BUSINESS PLAN ON CLEANING SERVICE INDUSTRY Course Name : Entrepreneurship and SME Management Course Code : FB-205 Report on : Business plan (Cleaning service industry) Submitted To: Chandon Kumar Pal Assistant Professor Department of Finance & Banking Jatiya Kabi Kazi Nazrul Islam University 1 31 October, 2021 Chandon Kumar Pal Assistant Professor Department of Finance and Banking Jatiya Kabi Kazi Nazrul Islam University Trishal, Mymensingh Subject: Submission of a report. Dear Sir, I am submitting herewith my report entitled “Business Plan on Cleaning Service” as fulfilment of the course requirement. The purpose of this report is to know the basic concepts on how to make an effective business plan. The report shows a detail scope of works, strategies, work plan and contractual condition. If you need any information about this project, please inform me. I would be delighted if the report contains entire information about my business plan. Your obediently, Jahidul Islam Joy ID No.: 19132643 Session: 2018-2019 Department of Finance and Banking Jatiya Kabi Kazi Nazrul Islam University 2 Table of Contents Executive Summary ............................................................................................................................ 4-5 Company Overview ............................................................................................................................. 6-7 Industry Analysis ……………………………………………………………………………………………………………………….8 Customer Analysis …………………………………………………………………………………………………………………… 9-10 Competitive Analysis …………………………………………………………………………………………………………………11-12 Marketing Plan ………………………………………………………………………………………………………………………….13-14 Operations Plan ………………………………………………………………………………………………………………………… 15 Management Team …………………………………………………………………………………………………………………16-17 Financial Plan …………………………………………………………………………………………………………………………..18-22 3 1. Executive Summary JIJ CLEAN, located at Mymensingh is a new home cleaning service providing home and apartment cleaning to its clients. JIJ CLEAN is headed by Jahidul Islam Joy, an experienced home cleaner and cleaning services manager. JIJ CLEAN will focus on providing weekly home cleanings to upper class residents as well as specialty cleaning services to other clients. These specialty services will include exterior cleaning services (porches, patios, building exteriors) and deep cleaning of homes that have heavy build-up of debris and garbage (preparation for moving or estate sales). The founder, Jahidul Islam Joy, will also develop proposals for cleaning services specific to the needs of the client and the amount of space to clean. He will write newsletters to clients describing the best practices in home cleaning, reviewing new products, and answering frequently asked client questions. Customer Focus JIJ CLEAN will primarily serve the residents within a 10 miles radius of our location. The demographics of these customers are as follows: • • • • • • 27,827 residents Average income of Tk. 74,700 58.9% married 49.6% in Mgt./Professional occupations 75% of residents are homeowners Median age: 38 years In addition to this relatively wealthy adult demographic for a cleaning service business, there are five large apartment buildings in the area. The management companies of these apartment buildings may require cleaning services to prepare for new tenants to move in. Success Factors JIJ CLEAN is uniquely qualified to succeed due to the following reasons: • JIJ CLEAN will fill a specific market niche in the growing community we are entering. In addition, we have surveyed the local population and received extremely positive feedback saying that they explicitly want to make use of our services when launched. • Our location is in a high-wealth area where customers are in need of house cleaning services. • The management team has a track record of success in the cleaning services business. 4 • The local area is currently underserved and residents rely on independent and often illegal house cleaners. Financial Highlights JIJ CLEAN is seeking a total funding of Tk.1,000,000 of debt capital to open its cleaning service. The capital will be used for funding capital expenditures and location build-out, hiring initial employees, marketing expenses and working capital. Specifically, these funds will be used as follows: • Headquarters design/build: Tk. 500,000 • Working capital: Tk. 500,000 to pay for marketing, salaries, and lease costs until JIJ CLEAN reaches break-even Top line projections over the next five years are as follows: Financial Summary Revenue FY 1 560,401 FY 2 782,152 FY 3 1,069,331 FY 4 1,379,434 FY 5 1,699,644 Total Expenses EBTIDA Depreciation 328,233 232,168 7,000 391,429 390,722 7,000 552,149 517,182 7,000 696,577 682,858 7,000 776,687 922,956 7,000 EBIT 225,168 383,722 510,182 675,858 915,956 Interest 6,016 5,264 4,512 3,760 3,008 Pre Tax Income Income Tax Income 219,152 76,703 378,458 132,460 505,670 176,985 672,098 235,234 912,948 319,532 Net Income 142,449 245,998 328,686 436,864 593,416 Net Profit Margin 25% 31% 31% 32% 35% 5 2. Company Overview JIJ CLEAN, located at Mymensingh is a new home cleaning service providing home and apartment cleaning to its clients. It is headed by Jahidul Islam Joy, an experienced home cleaner and cleaning services manager. While he has been in the cleaning services sector for some time, it was in January, 2021 that he decided to launch JIJ CLEAN. Specifically, during this time, Jahidul Islam Joy met with a former friend and fellow independent cleaning services provider in Dhaka who has had tremendous success. After discussing the business at length, he clearly understood that a similar business would enjoy significant success in this town. Specifically, the customer demographics and competitive situations in Dhaka were so similar that he knew the business would work. After surveying the local population, Jahidul Islam Joy went ahead and founded JIJ CLEAN. JIJ CLEAN’s History Upon returning from Dhaka, surveying the local customer base, and finding a potential retail office, Jahidul Islam Joy incorporated JIJ CLEAN as an S-Corporation on March 2021. The business is currently being run out of home office, but once the lease on JIJ CLEAN’s office location is finalized, all operations will be run from there. Since incorporation, the Company has achieved the following milestones: • Found office space and signed Letter of Intent to lease it • Developed the company’s name, logo and website located at www.jij-clean.com • Determined equipment and fixture requirements • Began recruiting key employees JIJ CLEAN’s Services JIJ CLEAN will be able to provide clients with the following services: • Weekly Home Cleaning: regular, general home cleaning services, customized to the needs of each client, for apartments, small homes, and large homes. • Exterior Cleaning: cleaning of exterior walls, patios, porches, driveways, etc • Deep Cleaning: garbage removal and deep cleaning of walls, floors, and carpets for tenants who are moving, home sales, and landlords of apartment buildings 6 • JIJ CLEAN Newsletter: frequently asked questions, cleaning tips, and product reviews for clients As we understand, the key to a successful cleaning service is being responsive to the particular needs of clients. We will have a full-time assistant manager who will, among other things, manage operations including scheduling, supply procurement, inventory, and bookkeeping. This will free up the time of us to work on sales and customer service. 7 3. Industry Analysis The cleaning services industry is generally strongly correlated with the strength of the real estate market. However, last year, according to Investopedia, the commercial and residential contract cleaning services market was $48.4 million in Bangladesh. Investopedia reports that the market will grow at 5.3 % annually for the next three years and that “gains will be driven by the shift toward “”do-it-for-me”” cleaning services in the residential market and by the outsourcing of noncore functions in the non-residential market.” This industry includes non-residential interior building, residential interior, swimming pool, street and parking lot, exterior building, chimney, transportation equipment, window, and more. Within the residential interior segment, some providers specialize in areas such as carpets, kitchens, walls, and floors. Major competitors include HandyMama Sheba Lagbe, Nepcons, Bangladesh maid agency etc., although local markets are often dominated by small businesses. Trends in the industry include the following: • Customer interest in companies that clean with all-natural or environmentallyfriendly products only. • Customer interest in companies that clean with non-toxic products. • Market downturn leads to growth in residential customers hosting dinners and events at their homes to save money, leading to increase in cleaning services before and after such events. • Customer interest in expert advice as to how they clean and maintain their homes better. 8 4. Customer Analysis Demographic Profile of Target Market JIJ CLEAN will serve the residents of Mymensingh and the immediately surrounding areas in a 10 miles radius. The area we serve is populated mostly by the middle and upper class and lead busy lifestyles; as a result, they have both the need for cleaning services and the means to pay for it. The precise demographics of the town in which our location resides is as follows: Mymensingh Sadar Sankipara Total Population 26,097 10,725 Square Miles 6.89 3.96 Population Density 3,789.20 2,710.80 Population Male 48.04% 48.84% Population Female 51.96% 51.16% Age 18-24 3.68% 3.52% Age 25-34 5.22% 4.50% Age 35-44 13.80% 13.91% Age 45-54 18.09% 18.22% Income 50,000 to 74,999 11.16% 6.00% Income 75,000 to 99,999 10.91% 4.41% Income 100,000 to 124,999 9.07% 6.40% Income 125,000 to 149,999 9.95% 8.02% Income 150,000 to 199,999 12.20% 11.11% Target Population by Age Group Target Population by Income 9 Income 200,000 and above 32.48% 54.99& Customer Segmentation The Company will primarily target the following three customer segments: 1. Middle and Upper Class Homeowners: The area in which the Company will operate has a significant population of homeowners. Many homes have two working parents with limited time to keep up with housekeeping and cleaning. Even homes with one parent staying at home can have a need for regular cleaning services or specialty services from time to time, especially when there are three or more children to care for. 2. Wealthy Renters: Many wealthy singles and couples chose to rent apartments and homes rather than to buy because of a temporary living situation in [company location]. These renters tend to work long hours at consulting companies, banks, and financial services and do not have the time or interest in cleaning their apartments regularly. 3. Apartment Management Companies: There are five apartment buildings in the vicinity which may be interested in outsourcing their cleaning services for apartment units when they are vacated. 10 5. Competitive Analysis Direct & Indirect Competitors The following two cleaning services firms are estimated to serve 50% of the house cleaning services customers within a 10 miles radius of JIJ CLEAN, as determined by a survey of 100 homes. Independent housekeepers are used by many more, although the exact number is difficult to determine. HandyMama HandyMama is an established local business and home cleaning service that has been in operation for five years. The company earns approximately half of its revenue through residential cleaning and half through business and office cleaning. JIJ CLEAN is very familiar with this competitor, having served as its sales manager for the past three years. HandyMama’s customer reviews are often mixed. There are often reports of cleanings being incomplete. While HandyMama does send crews back to redo any shoddy work, their reputation has been damaged by these incidents over time. JIJ CLEAN will create a brand built around the specific cleaning needs of homeowners and renters rather than serving both home and business owners. Amar Sheba Amar Sheba is a nationally franchised brand that cleans more than 300,000 homes, apartments, and condos in Bangladesh every month. Founded in 2010, the company has more than 300 locations and calls itself the largest home cleaning franchise network in Bangladesh. Amar Sheba operates on a similar model to JIJ CLEAN, providing customized proposals to clients based on an estimate of their specific needs. They encourage weekly service, but can provide service on any schedule chosen by a customer or one-time cleanings. However, Amar Shebadoes not offer any rates on their website, insisting that a home inspection must take place before any cleaning rates can be discussed. JIJ CLEAN will offer basic rate ranges (competitive with Amar Sheba) on their website, helping customers to come to a decision faster. Furthermore, JIJ CLEAN will build its brand as a cleaning expert through its intelligent weekly newsletter. Independent Housekeepers Dozens of independent housekeepers operate their own businesses, generally illegally, for area residents. These housekeepers advertise their services through word-of-mouth and flyers in supermarkets and local stores. They offer low rates (as low as Tk. 100 per hour) to clean homes and require payment in cash. 11 While many customers seek out these “off-the-books” workers to clean their homes, others are wary of hiring illegal workers who avoid taxes and don’t hold insurance or business licenses. Those who are legal to work in this country can potentially become employees of JIJ CLEAN, effectively buying them out as competition. Competitive Pricing Weekly Cleaning 1000-1500 1500-2000 1250-1750 Deep Clean 1500-2000 2000-2500 1750-2250 Exterior Cleaning 3000-4000 3500-5000 2500-4000 Competitive Advantage JIJ CLEAN enjoys several advantages over its competitors. These advantages include: • Client-oriented service: JIJ CLEAN will have a full-time sales manager to keep in contact with clients and answer their everyday questions. Jahidul Islam Joy realizes the importance of accessibility to his clients, and will further keep in touch with his clients through weekly newsletters about cleaning. • Management: Jahidul Islam Joy has been extremely successful working in the cleaning services business and will be able to use his previous experience to assure clients of the care that JIJ CLEAN will take to do the job right. His unique qualifications will serve customers in a much more sophisticated manner than JIJ CLEAN’s competitors. • Relationships: Having lived in the community for 20 years, Jahidul Islam Joy knows many of the local leaders, newspapers and other influences. Furthermore, he will be able to draw from his ties to homeowners from his work at HandyMama’s Cleaning to develop an initial client base. 12 6. Marketing Plan JIJ CLEAN will use several strategies to promote its name and develop its brand. By using an integrated marketing strategy, JIJ CLEAN will win clients and develop consistent revenue streams. The JIJ CLEAN Brand The JIJ CLEAN brand will focus on the Company’s unique value proposition: • Client-focused home cleaning services, that treat each home individually and get the job done right the first time • Service built on long-term relationships • Big-firm expertise in a small-firm environment Promotions Strategy ➢ Targeted Cold Calls JIJ CLEAN will initially invest significant time and energy into contacting potential clients via telephone. In order to improve the effectiveness of this phase of the marketing strategy, a highly-focused call list will be used; targeting individuals in homes are most likely to demand the services of a cleaning company. As this is a very time-consuming process, it will primarily be used during the startup phase to build an initial client base. ➢ Referrals JIJ CLEAN understands that the best promotion comes from satisfied customers. The Company will encourage its clients to refer their friends and neighbours by providing discounts for new client produced. This strategy will increase in effectiveness after the business has already been established. Additionally, JIJ CLEAN will aggressively network with local area hardware and cleaning supply stores that sell products used by JIJ CLEAN. This network will generate referral leads and give out flyers to customers at no charge in exchange for the steady purchase of cleaning supplies. In return, clients who seek to use the high-quality products that JIJ CLEAN uses will be directed to these stores. ➢ Internet JIJ CLEAN will invest resources in two forms of geographically-focused internet promotion—organic search engine optimization and pay-per-click advertising. The Company will develop its website in such a manner as to direct as much traffic from search engines as possible. Additionally, it will use highly-focused, specific keywords to draw traffic to its website, where potential clients will find a content-rich site that presents JIJ CLEAN as the trustworthy, well-qualified home cleaning firm that it is. ➢ Publications JIJ CLEAN will place print advertisements in key local publications, including newspapers, area magazines, and local sport programs. Additionally, the Company will print brochures and place them in specific locations frequented by target individuals, such as supermarkets and real estate offices. 13 ➢ Pricing Strategy JIJ CLEAN’s pricing will be competitive compared with HandyMama and lower than Amar Sheba, although higher than illegal independent housekeepers. For regular, weekly clients, pricing will be based on the average labour needed for a job and a steady fee will be set. For one-time clients, or clients who are trying out the firm’s services, a competitive hourly rate will be charged. 14 7. Operations Plan JIJ CLEAN will carry out its sales operations through phone calls and home visits/consultations. House cleanings will be scheduled within time ranges (i.e., 10 am – 4 pm Wednesday) rather than at exact times to allow leeway for jobs that may be longer or shorter than expected. After clients are served a number of times, appointments will be scheduled more tightly together based on the average service time for each home. The headquarters will not be used for client meetings, allowing savings on the renovation costs needed for this space. This space will house the three full-time, non-cleaning staff as well as cleaning supplies for the cleaning staff. Cleaning staff will be required to travel to client homes in their own vehicles and will be reimbursed for travel expenses. Jahidul Islam Joy will work as the primary salesperson for the company’s services, although the assistant manager and administrative assistant may be trained in sales activities over time. The assistant manager will manage company operations, under Jahidul Islam Joy’s supervision. The administrative assistant will handle basic scheduling work for the assistant manager, as well as light bookkeeping, answering phones, and organizing human resources. Milestones JIJ CLEAN’s long term goal is to become the highest quality provider of consistent home cleaning services in the Mymensingh area. We seek to do this by ensuring customer satisfaction and developing a loyal and successful clientele. The following are a series of steps that will lead to this long-term success. JIJ CLEAN expects to achieve the following milestones in the following months: Date Milestones March Finalize lease agreement April Design and build headquarter May Hire and train initial staff June Kick-off of promotional campaign December Reach break-even 15 8. Management Team Every business need management team to run the business successfully. JIJ CLEAN also has a management team. It consists of positions. They are• • • • • Managing Director Assistant Manager Administrative Manager Marketing manager Staff Manager The above roles will be played byPosition Name Managing Director Jahidul Islam Joy Assistant Manager Sazib Sarker Administrative Manager Sanjida Yasmin Marketing Manager Saiful Islam Miraj Staff Manager Rakibul Islam The roles of the following positions will be• • • • • Managing Director: Managing director will supervise every operations and decisions made for JIJ CLEAN Assistant Manager: The assistant manager will manage company operations Administrative Manager: The administrative assistant will handle basic scheduling work for the assistant manager, as well as light bookkeeping, answering phones, and organizing human resources. Marketing Manager: The marketing manager will create marketing plans and execute them. Staff Manager: Staff manager will manage all staffs, record their activities. 16 Company Structure: Managing Director Assistant Manager Administrative Manager Marketing Manager Staff Manager Hiring Plan: In order to launch the business we will hire the following employees: • Cleaning Staff: 9 full-time, experienced home cleaners. Must be read and speak Bangla in order to take directions directly from clients, as needed. Cleaning staff will be added consistently to fill the growing need for JIJ CLEAN services. 17 9. Financial Plan Revenue and Pricing JIJ CLEAN’s revenues will come primarily from cleaning fees from residential clients. JIJ CLEAN’s main revenue stream will be : Revenue Stream Average Price % of Revenue Regular weekly cleanings 1250 95% Deep cleaning service 3500 1% 1750 4% Exterior cleaning service Key Cost Drivers As with most services, labor expenses are the key cost drivers. Cleaning staff will earn a competitive salary, allowing JIJ CLEAN to hire workers who previously operated independent businesses. Furthermore, the costs of supplies and travel to client sites are expected to be roughly 20% of revenue. The major cost drivers for the company’s operation will consist of: • • • Salaries Cost of cleaning (supplies and travel to homes) Lease on company headquarters Moreover, ongoing marketing expenditures are also notable cost drivers for JIJ CLEAN. Capital Requirements and Use of Funds JIJ CLEAN is seeking a total funding of Tk. 1,000,000 of debt capital to open its cleaning business. The capital will be used for funding capital expenditures and location build-out, hiring initial employees, marketing expenses and working capital. Specifically, these funds will be used as follows: • Headquarters design/build: TK. 500,000 • Working capital: TK. 500,000 to pay for marketing, salaries, and lease costs until JIJ CLEAN reaches break-even 18 Key Assumptions & Forecasts The following table reflects the key revenue and cost assumptions made in the financial model. Number of customers per day Per location 2022 4 2023 6 2024 8 2025 10 2026 12 Average order price 1750 Annual increase in order price 6.00% Annual lease (per location) Tk. 50,000 Yearly lease increase % 2.50% Pro Forma Income Statement: 2022 2023 2024 2025 2026 Product/service 151,200 A 333,396 367,569 405,245 446,783 Product/service 100800 B 222264 245046 270163 297855 Total revenues 252000 555660 612615 675408 744638 Cost of goods sold 57960 122245 122523 128328 134035 Lease 60000 61500 63038 64613 66229 Marketing 20000 25000 25000 25000 25000 Salaries 133890 204030 224943 236190 248000 4000 4500 5000 5500 Revenues Expenses & costs Other expenses 3500 19 Total expenses & costs 271850 412775 435504 454131 473263 (19850) 142885 177112 221277 221374 36960 36960 36960 36960 36960 (56810) 105925 140152 184317 234414 23621 20668 17716 14763 11810 (80431) 85257 122436 169554 222604 Net Operating Loss (80431) (80431) 0 0 0 Income Tax Expense 0 1689 42853 59344 77911 (80431) 83568 79583 110210 144693 - 15.00% 13.00% 16.30% 19.40% 2023 2024 2025 2026 EBITDA Depreciation EBIT Interest PRETAX INCOME NET INCOME Net Profit Margin (%) Pro Forma Balance Sheet: 2022 ASSETS Cash 16710 90188 158957 258570 392389 Accounts receivable 0 0 0 0 0 Inventory 21000 23153 25526 28142 31027 20 Total Current Assets 37710 113340 184482 286712 423416 Fixed Assets 246450 246450 246450 246450 246450 Depreciation 36390 73920 110880 147840 184800 Net Fixed Assets 209490 172530 135570 98610 61650 247220 285870 320052 385322 485066 Debt 317971 272546 227122 181690 136273 Accounts Payable 9660 10187 10210 10694 11170 Total Liabilities 327631 282733 237332 192391 147443 Share Capital 0 0 0 0 0 Retained Earnings (80431) 3137 82720 192930 337623 Total Equity (80431) 3137 82720 192930 337623 247200 285870 320052 385322 485066 TOTAL ASSETS LIABILITIES & EQUITY Total Liabilities & Equity Pro Forma Cash Flow Statement: 2022 2023 2024 2025 2026 CASH FLOW FROM OPERATIONS Net Income From (Loss) (80431) 83568 79583 110210 144693 Change in Working Capital (11340) (1625) (2350) (2133) (2409) 21 Depreciation 36960 36960 36960 36960 36960 Net Cash Flow from Operations (54811) 118902 114193 145037 179244 Cash from Equity 0 0 0 0 0 Cash from Debt 317971 (45424) (45424) (45424) (45424) Cash from Financing 317971 (45424) (45424) (45424) (45424) Net Cash Flow 16710 73478 68769 99613 133819 Cash at beginning of period 0 16710 90188 158957 258570 Cash at end of period 16710 90188 158957 258570 392389 Cash Flow from Financing SUMMARY 22