You Need A Float of Six Months

When you are starting a business, it can take some time before the financial success becomes evident.  You'll need a float to keep your business and personal life alive.  A common recommendation is to have six months of funds available.  Some businesses will get off the ground quicker, some slower.

A way to get things moving quickly is to have your marketing plan figured out and executed.  Quite often, people don't know you exist until they've seen your name a number of times... like 8 or more.  This is not a high trust world anymore so your potential clients need to see your face, name or information several times before they even contact you.

You need to advertise, network, and talk about your business everywhere you go.  What you do in the start-up and low times will pay off in business which creates your good times.  And then you need to keep re-investing in marketing to keep your productivity cycle moving.

First Things First

Marketing.  You need to market.  And when you think you've got a full funnel of clients, keep on marketing.  At the six month mark, I don't think I have enough clients in my funnel and I continue to market.

Under the franchise agreement, I do not have much latitude for product, place or price.  We offer a comprehensive collection of services that appeal to the busy homeowner: house cleaning, window cleaning, duct cleaning, carpet cleaning, wall cleaning, house sitting, and pet sitting.  My territory was defined by postal code in the franchise agreement and going outside that would be in defiance of the agreement.  Lastly, pricing for services is also decided at the corporate level.  I wonder if pricing would have more flexibility if I was geographically removed from the corporate office.  The only element left under the typical four Ps is promotion.

I was required to spend a minimum amount of funds for my launch advertising.  I exceeded it.  Four fold.  And that's not counting the "free" stuff I did.  Here's a brief overview of the tactics used:

• A local newspaper interviewed me and my article appeared on the front page - along with a photo of me.  Got one phone call from this.
• I placed a series of ads in the above local paper. Got zero return on this very expensive method of advertising.  
• My bank let me set up a ballot box at the branch for a month and the winner of a 3-hour house cleaning has become an "every few months" client.
• The local Marketplace News worked with me to create a series of advertorials - like an infomercial, but in print, with a warmer approach. Got at least 3 clients from this.  It has paid for itself.
• We did a Facebook promotion giving away 3 hours of cleaning.  The winner became a monthly client.
• Got my box of business cards and handed them out at every single networking event I could attend.  Events included breakfast, lunch and dinners with the local Chamber of Commerce.  Attending a female-centered marketing event.  Speed networking.  Attending local alumni events (pub nights) for both universities I graduated from. No return on this yet, but you don't know when networking will eventually kick in.  I now have a ton of people trying to get me to buy their services, though. I found my bookkeeping support through speed networking.
• Participated in a Living Social promotion.  You lose money on a Groupon / Living Social promotion if your labour costs are tied to a specific service like ours is.  However, I have had one of the Living Social voucher purchasers turn into a regular client.  And it kept my employees busy while I was securing regular clients.  You can only grow as much as you have capacity to grow.  ROI is still negative, and is turning around.
• A cool thing we did as part of our Living Social promotion is get some magnetic business cards made up to leave behind.  I put them on every Starbucks bulletin board that I come across and one of my employees grabbed a bunch and puts them on her Super Mailbox.  They keep disappearing.  And I got a call from a lady who found one of the cards at Starbucks.

What did I learn from this?  My people tend to read Marketplace Newsletter.  Most but not all Living Social people are looking for a cheap cleaning service.  And now that referrals are starting, my team and I need to keep up the good work.

So I Started A Business

Six months ago, having just handed in my last assignment for my MBA a week or two before, I signed the paperwork and wrote a big cheque to acquire a home services franchise.  OK.  The cheque was not big in the land of buying a franchise.  But it felt huge in comparison to "my severance has just run out and I only bring in a pittance with consulting and thank goodness I don't have student loan payments".

The analysis behind buying the franchise was pretty easy.  First, it appealed to my skills, new and old.  Most of the work would be marketing, sales, and human resources.  Sales would be the hard part for me.  It is difficult to "ask" for the sale, the money, the privilege to provide someone with a service.  However, the franchisor had a system in place that would allow me to develop the relationship before asking for the money, so that concern was alleviated.  Second, it was affordable.  Overall, the investment was a little under $30,000.  Lastly, the home services business will generate a positive cash flow immediately.

Here we are, six months later, and things are getting good.  I am working on hiring a fifth employee.  I do 2-3 quotes a week and convert about 25% to active clients.  I get paid a modest salary.  And now I am looking for a mastermind group to bring my business to the next level.

Come hang out with me while I go through the process of growing my business and acquire new territories!