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Don’t Ignore the Small Accounts!

February 26, 2013

Just a quick note: I’ve been very busy with a number of issues not related to putting articles on the website. I’ve had a number of new subscribers and several book purchases. I’ve also been helping some new business start-ups get their first accounts (always fun to see that happen!!!).

While I have a little free time, I thought I’d address the question of the proper ‘mix’ of accounts. Here goes-

When you first start your cleaning business you are really just trying to get some accounts. I know that when I started I took just about anything that got me some experience and some money coming in. I knew I had to gain experience, and I knew I needed the money to put food on the table.

My goal was to get accounts, and the bigger the better. That was great; many of my clients had several buildings we cleaned and they wrote me checks for tens of thousands of dollars each year.

And then 2008 came and many of these large accounts closed or reduced the number of buildings they had me clean. In a matter of six months, our net income was cut in half and I had to let go of several of my best employees.

I forgot one simple thing: security comes from being DIVERSIFIED. By “diversified” I mean how much revenue is coming from EACH ACCOUNT. In a sense you need to view your cleaning accounts much the same way you would an investment portfolio. What do financial advisors always say when investing your money?  ”Don’t put all your eggs in one basket”.

The same is true when you look at your cleaning accounts. A simple rule to follow is that no single client should produce more than the average of all revenue generated in your business.

I am currently advising a subscriber who has 8 clients. The monthly invoicing of his various accounts is as follows:

  • A: $3400.00

  • B: $2080.00

  • C: $1034.00

  • D: $1050.00

  • E: $587.00

  • F: $525.00

  • G: $396.00

  • H: $272.00

The total amount invoiced each month is $9344.00. He has had many accounts over the years and as smaller ones have dropped out (some closed, some changed cleaners, etc.) he has been able to get larger and larger accounts.

Divide the $9344.00 by 8 and the average is $1168.00 The value associated in knowing the average invoice amount is in UNDERSTANDING that the one big account he has for $3.400.00 per month EXCEEDS the MONTHLY AVERAGE rule. In fact it exceeds it by a lot, as it amounts to ALMOST 37% of all revenue.

Having jobs that generate LOTS OF REVENUE is good; the only worry for you is to make sure you don’t get FINANCIALLY UNBALANCED.  What happens if that one customer FIRES YOU? That would really impact your day-to-day operations.

Now this DOES NOT MEAN you should be afraid of getting larger and larger accounts. The key is that once you realize you have an unbalance, work hard at fixing it. Fixing it is not hard, but it does require some more effort as the only way to create a better BALANCE is by ADDING MORE CLEANING ACCOUNTS that don’t exceed the monthly average rule.

When you start adding accounts you immediately begin to DILUTE the importance of that one big account. Chances are good you will be adding and subtracting accounts each year you are in business. Keep the ‘mix’ in the right proportion for financial success!

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