 to help make decisions as you're running your business and help you be more successful, more profitable. We're all, I believe, familiar with a P&L, a profit and loss statement. It is probably out of the three different types of financial statements that you would have along with your balance sheet and statement of cash flows. The P&L probably gives you the most insight on how your business is forming financially. I'm gonna show you some benchmarks on that. Some detail kind of go into the various categories that you would see on a P&L. But at a high level, your P&L could be broken down into four categories. The top part is just the income, the amount of money your clients pay you for the service you provide. And as a percent, these percentages here are the percent to income. So if that had a percentage, it would be 100% of your income is income. But out of your income, your money basically goes into three different buckets. The first bucket would be cost of good sold. That would be the variable cost associated with running your business. The largest part of cost of good sold is your direct labor. Basically the money you pay, the cleaning professionals that clean homes for you. It's variable in the sense that for every extra home you clean, those expenses that fall under cost of good sold would go up a little bit. For every home you clean, you have to pay your cleaning tax to clean it. Hence your cost of good sold would be going up. That number as a percent to income for a house cleaning business can vary a fair amount. And I'm gonna explain some reasons why and how that works a little bit later in the presentation. But at this point, fully loaded cost of good sold, I'm gonna say fully loaded. It would be including your insurance like workers comp. It would be including the employer portion of your payroll taxes. Could be as low as 45%. Maybe a little bit lower even in some cases. I have seen it around 40, but that's rare. On the high side, you're probably talking 60%. No misunderstanding. The number can be a heck of a lot higher than that, but it's really hard in this industry to run a profitable business if your cost of good sold is getting north of 60%. And there's some exceptions to that and we'll talk about that. But as a rule, that's a pretty high cost of good sold, 60% when paid. After you cover all your variable expenses, I'm gonna type variable here just to help us. You've got money left over and from an accounting standpoint, that's called gross profit. That's the amount of income you have lest your cost of good sold. And those are typically, the gross profit goes to cover your operating expenses, which are typically fixed. You're talking about your rent, your utilities, leases that you would have for like automobiles, things like that. Those expenses are typically the same month over month, regardless of how many homes you clean. Your rent's gonna be the same if you clean zero homes or if you, you know, like some of you guys in the Northwest are experiencing, your cost of good sold here over the last couple of weeks is gonna be really low because you're not cleaning any homes. However, your fixed cost, like your rent and so forth, is gonna be the same and the landlord's gonna be expecting that check at the end of the month, regardless if you clean any homes or not. So those are fixed. Those numbers can be 30 to 40%. And again, that can vary wildly as well. A lot of that depends upon the business structure. If you're running solos and they're using their own cars and you don't have an office and you see your cleaning technicians once or twice a week, if even that, the number can be lower. If you're running a more capital intensive business like we do here at Castlekeepers where, you know, you got brick and mortar space, you got company cars, yada, yada, yada, the number can be higher, but 30 to 40% is kind of a middle of the road benchmark for that. And if you're doing all that right, or if you take your income, subtract your cost of goods sold, subtract your operating expenses, you should be left over from that income of somewhere between 10 and 20%. Those numbers can vary wildly as well. If you're not doing it right, that net income number can be a negative percentage. That's called the net operating loss. That's not good. That's not sustainable. And if you do that over a long period of time, you'll no longer be in business. So we'll come back to this in a little bit, but let's just kind of break this down a little bit of the things that go into cost of goods sold and how that could be broken down as a percent to revenue. The largest part, and I just want to emphasize that, is the payroll expense itself. Just the sheer dollars, gross dollars you pay for your cleaning technicians. That could be 40 to 55%. There's a lot of other variable costs in here, but they're not real big from an accounting standpoint. You could even argue that they're not material. That's the way CPA would refer to a number that's maybe not really big and maybe isn't worth fretting about too much. A lot of the way that we teach this within foundations and the courses we teach as well as how we run our own business, we spend a lot more time looking at a metric called payroll as a percent to revenue, which is basically just taking the payroll number and dividing it by the income as opposed to fretting over, aggregating all these other smaller expenses just because it's really easy on a week over week basis. If you do a weekly payroll to take this Friday's payroll and divide it by last week's revenue to get a percentage, and that's one of the KPIs that we track week over week. And if you do really, really well, you can keep it in the low 40s, and if it gets up about 50, 55 for us, we start to fret a little bit. Can tell you that can get higher. We've got some smaller operations in some parts of the country and when we are growing and we have to add labor, you add a couple extra people to a branch. It's only running a few teams. It can really take your payroll expense and shoot it up as it compares to income. So it can be bigger. And if there's a rational reason for that, if you're doing that because you're growing and if you know that you're gonna grow into it, that's fine. If you've got a large operation and that payroll to revenue expenses ratio is too high, it doesn't matter how many homes you clean, you're not gonna be making any money. So anyway, 40 to 55% on that, you roll the whole thing up, maybe 45 to 60, all these other things are like less than a percent or so, except the workers comp. That can be all over the board too, just depending on what parts of the country you're in. On the operating expense side, the fixed side, let's say fixed, it's not literally fixed. I mean, your advertising would fall under operating expenses. That's gonna vary month to month, but it really doesn't go up and down as a percentage of the revenue generator homes you clean. That could be somewhere between four to 8%. And again, this is just general benchmarks in terms of what we see across our businesses and the other businesses that we work with. Some cases it's lower, some cases it's higher. You know, start up a small business and they're trying to ramp up quickly. It could be larger than that. If it's a more mature business, it could be smaller than that. Automobile expats, you know, anywhere to zero to five, depending upon the business model. You got a lot of other things here, bed, debt, bank, service charges, computers, these dudes, this is just stuff you're gonna find on your typical chart of accounts for cleaning business. All those are relatively small numbers, zero, you know, to 1%, one to two percent. Get down here a little bit in terms of your overhead. This is kind of where it gets interesting. This is your indirect labor. These are people that you have on your payroll that aren't cleaning homes, they aren't generating revenue. This is the person that's answering your phone, doing your sales, doing your scheduling, doing your bookkeeping, handling your HR. You might be doing all those things yourself. You might have one or more people in your office doing it, just depending on the size of your business. That's a percent to revenue for a business that is fairly mature, saying a million dollars and up. Now, that number could be as low as 9%. I guess based on our observations, if you get it below 9%, you're doing something really, really rare, and especially if you're performing at a high level and growing. If that number gets below, excuse me, above 15% for mature business, and again, if it's a startup or small business, it might be a lot bigger than that because you hire your first office person, you don't have much revenue. It's a big number, but it's a big number relative to a small amount of revenue, so it's still not a ton of dollars, but for mature business, if it gets above 15%, that can compromise your ability to be profitable as well. It's hard to oftentimes manage that number if it gets to be above 15% for mature business. Recruiting expenses, less than 1%, that's a number that might be worth looking at in today's world and today's market. I've seen some situations, we've got some situations where we're having to throw a lot more energy and resources and money at recruiting and what we have had to do over the long run just because of the labor market, that's contextually something you need to think about as well. Rent and utilities for mature business, maybe 2%, adding all the way up to 30%, 40% net income, 10% to 20%. So what are some of the things that you can do with these numbers? This cost a good sold number is really an important number to use and again a good proxy for that, an estimate for that is just your payroll divided by revenue. If you know what that number is, and I'm gonna just say hypothetically, let's pretend my payroll divided by revenue is 45%. And we said that our operating, excuse me, our cost to get sold is variable, but our operating is fairly fixed. So let's pretend that our operating expense is a fixed number and let's pretend it's $10,000 a month. If I know that my variable expense is 45% of my revenue, what I can do is I can, 55% of my revenue is what I could call gross profit and that's the money that is left over from, as the money that's left over from the income I generate after I cover my payroll. Said another way, every dollar I generate in revenue, 45 cents of it goes to cover my labor and the other 55 cents I have to go cover my other operating expenses. So if I take this $10,000 in operating expenses and I wanna know what my break even revenue is, I can take the $10,000 and I can divide it by my gross profit percentage and it comes out to be $18,000 in change. So if I got $10,000 in overhead to cover each month and my cost to get sold or payroll to revenue in this case is 45%, I need to generate $18,000 in sales in order to cover it. Now, if my payroll to revenue is not 45%, say it's up closer to 60%, I've gotta generate $25,000 in revenue. So that's why this cost to get sold number is so really important because the lower it is, the easier it is to make more money and clean fewer homes is really what it comes down to. So when this number starts getting really, really big, like 70%, holy cow, I gotta generate $33,000 in revenue just to break even. And the other magic thing about this, I'll put it back to 45% payroll, 55% gross profit after I generate my $18,181 in revenue, every dollar in revenue over that 55 cents of that goes into my pocket as profit. So I'm making a lot more money per dollar revenue after breaking even with a higher gross profit than I am one that's over 60%. I wanna show you one other thing too that kind of factors into all of this. That's not really anything that you're gonna find on your income statement, on your income statement is another word for your profit and loss or your P&L, but it's really, really, really important number. It is what we call the efficiency factor. And your efficiency factor is really nothing more than your time cleaning homes, let's forget my ambitability to type, divided by time on the clock. For example, if somebody works an eight hour day and say they cleaned three homes and each home was, it took them two hours to clean it, three times two equals six. If I take the six and divide it by eight, that gives me an efficiency factor of 75%. Set another way for that cleaning technician, for that cleaning professional, 75% of the time that you're paying them, they're actually making money and generating money for you, generating revenue. The other 25% of the time, they're either in the office and the meeting, getting their supplies together, driving from home to home, doing something but not being productive. So the higher this efficiency factor, set another way, the more time that you're actually paying your technicians that that time is being spent generating revenue as opposed to doing things that's not generating revenue. The much easier it is to keep this cost of good sold down and to, by definition, your payroll to revenue, keeping that down, making your gross profit more. So how does that impact us? Here's just a little grid that we put together and I've got various bill rates up here on an hourly basis, like $30 an hour, $35, $40 an hour, let's pretend that's what you're charging your customers, 45, assume that your technicians are working eight hours a day. For these four sets of bill rate per hour, I've got a efficiency factor of 65%, meaning that the technician spending 65% of the day cleaning homes, 35% driving around and doing non-productive stuff. So 65% of eight hours paid gives me 5.2 hours of actually cleaning time, so I'm actually making money 5.2 hours out of an eight hour a day. If I can get my efficiency factor up to 85%, that 5.2 goes up to 6.8. Let's pretend under both scenarios, you're fully loaded pay on an hourly basis is $15 an hour. So at $30 an hour and a 65% efficiency, I'm getting $156 in revenue a day per technician, basically just taking the 5.2 hours works times 30. If I'm billing $5 more, I'm getting 182 and if I'm billing 45 an hour all the way up to 234, compare those to the numbers over here if I've got an efficiency factor of 85. Instead of, I'd say $40 an hour, instead of $208 a day per technician, I'm getting $272 a day per technician. Pretty cool. This formula here isn't right. Oh, I changed that to 70, let me put that back. There we go. So if I'm billing $45 an hour at 65% efficiency, I'm getting 234 a day, I'm getting 306 a day if I can get the efficiency up to 85. Translating that all the way down to, you're paying your technician $120 a day under all of these scenarios, $15 an hour times eight hours, gross profit per technician per day. The gross profit number, remember that, that's the money you have left over after you pay your technician. Can be as low as $36 if you've got an efficiency factor of 65% and you're paying $30 an hour and you're charging $30 an hour and you're paying 15. See that's a payroll to revenue number, 77%. Remember we said you can never, it'd be very difficult to run a cleaning business profitably at that number. Look what happens though, as I increase my bill rate, my payroll to revenue numbers are getting more favorable at $45 an hour, I'm about 51% payroll to revenue, which would be 49% gross profit at 65%. But if I get my efficiency up, if I can schedule in a way where there's less drive time, cut down on my meetings and really emphasize that we need to be moving quickly and get it up to 85%, my gross profit goes from $114 a day per technician to $202 a day per technician. Pay your old revenue number all the way down to 34%. That's rocking. So say if your target revenue on a daily basis just to pay your bills and make some money, have some money left over for yourself in the form of profit is $1,000 a day as your target gross profit. Under each one of these scenarios, this is the number of technicians you would have to have cleaning. Under this worst case scenario here, you'd have to have 27 cleaning professionals cleaning for you, almost 28. All the way at the other end with a higher efficiency and a higher bill rate, you can make the same amount of money. You could have the same $1,000 left over in terms of gross profit with as little as five people. So we talk about benchmarks, we talk about what should your numbers be and it's really cool to know what your numbers should be but it's even cooler to be able to take those numbers and manipulate them to figure out what type of outcomes you can get if you can change the numbers from where it is to some place that's more favorable and that's really kind of what this whole model is about and how we use benchmarks and key performance indicators to manage our business and this is what we teach in foundations and the other programs that we do. Hey, Tom, in column J, J9 actually, we need to change that number to 15. Dude, wow, okay, it's even getting better. I think I used this for another presentation and I was doing some what-ifs. Okay, I need a couple more texts I guess or like one more tech between 13 and 15 but I'm still rather be here than here. Absolutely, we also have some questions in the chat. As you can see there. There's a chat? Yeah, so I've chatted with you a couple times and told you a couple of questions but I'll read what we have right now. Robin would like to know what makes up the payroll expenses, direct labor, payroll taxes? We'll go back over here. Well, the primary payroll expense here in this context is just the gross pay. So it's somebody's making $15 an hour that in times, say you had 100 hours of total payroll then it would be $1500 would be that number. You've got your other loads primarily workers comp. I guess the payroll expense in this context would have to include your taxes as well, the tax part of it, which would be the employer part of Fika Fuyisui. Okay, we have another question. Elena missed the little quick explanation about break even. Would you mind going over that again real quick? I think you have enough time Tom. Sure. I'm sorry, I've got too many monitors and I'm trying to find the chat. Here we go. Yeah, okay, I got it. Break even. The way this works is, don't change my formula. If you know what your cost of good sold is and it's hard to calculate that on a short-term basis. So if you do weekly payroll, you can figure out what your payroll divided by revenue is on a week over week basis. So you take your payroll on a Friday and divide it by the amount of revenue that you generated the previous week. You got this thing called the matching principle. So you wanna make sure you're matching the payroll up with the revenue that was generated. So if I'm paying people on this Friday, I made that money the week before. So you do that calculation, you get a payroll to revenue number. You take one minus that, that's your gross profit. So in this example, the payroll to revenue is 55% then my gross profit is 45%. So every dollar I generate, 55 cents goes to pay my people, 45% I have as gross profit. Now, I gotta take that 45 cents out of each dollar and I gotta cover all my other operating expenses. The example that I had here was this pretend our operating expenses for a month is $10,000. In order to calculate my break-even revenue, I basically take the $10,000 or whatever my fixed expenses in this case and I divide it by my gross profit percentage. Since, I got 45 cents out of every dollar if I need to come up with $10,000 in cash to pay my rent and other insurance and leases and so forth, I gotta generate $22,222 in order to break-even. If I can get this number down say to 45%, flipping it so 55% is my gross profit, I only have to generate $18,000. I can get it down to 40%, which is really pretty good. It can be as low as 16,000. What happens to a lot of people though, they let their payroll get out of control by either having too many technicians or more often, just not scheduling efficiently and not really emphasizing and measuring the efficiency factor and helping people that are working in your business and leadership roles and just everybody that does cleaning homes appreciate how important it is to be as productive and as efficient as we can be and if our efficiency factor gets to be too low, then this number will get high and say, your payroll to revenue might get to be 70%. And if it is, holy cow, I gotta do 33,000 in order to just generate 10,000 to cover my expenses. So that's kinda how you can take your payroll to revenue and if you know what your fixed costs are, generate your break-even point and then you really wanna manage your payroll to revenue to get that as low as you can to make that break-even number as low as it can be because as soon as you hit the break-even number, every dollar after that for that month, the gross profit percentage is money going in your pocket. Tom, we have another question. Thanks for that, it's a good explanation. TJ would like to know, what is a good percentage range for efficiency or rather at what percentage would give you pause for concern? That's a great question. Depends on a fair amount on your business model and where you do business. For example, I know some folks who have businesses in metropolitan areas, say where they got big tall vertical buildings and they schedule really efficiently where they will sell in a way where they'll take a technician, a cleaning professional and their entire day's work will be inside of one building. That efficiency factor can be really high, 90% are greater because they're not driving anywhere. They take public transportation and get there when they're on the clock. I mean, they're very little time wasted between homes. In other markets where, say it's more suburban, more rural and depending upon the population in your service area, you might have more windshield time and the number could be 60% or in the 60s and especially if you've got a large service area and a relatively small base of clients and at that point you need to work on your, how you schedule and how you incent customers to allow you to clean their homes on days that help you maximize your efficiency to help get that number up, but it can vary. The bigger your team size, typically the lower your efficiency factor is, it's just them how to drive time. You've got more people in a car, if you've got like a four person team, they might be cleaning seven, eight homes a day. So you've got four people jammed in an automobile driving back and forth between eight homes. That's gonna be more drive time. All right, I'm unmuting everybody. Oh, maybe not. Okay, Tom, we have another question from Robin. What is your benchmark for service rate per hour? Service rate per hour, would that be bill rate per hour? Tom, I'm gonna mute everybody and you're gonna get muted. I guess a function of your market with the market will bear and where you position your service in the marketplace. Are you trying to compete on price? Do you offer a service that has a broader scope of work and can you demand a higher bill rate per hour? That's all over the board. It's gonna be $60, $70 an hour in some larger metropolitan areas, but in some rural areas with minimum wage at $725 an hour, you can make it work in the low 30s. All right, Tom, so we are pretty much out of time. Are you going to share the spreadsheet? I can, if anyone has an interest, we can certainly do that. I guess the easiest way to do that would be to cleaningbusinessbuilders.com and down here in the bottom, it says five minute business assessment. Don't really pay attention to that, but if you give us your name, email and phone number, we'll know when it says best time to call, just say spreadsheet and we'll know that you want our spreadsheet and we'll get it to you. Actually, if you could do benchmarks would be better because we have another one that has spreadsheet. Okay, benchmarks. Benchmarks, yay. It would be great. If anybody has a last question, you can unmute yourself. I don't want to unmute everybody again, it gets a little loud, but then we, Tom could answer your questions. Jen tell us see that you have an interest in the benchmarks. I will go ahead and send that over to you. All right, well, I'm not seeing any more comments here, Tom. And nobody is unmuting themselves. So I think you're probably, oh, we do have a question. Stacy wants to know where owner salaries go. That's a good question too. For a mature business looking at these benchmarks and these ratios that would, if you're actually are working in the business performing, like if you have a job description where you're doing a job in your business every day, it would be part of this number here, your indirect labor cost, but it wouldn't necessarily be your entire paycheck. This gets a little bit tricky. You know, a lot of times people as the owner, they might be paying themselves more than what they would pay somebody off the street to perform that same job. But to keep, and that's okay if you want, but that would make these numbers look a little bit bigger, but it's really, you know, taking money out of one pocket and putting it in the other. So that's not a terribly big deal, except maybe you're paying more payroll tax and you need to, the way to really do it to get the cleanest number would be to factor in how much of the pay that you're giving yourself in terms of salary, what would the market rate be for hiring somebody to do what you're doing and I would put that there and I would be thinking the rest of it is down here in the net income. And really from your CPA would probably tell you that if you're giving yourself a paycheck, you wanna pay yourself market rate, but not a penny more and take the rest of it as profit from the company net income because the profit does not have the social security and other payroll taxes associated with it. You'll be saving yourself about seven and a half percent by doing it that way on the income that you're taking as profit as opposed to salary. All right, that looks like our last question there, Tom. Thanks so much. Well, thank you, I appreciate everybody joining us. I hope it was useful and if you have any questions, I think that you know how to find us. I mean, you can go to cleaning business builders and it's got our contact information and all that stuff there. We're not hard to get a hold of. Nope, we're not. All right, a lot of people saying thank you, Tom, and that it was great and very helpful, et cetera. So thanks again. I appreciate that. And again, if you have any questions, let me know and if you'd like the spreadsheet, let us know and we'll get it to you. Great, talk to everybody later. Bye-bye. Bye-bye.