Case Study: Clean Sweep

Virtual Workshop Preparation

Case Study: Clean Sweep

 

Introduction

Robson Harvey left Haiti to immigrate to Miami in the 1990s following the death of his beloved wife. Immigrating with him were his daughters Marie (born 1989) & Daphne (born 1993). Mr. Harvey remarried in 2000 and welcomed their new baby boy, Jean, in 2001.

LAUNCH

Mr. Harvey worked odd jobs until he saved enough money to start Clean Sweep in 1996. He began by cleaning professional offices in Little Haiti and nearby communities. This was mainly night and weekend work outside his clients’ office hours. This grew organically into residential cleaning services around 2000 when some business clients invited him to clean their homes in upscale neighborhoods outside of his community.

FAMILY

His daughter Marie assisted him on most jobs in the early days, and when she finished high school, she worked full-time in the operations, supervising the jobs that he could not attend to personally. When Mr. Harvey passed away in 2010, Marie took over the business herself by his wishes (although there was no written will).

Daughter Daphne helped her father and Marie through high school and then became the first Harvey to attend college. Daphne earned her associate’s degree in business at Miami Dade Community College and rejoined the family business full-time as office manager in 2015.

Both sisters sacrificed for years to send young brother Jean to Florida State University, where he studied business and marketing. Jean is expected to graduate in 2023.

CLEAN SWEEP IDENTITY

The Harvey family has always tried to position Clean Sweep as a community partner representing the best Haitian values to like-minded community businesses. “We are your Haitian neighbors who will outwork any outsiders to keep your property clean and sparkling at a price you can’t afford to turn down.” is their informal pitch.

BUSINESS MODEL

Pre-pandemic, 90% of CLEAN SWEEP’s revenue came from commercial contracts. Typically, they would obtain one client in a small professional center, and by leveraging their consistency, quality, and relational skills, they would eventually secure a collective contract for all the tenants of that building. They also have a daycare center client in their portfolio. The remaining 10% of their pre-pandemic revenue came from residential contracts, mainly in the homes of their business clients and with a few word-of-mouth clients. The two business channels are complementary, as the commercial work is generally done at night and the residential work during the day.

Their office and warehouse are in the family home in Little Haiti, which is financed as a business operations expense. CLEAN SWEEP owns two late-model service vans (10 y old and 20 y old) to move equipment and supplies to/from the worksites. Much of the time, employees use their personal vehicles to move between sites.

PRICING & COST-MANAGEMENT

Marie works hard to keep her pricing competitive, and Daphne manages costs to the penny – between them, they managed (pre-pandemic) to run the business at a 20% margin, slightly better than under their father’s stewardship.

MARKETING

CLEAN SWEEP does not have a marketing plan or budget. They have followed their father’s footsteps by gaining clients 100% by word of mouth, door-knocking, and connections they make at church. There is some discussion between Daphne and Jean about building a “real” marketing strategy when Jean graduates and enters the family business in mid-2022. This “modernization” of CLEAN SWEEP is a friction point between Marie and her younger siblings.

STAFFING

Besides Marie and Daphne, they have three full-time cleaners on staff. They have nine other employees on call. Pre-pandemic, the on-call employees averaged about 30 hours per week. Marie works double shifts when needed, and Daphne pitches in and helps on some night shifts.

COVID-19 IMPACT

From March 2020 to August 2020, the commercial business dropped by 50% due to many of their professional clients working from home and the closure of the daycare center. The residential business stayed steady during this period, with new clients asking for deep cleaning replacing the few clients who stopped service.

Beginning in 2021, the commercial business started to come back, led by the reopening of the daycare center, exceeding their pre-pandemic volume at the end of 2021.

Marie’s fixed cost ratios were stable during the crisis – she was able to reduce the hours of her on-call employees while retaining her full-time staff to weather the pandemic without layoffs. However, the pandemic challenge to the business was in her variable costs – cleaning supplies costs increased by +20% in 2021, fueled by shortages and supply chain issues, and these costs continue to rise in 2022.

Marie has been able to offset some of the cost increases by increasing residential cleaning prices, and although Daphne urged her to do the same for the commercial clients, Marie was reluctant; she saw that COVID was especially hard for the Little Haiti business community and she worried about losing the clients and community relationships that she and her dad worked to nurture over the past 20 years. This tension between the sisters on pricing strategy continues into 2022.

In August 2020, their cash flow improved when Daphne, overriding Marie’s objections, secured $15k in PPP assistance.

2021 has seen their commercial business stay steady in pricing and volume, and their residential revenue continues to grow mostly from pricing and premium services.

RISK

Beyond the ongoing steady price creep of their supplies, their insurance broker informed them that their workman’s comp insurance contract will increase by +25% in July 2022.

Both sisters are also worried about the condition of their vans and the potential cost of replacement.

FUNDING

Until 2020 CLEAN SWEEP was 100% bootstrapped. Robson Harvey never applied for loans or asked for assistance. Recently, they received the aforementioned $15k in PPP assistance and now a $10k Elevate Together grant, due to Daphne’s persistent efforts with the Urban League.

Clean Sweep Income Statement​

MENTORING

Daphne did the application and pushed Marie to seek mentoring. Their mentoring goals are to stimulate a flat business.

Daphne wants help with building the right strategy, including pricing, customer retention, and marketing.  Daphne sees their competitors using social media, as well as obtaining lucrative hotel, government & realtor contracts.

Marie is mostly interested in getting their costs under control, especially for labor, and she would like to increase their number of commercial clients.

Case Study: Clean Sweep

S.W.O.T. Analysis

For this workshop, please prepare a S.W.O.T. Analysis based on what you have learned about Clean Sweep.

Are you wondering or needing a refresher on a S.W.O.T. Analysis? No problem, here is an article on Investopedia.

Clean Sweep S.W.O.T. Analysis

Helpful

Harmful

Internal

External

Family Business Challenges; The 3 Issues Families Can’t Ignore

Authored by Francois Botha, Published by Forbes.com, March 31, 2020 (original article)

All businesses and those who own them face challenges at various points in their life cycles. These encompass things like talent acquisition, resource and cash flow management, growing competition, increasing regulation and fluctuations in not only the economic environment but consumer spending and loyalty.

Due to the nature of their business structure, in addition to these challenges, family-owned businesses and to an extent family offices, face a unique set of often issues that can have significant ramifications for the health and life of the company. The more interconnected a family is, and especially within a family business where assets are shared, the greater the potential for these issues to cause conflict.

Understanding these often-subtle nuances of family business dynamics is vital so that when families inevitably face them, they can have measures and strategies in place to overcome them proactively and avoid conflict.

Entitlement

The term “entitlement” describes those who demand benefits that exceed their contributions and show little respect to those responsible for those who attained material success in the first place. It often automatically conjures up archetypical images of spoilt, lazy, demanding next-generation brats and trust fund babies. Individuals who want to be handed everything for nothing and one day take over the family empire with little to no experience in its daily operations.

While this is an issue some family-owned businesses face when dealing with their next-generation heirs, it is not the only form of entitlement that exists in family businesses. The reality is that the founder’s beliefs, patterns and behaviors can also be rooted in entitlement. Just as the next generation often believe it is their right to control the family business, so founders may feel it is their right to control operations until they die, or sometimes even beyond death.

When either group cannot overcome their sense of entitlement, this directly impacts the relationships within the business and family, creating conflict that can contribute to the demise of the company. Thus, families need to be aware that both forms of entitlement can exist and that if they do, they cannot be ignored.

Just as next-generation heirs need to be educated and prepared for family office succession, so founders need to prioritize business continuity over personal power, both can be achieved by implementing and strictly adhering to corporate governance structures and clear succession plans. These not only enable the family business to maintain professionalism but also to prosper and continue for generations to come.

Sibling Rivalry

Most family business founders dream of building a business that can one day enable their offspring to join it and work as a team to ensure its future success. The harsh reality is that most don’t make it to the third generation. A contributing factor in family business demise is often sibling conflict.

While family business leaders are often able to mediate and manage conflict between their children successfully, many become increasingly concerned about the effect’s sibling rivalry may have on the health of the company when they start to consider succession planning. At this juncture, an important question becomes, what will happen when they’re no longer around to handle disputes?

According to Fiducia Partners, sibling rivalry is often emotionally or strategically motivated and solutions need to address the underlying cause. Emotional rivalry often stems from competition for parental recognition or approval, which starts when siblings are young but can extend into adulthood and their positions within the family business. When siblings are competing, they are not working together for the good of the enterprise.

If sibling rivalry has an emotional root, parent/child relationships need to be examined and worked on. In the business setting, it may be necessary to put measures in place that formalize achievement recognition and reward, thus removing the perception or influence of parental favoritism. Alternatively, Fiducia Partners suggest mandating that family members work outside of the family business, allowing them to achieve personal success elsewhere. This, the consultancy believes, can aid siblings in developing respect for themselves and each other’s achievements, which then supersede the need for parental approval.

While raised in the same family with the same parents and belief systems, siblings often develop conflicting values, management styles and even risk appetites, all of which can cause strategic rivalry in the family business setting. In this instance, a solid, detailed business plan and implementation of robust family governance rules and structures provide a unified direction for the business and reduce the potential for ambiguity and conflict, even when founders are no longer involved.

Employing spouses

In every family business, it is inevitable that, at some point, “outsiders” will be brought into the family and may potentially be considered for employment within the family business. There are as many arguments supporting spousal employment in family businesses as there against it.

When a spouse is highly qualified for the job, performance-driven, engaged and accountable, outcomes of employment within the business can be positive. On the other hand, the personal relationship issues experienced by a couple at home, or with other family members outside of work have the potential to spill over into business life and vice versa. This can affect all involved, blurring the lines between personal and business life and family and causing major conflict that can threaten the survival of the organization. Factor in that around half of all marriages end in divorces and the potential for complications down the line can be significant.

For these reasons, families need to give considerable thought and engage in open discussions that cover the possible implications of allowing spouses to join the business before proceeding. If it is decided that spouses will be invited, specific guidelines, employment and compensation policies, written codes of conduct as well as disciplinary and dispute resolution procedures need to be implemented and adhered to by all involved. In addition to these operational policies, agreements establishing what will happen in the event of a divorce or exit from the business should be implemented. While these measures will never eliminate conflict, they can help to mediate and manage it.

The issues facing family businesses and in some instances family offices are diverse, complicated, emotionally charged yet, in some instances, subtle. Still, they can be effectively managed and overcome when appropriate strategies and governance are implemented and executed. This is essential if both the family business and harmony are to be successfully preserved.