Biopsy of a Cleaning company

Cleaning company tidies up its strategy: Cleaning company GOL Group was created 24 years ago by Peter Gray (pictured) and Rikkie Lewis, both now 44. “We both enjoy playing golf and decided that, by cleaning in the morning, we would have the rest of the day to go and play,” says Gray. “We really didn’t take it too seriously.”
Today, however, GOL Group is anything but a lifestyle business. The Potters Bar-based company currently has a £1.1m income from a range of cleaning, maintenance and gardening contracts for private landlords and property agents. “We found our niche market was residential – looking after the communal areas in blocks of flats,” says Gray. slow and organic growth over the past quarter of a century, Gray now has his sights set on taking GOL to a £4m-ayear business within five years.
There is, though, a hurdle. A period of consolidation among its customer base means Gray and Lewis are being forced to explore new ventures just to maintain their current income levels and retain the services of the 34 skilled staff. The pair have always worked on the basis that no one client would account for more than 5pc of income. The consolidation means that ratio is ruined. But the challenges for GOL go much deeper. An overdue invoice – more than eight months late - has now been put in the hands of a debt collector. It’s not a huge amount – £16,000 – but enough to impact cashflow and profitability.
GOL has also terminated the contract. “We were providing a lot of manpower which was costing our company and we couldn’t afford it to carry on. If we had, it would have threatened the business,” says Gray. That client was one of several – together accounting for around 40pc of GOL’s income – that have been subsumed into a growing conglomerate. It means the GOL action has repercussions far wider now than the initial defaulting business. “It will potentially have an effect on our relationship with the main group,” he adds. The upshot is that Gray has to scout around for new revenue streams. “We have two options,” he says. “Take our current offering into the social housing sector, or find a new offering for the private residential market.” Both have their drawbacks. Competitors in the private residential sector tend to be small, he adds.
But in the social housing sector, competitors are much bigger meaning they can operate with a proportionately lower fixed cost base making it hard for the likes of GOL to compete on price. Net margins are also lower. GOL sees 8.5pc from its private market contracts but because of the volume, those working in the social sector do so on 5pc, says Gray. But it is a growing market. “Social housing now has to account for 25pc of all new builds.” Also, most housing associations, he adds, pay promptly. “We are starting to build relationships with housing associations. We are confident we can compete on service but the problem is breaking in and getting across the awareness that we are able to provide that service.
“We are at the stage where we need to diversify but we are in a predicament. “In social housing we are a very small player in a very big pond. We are not well known and to break into the market is hard. For most of these contracts your turnover has to be three times the value. “All we can bid for are £300,000 contracts. I have thought about acquisition to bring our turnover up and so make us able to bid for bigger contracts.
“However in our current private lettings market we are perceived as being quite large and a lot of property companies like to go with much smaller, one-manband operations because they have more control over the contractor. “These smaller businesses can also undercut us as they don’t carry the overheads we do. We are too small for the public and too big for the private sectors.”
Which brings Gray to his third option – stick with the current sector but expand the offering. “One of the services we have been providing is clearing items fly-tipped on clients’ property. The margins are much better and it seems to be a market we could go into.” Targeting domestic, retail and offices, Gray sees this opportunity as a way to give an instant boost to cashflow. “You get paid up front.” Such a move would, admits Gray, involve a lot of marketing. “We haven’t been very proactive with our sales and marketing so far and I’m not a natural sales person,” says Gray.
Which raises the question, shouldn’t GOL be looking to employ a dedicated sales team? “We did employ a sales consultant in the past – on a retainer for two days a week,” he says. “It cost us £30,000 for a year and we didn’t get one job from it.” Time is not on his side. Unless Gray can secure new revenue streams by the end of the year, he fears he will have to start shedding staff.

Expert comments on GOL Group - Business Club:

David James - Director, Henley Business School at the University of Reading:
In the best of times businesses often overlook their fundamentals, which in the worst of times comes back to bite them hard. A key fundamental of any business is marketing and relationship management and neglecting these has been partially responsible for the challenges Peter Gray and Rikkie Lewis face now. But if GOL is to grow they are going to have to take a more market-oriented approach and build awareness of what they can do and how good they are. Now is the time to get serious and push the name out in the market and identify the best growth opportunities and drive for them single-mindedly. Going for a niche in messy cleaning jobs such as clearing flytipping and fast response SWAT cleaning teams for jobs “too dirty for anyone else” may be their best bet. Working with the police on clearing up crime scenes may be an opportunity; drug clearances may also be a route. But without strong sales and marketing, a known name and strong client relationships will never develop. Focus on those basics and growth will come.

Tony Ford - Executive chairman, B2B Data. Com:
The retail and office market, which offers higher margins, is where GOL should take its business. This avoids the need for size and the requirements to meet set criteria of housing associations in a very competitive, lower margin market. The fact that the private market is fragmented is an opportunity and GOL’s size should impress land and property agents. It should be able to compete due to its critical mass. First GOL should research the offerings of its competitors. Does GOL provide the same services? What about window cleaning or changing lights? Find out what GOL’s competitive advantages could be in terms of price and services. Secondly look at internet presence and marketing material and then determine routes to market. This might be telesales following market research or could be direct face to face presentations and pitches. Bring in some professional help. The best salespeople are usually the founders as they have the passion. Sales training is worth considering and Peter Gray and Rikkie Lewis could decide to do the initial sales this way.

Rupert Merson - Teacher at London Business School:
GOL is sitting on the horns of several dilemmas. It’s not alone – all successful, growing businesses get stuck on them. Getting out of them demands change. Firstly, there’s the changing client. As you get bigger your clients get bigger too. Potentially there’s more money to be made, but bigger clients come with grief. Secondly, GOL is wondering which growth lever to pull – different services to existing clients, or different types of clients for existing services? Both routes present challenges. Thirdly, GOL is stuck in the middle – it isn’t as cheap as its small competitors nor as well resourced as its big competitors. The answer to dilemma three is: get big fast. That will then enable it to pitch for the bigger client (the answer to dilemma one). The answer to dilemma two lies in the answer to another question: which of the choices open to them will give them the best chances of securing business from larger clients soonest? None of this is easy. GOL will need to recruit and invest. And the owners will have to play less golf.

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Property Management Ups & Downs

Beal Properties Focusing on Upgrading Facilities USA: Beal Properties, LLC, a property management company in Chicago that specializes in rental apartments and condominiums, announces that they are focusing on upgrading some of their rental apartment buildings. The company owns and manages many properties throughout the Chicago area. Some of the neighborhoods include the North Shore, Evanston, Glencoe, Winnetka and Highland Park. Many of their buildings are located just off Lake Michigan and are older, vintage buildings. Though the buildings are older, Beal Properties updates the apartments inside with modern conveniences. They have been managing properties in the Chicago area for more than 80 years. Many of the rental apartment buildings owned by Beal Properties are located near train and bus lines and are just minutes away from downtown Chicago, the shops on Michigan Avenue and the nightlife and cultural attractions along the North Shore.
"We know that Chicago renters are a savvy group of people. They know what they are looking for in a home and we strive to give them exactly what they want. Our tenants love living just off Lake Michigan in our vintage buildings. With Beal Property Management, our tenants receive classic Chicago charm with the modern conveniences they expect. Living in one of our properties means that our tenants are never far from all the fantastic cultural activities and fun Chicago has to offer," said the owner of Beal Properties, LLC.
Lead by its janitorial supervisor, the janitorial team has been working to clean up, upgrade and beautify all of Beal's properties. Some of the things being done include hallway cleaning, courtyard cleaning, landscaping, individual apartment renovations, window cleaning, electrical upgrades, porch replacement and painting. Tenants should start to see the impact almost immediately after work has begun in the common areas. Some of the buildings affected are 550-560 West Aldine, 550 West Arlington and 719-727 West Barry, all in Chicago.
"We want to create the best possible living space for our tenants and by doing a little repairing and cleaning, we'll be able to do just that. Beal Properties' tenants will see improved common areas such as hallways, courtyards and porches. We are also adding landscaping to make the building exteriors look more inviting for our tenants. Some apartments will be completely renovated on the inside and we'll be updating appliances and painting the interiors. We know our tenants have a choice in where they want to live and the changes we are making will make our rental apartments even better places to live," said the owner. About Beal Properties, LLC: Beal Properties, LLC is a property managing company with rental apartments throughout the Chicago area. They have been managing properties for over 80 years.

MyHome suspended UK: Lloyds Bank has pulled the plug on MyHome International, the nationwide franchise operator providing residential services such as cleaning and gardening to thousands of families. The bank demanded immediate repayment yesterday of an £8m loan. The company said it was unable to pay and suspended dealings in its shares on the AIM market.
MyHome has more than 900 franchisees. Their immediate future is uncertain. The company owes its present plight to over-ambitious expansion. But it has also been hit by what it calls "cash-rich, time-poor" householders who are having to rein in their spending because of the credit crunch. Alarm bells began ringing in June when the company, now with a new executive team, flagged up a deteriorating financial position and warned that pressure on household budgets would affect results for the rest of the year. The following month it said that it was in breach of its banking covenants and was in discussions with Lloyds Bank which said it remained "committed" to a restructuring of its £8m facility. But that proved to be a pipe dream and the bank has decided it is no longer willing to support the company which has also been in talks with unnamed financiers.
Franchisees who have paid thousands of pounds to join the MyHome network could lose heavily.
Management has almost certainly been distracted by the tasks of absorbing last November's £16m acquisition of the "man-in-a-van" car repair business ChipsAway. The board was then forced into a much-needed restructuring with the loss of jobs and offices resulting in one-off costs of £3.3m. The company was also starting to find it harder to attract franchisees who were struggling themselves to raise the necessary finance. During the first half of the year, MyHome attracted just 77 new recruits, well below targets.
The group slimmed down to focus on residential and oven, carpet, fabric, and window cleaning, lawn cutting, and plumbing and electrical work. MyHome was originally set up by Unilever which identified residential cleaning as a market for its cleaning and detergent products, but it was sold in 2001 and turned into a franchise operation. The company was floated on AIM in December 2007 at 40p, focusing on what it termed "professional and managerial households likely to pay for a high-quality service provided by efficient and trustworthy providers". The company targeted what it called "managerially minded entrepreneurs" as franchisees, starting with one vehicle and a couple of staff handling around 25 customers. This would later be developed into a more ambitious undertaking with the franchisee servicing up to 250 customers. At its suspension price of 5p, MyHome is valued at just £3.18m. The shares have been as high as 98p.