Executive
Summary
The commercial cleaning subsector of
the Nigerian economy is still growing. We believe that with the growth of the
service outsourcing model in the country and with few well organized players in
this important sphere, XYZ Cleaning Services is well poised to add real value
to the business in a way that would create a win-win possibility for the
customers, the environment and our shareholders as well as other stakeholders.
• The commercial cleaning market in
Nigeria and particularly Lagos will expand over the next few years and will
support a number of startup firms over the next seven years.
In addition, the market for existing
cleaning contracts is highly fragmented with no major players dominating, thus
creating opportunities for new firms to enter.
• Lagos customers would be willing to
consider using XYZ Cleaning Services. In a survey of 30 prospective clients, 68
per cent indicated they would consider using the proposed company.
• Market surveys turned up several promising
customer leads across Lagos and other important cities such as Abuja and Port Harcourt
in both the commercial and industrial sectors.
XYZ Cleaning Services will initially
focus on securing a base of contracts from Lagos, especially commercial organisations
and then expand our marketing focus throughout the metropolitan cities across country.
The marketing niches are particularly
promising target audiences -institutional customers, corporate customers, and governments.
These targets alone account for a conservatively estimated N440 billion yearly
contract revenues in this sector.
XYZ pilot operations since March 2014
providing cleaning services at six sites grossing over N5 million confirm
expectations regarding viability grossing. The take off staff we have engaged
have also exhibited impressive commitment to their functions.
The
Enterprise
XYZ developed a business model and
structure for gaps in the provision of commercial and industrial cleaning to customers
in Lagos and big cities in Nigeria. We have developed creative operation, sales
and marketing inputs such as the 10 minute interval cleaning approach as well
as administrative excellence and the use of business consultants to help with
operational and growth issues.
XYZ has also in place, a quality
standards checks and continuous training for staff. We strive to build a
sustainable business that will succeed largely for the benefit of the environment,
job creation, and reinvestment.
Objectives
1) The landing of four or more new contracts each
quarter for five years; and
2) The creation of at least 40 new jobs
in the same period.
The venture is operating as a
subsidiary of XYZ Limited, a company dully registered by the Corporate Affairs
Commission –see Appendix A for copy of company registration certificate.
We are seeking capital injection of N10
million to enable us mechanize our operation, get a befitting head office,
conduct marketing communication campaigns, get operational vans and recruit
staff, among others.
The first two years of operation will
cover operational losses prior to break-even in year three-five. Note that
while the business may take a little time to achieve profitability, revenue
will start rolling in within six months of starting operations formally.
Commercial cleaning consists of
janitorial services provided to a variety of commercial property types. Low
entry barriers and a highly fragmented marketplace mark the industry, with no
large player or players dominating at the regional or national level. The
sector is attractive because of the opportunity to earn a significant sustainable
income.
Competitive
Advantage
For us at XYZ, our main competitive
advantages are novel approach to customer service and the commitment to quality
by our management. Our system, with its central contact point for responsive,
customer service, is structured to address the most common customer frustration
with existing cleaning firms. Our employees are more committed to delivering
quality services than most staff of other cleaning firms due to a combination
of motivational instruments.
Another advantage for our company is
strong management. XYZ’s manager is an experienced marketing executive with an
MBA from a renowned institution. This individual has in the kitty over 10 years
of sales and marketing experience with firms of all sizes, as well as
experience in consulting and business management and start-up service
businesses (Appendix B contains manager’s resume).
The primary strategy for competing with
established cleaning firms is to focus on providing high quality service and
great customer service to big, small and mid-sized clients that are treated
less well. These clients include banks/financial institutions, big
supermarkets, eateries, corporate offices, government offices, professional
service firms, such as law and accounting firms, as well as small retail
establishments. Over 400,000 of these small businesses are in operation in Lagos
alone.
The Industry
Commercial cleaning consists of
janitorial services provided to a variety of commercial property types: office,
retail, industrial, medical facilities, and multi-occupant apartment or luxury
apartment, among others. Services are provided both on a regular, scheduled
basis as spelt out by the particular cleaning contracts with revenues cited as
monthly or annual amounts).
Common services offered include
vacuuming, dusting, scrubbing and trash removal. Some cleaning contracts are on
a one-time project basis (revenues cited per event). Common project contracts
are for services like floor buffing, rug cleaning, and window washing.
While some firms provide services to
both the commercial and the residential market, most of the larger firms serve
the commercial market exclusively. Commercial cleaning is typically performed
in the evenings and early mornings while the employees of a commercial property
are away from the site.
The cleaning industry is a growing one in
Nigeria. The industry has continued to expand as companies increasingly
outsource cleaning functions and as new properties come onto the market.
Although the industry is not recession-proof, it is somewhat resistant to
movements in the economy due to the relatively inelastic demand for cleaning
services.
The
Market
The national market for janitorial/building
maintenance services has expanded steadily over the past decade. Estimated
industry revenues grew from around N100 billion in 1993 to just under N400 billion
in 2012. It is likely to maintain a healthy growth pattern over the medium
term.
Total employment in janitorial services
nationwide was estimated at 909,000 in 2013, up from 787,000 in 2003 and
677,000 in 1998.
Demand for janitorial services is
linked to the performance of the commercial real estate market, as well as
trends in the outsourcing of non-core services. Growth in the commercial
cleaning industry depends upon increased outsourcing, commercial vacancy rates,
and the construction of new office and commercial space.
By building a demand model based on
projected new construction and occupancy rates, we can project the demand for
new janitorial positions in the Lagos market (increases in outsourced positions
are an additional source of demand over and above the figures in this model).
Our model focuses on the office market. Although retail and institutional
customers also generate demand for janitorial services, the office sector is
the largest component of the commercial cleaning market.
Growth
Forecast
The research efforts project modest
growth for the office cleaning industry as the commercial real estate sector
begins to recover from the recent global economic downturn. The remainder of
the market is divided among retail, industrial, institutional, and other clients.
By holding the 2010 ratio of office
cleaners to occupied space constant, we can project the number of janitorial
workers who will be needed to meet the new office market demand for cleaning
services. The model indicates that 2,014 new janitorial workers will be needed
to meet new construction demand in 2015. The number of new cleaning employees
is predicted to be 6,000 in the next three year.
Existing firms will capture much of
this increased demand. Nevertheless, these figures indicate that the office
market alone can support a number of startup firms in the country. Even
assuming that new firms capture only five to ten percent of the increased
capacity, the cleaning market could support 10-15 new small-sized firms (30-60
employees) over the next three years. It should be noted again that adding the
demand from turnover, outsourcing, and other commercial cleaning sectors such
as retail or industrial space would further increase these figures.
Market
Analysis
Lagos customers would be willing to
consider using XYZ. In a market survey, 68 per cent of companies and
organizations surveyed indicated they would consider using XYZ. Federal, state
and local government offices are also possible sources for business, due to various
agencies and programmes established to encourage business growth.
In order to assess the level of demand
for XYZ’s services, we surveyed 41 potential customers of the business. The
interviewees included banks, property managers, health care facilities,
government agencies, and supermarkets, among other business types. Overall, the
results indicate that opportunities exist in the market.
The survey respondents had a median of
20,500 square feet to be cleaned, suggesting a median contract value of N4 million
per year. Cleaning firms cleaned the survey respondents’ spaces a median of
five times per week.
The survey responses also contain data
about the most important factors in selecting a cleaning firm. Potential
customers generally ranked quality as the most important consideration in
choosing a firm. Price was ranked second, followed by responsiveness and
variety of services.
These results indicate that XYZ must
provide work of the highest quality at a competitive price, and that timely
customer service is very important.
Given the competitive nature of the
commercial cleaning industry, it will be important for us to try to build a
solid base of customers, particularly among institutions that are in MC’s niche
areas –banks/financial institutions, shopping malls/supermarkets, offices,
estates, luxury apartments, educational institutions and government establishments.
The surveys of firms/institutions in
these categories conducted for this report turned up a number of promising
leads. Some opportunities may also exist with property management companies of
serviced flats or luxury apartments around Ikoyi and Victoria Island. They stated
that they were dissatisfied with some of their current cleaning contractors and
that they would be willing to use XYZ.
Government contracts are another
potential source of revenue for XYZ. These contracts are attractive in the
sense that the volume can be large, although the bidding process and contract
requirements can often be somewhat burdensome and drawn-out. Descriptions of
the potential for each level of government are contained below. There are about
70 federal buildings within the Lagos area and many more in Abuja by our
estimation. State agencies are also good
targets to get cleaning contracts.
Competition
There are 1,200 commercial cleaning
firms in the Lagos and similar number in other large cities. There are smaller
numbers in smaller towns; the discrepancy is likely due to higher commercial
density in urban areas than in the country as a whole. In general, the existing
cleaning enterprises do not reduce available market because their market share remains
fairly low. If anything, the growth of additional firms serves to raise
customer awareness and increase receptivity to our marketing pitch.
XYZ’ true competition is conventional
cleaning companies. A typical example is ABC Cleaning Services with head office
in Lagos and offices in major cities in Nigeria.
Marketing
Plan
Based on the competitive analysis, the essential
elements of the XYZ marketing mix are clear. Our service offerings must stress
the highest quality. Pricing is also important. In order to win contracts, XYZ will:
• Differentiate its marketing message
through emphasis on superior customer service, more equitable treatment of
workers and close supervision
• Use price as strategy for competition
• Possibly green cleaning techniques such
as use of non- toxic chemicals
• Aggressively pursue new contracts
coming on the market as a result of new construction
Marketing
Strategies
Juxtaposing the competitive strengths
cited by prospective competitors with the desired attributes preferred by
prospective clients, service quality was the most important factor customers
mentioned in choosing a cleaning service. Comparatively few companies used
price as a marketing tactic relative to the attribute’s ranking among
prospective customers—in a low skill, labor-intensive field like cleaning,
cutting prices can have a drastic effect on the bottom line.
The third most important feature for a
prospective client is responsiveness – how fast the company acts to resolve issues.
None of the cleaning services in our test cited great customer service as a
competitive advantage, revealing a great marketing opportunity for our service.
XYZ’ structure offers clients offer superior customer service experience for
customers.
To pleasure prospective clients we
shall be offering full bouquet of cleaning services -a variety of janitorial
services beyond standard office cleaning including window cleaning for high
rise buildings, industrial cleaning, and post-construction cleaning. XYZ
marketing strategy grows out of the research conducted for this business plan
as well as experiences. XYZ differentiates itself by offering top quality work and
superior responsiveness/customer service to its clients. XYZ is able to price
cleaning services on par with competitors (even though XYZ cleaners earn
considerably more).
Quality
Control
XYZ ensues that all work performed by employees
are of the highest quality. The general manager with/through the supervisors shall
inspect the quality of work on a regular basis and will perform any other type
of quality measurement or monitoring necessary to maintain quality standards.
All work performed by staff will meet or exceed the following standards:
• The MSC/employee will perform all aspects of
the work that are specified in the contract;
• The MSC/employee will perform the job
in accordance with any guidelines, policies, standards, or comments issued by
the client, including suggestions made by staff as the result of site visits or
quality checks, or methods demonstrated in training sessions;
• The work site will be left in an
extremely clean and tidy fashion;
• No damage will be done to any of the
client’s property or any of the building fixtures or features;
• The MSC/employee will be very
courteous and responsive to customer requests, complaints, and other feedback;
• The MSC/employee will perform the
work in the manner that is least disruptive to the client;
• The MSC/employee will immediately let
the manager know about all customer requests, complaints, or other feedback.
Financial
Plan
Based on our expectations of financial
performance and workforce availability, we believe that XYZ will dip into
equity capital/funding facility for its first two years of existence. This will
go into getting a befitting office space, machinery, consumables, staff
salaries, operational vehicles, legal services, consultants and government
dues.
In addition to providing a portion of
the equity for the venture, the company will also contribute non-cash support
for items such as office space and legal assistance. By year four, XYZ will be
a fully self-sustaining enterprise.
Capital
Analysis
• N200/square foot annual billing rate
• Wage inflation: 5 per cent
• Billing rate inflation: 5 per cent
• Accounts payable: 30 days
• N10 million loan at 15 per cent with (5-year
term)
• 25 staff members -wages
• Accounts receivable: 45 days
• Rent expenses
• Total number of estimated companies with
service contracts:
Year 1: 7
Year 2: 12
Year 3: 19
Year 4: 26
Year 5: 37
Conclusion
The market for our services is clearly
huge and growing, giving us an opportunity to position the business on the path
of solid, undeniable commercial success and ensure handsome returns on
stakeholders’ investment. The explosive growth for this market support us
reaching its break-even point by March 2016 and profitability in just two years.
By driving 60 per cent of profit back
into the business, we expect to reduce our line of credit balance to zero by
December 2017.
Initial responses to test marketing
with potential customers demonstrate a strong affinity for the services. Test
marketing also provided important insights into the customer and end-user
experience, both with the service buying process and using refined version of
the service. This plan reflects the applications of suggestions from the market
study. We anticipate even stronger growth than in this plan, based on our
recent market test responses.
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