2019 Wrap Up Success or Failure?
Well folks, it’s the end of 2019 and my wife and I are exhausted! We have spent the last 18+ months starting and growing our commercial cleaning franchise business from scratch. We ran the calculations about 2 years ago and decided that quitting our corporate jobs and starting a business would catapult us closer to Financial Independence and Retiring Early (FIRE) faster than our corporate jobs. My wife quit her job as a mechanical engineer, and I quit my job as a business development consultant. We both were making more money than we had ever made in our lives. We had all the cushy benefits, including work from home (me), company car, company cell phone, walking distance to work (my wife), 401K match and generous bonus programs. We were both raised with a scarcity mindset, so the idea of leaving $200,000 plus a year of compensation and benefits behind was terrifying. We had decided to buy a franchise license from the very company that I consulted for. I had the opportunity to see the profit and loss statements of many franchise owners who I worked with and realized that there was something to this business ownership idea.
It took a while for us to take salary from the business (see the chart below).
The first 12 month totals.
We started getting worried if we had made the right decision. We were making a small profit at first but had some 0% interest debts we owed to the two former business owners whom we had purchased assets from to start our business (a total of $50,000) and we still owed ourselves about $65,000 cash in startup funds. We put all the net profits towards those debts and purchasing more machines/supplies to perform more work. Had we made the right call? Could we generate enough wealth in the 5 year period that we were hoping for to retire from ”having to make money”? There were days that I thought my wife might just sell the business behind my back. We owed $115,000 and we were not taking an income. It felt like we took a step in the wrong direction. Or as my wife has said, it felt like we took a step off a financial cliff and just kept falling. It wasn’t until January of 2019 that we started to see a bit of light. Below see the 2019 numbers from our business. To clarify, the net income is after I have already taken out the owner’s salary. I realize that my columns above may be confusing, but the chart below helps clarify.
2019 Totals for the business. Combine my income taken plus the profit to get the total benefit to the owner.
We finally got our act together and some traction with clients in January 2019. However, as you can see, it was in April that things really started cooking with gas. We set a goal in December of 2018 of hitting a monthly revenue of $42,000 by December 2019. When we set that goal, internally, I felt like we would never hit it, but coming close would be good enough for me. As you can see, we hit that goal in April, 8 months ahead of schedule. With the above net profits, we were able to pay back the money owed to former owners, to where we now only owe $8,000 (at 0% interest so I’m in no rush to pay more than the minimum) and we paid ourselves back $25,000. We roughly owe ourselves $40,000 and $8,000 to outsiders, for a total of $48,000 still owed. I have enough in my company checking account to pay that off twice over, but I’m holding onto the cash to make sure we have enough funds to start any large commercial cleaning accounts that might come along.
To summarize, in 2019 we took home $196,833.68. With that money we paid off $67,000 of debt. We also purchased $10,000+ worth of equipment for the company. Keep in mind, that we haven’t taken out depreciation or taxes of our total. That will be another big chunk. Any remaining cash will stay in our business checking account to help build the company’s emergency fund.
After showing my wife the above numbers, she calmed down a bit and has allowed me to continue forward with the business. It is hard starting a business from scratch. It seems that with most businesses, you need some significant upfront investment and the ability to delay a salary for at least a year to ensure that your business has enough cash to move forward in the future. At this point, choosing to do the business is looking like the right decision. My wife has been able to start consulting on the side as an engineer adding to our personal finances as well. I’ll update you next time on how we did with our personal finances in 2019. Happy Holidays!
