EXECUTIVE SUMMARY:

Executive Professional Cleaning Services (EPCS) is a start-up office cleaning service

provider servicing the needs of offices in Puerto Rico. EPCS will strive to provide clients with

professional and first-class quality service. Services will include office cleaning (including

removal of trash, dust and cleaning of all surfaces, sweeping and mopping floors and cleaning of

doors and walls as needed), furniture cleaning, floor waxing, floor stripping and sealing, carpet

cleaning, window cleaning and finally, cleaning of bathrooms and kitchen areas. The

Administrator and Supervisor of EPCS are the owners of the company. With the advice from

their CPA and attorney, they chose to incorporate EPCS as a Corporation.

Potential target customers include small (0-49 employees) and medium offices (50-499

employees) within the metropolitan area, which include the towns of Bayamon, San Juan,

Caguas, Trujillo Alto, Carolina and Guaynabo. According to the US Census Bureau, the number

of companies in the metropolitan area of Puerto Rico indicates a greater number of small

businesses, followed by medium and large businesses. The owners will commence business

operations with three (3) full time employees and will increase to six (6) throughout the first

year, given that the company achieves the forecasted growth in business. These employees will

be dedicated solely to providing quality cleaning services to EPSC’s clients. The owners will

interview, hire/fire employees, monitor performance, direct sales, bill clients, purchase

equipment & supplies, observe daily financial information, and assist with cleaning duties if

necessary. They will work along with their employees to assist during the busier months.

Employees are vital components of providing a professional, quality cleaning service; therefore,

EPCS will provide adequate pay and extensive application processes to extract the highest

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quality of customer service from all employees. EPCS will mainly service the offices 5 days per

week or the time required.

EPCS estimates an initial investment of $41,500, which will be utilized primarily in

purchasing cleaning equipment & supplies, lease payments, payroll, and additional working

capital needs throughout the first year. Since the owners will each invest $5,000, EPCS will need

debt financing of $31,500. EPCS projects a loss of $14,735 in Year 1 with operating expenses of

$199,593, while in the following years there is an increase in revenues. Although the projections

reflect losses during the first year, the calculations of net present value (NPV) are positive. This

means that EPCS’s owners would receive a higher return on their investment than if they were to

invest elsewhere (based on their expected return on investment for other projects). Consequently,

the owners should invest in the company.

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INTRODUCTION

Executive Professional Cleaning Services (EPCS) seeks to establish itself as a leader in

office cleaning in the metropolitan area of Puerto Rico. Specific objectives that EPCS will seek

to meet over the next years include: to build a substantial, regular client base; to build operations

infrastructure, including professional management, and documented processes for operations and

cleaning practices; to build healthy gross margins by establishing itself as a significant buyer and

reducing pricing on cleaning supplies; to train low-cost labor to be more productive and efficient

in providing cleaning services; and to create a culture of productivity and resourcefulness for all

staff by encouraging the best ideas and cleaning procedures in order to rise to the top and be able

to properly reward its employees for their contributions.

EPCS seeks to ensure that businesses have a spotless office environment to support the

work they do and have their company focus completely on providing their services. The

company trains and trusts its employees to clean well and clean smart, listen to the needs of its

client to do the job they need done, and responds to the demands of the environment.

To become successful in the office cleaning business, EPCS must: foster an environment

of employees empowerment from day one of operations to make sure cleaning crews clean well

(carefully) and clean smart (efficiently), listen attentively to the needs of the client and

communicate this information effectively to cleaning crews, research and remain experts on the

greenest cleaning practices and products, and remember that the cleaning must meet or exceed

clients expectations to be considered done.

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INDUSTRY ANALYSIS:

The commercial cleaning industry is one of the fastest growing and most productive

occupations to invest in. Cleaning offices is not a seasonal business. Offices are running all year

round, and cleaning these commercial areas is needed in all 4 seasons. Even if the companies try

to cut expenses by laying off workers, they cannot stop providing a clean area for their remaining

employees. This industry has an increase in revenues of 16% every year.

SWOT Analysis:

STRENGTHS:

Commitment to quality service.

Dedication to customer satisfaction.

Highly trained personnel

Owner experience in the cleaning industry

WEAKNESSES:

New to market

Scarce resources base

OPPORTUNITIES:

New market with unlimited opportunities.

Market is showing consistent high growth.

THREATS:

Low barriers for entry of competitors.

High number of competitors makes replacement

of services easier.

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SERVICES

EPCS is a new cleaning service business specializing in office cleaning. The company

will operate from a central office and storage facility and use the work of cleaning staff training

to serve customers in Puerto Rico.

Services to be offered by EPCS will focus on the office space and includes:

Office cleaning (including removal of trash, dust and cleaning of all surfaces,

sweeping and mopping floors and cleaning of doors and walls as needed).

Furniture Cleaning.

Floor wax.

Floor Stripping and Sealing.

Carpet Cleaning.

Window Cleaning.

Cleaning the bathrooms and kitchen area(s).

EPCS deems it necessary to charge rates to offices based on sq. footage rather than a flat

fee due to their varying sizes. This will allow a cost structure affordable to all as well as an

operational system used to distinguish cleaning time needs and/or limits for each office. The

proposed pricing strategy is $0.30 per sq. foot per week cleaning. Therefore, an office occupying

2,500 sq. ft. will pay $0.30 x 2,500 = $750 per week, $3,000 per month during regular months.

The client may opt for additional cleanings during busier months/holidays. EPCS strives to be

competitive within the market, but will focus on offering the highest quality service. During the

developmental stage, the owner will work alongside employees performing the services, thus

providing labor cost savings. This strategy will succeed by keeping operating costs at a minimum

and gaining repeat business through quality, contracted work.

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EPCS contracts will have duration of 1 year. The contract will offer a 30-day “right to

cure” clause in their contracts – if the client is not satisfied, they can cancel without penalty.

The office will be located in the Main Santa Rosa Avenue, Bayamon with a rent of $800,

arriving at a total yearly lease expense of $9,600. Although cleaning services do not require

traditional office space, the purpose of obtaining an office front is to exude an enhanced

professional appearance to current and potential clients. The space will accommodate meetings

with clients and employees as well as storage for equipment and supplies.

MARKET

The market for office cleaning in Puerto Rico (metro area) includes small offices (1-49

employees), medium offices (50-499 employees) and large offices (500 employees and up).

Small offices are targeted as well as large, although it is expected that they will be more likely to

use our services after its record of customer service and operational success is established by

work with numerous smaller clients.

Market Segmentation:

1. Small Offices: Either newly established ventures, or small businesses designed to remain

small, few cleaning business seek to serve this market because of the cost in doing so.

Therefore, business owners generally require employees to do their own cleaning,

assuming they are saving money through this work. EPCS must show these businesses

not only that they do not save money by having employees do this work, but also that by

having professional cleaners maintain their offices they will increase morale,

productivity, and their appearance to customers, if customers/clients visit their office

spaces.

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2. Medium Offices: This group has a growing acceptance of the need for professional

cleaning services and is concerned primarily about price.

3. Large Offices: This group accepts the need to outsource their office cleaning to

professionals and is interested in working with vendors who can handle specific requests

and take care to protect the information, security, and equipment within their office

spaces.

Market Analysis:

According to data available in the U.S. Census Bureau on the number of companies in the

metropolitan area of Puerto Rico indicates a greater number of small businesses, followed by

medium and large Businesses.

Table 1. The number of offices in the towns that make up the metropolitan area.

Figure 1. Market Analysis.

Target Market Segment Strategy:

EPCS will build its expertise from the ground up, by building a successful base of small-

office clients, moving on to medium-office clients and then large-office clients. While larger

clients will not be turned away as the business starts out, it is expected that they will be more

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likely to use our services after its record of customer service and operational success is

established by work with numerous smaller clients.

Competition:

Direct Competition: Companies localized in the Metropolitan Area in Puerto Rico.

Indirect Competition: All the other companies localized outside the Metropolitan Area.

BUSINESS STRATEGY

Initially EPCS will provide its services to small and mid-sized offices within the

Metropolitan Area, even though a good marketing campaign requires a good marketing strategy,

the best way to achieve steady growth in business volume will be providing a high quality

service to our client base. EPCS will develop a quality-based service image focused on

responsibility, professionalism and competitive prices. To accomplish this; the recruited

personnel must have the personality and characteristics that exhibit EPCS’ vision, effective

personnel training will result in an efficient allocation of resources for the company, high

productivity and an employee that is able to take leadership roles within the organization by

developing and improving EPCS’ business strategy.

By providing excellent services at competitive introductory rates, the clients will get to

know the services and will seriously consider becoming repeat customers and making referrals,

thus enhancing EPCS’s reputation. Working within this framework EPCS will increase its

customer’s base to a tipping point that will enable it to adjust its structural organization and

hire/outsource additional employees to maintain a quality service reputation while increasing

market share.

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The business strategy will consist on three stages: the first stage; near launch operations;

this will comprise of on-site one on one client visits, cold calling sales and email offering our

services, contacts and other relevant information, as EPCS consolidates its efforts, additional

marketing strategies will be employed. The second stage involves newspaper advertisement, a

webpage and social networking advertisement; conventional brochures will illustrate variety

among our cleaning service packages. The third stage will be engaged when EPCS has become a

recognized established company; making brand recognition a strong advantage for EPCS; island

wide radio and TV advertisement, along with business conventions and industry gatherings.

The sales strategy, as mentioned before, will be based on a standard rate based on sq.

footage in order to accommodate varying office sizes and to provide clients with a consistent and

fair price. Based on cost of materials and time required, EPSC has decided on a proposed pricing

strategy of $0.30 per sq. foot per week of cleaning. This price is below the market average for

many cleaning service companies in the industry. Consequently, it would be affordable to all as

well as an operational system used to distinguish cleaning time needs and/or limits for each

office.

BUSINESS ORGANIZATION

We understand that the organizational structure more convenient for us is the private

corporation for profit. This decision is based on that this option represents a lower rate of income

taxes and protects the shareholders in their personal capacity.

Advantages of a Closed Corporation : (less than 75 shareholders)

Can operate without a board of directors and can be led by a single shareholder.

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Legal protection: In cases of litigation by any corporate management, it would sue the

corporation and not to its owners in their personal character.

Contributory benefits: Corporations are entitled to deduct expenses and payments for

their administration and depreciation of movable property.

Corporations have borrowing margin wider according to the composition of the

shareholders or the number of shares issued.

Disadvantages of a Corporation:

A corporation can‘t claim constitutional rights possessed by individuals (right to

defend themselves in court, the right to claim protection on privileges and immunities,

rights against self-incrimination).

Double taxation, corporations will pay for earnings from operations and the owners

will paid in their personal character for the accrued dividends.

ORGANIZATIONAL STRUCTURE:

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Shareholder (2)

Administrative Personnel (1)

Supervisor (1)

Employees (3)

The company will consist in 1 shareholder, 1 administrative personnel, 1 supervisor and 3

employees. The shareholder, also the administrative personnel, will be responsible for all

management duties, excluding professional activities performed by his advisory team consisting

of his banker, Certified Public Accountant, insurance agent, etc. The shareholder will interview,

hire/fire employees, perform payroll duties, practice direct sales, bill clients, purchase equipment

& supplies, observe daily financial information, maintain the website, and assist with cleaning

when necessary. The owners of the company will assist the cleaning employees during the

probable busier months. The supervisor is in charge of monitoring performance and assistance of

cleaning. The 3 employees with be paid a competitive salary with the purpose of attracting

employees who are efficient and high caliber. Also, additional training will be offered to the

employees.

FINANCIAL ANALYSIS:

The total project cost of EPCS is $41,428.07. EPCS is seeking $31,500 in loans. The loan

has a 4.8% interest for a term of 10 years. This will require a monthly payment of $ 331.04 (See

Appendix III-Table Amortization). The 2 owners are contributing $5,000 each from their

personal savings. Start-up costs will include cleaning equipment, cleaning supplies, office

equipment & supplies, and working capital. A detailed list of start-up expenses is included

among the following pages (See Appendix II). All cleaning equipment & supplies quotes are

based on current J&M Depot, Inc. wholesale prices.

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Cash Budget:

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Annual pro-forma income statements:

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Annual pro-forma balance sheets:

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NPV analysis:

Sensitivity analysis:

Using the calculations of Net Present Value we can determined that if the net cash flows

continues increasing in a 4% each year with a cost of capital of 10% the NPV is positive. This

positive value implies that we should make the investment. Therefore, if some assumptions are

change, for example, the cost of capital, the NPV will be decreasing and eventually be negative

(See table 2). If the NPV is negative, we should not invest in the business. This is caused because

the cost of capital is a critical value driver that values the cost of the company's funds.

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Table 2. Different Scenarios of cost of capital and its NPV

COST OF CAPITAL NPV

10% $323,793

20% $197,680

.

.

.

.

.

.72% -$106

CONCLUSION:

After analyzing all the financial sheets, studying the target market of EPCS in Puerto

Rico and developing marketing strategies we can conclude that it is positive and viable to initiate

the company of cleaning services to offices. Our establishment will be localized in Bayamon

capturing the metropolitan area sector.

Using the financial sheets, the net present value maintains positive to an increasing net

cash flow of 4% for the next years, with cost of capital from 10%.We could also say that is

viable to begin operations with the increasing revenue of 16% in the industry. For the first year

we will see a loss due to the initial cost for the opening of the business. Then, for the next years

there is revenue increasing among the years.

Because our strategy is to served primarily to small and medium offices to help them

concentrate in their strategy to increase revenues and not worry about cleaning, we expect that

the target market accepts positively the business and uses the services that Executive

Professional Cleaning Services has to offer. We are convinced that we can meet the financial

projections that we have established securing the EPCS success.

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REFERENCE

http://www.census.gov/econ/cbp/index.html

http://www.allbusiness.com/companyindex/Puerto_Rico/Janitorial_Services/

3D171E19AAE058530B901E5B535F008E-1.html

http://cleaningservicecomparison.com/commercial-cleaning-pricing.jsp?id =

http://autos.yahoo.com/ford-truck/e-series-van/2011

http://www.industrias.us/industriales/quimicas/ventajas-y-desventajas-de-una-

corporacion/

APPENDIX

Appendix I -F easibility Study :

For the selection of the location of the establishment we made a careful analysis of the

most important attributes to the success of our business, based on the basic principles of

the method "weighted site selection". Based on the analysis, the office location will preferably be

in Bayamon. Below is a list of principles and the weight we give to each attribute.

Description:

Weight Category Description

10 Office DensityAmount of offices nearby in which provided similar services

40 Proximity to ServicesProximity from the office to the location were the services are provided

5 Accesibility Access to the office

25 Rent Cost of the rent

15 TrafficAmount of traffic from the office to the location were the services will be provided

5Accumulated Atraction

Nearby businesses must attract similar customers

100

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Analysis:San Juan Bayamon Caguas Carolina

Office Density 2 5 7 7

Proximity to Services

35 30 25 27

Accesibility 3 5 5 5

Rent 5 17 20 15

Traffic 10 9 5 10

Accumulated Atraction

5 4 4 3

Total 60 70 66 67

Appendix II – Equipment and Supplies List

EQUIPMENT

Quantity U/M Description Unit Price Amount

3 SC890 CHAMBER VACUUM $366.32 $1,098.96

3 MODEL 20 HEAVY DUTY FLOOR MACHINE $953.95 $2,861.85

1 SELF-CONTAINED EXTRACTOR $1,601.10 $1,601.10

4 MOPPING COMBO PACK $151.54 $606.16

1 PERSONAL COMPUTER $1,380.00 $1,380.00

1 4 DRAWER COMMERCIAL VERTICAL FILE $117.63 $117.63

1 EXECUTIVE DESK $327.99 $327.99

2 DESK CHAIR $89.99 $179.98

1 ALL-IN-1 COPIER, PRINTER, FAX $499.99 $499.99

1 MULTI-LINE TELEPHONE $60.00 $60.00

1 FORD E-150 CARGO VAN $24,000.00 $24,000.00

Subtotal $32,733.66

OFFICE SUPPLIES

Description Amount

ACCESSORIES/DECORATION $368.00

BUISNESS CARDS $150.00

PENS, ENVELOPES, ETC. $250.00

Subtotal $768.00

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CLEANING SUPPLIESQuantity U/M Description Unit Price Amount

4 EACH DUST MOP WHITE 36" 13.00 52.004 EACH DUST MOP BLUE 18" 12.95 51.80

4 EACH DUST MOP BLUE 24" 16.25 65.004 EACH DUST MOP BLUE 36" 19.35 77.404 EACH D/M FRAME 5 X 18 3.80 15.204 EACH D/M FRAME 5 X 24 4.15 16.604 EACH D/M FRAME 5 X 36 5.90 23.601 DOZEN URINAL SCREEN N/P W/BLO 19.5 19.501 DOZEN URINAL SCREEN W/BLOCK 18.50 18.501 DOZEN BOWL BLOCK (SW) 3.5oz 9.90 9.904 EACH ESCOBA RECORD CON PALO 1.65 6.604 EACH RECOGEDOR PLASTICO 1.60 6.404 BOX LATEX GOLVE 4.95 19.801 CASE MASK 50 CS 4.50 4.504 EACH FIBERGLASS MOP 9.99 39.961 BOX-5 PAD 20" 5100 23.00 23.001 BOX-5 PAD 20" 7200 23.00 23.001 BOX-5 PAD 20" 4100 23.00 23.001 BOX-5 PAD 20" 3600 26.75 26.754 EACH MAPO RAYON BLUE 16oz 3.95 15.804 EACH MAPO RAYON 24oz 4.35 17.404 EACH MAPO RAYON 20oz 5.25 21.001 CASE 24 X 24 08 MIC BLACK 1000 CS 23.30 23.301 CASE 30 X 37 10 MIC BLACK 500 CS 23.95 23.951 CASE 30 X 37 10 MIC NAT 500 CS 23.95 23.951 CASE 43 X 48 16 MIC BLACK 200 CS 26.95 26.951 CS-12 GLASS CLEANER 32 OZ 24.85 24.8520 GALON HAND SOAP GALON---ELITE 4.85 97.002 Case Roll Towel 12/600 WHT 42.00 84.002 Case Roll Towel 12/350 WHT 25.95 51.902 Case Roll Towel 12/350 NAT 22.60 45.202 Case Toilet Tissue 12/1000 2 Ply 28.50 57.001 Box-4 Husky Ultra High Speed Finish Galon 64.80 64.801 Pail Husky Ultra High Speed Finish Pail 80.20 80.201 Box-4 Husky H/P UHS Premium FL Finish Galon 67.60 67.601 Pail Husky H/P UHS Premium FL Finish Pail 84.25 84.251 Pail Husky Floor & Concrete Sealer Pail 71.50 71.501 Pail Husky Versatile Premium FL Sealer 71.50 71.501 Pail Husky Rinse Free Floor Stripper Pail 67.80 67.801 Pail H/D Stripper Pail 46.95 46.952 Each Spray Buff- Rejuvenator 12/32 42.00 84.002 Galon SPRAY BUFF REJUVENATOR GL 9.65 19.302 CS-12 SPRAY & WIPE CLR DEGRACER 32 OZ 32.00 64.002 CS-12 N/A BOWL CLEANER 32 OZ 28.20 56.402 CS-12 BOWL CLEANER 9.5% THICKENED 32 OZ 26.40 52.802 CS-12 T/C BOWL TILET/PORCELAIN CLR 32OZ 30.00 60.002 CS-12 BOWL CLEANER 23% 32 OZ 27.00 54.002 CS-12 FURNITURE POLISH 16 OZ AEROSOL (GLAZE) 31.20 62.402 CS-12 STAINLESS STEEL WATER BASE 16 OZ (BRITE) 27.00 54.002 CS-12 STAINLESS STEEL OIL BASE 16 OZ (FLARE) 36.25 72.504 Each 5152 CHASE** DUST MOP TREATMENT 19 OZ 36.00 144.004 Each DUST MOP WHITE 18" 6.95 27.804 Each DUST MOP WHITE 24" 9.95 39.80

Subtotal 2380.41

PROJECT COST SUMMARY

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Description Amount

EQUIPMENT $32,733.66

CLEANING SUPPLIES $2,380.41

OFFICE SUPPLIES $768.00

WORKING CAPITAL $5,546

Subtotal $41,428.07

Appendix III: Amortization Table

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