please provide a descriptive answer for this.
After graduating from a diploma of business administration in Vancouver, Linda got hired as an
executive assistant to Fred, the director of operations at a local tech company. She has been
working at the job for the past three months. Her role includes scheduling and attending
meetings, sending emails, and booking travel and entertainment for visitors to the company
headquarters in Vancouver. She works part-time 5 days a week from 8 am to noon and is paid
about $35,000 a year.
During her free time, Linda volunteers as a cleaner for a non-for-profit organization called
Keeping It Clean. The organization supports people with mental and physical disabilities by
helping to keep their homes clean. The organization is run by donations made possible by large
corporate donors and community partners, as well as volunteers like Linda.
Although she enjoys the hustle and bustle of the corporate environment, Linda feels much more
satisfied by her volunteer work with Keeping It Clean.
Sensing that she may not be happy, Fred has offered Linda a full-time position with the
company, upping her salary to $70,000 per year plus benefits.
At the same time, due to her enthusiasm and great effort at Keeping It Clean, the President of
the non-for-profit organization has offered her a position as Head Coordinator. This position
would entail working more complex jobs and scheduling/coordinating the other volunteers
within the organization.
Even though Linda is excited about both offers, she has always wanted to pursue
entrepreneurship. Hence, she is contemplating starting her own cleaning business. To kick
things off, she has done some research and gathered some numbers. Admittedly, accounting
was her worst subject in her diploma, so she is seeking your help in analyzing her options.
Linda sees a trend of individuals getting busier, and consequently, lacking the time or energy to
keep their homes clean and organized. With her home cleaning/organizing business, she could
help people maintain tidy and organized homes. Also, due to the pandemic, corporations and
larger residential complexes are seeking more frequent cleaning in an effort to reduce
pathogens, viruses, and bacteria.
With the help of her parents, Linda has saved $8,500 to invest in her business.
If she were to start her own housekeeping business, Linda forecasts these figures:
Type Cost Frequency Average
Time
Tasks
Individual
House
cleaning
$65/hour Once a week 2 hours General Housekeeping, dusting,
bathrooms, kitchen deep scrub,
mopping floors, and vacuuming.
Common
Areas of
Residential
Building
$45/hour Twice a week 4 hours Vacuuming hallways, spraying
down windows and doors,
cleaning walls and floor of
elevators, cleaning gym or
common facilities in apartment
buildings.
Corporate
Cleaning
$40/hour Five days a
week
2 hours Daily dusting and cleaning floors,
cleaning surfaces, and restocking
supplies and emptying trash cans.
Cleaning individual offices,
restrooms, break rooms, and
common areas.
Special
Projects
$85/hour As needed,
likely once a
season
Minimum of
16 hours
(usually
spread
across a
weekend)
Specialized cleaning or organizing
projects, such as deep cleaning
carpets or organizing files.
CloudBnB $120 per
job
Higher
frequency
during
tourism
seasons –
winter and
summer
Flat $120
per
cleaning.
Varies from
1 hour to 3
hours
Vacation short term rental
properties that need to be
cleaned between stays.
For the CloudBnB, Linda plans to find short-term rental property owners in the local vicinity and
directly market her cleaning services. She has seen job postings for CloudBnBs located in
Whistler. Although these would be a bit far to travel to from her home in Coquitlam, they could
offer lucrative opportunities to generate sizeable profits. However, Linda is aware that CloudBnB
rentals depend on tourism and usually spike in the winter for ski season and the summer for
hiking.
Linda estimates that, based on her existing connections and some word-of-mouth marketing,
she can generate some quick success in her first year. She believes she can book 15 individual
houses on a weekly basis, 5 residential buildings, 4 corporate cleaning clients, 10 special
projects, and 4 consistent CloudBnB contracts in the summer and winter.
She informs you her ideal workweek includes 30 hours of work (including commuting). She
wants to continue volunteering one day a week with Keeping It Clean. She is wondering about
her company’s service mix and how it can be used to maximize revenues in relation to the work
hours invested. She is also wondering if it’s better to charge per hour or on a per project basis.
To get her business started, Linda will need about $500 in supplies including gloves, masks,
cleaning material, dusters, garbage bags, liquid bleach, and the like. She will likely need to
replenish these supplies once a month.
She currently uses public transport but wants to purchase a gas vehicle to drive to and from
various places and to help carry her supplies. She is thinking about doing a pros and cons
analysis of purchasing versus leasing a vehicle. She has found a 2019 used car on sale for
$17,500 but she is also looking at maybe leasing a hybrid vehicle from the dealership for $80 a
month at 6.99% interest with $3,000 as a down payment. She thinks either car will last her 5
years.
Linda is also planning to purchase an industrial vacuum cleaner for $900. She’s unsure whether
this and the vehicle would be recognized on the balance sheet or the income statement.
Linda is looking into different methods of advertising to boost sales and believes the best
method is to start a website. She has a friend, Victor, who is a tech wiz and is willing to help
create and host a website for a one-time fee of $3,300. She plans on boosting her website
through Google Ads and anticipates it will cost $120 per month to boost.
With the additional investment in advertising, Linda expects the number of customers to
increase by 25% for each type of service.
Victor has also offered to be brought on as a 33% business partner and is willing to cover the
cost of creating the website and the advertising costs with Google. If Linda bumps the
partnership share to 50%, Victor will also take on the accounting tasks. Linda is uncertain
whether to accept Victor’s offer- he has a bachelor’s degree in software engineering and tends
to have a stubborn personality at times.
Linda has also spoken to the bank and it is willing to provide her with two products:
a) a 7-year loan of $20,000 at 7.25% per year requiring monthly repayments, or
b) a revolving line of credit of 18,000 at 7.00% per year
Linda wants a detailed analysis on how much she will need to borrow and which structure is
better for her. She doesn’t understand the difference between a business loan and a line of
credit, so an explanation there would also help.
Since Linda isn’t great with projections and numbers, she is asking you for help in deciding if this
business is lucrative enough to pursue and if she should quit her executive assistant job and/or
volunteer role. She is also wondering about the importance about maintaining accurate records
in general. She has never run her own business and isn’t sure which business structure to
implement and how to start dealing with bookkeeping. She wants some quick advice on journal
entries, T-accounts, and the components of an income statement. Linda also wants some ratio
analysis, such as profitability indicators and return on investment or assets.
Linda wants specific advice on what she should do. She wants to know if pursuing Linda's
Housekeeping business is a good idea or if she should accept one of the other jobs offers on
the table. She wants detailed advice on business strategy, financing, ethical considerations, etc.
She is open to advice beyond what is discussed in the case, but it should be relevant to her
situation.