How to Start a Cleaning Business
Editor’s note: This article was excerpted from our Cleaning Service start-up guide, available from Entrepreneur Bookstore.
If it can get dirty, chances are someone will be willing to pay you to clean it.
And that’s why few industries can claim the variety and depth of opportunities that professional cleaning can.
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The cleaning industry has two primary market groups: consumer and commercial. The consumer arena consists primarily of residential maid services, along with carpet cleaners, window cleaners and a variety of other cleaning services required on a less-frequent basis. The commercial arena is dominated by janitorial services, which typically provide a wider range of services than maid services, along with other cleaning companies, such as carpet and window cleaners that target businesses rather than individual consumers. While it’s recommended that you decide on a niche and concentrate on building a business that will serve your chosen market, it’s entirely realistic to expect to be able to serve multiple markets successfully.
Before you leap into the cleaning business, it’s important to look at it with 20/20 vision. Though technology has certainly had an impact on cleaning services, this is not a high-tech business. Nor is there any glitz to it. And there will be times when you’ll have as much trouble as Rodney Dangerfield getting respect.
But the upside is that you can build an extremely profitable business that will generate revenue very quickly. Most cleaning service businesses can be operated on either a part-time or full-time basis, either from home or from a commercial location. That flexibility gives this industry a strong appeal to a wide range of people with a variety of goals.
Another positive aspect of the industry is that within each category of cleaning businesses are market niches and operating styles that vary tremendously. Salt Lake City janitorial service owner Michael R. says, “We offer a wide range of services to a very limited clientele. We have refined our customer base to a group that we feel we can best serve in a way that will allow us to maintain those customers permanently.”
This means you can build a company that suits your individual style and talents. If you like doing the work yourself, you can stay small and do so. If your skills are more administrative in nature, you can build and manage teams to do the work. For people who like working outside, the opportunities in service areas such as window cleaning and pressure washing are abundant. Residential maid services offer fairly predictable hours; disaster restoration and cleanup can mean calls at all hours of the day or night.
Few industries offer this tremendous range of choices and opportunities, and the need for general and niche cleaning is expected to increase in the future.
Do You Have What It Takes?
The necessary qualifications depend, of course, on the type of cleaning service you decide to start. But for any type of service business, you need a determination to make the business work, a willingness to please the customer and the dedication to provide a thorough cleaning job.
Another critical requirement for the owner and the employees of any type of cleaning service is honesty. “Clients must have total trust in the people who come to clean their homes,” says Fenna O, who owns a maid service in Orlando, Florida. This is important whether they’re cleaning bathrooms every week or carpets twice a year–or dusting and vacuuming an office at night.
A maid service is probably the simplest business in terms of necessary cleaning skills. Janitorial services, carpet cleaning businesses and other niche cleaning operations often require the use of special equipment and/or cleaning solutions for which you must be trained.
Beyond actually being able to do the work, a cleaning service operator needs some basic business skills. You need to understand the administrative requirements of running a company, you should be able to manage your time efficiently, and you must be able to build relationships with your employees and your customers.
Franchise or Independent Operation?
That franchises will work closely with you as you start your business and take it to the point where it is running smoothly and profitability is an advantage, especially in the beginning. But you may find that once you become established and are financially secure, a franchise agreement is a decided disadvantage.
For people who want to own their own business but would rather choose an opportunity that has proven successful for many others rather than gambling on developing their own system, a franchise is the way to go. Also, most franchises provide a degree of marketing support–particularly in the area of national advertising and name recognition–that’s extremely difficult for individuals to match.
In the long run, you’ll likely invest far less money operating as an independent service than as part of a franchise. Also, as an independent, you’re not tied to any pre-established formulas for concept, name, services offered, etc. That’s both an advantage and a drawback. The advantage is that you can do things your way. The drawback is that you have no guidelines to follow. Everything you do, from defining your market to cleaning a bathtub, is a result of trial and error. As an independent owner, you must research every aspect of the business, both before and during your business’s lifetime, so you’ll start right and adapt to market changes.
Most of the cleaning service operators we spoke with used personal savings to start their businesses, then reinvested their early profits to fund growth.
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If you need to purchase equipment, you should be able to find financing, especially if you can show that you’ve put some of your own cash into the business. Beyond traditional financing, you have a range of options when it comes to raising money. Some suggestions:
Your own resources. Do a thorough inventory of your assets. People generally have more assets than they immediately realize. This could include savings accounts, equity in real estate, retirement accounts, vehicles, recreation equipment, collections and other investments. You may opt to sell assets for cash or use them as collateral for a loan. Take a look, too, at your personal line of credit. Many a successful business has been started with credit cards.
Friends and family. The next logical step after gathering your own resources is to approach friends and relatives who believe in you and want to help you succeed. Be cautious with these arrangements; no matter how close you are, present yourself professionally, put everything in writing, and be sure the individuals you approach can afford to take the risk of investing in your business. Never ask a friend or family member to invest or loan you money they can’t afford to lose.
Partners. Using the “strength in numbers” principle, look around for someone who may want to team up with you in your venture. You may choose someone who has financial resources and wants to work side-by-side with you in the business. Or you may find someone who has money to invest but no interest in doing the actual work. Be sure to create a written partnership agreement that clearly defines your respective responsibilities and obligations.
Government programs. Take advantage of the abundance of local, state and federal programs designed to support small businesses. Make your first stop the U.S. Small Business Administration; then investigate various other programs. Women, minorities and veterans should check out niche financing possibilities designed to help these groups get into business. The business section of your local library is a good place to begin your research.
A Homebased Location
One of the hottest business trends today is to be homebased, and cleaning services are excellent candidates for this type of setup. After all, your customers will likely never come to your facility since all your work is done on their premises. But that’s not the only issue influencing your decision to operate from a homebased office or a commercial location.
Many municipalities have ordinances that limit the nature and volume of commercial activities that can occur in residential areas. Some outright prohibit the establishment of homebased businesses. Others may allow such enterprises but place restrictions regarding issues such as signage, traffic, employees, commercially marked vehicles and noise. Before you apply for your business license, find out what ordinances govern homebased businesses; you may need to adjust your plan to be in compliance.
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Opening a Commercial Location
Many industry veterans believe that in order to achieve authentic business growth, you must get out of the home and into a commercial facility. Certainly, doing so will help you create a successful and professional image, but before you begin shopping for an office, think carefully about what you’ll need.
Your office area should be large enough to have a small reception area, work space for yourself and your administrative staff, and a storage area for equipment and supplies. You may also want to have space for a laundry and possibly even a small work area where you can handle minor equipment repairs. Depending on the size of your staff, consider allowing for a small break area.
Regardless of the type of cleaning business you have, remember that chances are slim that your customers will ever come to your office. So look for a facility that meets your operational needs and is in a reasonably safe location, but don’t pay for a prestigious address–it’s just not worth it.
Because your work is done at your customers’ sites, vehicles are as important to your business as the location of your office. In fact, your vehicles are essentially your company on wheels. They need to be carefully chosen and well-maintained to adequately serve and represent you.
For a maid service, an economy car or station wagon should suffice. You need enough room to store equipment and supplies, and to transport your cleaning teams, but you typically won’t be hauling around pieces of equipment large enough to require a van or small truck.
You can either provide vehicles or have employees use their own. If you provide the vehicles, paint your company’s name, logo and telephone number on them. This advertises your business all over town. If your employees use their own cars–which is particularly common with maid services–ask for evidence that they have sufficient insurance to cover them in the event of an accident. Also, confirm with your insurance agent that your own liability policy protects you under those circumstances.
The type of vehicles you’ll need for a janitorial service depends on the size and type of equipment you use as well as the size and number of your crews. An economy car or station wagon could work if you’re doing relatively light cleaning in smaller offices, but for most janitorial businesses, you’re more likely to need a truck or van.
For carpet cleaning services, you’ll need a truck or van, either new or used, for each service person and his or her equipment. A good used truck will cost about $10,000, while a new one will run from $18,000 up.
Do You Need Employees?
Consider these startup staffing suggestions:
For a Maid Service Business: Your initial staffing needs will depend on how much capital you have, how large a business you want to have, and the volume of customers you can reasonably expect to service. Many independent maid services start with just the owner. Others will start with the owner and an appropriate number of maids. If you handle the administrative chores, chances are you won’t need to hire office help right away.
For a Janitorial Business: You may be able to start with no employees–or just one or two part-timers. If you have the capital available and the business lined up, you may need to hire more. You may also want to consider an administrative person to handle the records and answer the phone during the day; after all, if you’re working all night, you need to schedule some time to sleep. As your business grows, consider a marketing/salesperson, a customer service manager, and crew supervisors as well as additional cleaning personnel.
For a Carpet Cleaning Business: Depending on the strength of your pre-opening campaign and your startup budget, hire at least one service person and possibly two as you’re getting started, along with an employee experienced in clerical work who can book appointments and handle administrative chores. Though one person can likely handle most of the residential jobs you’ll get, you may want to consider staffing each truck with two people: a senior technician and a helper. The helper can assist with the prep work for each job (unloading equipment, moving light furniture, etc.), mix chemicals, empty buckets, clean up afterward, etc. This will make each job go faster, which is more efficient and cost-effective and also generates a greater degree of customer satisfaction.
Pricing can be tedious and time-consuming, especially if you don’t have a knack for crunching numbers. Especially in the beginning, don’t rush through this process. If your quote is too low, you’ll either rob yourself of some profit or be forced to lower the quality of your work to meet the price. If you estimate too high, you may lose the contract altogether, especially if you’re in a competitive bidding situation. Remember, in many cleaning situations, you may be competing against the customer himself; if your quote is high, he or she may think, “For that much money, I can just do this myself.”
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During the initial days of your operation, you should go back and look at the actual costs of every job when it’s completed to see how close your estimate was to reality. Learning how to accurately estimate labor and properly calculate overhead will let you set a competitive pricing schedule and still make the profit you require.
To arrive at a strong pricing structure for your particular operation, consider these three factors:
- Labor and materials. Until you establish records to use as a guide, you’ll have to estimate the costs of labor and materials. Labor costs include wages and benefits you pay your employees. If you are even partly involved in executing a job, the cost of your labor, proportionate to your input, must be included in the total labor charge. Labor cost is usually expressed as an hourly rate.
- Overhead. This consists of all the nonlabor, indirect expenses required to operate your business. Your overhead rate is usually calculated as a percentage of your labor and materials. If you have past operating expenses to guide you, figuring an overhead rate is not difficult. Total your expenses for one year, excluding labor and materials. Divide this number by your total cost of labor and materials to determine your overhead rate. When you’re starting out, you won’t have past expenses to guide you, so use figures that are accepted industry averages. You can raise or lower the numbers later to suit the realities of your operation.
- Profit. This is, of course, the difference between what it costs to you provide a service and what you actually charge the customer. Figure your net profit into your estimate by applying a percentage of profit factor to the combined costs of labor and materials and overhead. The profit factor will be larger than the actual percentage of gross revenue you’ll end up with for your net profit. For example, if you plan to net 38 percent before taxes out of your gross revenue, you will need to apply a profit factor of about 61.3 percent to your labor and materials plus overhead to achieve that target.
If you’re extending credit to your customers–and it’s likely you will if you have corporate accounts or if you are in the janitorial business–you need to establish and follow sound billing procedures.
Coordinate your billing system with your customers’ payable procedures. Candidly ask what you can do to ensure prompt payment; that may include confirming the correct billing address and finding out what documentation may be required to help the customer determine the validity of the invoice. Keep in mind that many large companies pay certain types of invoices on certain days of the month; find out if your customers do that, and schedule your invoices to arrive in time for the next payment cycle.
Your invoice should clearly indicate the terms under which you’ve extended credit. Terms include the date the invoice is due, any discount for early payment and additional charges for late payment. It’s also a good idea to specifically state the date the invoice becomes past due to avoid any possible misunderstanding. If you’re going to charge a penalty for late payment, be sure your invoice states that it’s a late payment or rebilling fee, not a finance charge.
Finally, use your invoices as a marketing tool. Mention any upcoming specials, new services or other information that may encourage your customers to use more of your services. Add a flier or brochure to the envelope–even though the invoice is going to an existing customer, you never know where your brochures will end up.
Though the total market for cleaning services is tremendous, you must decide on the particular niche you will target. If you want to do residential cleaning, do you want to clean private homes, condos and apartments, or empty rental units? If you’re starting a janitorial business, will you focus on offices, retail operations or manufacturing facilities? And will you target small, medium or large customers? As a carpet cleaner, will you clean residential or commercial facilities–or both? And what services other than shampooing carpets will you provide?
Once you’ve decided on a market niche, you must then look at the geographic area you want to serve. If you’re starting a maid service, you want to be able to schedule cleanings in a way that keeps your travel time to a minimum. The same applies to carpet cleaners. Janitorial crews that must move from building to building have a similar concern.
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After you’ve identified what you want to do and where you’d like to do it, research the demographics of the area to be sure it contains a sufficient number of potential customers. If it does, you’re ready to move ahead. If it doesn’t, you’ll need to reconsider how you’ve defined your niche or the geographic area.
Part of your market analysis includes your costs to serve that market. A densely populated market allows you to serve a greater number of customers because your travel time is minimal, but it also means you’ll be consuming more supplies. This needs to be planned for as well as factored into your rates.
You can build a very successful cleaning business on referrals, but you need those first customers to get started. Where are they? Indianapolis-based Bane-Clene Corp. suggests you start by contacting the following groups:
- friends and relatives
- your neighbors
- former co-workers and employers
- social groups and clubs, including card clubs, bowling teams, athletic leagues, lodges, fraternities, alumni groups, and neighborhood associations
- church or religious acquaintances
The Elements of Image
One of your most important marketing tools is the image you project. Jim Cavanaugh, founder and president of Jani-King International, a commercial cleaning franchise in Dallas, says image is made up of several components, including:
- The way you and your crew look. Are your workers clean and neat, wearing attractive uniforms or at least nice jeans or slacks?
- Your printed materials. Are your invoices and statements typed neatly or computerized? Do the documents you produce display professionalism, or do you damage your image by using handwritten bills and scrap paper for notes?
- Equipment. Is your equipment clean and in good repair, or dirty, with loose wheels, taped cords and in general disrepair?
- Integrity. Do you operate and behave in such a way that building managers and owners are comfortable trusting you and your employees with unsupervised access to their facility?
- Insurance.Having adequate business insurance, including liability, workers’ comp and bonding your employees, builds your credibility and image.
- Your vehicles. Are your company vehicles clean, running properly and neatly marked with your company name and logo? A dirty, dented truck that belches smoke won’t impress your clients.