Every so often I get an email message with questions about starting up a cleaning business or how to bid for cleaning jobs. I finally got smart and decided to publish a couple of my responses. This advice does not address every issue but I do consider it fairly well thought out and hope it does you some good!
My wife and I have operated our business for about 25 years. 95% of the receipts come from residential cleaning - we leave the outside windows and carpet shampooing to others. The balance of our income is derived from mostly light commercial cleaning. We clean some offices and have cleaned larger businesses like auto dealerships, community centers, restaurants, etc..
Here are the important questions to ask yourself:
a) How hard do I want to work?
By 'hard' I mean how much stress do I want to take on and how much demanding physical labor do I want to perform. Just dealing with certain customers can be stressful enough every once in a while, hiring employees and dealing with them brings disappointments and stressful situations every so often as well. The larger you get - more employees and more customers - means you have more stress in your life but the reward of a larger income helps reduce the stress in other areas of life. The physical labor part is a serious consideration. Certain tasks are very demanding and sometimes dangerous. Stripping and rewaxing floors - unless you have invested in some 'high end' stripping and waxing machinery - is very hard work. Cleaning ceiling and walls throughout a house is very tiring.
We have found that if you want your business to generate an income you can easily live with, which means enough income to pay the bills and have some to spend on things like vacations and retirement savings, will mean you will have to hire employees. They do most of the work in the field and you answer the phones, think up and implement ways to do more business and deal with the paperwork.
b) How much money do I want to invest?
Starting and equipping a residential housecleaning business is not very expensive in comparison to the start up costs of most businesses. We require our employees to have their own vacuum cleaners and reimburse them for the purchase of cleaning supplies. We don't have an inventory to deal with. We are very careful about the commercial jobs we take as we do not want to invest in the equipment necessary to compete on a full-time basis in the janitorial side of the business. We have done the stripping and waxing jobs and the carpet shampooing jobs (rented the equipment) but would prefer to stay away from them and leave them to specialists who have invested big bucks into equipment which reduces the amount of effort and time involved and which does a very good job. If you want to compete in the janitorial part of the market you will need to invest in some fairly expensive equipment (floor buffer(s), commercial vacuum(s) and more), learn about the proper handling of certain hazardous chemicals and be ready to put up with cleaning companies organized on a national basis with fancy, well maintained, newer equipment who pay their employees very little and are VERY price competitive. We have found that there is more profit in commercial jobs but you need to be careful about what jobs you bid because they can easily overwhelm you because of the job and equipment requirements.
c) How long do I want to wait before I'm making 'enough' money?
You invest in equipment, hire employees and spend money to advertise in the yellow pages and other targeted advertising efforts including a web site and for a separate phone line (and perhaps fax line) for the business. You do certain cleaning jobs yourself, continue to spend advertising dollars and grow slowly but surely. Perhaps you grow quicker than most because of contacts you have in the community which brings you quality new business. If your office is in your home you learn to do business 16 or more hours per day - and weekends begin to seem like any other day. Occasionally one of your people breaks someone's lamp or expensive nik-nak or stains their carpet with bleach. Occasionally an office manager or homeowner calls and says something is missing and accuses your employee and perhaps you of stealing. 99.9% of the time the supposedly stolen item turns up and most of the time a somewhat humbled ex-customer calls to say the item was found but usually doesn't decide to become a customer again. Be prepared to spend some money to repair or replace items broken or have a spot on a carpet replaced or redyed.
To answer the question more directly, given that you have one or more competitors in the area, you are not purchasing an established business, you will be working by yourself or with just one or two others initially and you have a 'normal' business situation in every other respect, you will need an additional income stream during the first year and well into the second year. If you work hard, are a good salesperson, don't have too much trouble with employees, don't have too much breakage and don't get a bad reputation in your community for some reason you should be profitable enough in the latter part of your second year or sometime in your third year to live comfortably on your cleaning business income.
d) How long do I want to wait before payment and what kind of payment methods do I want to make available to my customers?
We require 98% of our residential cleaning customers to pay their house cleaner before she leaves the job. Checks made out to the business. We discreetly discourage our customers from paying with cash. We also offer our customers the ability to pay with a major credit card but you need to check into the costs of setting up the ability for your business to do credit card transactions. There are initial set up fees and ongoing charges to consider. Most janitorial customers expect to be billed on a monthly basis and some will wait as long as possible to pay the bill. Be prepared to pay your employees before getting paid yourself for certain jobs.
e) How big a territory do you want to service?
You are tempted to cover as much territory as possible but consider how far your employees will be willing to drive on a regular basis and if you should charge extra for the costs involved in transportation of personnel and equipment.
f) What kind of image do I want to portray?
If you are in a market with one or more nationally or regionally organized and financed cleaning businesses you probably will not be able to advertise yourself as the lowest price in town nor the best equipped business so you need to find your niche and develop a statement of strengths that looks appealing in print. You need to print up letterhead with a nice looking logo, business cards, invest in a nice little web site and be noticeable in the yellow pages. You need to decide if you want to hire an 'accounts receivable' business to pursue your customers who wanted your service but decided not to pay. You need to decide if you want to have all, some or none of your customers sign a contract.
g) What about bonding, business license and insurance?
You will need to buy these. Commercial customers will want to see proof of insurance and the larger commercial customers will want to see $1,000,000. in general liability coverage. Banks and certain other businesses will want you to have run criminal background checks and send them the results. People expect to see the words bonded, licensed and insured in advertising and on business cards. They will ask you about it on the phone.
h) Other considerations:
If you will be out of the office quite a bit get an answering machine or an answering service. Invest in a pager or, better yet, a cellular phone. People like to talk to real people and your business will grow faster if you are available via the phone more often and quickly. Ideally it's best to have someone in the office at all times.
Be prepared to deal timewise and emotionally with government agencies. If you can afford it, hire an accountant unless you have the expertise, software and time to do it by yourself. There is a lot to know and a lot to do just right to keep the IRS and certain state agencies happy. Ask potential new employees about claims they may have made for injuries suffered 'on the job'. In Washington State, this would be claims made with the Department of Labor and Industries. There are people (claimants and their lawyers) out there who live off fraudulent and exaggerated medical claims. These scammers can cost your company thousands of dollars over a period of years.
Handling and storing cleaning supplies and chemicals may require you to have certain paperwork on hand and an understanding of them sufficient to explain how they work to customers and new employees. We have a question in our employment questionnaire about whether or not a potential employee is allergic to common cleaning chemicals. Every once in a while a customer will call and say that they require the use of only certain chemicals in their house and will want us to purchase the product or use the supply on hand in the house.
Training new employees is necessary. Do you have the time or do you want to make the time to do the training? We have a two or three long-time employees who are used to us asking them to work with a new person for a few days to do any necessary training. Make sure the new person knows there is a probationary period. During this time you find out if the person's heart is REALLY into working hard and consistency and being honest and if their car is REALLY reliable.
Reliable transportation and the ability to stay in touch is a key to the employees success and the stress level in your life. Make sure your employees have a phone (better yet a phone at home and a pager in their purse or on their belt) and that they have reliable transportation that will get the employee to work on 'normal' days in any season. The vehicle should always be available to your employee during normal business hours. We have run into situations where a boyfriend or husband is the very 'controlling' type and interferes with our employee getting to work at all and/or to work on time. Keep your eyes open for problems created by spouses or 'significant others'.
Be prepared for child care issues. If you end up hiring single parents be prepared for last minute changes in scheduling to accommodate sickness or problems with the child care provider. Also be prepared to report new hires to the government and to withhold and send garnished wages to child support agencies or welfare-type agencies.
Although we don't provide employee benefits to our people we would like to and are striving to be able to. We employ about 22 people. You do end up with a better group of employees who tend to stay with you longer if some kind of health care benefit is available to them.
Consider that if you start your own business you will have to pay the entire bill for your own health care until your business can afford group medical coverage and you can participate in it. This can be very expensive on a monthly basis.
Your question regards How To Set Up and Bid For Contracts?
We don't require our residential customers to sign a contract and we have never encountered a commercial client who wanted us to sign a formal contract. We have sent them bids including a description of our services for the price we are asking and I suppose most would consider the bid a certain kind of contract. We have never signed something more formal than the bottom of a bid letter with any of our commercial customers nor had them sign a contract of our own design. We bid jobs based on the what we know about the job, the amount of time and type of equipment it will require and tend to ask what we normally would ask of any of our customers on an hourly basis. Our residential customers pay from $20.00 to $22.00 per hour. We normally ask at least this much of our commercial clients. We do bid our commercial jobs on a monthly payment basis but when we figure out our asking price it normally amounts to at least $20.00 per hour for labor and as it turns out, after we have become proficient at doing the job, we find that we gross what amounts to $22.00 or more per hour on the job. Your market may be different than ours.
If you want to know about producing a competitive and regularly successful bid WELL that is a hard one to explain. If there is a way to find out what the customer previously was paying or why they were unhappy with the previous service you have some valuable information. If you know who you are competing against and how price competitive they are you have some valuable information. In our experience it all boils down to not underbidding. You need to get an accurate understanding of how much time it will take, how much you may have to spend on equipment and supplies each week or month, how often you will get paid and then make your bid high enough to cover your labor and materials PLUS make enough to help cover some of your office overhead and pay yourself for your time (if you are not doing the job yourself). If you can't successfully cover your costs and make enough for yourself you might as well not get into the business as you will not be able to keep the business open for long unless for some reason you want to operate at a loss.
You can do some market research by phone by calling your potential competitors and asking them what it would cost to clean your home. If you want to check out the commercial market you can call and pretend you own an office building or want your leased retail space cleaned and ask how much they would do the job for on a weekly basis or daily basis. If you have friends who have their houses cleaned or businesses cleaned you can ask how much they pay and for what services. You can search the Internet for business web pages detailing how much the business charges and what kind of services they perform. You can also determine in the same fashion what kinds of equipment the 'normal' cleaning service owns or rents.
Following are some nuggets worth considering/adopting.
1) Get licensed, bonded and insured.
2) Make plans, if at all possible, perhaps at a certain point in the future, to provide some kind of medical benefits for your employees. This will help you keep good, reliable people.
3) Be VERY careful about trying to set up your people as independent contractors. The IRS is very picky about the definition of 'employee'.
4) Develop a formal, well-thought out employee contract with a clause which addresses what happens if an employee 'takes' business away from the company.
5) Purchase a good accounting/payroll accounting software package like QuickBooks Pro.
6) Check criminal histories before hiring.
7) Be somewhat noticeable in the Yellow Pages. We also have had good success advertising in our local "city club" monthly magazine. Target the people that have the money to spend on house cleaning. Middle to upper income brackets. You will get business by word of mouth.. if your people do a good job but I would say that some form of published, well-read advertising is a must.
8) Get your own business website.
9) Hire people with reliable transportation and a working phone.
10) Unless you are planning on pursuing janitorial jobs you will find that a male employee is not your best choice to send into people's homes. In general, female employees work out best in the residential housekeeping industry. It's not that a male can't do as good a job, it's that most customers (especially female customers) feel safer... more at ease with a female housekeeper in their home for hours at a time.
11) Before you set your initial pricing structure for the services you offer call your competitors and get a feel for what the pricing is like in your community. Once every couple of years I open the phone book and call the services listed in the Yellow Pages and ask them for a quote on cleaning our house. Most will be able to give you an exact or ball-park price.
12) Be prepared for paying the tax man...know when taxes are due and have an idea of how much they will be. Set aside enough, on a regular basis, so you will have enough cash available at the appropriate time.
13) Set the business up as a corporation or limited liability corporation.
14) Be careful about hiring friends and/or relatives. It can get emotionally difficult.
15) Be prepared for your people to ask for draws. Decide beforehand what your policy is going to be.
16) Develop a list of cleaning duties for your people to refer to when doing a house. This is particularly helpful for new people and when asked by clients what services you provide. You will find our list published on the Amaculate Housekeeping website.
17) Be prepared for breakage and upsetting phone calls. Your people will break things, they will be accused of breaking things, and some of your customers will call with stories of suspecting your employees of taking things - normally the items are misplaced and found later on. Understand what a bond (bonding insurance) really covers and how it works.
18) I assume you will have an answering machine but it is better to have a person answering the phone during business hours as you will get more and retain more business this way. Being readily reached increases your chances of obtaining new business. If you can afford a pager or cell phone service - even an answering service - get it.