Building a Premium Residential Cleaning Company

[regilmour]

Hi All,

A couple years ago i stumbled upon the sub reddit r/entrepreneurridealong and after reading it for a 2 years, I decided that I was going to finally make the move to start my own cleaning business. The initial idea was to operate using the contractor model and use flat rate pricing. Long story short I made around $700 in revenue in about a month of operating before I ran the company down as I was leaving the country for a month(Christmas holidays).

The biggest problems with the business were 1. Sales/Marketing and 2. Charging a premium for a basic service. I learned a lot in the months I spent on building the business and the one month of operating it, but this was my first real "job" so I had to just figure out stuff on my own which made it very hard and stressful.

Anyway, over the next few weeks I plan on rebuilding the business using the employee model and charge hourly, getting all the necessary insurance..bonding..certification..and outsourcing ad words to a specialist. I have summed up all the points of which I need to change in the business or improve;


I want charge clients $45/hr per cleaner (usually I will just send in 1 cleaner) (minimum cleanings 2 hours)
I want to pay cleaners $20/hr
I want to profit at least $9/hr, which is 20% of $45

To Do List:

Business:
1. Obtain General Liability Insurance
2. Obtain Janitorial Bond
3. Obtain Professional Cleaning Certification

Hiring Employee:
1. Background Check
2. Complete I9 Form
3. Register with State New Hire Program
4. Workers Comp (Can somebody explain how this works please)
5. Social Security Tax
6. Unemployment Insurance Tax
7. General Liability Insurance Coverage
8. Janitorial Bond Coverage
9. Pay....weekly? or bi weekly?

Website:
1. Update Logo
2. Get "easy to book" video made on upwork or fiver
3. Remove sliders from homepage, and add video along with a "book now" CTA buttom
4. Update booking system Launch27 to reflect change from flat rate to hourly
5. All around improve website including about us section
6. Show we are insured...bonded...and certified on website
7. Add better testimonials
8. Create and update policy...ex..minimum booking of 2 hours...cancellation policy...etc

Marketing:
1. Outsource adwords to specialist, budget of around $750/month
2. Update Yelp page
3. Post Craigslist daily
4. Create promotions...ex..$45 off the first clean...
5. My own private label products...ex..air fresheners...put in clients home for free

Customer Service:
1. Look into getting a VA
2. Follow up calls to see how cleanings went
3. Hand written thank you cards...
4. Some form of email marketing

This is my first time posting here and I am just looking at starting a progress thread to get some useful advice. I am also starting Toastmasters when I get back to Boston.

 

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[regilmour]

Also.

I am a senior in College in Boston. My last full semester is this upcoming one, then I have to do 12 credits worth of summer classes. The Goal is to be operating this business full time by August..ish.

I have another business too. Its a event/promoting company. We are doing our first club event early Feb. Could potentially make $1k-$2k profit, maybe more. I would either put that money into the maid business or save it for a future real estate purchase. Looking to buy a property by 2018.

Anyway any advice would be appreciated.

 

[VDon]

The company is called UpMaid (trying to re brand as UPmaid, eventually I want to move into carpet cleaning...UPcarpet/UPcarpetcare...)

My website is www.upmaid.com

I want charge clients $45/hr per cleaner (usually I will just send in 1 cleaner) (minimum cleanings 2 hours)
I want to pay cleaners $20/hr
I want to profit at least $9/hr, which is 20% of $45

There is a company in Austria, Switzerland, Netherlands and Germany that runs the same business model - it's called Book a Tiger. www.bookatiger.com

Maybe this helps for your research.



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[VDon]

There is a company in Austria, Switzerland, Netherlands and Germany that runs the same business model - it's called Book a Tiger. www.bookatiger.com

Maybe this helps for your research.



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They promoted their business heavily via Groupon, that's how I found them first.


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[regilmour]

There is a company in Austria, Switzerland, Netherlands and Germany that runs the same business model - it's called Book a Tiger. www.bookatiger.com

Maybe this helps for your research.



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Yeah thank you!, looking at it now. If they are charging CHF 35 a hour in Switzerland, then my $45 a hour might be a little high.

 

[VDon]

Yeah thank you!, looking at it now. If they are charging CHF 35 a hour in Switzerland, then my $45 a hour might be a little high.

I bought like 3 hours of service via Groupon and it cost me like 30 Euros or so.

Definitely think about your price structure.


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[regilmour]

I

I bought like 3 hours of service via Groupon and it cost me like 30 Euros or so.

Definitely think about your price structure.


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I think I can definitely do some promotional stuff, like a free hour etc. But Book A Tiger probably has many more resources compared to me, so I doubt I could go as low priced as them. In the end I am trying to pay my cleaners decent wages so they don't run off and stay loyal.

 

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[happybhoy]

Hey man, I was building a list of local cleaners to prospect for adwords services and seen the same booking system you have a few times. I seen that thread on Reddit and was curious whether they were using the launch 27 thing. Is that where it comes from?

 

[regilmour]

Hey man, I was building a list of local cleaners to prospect for adwords services and seen the same booking system you have a few times. I seen that thread on Reddit and was curious whether they were using the launch 27 thing. Is that where it comes from?

The guy who started the thread ended up making the booking system, Rohan Gilkes. Most of the cleaning companies if not all that use Launch 27 are from that reddit thread. He also made a bunch of facebook groups that I am in too.

Entrepreneur Ride Along • /r/EntrepreneurRideAlong

This is not my ideal business nor do I have a passion for cleaning, but this is the opportunity I had and there was plenty of info on internet/reddit/facebook groups to educate me quickly on the industry.

 

[happybhoy]

Thanks for the info.

Have you seen this thread? check it out if not - GOLD - Making Money For Dummies (And In a Crowded Market)

 

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[regilmour]

Thanks for the info.

Have you seen this thread? check it out if not - GOLD - Making Money For Dummies (And In a Crowded Market)

I actually have read that thread. I really liked it. IceCreamKid is a very good writer too. The thread is actually one of the reasons why I am switching to the employee-hourly model, so I can provide a more premium service and justify high prices. I think once I work out all the numbers and costs of having a employee, I might be able to lower the hourly price of my service. $45 was just a rough figure. As long as my margins are between 20-30% I am going to go as low as I can.

Lets say as a rough figure that I pay the employee $20/hr. And that all the insurance/benefits adds up to 33.33% of that hourly wage, that's $26.6 that the employee costs me. That leaves me with the other $18.4, So I do think I will be able to reduce my prices by maybe $5-$10 a hour if those numbers stand.

 

[VDon]

Lets say as a rough figure that I pay the employee $20/hr

I have no clue what the minimum wage is in the US, but here cleaning staff is paid close to the minimum, which would be like 6-7 Euros (net) per hour.


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[SquatchMan]

I have no clue what the minimum wage is in the US, but here cleaning staff is paid close to the minimum, which would be like 6-7 Euros (net) per hour.


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It's the same here. He wants to pay more because he wants them to stay loyal and higher pay attracts much higher quality employees.

 

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[regilmour]

It's the same here. He wants to pay more because he wants them to stay loyal and higher pay attracts much higher quality employees.

Exactly. Besides that, I want to build a good relationship with the cleaners, and I think the first thing to do to achieve that is paying them a fair share of the profits.

 

[regilmour]

I have no clue what the minimum wage is in the US, but here cleaning staff is paid close to the minimum, which would be like 6-7 Euros (net) per hour.


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I think the companies that are paying their employees $6-$10 a hour to clean homes are targeting a different niche market than I am. More price conscious.

I want to target the more upscale city dwellers that are willing to shell out the extra $$$ for a safe, reliable, and thorough cleaner.

Not to mention we would be insured, bonded, and certified.

I also have other ideas to make my cleanings more valuable for the price, such as follow up hand written thank you cards, private label air fresheners, etc.

What do you think?

 

[VDon]

Exactly. Besides that, I want to build a good relationship with the cleaners, and I think the first thing to do to achieve that is paying them a fair share of the profits.

I would pay them the minimum and as soon as some goals are met, give them a bonus. Right now you are simply overpaying.


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[regilmour]

I would pay them the minimum and as soon as some goals are met, give them a bonus. Right now you are simply overpaying.


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Well that is a possible idea to consider.

So before, when I was using the contractor model and charging flat rate prices, I found and used a pretty good team. I would pay them 70% of the job while I keep the 30%. The money they would make divided by how long they would work usually ended up around $20 a hr per cleaner. Sometimes more, sometimes less. I have somewhat of a relationship with them now, and I would like to hire them as employees.

If I posted a ad looking for cleaners, yeah I could find a bunch of people and pay them minimum wage. But I am looking for the experienced cleaners, the ones already cleaning on their own looking for extra jobs.

But hey maybe you are right, I do need to make some goals for the next few months. In the end if I feel like I am doing way to much work to make such small margins then I will take another look at the pricing/pay again. Its all trial and error.

Thanks for your opinion though!

 

[eliquid]

I know all about this.

I do the marketing for several cleaning companies and one of the cities we hit is Boston.

You have a long run ahead of you my friend, very long. Especially if you go into w2

 

[VDon]

I know all about this.

I do the marketing for several cleaning companies and one of the cities we hit is Boston.

You have a long run ahead of you my friend, very long. Especially if you go into w2

Partner up - win win for both.


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[regilmour]

I know all about this.

I do the marketing for several cleaning companies and one of the cities we hit is Boston.

You have a long run ahead of you my friend, very long. Especially if you go into w2

Yeah I know. It will probably take me months and months of hard work and mistakes just to get the business to a few thousand a month in revenue. But you gotta start somewhere!

I was going to outsource my google adwords to this guy i met on a facebook group, he would use a budget of $500 a month and i would pay him a fee of $250 a month for a total of $750 a month. He said I could expect maybe 5 new clients in my first month. How does all this sound to you?

What would you recommend for average customer acquisition cost from adwords?

Would love to PM you and talk more as you probably know a lot more about the industry in Boston and how to better target my market.

 

[Gareth]

So your cost per customer acquisition via Adwords guy is : $150?

What is your expected lifetime customer value?

 

[regilmour]

So your cost per customer acquisition via Adwords guy is : $150?

What is your expected lifetime customer value?

Well, that is what he suggested for the first month, then based on that he would make adjustments etc. In the end he say around $70 is the norm for cost per customer acquisition.

In terms of lifetime customer value it depends on the frequency of the cleanings required, how many bedrooms/bathrooms etc.

Lets say the average client has their home clean once a month for 4 hours by one cleaners, that comes out to $180 a month, and assuming my numbers in the previous posts, $72 in profit. $72 x 12 months = $864 in profit from one customer. Does that sound right?

 

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[Gareth]

I'm not in the cleaning business so I don't know what is 'right'.

I think it's a big assumption that all acquired customers will stay with you for 12 months.

Have you factored in the cleaning materials? (sorry if I missed this)

 

[regilmour]

I'm not in the cleaning business so I don't know what is 'right'.

I think it's a big assumption that all acquired customers will stay with you for 12 months.

Have you factored in the cleaning materials? (sorry if I missed this)

That is true. On the other hand some clients might get their home cleaned for more often than 1 time a month, maybe 2 times a month....or weekly. But I think you are right, maybe I need to have a more conservative lifetime customer value to better reflect the realities...either 4 hours a cleaning...or 12 times a year is too high.

No its fine, I didnt touch upon cleaning materials yet. My cleaners are still going to use their own materials and vehicle. When I get a better understanding of the cleaning materials needed, I want to supply only eco friendly green cleaning materials to my cleaners, then I can brand the business as doing "Green Cleanings". So as of now they are still using their own.

So when I start offering my service under the new employee-hourly price model, I was going to offer promotional cleaning with "$45 off your first cleaning!", which is effectively 1 free hour, and try and stack 4 cleanings all in one day (each cleaning being 2 hours), one after another. So that way, initially the cleaner/s would be working for me part time just one full day a week until I can build them a full schedule.

 

[regilmour]

So I have come up with a pricing schedule based on frequency.

1 Time Cleanings : $45/hr
-$20/hr for cleaner
-$6.6/hr benefits + insurance (based on 33.3% of pay)
-$18.4/hr gross margin

Monthly Cleanings (10% off) : $40.5/hr
-$20/hr for cleaner
-$6.6/hr benefits + insurance (based on 33.3% of pay)
-$13.9/hr gross margin

2/Month Cleanings (15% off) : $38.25/hr
-$20/hr for cleaner
-$6.6/hr benefits + insurance (based on 33.3% of pay)
-$11.65/hr gross margin

Weekly Cleanings (20% off) : $36/hr
-$20/hr for cleaner
-$6.6/hr benefits + insurance (based on 33.3% of pay)
-$9.4/hr gross margin

Next I am going to work out a break even analysis based on all my fixed and variable costs to see how many hours I need to clean to break even in a month. Other than plan, there is not much I can do as I am country which heavily restricts internet usage making things very difficult. As soon as I return to Boston on the 20th, I will begin the process of converting my contractor to a employee and getting all the insurance, bonding..etc.

 

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[regilmour]

Break Even Analysis:

Fixed Costs:
-Website $200/yr
-L27 (booking system) $960/yr
-Bank $180/yr
-General Liability Insurance $500-$1,000/yr
-Janitorial Bond $50/yr
-Professional Cleaning Certification $300/yr
Total: $2190-$2690 ($2440 average)

Based on a average hourly gross margin of $13.9 (monthly cleaning)

$2,440 / $13.9 = 176 Cleaning Hours to break even
176 hours / 12 months = 15 (14.6 rounded up) hours a month

-With a average cleaning time of between 2 -3 hours. That would mean I would need between 5 - 8 (7.5 rounded up) customers a month, choosing the once a month cleaning.

-15 hours a month / 4 weeks = 3.75 hours a week, which is either 2 normal homes being cleaned (2 hours each) or 1 big home being cleaned.

So essentially I need at minimum between 1-2 home/s a week just to break even.

This is just a rough analysis, but gives me a idea of how much I would need to scale the business just to break even.

 

[VDon]

This is just a rough analysis, but gives me a idea of how much I would need to scale the business just to break even.

You need to pay yourself too.


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[regilmour]

You need to pay yourself too.


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Yes that's true. But I am fortunate enough to have all my expenses covered while I am still in university. But that all ends when I finish my last summer semester in August of this year. Then I am on my own.

So by then I would like to draw a small salary to pay my expenses. However, until August, I dont need any money from the business.

 

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[regilmour]

You need to pay yourself too.


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Not to mention I will be looking at getting a part time job in Boston, either working in a restaurant or valeting, and either save what I make or invest it in the business. The jobs times wont interfere with my business times either as they will be late night or weekend jobs.

 

[eliquid]

How are you planning to be any different than Handy or the other companies currently in Boston that are charging less than $33 an hour and provide eco-friendly supplies?