Who are you targeting as cleaning company clients?
A Cleaning or Janitorial business caters to two groups namely: Consumer and Commercial. The consumer domain consists of primarily residential maid services or various cleaning services needed by households on less frequent basis like window cleaning, carpet cleaning, etc. On the other hand, the commercial domain offers a wider range of Janitorial services targeting businesses rather than individual consumers. Due to personal choice and to specialize in one arena, you may want to concentrate on just one group. However, nothing stops you to cater to both domains. You can specialize in a certain cleaning job and decide to just operate at an individual level or you can grow big and build a team and decide to venture out into a variety of cleaning jobs.
What qualifications or prerequisites are needed?
Depending on the type of cleaning service you want to start you need to gain qualifications in the field. But one of the basic requirement is your dedication to provide “thorough cleaning”. An interesting point to consider while starting up a cleaning business is to ask yourself if you are a person who is passionate about clean surroundings and detail oriented. If you are lazy and not so particular than the business may not be the right choice for you. To survive in this business, you need the skill, desire, and determination to be thorough in your job. Another significant requirement is “Honesty”. If clients can trust you then you will have permanent customers. Time management, customer service relationship, and basic business skills are all needed for a smooth, profitable, and sustained run of your business.
Insurance and Bonding is a critical component as you will need (at a minimum) bonded, a general liability policy and workman’s comp on your employees. Rules differ by city and state on whether you need employees or 1099 sub-contractors. Find a good labor/employee attorney in your area to reduce litigation and taxing authority risk. Also, do you need to charge sales tax? Again, the laws differ from state to state. City, county, and state business licenses are required, too.
What investment is required?
For Janitorial services including carpet, blinds, fan, window, and hard surface cleaning, you will need special equipment and tools. The better the tools and cleaning supplies, the lower your labor costs. Labor is THE critical variable cost in your cleaning business. You would also need a good and suitable vehicle that can serve as an advertising platform too. Vinyl wrapping is inexpensive to promote your mobile brand via your vehicle(s) You would also need some help and consider hiring an employee either on a part-time or full-time basis. As much as you like, you cannot manage everything on our own. If you have customers lined up then you may need to hire more employees. Initially, you may be able to manage the administrative part on your own, if you are starting on a small scale but as you grow, you need an administrative staff to answer phone calls and maintain records, a few cleaning personnel, and marketing and sales personnel. Owning a commercial space for your office is another significant cost. Consider all the pros and cons before deciding if you really need to operate from a commercial office. Many agencies prefer to start the business from their home. Your customers or clients are very unlikely to visit your premises. The nature of this service is that you make a great first impression on your customer’s premises.
Challenges you should be prepared for.
When you work with commercial clients, the biggest challenge you would face is the waiting period to get paid. As per market norms, large companies pay types of invoices on certain days of the month. Most of them would clear the payments in 30 to 60 days. This creates a real problem because for Janitorial services you need quick cash to meet daily expenditure. A commercial cleaning company would need cash each week to pay off salaries of cleaning personnel and to buy supplies of cleaning solutions. Most of the time you would need to hire personnel temporarily and you cannot withhold their payment. Even if they are permanent employees they need to be paid every week. You cannot avoid hiring personnel either on a temporary contract or permanent basis if you want to expand your business and make a name for yourself in the industry. Also, is the fact that you at one point in time, you may need to cater to different clients and need more resources as and when needed. If you do not take up the job offered, someone else will. You will need to arrange for additional working capital.
Choose from the following Solutions.
Initially, you may use your own resources and savings. However, on a regular basis, this may not be possible. Similarly looking for help from friends and family is not a long-lasting solution. Another possibility is to offer “early payments discounts.” A discount of 2% is offered to clients to pay in less than 10 days. However, the drawback is that it may not be a feasible option in this competitive market and you cannot always trust clients to pay on time even after applying discount. Large companies may prefer to pay in their own due course (30-60 days) instead of taking benefit of the early payment discount. A better approach to this problem is to use the benefit of a factoring program. You can finance your slow paying invoices for immediate cash flow. Financing invoices is called “Factoring.” Under this arrangement, you as a business sell your invoices to a factor at a discounted rate. With this arrangement, you can avail up to 90% of invoice value within 1 day at a cost of 1-2.5% per 30-days. Businesscash.com has a history of funding the needs of a Janitorial or commercial cleaning service, since 1998. BusinessCash offers two types of factoring services: Recourse factoring and Non-Recourse factoring.
Recourse factoring is an agreement where a business sells it current invoices to a factoring company on a condition that if the clients fail to make payment the business will buy back the invoices. In other words, the company does generate cash flow by financing the invoice but agrees to absorb the risk in case of non-payment from the client. This is dangerous as credit scoring and collections are probably not part of your skill set.
A stress-free choice is Non-Recourse factoring. Under this arrangement, the factor accepts the risk of non-payment. Once you have factored your invoices, the factors take the ownership of collecting invoices. You can choose to minimize your risk and get easy cash flow at a slightly higher transaction fee. BusinessCash offers you the credit guarantee that they will be responsible to collect the invoices. Generally, this guarantee is also valid in case the client files for bankruptcy. This is the high point of Non-Recourse factoring. It is not unusual for the biggest names in the industry to file for bankruptcy. By just paying a transaction fee, you can relieve yourself from the uncertainty of getting paid in time and get quick easy cash flow.
Moreover, with BusinessCash.com, invoice factoring is an easy option. BusinessCash offers same day funding to give you access to needed working capital at no credit risk. You can be totally credit liability free and concentrate on giving quality Janitorial services and be prepared to take up new clients. Businesscash offers you Non-Recourse factoring at a nominal fee of 1.25% -2.25% including credit protection per 30 days based on your monthly sales volume.
Facts which may influence your decision to start a Janitorial Service
Here are some interesting facts:
- Research conducted by Marketdata Enterprises Inc. showed in 2012, Commercial and residential cleaning is a $78 billion industry. Furthermore, during a down economy, commercial cleaning did better than other industries.
- According to the U.S. Department of Labor, employment in Janitorial and building cleaning service is projected to grow 11% from 2010 to 2020.
- The 50 largest companies generate about 30 percent of revenue. In the US carpet cleaning industry, the 50 largest companies account for about 20 percent of revenue.
- Janitorial services account for about 90 percent of industry revenue.
- After you build your business, there exists a ready Exit Strategy to Fund your retirement as janitorial company buyers are always out there.
Deciding on the right factoring company for your cash flow needs
One of the major benefits of non-recourse factoring for cleaning companies is that a factoring company like BusinessCash shields and protects you from bad debts. When deciding on a factor, ensure that they offer customer credit (bankruptcy) protection. Understand the terms and conditions carefully. Choose a factoring company that has been in business for a long time and funded start-up janitorial companies for 20+ years. A Janitorial Factoring company’s experience and industry expertise can help your company grow and avoid unnecessary risk.