Growing Cleaning Company

[Tony1765]

My cleaning company has been using self-employed cleaners for a while now. I'm really not happy with the level of control or motivation of the self-employed cleaners to attend bookings.

I am looking at hiring cleaners at around £8.50 an hour on a zero hour contract.

At the moment my cleaners provide their own products or they use the customers.

The cleans will be both domestic and offices.

My questions and points are actually pretty vague, I'll try to highlight my general concerns and viewpoints so you can get a general gist of where my thinking is at.

1) Health and safety etc. - what are my responsibilities in order to keep my employees safe and realistically what are the costs per employee of this in both time and money? Slightly vague question, i'm just trying to work out my responsibilities as an employer, my expected profit margins/ph and the time required for each employee to know how fast I can grow or hire new employees (or am I overthinking things?). I would like to know the risks etc and the potential problems I could have if i ignore this

2) Travel expenses - I will be paying an hourly rate for the day typically. If I rota a cleaner in, I will do so for an 8 hour day. They will be using their own car/van and their own insurance. Are there hidden expenses for me in doing this and what are the pitfalls?

3) Employee retention & offering a reliable service - Do you guys believe that ditching the self employed method and nurturing a relationship with an actual employee as a legitimate way to solve the headaches of getting text messages at 8am with self employed cleaners cancelling?

I am looking to grow a legitimate company that isn't just a cash grab. Profit right now is not essential as this is not my main source of income. I want to invest in a company that will be as good as possible in every way and don't want to make stupid shortcuts or create a cash grab company, although it's clearly important to build things from the ground up with a good level understanding of future costs and pitfalls.

This post is a little bit scatty, apologies if anything doesn't make sense.

 

[Mr D]

Your staff are actually self employed rather than just classed that way by your choice?

Zero hours contracts work both ways - you offer the person some hours they can refuse. Not necessarily motivational as regards income compared to self employed who just bill you by the job and can go quite a bit higher cost than that.
8 hour day you being billed at say 80 pounds plus a day?

 

[Tony1765]

The current cleaners are sole traders operating their own self employed work and customers outside of mine.

They can subcontract, accept and decline work, paid only for time spent on a job @ £10ph.

I just don't like how fragile the model is, it feels like a fake business designed to limit responsibility and labour cost

 

[WeddingsInWales]

Well, your best bet would be to start studying existing cleaning agency franchises, and see how they work. Whether you end up joining a franchise is a completely different question, you have to be very careful, but simply by keying in Domestic Cleaning Franchise you will find your way to firms such as Time For You, Maid 2 Clean, and various others, most of whom are in fact clones of the originator, SelClene (being SelClene's former franchisees). Others such as Molly Maids went down a different route.

There are two models which you are currently appearing to be slightly confused about. Either you are employing cleaners who are 'self-employed' or they are your 'employees'. You mention the cleaners are self-employed. So who pays them? You or the customers? If it is you, then they are your 'employees' with all the implications that has for you to operate PAYE, NI, pensions deductions, holiday pay working time directive, etc, not to mention your need fairly quickly to register for VAT. The Inland Revenue define an employee / employer relationship according to who pays the employee. If you pay the employee and tell them what to do, you are the employer. If the client does, they become the employer, and you become the agent.

I came up with the idea of the cleaners being 'self-employed' back in 1987, but after I had been going a few years and started franchising, the Inland Revenue said they were my employees. I laughed, like you might do, naively, saying they were 'self-employed'. The Revenue claimed unpaid PAYE going back years and threatened to close me and the franchisees down. I was very worried, but having taken advice and employing a good chartered accountant, it was established (A) the cleaners were not self employed, they were 'employees' and (B) they were not my employees, as I did not pay them, they were the clients' employees, as they were paid direct by the customers.

This meant a few changes in our contracts to make the clients aware they were the employers, advising them on PAYE. WTD, NI etc. We also found incidentally there is no NI payable on domestic cleaners working in private houses - an anomaly that continues to this day (not many understand this). We continued supplying cleaners for an agency fee, acting really like an inntroductory agency, and we grew to 96 franchised branches, 12,000 clients, and £300k net profit annually (not gross profit, net profit - money I could pay myself - though the income tax was very high).

By 2008/10 the market became flooded with competitors, mainly Eastern European immigrants entrepreneurially setting up their own agencies, and some of our own former franchisees setting up in opposition and running their own franchise operations. Success was down to who could be most effective at SEO and website promotion, not on local service or local marketing as used to be. Where leafleting once obtained endless streams of clients, now it was the website, but with thousands of small competitors, and each website making even the smallest newcomer look as good as an established firm, our own agencies slowly contracted. We ceased franchising due to the number of copiers, not only could we not trust new franchisees not to copy, but due to the competition we no longer felt we had a franchisable business.

This is why you should not join any cleaning agency franchise, they all will have the same issues we faced, so risk setting people up to fail. But you can learn what they are all doing.

As to setting up a cleaning agency now, the fortunes that could be made back in 1987 are not there now, you will struggle to get above 100 clients, and once you do, as you correctly identify, cleaner let-downs will mean you suffer quality control issues, your service will not be good enough to retain clients, who will then migrate to your competitors when their cleaner leaves or proves unreliable. You will face issues such as quality of cleaning, with customers often unhappy with their cleaner's work, or more commonly, cleaners simply up and leave without telling anyone.

We had huge churn, the average client lasted 5 quarters, so we were churning our entire client base once every 15 months. With 2,000 clients in our own agency at its peak, this meant a huge operation to recruit new clients and new cleaners. This worked for several years until the aforementioned excess competition spread the client demand over hundreds of little agencies. We still have a cleaning agency franchise, but we have not taken on any new franchisees for 18 years and have no current plans to re-enter the market. We continue to service maybe 500 clients nationally. It is now only a sideline business and you will not make money at it. You might make a living if you did the cleaning yourself (especially to cover let-downs) and kept it tight and small and local. Martin.

 

[Tony1765]

Thanks a lot for your detailed reply and insight

What's your opinion on office cleans over domestic cleans and targeting that market alongside domestic?

 

[WeddingsInWales]

Never touched office cleans aside from Home Offices in private houses. Not a market we needed to bother with, as there was too much competition even back inn 1987. We found the domestic market at the time had huge demand and limited supply, and what supply there was, was unreliable. Also we did not want full time cleaners, even if we could have found enough of them. The hours were all anti-social really early, or really late, as of course office cleaners have to clean outside regular office hours. We also hit upon an endless supply of workers who could legally only work 20 hours a week, so our supply of cleaners wanted only part time work, typically domestic jobs for 2 -3 hours/ job, maybe four or five clients each, max, arranged around their college course timetable or whatever. So a lot of overseas students all with 20 hours / work on Student Visas in those days. We saw other agencies employing full time Polish etc before these countries joined the EU, and they were closed down. But we were able to employ hundreds of Lithuanians and Polish before those countries joined the EU, because they all came over on Student Visas. We became the go-to agency in London for all these willing workers. Once they joined the EU of course we lost the monopoly on this source of cleaners, and they in turn set up their own agencies. None of this profile of workers would have suited the office cleaning market which I just had no interest in. Mine was a numbers game - 500 leaflets, 1 client, 2,000 clients paying £420 a year in agency fee of which about 35% was net profit, good business. This cannot be done now. So you might look at small offices. We'd leaflet businesses too, back in the day, but never got any response. We got good responses from well-to-do private householders, maybe the businesses just employed their own staff or if they did use any agency, did not switch so regularly. So commercial cleaning was a market I never learnt about nor wanted to.

 

[Tony1765]

Incredibly valuable insight.

I dislike the idea of competing with other franchise businesses and even the agency fee model.

Office cleans if acquired would be daily cleans with weekly turnover of £150-300 (1-2 cleaners) with 33% of that being net profit.

I have had the idea of building up employees in the domestic market so I've got a solid team then marketing to offices and businesses and use domestic cleans as an employment funnel that feed the contracts - working toward apartment communal areas, offices, schools, colleges, housing associations

Having a company that employs its staff puts us in a position to go for bigger contracts. For example a screwfix near me uses a contracted cleaner. The b2b clients look like they're worth 5x of a domestic client.

Alongside this offering airbnb services