5x Ways To Increase Cleaning Profit Margins in 2024
Like many service-based industries, contract cleaning is a profession where the level of work completed is not always accurately reflected in the amount charged to customers, leaving owners frustrated, undervalued and unsatisfied with their business performance. Given that the contract cleaning industry in Australia is huge, with IBISWorld reporting the total 2023 revenue being $12.8 billion in their industry report, there should be more than enough opportunity for owners to make a healthy margin on every cleaning job. To achieve this, making small yet powerful changes to daily operations can significantly help increase profits and reduce unaccounted time and resources. 2024 is the year of changes!
Before we get into it, what is profit margin again?
Margin is the calculation of income earned minus expenses. It allows business owners to understand how much money they are left with once they pay their expenses (i.e, profit). Margin can be calculated on the income and expenses of each individual cleaning job, or can be a summary of cleaning jobs over a certain period (e.g monthly, quarterly).
It can be represented as a percentage (%) or a dollar figure ($).
Before I calculate my margin, do I have a clear picture of what my expenses are?
Before anyone can assess ways to improve margins, a complete list of business expenses is crucial to ensure calculations are correct. Write a list of all the kinds of expenses your cleaning business has, and for those expenses that may occur periodically, calculate the average of this expense per cleaning job.
Do I have a target profit margin % per job in mind?
The Trusted Cleaner reports that cleaning business margins can range anywhere from 10% to 28%, which can depend on the type of contract cleaning, expenses and the amount charged per job. Once you calculate what your current average margin is, this will provide a better indication of what a realistic target is. We can’t tell you what that magic number is, but what we can do is give recommendations to help increase it!
After crunching the numbers you may surprise yourself and find your margins are already healthier than you imagined!
How to grow your margin:
1. Review the best (and worst) revenue-making jobs in 2023.
Before anything can change, reflection on the past year’s performance can provide a tremendous amount of insight for 2024. What jobs do you feel were most successful? Why? Which jobs provided the highest margin vs the ones that didn’t? Why again? Some factors will be in your direct control and others will not. Take note of areas where you feel contributed to better margins and customer satisfaction and try to replicate these conditions more consistently for future jobs. Remember, margin is only one of many other important factors that make a job successful.
2. Review your prices.
Although this may be a delicate exercise for a lot of businesses right now, reviewing prices at least once a year is hugely important for the profitability of any business. There are two key purposes for reviewing prices. The first one is to help protect against increases in business expenses, alleviating the impact on margins by channelling these increases into business rates. The second one is to ensure businesses are adequately charging customers based on their labour and skill set to complete a task. How specialised are you? How competitive is the region you work in? Does it make more sense to gain profits through cheaper rates and a higher volume of work or through higher rates and a smaller volume of work? Remember that each year is another year of experience, skill and success that can funnel into more premium pricing.
3. Use the right tools for the job.
Labour is one of the largest expenses a contract cleaner needs to pay in order to get the work done. For this reason, efficiency is crucial and the right cleaning equipment can ensure this efficiency is maximised. Professional cleaning equipment can provide far better cleaning results than human labour can achieve on its own and can allow the completion of more jobs in shorter turnaround times.
Cleaning equipment is a cost too, so business owners should consider whether renting or buying equipment is the most appropriate option. A popular choice is renting a floor scrubber or sweeper for a customer’s job and if they like it, commit to a purchase. There are also many affordable second-hand equipment for sale depending on how budget-conscious businesses are.
When making decisions about cleaning equipment, return-on-investment is another key calculation to consider.
4. Learn to say no to jobs not worth your time.
We get it, you don’t want to disappoint anyone, but sometimes certain cleaning jobs are outside your area of expertise and end up costing you more in the long run. Unless it is an area of contract cleaning that you plan to expand into, avoid taking on jobs that may cost you a lot in overheads or capitalisation.
Going back to point 1, think about which jobs have previously rewarded you high margins and think about the kind of business you want to chase in 2024. Consider establishing relationships with other cleaning businesses so if you have an enquiry for a job that is not in your field, you can refer them on and they can do vice-versa. It is a cheap and effective way to gain more referral business!
5. Always visit the premises before quoting.
Depending on your pricing strategy, contract cleaners can get burnt by misunderstanding the scope of work from a client and end up quoting less than what they should. In 2024, start attempting to always complete a site inspection before providing a quote to ensure there is no miscommunication in the area size, level of work, or facility accessibility. All these factors can drastically change the amount you should charge in order to make good margins.
Conclusion
Contract cleaners strive for customer satisfaction and high performance in every cleaning job they take on. Your efforts should be equally reflected in the price charged to ensure the healthiest profit margins possible!
If you find yourself in need of more effective cleaning equipment to get work done in 2024, speak to one of our Sales Representatives who will be happy to discuss your business requirements.