Setting up a cleaning business has relatively minimal costs, can be done quickly and requires little training. At the same time, demand for cleaning services has increased significantly over the last 10 years with the market valued at around £3 billion. It is no wonder therefore that there are now more than 30,000 cleaning business set up to grasp that opportunity.
However, all gold rushes end. We are not saying this one has, but it is good practice to be aware of market changes and be ready to react. In this article, we are not therefore going to just jump straight in, assume it is a great opportunity, and giving you our ‘how to’ guide. We wanted to first let you know the reasons for the demand; look at whether anything had changed – hint: it has been quite a year and 2021 will also have its challenges; let you know about the competitive reality of that gold rush. Finally, then give you our tips to help you set up and successfully run and market your cleaning business.
Why Has It Been Booming? Has Anything Changed?
The boom in demand for cleaning services over the last 10 years has been due to several reasons. The rising disposal household incomes. An increasing number of women in the workforce who don’t have time or want to do their own cleaning. Demand from young professionals. Also the falling price of hiring a cleaner, making it an affordable option for much more of the population. While Covid19 initially caused a fall in demand for these services during lockdown, there has been an upturn since.
The question is whether there are any factors that point to a change in those long-term trends? Read on to find some of those changes and their possible influences:
COVID 19 and Brexit have had a downward effect on household incomes that will continue into the foreseeable future. However, it is not clear if they will decide to cut back on their cleaners. In fact, COVID19 has accelerated a trend that was happening before: homeworking. Homeworking in turn has increased demand is due to people becoming more conscious of the state of their house cleanliness. With this in mind people may view cleaning as an essential service and cut back elsewhere.
Supply of cleaners
In the case of Brexit, it might potentially cause further economic downturn. However, there is the likelihood of restrictions on the number of people coming into the country to work, and these immigrants make up a large proportion of the cleaning industry.
Women in the workforce
Statistics indicate the number of women in the workforce is starting to bottom out, limiting this as an area for growth.
Competition and Pricing
While demand has increased considerably the rise of technology and number of people who have entered the market mean that average wage of a cleaner has fallen from £25 an hour in 2006 to £12 in 2020. In London it is particularly competitive with price wars keeping that hourly rate down. However, some of these tech companies have left the market and prices have started to settle.
The above shows there are changes that are good and bad for the cleaning market. We suggest you watch them and do your own research.
Find Ways to Create a Competitive Niche
The cleaning world is incredibly competitive, but you can help yourself with segmentation. Segmentation is about breaking your customers down into different groups, understanding their different requirements for a product and their purchasing habits. Doing this helps you to target customers with the correct message and find niches that are more profitable. For example, we already noted that a number of technology platforms like TidyChoice have come into the market and these platforms have driven down prices. Since you don’t want to compete with them, it would be good to look for segments of the population who are less tech savvy – It will be easier to close them and you may be able to get higher hourly rates.
If we make a generalization that the older generation are that less tech savvy one, you can create hyper focused messages based on that demographic and place those ads in locations they are looking. There is no need to waste your time advertising your services to young people who are used to comparison and marketplace sites. At the very least, if you decide to compete with the marketplace sites you now know you must position your business as local rather than the unfriendly tech solution.
To do this you should Google to find industry reports, go to Forums, and read blogs to find much more about the industry. It is worth it. It works!
Research the Competition
Understand who you will be competing against and their pricing. This information is crucial in helping you set your own pricing and sector targeting – If you are up against a huge company who is spending a fortune on ads and offering very low pricing, you may not want to compete with them. Even when you have narrowed down and targeted a sector you will most likely find you still have competitors, so you need to know their pricing.
What Kind of Cleaning Business?
The market for cleaning services is roughly divided between businesses, residential and specialist services like window or roof cleaning.
Going after the commercial market may give you the opportunity to win bigger contracts, but it may also mean you need a team, have more competition from larger players, need to spend more time negotiating contracts, and will usually result in you having to buy and bring your own equipment which is not only a cost on the cleaning equipment but potentially on vehicles.
Similarly, with some specialist services you may need to buy a ladder and once you do that you will also need a vehicle to bring it in. If you can’t afford, or don’t want to have, these initial costs then the right choice for you is residential – Usually you can utilise the cleaning equipment of the homeowner.
Business model – Franchising or On Your Own
Think about whether you want to join a franchise or create your own brand. There are a number of large franchising companies – Merry Maids, Selclene and Molly Maid to name but a few – who offer the advantage of a recognized brand which they promote, but it will cost you franchise fees in the thousands of pounds. If you are confident you can build out your brand, or don’t want to invest, you can go it alone.
An alternative to franchising is the large marketplace sites. You won’t have to pay the franchising fee but a cut of each time you are paid. This method is good if you don’t have the funds to invest but obviously means a lower hourly rate now, and forever.
A suggestion might be to go it alone and, at the same time, work for the marketplace sites to get initial income coming in. While you are at the customer you got from the marketplace, you can ask them if they know anyone who wants to come onboard with your private business. Check the marketplace terms and conditions so you don’t get in trouble, but you won’t be the first one to slowly transition your customers from a marketplace to your own ownership.
Budget and Cashflow
Many businesses that go under do so simply because they run out of money to function. You have your mortgage, your equipment costs, travel costs and so many others. You need to budget for the fact it will take a few months to build up a business and have the cashflow to support that. There is nothing more frustrating than investing in the equipment and marketing then finding you aren’t able to continue.
There are so many ways to do this and if you have done your segmentation and targeting correctly, you can be much more effective. However, you still need to promote and understand the channels your customers respond to. Continuing with the example of the less tech savvy, it might well be that advertising in your local newspaper, newsagents, or even a leaflet drop will be sufficient.
Note, please don’t take this example as gospel: I am not suggesting for a moment that all older people are not tech savvy and so investment in Facebook ads, a Facebook page etc may also likely be extremely helpful.
Your first step before you start should be to write a buyer persona that details everything about your ideal buyer: their concerns, buying habits and where you are likely to find them. This will help you target them with the right language in the right place.
Recommendations are also an extremely powerful tool, so make sure you do a fantastic job. In addition, incentivise your customers to write a positive review and offer discounts to bring their friends onboard.
Invest a little in a company name and logo. Even if you have acquired all your customers by word-of-mouth and think you don’t want to appear too commercial, it can only be good to have some T-shirts done and something on your car. Ideally, you want more customers near your present one, and if your car sits on the road for several hours each week your customer’s neighbours will get curious.
You get easily get logos done and t-shirts printed on sites like 99Designs. It is really easy and not very expensive.
Unless you are working for a marketplace that takes the money from your customer, its cut and passes the rest along, you will need to take payments. You might think that naturally the answer is cash, but if you have longer term customers or businesses they may want to be invoiced. In addition, cash carries many drawbacks in terms of safety and convenience that can be resolved by getting a mobile card payment solution like what Aceworks offers.
Taking on Staff
You may just be planning a one-person operation, or you may feel you are a better marketer and administrator meaning you want to employ staff.
If you employ staff, and especially as they are going into people’s homes, you should ensure the appropriate background checks and references. You also need to be aware of the National Minimum Wage and how you can pay and then deduct their wages from your tax bill.
Injuries could occur as a result of your work so you should protect yourself through Public Liability Insurance and Personal Indemnity Insurance. If you take on employees, you will need to get Employer’s Liability Insurance.
Once you earn over £1000 a year your business needs to be registered for tax. You have a number of set up options:
Sole trader – This is the easiest and most straightforward choice, but you personally are responsible for any losses.
Limited company – This takes a little longer to setup and has more reporting and management responsibilities, but your company is responsible for your debt not you.
Partnership – This is the best option if there are several of you doing this together.
You can find out more here.
In all cases, you need to pay tax through self-assessment and you will need to keep accounts of your income and expenses. There are specialist accountancy software packages that can help you with this as will the payment software mentioned above through automatic recording of all invoices.
Regulations and Qualifications
While there are no licenses or qualifications necessary to start a business, you still should have a general understanding around health and safety issues that could end up getting you sued or in losing business. For example, the Control of Substances Hazardous to Health Regulations (or COSHH) is a UK law that you should be aware of and know how to protect your customers against.
In addition, joining one of the professional bodies below will help with your credibility and in getting additional information on the industry and making a success of your business.
Get Together a Business Plan
All of this should be written down in a business plan that details clearly with evidence that you have researched the market, understand it, identified a way to compete, and budgeted for all costs. You write it down so you can stare at it and ask yourself honestly if you feel, you have done this. You may be a little put off by business plan jargon like macro, meso and micro analysis but less you get past the big words it makes sense. Think about how you have criticized or found incredulous when someone has tried to sell you something. Ask yourself the question whether you are making the same mistakes.
Hoof Payment Solution
Interested in knowing more about how card payment solutions can help you grow your sales and get paid on time? Go to Hoof to discover the many benefits of taking card payments.