Thinking of starting a business, but not sure where to start? As I’ve covered before, starting a cleaning business is incredibly appealing. Not only do they have consistent, recurring demand, but they also come with low overhead expenses.
But as you’re thinking it over, you may be wondering: Is a cleaning business profitable? I’m here to tell you that they’re not just profitable, but they can be made into strong, cash-generating powerhouses.
In this article, I’ll break down what you need to know about building a profitable cleaning business. I also cover profit margins, common mistakes, and how to increase profitability in your cleaning business.
Note: The information in this article reflects the perspective of one business owner and is intended for informational purposes only. Before making any decisions about your pricing model or profit margins, we encourage you to conduct your own research and consult with a financial or business advisor who understands your specific situation.
What factors affect cleaning business profitability?
As with any business model, the profitability of your cleaning business depends on revenue and expenses. With that in mind, here are key factors to consider when tracking your profitability in the cleaning industry:
1. Revenue
There are three major factors affecting the revenue of your cleaning company:
- Client mix. What’s the balance between your residential and commercial clients? You can charge more for residential cleans, but they can be inconsistent. Commercial cleans are more predictable because they operate on monthly contracts. The tradeoff is you can’t charge businesses as much.
- Pricing model. What does your hourly rate look like for each client? For most clients, you can charge flat rates vs per-hour pricing once you know how long each cleaning takes.
- Available add-ons. Providing upsells like carpet cleaning and disinfection can increase your average order value.
2. Labor
The biggest expense line item for cleaning businesses is labor. After all, it’s the core service that we provide to customers.
You can manage your labor costs in two ways. If you work with contractors, you can offer a revenue split for every job you do with them. It offers an incentive because they know how much they’ll earn from each job.
Or you can hire cleaning technicians as payroll employees and pay them on an hourly basis. However, you should know that when you employ technicians, you’ll incur additional expenses. These include workers’ compensation, insurance, and benefits.
3. Supplies and equipment
Startup costs for supplies can be as low as $40 for residential jobs and house cleaning. Surprised? I show how you can get your first few cleaning supplies for less than $40 in this video:
Your cleaning equipment needs will vary depending on the types of services you provide. For example, you’ll need different types of vacuums and mops to handle residential jobs versus commercial jobs.
4. Marketing
Another essential line item for cleaning businesses is getting in front of potential customers.
The good news is, you control how much you spend here. Google Local Services Ads, or LSAs, let you set a monthly budget to limit your ad spend. I got started with a $500 initial investment for my first month of LSAs.
Other marketing initiatives won’t cost money up front but may take time setting up. Google My Business, for example, can take a few weeks to get going. Referrals and word of mouth can take several months or longer.
5. Back-office expenses
These are the monthly operating costs that keep your business running.
They include line items like:
- Gas reimbursement for your team
- A local or state business license, if required
- Cleaning business software tools like your CRM and business phone
💡Looking for a phone system for your business? Check out Quo’s deep dive into the best phone systems for cleaning companies.
What are the profit margins for residential cleaning businesses?
In my experience, successful residential cleaning businesses have gross profit margins of 40–50% and net profit margins of 20–30%.
I prefer a 50-50 split with my contractors on residential jobs. That way, I know how much revenue is coming in, and I can compensate my team fairly so they stay with my business.
Here’s a breakdown of the profit margins for residential cleaning jobs in New Jersey, where I run my business. Keep in mind my rates might fluctuate based on demand and other factors:
- Revenue: Let’s estimate two cleaning jobs per day, seven days a week. A rate of $70 per hour charged to customers and an average cleaning time of two hours per job comes to $7,800 per month.
- Labor: At a 50-50 split, your contractors will be paid $35 per hour.
- Supplies, marketing, and back office expenses: Let’s assume the following:
- Supplies: $500
- Marketing: $500
- Back-office expenses: $1,000
- Net profit: $1,900, or 24%
What are the profit margins for commercial cleaning businesses?
Many new cleaning business entrepreneurs believe landing commercial jobs is hard. Nothing could be further from the truth. Office cleaning is actually much easier than home cleaning. And there’s also little to no barrier to entry.
Commercial cleaning jobs bring in less revenue per-clean. But they can generate higher revenue because they’re recurring services: think 80 to 100 hours per month for a small business versus six hours for a homeowner.
I recommend a 70-30 revenue split with contractors on commercial jobs. The gross profit margins range are 30%–35%, and the net profit margins are 20%–25%.
Here’s a breakdown of the profit margins for commercial cleaning jobs in New Jersey:
- Revenue: Let’s estimate two cleaning jobs per day, five days a week. At a rate of $30 per hour and an average clean time of four hours per job, that comes to $4,800 per month.
- Expenses: At a 70-30 split, your base cost will be $21 per hour. You can break that down into:
- Labor: $15 per hour
- Taxes and insurance: $2 per hour
- Travel and supplies: $2 per hour
- Overhead and admin: $2 per hour
- Supplies, marketing, and back-office expenses: Let’s assume the following:
- Marketing: $500
- Net profit: $940, or 20%
Common mistakes new cleaning business owners make
If you want to keep your profit margins healthy, here are the most common traps to avoid:
1. Not knowing your numbers
As you grow, so will your expenses. It can be easy to lose track when you’re excited about all the new jobs coming in.
When I first started with employees, we were clearing $50,000 to $60,000 a month. But we weren’t paying attention to overtime, supply costs, new vehicles, gas, and tolls. No wonder we couldn’t make payroll.
But I get it: most business owners aren’t accountants. My biggest advice is to find a local accountant and let them know each month what came in and what went out. This makes it easier to track overhead costs and keep tabs on profitability.
2. Lifestyle inflation
When building a successful cleaning business, it’s easy to get carried away with topline revenue. But just because you have more money in your account doesn’t mean you can afford a new car or a nicer place. Instead, I recommend reinvesting as much as you can into the business.
Our first paycheck was $150 a week. Then, we went up to a couple hundred dollars per week. We reinvested most of what we made. I’m really glad we did.
If you can live frugally in the first few years of your business, you can easily maximize your future profit potential.
3. Not building recurring customer relationships
New businesses always want to acquire new cleaning clients. But many of them fail to invest in building long-term customer relationships.
One reason for this is they don’t track their customer relationships in a phone system or a CRM.
With business phone systems like Quo, formerly OpenPhone, you can keep track of past customers who gave you a positive review after a clean. Simply save a custom property in their contact profile. You can set a reminder to follow up with them about their next service. You can also pitch them on specialty services like window cleaning, deep cleaning, and green cleaning.
7 ways to increase your cleaning business profitability
Even if you keep track of your profit margins and avoid making mistakes like lifestyle inflation, you might still be at break even. Here’s what I recommend to cleaning businesses to improve their profitability over time:
1. Review your prices regularly
Many cleaning businesses set prices in the first year and never update them again — even as costs go up. Why? They’re afraid. Over time, that will seriously eat into your margins.
I’ve worked with businesses that haven’t raised rates in five years. When we sit down and do the math, we find out they’re making $2.40 every time they go to a house.
Don’t be afraid to raise your rates every three to six months. Then let your existing customers know about it when you do.
The key is to use the form of communication each customer prefers and give them advance notice. Never spring it on them right before their next clean.
What if a customer objects to your price increases? Highlight the value of your cleaning service compared to hiring someone off Craigslist or a random app. For example, we make the case to customers by highlighting some of our differentiators, including how we:
- Pay our technicians a fair wage
- Use the newest equipment
- Carry millions of dollars in liability and workers’ compensation insurance
If uninsured cleaners break something, there’s no way to get it reimbursed through insurance. Once we illustrate our value to customers, they usually understand and accept the price increase. Sometimes, we also offer a one-time add-on to make it easier for them.
2. Assess whether you have enough people on your team
Another common mistake is spending too much on overtime for cleaning staff instead of simply expanding your team. It’s more efficient to add part-timers to your labor pool during busy seasons. That way, overtime pay doesn’t cut into your margins.
Think about it: paying time-and-a-half to three or four people could easily eat through margins for your cleans. But bringing one or two part-timers would eliminate this overtime. You’ll also be able to complete more jobs in less time.
3. Capture every incoming lead with a business phone system
One of the biggest reasons I’ve seen teams lose revenue? They don’t capture all their leads. Customers call in, but the business owner is using their personal phone and can’t answer when they’re busy.
Professional phone systems can help you capture incoming leads 24/7. Providers like Quo offer shared phone numbers. Even if someone on the team is busy, incoming calls are routed to the other members with access to the shared number. It reduces your missed calls and lost leads.
If everyone on your team is busy, you can use an AI cleaning answering service like Sona to conduct initial lead intake. It can also help you book appointments automatically. And Sona calls are logged in your Quo workspace and synced with your CRM.
With these business phone features, your calendar stays full and your revenue keeps growing. No additional work required.
4. Use scope-of-work checklists to stay on task
Customers may decide they want additional tasks at the last minute. But this can add time to your cleaning jobs and cut into your profitability.
We recommend using scope-of-work checklists to set clear expectations and avoid scope creep.
We have a checklist on our website, and we send it during the quoting process. We’ll send it again via email before we arrive. That way, the customer knows what’s included, what’s not, what costs extra, and what we don’t do.
But if someone still asks for something outside our scope, we don’t necessarily say no. We let them know it’s not part of their cleaning, but we can do it and add it to their bill.
5. Leverage commercial accounts to reduce seasonal slowdowns
Seasonal slowdowns are a real thing, especially in residential cleaning.
The timing of this depends on the area. For example, in New Jersey, winter is slower for residential cleaning because a lot of our clients go to Florida. Cleaning for those clients picks up again in the spring.
As you can imagine, this can affect your profitability.
The good news is that commercial cleaning has consistent demand year-round. I try to find the right balance between residential and commercial clients. That way, you can offset revenue volatility as much as possible.
6. Increase operational efficiency with field service management software
As you scale, be sure to increase your operational efficiency with field service management software, or FSM.
For example, you can optimize travel routes for your teams with tools like Jobber. This can help reduce your monthly gas reimbursements.
You can also send appointment reminders to clients with Jobber and Quo to reduce cancellations. This can make customers happier since they can respond quickly and avoid late fees.
Which brings us to my next point…
7. Have clear upfront deposits and cancellation fees
Always take deposits, whether cash is tight or not. My business requires deposits of 25% of the total service cost, but some of the people I mentor require up to 50%.
Taking deposits can help you in two ways:
- Ensures jobs stay on your schedule and don’t get canceled at the last minute
- Helps with cash flow because you’re not waiting for full payments after you’ve finished your work
Make sure your deposit is non-refundable. Otherwise, the client can shop around for a better deal, then cancel the service and request a refund. A non-refundable deposit almost guarantees they won’t do that.
We also charge extra if a client needs to reschedule within a certain window. If they call more than 48 hours before their appointment, there are no penalties. But if it’s less than 48 hours, we charge an extra 25% rescheduling fee. For same-day cancellations, clients owe the remaining balance of the cleaning — even if we aren’t doing the clean, our teams are already on the road.
Increase your profits for the long term with a smarter pricing strategy
Your cleaning business profitability is a direct function of your pricing. Unlike most of the factors that affect your profit margins, your price is the only one you can control. Set the right price, and every clean will be profitable for you. If your price is too low, you’ll be in the red even as you grow your customer base.
Since pricing is such an important topic, I’ve covered it in this guide on how to price cleaning services for your business.
FAQs
Residential cleaning services have higher profit margins for each job but are less predictable. Commercial contracts are the inverse of that. To grow your profit margins, invest in both types of jobs and don’t depend solely on one or the other.
Solo cleaning businesses usually become profitable after their first 10 to 15 cleaning jobs. That’s because overhead expenses are relatively low, so you can start making profits relatively quickly. But if you choose to hire people before you get started, expect to reach profitability a little later.
By yourself, you need $1,000 minimum for cleaning supplies, ad spend, and other upfront costs. The same is true if you hire contract employees. But if you’re planning to hire employees, you need about $2,000 for supplies plus two weeks of payroll.
