23 data to include in the business plan of your cleaning company

This article was written by our expert who is surveying the industry and constantly updating the business plan for a cleaning company.

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Ever wondered what the ideal cleaning supply cost percentage should be to ensure your cleaning company remains profitable?

Or how many client contracts need to be secured each month to meet your revenue goals?

And do you know the optimal labor-to-job ratio for a residential cleaning service?

These aren’t just nice-to-know numbers; they’re the metrics that can make or break your business.

If you’re putting together a business plan, investors and banks will scrutinize these figures to gauge your strategy and potential for success.

In this article, we’ll cover 23 essential data points every cleaning company business plan needs to demonstrate you're prepared and ready to thrive.

A successful cleaning company keeps labor costs below 50% of revenue to ensure profitability

A lot of wine bar establishments might not seem related, but they share a common business principle with cleaning companies: keeping costs in check is crucial for profitability.

For a cleaning company, labor costs are typically the largest expense, so maintaining them below 50% of revenue is essential to ensure there's enough left over to cover other expenses like supplies, insurance, and marketing. If labor costs exceed this threshold, the company might struggle to cover these additional expenses, leading to financial instability.

By keeping labor costs under control, a cleaning company can maintain a healthy profit margin, which is vital for growth and sustainability.

However, this percentage can vary depending on the specific services offered and the market in which the company operates. For instance, a company offering specialized cleaning services might have higher labor costs due to the need for skilled workers, but they can offset this with higher pricing. Similarly, in a competitive market, a company might need to keep labor costs even lower to remain competitive while still offering quality service.

Equipment and supply costs should ideally stay between 5-10% of total sales

Insiders often say that equipment and supply costs should ideally stay between 5-10% of total sales for a cleaning company.

This range ensures that the company maintains a healthy profit margin while still investing in quality supplies. If costs exceed this range, it might indicate inefficiencies or overspending, which can eat into profits.

On the other hand, spending too little might compromise the quality of service, leading to dissatisfied customers and potential loss of business.

However, this percentage can vary depending on the specific services offered and the scale of operations. For instance, a company specializing in high-end, detailed cleaning might naturally have higher supply costs, while a business focusing on basic cleaning services might stay on the lower end of the spectrum.

High employee turnover is common, with rates around 200%, so budget for continuous recruiting and training

Most people overlook the fact that high employee turnover is a significant challenge for cleaning companies, often reaching rates around 200%.

This is primarily because cleaning jobs are typically low-wage positions with limited benefits, making them less attractive for long-term employment. Additionally, the work can be physically demanding and repetitive, leading to job dissatisfaction and burnout.

As a result, cleaning companies must budget for continuous recruiting and training to maintain a stable workforce.

However, turnover rates can vary depending on specific factors such as company culture and location. Companies that invest in employee engagement and offer competitive wages may experience lower turnover rates, while those in high-cost living areas might struggle more to retain staff.

60% of cleaning companies fail within the first three years, often due to cash flow issues

It's worth knowing that 60% of cleaning companies fail within the first three years, often due to cash flow issues.

One major reason is that these companies often face irregular payment cycles, which can lead to cash flow problems. Additionally, many cleaning businesses operate on thin profit margins, making it difficult to absorb unexpected expenses or delays in payment.

Moreover, the initial costs of equipment, supplies, and marketing can be substantial, putting a strain on financial resources early on.

However, the success rate can vary depending on factors such as location and target market. For instance, companies that focus on commercial clients may have more stable cash flow compared to those serving residential clients, who might cancel services more frequently.

Companies should aim for a break-even point within 12 months to be considered viable

Maybe you knew it already, but aiming for a break-even point within 12 months is often seen as a benchmark for a cleaning company's viability.

Reaching this point quickly indicates that the company can cover its operational costs and start generating profit, which is crucial for long-term sustainability. It also shows that the company has a solid business model and effective marketing strategies in place.

However, this timeline can vary depending on factors like the initial investment and the local market demand for cleaning services.

For instance, a company in a highly competitive area might take longer to reach break-even due to lower pricing strategies needed to attract customers. Conversely, a company in a niche market with less competition might achieve this milestone faster, as they can charge premium rates for specialized services.

Recurring contracts are crucial, with a target of 70% of revenue from repeat clients

Believe it or not, recurring contracts are the lifeblood of a cleaning company, aiming for 70% of revenue from repeat clients.

These contracts provide a steady and predictable income, which is crucial for managing expenses and planning for growth. Additionally, they help build strong relationships with clients, leading to trust and long-term partnerships.

However, the importance of recurring contracts can vary depending on the type of cleaning services offered.

For instance, commercial cleaning services often rely more heavily on recurring contracts due to the ongoing nature of their work. In contrast, residential cleaning might see more one-time jobs, but still benefits from loyal customers who schedule regular cleanings.

Prime cost (labor and supplies) should stay below 60% of revenue for financial health

Experts say that keeping prime costs, which include labor and supplies, below 60% of revenue is crucial for the financial health of a cleaning company.

Labor costs are often the largest expense for cleaning companies, as they rely heavily on human resources to deliver services. Supplies, such as cleaning agents and equipment, also contribute significantly to the overall costs, making it essential to manage these expenses efficiently.

By maintaining prime costs under 60%, a cleaning company can ensure it has enough profit margin to cover other operational expenses and invest in growth.

However, this percentage can vary depending on factors like the size of the company and the specific market it operates in. Smaller companies or those in highly competitive markets might experience higher costs, necessitating a more flexible approach to managing their prime costs.

Cleaning companies should reserve 1-2% of revenue for equipment maintenance and replacement annually

Few wine bar establishments

Cleaning companies should reserve 1-2% of revenue for equipment maintenance and replacement annually because it ensures that their tools and machines are always in optimal working condition. Regular maintenance helps prevent unexpected breakdowns, which can disrupt services and lead to customer dissatisfaction.

By setting aside a small percentage of revenue, companies can plan for both routine maintenance and eventual replacement of equipment, ensuring long-term operational efficiency. This proactive approach can also help in budgeting and financial planning, as it avoids the need for sudden, large expenditures.

However, the exact percentage may vary depending on the specific needs of the company.

For instance, a company that uses more specialized or high-tech equipment might need to allocate a higher percentage to cover the costs of maintaining such tools. Conversely, a smaller company with less complex equipment might find that 1% is sufficient to keep everything running smoothly.

A successful cleaning company should aim for a client retention rate of at least 80%

Please, include that in your business plan: a successful cleaning company should aim for a client retention rate of at least 80%.

High client retention is crucial because it ensures a steady stream of recurring revenue, which is more cost-effective than constantly acquiring new clients. Retaining clients also helps build a strong reputation through word-of-mouth, as satisfied customers are more likely to recommend your services to others.

Moreover, a high retention rate indicates that your company is consistently meeting or exceeding client expectations, which is essential for long-term success.

However, the ideal retention rate can vary depending on the specific market and client needs. For instance, commercial cleaning contracts might naturally have higher retention rates due to long-term agreements, while residential cleaning services might experience more fluctuation due to seasonal demand or personal preferences.

Inventory turnover for cleaning supplies should happen every 30 days to avoid waste and ensure freshness

A precious insight for you, inventory turnover for cleaning supplies should occur every 30 days to minimize waste and maintain freshness.

Cleaning supplies, like disinfectants and detergents, can lose their effectiveness over time, especially if they are stored improperly. By ensuring a monthly turnover, a cleaning company can guarantee that their products are always at peak performance when used.

Moreover, frequent turnover helps in avoiding the accumulation of expired products, which can lead to unnecessary waste and additional costs.

However, the ideal turnover rate can vary depending on the specific needs of the company. For instance, a company that specializes in medical facility cleaning might require more frequent turnover due to the higher standards of cleanliness and sanitation required. Conversely, a company that handles residential cleaning might find a slightly longer turnover period acceptable, as the demand for certain supplies may be less intense.

It’s common for cleaning companies to lose 2-4% of revenue due to theft or inventory shrinkage

This is insider knowledge here, but it's common for cleaning companies to lose 2-4% of revenue due to theft or inventory shrinkage.

One reason is that cleaning supplies and equipment are often stored in multiple locations, making it difficult to monitor them closely. This can lead to unauthorized access and misappropriation of items, either by employees or outsiders.

Additionally, the nature of the work often involves unsupervised environments, which can increase the risk of theft.

However, the extent of revenue loss can vary depending on factors like the size of the company and the security measures in place. Smaller companies might experience higher percentages of loss due to limited resources for monitoring, while larger companies may have more robust systems to mitigate shrinkage.

Office rent should not exceed 5-8% of total revenue to avoid financial strain

Most of the wine bar establishments' office rent should ideally stay within 5-8% of total revenue to prevent financial strain.

For a cleaning company, keeping rent within this range ensures that a larger portion of revenue can be allocated to essential areas like staff wages and cleaning supplies. If rent exceeds this percentage, it can lead to cash flow issues and limit the company's ability to invest in growth or handle unexpected expenses.

However, this percentage can vary depending on the company's specific circumstances.

For instance, a company operating in a high-rent area might need to adjust its pricing strategy to maintain profitability. Conversely, a company with a remote workforce might have more flexibility in keeping rent costs low, allowing them to allocate funds to other critical areas like marketing or technology upgrades.

Upselling additional services can increase average contract size by 15-25%

Not a very surprising fact, upselling additional services can boost a cleaning company's average contract size by 15-25%.

When a cleaning company offers extra services like deep cleaning, carpet shampooing, or window washing, it provides more value to the customer, which can justify a higher price. Customers often find it convenient to bundle these services with their regular cleaning, leading to an increase in the overall contract size.

However, the impact of upselling can vary depending on factors like the customer's budget and the specific needs of their space.

For instance, a small office might not require extensive additional services, resulting in a smaller increase in contract size. On the other hand, a large commercial space with specialized cleaning needs might see a more significant boost, as they are more likely to opt for a comprehensive package.

The average profit margin for a cleaning company is 10-15%, with higher margins for specialized services

This valuable insight highlights that the average profit margin for a cleaning company typically ranges from 10-15%, with higher margins often seen in specialized services.

One reason for this range is that basic cleaning services tend to have lower margins due to high competition and the need to keep prices competitive. In contrast, specialized services, such as hazardous waste removal or deep cleaning, can command higher prices due to their complexity and the expertise required.

These specialized services often require specialized equipment and training, which can justify the higher prices and, consequently, higher profit margins.

However, the profit margin can vary significantly depending on factors such as location, clientele, and the scale of operations. For instance, a cleaning company operating in a high-demand urban area might enjoy higher margins due to increased demand and willingness to pay for premium services.

Average contract value should grow by at least 3-5% year-over-year to offset rising costs

This insight highlights the need for cleaning companies to ensure their average contract value increases by at least 3-5% annually to keep up with rising operational costs.

As costs for supplies, labor, and overheads continue to rise, maintaining the same contract value could lead to reduced profit margins. By increasing contract values, companies can offset these rising costs and maintain financial stability.

However, the extent to which contract values need to grow can vary depending on specific factors such as the company's location, the scale of operations, and the type of cleaning services offered.

For instance, a company operating in a high-cost urban area might need to increase its contract values more significantly compared to one in a rural setting. Additionally, companies offering specialized cleaning services may have more flexibility in adjusting their prices due to higher perceived value by clients.

Ideally, a cleaning company should maintain a current ratio (assets to liabilities) of 1.5:1

This data does not come as a surprise because maintaining a current ratio of 1.5:1 is generally considered a healthy balance for a cleaning company.

Such a ratio indicates that the company has 1.5 times more assets than liabilities, which provides a cushion to cover short-term obligations. This is crucial in the cleaning industry, where cash flow can be unpredictable due to seasonal demand and client payment schedules.

However, the ideal ratio can vary depending on specific circumstances, such as the size of the company or its growth stage.

For instance, a smaller cleaning company might aim for a higher ratio to ensure it can handle unexpected expenses. On the other hand, a larger, more established company might operate efficiently with a slightly lower ratio, as it may have more stable revenue streams and better access to credit.

Effective service bundling can boost revenue by 10-20% by highlighting high-margin services

Yes, effective service bundling can indeed boost revenue by 10-20% for a cleaning company by highlighting high-margin services.

When a cleaning company bundles services, it can strategically include high-margin offerings like deep cleaning or specialized treatments alongside regular cleaning tasks. This not only makes the bundle more attractive to customers but also increases the overall profitability of each sale.

Customers often perceive bundled services as offering better value, which can lead to increased sales volume and higher revenue.

However, the effectiveness of service bundling can vary depending on factors such as customer demographics and the specific market segment being targeted. For instance, residential clients might be more interested in convenience and value, while commercial clients may prioritize customized solutions that meet their unique needs.

A cleaning company should have 0.5-0.75 square meters of storage space per employee to ensure efficiency

Did you know that a cleaning company should have 0.5-0.75 square meters of storage space per employee to ensure efficiency?

This guideline helps in maintaining an organized workspace, which is crucial for quick access to cleaning supplies and equipment. When employees can easily find what they need, it reduces downtime and increases productivity.

Having adequate storage space also minimizes the risk of equipment damage and loss, as items are less likely to be misplaced or improperly stored.

However, the specific storage needs can vary depending on the type of cleaning services offered and the size of the equipment used. For instance, a company specializing in industrial cleaning might require more space due to larger equipment, while a residential cleaning service might need less.

Client satisfaction scores can directly impact referrals and should stay above 90%

This data highlights that client satisfaction scores are crucial for a cleaning company because they can directly influence the number of referrals the business receives.

When clients are happy with the service, they are more likely to recommend the company to friends and family, which can lead to an increase in new business. Therefore, maintaining a score above 90% is essential to ensure that clients are consistently satisfied and willing to refer others.

However, the impact of satisfaction scores can vary depending on specific cases, such as the type of cleaning service provided or the client's expectations.

For instance, a client who requires a one-time deep cleaning might have different satisfaction criteria compared to a client with a regular cleaning schedule. In such cases, the company must tailor its services to meet the unique needs of each client to maintain high satisfaction scores and encourage positive referrals.

Companies in urban areas often allocate 2-4% of revenue for transportation costs

This data point highlights that companies in urban areas, like cleaning services, often allocate 2-4% of their revenue for transportation costs due to the unique challenges and demands of city environments.

Urban areas typically have higher traffic congestion, which can lead to increased fuel consumption and longer travel times for cleaning crews. Additionally, the dense population and frequent need for services in various locations require efficient logistics planning to minimize costs.

For a cleaning company, transportation costs can vary based on factors such as the distance between clients and the frequency of service visits.

In some cases, companies might invest in eco-friendly vehicles or optimize routes to reduce expenses, which can affect the percentage of revenue allocated to transportation. Ultimately, the specific allocation depends on the company's operational strategy and the unique characteristics of the urban area they serve.

Digital marketing should take up about 2-4% of revenue, especially for new or growing companies

Actually, digital marketing should take up about 2-4% of revenue for new or growing companies, like a cleaning company, because it helps establish a strong online presence without overextending the budget.

For a cleaning company, investing in digital marketing is crucial to reach potential customers who are increasingly searching for services online. Allocating 2-4% of revenue allows the company to experiment with different strategies, such as social media advertising and search engine optimization, to see what works best.

As the company grows and revenue increases, the percentage spent on digital marketing can be adjusted to match the company's specific needs and goals.

For instance, if the company is in a highly competitive market, it might need to spend more to stand out, whereas in a less competitive area, a smaller budget might suffice. Ultimately, the key is to find a balance that maximizes return on investment while supporting the company's growth objectives.

Seasonal service offerings can increase sales by up to 20% by attracting repeat customers

It's very common for cleaning companies to see a boost in sales by offering seasonal service packages, which can attract repeat customers and increase sales by up to 20%.

These seasonal offerings, like spring cleaning specials or holiday preparation packages, tap into specific customer needs that arise at certain times of the year. By addressing these needs, cleaning companies can create a sense of urgency and relevance, encouraging customers to book services more frequently.

Moreover, when customers have a positive experience with these seasonal services, they are more likely to become repeat clients, contributing to a steady revenue stream.

However, the effectiveness of these seasonal offerings can vary depending on factors such as geographic location and local climate. For instance, a company in a snowy region might see more demand for winter-related cleaning services, while a company in a warmer area might benefit more from summer cleaning packages.

Establishing a supply cost variance below 3% month-to-month is a sign of strong management and control.

A lot of cleaning companies strive to maintain a supply cost variance below 3% month-to-month because it indicates strong management and effective cost control.

When a company can keep its supply costs stable, it shows that they have a well-organized procurement process and are effectively managing their inventory. This stability also suggests that the company is adept at forecasting demand and adjusting orders accordingly, minimizing waste and overstock.

However, the ability to maintain such a low variance can vary depending on factors like the size of the company and the diversity of services offered.

For instance, a smaller company with fewer clients might find it easier to control supply costs due to less variability in demand. On the other hand, a larger company with a wide range of services might face more challenges, as they need to manage a more complex supply chain and adapt to fluctuating client needs.