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How To Start A Commercial Cleaning Business

How To Start A Commercial Cleaning Business

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How To Start A Commercial Cleaning Business

How To Start A Commercial Cleaning Business

Cleaning is an essential aspect of every business. From office buildings to hospitals, every establishment needs efficient cleaning services to maintain a clean and hygienic environment.

Starting a commercial cleaning business can be a lucrative opportunity, especially in the current climate, where cleanliness and hygiene are at the forefront of everyone’s mind. Success in this industry requires more than just being able to pick up a mop. To help you learn more, this guide will provide an overview of the business, steps to get started, and answers to common questions.

Business Overview

Commercial cleaning businesses help to keep commercial buildings clean and, therefore, safe for use. A cleaning business may hold a contract with one large operation, providing all of their daily cleanings. The business may hold smaller contracts with multiple businesses, providing cleaning services only on certain days. Because many businesses require cleaning during non-business hours, it’s common for cleaning businesses to operate after 5:00 pm and into the night. Many businesses hire commercial cleaners including offices, schools, warehouses, hospitals, retail stores, and other commercial establishments.

While a cleaning business can take a general approach to cleaning, it’s common for these businesses to specialize in certain areas. A business may specialize in certain aspects of cleaning, like floor care or window cleaning, while others may focus on residential cleaning, medical cleaning, or industrial cleaning. A business may offer maid services, sanitation services, or damage restoration cleaning, and these specialties often allow businesses to charge more for their services.

Industry Summary

The commercial and janitorial cleaning industry is expected to generate over $90 billion in 2023.1 This is a large and growing sector with many small local operations as well as larger regional and national franchises. Demand is continuous thanks to the ongoing cleaning requirements of the millions of commercial properties in operation.

The commercial cleaning category is expected to see growth of 7.2% annually through 2028.2 This growth is driven by factors such as increased concern about workplace hygiene, employee well-being, sustainability, and the rise in non-commercial and commercial building construction.

The cleaning industry is often seen as recession-proof. Businesses, regardless of their size, need to maintain clean premises for health, safety, and aesthetic reasons. Also, labor is hands-on and can’t be easily automated or outsourced, keeping the opportunity steady. The current workforce shortage has also increased demand, often allowing companies to charge higher premiums.

There are many trends to be aware of before starting a commercial cleaning business. A few to be aware of include:

Sustainability: There has been a growing emphasis on sustainability within the commercial cleaning industry. Businesses are increasingly seeking eco-friendly cleaning solutions that minimize environmental impact. Consequently, green cleaning practices have gained momentum, focusing on the use of biodegradable and non-toxic cleaning agents, as well as energy-efficient equipment.3

Technology and automation: Technology has revolutionized the commercial cleaning industry, providing innovative solutions to enhance efficiency and productivity. For instance, the advent of robotic cleaners has automated mundane cleaning tasks, allowing human workers to focus on more complex and specialized areas.4

Increased demand for sanitation and disinfection services: The COVID-19 pandemic has created a huge demand for sanitation and disinfection services, which has put commercial cleaning companies in a unique position.5

Steps To Start A Commercial Cleaning Business

Step 1: Research the Market

When considering a business idea, it’s easy to get caught up in the excitement and overlook the need for market validation. Market research serves as a reality check, helping you understand whether there is a viable market for your commercial cleaning business, in addition to providing valuable insights into customer needs, competition, and potential gaps in the market.

To begin, determine if you want to provide general cleaning services or if you should specialize in a particular type of business, such as offices, schools, medical facilities, or retail spaces. Consider factors like the number of businesses in your area, their size, and the demand for cleaning services. Understanding your target market size will give you a sense of how many of them there are, which will later help in calculating whether there are enough to support your business.

You probably aren’t the only other business in your area offering commercial cleaning services, so researching the competition is the next task. Assess the number of established cleaning businesses currently serving the area and evaluate their online reputation and customer feedback. Also, look into their services, target markets, pricing, and customer reviews. This analysis will help you understand the level of competition and identify any gaps or niches that you can focus on. Differentiating yourself from the competition can make your business stand out and attract potential customers.

This next step is something most people won’t do, but it could make the difference between success and mediocrity. Reach out to your target customers, maybe local commercial real estate companies, property management firms, or office building managers. Introduce yourself and inquire about the cleaning services they currently use. Gauge their level of satisfaction with existing providers and listen for any pain points related to quality, reliability, or cost. This direct customer engagement provides valuable insights into the gaps you could fill with your new cleaning business. By addressing their needs and concerns, you may also attract new customers before starting your business.

Step 2: Write a Business Plan

Starting a commercial cleaning business may seem like a straightforward process, but without proper planning, it can quickly lead to confusion and setbacks. That makes writing a business plan the next step in starting the business. A business plan helps provide a clear path forward by having you research and think through important information, such as the target market, services offered, marketing strategy, pricing, and financial projections.

In addition to providing a clear path forward, a business plan can assist in operational planning. In particular, it can help you make important decisions about the services to offer, source cleaning products and equipment, and calculate labor needs.

Another important reason for writing a business plan is to secure funding. Lenders will want to see a well-researched and well-written business plan that demonstrates the feasibility of your business and its potential to generate revenue.

Related: How to write a business plan

Step 3: Source Funding

Once you’ve verified the market and completed your business plan, the next step is securing funding. This can be a challenging aspect of starting a business, but there are several common sources of funding to explore.

The first source of funding to look at is your own personal investment. Before seeking outside funding, evaluate how much personal savings you have available to finance your business. If your personal savings aren’t sufficient to cover startup costs, you’ll need to explore other funding sources.

Lenders are a common outside source of funding for your commercial cleaning business. When approaching lenders, they typically expect you to invest at least 15% of your personal funds towards the total project cost. It’s also important to have a good credit score and sufficient collateral to secure a loan. If a traditional bank loan seems risky to the lender, they may suggest obtaining a Small Business Administration (SBA) loan guarantee, which provides additional support.

Another potential source of funding is friends and family. They may be willing to invest in your commercial cleaning business, but this should be treated as a formal business transaction. Clearly outline the terms and conditions, repayment expectations, and any potential ownership arrangements to avoid misunderstandings or conflicts in the future.

For smaller funding requirements or when traditional lending options are unavailable, microloans can be an alternative. These loans are offered by local economic development organizations and are designed to support small businesses. Some organizations may offer business training and mentoring alongside the funding.

Related: Finding the money to start a business

Step 4: Register the Business

You may have the passion and experience to provide excellent cleaning services, but you also need to ensure that you take care of all legal requirements and register your business correctly. This process varies by state but generally includes choosing a business structure, registering your business name, and obtaining necessary licenses. Here is an overview of the common steps:

Business structure: When choosing the legal structure for your commercial cleaning business, consider these common types:

Sole proprietorship:

  • Simplicity and lower cost in setup.
  • The business is not separate from the owner, meaning personal assets could be at risk in case of business liabilities.
  • Best for small-scale operations with minimal risk.

General partnership:

  • Suitable for businesses owned by two or more individuals.
  • Similar to sole proprietorship in terms of personal liability.
  • Involves a shared responsibility among partners.

Corporation:

  • A separate legal entity that offers liability protection to owners.
  • More complex and expensive to set up and operate.
  • Suitable for larger operations or those seeking investment.

Limited Liability Company (LLC):

  • Combines the liability protection of a corporation with the flexibility of a sole proprietorship and partnership.
  • Ideal for those seeking personal liability protection without the complexity of a corporation.

For commercial cleaning businesses, LLCs are often a popular choice due to their liability protection and operational flexibility. However, the choice depends on individual business needs and goals.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

Related: Tips and ideas for naming a cleaning business

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits:

A commercial cleaning business will need to obtain certain business licenses and permits, including permits and certifications, if regulated cleaning chemicals are being used. These permits and licenses can vary based on the state and town where the business is located.

Additionally, there are some general local, state, and federal business registrations like a local business license, state sales tax permit, and Employer Identification Number (EIN) with the Internal Revenue Servcie (IRS).

Step 5: Set Up Operations

Transitioning from the planning phase to setting up operations is where you finally see your ideas and plans come to life. This stage involves making key decisions about the location, equipment, and operational systems, which lay the groundwork for the business’s daily activities.

Unlike many businesses, one unique aspect of a commercial cleaning business is that it does not require a high-traffic or highly visible location. In many cases, the business can be effectively run from the owner’s home, especially in the early stages. The primary focus should be on accessibility and convenience, and is optimally close to client sites to minimize travel time and costs. The chosen base of operations, whether it’s a home office or a small commercial space, should primarily serve as a storage and operations hub. Here, equipment, supplies, and possibly a small fleet of vehicles can be housed securely.

Acquiring the right equipment and supplies is the next task. This includes purchasing cleaning tools such as vacuum cleaners, mops, buckets, and a variety of cleaning solutions tailored to different environments and cleaning needs. Consider leasing expensive equipment until you know that it will be needed on a continuing basis before making a long-term commitment.

Depending on the size of your team, scheduling and logistics software like Jobber and OctopusPro can streamline cleaning business operations. Efficient scheduling involves managing client appointments, allocating cleaning staff and resources appropriately, and planning routes for operational efficiency.

Implementing a reliable billing system is also important. It should streamline the process of invoicing clients, facilitate the tracking of expenses, and ensure you are paid.

Step 6: Hire Staff

When starting a commercial cleaning business and planning to hire employees, it’s important to understand the responsibilities that come with being an employer.

Before hiring any employees, the first step is to obtain an Employer Identification Number (EIN) from the IRS. This number is necessary for tax purposes and is used to identify your business entity. Next, it’s important to verify the employment eligibility of your potential hires, ensuring they have the necessary documentation to work legally in the U.S.

Additionally, each state has its own specific hiring requirements, which may include registering with state agencies and complying with state-specific labor laws, so it’s important to research and understand the hiring regulations and obligations in your particular state.

Worker’s compensation insurance is generally required by most states, which provides coverage for medical expenses and lost wages for employees who are injured or become ill on the job. This insurance provides coverage for employees who might get injured on the job.

Last, you need to familiarize yourself with labor laws that govern areas like minimum wage, overtime pay, workplace safety, and anti-discrimination practices. Adhering to these laws is vital to ensure fair and legal employment practices.

Related: State guides for hiring your first employee

Step 7: Prepare to Open!

As you approach the final stages of launching your commercial cleaning business, there are several tasks that are probably still needed. These can include:

Business insurance: Types of insurance to consider include general liability insurance, property insurance, and workers’ compensation insurance. These cover various scenarios, from damage to client property to employee injuries on the job.

Setting up bookkeeping: Set up accounting software to handle daily transactions, manage taxes, and prepare financial statements. Keeping accurate and detailed financial records will help in tracking the business’s financial health and is essential for making informed business decisions.

Contracts: Contracts, such as a Commercial Cleaning Contract, outline the terms and conditions of the cleaning services you provide, including the scope of work, payment terms, and any other specific agreements. Having a well-defined contract helps set clear expectations and protects your business legally.

Opening a business bank account: Opening a dedicated business bank account simplifies bookkeeping, tax filing, and provides clarity on the business’s financial status.

Creating a marketing strategy: Last, you’ll need a marketing strategy to let potential customers know about your new business. This could include creating a strong brand identity with a logo, building a professional website, setting up your business listing on Google My Business, Angie’s List, and utilizing social media platforms like Facebook, LinkedIn, and Instagram.

Greg’s Tip: Consistently delivering services to a high standard is vital for client retention and referrals, so be sure to use checklists and technology to track completed work.

Greg's Business Tip

Common Questions When Starting A Commercial Cleaning Business

How much does it cost to start a commercial cleaning service?

Costs to start a commercial cleaning business can be quite affordable and can be scaled up as most of the expenses are for equipment that could be rented. A small, one-person business can cost $10,000 or more to start, while larger businesses may require an initial investment of $40,000 or more. Most of these costs center around cleaning equipment and vehicles, which you may already have.

Equipment and Supplies: $3,000 – $8,000
This includes necessary cleaning equipment like vacuums, floor cleaners, mops, buckets, and a range of cleaning supplies. The cost will depend on the quality and quantity of the equipment you choose to purchase.

Vehicle: $5,000 – $10,000 (if purchasing a used vehicle)
A reliable vehicle is crucial for transportation to client locations. The cost varies based on whether you buy new or used, lease, or use an existing vehicle.

Location: $1,000 to $5,000
If you choose to rent a space for operations and storage, you’ll need to pay an initial deposit. The cost varies based on the location and size of the space.

Business registration: $100 – $800
This includes the cost of registering your business name and legal structure, which varies by state and the type of business structure you choose.

Insurance: $500 – $2,000
Insurance costs typically include general liability and, if hiring employees, workers’ compensation.

Marketing: $500 – $2,000
Initial marketing costs cover creating a website, designing a logo, and initial advertising efforts. These costs can vary based on how much you do yourself versus hiring professionals.

Miscellaneous: $500 – $1,000
This covers unforeseen expenses or additional small tools, uniforms, and supplies.

While not included in the initial startup costs, it’s important to have three to six months of operating expenses on hand as a buffer. This can help cover unexpected costs or periods of slow business.

How profitable is a commercial cleaning business?

When starting out, a commercial cleaning business has the potential to generate $200,000 in annual revenue, assuming the owner secures 5 office building accounts averaging 20,000 square feet at a competitive rate of $0.30 per square foot6 cleaned per month.

With 5 accounts of that size, the annual cleaning revenue would be: 5 accounts x 20,000 square feet per account x $0.30 per square foot x 12 months = $200,000.

The total expenses involved with running operations, paying 4 employees, equipment and supplies, insurance, etc., could reasonably cost around $130,000 per year.

Breaking down the $130,000 of annual expenses:
– Labor: $80,000
– Cleaning supplies and equipment: $15,000
– Vehicle costs: $10,000
– Rent: $12,000
– Insurance: $8,000
– Miscellaneous expenses: $5,000

That translates into a first-year profit potential of $70,000 for the commercial cleaning business example.

What skills are helpful in running a commercial cleaning business?

Starting a commercial cleaning business doesn’t require a business degree, but certain skills and experiences are valuable in starting and running this type of business.

Cleaning experience: A business owner who has firsthand experience working in the cleaning industry will be well-prepared for what to expect.

Knowledge of chemical safety and handling: Cleaning chemicals are harsh and harmful if misused, so knowledge of general chemical safety and handling procedures is valuable in this industry. Training and certification courses are available and are required for certain types of chemicals.

Attention to detail: Little details matter in cleaning, and a business owner with attention to detail can ensure that jobs are done right.

Physical fitness: Cleaning is hard work, so physical fitness and strength will be an advantage and will make your daily cleaning work easier.

Management experience: Most commercial cleaners employ multiple staff. Experience in hiring, training, and managing staff is an important skill to have.

Customer service skills: A cleaning business owner will need to stay in contact with the property managers or owners and may need to troubleshoot issues and ensure that the business delivers quality service. Customer service skills are valuable.

What is the NAICS code for a commercial cleaning business?

The NAICS code for a commercial cleaning business is 561720.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

Resources:

  1. IBISWorld ↩︎
  2. SkyQuest ↩︎
  3. CleanLink ↩︎
  4. Service Autopilot ↩︎
  5. The Janitorial Store ↩︎
  6. Commercial Cleaning Corp ↩︎

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Commercial Cleaning Business

How To Start A Commercial Cleaning Business

2 Responses

  1. good points here took some good notes on how to be ready to start my business and start a new chapter of my life

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