Register Your Business With the State
As a business owner, you have many options for managing the status of your company. You can operate as a sole proprietor if you are the only person involved or as a partnership if you’re working with another person.
These 2 designations are the basic types of business entities and allow you to begin operating immediately. However, choosing to run your business as a sole proprietor or partnership may not be the best long-term choice.
Filling for a limited liability company (LLC) is a more advanced business designation, but it comes with personal protection. With a sole proprietorship, your business and personal finances are the same. Any business debt you incur becomes part of your personal liability. If a client files a claim against you, all of your assets (including personal assets like your home, retirement, and car) are at risk. However, with an LLC, your business and personal assets are separate.
Tax benefits are another reason to consider filing for an LLC. A limited liability company uses a pass-through taxation process that allows you to take business tax credits on your personal income when filing your annual taxes. This step can help lower your taxable income when reporting.
Within most states, filing for an LLC is pretty straightforward. Each state has its own registration site, criteria, and fees. These fees typically range from $100–$150. As an LLC, you will need to submit an annual report for your business, but there are templates you can use online.
In some areas, you can pre-register your LLC so it goes into effect on a specific day. For example, in the state of Florida, you can file for LLC status as early as October 1 for an effective date of January 1. This process makes it easier to file your taxes because all of your business expenses will fit evenly under one year instead of splitting up the expenses mid-year.
Once you have your LLC, you will need to apply for an Employee Identification Number (EIN) through the IRS. Your EIN will help come into play when filing your taxes, completing W-9 (independent contractor) forms, or seeking funding from financial institutions.
Registering your cleaning service may be challenging as you navigate government websites, but this is a process you only have to do once and then only need to renew or report on once a year.
Set Up Your Bank Account and Secure Funding
With your LLC and EIN, you can open a business bank account to manage your cleaning company’s finances separate from your personal. Even if you are operating as a sole proprietor, separating your business expenses and profits from your personal finances can help you better manage your business and more easily file your taxes each year.
You have options when opening a business bank account. First, you can open one with your current financial services provider. Your bank or credit union may be able to link the accounts or create a new account with minimal effort.
However, you may want to look for a financial services provider that offers more favorable fees, interest rates, and loan options. If you plan to secure a short term loan or business line of credit for your cleaning service, you may want to create a business account through the loan provider. Managing your finances under the same roof as your creditor can streamline the repayment process.
The bank that you choose for your account will likely want you to sign up for a business credit card. Keep in mind that just because you bank with that institution, it doesn’t mean you have to use their credit cards or other financing options.
You may find a credit provider that offers a lower interest rate or better benefits than your bank. You can also look for rewards programs based on your business needs. Don’t just go with the easiest option—take time to find the best financing options for your business.
When operating a cleaning service, you may want a credit card that offers cash back on gas or purchases at stores like Target or Walmart. These benefits will help you save on the business expenses you accrue the most.
Even if you just need a basic loan of under $1,000, securing your financing and setting up your bank account is an essential part of getting your cleaning service off the ground. Once you have the financial stability you need, you can focus on other areas of your business.
Know What Investments and Expenses Are Required
With the financial management squared away, the next step to launching your cleaning service is getting the materials and equipment necessary. This step requires having capital on hand to invest in your business. If you don’t have the funds available, you may want to consider taking a small business loan or line of credit to give you immediate access to cash.
A few common expenses that you might face when launching a cleaning service business include:
- Basic supplies and materials (cleaning solution, wipes, specialized tools)
- Advanced equipment (high-end vacuums, duct cleaning, anti-allergy cleaning supplies)
- Work vehicles and related expenses (insurance, gas, attachments)
- Business insurance
- Marketing costs
- Client management and financial accounting tools
- Employee payroll and benefits
As you begin purchasing equipment for your business and outlaying money for other expenses, be diligent about your bookkeeping so you can forecast variable and fixed monthly expenses. You don’t need a degree in finance to run a business, but prioritizing good recordkeeping can improve your chances of succeeding.
You should also use a monthly stipend to create a cash reserve for unexpected business costs. If an expensive carpet washing vacuum breaks, you will need to have funds to replace it immediately. If your business needs to close for a month because of a global pandemic, then the cash reserve can keep you above water.
You might be bootstrapping your cleaning service business with just you and your immediate resources. However, in a few years, the business will hopefully grow to a brick-and-mortar office, a fleet of cleaning vans, and a dozen people on your staff. Good financial practices today can help you scale your cleaning service tomorrow.
Set Competitive Prices for Your Area
One of the main benefits of developing clear financial reporting early on is the ability to set clear prices. Charging the right amount for your services can help you get clients and make sure your business is profitable. If you charge too low, then you will have to work harder to turn a profit—meaning longer hours and more clients. If you charge too much, then you may have a harder time selling people on your services.
Look at your expenses and set a minimum amount that you need to earn monthly to break even. For example, if you have $2,000 of monthly expenses and want to earn a salary of $3,000 per month, then you will need to earn at least $5,000. This amount means you will need to average a little more than $30/hour over a 40-hour workweek, including driving to and from client locations.
After you look at your minimum income needs, conduct research on the various price points of other cleaning services in your area. Regionally, companies could charge as low as $25/hour or higher than $100/hour.
If the quality of your services aligns with these brands, then you will want to set your prices within this range. This way, you won’t get priced out of the market by cheaper brands and won’t lose money because your prices are too low.
Other factors will affect how you set your prices. For example, you can charge more by offering specialty services:
- When people move in or out of their homes, they need specialized services.
- People with weakened immune systems need increased sanitization and a deeper cleaning process than those who simply want their homes tidied up.
- Businesses require more frequent visits and have specific standards to meet health codes.
Offering specialty cleaning services may require training on your part to understand the needs of your customers, along with the investment of specific equipment. However, your efforts may pay off financially in the long run.
Know that you can always adjust your prices as needed. You can raise your prices for new customers or offer discounts to make your company seem more alluring. However, good market research and financial planning can help you hit the pricing mark right on the first try.
Develop Operating Policies for Your Cleaning Service
As you begin your operations, you will need to develop a set of policies for how you run your business. You may have these policies in mind already but should take steps to write them out as part of your business model.
A few questions to answer as you launch your cleaning service include:
- Will you primarily service homes or will you accept commercial cleaning contracts?
- What size homes and businesses are you willing to clean? What buildings are too big or too small for you to handle?
- What parts of your town are you willing to drive to? How far is too far away?
- What hours and days are you willing to work?
- What materials will you use? Will you use cleaning materials provided by the customer or your own?
Having these policies in place will help you take on work that is right for your business while passing on contracts that are too big or too far away. They will also ensure your business stays profitable and maintains a positive reputation in the community.
If you are looking for examples of policies to mimic for your cleaning service, look for big-name brands and check out their frequently asked questions pages and other informational materials.
There may also be some processes and standard operating plans that change as your cleaning service transitions from a new concept to a successful brand. A policy that seems good in theory may need to be adjusted in practice. Keep this flexibility in mind as your business continues to operate.
There are additional processes you will need to develop as your business grows. For example, if you need to hire another person to work for you, then you will want an employee handbook.
This handbook is a standardized list of guidelines for employees of your cleaning service business. It covers topics like company culture, drug testing, performance reviews, and termination. You never want to treat one employee a certain way and another employee differently. Furthermore, you don’t want employees to think you are making up rules as you go.
Developing an employee handbook can make your policies clear and create a guide for both you and your workers to follow. If you aren’t sure what to include or how to write it, there are employee handbook examples online, as well as other HR training materials you can use.
Market Your Cleaning Service to Attract Customers
With these elements of your business in place, the only thing missing is your customers. By marketing your cleaning service, you can attract people to your business and turn them into long-term clients.
With cleaning services, the customer lifetime value is incredibly important. This is how much a customer is worth to you over a period of time. For example, if you clean a client’s home once per month for $150 each time, then that customer is worth $1,800 over the course of a year. Consider the long-term value of bringing on new customers when choosing your marketing promotions.
For example, you could offer a discount to customers who make quarterly payments. Instead of paying for the services weekly or monthly, they would write 1 check at the start of the quarter. This prepayment gives your business funds early on and guarantees work in the coming months.
You can also develop a marketing strategy that helps your business financially. Setting up a referral program offers a discount or bonus to existing customers when they recommend new clients to you.
With a high number of referrals, you could have multiple clients in the same neighborhood or condo complex, increasing the number of homes you can clean each day because you save time (and gas money) by not driving around town. This approach is strategic marketing for your brand.
There are dozens of ways to market your cleaning service, from social media promotion to paid advertising. Make sure you choose methods that drive a high return on investment (meaning new and profitable customers) while still aligning with your brand goals.
Consider Starting Your Cleaning Service as a Side Hustle
The goal of this guide is to give you the tools needed to successfully launch a cleaning service. While it may seem like a lot, you can develop your policies over time as you grow your business.
In the meantime, consider starting your cleaning service as a side hustle along with your current job. This informal start will give you time to register your business and open a bank account without losing money in the short run.
There are many benefits of operating a cleaning service as a side hustle:
- You can build your client base early and start strong when you decide to make it a full-time job.
- You can adjust your pricing and policies with a few test clients so you are prepared once you fully launch.
- There is lower risk involved because you already have a main income source in place.
- You can determine how many hours you want to work and when you want to work them.
For example, you may set up weekend cleaning services for small businesses that are closed, or clean offices at night.
The challenge of operating your cleaning service as a side hustle to start is that you risk burning out. Working 2 jobs can be exhausting, especially as your cleaning business starts to grow. Know how much you can handle physically and mentally, and set goals to begin transitioning to running your cleaning service full-time.
Launch Your Cleaning Service Today
You don’t need to have all of these elements in place immediately to launch your cleaning service. With the right cleaning supplies, you could start visiting homes tomorrow and making money.
However, if you want your company to be successful in the long run, then you will need a business account, correct registration paperwork, company policies, and balanced books. Continue developing these plans and materials as you grow your cleaning business so they will be in place when you really need them.