[bliteamite]

I've recently put forward a tender for office cleaning. I've found out that another tender has quoted 8.95 per hour.  Can anyone out there tell me how in hell anyone can make money with an hourly rate that low?

[cleaning-team]

I've recently put forward a tender for office cleaning. I've found out that another tender has quoted 8.95 per hour.  Can anyone out there tell me how in hell anyone can make money with an hourly rate that low?

You think thats low? That is above average around here - normal is something like £8.00 or even less but I agree with the sentiment.

[bliteamite]

There has to be something illegal going on. Casual under min wage labour , Inadequate insurance, if any. How can you pay anyone plus the cost of travel from site to site and the materials at that sort of rate. It just doesn't compute. It's not worth getting out of bed for.

[pristineclean]

I have a few contracts where I'm getting less than £8.95 an hour. If I have a contract where I'm delivering more than 40-45 hours a week £8.95 chargeable is going to yield me about £3- £4 000 annual profit, to which I'll add the profit of consumables supply and special cleans. 

It's all about volume, in my opinion, and I think that all cleaning companies are going to struggle where there are less than 20 or so contracts to dissipate the admin (and insurance) costs.

[trevor perry]

I have a few contracts where I'm getting less than £8.95 an hour. If I have a contract where I'm delivering more than 40-45 hours a week £8.95 chargeable is going to yield me about £3- £4 000 annual profit, to which I'll add the profit of consumables supply and special cleans. 

It's all about volume, in my opinion, and I think that all cleaning companies are going to struggle where there are less than 20 or so contracts to dissipate the admin (and insurance) costs.

how do you get 3-4 grand profit on them figures 40hours x £9 =£360  wages = 40x £6=£240 + NI + holidays = £52  Total= £292 whilst your cleaner takes holidays another cleaner will have to be paid =  round about £25 a week grand total =£317 which leaves £43 a week profit but out of this you have insurance costs, administration costs, training
 etc if your cleaner is reliable you will be lucky to make £1500 a year out of the job but if they are of sick or unreliable and you have to make any site visits then any profit has gone down the pan and you could be running at a loss

[Pristine Clean]

Its funny we seem to get posts on the same subject every so often. And the subject of prices comes up all the time.

A profit on large or small contract can be done. Ill admit you don't always make a profit on every single contract. And in that case you live on hope of Extra jobs. These then even out the profit and loss.

Some contracts you make a huge profit which compensates for the loss of profit on another contract. This only works on volume. Contracts come and go just like cleaners.

We too have contract at low prices. - Not through choice!

The reason behind the low prices is a simple one. An office calls anyone with an advert or website that reads "Contract cleaners" or "Office Cleaning"

As far as the office is concerned anyone can be a contract cleaner. Lets be honest most people went into cleaning because its a cheap way to start your own business.

All you need is a Henry and a yellow duster bit of polish and a business card with "Contract Cleaner" and advert in yellow pages and hey presto you have a ready made business.

But for those that have been in the industry for more than a day all know too well its not as straight forward as that.

I come across companies that have started up and it reads like this

10 years in the industry ------- when in fact they only started yesterday and have not even done a days cleaning
All Services catered for ------- They have no idea what services to offer and no equipment except Henry
Knowledgeable staff  ----------- Friends and family if there lucky
Deep Cleans    ---------------- Just put on advert for good measure
Commercial Kitchen Cleans --- Sounds good

All of a sudden their phone rings, asking for a quote on a Commercial Kitchen Deep Clean.

They respond by "Certainly" take a few details, brag there way through - having no idea how to actually clean a commercial kitchen. The only reason why they passed is because the client has no idea either how long it will take or what is needed. All the client wants is a cheap price and a clean kitchen.

10 minutes later they come on here asking - Guys Help!!! Please

1. How do you clean a commercial kitchen

2. What's needed

3. What shall I charge

Then kind people like me respond give them all they need to know and make a profit. So there you go another business with a wealth of knowledge from a great forum.

And before you know it, their business is performing better than yours and they have just open an office right next to you. Now there your competition.

Dave

[cleaning-team]

Its funny we seem to get posts on the same subject every so often. And the subject of prices comes up all the time.

A profit on large or small contract can be done. Ill admit you don't always make a profit on every single contract. And in that case you live on hope of Extra jobs. These then even out the profit and loss.

Some contracts you make a huge profit which compensates for the loss of profit on another contract. This only works on volume. Contracts come and go just like cleaners.

We too have contract at low prices. - Not through choice!

The reason behind the low prices is a simple one. An office calls anyone with an advert or website that reads "Contract cleaners" or "Office Cleaning"

As far as the office is concerned anyone can be a contract cleaner. Lets be honest most people went into cleaning because its a cheap way to start your own business.

All you need is a Henry and a yellow duster bit of polish and a business card with "Contract Cleaner" and advert in yellow pages and hey presto you have a ready made business.

But for those that have been in the industry for more than a day all know too well its not as straight forward as that.

I come across companies that have started up and it reads like this

10 years in the industry ------- when in fact they only started yesterday and have not even done a days cleaning
All Services catered for ------- They have no idea what services to offer and no equipment except Henry
Knowledgeable staff  ----------- Friends and family if there lucky
Deep Cleans    ---------------- Just put on advert for good measure
Commercial Kitchen Cleans --- Sounds good

All of a sudden their phone rings, asking for a quote on a Commercial Kitchen Deep Clean.

They respond by "Certainly" take a few details, brag there way through - having no idea how to actually clean a commercial kitchen. The only reason why they passed is because the client has no idea either how long it will take or what is needed. All the client wants is a cheap price and a clean kitchen.

10 minutes later they come on here asking - Guys Help!!! Please

1. How do you clean a commercial kitchen

2. What's needed

3. What shall I charge

Then kind people like me respond give them all they need to know and make a profit. So there you go another business with a wealth of knowledge from a great forum.

And before you know it, their business is performing better than yours and they have just open an office right next to you. Now there your competition.

Dave

Harsh but fair!!! Always amazes me some of the questions being asked on here daily...

[supernova77]

Some contracts you make a huge profit which compensates for the loss of profit on another contract. This only works on volume. Contracts come and go just like cleaners.

I would never take on a contract that was making a loss! What happens if you lose the contract that is making money and that was compensating for the contract running at a loss?

Not a good business model in the cleaning industry at all!

Andy

[bliteamite]

I agree Andy. Whatever is the point of taking on a contract and everything it ties you to if you're not making a profit? If you're taking 8-9 quid an hour you have to pay your employees for the same amount of hours you're charging for, plus travelling time. Unless you have some unbelievably easy going staff who are happy to spend two - three hours a day travelling for nothing. It seems a very shaky way to run a business and could well land you in some financial difficulty. Sorry! Still don't get it

[pristineclean]

This is a forum which helped me when I started my first commercial cleaning business in 2003 and I feel kind of honour bound to assist when I can although much of what Dave said amused me because of its underlying truth. I'm aware that when I help out potential competitors that it's not perfect business sense but I balance that by reasoning that ten or more additional companies aren't really going to affect me that much and will ensure that I keep my competitive edge.

So....

Everyone gets 28 days holiday a year, the basis upon which you based your fairly accurate calculation of holiday cost - no argument there. However, unless you're providing a service at a unit which is open on Bank Holidays, in which case you'd apply a premium, you are actually going to be paying four weeks holiday cover only in respect of your cleaner. Ergo..

6x8x5 = 240 (x52) = 12480 NB not 52.14 since cleaners are paid in weekly increments

Holiday Cover 4x240 = 960 : (12480 +960) x1.25 (NI) = 15 120

Chargeable 9x8x5 = 360 (x52) = 18720

These are examples only, naturally, and a job with six part time people is unlikely to have anywhere near the NI requirement above.

Also, I've never heard of a cleaning company which pays travelling time to staff. I have to pay supervisors and managers to travel between sites but a cleaner who has a contract to clean two hours a day will be paid two hours a day.

Your posts gave me some pause for thought and I'm driven to the conclusion that your experience must be in the domestic environment. My background in commercial cleaning is depressingly robust ( I wish I'd written a book instead  ) and I've never heard of any company, private or public sector, which pays for travel time.

Right, back to my own problems now - I still have a fox, a chicken and a bag of corn to get over this lake and I can only fit one of them in the boat with me....

[sherco]

This is a forum which helped me when I started my first commercial cleaning business in 2003 and I feel kind of honour bound to assist when I can although much of what Dave said amused me because of its underlying truth. I'm aware that when I help out potential competitors that it's not perfect business sense but I balance that by reasoning that ten or more additional companies aren't really going to affect me that much and will ensure that I keep my competitive edge.

So....

Everyone gets 28 days holiday a year, the basis upon which you based your fairly accurate calculation of holiday cost - no argument there. However, unless you're providing a service at a unit which is open on Bank Holidays, in which case you'd apply a premium, you are actually going to be paying four weeks holiday cover only in respect of your cleaner. Ergo..

6x8x5 = 240 (x52) = 12480 NB not 52.14 since cleaners are paid in weekly increments

Holiday Cover 4x240 = 960 : (12480 +960) x1.25 (NI) = 15 120

Chargeable 9x8x5 = 360 (x52) = 18720

These are examples only, naturally, and a job with six part time people is unlikely to have anywhere near the NI requirement above.

Also, I've never heard of a cleaning company which pays travelling time to staff. I have to pay supervisors and managers to travel between sites but a cleaner who has a contract to clean two hours a day will be paid two hours a day.

Your posts gave me some pause for thought and I'm driven to the conclusion that your experience must be in the domestic environment. My background in commercial cleaning is depressingly robust ( I wish I'd written a book instead  ) and I've never heard of any company, private or public sector, which pays for travel time.

Right, back to my own problems now - I still have a fox, a chicken and a bag of corn to get over this lake and I can only fit one of them in the boat with me....

Take the chicken over first...come back and get the corn, take the corn over the lake, and bring the chicken back with you, leave the chicken there and take the fox over the lake and leave with the corn..now go back and get the chicken and bring back across the lake!!

[Pristine Clean]

Some contracts you make a huge profit which compensates for the loss of profit on another contract. This only works on volume. Contracts come and go just like cleaners.

I would never take on a contract that was making a loss! What happens if you lose the contract that is making money and that was compensating for the contract running at a loss?

Not a good business model in the cleaning industry at all!

Andy

Hi Andy,

I think I might not have made myself to clear here.

It is not a business model to take on contracts where we make a loss. Common sense prevails here. However what I meant was I am aware that in certain circumstances that some companies - mainly large ones do have contracts where they are barely breaking even.

I am also sure that on some jobs whether a contract or a one off clean that sometimes things happen that you could not foresee or that were out of their control that causes a loss on the job. That said does not mean you don't get a profit - but it wont be as big a profit.

This can be for many reasons,

Machine failure - due to this you either rebook or hire a machine and get machine repaired. This now means you might still get a profit but not as much as you had hoped for.

Maybe there is some hold up on a job so extra time is required - maybe it was You or the contractor that was at fault.

Maybe the cleaning contractor or you had an accident and broke a clients belonging such as a window or scratched a car. then you had to pay for it. These are only examples.

I know not every job gives you the profit that you work out on paper. So that's where you make up for the jobs that you get a large profit from.

I hope now that you can see that it is not our business model just to take on contracts especially at a loss.

Dave 

[trevor perry]

i have lot of experience in the commercial cleaning sector and and as pristine says lots of large firms will work on very small profit margins but in my experience they are welcome to it if any of my jobs arent making a reasonable profit i would put the price up or tell them to find someone else, also with the calculations i put up it was based on paying wages of £6 an hour all our cleaners are on well above that rate as paying them sort of wages you very rarely get reliable staff and cause yoursef loads of hastle but that is just my experience everyone should run their own business how they find best for them

[Paolo]

I am about to take on a fair size contract for a local charity and budget constraints make itfall into profit by about 5p an hour if at all.

The reason for doing it, is that I should be able to network off this contract to gain more lucrative work.

It is also about filling up my guys hours and keeping them happy.

Everyone's business is very different, it is important to remember that.

[Adam P]

just want to jump in on prices from competition. lately so many customers looking for an eot clean are getting prices less then half what we are charging, so say we quote £250 for a clean, they've been given £110! absolutely crazy i can only guess that once they see the property they switch the price, or that they don't do a very good job. i get customers who pay our prices but it's a pain when 1 after the other after the other is shocked at what we charge.

[Gilbert Sprous]

Interesting thread.  I think I would have to take the diplomatic approach and say just about everyone is right.  Every company uses a different model and and that model is profitable for the business (or that is the theory). 

I would have to agree with Dave, if you average your fixed costs over a large amount of contracts then the variable costs are the only consideration on a new contract.  This allows a small margin on a large amount of contracts and still produces a profit .  But since Dave has said he has never met anyone that pays travel time, let me introduce myself. 

I work off two different models really.  One for 10 + hours and one for less than 10 hours per week and they do overlap a bit.  My traditional 10+ hours is not much different than most, work out pay and costs and divide by 100 minus my profit margin to give me a price.  If my price is lower or in some cases if the management has more confidence that I will deliver a better end product regardless of my price being higher then I win the contract.  I go into the less than 10 hours with a little different approach.   I really am not concerned if I am underbid, they either except the offer or dont and to be quite honest it is usually a bit over priced.  All the less than 10 hours contracts go to my Mobile team who I provide a Van and Petrol.  I pay them from the time they arrive at the first site until they finish at the last and they have a certain amount of time to accomplish all of the sites.  Of the 16 I employ 2 are on the mobile team and they clean 16 small sites for me.  Some as little as 1.5 hours every two weeks.  The largest is 12 hours a week.  They are both almost full time and the turn over they provide me is in the neighborhood of 30 k per year.  After including vehicle, insurance, travel time, and all I am still working on a net of 27% for there efforts.  So as you can see it can be profitable, the reason I keep the small contracts and the mobile team is because of the added net they provide me.  Using a mobile team stops me from hiring another 16 people and running payroll for them not to mention trying to hire for 1.5 hours every two weeks is a bit hard.  But again because the client has tried to hire for this they know it is hard at any price and are willing to pay me the premium to ensure that it is done.  Also with a mobile team I do not have to factor in such a large amount for equipment because as a  mobile team equipment becomes a fixed cost averaged over the 16 contracts.

The reason someone comes in at such a low price can be many different reasons from being a sole trader who is just looking to make more than if they worked for someone else.  It could be any number of reasons.  If you look back I  posted once about a contract that I was severly out bid on.  It was a Pizza Hut and the bid that was accepted was like 7.20 per hour.  I could not believe how low it was and there was no math that I could do that would justify that for my business model.  To bring a little relief I did see the business later on Dragons Den.  It was a business called UK Cleaning or something close to that.  After seeing them on there I understood a bit more, dont get me wrong I have a complete understanding of averaging fixed costs over larger amounts contracts to make a little on a lot.  This will help when you are large because you can underbid a lot of people and work on 3-5% net but for a small business that is not achievable unless you have a surplus of funds to carry you personally until you reach a thresh hold that will support you.  Back to the Dragons Den, their third year of trading was 100,000 turnover with 4000 net.  4% net!! That is why they were able to bid that 7.20 per hour.  The Dragons had a hey day with them, and they could not explain their costings.  They did get an investor though, cant remember which one took them on but they were going to go over costings with them, I do remember that.  My third year of trading I did something like 120000 with 24% net.  Bottom line is I am not willing at this point to compete on a lower margin, I will get there but I will just pass on the contracts that do not meet the margins that I have set.

Saying that over the last year I have taken a few jobs at low margins to help a couple of my employees to get more hours.  It was just that during the recession I wanted to keep the good guys and sometimes I am weak lol.  Dont know if it was any help but I got out what I had to say.

Gilbert