The Step-By-Step Guide To Starting And Funding A Cleaning Business
Entropy is a powerful force. If there’s one thing you can rely on, it’s that everything gets dirty sooner or later. If it doesn’t get dirty, it gets cluttered. Add in the increasing prevalence of two-income households, the pace of modern work, and long commutes and it’s not surprising that more and more people are letting their chores slide. And that’s not even taking into consideration the huge messes businesses make. The fields are ripe for the harvest — why not cut yourself a piece of the action and start a cleaning business?
Luckily, the overhead costs of starting a cleaning business are fairly low (at least up until you start adding staff). Still, you’ll want to have a good sense of what you’re getting into before you dive into the cleaning industry. It’s vital to have a plan to tackle the expenses and challenges you’ll encounter along the way.
Not sure where to start? We’ll break starting and funding a cleaning business into a step-by-step process below.
Table of Contents
- Make A Business Plan
- Calculate Startup Costs
- Register Your Business
- Get Business Insurance
- Seek Business Funding
- Choose The Right Software
- Bolster Your Web Presence
- Delegate Work
- Advertise Your Business
- Final Thoughts
Make A Business Plan
What separates a business from a side gig? Well, a lot of stuff, but one of the bigger points of delineation is whether or not you have a business plan and a clear strategy.
Creating a business plan can be an intimidating prospect, but you don’t need to have a business degree to write one. You don’t even need to have taken a class.
A business plan is, essentially, an outline documenting what your business is, what it does, how it’s organized, its financial means, and a strategy for how you intend to grow.
There are a lot of resources online that can give you an idea of what a business plan looks like, as well as templates to help you get organized, but a typical business plan has the following parts:
- Executive Summary
- Company Description
- Market Overview
- Sales & Marketing Strategy
- Operating Plan
- Organizations & Management Team
Calculate Startup Costs
The good news about launching a cleaning business is that it’s possible to start one with relatively little overhead.
At a bare minimum, you’ll need cleaning supplies. This assumes you’ll be doing the cleaning yourself and aren’t taking on any additional employees right away. If you’re cleaning residential homes, these supplies will more or less be the same ones you use to clean your own home. If you’re getting into commercial cleaning right away, you’ll likely have to invest in equipment (and possibly personnel) that can handle larger volume messes and expansive spaces.
If you plan on cleaning as more than a side gig, you’ll also need to pay fees to register your business. This isn’t a very big expense if you’re content with running a sole proprietorship (or partnership, if you’re starting it with someone else) –usually less than $50. You can also file a DBA, which allows you to legally do business under another name (the name of your company). We’ll get a bit deeper into it in the next section.
Additionally, you should factor in any initial advertising costs, as well as transportation costs for getting yourself or your employees to the work sites.
Register Your Business
Registering your business may sound intimidating, but it can actually be one of the easiest parts of starting a business.
Why should you register your business? At minimum, it protects the name you’re using to do business so that no one else in your area can (legally) use it. It can also help you qualify for business-to-business services and services that require an EIN number.
Incorporating, on the other hand, is a more complicated and expensive process that comes with its own advantages and disadvantages.
Here are the most common types of businesses you can register as:
- Sole Proprietorship: By default, this is the type of business you’re running when you initially create one. You and your business are, for tax and liability purposes, considered the same entity. In fact, if you want to do business under a name other than your own, you’ll need to file a DBA (doing business as) with your local county clerk.
- Partnership: Essentially the same as a sole proprietorship, except you started it with one or more other people. By default, you’re each considered to own an equal share of the business for tax and liability purposes.
- Limited Liability Corporations (LLCs): If you’ve seen LLC after a corporation’s name, you’re dealing with this type of company. LLCs offer limited liability protection for their owners without the full complexity of a corporation. Each state has its own rules for how to start and maintain an LLC, and you don’t necessarily have to register your LLC in the state where you’re doing business (although you’ll generally want to). LLC owners report their business earnings and losses on their personal taxes.
- C-Corp: This is the “basic,” default form of incorporation. Shareholders are considered the owner(s) of the company and receive limited liability protection; however, the business decisions are made by corporate officers who may or may not be shareholders. The corporation is taxed separately and shareholders pay income tax on dividends. To form a C-corp, you’ll file articles of incorporation with your state.
- S-Corp: S-corps are similar to C-corps in most ways, but come with a few additional restrictions: you must have fewer than 100 shareholders and they have to all be U.S. citizens or residents. Unlike C-corps, profits and losses are reported on personal taxes, not unlike an LLC. In addition to filing articles of incorporation, you’ll also need to file IRS Form 2553.
Get Business Insurance
Depending on your local and state laws, business insurance may or may not be optional. However, given that cleaning involves a lot of physical contact with valuable items (not to mention the fact that you will be in the profession of making floors slippery), you may want to consider getting insurance even if you’re not required to have it.
General liability insurance can protect you in the case of lawsuits or accidents, including property damage and personal injury claims against your business. It can also make your business seem more professional to prospective clients.
Your own equipment is also subject to wear and tear, as well as accidents, so you may want to consider property insurance for any items that aren’t easily replaced.
While those are the big two worth considering, you may also want to consider other types of business insurance to help cover anything from worker’s comp claims to vehicle damage.
Seek Business Funding
Now that you have a sense of what your expenses will be, it’s time to see if you can cover them out of pocket and still pay your rent. If you can’t, and are unable to tighten your belt without sacrificing the tenets of your business plan, you may need to seek some source of external funding.
Where should you look?
If you’ve saved up for a rainy day, the weather might start looking pretty stormy right about the time you’re starting a business. The nice thing about dipping into your savings is that you’re not taking on debt and all the expenses that go with it.
On the other hand, you are risking your own money, along with the lost-opportunity costs of not being able to invest that money in something else.
And, of course, you may not have been able to save enough to cover your expenses anyway.
Tap Your Support Network
If you don’t have the money handy, another option is to ask your family or friends for a small loan. Generally speaking, your support network will give you a better deal than even the most competitive bank will.
Asking your friends and family for money can be tacky and awkward if you don’t put their concerns at ease. You also may damage your relationships if you aren’t able to pay the money back within the expected period of time. It’s important to take a professional and organized approach.
If you do go this route, strongly consider formalizing any agreements you make so that all parties are fully aware of what they’re risking and stand to gain from the arrangement. Create and sign a contract, just as you would do with a traditional lender.
For purchases you can pay off quickly, it’s hard to beat the convenience and incentives of credit cards.
Credit cards come in both personal and business varieties. You don’t actually have to own a business to get a business credit card, but their rewards programs are generally more geared towards business expenses.
If you’re going to use credit cards, be sure to use them wisely. That means paying them off within the interest-free grace period offered by your card’s provider. For personal credit cards, this is legally at least 21 days from the time you receive your bill. For business credit cards, there is no legal minimum, but most extend a similar one as a courtesy.
Just remember, if you fail to pay your card off with that window, carrying a balance on a credit card is an extremely expensive way to finance your business. And avoid taking out cash advances on your cards unless absolutely necessary.
Recommended Option: Capital One Spark Cash Select For Business
Capital One Spark Cash Select For Business Annual Fee: $0 Purchase APR: 14.74% - 22.74%, Variable
Capital One Spark Cash Select For Business
14.74% - 22.74%, Variable
Spark Cash Select for Business is great for businesses that don’t have their expenses concentrated in a single area, or that don’t want to worry about complex reward programs. You’ll simply earn 1.5% cash back on every purchase you make. There’s also no limit on the reward, so you don’t have to worry about exceeding a maximum threshold: whether you spend $20 or $500,000 in a year on your card, you’ll still get 1.5% back.
You will need to have excellent credit to qualify, however.
Recommended Option: Capital One Spark Classic
Capital One Spark Classic For Business Annual Fee: $0 Purchase APR: 24.74%, Variable
Capital One Spark Classic For Business
If you don’t qualify for Spark Cash Select for Business, Capital One offers an equally versatile card that’s much easier to qualify for. Spark Classic offers a similar cashback reward program, but the rate of return is 1% rather than 1.5%.
While not the most exciting card, it’s a good one for repairing your credit.
Business loans are frequently out of reach for brand new businesses–even the more risk-taking lenders generally want to see that you can keep your business together for at least six months before they’ll lend to you. That said, there are exceptions to the rule, with some lenders focusing on new businesses.
And remember, when you’re starting out you don’t necessarily need a “business” loan; personal loans can leverage your personal credit for an early cash infusion even you need it. If you’re buying a specific piece of equipment, you should also consider equipment financing.
Recommended Option: Lending Club Personal Loans
Lending Club is a good option for individuals who may not have the strongest credit, but have a good debt-to-income ratio. The borrowing range is fairly narrow at $1k to $40k, but when you’re just starting out you don’t want to go too deeply into debt anyway. You’ll have three-to-five years to pay it off, which makes it fairly manageable while you’re building up your business.
Recommended Option: Lendio
Lendio takes some of the frustration out of applying for a loan by allowing you to apply to their entire network of lenders all at once. If you’re thinking about tapping the alternative lending market for the first time, it’s a pretty good place to start.
They can’t necessarily help every business, but a shotgun approach can sometimes be easier than finding that one special lender.
Recommended Option: Upstart
If you’re having trouble finding a lender who will work with you, take a look at Upstart. You’ll need to have at least fair credit and a regular source of income, but otherwise, Upstart’s way of evaluating potential borrowers is pretty unconventional (good news if you’re starting a business).
Better yet, Upstart’s rates are pretty reasonable and you’ll have three or five years (one or the other, not between) to pay your balance off. Unfortunately, they don’t currently lend within West Virginia or Iowa.
Choose The Right Software
As your business grows and becomes more complex, managing the logistics of your company can become quite labor-intensive. If you don’t want to sink too many man-hours into keeping track of all that stuff, you’ll want to delegate it to a software program.
This doesn’t necessarily mean you have to enroll in a bunch of expensive SaaS platforms if it’s just you cleaning for a handful of clients, but it doesn’t hurt to know what kinds of options are available.
Types of software you may want to consider include:
Field Service Management
This type of software centralizes processes and workflows for businesses that have employees who are dispatched to external sites for work. They often include features like scheduling, dispatching, and booking. Some also come with invoicing, payment processing, and customer notifications, so it’s quite possible to find an all-in-one service that meets your needs.
If field management software sounds like overkill, you can try scheduling software to manage your appointments and those of your employees.
If your business is growing, and you no longer have time to run out to buy supplies every time you need them or use your clients’ stash, you may find it helpful to formally keep track of your inventory.
It’s always a good idea to keep track of your expenses, accounts receivable, payroll and related issues, especially as your business grows and becomes more complex.
|Data||QuickBooks Online||Xero||Wave||Zoho Books||FreshBooks|
$20 - 150/month
$9 - 60/month
$9 - 29/month
$15 - $50/month
|Ease of Use||Moderate||Moderate||Very Easy||Very Easy|
|Accounting Method||Cash and Accrual||Cash and Accrual||Cash and Accrual||Cash and Accrual||Cash and Accrual|
|Review Visit||Review Visit||Review Compare||Review Visit|
Bolster Your Web Presence
A cleaning business can get pretty far on word-of-mouth and savvy networking, but expanding your reach in the digital age usually means you’ll want to bolster your web presence.
A website is still a very important way for potential clients to find out information about your business and what services you offer. Happily, for a cleaning service, it doesn’t have to be all that complicated. If you don’t want to contract the job out, there are plenty of services online that make it easy to build your own decent-looking website.
A spiffy website is only one aspect of an online strategy, however. You still need to get people to visit it. You’ll want to consider factors like search engine optimization (SEO) so that, for example, the phrase “kitchen cleaning Rochester” will return your website in the top results.
You may also want to use social media to build brand recognition, steer traffic to your site, and announce specials or changes to your services.
If it’s just you and a cart full of cleaning supplies, you can skip this part. However, if you’re planning to grow beyond what one mere mortal can clean in a day, you may be taking on more people.
Taking on additional people as employees come with many advantages: you’ll be able to get significantly more work done, have a larger pool of expertise to draw from, and be more flexible with scheduling. This does come with some additional costs, as you’ll be paying some of the taxes on their salary as well as offering benefits (at least in theory), so be sure to grow your staff wisely and at a pace that fits the amount of business your generating.
In exchange, you’re allowed greater control over the parameters of how your employee works, where, and at what time. Setting a wage that’s fair and not abusing this relationship will generally improve morale and help you avoid the costly process of employee turnover.
If you aren’t quite ready to take on employees but need additional help, you can hire contractors. Contractors are free agents who work for themselves even though they may be regularly and continuously used by a particular client (that’s you). Since they’re self-employed, you don’t have to worry about additional expenses beyond paying their fee.
Beware that many businesses make the mistake of treating 1099 contractors as employees, which can get you into pretty serious trouble. If you want to have employees, you have to hire them. As a general rule, you have no say over what jobs a contractor decides to take, the methods they use to complete the job, or the precise time they choose to do it.
Advertise Your Business
A strong web presence and social media campaign can get help get your name out, but we aren’t quite at the point where advertising is obsolete.
Since a cleaning business is constrained by geography, you have to physically send someone out to do the job. That means you can use your modest advertising budget to buy ads in your local market, which is usually cheaper than trying to grab eyeballs from several states away. Ideally, you’ll want to seek ad platforms utilized by the types of people who are likely to buy your services. Cash-strapped kids at the local state college campus probably don’t have a budget for cleaning services, for example (although some fraternities or sororities may), while busy soccer moms might.
Once you know who you’re advertising to, you can select a medium that fits your target demographic. Once you start getting new customers, ask them where they heard about your business so you can get a sense of which ads are working and which aren’t.
Even if you don’t have money to spend on advertising right away, put the word out to your own social network that you’re offering cleaning services. Word can spread fast, especially if you have a reputation as a trustworthy person.
We still haven’t invented self-cleaning spaces, so you have a potentially bottomless demand for your services. With relatively low overhead, a housekeeping or cleaning business is one of the more accessible industries to jump into, so if you have the skills and the inclination, why not give it a try?