The big question: residential or commercial? When you’re thinking of starting up a cleaning business, this is a decision that all cleaning businesses need to make early on. And it’s one that carries very different ramifications that are significant in dictating almost every aspect of how you’ll be conducting business.
It’s a choice that dictates what type of service you’ll offer. Whether you’ll be specialising in hotel cleaning or chiefly in residential homes. It will impact how your work will be taxed, how many outgoings you’ll have and how much money you’re likely to make. In short, it decides your business model.
Fortunately, there’s no right or wrong answer depending on your circumstances. With a bit of forewarning, however, you can make the most sensible an cost-effective solution that best suits your capabilities and your needs.
So, come with us and we’ll explore the differences between commercial and residential cleaning services, and how they might affect how you approach your startup.
Commercial cleaning 101
Commercial clients require cleaners for customer spaces or office space. Typically, hotels need heavy cleaning coverage during daytime hours, while business environments look to hire out-of-hours services to clean their working environments before or after employees arrive or leave. Retail and restaurants also need specialist cleaners to ensure that their shop floors are compliant with hygiene requirements. So what kind of clients you attract will dictate your working hours.
Setting up a commercial business will cost considerably more money than a more domestic-based service, with more materials and heavy-duty equipment such as sweeping machines and vans needing to be sourced. Predictably, however, the earning potential in working commercially helps to mitigate this, and may prove the most fiscally advantageous solution if you manage your outgoings wisely.
The average wage for a commercial cleaner is £7.50 per hour, while you’ll also need to take into account vehicle running costs and the number of staff required to provide an efficient service within a client’s required timeframe.
If you’re considering starting a venture into the world of commercial cleaning, then it’s likely that you’ll require some form of financial backing to make sure you have the workforce and business costs accounted for. There will also be insurance and licensing requirements in order to care for your workforce and the types of buildings they’ll be working in.
Residential clients will require cleaners to work in their homes, typically throughout the day while they are at work. This adds an element of flexibility and can enable companies to work multiple jobs each day at times that mutually suit both parties.
Setting up a home cleaning service is considerably cheaper than starting a commercial endeavour, and the scale of your business can be more down to you as the company owner.
While a domestic cleaner’s outgoings are lower, the average hourly rate for a home cleaner is around £7.23 depending on the level of service and location. This represents a smaller margin than what a company can expect to charge clients for commercial solutions.
Home cleaners will be required to have a good range of cleaning tools and products available to them, but even with this taken into consideration, it’s possible to enter the fray as a domestic cleaner on a shoe-string budget. This wouldn’t necessarily be the case for their commercial counterparts.
Like with commercial cleaning services, your business can experience growth via word-of-mouth and reputation. This means that even if you start as a one-person operation, your level of authority can develop into an attractive prospect for other cleaners to want to work under your business name – enabling an excellent opportunity for growth in each sector.
Cleaning businesses face different challenges to those posed by retail and more static ventures. You’ll need to be acutely aware of your area, and how easy it will be to gain new clients. You’ll also need to think about how you could go about travelling to each of their locations in a cost-effective manner, with the necessary supplies and equipment.
If you’re a commercial cleaning business looking to serve your area’s hotels, it could be problematic if you accept clients that are over an hour’s travel apart. This will not only eat into your employees’ working hours but also your petrol costs.
Domestic cleaners have more flexibility in the clients they can gain, but should still be mindful of choosing a strong location to pitch up. Affluent areas and commuter belt locations are ideal places to market your startup, as your potential customer base will likely be looking to keep their properties in a healthy condition or require help to ease the burden on their busy lives. Make sure that your clients don’t live too far apart so as to become an issue on transport-based expenses.
So should I incorporate?
The formation process for starting a cleaning business will be dependant on the scale of your intended company and the sectors it reaches.
For example, if you’re looking at more hotel-based and commercial cleaning services you might want to consider becoming a limited company. The advantages of this are that it caters well towards larger scale businesses and separates you as the owner from the company’s financial services – meaning that your possessions will be safe should your business begin to turn out a deficit.
While your accountancy fees will be generally higher, and you’ll be required to file accounts, company tax and corporation tax calculations to HMRC each year, you can also enjoy a stronger reputation as a more established business by registering as a limited company. Additionally, whilst the accountancy required is more comprehensive, there’s also greater tax advantages associated with doing so, meaning that you can possibly increase your take-home pay considerably by going limited.
Likewise, if you’re looking at entering a more domestic market, then you might feel better suited to registering as a sole trader. This is a much simpler process with lower accountancy fees and more straightforward tax returns. However, you’ll also be personally responsible for the business’ performance – meaning that your possessions may be at risk if you fail to register a profit.
Meeting the regs
Both types of business venture can lead to great success if planned well enough, but be mindful to consider the kinds of insurance and legalities associated with starting a cleaning business before you take that leap into the market.
Employers’ Liability Insurance is a legal requirement if you decide to take on staff in your company, and if you’re looking at taking on a cleaning contract, then you’ll need to consider the Transfer of Undertakings (Protection of Employment) Regulations also.
It’s also advisable to undergo a CRB check before starting operations with staff to help comply with some client requirements and help improve your image. To further boost your business reputation you could benefit from joining a dedicated association – the Cleaning and Support Services Association helps to keep the industry and its businesses growing no matter how established they may be.
Now if that’s feeling a little overwhelming, don’t worry. We provide a wide range of formation packages to take the strain out of setting up your cleaning business – no matter what the scale of operation may be and what sector you’re planning on entering. It’s a good place for you to start if you’re keen to begin the process.
Sometimes the formation process can be an unwanted distraction from your business focus, so why not let us take some of the strain? In the meantime, if you’d like any more information, feel free to get in contact or check out some extra advice on our help centre. For more information on our company formation packages to help get you started, you can view them here.