How to Start a Cleaning Business

Cleaning businesses can be an appealing option for aspiring entrepreneurs. For starters, compared with many other types of small businesses, a cleaning business generally requires a low upfront investment. These businesses can get up and running fairly quickly and don’t require significant space or certifications. Plus, the necessary supplies are relatively inexpensive.

Moreover, projected growth for the industry is impressive. The global market for cleaning services is projected to grow at a compound annual rate of 6.3%, generating revenue exceeding $115 billion by 2031. According to the National Institute for Occupational Safety and Health, 2.6 million workers in the United States will be employed in custodial services by then.

If you decide to venture into a cleaning business, though, you must understand the business landscape. Read on to learn essential information for starting a cleaning business that can endure for the long haul.

Types of cleaning businesses

Most cleaning businesses offer either residential or commercial services.

Residential cleaning is conducted in people’s homes. All kinds of people purchase cleaning services, including busy families, aging adults who can no longer safely manage cleaning tasks, and those with disposable incomes who prefer to outsource cleaning.

The residential market works well for one-person cleaning businesses. The jobs generally are smaller than those in commercial enterprises, and you typically will get paid soon after completion. However, you will generally need more clients to support a residential cleaning business than you would for a commercial cleaning business. While the barriers to entry are low, the competition can also be intense.

Commercial cleaning is performed in a wide variety of businesses, and the demand for this service has increased post-pandemic. Solo cleaning businesses may struggle to succeed in this sector. You’ll go up against larger janitorial service companies with their economies of scale, and you may need a vehicle. The pay generally will be greater, though, and you can lock in clients with contracts.

Whether you go with residential or commercial, you can provide niche services that allow you to position yourself as an expert (and charge premium prices as a result). In the commercial sector, niches include offices, retail, schools, and small businesses.

The residential market has numerous niche opportunities, including:

•  Move in/out
•  Green cleaning
• Laundry and/or dishes included
•  Deep cleaning
•  Cleaning for property managers
•  Windows
•  Pools
•  Carpets
• Upholstery

If you plan on offering multiple services, it’s generally best to select a few to begin with and focus on doing them well. You can add new services over time if existing clients request them or you identify an under-tapped demand. 

Planning your cleaning business

Market research is a must-have for every new business idea. You need to know what’s already out there before you invest your hard-earned money. For example, is the market saturated? What do potential customers seem to seek when looking for a cleaning service? Who are your target customers? Who are your likely competitors?

You can start by googling “cleaning services in my area.” Look at your potential competitors’ websites to determine their service offerings and prices. Check online reviews for those businesses to see what customers like and don’t like about them—are there any gaps you could fill?

This is a good time, too, to research franchise opportunities. A franchise for a larger cleaning company will require a bigger investment, but it comes with a built-in client base and access to a wide range of proven tools and methods for running the business. You won’t need to reinvent the wheel!

Once you’ve made some decisions, take the time to draft a formal business plan. It’s a vital roadmap for launching a new business. Your plan should include these components:

• Executive summary (the introduction to your cleaning business)
• Company description (greater detail on your business’s set-up and history)
• Market analysis (data and research on the viability and profitability of your business)
• Financials (budgets, expense and cash flow projections, funding sources, etc.)
• Services (descriptions of your offerings and explanations of how they provide value)
• Marketing strategy (how you will build a customer base and sell your services)

Financial planning is also fundamental when starting (and maintaining) a new business. Begin by developing a short-term budget for your startup costs, including:

• Supplies and equipment
• Business registration, license, and/or permit fees
• Insurance
• Marketing expenses
• Transportation
• Wages and benefits (if applicable)
• Technology (for example, accounting software or scheduling apps)
• Credit card/payment processing fees (if applicable)

Track your costs closely in the first year of business to budget for ongoing expenses more accurately. Make sure your budget includes a salary for you, a profit to invest further in the company, and taxes.

Taxes can be tricky for new entrepreneurs to understand. Consult with a professional to reduce the risk of unexpectedly high tax bills, as well as penalties and interest for noncompliance with the numerous tax rules for businesses, such as the mandatory quarterly payment of estimated taxes and withholding requirements. 

Legal requirements and protections

Another crucial decision is the choice of a business structure—or business entity. A cleaning business generally will be a sole proprietorship, partnership, C corporation, limited liability company (LLC), or S corporation.

The entity type is no small matter. It has significant implications in terms of legal and tax liability. For example, a sole proprietorship is usually easiest, but you’ll be personally liable for all business debts and liabilities, plus you have to pay self-employment tax. With an LLC, you can separate yourself from personal liability for the business and pay less in taxes, but it’s more complicated, and you must maintain certain formalities.

Depending on your entity choice, you may also be required to register your cleaning business with the local government, city, and/or state. These jurisdictions might require specific licenses or permits, too.

And don’t forget to obtain appropriate insurance coverage. It won’t just provide financial protection; it’ll also enhance your credibility with your target market. When people let strangers into their homes or businesses, they appreciate the peace of mind that comes with insurance.

Several types of business insurance are available. For a cleaning business, options include:

• General liability: This provides coverage if someone sues your business for bodily injury, property damage, or personal injury for things like defamation. You may need to pay extra for a “care, custody, and control” endorsement, which extends coverage to third-party property damaged while cleaning.
• Workers’ compensation: Your state likely requires workers’ compensation if you have employees. It covers the expenses stemming from work-related illness or injury.
• Commercial auto: Your personal auto coverage won’t apply to accidents that occur while you’re driving for business purposes. Commercial auto also covers theft, weather damage, and vandalism.
• Business owners’ policy: This policy bundles general liability, commercial property, and business interruption insurance into a single policy.

Safety and health regulations

Cleaning business owners must stay on top of the relevant federal and state safety and health regulations. Cleaning industry hazards are covered by the federal Occupational Safety and Health Administration’s (OSHA) standards for general industry, including those regarding the handling and disposal of hazardous chemicals and materials and requirements for personal protective equipment like face, eye, and hand protection. OSHA also has identified several hazards and solutions to help cleaning industry employers recognize and mitigate risks.

Be aware that state health codes and safety regulations can vary from federal and, in some cases, may be more stringent. California, for example, has voluntary safety and health guidelines that specifically apply to house cleaners in addition to its general requirements for safe workplaces.

Expanding the team

Cleaning is a type of business where you can start without employees, which may be the wise route. Working solo initially means you can set the standards, identify trouble spots, develop best practices, and contain costs. But don’t accept more work than you can handle alone, which could hurt your business’s reputation right out of the gate. It’s better to have a waiting list than not to show up or let quality slip.

When you determine it’s time to expand the team, you have much to consider. For example, you should consider going with full-fledged employees or independent contractors. Contractors are generally cheaper because you don’t have to pay payroll taxes, provide benefits, or pay overtime or minimum wage. The tests for contractors are strict, though, and misclassification can prove very costly. You could owe back pay, along with penalties, and end up liable for withheld employee benefits.

Regardless, you’ll need to craft a job description that details the responsibilities and requirements. Post the description where your ideal workers will see it, whether online or off. After promising job interviews, ask candidates to do a paid test run so you can evaluate their work. You’re not looking for perfection yet—just a reasonable effort, efficiency, and a willingness and ability to learn.

You’ll boost their performance if hired by developing protocols, checklists, and training that describe how various cleaning processes should be performed. This will ensure consistency and high standards. 

Despite the added cost, it’s advisable to run background checks for all employees. A rogue employee pocketing a piece of jewelry or worse could cause devastating reputational damage for your business. Check references, as well. Too many employers simply collect contact information for references and don’t actually reach out.

When you hire your first employee, you must obtain an Employer Identification Number from the IRS. You may also need to register with the state department of revenue. You’ll be expected to withhold and deposit income tax withholding and each employee’s share of Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA). FICA is a federal tax that employers and employees split. You’ll also be required to pay unemployment insurance taxes and satisfy various federal and state reporting obligations.

There’s an alternative if you want to put off the hassles of employees or contractors, but have more demand than you can handle: raise your prices. The number of clients and inquiries might drop, but you can make as much or more money for the same amount of work.

Marketing your cleaning business

Marketing helps your target clients find you. The first step is to select a name. Your name should make immediately obvious the kinds of services you offer and, if possible, what differentiates you from your competitors. An effective business name isn’t vague or generic, but it also doesn’t box you into a corner if you later expand your services or geographic area. And it’s easy to spell and pronounce.

When you have a name in mind, check with your secretary of state’s office to confirm it’s not already in use. You should also search the U.S. Patent and Trademark Office’s trademark database. If you plan on having a website (generally recommended), check for domain name availability, too.

Digital marketing is indispensable nowadays, so you should have at least a basic website or Facebook page with your services, prices, positive reviews, and a contact form. List your business on NextDoor, TaskRabbit, and Handy. You can use social media like Instagram and YouTube to post tips, promotions, and before-and-after photos. But remember: do not take or post photos of your client’s homes or companies without their written permission.

Word-of-mouth is also powerful for cleaning businesses, of course. Treat every customer well and ask for references. Give them business cards to pass on and offer a referral program where they’ll receive a discount for referring you new clients. Respond promptly whenever people reach out, even if their inquiry isn’t a “match” for your business. 

Finally, remember that marketing comprises your pricing strategy, including whether you’ll charge a flat fee, hourly, by square footage, or by service. It often works well to take an hourly approach while you’re honing your processes and learning how much time different jobs require.

As for the rates, you should have an idea of competitors’ pricing from your research, and you can deduce customers’ willingness to pay those prices based on reviews. Avoid the tendency to undervalue your services, though. Sometimes, premium pricing conveys an image of premium services. Remember, too, that you can adjust your prices based on factors like client response and your expense trends.

You may be tempted to offer deep discounts to land early business, but that’s not sustainable for the long term. After all, you have to cover not only your costs for that job but also your overhead, profits, and taxes. You could, however, offer a first-time discount with the clear understanding that it’s a one-time deal.

Your marketing and other plans will evolve as your business grows—and so will your responsibilities. Fortunately, even solo business owners don’t have to go it alone. Gusto’s products can ease the burden for businesses of all sizes with its affordable payroll, employee benefits, and HR solutions.