We allllll struggle with something in our work, I’m no exception. My kryptonite seems to be focusing on one thing at a time. I have about a dozen different projects in my head and I want to attack them all at once but we humans are notoriously not good at multitasking, no matter what we may believe LOL.
Before continuing on with a generic email series, I thought I’d ask what things you might struggle with. PLUS, I’ll give you my “Complete Guide to Getting 15 Top-Quality Online Reviews in ONLY 2 weeks” for free.
Learning about which of the following would really help you out (it’s ok to click on more than 1 or even all lol!):
- Basics: how to clean a home, what tools to use, insurance needs
- Clients: finding them, persuading them to hire me, how to handle payment
- My Fees: how much should I charge, how to raise my prices, justifying my prices, should I offer lower price ever?
- Back Office: how to keep good records, Schedule clients, keep track of everything, report income, taxes
- Advanced: when to expand and hire, who to hire, subcontractors vs employees, should I buy company cars, should I expand and do different types of cleanings (commercial, PCC)
- Marketing: what’s the best way to market, what are different ways to market, how to find clients, who are best “ideal” clients, how much to spend on marketing, how to calculate return on investment in marketing
- ALL of the above!
Thanks for sharing your needs with us!
Did you know that you can order number of different types of services through Amazon? It’s officially called “Amazon Home Services” (aka “AHS”) and house cleaning is one of them! Here’s how it works:
- Someone searches Amazon (or Amazon displays in their sidebar) for a service. They’ll see that Amazon can provide regular house cleaning, deep cleaning or spring cleaning, carpet cleaning, Move-in or move-out cleaning, and a few others.
- The customer selects, say, house cleaning and enters information (# bedrooms, #baths, square footage of home) and then sees an estimated price. Click here to see an example.
- Amazon then adds the customer request (includes three dates and times the customer has selected as good for them) to the service provider app.
- You, the professional service provider, can see the request in the app and elect to request it or dismiss it.
- On the day and time agreed upon, you service the client. They sign the app that you’ve cleaned that day and you take a selfie photo in front of their home (to verify that you actually did clean THEIR home).
Amazon uses Independent Contractors to fulfill these cleanings, and it’s not difficult to get set up as an AHS provider. You submit information about your business like EIN or SS number (if you don’t have an EIN yet), insurance and workers comp info, and complete a background authorization for the company and also for any worker that will be in the client’s home.
Here’s what I like about working with AHS:
- It’s not just another lead selling company (like Home Advisor or Thumbtack where you pay a fee for the lead regardless of if it ever leads to anything). Fees are only taken out of jobs you are awarded and service. AHS keeps 20% of all fees charged to the client so from this example of $170.52 the servicer gets $136.42, and Amazon keeps $34.10.
- While the 20% is larger than lead fees from the others, there are no wasted fees paid. For example, if I purchase 3 leads from Home Advisor at $25 each and only land one of them, the effective fee for the one I got was $75. I can picked choose exactly which ones I want to request.
- Above all, though, the best reason to use AHS is that they allow you to directly service the client in the future through your own business. So after the first visit, they all go through my company and I keep all the revenue:-)
But true to Amazon’s core value of trying to provide all things at the lowest possible price (something they typically are remarkably good at), it’s not a good business model for home services. When hiring a professional who will be in your home (cleaner, plumber, whatever) they will have access to YOUR HOME. And providing the cheapest possible servicer is a risky bet Amazon makes with the customer’s belongings.
I’ve seen some prices on AHS for cleanings that after their feee would only be $20/hour. As a cleaning company, I don’t even make any profit until I’m getting at least $30/hour, and neither will any other professional cleaning services company. If I was an independent solo cleaner (not company, just me), I’d still be able to get $25-$30/hour all day long from clients.
A little bit about basic economic principles. When determining prices, you must consider supply and demand, what your profit margin is, and what the market can bare:
- Heavy supply and low demand pushes prices down. Low supply and heavy demand drives prices up.
- All professional cleaners (solo or company) have overhead that must be met. Licenses, workers comp, travel time/gas, cleaning supplies, etc. If a job doesn’t profit you and there’s no guarantee it’s anything but a 1-time cleaning, you’d be better off sitting at home than doing a cleaning for a loss.
- When looking at what the “market can bare” the price must be acceptable to both parties; provider and consumer. If price is too high, consumers won’t buy. If price is too low, provider won’t provide. The price needs to satisfy both parties.
In trying to low-ball prices, though, Amazon has cut their own throat unfortunately. I cannot tell you how many cleaning opportunities I’ve seen in the app that are underpriced by 25-50% (so I obviously dismiss them). Then, if no-one else requests to do it, AHS send out an email to the providers with the job details and price. So by being excessively low, they end up having to cancel the cleaning because “no cleaning professionals are available”. The customer is disappointed and Amazon has lost the opportunity for fee revenue.
Lesson: price based on what the market – BOTH sides of the market – can bare or risk loosing income. You’d think Amazon is large enough to learn that, but they’re new to the whole services industry and will (hopefully) learn how to run that business better. Or leave the market.
Man, this is the big daddy of all posts…people spend YEARS perfecting their pricing models, and it’s a tough thing to really decide. Here are some things for you to consider when pricing your services:
1. Being a professional cleaner is HARD WORK. It’s strenuous on your body to lift, stretch, bend, crawl on your knees, scrub, vacuum, and clean a home or business. It’s not as strenuous as body building, more like a light cardio workout – but an 8-hour cardio workout!
2. Being a professional cleaner requires professional tools. You must invest in high-quality cleaning equipment like microfiber cloths, commercial-grade mops and vacuums, and good-quality cleaners. A typical vacuum is meant to be used once a week for 2 hours, not 3 times a day for 2 hours. You’ll need higher quality equipment, and it will also need to be replaced more often than home models.
3. Being a professional cleaner requires overhead. Even if you’re a solo cleaner who does their paperwork at the kitchen table, you have overhead. Business registration, tax vendors license, liability insurance, workers compensation coverage, self-employment tax, income taxes, banking fees, cell phone, gas for the car, car insurance.
When pricing out your services, it is easiest to price by the hour – at least at first. After you’ve gotten a good system in place and are a speedier cleaner, you can price by the job.
The easiest way to price by the hour is to do a simple worksheet. Click here for an example of what a person just starting out working 30 billable hours a week might expect (you might actually work more hours per week when you take into consideration travel time in between jobs, and running errands for the business which aren’t billable to any client). In the example, you can expect about $1.50 out of every hour you bill for to go towards expenses.
In this other example, a company with much greater costs can expect much less of each dollar billed to clients to be profit.
“…In this world nothing can be said to be certain, except death and taxes.”
Fresh-faced solo cleaner or seasoned professional, we all need to think about taxes and licenses. “Which ones are really necessary?” or “I’m new I don’t need to worry about that yet.” might be thoughts you have had. There are a few things to consider no matter what your company size or level of experience.
1. Holding all required licenses for your profession sets you apart especially when new.
For many in the cleaning industry, this means a simple business license/registration with their state, county, and/or municipality. Often these are very inexpensive ($50 or less) and are required annually or less often. Showing client prospects that you are registered and an active participant in the economy of your state/county/locality is important because it signifies you’re serious about being a professional. And it’s the professional that can produce high-quality services and are viewed as more valuable, especially when just starting out and you don’t have very many reviews or clients yet.
2. Paying all required taxes also increases your professional standing & legitimacy.
The advent of the internet and Google has increased the barrier to entry into being a professional. If you hold yourself up as a cleaner, but there’s no record of you anywhere on the internet (reviews, website, etc) then people are more suspect of your ability to be a professional. They are more wary of letting you into their homes to clean, because they’re aware that you could just as easily be a scammer trying to gain entrance into their home. All else being equal, being a legal entity provides a certain amount of legitimacy all on it’s own.
3. Not paying taxes, or not paying the full amount, leaves you vulnerable to audit.
According to Publication on Topic 756, the IRS defines “household employees include housekeepers, maids, babysitters, gardeners, and others who work in or around your private residence as your employee. Repairmen, plumbers, contractors, and other business people who provide their services as independent contractors, are not your employees.” If the homeowner has a household employee, they are required to pay the employer portion of social security and FICA taxes (7.65%) to the IRS. If they DO THAT, and you do NOT report their income, then the IRS will eventually catch up to you and that’s not a fight we mere humans can win lol.
In order to prove that you’re an independent contractor, you may need to provide a client with a W-9 that proves you’re a business and you file and pay your own taxes (both the employer and employee portion of taxes).
4. If you get audited, all your clients will get audited too and you may be vulnerable to lawsuits.
If you do get chosen for whatever reason to be audited by the IRS, as a possible condition of lowering your penalty or potential criminal charges (YIKES!!) the IRS may ask you to provide names of allllll your clients so they can be penalized for not withholding employer taxes. IRS general fraud statutes reads:
Any person who willfully attempts to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof:
Shall be imprisoned not more than 5 years
Or fined not more than $250,000 for individuals ($500,000 for corporations)
Or both, together with the costs of prosecution
And if found guilty of a felony, I cannot begin to count the ways your life will be ruined, only beginning with financially.
5. Not paying into the social security fund on earned income only decreases the social security benefits you deserve to receive.
Social security benefits when you retire is solely dependent on how much you paid into the system. The comparison of SS to a traditional self-directed retirement account (like an IRA or 401K) is not comparing apples to apples – they aren’t exactly the same. A traditional retirement account is able to have returns at greater amounts because of greater risk, however the income from it will be 100% dependent on the value and how long you live. Social Security income, in contract, is more like an annuity or life insurance policy. The income from it is guaranteed to have a COLA (Cost Of Living Adjustment – generally increases) AND last as long as you’re alive. And that alone could mean a greater overall return vs a conservative investment strategy.
Investment returns aside, it’s a good thing to have social security income and by not paying into SS you only deplete what you could earn in retirement.