How To Start a Cleaning Business The Right Way — Pro Housekeepers

How much to charge when starting a cleaning business

An important factor to consider when starting your business is how much to charge clients. If you’re working as a sole proprietor, you might make the mistake of thinking your hourly rate is the only important calculation. However there are more expenses associated with running even the smallest business than just your wages to consider. Your overheads will soon add up, and there are additional taxes to pay if you’re self-employed that can quickly reduce your overall profits.

Start your calculation with your hourly rate. According to Freshbooks, the standard rate most cleaners charge is $25-$90 per hour, depending on area and expertise. Check out the local cleaners in your area to see what the competition is charging. Your rate should be competitive, but if you want to price yourself higher than other cleaners, consider the value-added extras you can include in your service to make it worth the additional cost. Including some chores as standard, such as making or changing beds, sweeping external spaces, and washing windows, could give you an edge over companies that tack on additional fees for those services.

Next, consider your tax liabilities. The federal self-employment tax rate is 15.3 percent. This is in addition to other income taxes you may have to pay, and is twice the rate of employee taxes. That means a self-employed cleaner earning $25/hour owes an extra $1.90 per hour in taxes, compared with an employee earning the same hourly rate.

Generally speaking, small business owners should reserve 30 percent of their income to cover taxes. Adding that to the rate you want to take home increases your prices from $25/hour to $32.50/hour. Paying taxes out of your hourly rate instead reduces your profit to $17.50/hour.

Cleaning businesses also have other overheads to consider. There’s the cost of bookkeeping and accounting, transportation costs to and from clients’ houses, the time spent traveling between jobs, advertising, and the cost of purchasing cleaning materials and equipment. Cleaners rarely work a full eight hours per day in a single property, and you need to account for that extra time in order to make enough profit each day for your business to be viable.

Let’s say your hourly rate is $25/hour.  How many hours will each cleaning job take? In order to make that calculation, you need to visit the property. As a general rule, it takes approximately 1.5 hours to clean 1000 square feet. However it’s much faster to clean a minimalist apartment than a cluttered home with small children who leave toys and sticky messes wherever they go. Establish your own baseline for how quickly you can clean an area based on the floor plan, and then adjust for variables such as kids, pets, delicate and expensive ornaments that need extra time and care, and additional tasks you might offer such as vent or window cleaning. Your hourly rate multiplied by the number of hours the job will take is your labor cost, and the basis of your overall estimate.

If we assume an estimate of 4 hours to clean a two-story family home at a labor cost of $25/hr, your base rate is $100. Next, add on your taxes. Self-employed individuals will have to pay 15.3 percent tax. Employers have to pay FICA (payroll) taxes at 50 percent of this rate, or 7.65 percent. There are also state and federal taxes to consider. Sole proprietors should withhold 30 percent of their income to cover tax liabilities. Larger businesses share some of the FICA tax burden with their employees, and might only need to withhold 20 percent of their income for taxes.

Adding 30 percent for taxes onto the $100 labor cost brings the total to $130. This will cover labor and taxes, but there are still other expenses to consider. If you supply your own cleaning equipment, materials, or personal protective equipment (gloves, booties, work shoes, eye shields, etc.), these costs should be added to your calculation. For general domestic cleaning, 5 percent overhead is usually sufficient to cover these costs, bringing the running total to $136.50.

If your cleaning business will be working in a niche industry using specialist equipment or solutions, it’s advisable to calculate the exact cost of each job, as it could be several factors higher. If you’re using $50 worth of cleaning solution for each client, that will eat into your profit and significantly reduce your hourly rate.

Next comes your overheads. These are the everyday costs of running your business. That could include office rent and administrative employees, business licenses and fees, advertising fees, website hosting and maintenance, traveling time and more. In terms of maintaining a digital presence, understanding domain name change is also an integral part of managing your cleaning business. It’s something you may need to consider if your business evolves, or if refreshing your website identity aligns with your marketing strategy. This three-step process shows you an easy, seamless way to change your domain name without disrupting your online operations. So, make sure to set aside resources for potential web domain shifts. Any costs your company incurs that are not a direct result of being in a property cleaning also need to be covered by the rate you charge for the work you do.

If you’re working from a home office for a couple of hours a week keeping your books in order, your admin costs might be comparatively low. However a large scale cleaning operation with a number of employees could see administrative costs soar as high as 50 percent or more. If we assume administrative costs of 25 percent for this calculation, that brings the cost of a 4-hour cleaning to $170.63.

Finally, add in your markup. This is your business profit and a buffer in case of unexpected costs. A good rate is 33 percent. This means a third of your fee goes toward profit and covering the cost if the estimate was short or another expense runs over. The final cost of cleaning the property over 4 hours comes to $226.94 — a long way away from the $100 hourly rate you started with. Be sure to make invoices for your clients, no matter what you charge. They’ll come in handy during tax season.

Pro Tip: Check out our ultimate guide to setting your price for house cleaning.