Cleaning industry prepares for tough times

Dateline: 04.03.2009
Author: BSCAA

Rodney Barnes (pictured), national president of the Building Service Contractors’ Association of Australia (BSCAA), said its members had already experienced fallout from the financial crisis.

Reports show that tenants are vacating at a higher rate, reducing income from existing contracts. In other cases, window, carpet and upholstery cleaning are being removed from contract specifications or requests have been made to reduce contracts by specific percentages.

Members said more jobs were being reviewed and put to tender, while other clients were insisting on ‘basic’ contracts that exclude profitable extras. Managers of underperforming properties have also been reported as seeking reduced outgoings to retain or entice tenants.

Some marginal cleaning businesses had readily responded to clients who were keen to shave costs. Others said a reduction in the level of building maintenance had caused a rise in emergency work related to drainage issues.

Ongoing Challenges

“The challenge for the cleaning industry is to recognise these market dynamics and deal with them on top of other issues,” Barnes said.

“There is no doubt the financial crisis is cutting deeply into the revenue streams of companies that have been forced to take a defensive position. Businesses are looking at every opportunity to reduce costs. The challenge for our industry is to present compelling arguments that will discourage customers from cutting corners that could jeopardise their reputation or expose them to litigation by risking the health or safety of their staff.

The provisions of Clean Start and the pending new national award will help to improve the professional image of the industry. However, until there is general industry compliance, marginal operators will attempt to avoid these requirements.

Another challenge is illegal ‘pyramid’ subcontracting and some questionable franchising practices. As a leading industry body, BSCAA does not support such practices because they undermine legitimate tendering, reduce quality of service delivery and invariably lead to breaches of awards and industrial legislation.

As a consequence, the Workplace Ombudsman has approached BSCAA to participate in a joint initiative to educate contractors about their legal obligations in an effort to limit illegitimate sub-contracting in the future. The Ombudsman’s office has made it quite clear that continued non-compliance will lead to spot audits (such as those conducted in Queensland in 2008) and prosecutions such as the recent one in South Australia this year.

“The BSCAA supports this initiative and intends to cooperate fully with the Workplace Ombudsman’s Office,” stated Barnes.

Some Advantages

The BSCAA says while most companies invest considerable time and effort in ensuring regular and close communication with their customers, some ignore the obvious benefits of sound client relationship management. If you have a good client relationship, it is easier to explain and negotiate concessions to ensure both parties receive an acceptable outcome.

Staff development and training is also seen as a priority for cleaning contractors. Companies prepared to invest in their employees will always be able to guarantee the best service to their customers. Record low employment of recent years has made it difficult for many businesses to attract quality staff, while growing unemployment has created better opportunities to attract cleaners, supervisors and managers.

Survival Tips

Barnes emphasised a challenging business environment calls for some basic and practical approaches to ensure survival and growth. Some of these include:

* Treat retention of skilled employees as a priority.

* Good client communication is paramount. Competing in a public tender where there is no relationship is dangerous and often a waste of time.

* Direct your efforts around quality rather than quantity. Understand and know what your clients want and focus on it; delivering a good service delivers a good margin.

* Try to diversify. Promote add-on sales such as carpet and window cleaning. Make suggestions where you may be able to reduce costs.

* Look at your business costs. Are you getting value for money out of your service providers? Examine whether you can reduce costs by changing some long established practices.

* Access to funding has become more important since the downturn began. With access to capital likely to become tighter, small companies need to focus on secure funding arrangements to help sustain and develop their businesses.

* Manage debt ratio and don’t over commit. Examine core business operations, revenue projections and working capital levels. It is important to have a strong balance sheet which will give you a healthy and respectful relationship with your banker.

“As in previous tough times, companies that examine every facet of their business and act with a positive attitude invariably come through very well. These conditions won’t last forever, with many economists predicting the second half of 2010 will see conditions improving,” Barnes surmised.
www.bscaa.asn.au

Cleaning industry prepares for tough times