Keeping your head above water

Six critical success factors for your business.

The commercial cleaning industry in Australia is worth around $11.7 billion in revenue, according to IbisWorld*.

In 2019/20 the industry reported a decline of 0.4 per cent due to COVID-19 and subsequent decrease of the number of cleaning companies in the market.

The good news is the industry is predicted to grow more than 3 per cent annually between 2021 and 2026*.

According to IbisWorld, this growth will be largely led by facilities re-opening their doors, and the implementation of new deep cleaning services.

More than half (55 per cent) of the $11.7 billion market is made up from internal commercial cleaning*.

This is positive news for the top line; however, it is not so great for the bottom line, with margins expected to drop between 2-3.8 per cent due to high competition and Covid-19.

This outlines the importance of managing the cost to serve by client if you want to keep your head above water in this fast-changing environment we all now find ourselves.

Not only is the competition becoming fiercer in the market, our two largest industries – tourism and hospitality – are hurting due to the pandemic which has a negative flow on effect to the commercial cleaning industry.

Every industry has its own needs and wants, and business leaders need to be able to identify, communicate, and renegotiate quickly to keep on top of costs and service expectations.

Why?

The hospitality industry is struggling financially as costs across that market have exploded as a result of COVID-19.

As an example, look at the industry’s continuously changing cleaning regimes. It is more important than ever cleaning companies understand these regimes and adhere to them.

Cleaning teams will need to have all relevant and up to date documentation and protocols in place in order to sustain these contracts.

Not only that, these regimes have an impact on your cost to serve. Keeping hard and soft costs under control will be vital to the survival of your business.

Some examples of hard and soft costs include:

Hard costs:

  • Product pricing increases
  • Product volume increases
  • Additional cleaning products
  • Labour hours increase
  • Insurance
  • Equipment (depreciated over time)

Soft costs:

  • Implementing new cleaning, safety, and workplace processes
  • Training such as COVID-19 safety or new services such as deep cleaning
  • Documentation/administration

Success factors

Ability to compete on tender: Firms that can professionally cost and prepare cleaning service quotes, tenders and contracts for clients can maximise revenue and profit. Operators must match required service standards to contract payment.

Set clear internal protocols and communicate these to enable you to compete: Staff must communicate and negotiate effectively with clients to meet service requirements in a timely manner.

Use of production techniques that add value to base product(s): Firms can show a point of difference by providing clients with a choice of more expensive, value-added services, developing bespoke services, or demonstrate how environmental products are socially procured are cost effective. Most importantly across all these points: You must be clear and price accordingly.

Self-employed cleaners: You must develop entrepreneurial skills, particularly those relevant to operating a small business to maximise time and business opportunities, otherwise you will not survive.

Building relationships: Understand who the decision maker is and who the influencers are – they are both vital to the success of you winning the contract.

Economies of scale: If you are a smaller cleaning company understand your niche. If the market has changed or become more difficult to maintain cost wise, explore other markets that are more flexible – refocus your business or have a mix of large and small commercial contracts to maintain margins.

*Commercial Cleaning Services in Australia – Market Research Report, IbisWorld August 2020

Susan Crane is a business coach and director of Susan Crane Consulting. She can be reached at info@susancraneconsulting.com

Crane will be presenting at the ISSA Cleaning & Hygiene Expo in October 2021 in Sydney. For more information about the event, click here

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