5 Ways to Reduce Costs as Wages Increase in Your Cleaning Business

The federal minimum wage ($7.25 an hour) hasn't changed in a decade—but that doesn't mean owners of commercial cleaning companies aren't feeling a pinch when it comes to labor costs.

In fact, across the country, states are raising their minimum wage and even many large cities are doing the same, creating their own higher minimum wage. When a state, city, or county minimum wage is higher than the federal rate, employers must pay the higher amount. Overall wages have been slowly edging up since dipping in 2016. 

Payroll is the most expensive line item in any commercial cleaning company's budget, and a mandatory wage hike can eat into profit margins. Some states are incrementally increasing minimum wages to soften the blow, but it only delays the inevitable pinch.

What can you do to survive?

Reduce costs as wages increase to retain your profit margins

Here are 5 ways your commercial cleaning company can reduce costs to soften the blow as wages continue to increase.

1. Reduce costs

Conduct an audit of how you spend money in your business. Where can you reduce expenses? For most commercial cleaning companies, equipment and cleaning chemicals offer the greatest potential for cuts.

Could you save money by investing in higher-quality supplies and products that will be more durable and last longer, or that will increase your workers' productivity? Could you purchase chemicals or disposable tools in bulk to get them at a reduced price? Likewise, are you doing as much as you can to cut costs by using more concentrated cleaning solutions? Could you reduce the number of products you must buy and store by using multi-surface cleaning chemicals?

Also, if you don't have an equipment replacement program in place, create one. This will help you plan for maintenance and repairs and avoid replacing a machine before the end of its useful life. Postponing purchasing pricey tools by even a few months can add more dollars back into the budget.

Finally, make sure your training program is current and thorough. Equipment abuse can result in early replacement, and misuse of chemicals and other tools can also result in added costs. Train your staff on safe and efficient ways to use your equipment and chemicals.

2. Increase productivity

When labor costs go up, business owners need to find ways to increase sales without increasing worker hours or reducing service quality. The answer is creating a more productive labor force.

Time-saving equipment is one of the best ways to boost how much cleaning each employee can accomplish. Although it requires an upfront investment, purchasing more efficient equipment can significantly reduce labor costs over time and offset wage increases.

As an example, you probably already know that backpack vacuums allow workers to clean more than twice the space at the same time as a traditional upright vacuum. Plus, the newer technology also reduces repetitive motion injuries and related worker compensation claims. 

Another option for increasing productivity is to implement team cleaning. Each cleaner has a specific cleaning assignment and a team leader handles inspections and communication with the client. Teams are cross-trained and tasks are rotated to reduce burnout and boredom.

The team cleaning method is a leaner approach that allows your staff to become more efficient.  

3. Reduce turnover

Hiring is expensive. The costs of advertising, screening, and training new employees add up quickly. By reducing your turnover rates, you can cut these onboarding costs and use the savings to cover rising wages.

Also, the longer a cleaner stays with your company, the more their work quality, efficiency, and consistency will improve. This will also add to the bottom line. 

It costs more to lose an employee than to retain your current staff, so make it a priority to reduce turnover. Check here to learn more about The Key to Getting Your Best Cleaning Technicians to Stick Around.

4. Increase prices

Increasing prices is perhaps the most obvious way to cover rising labor costs. That said, it's typically not the best first course of action. 

There's more to pricing than simple math. While it may add up on paper to raise prices, it may not deliver the expected results when put into practice. That's because you must also consider the competition and your specific service area.

Trying to pass 100 percent of wage increases directly onto your customers costs you if it results in dramatically outpricing your competitors or going beyond what the local market will bear. 

If raising prices is the only way to survive, then raise them. But first, consider if there are other options that may reduce just how much you must raise prices.

5. Change your staffing

Depending on the severity of wage increases in your area, even all of the above options may not be enough to offset the damage. In these cases, you may need to make changes in your staffing.

Before issuing pink slips, consider less-drastic options. Can you use scheduling/dispatching software to create the most optimized employee schedules? Can you scale back your offerings or hours of operation in order to reduce staffing hours? Can you limit or stop overtime? Can you reduce any employees from full-time to part-time (not ideal, but perhaps better than firing).

Finally, you may need to consider firing poor performers to create the most productive team. If you're firing employees that you cannot afford to replace right away, remember it likely means you'll have to work more hours to keep your clients happy. In that case, explore ways to automate or streamline administrative tasks you currently handle (such as accounting software or social-media scheduling tools).

Labor is the greatest expense for cleaning services, so an increase in the minimum wage can make it challenging to make the dollars add up. The most successful companies explore all options to cut costs and avoid passing on additional costs to the customer or cutting staffing.

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