The following article was written based on information in a talk by Tom Stewart that occurred live at the 2019 Maid Summit.
This online convention for Maid Services was hosted and organized by ZenMaid and included over 40 other cleaning industry experts.
Check out the full replays of presentations given by each speaker from this amazing event at MaidSummit.com
– About the presenter –
Tom Stewart is the CEO of Castle Cleaners House Cleaning, a professional home cleaning company that has expanded to 6 branches all over the United States.
Tom’s cleaning company has a home office in South Carolina and they do all their own customer service, recruiting, sales, HR functions, accounting, payroll, etc. in house.
Castle Cleaners uses innovative technology to continually grow business and steadily increase profit potential.
Tom is also a partner of Cleaning Business Today, a website dedicated to providing the latest in the cleaning industry.
As if that wasn’t enough, Tom has also started the Castle Keepers Institute designed to train and professionalize the cleaning industry along with Derek and Liz Trotter.
Tom Stewart has been dedicated to using his own success to help others in the field for years, so we thought we would share the 3 key performance indicators (KPIs) he uses to track profitability in order for you to increase your own Maid Service’s profit.
Number 1 – Your Maid Service’s weekly occurring revenue
The basic idea of your recurring revenue comes from how well you are able to create a stack of cleaning clients signing up with your Maid Service.
If you were to start today, gaining one new recurring cleaning client and they pay $100 on average per cleaning per week, then a single weekly client is worth $5200 annually.
If this was the case, and you were stacking one of these new cleaning clients per week, then that is $5200 annually times 52 weeks.
That’s $270,400 gained by the end of your 2nd year in recurring revenue from stacking these new cleaning clients on top of each other over a year.
However, this isn’t just going to happen because we say it will, KPIs for Maid Service profit need to be tracked in order to ensure you are making the right moves for your home cleaning business.
Recurring client growth is an art form that should be nurtured in order to increase your cleaning company’s profitability.
Pay attention and note your weekly gain or loss from a cleaning client in order to figure out your weekly recurring revenue numbers.
Identify issues and resolve them when you see that you are having cleaning clients leaving your company at a high rate.
However, keep in mind that the bigger you are, the more difficult it can be to stack weekly revenue and the more cleaning clients you have, the more you will lose.
Fear not though, this is only because all of your numbers are increasing and you are essentially playing in a larger field.
Number 2 – Payroll percentage to revenue
If you haven’t already, build a simple spreadsheet that contains where your money goes each week to track KPIs for your Maid Service profit.
You can split the revenue pie into 3 main sections: direct costs, indirect costs, and the remaining portion can be distributed as you need for other costs.
- Direct labor – This is what goes towards paying the people who clean the homes. It should make up about 50% – 60% of your total revenue.
- Indirect labor – Labor that is allocated to paying those who do sales and other things indirectly associated with the growth of your Maid Service business. It includes: answering phones or sending emails and is labeled “indirect” because it’s not direct in-home cleaning labor. This should be around 15% of revenue.
- The other 25% – Use your remaining revenue to invest in the growth of your Maid Service Business. Refresh your training program and work on improving your marketing techniques, these sorts of things can shrink a payroll expense lower and increase profitability. They help to brand your business and make it consistent.
You can get your ratio even lower by being more efficient with the daily operations and tracking KPIs for your Maid Service.
Help your employees function more effectively by providing proper training, decreasing drive times or using quality tools like vacuums and aprons to make each job easier to accomplish.
Number 3 – The break-even analysis
Figure out what the cost per month is for each job and track your numbers over time, consider variables that may affect your Maid Service profit.
There are several ways these costs could be affected by the growth of your Maid Service business. If you pay a few more hours for cleaners, your insurance for those hours goes up a little bit.
Additionally, transportation cost goes up a bit, as well as the weekly cost of cleaning supplies. They all factor into a profitable increase: costs, rent, marketing needs, etc.
Once you have your monthly costs together, subtract them from your monthly revenue, the difference between revenue and cost is the part of the Maid Service profit that goes into your pocket!
How does a Maid Service owner figure out how to obtain their break-even revenue though?
Think about it like this: gross profit pays for the non-variable expenses. So for every dollar of revenue, we have to pay 38 cents indirect expenses.
So, if you have $30,000 worth of indirect expenses, divide that by your gross profit percentage and find your break-even revenue.
$30,000/.38 = $78,978
This means that you must make $78,978 a month in order to break even and knowing this number will allow you to work backwards to achieve the level of success you desire.
Another option to find your break-even number is to divide your revenue by the average bill rate per job to find the number of jobs you need to perform each month.
Knowing these numbers is great for the growth of your Maid Service business.
Maid Service profit is found in the margins of the numbers explained above.
The first thing is always first, you need to make sure your bills are paid.
If you are going to increase your profit potential, then it will be in the jobs performed later in each working day. Let’s say you need to work 36 jobs a day in order to hit your break-even number and you are making a percentage profit of $38 on each home.
When you don’t hit your numbers, you will lose that $38 per home that you would have made for each home had you surpassed your daily break-even of 36 homes.
What happens if you clean just 1 more home a day, you ask?
That’s extra profit for your Maid Service!
If you did this every day you’d get $38 a day and $823 in profits a month.
Knowing these numbers helps to motivate you to be a more consistent cleaning company. It allows you to be engaged in the way KPIs for Maid Service profit operate, from providing stable, competent employees to encouraging cleaning clients to stick with already set appointments.
This article was developed from a live presentation given by Tom Stewart at the 2019 Maid Summit, which was hosted and organized by ZenMaid.
Don’t forget to check out full replays of talks from Tom and over 40 other cleaning industry experts at MaidSummit.com