Guides
Commercial cleaning unit economics for owners
Commercial cleaning profit margins and break-even worked in named variables: contribution per account and per labor hour, the account count that covers fixed cost.
What to take away
- Break-even for a cleaning company is a count of accounts, not a revenue figure. Work out how many contracts of your typical size cover fixed costs, and you know how exposed you are to losing one.
- Contribution per account is monthly price minus the labor, supplies, and travel that account alone causes. Overhead is paid from the sum of contributions, never from any single account.
- Contribution per labor hour is the number that tells you which accounts to keep. Two accounts with the same price can differ widely once restroom counts and drive time are in.
- The janitorial closet you did not price, the consumables you did not charge for, and the credits you issued after complaints are the three leaks that move break-even without anyone noticing.
- Recompute break-even every time a wage changes, an account leaves, or a vehicle is added. It is a moving number.
Why this page gives you formulas and not figures
No general page can know your local wage, your insurance premium, or what a mid-sized office in your town pays for nightly service. Any margin percentage printed here would be a guess dressed as advice.
What can be given is the arithmetic, in named variables, so you can fill it from your own payroll and your own contracts. The pricing and profit guide explains how one building is priced; this page works one level up, at the company.
The variables
Gather these from your own records before doing anything else.
Variables to gather
- P: monthly price of one account
- L: monthly direct labor, loaded
- S: monthly supplies and consumables
- D: monthly travel and setup cost
- C: contribution, P minus L minus S minus D
- F: monthly fixed cost of company
- H: monthly labor hours on account
| Variable | Meaning | Source |
|---|---|---|
| P | Monthly price of one account | The signed contract |
| L | Monthly direct labor for that account, loaded with payroll taxes and payroll-linked insurance | Timesheets and payroll |
| S | Monthly supplies and consumables you carry for that account | Purchase receipts filed by account |
| D | Monthly travel and setup cost for that account: drive time paid, fuel, parking | Route records |
| C | Contribution of the account, P minus L minus S minus D | Computed |
| F | Monthly fixed cost of the company: rent, insurance not tied to payroll, software, vehicles, the owner's draw, marketing | The general ledger |
| H | Monthly labor hours on that account | Timesheets |
The IRS page on what records a business should keep describes a system that clearly shows income and expenses with supporting documents. The reason to file supply receipts and timesheets by account is that S and L are otherwise unknowable, and without them C is fiction.
The derivation
- For each account, compute C = P minus L minus S minus D. Any account with C at or below zero is paying you nothing for the risk of holding it.
- Sum C across all accounts. Call the total contribution TC.
- Break-even is reached when TC equals F. Profit before tax is TC minus F.
- Divide F by the average C of your accounts. The result is the number of typical accounts needed to cover fixed cost. That number, not a revenue target, is what you are protecting when you inspect restrooms.
- For each account, compute C divided by H. That is contribution per labor hour, and it ranks your accounts honestly.
A worked version in letters: if F is covered by seven typical accounts and you hold nine, losing two puts you at zero. Losing the two with the highest C per hour puts you below zero even though you still hold seven. Which accounts you lose matters as much as how many.
Derive break-even and rank
- Compute C = P minus L minus S minus D
- Sum C across accounts to get TC
- Break-even when TC equals F
- Divide F by average C for account count
- Compute C divided by H to rank accounts
Why per-hour contribution beats per-account price
Two offices pay the same P, but one has two restrooms and a closet with a mop sink beside the elevator. The other has six restrooms, a basement closet, and a dumpster across the parking lot.
Same price, different cost
Office A
- Restrooms
- Two
- Closet
- Mop sink by elevator
- Dumpster
- Nearby
- Labor hours H
- Lower
- Contribution C
- Higher
- C per hour
- Higher
Office B
- Restrooms
- Six
- Closet
- Basement closet
- Dumpster
- Across parking lot
- Labor hours H
- Higher
- Contribution C
- Lower
- C per hour
- Much lower
L and D are higher on the second, so H is higher; same price, lower C, much lower C per hour. If you can keep only one, the ranking is obvious once the variables exist and invisible when only P is known.
The Bureau of Labor Statistics wage tables give local wage estimates by occupation and area, which is useful for testing whether your L assumption is in the right region. They do not know what your night crew costs to retain. Use your own payroll for L and the tables only as a check.
The three leaks
Break-even moves without a decision being made when any of these is left uncontrolled.
Three leaks to control
- Unpriced consumablessoap and paper growing S
- Unpriced access costsign-in desk or moved closet
- Credits after complaintslog by account and reason
- Unpriced consumables. If the contract is silent on paper and soap and you have been supplying them, S has been growing and C shrinking since the first month. Fix the contract at renewal; until then, know the number.
- Unpriced access cost. A building that added a sign-in desk or moved the closet since the walkthrough has changed D and L. Re-time the site.
- Credits after complaints. Every credit reduces P for the month it was issued. Log them by account and reason; an account that needs a credit each quarter has a supervision problem, and the fix is inspection rather than discount.
Sensitivity: what moves the number most
Test each of these against your own figures and see how far break-even shifts.
What moves break-even most
Wage increase raises L on every account at once
Vehicle or floor machine raises F by monthly cost
Losing highest-C account worse than two small ones
- A wage increase raises L on every account at once. This is the largest single mover, and the hiring and training guide covers why paying enough to retain people is usually cheaper than the turnover it prevents.
- A vehicle or floor machine raises F by its monthly cost. The equipment and setup guide explains when a purchase should wait for a contract that funds it.
- Losing the account with the highest C is worse than losing two small ones. Know which one that is.
- A new account far from the route raises D for itself and, if it breaks the route order, for its neighbors.
What this means for the plan
A business plan for a cleaning company should state the break-even account count and the C per hour floor below which you decline work. Those two numbers, kept current, are the plan's only financial content a lender or partner can test against reality.
They are also what you are advertising when you claim to be profitable. The Federal Trade Commission's advertising guidance for small businesses applies to any claim about savings or value you put in front of a customer. Keep your claims about price as supportable as the arithmetic behind them.
For the method of turning one walkthrough into one price so that C is positive from the first month, see how to set a price that earns a fair margin.
Common questions
Is there a typical margin for commercial cleaning?
Not one a page can give you. Margins vary with local wages, building mix, and whether consumables are charged. Compute C for your own accounts and set your own floor.
Should overhead be allocated to each account?
Allocate it for pricing so the quote covers a fair share. For deciding which accounts to keep, use C before overhead, because overhead stays whether or not the account does.
How often should break-even be recomputed?
Whenever L, F, or the account list changes, and at least quarterly. A once-a-year figure is a historical curiosity.
What if every account has positive C but the company still loses money?
Then TC is below F. Either fixed cost is too high for the account count, or the account count is too low. The arithmetic tells you which, and only one of them is fixed by selling.
