Cleaning Business Tips Video

Subcontracting: If It’s Good Enough for You, Is It Good Enough for Them?

What You’ll Learn

Set subcontracting cap at 10% to 15% of revenue
Win cleaning contracts directly with the customer
Decide on subcontracting only when it is needed

Short Summary

Sub work can look like easy money. Too much of it builds another company’s business, not the cleaning company’s. Many big firms that hire subs almost never take sub jobs, often under 5%. A sub has little direct customer contact and the customer sees the other company. The other company sets the price, so there is little room to raise it. Cap sub work at 10% to 15% of revenue each year. Spend most sales time finding cleaning contracts with the customer for long-term value. Take sub jobs only when the business needs work now and no direct job is ready.

Frequently Asked Questions

What percent of sales should come from sub jobs?

Aim for 10% to 15% of total revenue. Lower is better when direct contracts are available.

Why do big cleaning firms take so little sub work?

They focus on owning the customer contract. Sub work builds the other company’s business.

Is some subcontracting still okay?

Yes, when the business needs work now. Keep it small and temporary.

What is the main risk of too much sub work?

The customer sees the other company, not the sub. The price is set by someone else.

What should come first, direct sales or sub jobs?

Direct sales should come first. Sub jobs should come only after direct bids are tried.

Transcript

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Well, hi there, and welcome back. Dan again from CleanGuru.

I was thinking about prime contractors, the ones that, for the whole country, really focus on subcontracting their work out. They’ll build their cleaning business based on finding subs around the country to do their cleaning.

And I was thinking about the larger ones, the ones that maybe do over a million dollars a year. I wondered: What percentage of their revenue do they actually act as a subcontractor for someone else? It’s good enough for you to be the subcontractor—that’s how they’re building their business. Is it ever good enough for them? How much of their work, what percentage of their revenue, are they actually the subcontractor for someone else?

And the answer is very little. A lot of times less than 5%, often zero. They just don’t do that.

Now, I realize that there are other prime contractors that have employees, and they do their own cleaning with their own employees, and they also do lots of subcontracting, too. So there are mixes of this, but there are lots and lots of prime contractors, primes, that do just subcontracting.

And it made me wonder: Why is it that they really encourage subcontracting—this is great—but they don’t do much of it, if any, themselves? And why is that?

Well, it goes back to what we know. You’re really not building any equity in your business. You’re really building someone else’s business, right? And you really don’t have a lot of client relationship. If the person gets mad at the prime, or if the prime gets mad at you, what happens to you? How much leverage do you really have? You don’t have much client relationship, and you don’t really even have much pricing power either when you get right down to it.

So I guess the thing is, I used to recommend that independent cleaning businesses try to do less than 20%, kind of cap it at that. And I would encourage you today to try to do even less than that if you can. Again, try to build your business on finding contracts yourself. If sometimes you have to do subcontracting, fine. But 10% to 15% of your revenue of your business subcontracting—not a lot of it.

Till next time, remember: You can do this. You really can.