How to start a cleaning business: 9 – Reducing costs to improve the bottom line

Costs do not exist to be calculated. Costs exist to be reduced – Taiichi Ohno

I recently decided to take a look at my expenses to see if there’s anything I can cut back on or eliminate all together in order to increase profitability.

Unfortunately there are always some costs that can’t be reduced, such as vehicle registration and business name renewal. Let’s focus on the costs from the first year of business that we may be able to reduce:

Item Average monthly cost
Petrol $220
Income protection insurance $49.05
Cleaning consumables $58
Advertising $17.87
Cleaning equipment $34.96
Uniform $12.75
PPE $9.92

The easiest saving came by itemising my cleaning consumables and getting rid of unnecessary products. In doing so I was able to save $15/month.

One of my clients requires me to possess income protection insurance in order to do business with them. This same company has recently reduced their cleaning service from weekly ($280/month) to fortnightly ($140/month). After subtracting insurance costs I’m left with less than $100. I made a quick call and reduced the level of insurance, with the new payment amount of $24 and a saving of $25.05/month.

Public liability insurance is up for renewal in August so I started shopping around for quotes. The best I could find was a five million dollar public liability policy with AAMI, which came in at an annual cost of $581.98 or $48.50 per month.

Eliminating paid advertising was easy. All my work now comes through referrals and free strategies that I’ve previously written about here, here and here. This equates to a saving of $17.87/month.

I now have all the cleaning equipment that I need and unless something breaks down, I can’t see myself purchasing anything new in the near future. Sticking to an equipment maintenance schedule will also increase the longevity of  my tools and will save $34.96/month.

I shopped around for cheaper accounting software, but it turns out I’ve got the best price currently available. I’ll need to purchase some warm work clothes for winter so I don’t expect my uniform cost to decrease. Same can be said for PPE, which is actually my runners (or covered shoes for tax purposes).

Total monthly saving – $92.88

So by spending a bit of time analysing your data, you can easily improve you bottom line for very little effort. In a future post we’ll look at further improvement through reducing waste and eliminating inefficiencies.

Share your ideas on reducing costs in the comments!


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