Episode 10: Choosing The Right Systems for Your Local Cleaning Business

Episode 10: Choosing The Right Systems for Your Local Cleaning Business

Brandon Condrey:
So that's why you do this stuff. It's hard. Not because you can do it an easier way, but you're going to do it because it's a challenge and it'll really, really succeed in the end. If you can pull it off.

Brandon Schoen:
Absolutely. So putting in the hard work, think bigger and build something. That's a bigger picture, bigger payoff for everyone. And it's gonna benefit you, your company, your employees, and the whole team.

Announcer:
Grow your cleaning business, make more money, have more time. This is the Profit Cleaners podcast with your host Brandon Condrey and Brandon Schoen.

Brandon Schoen:
Hey everybody. Welcome back to another episode of the Profit Cleaners this is Brandon Schoen, your host,

Brandon Condrey:
And Brandon Condrey your other host.

Brandon Schoen:
Yeah, the spreadsheet Ninja. And together we are the Profit Cleaners keeping it clean and we got some more fresh content for you guys today doing the house, cleaning, bringing freshness and whatever we're bringing, but we're doing it, man. It's awesome. And we're glad you guys are here. We're so thankful for all the comments and questions. People are reaching out and thank you guys for doing that. And just real quick, maybe we should cover a few housekeeping.

Brandon Condrey:
As always, if you haven't subscribed to the podcast, if you have found us through Google, somehow the guide to this particular episode, we do this stuff all the time. It's all good. So subscribe, leave a review. Tell your friends.

Brandon Schoen:
Yeah, guys, we're doing this without a bunch of sponsorship and annoying ads and stuff, because we want to give you so much value. So if you are getting value from this, share it out or at the very least yet, just give us a review or something. Subscribe, let us know that you're out there and getting value from that. And so today, guys, we're going to be talking about really something that I've been getting a lot of questions about, honestly.

Brandon Condrey:
Yeah. These are coming from our coaching students and we've had this question a couple of times, so we figured might as well just make a whole episode about it. But yeah, it's when you are hiring Cleaners do you bring them on as 1099 independent contractors or W2's full employees.

Brandon Schoen:
Yeah. And I think this is the bigger question too, is depending on what role you're hiring for specifically in this episode, we're going to be talking about more Cleaners and that position. However, we do have a lot of, I would say 1099, like contractor freelancer type people that we use for other stuff.

Brandon Condrey:
We do have freelancers that we use. None of them are actually 1099 in tax sense, but they are freelancers that we pay through a platform.

Brandon Schoen:
Right? Yeah. And I believe Upwork does some type of 1099 stuff on the back end for them.

Brandon Condrey:
Or, and I have no idea how hand is that. I know that they're taking a cut for feeding, you work as a freelancer, but I don't think that those people are also 1099 employees of Upwork. So we'll just break it down for you real quick. So the difference between a W2 and 1099 from an IRS tax perspective is the w two employees are employees of your company. And when you have an employee like that, you are responsible for paying a share of their taxes, both for state and federal taxes and social security and Medicare and Medicaid, all that stuff comes out of their check. All those deductions will. The employer rather is typically matching those deductions. So paying a certain percentage Of the employees, stuff that all goes back into the federal government treasury, right? There are certain States where you don't have income tax is not gonna apply, but by and large, that's the case all over the place. So if they're an employee, then they also get benefits and you're providing them uniforms. And whatever else comes with being an employee at your particular company, right? A 1099 is you have contracted out to someone else who is a company. They usually have to be a registered company. You're going to get what's called a W9 from them for your tax records. And you're just going to pay them some agreed upon amount. You are a contract cleaner. I am going to pay you this much to go clean this house. Here's your work order. Right? So that is the nuts and bolts of the difference between the two, right? From a really high level financial standpoint, right. We're going to cover all the little nitty gritty details as well.

Brandon Schoen:
So really guys, in this episode, we're gonna be talking about all that. Brandon just talk about the differences between W2 1099, a lot of the pros and cons. And you want to stay until the end where we were just covered all this stuff. And then also kind of tell you guys, maybe we should start actually telling people the story of when we very first started and we came across launch 27 and we were kind of debating like the same thing. Like, do we hire like, just on the fly, kind of like click people on demand kind of thing. Or do we build this longer term, bigger vision where we're hiring people for the long term and I kind of a different mindset. Sure. Right.

Brandon Condrey:
So here's how this happened. Right? Brandon and I met hanging out at the park. I think you guys have heard that story a couple of times, kicking around business ideas, all kinds of wacky things, tool rental and whatever. And I came across a Reddit post in an entrepreneur sub reddit, and it was from a guy named Rowan Guilties. I hope I'm pronouncing that correctly. He's the founder of launch 27, which is a software that does scheduling and all kinds of stuff for cleaning companies. What struck me about his comment though, was service industries are the way to go because you're usually competing against local sort of mom and pop operations that are not up to speed on marketing and advertising and sales, that type of stuff. So if you go in with a mindset of like, I can beat you from a marketing perspective, if I know how to get people through the door, sales is the oxygen of the company. As Mike McCollough, it's always says, if you can get people through the door, then the rest should just fall in place. So that's when I sent you an email, I still have the email. Maybe I can dig it up for the show notes, but I saying, Hey man, do you want to start a cleaning company with you? And then I linked to that comment. And the comment itself Rowan was pitching towards 1099 is launch 27 is built off of 1099 is left. And right. And we ended up going a different way. One of the reasons we went a different way, A - we knew Corby. So we had a potential and this was before we'd got everything finalized, but we knew someone that we could talk to about it. And my mom, you know, has been in management for a long time. And I had kicked these ideas around with her as well. And she was like, look, if you want to make any real money, you have to manage people. That's what it boils down to. And so we decided to go with, I guess, the more traditional route of a company, which is to hire employees and be a job creator. That's what we're doing.

Brandon Schoen:
Yeah. And that was on the only, I've seen other software's come out too, since then. And so I think there's been variations really this whole trend of like crowdsourcing talent or crowdsourcing, whatever the crowdsourcing is. But in this case, what launch 27 was doing and some other ones I've seen again, it's creating this Uber type platform or for Cleaners right. Where you could just be like, I got a job and now I need someone to fulfill it and deploy it, but I don't have a full time person, but this random person is just going to pick up the job.

Brandon Condrey:
Yeah. So I can't remember if it was launched 27. Cause we never actually used that platform on a day to day basis. But one of them was just that like a job would get posted to a board like, Hey man, I got an apartment this afternoon at three o'clock. You guys want it? And people would like compete to get it. Right. And so that to me just makes me uncomfortable if it's a onetime job. Like maybe, but if you're a recurring customer, like I don't want to see different people in there all the time.

Brandon Schoen:
Yeah. Okay. I think, I actually remember seeing some of those reviews and they were pretty horrifying. Like we were reading all sorts of comments. We were in these groups at this time. It was alarming man, because people would be like saying what was happening or like these people, they don't even know showing up to a house cleaning or bringing whatever products. Again, there's so many variables you just are like basically losing control.

Brandon Condrey:
So I'm still in the launch 27 Facebook group, because it's just interesting to see what people are dealing with just as fellow cleaning company owners. Right. And so the things that I've noticed are a lot of people selling the business, like, Hey, I'm selling a four and a half star reviewed business in Chicago, but the guy's living in Austin, Texas. So a lot of them are selling. They're just getting out. Like they built up, it's less of a cleaning company and more of like, here's a domain that has really good reviews. Do you want to take it over? And then the other thing was like a lot of questions on basic cleaning stuff, which is like, Oh, how do I, you know, a person booked a job online, but then the Cleaners got there and it's like this crazy hoarder house. Like if you were using our system of talking to people and looking at it on zoom or going out in person, that would have never been a problem. But again, we're not hunting for one off business. We're looking for the recurring customers that have lifetime value. Like the five figures. That's what we want.

Brandon Schoen:
Yeah. So I think in general, what we're seeing too is just the people that were selling their businesses. A lot of times it was like they were trying to get out. Cause they're like, man, this kind of sucks. Or they just kind of, weren't making like amounts. They were selling it for it. Wasn't millions of dollars. It was like a hundred grand or no. Right.

Brandon Condrey:
It's just like getting a business on like Flippa, it's just, you know, Hey, we have this weird sock company, their distribution comes from China. We sell on Amazon. Do you want to buy it? It's like 20 grand. I would call that in my mind, like a stepping stone to being a real business. So we could have started that way. It's really cheap to get that off the ground, but we'll go over the pros and cons here, but that's not going to be a longterm thing where you have like, I'm going to get an exit strategy together and sell my business for $20 million in 10 years. That's not going to happen with an independent contractor business.

Brandon Schoen:
Put yourself in the investor's shoes, buying that cleaning business. That's a huge hole right there. You know, like glaring at you. Like, wow, you don't even have consistent work force labor. That's consistently delivering your product because you just haphazardly put people out there to deploy the service and you don't. It's just, I would never want as an investor one end. Okay.

Brandon Condrey:
So think we've made it apparent that we're leaning on the W2 side here. So let's just give you some shots here. So the cons on the independent contractor side to me are that the way that an independent contractor is going to work is that they're providing their own vehicle, their own tools, their own cleaning supplies. So like you may have this cleaner, that's going to play nice with your environmentally friendly stuff that you want to do. But the other one's going to bring in like hardcore, Bleacher, whatever. And then they're going to, I don't know, like eye color steamed the floor, or I spilled a mop bucket on this carpet. Now the carpet has to be replaced. That's all on you. That's the cleaning company or one of the few pros for 1099 is that they do have to carry their own liability insurance. Like that may fall on their insurance. It depends on how you got that contract set up. So the downsides are tools completely different. We don't know what they're using, how they're using it. They could be using razor blades to clean up stuff on the floors was granted a scratch. Everything that people are different. You could have one person who worked out great one day and then they just dropped off the face of the earth and they're never coming back. So there's that there are some pluses to the independent contractor side of things, which is basically that you don't have to pay taxes for the employees. You also don't have to pay insurance. So we as an employer that own cars and have a bunch of employees have to pay for general liability insurance workers, comp insurance, and then car insurance on top of it. So if you're an independent contractor, they're covering all that stuff on their own. They're responsible for their own workers' comp their own car insurance, their own liability insurance. That's why it is the cheaper option to get off the ground. Cause really you just need a website and some marketing and boom, I've got a funnel to get people into the cleaning thing. And now I'm just going to dispatch it to these people. The downside is from a longterm perspective, those aren't recurring customers. You're going to get at one time and be like, Oh, it was really great when Julio came out last time. But then the next time it was this guy, Ben, and he didn't do half the same stuff. And there's very little recourse for the customer. Like who am I going to complain to? They don't know that they're not your employees that just brought up another con. Is that when they're showing up, like what are they wearing? Like, are they wearing your shirts, their shirts? Are they wearing jeans with holes in them? Like you don't have any control over that unless your contract is really, really robust.

Brandon Schoen:
Yeah. I just feel like it's opening up a huge can of worms, man. Just like the whole reason we do. A lot of the things we do is for organizational efficiency and just all these efficiencies we try to build in which means you're eliminating variables, which means you're systematizing it. So it's streamlined. So there's not like 50 things that could go wrong. If there's three things that could go wrong or minimizing that. Right. So, right. So yeah, in that case, you really just, like you said, you're just fully having someone else control your business beyond the front lines of your business. Kind of. Right. And that's really, I feel like that's a huge problem. So I think that's the biggest reason we kind of steered away from that so much so that maybe we should tell people about one of our direct competitors that apparently hired some, we don't know all the details, but a lot of our customers that came over from them told us like, you know, your direct competitors doing this, they put all their employees. Remember this was like 1099, a lot of their employees. So they made them drive their own car.

Brandon Condrey:
When we just come into the market, we kind of eclipsed a competitor and they had hired some business to help them sort it out. And so they, I don't know if they 1099 then, but I know that what they had done was make them start using their own vehicles. Right. It means that you've got a Genki car showing up potentially someone's house. It's not branded like your business cards should be,

Brandon Schoen:
Oh, I think he even said one of their cars got stolen and they couldn't it.

Brandon Condrey:
So an employee had a car stolen outside of a house and their corporate insurance wouldn't cover it because it was their car, their car insurance should have covered it. You have that employee wasn't carrying the legally required amount of car insurance on their car. So they were out a car and I would feel terrible as an employee being like, I mean, as an employer, like I made you go out there to do this and you don't have a car anymore. And you'd probably don't have the money to replace that car. Yeah. So like they were just It's across the board. Right? So the plus sides to the W2 are control over the system, all of our employees put WhatsApp on their phone. So we can message everybody with important stuff right away. Right. Your independent contractor would not necessarily be doing that. They may not be on the communication platform that you want to be on uniforms. We control how everybody looks. We do inspections on uniforms as part of their compensation to make sure that you're bringing in Clean shirts and things that have holes in it. If they do then just go get another shirt. Like that's part of the thing of being an employee here. We're not going to charge you for uniforms.

Brandon Schoen:
Same with the products though. Like we were controlling what products and how they come back and how they go out. If they're cleaned, what kind of products they're actually using? If yeah, no, like some of these other contractors might be using a rag or something from another house that's filthy. And then coming to this new, this house.

Brandon Condrey:
Yeah. You don't know. As the end user we're using freshly laundered color, coded stuff across the board that makes the customer feel good. So the downsides to me on the W2 side are few and far between now granted, there may be a situation where you work in a state New Mexico that we're in is an at-will work state. So that means that if someone starts acting crazy, not showing up that we can just cut them loose. And it's not a big deal. There are States where from a labor perspective, you really have to document their malfeasance and the things that they're not doing correctly and how they're not performing to be able to build a case to fire them so that you don't get sued for wrongful termination. Right? We all, we do that also. That's just Best practices, HR thing, that if someone is screwing up, you need to document it. They got a written review, they got a verbal review, they got a double written review. They got terminated. You need to have all that documented in some sort of personnel file. So that if someone does on the offhand chance, come back with a lawyer, like, look, yeah, they were screwing up left and right. It was like gross negligence. So we're cool. Right? So you may work in a state where you have to do that, but you should be doing that anyway. So really, I mean, it just boils down to having control over the entire system and being able to work it the way you want. Yeah. The W2 thing.

Brandon Schoen:
Yeah. Way less variables, way more of a system with the W2's. And really, I feel like it just attracting more of the right people for this bigger grander vision that you have a sustainable business.

Brandon Condrey:
If you are contracting out to a cleaning company because by definition, the contractors have to be a company. They have to already be organized. If you're contracting your cleaning out to someone else who's doing it, what's to stop that contractor from going up to the customer and be like, Hey, I'll do this next week on my own for 50 bucks less. Yeah. And so what are you going to do if you're running a company in Chicago, but you're based in Austin, what are you going to do? Like get mad at them. Like why you don't have the contract anywhere? Like I know I stole your customer, so I'm out like see you later. So there's just so many downsides to it, but I can see that it would appeal to a certain kind of entrepreneur that wants to do it from a bootstrap type of setup. I mean, I think that you can bootstrap our version as well as we did in the beginning, you just got to do it, just get started and get going. And like the rest of it'll sort itself out later, like you might have to take a pay cut to do that, or a no pay for a little while, maybe a long while, but it will work out In the end.

Brandon Schoen:
Right. And the funny thing about that is too, like a lot of times when you hire more help, the business speeds up and the revenues pick up and you actually make up for that pay cut or whatever, because everything just picks up. You know.

Brandon Condrey:
Exactly. We have a friend who runs a landscaping company and he did it the other way he started. I mean, his people are W2, but like he has no help in the office. He's the, he's a one man show on the phone and billing and everything like that. And he'd been going for a long time like that. And he made good money from the beginning. We did it the other way, where we wanted to grow really, really fast, which we did by not paying ourselves in the beginning and stacking on more customers, more Cleaners more customers were Cleaners. So there are pros and cons to each. I just think that from a longterm success standpoint, and if you do eventually want to sell the company, if you've got a cleaning company with a bunch of employees that have been there for a long time, the turnover is low because you're a good employer. You treat your people good. The employees are happy. Your customer base is not attached to one thing. Like one of the things that a consultant will ask you when you're trying to sell a company is how much of your business comes from your like top three customers? And if it's like 40 or 50%, that's a no go for an investor because it means that it's all tied to this relationship with like three people. But in our case, we don't have a top customer. They're all basically the same from a revenue standpoint. So that to an investor looks great. It's for cleaning. Like we've talked about it, just use that, Oh man, you have a subscription service with 600 subscribers that pay 200, $300 a month. Right. I'm in like, yeah.

Brandon Schoen:
And it just comes back to building that like team culture that if you're attracting like longterm mentality mindset, people that are in it for the long haul, like not only is it more attractive to the investor, but it just builds this whole team culture of like, we're all here together. The attitude's going to be different. It's going to attracting a higher quality prospect in general. So I would say even going back to when we very first started and we asked our mentor very much. So I think that was his response to, he might have tried some of the 1099, but sure. But he's been doing that the same way since then, too, in working out great for us. I think anyone out there doing this, that's probably the way to go out. So we'd recommend, right?

Brandon Condrey:
Yeah. I mean, hopefully we've spelled out to you that there are issues going to 1099 route that are not in your control. Once the contract is signed, they're going to go out and do the thing. And if one cleaner that you got on a contract is going to do it really, really well. Like you'd like it done like, Oh great. But the next one comes out and yeah, it uses the rag that they used around the bottom of the toilet on the kitchen sink. And the customer sees that they're going to be livid, but like, what can we do? Like you signed a contract, you get paid this much. And so no one is an employee. You have different strategies that you can do. You can build the kickass company culture around it. And I just think that's the way to go. Is it easy? No, no. Like a lot of things that are worth doing are not easy. Like if they were easy, then we'd all be running seven figure cleaning companies tomorrow because it's super duper easy to do. It is hard for a reason, which is what you want. You want to find a market where it's difficult so that you can compete and stand out and be the best in a situation where it's not easy to be good. Like that's what you want.

Brandon Schoen:
I love that, man. A lot of people kind of want to steer away from the hard work. And I forget what the quote is, but it's like hard work looks like, you know, hard work, like putting on your pants and doing something like some hard work. It's just like people steer away from that. But actually you kind of want to try and move towards. Sometimes that's harder or like just put in the hard work and then the results show up on the other side, the value is just there. You know, there's a lot better result on the other side of it. So I think that's what we'd leave people with today, man. Just do it however you want. But honestly, if you're building something sustainable longterm, you're there for the big Profit play in the end. Like that's the way to do it.

Brandon Condrey:
What's the JFK quote on landing on the moon, JFK before he was assassinated is talking about why we should land on the moon. He said, we do these things. Not because they are easy, but because they are hard, like that's why we're going to do it because landings someone on the moon in the 1960s with a computer that had the power of like a calculator was borderline impossible and they still did it. And it was amazing. And the US has been leading in space ever since. So that's why you do this stuff. It's hard. Not because you can do it an easier way, but you're going to do it because it's a challenge and it'll really, really succeed in the end if you can pull it off.

Brandon Schoen:
Absolutely. So there you go, guys, put in the hard work, think bigger and build something. That's a bigger picture, bigger payoff for everyone. And it's gonna benefit you, your company, your employees, and the whole team. So anything else you want to tell people today about?

Brandon Condrey:
We're still doing our free coaching once a week on Thursdays, you can sign up for that. Profitcleaners.com/masterclass. That's where this question came out of. So that's how we got here. So please check that out and then as always subscribe and review and keep it clean.

Brandon Schoen:
Keep it Clean guys.

Brandon Condrey:
So yeah. See ya.

Announcer:
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