Episode 120: Protect Your Cleaning Business: Secure Your Company’s Future with Insurance

Episode 120: Protect Your Cleaning Business: Secure Your Company’s Future with Insurance

Brandon Schoen:
As you're building a professional business here with professional Cleaners and you're having these systems and insurance and all these things in place, this is why you do it. This is why you have that structure in place because it not only makes you more professional, more reliable, more trustworthy, but it's also just peace of mind and it's better customer experience for everybody, including your employees. And this is why we do that, even though people look at it and say, oh it's, it's so much more money. I'm just, yeah. But the opportunity cost is you're creating a better experience.

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.

Hey everybody. Welcome back to another episode of the Profit Cleaners podcast. The only place where you can learn from the top 1% of cleaning business owners from around the world to take you to the next level and win. I'm your host, Brandon Shane, and I'm joined by my amazing co-host in the house. Brandon. Condrey. That's me. What's going on man?

So guys, welcome to the podcast. We're super excited for yet another moment of time with you. Thank you guys for being here. Let's soak up some knowledge. Let's take some massive action and uplevel our businesses and a rising tide raises all ships. So let's, let's do it together guys. So in this episode we're gonna talk about a quick update on insurance.

Question that comes up a lot is what kind of insurance do you need? What kind of, you know, things that happen with insurance, how do you save money? What's the best ways to do it? So we're gonna talk kind of a little bit more of a worker's comp update on, on the workers, workers' comp insurance and just, you know,

give you guys a little background of you know, what it's like, you know, this many years into the business and what's, what's changed. And yeah, insurance is obviously a big, big deal, especially if you are a professional cleaning company and you're offering higher level services. This is a great thing to to have. And so let's jump into it man.

Let's tell people maybe a little bit more of the basic info. We probably covered this on the past podcast a little bit, But we have for sure. But we'll just give you a primer on business insurance in general. So the insurance that we carry and that you should probably carry depending on your state, is general liability Insurance. That's also called commercial insurance.

That one is like just covers whatever. That's usually the biggest amount, like I think our coverage line on that one is like millions of dollars. I cannot remember how many millions of dollars, but it's over a million. That's the insurance you Would use. Like if you Burnt someone's house down or something crazy like that, it would come outta that insurance.

So there's that one. Then we have auto insurance cuz we own and operate a lot of cars. And so that's a good chunk of our premium. I think it's the biggest part actually. And then there is workers' compensation. And so workers' comp as if someone gets injured on the job, they don't have to pay those medical bills out of pocket. Your employer's insurance policy covers that.

That is a legal requirement everywhere in the United States as far as I'm aware. And you still find shady companies that operate without it. I don't know how they do that, but you gotta have it. And then there's another one that we added this year, which I'll talk about later, but that's an umbrella policy so we'll get there a little bit later.

So in the past we have all, we've told you a couple times more than once, I think that we, you know, like using an insurance broker, the idea behind a broker is they carry lots of products. So this is like the difference between going to like your local Allstate agent to get business insurance through. They only carry products from Allstate and they're one price and then it goes up every year.

A broker has the ability to know which carrier is good for your type of business and then they'll shop you around and talk to those various carriers to find you a good fit. And then the real benefit of a broker is if they feel like you're not getting a good deal, they will move you somewhere else. And that's exactly what happened to us this year with workers' comp and so we're gonna talk to you guys about that.

Awesome man. I think just to, to go back to the beginning, when we very first started, if I remember correctly, Brandon, correct me if I'm wrong, but the insurance, maybe the whole gamut of insurance or maybe just certain parts of it, it would, maybe the worker's comp especially was a lot more money in the early years, right?

Because we weren't proven, they didn't trust us as much, we didn't know how many claims we'd have. So yeah man. So what does that look like then versus now? I don't Remember the cost. I somewhere on our Facebook group, I analyzed that for someone when they asked, but the short answer is it was a lot more expensive. So you got a biology major and a business major who both have zero experience in managing other employees or a physical location and we're gonna start a cleaning company with a bunch of cars that drive all over the place.

That's a lot of caution for insurance carriers. And so workers' compensation has this thing called an experience modifier. And so it can go up or down depending on your experience. And because of our lack of experience, there's like a base rate, this is what your rate is, but because you guys have no idea what you're doing, we're gonna multiply it and it goes up.

So in the beginning, workers' comp was more expensive, but from a cashflow perspective it wasn't that much money because we didn't have that many employees. So workers' comp and general liability are calculated based on the amount of payroll that you do. Workers' comp is payroll, general liability is sales, I think is revenue based. So it's a function of those two.

And so as you get bigger, those policies get bigger. But for instance, right, we use Profit first. We set aside 2.25% of revenue to cover all insurance and that seems to handle it. So we are paying 2.25% for insurance and it, it's pretty well dialed in right that amount and that seems to work well for us. So what was the big kind of mistake or whatever you wanna call it in the beginning that we made with insurance when we,

it was like the end of our first year. Oh yeah. And then we got this big old check that or this payment we needed to make. Yeah. So that's on top Of what we already were Paying. I only needed to make that mistake once before we fixed that. So the, I didn't know this, I, this was just a,

I'm a biology major, I never run a business, I had no idea this was a thing. So at the end of your yearly policy with insurance, every single year they hire an outside company to do an insurance audit. And so they call you up and they ask for your payroll numbers and your sales figures from last year, blah blah blah. And then at the end of that audit they calculate a difference.

So like when you go to set up your insurance premiums, they're gonna make you guess, tell me what you estimate your sales to be this year and tell me what you estimate your payroll to be. I took a stab at it. It was our first year in business. I had no idea I was way off. We grew a lot more over that first year than I thought we were going to.

I think I put it, I think I pegged the numbers to what we had in our business plan and we went faster than that. So what happened was, okay, we ensured you for $50,000 of payroll and a hundred thousand dollars of sales. What actually happened was $175,000 of sales and $80,000 of payroll. Well you owe them the difference because like they took that risk on the whole year.

And so in our case, that big payment that you were talking about was $18,000, which we did not have like that. That was a huge amount. So I just got really friendly with the lady at the other insurance company that we had to pay back and they broke it up into smaller payments for us. And the change we made, which was huge and I highly recommend that you do this,

is that we found an insurance carrier that would let us report payroll in real time. All that audit was almost all worker's comp. So when you run payroll, you give your payroll numbers to the insurance company and then they calculate your premium based off of that. And so at the end of that audit every year it's like zero. Like that's what I want to owe,

I wanna owe zero on an audit because I correctly paid you through the year. That's the idea. And so we switched to a a carrier that offered that and that was huge. That means we have not had any big aha you owe $20,000 on an audit and that was when we were small. If we had made that mistake at the revenue numbers we're at now,

dude, that would've been a 50, $80,000, a hundred thousand dollars audit. I don't know man, that was a big number back then for us. So there's that. Yeah, That would be pretty scary. So definitely, you know, think that through and make sure you guys are finding someone you can do that with Report monthly. Do we have a different,

we like I, I think we got a broker at some point, right? And they switched or did we have that broker from the beginning? Cuz that was the other, We had a broker from the beginning and then your high school buddy, do you remember? Tyler actually hit us up and he was working for an insurance broker and we had them give us competitive offers and I remember Tyler told us this thing.

He is like, well it sounds like the other guy's just following this underwriter around is probably giving him a better commission on that one because he wasn't, the first broker wasn't shopping us around, we were just with the same company and we didn't like the numbers. So when we switched to the broker that we've been with ever since, you know, I think we've been with them for three years,

four years and the A, the premiums were lower and B, they were telling us that like look the benefit is we're gonna shop you around and it doesn't look like the other guy's doing that. And so this year, this month in June, this was where they really put their money where their mouth was and saved us a grip load of money. So let me run these numbers down for you guys.

All right. Last year our general liability premium was 10,000 bucks. Our auto premium was 24,000 and our workers' comp was 17. So this year, okay we've gone up, you expect the premiums to go up because payroll's gone up, revenue's gone up, we're growing. So we all expected these numbers to go up. So auto, no sorry, general liability went from you know,

10,000 bucks to 18,000 bucks. Auto went from 24 to 29 workers' comp, this was wild man workers' comp went from 17 to $41,000 is what they quoted us. So, and our broker was like whoa, this is a huge jump. And so what he said happened on the back end was whatever, you know, insurance, even though it looks like it's our carrier,

like there's some subcontractor in there that does the workers' comp insurance for our carrier. Well they had two or three that they kind of spread it around on and they dropped down to one and they put us in like this very punitive category. Even though, I mean we have claims like we're a big company, we got 50 some odd Cleaners out there man.

Like they hurt themselves. Usually it's very minor, like it's a slip and fall, I need to get some physical therapy, I cut my finger, I go to urgent care, small things. So we didn't have excessive claims and no one ended up in a wheelchair or anything like that. But to go like that was more than double the amount. And so this is where the broker did their job and they shopped it around and we,

so we kept everything with the same company that we had last time. So the auto general liability, all that stuff is with our old carrier, we just swapped out the worker's comp for a different one. And so instead of a $41,000 worker's comp quote, it was $25,000. So that is a $16,000 difference over the year. And you know, when you're maximizing for Profit and cashflow like that money is either gonna go directly to me and Brandon cuz that's Profit that we just realized by,

you know, switching, by saving an expense, cutting an expense. But more than likely that money is gonna go into our expansion process. So like we're gonna have more money to put into future cleaning locations and teams inside of Texas. So that was a huge change and from the brokerage perspective, that's like no big deal. That's just them doing their job.

I was super psyched because we just saved, you know, 16,000 bucks. Yeah, that's amazing man. I, that's a huge, huge win And that is the reason why we're the Profit Cleaners cuz we show you guys these kind of things, how to squeeze Profit outta stuff, how to optimize things because at the end of the day it's all those little tweaks and those little details that are gonna get you,

you know, an extra thousand here, an extra 20,000 here, you know, just increase your potential in a lot of ways too. So what about like those, the the, we had that car accident we talked about a little while ago. Was that an a, a comp claim? Like how did that end up working out and did that increase our rate?

That Didn't go on our insurance because we had ultra clear HD dash cam video of the other driver texting and running a red light. So that was 100% on their insurance, that was on our worker's comp. We can't avoid the worker's comp for that injury cuz they were definitely employed but the auto stuff that was not a claim against us. So we had to total a car and we got a car replaced and that was all off of his insurance and I hope they kicked him off after that because that was a dickhead move.

He told the cop like we ran the red light. Oops sorry man, look at this. Look at this really, really awesome video that we have of you broad sighting our team, which was so stupid. Wanna know why most cleaning business owners fail or get stuck systems When you don't have the right systems in place for hiring, training, marketing, all of the day-to-day essentials,

then your business gets jammed and without the right systems it's impossible to keep moving forward. If you're ready to add smart proven systems to your cleaning business so that you can join the top 1% of cleaning business owners, head over to our free Facebook group now and watch the masterclass pinned to the top of the group. Just search top 1% cleaning business owner club,

find our faces and watch the free class to learn exactly how we took our business from zero to seven figures in just three years. So yeah, in a addition to you guys using a insurance broker, you should definitely have dash cams in all of your vehicles. Yeah, have that and then like what does that look like if, let's say somebody's in startup and they don't have cars yet or they're not even doing the cars,

like what does that look like if you have your employees driving around cars and they get in an accident, is it on them or like is there any way you can that depends On how you set up your commercial policy, right? So like our commercial auto policy is very liberal so like it will cover any car that's being used for work purposes, even if it's a personal vehicle because we do run into issue sometimes where a car breaks down,

we don't have a backup so we're gonna pay one of the team members to use their own personal vehicle that day just so we're servicing the customers while the car gets fixed. And I wanted to make sure that those vehicles were covered under our insurance if something happens, you know, to them while they're out in the field. And so I can't remember what it's called,

but it's called a symbol I think, and it's a number between one through nine and dude, I don't work in insurance so nobody quote me on this. One of the numbers is very good. It covers all the things and one of them is very bad, it's very limited, it only covers it during business hours and stuff like that. So we got the one that was most permissive.

So if people use personal vehicles for business reasons, it's covered. So, but not all insurance is built like that. Like I remember one of our competitors started losing customers because employees were upset and it was because, you know, one of their cars, personal vehicle, they made them use their own vehicle got stolen outside of a customer's house and the business insurance wasn't gonna cover it.

And you know, the person, you know, the low hourly wage cleaner who's working that job probably doesn't have like super stellar auto insurance. And so now they're left holding the bag on this big deductible on the car and I just, that just rubs me the wrong way man. Like you're, you shouldn't be doing that. Like if your employees are out there hustling for you,

you need to be there for them if something bad happens. And that to me is part of this insurance thing. So in the event that one of our employees is driving a personal vehicle for us one day and it's stolen at a job that's on us, that's on our insurance. Awesome man. And I also think a lot of people seem to think that like,

well maybe, maybe like the cars even like they look at the cars or like as an added expense or even that insurance you mentioned that's like one of the higher amounts, but between that and even just the normal insurance we have, again, this is part of what separates you guys as you know, as you're building a real business, you're building a real asset and this is the part of the separation here between you know,

the normal, you know, solo housekeepers that work just by themselves versus a real company. And this is building a lot of value. This is gonna help you charge higher prices. This is gonna help you confidently help you know, sell, you know, as as customers are asking you what, you know, what can you do to clean my house?

And you're telling them, but you're also telling 'em we're licensed bond insured where you have, you know, insurance for everything. Like again, that's just helping if you tell the story of what happens if someone gets, you know, hurt in your house or they break your very expensive oven or your door or whatever, normally a a housekeeper that isn't running a real business,

they're just doing it on the side, they're not gonna cover be covered for any of those things. So it ends up being on the homeowner. And so usually that's a great thing to mention in your pitch when you're, when you're doing your estimates is just all the different reasons why there's benefits to working with the company over an individual. And I think that that's a big one is having kind of just that peace of mind that hey,

if anything happens you guys are gonna make it right and if someone slips and falls or breaks something, you guys are gonna replace it, fix it as opposed to, you know, some of the crazy stories we've heard, even I've, I've got A crazy one that I can tell you right now. So yeah, this happened at my peer group of other business owners that I go to once a month called Firecracker.

When I was in there, one of the new members was like, Hey can I get a quote on my house? I was like sure, here's your quote. Like what happened? You said you had a cleaner. She went to Italy for a vacation and while she was there she noticed that her business account was having thousands of dollars in cash withdrawn like every day.

And it turns out the only people that had access to her house were her Cleaners and they swiped her wallet that she left and they took the business debit card to a casino and just gambled the money man. And so that sounds like kind of an addiction issue to me, but that's one of the reasons that you don't want to be hiring addicts. And so you know,

her bank is gonna reimburse for the money and you know the, she fired the cleaner obviously and the Cleaners now she's reported to the police as theft. And so as we were talking about this, one of the other members who's been a customer of ours for a long time was like, that's exactly why I like you guys because you guys have the insurance for this stuff.

So like if someone had stolen my wallet and done that, you would've like fixed it. And I was like yep, that's part of our promise to you guys to not do that. Like that's the whole idea. Yeah and that just goes a long way in creating again that customer experience. We always talk about guys and it's like not just when things are going great and everyone's feeling,

you know, like, hey I got my house cleaned, everything worked out perfect, but what about when things don't go well? What about when yeah things break or something possibly goes very, very wrong Again, just having that professional kind of separation between working with a real company that's doing these things, that's has systems in place, that has insurance systems in place that's gonna go so much further for peace of mind in making people wanna stick with you long term.

And I know we've had a lot of customers that have had like housekeepers that were just like, you know, they're, they've had 'em for years and they, they usually would tell us like they start out really great and then they kind of like plateau and then they like go on this this downhill, you know, trend and they stop being reliable, they,

they get harder to work with, they almost start taking on them as like a family member. Like they'll get hurt or they'll have a hospital bill and the, and the homeowner's like, well you know, we've worked with you for 15 years or five years or whatever, let's just, we'll pay for it. And you know, like they almost feel compelled and obligated to do that.

So again, like that can be uncomfortable for people and sometimes they just want that layer of separation. And so again, as you're building a professional business here with professional Cleaners and you're having these systems and insurance and all these things in place, this is why you do it. This is why you have that structure in place because it not only makes you more professional,

more reliable, more trustworthy, but it's also just peace of mind and it's a better customer experience for everybody including your employees. And it's just, this is why we do that. Even though people look at it and say, oh it's it's so much more money. I'm just, it's like yeah, yeah but the opportunity cost is you're creating a good better experience and also even with the cars,

how much additional revenue, even though that's an expensive, you know, expense every month, having car insurance, having cars in general like those are bringing in revenue, that's branding, that's word of mouth, stuff like that that you can't really put a price on. So it's like what's the opportunity cost of not doing those things, of not having insurance,

of not putting yourself in a position where you're a professional company, there's a lot more that could go wrong and there's a lot more reason for you to have higher prices and more value. Totally. But this also saves you personally the business owner. So I wanna talk to you about the other insurance product that we added that we haven't had before. And so that's called an umbrella policy.

So I have a personal umbrella and I highly recommend everyone get one of these. They're very inexpensive and we have a business umbrella now too. And so an umbrella basically kicks in when the other policy ran out. And so this is kind of like a worst case scenario issue. And so an example that we talked about with the broker when we were kind of working through it is like okay,

let's say we're at a hundred percent at fault on this car accident and it goes really bad. Like we turn one of the other victims in that car into like a paraplegic or like we kill their kids, like something really, really bad. Well the auto policy lee is like a million dollars, let's just use that number So we pay for their medical care and the car and all that stuff that takes care of most of the million and then they turn around and sue us as well.

So that's gonna run into now the general liability and if we end up paying out between legal fees and settlements and stuff more than the policy value, that's when the umbrella insurance kicks in. And so our umbrella is more than all of the other policies combined and it's very inexpensive and I mean not, I mean it's 9,000 bucks for us this year but given the amount of numbers we're talking about for revenue,

it's not that bad. And so the idea is it is there if the other policies run out and you can tweak those amounts on it. And so that is one thing that we added this year that was a little different and the difference between a million dollar umbrella and a $3 million umbrella was like almost negligible per month. So we just went for the 3 million and that just is an added layer of if you get sued,

we didn't carry that in the beginning when we were super tiny, we already had the general liability. But as you get bigger, you know like mo money mo problems, you're kind of a target for maybe a potential like lawsuit like that they see that you're this highly successful company and you hit my kid and I'm really mad like I'm gonna call a lawyer.

This is just kind of a little another layer of protection between you and the general public should someone get a little bit vindictive about something. And on top of that, like even though we have insurance, you do need to be talking to your employees about driving safely. That's part of the dash cam system that we have. It's tracking speed and hard braking and cornering and all that stuff.

And so I do not want our employees out there driving recklessly just cuz we have insurance. You guys need to be super duper cautious. That's to save you from getting a car accident and to save the company from getting sued. These are all just layers of protection, you know for your liability as a business owner so that you know like in the worst case scenario that you don't end up like losing your house or something.

Like that's that's what we're shooting for Here. Yeah, so I mean just what would I mean that one time you got in a small fender bender close to the office, I was actually kind of worried about it cuz I was like, oh these people and I think that lady like got out of her car and was like holding her neck and like, I don't know what happened but I was like,

oh shit man, we're gonna get sued now. They did, they did sue in the end it's just they didn't sue you or I, so they sue the company but the company's insured so the insurance stepped in with lawyers and it took a year to settle and so we settled that lawsuit I think for 30,000 bucks. But it wasn't them suing San Diego Green clean,

it was them suing the insurer because like what happens in any car accident situation, I'm hurt, my car's broken, the insurance sends out an adjuster to look at your stuff, look at your injuries, look at this, and then they offer you an amount like hey we're gonna give you 20,000 bucks to not sue us. And if you don't like that you can tell 'em no.

Like they're, you don't have to sign that check. This is what so many of those like personal injury attorney's ads are about like don't accept the check. Like so they said no, they got a lawyer who I don't know sued him, you know like said we're not gonna do it and they got 30,000 bucks. I don't remember what the initial settlement offer was but they got 30,000 bucks.

So, but normally a personal injury attorney charges a 30% contingency fee. So like they won so 10,000 bucks of that went to the attorney and so they ended up with $20,000 anyway. Now the downside there for you like suing someone like that, let's say that lady had long-term health impacts from that car crash, which was like 18 miles an hour by the way.

So I don't think she does, but let's say she does. If you took that settlement via a lawyer, that's it. That's all you get. So like if you got 20,000 bucks and your neck starts hurting a year from now and you think it's from the car crash, you can't come back and like double dip. If you take the insurance coverage at the beginning without the lawyer,

you can keep coming back and that just eats into the policy and like I'm injured, I'm just gonna, you're covering my bills until I'm not injured anymore. So I mean this is the world we live in in the United States. I mean some of this stuff is like super silly but I'm really glad she didn't sue me personally. But that's not in their benefit.

Like they probably talked to a personal injury attorney and they're like, no man, you sue the insurance company, that's what it's for. So, and it worked and you know like the lawyer kept me, he'd call me every now and then so like hey it's going great. And then he called me one day and was like, hey it's all gone,

it was 30 grand. I'm like, thanks a lot. Highly trained insurance lawyer guy. Like I didn't have to do anything, I didn't show up or depose anything. Like it was all good. Yeah and that, that's also something to really, I mean we need to start really digging into this more too, but as you grow the business you are more of potentially a target,

you know, if, if you're wearing your company shirt and something happens or you know, people are gonna see that as an opportunity to come after you. So it's like we've talked to our, to John, our CFO about this, you know, at some point just as you grow you wanna just have more protections in place and you know, maybe,

you know, have different assets in different places so that people can't just wipe you out and take your house and all your assets and all that you've worked for to build this business if something crazy or silly happens, whatever it might be. Yeah. So that's definitely when you get into the legal structure stuff that you need to talk to an attorney about. Like one of the strategies we've looked at is as we expand to multiple cities,

you put every cleaning company in in its own city in its own L L C and then there's like a bigger corporation on top that owns all of those little sub LLCs. That's a huge paperwork nightmare. And you gotta file taxes for every single one of those LLCs. And man, I'm not looking forward to that part, but from a asset protection standpoint,

like the most they might ever get is like bankrupting one city and then you just turn around and fund it with the other ones. So talk to an attorney and your insurance people about that. We are not attorneys or licensed insurance providers but so I mean that, that's kind of the update. So if you don't have insurance, I highly recommend getting some insurance.

I believe you're legally required to have a lot of it. So, and get more than you think you need, man. Like I just, I don't know, insurance is one of those funny things where it just, I dunno gives me a warm, fuzzy feeling when it works out. And we've had enough claims now where like I know that we're getting treated right by the carriers and stuff and so yeah,

I think it's totally worth the money. Yeah, it's, it's again one of those things that you maybe don't think is important right away, but it's like all these things you put in place, all these structures and systems that help you act big before you are big. Same with uniforms, same with cars, same with just showing up, being professional,

having systems, like all that stuff goes a long way and helping people feel like, wow, there's a lot of value here. I'm willing to pay for that and I'm willing to stick around and I feel good about it, you know? And so that's why we do these things guys. So, so yeah, hopefully you guys got some value out of the show today.

If you guys are getting value, share it out. Leave us a review. Subscribe to the podcast, go check out the masterclass if you haven't watched that yet. Profit Cleaners dot com slash masterclass. I think you guys are doing awesome. Keep crushing it. We're gonna keep crushing it with you and we're gonna keep winning together. So until next time,

keep It Clean. Keep it clean. Thanks for joining us today. To get more info, including show notes of updates, trainings and super cool free stuff, head over to Profit Cleaners dot com and remember, keep it clean.