Words: Jen Richardson
Many cleaning business owners look at incoming revenue to gauge whether they’re growing. Sites added, revenue up, but the bank account tells a different story. That’s the effect of rising costs and shrinking margins. The business looks like it’s growing. In reality, it’s just getting busier.
Where the squeeze comes from
Costs in this industry compound quietly. Award wages increase. Super now sits at 12 percent. Workers’ compensation premiums move with claims history. Portable long service leave levies apply across New South Wales, Victoria, Queensland and the ACT. Insurance renewals are higher each year.
If you’re not regularly reviewing your pricing, the business absorbs every one of these increases and profits shrink with each round. Most cleaning contracts either have no rate review clause at all, or one tied to CPI (consumer price index) that hasn’t kept pace with actual wage and operational cost growth. You sign a rate, absorb three or four rounds of cost increases across the contract term and then rebid against someone who hasn’t yet worked out what the job actually costs.
Your hourly cost is not your hourly rate
Take a casual cleaner. Start with the award rate, then add the 25 percent casual loading. Then shift and weekend penalties – in cleaning, those aren’t the exception, they’re most of the work. Layer on super, workers’ compensation, payroll tax if you’re over the threshold and the portable long service leave levy. Then consumables, travel between sites and supervision.
By the time you’ve accounted for all of it, your real cost per hour is more likely 45 to 60 percent above the base hourly rate. Most operators know this in theory. Very few have actually run the numbers on their own sites.
Pick your three biggest contracts and rebuild the cost per hour using the roster you actually run – not the one you originally quoted.
The subcontractor question
Super applies to anyone working under a contract wholly or principally for their labour. A solo cleaner with an ABN who turns up and cleans is almost always caught, regardless of what the agreement says. From August 2024, the full working relationship is assessed – not just the contract. If you set the hours, supply the equipment and direct the method, you have an employee. Payroll tax carries its own rules again, and in NSW payments to contractors are treated as wages unless a specific exemption applies.
Then there’s Payday Super. From 1 July 2026, super must reach the fund within seven business days of every pay run. If you pay weekly, that’s 52 payment events a year instead of four, while your clients are still paying you on 45- to 60-day terms. The quarterly cycle was working capital many operators were relying on without ever calling it that. It’s gone now, permanently. The director penalty regime means unpaid super is personal liability.
Three things to do now
Know your profit by site, not just overall. Your average almost certainly hides two or three sites running at a loss and being carried by the rest.
Get a rate review mechanism into every new contract, tied to award movements rather than CPI. If a client won’t accept it, that tells you something beneficial about the client.
Be willing to hand back the sites that don’t work. Turning down revenue goes against every instinct, but a site running at a negative margin isn’t just losing money. It’s consuming the supervision, administration and attention your profitable sites need.
What you’re actually building
Cleaning businesses tend to sell for less than their owners expect. A book of 12-month contracts with 30-day termination clauses isn’t recurring revenue to a buyer; it’s a set of short options the clients are holding. One client representing 40 percent of revenue gets discounted hard in any valuation. And if the client relationships live in your phone and the rosters in your head, there’s very little there to sell.
The question isn’t what your business is worth today. It’s this: if you stopped answering the phone for a month, what would still be standing?
Busy was never the goal.
Jen Richardson is founder of 123 Financial Group, a Newcastle-based accounting and financial advisory firm.
