Carpet Cleaning: Cleaning Up in an all Cash Business

 

The appeal of this business is that with a little capital, someone can really clean up.  Once you own the equipment, the actual amount you spend on doing a cleaning job is not very much.  Just chemicals, supplies, and the gas it takes to get to the job.

This Industry has a History of over-hyped Get Rich Quick Claims

Since the days of wonder boy millionaire Barry Minkow, popularized his ZZZZ Best carpet cleaning business in the 1970’s, people have been getting into this business.  As it turns out, the profitability of his business model had been exaggerated, so it eventually came crashing down.

Off Topic As it turns out, the boy wonder that got so may of us interested in business, didn’t exactly make all his money from cleaning carpet.  Barry Minkow, served time in jail for the ZZZZ Best issues and became a Christian Minister, trained FBI agents, and even taught seminars on how to avoid financial fraud.  He has even written a tell all book (not shown) which you may be interested in if your remember all of his TV commercials and appearances.

But in July 2011, he was again convicted of stock price manipulation of Lannar Homes shares and had to go back to jail.  (OC Register article)  Ironically, he had been advising people regarding fraud and stock price manipulation.

The point is that the profitability of carpet cleaning has been overstated for decades.  So if you haven’t worked in the business, take any promises of huge profits with a grain of salt.  The big money might just be in selling franchises and carpet cleaning equipment.

The people who sell the machines state that you can make anywhere from $120-150/hr and up.  Well this might be true if you just consider the money you make and divide it by the time it takes to clean carpet.  But the real money is made in marketing your service.  The mark-ups on this are huge.  After you own the machines, the chemicals are not that expensive on a per job basis.  And your other main ingredient is water.  But remember what we learned from Minkow, if you think you are making a killing off someone else, you might actually be the sucker.

Equipment you will need.  You will need a rotary scrubbing machine that works the shampoo and hot water into the carpet (or a dry cleaning system) and a heavy duty vacuum.  Many companies have a van mounted vacuum so they just drag the hoses into the customer’s house.

One inexpensive way to get into the business it to buy a machine like the one you can rent at the home center.  You can put it in the back of a pick up truck and they come with an upholstery cleaner attachement.

  • You can purchase the “RUG Doctor” machine which used to be what all the carpet cleaners used.  It contains a heated tank of soapy water.  It sprays this on and then you use the machine to vacuum it up.  It goes for about $800 at Sam’s Club.  http://www.samsclub.com/sams/shop/product.jsp?productId=190202&pid=CSE_Froogle&ci_src=14110944&ci_sku=201573 (We just found this on-line.  We don’t get paid for Sams Club advertising.)  This will do the job.  Before the truck mounted machines became widely used, this is what carpet cleaners would use.  But with a price that low, a lot of people are just buying the machines for their own homes.

The beauty of this machine is that if the business does not work out, you can always use it for home use.

 

  • The next step up is the Rotovac Machine.  It has a rotating head that uses jets of water in several directions to clean carpet.  Since it rotates, you have to do less work moving the cleaning head back and forth.  The other advantage this has over the Rug Doctor is that it has a separate extractor.  (For some reason these companies use the word extractor rather than vacuum.  I guess it sounds like something you would pay more money for.)  They have a business start up kit for $3,000.   Their Website
  • The next step up is to buy a van mounted machine.  The best deals can be had by looking on C-List for someone exiting the business.  We noticed vans with the suction machine and supplies going for $10,000 – $25,000.  Granted they were older vans.  People need to get out of the business for a variety of reasons.  The most obvious is they have something better to do with their time.  But you will not ever see this in an ad.

 

If you are just looking at equipment, this is a business you can get into for very little.  The main cost is marketing.  You see all the ads in the Pennysaver, on your front porch, on the internet and in the newspaper.  Finding customers is where you make your money.

Bait and Stitch has been a long time problem in this industry.  The deal with the ads is that the offer a couple of rooms for a small amount of money.  This is the game.  When they get to the customer’s door, they up-sell the customer on more service and explain that the ad is just for vacuuming.  You may not want to do business this way, usually the homeowner feels like they have been ripped-off.  They will not become a repeat customer.  The problem is that the customers expectations are set by all the ads they see offering low cost cleaning.  We looked at the internet and saw several ads for cleaning for around $15/room.  It’s obvious that you cannot drive to and from a customer’s house (25 min), spend time talking with the customer (10 minutes), and spend about 40 minutes moving furniture, using chems to clean the carpet, and … for $15.  Each call will take over an hour.  But customers just don’t get that when they see the ads.

 

 

Franchise Opportunities

Franchises get you over the hurdle of name recognition.  You probably get tons of flyers on your driveway and in the mail box.  But people want to call someone they know.  The biggest advantage to owning a franchise is marketing.

Surf’s Up Your best bet is to buy a franchise that is owned by someone else.

  • Chem Dry/Home Depot This company uses a different cleaning technology that is perceived to be more GREEN and does not leave as much residue.  This differs from what they refer to as the “soak and suck” technology used by other companies which leaves some customers unhappy because carpet is left wet by their competitors.  They Franchisor is owned by Home Depot, and the start up costs are about the same as Sears.  We have been contacted by their franchise outreach coordinator Sara Haslem-Davis 800.351.9081   She said that they have franchise opportunities in OC starting at $40,000 and going up to $140,000 depending on what type of equipment you buy from them.  You need to put $6.000 down on their equipment and they can finance the rest.  (They don’t finance the van.)  But the list price is just a starting point.  Sara tells us that they offer low interest financing and if you are a veteran there is a 10% discounts. She went on to explain that they do not require industry experience or a minimum net wealth.  Part of your initial start up costs includes a week of training at their center in Utah.  See Chem-Dry’s franchise webpage  www.chemdryfranchise.com  In terms of royalities, they don’t charge a percentage of the gross.  It’s a flat $350/month–waved for the first four months.  That covers their marketing and use of their name and tie-ins with major retailers and referrals from their call center.

 

  • Sears offers franchises for their home cleaning services which also include duct cleaning, grout cleaning, and upholstery cleaning.  http://www.searsclean.com/franchiseopportunities.aspx They are vague about what it takes to get into the business.  They say the investment cost is from $25,000-191,000 on one franchise website and that you must be able to put 20% down with a minimum liquid (i.e. retirement plans and your home not included) of at least $50,000.
  • Stanly Steamer according to there website, there are not any franchise opportunities available.
  • Service Master Floor Care Services The cost of the franchise is only $10,000.  It includes two weeks of cleaning, marketing materials.  You can buy equipment and supplies from them.  This is a well know company that franchises a lot of businesses.  http://www.ownafranchise.com/types/carpet.html
  • Heaven’s Best   This franchise is advertised as being less expensive than the alternatives.  And that might explain why they have been growing so fast in California.  They charge a $80 monthly fee, $28,000 Franchise Fee, and do not take a percentage of your gross sales for advertising.  They already have a lot of franchises in California; but there are some areas still open in Orange County.  The initial Franchise Fee includes some equipment, a training program, and an exclusive franchise area.  Area sizes are determined by the number of households in an area.  The business can be run out of your personal garage or a small office since most of the equipment can be stored in your van.  They claim that you can be the number one carpet cleaning company in your area within six months.  Skeptics might argue that the costs are lower because advertising costs are paid for by the independent businesses, and the company is not taking advantage of the economics of scale in advertising.  That is , the other companies get more bang for their advertising dollar by advertising for a group of franchisees in a given area.

 

See our page on tile/surface cleaning since customers for this business would also be interested in these services.

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