A dire situation leads an owner to implement a new business model.
Desperate times call for innovative solutions. When faced with
escalating workers’ compensation insurance rates, over 50% of payroll in 2002, this Southern California house cleaning company needed a new game plan quick. The owner knew that his business would not survive unless he could find a way to lower his labor costs. After much research he realized he could legally transform his cleaning company into a domestic referral agency.
Rules of the New Game
Under this model, cleaning technicians are treated as contractors rather than employees. As the owner explains, “I would guess that roughly 25% of the homes being cleaned for pay in California are being serviced by domestic referral agencies. There are a lot of rules that have to be followed and if you don’t know what you are doing, the California Employment Development Department (EDD) will reclassify your contractors as employees. This would be a very expensive mistake. We’ve built a model where we are 100% legal. We just completed an audit by the [California] EDD last winter and the results show we are fully in compliance. “
Limitations and Advantages
The owner does caution that there are some limitations to this business model. “I miss not being able to provide training, equipment and cleaning products to my cleaners,” he says. “Doing any of these, however, would create an employer/employee relationship.”
The company has two full-time employees who handle the day-to-day activities. The owner’s involvement is limited, spending only two to three hours a week in the business. He started it as a maid service franchise in 1999, and believes that the processes he implemented then are a big part of the agency’s success to this day.
The Numbers
The owner is now offering his business for sale, with plans to move to the high deserts of California afterward. The numbers
break down as follows:
The owner is asking $450,000 for his business. He is willing to finance up to 50% of the purchase price for 3 years at 6% interest.
The information contained in this column was supplied by the current business owner, and is without warranty of any kind. For further analysis and an explanation of the terms used in this column, click .
Steve Shwetz is the owner of Mesa Property Management. To discuss purchasing his business, Steve can be reached at 909.524.9541 or
steve@mesaproperties.net.
FAQs
Q: What workforce metrics should a cleaning business track? A: Track applicants, interviews, hires, training completion, time to productivity, attendance, quality, retention, turnover, and labor as a percentage of revenue.
Q: Why is employee turnover especially costly in residential cleaning? A: Turnover creates recruiting, onboarding, training, supervision, schedule disruption, quality, and customer-retention costs beyond the departing employee's wages.
Q: How can a cleaning company reduce employee turnover? A: Improve job expectations, manager communication, scheduling, training, recognition, pay clarity, workload balance, and early intervention when attendance or quality declines.
Q: How should contractors and employees be classified? A: Classification depends on applicable law and the actual working relationship, not merely the label in an agreement. Current legal guidance should be reviewed with qualified counsel.
Q: How often should staffing performance be reviewed? A: Recruiting pipelines should be reviewed weekly, while turnover, retention, productivity, and labor-cost trends should be reviewed monthly and over rolling periods.
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Tom Stewart is a CEO and industry thought leader focused on scaling residential cleaning businesses through strategy, systems, and leadership development, translating complex concepts into actionable frameworks. With his wife Janice Stewart, he co-owns Castle Keepers, the first company to achieve CIMS certification. Tom is the founder and CEO of MaidCentral Software, the leading business management platform for professional home cleaning companies in North America, and the founding editor and publisher of Cleaning Business Today. Learn more at TomStewart.com.
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