Tuesday, August 14, 2012

Sub-contracting Pitfalls & Warnings

What is Subcontracting in the Janitorial field?

It is the situation where a company pretends or gives the impression that they have offices and staff in every city, in every state in the US.  They then sell a customer on a low price for servicing multiple locations or 1 major facility.  Nothing could be further from the truth.

Most of these companies have sales people who represent them and that is the total of their staffing.

Once they sign a service agreement with a customer they then get on Google and the phone calling all the listed cleaning contractors they can find and offer them the work less 35 to 45% off the top as their handling fee. ( This is a violation of IRS rules governing subcontractors in the tax code which states that subcontractor should quote each job and not be told what the amount is)  This is why we at L & K Office Cleaning avoid subcontracting.  It's not fair to the customer or the contractor.

Why am I discussing this today?  I am going to do something I rarely do and talk about cleaning prices on the Internet and I am going to use a recent phone call from a firm in TX asking me to subcontract some work for them here in WI.

The salesperson or operations task manager from the ABC Cleaning Company called me late last week and said he had 5 stores that needed to be serviced 2x a week, that it would only take 1 person 20 minutes each cleaning, it had to be done during the day and it paid $124 a month per store.
I asked him for the addresses of each store and he seemed reluctant to give them to me and was shocked that I didn't want to immediately grab a mop and head out to start cleaning.  He obviously did not do any research on me.  He said that the stores were 'mostly tile' and all the service called for was a sweep and mop and maybe vacuum where needed.  He sent me the list, they are some kind of money store.

To give you the quick math on this: $124 a month x 12 months = $1,488 annually divided by 104 service calls is $14.31 per cleaning.

How I look at these types of job offers:
1. I took the list and drove around on the weekend to see the sites and get the round trip mileage. ( 110 miles round trip from my office in a route starting with the furthest location and working back in) 

2. Visiting each site, some were carpeted and some were tile and all had walk off mats, not one of them could be cleaned any faster than 40 minutes, keeping in mind that they would have to work around any customers standing in lines in the lobbies. This is Wisconsin and we get this thing called snow up here, 1 hour per cleaning in the winter, no way of doing it any faster.  All stores come in from street level and will be loaded with salt, slush etc...

3. Store personnel gave conflicting ideas on what cleaners were supposed to do, some thought floors, bathrooms and windows, others thought just floors.  This is a clear sign of poor communication between the contractor and owners.  This will give the subcontractor major issues and problems with both the local customer and contract holder.

Continuing with the rare math breakdown:
If we were to service all 5 stores our gross income would be $71.55 per day.  Now before I pay the cleaner I will have to pay $22 for gas out of that $71.55 ( .20 per mile--way under the federal rate)
I now have $49.55 left to work with.
An employee, working during the day costs me around $17.50 per hour and they would need to be out for a total of 5 hours on a clear day with light traffic in the summer and 6  to 7 in the winter
So, for the sake of this demonstration, lets use 5 1/2 hours per service day, I would pay out $96.25 to service 5 stores paying me $49.55

Since we are not a charity I called the manager back and told him we weren't interested and he said that's OK, we found someone to do them.

Put yourself in the shoes of the store managers in those 5 locations, what kind of quality service are they going to get?  Is the subcontractor that is coming into their store insured? bonded? trained? or off of craigslist? 

This is why we always tell our customers and potential customers to ask questions when sales people call on them.  What might appear to be a good deal may in reality be a nightmare waiting to happen.
If anyone would like to see a copy of the correspondence between me and this company just send an email to Ken@lk-clean.com and tell me why.  I will be happy to forward it.