The Road Ahead

For many building service contractors, 2007 is shaping up to be a good year, according to a survey recently conducted by Contracting Profits. Many report higher sales and profits than the year before, as well as increases in customers, employees, square footage cleaned, prices charged and revenue. Green cleaning and cleaning for health demand continues to grow, as does day cleaning and cleaning in green buildings. Expectations for 2008 are that those trends will continue to grow.

In the presence of that optimism are the “facts of life” inherent to running a contracting business in the cleaning and building service industries — issues that continue to plague BSCs on a daily basis. Staffing, pricing, supervision, turnover, customer retention and collections are issues that most contractors battle year after year. Those problems might be affecting the optimism of BSCs; in fact, more BSCs were predicting positive growth last year than are predicting it for next year.

Moreso than in years past, concerns about the economy, rising energy and fuel costs, illegal immigration and the presidential election are on the minds of BSCs across the country. Only 41 percent of those polled think the nation’s economy will improve in 2008, down from 46 percent the year before. More than a third of BSCs think the outcome of the presidential election will affect their business, and six in 10 don’t think any immigration reform will be passed next year.

Though each local and regional economy and business climate is different, BSCs everywhere are doing what they can to be successful while keeping a close eye on national issues and how they might affect business.

The economy
By most accounts, the national economy is doing well. It’s stable and strong, and growth may be slower but no downturn is anticipated. But BSCs still feel the affects of any negative changes in their regional and local economies — some more than others.

In troubled Michigan, the unemployment rate is among the highest in the country as the automotive and manufacturing industries are closing up or moving out. In addition, the state legislature has enacted a new 6 percent tax on services, including janitorial. Not only are BSCs in some parts of the state losing business, but they’ll have to start taxing the customers they still have.

“The state as a whole is in a lot of trouble,” says Michael Hillyer, president of M&A Services in Oscoda, Mich., a resort community where businesses are closing up because of the decrease in recreational traffic. “There are people that have had businesses, successful businesses — for the last 10 years, 20 years, some of them even this is the third generation — and they’ve always done well up until the last two years, and it’s gone downhill. … I hear reports about the [national] economy but what I see is what I see.”

Hillyer is doing his best to stay in business but after a very slow summer, he isn’t optimistic.

“I don’t see the economy getting any better any time soon,” he says.

Bill Andrews, president of Wil-Klean Building Service in Waterford, Wis., isn’t feeling the constrictions of a Michigan economy, but he still worries about the local and national economy more than he did before.

“I’ve been thinking about that a lot lately because this past year we’ve had a couple companies [undergo] corporate changeover and of course, the first thing that goes is the outside vendors, so that’s always on my mind — companies for sale and that kind of thing,” Andrews says.

But when it comes to growing his business, Andrews is optimistic about the year to come. Customers are always out there, he says, and it’s just a matter of pursuing the right contacts and being persistent.

Economic concerns are natural and warranted for BSCs, especially with fuel and supplies prices increasing. While some local economies in the Midwest are suffering, the Midwest as a region is looking good, says Jacques Bussaers, president of BJB Enterprises in Omaha, Neb.

“I think at this time, due to the Ethanol craze and development here, and the high cost of wheat in the Midwest has made the economy fairly strong,” Bussaers says, adding that the local market is particularly strong — strong enough to support substantial increases in revenue for the company.

While revenue has increased for Bussaers’ company, profit margins have decreased. And to retain quality employees, they must be compensated well.

“The major concern is, in order to get quality people, you have to pay more. That’s basically what it boils down to,” Bussaers says. “So if you can increase your volume and increase the pay structure as well and make it more attractive to people to come join the organization, that’s the best way of doing it.”

Uncertainties such as the war in Iraq, the election and the cost of oil are concerns, he says, “but there is still a need for what we do whether this is happening or not. The economy, as I see it, is going fairly well and is fairly strong. I don’t know if there’s going to be some major implosion because of the housing market but I don’t think it’s going to be that much worse so I’m fairly optimistic about ’08.”

Politics
From the presidential election to immigration, political outcomes and decisions will have an impact on BSCs next year.

“Cautious optimism is a good thing, but the election coming up is going to be a big factor in where small businesses go,” says Theresa Brennan, owner of Ocean Breeze Cleaning Services in Ashburn, Va.

In a profession that sways conservative and Republican more often than not, some respondents voiced fears that a Democrat might be elected president, creating a decidedly more liberal Washington electorate. Others say they will be happy to see a change in administration. Thirty-five percent of BSCs surveyed think they’ll be affected by the election outcome, for reasons that include taxes, benefits, labor issues, inflation and immigration.

Brennan is particularly frustrated with the way governments have handled the illegal immigration problem.

“A lot of local governments are cracking down on and passing resolutions about illegal immigrants,” she says. “Whether it’s local or national, it seems like the first thing they say is they’re going to start cracking down on businesses that hire illegals.”

Brennan follows the rules, filling out I-9s and taking care of other necessary employment paperwork. But she, along with many others, is confused that illegal immigrants are given Social Security tax ID numbers, making it more difficult to tell if someone is illegal.

Small businesses are in a no-win situation right now, Brennan says, because there’s not a good way to validate paperwork, or to follow up on the paperwork, rules don’t seem to be set in stone and governmental entities aren’t working in concert to help solve the illegal immigration problem.

“We’re stuck in the middle, and when I hear President Bush all the way down to our local supervisor, say ‘We’re going to crack down on businesses who hire illegals,’ well, OK, but give us a process,” Brennan says.

Immigration is always an issue for BSCs, and for many in border states, it’s getting worse. John Kronenfeld, president of NRG Maintenance Co. in Buena Park, Calif., says despite filling out I-9s and doing background checks, he knows a few illegal immigrants can still slip through. He does not believe Congress will reach comprehensive reform any time soon — and neither do most of his colleagues. Two-thirds of BSCs think any reform passed next year will be ineffective.

“The United States’ approach to immigration is just backwards,” Kronenfeld says. “They’re punishing everybody. … The bottom line is, we should open our doors, not close them, and allow these people to work. That’s what they’re here for.”

With the times
BSCs are catching up with cleaning trends such as green cleaning and cleaning for health, as well as technology trends. Look for 2008 to be a year of continued evolution and transition into a more science-based approach to cleaning — and for BSCs to be jumping online to read more about it.

“In general, technology has increased to the point where you can use it to run a more lean, efficient business at all levels,” says Amy Polokow, director of public relations for Kimco, Norridge, Ill. Not only are companies using the Internet to communicate through e-mail and phone systems, but they’re purchasing online as well as enhancing their own Web sites for their employees and customers. For example, Kimco features a Web portal for employees across the country to communicate and obtain information and documents.

“I think technology has brought not only people within the company closer, but it’s brought companies closer,” Polakow says. “I think you’ll see more partnerships and alliances among vendors.”

Environmental issues are also on the radar of more people, businesses and politicians, which can mean increased sales for BSCs who have transitioned to environmentally friendly cleaning programs and products. More than half of BSCs, 54 percent, expect the number of green cleaning products to increase next year, and 27 percent expect to be servicing more accounts for U.S. Green Building Council Leadership in Energy and Environmental Design (LEED) certified buildings.

BSCs know that 2008, moreso than other years in the recent past, there may be some bumps in the road ahead — but that’s not stopping them from working toward their business goals and retaining the optimism that has motivated them in their pursuits and attitudes. The future, most feel, is still very bright.