Census Bureau: BSC Start-Ups Booming

Last month, the U.S. Census Bureau’s Economic Census provided figures that indicate a recent boom in the national number of sole proprietorships, and that’s good news for distributors.

According to the 2002 data, the latest year with statistics available, the number of building service contractors (BSCs) without paid employees soared by 20.4 percent to almost $6 billion in revenue. One reason for the growth, wrote Elizabeth Olson in an April issue of The New York Times, was “the decline in payroll jobs during the 2001 recession, which encouraged or forced many laid-off workers to branch out on their own.”

Granted, sole proprietorships, which experienced a 5.5 percent increase in combined revenue — to $770 billion — in 2002, don’t always represent key accounts for distributors. However, thanks to the recent boom in cleaning company start-ups, what were once sole proprietorships could grow into significant customers.

Greg Littlefield, president of Building Service Contractors Association International (BSCAI), is quoted by Olson in The Times article; he left a job in office-equipment sales in 1990 and started a contract-cleaning company, because “it will never lack customers.” His company, Professional Facilities Management, Montgomery, Ala., now has 900 employees.

“The industry has been helped by schools, hospitals and government agencies that traditionally had in-house janitorial staffs but are now using contractors for their work,” says Marketdata Enterprise, a Tampa, Fla.-based research firm quoted by Olson in The Times.

Marketdata contends that “the commercial cleaning industry rolled unscathed through the 2001 recession.”

There are undeniable factors that make starting a cleaning business easier than starting many other types of businesses, says Anthony Trombetta, director of education for ISSA, Lincolnwood, Ill.

“This industry affords an ease of entry that other industries don’t — that’s one reason that we’re seeing so many new companies,” he says. “Business owners don’t need to invest a high-capital expenditure to start a business in our industry.”

The New York Times article explains the increase in the number of BCSs by saying that “low-tech” companies are the fastest way to make money in a post-2001 economy, but Brian Head, an economist with the U.S. Office of Advocacy, Washington, says the low-tech label is a misnomer.

“People talk about ‘high-tech’ and ‘low-tech,’ but most businesses — no matter what they are — are using a lot of high-tech solutions,” says Head. “I really hesitate to call any business sector low-tech. I’m sure that if Greg Littlefield has grown his company to 900 employees, then he’s probably taking advantage of quite a lot of technology. The truth is that there was a slow, steady rise for companies in a wide range of industries after 2001.”

NEWS MAKERS

G-P First Quarter Profits Increase
Georgia-Pacific Corp., Atlanta, recently reported a first-quarter 2005 net income of $205 million (78 cents diluted earnings per share). G-P’s first-quarter net income in 2004 was $147 million (57 cents diluted earnings per share). The company’s net sales in the first quarter of 2005 were $4.6 billion, compared with $5.2 billion in 2004.

BSC Survey: Offer Additional Services
A recent survey conducted by the Institute of Inspection, Cleaning and Restoration Certification (IICRC) indicates that building service contractors (BSCs) are missing out on additional sales opportunities.

According to the survey, 71 percent of BSC customers who were questioned about “add-ons” purchased hot-water extraction or steam carpet cleaning; those who weren’t asked didn’t purchase.

ISSA Announces Changes to Trade Show Format
In an effort to add more “fun” to the trade show experience, ISSA has announced a number of changes for ISSA/INTERCLEAN in October. Exhibitors will now be allowed to serve food and beverages, including alcohol, at their booths. Also, there will be increased amenities at the show, including more rest areas and a sports bar on the show floor.

Junk Fax Prevention Act Clears Senate
The Junk Fax Prevention Act of 2005 (S. 714) passed the Senate Commerce Committee in April, a decision that represents “significant progress” according to representatives from ISSA’s legislative department. S. 714 would restore the “established business relationship” (EBR) provision governing fax communication, allowing faxes to continue between distributors and existing customers.

MERGERS & ACQUISITIONS

The Freedonia Group Inc., Cleveland, recently published a study that details extensive jan/san sales data for distributors. The 2004 data breaks down $5.4 billion in jan/san sales by category (excluding cleaning chemicals):