Cleaning Business Profit Margin: Residential vs Commercial Numbers

You landed a $4,000-a-month commercial contract and you're celebrating. Three months later, you're working more hours, your payroll is bloated, and your bank account looks the same as before. Sound familiar?

This is the trap most cleaning business owners fall into when they don't understand their cleaning business profit margin on each type of work. They chase the big commercial number because it looks impressive on paper, without running the actual math on what they keep after expenses. Or they dismiss commercial entirely and stick with residential because "the margins are better," missing out on stable revenue that could smooth out their cash flow.

The truth is, neither residential nor commercial is universally "better." The one that's better is the one you price correctly and manage tightly.

The Real Cost of Not Knowing Your Cleaning Business Profit Margin

Here's what margin confusion actually costs you. Let's say you're running a mix of residential and commercial work, doing about $15,000 a month in revenue. You feel busy. Your trucks are moving. Your team is working full days.

But you haven't separated your residential numbers from your commercial numbers. You're looking at one lump sum in your bank account and hoping it all works out.

Meanwhile, your commercial contract is eating 60% of its revenue in labor alone because the scope keeps expanding. Your residential jobs are profitable individually, but you're burning an hour of unpaid drive time between each one. And you have no idea which side of the business is carrying the other.

Many cleaning business owners report being "booked solid but broke." If you haven't read our breakdown of why that happens and how to fix it, start there. But the short version is this: revenue without margin clarity is just expensive exercise.

Why the Margin Gap Between Residential vs Commercial Cleaning Exists

Residential and commercial cleaning are fundamentally different businesses that share the same supplies.

Residential cleaning often runs gross margins in the 30-50% range, though this varies by market, staffing model, and service mix. Here's why that number tends to be higher:

• You set the price. There's less competitive bidding pressure on a 3-bedroom house than on a 10,000 sq ft office.
• Jobs are shorter, so labor inefficiency has less time to compound.
• Clients pay quickly, often same-day or card-on-file.
• You can charge higher-margin add-ons when priced to account for extra labor time. Fridge cleaning ($40), oven cleaning ($50), window cleaning ($5/pane) - these can significantly boost your margins.

Commercial cleaning often runs gross margins in the 20-40% range. The squeeze comes from multiple directions:

• Competitive bidding drives prices down. You're not just competing with other quality operators - you're competing with whoever submits the lowest number.
• Contracts are larger but payment is slower. Net-30 or Net-60 is standard, which means you're financing payroll out of pocket for weeks.
• Scope creep is relentless. The property manager who hired you for "general janitorial" starts expecting floor stripping, window washing, and restocking supplies.
• You need more staff on-site, which means more scheduling headaches, more no-shows, and more supervision.

The gap isn't random. It's structural. And if you don't account for it in your pricing, you'll subsidize your commercial work with your residential profits without ever realizing it.

The Cleaning Business Margins Math That Actually Matters

Gross margin is a starting point, but it's not the number that pays your mortgage. What matters is profit per crew-hour after all costs. Let me walk you through both sides.

For a fair comparison, I'm using the same metric for both: profit per clock-hour of crew time (the total elapsed hours your crew spends on the job, including drive time).

Residential Cleaning Margin Example

You charge $250 for a standard 3-bedroom clean. Your two-person team takes 2.5 hours on-site. Add 30 minutes of drive time each way. That's 3.5 crew-hours total.

• Revenue: $250
• Labor (2 cleaners x 3.5 hrs x $16/hr): $112
• Supplies: $15
• Drive cost (fuel, vehicle wear): $12
• Insurance allocation: $8
• Total cost: $147
• Gross profit: $103
• Gross margin: 41%
• Profit per crew-hour (based on 3.5 hrs): $29.43/hr

Not bad. Now multiply that by 4 jobs per day, 5 days a week. That's roughly $2,060 in weekly gross profit from one crew.

Commercial Cleaning Margin Example

You win a $4,000/month office cleaning contract. The building is 8,000 sq ft, cleaned 5 nights per week.

• Revenue: $4,000/month
• Labor (2 cleaners x 3 hrs/night x 20 nights x $16/hr): $1,920
• Supplies: $200
• Drive cost: $160
• Insurance allocation: $120
• Equipment depreciation: $80
• Total cost: $2,480
• Gross profit: $1,520
• Gross margin: 38%
• Profit per crew-hour (based on 60 hrs: 3 hrs/night x 20 nights): $25.33/hr

That $4,000 contract still looks decent on paper, but notice the gap - you're making $25.33 per crew-hour vs. $29.43 on the residential side. The residential work generates roughly 16% more profit per hour of crew time.

And here's the kicker - that commercial number assumes everything goes perfectly. No callbacks. No re-cleans. No employee calling in sick, forcing you to cover the shift yourself. In reality, many owners report that commercial margins erode further once you factor in quality control visits, re-cleans, and the admin time spent managing the contract.

How to Calculate Your Own Cleaning Business Margins (The Manual Fix)

You don't need expensive software to figure this out. You need a notebook, an hour, and honesty about your costs.

Separate Your Revenue Streams

Pull your last 3 months of invoices. Sort them into two piles - residential and commercial. Total each one.

Calculate Your Fully Burdened Labor Rate

This is where most owners get it wrong. Your labor cost isn't just the hourly wage. It's the wage plus payroll taxes, workers' comp, paid time off, and training time.

A $16/hr cleaner actually costs you roughly $19-22/hr once you add those costs. Use $20 as a conservative estimate if you haven't calculated yours exactly.

Many operators aim to keep total payroll in the range of 40-45% of revenue, though this depends on your business model and what you include in payroll (field labor only vs. total payroll with office staff). If you're above 50%, you've likely got a pricing problem, a productivity problem, or both. That ratio is one of the most important numbers in your business.

Allocate Your Overhead

Take your monthly overhead - insurance, vehicle costs, supplies, phone, software, marketing - and divide it proportionally between residential and commercial based on revenue share.

If residential is 60% of your revenue, it carries 60% of overhead. Simple.

Calculate Profit Per Crew-Hour for Each Type

For every job type you run, figure out the total crew-hours involved (including drive time, setup, and any admin), then divide your profit by those hours. Make sure you use the same method for both residential and commercial so you're comparing apples to apples.

This is the number that tells the truth. Not gross revenue. Not gross margin percentage. Profit per crew-hour of effort.

Look at the Results Honestly

You might discover your residential work generates more profit per crew-hour. Or you might find that your commercial contract, despite the lower margin, provides enough volume to cover your fixed costs while residential fills in the high-margin gaps.

Both outcomes are fine. The dangerous position is not knowing.

Building a Residential vs Commercial Cleaning Mix That Works

The smartest cleaning business owners don't pick sides. They build a portfolio.

Use commercial as your floor. A few solid commercial contracts give you predictable monthly revenue that covers your fixed costs - rent, insurance, vehicle payments. This is the foundation. Even at 20-40% gross margins, this stability is worth something. You know the money is coming. You can plan around it.

Use residential as your ceiling. Residential work at 30-50% gross margins is where you build actual wealth. This is the work where your pricing power is strongest, your add-on revenue is highest, and your ability to prevent scope creep directly protects your margins.

The ratio depends on your stage. If you're a team of 2-5 people, many operators lean toward 60-70% residential and 30-40% commercial. The residential margins keep you healthy while the commercial base gives you breathing room. Your ideal split will depend on your market, your team, and your growth goals.

If you're scaling to 6-20 people, commercial becomes more attractive because it's easier to staff and schedule predictably. But you need to be ruthless about pricing. Every commercial bid should hit a minimum gross margin threshold - and many small operators find that a floor of around 25% keeps them from taking on money-losing work, though your number will depend on your overhead structure.

Watch your cash flow timing. Commercial payment delays of 30-60 days can strangle a growing company. You're covering payroll weekly while waiting a month or more to get paid. If you're heavy on commercial, you need a cash reserve or a credit line to bridge the timing gap between doing the work and getting paid.

Price Like You Mean It

The single biggest lever you have is pricing. And most cleaning business owners leave money on the table because they price based on what they think clients will pay rather than what the work actually costs.

For residential, stop guessing. Calculate your fully burdened cost per job, add your overhead allocation, then add your target profit margin. If that number is higher than what you've been charging, you need a price increase conversation - not a discount.

For commercial, stop bidding low to "win" contracts. A contract you win at 15% gross margin is a contract that will slowly bleed you dry. You'd be better off turning it down and spending those labor hours on residential work at 40%+ margins.

The SBA's financial management resources offer solid fundamentals on pricing and cost analysis if you want to dig deeper into the principles.

Here's a quick gut-check formula for commercial bids:

Minimum bid = (Labor hours x $20 burdened rate) / 0.60

That 0.60 means you're targeting 40% gross margin. Note that this formula covers burdened labor only - you'll need to factor in supplies, overhead, supervision, and any periodic services (like floor stripping) separately to get a true all-in bid. If the market won't bear that number, the contract isn't worth your time.

A Better Way to Track This

Running these calculations manually works, but it's slow. And the moment you stop doing it consistently, you drift back into guessing.

This is where automation earns its keep. Not flashy AI or expensive software - just simple systems that calculate your margins in real time as you invoice jobs.

When your job management system automatically tags each invoice as residential or commercial, tracks your actual labor hours against estimates, and calculates your real profit per crew-hour, you can spot margin erosion the week it starts instead of discovering it three months later when your bank account is thin.

You can also set up automated alerts when a commercial contract drops below your minimum margin threshold, or when your payroll ratio creeps above your target. These aren't complex systems. They're straightforward automations that protect the numbers you just spent time calculating.

The goal isn't to replace your judgment. It's to give you accurate numbers fast enough to actually make decisions with them.

The Bottom Line

Residential cleaning margins are often higher (30-50% gross) but come with scheduling complexity and client acquisition costs. Commercial margins are often lower (20-40% gross) but offer volume and predictability.

Neither type is inherently better. The businesses that thrive are the ones that know their numbers on both sides, price accordingly, and build a mix that balances stability with profitability.

Run the math I laid out above. If you don't like what you find, at least now you know where the problem is. And a problem you can see is a problem you can fix.

If you want help setting up systems that track your margins automatically so you're never guessing again, let's talk.