Do You Offer a Price Discount to Get a New Cleaning Account?

Many commercial cleaning companies offer discounts from time to time. There are a number of reasons why discounting your prices can make sense, but there are also times when it's not a good idea.

Before changing your pricing structure, consider how it will affect your bottom line. Will discounts bring in enough extra business to keep your profits steady? Will the loss of revenue cost you income and cause difficulty scaling your business? There may be an alternative you haven't yet considered.

Why Commercial Cleaning Companies Offer Price Discounts

Two of the main reasons business owners offer price discounts on their cleaning services are to compete for a specific contract or to lure new customers.

It can be tempting to price match what your competitors are offering, especially when it seems like a small difference in profit for you. Just remember: you and your competitors have different business plans. Even if you have the same target customers, you have different methods, expenses, and goals.

When Discounting Makes Sense

Offering a discount on your cleaning services can be a huge boost to your business in certain scenarios. If summers are slower for you, as an example, offering a discount on a particular service can attract business you may otherwise not get. Hotels use this tactic to book rooms on weeknights or during less popular travel months. For a cleaning company, you might offer a discount on window washing or carpet cleaning to get your foot in the door on a new account.

It may also be beneficial to offer a discount to your most profitable customers. Perhaps you negotiated discounts on consumables for their account and you want to pass along that savings. They may remember and reward that generosity when it's time to renegotiate your contract. Adding an unexpected discount to an invoice can boost your image for your long-term customers.

Finally, there may be times you want to bring in extra revenue for a specific reason. If you need an income boost to pay off an expensive piece of floor equipment, for example, it may make sense to offer a flash sale on floor services using your new equipment. This can bring a quick influx of extra work and extra revenue.

Lost Revenue vs. More Business

When you offer a discount, you bring in less revenue per customer, yet most of your expenses remain unchanged. Consider whether the discounted rate will bring in enough new business to offset expenses so you don't lose profits.

Price Discount to Get a New Cleaning Account

This calculation requires knowing your profit margin. This chart  will help you determine how much new business you will need to keep your profits at the same level. Here is an example:

If your current profit margin is 30%, and you offer a 10% discount then you'll need to bring in 50% more sales to earn the same amount of profit.

Let's break down the math even more. Say you have 100 customers paying you $100 for every service at their location, and your expenses are $70 and revenue is $30. If you offer your customers a 10% discount, your expenses remain $70, so now you keep only $20 from their reduced $90 invoice.

That same discount applied to all of your 100 customers means you earn $2,000 instead of the usual $3,000. To bring your profit back to $3,000, you need to bring in 50% more sales at the discounted rate.

Is the proposed discount enticing enough to attract 50 new customers to make up the difference?

Try Something Else Before Changing Your Prices

If you already have satisfied customers at your current rate, you likely don't need to change your prices. You have an audience who has already demonstrated that your services are valuable and worth what you charge.

Instead of offering a discount, think of ways to add more value to your current offerings without increasing expenses. Perhaps you can work with your janitorial distributor to get free disinfectant dispensers installed at your client's location at no charge, with the agreement that you'll be purchasing the disinfectant to keep the dispensers filled. To go a step further, showcase your excellent safety record by teaching employees in the building how to prevent the spread of germs at work and at home.

Also, before changing your pricing, look at how you can adjust your expenses. If you're able to save money on supplies, staffing, or transportation, you can boost your profits without changing your revenue. You'll be surprised how simple cutting your costs can be if you're willing to change some of your practices.

Increase Prices to Set Yourself Apart

Depending on your business model, it may not be feasible to give discounts or compete with similarly priced cleaning companies. In these instances, you should look at how you can raise prices to beat the competition. Naturally, you'll also need to enhance your services too, in accordance with your new rates.

BSCs that charge higher rates are able to do so because their customers see an added value in this company not available from others.

Perhaps you provide continuing education for your employees. Employees with advanced training or janitorial certifications typically stay with your company longer, are better equipped to handle difficult tasks, and are more efficient. Or maybe you've invested in state-of-the-art equipment that allows you to clean in a quieter, less obtrusive way.

Customers may pay a premium price for the security and dependability of a professional, well-trained team of cleaners. Or pay more for cleaning that can be done during work hours without interrupting their own employees.

Raising prices also frees you to focus more on retaining current customers instead of finding new leads and seeking out new customers. This chart will help you calculate the percentage of sales you can lose before you'll see a decline in your profits. If we use our example of 100 customers, you could earn your $3,000 profit by cleaning only 94 times at $102. Do you think more than 6% of your customers would drop your services over a 2% price increase. 

There are many factors that go into your pricing structure. Before you discount your rates, make sure it's the smartest option for your business. In some cases, a discount is a great way to bring in new customers and extra revenue. In others, you may be setting your business up for failure.

By taking the time to analyze how the discount can affect your bottom line, you can make an informed decision about whether right now is a good time to discount. Who knows—you may find you'll earn more money by trying something else.

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