3 Strategies for Increasing Cleaning Business Profit Margin

Unless you're running a charity, your primary objective as a cleaning business owner is profitability. Without it, your company will not survive.

It's no surprise that one of the questions we get most often from BSCs is, “how do I increase my profit margin?” There are three basic strategies for increasing profit margin for your cleaning business: lower your costs, sell more services, and/or raise prices.

What we've discovered is that most cleaning business owners tend to focus on just one of the three and place less emphasis on the rest. In truth, finding a balance among all three is almost always the smartest approach for creating a successful and profitable cleaning company.

Increase your Cleaning Company's profit margin

Here are 3 Ways to Increase Profit Margin in Your Cleaning Company

1. Lower Costs

Business owners looking to boost profitability very often try cutting costs first. They look at the numbers—money coming in vs. money going out—and then focus on ways to save on payroll, office expenditures, supplies, and marketing. They search for more efficient tools and equipment that can deliver a quick return on investment by allowing cleaning techs to do more work in less time.

Upside:
The truth is, most of the time we need fewer resources than we think to do our work. Making smart cuts allows you to maintain your prices and customer base while still making more money. That means an increase in profits without an increase in prices or having to find new customers.

What's more, figuring out ways to lower operating costs and increase efficiency is a must for the cleaning industry because it's getting harder to find enough techs to handle increasing sales.

Downside:
Cutting expenses isn't always easy. The leaner your operation, the more difficult it will be to find room for further cuts. Eventually, you'll run the risk of cutting back too far and end up with overworked, underpaid, ill-equipped, and poorly trained technicians. That will lead to dissatisfied customers, lost business, and decreased profitability. A business then may be tempted to make more cuts (and exacerbate the problem) or be forced to cut prices.

A lean operation is important for sustainability, but the truth is you can't save yourself into prosperity. Ultimately, continuous growth is key to continuous profit gains.

2. Sell More Cleaning Services

Marketing-focused cleaning business owners are more inclined to focus their attention on customer acquisition and retention. Their goal is to gain new customers and keep their existing customer base long-term. They focus on marketing efforts, up- and cross-selling, customer loyalty programs, and exceptional customer service. 

Upside:
More clients equals more money. Happy clients are more likely to buy more services and make referrals, both of which mean more money. 

Downside:
It costs money to get new clients, including advertising spend and sales' team salaries. Luckily, upselling to existing clients can reduce/offset the costs associated with marketing or client acquisition. You'll also need more staff to handle the additional work, and it can be difficult to find reliable workers in the cleaning industry.

3. Raise Prices

In “Pricing for Profit,” author Peter Hill says its a flawed assumption that all customers want the lowest price. He says raising prices can be the best way to build profitability and create sustainable growth. There is a big caveat: A business must be able to communicate and demonstrate the value in their price to the customer.

In its “Power of Pricing” study, McKinsey & Co. backs up Hill's claim: “Pricing right is the fastest and most effective way for managers to increase profits.” 

Upside:
Raising prices doesn't require new staff or other investments. And even a small change can have a dramatic effect. The McKinsey study found a price increase of 1 percent (with no change in sales volume) generates an 8 percent increase in operating profits. That's an impact nearly 50 percent greater than a 1 percent fall in costs and three times greater than the impact of a 1 percent increase in sales. 

Downside:
If customers fail to see the value in your higher price point, they could flee for lower-priced BSCs, especially if you operate in a highly competitive market. Properly communicating the price increase will take an investment of time and, potentially, money for printed materials.

By reinvesting some profits from a price increase into service improvements, like better equipment or tech training, you can show customers why you are worth more than the competition.

The Best Way to Increase Profit is to have a Balanced Mix

Let's say your operating costs are $50 per site, but you charge $100 and have 100 clients per month. That's $5,000 of profit per month. To raise those profits to $7,500, you could lower your costs by 50%, find 50% more clients per month, or raise your prices 25%. Any of those options may seem impossible.

Instead of doing just one, however, what if you made smaller adjustments to each? Cutting costs by 20%, selling 20% more services, and raising prices by 10% would increase your profits to $8,400.

The bottom line is that business owners who are focused on just one or two of the three ways to increase profits will struggle at some point. Taking a more proactive and balanced approach to all three will give your company the best chance at long-term success.

As a business owner focused on profitability, your goals should be to come up with the right pricing strategy, attract and retain good clients, and keep your expenses as low as you can while still providing high quality service and a distinctive experience.

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