Making Your Cleaning Cost Estimates More Competitive
Pricing your cleaning services can be a fraught process. There's a sweet spot that isn't necessarily easy to find. Too low and people will think you're inexperienced and unreliable. Too high and people will either go elsewhere or do it themselves.
When you're starting out, you may be tempted to go low to get clients in the door, but then as you expand and your costs go up for materials, employees, etc., you're still making a lower rate than you can afford. It's good to charge customers the rate you would if you had employees even when it's just you at first. This way, when you do have to hire employees, you can offer THEM a fair wage for the work they're doing.
Compare the actual cost of a job after the fact with what your estimate was so you can get better at matching the two. Accurately pricing overhead and labor will give you the ability to charge exactly what you need without overcharging or seeming unfair. Part of making your prices more competitive is research into industry standards and practices, and part of it is time, or figuring out what your costs really are by just doing jobs. The more jobs you do, the more competitive you can make your pricing as you learn.
Factors to Consider
Labor
This is usually couched in terms of an hourly rate–what you pay your employees (including yourself) in wages and benefits. Don't forget to include your own labor as manager/boss!
Overhead
Overhead is calculated as a percentage of labor and materials–it's basically the non-labor expenses of your business. A good model is: divide the total operating expenses of your business over one year by the total amount of labor and material expenses over one year. That's your overhead cost. (Supplies are typically about 5% of labor costs). Again, when you're just starting out, you won't have past numbers to guide you, so you'll have to rely on industry standards or advice from others in the business whom you trust.
Profit
Apply a markup to the total cost of any given job to give yourself a net profit. The markup percentage will be bigger than the net profit percentage. For example, if you want to make a net profit of about 40% before taxes, you'll need to mark up your jobs by about 60%.
How to Price a Job
First off, don't give your estimate until you've seen the state of the property you're going to be cleaning. You don't want to lose the customer's trust by giving a false estimate that you have to hike up later. Consider the variables that will determine how much time and effort the job will take, like the size and layout of the space, location of furniture and appliances, availability and location of electrical outlets, number of rooms (number of restrooms in particular), how many employees you have, any special materials or techniques you will be using, what kinds of surfaces you'll be cleaning, when cleaning can take place, and how frequently the cleaning will take place.
Once you know how many man-hours the job will take, multiply that by your workers' wages. Overhead for janitorial services is usually 20 to 50 percent of labor costs, somewhat higher than for a residential cleaning job, and the expected net profit for a janitorial service tends to be 10 percent to 28 percent of gross sales.
Competitive pricing will get easier the more experience you get. But never underestimate the power of careful research and calculation in the meantime! Visit The Janitorial Store today for more helpful information on starting and managing your cleaning business.
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Are you confused on how to prepare bids for commercial cleaning accounts? If you bid too high, you might lose the job, but bidding too low might mean you won't make a profit on the job. Walking that fine line and bidding correctly can have a huge impact on the success of your cleaning business. This Ebook will show you how to bid, step-by-step.
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