Some of the concepts are similar to residential, however, quite a few of them are not so we have a special tutorial that’s all about that.
The first thing I want to say to you is that yes, it’s important that you price in a way that is going to be profitable for your business. The other thing that is important is that you price in a way that’s actually going to get you the business.
There are two things to know about pricing your business, you don’t want it to be so low that you’re not making any money. You also don’t want it to be so high that you don’t get the business. There’s actually nothing wrong with it being high, as long as you explain why it’s high. You just want to be able to the justify the price and get your prospect to see why it needs to be that high. Actually, successful selling at profitable prices doesn’t begin with the selling, it actually begins with the marketing and that is where we are going to start.
[box title=””]This article is brought to you by Pamela Washington of Build My Cleaning Business. Pam has more than 30 years experience in the cleaning business, and knows a little something about how to find your perfect price point in order to mazimize profit. Following her step by step guide you will be well on your way to bidding jobs that actually pay.[/box]
Step 1: Pricing for Profit
The first step in pricing for profit is actually marketing. One of the things that I say to people that I coach all the time, is that marketing is where you get your message out about your company. You get it into the marketplace in a way that people find compelling so they reach out to you and talk about doing business with you. Selling is when you actually close the deal. Pricing for profit is about selling, and about closing the deal.
We can’t really address that without talking about marketing first. What you need to know to put yourself in a position to have profitable pricing, is that the very first step begins with appropriate client attraction. Appropriate client attraction has two components, first you need to clearly identify and define your ideal client. Then you also need to clarify what your unique selling proposition is, and I’m going to underline the YOU because it really needs to be unique. Your ideal client needs to be someone who can recognize themselves during your marketing message.
You need to say things like, “Is your office cleaning gone to the dogs?” You know that what you are really asking is, “Do you have office cleaning?” This statement is only for people who have office cleaning, and have clients whose office cleaning is a problem. It is not for people who are already satisfied and who are just price shopping. For those type of people you might say something like, “Are you tired of micro managing your janitors at work?”
I’ve identified the client and what I am offering them by saying, “If you are in Las Vegas you deserve a great office cleaner.” I specified where I am, and I’ve talked about what I’m offering. All of these are ways in which I help my ideal client to recognize himself. I don’t say things like, are you paying too much for office cleaning, because that’s going to attract price shoppers and those are not people that I’m interested in.
You want to be very careful and specific in identifying what is the problem that you solve for your ideal client. What is the unique selling proposition that you offer, for example, we offer a money-back guarantee which is not something that you ever see offered in the commercial market. We talk a lot about letters of recommendation, and we talk about winning a lot of awards. We also talk about recognition and press for things like innovative customer service.
We talk about innovation. Innovation is not something that you typically think about in a cleaning industry. It is something that would make us unique. It’s important that you clarify for them why they would want to do business with you, as opposed to someone else. It is no longer enough just to say things like: we are licensed, bonded and insured. We go the extra mile for you and take attention to detail. Everybody says that, and that is not enough nowadays.
Step 2: Pre-Screen Prospects
It is really important for you to pre-screen prospects, and while you are doing that you’re also going to be building rapport. We pre-screen if they call the office, or they send an email. We pre-screen them for things like location, industry, time of day that they want the cleaning done, and the frequency. These are all things that may be deal-breakers. If they are looking for somebody to clean twice a month, that is not us. There are certain industries that we do not service.
Pre-screening is important because rather than wasting your time trying to struggle to come up with the price, convince, and close a buyer for something that you don’t really want anyway you have now found out what type of business they have and can end the conversation. While you are talking to them you are finding out that they are the location that you want, the industry you want, and the time of day is right, remember that.
During that conversation, what I call the discovery conversation, you’re able to empathize with them. You know when they say we are on the west side of town, you can say, “Yes, I work in that area, and my office is over there.” That is how you build some type of rapport with them. Here are some of the most important things that you want to know. You want to know the size, and the other most important question is “why.”
Why are they looking for another service?
Their response answers the question, what is their pain, what is their problem, which helps you to begin to build rapport. It will help you understand what they’re really looking for.
If they say to you for example, “We have a good janitor service now, however, you know they’ve been here for five years so we thought that we would put it out to bid again just to see where the market is.” This tells you that these people have no loyalty, and that they are price shoppers. You know that if their current service has been there a good amount of time, they are probably doing a good job. They don’t care about the quality they are currently receiving, all they care about is the price.
It is important to know that if they say we had to fire our janitorial service because we kept having issues about dependability you now know that one of the things that you want to focus on is how dependable you are. How you maintain that dependability is going to be a focus for you. You can use an electronic clocking in and clocking out tracking software, that way you know where your janitors are.
Building rapport is what allows you to begin selling the customer on your service and what is unique about your service plus how you solve their problem before you’ve ever talked about price.
Step 3: Site Visit
Whenever you are doing a commercial quote, you always go out for a physical visit. You don’t give commercial quotes over the phone. In part, because it reduces your product to a widget or a commodity, and it makes it harder for you to get the price that you want which is a profitable price. It also makes it harder for you to justify your price, plus it is really risky.
All square feet are not created the same, and it is not necessarily worth it to do site visits for every residential account. However, the sizes for most commercial accounts are worth a physical site visit. Especially for the kind of commercial accounts that I hope you’re looking at, which are 10,000 to 15,000 square feet or more, three days per week, and $1000 per month. Those generally are worth your time to go out to, or to send someone on your team to do a site visit.
With the site visit, you are going to do a couple of other things. You are going to get a commitment from them to let you know what’s happening during the bidding process. The other thing that you are going to do, that is super important, is you’re going to do a test quote. You are going to run a number past them so that you can get some general understanding of where their budget is.
If you go and you look at it, then you determine that it’s going to be somewhere between $3000 – $4000 dollars a month just off the top of your head. You want to be able to say to them, “Mr. prospect” as you are looking in their face. “I’m thinking you know based on the sort of work that we’ve discussed, it’s going to be at least $3000 dollars a month. I want to run that number by you to get an idea of what you’re currently paying. Plus I’d also like to know what the number crunchers are going to be okay with”. He then says to you, “Our budget is $1500, so there’s no way that we’re going to be able to pay $3000”.
You want to know that upfront so that you can either revisit the scope, or you cannot submit a bid. I don’t want you submitting bids that you don’t have a good possibility of winning, and if you’re that far off on price, I want to save you some time. Now that we have talked about the site visit, and of course you’re actually going to look at the facility, here’s step number four.
Step 4: Value Before Price
While you’re building rapport, let’s say that your prospect says to you while you’re doing the site visit that they have a janitorial service now that they are dissatisfied with. He also says they have repeat complaints, they do better for a little while after the complaint, and then we’re right back to the same place. You then share with him what your solution is, and why that would never happen if he was your customer. You let him know that you have electronic tracking, and that complaints always get addressed. You also make sure you let him know that you have checklists for your janitors to make sure that they don’t forget things.
You should also emphasize that your quality control processes are in place to catch problems in a proactive way before they become a complaint. You are showing him what the value is that you’re going to bring him or her as your prospect. Let’s say they talk about the fact that there has been some theft, or they are not sure there is theft, and that they don’t feel confident about the integrity of the current cleaners. You talk about how you do background checks, and you talk about how long your cleaners have worked with you. What you are doing is discussing the value that you bring, along with your unique selling proposition before you ever get into talking about pricing.
Step 5: Pricing Calculators
People so often get stuck on the price. There are so many other things that we need to be discussing to sort of set up the pricing conversation.
I’m going to give you three different ways to calculate your pricing.
The first one is that you could take minimum wage in your area then multiply that by 125%, and that’s your starting pay rate for your cleaners. In Las Vegas, the minimum wage is $8.25, so if I take $8.25 x 125% that equals $10.40. We start janitors at $10.00 an hour, and that’s because they’re part-time. I really liked hiring part-time people for night time janitorial work. I would say if you’re going to have people full-time, you want to pay a little bit more. Base wages should be between 33% and 36% of what you’re charging. If you’re paying people $10.00 an hour, that means that you’re going to charge around $33.00 an hour to the customer. That is pricing calculator method number one.
Pricing calculator number two is what you call work loading. This is where you look into space and you calculate how many hours per week it will take to clean that space. Let’s say it is 10,000 square feet, and you determine that it’s going to take you about 10 hours a week to do the work. You are going to take 10 times 4.3 three weeks times $33.00 an hour, that would be $1,419.00.
I know in Las Vegas it’s difficult to get $33.00 an hour for janitorial services, so let me show you one other method that you might be able to use, which is the square footage method. Let’s take that 10,000 square feet, and let’s say this is white color office space. That would be calculated at around 12 cents a square foot which you multiply by 10,000, and that comes out to $1200. Now we’re going to average those figures together, and it comes out to be $1,300.00.
You used a variety of different factors to sort of come up with a price, now you can have difficulties using the work loading method, because a lot of people do. Especially at 50,000 square feet, because it’s very difficult unless you’re super experienced to look at 50,000 square feet, and be able to eyeball that. Let me give you an easy way to do that. Take 50,000 square feet and what you can do is you can take all of the office spaces and look at those first. Then you can take the break room, restrooms, conference rooms, common area, and cubicles and look at them separately.
What you are going to do is break it down into bite-sized chunks. Let’s say you decide that the executive offices are going to take you a certain amount of time. You can either do it by the day or by the week, so let’s say it is easier for you to calculate it based on the day. If you figure the offices are going to take you about 45 minutes (executive offices), cubicles will take 1 hour and a 1/2, break room 45 mins, restrooms 1 hour, conference room 1 hour and the common room will take about 5 hours. All of those added up, is 8 hours a day at 40 hours a week.
Let’s say you think you could get people for minimum wage, which is $7.25 per hour in your area, and maybe you are so efficient that you think that you can get it done at 120%. Let’s take $7.25 times 120% which equals $8.70. I don’t think you’re going to be able to get good janitors at that hourly rate. So let’s say it’s $9.50 times 3 which is $28.50. Now if you have figured it will take 40 hours a week, times 4.3 times $28.00 an hour, you come up with $4,816. I actually was just sort of making up numbers here, because I think that 40 hours a week for a 50,000 square-foot building may be a little low. Maybe the restrooms are going to take 2 hours so that actually is 9 hours. Really, the scenario that I was trying to describe to you is how you can break down a big giant space into manageable size pieces.
Step 6: Specifications
I have two more things that I want to cover in today’s tutorial that is going to help you to price and operate profitably in your commercial cleaning service business. It is important when you’re coming up with your specifications that you’ve got your price ready when you’re submitting your proposal.
So there are all these details that you need to include to make sure you have a written scope of work. You don’t want to have any misunderstandings about what was included, plus you want to make sure that you address payment terms. In particular, you want to get paid in advance. The thing that’s super important is your pricing, and that there’s no contract end. These are things that you want to build in to your specifications so that when your contract ends people will not feel obligated to go out to bid, because you don’t want that. You want it to just continue forever and ever, so you can stay there forever.
Step 7: Customer Service
Here are just a few things that I want you to consider when you are beginning in the cleaning service industry. This is really important to know when acquiring clients. If you don’t know this, commercial deals close slowly. Commercial deals take a long time to close, unlike a residential contract where you could do marketing today, then people call you in three or four days so you can do the work the following day, then get paid that same day. Commercial deals aren’t like that, they close very slowly, so just know that when you’re starting out.
When you are no longer a beginner what becomes really important is that you retain the clients that you have, because the lifetime value of a commercial customer can be huge. Let’s say you have that 50,000 square foot building that we were just talking about that was paying you $4,816 a month times 12 months. The nice thing about commercial clients is that you know they don’t go on vacation. They are not going to cancel the service because you know their mom is coming to visit, or whatever the reason. They are much more stable and are going to stay there forever so you can figure that revenue to be your annual.
Let’s say you keep that account for five years, which is very likely in a commercial account, that equals almost $700,000. Think very long and hard about customer service, and the lifetime value of your clients in terms of pricing for profit.
The final thing that’s super important to commercial clients, is that you show them appreciation. I highly recommend that you do-little things, for example, we use greeting cards not at Christmastime because everybody does that. We send them out in November as a little thank you for your business. It is important to show appreciation once a year, even if it cost you $3000 – $4000 dollars which is worth it to keep a $700,000 account.
Make sure that every time your quality control person goes to do the quality control inspection that they leave a note, so that their customer knows that you’re on top of things. It shows you’re proactive about quality control.
That completes what I want to talk to you about today as far as pricing for profit on your commercial cleaning proposals. We talked about 7 different things, and pricing was certainly one of those things. I want you to keep it in context and make sure that you’re talking to the right people, that you pre-screen them, that you have gotten the commitment from them to communicate with you. Make sure you discuss the value of what you bring to the table and how you’re going to solve their problem, whether it’s that they just moved to that building or they need janitorial services right away. Make sure that you connect with them in terms of the value that you’re going to bring, and then you go into the pricing calculator.
Pricing is part of a process around running your business in a profitable way, and along with that building specifications into the contract to make sure that you’ve worked out all of the details that can really make or break your profit margin. Remember customer service will help you retain that customer long-term, which again is what’s going to make it super profitable for you.
I am Pam Washington from Build my Cleaning Business. If you want to get more information, and if you want to continue learning with me, please visit my site, BuildMyCleaningBusiness.com.