At Bane-Clene Institute, instruction includes a segment on how to price services. Nearly everyone who enters the cleaning business seems to use a formula something like this: Call everyone in the carpet cleaning business who advertises in the Yellow Pages Advertising and try to get a price from them for a mythical residence or business at a nonexistent location.
Some really get sophisticated at this point. They total up the estimated prices, divide by the number of companies called, and then subtract 10 percent. Other formulas are used, but this seems to be the most prevalent.
Some really get sophisticated at this point. They total up the estimated prices, divide by the number of companies called and then subtract 10 percent. Other formulas are used, but this seems to be the most prevalent.
A better way is to estimate your own costs. Labor, overhead and material make up the basic costs. What is your time worth if you do the job yourself? What would you pay to have the job done? What does your truck operation cost . . . gasoline, depreciation and oil changes? How about advertising, cost for answering the telephone, electricity, office equipment? Of course, the equipment to do the cleaning must be included. Insurance is certainly a cost factor.
After all these costs are catalogued, you should be able to establish an hourly cost for operating your business. When this is established, you can apply the most important part of your pricing formula: your profit. What do you expect to make? Five percent, 10 percent, 20 percent, or more?
Suppose you arrive at a cost of $30.00 per hour for all of your business costs, and you want to make a 20 percent profit. This sounds so basic. However, many people forget to include the profit margin in their calculations. A 20 percent profit with a $30.00 operating cost would mean that you would have to charge a minimum of $36.00 per hour for your service time.
For a 20 percent profit, the equation would look like this: $30.00 cost x 20% = $6.00.
Base price is $36.00. A 10 percent profit margin would add $3.00 to the cost factor, and so on. If your hourly cost is only $20.00, good for you! But be sure you include everything in computing your true costs. Your CPA should be able to help you with this. The formula for establishing a price is:
LABOR + MATERIAL + OVERHEAD + PROFIT = PRICE
All of Bane-Clene’s service company carpet cleaning is charged by the square foot. Many carpet cleaning companies charge for cleaning by room, rather than by the actual square foot cleaned. What the customer wants cleaned is what is measured and is what they pay for. If the customer only wants the traffic areas cleaned, that’s what we measure and what we charge - usually with a lower price than most carpet cleaners who charge simply by the room. We measure the carpet and calculate the amount to charge with a calculator device. If we are doing an estimate, we leave the customer a copy of the price and then the customer can decide whether to make an appointment.
Bane-Clene has simplified pricing by designing the “Price Calculator.” If management is frugal and incorporates the guidelines offered at Bane-Clene Institute, charges for cleaning services can be taken directly from the charts provided. Using the Bane-Clene system of pricing, the minimum charge would be “Level A” on the Price Calculator. However, by knowing the actual costs of conducting business and building in certain contingencies, you may want to use level “B,” “C,” or “D,” depending on the economy in the area of the country in which your service business is located. With square-foot pricing, you can figure your expenses to include high-quality service and an automatic profit on every job. Four different price levels show volume discount prices on 200 to 3,000 square feet. The Price Calculator also includes a square footage calculator. Pricing becomes easier, faster and more accurate.
Not everybody has what it takes to make a profit. More than half of the people who try to start profit-making businesses give up in less than two years. Less than one venture in five lasts ten years.
To make a profit, you must have customers who will buy your service for at least a little more than it costs you to deliver it.
Be sure that your customer gets full value for his or her money! Keep your customers in mind at all times. Make certain your company’s work is of excellent quality, the kind of quality work people are happy to buy. Try to work as efficiently as you can. Make sure the work you do represents value for your customers. These are the attitudes which produce profits.
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