Hello Mr. Toburen,
Firstly I would like to say thank you for all the great resources on your SFS site! I have just started my carpet cleaning journey and this information is very helpful!
I was wondering if you would be able to answer a question. I have been struggling to work out how much to charge. (“Per square metre” is what is used here in the UK.) Is there a formula to work this out?
Once again thank you and Happy New Year from London!
Thank you, Happy, for the kind words. It makes us feel great to help new folks entering the business. (Even if you are “across the pond” where Jon-Don probably isn’t going to sell you much stuff!) And don’t forget we have a special “Just Starting Out?” section if you are new to the industry.
Of course no matter how many years someone has in business the eternal question is: “How much should I charge?” And of course the easy answer is, “As much as you can!”
After all, I tell every SFS class: “There is no virtue in poverty”! and my favorite saying, “All things being equal- it is better to have money than not have money!” But I digress …
Happy, here are a few philosophical thoughts on pricing. I’m hopeful we can get Chuck Violand (our resident expert in pricing) to chime in later this Spring on how to set prices and maybe even share some worksheets with us. Sooo …
- Know your true cost of doing business- Most cleaners don’t have a clue. That is why a general price for a country (or even a city) is totally meaningless. There is no “Magic Number” since every cleaner has different marketing costs. (Or they can use the free marketing Bill Yeadon writes about in his Hub Marketing Special Report!) Each company also has different fixed costs such as equipment leases or loans. But simply put you must come up with a monthly total of every single cost you face.
- Know your production rate- Once again, most cleaners don’t have a clue! How can you assign a “price per metre” when you don’t know how long it will take you to process it? (For help on this check out our Production/Pricing Analysis Log. Don’t worry- the download is free!) Religiously fill this Production Log out (even for your residential jobs) over a period of several months and you will learn exactly how many square meters you can clean per hour in any given scenario. Then …
- Pull the numbers together- Listen closely here, Happy. Pricing is just a function of costs you must pay (including yourself!) and time plus quantity. Sooo…
- Calculate your True Cost of Doing Business (TCDB)- As in add up all your overhead/replacement fund for equipment/desired profit and include extra for “Murphy’s Law” because bad things happen to good carpet cleaners! Now you have a rough monthly Gross Income Amount you should produce. (If you include ALL your costs and charges you will be amazed at how high it is.)
- Calculate how much you will work- Figure reasonably how many days/ hours per month (HPM) you can clean. Err on the low side here and allow for time off with the family, equipment breakdowns, slow work times, etc.
- Divide and conquer- OK, down in the trenches time!
- Here’s the formula: Take your monthly TCDB and divide by your HPM which in turn gives you your all-important Income Per Hour (IPH). This is your “nut” as in how much gross income you must generate per hour of work. NOTE: It is good to also generate your “nut” per day and per week and TRACK IT. I love surprises but being “surprised” at the end of the month by not having the money to make a lease payment it never fun!
- So now you know your “nut” per day and per hour. (If nothing else this will add the all-important “sense of urgency” to your daily routine.) Now for “how much to charge” …
- This is the easy part- When pricing any job (especially commercial) just calculate A) how long it will take you (refer to your Production Log for an accurate estimate) and then B) multiply your time required to do the job by your IPH and then C) divide the square meters by this amount which in turn will D) give you your cost per square metre!
Now you have a simple formula that lets you feel in control of pricing any single job. Of course, just being on top of your pricing will not make the phone ring, Happy! To do that you will need to get the word out but that is the subject for a different post!
Best wishes and let me know how you are doing!
PS Happy, I assume they have heard about something called “encapsulation cleaning” in the United Kingdom? If so, I would urge you to check out Jeff Cutshall’s Special Reports on how to build Commercial Maintenance Routes using part time employees in their own vehicles.