Dear Steve,
Do you have to be an accountant to understand what your costs are in business? I’ve completed my first year as a carpet cleaner and I still don’t REALLY know how much each job is costing me.I’ve priced carpets based on what my local competitors charge- 17 to 28 cents per sq.ft.So please, be honest Steve, what should I do?
Perplexed in Springfield
Brutal honesty, Perplexed? Remember you asked for it. (Before I nail you to the wall let me congratulate you for at least recognizing the problem. See #1 below.)
1. Virtually anybody can “suck rug”. Some of these individuals can even get them clean! A few cleaners can please clients and even get them to call them back. (A very select few can consistently turn these repeat clients into Cheerleaders that enthusiastically sing the cleaner’s praises from the rooftops … but I digress.) But frankly, most carpet cleaners go merrily through life totally ignorant of what their true costs, much less what their true profits (if any) really are. Consequently they never really make any “real money” and kind of eke their way through life. Remember, Perplexed, the reason to be in business is to make money … and a lot of it. So how do you reverse this sad state of affairs? (Above all else quit basing your pricing on what your competition charges. Do you respect them? Probably not. Then WHY are you allowing your competitors to determine your pricing strategy?)
2. Educate yourself. You don’t need to come to Strategies for Success. (Even though you’ll learn more about practical, “real world” accounting in an afternoon with Chuck Violand than you will in months of research on your own!) Buy some books on small business manangement and accounting.The “Dummies” series aren’t bad. Avoid the big “college textbooks”. They are almost unreadable and most of the stuff doesn’t apply to us. Fortunately, a carpet cleaning business is real simple. Money in – money out – where did it go? (Forgive me, Chuck.)
3. Get computerized. I know a lot of people say to start out manually. But computers are so cheap. And Quickbooks is so simple it is actually easier than doing it manually. Plus the investment and ease of use is an incentive. In fact, the tutorial in Quickbooks could provide your education at the same time.
4. Network. Go to industry trade shows or hook up with a local carpet cleaners association.
5. Do it. No one is worse than me when it comes to self-discipline and accounting. But don’t think of accounting for just paperwork’s sake. Think of it as your children’s education, a new house or a new Harley!
6. Above all else. raise your prices immediately. Do this even BEFORE you analyze what your break-even price is because I know (and you do too) that you are too low now. (Because virtually every carpet cleaner does not remotely charge the true cost of doing business.) There is no virtue in poverty! And I promise you what many SFS members have come to realize. Raise prices and you will lose no (or very few) clients and you will make more money. (And that is even before you get down in the trenches with your accounting!)
Let all of us know how you are doing.
Steve Toburen
P.S. Of course, it does keep coming back to making the Cheerleader out of every single customer, Perplexed. I won’t lie to you. I was terrible to mediocre when it came to accounting and job costing (which is actually more important). But a simple truth that I share with every SFS class (when Chuck is out of the room) is “When you make the Cheerleader … everything else (including knowing what your costs are) takes care of itself!”