How do I price this job? What price? What should I charge? How do I bid? Is this price fair?
Hopefully this will help put things into perspective. If this is helpful enough perhaps even a sticky. If you hate it or feel your way is better please share. I'm ever evolving and changing.
The Formula:
Annual Labor + Annual Cost x Profit Margin / 12 Months = Monthly Price
Later in this thread Iโll suggest 3 different margins of profit to use with this formula.
What I want to stress is that nothing is set in stone and these are just baselines to work off of. Theyโre designed to be fine tuned, adjusted, mulled over and scrapped on a whim if things change. But it will give you some perspective and a starting point.
Lets answer a few questions before we start plugging numbers into a formula.
How much work can be done by one employee/person in an hour?
The average cleaner/janitor can cover approx 2,000 - 3,000 square feet an hour. Obviously that can change based on density, number of stalls, offices and how detail oriented the job is. But again we are talking averages and baselines.
How do I determine my costs for maintaining an account beyond labor?
This is a two part answer. Disposable product and cost of operation.
Most of us know what we pay to operate daily. Monthly payments such as insurance, bond, vehicle payment, equipment payment, advertising and anything that is essentially set in stone monthly from an operating perspective. For the sake of the formula Iโll share our number. Based on my most recent calculations it costs us approximately 40 dollars a day to operate.
Now each account will go through disposable products at a different rate. Glass cleaner, sanitizer, mops, rags, laundering mops and rags, floor cleaner, all purpose cleaner, bar keepers friend, magic erasers, replacing broken mop sticks/buckets and the list could be pages long. An average three day a week account goes through approximately 50-75 dollars in disposable product a month. Experience helps here but you can guesstimate with relative accuracy, which is what I did here. I donโt feel as though you need to be exact but at least in the ballpark.
Lets work up a detailed example. To keep it interesting Iโm going to put a few information seeds in here that we can reflect on once we have our price worked out.
A+ Make Believe Call Center -
2 Days a Week cleaning after 10pm. They require your business to be insured and bonded. A background check on the employee(s) who will be doing the work and will expect you to be responsible for your own set of keys and alarm code.
During the walk through our contact was very chatty and stated that theyโve gone through 3 cleaning crews in the last 2 years and they had issues with all 3. The first one was a friend of an employee who only charged them 800 a month but sometimes she wouldnโt show up and other times she was in and out in an hour. So they hired a big national company for double the price who cut corners on mopping, never dusted and didnโt do a very good job getting the bathrooms clean. The last company was better but one of their employees was caught on camera stealing. Hence the requirement for a background check.
8,000 square feet total. 6,000 square feet is commercially carpeted and requires vacuuming. 2,000 square feet ceramic tile and grout that requires mopping.
High dusting of corners, returns, tops of cubicles and ledges once a month.
Dense cubicles (you are not required to touch the cubicles or desks) with 40 trash cans that will be changed out every visit.
4 toilets and 3 urinals in the menโs room and 5 toilets in the ladies room to be cleaned and sanitized each visit. Two large mirrors.
4 managers offices. Each office has an interior window and glass window in the door. So there will be minor glass cleaning.
One kitchen with a table and long counter top, stainless steel double sink and once a month you will empty and dispose of anything not labeled in the fridge.
The Call Center will be supplying all trash bags and paper goods.
So to summarize on the job scope we have a fairly dense call center that sees a lot of regular daily traffic. A fair amount of vacuuming and mopping but not overly detail oriented.
Letโs start plugging in some numbers:
- Labor -
1 employee covering a minimum of 2,000 square feet an hour comes to 4 hours each visit. The account calls for 2 days a week. So 8 hours a week x 52 weeks = 416 hours a year.
Average janitor earns 14 an hour (we pay higher but thatโs another thread). 14 x 416 hours = 5,824.00 annual Labor.
- Cost -
Each janitorial account is worth 1-2 days operating expense a month. This is purely subjective. As I mentioned earlier our daily operating cost runs 40 dollars a day. So 80.00 dollars. Then approximately 50.00 dollars a month in disposable product.
40.00 + 80.00 = 120.00 a month. Which comes to 1,440.00 annual cost to maintain the account.
Add labor and cost together to get a total expense.
1,440.00 + 5,824.00 = 7,264.00 annual total.
- Profit Margin -
Now here are your three options for determining your margins.
Option 1: 1.5 times annual total for a tighter margin. Perhaps a small job, easy job, convenient referral, neighboring account or friend price. You want the account but competition is tight. Etcโฆ
Option 2: 2.5 times annual total (which is my most common baseline)
Option 3: 3.5 times annual total. Which would apply to difficult jobs, detail oriented jobs, extremely demanding customers and any other variable that gives you the feeling that you should be driving the price up. I reserve margins this high for unique and extreme accounts.
Annual Labor + Annual Cost x Profit Margin / 12 Months = Monthly Price
Option 1.
7,264 annual total x 1.5 profit margin = 10,896.00 annual. Divide by 12 months = 908.00 monthly charge.
Your monthly expense on this account runs right at 606.00. This leaves you 302.00 a month.
Option 2.
7,260 annual total x 2.5 profit margin = 18,150.00 annual. Divide by 12 months = 1,512.50 monthly charge.
Your monthly expense on this account runs right at 606.00. This leaves you 906.50 a month.
Option 3.
7,260 annual total x 3.5 profit margin = 25,410.00 annual. Divide by 12 months = 2,117.50 monthly charge.
Your monthly expense on this account runs right at 606.00. This leaves you 1,511.50 a month.
Conclusion and Perspective:
So now youโre at the point where you turn the brain on and weigh all your knowledge of the job, the customer(contact), proximity and any other factor you should be considering before you put a final price on your bid.
For perspective I will give you my opinion. The job seems relatively easy. I probably over estimated on labor. Nothing overly unique or special. No crazy instructions or task that could have an employee stuck for 2-3 hours longer than they should. It will be a night job. They are requiring insurance and for one of your employees and yourself to have their own set of keys and alarm code. Sounds like theyโre weeding out the bottom feeders and are looking for a legitimate business vs. some old lady looking for part time work off Craigslist.
Our low margin is only slightly more than the lady who was uninsured and unreliable. Our middle margin is likely a bit cheaper than the big company she โpaid doubleโ for. That company also failed to deliver to expectation. So we have a price precedent we can beat while maintaining a pretty juicy margin on a fairly easy and straight forward job.
Our high margin seems way out of line for such an easy job and I think we risk our contact taking other bids if she gets sticker shock.
Iโm going with our middle margin and if Iโm worried that this might become super competitive I could even pencil in once a year carpet cleaning at N/C. Or for that matter if the their tile and grout looks rough I might offer a one time tile and grout cleaning for signing up with us. These are the things most janitorial companies never address.
Any little perk or benefit that would help separate us from the competition could be a difference maker. After all our margin is solid so it wonโt hurt to give a little and close the deal.
We could easily go higher if I felt the need. If the customer had blurted out their budget is 2k...well I'd have to consider that.
Disclaimer:
The obvious. This is just one of many ways to calculate a bid and the way I personally like to do things. But Iโm not an authority on anything other than my opinion. I would never put this process on a bid. Keep it private. Again nothing is set in stone so you have all the freedom in the world to adjust a price by 10 or 100 dollars. Other work requires additional consideration. VCT, power washing, excessive glassโฆetc. You get the idea. This is a basic and very elemental way of looking at things despite the long write up. Take into consideration as much or as little as you see fit.
Hopefully this will help put things into perspective. If this is helpful enough perhaps even a sticky. If you hate it or feel your way is better please share. I'm ever evolving and changing.
The Formula:
Annual Labor + Annual Cost x Profit Margin / 12 Months = Monthly Price
Later in this thread Iโll suggest 3 different margins of profit to use with this formula.
What I want to stress is that nothing is set in stone and these are just baselines to work off of. Theyโre designed to be fine tuned, adjusted, mulled over and scrapped on a whim if things change. But it will give you some perspective and a starting point.
Lets answer a few questions before we start plugging numbers into a formula.
How much work can be done by one employee/person in an hour?
The average cleaner/janitor can cover approx 2,000 - 3,000 square feet an hour. Obviously that can change based on density, number of stalls, offices and how detail oriented the job is. But again we are talking averages and baselines.
How do I determine my costs for maintaining an account beyond labor?
This is a two part answer. Disposable product and cost of operation.
Most of us know what we pay to operate daily. Monthly payments such as insurance, bond, vehicle payment, equipment payment, advertising and anything that is essentially set in stone monthly from an operating perspective. For the sake of the formula Iโll share our number. Based on my most recent calculations it costs us approximately 40 dollars a day to operate.
Now each account will go through disposable products at a different rate. Glass cleaner, sanitizer, mops, rags, laundering mops and rags, floor cleaner, all purpose cleaner, bar keepers friend, magic erasers, replacing broken mop sticks/buckets and the list could be pages long. An average three day a week account goes through approximately 50-75 dollars in disposable product a month. Experience helps here but you can guesstimate with relative accuracy, which is what I did here. I donโt feel as though you need to be exact but at least in the ballpark.
Lets work up a detailed example. To keep it interesting Iโm going to put a few information seeds in here that we can reflect on once we have our price worked out.
A+ Make Believe Call Center -
2 Days a Week cleaning after 10pm. They require your business to be insured and bonded. A background check on the employee(s) who will be doing the work and will expect you to be responsible for your own set of keys and alarm code.
During the walk through our contact was very chatty and stated that theyโve gone through 3 cleaning crews in the last 2 years and they had issues with all 3. The first one was a friend of an employee who only charged them 800 a month but sometimes she wouldnโt show up and other times she was in and out in an hour. So they hired a big national company for double the price who cut corners on mopping, never dusted and didnโt do a very good job getting the bathrooms clean. The last company was better but one of their employees was caught on camera stealing. Hence the requirement for a background check.
8,000 square feet total. 6,000 square feet is commercially carpeted and requires vacuuming. 2,000 square feet ceramic tile and grout that requires mopping.
High dusting of corners, returns, tops of cubicles and ledges once a month.
Dense cubicles (you are not required to touch the cubicles or desks) with 40 trash cans that will be changed out every visit.
4 toilets and 3 urinals in the menโs room and 5 toilets in the ladies room to be cleaned and sanitized each visit. Two large mirrors.
4 managers offices. Each office has an interior window and glass window in the door. So there will be minor glass cleaning.
One kitchen with a table and long counter top, stainless steel double sink and once a month you will empty and dispose of anything not labeled in the fridge.
The Call Center will be supplying all trash bags and paper goods.
So to summarize on the job scope we have a fairly dense call center that sees a lot of regular daily traffic. A fair amount of vacuuming and mopping but not overly detail oriented.
Letโs start plugging in some numbers:
- Labor -
1 employee covering a minimum of 2,000 square feet an hour comes to 4 hours each visit. The account calls for 2 days a week. So 8 hours a week x 52 weeks = 416 hours a year.
Average janitor earns 14 an hour (we pay higher but thatโs another thread). 14 x 416 hours = 5,824.00 annual Labor.
- Cost -
Each janitorial account is worth 1-2 days operating expense a month. This is purely subjective. As I mentioned earlier our daily operating cost runs 40 dollars a day. So 80.00 dollars. Then approximately 50.00 dollars a month in disposable product.
40.00 + 80.00 = 120.00 a month. Which comes to 1,440.00 annual cost to maintain the account.
Add labor and cost together to get a total expense.
1,440.00 + 5,824.00 = 7,264.00 annual total.
- Profit Margin -
Now here are your three options for determining your margins.
Option 1: 1.5 times annual total for a tighter margin. Perhaps a small job, easy job, convenient referral, neighboring account or friend price. You want the account but competition is tight. Etcโฆ
Option 2: 2.5 times annual total (which is my most common baseline)
Option 3: 3.5 times annual total. Which would apply to difficult jobs, detail oriented jobs, extremely demanding customers and any other variable that gives you the feeling that you should be driving the price up. I reserve margins this high for unique and extreme accounts.
Annual Labor + Annual Cost x Profit Margin / 12 Months = Monthly Price
Option 1.
7,264 annual total x 1.5 profit margin = 10,896.00 annual. Divide by 12 months = 908.00 monthly charge.
Your monthly expense on this account runs right at 606.00. This leaves you 302.00 a month.
Option 2.
7,260 annual total x 2.5 profit margin = 18,150.00 annual. Divide by 12 months = 1,512.50 monthly charge.
Your monthly expense on this account runs right at 606.00. This leaves you 906.50 a month.
Option 3.
7,260 annual total x 3.5 profit margin = 25,410.00 annual. Divide by 12 months = 2,117.50 monthly charge.
Your monthly expense on this account runs right at 606.00. This leaves you 1,511.50 a month.
Conclusion and Perspective:
So now youโre at the point where you turn the brain on and weigh all your knowledge of the job, the customer(contact), proximity and any other factor you should be considering before you put a final price on your bid.
For perspective I will give you my opinion. The job seems relatively easy. I probably over estimated on labor. Nothing overly unique or special. No crazy instructions or task that could have an employee stuck for 2-3 hours longer than they should. It will be a night job. They are requiring insurance and for one of your employees and yourself to have their own set of keys and alarm code. Sounds like theyโre weeding out the bottom feeders and are looking for a legitimate business vs. some old lady looking for part time work off Craigslist.
Our low margin is only slightly more than the lady who was uninsured and unreliable. Our middle margin is likely a bit cheaper than the big company she โpaid doubleโ for. That company also failed to deliver to expectation. So we have a price precedent we can beat while maintaining a pretty juicy margin on a fairly easy and straight forward job.
Our high margin seems way out of line for such an easy job and I think we risk our contact taking other bids if she gets sticker shock.
Iโm going with our middle margin and if Iโm worried that this might become super competitive I could even pencil in once a year carpet cleaning at N/C. Or for that matter if the their tile and grout looks rough I might offer a one time tile and grout cleaning for signing up with us. These are the things most janitorial companies never address.
Any little perk or benefit that would help separate us from the competition could be a difference maker. After all our margin is solid so it wonโt hurt to give a little and close the deal.
We could easily go higher if I felt the need. If the customer had blurted out their budget is 2k...well I'd have to consider that.
Disclaimer:
The obvious. This is just one of many ways to calculate a bid and the way I personally like to do things. But Iโm not an authority on anything other than my opinion. I would never put this process on a bid. Keep it private. Again nothing is set in stone so you have all the freedom in the world to adjust a price by 10 or 100 dollars. Other work requires additional consideration. VCT, power washing, excessive glassโฆetc. You get the idea. This is a basic and very elemental way of looking at things despite the long write up. Take into consideration as much or as little as you see fit.