Do You Want To Learn How To Price YOUR Services?

[shane deubell]

NO not based on what the idiot across the street charges...
Based on YOUR Cost Of Service and gross profit you want to achieve

Pay no attention to actual numbers, the formula is what is important

Cost Of Service- direct costs to physically clean a carpet
2000 sqr ft

Labor- moving at 350 sqr ft hour = 6 hours This includes everything
6 hours x $25 hour = $150
Labor- $150

Materials- 2/3 Gallon of prespray and misc spotters $30
Materials- $30

Equipment- truckmount costs $25k divided by 6000 hours= $4.20 hour
Maintenance $2k divided by 6000= .35
1.5 gallons gas per hour x 6000 hours= 9000 gallons x $3.50 gallon= $31500 / 6000 hours= $5.25
Round it up to $10 hour
Equipment- $10 hour x 4 hours running time = $40
Equipment= $40

Van- $20k divided by 100k miles = .20
$3k in maintenance / by 100k = .03
Gas- 100k miles / by 15 miles gallon = 6666 gallons x $3.50 gal= $23,333
$23333/ 100k miles = .23 mile
Total cost $.46 per mile

Total Cost= Labor $150 + detergents 30 + equipment 40 + 20 miles $9.2
$230 Cost

This is a 1x service, we really want a gross profit of 60% or more

$230 cost /divided by 40% {the cost % we want to be at} = $575

Price for 2000 sqr ft = $575
$575 divided by/ 2000 sqr ft = $.28 per sqr ft

 

[Blacktiedetailing]

Like I said, love reading your posts and info..

 

[Mojo Rising]

Best post of the year!

You mentioned that a van should be making around $250,000 a year before adding another truck.. You able to break down that for us too? Been meaning to ask you about that.

 

[StevenB.]

Shane you are a Brie man if I"ve ever seen one

 

[AdmiralClean]

I know how to price my services. Seriously ... it is not rocket science.

What is rocket science is knowing how to get the business.

Marketing is what separates the men from the boys.

And I will continue to play in the corner with the other boys while I wait on one of you men to show me how to market.

 

[Tron]

Good stuff shane.

I belive this is almost exactly the formula Chuck Violand uses in SFS on day 1.
It was so refreshing to see a pro example of how to do it instead of just price waring with every idiot in valpak.
And it exposes why you will or will not survive long term in business.. Especially when you start to factor in the cost of retirement and health insurance or other variables.

On the flip side it can show you how to be competitive on large Jobs.

 

[Todd the Cleaner]

NO not based on what the idiot across the street charges...
Based on YOUR Cost Of Service and gross profit you want to achieve

Pay no attention to actual numbers, the formula is what is important

Cost Of Service- direct costs to physically clean a carpet
2000 sqr ft

Labor- moving at 350 sqr ft hour = 6 hours This includes everything
6 hours x $25 hour = $150
Labor- $150

Materials- 2/3 Gallon of prespray and misc spotters $30
Materials- $30

Equipment- truckmount costs $25k divided by 6000 hours= $4.20 hour
Maintenance $2k divided by 6000= .35
1.5 gallons gas per hour x 6000 hours= 9000 gallons x $3.50 gallon= $31500 / 6000 hours= $5.25
Round it up to $10 hour
Equipment- $10 hour x 4 hours running time = $40
Equipment= $40

Van- $20k divided by 100k miles = .20
$3k in maintenance / by 100k = .03
Gas- 100k miles / by 15 miles gallon = 6666 gallons x $3.50 gal= $23,333
$23333/ 100k miles = .23 mile
Total cost $.46 per mile

Total Cost= Labor $150 + detergents 30 + equipment 40 + 20 miles $9.2
$230 Cost

This is a 1x service, we really want a gross profit of 60% or more

$230 cost /divided by 40% {the cost % we want to be at} = $575

Price for 2000 sqr ft = $575
$575 divided by/ 2000 sqr ft = $.28 per sqr ft

Thank you Shane. I appreciate how you laid this out. I just copied this post to print out and keep on the inside of my clipboard.

 

[Steamworks]

Nice formula but your missing Costs of business insurance, vehicle insurance, cost of marketing , cell phones etc etc. This should all be part of calculating your price. also your cost of maintenance on a van is pretty low. I dont know bout you but I go thru tires, brakes and shocks every couple years on a 3/4 ton truck and i work locally with every job being within 25 kms. This is why when I get flyers in the mail to do your whole house for 99 bucks I laugh at these guys. They arent business people and have no clue what it costs to run a business.

 

[Tron]

I know how to price my services. Seriously ... it is not rocket science.

What is rocket science is knowing how to get the business.

Marketing is what separates the men from the boys.

And I will continue to play in the corner with the other boys while I wait on one of you men to show me how to market.

I agree it's half the battle. The other half is getting the work.
Problem is those who have honed it in to perfection are either to busy to share it or they don't want anyone around them catching g on.

 

[jrandall]

One thing I don't understand is if the cost is $230, and the price is $575, that would be 150% markup, not 60%.

Cost - $230
Markup (Cost x 150%) - $345
Total - $575

Cost - $230
Markup (Cost x 60%) - $138
Total - $368

 

[Joey J.]

One thing I don't understand is if the cost is $230, and the price is $575, that would be 150% markup, not 60%.

Cost - $230
Markup (Cost x 150%) - $345
Total - $575

Cost - $230
Markup (Cost x 60%) - $138
Total - $368

$575-$230= $345

$345÷$575= .6 or 60%

That is the proper way to figure gross profit.

Sent from my Galaxy Nexus using Tapatalk 2

 

[jaymark]

The company I worked for before starting CC, I had to figure COGS down to a fraction of a penny and reduce that cost even further as the housing crunch was kicking into high gear and we had to reduce cost to meet estimates. Actually turned this effort it into my gradation thesis.

I join the CC ranks, and guys all across the world are asking random posters what they should charge for a service lol..

Good post shane, hope people actually fill it out for themselves.

 

[StevenB.]

Is there an office expense in there? I read it a couple of times and didn't see that mentioned...perhaps I missed it. Is this a one man operation or with employees? That last factor is way too important to ignore imho

 

[davenjai]

Good luck Shane.

 

[jrandall]

$575-$230= $345

$345÷$575= .6 or 60%

That is the proper way to figure gross profit.

Sent from my Galaxy Nexus using Tapatalk 2

My bad, I was confusing markup with gross profit.

 

[SkylinePrints]

Thanks Shane. Very good illustration of how to price. The concept is simple and every business has to use their own figures to price correctly. Even in my industry, I've seen many businesses fail because they do not follow the concept you presented. Doesn't matter what the guy down the street charges if it does not cover your overhead. You will be out of business guaranteed.

 

[AdmiralClean]

I get sick with worry every January from lack of work

And then I get sick from exhaustion every July from over work.

My life is a turd circling the toilet.

I stop by here every day to change my shorts.

 

[FastFinish]

I am a huge numbers guy, ie.. spreadsheets, cost calculators etc. I had to be for my last career whether I liked it or not. In fact I created a performance spreadsheet that would calculate grades based on the performance of each category we were trying to measure for all the sales staff. I had the staff come up with the numbers that they felt would be Over-performance or under-performance. The scorecard was the marker. It would show who was the best or worst. It was self monitored and there was no way to manipulate it. It was the bottom line to everything. We had a saying- Liars figure, but figures don't lie. NO Excuses!
One thing the figures couldn't do is help with the intangibles of humanity.
It never took into account sick days- accounts that went bankrupt-newly hired people-changed or split territories etc.. list goes on.

With that said- I now look at cost of doing business differently. Costs are for taxes-prices are for profit. I do a lot of free work- it is calculated and purposed and also written off depending on the nature of it. Cash flow is the game I am in now. If you have enough flowing, I can make it profitable no matter what type of business it is.

 

[AdmiralClean]

Amen brother ... let me continue to learn how to bring it in.

I can always worry about managing it properly after I have it.

 

[shane deubell]

These are job cost numbers, fixed costs like rent, telephone, insurance are there regardless of how many jobs you have and come off the gross profit at the end of the month. That will be another thread...

It is critical to understand how these numbers interconnect when making business decisions

For example:

1. A portable will have lower equipment cost BUT higher labor cost, you are making a trade off.

2. XYZ TM for $10k may have a lower intial cost but lower number of gross hours and higher maintenance costs. Also with some models higher labor costs because you have to wait for pressure/heat, with 0 resale value.