Do You Want To Learn How To Price YOUR Services? | TruckMount Forums #1 Carpet Cleaning Forums

Do You Want To Learn How To Price YOUR Services?

Blain

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This is an excellent post from Shane & definitely helpful for those who don't yet have as strong of a business acumen that is needed to successfully run their business.

To capitalize on his example, and to briefly answer the questions about overhead (office expenses, insurance, cell phone, etc), here's your formula:

Sales - Cost of Goods/Services = Gross Profit

Gross Profit - Fixed Expenses = Net Income
 
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Scott W

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Good formula, Shane.

I have an Excel spreadsheet that will allow you to enter the same information that Shane showed. You can also enter overhead for advertising, office expense and so forth. Also can plug in two different production rates, one for commercial and one for residential.

With just a few changes, you can also do "What if" situations. For example if I buy this tool my production rate will increase by X sq. ft. per hour. How much work do I need to get to pay for the tool or make the purchase worthwhile?

If you want a copy of the spreadsheet, just send me an email. Ask for the cost of doing business spreadsheet. scottw@bridgewatercorp.net
 

Neil

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I was just thinking about this yesterday when a customer called to have 7 areas cleaned and I quoted a price of $250 to do the job. They wanted to pay about half of what I quoted to which I said no.

It has been a slow couple of weeks here and I had no work for the day and I found myself wondering if I should have just gone and done the job at the lower price. It was close to home here so my fuel cost would have been minimal. My only fear is if I do it for half price they will always expect it and so will all their friends.
I would have done the job but found a way to increase productivity. The subjective cost for owner operators is time. Some price theirs higher than others. Your time is worth less on a day that you have no work. Personally I would have done that job with open areas only and asked the customer to pre vac. Assuming normal soiling conditions it would have taken me 45 minutes.

Also, they may have wanted to pay half of what you quoted but may have been willing to pay a bit more. For example, they say they are willing to pay $125, you counter by saying you can do it for $185 if it's open areas only. This saves you a lot of time and the customer may end up meeting you at $150 or $160 once you get to the pre vac negotiation point (or any other step in your process that increases your production.)

There are steps in my cleaning process that I won't eliminate (negotiate) for quality reasons, specifically pre spray and agitation in heavy traffic lanes. These are value points that I give people if I get a call like the one you received.

Your reputation and cleaning process have value as well, and this particular lead may have really wanted to hire you for those reasons, but she was legitimately on a tight budget.
 

GreenTechAgain

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I was just thinking about this yesterday when a customer called to have 7 areas cleaned and I quoted a price of $250 to do the job. They wanted to pay about half of what I quoted to which I said no.

It has been a slow couple of weeks here and I had no work for the day and I found myself wondering if I should have just gone and done the job at the lower price. It was close to home here so my fuel cost would have been minimal. My only fear is if I do it for half price they will always expect it and so will all their friends.
This happens to me as well and I try not to give it a second thought.
There will ALWAYS be someone who is cheaper then you.
You have to make the decision not to chase the bottom.
 

shane deubell

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Yes, before steve has a heart attack the truckmount part was taught to me by SFS.

Starting in the commercial cleaning business our bid work sheets were more based on labor, materials and paper usage so after attending his class i added the equipment part. Had no idea before...
 

King Cobra

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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
$575-60%=$345+$230(codb)=$575 Gross Profit
 

larsox

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Great info. Thank you Shane!
 

Deron06

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Deron's Method of Determining Pricing;

Storm down to the local Chevrolet dealer and check prices on the newest supercharged Corvette and if single, calculate how much the best looking female is going to cost you to land in your bed (don't be a plunger head; it has nothing to do with love). Now, how much are you going to have to light up these cheap loafer customers in order to fulfill these needs of yours? This is what you charge.

Enough of the hocus pocus, Shane. Can't you see that these poor b@stards need to get laid (except for Deron fans, of course). Have a heart, trooper.
 

wandwizard

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I was just thinking about this yesterday when a customer called to have 7 areas cleaned and I quoted a price of $250 to do the job. They wanted to pay about half of what I quoted to which I said no.

It has been a slow couple of weeks here and I had no work for the day and I found myself wondering if I should have just gone and done the job at the lower price. It was close to home here so my fuel cost would have been minimal. My only fear is if I do it for half price they will always expect it and so will all their friends.
I think everyone gets calls like that, I know I do, and it usually happens when things are super slow. Sometimes I'll meet em 1/2 way just to get the business. I've had some last year that were a little over 200. and decided to offer a 200. fee for the job. At least I was there earning something as opposed to the alternative. I can live w/200. for 2 or 2.5 hrs. work as long as I don't have to drive an insane distance. Most of my jobs are within 15 minutes of my house. Machine and van all paid for so my business is pretty well debt free.

To not run into the problem of them expecting future visits to be the same you might want to offer a new customer discount, say 50.00 off, 10 % off or whatever you thinks good. After you get in to do the job you can better decide what it's really worth to you. Often, after they see your work, they'll know you're worth it. Then you've not only made a new customer, but perhaps some referrals from them as well. Many people still have never seen a real live professional cleaning before. I've found some women, especially, will have a set amount in their head they're willing to pay. If it's pretty close to what I want I'll go ahead and do it sometimes unless the job is just one those super nasty ones. You also might want to offer some free, in home estimates, so the customer actually meets you and you get to better sum up how much work that jobs gonna be and how long it will take you. I don't do this on jobs too far out of my home town area though.
 

shane deubell

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I think everyone gets calls like that, I know I do, and it usually happens when things are super slow. Sometimes I'll meet em 1/2 way just to get the business. I've had some last year that were a little over 200. and decided to offer a 200. fee for the job. At least I was there earning something as opposed to the alternative. I can live w/200. for 2 or 2.5 hrs. work as long as I don't have to drive an insane distance. Most of my jobs are within 15 minutes of my house. Machine and van all paid for so my business is pretty well debt free.

To not run into the problem of them expecting future visits to be the same you might want to offer a new customer discount, say 50.00 off, 10 % off or whatever you thinks good. After you get in to do the job you can better decide what it's really worth to you. Often, after they see your work, they'll know you're worth it. Then you've not only made a new customer, but perhaps some referrals from them as well. Many people still have never seen a real live professional cleaning before. I've found some women, especially, will have a set amount in their head they're willing to pay. If it's pretty close to what I want I'll go ahead and do it sometimes unless the job is just one those super nasty ones. You also might want to offer some free, in home estimates, so the customer actually meets you and you get to better sum up how much work that jobs gonna be and how long it will take you. I don't do this on jobs too far out of my home town area though.
Do you know what your unearned profit is?
 
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wandwizard

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Do you know what your unearned profit is?
All things considered, I'm talking losing maybe 15 to 25 dollars profit at most. I can think of a couple last year I knocked off about 22 -23 bucks to get them down to 200. Both jobs were easy peasy and went fast. Really I was just giving them some free time and very little else. I'm talking maybe a few extra ounces of TLC and a bit more gas burned out of my TM.

On a job I'm giving anywhere from 20. to 50. off to get the job. (50. would be fairly rare)Usually when I do something like this I try to factor in distance to the job and time doing the job. If I have doubts, and they're only 10 or 15 minutes away I'll go see them. I do charge by the sq. ft, so I'm really knocking off mabye 2 to 5 cents per sq. ft. to get in the door at the most. I try to factor in ALL my business costs as a part of every job too, but I'd rather make something than nothing sometimes.

I don't go crazy with this. I wouldn't have done the job Todd was talking about for 1/2 price, but I would've at least tried to get them to meet me at say 200. I would not have gone any lower than that.
 

crash1big

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There are so many things to consider in Todds situation that only he would know about. Plus his own business plan and model.
It might benefit some companies to do the job for 1/2 price. For others it might not be worth the effort. Plus there are things such as perceived value, future benefits, potential referrals (or not), the company pricing policy, etc.
All these things should stem from a good business plan. Put the plan in motion; set some policies; tweak often, and stick to it.
I wouldn't have done the job either because it's not fair IMO for one customer to get a break (just because) and not the other.
BTW, Thanks Shane. Good stuff. :)
 

shane deubell

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All things considered, I'm talking losing maybe 15 to 25 dollars profit at most. I can think of a couple last year I knocked off about 22 -23 bucks to get them down to 200. Both jobs were easy peasy and went fast. Really I was just giving them some free time and very little else. I'm talking maybe a few extra ounces of TLC and a bit more gas burned out of my TM.

On a job I'm giving anywhere from 20. to 50. off to get the job. (50. would be fairly rare)Usually when I do something like this I try to factor in distance to the job and time doing the job. If I have doubts, and they're only 10 or 15 minutes away I'll go see them. I do charge by the sq. ft, so I'm really knocking off mabye 2 to 5 cents per sq. ft. to get in the door at the most. I try to factor in ALL my business costs as a part of every job too, but I'd rather make something than nothing sometimes.

I don't go crazy with this. I wouldn't have done the job Todd was talking about for 1/2 price, but I would've at least tried to get them to meet me at say 200. I would not have gone any lower than that.
You never answered my simple question, Do You Know What Your UNEARNED number is?
Profit minus your labor....
 

wandwizard

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You never answered my simple question, Do You Know What Your UNEARNED number is?
Profit minus your labor....
I'm not sure I understand what you're getting at. As an O/O I can afford to throw in some "free" labor. I'm talking an extra 15 or 20 minutes. I'm more concerned with my "earned" number here than unearned. What I understood you to mean was how much do I actually lose in earned profit by giving say a 10% discount, which is normally around what I might give to someone as an incentive to go ahead and book the job. If I give someone 25.00 off on a 250. job or 50.00 off on a 500. job REALLY I haven't lost anywhere near that amount, mainly because I'm not having to shell out the taxes on the lost income. I'm not sure I can give you the exact answer you're looking for. I really don't factor in labor cost in this at all. On a 10% discount I'm gonna lose about 1/2 that in profit at the most, but I'm still earning a decent profit on the job as opposed to not earning anything and just maybe getting a lifetime customer.

I'm far from being an accountant as you can probably tell. My basic formula is Gross income minus Total business expenses (I mean every single one of them) + all income taxes. At least it gives me a pretty solid idea of how much actual profit I'm making off of each job and lets me set my prices accordingly.
 
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extremecleantn

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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
Awesome stuff Shane ! What if we just shoot for $1K per day ? Just kidding.
 

shane deubell

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A clearer picture is what is your company profit AFTER paying yourself a salary of $50k a year or a % sales.

The facts are most cleaners do not have any real profit.
 

Spazznout

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Shane while I agree in theory with you, in practice most o/o pay themselves whatever is left after expenses and taxes. Most cleaners are NOT trying to establish multi employee and truck operations. For these folks unearned profit does not even need to enter into the equation. There goal is to establish a profit that is equal to a comfortable living. That is all. It took me a minute to figure out on this forum there are two groups of cleaners. Those who will always be O/O and have no desire to build larger businesses. Then there is those of us who strive for larger companies and operations that have profit beyond our personal salary's.
 

shane deubell

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Shane while I agree in theory with you, in practice most o/o pay themselves whatever is left after expenses and taxes. Most cleaners are NOT trying to establish multi employee and truck operations. For these folks unearned profit does not even need to enter into the equation. There goal is to establish a profit that is equal to a comfortable living. That is all. It took me a minute to figure out on this forum there are two groups of cleaners. Those who will always be O/O and have no desire to build larger businesses. Then there is those of us who strive for larger companies and operations that have profit beyond our personal salary's.
For an owner operator it is even more critical, you cant clean carpet forever...

The goal should be to invest $20k a year or whatever and build up your investment income, so over time as you age and slow down the investment income picks up the slack.
 

Bill Yeadon

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For an owner operator it is even more critical, you cant clean carpet forever...

The goal should be to invest $20k a year or whatever and build up your investment income, so over time as you age and slow down the investment income picks up the slack.
Shane, I would think Steve would think you're doing a darn good job here. We're getting old and will need replacements soon.

As for the elephant in the room question about owner operators, you are in the classic E-Myth problem, you own a job. If you don't go out next week you make no money.