- THE MAGAZINE
“It was the best of times, it was the worst of times.” – Charles Dickens
I call it “The Good, the Bad and the Ugly” of the carpet cleaning industry.
Carpet cleaning is an easy industry to get into. Heck, I started up my first cleaning business at the age of 16 with $75! (Used buffer, used mop buckets, used squeegees and used mops!) I don’t know of another business with a better initial investment/potential reward ratio. So if carpet cleaning is so good just what is the bad?
This is an easy industry to get into! This low required investment along with our recent brutal recession has spawned lots of cleaning business start-ups that are job substitutes as in, “since no one is hiring I guess I’ll just start cleaning carpets to pay the bills.”
Now my hat is off to the never-say-die entrepreneurial spirit of these brave souls. Been there, done that! After all, I basically started cleaning carpets because I was “un-hireable.” Simply put, I didn’t (and still don’t) fit into the corporate mold!
Remember too that some of today’s most profitable corporations were founded by business misfits (a little company called Apple comes to mind). So where is the “bad” in all this?
Sadly, these newly minted carpet cleaners don’t have a clue on the true cost/overhead of running a real business! In fact, in the beginning, these inexperienced entrepreneurs are delighted to just be earning the hourly wages they made at their previous job.
So therefore, each new flock of carpet cleaners starts out advertising unrealistic (and unsustainable) prices, and sure enough, the customers start calling in until the carpet cleaner goes out of business. And then the cycle repeats itself with a new group of start-ups! Meanwhile, this perpetually renewing downward pressure on carpet cleaning prices is a killer for all carpet cleaners. But now the plot thickens with …
These new cut-throat-priced carpet cleaners either quickly go broke or rapidly realize that just matching their old job salary isn’t going to keep them in business and leave enough for a good living. But now they are trapped in this “Cut Rate Advertised Price,” or C.R.A.P., model.
So what can you do if you are trapped in this ugly C.R.A.P. low-price business model? Your options are limited. You can (a) continue running a marginal business while earning a lower-middle class living, (b) start cheating your customers with the far-too-common “bait and switch” carpet cleaning business model, or (c) build your life around this simple life concept:If I keep on doing what I have always done I will get what I have always gotten.
So are you unhappy with your “Cut Rate Advertised Price” business model? If so, you simply must do things differently.
Here is a grab bag of ideas on how to do things differently:
Change your self-image: I don’t want to sound like a Tony Robbins motivational infomercial here, but you must reject the industry-wide mindset that all the very best a carpet cleaner can hope for is a middle class lifestyle. Instead, repeat after me, “I deserve to be wealthy.” Say it again and again and again!
Now that wasn’t too hard, was it? Once you believe in your heart that you truly can become rich from your carpet cleaning business (and yes - this is an industry with unlimited potential) you must…
Determine what your true monthly cost of doing business really is: Folks, this isn’t rocket science. But it will require you tearing yourself away from the mental pabulum on your TV screen and focusing on your future! Simply add up all your yearly expenses, including a living wage for you. Don’t forget to include money for Uncle Sam and for an equipment replacement/business expansion fund. Add it all up and then throw in an extra 10% for our old friend “Murphy.” (Things go wrong even in the best run business.) Wow, this all adds up to a substantial nut! But wait, there’s more …
Add in for your profit: If you are content with the amount profiled above then you just own a job masquerading as a business. I define profit as “the amount left over after all of your expenses are paid.” (And yes, this includes the money needed to hire someone to do all the work you do now in your company.) After all, you deserve this beautiful thing called “profit” for the blood, sweat, tears and the sleepless nights you pour into your company.
Remember too, that if your books do not show consistently increasing profits, no one will want to buy your business when you decide to cash out and retire. So toss in another 20% for profit on top of your basic monthly nut to give you the finer things in life - including a luxurious retirement. After all, you deserve it. So, do you have your final monthly number now?
Divide and conquer: Now take your (substantial) monthly nut and divide it by the projected number of “wand-to-the-carpet” hours you will work per month.
Example: If you determine your total monthly “nut” (including desired profit) runs $10,500 and you historically average 85 production hours per month (probably optimistic) you must generate at least $123.52 in production per hour (PPH).
So now you know exactly how much on average you need to produce in revenue for every hour you put on your machine. I called this my “desired amount per hour (DAH).
Finally, the last part of this exercise involves calculating how many square feet you can clean per hour in different scenarios. (Don’t know your production per hour? Then you need to download my free Commercial Production/Pricing Analysis Log at http://tiny.cc/SFSpp) Now you can simply divide your projected PPH by your DAH and voila: You know how much to charge for any given job.
Commercial Example: Using your Production/Pricing Analysis Log, you determine a medium-sized restaurant can be extraction cleaned at 700 feet per hour, including set-up and break-down. So a 3,000 square-foot restaurant will need 4.28 hours at 123.52 = $528.66. So how much will you charge per square foot? $528.66 divided by 3,000-feet means your square foot price will come in at 17.6 cents per foot.
Residential Example: Remember that residential isn’t nearly as efficient as commercial work. So after including certain factors (moving furniture, travel time, cleaning confined areas), you calculate your average PPH is 365 square feet. So a typical 1200-foot residential cleaning will require 3.28 hours at 123.52 = $405.14 or 33.7 cents per foot.
Remember, these calculations are for illustration purposes only. Your numbers will and should vary. I would also add that if you feel you can charge more then go for it.
Suck it up: Most cleaners fall into low pricing because of fear! They start out scared of their competition and desperate for the phone to ring. So they set their prices even lower than the already cut-throat going rate so the vicious negative C.R.A.P. pricing cycle continues. It will take courage on your part to break out of this dead-end pricing.
Of course, once you know what you need to charge, you must not only free yourself of fear but also justify your higher pricing model to your customers. Wouldn’t it be great to dump “the bad and the ugly” and refocus yourself on “the good” in this wonderful profession? How? By setting your company apart logistically and emotionally from the Cut Rate Advertised Price cleaners out there! So next month let’s focus on your “Cutting the C.R.A.P.” business model!