Finding Profit in Commercial Cleaning

October 13, 2008
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“Never be frightened to make a profit. Better in your pocket than in their cash register.”
- Michael Levy

A wise man once said, “Pride and stubbornness are a deadly combination.” (And no, he wasn’t talking about me!) I notice these two unfortunate personality traits far too often in carpet cleaners. These poor folks stubbornly and proudly struggle along performing only residential cleaning while overlooking other easier, and often more profitable, market niches in our industry. One of these synergistic diversifications is regular commercial contract carpet cleaning.

I won’t belabor the obvious advantages of the contract commercial arena like predictable year-round cash flow; better use of existing equipment; higher net profit; normally dealing with sane clients (unlike flaky homeowners!); less competition, etc. So if there are so many advantages to contract commercial work, why do so few carpet cleaners focus on this sector?

One big stumbling block for many carpet cleaners is pricing the commercial job low enough to get the work but high enough to make a profit. Nowhere is it more important to jettison the deadly combination of pride and stubbornness than in pricing a commercial service agreement. Price your commercial quotes at the high price per square foot you need for profitable residential cleaning, and you will stay a residential cleaner forever – and very likely get laughed out of a lot of commercial establishments! But set your prices at the cutthroat “going rate” and you’ll probably go broke. Tough choice.

To help you find the “sweet spot” of commercial pricing, let’s start with a mental exercise: right now, please, sit back and meditate on exactly why you went into business for yourself. I know my “entrepreneurial plunge” came about because I wanted to make the most amount of money in the least amount of time and with the smallest amount of financial and emotional capital invested in the endeavor. Actually, I still feel this combination is a great lifestyle goal!

Now, if you buy into this “most money in the least time” concept, the price you charge per square foot for carpet cleaning quickly becomes irrelevant. Instead of stubbornly basing your price-per-square-foot price on pride (as in “I won’t even get out of bed for less than $.30 per square foot!”) you will now establish your job price – and, if needed, the square foot price – calculated solely on three key factors. You will focus on:
  • how long it will take your crew to do the work, and
  • your true cost of business per employee hour, plus
  • the profit percentage you want from this job.

Remember, when setting your profit goals be sure to take into account the recurring nature of regular contract work, which potentially can create a wonderful stream of ongoing profits with absolutely no marketing costs on your part. So don’t try to milk this cow too dry in the beginning!

Next time you price out a potential regular contract commercial account, try following these steps:
  1. Interview the customer on-site. Explain that to give them the most “bang for the buck” with your carpet maintenance proposal you must learn a bit about their business and traffic patterns. Then, as you interview the client, fill out a Commercial Needs Analysis Form that quickly and concisely gives you the big picture on what their carpet maintenance needs really are (for a copy, send me an e-mail.

    The hidden benefit of this conversation/interview? You will impress the customer, and together you will start building a professional relationship. Your goal is learn enough information about your customer’s needs to give your customer a wide number of carpet maintenance options. In addition, this process will change the customer’s perception from you being just one more rug-sucker in an endless line of forgettable service providers to that of a professional carpet-cleaning consultant that actually cares.
  2. “Zone” the job. I wish I had a dollar for every time the customer has said to me, “Give me your best square footage price for a one-time cleaning of all my carpets. We have (fill in the blank) square feet.” Don’t fall into the trap of only giving a one-time full cleaning price. Instead, you should subtly take control of the job specifications by using your completed Commercial Needs Analysis Form to “zone” the job into high, medium and low-traffic areas.

    For example, let’s consider a typical medical clinic with 10,000 square feet of commercial glue-down carpet. You have already defined the use and traffic patterns during your initial meeting/interview with the clinic’s facility manager. High-use areas will usually include entrances and walk-off areas, food service areas and intensive use hallways and exam rooms. Medium-use areas will be general office traffic patterns and most other hallways. Low-use areas will often be meeting rooms, private offices and other areas toward the back of the building.
  3. Determine your suggested cleaning frequency for each zone. Be honest here. Look at which areas can be cleaned successfully with encapsulation and which sectors will at least occasionally require hot water extraction. Consider not just traffic, but also type of soiling. If you are using truckmounts, you should also examine access points, hose runs and water sources. At the same time, you should price out a second “fallback” cleaning frequency plus of course you will also present (at a higher price) the one-time cleaning option the customer originally asked for.

    For example, our 10,000-square-foot medical clinic might have 2,200 square feet of high-traffic entry, food service and intensive-use patient areas that “in your professional opinion” will require monthly extraction cleaning. There may be another 4,800 square feet of medium-use carpet that should be encapsulation cleaned monthly along with a rotating extraction cleaning every three months. And finally, there is another 1,800 square feet of low-use offices and meeting rooms that will be encapsulation cleaned every six months and extraction cleaned only “as needed” for an additional amount per square foot when you are in the building anyway. For those of you with your calculators out, what happened to the other 1,200 feet of the 10,000-square-foot total? Simple; it is in areas that now are unused, and will be added to the service agreement as required.
  4. Calculate how long each suggested service will require. Hopefully you have a handle on your cleaning speed per hour with various office and carpet types. Therefore your pricing now becomes a simple mathematical exercise involving your overhead cost per hour (if you don’t know what this amount is, do not price any commercial service agreement until you and your accountant have determined exactly how much it costs you for each hour your company works) plus the amount of profit you want, multiplied by the hours required to do each area. Won’t it be nice to remove the fear and the guesswork out of the pricing process? If you don’t know your cleaning production per hour, immediately start keeping a “cleaning diary.” Note the actual square footage cleaned for each commercial job, carpet style and soiling level, how much furniture had to be moved and how many people were on the crew. Write down the total number of hours on the job plus your actual machine running time. Include notes on unusual access or set-up problems. Very quickly, you should have an average hourly production rate for each type of job/carpet that will help greatly in pricing your commercial work.
  5. Add up the entire cleaning cost for the next year for all services and divide by 12. Now you have a palatable price per month based on the very logical schedule both the facilities manager and you have agreed on in the Commercial Needs Analysis Form. Sit back and reflect on the job overall. If you want more profit, just increase your monthly amount. Remember, there are no square footage prices in your proposal, just a regular monthly amount based on an agreed-upon schedule of work. More profit is always good, but don’t go overboard on bumping your price up; usually, the time required to perform any regular contract commercial cleaning job will decline substantially over the first six months of the account through increased efficiency and your higher cleaning standards. The result? Much more profit out of the account than you anticipated.

At last: A five-step pricing system for regular contract commercial accounts that gets you out of the “proud and stubborn” trap. Instead of depending on voodoo, witchcraft, throwing darts at numbers and/or blind luck, you will just follow a routine and logical system to arrive at a customer-attractive price that will add greatly to your net profit!

But correctly pricing the job only puts you in the ballpark of profitability. Next month we’ll focus on hitting a business home run by getting the customer’s signature on the dotted line of your Commercial Service Agreement. The company you save may be your own – through focusing on regular contract commercial accounts!

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