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New Ways to Slice the Pie

September 14, 2004
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"Nowadays people know the price of everything and the value of nothing."
-Oscar Wilde (1854-1900)

Pricing is as much an emotional issue as a financial one. Putting a price on your services reflects your ego, self-image, past experiences and, yes, your deepest, darkest fears. And absolutely nothing will get carpet cleaners lathered up faster than arguing over who charges the most and who is lying about how much they charge.

But let's look at pricing a little differently. Instead of obsessing over that big price-per-square-foot number, just what is your goal as a business owner? My guess? To make a lot of money in a very short time with no headaches and as little of your capital invested as possible.

Since some sticky legal and ethical issues prevent you from achieving your "quick and easy big money" goal by robbing banks or dealing drugs, just how can a carpet cleaner "clean up"? The quick answer is to raise your prices. There is no doubt that the vast majority of carpet cleaners out there do not remotely charge enough. But what is enough?

Obviously you must cover all of your ongoing business expenses (and trust me, there are always more than you first think, especially when you add employees and their related expenses).

Build a fund to repair or replace aging equipment, plus finance future growth and provide a nest egg for the inevitable emergencies that crop up (depreciation is much more than just a word the IRS uses).

Charge enough to pay someone (even if that someone is you) very well to do the physical and mental work your business demands.

You should also be making a healthy net profit over and above all of the above to reimburse you for the financial capital and years you have invested in your business. In addition, you should also be rewarded handsomely just for enduring the daily stress of being an entrepreneur. (Your spouse should also be financially compensated for their putting up with you in your stressful struggle!)

Remember that a high price per square foot alone will only give you bragging rights at Connections 2004 or on the ICS Bulletin Board. You should be much more interested in your bottom line and how much money you take home at the end of the week. Here are some ideas:

Sell up. The fastest, easiest and biggest money around is selling more goods and services to the customer while you are already in his or her home (more on how to sell up is coming soon). Think about it. You have already covered (hopefully!) your basic overhead costs with the basic job. Now, the extras that you sell will be almost completely gravy. Carpet protectors and deodorizing, additional rooms, upholstery cleaning and fabric protection, ceramic tile and/or hardwood floor cleaning or sealing, the list just grows and grows. And so will your bottom line.

I am NOT advocating deceptive "bait and switch" high-pressure selling here. B&S is unethical, immoral and the bane of our industry. You should, indeed must, do everything you promised to do for the price you agreed to do it for. But there is absolutely nothing wrong with informing the customer of other services you offer and, in so doing, giving her the opportunity to spend more money with you!

Think per hour, not per square foot. Once again, the eternal question on how much to charge per square foot is only relevant in that it affects how much your net profit is per hour. For example, we found moving the furniture in bedrooms caused our production times to increase by over 100 percent. A typical bedroom that might take 12 or 15 minutes cleaning all the open areas could take 30 to 45 minutes if we had to drag all the furniture around (cleaning under fixed furniture in a bedroom is seldom necessary). We started offering a "40% Open Area discount" off the entire square footage in the room and our customers loved it. And we actually made more money and net profit per hour.

Become more efficient. The eternal debate of "Can you do as good a job with a portable as you can with a truckmount?" will be with us forever. But to me, the question is, "Which method is more efficient?" And simply put, on residential cleaning we could flat out do more work faster with less employee fatigue with a quality truckmount.

Anything that you can do to reliably clean better and faster will pay off in the long run. Rotary extraction, powered hose reels, wastewater pump outs, lighter and wider scrub wands and fresh water tanks can all give you faster production times on some jobs. And if you haven't discovered this before, please quit skimping on chemicals. Buy the very best for your application. The cost difference between marginal and great chemicals is such a miniscule percentage of the job. Quality chemicals that may cost a bit more will dramatically increase your efficiency, your cleaning quality and your bottom line.

peaking of chemicals, one of the biggest revolutions I have seen in cleaning low-pile commercial carpeting is encapsulation. Properly specified and applied, encapsulation technology will clean much faster with better dry times and better final appearance than hot-water extraction by even the most powerful truckmount.

Change your market. Where is it cast in stone that you have to be just like every body else? Carpet cleaners have a lemming-like tendency to congregate at certain price points and market segments and then fight tooth-and-nail over the few customers available. Look around for market segments that are underserved or even better undiscovered in your town.

For example, if I was cleaning carpet in a large market base, I would very probably clean very few carpets. Instead, I very likely would be known as "The ceramic and grout cleaning expert" or "Mr. Hardwood" or "Mr. Stone Restoration." Specializing in Oriental rug cleaning, wood deck restoration or duct cleaning are other business niche options. And don't forget the much maligned but extremely profitable area of regular commercial contract cleaning.

Focus on your overhead. The very best way to add to your bottom line? Save more of what you are making now. It is infinitely easier to cut $10 of expenses, which becomes immediate net profit, than to gross the one $100 needed to make that same $10 profit. Ineffective marketing campaigns are very likely the biggest culprits where your bottom line is concerned, and unnecessary Yellow Pages advertising is probably the worst offender in the group.

Sure, pricing is an emotional issue. But it shouldn't be. Do emotions have a place in business? Absolutely. To make "Cheerleaders" out of your customers you must develop an emotional relationship based on professionalism, trust and loyalty. But when it comes to setting your price, ditch your negative emotions and focus on the points above. Then, once you are commanding the high net profit you deserve, stick to your guns and never back down.

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