It’s all about the money, money, money…
It is a question I get asked often – How do you price up for your cleaning service? The area of pricing is one that most new cleaning businesses (and the established ones) have trouble with, as we run the risk that, if we price ourselves too cheaply we could be inviting all the wrong sort of clients yet if we are too expensive we might not get any clients at all, Eeeek!
There are several ways to price up for your cleaning service and in today’s post we are going to look at the cost-plus model and how you can use that to check that you are covering costs and making a profit.
What does cost-plus mean?
Cost-plus = the cost of what it takes to provide your service + the profit margin you want/need = profitable business
In order to work out our costs, we need to know them. The below three areas show the different costs types you will have within your cleaning business.
1. Material Costs = Cleaning products, mop heads, rubber gloves, can of polish… anything and everything you need to complete your service properly
2. Labour Costs = What do you pay yourself or your employees per hour? Will you be liable for employers PAYE and NI on their weekly/yearly wage? Do you pay into a pension for employees? Have you factored in employee holiday pay? When working out the labour costs, make sure you include all the associated costs and not just the cost per hour of the physical work.
3. Overhead Costs = Insurances, bookkeeping and accountancy fees, administration costs, advertising, professional subscriptions, taxes, office supplies, employee uniforms etc., etc. Some of your costs will be fixed, like your insurance for example, you will know what the monthly cost is each and every month. Some of your costs will be variable, such as your printer ink or paperclip supplies, and these costs will vary and fluctuate throughout the year.
Now that we know our costs, we have to work out the profit margin we want to add, in order that our business makes money and is profitable.
At this stage, I would recommend that you start to do some market research and take a peep at what your competitors are charging for their services. As you now know the cost of putting yourself or your staff member out of the door, you will be able to roughly gage what profit margin your competitors are working to.
*** As a side note: Please compare your business to similar businesses. If you are a sole trader, compare your sole trader cleaning business to the best cleaning sole traders in your area – don’t compare your sole trader business to a cleaning service business employing people, as their overheads will be very different from yours and you will be doing yourself a disservice **
Take a look at the below video as a full recap to the above post:
What did you think of today’s post? Do you think it could be useful for you and your cleaning business? Would you like to know more solutions like this? Please feel free to add any comments, suggestions and feedback below.
Thursdays video is all about competitor checking and why you should be doing it in your business – subscribe to the YouTube Channel to make sure you never miss an upload 🙂
See you soon,