Episode 698 – How to Price Services for a Multi-State Cleaning Company
Nicole's Cleaning – How It Started
A Successful Venture with a Flaw
Nicole evolved gracefully with her business in five years. Her cleaning company services both commercial and residential clients in Wisconsin and Minnesota. Today, Nicole’s Cleaning has around 12 employees that include both part-time and full-time workers.
But there was a deep flaw in the venture. Nicole was operating from the border zone between Wisconsin and Minnesota. Hence, she got clients from both these regions. But in recent times, she heard from some sources that she wasn’t charging enough in Minnesota. This remark made her rethink the pricing of her services. This particular pricing issue emerged as Minnesota has a higher cost of living, unlike other surrounding territories.
Mike's Perspective on Setting Financial Structures
On discussing the issue with Mike in the Grow My Cleaning Company Podcast, they together tried to put things into perspective. According to Mike’s opinion, he would charge the same for every client he gets. It wouldn’t, and it shouldn’t vary from client to client based on their financial backgrounds. Whether it’s a small-scale startup or a multimillion-dollar industry, the pricing of the services should not depend on the client’s credit score. Neither should it change with the varying economy at different places.
In Mike’s words: Payments don’t come from preferences. You cannot charge higher for a person with considerably expensive attire, and neither can you drop your pricing down for a frail old lady with a poor bank balance. This way, an owner will never be able to scale his/her business correctly.
Again, to structure a successful financial model, Mike advises Nicole to follow the “50-30-20” model, where 50% for the cost of goods sold, 30% overhead, and 20% profit margin. Suppose the labor cost is $100, and you charged $200, so that leaves $60 for overhead, and you get $40 as profit. Therefore, if the expense gets higher somewhere, you have to charge higher to balance it out.
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