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Episode 698

How to Price Services for a Multi-State Cleaning Company: Episode 698


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Episode 698 – How to Price Services for a Multi-State Cleaning Company

Today, we are going to talk about Nicole’s five-year-old cleaning entrepreneurship and how she managed to structure a profitable financial model for her business.

Nicole's Cleaning – How It Started

Nicole May started Nicole’s Cleaning in Arcadia, Wisconsin, five years ago. She worked as an employee in a cleaning company in Hayward previously. After moving to Arcadia, Nicole started working as a waitress and manager of a restaurant. She had worked for a while and finally took the leap and ventured into her own cleaning business and into the world of being an entrepreneur.

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.

Nicole's Takeaway

With a set of examples that Mike came up with, Nicole finally got a clear picture of her financing model. She understood that as the cleaning business owner, she has to take charge of the pricing models, and that cannot be biased. She also realized that she should increase the charges if the labor expenses and other expenses get higher. The podcast session helped her figure out the successful financial model for her company.

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