Episode 178 – Increase Your Cleaning Business Profit Margin
Cleaning Business Profit Margin- The Holy Grail of Your Cleaning Company…
Episode 178 Eddie Williams Loonrah Environmental Services
Mike coaches Eddie Williams, owner of Loonrah Environmental Services (you have to listen to the podcast to find out how the name came about) on how to improve his cleaning business profit margin. You can do a lot of work for some very small gains by managing cleaning times and supply costs or you can make massive gains with a simple change…
KEY POINT: The quickest way to improve cleaning business profit margin is to raise prices
Mike has given this coaching often enough to know that before he gets the words out of his mouth, your response is- “I can’t do that- they will be angry- or quit!” or “John has been with me since I first started- I could never raise his rates…”
Rest assured, you are not alone, these are common responses and we will get you through it! Let’s start with a solid philosophical foundation and build with some actionable strategies.
Start with a conversation with yourself around whey your business exists. For most cleaning business owners it has to do with freedom. Financial freedom, time freedom- freedom to do what they want, where they want with who they want.
SPOILER ALERT: All the reasons you started your company require cleaning business profit margin
Often, by the time you are a couple years in your cleaning company has become your task master. You serve it with constant interruptions, time, money- what ever it needs you deny your baby nothing. Start by getting back in touch with WHY you started your business and your goal of freedom!
KEY POINT: Your cleaning business exists solely to serve you and your family
As soon as you start to serve your business instead of it serving you, it is time to kill it or make some big changes. This is the mentality, the foundation that will serve you well when you decide to increase your cleaning business profit margin by raising prices.
As soon as those customers no longer serve your business, they have to go. Here are some examples of fine reasons to part company with a customer:
They don’t pay on time
Don’t pay at all
Berate you or your employees
So often I coach cleaning company owners and we find that 10% of their customers are losing them money. They are writing a check every month for the privilege of cleaning. They do not qualify as customers if there is not profit margin.
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Here are some things to keep in mind when you discuss price increases with customers:
If not a good fit under the new pricing structure, that’s totally fine
You don’t owe anyone cleaning forever regardless of the profitability
It’s not their fault- they are paying the amount you asked them to
KEY POINT: More times then not, your customer knows they have been underpaying and are surprised it took you this long to figure it out!!
Now that you have a proper mindset, lets talk turkey and give you some actionable ideas on how to raise prices and have appropriate profit margin for your cleaning business.
Ideally this is a face to face conversation.
NOTE: If you are a residential cleaning company with lower monthly value than your commercial counterparts and you have more than 50 clients, you can do this by phone.
Don’t make the conversation about exchanging money for time, but solving a pain. Start with asking if they are satisfied with your work. If they have issues- address those first. You have to be able to effectively deliver the result your promised before you can address pricing.
You may want to have the conversation about raising prices at a different time, but if they are an unprofitable customer, have it immediately. You might try saying something like this:
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“I actually came to talk to you today about how we can do a better job. We have not been spending enough time to fully solve your problem and serve properly. To get this fully taken care of for you, we are going to need to charge $X. I understand if it’s too much and you need to find someone else that is willing to handle this for less money. But I can assure you with the proper resources, we will be able to get this handled for you.
If they are happy with the service you are providing, the conversation gets a little easier:
“I am so glad we are doing a good job for you! I did want to let you know that to continue providing fantastic service and keeping this headache off of your plate, we are going to have to adjust our pricing.”
Feel free to explain that the cost of labor is increasing and you are more interested in providing excellent service than being the low cost provider. It is not unreasonable for you to make a profit. If they want you to work for free so they can save a buck- they are NOT your target customer.
Now that you have the tools to take charge of your cleaning business profit margins, join us in the…
Mike gives his guest the opportunity to share their experience and knowledge with you and asks three quick questions and gets three amazing answers:
What’s the best piece of advice you ever received?
What’s the biggest mistake you’ve made in the cleaning business that we can all learn from?
Being unbalanced in your pricing.
What’s one thing Cleaning Nation can do today to improve their lives or their business?
Love. When you act out of love, you get to do what you love.