Words: Jen Richardson
Most cleaning business owners can tell you what they paid for their last drum of disinfectant. Ask them when they last raised their own prices, and you’ll usually get a long pause that’s costing them money.
Your pricing affects profit more than almost anything else you can control. Here’s a simple example. A cleaning business turns over $600,000 a year and makes eight percent net profit, which is $48,000. If it lifts prices by five percent and keeps the same clients, that’s an extra $30,000 going straight to profit because the costs haven’t changed. Profit jumps from $48,000 to $78,000.
To make that same $30,000 by winning new work at an eight percent margin, you’d need to find $375,000 worth of new contracts. One of those options is a lot less work.
We look after everyone but ourselves
Small business owners are very good at absorbing costs. Award wages go up every July. Super rose to 12 percent last year. Insurance, fuel, rego, chemicals and consumables all crept up, and we quietly pay every one of those increases. Then we keep charging clients what we charged three years ago.
It usually comes down to fear. We worry the clients will walk, or we’ve built a good relationship and it feels awkward to raise it. Sometimes we’re just too flat out to sit down and do the numbers. So, the business ends up subsidising its clients. The owner ends up working longer hours for less.
Your equipment has a price too
This is where a lot of cleaning businesses leak money without realising it. Think about your floor scrubber, carpet extractor or pressure washer. When you bought it, did you build its cost into your pricing? And, if you did, have you updated that since? Replacing that same machine today will probably cost more than it did five years ago and servicing and parts have gone up as well.
Every job that uses that equipment should carry a share of its costs: the purchase price, the maintenance and the money you’ll need to replace it when it dies. If your pricing doesn’t cover that, you’ll be funding the replacement out of your own pocket or your cash flow at the worst possible time.
The same goes for specialist services. Strip and seal, carpet steam cleaning, high-access windows and sanitising work. Those are often priced based on gut feel from years ago and never touched again. Add in travel time, site inductions, compliance paperwork and after-hours work and many of those jobs are running at far thinner margins than owners think.
Where to start
Work out your true cost per hour, including wages, on-costs, equipment, vehicles and admin. Most owners who do this for the first time get a shock.
Review every contract at least once a year. For new contracts, include a clause that allows for annual increases tied to CPI (Consumer Price Index) or award changes so the conversation is already expected.
Price equipment and specialist work separately from your standard cleaning rate.
Give clients 30 days’ notice and explain it plainly. Most of them are running a business, too, and understand costs go up.
And if a client leaves over a fair increase, check your numbers. Quite often it’s the job you are making the least on. Your prices should keep your business healthy. If you can’t remember the last time you reviewed them, this week is a good time to start.
