29 Nov Misc.: Improving Your Bottom Line Or… Fun With Numbers !!
I would like to show you why it is so important that you charge enough for your services (without charging so much that you lose the volume of work necessary to stay busy). This can be accomplished by gradually raising your prices through out the year.
For example, if you start the year charging .20 per square foot and finish the year at .30 per square foot, you will have, at least, doubled your net income per week or have been able to cut the amount of work you do by half, while still maintaining the same income level.
.30/sq ft is a desirable point to be at because you don’t need to live in a large city or be in business 10 years or more to reach to this income level. I know many people, who, even based in small towns, charge this rate with a 1-truck operation. Conversely, some cleaners will not be able to raise their rate this fast and may have to take 2 or more years to get there.
We will assume the average job is 700 sq ft and the cost of cleaning carpet in a small town is .10/sq ft. This is a low rate, but will illustrate the point. If your cost of cleaning is higher than .10/sq ft, then the differences will be even greater than those shown here:
Example #1 [Cleaning @ .30/sq ft]
700 square feet per job multiplied by 10 jobs per week (2 jobs per day) = 7000 square feet of carpet cleaned per week.
7000 square feet multiplied by .30 per = $2100 per week in gross income.
$2100 per week minus $700 (cost of cleaning at 7000 sq ft x .10) = $1400 per week in net income.
Example #2 [Cleaning @ .20/sq ft]
700 square feet per job multiplied by 20 jobs per week (4 jobs per day) = 14,000 square feet of carpet cleaned per week.
14,0000 square feet multiplied by .20 per = $2800 per week in gross income.
$2800 per week minus $1400 (cost of cleaning at 14,000 sq ft x .10) = $1400 per week in net income.
Now, both of these cleaners will net $70,000 per year, under both of these scenarios,
and assuming they can average these numbers for 50 weeks of the year.
The difference is this:
The cleaner charging .30 per square foot will only have to clean 350,000 square feet of carpet to get there, while the other cleaner, charging .20 per square foot, will have to clean 700,000 square feet of carpet to net the same figure.
Here is a 3-step “gradual” price increase that takes 1 year to accomplish:
#1) If you start in January with a price of .20 per square foot, add .04 to it. This brings you to .24 per square foot.
#2) In July, add another .04 to it. This brings you to .28 per square foot.
#3) When the following January comes, add .02 to you price. This brings you to .30 per square foot.
For your existing customers, you may choose to increase your price over a 2 year period, so that 80% to 90% of them can be retained. You will lose the people that were only dealing with you because of your original price. This, however, leaves you with more time for the customer that is looking for a quality carpet cleaner like yourself.
At this price, (.30) you also have the option of raising the number of jobs you do (up to 3 per day) over time. Based on the above definition of “the average job”, this raises your yearly income up to nearly $100,000! Or, if you prefer, you can stay at 2 jobs per day and have more time to spend with your family and enjoy life.
The choice is ultimately up to you.