What's Your Costs To Deliver Your Services?

How Much Does it Cost to Deliver Your House Cleaning Services?

Chances are you started your house cleaning business because you enjoyed cleaning and decided to turn that passion into a business. And I can bet that you went into it wanting to make a profit and be successful. Why else would you put so much of your time and effort into cleaning other people's homes?

Many times new business owners are great at cleaning but no so great when it comes to the business part of it. We are not saying that you need an MBA in order to run a successful cleaning business, but some business wisdom is definitely a must.

I cannot tell you how many times I have responded to questions from owners like; “how much should I charge for a 3000 square foot home?” or “how many hours should it take me to clean a 2500 square foot home?” Questions like these usually equates to inexperience. Sure, it's important to know how long it is going to take to clean a particular home, but it's also important to understand all of the costs associated with running a profitable cleaning business.

Understanding the true cost to deliver your cleaning services is key

Too many cleaning businesses have a tendency to overlook the small expenses associated with their business. They wonder at the end of the year why they are making money, but have no money left. For example, many times businesses underestimate their true cost per employee. They think that since they are paid $10 per hour that is the number to be figured into the price. But if you include the cost of administration (recruiting, interviewing, orientation, training, etc.) health packages, PTO, or retirement, $10 per hour is not the company's true labor cost. It is a combination of all these costs together that determines true labor costs.

Monitoring your company's costs and profits monthly, will help you comprehend your current financial position. Evaluations of your profit and losses (P & L) and balance sheet will give you a much better insight into where the money is going and what you can do to improve upon the bottom line. Many times cleaning business owners have out of pocket expenses that are never figured into the businesses expenses. We cannot stress enough how important it is to manage all financial transactions appropriately and to make sure they are recorded correctly.

If you want to stay in business and continue to pay your employees, then you need to make a profit, period. Before you can figure out how much of a profit you can make, you need to figure out the total costs to deliver your services. Once you know that, you can price your services accordingly.

Here are some of the costs involved in keeping your business running:

1. Payroll and payroll expenses. This is the number one expense of any cleaning business.
2. Recruiting and hiring costs.
3. Drive time between accounts.
4. Vehicle expenses.
5. Cleaning chemicals, tools and equipment.
6. Uniforms.
7. Insurance (Worker's Comp, General Liability, Bond, etc).
8. Overhead (marketing, administrative, office expenses, postage, telephones, internet, office rent, utilities, etc.)

Calculating Monthly Expenses

In order to calculate your expenses you could start an expenses spreadsheet or use the Budget Review Worksheet or the Operating Budget Worksheet available in the download library for MyHouseCleaningBiz.com members.

Begin your expenses spreadsheet by listing your categories down the left side of the spreadsheet. Then across the top, list the months from January through December. Next start filling in the recurring expenses such as the phone bill, insurance payments, or office rent. Then take a look at expenses that might vary from month to month. For example, you may put extra marketing activity dollars into November and early December to promote holiday cleaning specials. After estimating your expenses, total up the columns so you have an estimate for each month.

Now start another spreadsheet to estimate your sales and forecasted profit. Start by listing your estimated income by month. Next subtract out your expenses, which is taken from the expenses spreadsheet. The result is your estimated profit by month. If you don't like the results, it's time to start making plans to cut back on expenses or increase sales.

Pricing accounts and Maintaining Your Cleaning Business Profits

In order for your cleaning business to prosper and continue to grow, it's necessary to know your true costs before submitting your price. Like many new business owners, when just starting out, we jumped all over any new business opportunity that came our way. At first we made a few bucks, but over the years our expenses and labor costs increased and profits took a hit.

It's important to continue to measure the profitability of ALL your current cleaning customers. Your company expenses as well as inflation will cause your profits to decline over time and it is recommended that you run a profitability check at least once a year. If you have customers that don't fit your profit margins, you will need to determine what steps to take concerning those customers. This usually means you will need to initiate a price increase for the “unprofitable” ones.

And finally, don't be afraid to walk away from a cleaning job that you cannot make a fair profit at. Don't just give a low price to compete with other cleaning businesses for a new client. Price your service to make a profit. If you don't get the client, don't regret it, just forget it. Move on to the next prospect that does fit your ideal profit model.  

Once you know your cleaning company's true cost to deliver your services, you can, with confidence, bid for profit. And by monitoring those costs regularly and taking the necessary actions to ensure your profitability, you greatly increase the chances of your cleaning company sticking around for years to come.

MyHouseCleaningBiz.com Members:

Want to have a profitable cleaning business? Then you need to know if each one of your client accounts generates profit. The Residential Cleaning Calculator makes it quick and easy to do just that! First, estimate your price by entering a time estimate or productivity rate, along with an hourly rate to charge or square foot price. Next, you'll need to figure out your expenses. Just fill in the blanks and you'll see an immediate result - dollar amount of profitability and percentage of profitability by service and for the year.

Using MyHouseCleaningBiz.com  Residential Cleaning Calculator does just that!