How To Price Jobs as a New Cleaning Business Owner
All over social media I see the question "how much should I charge?" In fact, I asked the same question when I first started out. I see it from carpet cleaners, house cleaners, power washers, window cleaners, it seems everyone has the same question starting out...how much should I charge?
The thinking goes, I need to make $35, 50, 60 /hr and I am good.
You need know your costs. BEFORE you establish a price.
And your costs will be different per industry and market.
If you are a house cleaner/maid business, and have low operating costs and low employee wages, then perhaps charging $35-50/hr is appropriate. That would break a legitimate power washing business. Once you understand your costs and your market then you'll understand how to price jobs.
So, lets go over a basic breakdown
This is an ideal...a single operator with no employees could have a net profit of much higher than what we have here. In fact if you are single owner operator or invoicing under $200k per year, you should be netting around 50% of your gross revenue, (and then the taxman will come, but that's a different post.) I certainly didn't net 50% in my first year (I was around 4%), but that's beside the point! Here are the things you need to know:
100% What you invoice for the job. Your Top Line Revenue. This is what you charge for a job. And this is what you want to know. So how do we figure that out? By understanding the rest of what follows.
Cost Of Goods & Services (COGS)
Your COGS are the direct costs associated with the actual service you are invoicing for. Your COGS should be 48% or less of your gross Income.
Aim for less less less!
Employee wages. 17-21% No more than 21% I cannot stress this enough! I see guys charging $50/hour and paying their helper $25/hr – you’re not going to be profitable paying your employee 50% of what you invoice. MAX 21%.
Whatever is used to complete the actual job is counted here. Things like gas, small tools used for the job, tarps, drop sheets, o-rings, quick connects, brushes, chemicals, etc.
TIP: Buy chemicals and single use items in bulk, direct from the manufacturer if you can. It might cost more up front, but you’ll save huge $ in the long run.
Your expenses are the things you need to run a business that are not necessarily associated directly with the job you just invoiced.
Your expenses should be 30-35% of Gross Income.
Your business assets (vehicles, big tools, computers, furniture, equipment etc.)
Maintenance on vehicles and equipment. People tend to forget this! Power washers require weekly oil changes, hoses break, quick connects rust. Pumps die. etc. Plan for it.
Your salary (yes pay yourself a salary! I wont tell you how much, but it should fit in here.)
Insurance, liability. These are usually around $10-15/day. Don't forget!
WCB, Workers comp/WOrksafeBC etc. Whatever you call it, this varies from industry. Our rate is 11.26%. What that means, if my employee makes $200/day I pay $22.52 to wcb per day. A house cleaner is probably around 2%
Accountants, bookkeepers, office staff.
Marketing, website, etc etc. Marketing is big expense for businesses and should be around 10-12% in your first 3 years, and around 4-6% for an established business.
Net Profit – 17-23%
This doesn't go in your pocket.
Reinvest 8-10% in the business. Upgrade your equipment to increase your efficiency. Get another vehicle so you can have another crew on the road. Etc.
Save. 5% to a business savings account for those long cold winters. Your business needs cash, it is the fuel that drives your business forward. If you don’t have any coming in, you better have some saved up, or employees will leave, equipment will break, and you’ll be stressed. In short, your business will stall on the side of the road.
Some To You, the owner. Usually around 5%. ON TOP OF YOUR SALARY. Again, if you are a single owner operator you should be keeping around 50% of the gross.
TIP: have several business bank accounts. Not just one. Have an operational account and a savings account at minimum. I also highly recommend reading the book, Profit First.
So how much to charge for a house cleaning or a house wash or carpet cleaning? If you are completely new, (which I assume you are, since you are asking), go and clean for friends and family. Learn how long it will take to complete a particular job correctly. Learn your COGS and consider all of your operating expenses.
Once you get that, you will have a better understanding of how much to charge.
I hope this helps.
Disclaimer - I am not an accountant!