Pro's Corner

Will Raising Prices Help Your Bottom Line?

I frequently hear from owner/operators who say they hear of other cleaners charging $ .50 or even $1 per sq. ft. and are sure they could never charge that much in their market without losing their customers. It is true that a company charging 15, 20 or 25 cents per sq. ft. cannot double or triple its price in one fell swoop and not expect to alienate their client base. But, what effect would a smaller increase have? 

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We will call our hypothetical company ABC Carpet cleaning.  ABC Carpet Cleaning is owned and operated by Adam B. Cartwright. Adam has a part-time helper, Joe. Currently ABC charges $ .20 per sq. ft.  The cost of advertising, paying for his equipment and vehicle, maintenance, insurance, gas, labor, taxes, chemicals and all the other costs of running a business comes to $ .15 per sq. ft. 

My Post (31)-1

Averaged over a year, ABC cleans about 2,000 sq. ft. of carpet each workday. That is 500,000 sq. ft. in a year (5 days a week for 50 weeks). At 20 cents a sq. ft., they gross $100,000 per year. The 5 cent a sq. ft. profit equals $25,000 a year. Adam finds it a real struggle to get by on that annual income.

Adam decides to raise his prices just a little bit to 23 cents a foot.  Expenses remain the same; while the profit has grown to 8 cents on each sq. ft. they clean. The gross is $115,000 with an annual profit of $40,000. Adam is not making a fortune but some of the tension has gone from his back and neck, and he is sleeping better.

Few, if any customers, object to a price increase of 10% to 15% on a service they normally only have done once every 18 to 24 months. ABC Carpet Cleaning probably will not lose any clients over this small increase.

Next year, ABC could adjust prices upward another 3 cents. Over that year, their cost of doing business will probably increase as well, perhaps about 3%. Do those calculations, and the annual profit is now $52,750. Adam may even take the family on a vacation!

Is there anything Adam can do to help his bottom line before next year? Sure! How about by offering protector to every customer? Protector sales add one of the biggest boosts to a business in terms of income earned for the time spent. $400 per hour while applying Maxim Protector (for nylon) or Advanced with Teflon (for polyester, olefin and triexta) is common.