How Do You Price A Cleaning Bid?

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How do you price a cleaning proposal, and why is it so important?
In this episode, I dive into how our company, Universal Janitorial Services, prices our recurring clients.
People don't buy based on price; they buy based on perceived value. I give the example of the Chevy Spark vs. the Ford F-150. The Spark is the least expensive new car sold in 2021. The Ford-150 series starts at double the price and sold the most. If people buy based on price, they would have purchased the Spark and not the Ford F-150. They bought the Ford based on perceived value, based on whatever that is for them (utility, leg room, safety, etc.).
There are different ways to price: $$$/sqft, $$$/hour, by the job, and by a monthly or annual rate. Pricing on square feet or hourly can be problematic.
Our pricing strategy is to lose 80% of our bids due to price. We don't want to win them all. Why? If we win them all, it means our price is too low. If we only win 2 out of every 10, then it means that those two are very profitable.
There is no RIGHT or WRONG way to price, except that it's wrong to price and lose money on a consistent basis. You always want to make money.
Our price has 4 components: labor, supplies, overhead, & profit.
Labor is simply the calculation of the gross wage (rate paid per hour x hours per day x days per week x weeks per year). Then we add in our labor tax rate. Some people add in insurance rates, uniforms, etc. We don't do that, but it's not a bad thing if you do. We add this into our overhead.
Supplies, for us, are based on the Scope of Work (SOW). We estimate supplies based on that SOW.
Overhead is EVERYTHING that is not labor or supplies. So, for Universal Janitorial Services, this includes insurances, payroll processing, postage and delivery, marketing, legal, accounting, my salary (we are a C-Corp), rent, utilities, telecom, SaaS, office supplies, and more. I create a multiplier. ALL of our clients pay this multiplier. This is based on (= Overhead /(Labor + Supplies)).
Profit is whatever you make of it. Our goal is around 10%. Again, we are a C-Corp and Uncle Sam takes 35% or so of that. If you're a pass-through entity like a LLC or Sole-Prop, then you definitely need that percentage to be higher to cover your pay.
I add up all 4 components to come up with an annual rate, and I divide that by 12 for a monthly recurring rate.
Finally, we create an overall company P&L and create individual P&Ls for each client. That way we can track which clients make us more money than the others.
Resources mentioned:
Copy.ai
Video Walkthrough On Our Pricing (Important to note: I rewatched this video I made last year and caught a mistake in the profit calculation. The enclosed Spreadsheet in the line item below actually has the correct calcs - Mark).
Sample Pricing Spreadsheet from Video above
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