Count The Cost of Your Janitorial Proposal

Suppose you wanted to build a tower. Wouldn’t you first sit down and count the cost to see if you have enough money to complete it?

CleanlyRun blog post image - Crane

For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you saying, this person began to build and wasn’t able to finish.

These wise words written 2000 years ago are still true today. And these foundational truths has guided me well for many years, from running multiple businesses to navigating life.

In this Blog Post, I’m focusing on how to determine what it will cost to clean a building before you set your bid price. You MUST “Count the Cost” first!

Based on my three decades in the Janitorial Industry, here’s my Top 10 list of considerations required to calculate a profitable Janitorial Bid!

  1. GENERAL BUILDING TYPE: Different building types have different cleaning times/production rates. A 3,000 sq’ fully carpeted Library may only take 2 hours to clean, while a 3,000 sq’ Medical Clinic with 1500 sq’ of waxed VCT floors may take 4 hrs.
  2. CLEANING FREQUENCY AND LEVEL OF DIFFICULTY: Cleaning difficulty level is gauged not just by the size of a building, but rather by looking at the number of employees in the building (Building Density), plus the number of customers or patients or clients – the “Traffic” – that frequents this building on a daily basis. Higher building density/traffic results in longer cleaning times, which equates to a slower cleaning production rate for you and your cleaning staff. Basically, the more people in and out each day equals more trash, spills, messes, etc., which means it takes you longer to clean.
  3. CLEANABLE SQUARE FOOTAGE AND FLOORING TYPE: Whether you count ceiling tiles, get the number from your potential customer, or look online at the County Property Appraiser, make sute that you get the actual Cleanable Square Footage. Did you know that carpeted floors clean 15-20% faster than hard floors? And that waxed, vinyl tile floors with a shine can take 10% longer to sweep and mop than other hard floors like ceramic tile?
  4. DETERMINE PRODUCTION RATE: A facility’s Production Rate refers to how many square feet of a building can be cleaned by one person, in one hour, performing a set of standard cleaning tasks. Of course, you will have a much slower production rate when doing residential and construction cleaning.
  5. TOTAL DAILY CLEANING/LABOR HOURS: Once you have your Production Rate, this rate is then used to compute how many hours are required to clean a building per visit (i.e., the Daily Cleaning Hours). And once the Daily Cleaning Hours have been workloaded – that is, labor and wages have been distributed across these hours – then the bid’s Labor Costs can be computed by the system.
  6. LABOR COSTS: Once the Daily Cleaning Hours have been workloaded – that is, labor and wages have been distributed across these hours – then the bid’s Labor Costs can be totaled.
  7. ADDITIONAL PAYROLL COSTS: These costs typically include applicable Federal, State dan Local Taxes, as well as Work Comp, etc. There are government websites that can give you your state rates to go by. Your Accountant can help you. Also, there are many payroll software programs as well as many Employee Payroll Companies and Employee Leasing Companies that will give you an exact percentage.
  8. CHEMICAL /SUPPLY COSTS: These can run 3-10% of your monthly costs and expenses. These costs typically include floor cleaner, glass cleaner, all-purpose cleaner, disinfectant cleaner, bowl cleaner, stainless steel polish, etc. Buy chemicals in dilutable, concentrate form to keep costs down. Chemical mixing stations are great also. Products like bowl cleaner and stainless steel cleaner are usually sold “ready to use” (RTU), and cost a bit more, so shop around for reasonable pricing. Equipment like vacuums, buckets, floor buffers, etc. are an upfront cost that can be depreciated over time (talk to your Accountant).
    Chemicals like floor stripper, floor finish and carpet cleaner are an expense if you provide your customer with extra Specialty Work, but is included when and if you add these services in your bid.
  9. OTHER MISCELLANEOUS COSTS / EXPENSES / OVERHEAD: These typically include things like.. higher level managers over multiple buildings doing inspections, training, cell phone costs, fuel, etc. When you’re just starting out with only a few buildings to clean, these costs are minimal and can be hard to define, but figure in at least 2-3% to be on the safe side, even if you are the only employee and do all the work.
  10. TOTAL JANITORIAL COSTS / EXPENSES: Congratulations, now that you’ve calculated all of these costs and expenses you’re ready to “SET YOUR PRICE” (via Profit Margin or Cost Markup)!

Keep in mind:  When you get requests for a Janitorial Proposal, that’s the time to create a winning bid! If you’re content with the way you’ve been calculating your Total Janitorial Costs/Expenses,” that’s great. But if you’re looking for a proven competitive edge – my automated best practices – I encourage you to try a free 30 day trial of CleanlyRun Janitorial Bidware.

Check us out at CleanlyRun.com… Let’s grow your business!

CleanGuidePro Successful bidderDrake

Janitorial Profit Margin versus Janitorial Cost Markup. Which to choose?

Not understanding the difference between Janitorial Profit Margin and Janitorial Cost Markup is one of the most common pricing mistakes in the cleaning industry.  I’ve seen way too many new business owners decide to price their janitorial bids solely on Markup – “I’d like to make $500 on this job” – rather consider the Margin of Profitability for the work…

Both terms – Margin and Markup – help you calculate profit, but prioritizing the wrong one could hurt your bottom line.

Let me break it down.
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Margin: (a.k.a. Profit Margin) is the percentage of the final selling price that is profit. In the highly competitive janitorial services industry, Profit Margins can trend low for very large jobs — say, 12 to 15% — but that range is unprofitable for small to medium clients.

Markup: (a.k.a. Cost Markup) is either the (a) Dollar amount above cost, or the (b) Percentage of the cost that you add on to get to a bid price.

So which approach should you use? As a general guideline, it is probably better to focus on your Profit Margin rather than a Cost Markup in a service business. A higher Profit Margin percentage matters more than a higher Cost Markup percentage. For example, a 25% Cost Markup only yields a 20% Profit Margin, which means that your markup isn’t as profitable as it may seem at first glance.

With margins, a 50% Margin means that half the selling price is profit. So, a 50% Margin means there is a 100% Markup — as you have added 100% of the cost price to make the selling price. (With margins, a 100% Margin is only possible if the cost price is zero.) In short, a focus on Profit Margin is more effective when it comes to pricing your janitorial bid.

Of course, situations and customers vary, and the choice to prioritize Margin or Markup is yours. Fortunately, CleanlyRun Janitorial Bidware displays Markup and Margin right next to each other, so you always know what is your Profit Margin’s equivalent Cost Markup — and vice versa.  In addition, we’ll suggest a minimum Profit Margin/Cost Markup for each bid that you can adjust as you see fit.

On a related note, I’ve touched on how the Profit Margins of smaller businesses can be higher than bigger ones, even with a lower Fair Market Price.

That’s enough math for now! 😉

CleanGuidePro Successful bidderDrake