How to reduce payroll costs and increase client retention.
I was contacted recently by a frustrated home-cleaning business owner. “I need more clients,” she lamented, “and I have to cut my payroll costs if I’m ever to make any money.”
“What are your client retention rates?” I asked.
“Not good,” she replied. “If I open three new accounts, I lose two within a year. I need you to teach me how to market better.”
“Your 33% retention rate is too low,” I explained. “When that rate is over 66%, your business will grow. Satisfied clients are your best sales force.”
“How do I increase my client retention rates?” she queried. “Do I need to do more CSI calls?”
“CSI calls are always important,” I explained, “but will not stop clients from leaving. Let’s talk about your second big issue: payroll. The product you sell is the labor of your cleaners. If the quality is not meeting expectations, your clients will stop buying from you. If there was a way to control or reduce payroll costs and improve client retention, would you be interested?”
“Absolutely!” replied the owner.
Using Payroll To Inspire Excellence
Let me share with you the same advice I gave this owner. In my company we have a client retention rate of about eighty percent. We credit this success to our ongoing investment in training and an approach to payroll that financially rewards excellent technician behavior.
For our successful system, we have established a base wage for everyone at the low end. We ask each employee to sign an agreement indicating which days and hours they can work. For outstanding performance, our bonus is $2.75 for each hour worked at a job site. However, if something goes wrong or a customer is not happy, there are deductions.
Attendance Each half day of unavailability is a minor infraction, unless time off was arranged and approved in advance.
Following company policy Tailor a list to your own policies. Infractions can be major or minor.
Quality of work Assessment is based on site inspections. Infractions can be major or minor.
Client complaint It’s a major infraction if it results in a permanent change of assignment; a minor one if the issue is easily corrected.
Minor infractions can reduce the $2.75 bonus by ten to thirty cents per hour. Major ones can start at fifty cents, or even wipe out the bonus. Everyone starts fresh every four weeks. We privately review each infraction with our employees so they know how to improve. Also, we don’t offer this plan to part-timers or new hires until they have been with our company at least six weeks.
This process ensures that our company attracts and keeps the best technicians. It also leads to high client-retention rates. My company’s sales are now approaching two million dollars. I have proven that using payroll programs to improve motivation leads to higher profits.
Patrick Irwin is president of Windsor Home Cleaning, which he founded in 1978. Located in Ottawa, Ontario, this award-winning company now has forty cleaning technicians plus a full-time operations and finance staff. Click here for more information.