Use these best practices to implement your first price adjustment or across-the-board price increase.
Everything’s been going along just fine, but maybe there are a few things nibbling at your subconscious. Is your net profit from each job shrinking somehow? Have you heard that “the other company in town charges $XX per hour” – more than you? Does every job you quote sign up with your service? Has it been ages since you did a price adjustment or a price increase? Well, as scary as it may be, now is the time to raise your rates and/or prices!
One way to get over the fear is to have a good system to follow. Creating that system may be a challenge initially, but when put into process, it becomes a standard task that gets done each time without having to think about it. There are three basic types of rate/price changes.
1) Standard Rate Change. This is when you change the rate you charge across the board. Regardless of how you pay, you will have a standard rate per hour. You may have different rates for different types of cleaning (one for routine service, one for vacant cleans, or maybe your weekend rate is different), but at some point, you will need to raise this rate to not only make ends meet, but also to remain competitive.
Consider putting this on your yearly calendar as a to-do item. When it pops up, check the competition’s prices, talk to your accountant about your profit margin and any necessary changes, and evaluate your expense accounts for waste. Rate changes usually affect new clients while price increases will be used for routine clients.
2) Price Adjustment. This is when you need to adjust the price you are currently charging your routine clients because they are either over or under paying. Typically this will happen soon after the client begins service. There may also be a change in the household that demands a price adjustment, such as new flooring, child goes off to college, new pets, etc.
Put a system in place to flag all clients after their 3rd cleaning to check the accuracy of the time allotted for cleaning. Consider auditing all clients at their one-year anniversary. As part of that audit, check on the condition of the home. This can be done by survey, a personalized letter, phone call or by using an internal audit system where your techs fill out an audit form recording all changes to the home. Price adjustment conversations are better done on the phone or in person, so the reasoning can be explained more thoroughly.
3) Price Increase. This is when you need to raise the price of all clients’ current rate due to inflation, increase in expenses, etc. It’s the scariest of all types of increases, but certainly the easiest to implement. Consider making increases on a yearly basis and incorporating the audits described. Additionally, use these audits to track the level of satisfaction your clients have with your service.
Increases are easier to send when you are convinced of the client’s satisfaction. Doing audits and sending increase letters (by email or snail mail) based on the client’s anniversary have 3 additional benefits. If there are losses, they will be mitigated by being spread across the year. Doing them monthly makes them seem more common place and consequently less scary. Turning them into a systematic process means anyone can do them and you can cut your emotional ties more easily.
When all is said and done, for you to see your bottom line grow, you must run your company as a business and not as though you are cleaning for your friends. Don’t wait any longer. You know it’s time!
Liz Trotter is founder of American Maid Cleaning as well as an entrepreneur and leadership trainer based in Olympia, Washington. She is also a former ARCSI baord member, a partner in Cleaning Business Builders, creator of the HiPEP employee development system and a charter member of Cleaning For A Reason.