Pricing Series Part 3 - Cost Versus Value

I was talking with Robert Pierce from my Solo Cleaning School Elite Membership. He's doing amazing. Robert works as a manager at Target and it's been in retail for 25 years. He found me on the Side Hustle Nation Podcast and decided to start a solo cleaning business. Robert understood the value of investing into his new business as he wanted to shortcut years of trying to figure it out himself. He joined the Elite Membership and has subsequently built his solo cleaning business in 6 months to a lean, professional, and profitable company. I was so impressed talking to him as he shared how close he is to achieving his goal and dream of getting out of retail! I was so excited to hear this. We talked about his plan and how many clients and profit he needs to hit this goal.

​The main reason for the call was for strategic coaching. He was taking on 1-time and recurring house cleaning clients, but like me, he wanted to get into commercial more. He had a recent opportunity with a tool & die shop. It was set up like any industrial building. Picture a large steel box with offices in the front and huge warehouse and/or manufacturing space in the back. There's a filthy bathroom in the warehouse area and the office space isn't the most pristine either. These are blue-collar workers, running a useful service to the community. Robert did an estimate for cleaning the offices and warehouse restroom 3 weeks ago with no feedback. He wondered if his prices were too high. Our conversation was excellent and I knew it would help others as well.

Robert gave a very realistic price of $200 per visit. He estimated the job would take 4 hours per visit and he wanted to charge an hourly rate of $50. Thus, he gave a flat rate price of $200 per visit. I agreed with Robert on his method and the price was reasonable for the work he was proposing to do. However, I knew it was overpriced! Listen to what Robert shared next. "Ken, I found out that this facility had a janitor that cleaned prior. I figure he was there for 8 hours to clean the place and made $12 per hour. I'm guessing the tool & die shop paid $100 per day to have their facility cleaned. I'm asking $200. I figured it would be fine since I'm an outside contractor and would be fully insured." Robert already knew why they weren't calling him back. This was all the opening I needed. He is absolutely right at his $200 price is completely reasonable. I taught him that in the Elite Membership. But... there are two angles to come in on a price. One is COST PRICING and the other is VALUE PRICING.

It doesn't matter where he's cleaning. If he estimates the job will take 4 hours, then $200 is an appropriate price based on COST. Unfortunately, that is only half of the equation. What is the value? I shared an example of a wealth management firm where the planners wear suits. Every client has the potential of a million dollar portfolio coming into that business. A law firm is similar. These type of professional companies VALUE cleaning very highly because it could make or break a million dollar sale. I call this presentation cleaning. The point is this. The wealth management company may VALUE a cleaning at $300. It only COSTS you $200. You can easily charge $250. You feel like you're getting a great price and they feel like they're getting a great value. This is a win-win. Let's look at this tool & die shop. They are not white-collar professional workers. They wear steel-tipped boots and dirty blue jeans. They track dirt around the offices and restrooms. They want it cleaned, but they don't care who sees it. Therefore, they VALUE the cleaning at $100. That's why they paid a janitor. When Robert came in at $200 and they have a value at $100, there was no chance for negotiation. Robert would have to come down in price to $150 and the shop would have to pay $50 more than what they valued. This is a lose-lose situation. Do you see the difference between COST and VALUE? The lesson here is very simple. Shop yourself around to the company's that have the greatest VALUE on what you can provide for them and you will always get great prices and profitability.

There was one other lesson that I taught Robert on that call. Although my ISO Model is intended for solo cleaners, the strategy is applicable for every cleaning business. ISO stands for Initialize, Stabilize, and Optimize. Here's what I taught him. "Initializers need clients. Do whatever you can to get clients into your business. Serve them. Get testimonials, recommendation letters, before & after photos, and referrals. Stabilize that business. Optimizers need profit. Do whatever you can in a strategic way to increase profits, whether that means adding or subtracting clients."

Make sure to check out Solo Cleaning School Elite Membership where Robert and other amazing solos get the training they need to accelerate through the ISO Model!