Pricing For Post Construction Cleanups– How to! By Aduvie Okoh
The data shows that the most important factor in winning Post Construction Cleaning contracts is the price. Ninety percent of the proposals we have lost was due to the price. We lost to a lower bidder.
Pricing is everything. Usually, The General Contractor is always looking for the lowest bidder or at least a bid that is within his budget.
The lowest bidder is first picked, then the Project Manager goes through the scopes and expectations with the Sub.
As long as the cleaning contractor covers all the required scopes, they will issue the cleaning contract.
It is the Sub’s responsibility to execute the contract within the contract amount.
The question is, how do you set your pricing correctly? How do you put in a price that the Project Manager would be happy with and at the same time you too will make a profit?
The price is where most contracts are won or lost. Unfortunately, most cleaning companies have not taken the time to study and understand the art of pricing construction cleanup jobs. They price emotionally.
Emotional pricing means pricing to maximize profit. Yes, it is true that you are in business to make as much profit as you can, but to win a cleaning contract, you have to be strategic. There are factors to consider before submitting a price.
Think through these factors before deciding on a final price;
The Competition: The Post Construction Cleaning landscape is one of the easiest niches to get into. Every day, new entrepreneurs venture into cleaning. Experienced in residential and commercial cleaning, they decide to get into the Post Construction Cleaning niche because they recognize that there is money to be made.
And there are others who have no cleaning experience but they need to put body and soul together, so they venture into Post Construction Cleaning.
Therefore, you must understand that the Project Manager is not talking to you alone. On average, the PM talks to 5 vendors before making a final decision.
Except you have some sort of relationship with the project manager or some sort of expertise that you can leverage on, your strategy must consider the competition.
Obviously you do not know what the competition is thinking, but you can decide on your price by submitting your lowest comfortable bid.
If a job can be executed for 10k, ask yourself, can I do it for 8k, how about 7k, that way you are thinking strategically.
Usually, after submitting a price, at Construction Clean Partners, we try and get information from decision-makers on how our price sits with respect to the competition. Some decision-makers are cooperative, and if they tell us, ‘hey I got a price lower than yours’, we know to go lower, depending on the project.
Budget: Another factor to consider is The PM’s budget. The smart thing to do is ask, “Hey PM what is your budget for the cleaning?”. “How much are you willing to pay for this service, what is your range?”
You usually may not get a direct answer, but when you do, can you go lower? In case the budget is too low, I will suggest you still send in a number. If he doesn’t get a lower bid, you win. If he does get a lower bid, you will be in file for future invites.
Cost and Profit Analysis: This is a factor to consider as well as a pricing style. This style mostly gets you a very competitive number, but you have to get all your variables right.
Cost of Labor + Cost of Equipment + Markup (Profit) = Total Price.
To accurately get your labor costs, you have to first determine the number of hours/days to complete the job. Multiply that by your hourly labor costs. In most states, official labor costs hover around $25/hour.
Most cleaning companies pay their laborers for less than that, but it is a good number to use to estimate your costs. As stated earlier, when you finally conclude on a price, ask yourself again, “can I go lower”?
If the job is Union labor or Davis Bacon prevailing wage, you have to find the prevailing wage in that county before pricing. This link is helpful for checking for the prevailing wage. (We will discuss Davis Bacon in a future article).
Equipment costs usually comprise of all your reagents, machines, lifts, etc that you either buy or rent to do your work with. Experienced cleaners are usually familiar with these costs and can easily calculate the total cost.
New kids on the block may have to make the extra effort to find these costs and put numbers together. It is worth it.
Assume your labor and equipment costs equals $6,000, and you decide on a markup of 40%, your total price would be $6,000 + $4,000 = $10,000.
Can you markup by 30% or 25% or 20%? Think about it before you submit. It is tempting to go for the highest markup, but will the highest markup win?
Per Square Feet pricing: Using the Cost and Profit Analysis method can result in very competitive pricing. But it is usually difficult to get all your variables correctly. Especially for big jobs that require multiple mobilizations and if other trades still have to work while you clean.
Setting a price using the Area (feet^2) can give more robust pricing. The general average across the USA is 25 cents per square foot. More often than not, 25 cents per SQFT would give you a markup of 40% or more, especially if the cleaning is limited to final clean only with little or no exterior windows.
As usual, can you do the job for less? 23 cents maybe? How about 21 cents?
You should understand that projects have different types and scopes of work. Deep cleaning for an apartment complex priced at 25 cents per Square feet cannot be the same price for a warehouse that needs basically a sweep and scrub.
Construction Clean Partners came up with a pricing guide that should help you with pricing for most types of projects. The list is not exhaustive and does not consider Davis Bacon or Union pricing.
Also, in some states, labor costs may be higher and may need you to go above 25cents per square foot.
You will agree with me that having a strategy for pricing cleanup jobs is a very important step to winning Post Construction Cleaning Contracts. Recognizing the competition and working with the PM’s budget would go a long way in helping you to create a competitive price.
In the end, pricing is an art. But understanding and mastering the pricing styles will go a long way in helping you secure more wins.
This article is written by Aduvie Okoh with Construction Clean Partners. You can email me with any questions, firstname.lastname@example.org or give me a call (404) 734-5751.