Why Do We Give Regular Price Increases?
We get money is tough to talk about and we understand as a business ourselves how much a dollar needs to get dragged out to make it go as far as possible. Giving out price increases is hard, for many reasons. For one, we expect when one of our clients gets a rate increase notification they will go out and get quotes (which is just smart business, but it still stings a bit) from other companies. We also understand budgets are what they are. While we do our best to keep prices reasonable, we also want to guarantee our pricing for at least a year. Without some magical future sight abilities, we have to over estimate costs so our clients can plan for at least a year.
So, what leads to price increases in janitorial? How is the price determined, the factors used to make sense of it all?
Economical Factors Affecting Price Increases
We could honestly spend hours, days, heck even years hashing out economic factors. You could make yourself crazy trying to predict what the economy, lawmakers, mother nature, out of the blue epidemics or a random disease effecting a breed of frog that ends up effecting … who knows what but makes things more expensive somehow.
Typically, we have seen businesses use a 3% inflation increase as their go to method. Simple and less math, which is always nice, but we find it does not fully encompass all the possibilities that are out there when it comes to ensuring your costs are covered and you account for your goal profit margin.
To be frank – it can be “educated” guesswork when you really think about it. We look at the following to help guide us but at the end of the day, we are not fortune tellers.
We know our employees are the backbone of our company. To help express that, we account cost of living and a sustainable wage into our pricing. Since COVID, our wages have gone up almost 100%. This is both because a low wage is not motivating for applicants and labor here is not a huge, endless pool of people. We also do specialized cleaning, such as surgical centers, that we want to pay a higher wage knowing the expectations are also high of the staff member.
Along with just general wage, we also like to offer other benefits to encourage long term employment. Having long term employees actually can help reduce costs – time and money spent training and other administrative costs associated with hiring new people are saved with having people stay.
Remember the toilet paper crisis of 2020? It had a HUGE effect in our world and still does to this day. We had some paper products increase over 40% and randomly at that! Having buying contracts and rebate programs do help but there is only so much you can do when you are at the mercy of suppliers. Included in contracts are usually cleaning chemicals and supplies such as rags, mops, mop buckets, etc. but if paper products are included…oof! Price increases have to account for these possible supply cost changes. It is all unpredictable at best, a wide shot of a guess at the worst. Here is a great article helping explain why.
Honest Miscalculation and Changes in the Workload
People will always make mistakes, unless you are Tom Hanks who we know is just a perfect human. When pricing happens, mistakes can be made. You can miss something in your calculation or how many hours to account for. This tends to be hard admitting to a client and at Garden City Janitorial, we will not ask for a correction if it is not caught until after the contract is signed. Doing right by the customer is a top priority of ours.
Change is also a constant in this world. Staff changes, expectations change, the space and it’s cleaning needs change. With long term customers, it’s an honor to be able to work with these changes and adapt. But that also leads to changes in scope, time needed to clean or days cleaning is needed are all items that affect pricing.
There is much more that goes into pricing, so before your eyes go numb, we will continue this series later on.