In the residential cleaning industry, we often speak of the 3 profit drivers in a company – Costs, Price, and Volume. Much of the focus is on lowering costs and increasing volume, but it’s also important to talk about Price. In this article, we will take a closer look at one of our Core Key Performance Indicators (Core KPIs) – your Bill Per Cleaning and how making small changes to this one area can have a big impact on your business overall.
Sales Driven Mindset Vs Profit Driven Mindset.
In the infancy of a residential cleaning company, we tend to focus on how many homes we have cleaned or how many customers we have – this is known as a Sales Driven Mindset. However, as our company matures, it is important to transition to a Profit Driven Mindset and think about additional questions such as ‘What is our profit per home’? Or ‘What happens if we increase our profit per home by a small percentage?’ Your Core KPIs, and in particular your Bill Per Cleaning Rate are a good place to start answering these questions.
What is your Bill Per Cleaning?
Simply put, your Bill Per Cleaning is the average revenue across all of your jobs, including one-time cleans with a higher bill rate, smaller commercial jobs, or priority cleans that may only be an hour. We are looking for the average to get a good representation of your overall revenue.
As a MaidCentral partner, you are easily able to track this number using the Core KPI Dashboard. However, if you aren’t a MaidCentral partner, you can calculate this KPI by dividing your total revenue generated in a given time period by the number of completed jobs in that same time frame.
Small Changes to your Bill Per Cleaning Rate can have a BIG Impact on Profits
Let’s look at an example:
You’ve determined that your average bill per cleaning is $150.00 What happens if you increase your price by 4%? Well, for your customer, that increases their price to an average of $156.00 – a relatively small change. However, if your expenses stay the same, that 4% increase yields a 12% increase in profits!
Over the last few years at MaidCentral, we’ve gathered data from companies across the US and Canada. There will be some variance based on geographic location, but in general, we have seen average bill-per-cleaning rates of MaidCentral partners increase from an average of around $135 in 2020 during Covid to an average of around $190 in 2023.
This doesn’t mean that if you are currently sitting at a $150 average bill per cleaning rate, you should immediately implement a big increase. You’ll need to take into account what your geographic area will support, along with other factors, like when your last rate increase was and the overall economic climate. You may be better served by making several smaller increases over a short period than you would be with one large increase.
How do we implement this change?
The most impactful way to improve your average bill per cleaning rate is to focus on jobs that are currently underpriced. An exercise that we find helpful is to create a graph of your revenue per hour across all homes and then locate the average.
In the graph below, we see that in this example our average revenue per hour across all jobs is $65.57. Some jobs are priced well below the average with some as low as $28 per hour.
What happens if we increase the prices for all of the homes that fall under our average to $65.57? We see that our average revenue per hour will increase to $72.49 per hour – which is an increase of $6.92 per hour from our original average of $65.57.
That’s great, but what does it mean for our overall profit?
Let’s assume that before our rate increase, we had a profit margin of 10% which would have equaled $6.57 profit per hour. With the rate increase, we now have a profit per hour of $13.49 ($6.57 + $6.92). This is a 105% increase in profits!
If you are not a MaidCentral partner, this might be a time-consuming exercise – but we feel it is well worth it to understand that significantly underpriced jobs are very expensive to continue to service. If you remove the lowest-priced jobs and increase your average Bill per Cleaning rate, you can be more profitable by servicing fewer homes. With a profit-driven mindset, we focus on making sure that homes are priced properly and we are willing to sacrifice the number of homes we service if this means that we will be more profitable at the end of the day.
Let’s take a look at some additional methods to increase our average bill per cleaning:
- Rate Increases/Adjustments – We should be implementing rate increases regularly to keep up with inflation. Implementing a monthly process to increase rates for customers who haven’t received one in the last 9-14 months will ensure that you don’t wind up with long-time customers who are significantly underpriced. While this might be a daunting process on paper, MaidCentral makes it easy with our rate adjustment tools.
- Increase Quoting Hourly Rate – Increase new customers as they come in. Plan to adjust your pricing a small amount, such as an additional $2.50 every few months as this should help keep your pricing in line with inflation and avoid any large bumps.
- Use MaidCentral’s Dispatch board for daily tracking of under/over time houses and make adjustments where needed. Just as under-priced houses are expensive – so are ones that are taking longer than they should to complete.
- Add Skip/lockout fees – The time that we aren’t spent cleaning houses is expensive. It’s not unreasonable to pass those fees on to the homeowner.
- Add-ons available in the customer portal – Easily allow homeowners to add additional services such as refrigerators or oven cleans.
- Bulk Rade modifications – We’ve found that many companies are having success by adding on small administrative fees to help cover credit card processing fees, general overhead, or even in some cases adding a line item for a health and safety fee to cover supplies and insurance costs.
Understanding your Average Bill Per Cleaning Rate is a big step toward moving towards a profit-driven mindset. It can provide insight into profits, growth, and pricing strategies. If you would like to learn more about the Average Bill Rate KPI, check out our recent Webinar on this topic or try out our FREE Growth Forecasting Tool that allows you to input your Average Bill Per Cleaning and other Core KPIs into an online calculator and test different scenarios where making a small change can lead to a BIG impact!