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Wednesday, November 26, 2014

Question

I'm looking to develop a commercial cleaning pricing model. I'm after advice on what a typical cost break down/split for direct and indirect costs should look like i.e. for a contract price, what % of the contract price should labor costs be? supervisor costs?, materials/chemicals?, uniforms?, equipment?, office overhead? if I target a 12-15% profit before interest and taxes? Any assistance is greatly appreciated. I realize this can vary greatly, but am looking for some broad industry benchmarks to aim for.


Answer

I am not aware of any pricing model such as you describe. That doesn’t mean there aren’t any; I’m just not aware of them.
I have never looked closely for guides such as these because, as you say, all of the items factored in vary greatly from one business to another and I could never be sure they would fit mine.
For example, supervisor costs on a large facility with 50 cleaners will far exceed those for a small bank branch where the cleaner works alone and the supervisor visits twice a month.
Another example could be office overhead. Use a home office and it is minimal; rented space could cost a substantial amount each month.
Uniforms? We use a simple company apron, but many provide a full shirt and trousers. Cost is quite a bit more for the latter, especially if laundering is included.
Overall, we have looked at a 60-40 split between labor (60%) and the rest, including profit. That is ballpark and you should have a more exacting breakdown to cover the details, such as supplies, insurance, uniforms, etc.
And now follows my customary caution. You say you need this to have some “some broad industry benchmarks to aim for.” As usual, I am going to tell you to use your own numbers and not someone else’s, especially when they are “broad”.
Even if what you desire is available somewhere, it will not fit your situation and you can “aim” for a 4% profit on a small job where you should be looking for 20%. All because your target was “broad” and didn’t fit your circumstances.
Start taking notes and recording actual costs and profit to see where you are. Then, set some of your own goals to aim for instead of those of others. It will work to your benefit in the long run.

Lynn E. Krafft, ICAN/ATEX Editor
lekrafft@juno.com