Q. I have some accounts that I been cleaning for over three years. The price on some of these was based on me paying my employees $8.00 per hour. Now, with me giving the employees a yearly raise, I have to pass this down to my customers. And other accounts are bid too low. How do I go about raising my prices? I have a big fear that they will look elsewhere if I do. Thank you.
A. First of all, I’m sure you know the timing is not advantageous to raise prices, especially when business owners are looking for ways to reduce operating costs (including janitorial services). With that said, understand that you also risk opening up the contract for competitive bids.
If you feel some of your contracts are not turning a required profit, there are some strategies you could pursue. Make sure the quality and service you provide is superior and the customer is pleased with your overall service. Then, you could explain that your starting employee wage is now 30% below the current prevailing wage for your area (see http://www.bls.gov/oes/current/oessrcma.htm#C).
Out of fairness, you want to keep up with the increased cost of living by paying your workers what they need in order to survive. Then, mention how much you would like to bill as an increase to help out your crew and ask the contact if he or she thinks management would be open to that increase.
This approach is risky, yet palatable. So, if you feel an increase is necessary, be prepared for some tough negotiations. If possible, offer some perceived value-added services that would cost you little or nothing and still be a perk to the customer.
We have a proven system for every area of your business. Learn More...