Quadrant Pricing

I will share a little insight from my business perspective. I am always amazed by the fact that when people start out in this business the natural assumption is that you should make what I do after being in this business for over 20 years. Many guys go out and do a couple houses a week it takes them 5 hours to do it they rake in $500.00 and they make the comment I am making 100 an hour. You are misleading yourself. You did make 100 for the hours you worked and if that is all you wanted to work thats great. However, if your building a business you should probably base your hourly like the rest of the world and base that number off 40 hours a week. So that same scenario you made $12.50 an hour.

Here is my Quadrant Pricing and it does work best with commercial route work but it gives you a basis in residential as well.

I think when you first start you should set your goal at 50,000 a year. I have my reasons there not important right now. Divide 50,000 in 52 weeks divided by 40 hours. You end up with 24.03 an hour. That is our goal.

So we have a 40 hour quadrant to fill. No more all other hours are dedicated to family and whatever else you do. Now go fill your quadrant. You need enough jobs to fill 40 hours a week and until that is full. Build it one day at a time whether it be 24 $1 accounts an hour or 1 24 dollar account you need all you can get, just never price less than your goal per hour. I DONT CARE WHAT OTHERS CALL YOU (lowballer) FILL YOUR QUADRANT they are not and will not provide for your family or you.

Once you have filled that 40 hours then you can start to look at expansion and it is easy to do. You have a 50,000 base of business. Lets say in year two you want to up your 40 hour quadrant to be making 28 an hour. Very easy in January raise your prices 15% and your there. Will some quit you bet now its your job to replace those with the higher price. You continue to do this until you have reached the max that a market will bear.

I base this philosophy off a rule that is taught in the hotel industry. Its called the 80/20 rule. To them this means when your hotel occupancy is below 80% you dont let anyone get off the phone or walk out over price…Heads in beds…Anything over 80% you drive rate…that means what they call rack rate or top dollar. So the next time you are wanting a room dont ask price first ask occupancy if its lower than 80% they will negiotiate rate.

This applies to the window cleaning industry. Until you are working all you want its Heads in Beds or get accounts. After you have your quadrant filled then you drive rate and try and increase your hourly rate as much as the market will bear.

Draper,

I really like where you’re headed with this topic. Would you mind expanding for those of us who are still relatively new to the business? I am sure others would like to know as well. And, could you also mention about when you get to the point where you are ready to expand by hiring employees and moving to $100,000 mark? Inquiring minds want to know. I have heard and seen many guys here that are dying to go from one man shows to quite a few employees. Can you give more advice on how they can and should approach their sales when they are ready for this?

Good post Mike, it really helps to see different philosophies.

I love you MIKE!!!

good post

Bert some of this has to be applied to your individual market. I dont know what your market will bear. Also its important to know what the labor is going to cost you.

In my area I can make about 65.00 an hour in commercail route work thats about cap. When I started I was trying to do 40 an hour lets run with that. So I am running 40 hours at 40 dollars an hour. I cant do anymore because anything over 40 hours is for something else right? So I decide I dont want to do all the work anymore what is it going to cost me to hire this work done and I dont want to lose any of my profit. So in my area I can hire a pretty good guy for 15 an hour and this is going to cost me about 17% on top of that for work comp and payroll taxes so the guy is actually costing me 17.55 an hour. Again these are loose you can tighten them up its just to get you thinking.

Now I am essentially making 1600 a week now I want to pay a guy to do this work and it is going to cost me 702 to pay this guy. So what do I need to do to first break even? I just lost 44% of my quadrant to pay this guy. So you will need to fill that quadrant with work.

My advice is never hire a guy until you can take your quadrant to the max the market will bear. So like I did I started at 40.00 an hour do what I said up above keep rolling that business until it gets to in my case about 65.00 an hour. Once it is maxed the only thing you can do is fill another quadrant so you need to take the hit and hire it done and go build the next quadrant but I personally would not do this until my 40 hour week was maxed out at maxed out per hour income.

An interesting perspective. I’m not sure I agree with all of it, but you bring an interesting way of looking at things.

Good post Mike. Its easy to say I made x amount of $s today. What does that mean in the big picture though?

Fill the Quadrents.

Its a theory and philosophy. Not all applies to everyone even me. I have seen though alot of new window cleaners come on these forums and ask what should I be making. Most replies will be 65-85 an hour my reply is a living first then lets talk about how to increase that. Lets get you secure in the self employment area first then lets make you a business owner.

I like to make the mind think a little.

You got it! If you are trying to build a business you have to take that out over a week. Make a living first then lets build a business. Because if you dont make a living you wont survive long enough to do the other.

Much like the hotel that is under 80% capacity, I’m more willing to negotiate during the winter months. Whatever discounts I run in my marketing campaigns expire March 31st. I really don’t mind if I fail to make much money during this time, I just want to provide work for my crew until the season starts up again.

Well said.