Setting pricing

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Pricing is one of the most important factors in your business. And in business, pricing is one of the 4 types of marketing. Pricing is vital if you wish to stay afloat, and thrive in business.

Of course in different parts of North America pricing the price of the cost of living varies. In big cities like Toronto, one needs to price higher, and window cleaning companies in general may price higher in big cities like this. In Toronto the cost of housing is high (although housing prices are expected to be flat or drop). An average house here costs $370,000. Rent goes for about $1000/mth for a two bedroom, and the price of gas is about $1.10/litre. Prices in general are a little higher here than in some small towns.

So when setting pricing, you may charge a little higher in a bigger town like here than in the boonies.

However, one thing that seems to be similar everywhere is competition. There are tons of window cleaners in Toronto.

When setting your prices it is better to go from a high point, and then gradually lower the price you are offering if you are not breaking through. When starting out you would want to target larger places if possible, so that your route can grow faster, and you may have customers that take the window cleaning more seriously.

Before starting out, you might want to consider not quitting your day job, or having your spouse work more, so that you are not under extreme financial pressure. It’s good to be hungry for work, but if you start in a desperate look for work, you may be tempted to price very low at the beginning which causes problems down the road.

A reasonable price is very important. Consider this, you have ordinary expenses to pay to run a business, gas, insurance, equipment, depreciation, and taxes. You also have unpaid labour you do for your business, canvassing, bookkeeping, meeting with the accountant. In addition you start out in business as an investor, hoping to have a good return on your investment in money and time. So don’t feel like you are pricing too high if you are targeting $60, $70, or $80/hr (averaged over the day’s work). You are an investor, you work tireless unpaid for long hours, and you have bills to pay. You are not an employee, who merely works 8 hours, only does a minimum of unpaid lobour, and has benefits like workers comp, unemployment insurance, and an employer paying into your old age pension (in Canada at least). You are the owner of a company, an investor, and a tireless unpaid labourer.

If you start out pricing too low, you will find it hard to raise prices later on, you may struggle, as many have working many hours, but not seeing a lot of profit. You may be working hard, but find it hard to hire an employee, because you can’t pay him a decent wage. Or you may find expenses so high, that you feel you must cut corners by doing shoddy work, skipping windows (that are dirty), skimping on equipment, having a beatup car, an not being able to take a decent vacation. The worst thing is to feel like a slave of your business.

As an example, I’ve been able to secure many contracts with big stores, charging about $1 or $1.25/per window/per side.

You may worry that pricing at a higher level will make you lose a lot of jobs, when someone cheaper comes along. Well, I’ve been window cleaning for six years, and that has rarely happened. When someone is happy, and you maintain a good relationship with them, and you do quality work, they won’t look for someone else. Think about it, if they quit with you, who they trust, they have to risk having a bad window cleaner take over that they regret using. People aren’t as attached to price as you may think.

And no, I don’t work in a dream, or pie in the sky market, Toronto is ultra competitive. In Toronto which is a large city of 5 million people. The window cleaners run the gambit, there are bums who clean windows for alcohol, drugs, who are very unreliable. There are window cleaners on bike, usually not very good, but there have been a few good bike cleaners, there are those who have been window cleaning for years and never raise their price, they skip windows, skip cleans just keep things going. They usually have a beat up car, work like a dog, and don’t really see the fruits of their labour. And there are some window cleaners who price decently, do good work, and are picking up new jobs regularly, while holding onto their existing clients. A friend of mine did a search of all listed companies in the Toronto area and counted 350, and I’m sure there is many more than that.

Toronto is doing ok economically, there is no subprime market mess here, but the economy here is sorta lukewarm, unemployment here is higher than the rest of Canada, business in the core, find it hard with high business taxes, and there is high competition so there is no pie in the sky dream market.

Pricing at a higher level enables you to have a leverageable business, you can hire and keep good employees paying them well, you can enjoy vacations or whatever you do to refresh yourself, you can earn dividends on the good investment your window cleaning makes as you sell route, have employees or sell franchises. Plus all the hard work you did at the beginning of the business you get paid back for.

Of course pricing takes a certain amount of experimentation. You may start out a bit too high, or realize you are not charging enough. It is useful to learn more about your market, your cost of living and what others charge. But in the end, look at what you want to make.

But remember don’t price like you are the employee because you are not.

Price at a high level, and work from there, target larger jobs, be persistent, and make changes where necessary.

Some good info there Mike. I would like to add if one does loose an account because of price you are really not “loosing” anything. Those types of customers are usually your lower priced accounts (not a rule just more of an observation).