Developing Pricing Guidelines for the Mobile Power Pressure Wash Contractor
Metadescription: Determining a price for your services that maximizes profits has several aspects. Here are some proven suggestions to help you developing pricing policies that keep you in the black and maintain your customer base.
I. Creating your Mobile Pressure Power Wash Price Survey
How do customers find you?
Developing your market survey
II. Creating Bid Packages
Note about Environmental Power Washing
Quality of Work
III.Basic bid estimates and pricing
IV. Payment and Terms
The issue of “Perceived Value”
Pricing your services is more of an art than it is a science. Salesmanship plays a major role in the amount you can get for a particular job. Some contract cleaners can get 10% to 100% more for the same job than their competitors. Pricing becomes even more difficult when competitors enter the power wash business with extremely low overhead. They use consumer-quality pressure washers, they do not carry insurance or workmen's compensation, and they do not have an office and related expenses because they operate from their homes. This may give them an edge in pricing but, in the end, it causes more problems because customer liability is greater due to the lack of insurance and workmen's compensation, and the quality of work is often poorer.
This pricing guideline should be used as a reference point, not as guarantee that you will get every bid. Modifications need to be made to fit the economic conditions and competition in your area. You will have to decide if you are going bid based on quality or price, or somewhere in between.
How do customers find you?
When a prospect calls, try to determine how he got your phone number. Was it from a referral, the yellow pages, newspaper advertising, a recommendation from a current customer, seeing your truck while you were working, etc? Yellow pages leads tend to be price shoppers and they call a number of the businesses listed in the yellow pages. Consider this when you bid. The best leads are recommendations from current customers, and you may not have any competition on these bids. Track where business is coming from, and direct your advertising efforts based on this information.
Developing your market survey
To develop your market survey, begin by asking a few questions every time you lose a bid: ask the customer whom they chose, the price they paid, and why they did not select you. You may not be able to get all the details on every lost bid, but you can usually get some information. Whatever information you get, use it to start modifying your prices to fit your market area. If you are getting every job you bid on, your bids you are too low. You need to lose about 20% of your bids. This is a good sign that you are getting for most for your time and effort (what your market will bear).
After a competitor has completed a job, visit the site to see what kind of work he did. If possible, find out what he or she charged. Also, try to determine if your competitor has insurance or workers’ compensation. When you submit a bid, include insurance and worker's compensation certificates in the bid package, and explain the liability that people have if they choose a contractor that does not have this coverage.
In areas where the wash water can be captured easily and discharged to a sanitary sewer on site, there is no extra charge for environmental power washing. For example, those locations where the wash water flows to a common collection point and is picked up with "Vacu-Boom" or drain blockers, portable dams and a sump pump and then discharged on-site into a sanitary sewer. This takes only about an extra fifteen minutes. Most contract cleaners in metropolitan areas cannot charge extra for this because of competition. For more information on environmental power washing, read "Environmental Pressure Power Washing: Reality of Enforcement".
Quality of Work
Establishing an acceptable standard of quality for your work in relation to the price you charge is one of the first issues to address. When people first enter the mobile power wash business, they are often idealistic about providing a superior product for a low price. A problem with this is the amount of money earned on a job. Perfection takes time, and time is money. While customers want superior cleaning, they are not always willing to pay for the expense. Add to this the fact that what is clean is subjective and varies from person to person; is clean a swept parking lot or a power washed parking lot?
The important thing is determining what price and quality that the customers really want. If you are not careful, you will find yourself bound to a contract that requires you to deliver more than is profitable. Generally, if the customer is happy with your service you should be too, even if you are not completely happy with the job. Do not point out your deficiencies.
One of the best examples of this problem is one I encountered several years ago. I had two customers that were in the truck washing business - fierce competitors. One contractor typically charged about $5.00 for a road tractor wash while the other one typically charged about $15.00 per wash. Both contract cleaners were successful, and both grossed about $90.00 to $125.00 per hour (notice that the hourly rate was about the same). The difference was in the quality of the service each provided. The customers of each contractor were very satisfied with their service and the quality of their work.
Most contractors do not charge extra for travel to a job within a 30-minute to a 1-hour drive of their shop. However, they do charge a minimum of $75.00 to $150.00 in order to make small, unprofitable jobs profitable. This covers the fixed costs required in dispatching a crew and wash rig. Some contractors charge a small fee of $25.00 to $40.00 for the time it takes to get a wash crew ready for travel and include it in the bid price.
Travel charges can be included in different ways. Some examples are:
- 50% to 100% of your normal hourly rate
- 50 cents to $1.00 per mile
- 30 cents per mile plus $35.00 per hour
- No charge on regular service jobs
Most commercial customers do not question the use of their water, but residential customers often complain if you use their water. Because they do not fully understand water rates, they think 500 to 1,000 gallons of water is very expensive. Before you begin the job, check the water rates for your area. (On average, water cost is about 50 cents to $3.00 per thousand gallons - a minor expense.) However, if you have to haul water to the job site, the costs associated with this need to be included in your bid. Contractors who have to bring their own water charge their regularly hourly rate to get it and haul it to the job site. Some contractors doing residential work will add $45.00 for water if they do not use the customer's water. I would suggest that you explain to the customer the water is a job cost and the less you have to pay for water, the less expensive the job will be. If the cost of water increases, then the price will have to go up.
Most companies will have a minimum charge to cover the cost of showing up at a job location. It is not profitable to spend 30 minutes driving to $25.00 job. Some standard pricing options include
- Option 1 - $45.00 to $125.00
- Option 2 - $75.00 to $125.00 for the first hour, then charge the regular hourly rate
- Option3 – A minimum of charge of one or two hours at your regular hourly rate
We recommend contacting:
Joseph D. Walters Agency
2704 South Park Road, Bethel Park, PA 15102
Phone: 1-800-878-3808, Fax: 1-412-831-7498
Licensed in 45 States
Contact several other companies to compare rates and the extent of coverage. Once you have selected an insurance company, adjust the rates in your bid to help cover the premiums.
Commercial contractors with insurance and Worker's Compensation
Non-environmental - $65.00/hr to $115.00/hr, average-$65.00 to $85.00/hr
Environmental - $70.00/hr to $150.00/hr, average $75.00 to $105.00/hr
Part Timers without insurance and Worker's Compensation
Non-environmental - $55.00/hr to $85.00/hr, average-$65.00 to $75.00/hr
Environmental - $60.00/hr to $95.00/hr, average $60.00 to $90.00/hr
You should never make less than $65.00/hr for a one-man rig. The break-even point is $55.00/hr for a one-man rig and you are losing money if you are charging this for a two-man rig. Some contractors will reduce their hourly rates $5.00 to $10.00 per hour if heat is not required or for cold-water washers.
Most contract cleaners will keep their rates low when starting out until they build their customer base and gain experience. Once you gain experience and have an established reputation, your prices can be increased.
When you are bidding a job you are not familiar with, you can always fall back on bidding by the hour with a "not to exceed" amount. You will find that when bidding on a per hour basis, the customer is not nearly as picky as when you are doing the job at a fixed price.
Sometimes it is difficult to decide whether to bid by the job or by the hour. If you bid by the hour, your customer is taking the risk on how long the job will take; if you bid by the job, then you are assuming that risk. Therefore, most contract cleaners expect a higher hourly rate for bid jobs than for jobs by the hour to cover their risk for jobs they miss bid.
When estimating jobs, it is best to figure the price two different ways. For example if you are bidding a parking lot, figure the price based on cost per square foot. Then figure the price based on a time estimate multiplied by your hourly rate; these numbers should be about the same. If there is a large price difference, then you had better study the situation more closely.
If you are bidding by the job, be aware of the hourly rate you are earning and adjust future pricing bids accordingly. If you are on a job and you realize you underbid, start adjusting your work accordingly, and look for ways to speed the job up.
One final suggestion: This may sound too simple, but come contractors will ask the customer what they are willing to pay for a job. However, it does work. Try it yourself, and if the price is one you can live with, you have the job.
Many small companies fail to be aggressive when bidding and working for large corporations or government agencies. They tend to be intimidated by the reputation of a premier company, or the bureaucracy of the government, and avoid discussing the details of payment. Many large organizations pay on 60, 90, or 120 cycles, and if you are not prepared, or do not insist on being paid earlier, you could find yourself in a financial bind. If you are small company, and need payment earlier than your customer’s regular payment schedule, be upfront and honest and let them know. If you expect to be paid when the job is completed, this needs to be clearly stated on your bid. Do not assume you will receive payment immediately upon completion of the job. Sometimes a 2% discount in ten days will assure payment in a timely manner.
Start your collections procedures before you start the job. Find out what the company’s payment practices are. You need to know who is responsible for authorizing your invoice and who actually processes or writes your check - it may be from another corporate office in another state. For large corporations and the government, find out who is the Accounts Payable clerk or manager, and ask when they normally pay their vendors. Gather this information before you start the job, not after the payments are 90 to 120 days late.
For jobs lasting more than thirty days, it is normal to receive draws against the total bid based on the percentage of the work completed. Sometimes you can get a deposit before you start the job, and work with the customer on payment terms for the remainder. For medium size jobs 25% down, 50% upon completion, and 25% net 30 days is common. In the construction industry, it is normal for the general contractor to hold back a 10% retainer from all subcontractors until the entire job is completed. This means that you may not get that final 10% until several months after you have finished your portion of the project.
The question of whether or not to give notice of price increases to regular customers is a subject of debate, and each contractor has his or her preference and reasons for that preference. Some will give notice and some will not. If you give notice, it will draw the attention of your customers and may cause all of your work to be reviewed. On the other hand, if you do not give notice one of the following is bound to happen
- The customer will not notice
- The customer will notice but will not complain
- The customer will notice and call. If they do, you have four options:
*Tell them it was a clerical error
*Exclaim – “You are only receiving the price
*Explain how your cost have gone up and a pric
increase is necessary
*Fire some customers if they are too hard to deal
The issue of “Perceived Value”
Be aware of the perceived value of power washing, which is normally between $70.00 and $200.00 per hour. When working on bid jobs, if your earnings substantially exceeded these figures, expect problems ranging from being paid to the customer rejecting the quality of your work. I had one instance where a trucking company was extremely satisfied with the quality of the work from a high school student, a mobile power wash contractor cleaner, washing their trucks for over a year. The trucks were washed on the weekends and he employed other students to help with the work. They thought he was a shining example of what all young men should be. However, when the terminal manager checked the time sheets and discovered the contractor was earning over $300/hr, he was abruptly fired. The quality of his work no longer mattered. His perceived value as a high school student doing truck washing was not $300.00 per hour. Many contract cleaners have learned this same lesson in the same way.