What we will discuss in this newsletter you will not find anywhere else.  By the end of this newsletter my hope is that you will understand the importance of accuracy when bidding janitorial services.  Guesswork  can be very costly. 

Although it's true that variables such as non-productive time, unavoidable delays, and miscellaneous time allowances cannot always be determined precisely, as professional contractors we still have the responsibility to prepare an accurate bid when we have as much accurate information as we possibly can obtain.  Guesswork not only makes a bidder look unprofessional, but it can be very costly to the bidding company and can cast bad light on the salesperson and company who present the off-the-wall bid.

When bidding on janitorial services you need to know your costs and how much profit you want to retain. To arrive at the right price, there are two fundamental numbers required for bidding cleaning contracts.  First, you need to know the total number of labor hours per month, and second, the hourly rate you will charge for those hours.  If you are bidding strictly by the square footage method, hourly rate will not be used to arrive at a monthly fee.  Although the square footage method is a good one to use, when used alone it may be as much as ten to twenty percent off the correct price.  It should only be used to verify your other bidding methods.

The square footage method is especially good when bidding a facility in a specific industry because square footage rates do not apply for all industries.  The square footage rate for a certain type of facility may be twice as much as it is for another type of facility; or it may be one and a half times as much; or it may be one and a quarter times as much.  The most accurate way to determine the square footage rate for each type of facility is to keep records of the buildings you currently clean and then arrive at your own square footage rate for buildings in that same industry.  It's more paper work, but the extra effort will provide enormous dividends on future bids. 

The most accurate way to bid any facility is to use a combination of bidding methods with a spread sheet or bidding software.  Use (1) the Cost Per Square Foot method, (2) the Estimated Time method using hourly production rates such as 3000 square feet per hour for certain type facilities, and (3) the Previous Experience Method using estimated hours from comparable buildings you currently service or have serviced in the past.  Calculate a price using all three methods, add them up, and divide by three to arrive at an average price.  This average price is likely the most accurate price.  This method has worked for me for years, and I have been fortunate to obtain millions of dollars in annual contracts.  The book entitled Sales and Marketing for Janitorial Services published by Clean-Pro Industries, Inc. provides a sample spread sheet that will show you how to bid accurately. 

Another area where accuracy is important is in determining frequencies. For example, if your quote is for seven times a week service, you can look at the chart at the bottom of this page and see that you will clean the building 30.44 times per month on an average throughout the year.  We arrived at 30.44 by dividing the total number of days in an average year--365.25 including leap year--by the number of months in a year, 12.  The result is 30.44 cleanings per month. 

If your quote is for five times per week service, you can look at the chart and see that you will be cleaning the building 21.75 times per month on an average throughout the year.  We arrived at 21.75 by first dividing the number of weeks in a year, 52.18, by the number of months in a year, 12.  The result is 4.35, not 4.33 or 4.3 as many people think. We then multiply 4.35 weeks per month by 5 cleanings per week to arrive at 21.75 cleanings per month.

Most people think there are 52 weeks in a year.  That's close to being correct, but actually on an average, there are 52.18 weeks in a year.  We calculate that by dividing 365.25 days in an average year over a four-year cycle--including leap year--by the number of days in a week, 7.  The result is 52.18 weeks per year, not 52 weeks as most people think.  If we were to disregard leap year, the average year would still have 52.143 weeks--365 days per year divided by 7 days per week = 52.143 weeks per year-- not 52 weeks per year as most people think.

The numbers in the chart assume you will keep your customer accounts at least four years including a leap year.  Your goal is to keep your accounts ten, twenty, thirty, or more years.  Some contractors manage to keep at least a few of their customers for one, two, or three decades.

You may say, “Well, isn’t this figuring to the hundredth of a percent splitting hairs?”  Maybe so, but let’s calculate your lost revenue over a one year period, if you were to use the traditional numbers when converting frequencies of service to decimals. 

Some contractors use 4.30 as the average number of weeks per month and 21.60 as the average number of cleanings per month for five times per week service.  These numbers can lead to financial problems for the contractor over a period of time and can distort the monthly fee considerably, especially when bidding on large accounts. 

Other contractors use 4.33 as the average number of weeks per month and 21.67 as the average number of cleanings per month for five times per week service, as I did for many years.  Although, closer to the correct numbers, these numbers are still not precise, and can slightly distort your price over a four year period.

An employee working five days a week will work an average of 4.35 weeks a month, not 4.30 weeks a month, and will work an average of 21.75 days a month, not 21.60 days a month.  Assuming you charge  $18.00 per hour, an employee working five days a week will work 21.75 days per month--on an average-- and will bring in $37,584.00 during the year. 

At that same hourly rate, a worker will bring in $172.80 per year less using 4.33 as the number of weeks per month. At the same hourly rate, a worker will bring in $259.20 per year less using 4.30 as the number of weeks per month.

Hardly enough to worry about?  Well, what if you had 100 employees, 200 employees, or 1,000 employees each losing your company $172.80 or $259.20 per year?  Using 4.33 weeks per month your annual gross revenue will be reduced by $17,280 with 100 employees, $34,560 with 200 employees, and $172,800 with 1,000 employees.  Over a ten year period that would mean a loss in revenue of $172,800 with 100 employees, $345,600 with 200 employees, or $1,728,000 with 1,000 employees.  Now we're talking serious money!  All because of a difference of 0.02 (4.35 minus 4.33) when calculating the number of weeks in a month.

Using 4.30 weeks per month your annual gross revenue would be reduced by $25,920 with 100 employees, $51,840 with 200 employees, and $259,200 with 1,000 employees.  Yes, that's nearly two hundred and sixty thousand dollars lost revenue using the wrong number!  Over a ten year period that would mean a loss in revenue of $259,200 with 100 employees, $518,400 with 200 employees, or $2,592,000 with 1,000 employees.  Think about it: a loss of more than two and a half million dollars!  Now we’re talking very serious money!  All because of a difference of 0.05 (4.35 minus 4.30) when calculating the number of weeks in a month.  That's a loss of 1.15% of the total revenue. 

Since the average contractor's net profit ranges between 5% and 7% of gross revenue, a loss of 1.15% of the gross revenue using the wrong number of weeks in a month would mean giving up between 16% and 23% of the net profit.

You be the judge, is it important to be completely accurate when determining frequencies of service and when calculating janitorial service contracts? 

Here’s a chart you may use for your personal use:
 
 

Article written by: 
Forrest L. Farmer, President
Clean-Pro Industries, Inc.

For books on bidding go to www.clean-pro-industries.com  and then click on Janitorial Books.

E-mail your comments on this article to newsletter@clean-pro-industries.com
 
 

This article and chart are copyrighted.  All rights reserved. 
Copyright 2000 Clean-Pro Industries Inc.