Episode 16: Should You Increase Prices During A Pandemic?

Episode 16: Should You Increase Prices During A Pandemic?

Brandon Schoen:
If you guys are going to do this at all, if it's a COVID line item, or if it's just across the board, price increase, tell people the reason why. Right? Tell them why you're doing this. If you explained the why it all makes sense and people don't question everything and freak out.

Announcer:
Grow your cleaning business, make more money, have more time. This is the Profit Cleaners podcast with your host Brandon Condrey and Brandon Schoen.

Brandon Schoen:
Hey everybody what's up and welcome back to another episode of the Profit Cleaners - the only place where you can learn from the top 1% of cleaning business owners around the world to increase your business, grow your cleaning business. Thank you guys for being here. I'm joined today by my cohost Brandon Condrey in the house.

Brandon Condrey:
That's me!

Brandon Schoen:
And together we are the Profit Cleaners bringing you guys fresh value and content every week. Sharing just stories of our cleaning business, what we're doing to grow our cleaning business and how you guys can be applying those same principles and lessons. And we can be on this journey together. So today we're talking about a very interesting timely topic. I would say it's related to the pandemic. And are you, or, should you be increasing prices during the pandemic? We've talked about this. It's been an issue in the past week. We're going to share some things overtakes and things we've done.

Brandon Condrey:
Yeah, we'll go over the last price increase we did. And what you shouldn't do if you ever have to do that, that was, we did make some key mistakes on that one, but we'll tell you how we're recouping some pandemic stuff that we're shelling out for out of pocket.

Brandon Schoen:
Absolutely. So stay tuned guys we're going to be diving into that today. And also just talking about at the end of this episode, we'll share some tips and things that help you do those at price increases if you decide to do it, I mean, just sharing out more of the fresh content we're going to be doing. If you guys haven't already subscribed or left a review for the podcast, just some quick housekeeping. If you're getting any value out of this, if it cracked a smile, if you learn something, whatever it might be, please leave a review. Please subscribe to the podcast that really helps us out that's the fee, right?

Brandon Condrey:
Yeah. That's the ticket for admission is - subscribe.

Brandon Schoen:
Yeah. And so other than that, guys, let's dive in. So when we first started talking about this Brandon I think we were like, gosh, that's a terrible idea, right? This is months ago. We should not be increased the prices during this time.

Brandon Condrey:
In the very beginning of the pandemic, all these state economies shut down, people were being laid off. All of those things are a concern. So the gut reaction back then was don't raise prices because you don't want to try and gouge the customers that you did keep. And that's when we were down like 30, some odd percent. So we're just going to keep everything fine. We were looking at doing a price increase sometime during 2020 anyway, but we opted to not do that. And then there was a bit of uncertainty at the time. How long is this going to last? We're going to be out of this. And a little while Trump was telling people, I was like, no big deal. It's going to go away. And so maybe it'll go away, but that's obviously not what happened. We're in month eight right now when we're recording this. So we're deciding some things we're going to do something a little bit different, I think.

Brandon Schoen:
Yeah. And I think maybe a good way to start out is let's tell them the big mistake we made back in. I want to say it was 2018.

Brandon Condrey:
I think it was 2018. So it's been over two years since we did a price adjustment. And so what happened was in the beginning, when we were brand new, we had pricing data from our mentor in Denver, but we didn't know Denver is a much different market than Albuquerque. The cost of living is way higher. The wages are way higher pricing is different. Wages for cleaners are higher. So we had to figure out how do we figure it out on our end. So in the beginning we were just throwing spaghetti at the wall. All right. We'll charge 75 bucks for this one. And eventually, you hone it in. You get a bunch of quotes from competitors. The customers were showing us their quotes from competitors. Like you guys are so much lower. Okay. That's great. And then in the back of your mind, you're like, dammit, like we're too low. So what we had done in the beginning was we raised prices for new customers. That was the barometer. So we got to the point where like, Oh, if every single person that's coming through to get an estimate is saying, we're too high. Then we found our ceiling, let's go back down. And so that's how we got our flat fees dialed in for the Albuquerque market. And then we're like, well, if we get everyone standardized on the same flat fee square footage model, then we could increase revenue by 60,000 a year. I can't remember what the math was back then, but I'm sure there's a spreadsheet of it somewhere. But the point was, what I wanted to do was just get everybody on the same flat fee schedule. And what we had done was because every customer was different. We had to have this elaborate update for people. So we sent out an email saying, there's going to be a price increase. We're going to leave a letter in your house with the details. So it wasn't just like everyone went up by $10. Some people were $50 or $80. I think the worst one was 40%. It was a 40% increase. And so that's because he was an early customer, he was getting monthly service and it was way lower, like on an hourly basis than it should have been. And so we were trying to normalize everything.

Brandon Schoen:
Yeah. We basically just did it in the beginning. We took on anything and everything. Like we did all sorts of crazy pricing, right?

Brandon Condrey:
Yeah, totally. We had weird deals. We have discounts that were making it cheaper for extended periods of time. Yeah. So the mistakes we made were twofold. One, we should have just done a flat across the board. If you're still a customer, we're just going to go up by this amount and it'll be fine. Like everybody's just going to go up by 10, eight, $15. Like whatever the math would have made sense. Right. The second one was we gave people zero notice, like we sent out the email, the next clean we had their letter dropped off and the prices went up and apparently people didn't pay attention to that. So we got angry people calling the amount we charged was different to their credit card. And I'm like, well, we sent you an email and we dropped off this letter. And then of course we had angry people quitting because they had a 40% increase, 30% increase as opposed to like, Hey, we were paying 120 before and now we're going to do 130.

Brandon Schoen:
Yeah. What did we end up? Like you mentioned the number earlier. And I was like, what did we actually lose that many customers?

Brandon Condrey:
I tracked this. And we lost 22% of the customer base when we did this, which was the huge mistake that was during the pandemic. In the early days we lost 35, I think was our worst 35% way down. So that was our own self-induced pandemic because we were not thinking clearly. So if we had to do it all over again, if we were going to do a non-pandemic price increase, we would give people lots of notice, like months of notice. So three to six months, something like that, Hey, just a heads up because of our ethos on paying people living wage and market conditions or whatever, you can justify it. You want, but you have to tell them why here's, why we're doing the price increase. It's going to be effective in January of 2021. And that would be four months of notice. And so that's what we would have done differently was give notice. And I would have just made it a flat fee. Like we're just going to drop either where everyone's going up by 3% or everyone's going up by 10 bucks, whatever that math works out, whatever works better for your system. Right? And then that way they've got time to think about it. You've got time to get them a couple reminders. So like you do this little leave behind in the house when you clean, it's a little like postcard, you get printed up, heads up prices are going up by this much on such and such date. And you drop that a couple times. And then the last one, like friendly reminder, this is the last clean before the new price increase effective whatever date it is. Yeah. So if that's what we would do, if we were going to do it differently without a Pendo.

Brandon Schoen:
Yeah. And we sent out a big email blast, we liked actually left a physical copy of like what specifically their rate would be going up and that's what the teams left in their house. Yeah. Alternatively, our competitors, they actually have done. I feel like it's like three or four times a year. Sometimes that our competitors, the franchises will do.

Brandon Condrey:
There was a time when the franchises one in particular, we got a bunch of customers from them over this three month period. And it's because they had done two price increases in the same year. Wow. And so they got one in March and then another one in like September. And the second one, I remember this customer telling me, he was like, look, I'm happy to adjust for the pricing if something needs to be different. But the second price increase for this guy was 40%. And so we had obviously made the 40% mistake, but it's interesting to see companies that have been around for decades doing the same thing. And so I don't know the history of that company, like is that their first price increase in 10 years. And that's why they did it twice because they just weren't thinking about it. Or are they doing that literally every year, either way, you should be trying to think ahead of this. So the price increase, shouldn't just be like, let's catch up to where we're at now. Try and put some forethought into it. So we're going to increase it so that we don't have to do another one for two years. Like I think our goal is to do one, like every two to three.

Brandon Schoen:
How often does Corby do his, I'm trying to remember you. It's not every year.

Brandon Condrey:
No Corby is very sporadic. I think he does is like every five years. And there's might be a little bit more stable. Like we're still kind of new. And like, you may get to the point where you really have to do them all that often. Cause you just have it like super dialed in or the profitability is where you want it to be at. Right. But why I remember when Corby did his, it was because the minimum wage in Denver was going up and they always try to keep way ahead of the minimum wage. And because Denver was getting very competitive, lots of people are moving there. They were just having trouble finding people that wanted to clean houses. So they were taking jobs elsewhere. And so that's a capitalism competition thing. You got to keep up with wages to make sure you're getting people. So all that again, depends on your market and how much to do it. But there's a couple of tips in there, like flat fee, give some notice. But the title of the episode is should you increase prices,

Brandon Schoen:
During the pandemic yeah. So right now with all this craziness going on a few months ago, we talked about this and we were like, absolutely not like people are already freaking out. And you even said a week ago when you're talking to your leadership business group, the last thing we want to do is gouge our customers during this time. Right?

Brandon Condrey:
So we're not trying to, you don't want to extract as much as you can out of the customers. That's not a good business model. You want it to be sustainable for you and the customers and the employees. Like it's all going to make sense. Long-term so I was talking, you get, there's like a hot seat in my leadership group. It's kind of like a mastermind. And so you get to bounce some questions off of people. And I had said to the point where it'd be really nice to have a price increase, we were kind of scuttled to that, but I want to do that during the pandemic. And then someone said something that blew my mind, cause I had never thought of it. Or they said, what about just adding on a line item that's a COVID safety fee. And I started asking people in the group and they had all seen it at various locations. Like some delivery services are doing it, other service companies. And so the justification for it once we actually started to sit down and think about it. Well, here's what we ended up doing during the pandemic. And we didn't adjust prices at all. We started doing sick pay right away. That was before the cares act, gave you a tax break on the sick pay. But that only applies if they have positive cases because we were screening for temperatures. If we sent you home, you came in, I had a fever and we sent you home and you were negative. We still paid you for the time you were out. We do that because I don't want to set up an incentivization for the employees to lie to us. Like if you answer, yes, I lost my sense of taste or smell. And we're like, well go home. And we're not going to pay you for today. Then it just encourages them to lie. And so we want them to give us honest answers because that's how you help slow the spread.

Brandon Condrey:
So the things that we changed were sick pay. That was a big one. We pay out of pocket for that. That's just coming out of like operating expenses, right? We had to buy equipment. So we bought temperature probes that are touchless so that we can take everybody's temperature every day, we got blood oxygen monitors. We bought electrostatic sprayers to test all that stuff was equipment that we had to buy. We bought PPE. So we had multiple rounds of fabric masks made for everybody. We provide the disposable type. Now we've always provided gloves. That's just been the thing that we did all the time, but we're going through way more gloves. Cause they're changing them a lot more often. You know, you're a bit nervous about the virus being on the gloves. And then for awhile in the beginning, we also did shoe covers and that was when it was new and the science hadn't gotten down to the respiratory droplet part. Yeah. So we bought all that equipment. Just recently we set up a corporate account with a private laboratory, a reference lab where we can send them in to do testing. So like if they do get, let's say they came in with a high fever, not a high fever, but like a temperature that was above our threshold. Normally we would send them to get a test from the state. The state is concerned about positive cases. So they're letting those people know right away. If you're negative, we had an employee go 22 days once before getting a result from the state. And so meanwhile, we paid 22 days worth of sick pay because we didn't want them in here in case they were positive. So now we get this lab offers us two things. We get antigen testing in like 20 minutes or they'll do the normal PCR test, which is what the States, all the States do. But that comes back in like two days. So this saves us money on the sick pay, but we're now having to pay out of pocket for tests, right? That's another thing we added. And then there's some harder to quantify ones which has increased chemical usage. Cause we're having them sanitized all the equipment in between every job and spray down everything a lot. And so that's just more chemicals that were running through the system and we had new chemicals come on. So like we put hand sanitizer dispensers throughout the office and we gave hand sanitizers in the car. And so all that stuff adds up. And so that's what we're going to do. We're going to do a COVID safety fee.

Brandon Schoen:
Yeah. And no it's, we didn't actually do this. We keep mentioning Corby, Corby if you guys don't know, is our mentor up in Denver, who we started with. He even went as far as putting like fiberglass, plexiglass things in the cars to separate them all, which I don't even know how much that would've cost, but there's other companies even doing more extreme things than we're doing, which adds to this cost. You might be doing extra stuff that we're not even talking about here, depending on where you live and depending on what the laws and regulations are here.

Brandon Condrey:
So that's our added increase. But like you think about it on your end, what else did you do? So Corby added plexiglass dividers and all the cars, which is crazy. Did it. And then we knew another cleaning company in town that just got like hazmat certified. And so they have like positive pressure suits and like what you would use to like remediate a meth house or something, but they're using it for COVID patients that stuff's intense and expensive. So the way that we're going to do this, they were going to roll this out is we're going to send a letter to everybody saying effective on such and such date. We're going to start doing a temporary COVID fee for every clean you have. And this is going to be something small guys we're talking about between four and $8. And so on the low end with our amount of jobs, that's adding $3,500 a month to the bottom line, top line, I suppose rather or 6,000, depending on the higher one. And we don't want to charge the weekly customers 10 bucks. We want to add their thing. We don't increase it by $40. We want it to be something reasonable. Well it's just to help offset what we've already done. And then a little bit more money to play with in case we have to experiment with something else in the future.

Brandon Schoen:
Yeah. And on the flip side of this, no companies, your cleaning business, for example, minority, be experiencing some different pricing things going on because you might be introducing and pivoting, introducing new services, introducing the electrostatic sprayers, where you're disinfecting things in a higher level. People might be getting the frequency of their cleans a lot more often too. So there's a lot of things you could adjust pricing with this one, we're talking about just a single line item would last however long, this last right. And would go away at some point in the future, which hopefully by then we're predicting another year or so at least where we're living here, this is going to probably be mining us up with the next price increase, which is like you said, Brandon we probably wanted to do it this year, but we're going to sneak it in with the COVID thing this cause we have to accommodate for those costs.

Brandon Condrey:
Yeah. So I think the COVID thing is going to be temporary. We'll have some language in it that kind of says like for the foreseeable future. So I don't, we would eliminate the COVID fee when we no longer had a mask requirement when the vaccine was widely available. When schools are back in session, like when life kind of returns to normal and people aren't super freaked out about having strangers in their house. That's when I think it would go away. So like in my mind, that's probably next fall, fall of 2021. And then once that goes away, I think the plan is we'll let it ride for three, some odd months and then we'll do the price adjustment that was going to be scheduled for 2021. And it will be roughly around the same amount. It'll be like that one might be more like $10 a pop for everybody, but that'll be, we'll give notice on that one. So like we'll remove the COVID fee for awhile and then say like, Hey, starting in 2022, everybody's price is going to go up by X, whatever that amount is.

Brandon Schoen:
And I think a really, really big tip Here is if you guys are going to do this at all, if it's a COVID line item, or if it's just across the board, price increase, tell people the reason why. Right? Tell them why you're doing this. If you explain the why it all makes sense and people don't question everything and freak out. Our mentor told us this all the time. He's like, if you explain the why, whether it's yeah. Whether it's telling them how to clean or help telling them how you clean to the customer, whatever it is, like, whoever you're talking to. Just talk about the why, why you're doing this and explain that in this case, the COVID line item is all the things you mentioned, all the extra things we're purchasing.

Brandon Condrey:
That'll be totally explained. Yeah. Like on the regular price increase, the why has to make sense? You can't say it because I want a new truck. It has to be in the market conditions have changed and wages are becoming more competitive. And in our effort to pay people living wage, we're going to do this. So you do need to explain it. You can't just tell them like, Hey everybody, we're doing our third price increases here. Just cause,

Brandon Schoen:
Just cause we want more money. Yeah. You got to give them a good reason. Why? So I think that's pretty much it. And then another thing I wanted to mention was the feedback you got from your leadership group was really interesting. Not only from the leader of the group, but several people, you said they were kicking around $5 or how much would one person that's actually our customer was weekly. And she was like, Oh, I don't know about that. Right. But everyone else agreed that somewhere in that range would be acceptable.

Brandon Condrey:
So what I was saying is I, we were hesitant to raise prices at all because of everyone's unique financial situation during like a super stressful time. And what they had said was we'll know, like, if you think about it, like I want to support the companies that are doing well. And I want to make sure that the essential workers are healthy and we are definitely essential. And so they had given the examples of their tipping, really high for food delivery services and things like that. And so like we are, I mean, I do think tips have gone up across the company, but that doesn't come to us. That goes to the cleaners. So this is just kind of a way, like we're paying $150 every two weeks to clean our house. I'm not going to be upset that you guys are asking for an extra $6 and 50 cents to offset the cost of all the stuff that's keeping me safe and the employee is safe. So that'll be in the letter. This is all in an effort to keep the customers and the employees safe, but it doesn't create a cost and we put it off for seven months. But now that it just keeps going, it keeps going, like we're going to have to make an adjustment here.

Brandon Schoen:
Yeah. And I think this all comes back to what we talked about in an earlier episode about pivoting and pivoting, your marketing messaging, which is we're now talking about delivering confidence, clarity, peace of mind, and these things that are maybe a little different pre-pandemic, which is more get your time back. And it was more of this fun message. Now people want that certainty. That the reason why we're doing this is to be more certain that you're safe and to prevent the spread and to be healthier and safer and all the confidence that we can instill in people in that message. So, absolutely. That's it guys. So there's some tips for you. I think if you guys are at a point where you haven't done a price increase, think about doing it. If you haven't done anything during the pandemic to do that, and you're investing in these things to keep your employees and your customers safe, definitely give it a go or think about it and brainstorm it. I think we've given a lot of cool ideas here for how you can do it.

Brandon Condrey:
And we'll report back. We'll give you guys an update in a couple months maybe, and see how it's going and whether it was well received and we'll let you know.

Brandon Schoen:
Awesome. All right. Well, I think that's pretty much it. Anything else you want to add Brandon?

Brandon Condrey:
Yeah. You guys can always reach out to us at hello@profitcleaners.com. If you have any questions or you definitely want to, you want to hear an episode on like the best vacuum and why it's so easily repairable, whatever you guys want to hear about. Like, we'll tell you, and then we're still doing the masterclass, right?

Brandon Schoen:
I'm still doing the masterclass Profitcleaners.com/masterclass come over to the webinar live guys. We do it every Thursday. Lots of cool questions come out of that. And we even make podcasts out of that eventually because some of them are so good. But if you need help, jump on those live guys. And then yeah, we're getting content up everywhere. So Instagram, Facebook, we got a group going, we got YouTube channel going. Just find us wherever you like to consume content, including this podcast. But we do more behind the scenes stuff sometimes in other channels. So check this out guys. And I think that's pretty much it.

Brandon Condrey:
That's it. Keep it clean.

Brandon Schoen:
Keep it clean.

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