Episode 95: Another Price Increase? Here’s Why (And How)

Episode 95: Another Price Increase? Here’s Why (And How)

Brandon Condrey:
Here's the reality of cleaning. Cleaning is a luxury like no doubt. So there's a variety of reasons in your local market why this could go good or bad. For our purposes, this price increase was 8%, so we did an 8% price increase. And then for new customers that don't know they're getting a price increase, we raise prices 10%. Your pricing that you're quoting new people is actually an interesting place to like run experiments. So like when trying to come up with this price number, this 8% number, how far are we gonna do it? Like you tell 'em this is the price and if they're like, Oh my god, that is like so expensive. You're like, well 20 people in a row told me it was super expensive. Maybe we should dial this back down. And you get to some number where you're like, that's competitive. And so it's just trying to strike a balance with the market. So this is free market economics. You really gotta pay attention to what other providers in your area are charging. You can't make it up and succeed long-term.

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. Welcome back to another episode of the Profit Cleaners. The only place where you can learn from the top 1% of cleaning business owners from around the world to take it to the next level and win. Guys, thank you so much for being here today. I'm your host, Brandon Schoen and I am joined by the one and the only Brandon Condrey in the house.

Together. We make up the Brandons That's, that's the Brandons of the Profit Cleaners. It's kind of funny how our names the same. I don't know how that happened, But it's like Captain Planet. We should get rings that like lock together when we like see each other in person or something That's with our powers combined Earth, water and fire. We can change the world to the cleaning business.

There You go. Boom. I like it. There we go guys. We're gonna rebrand the the podcast here pretty soon. Cool. A little more superhero e. But anyways guys, we went on a tangent there, but let's get back to the show because it's a really good episode and you guys are gonna learn a lot and you're probably gonna be impacted hugely by this episode because we're talking all about our recent price increase that we just did.

And it might be time to raise prices again. We did it a year ago. So we're gonna share that story with you guys. Also share the right way to do it and why your best customers actually won't mind and you'll be freeing up space. More of the best customers, get rid of the tire kickers. So we'll talk all about that and if you guys stay tuned until the end,

we're gonna give you guys that letter that we emailed out to our customer list so that you guys might find that helpful. So stay tuned until the end and before further ado Brandon, let's dive into it and let's tell everyone what we're doing with this price increase, why we're doing it, why we think people should do it if they haven't done it already.

And let's just get into it. Yeah, let's tell 'em I Can hear you dealer listener saying right now. Didn't you guys just do this? Didn't you guys just raise prices? Right. We raised prices in July of 2021. Let me give you a brief history here of Sandia, Green, Clean pricing. We had a throw spaghetti at the wall pricing when we opened.

Just trying to like figure out the market in retrospect could have done a way better job at market research. However, we threw it at the wall. Eventually we figured out like, oh hey, there's actually, you know, we're getting some, we got an idea of the market. So we then switched gears to okay, how do we, we did a big adjustment that time and at the time I wanted to have everybody on the same if you were in the same square footage,

I wanted everybody to be paying the same price. So we did that and some people ended up with like a 40% increase and they predictably left. That's not surprising at all. So whatever, my bad. So they left not a big deal. Now then the pandemic hit. We had a a that 40% standardization price increase. We did that in 2018 and then in 2020 we were gonna raise prices anyway.

And then obviously 2020 went bananas like you all saw and witnessed and were part of because of covid. However, what we did during Covid was we put on a temporary fee. Every cleaning is gonna be subject, it was about $14 a month per customer and that was to cover like gloves were super expensive in testing. And then in July of 2021 we did a really well researched thought out price increase where we dove into which square footage or bringing us the most revenue,

like an 80 20 analysis, made sure we didn't hit those people too hard. We really raised our move-in in one time prices cause we didn't wanna do those. So we raised those by 40% and those still get booked constantly. So I'm starting to think maybe we could've raised those more. So then at the time we told 'em like, hey we know this is a big ask but C'S hard,

this is a new world. Almost everybody stuck with us. I we lost very little people. So now we're in September, so we've given 'em, it's like 14 months, it's taken, our price increase has taken effect October 1st. So why did we do this increase? I don't know. Do you watch the news? Inflation's been crazy. We're at 40 year high on inflation,

We're now at 40 year high on mortgage rates. So some stuff that was high during Covid, I don't know if it's ever just gonna come down. So like our gloves are still stupid expensive, so expensive and then 9% inflation that hits everything across the board. But the big one was like volatile gas prices, inflation. So our vendors were more expensive.

And then staff, like we've had multiple episodes on staffing issues and so how do we get out of that? You gotta be competitive man. If McDonald is paying 17 bucks an hour, we gotta get closer. So we're trying to get closer to that mark and all those things have worked but the end result of that is, look man, we can't keep you at 2021 pricing when inflation had,

you know, it was like four months in a row of 40 year highs and I we're not done yet. Like it's still going. Yeah, absolutely. So I mean like we're kind of in a similar position as we were a year ago, but it's like it just keeps going And there's other challenges now I would say more than ever it's the labor market which is expensive because now you have to pay a bunch of money to recruit people and to train people only for them to leave after a day or never to show up in the first place.

You spend all that money cultivating that lead. And so I don't know, that's been I think a huge drain. I don't think the customers see that as much but it, it's definitely affecting our business in other ways. So it's not just the same mold, it's like other new things, other new challenges as well. But I think what it gets down to,

like you said Brandon people kind of are expecting this right now. Like everyone's experiencing this in the world. So we're gonna tell you guys of course to tell 'em the reason why. You gotta explain the reason why. So, so that always helps. But when it comes down to it, people are kind of ready bracing for this. And I think if you do it in such a way that,

like you said Brandon, it was like $14, like for the most part your best customers, if it's 10 or $15 more than they normally pay for a cleaning, I mean they're gonna stomach that most likely and be like, yeah I mean we're all paying more money for milk and for other stuff and eggs and like it's, it's all double or triple or quadruple at the cost.

So an extra 10 or 15 bucks on their invoice. Especially if you explain the reason why and tell 'em like you're supporting a local business, here's all these reasons, all these factors like they're gonna understand you're gonna keep your best customers and you're going to bring in the new ones if people cancel and they'll be better Customers. Yeah. So here's the reality of cleaning.

Cleaning is a luxury like no doubt, I mean your average person, I mean I don't think your average person is gonna get cleaning but like there's a large swath of society that could do it. If you get the marketing right and you get in front of them, you know, but if you're talking luxury goods and like their inflation went up 9%, they're typically not that concerned with a price increase of the same level.

If inflation's nine and you try and do a 50% increase, they're probably gonna raise an eyebrow and be like maybe not and they'll go look for someone else. But if 50% increase on your end is what gets you to what the market is and you were grossly under price, then sure they'll stay with you. Cuz they'll call around and be like, well everyone else is higher still so we'll stick with you.

So there's a variety of reasons in your local market why this could go good or bad. So for our purposes this price increase was 8% so we did an 8% price increase and then for new customers that don't know they're getting a price increase, we raise prices 10%. So that's actually your pricing that you're quoting new people is actually an an interesting place to like run experiments.

So like when trying to come come up with this price number, this 8% number, how far are we gonna do it? You can, let's raise it by 15 and tell new customers like hey it's 15%, no you don't have to tell 'em it's 15% higher. But like you tell 'em this is the price and if they're like oh my god that is like so expensive.

You're like well 20 people in a row told me it was super expensive, maybe we should dial this back down. And you get to some number where they're like that's competitive. And so it's just trying to strike a balance with the market. So this is free market economics, you really gotta pay attention to what other providers in your area are charging. You can't make it up and succeed long term.

And that's actually just makes me think of a conversation we had with our CFO John recently where we're in this weird transition of we're growing but we're like trying to keep our teams so we can keep growing obviously with the new customers. But he was actually saying, yeah like if you guys just increase, if you couldn't keep up like we're booking people a month out,

he was like just increase the prices for the new customers to the point where it slows them down, you know, and you can use it kind of as a throttle. And I thought that was an interesting way of thinking of, so if you guys are in that same boat, you can use pricing for new customers as a throttle to slow 'em down and you can charge a lot more if you need to just to keep the flow a little bit slower so you can keep up with the pace.

Of course we don't like going slow, we like going fast so we wanna go as fast as possible but you also gotta keep the quality and and the product and everything, you know, and I think that's where we're trying to manage all all those expectations as well. So yeah, but I think like kind of an interesting story that came up recently on my travels as I,

cuz I've been traveling across the United States as some of you guys know and I've talked to lots of people in different markets and I've talked to quite a few Cleaners actually in these different markets and I think it's like, like a similar problem that a lot of people have. Which one of the specific ones, I was at Virginia Beach and this woman was telling me that she cleans houses but she's like,

she has this, you know, it was like a 4,000 square foot house and she's been charging $150 somewhere around there to clean it for the last like five years and she's never done a price increase and she didn't specifically tell me why she hasn't, she just never got around to it. Or maybe she's afraid she'll lose the client. I'm not really sure.

But I think a lot of that is that fear that you might lose the client or, but I was just telling you Brandon this and you were like man whatever, like get rid of that guy, you know and that's kinda like the mentality you need to like get is like there's a lot of people that need your services and there's a real problem that you're solving here and people will pay whatever it takes as long as you're delivering that value and providing a superior product.

Like you have an opportunity, you Know? Yeah I mean if you, if you raise prices and 50% of your customer base quits, that sucks for you for sure. But those are gonna be super pain in the ass customers that already are now outta your hair. And if you raised your outgoing prices to new customers even higher, then the upside to that scenario of losing those customers is you just freed up half of your schedule to get people that were paying even more than that price increase was gonna pay.

So yeah, $150 for a 4,000 square foot house is insane. I don't care what marketing is in like a 4,000 square foot house is huge. And so like you need to be getting paid what you're worth, especially if you're an individual. Like you can't be, you can't be going in there and cleaning it for 150, 50 bucks all the time.

Like that's gotta take one person like all day and time is money. Your time is worth something. Like you're giving up your time to hang out with your kids or learn stuff and get a degree and fix things around your house to go clean someone else's house like that better be worth your while to do it. And yeah like I get the fear, I don't want to increase prices.

I'm really afraid that everyone's gonna bail man. That's like your lizard brain trying to keep you safe and comfortable. You gotta get over that thing and like look hell or high water like we're raising prices and honestly what you wanna do, instead of doing these drastic price increases every other year, every three years or something, just get in the habit of doing a little adjustment every year.

It'll pace with their wages and cost increases and stuff and then they won't. Yeah it was like 5%, 3%, 8% like whatever's going on in the market, they get it and then if they cancel, as long as you are keeping pace with the market, they're not gonna be able to get a better deal somewhere else. They'll always find someone to do it cheaper but that's not a better deal necessarily.

That potentially means that you're getting much lower quality and like you're the best cleaning company in the market. Price yourself like that man act as if you are the best cleaning company in the market, Right? That yeah that's huge, right? There's it's at some point you actually kind of do wanna be the most expensive cleaning business service in the market because that projects that you are the best.

Like people associate the highest price with the best. It's always how it is. Like if you go to a nice restaurant and you see nice steak on the menu and it's only 20 bucks, you're gonna be like, why is this only 20 bucks? Like it's not the best. Like it should be a lot more than that, right? So at some point earlier in the beginning like we didn't do that cuz we wanted to attract a lot more customers,

but at some point as you grow your brand, that should be the goal is you should be at the upper tier echelon of those price points because that's gonna be the better customers. Those are gonna be the ones that complain a lot less. They, they are just easier to work with honestly. Like the people that demand the most always wanna pay the least.

So if you wanna make your life a lot easier, actually get rid of the people that are paying $150 all day long for 4,000 square foot and bring on one more customer. Let that guy go and bring on another customer that'll pay you 300 or $400 and now you've completely solved your problem. So I think getting over that fear is really big but then it opens up an opportunity for you to attract the right customers which are willing to pay.

If you're not the top, just work your way until you are the top dog and then you can say yes and no to which business you wanna take. You can charge the highest because you've perfected your product and your systems and like Brandon said, a lot of it's even being an entrepreneur, it's like fake until you make it sometimes. Like not all the time but you gotta believe you're the best to be be the best.

You've gotta act like the best, even if you know you're not quite there, like start charging higher price, people will associate it with a higher quality product. Yeah and that's just the way it goes. So we'll give you some bullet points that were, that were in the letter that we sent out, but if you want the full text, there's a way to opt in in the show notes.

You just need to do whatever the call to action is in there. I don't know what it's gonna look like yet, which is why I'm saying this, but we'll send you the full text so you can actually read it but essentially, Yeah you guys could even use it if you guys wanna just copy our letter and rewrite it a little bit, I Mean sure we'll give It to you.

Hey guys, I wanted to take a quick break to let you know a little bit more about our course, The 10 x toolkit. We've put together so many amazing resources to help cleaning businesses like yours learn how to get more recurring clients on the schedule. The systems we teach you in this course are the exact same systems we've used to grow our cleaning business to seven figures in just three years.

In fact, in one year we were able to accomplish the growth that our mentor in Denver had in 10 years. So it's definitely a shortcut guys to success model after that success, everything from finding the perfect clients to learning how to keep your schedule filled, we cover everything you need to 10 extra business and without wasting your time and money. So to learn more about this incredible course,

head over to Profit Cleaners dot com slash courses. That's Profit Cleaners dot com slash courses. I mean we've talked in the past about staff meetings, how when we're delivering feedback to the teams, we use what we call the shit sandwich. So you start with something nice, cover the nasty stuff in the middle and then end with something nice. And so we usually do like,

hey look at all these good reviews you guys got by the way, don't crash cars into other cars. And then at the bottom you're like congratulations to so and so for having a baby like that. That stuff is how we run it. And so, you know, it's, I don't know how much that actually adds to anything but this, our letter kind of also follows the same pace at the beginning it's very light.

We're talking about how covid essentially is over, kids are back in school, things are great in the middle. We cover these bullet points. Look unfortunately because of the environment that we're in post covid, like we're still not out of it. So we are suffering from volatile prices, we're suffering from higher pay for employees. That's the wrong word. I'm not suffering from that.

I'm happy to give the employees higher pay. We just need to make sure that we can maybe be able to afford it and you as the customer want us to pay our people well so that they're not, you know, they're happy in their job. You don't want people that are miserable in their job to come into your house and start swiping jewelry and watches and stuff.

We're paying higher recruitment fees and then we cover inflation as a form of increased cost to goods. So gas is part of inflation, that one's the big one, but just like gloves, cleaning supplies, all of it man, like maintenance on the cars. It's just all pricey these days. And so yeah, the point of the business is that I the business owner,

I'm not going to eat that pricing. I am passing it on to you the customer. That is how capitalism works. And so for the most part, your people are gonna understand that if they're looking at you for some big huge discount, like sorry man, like I'm not that like you need a housekeeper that's gonna do it on the cheap and you can pay cash under the table or whatever.

But it's not us. I'm sorry. Like you're gonna lose all the benefits you get at the big company. Yeah, yeah. And we really like drilled in like I think a lot of people like working with local companies because it feels more like family and it feels more like just something you can relate to and it's like a feel good thing too, you know,

for a lot of people. So we really drilled that point in like our teams are our family and we like wanna pay 'em the best because they are the best and like you want the best for your house and like, you know, like people do, like if you're coming in their home, it's a very personal space. Like you wanna give them confident,

you gotta sell that and and show them. So I mean like that, there's a lot of reasons why they're very like factual. Like people know inflation and gas and cost of goods and the labor market. People have heard all these things. So of course that's, that's all good and and fine. But like you want to also stir people's emotions too and tell 'em like these are our family and our employees like they're the best and they're gonna come in,

they're gonna treat your home like family and we're gonna, you guys are gonna have a happier, better day as you know, you know, actually get a claim your weekend and get your time back and spend it with the, and you're not gonna have to be worrying about who was in your house. You know, like, so it's things like that and you tell a story and you like stir people's emotions and,

and, and you'll tell 'em the reason why There's a great book by Simon Sinek that we've mentioned on the podcast before. But tell start with why. Tell 'em the reason why. That's what we did here, here. Hey guys, some really good stuff. Here's some, you know, reasons why we need to increase, increase prices as you already know.

But you know, keep let's, let's keep being awesome and you know, thank you for supporting our local business. Like just like, like Brandon said, sandwich it in there and you know, you might have some people quit and cancel like last time we did this, I wanna say it was like 10 or 15 people out of our hundreds of customers.

Brandon, you know, so it's not as scary as a lot of people think thousands let's be, let's Be legit here. Yeah, That's true. We sent this email out to 3000 people, 3000 active customers, over 3000. So right now we have, we have 1054 repeat customers in the last 12 months. So what, what brand is talking about the active customers that includes people that got estimates and all kinds of stuff like that.

But cancellation so far we've only had three that specifically told us it was the price increase that made me cancel. And then we've had three that are also in the unknown category, which we always call and try and ask them like why did you cancel? Sometimes they don't answer the phone. So that could be anything. If you lump 'em in with a price increase then we had six out of the 3000 people that it went to.

That is a teeny tiny fraction. Now full disclosure, I don't read my email, I hate email so you know, I don't like it when people communicate to me through it. It is my least favorite form of communication. So there are gonna be a number of customers who got the email and just didn't see it. It got lost in the blur.

So what will happen is over the next month, like probably over the entire course of October more people will realize that their price went up. They will call be like what the heck? The customer experience team has a list of rebuttals that we already have for you. Like don't, don't forget this, this and this. This is what we're given to you.

So by and large you know they're they'll, most of them I think will understand we're gonna tell 'em why Simon Sinek style, this is why we're raising the prices. Everyone will be like okay cool, I'm fine with it. Some of those people over the next month when they realize it went up will cancel and that's fine but it's certainly not gonna be 1,050 people.

Like they're not all gonna cancel it is what it is, you know what I mean? And like in the meantime we're still booking a month out and we had 30 estimates this week. So there is more business coming through the door that will replace the people to cancel and sometimes those people will come back like maybe their job hasn't caught up to the fact that inflation is killing everyone's salary And so they'll get a cost of living adjustment early next year and then they'll come back.

A couple of those that were on the cancellation list actually specifically stated that they were gonna pause service while they sort some things out and then maybe come back. The nice thing about cleaning is that some people get really hooked on it and like you adjust your life around not having to do it and then if you cancel it, you live with doing it yourself for a while and you're like nevermind that was terrible.

Let's call 'em back and we'll do something different. Yeah that is the nice part about the cleaning business for sure. And but the the luxury side of it, you have the people that are just like not gonna be as affected by a lot of this stuff but at the same time you are gonna have some people that are gonna drop off. But again,

look at it as a positive thing that you're actually freeing up room in your business for the best customers to step on. You're kicking off the worst customers that just, you know, maybe we're gonna complain more and be more of a headache. And actually Brandon, you asked me when we sent this letter out, you were like, cuz we've done it both ways and you were like should we put the,

the actual number, The specific amount? I was just gonna talk about this. Yeah and I know we in the past we've done that, we actually, like the very first time we did this we put like the exact price increase like to the T on this customer, you're gonna have this much and it's gonna be this much. And we did that in the very beginning and we got so much more turnover and problems from it.

And so I just told you like, I think we did it last time too, like just be a little more vague about it. If people see this and they really wanna know like let 'em reach out and let our customer service team handle it with the rebuttals and and the responses. That'll just put 'em at ease and like explain it. You know,

I do Like it this way. The letters specifically said something along the lines of this small price increase. That's all it said. So you leave it very vague and this does a couple things. I think one, it gives our customer experience people a chance to have a crack at it. When someone says they're gonna cancel, Okay well let me tell you about this,

this and this. As opposed to them just seeing it's a this percent increase. Like oh hell no I'm not paying that. But I think the other thing it does is it gives the customer some time to sit on it like oh man they're increasing prices again. Last time it was 25%, it's probably gonna be 25% again. And then you reply to the email,

how much does the price increase? Well don't worry, it's only 8% so it's adding 10 more dollars to your cleaning. They're like oh well that's not so bad cuz like it gives them a chance to imagine the worst of the price and then we get to over deliver on it's actually not that bad. And then I do think that's a good strategy. Yeah,

absolutely. I mean you, that's actually a really powerful strategy right there like in psychology is you present somebody with the worst possible scenario or you let them imagine it in your own head, in their own heads and then they come to the reality of oh $10, that's nothing I was imagining 20 or 50 or a hundred, you know, something ridiculous. So,

so yeah I think that's played to our favor and you know like very few people are gonna, with the amount of time we already have in our days that that's so limited are gonna actually reach out. They're just gonna probably wait until they get the next bill and be like, oh it was like 10 bucks more. No big deal cuz you know, people are so busy and it's not a huge deal but to our bottom line it's very much a big deal and it really does help,

you know, I don't know what, what, what that number is, but That 8% essentially covers like our entire like operating budget outside of labor. So like labor's our biggest chunk by far as it is with any service company. But when you add that 8% that just means okay that's 8% that goes towards uniforms and they'll leave behind stuff and cleaning supplies and like some of those things like we've held back on buying,

like we're using some ratty shirts that need to be replaced cuz we were trying to do the math and this customer price increase, but here we are and it's happening in, I don't know, three days. So we'll actually start seeing the, the effects of it. Yeah, absolutely. So it's a touchy subject but I think people just need to get more bold.

I mean this is business guys and it's like if you don't start thinking about being profitable, like sometimes businesses go for like 20 years and they never turn to Profit because they're just always trying to appease everyone and make everyone happy and but sometimes you gotta just play the game and just realize that this is about making money, this is about we gotta be profitable at the end of the day.

Why did you start a business maybe to be free and have more time, but ultimately it's you gotta have money to solve those problems and to give you that lifestyle. And so I think we're all on this podcast listening with similar interests. Like we all wanna make a lot of money, we all wanna be profitable and successful with our businesses, so sometimes you gotta do stuff like this guys.

So this is just part of running your business and you can't feel bad about it. You can't, you know, wait until next year. You know, Speaking of big companies doing stupid things, this is mildly related to the price increase, but next door to our business there is a national commercial janitorial company. We got a couple employees from over there recently,

which has never happened before, but some people left ship and we asked them why. We found out why the entire office staff of the office next door was fired by corporate because several people in the office were stealing customers credit card info and using it to buy other stuff. And this isn't like, these are big corporations that have giant warehouses and so it took them a while to notice I think.

But you're taking your card on file and going and using it to, to like supplement your personal income. I don't know if everybody was involved, but I know that certainly like the manager was fired for probably not catching it. But the way it's related to the price increase is if you don't pay your people well then you intentionally are not. You set up an incentive system for them to try and get what they need.

And sometimes that's by doing some things that are not cool and maybe that got referred to criminal prosecution or whatever, but they wiped the slate clean next door and some people didn't wanna work for the new management so some people came over here, but those are things that you have to stay on top of. So I'm not saying that they didn't increase their prices,

but I'm saying maybe they weren't paying their people well. And that's part of our price increase. That's it. So keep it clean guys, Thanks for joining us today. To get more info including show notes, updates, trainings, and super cool free stuff, head over to Profit Cleaners dot com and remember, keep it clean.