Profit and Loss...but mostly loss

In this show, I discuss a pivotal moment in the company as we shift into an investment phase, and focus on customer acquisition, and building our credibility online. It's a fairly risky strategy in terms of spending because, well, I might lose all of my money that I'm investing. Time will tell if it works. Originally aired 10/11/2023.

Transcript

Speaker 1: 0:01

Hey everybody, mike here and welcome to Task Force Entrepreneur. The podcast I started went from being a tech engineer to starting a house cleaning business. Yep, that's my story and I'm sticking to it. I hope you enjoy the show. Hey everybody, welcome to today's show. If I sound a little funny, it's because it is 6.32 in the morning right now.

Speaker 1: 0:26

I've decided to make a slight change to the business. The reason that I'm recording this at 6.32 in the morning is because I'm going to implement it this morning and really, really hope that it will have an impact starting today. So I kind of have to get to it quickly. But I wanted to record this, to make a record of this, because this might have far reaching consequences in the next couple of weeks for the business. So let me explain what's going on.

Speaker 1: 0:57

The reviews and feedback we've gotten from current customers has been great, With the exception, as many of you know, from previous episodes. We had a couple of incidents that were not so great. The problem is we're having a hard time getting recurring customers. So what I've noticed is well, there's two major problems, I think. The first is I do think our prices need to be trimmed just slightly, and the way that I've been, pricing has been somewhat inconsistent. So I'll give you an example. Let's say someone called up and said I want you to come monthly and I go out there and I look at their home and talk to them and I determine it's going to take two hours of work. My cost per hour is what I've been operating on has been $50 an hour. Now that factors in the pay of the employee, that factors in taxes, that factors in supplies, overhead for the business, advertising, all that stuff. So if it's a two hour job I would say, okay, $50 times two is $100. And then here's where I've been very inconsistent. I've also been adding in the cost of mileage and time driving for the cleaner, and that's a relatively small amount, to be honest.

Speaker 1: 2:29

But the problem is the way I've been doing. It is, I've been adding that in after my cost and then adding our margin. Our margin is basically marking up the mileage and drive time, which is kind of indifferent, I mean, to the customer. It's just the prices, the price. But the result is it is a higher price than if I had just marked up that base cost of $100. Let's just say I took it from $100 to $130 and then I added $15 in for mileage or whatever, and now their price is $145. And actually, if I throw this into the calculator which I'm doing right now, let's say we did it the other way we take our base cost of $100 and I add in that $15 for mileage, and now I mark it up in this case 30% Now the price is $149. And, as you can see, that's a difference that's only I think that's like a $4 difference, but this is a relatively low cost example. So this has been essentially, in my opinion, artificially inflating our prices slightly higher than what they should be, and I don't always do it the same way. So that's kind of the problem. So I need to stop, I need to become a little more standardized in that regard.

Speaker 1: 3:51

All right, so on to the reason that I'm recording this, which is, I said I was going to try something new. So it's clear, I need to standardize, kind of the method of pricing. We can't have like flat pricing and that sort of thing for those wondering, because let me tell you, two houses could be identical and one could take three hours and one could take six, so we just can't do flat rate pricing. So the problem that I'm going to try to solve with. What I'm about to share with you is we need more reviews and we need more people coming in the door. Pricing is working, but not as fast as I would like it to work.

Speaker 1: 4:35

So I'm actually going to view the next 60 days as an investment phase. We are going to operate at a loss for the next 60 days. I'm going to put more money into the business and what we are going to do is offer first-time cleanings for somewhere between $39 and $69. There's no contract, there's no obligation. Someone could take their $39 cleaning and leave, but I'm hedging our bets on the fact that some people will stay and become reoccurring customers, and even those that don't, hopefully we can push them towards getting more reviews. So even if they leave after a $39 clean but leave us a five-star review, that's a win, at least for the next 60 days. So this is not a permanent change that's going to be going on for a long time. I don't think. I think this is a short-term promotion.

Speaker 1: 5:41

And for those wondering if we come out and do a $39 house cleaning yes, of course we're losing money, but what we're going to do is we're going to make that $39 cleaning fairly basic. That is not going to be everything that we would include in, say, $180 cleaning. It will, however, include the basics, the things people really care about. You know bathrooms, floors, kitchen, you know that sort of thing. So just to give you an idea of the numbers, let's say a $39 cleaning is actually, you know, two and a half hours of work, right? So my cost for someone to go do that work is, I would say, let's just ballpark it at $140. That includes, like mileage, the time of the cleaner, everything. So if I charge someone $39, essentially that means that if you take that $140, the total cost, you offset it a little bit with that $39. Now you have $101. So my cost, my investment for us to do that cleaning was $100.

Speaker 1: 6:57

And I would say I don't really have a specific goal in terms of how many I plan on doing, but you know, if we could do 20, 30 of those, that would be great. So that comes out to $2,000 or $3,000 as an investment, and I'm not doing this blindly. We're not going to do this and not get anything out of it. So it is predicated on the idea that we're going to get reviews and, yeah, maybe a couple of those people will stay and become regular customers, and maybe the better consistency of our pricing on the reoccurring part. Maybe that will also keep more customers, because I definitely know for a fact we have missed out on a few opportunities because our price was just slightly too high.

Speaker 1: 7:51

So essentially, I'm just trying to make things a little bit more digestible for customers. I'm trying to get people in the door, I'm trying to make sure that our margins are consistent and repeatable, which as of right now, they haven't been. I mean, sometimes I've marked up things 25%, sometimes 35%, it just depends. But personally I think that's okay because sometimes it depends on the opportunity. You know, if it's a very large job, we can go a little thinner on margin because we're still going to make good money. But I do think we need to just kind of level things out. So anyway, this was just mostly to log that this is a major change we're going to be working on the remainder of this week and also next week.

Speaker 1: 8:42

So before we close out, the one thing I will add is yesterday I had a little bit of a panic just realizing that we're not getting the business in that I had hoped. It's kind of weird. It feels like, you know, last week was crazy, and then all of a sudden it just died, and so this might be me just overanalyzing, but I just started freaking out a little bit. So the other thing I did was I started reaching out to property management companies and for those of you that aren't familiar with how they work and this is something I've been learning, by the way property management companies will manage things like rental houses or apartments, or entire apartment communities, I should say, and they can do anything from collecting rent. They can do, you know, manage the maintenance. They can handle calling companies to come fix their conditioning. They can handle helping tenants get keys to their house that they got locked out of. You know there's all kinds of stuff right. They basically make it so whoever owns that property doesn't have to actually do the day-to-day stuff.

Speaker 1: 9:50

Well, the reason that working with property managers is so appealing is because, obviously, the amount of work they have can be pretty large and oftentimes they have many different clients. So if you can get a good reputation going with them in theory, then that could extend to other properties and that sort of thing. And early on when I started this company, I actually had a property manager that reached out and we had talked, and we had talked about doing five to 15 cleanings per week at one property. So this was very, very far out of our service area, which is why we're not doing it now. But that's just an example. It could be very, very, very lucrative and again, margins might be lower, but it would be very, very steady work.

Speaker 1: 10:40

So anyway, I've been reaching out to those property managers and the way that it kind of works is they have vendor lists, so they will have a list of kind of the vendors such as electricians and AC companies and plumbers and cleaning companies. So they may have a list of five cleaning companies or 10 that they'd like and you get on that list after proving that you have insurance and all this kind of stuff, and then what you do at that point is basically wait for them to say, hey, we have a job, how much can you do it for? And they can either pick the lowest bid or they can forward the bids to the owner and the owner can make a determination, depending on how it's structured. I think in many cases they will just make the decision, but anyway, so I'm working on that as well and I have already seen some promising just glimmers of hope. So we'll see.

Speaker 1: 11:37

I don't know. I think that might be something that does pay off in the next few weeks, but time will tell. All right, the day is starting and I am behind, so I am going to get that stuff going and I will definitely be recording a follow up to let you guys know how this turns out. So I'm interested myself to see if all of this activity has some kind of positive effect on the number of customers and that sort of thing and hopefully doesn't diminish the quality of customers. That's a concern I have as well. So we'll see. But thank you for listening. I hope you guys have a great day. Hey, thanks for listening to the podcast. Listen. I don't know if this promotion is going to work or not, but what I do know is this podcast doesn't work unless I get reviews. They mean a lot to a brand new podcast, so if you'd leave me a review, I'd really appreciate it.