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A minimum charge protects you from losing money.
It facilitates saying “no” to unprofitable jobs and acts as a guide to pricing.
Using this charge effectively also improves the quality of your customers.
Most carpet cleaning companies have a minimum charge; yet many lack a clear understanding of how to use it effectively. Here are some strategies.
Service companies that travel to the consumer''s location impose a minimum charge. Every job consumes time, energy and money.
A minimum charge ensures that you don''t lose money servicing a customer. You must consider all of the costs incurred on even the smallest job.
The obvious expenses are the time and mileage for driving to the customer''s location along with the equipment setup and pickup time. Other, less obvious, expenses on-location include: Time spent talking to the consumer, calculating the quote and collecting the payment.
A portion of all of your fixed costs, such as office expenses, van and equipment depreciation and insurance also need to be taken into account. Many companies find that a minimum charge of $100 is necessary to keep them profitable.
Premium customer invoice totals should be well over your minimum charge. Therefore, a minimum charge will have little affect on them.
Explaining this to a consumer
Consumers rarely take into account that you are driving to their location and that there are more expenses in running a business than the time spent actually cleaning.
Explain that you must charge a minimum amount in order to make a trip to her house.
Remind her that a minimum charge only affects unusually small jobs. A minimum charge has no affect on square foot or room pricing.
Minimum charge is a grooming tool
When business grows to the point that you have more work than you can comfortably manage, consider grooming your clientele.
Grooming intentionally encourages certain customers and discourages others in order to improve your profitability and enjoyment.
If you need to turn away customers, be sure your premium customers are not the ones to go. Instead, turn down less profitable jobs.
New customers are less profitable and more risky than repeat customers. I recommend having a higher minimum charge for first-time customers. Doing a small job for new customers lowers your overall job average.
I suggest that you charge approximately one half of your job average for first-time customers. For example, if your job average is $250, it would be reasonable to charge $125. If your average is $400, your minimum for these new customers should be $200.
Use a minimum for other services
If you offer multiple services that require different setups, think about a minimum charge for the additional service.
For example, if you are cleaning carpet and your customer wants you to clean one dining room chair (regularly $25), you might have a $35 additional service minimum to help cover the time required for the extra setup.
Your goal is to get more upholstery work, not to charge more for the chair.
Have an internal policy that restricts when small jobs are scheduled. Do not allow premier time slots to be filled with small jobs.
Morning appointments: This is normally a desirable time slot. Apply a $200 minimum for the first appointment. This helps encourage larger jobs.
After-hours work: You are sacrificing personal or family time — you had better be getting paid for it.
Holiday peak periods: Don''t inconvenience a premium customer or turn down large invoices for small jobs.
Distant locations: Don''t drive an additional hour to outlying areas for small jobs. Use high minimums for this work.
Lowering your minimum
There are times when certain circumstances dictate that you might reduce your minimum pricing
Premium customers: Customers that normally provide you with your highest invoices occasionally need emergency spot cleaning. Consider drastically reducing your minimum, or doing the job for free.
Extremely easy spotting jobs: If you can handle a spotting job on the way to a scheduled appointment or easily resolve the situation without an extensive setup, think about a lower minimum.
Slow season: During your off season, when you have more time than money, temporarily lower your minimum.
Encourage customers with small jobs to schedule during this time.
Always explain and note on the invoice what your normal minimum charge is and why this is an exception.
Raising your minimum
If you are consistently scheduled in advance 10 working days or more, it might be time to raise your minimum.
A good rule of thumb is to raise your minimum to one third of your annual job average. If your average is $375, you should raise your minimum to $125.
It''s a tool
Grooming your clientele is an important part of becoming profitable. Remember, committing to a small job often prevents you from doing a larger more profitable job.
A minimum charge is a company policy that makes it easier to explain why you won''t drive across town for $35. This protects you from losing money.
But remember, you are the owner of the company and you can make exceptions to your own policy. Be sure your exceptions are thought out and not just caving in to a “squeaky wheel.”
Use your minimum charge wisely to ensure your business is profitable.
Steve Marsh is the creator of the Be Competition Free Marketing Program. He is a 30-year veteran of the carpet cleaning industry, an IICRC-approved instructor and a Senior Carpet Inspector. Marsh is a marketing and business consultant who provides a turn-key program for attracting better customers. For more information, log on to www.BeCompetitionFree.com.