Changing Businesss Philosophy

[HCBailly]

I’ll start off with some good news. I’ve completed the transition from my old truck mount carpet cleaning machine to a portable one. It’s been a few weeks so far, and I’m loving every minute of it. This move at least doubles my gas mileage, possibly triple, since the truck mount used gas too. I’m very happy with the new machine, and have been pleasantly surprised to find out that my client base doesn’t care, as long as I still get the job done right.

With this transition completed, it opens up many more opportunities for my business, while requiring me to change my business philosophy. Before, the philosophy was to target high-end residential homes as new prospects or via referrals. While this nets a higher average ticket, I’ve found two problems with it now:

1) Most high end homes now have wood floors, which I’m extremely unwilling to expand my business in that direction.

I would rather go out of business and get a real job, because wood floors are a nightmare business. I know, because we used to do them. In theory, if they have no wall-to-wall carpets, they should have oriental rugs, but that fact has not helped my business at all.

2) Just because they make a higher gross income, doesn’t mean that they have more disposable income.

All that really matters is how much the prospect values my service. If they don’t value having clean carpets, then it doesn’t matter how much money they have, or how big their home is. I’ve had clients in 1-bedroom condos who spend more on me than clients who live in mansions. Furthermore, I analyzed the average home value per town vs. money spent on me, and there appears to be zero correlation.

Thus, it appears to make sense for me to target lower-middle class homes. They tend to have more carpets, so at least I would have a shot of getting my foot in the door, as opposed to a high-end home with all wood floors.

Given the state of the economy, it appears that the most logical solution is to adopt the Walmart philosophy of business: offer my services for a price that even the poor can afford, just to get more business rolling. Granted, I’m not going to get rich that way. However, the theory is that if I can attract clients on a massive scale with a lower introductory price, I should at least break even on the initial job, and make my profit on upselling, repeat business, or referrals. So how do I do that?

In the past, I’ve mostly useful discount coupons (ie: $50 off) or percentage off coupons. These have had almost zero impact on my business. What the average person has told me is that people want a fixed price on my services. Regularly, I charge by the square foot, which causes the prices to be variable, depending on the size of the room. However, if I charge by the room, I can fix the price, regardless of size. For example, Sears usually has a price of 3 rooms for $99.

My dad (the previous owner) didn’t like charging by the room, because it made it too easy to compare my price to someone else. They would just look for the lowest price and go with them. Even if they used me, they would only be loyal to my price, not to me, personally. Still, I’d rather be spending my free time delivering doorhangers for a lower price, than sitting at home crying in my beer.

On a separate note, I also notice my existing client base seems to be cleaning far less often. The first effect I noticed is a decline in my ROI on my monthly newsletter, regardless of how good my sale is or not. Secondly, less and less clients are continuing with my maintenance “VIP†program, despite offering 60% off my regular price. With that, I suppose that leaves me with two questions:

1) Do you agree with the proposed change in my business philosophy? If not, what other options do I have?

2) Is there anything more I can do to encourage my existing client base to clean regularly again?

Unfortunately, my business is heavily dependent on economic conditions and more homes are moving towards wood floors. It was definitely a bad decision on my part. If I had to do it over again, I would not have bought the business. I’d rather have gotten a real job. But, I’m stuck here now, and there’s only one way out: success. Maybe that’s a good thing.

Thanks for the discussion.

 

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[MJ DeMarco]

Have you tried a "cleaning club?" and target that to the upper-class folks?

Upper class folks value their time. Your cleaning club is an annual service, paid annually, that would get their carpets cleaned 3X per year without having to actually make the appointments; you just call them to confirm their trimesterly cleaning.

This way you can build a repeat "membership" base of clients that makes valuation easier (if you want to sell the business later).

The hook is that the upscale client doesn't have to worry about dirty carpets -- you show up every 4 months and clean them. The appointment maker goes from your client (who is just too busy to think about dirty carpets) to YOU.

My pest exterminator operates under this model. They call me every 3 months to confirm their arrival. If they didn't do this, I would never call -- I just forget or don't have time. It's not a priority.

If you can make your biz into a service where your clients don't need to think about it, I think you'd have better luck.

As for discounting your service, I'm not a fan of cheap as it attracts cheap clients. It also sounds like you are just trading your time for $$$. A cheap model would be OK if your plan is to Fastlane the idea .... duplicate, franchise/chain where your time is not being traded for $$.

Good luck.

 

[HCBailly]

I think the way my program is set up is somewhat like that, except they pay as they go. After they get their carpets cleaned, I add their name to my database for the month. Six months later, I look back on that month and do four things to remind them of their maintenance cleaning.

1) I send a letter with a coupon for the discount.

While the most expensive of the four steps, it is also the most critical. No matter what order I do these in, they’ll ignore my initial contact 90% of the time. In theory, they’ll throw away the letter, but hold on to the coupon. Thus, future steps will have a greater chance of success, because they are designed to remind them of the coupon. Using this step first has generated the best overall results for the month in my experience.

2) I send a postcard.

Sometimes, a letter just doesn’t work. They might just throw it away without even opening it. In theory, they might be able to at least glance at the postcard before throwing it away.

3) I call each client individually.

By itself, this step generates the best results, regardless of its placement. Either I book the appointment upon contact, or they call me back after leaving a message. However, using this step first tends to reduce the effectiveness of the other steps; thus, reducing the total number of clients who renew the program.

4) I email each client.

This step has never worked for me. I’ve never had anyone make an appointment via email. I tried placing it earlier in the sequence, different variations of the email itself, and removing it entirely. There seems to be no correlation.

I’ve tried for years to get people to book in advance, and no one ever takes me up on the offer. In general, they simply don’t know what their schedule is going to look like that far down the road. I offer the flexibility of being able to reschedule, to no avail. Originally, it was a requirement for the program, and I would get 1 or 2 signups. Since removing the restriction, I usually get at least 10, sometimes 15 per month.

About trading hours for dollars (this is a real pet peeve of mine), isn’t that what everybody does? Regardless of how many systems you have in place, you’re still trading hours for dollars. The only difference is the number of dollars you are receiving for your hours. Unless I’m able to sit at home, play video games all day (which I would never do, even if able), and just count the money, I’m still trading hours for dollars.

In any case, my goal is to generate the highest dollar:hour ratio possible that will allow me to survive indefinitely. I don’t care whether that means having a normal job, being self-employed, owning a business, or watching stocks all day.

That’s why I got into this business in the first place. It has a very high profit margin compared to other businesses. I’m not a subscriber to the philosophy of being my own boss or having the resulting freedom. That’s not a motivation for me. All I care about are the results, because that is what generates the emotional reward.

I don’t know what you would call the opposite of cheap clients, but I strongly disbelieve that there are enough of them to support the lifestyle I want, let alone exist at all. Gas prices are causing everyone to re-evaluate their budget, and usually forcing them to discard carpet cleaning as a priority, regardless of income level. Thus, it seems logical to conclude that if I’m left with mostly cheap clients, I might as well get as many of them as possible.

Of course, ideally, I would love to have employees do all the work for me, but that requires far more income than I have now. I would have to triple my business to do that. This is just the first step, I hope.

 

[Russ H]

Totally agree w/MJ.

We get both pest services and windows done every 4 months.

We're happy to pay for it, and they call us a week out to confirm the time/date they're coming.

We greatly appreciate the service-- and like MJ-- would NEVER do this on a regular basis if we had to call the business and schedule the stuff ourselves.

Also, I think your fall off in ROI and other things could be telling you something (we watch these things VERY closely in our business).

You may want to ask yourself if you are offering enough VALUE to your clients-- perhaps that's why there is a fall off.

Our experience has been if we see a decline in repeat business-- or--more importantly-- in referrals-- that we are not offering our existing client base enough value. Or we need to work on better follow up services.

Hoping this helps.

-Russ H.

 

[MJ DeMarco]

About trading hours for dollars (this is a real pet peeve of mine), isn’t that what everybody does? Regardless of how many systems you have in place, you’re still trading hours for dollars.

Sounds like you haven't read a lot of what's been going on here. Your faulty belief is probably what keeps you in that vicious cycle of trading your life's hours (your life) for dollars.

Perhaps the business philosophy that needs changing is more than a pricing structure.

Good luck.
~ MJ

 

[kurtyordy]

Another option would be to expand your services and contract with the large apartment complexes for total clean of open apartments. They may even pay a retainer, not sure.

 

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[HCBailly]

Before purchasing the business, my dad had me gradually take over various functions over the course of five years. For the last three years, I’ve been doing the exact same thing that I’ve been doing before. The only difference is that now I’m counting the money, since I’m the owner.

So if value is the same, and business drops off, then I would conclude that something has changed in the market. I can directly correlate the drop off in business to the rise in gas prices. Thus, in order to compensate, I would have to either lower my prices or increase my value.

Most people simply do not value carpet cleaning. Obviously, I cannot change what someone else values, so the only thing I can change is the value I am providing to match it. To my knowledge, clients use me for a variety of reasons:

1) I’m almost always on time. If I know I’m going to be late, I always call ahead of time.

2) Despite my sometimes brash attitude online, I can be quite charming irl. They use my services because they like me.

3) I do the job right the first time and guarantee my work. I do all the little things like using corner protectors for hoses, giving out free bottles of spotter, and free booties to walk on the carpet while it is wet.

4) I always do a walkthrough to confirm the client’s satisfaction. Once I return to the office, I send a thank you letter. The next day, I followup with a phone call to make sure everything dried up okay.

How can I offer more value than that? I’m either on time or I’m not. They either like me or not. I either do the job right or wrong. They’re either satisfied with my followup or not. I fail to understand how I could offer more of that value.

Regarding referrals, my belief is that the reason I’ve stopped getting referrals is two-fold. Of course, gas prices are one factor. The larger factor is that I’ve stopped getting new clients everywhere. I’m keenly aware that I’ve tapped out my existing clients for referrals. They’ve already referred me to everyone they know. Thus, I need a new source of clients, even if they are cheap, just to get more referrals, I would think.

About trading hours for dollars, I don’t believe I’ve ever met a single person who doesn’t still do that. In theory, I probably should have, given all the wealth-building seminars I’ve attended. Yet, every single investor I’ve met still goes out to work everyday. I’ve met so many people who have achieved far more wealth than I would ever care to accumulate, yet they are still trading hours for dollars. Why? My guess is that the reason I have never met such a person is either:

1) They don’t exist. I find this to be highly improbable.

2) If they reached a state of true financial freedom, I would never meet them. Why would they be going out to seminars all the time? They would be traveling or doing whatever they really wanted to do with their life, besides trading hours for dollars.

Regarding apartment complexes, I do have a few that I clean for regularly. I’ve even semi-considered completely changing my business to all commercial work, but that would require many more buildings to accomplish that goal. I’m still working on that.