I have received numerous phone calls from janitorial and floor care service companies in the past two weeks in response to my recent article in Cleaning & Maintenance Management magazine regarding ultra-durable urethane floor finish. What always amazes me is how few people can truly see the light when it comes to floor care in terms of revenues, costs and profits. They ask me about the costs associated with our products, and then I tell them the costs along with the going rate of the contractors who are successfully finishing floors with UDU.
Because almost everyone I speak with says that they currently charge about 30 cents per square foot to strip and wax floors, they practically fall out of their chairs when I tell them that UDU costs about 36 cents per square foot and that the contractors I know of are charging an average of $1.75 per square foot to strip floors and install UDU finish.
"How can they justify that? It must just be different in their part of the country than ours. I would never be able to get my customers to agree to that," they say. Since I know of contractors doing this successfully in all regions of the country (with the exception of the Northeast), I'm certain it's not geography.
Read on to see how they can justify it. (For those of you interested in a better business model, pay very close attention.)
Let's break it down.
Let's say you currently charge 30 cents per square foot for strip and wax service and you get a 10,000 square foot building. This will be $3000.00 in new revenue. This will seem like a really nice sale. But then come your costs:
- cost of stripper (10,000 sq ft / 1,000 sq ft per gallon = 10 gallons x $15 = $150) = 1.5 cents per square foot- cost of finish (5 coats x 10,000 sq ft / 1500 sq ft per gallon = 34 gallons x $10 = $340) = 3.4 cents per square foot- cost of equipment (estimate) = 0.5 cents per square foot- cost of pads, mops, etc. (estimate) = 1.5 cents per square foot- cost of labor [direct] (2 people, 2500 sq feet per day to strip and finish, 4 total days @ 8 hours each, $10 per hour wages, $5 per hour for insurance and taxes = $960) = 9.6 cents per square foot- cost of overhead [vehicle, gas, insurance, liability insurance, meals, etc.] (conservative estimate of 25%) = 4 cents per square foot- total costs = 20.5 cents per square foot or $2050.00
Your profit = $950 (32%)
Let's say you charge 20 cents per square foot to scrub and recoat the floors for this customer once per quarter or 3 times throughout the year. This will generate an additional $6000.00 in annual revenue paid out in three installments of $2000.00 each. Again this seems like a nice sale and this is what many people say to me they can't give up. Again, let's look at the costs for each of these sessions.
- cost of finish (2 coats x 10,000 sq ft / 1500 sq ft per gallon = 14 gallons x $10 = $140) = 1.4 cents per square foot- cost of equipment (estimate) = 0.3 cents per square foot- cost of pads, mops, etc. (estimate) = 1 cents per square foot- cost of labor [direct] (2 people, 5000 sq ft per day, 2 total days @ 8 hours each, $10 per hour wages, $5 per hr for insur. and taxes = $480) = 4.8 cents per sq ft- cost of overhead [vehicle, gas, insurance, liability insurance, meals, etc.] (no change from the initial job, but could even be more if gas prices or insurance costs have gone up) = 4 cents per square foot- total costs = 11.5 cents per sq ft or $1,150.00 x 3 quarters = $3,450.00
Your profit = $850.00 (43%) each quarter x 3 quarters = $2,550 per year -- This definitely looks like a good profit margin on paper, and a good ongoing revenue stream. Many people who inquire about UDU say to me that they like stripping, waxing and burnishing because it generates ongoing revenue. But what if the customer decides that one quarter they don't feel the work is needed. That's $2,000.00 of revenue and $850.00 profit you just lost and will never get back. To be successful, you have to ensure that the customer will always agree to these charges. That takes a fair amount of sales effort to lock that customer in, but you will see later that the sales effort for UDU is really no different.
Now, let's say this customer really wants their floors to shine all the time, so they agree to a monthly burnishing program. You charge 7 cents per square foot. Total revenue is $8,400.00. But, again, let's look at the costs. This is one area where many contractors unfortunately lose money if they are not careful. Customers can have a tendency of requiring additional treatments at no extra charge because they aren't satisfied with the shine between treatments.
- cost of equipment (estimate) = 0.5 cents per square foot- cost of pads (estimate) = 0.5 cents per square foot- cost of labor [direct] (2 people [one to move things, one to run the machine], 2.5 hours each session, $10 per hour wages, $5 per hr for insur. and taxes = $75) = 0.075 cents per sq ft- cost of overhead [vehicle, gas, insurance, liability insurance, meals, etc.] (no change from job to job, but could even be more if gas prices or insurance costs have gone up) = 4 cents per square foot- total costs = 5.075 cents per sq ft or $507.50 each session x 12 = $6,090.00
Your profit = $2310.00 annually (28%)
Let's add up the totals for the year: (assuming all tasks are billed)
- Revenue (cost to customer) = 3,000 + 6,000 + 8,400 = $17,400- Costs to you = 2,050 + 3,450 + 6,090 = $11,590- Your profit = 950 + 2,550 + 2310 = $5810 (33 % of revenue)
Let's look at some other costs that should be considered by you and the customer under this scenario:
- Over the course of the year, you and/or your crews will have been in this building to do work 22 separate days and approximately 110 hours. This means a lot of extra electricity to keep the lights, heat and A/C running and potential extra security costs for the customer as well. - You will have made at least 22 round trips to and from this facility which leaves a sizeable carbon footprint for those of you striving to be more "green".- You will use as much as 250 gallons of water to strip, scrub and rinse the floors, and will pour almost all of that down the drain as waste water. The customer eats the expense of the water and sewage.- You will use as much as 100 hours of energy to operate your equipment. The customer eats the cost of electricity.- You will use 76 gallons of floor finish and 10 gallons of stripper. This adds up to a lot of packaging waste and potentially hazardous chemicals being used by your employees and dumped down the drain when stripped each year. - You will use at least 8 stripping pads, 6 scrubbing pads, and 6 burnishing pads which all end up in a land fill when they are no longer effective for use.
Now let's shift gears and look at what you could do with ultra-durable urethane for the same 10,000 square feet (assuming the typical lifecycle as shown by historical data) charging $1.74 per square foot for stripping and finishing:
Total revenue (cost to customer) = $17,400 - Same total cost to the customer as before, but paid up front. Keep in mind, you get this revenue right away versus being paid a moderate payment initially, moderate payments quarterly, and small amounts monthly. (Money is always worth more now than it is later).
- cost of stripper (10,000 sq ft / 1,000 sq ft per gallon = 10 gallons x $15 = $150) = 1.5 cents per square foot- cost of finish (1 coat x 10,000 sq ft / 600 sq ft per gallon = 17 gallons x $210 = $3570) = 36 cents per square foot- cost of equipment (estimate) = 0.5 cents per square foot- cost of pads, mops, etc. (estimate) = 3 cents per square foot (the rollers and applicators used are a bit higher in cost than the standard mops used for applying wax)- cost of labor [direct] (2 people, 3500 sq feet per day to strip and finish, 3.5 total days @ 8 hours each, $10 per hour wages, $5 per hour for insurance and taxes = $840) = 8.4 cents per square foot- cost of overhead [vehicle, gas, insurance, liability insurance, meals, etc.] = 4 cents per square foot- total costs = 53.4 cents per square foot or $5340.00
Your profit = $12,060 (69% of revenue)
In order to effectively maintain the appearance, a quarterly scrub with a white or red pad and neutral cleaner may be necessary to clean out minor scratches and remove any excessive dirt build up. Assuming the same costs as burnishing you will incur an additional 15.225 cents per square foot or $1522.50. This brings your profit down to $10,537.50.
Over the course of the year, under your one-year satisfaction guarantee, you can expect to do spot repairs and re-coating on about 500 square feet costing you an additional 40 to 45 cents per square foot or as much as $250.00 depending on how many different times you do this. This will bring your total profit down to $10,287.50. If you had to repair/recoat as much as 1,000 square feet (highly unlikely), you would still have a profit of at least $10,000.00
During the course of this maintenance program you and/or your crews will have visited the facility only 6.5 separate days for approximately 35.5 total hours; more than 60 percent less in both statistics as compared to a conventional finishing program. You will have made only 6.5 round trips to the facility, significantly reducing your carbon footprint and vehicle wear-and-tear. You will have used far less water by eliminating scrub and recoats, and next year you will eliminate the water associated with stripping because you will simply scrub/screen the finish rather than fully stripping it. You will have used only 17 gallons of a zero-VOC, water-based chemical finish instead of 76 gallons of acrylic wax loaded with zinc and/or potentially harmful solvents. Next year you will not use any stripper chemicals or stripping pads. You will no longer use a minimum of 6 burnishing pads or any burnishing equipment. You will use far less hours of electricity as well.
Let's recap by comparing the dollars between the two scenarios:
- With conventional strip and wax, scrub and recoat, and burnishing you charged $17,400 and made a profit of $5810.00. - With an ultra-durable urethane program you charged the same $17,400 and made a profit of $10,287.50 -- an additional $4,477.50 (26% of revenue).
With these kind of numbers, it doesn't take a Harvard degree to figure out how to justify switching to ultra-durable urethane. Labor and overhead are simply too costly to ignore, and sadly I talk to far too many people who just don't get that.
If your customer should not be keen on paying $17,400 up front instead of over time like they are used to, then set them up on monthly payments. You'll still get the additional profits and the customer will have less intangible costs such as water and electricity. The monthly payments will allow them to budget more easily as well, rather than having a larger payment up front, three sizeable payments each quarter and smaller monthly payments. On top of that, you can tell them that their cost next year will either be slightly less or nothing at all. The finish may hold up for a full two years, or your charges to recoat will be less than the full charges of the first installation since it doesn't take as much time to screen and recoat as it would to fully strip the floors and finish again. Many of the contractors I know of using UDU charge up to $2.25 per square foot knowing that they will not be back at a facility to do work for two years. They break down the cost comparison for the customer over a two- to three-year period. The customer essentially saves even more money, and the contractor makes even greater profit up front.
You can give your customer the feel-good sense of being "greener" in the process as well.
If this has got your attention, I'm sure I'll be hearing from you, at which time I'll be inclined to share additional ways for you to make even more money by doing ceramic tile floors and using other cutting-edge technologies that save time and labor.
Its nice to read that someone has got the picture right when it comes to proffessional floor care!
Way to go!
Bo, Thanks for the comment. When you've got a good product and the right processes, floor care can really be one of the "greenest" and least costly things you do for your building with some of the highest value return. Customers love shiny floors, but what businesses have had to pay and go through over the years to keep floors shiny has been a tragedy. But now that there are better alternatives, people need to start gravitating to them.
I liked your analysis. Very thorough. How did you get into this business? How long have you been involved in floor care? You would appear to have advanced expertise in UDU floor care products. Thanks
We have a new product that's easier to remove, which will save you time / money. We've done significant testing, and are happy to share our research with you.
Though I manage a hospital housekeeping dept., I do not do side work. Nevertheless, I'm all the time getting phone calls from contractors or associates wanting to know how to figure loss and profit or going rates. I also get the occasional question regarding frequency of re-coating and or burnishing. This article was an excellent resource and I have saved it for future use.
Thanks again for taking the time to be so detailed.
Interested in your product and procedures. Do you have a training program for product use and application? Let me know, please. Curtis Elliott http://a-1janitorial.com Lawton, OK email: firstname.lastname@example.org
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