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Thursday, November 27, 2014

Question

We have a new out-of-state janitorial company that has come into the Jackson, MS area and is bidding Class A office space at .055 per square foot. This includes carpet cleaning, hard floor stripping and finishing, and 5 day-a-week cleaning. How is he doing it for this price?


Answer

That seems to be a low price, especially when project work such as carpet cleaning is included. Only time will tell if it is too low to actually perform a quality job. Watch the project and see how the cleaning looks six months from now.
There are economies of scale. A truly large company may be buying equipment and supplies in large quantities and saving money in that area. A large company can make a smaller profit on each of its many accounts and still run in the black. And labor costs can be reduced by paying lower hourly wages, pushing for higher production rates, and utilizing more productive equipment.
However, the time and money for the labor cannot be cut back indefinitely without sacrificing quality. Things will be skipped and instead of the needed four coats of finish they will apply two.
Then there is the strategy of churning accounts. Get an account at a low price that eliminates the competition. Milk it for all you can for as long as it takes the client to become fed up with poor service, uncleaned toilets, poor carpet cleaning, etc. Get dumped by the dissatisfied client and go looking for the next “sucker for the low ball”.
At this time, it is hard to say what is happening. They may even be losing money and not have enough business savvy to know.
Keep watch and you soon will know if they really can do this for that price or not.

Lynn E. Krafft, ICAN/ATEX Editor
lekrafft@juno.com