Most of the time when clients call you for a foreclosure clean up job, they’re going to want you to give them a rate over the phone. Patiently explain to them that you have to see the property before giving doing this, which means scheduling an appointment. Once you clear this hurdle, they’re still going to want you to — what we call – “blurt out a price” right on the spot once you’re on site.
As an established foreclosure cleanup company owner in the metro Atlanta area explains, “We get sssssooooo many calls from realtors, investors, new foreclosure homeowners and our competition wanting to know how to price a job. They’ll say something like the following:
Caller: Can you just send me over your price list so I can have it on file?”
Caller: I have a 2400 sq. ft. home with just a few items in it; can you just give me an idea of what it will cost?”
Caller: I am a new business owner and want to get an idea of how to price this job…. can you tell me what you charge?”
To all of these requests she says her response is a polite “no” because foreclosure cleaning is an industry with thin profit margins.
Foreclosure Clean Up: An Industry with Thin Profit Margins
Many of the services offered by foreclosure cleanup companies have thin profit margins. This means your business can be in trouble from the outset if you don’t learn how to price appropriately.
To be fair to your customers — and to your bottom line – you have to know your direct and indirect costs in order to price a job correctly.
Foreclosure Cleaning: What Your Direct and Indirect Costs Mean to Your Bottom Line
Direct costs are the costs that can be defined concretely for every job, eg, wages for labor and costs of supplies. You can put your hand on the receipt for everything as it relates to the job at hand; hence, it’s easy to see what the jobs costs you to do.
Indirect costs are all the other costs not accounted for in your direct costs for a particular job, but they are still necessary for you to be in business. These costs are there whether you get foreclosure cleaning jobs or not. Hence, they should factor into every job you price.
Some examples of indirect costs are business insurance, phone, gas, paper and ink cartridges for your printer, etc.
The inability to factor in indirect business costs accurately is one reason why so many small business owners – especially those who are new to business — find it difficult to price jobs. They usually wind up not charging enough and before you know it, they’re out of business.
How to “Accurately” Calculate Indirect Costs
Accurately is in quotation marks because by their very nature, indirect costs are estimates. But you can get pretty close using some concrete formulas for calculation.
Your biggest indirect costs will be easy to figure out (eg, phone, insurance).
The intangibles in your foreclosure clean up business like gas for running around doing estimates, figuring out how long it’s going to take to complete a job and how many workers you’re going to need for a job will give you the most headaches initially.
The only way to figure these things out is to pull upon knowledge you already have and use common sense.
For example, to figure out how much you’re going to spend on gas — just figure in a certain number of miles per week. If you stay within a certain geographic area (say, 25 miles) then figure giving 1-3 estimates a week. At 50 miles per round trip, you can get an idea of how much gas you’ll be using.
To figure out how long it’s going to take to clean a house, use your own experience in cleaning your house.
When you clean your house, how long does it take? Other things you’ll want to keep in mind is how much larger/smaller your house is compared to the one you’re bidding on; and is it a white-glove or broom swept clean. Then, add in more time for wiggle room.
The above is mostly excerpted from the ebook on how to price foreclosure cleaning jobs, Pricing Guide for Foreclosure Cleaning & Real-Estate Service Businesses: How to Price Jobs for Profit.
P.S.: Learn how to start a foreclosure clean up business — and get on the road to creating financial security for you and your family.
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Copyright © 2009 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.