This article is a continuation of BSCAI’s Bidding and Estimating series, helping you learn how to bid commercial cleaning jobs. Read the last article in the series here.
Accurate job costing — often called bid budgeting — is vital for cleaning professionals looking to submit competitive and profitable bids in the contract cleaning industry. It is more than just crunching numbers: effective job costing demands a thorough understanding of labor, materials, overhead expenses, and market factors. When performed correctly, job costing helps you create bids that stand out while safeguarding your bottom line.
In this article, we will explore how to develop a comprehensive bid budget that positions your cleaning business for long-term success. From labor costs to profit margins, this guide will walk you through the critical elements of job costing so you can secure more commercial cleaning contracts and grow your business sustainably.
Labor Costs: The Core of Your Budget
Labor is typically the largest expense in any commercial cleaning bid, comprising roughly 50% to 80% of the total price. Careful planning in this area lays the groundwork for the entire bidding process. Start by focusing on these three areas:
- Staffing and Management Costs: Budgeting must account for frontline cleaning staff and any management or administrative roles needed to oversee the contract. Site-based supervisory staff, for instance, can be essential for quality assurance and client communication. Accurately determining the number of employees required and their corresponding work hours is crucial. Be sure to calculate annual hours accordingly, factoring in the number of service days, paid holidays, and any potential overtime.
- Pay Rates: Pay rates should reflect market conditions, the skill level of your employees, and local wage requirements. Online job platforms such as Indeed can offer insights into standard pay rates in new or unfamiliar markets. It is also essential to research prevailing minimum wage laws, which vary by state and even by city, to remain compliant and avoid financial penalties.
- Payroll-Related Costs and Benefits: Beyond hourly wages, there are additional mandatory expenses, including payroll taxes, workers’ compensation, and general liability insurance. Optional benefits — like health insurance, retirement plans, or paid time off — can also impact labor costs. These rates may vary significantly from one region to another, so proper research and allocation will help you avoid unpleasant surprises mid-contract.
Accurately estimating labor costs sets a firm foundation for your bid. If you misjudge this single largest expense, even small errors can drastically cut into your profit margins.
Supplies and Equipment: Balancing Quality and Cost Efficiency
After labor, the second major cost category in your bid centers on cleaning supplies and equipment. High-quality supplies can elevate service standards and client satisfaction, but you must balance these costs carefully to remain profitable. Consider these three areas when planning supply and equipment costs:
- Equipment Amortization Costs: Large equipment — such as floor scrubbers, carpet extractors, and burnishers — should be amortized over its expected useful life. This approach spreads out the equipment expense, preventing any single bid from bearing the full cost. Set a dollar threshold to determine which pieces of equipment should be amortized and include a reasonable replacement schedule in your financial calculations.
- Supply Costs: Common consumables like cleaning chemicals and can liners can be estimated by assigning a percentage of labor costs to supplies or calculating a fixed cost per man-hour. This method ensures that your supply budget scales with the size and scope of the project.
- Restroom Consumables: When restroom consumables such as soap, paper towels, and toilet tissue are part of your contract, incorporate those expenses into your bid. Historical usage data, if you can get it, is ideal. In cases where such data is unavailable, use facility headcount and foot traffic patterns to estimate consumption. High-traffic areas can lead to surprisingly high consumable costs, which should be accurately reflected in your final pricing.
Striking the right balance between quality and cost management in supplies and equipment helps you deliver outstanding service while maintaining healthy profit margins.
Other Direct Costs: Hidden Expenses That Add Up
Hidden or often overlooked direct costs can quickly add up and erode profits if not identified during the bidding process. Including the following from the outset makes your final bid more accurate and protects you from financial surprises:
- IT and Software Needs: Commercial cleaning contracts often benefit from specialized software for scheduling, timekeeping, and workforce management. While there is a cost associated with these tools, they can improve efficiency and reduce administrative errors, yielding long-term savings.
- Recruiting Costs: Securing qualified staff for a new contract may involve posting job ads, engaging recruiting agencies, or using paid screening tools. Factoring in these expenses ensures your staffing budget is realistic.
- Background Checks: In sensitive or high-security facilities, background checks are critical. Cleaning professionals should confirm whether the client requires specific screening procedures and include associated costs in their proposal.
- Vehicle Costs and Uniforms: If your team needs to travel between sites or if uniforms are mandatory, factor in leasing, insurance, fuel, maintenance, and uniform expenses. These costs can vary based on fleet size, travel distances, and uniform requirements.
- Performance Bonds: Some clients, especially government agencies, require bid or performance bonds. While these can be a notable expense, they can also make your bid more compelling by showcasing your reliability and financial stability.
- Subcontracted Services: If your company outsources specialized tasks like window cleaning or floor refinishing, verify that you accurately include subcontractor fees in your overall bid. Transparent communication about these costs can boost client confidence.
Accounting for these direct costs helps ensure that the final contract price truly reflects the scope of work and minimizes the risk of cost overruns once work begins.
Profit: Balancing Margin and Market Positioning
Achieving profitability while staying competitive can be challenging in the crowded commercial cleaning market. Several factors influence how you approach this balance:
- Margin vs. Markup: The terms margin and markup are often used interchangeably, but they calculate profitability differently. A margin is the profit percentage relative to the total sales price, whereas a markup is the percentage added to the actual cost. Understanding both concepts can help you avoid underpricing, ensuring you meet profit targets.
- Overhead Implications: Winning a sizable contract can introduce new overhead costs, such as additional administrative support, new office space, or expanded software needs. Consider how taking on a new contract will affect your overall business structure and account for these changes in your bid.
- Competitive Analysis: To position your company effectively, you must understand what your competitors charge and what level of service they provide. By researching local and regional pricing strategies, you can identify a sweet spot for profit without alienating prospective clients with prices that are too high or too low.
- Size and Scope of the Job: Large, high-profile jobs often attract more competition, potentially driving down margins. Smaller or more specialized contracts may allow higher margins. Typical margins in commercial cleaning can vary anywhere from 8% to 30%, depending on contract size, complexity, and competitive dynamics.
A Strategic Approach to Job Costing
Developing a well-rounded job costing process is a strategic advantage in the commercial cleaning industry. From accurately projecting labor expenses to factoring in often overlooked costs like IT, recruiting, and performance bonds, a detailed bid budget positions you to win contracts profitably. Keeping a close eye on profit margins, overhead implications, and market conditions ensures that each new bid not only grows your business but also maintains healthy financial returns.
By investing time in refining your bidding and estimating strategies, supported by insights and resources from BSCAI, you set your company up for consistent success. The key is to treat job costing as an ongoing process, continually assessing and adjusting for better accuracy and efficiency. With robust job costing in place, you can approach every new contract with confidence, knowing your bids are both competitive and poised to boost your bottom line.
This article is one of several in a series on bidding and estimating. Read more here: