Introduction
If you Google "housekeeper near me" you'll find a lot of businesses with a wide range of pricing. It can be hard to understand why prices are as they are. This article is a discussion of the factors that contribute to pricing choices amongst housekeeper services/cleaning services. It is mostly a review of different points raised by a getjobber article. The main goal here is to understand the differences in price determination that come into play when one provides a cleaning quote or rate.
Contents
Housekeeper Hourly Rate Billing
Profit margin
Imagine three companies:
Company 1: $30/hr/cleaner labor rate
Company 2: $45/hr/cleaner labor rate
Company 3: $60/hr/cleaner labor rate
The only factor here that varies is profit margin. Company 1 is a company owner who comes out and does the cleaning by themselves. They earn $30/hr and that’s it. Their hourly rate IS their profit margin. Company 2 is a company owner who has hired an employee who does their cleaning. They pay the employee $30/hr and pay themselves $15/hr as a profit margin (50% profit margin). Company 3 is a company owner who has hired an employee at $30/hr, the remaining $30/hr goes to the company owner as a 100% profit margin.
Experience and equipment
Imagine two cleaning services that are perfectly aware of each other’s productivities:
Service A: $30/hr - basic cleaning tools 1 year experience; productivity level 4/10 (where 1 is completely unproductive, and 10 is the highest speed a human being can do this job in)
Service B: $55/hr - high quality cleaning tools, 10 years experience; productivity level 8/10
Why the price differential? Service B’s pricing is based on their understanding of Service A’s pricing. They know that they can work exactly twice as quickly as Service A given their superior tools and experience. Thus, Service B provides an attractive offer to the client in this form: I’ll do your job twice as fast as the next guy, you’ll go back to your regular, daily life sooner, and you’ll even end up saving a little bit of money.
Cost of labor
Imagine 3 cleaners:
Cleaner A: 18 year old out of high school, lives at home with parents, working to cover some expenses, considering college
Cleaner B: 19 year old in college, paying tuition fees
Cleaner C: 45 year old with family, paying mortgage
Note: all three cleaners have no professional housekeeping experience and apply for jobs in cleaning companies
Intuitively, if we ask the question, “which company is most likely to pay more for their labor” we understand that it’ll be whoever hires Cleaner C. The 45 year old with the mortgage won’t be able to make $50/hr at the cleaning job, but they’ll negotiate themselves $25. In contrast, the 18 year old will be so happy to have received a job offer and experience at all, that they’ll gladly work at minimum wage ($16.50/hr in Ontario).
Flat rate billing (quality of work)
Imagine 2 cleaners offering a flat rate for housekeeping:
Service A: I’ll clean your home - $350
Service B: I’ll clean your home - $250
Service B is more attractive. However, Service B may cut corners. Clients are necessarily the best judges of quality, and they’ll never know because they aren’t comparing the quality of work side by side between Services A & B. Service A may go over all the corners, the ceilings, inside the oven and do a deeper, more comprehensive and accurate cleaning job than Service B, but Service B may win the contract on pricing attractiveness.
Housekeeper Overhead Expenses
Personal life expenses (rent/mortgage, family, commute, etc)
Imagine the following cleaners:
Cleaner A: homeowner, supports their family, drives to work daily with their car
Cleaner B: rents a room in a house, supports themselves, commutes by bus daily to work.
Who can afford to charge less? Cleaner B is able to charge less because their personal expenses are less.
Taxes
Imagine the following cleaners:
Cleaner A: cleans a home themselves, for cash, no invoice/income tax evidence
Cleaner B: hires an employee, pays HST in Ontario, pays out other relevant employment taxes according to government laws, invoices and pay income tax
Who can afford to charge less? Cleaner A. The cleaning service that abides by the fewest government laws for employment and taxation is the one that can afford to charge the least. This is unfortunate.
Business expenses
Imagine the following two cleaning services:
Cleaner A: advertises for free through Kijiji, commutes to work by bus or carpools with someone, doesn’t carry insurance
Cleaner B: runs Google ads for advertising, drives to work in their own car, carries $2 million liability insurance for business as well as WSIB or some other employee coverage insurance.
Who is more likely to charge less? Cleaner A because of the same principle as the above. Less overhead means more opportunity to bill less.
Supplies and how they’re used
Imagine two cleaners:
Cleaner A: uses the same rags, mops, brooms, and sponges from job to job. Washes them at home. Purchases the cheapest available cleaning supplies from a dollar store.
Cleaner B: always brings clean, out of the packaging supplies, and uses a lot of different rags and towels for cleaning different surfaces.
Who's going to charge more for supplies? Cleaner B will because their process, which they hope will achieve a better quality cleaning job requires a bigger payment.
Housekeeper competition
Supply of Cleaning Service Providers
Imagine two marketplace scenarios
Scenario A: A small town has only 3 available cleaning services, charging $25, $35 and $45/hr accordingly; you are a new entrant into the cleaning business, what can you charge which will guarantee you a share of the market?
Scenario B: small city has 300 available cleaning services, ⅓ of which charge $25, a third charge $35, and a third charge $45; same question as a new entrant, what can you charge?
In which situation is the client more likely to get a good price for housekeeping? Scenario B provides better opportunities for clients to save money. More competition means a greater psychological price pressure among service providers that they must lower their prices in order to compete. It means that consumers have more choices and can afford to make multiple calls to different companies (shop around) before making a decision. All of this is bad for price considerations and drives them down. For this same reason, the price of regular housekeeping is lower than specialty cleaning services (i.e. move-in/move-out and construction). There are fewer companies that are able to turn around jobs within a 24 hour period (essential for move-in or move-out cleaning) and fewer companies that are willing to do construction cleaning (since it requires heavy lifting at times, dangerous work environments, and toxic dust that requires n95 masks). An opentextbc marketing textbook writes that businesses need to understand “how sensitive they [buyers] are to changes in price.” Price sensitivity should be (all other things remaining equal) be wider in a marketplace with few service providers, and narrower in one with many options.
Housekeeper irrational thinking
Price does not equal value
This service pricing blogger asserts that “services or products that have a higher price also have a higher perceived value.” The reasoning isn’t irrational. If a cleaning service does work at $50/hr, I may assume that they must be busy and be experiencing higher levels of demand, which in turn has raised their prices or alternatively, that they can justify their prices with experience (added value). However, sometimes $50/hr is just $50/hr. Cleaning services may charge a high rate out of simple entitlement (I deserve it, I work hard), or a desire to be seen as valuable (i.e. perhaps it helps them in some other way). Thus, pricing is sometimes done for reasons that have nothing to do with competition, demand, supply, expenses, or business expansion.
Fear
This handyman blogger writes about one customer “I didn’t want to bid too high and lose the customer forever. But I also didn’t want to underbid because I knew how much I was worth and had no interest in working for free.” Based on how they’ve written this passage, it appears that economic considerations like demand, supply, competition etc, have less to do with pricing than fear of losing “the customer forever” or disgust regarding “working for free.” Personally, I know many situations where customers have attempted to introduce emotion into bidding processes by expressing how much work they can provide me, how little money they have, how their last service provider charged something else, etc. Fear or lack thereof is a powerful motivator and can lead service providers to make stupid decisions with their pricing. Cleaners shouldn’t be charging low to intimidating people or high to friendly people; doing so punishes non-manipulative human beings, the very people cleaners should be trying to forge better work relationships with.
Lack of mathematical skills, business sense, common sense, reasoning etc.
A friend of mine recently entered into a contract to drive a client from point A in the city to point B for $20 per commute. The commute would require him to pick this individual up at their home (at least a 10 minute drive), then drive (at best, when there’s no traffic, which isn’t the case) for 30 minutes to drop them off. They would then have to pick them back up at the same spot 8 hours later and drive them home. In total, earning $40/day. This arrangement would require my friend to drive 40 minutes and then spend the day in another part of town doing some other work (food delivery ostensibly, which they can’t always do anyways because they have to return the car sometimes since it's a shared vehicle). 40 minutes of gas usage is around $8. So, my friend, for his time (40 minutes minimum), for the fact that he might sometimes spend more on gas because he needs to get the car home to his family, and for the risk of driving daily, made $12/40 minutes (at most). This person has been self-employed in business for 5-7 years doing other kinds of work. This is no longer a question of economics or fear. Some people price things simply out of insanity. I know of the case of a teacher that was doing in-person lessons for $12/hr several years ago, and I have heard of landscapers charging $25 per lawn and $40 per lawn for jobs that take hours. These people no longer pricing out of economic considerations. They are either kind souls that wish to help others, completely illiterate in terms of business, or people who simply need something to do and don’t care what they’re doing. Such individuals are commonplace and often regular businesses do such pricing practices to various degrees.
Conclusion
So, there you have it. From a consumer point of view, I hope this helps readers decide how to hire a housekeeper in Toronto (my home city). For housekeepers across Canada, I hope that this article helps service people determine their rates and have a clearer idea about how they should price their services. To recap, when a housekeeper provides a price for a job, they are taking into consideration the following: profit margin, quality of their work, overhead expenses, experience and equipment, cost of their labor force, competitive environment, and feelings and irrationalities.
Note: If you'd like to read other blog posts, check out my main page