Uh oh! It’s that time again! Time to dust off the coat and tie and arrange a visit with a client for the daunting task of requesting a price increase. My father, Don McLemore, a BSCAI past president, used to say that obtaining price increases from customers is like “pulling hen’s teeth.” For you city slickers out there, hens do not have teeth. They grind their food up in their stomachs. Relax, I didn’t know that fact either!
In other words, how do you perform an unenviable task of requesting a price increase? And, more importantly, how do you plot a road map to success? Delve into the following:
QUALITY OF SERVICE
The most obvious hurdle in obtaining an increase is to ask if your company is providing outstanding service. Read your latest marketing piece and ask yourself the tough question: “Are we actually providing the service we promised?” If the answer is “no”—hold the phones! Price increase and less than desirable service equals you receiving a “thank you” note from your local competitor’s sales person for the nice, big, fat commission check he just earned for taking your business. A timely inspection of the facility a month in advance can make the difference.
Let’s face it. We are in a thankless business. the phone normally doesn’t ring to tell us, “Hey, i just want to thank you for setting the alarm last night. thanks to your staff, we arrived to a clean and safe office this morning.” Therefore, it is imperative we remain in regular contact with our clients. even if they are not calling us, we should be calling them. if you have not touched a client in six months and the first time they hear from you is to request a price increase— “danger, danger, Will Robinson!”
While it might look good on paper to you, it could be misconstrued by your client. Simply sending a letter without a forewarning is a recipe for disaster. requesting a price increase is a touchy subject. it is imperative the request be made in person to gauge the client’s inflection and tone. For example, when is the last time you received a form letter from a vendor stating your price will rise by X percent the following month? Your immediate thought was, “Well let’s just see about that!” as you opened the drawer housing the other vendor’s information who has called on you before.
Do you have any clients who gave you a scope of work to the bid the job which, in turn, resembles nothing close to the actual services provided? Over time, the scope of work has a tendency to expand from the original agreement. understanding that janitorial services when, boiled down, is simply “time and material.” Time to perform the tasks and materials used to do them. The additional tasks that have crept into the scope of work must be accounted for in the monthly billing.
Turnover is the hidden thief of our industry. Loss of productivity, safety, security, etc. are a natural result of turnover. Therefore, being able to provide wage/merit increases to staff members is key. Unfortunately, wage increases are normally impossible without the client’s participation unless your company needs a charity write-off for taxes.
CONSUMER PRICE INDEX (C.P.I.)
The consumer price index is an index number measuring the average price of consumer goods and services purchased by households. Without merit increases for your staff and/or an increase in your monthly billing amount when the CPI rises, you are actually accepting a return on investment less than originally agreed upon by the client.
Have you received a price increase from your suppliers lately? let me guess the words? Were gas, raw materials or production costs in the request? Passing along the cost of doing business is a necessary evil. If you present a clear argument of your additional expenses, you can expect a greater acceptance level of the increase.
The more proactive front would be to include an annual price adjustment in your contract pegged to the CPI, wage increases, etc. If the client understands and can budget for the natural increases in contract rates, you will be further along in keeping long-term clients and a healthy bottom line.
Long story short, requesting a price increase from your clients does not have to be like “pulling hen’s teeth.” With the proper approach, strategy and delivery it may turn out to be easier than you think.
Curtis McLemore is the CEO of McLemore Building Maintenance, Inc., a second generation BSC headquartered in Houston, TX. He currently serves on BSCAI’s membership committee, is a President’s Club member and participates in BSCAI’s Mentor Program. He can be reached at cmclemore@ mbminc.com.