Summary

The episode discusses dealing with clients who impose budget cuts, with the options being to match, meet, or lose the contract.
Joel shares a real-life consulting experience where a client faced the possibility of losing their largest account due to budget cuts.
Rising global costs, especially since the pandemic, are highlighted as a major challenge, affecting labor, insurance, and shipping.
A holistic approach was taken to analyze the client's operations, including building details, staffing, and resource use.
The client had to reduce costs by 20%, and through detailed analysis, they managed to exceed this target, achieving a 22% reduction.
Strategies included evaluating time studies, equipment types, and complaint histories to identify areas for efficiency improvements.
Cost-saving measures included reducing supervision hours, finding more cost-effective vendors, and investing in durable materials.
The client switched to more efficient equipment, like backpack vacuums, to reduce production time and costs.
Trust and past successful guidance from Joel were crucial in convincing the client to make strategic changes.
Listeners are encouraged to reach out through the podcast or the provided website for guidance on similar challenges.

Beating A Budget Cut

Episode 74

Budgeting conversations with a current client are rarely welcome news. When an email, text or phone call starts with, “We need to go over the current cleaning costs”, get ready. The bean-counters are at work. It’s not uncommon to start with janitorial services. Part of that is based on the misconception that your work is not all that valuable. We’ll come back to that. My first piece of advice is simple but not easy…

Don’t Panic Over A Budget Cut

Whether the cut is certain or not, keep a level head. Remember, the client is reaching out to you. That probably means you and your commercial cleaning company are still in the race. You need to listen carefully to what your client is saying and NOT saying. If a point about the service or the budget is unclear to you, ask questions. If you’re not clear on what questions to ask, contact me here.

What Prompted This Budget Cut?

• That’s a fair question. Your customer may have:
• Suffered a loss
• Be planning for an expansion and need to bridge
• Have been approached by a low-ball cleaning competitor
• Not understood why your costs are what they are
• Not understood the value your services truly provide

Budget Cut vs Daily Operations

Almost every commercial cleaning service could be re-evaluated on an annual basis. I’m not suggesting that happen so you can reduce your billings. Setting smart, well informed pricing is important. I AM saying that as the cleaning company owner or manager, you should be prepared for budget cut conversations. This is a common step in your client relations. Approaching it with a sense of calm professionalism will serve you and your customer well.

Breath, Plan and Act Regarding Budget Cuts

At some point this is going to happen to you. If it hasn’t happened yet, you can expect it. If you and your commercial cleaning business are in it right now and need help, contact me. I know how hard you work in the cleaning business. This type of news can be discouraging. But you can overcome this. This won’t be the only time it happens. One of the best decisions you can make is finding a coach who’s been there. Contact me. Together we can make a path to your business success.

 

This Week’s Podcast transcript can be found below.

 

Ray

Joel, we’re back. This is a big topic we’re talking about today. Dealing with a client that’s had budget cuts, and you either match the cut, meet the cut, or lose the contract.

 

Joel

This is a real-life example of one of my consulting clients that I helped work through this actual scenario.

 

Ray

Fill me in here because this looks like disaster all day long to me.

 

Joel

It can be disaster. And even when they reached out to me, they figured they were going to lose the account. Because they’re like, “There’s no way we can get our cost down.”

 

Ray

So,
Joel, the sky is falling. What do I do?”

 

Joel

The sky is falling. Save us! And I say that tongue in cheek because it’s not really how the call went down. But yes, we really think we’re going to lose this. We don’t see where we can cut, and we think we’re going to lose it. And it’s our largest account.

 

Ray

Even worse. Okay.

 

Joel

This is a building service contractor’s nightmare. We all know that costs are going up all over the globe, particularly since the pandemic. There’s rising costs with just about everything.  Everything from labor. The insurance world is out of control right now. There’s all types of issues with the prices that we’re paying to get things into the United States.

 

Ray

Oh, just sheer material cost.

 

Joel

Yes, because most of the equipment that is purchased in our industry is not made in the United States. It’s made outside the United States. It’s got to be shipped in. So, shipping costs. I have a friend who worked in the chemical side of business, and the shipping costs were driving them insane. I know that this is just happening everywhere, and it’s real. And when you have your insurance costs that are tied into your labor rates. And your labor rates are going up. And your insurance is going up. And your worker’s comp is going up, and your unemployment is going up because we’re in a high turnover industry, it’s like all you see is outgoing money. And now your client calls you and says, “Oh, by the way, I need you to cut my cost by more than 20%.”

 

Ray

For our listener, if this feels like the last time you got a call and you felt like you were going to crap your pants in the middle of the day, listen up.

 

Joel

Oh, yeah. There’s a lot of that that goes on in this industry. What we started out by doing was they shared all the client information to me; The size of the building; The room types; The floor coverings; The current job expectations; The frequencies.

 

Ray

So, you’re getting a real 360 on the activity in the account.

 

Joel

Exactly: How many people they’re currently staffing it with; How many hours are they working; How many supervision hours are being attributed to that account each week; How many management hours are attributed to it each week. We took a very holistic approach to it. They told me what the monthly bill was. I multiplied it out over 12 months, and then we took and slashed 20 % and looked at that number. And (then) said, “How do we get to this number?” We use the time study book that happens to be out there that says, “This is how long it takes to do this, and this is how long it takes to do that”,, and ask them, What type of vacuum cleaner do you have? Because there’s different production rates with different types of vacuums. So we looked at absolutely everything in his operation. We looked at ways that we could find materials and equipment that allowed his staff to work quicker and more thoroughly. We also looked at redundancies. We looked at where we could maybe lower expectation levels. We looked at all of the complaints that had come in over the last two years to decide where the problem issues were, where we couldn’t cut expectations and frequencies.

 

Joel

But then when we saw other things that weren’t as prevalent in the complaint department, we were able to say, “Okay, let’s look at those frequencies and how much time per day do you currently spend on this? This is what it says by the time studies, how much time. Are we at the right number of hours? Are you expecting too many hours a day?”

 

When we got done and finetuned everything, he beat what they needed to have the reduction by an additional 2%.

 

Ray

Oh, wow! Remind me again, the number that he was directed to get to.

 

Joel

20%. And he got 22. Wow.

 

Ray

Okay, with your direction.

 

Joel

He did a lot of it on his own. (Okay.) I told him the things that he had to look at. He did all the hard work. When I sat down with him a couple of days later, he says, I’ve figured it out. We know what the new price is going to be. They even said, “Okay, well, we normally send our Supervisor, five days a week to this account, we’re going to cut that by a day.” So, he saw some time savings there on the overall costs. And I said, “Well, is that going to be smart to do? And he said, Well it has to happen in order for the numbers to work right.” So, they looked at absolutely everything. They looked at the cost of supplies that they were buying, their materials, and try to find vendors that might be able to save them one or two percent on things. And materials, those are going to be items that last about a year. They’re longer than single use, but it’ll last up to a year. So sometimes he looked at the durability of an item and bought something that was a little bit more but would last a little longer.

 

Joel

They looked at the equipment. They changed over vacuums from uprights to backpacks. Things like that that helped him get the production that he needed to get so that he could cut that price down.

 

Ray

Joel, I am impressed by the point that they considered purchasing to save. I know a lot of companies, not just cleaning companies. They would say, “Look, we’re already trying to cut here. We can’t afford a more expensive piece of equipment like a backpack (vacuum).”

Not inexpensive by any stretch. But your point that this is going to cut your production time significantly and that we’re actually taking it to heart. That’s a huge step, and that’s a huge step of trust.

 

Joel

It is. The only reason why he believed in that was because early on working with him, he had another project he was working on, and I had recommended a certain type of piece of equipment. He couldn’t get the actual piece of equipment that I had suggested through any of his vendors or anything. But he found something that was very similar in fashion and gave similar results. When they did the work with that piece of equipment, they were able to beat the production rates that are out there and therefore became more profitable. And he was able to springboard from that. So, it was very easy for him to be able to look at that knowing that I did not steer him wrong the last time. And building on the trust of having used me in the past was definitely helpful for this particular situation.

 

Ray

For our listener, cleaning company owner, new or not, they’re faced with this challenge. It’s going to happen at some point. How do they get in touch with you? How do they get the direction so that they know they’re heading in the right place?

 

Joel

Well, if they’re listening to this podcast, they can even put a comment down in the bottom saying, “Please contact me” with an email, or they can go to my website and contact me through that, which is docsfs.com, and leave us a message there, and I will get back in touch with them.

 

Ray

Thanks, Joel.

 

Joel

You’re welcome, Ray.