How to work out your cost per crew hour

A price is not high or low on its own. It is high or low against your cost, and the only cost that compares fairly across a two-hour condo and a five-hour house is the cost of one hour of crew time. Work that out once and every quote, every old client and every argument about discounts becomes a subtraction instead of a feeling.

There are six inputs. None of them require an accountant, and you already know five of them.

The six inputs

Pay and burden

Take what you actually pay a cleaner per hour, not the rate you wish you paid. Then add payroll burden: employer taxes, workers compensation, paid time off, and any benefit you fund. Twenty to thirty per cent is the usual band for a company with employees. If you use contractors, your burden is lower but your legal exposure is different, and that is a conversation for your accountant, not a pricing tool.

At $20 an hour and 22% burden, an hour of cleaner time costs $20 × 1.22 = $24.40.

Drive time is crew time

This is the input most owners leave out, and it is why their numbers look better than their bank account. If you pay from the first stop to the last, twenty minutes of driving per job is twenty paid minutes per cleaner. A two-cleaner job with twenty minutes of drive is not four paid hours for a two-hour clean; it is (2 hours + 20 minutes) × 2 cleaners = 4.67 paid crew hours.

Same clean, same price, seventeen per cent more cost than the version in your head. Every number below uses paid crew hours, never billed hours.

Supplies and overhead, converted to an hourly figure

Supplies are easiest to think about per job, so divide them by the paid crew hours of an average job. Six dollars of supplies over a 4.67-hour average job is $1.28 an hour.

Overhead is your monthly fixed cost: insurance, software, phone, vehicle payments, advertising, and whatever you pay yourself for office work rather than cleaning. Divide the monthly total by the paid crew hours you actually run in a month. At $1,200 of overhead and 420 crew hours a month, that is $2.86 an hour.

If you run fewer hours, overhead lands harder on each one. That is not an accounting artefact, it is the real reason a slow month feels so much worse than the drop in revenue suggests.

Add the cost, then price for margin

Cost per crew hour is the three pieces added up: $24.40 + $1.28 + $2.86 = $28.54.

Margin is not markup. If you want twenty per cent of revenue left over, you do not add twenty per cent to cost, you divide by what is left after margin:

cost floor = cost per crew hour ÷ (1 − target margin)

So $28.54 ÷ 0.80 = $35.68 per crew hour. Adding twenty per cent instead would have given you $34.25, and quietly cost you a point and a half of margin on every job forever. This one is worth getting right.

What the floor is for

Now every job has a minimum price. Multiply the floor by the paid crew hours the job actually takes:

A price below that line does not mean you lose money on the day. It means the job is funding less than its share of your overhead and your margin. Do enough of them and the business is busy and broke at the same time, which is the most common way a cleaning company fails.

Three mistakes that make the floor look too low

• Using billed hours instead of paid crew hours. Two cleaners for two hours is four crew hours before anyone drives anywhere.
• Leaving your own labour out of overhead. If you clean thirty hours a week and do the books at night, the office work is real cost even when nobody invoices for it.
• Using the pay rate you plan to pay. Price against the wage you pay today, or your floor is a forecast rather than a floor.

Do it once, then check the clients you already have

A cost floor is only useful pointed at your existing book. New quotes are easy to price correctly, because you do the arithmetic while the number is still in your mouth. The expensive clients are the ones you priced three years ago at a wage that no longer exists, and who have been renewing quietly ever since.