How do I price the risk in resident services on a 22 room house?

An operator with a 22 room house reached out about contracting out what he calls resident services. Right now that means daily common area cleaning, weekly room linen, a hot breakfast weekdays, and someone on site 7am to 3pm who handles packages, lets in contractors, and deals with whatever comes up.

He's paying two part timers directly and wants it off his books as a contract. His current all in cost is about 76,000 a year including his payroll taxes. He's offered 68,000 flat.

I can staff it. Two people, staggered, roughly 52 hours a week of coverage plus the breakfast prep. Labor lands around 47,000 loaded. Food is his cost, he keeps that, so it's not mine. Supplies and linen contract another 9,000. So 56,000 against 68,000, a 12,000 margin, 17.6%. Thin but not crazy for a single site.

What I can't price is the part in the middle of the scope. "Deals with whatever comes up" in a 22 room boarding house is not the same sentence as it is in an office. My person on site will at some point be the first one to a medical event, a dispute between residents, or someone who hasn't come out of their room in two days. That's not cleaning. Whether that person becomes a de facto property manager, and whether that pulls in any licensing on my side, depends on state law and I've got a call in to find out.

The insurance question I don't have an answer to either. My general liability was written for commercial cleaning. Putting staff in a residential setting where they interact with vulnerable residents daily reads to me like a different risk class and probably a different premium, and I need my broker to actually confirm it in writing rather than telling me it's fine on the phone.

If the premium delta is 6,000 my margin halves. If it's 15,000 the contract loses money at his number.

The decision is whether I quote at all before I have the insurance answer, or whether I go back and try to split the scope, cleaning and linen as a firm price, on site presence as an hourly pass through with a defined boundary on what that person does and does not handle. He'll push back because the whole point for him is one number.

3 replies

1raj_mehta14CapitalPRO6

The scope split is the answer even if he hates it. What you're describing in the middle of the scope is unbounded liability priced at a fixed fee, and no amount of margin fixes that shape. Boundaries in writing about what your on site person does when they find someone unresponsive matter more than the dollar figure.

2samantha_ruizAU4APRO6

I'd quote nothing until the broker writes back. I've done a version of this on the construction side, taking a scope with an undefined tail on the assumption the insurance would sort out later, and the renewal repriced my whole book, not just that contract. The 15,000 you're worried about might not land on this job. It lands on everything you insure.

Also 17.6% on a single site with one client is not enough cushion to eat a surprise. If he walks over the split, he was going to be a hard client anyway.

1devon_pierce Get yoursPRO5

Question rather than an answer. His current cost is 76k and he's offering 68k. He's asking you to do it for 8k less than it costs him while you carry the risk he's shedding. Why is that the starting point? I'd want to know what he thinks he's buying for the 8k discount, because usually the answer is that he's tired of it and tiredness is worth more than 8k.

How do I price the risk in resident services on a 22 room house?

3 replies