Subject: website email
My partner and I are starting a home services company, starting with residential cleaning, in New Hampshire.
I have extensively researched the “M” franchises and have decided that while they have invested considerably in their approach and infrastructure, the ongoing requirement (AKA Royalties) is way too much to pay.
While we will not use a franchise, we intend on behaving as one. We have an aggressive growth strategy, will be operating out of our own commercial property (hoping to close by mid-August), using company vehicles exclusively, all service providers will be employees and fully insured. Our goal is to open 3 or 4 physical locations, each offering 2 or 3 services in the next 7 to 10 years.
I located your site as I was searching for someone to help get us set up on the Internet and I was really hoping to find someone with some understanding of this business.
I was very impressed with your website and hope we can get together and discuss.
Sent:Monday, August 02, 20043:20 PM
Thank you for your interest and your kind words. We are happy to speak with you anytime to discuss your new venture. Let’s arrange a phone conference.
We’ve been doing an incredible amount of research in the past weeks in connection with the implementation of the House Cleaning Directory, and I’ve come up with a few new observations, which may not be entirely accounted for in the articles we’ve written so far. So, I hope you don’t mind that I am using this opportunity to write about a few new thoughts. Many of the Articles are based on the premise that Denver Concierge’s competitive environment and market is representative of the rest of the US. Based on our ongoing research, I firmly believe it is not. Denver itself has a population of over 2 million, and the greater metro area is much larger than that. One of the reasons we moved to Denver was because we felt that the demographics in terms of age and income bode well for selling maid services. Also, Denver Concierge relies heavily on the Hispanic population for a portion of its workforce, and in Denver the labor pool is quite deep. We can rely on our own transportation here, while places like LA and NYC may rely on public transport. So to the extent these factors may not apply to your market, then the articles should be discounted accordingly.
The primary factor not properly reflected in a couple of the articles is that for some smaller markets, independents may be no more scaleable than the M franchises. This is because many small rural populations have a limited demand for maid services. Therefore, such markets have limited growth potential for any type of maid service company, be it a franchisee or an independent. In such instances, independent maid service companies will not enjoy the same advantage over their franchisee competitors that Denver Concierge enjoys over the M’s in our own deep market. We are unencumbered by the M’s service zones, but for rural areas, service zones may not represent a constraint-the lack of a sufficient number of prospects living within a reasonable driving distance may be the constraint. Of course, to some extent it depends on one’s definition of scale. We define it as the potential to earn annual revenue of a bare minimum half a million dollars. Any lesser amount is unlikely to support more than a handful of healthy incomes, not a scaled enterprise.
To the extent you qualify financially and from a management skills standpoint to purchase a franchise, then you are likely also a good candidate for starting an independent maid service from scratch. I believe that the massive difference in failure rates between franchisees and new independents is largely a matter of adverse selection-that is, those entrepreneurs who are most thinly capitalized and could not qualify to purchase a franchise, end up starting an independent maid service and failing, not because they lacked the support of the franchisor, but because they were under-capitalized and under-qualified to manage any new business from the outset.
Regarding multiple services, in deep markets, we highly recommend companies highly specialize in terms of market segment and services (and this is coming from someone who started a diversified concierge company). You can pay commercial cleaners less than residential cleaners; a little higher turnover doesn’t bother commercial customers, and training isn’t nearly as important for commercial cleaning as it is in fine homes. So if you are going to focus on high-end homes, you’ll have to embrace a higher cost structure and you will in turn price yourself out of many commercial assignments. And what is the point of meddling with carpet or window cleaning if you have sufficient growth in your area of core competency? In the smaller markets, out of necessity, companies seem to market to both residential and commercial customers. And in thin markets, most companies leverage their small customer base by offering multiple services. In small towns, I think it most often ends up being one person managing several employees and cleaning himself, while the other partner operates a carpet cleaning van or pressure washing truck–kind of like two jobs with a couple of part-time employees as a bonus. It’s OK if both partners enjoy the autonomy of working for themselves and earning an OK wage, and don’t really mind that the operation is not scaleable (and therefore builds no significant value).
For me, I do mind!! A new venture is risky and if there is no prospect of hitting a home-run from the outset, then maybe it’s not worth the risk. A business involving an investment should be started with the prospect of growing, then selling it for sufficient dough to compensate an entrepreneur for his investment risk plus lost wages during the start-up phase. And I can imagine that operating a carpet cleaning truck for ten years doesn’t usually end in a way that can be categorized as a home run.
Three or four locations? We’ve found it difficult to implement this for ourselves, from a management perspective. It doesn’t mean we won’t accomplish it in the coming 2-years’just that it isn’t easy. Do you already have three or four highly motivated, smart friends picked out to manage three locations? If not, then unless you are going to become a franchisor, you may have to remain opportunistic about such an expansion plan.
All these glum words, because I used to live in New Hampshire. It’s a beautiful place, but the population is more spread out than in Denver. If you are in one of the larger cities, then you might find an opportunity for scale. Are there any small local companies available for purchase? Have you considered going to Boston? What a wonderfully large market that is. . .
As far as the internet, I am confident that we can help you attract significant business in a large market. We are really hot about web-based marketing right now. It’s working wonders for Denver Concierge. We spent about $250 on web-based marketing in July and won about five new customers per week from it. That works out to about $12 per new customer. With other ad forms, we have generally paid $200 (or more) per new customer. Our phone book ads have generated new customers for literally thousands of dollars each. I have no idea how web-based marketing will do in a smaller market-maybe there, people still rely on phone books. We can get you a website online in a couple of days. We’ve seen just about every house cleaning website in the US. Ours beats 98% of all those out there, and because we are leasing them in multiple markets, costs each company only a fraction of the price. Please see www.house-cleaning-Alliance.com for prices, and www.maid-service-parker.com for an example of a template.
Thank you for your interest. I hope this was helpful. I look forward to speaking with you.