You can buy books telling you what a low investment, high growth opportunity residential house cleaning can be. We believe that the house cleaning’s 50% per annum failure rate speaks for itself. It is an attractive industry, but it is the potential for limitless scale and profits from cleaning nice homes, not the misconception about low investment, which makes it attractive. Most certainly the industry does require a low level of investment relative to many specialty retail, restaurant or manufacturing industries, and it has fantastically greater potential for scale, but it is irresponsible for experts to tout prospects for high growth and profits based on an operating model of operating from home with a cell phone and a bucket.
We are not saying that entry into our industry requires investment. In fact, for those cleaning themselves, or employing just one or two others to clean with them, it is possible to get into the industry with just a hundred bucks, and we have nothing against someone else taking such an approach. It’s just that we don’t consider the growth or profit potential for such endeavors to be interesting. Rather, we believe that (in addition to typically damaging the industry’s price structure) such entrepreneurs really end up just buying themselves a job cleaning houses, a job they will weary of before their enterprise reaches anything remotely sufficient in scale to become financially interesting.
Think of any such an enterprise as being the equivalent of Alice, the Maid, of Brady Bunch fame. I can imagine that the Brady’s paid her, not like an architect mind you but nevertheless, reasonably well. Even so, was she really in business, or did she just have a job as a maid? What if she had bought herself a cell phone and dashed around the neighborhood during her lunch hours trying to line up work for herself and her sister for Saturdays-would that then have constituted a business? We like Alice just fine. It’s just that we don’t think of her as having been in business and, even when she worked for the Brady’s, given her inability to scale, we didn’t feel horribly threatened by her, as a competitor. If you intend to get into business for the cost of a bucket and start out by cleaning yourself, then imagine yourself as being Alice . If you are as committed and competent as Alice, have no further aspirations for growth and profits, and would be satisfied with her wages, insurance benefits and retirement plans, then the endeavor will be a success for you (as long as you find a family as nice as the Brady’s).
I’m not trying to discourage you, but on the other hand we wouldn’t want everyone just stumbling into our industry with their eyes closed, making a mess of the place. We dispute a lot of the hype being sold today–that a bunt through some miraculous metamorphosis results in a homerun, in the maid service ballpark. We already have enough companies in our industry bunting their brains out. If someone wants to start another maid service, let them bring their money and swing for the fence. To start a real scaleable maid service enterprise from scratch, expect to spend $50,000 (paying yourself zero) over the course of the first 12 to 18 months. Over that time, with some skillful management and a healthy dose of luck you likely will have passed operating break-even (not full payback of your investment), built a referral bank of 100 to 120 fantastic well-paying customers, and gathered a troop of 8 to 10 exceptional, well-paid, well-trained, loyal employees. A foundation will have been established, and round two can begin.
It certainly can be done a lot more cheaply over a longer period, but really it comes down to what value you put on your own time. For Hanna and I, we were both investment bankers prior to embarking on this venture. So we weren’t really willing to go slowly for three to five years, paying ourselves a pittance cleaning houses ourselves, whenever necessary, while we were waiting for the company to grow. I know some believe you should do some of the cleaning work yourself when you first start out, but we never resorted to becoming fill-ins, even though opportunities presented themselves almost daily. It wasn’t a matter of not wanting to get our hands dirty, it’s just that our hands were already quite full, managing the monster. Given the chance to do it over, we could avoid some of the mistakes we made then and could have spent less than we did, but fundamentally, we wouldn’t now take any less brazen approach to growth, or quality of service.
If we had it to do again, as a first step, we would try much harder to locate and buy an unprofitable maid service-one with at least OK prices, a half dozen employees, and about 50 to 100 customers clustered as best they could be in several nice neighborhoods. The only problem with such an approach is that you have to be opportunistic about it, or you will grossly overpay. Before we started Denver Concierge, we looked and actually found one such company, but luckily we refused to pay the $100K being asked for it (the price should have been just $30K). We hadn’t yet learned that for such a company, the involvement of a business broker in and of itself, makes a transaction at any reasonable price untenable.
We were in a big rush anyway, so we decided instead to start a company from scratch. In retrospect, maybe we should have just spent the entire first summer looking for the perfect acquisition prospect, finding the perfect place to lease, organizing an office, pricing suppliers, organizing insurance, prepping vehicles, and developing simple systems for training, operations, accounting, payroll, and scheduling. We could have invited ten companies around to clean our house, developed marketing materials, scoped out competitor prices pay, and office locations. We could have done all that for the added cost of some rent, and tax-deductible house cleanings, and we would have been better prepared when we were finally able to acquire a going concern at a reasonable price. At the time though, we didn’t understand that cleaning companies, like falling leaves, are plentiful . . . if you just wait for the autumn. Even had we understood, there would have been no waiting around for us; we didn’t like the idea of earning nothing for an entire summer. Of course, that seems ridiculous now, since we didn’t actually pay ourselves anything at all for the first two years anyway.
Ignoring all that as I’m sure most will, if you decide to start the venture from scratch, that is zero employees and zero customers, and if you plan to provide exceptional service from the outset, then we would endorse incurring extra payroll hours throughout the start-up period to train and keep full-time employees while you are trying to scramble together enough house cleaning assignments to keep them busy. Others might suggest that you employ them on a part-time basis at first-we believe such an approach puts you on the slippery-slope from the outset, because your employees will be running around looking for better employment opportunities during their days off. Instead of you sorting your employees, they’ll sort themselves, and you’ll quickly be stuck with the duds. Adverse selection of employees is an early slip towards mediocrity, and in our industry, mediocrity always ends badly.
Nostalgically, I remember on about the sixth day of our operations, when we got our first customer and packed off three eager, smiling, well-trained and over-equipped house cleaners (two of the three still work here). After that assignment, our newest phoned with glowing reviews, and signed on for every two-weeks. Well done . . . now it was just nine days of blanks before our next scheduled assignment! Those were the days.
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Chris Lude founded Denver Concierge in September 1999 and over four years grew it to become one of the largest independent house cleaning companies in the United States . Permission is granted to reproduce this article but credit must be given to the author. No part of the article content can be modified, and a link must be provided to: http://www.House-Cleaning-Alliance.com