by Chris Lude, Co-Owner of Denver Concierge.
Sent: Tuesday, June 8, 2004 10:46 AM
To: Chris Lude
I’m not sure I understand your operating forecasts. Why are you hiring employees you do not need throughout the first year?
9 June 2004
Thank you for your interest. The decision to carry, or not, added employees during the start-up phase, involves pivotal tradeoffs. Many companies do not hire employees until they need them during their first year, or ever, because it is so expensive to do so.
It is easier to avoid hiring extra employees under a different operating model involving the owner joining employees in cleaning homes throughout the start-up phase. Our plan does not envisage the owner ever cleaning homes. Under our plan, especially during the first six months, there will occasionally be days an operator would be understaffed, but many more days one would be overstaffed. If an operator always has a little slack, they will have the resources to take on new work, and can grow faster than if they are always topped out. In the beginning, we also propose proportionately more slack for training new employees.
We have always employed our cleaners full-time, in order to minimize turnover and provide better service. We don’t run fliers anymore, but we used to when we had only four employees and needed to soak up loads of slack. One can get some marketing benefit from running fliers, by using a little discretion in which neighborhoods they are run.
Scheduling becomes operationally more efficient with scale. A mature enterprise should reduce labor as a percent of revenue to 40%. Some of the franchises achieve even lower percentages. A mature enterprise should rely on a combination of quality and efficiency incentives to optimize labor cost ratios while maintaining service quality. All of this is difficult to achieve or implement as a start-up, without adversely affecting employee morale and service quality.