Introduction & Why I Started This:
In late 2020, I left my full-time role as a PE investor to help start and lead WeHero, a business that helps companies build and execute their social mission. Going from a well-defined traditional finance role to a boot-strapped leader at a fast-growing SMB was a pretty big shift. I had some clear advantages thanks to my financial background, but I lacked experience in being nimble and starting something from zero.
So, after a few months of feeling bad about myself, I decided I needed to start something else to learn those valuable entrepreneurial skills. That was easier said than done since I needed to find something that wouldn’t interfere with me scaling WeHero. Because of this and a variety of other reasons, I decided to launch a home cleaning business.
Twelve months later, the business is doing $14k in monthly recurring revenue. As I reflect on the last year, I wanted to share my thoughts on the industry and the biggest things I’ve learned to help other entrepreneurs in training.
All of the below information is based on my experience, and I’ll keep it updated as I get feedback from the real experts in the industry.
Pros of a Cleaning Business:
Low Start-Up Costs:
- It’s possible to get a home cleaning business off the ground for under $1-2k depending on how you structure the business. Even more importantly, you can get an MVP launched for under $500 if you understand the demand in your market.
- I wasn’t planning to do any of the cleaning myself, so my start-up costs consisted of the following: Website & Domain, Test Cleans to Vet Cleaners, Launch Marketing, Free Cleans for Continued Testing.
- If you have time on your hands and want to keep your startup costs low, I’d recommend buying supplies and doing the cleaning yourself. The equipment will cost less than the test cleans with potential teams, and your margins will be higher. Not to mention, you’ll control 100% of the quality.
- It’s worth mentioning that there are relatively minimal fixed costs in this business, so it’s possible to get the business to cash-flow positive quite quickly.
Ability to Differentiate: It’s possible to differentiate your business in this market by focusing on three main areas:
- Technology: Some of the best cleaners run their business 100% from their cell phone. This is easy for them, but it’s a bad experience for the customer. By leveraging existing industry technology, you can build a damn good website and CRM system in less than 24 hours. I may be biased because I’m based in San Francisco, but our customers really appreciate the ability to schedule cleans online, adjust their existing bookings, and cancel without having to call us. I also love this feature because it greatly reduces the time it takes to manage this business.
- Quality: It goes without saying, but the key to this business is having the best cleaners in your market. Over time, this is all that matters. As I said in the above point, there are amazing cleaners who run their business from their phone. They’re 100% full all the time. I truly believe 90% of our success is having great cleaners. As a business owner, you’d be shocked at the stories I’ve heard from clients about their former cleaners.
- Customer Service: Treating every client like a VIP matters. Being positive on the phone even when something goes wrong is essential. It’s important to go above and beyond because not many in this industry do. We drop off thank you gifts to clients and give all recurring clients a holiday gift. I’m lucky that this isn’t my sole income, so I always take the approach that the client is right and don’t charge them, even if it’s only something minor that has gone wrong. I know many don’t agree with this approach, but it has helped build deeper relationships with my clients.
- Not having to continuously acquire customers is the world’s biggest business hack. One of my goals for this project was to learn how to market. While I’ve definitely gotten a bit better at this task, I don’t enjoy it much. If you build a business focused on recurring customers, you don’t need to constantly market the business. I’ve had months where my marketing cost went to zero and my revenue didn’t dip at all.
- As I look to keep growing, I’m excited to explore and test more marketing initiatives, but it’s also really nice to know that it’s not necessary for success.
Large & Well Defined Market: Disclosure: I live in a suburb of San Francisco, CA so this section may not be relevant for everyone reading this.
- Once someone hires a cleaner, they don’t stop using a house cleaner. In areas where the cost of living requires a dual-income household, getting your house cleaned seems almost like a necessity to our customers.
- One of the other key advantages of this business is that your customer base is well-defined. You know the geography you serve, and you know the areas and type of clientele that are likely to use your service. This makes marketing a hell of a lot easier. If you’re a well-connected member of the community, you have a huge advantage.
Limited Time Commitment
- I was able to build this business while still working on my other businesses full-time. This is a unique trait of a simple business model like cleaning. In addition, it’s possible to automate almost everything in your business so that it runs smoothly without much human interaction.
- You can hire support to assist with client and cleaner service. If you hire correctly, they handle the daily tasks while you focus on growing the business. By no means is this passive income, but it has the potential to be largely hands-off.
Cons of a Cleaning Business:
Entry Into The House Required: It goes without saying, but cleaners need to get inside of the house to do their job. While this may seem like a small matter, there are a few important ramifications of this:
- Increased liability. There is always the risk that cleaners steal something or break something expensive. I dealt with a cleaner accidentally breaking a TV. That wasn’t very much fun.
- Increased operational burden. I’d say over 50% of the calls we deal with are related to cleaners running late, cleaners arriving early, cleaners not being able to get in, clients forgetting to leave the door unlocked, or electronic lock systems not working. I could go on, but you get the drift. Timing for the work is VERY important. In other home services businesses that deal with the outside of the house, your timing is less relevant, and thus it can be less operationally intensive.
Team & Hiring
- This one is the most talked about, and I can’t add much else here. Your team is the most important factor in this business. To succeed, you need to find and retain the best cleaners. Without this skill, you won’t be able to grow.
- This is one of the biggest challenges in the industry right now. Business owners who are developing and training staff in-house will likely win in the long run.
- Ultimately, my belief is that you need to pay the really good people above market and make their life as easy as possible.
- As I said earlier, there are low barriers to entry and anyone can enter the market and win new business through marketing cost. It's hard for competitors to steal your recurring bookings, but they can make it challenging to win new clients.
Low Margin & Minimal Enterprise Value Growth
- This is a lower margin business with most home cleaning businesses ranging from 10-25% net margin. This helps keep a bunch of competitors out of the industry, but it also prevents you from building a large stock-pile of cash to go and invest in business lines and growth initiatives.
- Due to the challenges of this business model, the market gives very little enterprise value to these businesses. Trying to exit the business can be challenging. Even with mainly recurring clients, buyers tend to be very value-conscious given the risk profile. I’m curious how this differs as I scale, but I considered selling the business and the initial offers were almost laughable.
The Biggest Things I’ve Learned:
The Internet is Powerful
- There is so much intense power and knowledge that comes from the internet. Because I didn’t have any mentors or contacts in the home services space, I went to the internet for knowledge and community. Through basic Google searches, Twitter, Reddit, and other sites, I was able to learn so much about best practices and how to excel in the industry. I’m excited to add some of my takeaways so that others can benefit and build great businesses.
Customer Experience > Profit
- I was immensely lucky to be doing this entire project as a learning experience, so I didn’t have to be 100% profit-focused. Not being focused on profit in the short term actually helps you grow and become more profitable over the long term. Giving discounts and refunds may look stupid at the time, but they help build customer loyalty and lead to more recurring bookings.
Anything is Possible:
- I know there’s so much hype on the internet about taking action and how easy it is to start businesses. Well, a lot of that is total BS, but I do think it’s important to realize how much can happen in a single year. If you’re contemplating starting a business, whether it’s cleaning focused or not, just do it. Even if it loses money and never takes off, you’ll learn more through the experience than an entire MBA program.