"From working my ass off 90 hours per week running a business that wouldn't scale to nice salary/benefits for 40 hours. I'm taking home the same net and I feel like I'm on vacation."
I don't want to sound too snarky and I really admire OP's initiative and ability to make things happen, but this just doesn't smell right. It's easy to get excited by nice revenue in the beginning (as he should), but this new business:
- doesn't scale well
- is notoriously difficult to get and keep good workers
- is the first thing customers eliminate when times get tough
- has minimal barriers to competition
- is price sensitive
- is difficult work
- is almost 24/7 customer service
- has major tax/liability/insurance issues
- provides minor personal growth opportunity
It reminds me of growing up hearing the debate between 2 uncles at Grandma's every month. One ran his own grocery store and the other worked 9 to 5 for BigCo. Each thought the other had it made.
Uncle A said, "You get to go home every night at 5, never work weekends, get benefits covered, and have a life.
Uncle B said, "But you can grow your income as big as you want and you don't have to put up with an asshole boss."
Both were right.
OP is excited now, but I have a feeling that in about a year or so, he'll be feeling a lot like Uncle A.
My uncle, Peter Dussmann, started out cleaning offices, then started an office cleaning company, than bought an office building...now he owns one of the largest service companies in the world (50k+ employees).
I does not scale well compared to what? I might scale poorly compared to your average social network silicon valley mobile app startup, but it scales well compared to any other small business. He does not need a physical space and there are almost no other fixed costs. Also I feel he is using his "computer skills" to gain a competitive advantage by doing SEO and he also has an original brand. If he was able to replace his full time job in 4 month, he should be able to grow enough in a year time to hire someone to do most of the annoying administrative work for him.
Sure building a photo app and selling to Facebook would be cooler. I guess everyone has to figure out for themselves what they want from life.
Isn't the real message here that we shouldn't forget that many of us startup geeks can completely out-design and -SEO virtually any local service provider out there and that there might just be big money in doing so?
It is indeed important for him to realize that he'll be 'just an another agency' though and needs to start acting like one.
That doesn't negate the fact that a properly-SEO'd site which outperforms local agencies can be tremendously valuable and achievable.
Seems like it can scale quite well. Look at Merry Maids and Jani-king. It wouldn't surprise me if a more modern maid service that was entirely corporate-owned (rather than a franchise) supplanted the current leaders at some point.
The margins seem high enough that layers of management could work.
Difficulty in keeping good employees hasn't stopped Wal-Mart or McDonald's.
Times are tougher than most people alive can remember, so if it's working at all now, it probably can only get better.
There may be a solid first-mover advantage, so barriers to entry that are non-financial may exist.
It sounds like his part of the work isn't difficult. I don't know if I'd define what a maid does as difficult either. It just sucks.
Running a business of any size is a major personal growth opportunity.
My guess is customer service calls will happen at reasonable hours. Nobody wakes up at 4 am to decide their maids did a bad job.
I can't comment on taxes. He claims to be insured/bonded. I don't know much about that for that sort of business though.
I think you are being a bit harsh on his ability so cale. Anecdote time:
I own a lead-generation business. We focus primarily on home services, and over the last couple of years I've gotten to see a lot of businesses on this guys scale operate. My favorite is an air-duct cleaning company that we work with out of Colorado Springs.
When they started working with us they were brand new. A single truck that was just trying to make ends meet. However, one of the owners is a natural on the phone. When we provide a phone call she closes that business something like 80% of the time. Over a two year period they've grown to 10 trucks, and 15 employees. They are providing service 7 days a week. They are turning a solid profit per truck, and the owners are really happy.
Yes it's a long ways away from being a billion dollar company, but that's not to say it never will be. They've cracked the sales cycle and their growth is only going to continue as the push out into more and more areas.
They won't be huge overnight, but over a 10-15 year period there is no reason to think that they won't grow into a hugely profitable business that makes their owners very rich.
It'll be hard work, and they have a lot of hurdles ahead (learning to manage a larger business) but that doesn't mean it's not rewarding or worth their time to try.
Based on the labor discussions here and on reddit, next time this year might be more like:
"I thought I had a good thing going paying my workers as 1099s, but then I was audited and all my workers were reclassified, the IRS went after back taxes and my workers sued for benefits, and the fact that I incorporated as an LLC didn't matter (since an LLC offers no protection against IRS recovery of back-taxes due to reclassification)."
I strongly recommend he seek out the services of an employment lawyer.
Does it have to scale to national or global size? No. The guy covers a sizeable metropolitan area with an abundant potential client base. Does he have to scale up to 500 employees? No. He can keep his business small and profitable.
I understand the train of thought you're having. It may not be the best kind of business scaling-wise but if done right he could open some more somewhere else and horizontally scale that way. Everything can be scalable when pushed into the right direction.
More branches = more employees = almost automatic administration = more money.
Since everybody else is pointing out how poor his employee compliance is and that he's picked a freaking hard row to hoe, I'll praise the guy. Awesome job! This is the internet equivalent of going door-to-door. In fact, I bet you could combine this with going door to door and see sales really take off :)
The scaling thing Edw brings up doesn't concern me right now: you are in the throes of kicking ass. Later on reality will sink in. But he's right -- you have some major changes to make if you really want to go long-term with this.
Patio has a more legal concern: that your cleaners are really workers. I'm not so sure. I'd see a lawyer about this pronto. If these folks were already doing some cleaning before you met them, and if you make it clear that there is no office, there is no work hours, they are free to take or not take work, and that their only obligation to you is completing each job they sign up for? I think you might be fine. It's certainly a lot less control that software contractors have over them, and they're contractors.
Instead of growing, I'd concentrate on making this thing hands-off. Hire a temp to do the office work, etc. Even if it eats into most of your income, once you are freed up then you'll be in a position to really expand. This "make the business a machine" is your next step. At least according to everybody I read.
I liked the post. We need reminding that a little bit of hussle and not over-thinking things can take you a long ways.
He has a "detaileddddddd" checklist of how he wants the work done and a training program. His lawyer is going to tell him that they're employees.
What's worse is, the better he does, the more clear-cut this issue gets. His key business metric is employee turnover, and anything he does to improve this increases the likelihood that his employees will be relying on him for most of their wages.
This is a "too good to be true" scenario. He's defined a fixed-price service with rigorous standards to be delivered across a major metro area with 8 known-good workers and is making $1000/month on it. To be compliant, some of that has to give: his business will have to look more like a placement or dispatch service, or he'll have to make way less money.
He's essentially figured out that cleaning is one of many services which would have lower barrier to entry if it were not regulated. He is, of course, right. I sincerely hope for his sake that he reinvests profits into bringing himself into compliance with e.g. employment taxes, workers comp, etc.
It's interesting that what used to be a site full of risk-takers and entrepreneurs is tearing every little detail of this guy down.
The gentleman tells you it's a fly-by-the-seat-of-his-pants learning experiment. He doesn't need you to tell him every little detail he's getting wrong. He's learning by actually doing it.
Further, it seems a lot of commenters aren't actually reading his posts and comments -- a lot of the criticisms are already documented and addressed on his posts. Even edw519 (who I love).
I was drawn to HN because of the risk-loving hackers who dared, not the naysayers who only feed my internal risk-adverse naysaying thoughts.
Edit: Since I posted this comment, a large discussion around 1099s has bloomed, and I'm not referring to this excellent discussion. I'm specifically referring to the knee-jerk naysaying.
You have a point. I think many of the criticisms you'll read here are coming from people who have "been there, done that" with their own businesses.
The 1099 vs W2 issue is very real but (imo) totally fixable in a few days with a decent accountant and a meeting with your staff and some paperwork.
He was probably fine for FY2011 to pay his maids on a 1099 for work done between when he started the business in November 3 and the end of the year. (He even stated that doesn't still work with all of them, some really were just temporary staff that didn't work out and weren't trained).
He definitely needs to convert them to employees for FY2012, but it's only April and these are relatively small amounts of money. I'm pretty sure he's not trying to stick his workers with a huge tax bill in 2012. People who are suggesting that this is his "business model" are way off base.
The most interesting part of this story, which nobody is talking about, is how he is using his website to allow clients to pick and choose these Godaddy-style addons (cleaning refrigerator and closets and so on). It totally makes sense for service-oriented business like cleaning and lawn care.
He could probably follow the Godaddy model and operate the rest of his business at small margin and make the bulk of his money off those addons that other cleaning businesses haven't yet thought to offer.
He's not withholding. Chances are good his workers aren't paying taxes either.
According to the manual the IRS uses to train its worker classification auditors, the three most important factors are:
Instructions to workers: Your worker is probably an employee if you require him or her to follow instructions on when, where, and how work is to be done. This is a very important factor. However, if you tell your electrician you want blue switch plate covers instead of white, you are not exercising control to a degree that would make the person an employee.
Job training: If your company provides or arranges for training of any kind for the worker, this is a sign you expect work to be performed in a certain way; therefore, the worker is your employee. Training can be as informal as requiring the worker to attend meetings or work along with someone who's more experienced.
Worker's ability to make a profit or suffer a loss: An employee may be rewarded, disciplined, demoted, or fired depending on job performance, but only an independent contractor can realize a profit or incur a financial loss from his or her work. In other words, an employee will always get paid; an independent contractor, however, has a
financial stake in his enterprise.
Also:
Importance of the worker's services: If a worker provides services that are integral to the success of your business, the worker is likely your employee.
Personal performance of services: An independent contractor should have the freedom to hire assistants or subcontract work to other workers or firms at his or her expense (this is where profit or loss could enter the picture). If you require the worker to perform the work personally, that's a sign of control and therefore indicative of employee status.
Ouch.
This scheme is going to work until he starts issuing 1099s and the government (maybe after months or years) notices them and goes after the workers for their (extremely expensive) self-employment taxes. Which, because they're probably making the prevailing rate for housekeepers (high teens per hour) is going to threaten to drive them into bankruptcy and thus cause a stink.
You are correct that the maids are employees, but since he only just started this business, it seems like a very fixable problem to convert them to employees.
I ran some numbers on a free paycheck calculator site (paycheckcity.com) and assuming the following: Washington DC, wage of $20/hr, 30 hrs/week, married (2 exemptions), the numbers come out to:
Weekly Gross Pay $600.00
Federal Withholding $29.81
Social Security $25.20
Medicare $8.70
Washington DC (ouch) $28.00
---
Net Pay $508.29
So, he might need to set aside $100/employee/week.. The taxes aren't necessarily a business-killer.
First of all, congratulations to him! Amazing success for 4 months work.
However, the issue with this is, there is no incentive for the cleaners to stay with the company. My ex was with a company very similar to this one, she signed up, but after she knew the clients for a while, she realised she could cut out the middleman and increase her wages substantially. The company tried to hit her with a 900$ bill for lost profit, their reasoning was "how can we stay in business if our workers keep running of with the clients?" (what does that say about the business model?). She convinced her favourite clients to ditch the company, which allowed her to bring in more money and the clients had a cheaper rate. Further clients were found by word of mouth at that point. I think throwing up some ads in the local paper would be cheaper in the long run than lost money from going with a company like this.
Hmmm... that's an interesting (and scary) point. I wonder if it would make sense, from the business owner's perspective, to shuffle the employees around between clients to decrease the chances of this?
It's a nice personal achievement, but I can't help myself cringing at business models of this kind. It's plain old extraction of surplus-value, adding very little to the economy as a whole. The workers would be better off operating as a cooperative, I wish they had the education to know that from the outset, and the means to implement it.
Be careful about confusing what you want people to value with what they actually value because that's how you get Marxism.
I hired a cheap startup cleaning company (an internal startup within a larger organization). Flaky, unprofessional management; cleaners who sucked at their jobs... going by my and my friends' experiences, finding a good cleaner is pretty hard and (this is a big 'in general') the more expensive ones are more reliable. Information, quality assurance, and good management are all scarce--a lot scarcer than most people tend to assume--and cost money.
The other part is that the employers aren't "extracting as much surplus value" as you think from the sell side either. For instance, most programmers are content to work for the Man, losing significant amounts of "surplus-value". Independent contractors appreciate the freedom, the money, the flexibility, the power to say no, but it's not for everyone, because managing yourself is also a giant pain in the ass for a large number of reasons.
Finally, I think you're being down voted because all this is probably common knowledge on a forum for smart, startup-minded hackers. When you talk about "extracting surplus-value" there are prominent members of this community who do that for a living.
He's not playing golf all day: he did design and commission the scheduling system he now operates, and provides ongoing advertisement and management.
From what he says, it looks like he gets $40 to $60 per job, whereas cleaners get $15 to $30 per job -- they work in team, so it's $30 to $60 in total (it's all pre-tax, from what I understand). Not a terrible arrangement, to be honest, especially in the Land Of The Free From Socialism; apparently this is much more than what they used to make when a big company exploited them.
I do agree however that the IRS will kick the shit out of him if he doesn't switch to proper employment asap, and that's how it should be: it's all fun and games when things go well, but when hard times come (and they will come) the workers should get some protection.
From a business standpoint this is absolutely brilliant. Everyone should be doing this, doesn't matter if you're a SaaS or selling real-world goods & services.
> 2) Having Extras at checkout. When we first started, you would checkout online and just order your home cleaning and pay. Then I had the brilliant idea (seems so basic now) to have other options for people to choose extra stuff at checkout like "cleaning inside the fridge", "cleaning inside the windows", "cleaning inside closets", it was just extra money that I was leaving on the table. It took my average profit from about $45 to closer to $60 per client.
As long as defaults are "honest" (i.e. not pre-selecting extras), sure. It's a balance though: it gets really tiring to go through pages and pages of upsell attempts whenever I buy a computer from certain vendors.
The real trick, I think, is to take some of the minor elements people would expect without really thinking about it, and turn them into explicit extras. It devalues the base price a little, but the gains are worth it in many cases (like here).
An excellent example of a valuable product that was bootstrapped from the very beginning. It's really a shame that news like this is not more prevalent. We are so accustomed to seeing media highlights of highly glamorized "overnight successes" that we forget that there are plenty of other founders out there who are starting businesses and going through the same struggles and accomplishments.
More importantly, stories like this make it seem that success is within reach and not something achieved only by an elite few with well connected VCs in some well-known startup hub.
When someone suggests a business idea like this one I come back with this:
"It's a great business idea. It will provide you with the freedom to choose which 20 hours of the day you want to work, including weekends."
Here's the reality: He gets huge points for going out and "getting into the game". Who knows? This might be what he loves and ends-up thriving despite the hard work and long hours. There are lots of businesses like that. And, frankly, the fact that they don't scale matters not to a huge percentage of business owners.
The greatest thing about this is that you have a (presumably) young man learning about the realities of business. Succeed or fail, he will be better for it. And, should he choose to move on and do something else he'll be a million times better prepared to make the right decisions and do well. He will succeed, regardless of whether this first venture does or not.
Hi folks, OP from the reddit thread here. I'll answer questions. disclaimer:
This is my first time posting here.
Disclaimer #2: I'm no expert.
Disclaimer #3: See Disclaimer #2 again. I just tried something and it took off. Will it work long term I have no idea. Where I am now is just the reality of where I am now. Have I made mistakes, you bet your life on that! Okay, I'll scroll through and try to respond to anything I can.
hi there. I dont even know your name, and reading thoroughly reddit, I couldnt find it anywhere either.
my impression is you are extremely business-smart person that is just learning business. You are not afraid of making mistakes knowing every mistake is an opportunity to learn new things, plus most mistakes can be fixed. please write a after-post about your financial situation after converting every emp into w2 as I think you are fully aware by now they would not pass "irs 20 questions to be 1099" rule.
btw: too bad you are not located in the New York City. I have been let go my work recently and thinking about doing something else than 8-5 w2. I read between the lines reading you and felt chemistry that we both could learn alot and accomplish alot business-wise (of course, I could be wrong...)
I would like to connect with you. would you please email me? (my address is in my HN profile).
btw #2: thanks for sharing your story. I sure learnt new stuff today.
This is scalable, I am not sure why people are saying it isn't. In its current form, no, but if he puts it into high gear and takes it to the next level, there is no reason he couldn't repeat this model, hire managers etc and be completely hands off. But, that is not what I would do necessarily, I would get my franchise papers in order ASAP, and start marketing this online, there are a lot of good keywords to go after (how to start a cleaning company etc). Get it to the point where he knows exactly how to repeat this in any city and make XX,XXX$/yr for the "owner". Figure out a franchising model, where the owner of the franchise can learn how to repeat your success, and you get part of the profits/or a franchise fee (hell you could "loan" them the money at interest). Nothing sells better than telling people that you can teach them how to leave their job, make 60,000$/yr, and actually be able to do it.
I can't help but think a lot of people find fault with this because they don't want to believe that it could be possible to start a business this way because they didn't think of it first. But you know full and well that whatever employment law and tax compliance requirements exist can be overcome and overcome fairly easily. Why look past the entire story to point out the few things that could fuck him up?
And to those talking about the lack of scalability, etc. I ask you: how many businesses have you started that employ people? How many businesses of this kind have you run? If the answer is <1 you are not qualified to make those assumptions.
We can organize your closet (in whatever way you would like), and thoroughly clean and organize the items in your kitchen, or even spend time restoring your china to their full glory.
Refrigerator / Freezer Cleaning
We’ll dispose of expired items, & remove racks and compartments to deep clean them as well as the walls of the fridge.
Errand Services
Need a personal assistant for the day or just need someone to drop your car to the mechanic or to run to the mall for you? Name it and we’re there to take care of any errands you may have. $60 for first two hours ($35 per hour after).
-------
Clean is something people like. To people like me it gives peace of mind and freedom to think and work on other things. But cleaning is something a great many of these people don't like to deal with. A cleaning service has to be a moneymaker.
Has anyone tried to consider the numbers involved with this business?
About how long does it take for two maids to clean a house (or in other words, how many houses can two maids clean in one 8-10 hour day?)? Also, about how many maids do you have working for you?
In trying to come up with a ball-park figure: My guess would be that each pair of maids could bring in about $600-800 a day in revenue (cleaning 4-5 homes). Of this it would seem that about $400-500 goes to paying the maids (say , $200-250 per maid), with about $75 dollars going to daily expenses (gasoline, cleaning materials, etc), leaving whatever remains going to other major business expenses and profit.
If his workers are busy 20 days a month, it would seem that a bunch of the so-called monthly costs of being an employer (say around $750 per month per employee) only comes out to be around $75 dollars a day (per pair of maids). I have no clue as to what this value actually is (or how much of it would be part of their hourly wage), I'm just guessing.
All in all though, I would guess that for each maid he has, on average it is costing him around $275-325 per day while bringing in around $300-400 per day. If their is any truth to the numbers above (which one number being off could dramatically mess everything up), it would appear that he is bringing in about $50-75 per maid. If he prices his service to keep that profit in mind (to make at lease $50 per maid per day), then having a staff of 10 maids could end up making around $100-150k a year. And I suppose the scaling would seem to work pretty linearly; if he doubles the number of mades or how much he brings in per maid, then his profit would double as such. Of course there are things like insurance and training (perhaps those costs total 10% of each maids daily wage and is included in that value)...
Based on these numbers though, having 10 maids would require having 25 homes to clean each day (or about 500 per month). I see that he has given out 2254 lunches so far (if I really wanted to make an accurate estimate of the business he is doing).
Anyhow, is there anything major that I'm missing in these numbers? I'm just trying to make an estimation..
It looks to me the idea may not be the best one and his success will not be easy to replicate (for those that are thinking to do the same in their cities), but the discussion the story generated is very interesting in two ways:
1)there are bits of localcasestudy's experience that can be used by other businesses irregardless of what sector they are
2)the moral of the story is that if you want to run your own business you can do it.
And it doesn't necessarily have to be a tech startup looking to raise funds.
This is a really impressive story. Sure there are some obstacles and challenges - but this is the fun of very real life business.
The guy has taken a traditional business and applied all the buzz of the web (social media, lean, etc etc) to establish a profitable business in 4 months.
I would love to hear from others willing to share similar experiences of turning an idea into one business (cleaning), then repeating the process again (lawn services).
This kind of sharing is what makes these communities priceless.
My mom started a cleaning business some time ago. I wanted to try Javascript and promote her business so I wrote a quote calculator that takes into account number of rooms, number of bathrooms, area size, etc...
(shameless plug)
If you understand portuguese have a go at:
[+] [-] edw519|14 years ago|reply
"From working my ass off 90 hours per week running a business that wouldn't scale to nice salary/benefits for 40 hours. I'm taking home the same net and I feel like I'm on vacation."
I don't want to sound too snarky and I really admire OP's initiative and ability to make things happen, but this just doesn't smell right. It's easy to get excited by nice revenue in the beginning (as he should), but this new business:
It reminds me of growing up hearing the debate between 2 uncles at Grandma's every month. One ran his own grocery store and the other worked 9 to 5 for BigCo. Each thought the other had it made.Uncle A said, "You get to go home every night at 5, never work weekends, get benefits covered, and have a life.
Uncle B said, "But you can grow your income as big as you want and you don't have to put up with an asshole boss."
Both were right.
OP is excited now, but I have a feeling that in about a year or so, he'll be feeling a lot like Uncle A.
[+] [-] qeorge|14 years ago|reply
My uncle, Peter Dussmann, started out cleaning offices, then started an office cleaning company, than bought an office building...now he owns one of the largest service companies in the world (50k+ employees).
http://de.wikipedia.org/wiki/Dussmann
When you make money it opens up other opportunities. How you leverage them is what matters.
That said, I'm 1000% Uncle B.
[+] [-] ma2rten|14 years ago|reply
Sure building a photo app and selling to Facebook would be cooler. I guess everyone has to figure out for themselves what they want from life.
[+] [-] mtrimpe|14 years ago|reply
It is indeed important for him to realize that he'll be 'just an another agency' though and needs to start acting like one.
That doesn't negate the fact that a properly-SEO'd site which outperforms local agencies can be tremendously valuable and achievable.
[+] [-] mattmaroon|14 years ago|reply
Seems like it can scale quite well. Look at Merry Maids and Jani-king. It wouldn't surprise me if a more modern maid service that was entirely corporate-owned (rather than a franchise) supplanted the current leaders at some point.
The margins seem high enough that layers of management could work.
Difficulty in keeping good employees hasn't stopped Wal-Mart or McDonald's.
Times are tougher than most people alive can remember, so if it's working at all now, it probably can only get better.
There may be a solid first-mover advantage, so barriers to entry that are non-financial may exist.
It sounds like his part of the work isn't difficult. I don't know if I'd define what a maid does as difficult either. It just sucks.
Running a business of any size is a major personal growth opportunity.
My guess is customer service calls will happen at reasonable hours. Nobody wakes up at 4 am to decide their maids did a bad job.
I can't comment on taxes. He claims to be insured/bonded. I don't know much about that for that sort of business though.
[+] [-] enjo|14 years ago|reply
I own a lead-generation business. We focus primarily on home services, and over the last couple of years I've gotten to see a lot of businesses on this guys scale operate. My favorite is an air-duct cleaning company that we work with out of Colorado Springs.
When they started working with us they were brand new. A single truck that was just trying to make ends meet. However, one of the owners is a natural on the phone. When we provide a phone call she closes that business something like 80% of the time. Over a two year period they've grown to 10 trucks, and 15 employees. They are providing service 7 days a week. They are turning a solid profit per truck, and the owners are really happy.
Yes it's a long ways away from being a billion dollar company, but that's not to say it never will be. They've cracked the sales cycle and their growth is only going to continue as the push out into more and more areas.
They won't be huge overnight, but over a 10-15 year period there is no reason to think that they won't grow into a hugely profitable business that makes their owners very rich.
It'll be hard work, and they have a lot of hurdles ahead (learning to manage a larger business) but that doesn't mean it's not rewarding or worth their time to try.
[+] [-] infinite8s|14 years ago|reply
"I thought I had a good thing going paying my workers as 1099s, but then I was audited and all my workers were reclassified, the IRS went after back taxes and my workers sued for benefits, and the fact that I incorporated as an LLC didn't matter (since an LLC offers no protection against IRS recovery of back-taxes due to reclassification)."
I strongly recommend he seek out the services of an employment lawyer.
[+] [-] jefft|14 years ago|reply
This guy got off his ass and started a real business. How about a pat on the back or words of encouragement?
Here's a dose of optimism for you, OP: Good for you. You got this far, you will figure out the challenges ahead of you.
“It is not the critic who counts" has never been more true.
[+] [-] Maascamp|14 years ago|reply
[+] [-] frogpelt|14 years ago|reply
- doesn't scale well
Who said he wanted it to "scale"? If he has already replaced his income he may not need much "scaling". Nice buzzword though.
- is the first thing customers eliminate when times get tough
Times are tough now and he is growing his business (or "scaling" if you prefer buzzwords).
I'm interested to know what kind of business you're running and how well it is performing.
[+] [-] neonkiwi|14 years ago|reply
[+] [-] grimatongueworm|14 years ago|reply
[+] [-] localcasestudy|14 years ago|reply
you could be right my man. I'm not looking at this through rose colored glasses at all. I'm a realistic ^ 2. Thanks.
[+] [-] tbergeron|14 years ago|reply
More branches = more employees = almost automatic administration = more money.
Those are only my opinions, therefore not facts.
[+] [-] DanielBMarkham|14 years ago|reply
The scaling thing Edw brings up doesn't concern me right now: you are in the throes of kicking ass. Later on reality will sink in. But he's right -- you have some major changes to make if you really want to go long-term with this.
Patio has a more legal concern: that your cleaners are really workers. I'm not so sure. I'd see a lawyer about this pronto. If these folks were already doing some cleaning before you met them, and if you make it clear that there is no office, there is no work hours, they are free to take or not take work, and that their only obligation to you is completing each job they sign up for? I think you might be fine. It's certainly a lot less control that software contractors have over them, and they're contractors.
Instead of growing, I'd concentrate on making this thing hands-off. Hire a temp to do the office work, etc. Even if it eats into most of your income, once you are freed up then you'll be in a position to really expand. This "make the business a machine" is your next step. At least according to everybody I read.
I liked the post. We need reminding that a little bit of hussle and not over-thinking things can take you a long ways.
[+] [-] tptacek|14 years ago|reply
What's worse is, the better he does, the more clear-cut this issue gets. His key business metric is employee turnover, and anything he does to improve this increases the likelihood that his employees will be relying on him for most of their wages.
This is a "too good to be true" scenario. He's defined a fixed-price service with rigorous standards to be delivered across a major metro area with 8 known-good workers and is making $1000/month on it. To be compliant, some of that has to give: his business will have to look more like a placement or dispatch service, or he'll have to make way less money.
The IRS reclassification thing will be painful.
[+] [-] patio11|14 years ago|reply
[+] [-] gojomo|14 years ago|reply
• he seems to be comparing his prior 'take-home' (after-tax) pay with his new venture 'profits' (monthly pre-tax).
• as another redditor points out, he may be in for a painful 1099-reclassified-as-employee showdown with the tax and employment authorities
And yet, good on him. He's found a niche and will now rapidly get to learn the tax & employment law details.
[+] [-] chc|14 years ago|reply
[+] [-] runjake|14 years ago|reply
"He's going to burn out."
"Let's see what he has to say in a year."
Am I on HN?
It's interesting that what used to be a site full of risk-takers and entrepreneurs is tearing every little detail of this guy down.
The gentleman tells you it's a fly-by-the-seat-of-his-pants learning experiment. He doesn't need you to tell him every little detail he's getting wrong. He's learning by actually doing it.
Further, it seems a lot of commenters aren't actually reading his posts and comments -- a lot of the criticisms are already documented and addressed on his posts. Even edw519 (who I love).
I was drawn to HN because of the risk-loving hackers who dared, not the naysayers who only feed my internal risk-adverse naysaying thoughts.
Edit: Since I posted this comment, a large discussion around 1099s has bloomed, and I'm not referring to this excellent discussion. I'm specifically referring to the knee-jerk naysaying.
[+] [-] bhousel|14 years ago|reply
The 1099 vs W2 issue is very real but (imo) totally fixable in a few days with a decent accountant and a meeting with your staff and some paperwork.
He was probably fine for FY2011 to pay his maids on a 1099 for work done between when he started the business in November 3 and the end of the year. (He even stated that doesn't still work with all of them, some really were just temporary staff that didn't work out and weren't trained).
He definitely needs to convert them to employees for FY2012, but it's only April and these are relatively small amounts of money. I'm pretty sure he's not trying to stick his workers with a huge tax bill in 2012. People who are suggesting that this is his "business model" are way off base.
The most interesting part of this story, which nobody is talking about, is how he is using his website to allow clients to pick and choose these Godaddy-style addons (cleaning refrigerator and closets and so on). It totally makes sense for service-oriented business like cleaning and lawn care.
He could probably follow the Godaddy model and operate the rest of his business at small margin and make the bulk of his money off those addons that other cleaning businesses haven't yet thought to offer.
[+] [-] ceejayoz|14 years ago|reply
[+] [-] tptacek|14 years ago|reply
According to the manual the IRS uses to train its worker classification auditors, the three most important factors are:
Instructions to workers: Your worker is probably an employee if you require him or her to follow instructions on when, where, and how work is to be done. This is a very important factor. However, if you tell your electrician you want blue switch plate covers instead of white, you are not exercising control to a degree that would make the person an employee.
Job training: If your company provides or arranges for training of any kind for the worker, this is a sign you expect work to be performed in a certain way; therefore, the worker is your employee. Training can be as informal as requiring the worker to attend meetings or work along with someone who's more experienced.
Worker's ability to make a profit or suffer a loss: An employee may be rewarded, disciplined, demoted, or fired depending on job performance, but only an independent contractor can realize a profit or incur a financial loss from his or her work. In other words, an employee will always get paid; an independent contractor, however, has a financial stake in his enterprise.
Also:
Importance of the worker's services: If a worker provides services that are integral to the success of your business, the worker is likely your employee.
Personal performance of services: An independent contractor should have the freedom to hire assistants or subcontract work to other workers or firms at his or her expense (this is where profit or loss could enter the picture). If you require the worker to perform the work personally, that's a sign of control and therefore indicative of employee status.
Ouch.
This scheme is going to work until he starts issuing 1099s and the government (maybe after months or years) notices them and goes after the workers for their (extremely expensive) self-employment taxes. Which, because they're probably making the prevailing rate for housekeepers (high teens per hour) is going to threaten to drive them into bankruptcy and thus cause a stink.
[+] [-] bhousel|14 years ago|reply
I ran some numbers on a free paycheck calculator site (paycheckcity.com) and assuming the following: Washington DC, wage of $20/hr, 30 hrs/week, married (2 exemptions), the numbers come out to:
So, he might need to set aside $100/employee/week.. The taxes aren't necessarily a business-killer.[+] [-] unknown|14 years ago|reply
[deleted]
[+] [-] turkeyman|14 years ago|reply
However, the issue with this is, there is no incentive for the cleaners to stay with the company. My ex was with a company very similar to this one, she signed up, but after she knew the clients for a while, she realised she could cut out the middleman and increase her wages substantially. The company tried to hit her with a 900$ bill for lost profit, their reasoning was "how can we stay in business if our workers keep running of with the clients?" (what does that say about the business model?). She convinced her favourite clients to ditch the company, which allowed her to bring in more money and the clients had a cheaper rate. Further clients were found by word of mouth at that point. I think throwing up some ads in the local paper would be cheaper in the long run than lost money from going with a company like this.
[+] [-] guynamedloren|14 years ago|reply
[+] [-] ricardobeat|14 years ago|reply
[+] [-] cynicalkane|14 years ago|reply
I hired a cheap startup cleaning company (an internal startup within a larger organization). Flaky, unprofessional management; cleaners who sucked at their jobs... going by my and my friends' experiences, finding a good cleaner is pretty hard and (this is a big 'in general') the more expensive ones are more reliable. Information, quality assurance, and good management are all scarce--a lot scarcer than most people tend to assume--and cost money.
The other part is that the employers aren't "extracting as much surplus value" as you think from the sell side either. For instance, most programmers are content to work for the Man, losing significant amounts of "surplus-value". Independent contractors appreciate the freedom, the money, the flexibility, the power to say no, but it's not for everyone, because managing yourself is also a giant pain in the ass for a large number of reasons.
Finally, I think you're being down voted because all this is probably common knowledge on a forum for smart, startup-minded hackers. When you talk about "extracting surplus-value" there are prominent members of this community who do that for a living.
[+] [-] toyg|14 years ago|reply
From what he says, it looks like he gets $40 to $60 per job, whereas cleaners get $15 to $30 per job -- they work in team, so it's $30 to $60 in total (it's all pre-tax, from what I understand). Not a terrible arrangement, to be honest, especially in the Land Of The Free From Socialism; apparently this is much more than what they used to make when a big company exploited them.
I do agree however that the IRS will kick the shit out of him if he doesn't switch to proper employment asap, and that's how it should be: it's all fun and games when things go well, but when hard times come (and they will come) the workers should get some protection.
[+] [-] maukdaddy|14 years ago|reply
> 2) Having Extras at checkout. When we first started, you would checkout online and just order your home cleaning and pay. Then I had the brilliant idea (seems so basic now) to have other options for people to choose extra stuff at checkout like "cleaning inside the fridge", "cleaning inside the windows", "cleaning inside closets", it was just extra money that I was leaving on the table. It took my average profit from about $45 to closer to $60 per client.
[+] [-] toyg|14 years ago|reply
The real trick, I think, is to take some of the minor elements people would expect without really thinking about it, and turn them into explicit extras. It devalues the base price a little, but the gains are worth it in many cases (like here).
[+] [-] lachyg|14 years ago|reply
[+] [-] jczhang|14 years ago|reply
[+] [-] akg|14 years ago|reply
More importantly, stories like this make it seem that success is within reach and not something achieved only by an elite few with well connected VCs in some well-known startup hub.
[+] [-] robomartin|14 years ago|reply
"It's a great business idea. It will provide you with the freedom to choose which 20 hours of the day you want to work, including weekends."
Here's the reality: He gets huge points for going out and "getting into the game". Who knows? This might be what he loves and ends-up thriving despite the hard work and long hours. There are lots of businesses like that. And, frankly, the fact that they don't scale matters not to a huge percentage of business owners.
The greatest thing about this is that you have a (presumably) young man learning about the realities of business. Succeed or fail, he will be better for it. And, should he choose to move on and do something else he'll be a million times better prepared to make the right decisions and do well. He will succeed, regardless of whether this first venture does or not.
[+] [-] localcasestudy|14 years ago|reply
Disclaimer #2: I'm no expert.
Disclaimer #3: See Disclaimer #2 again. I just tried something and it took off. Will it work long term I have no idea. Where I am now is just the reality of where I am now. Have I made mistakes, you bet your life on that! Okay, I'll scroll through and try to respond to anything I can.
[+] [-] joering2|14 years ago|reply
my impression is you are extremely business-smart person that is just learning business. You are not afraid of making mistakes knowing every mistake is an opportunity to learn new things, plus most mistakes can be fixed. please write a after-post about your financial situation after converting every emp into w2 as I think you are fully aware by now they would not pass "irs 20 questions to be 1099" rule.
btw: too bad you are not located in the New York City. I have been let go my work recently and thinking about doing something else than 8-5 w2. I read between the lines reading you and felt chemistry that we both could learn alot and accomplish alot business-wise (of course, I could be wrong...)
I would like to connect with you. would you please email me? (my address is in my HN profile).
btw #2: thanks for sharing your story. I sure learnt new stuff today.
[+] [-] AnthonyJoseph|14 years ago|reply
[+] [-] dkrich|14 years ago|reply
And to those talking about the lack of scalability, etc. I ask you: how many businesses have you started that employ people? How many businesses of this kind have you run? If the answer is <1 you are not qualified to make those assumptions.
[+] [-] septerr|14 years ago|reply
-------
Organizing
We can organize your closet (in whatever way you would like), and thoroughly clean and organize the items in your kitchen, or even spend time restoring your china to their full glory.
Refrigerator / Freezer Cleaning We’ll dispose of expired items, & remove racks and compartments to deep clean them as well as the walls of the fridge.
Errand Services
Need a personal assistant for the day or just need someone to drop your car to the mechanic or to run to the mall for you? Name it and we’re there to take care of any errands you may have. $60 for first two hours ($35 per hour after).
-------
Clean is something people like. To people like me it gives peace of mind and freedom to think and work on other things. But cleaning is something a great many of these people don't like to deal with. A cleaning service has to be a moneymaker.
[+] [-] bannerts|14 years ago|reply
About how long does it take for two maids to clean a house (or in other words, how many houses can two maids clean in one 8-10 hour day?)? Also, about how many maids do you have working for you?
In trying to come up with a ball-park figure: My guess would be that each pair of maids could bring in about $600-800 a day in revenue (cleaning 4-5 homes). Of this it would seem that about $400-500 goes to paying the maids (say , $200-250 per maid), with about $75 dollars going to daily expenses (gasoline, cleaning materials, etc), leaving whatever remains going to other major business expenses and profit. If his workers are busy 20 days a month, it would seem that a bunch of the so-called monthly costs of being an employer (say around $750 per month per employee) only comes out to be around $75 dollars a day (per pair of maids). I have no clue as to what this value actually is (or how much of it would be part of their hourly wage), I'm just guessing.
All in all though, I would guess that for each maid he has, on average it is costing him around $275-325 per day while bringing in around $300-400 per day. If their is any truth to the numbers above (which one number being off could dramatically mess everything up), it would appear that he is bringing in about $50-75 per maid. If he prices his service to keep that profit in mind (to make at lease $50 per maid per day), then having a staff of 10 maids could end up making around $100-150k a year. And I suppose the scaling would seem to work pretty linearly; if he doubles the number of mades or how much he brings in per maid, then his profit would double as such. Of course there are things like insurance and training (perhaps those costs total 10% of each maids daily wage and is included in that value)...
Based on these numbers though, having 10 maids would require having 25 homes to clean each day (or about 500 per month). I see that he has given out 2254 lunches so far (if I really wanted to make an accurate estimate of the business he is doing).
Anyhow, is there anything major that I'm missing in these numbers? I'm just trying to make an estimation..
[+] [-] pier0|14 years ago|reply
1)there are bits of localcasestudy's experience that can be used by other businesses irregardless of what sector they are
2)the moral of the story is that if you want to run your own business you can do it. And it doesn't necessarily have to be a tech startup looking to raise funds.
[+] [-] sparknlaunch12|14 years ago|reply
The guy has taken a traditional business and applied all the buzz of the web (social media, lean, etc etc) to establish a profitable business in 4 months.
I would love to hear from others willing to share similar experiences of turning an idea into one business (cleaning), then repeating the process again (lawn services).
This kind of sharing is what makes these communities priceless.
[+] [-] localcasestudy|14 years ago|reply
[+] [-] yeureka|14 years ago|reply
(shameless plug) If you understand portuguese have a go at:
http://abelhinha.net/calculadora.html
[+] [-] septerr|14 years ago|reply