Wednesday, August 17, 2005

The Economics of Housecleaning

The housecleaning industry is crowded with hundreds of competitors within a given market. The competitors range from small, one person businesses to large, franchised businesses. Someone recently asked me why rates vary so much within the industry. The main reason: low barriers of entry.

Anyone can become a housecleaner tomorrow. There's no required licensing, no high amount of education, and you only need a small amount of capital. At the same time, anyone can quit being a housecleaner tomorrow because of the same reasons. For example, John Doe wouldn't start a construction business today and close tomorrow. Why? Because John has spent a large amount of money on equipment and land. A newly formed housecleaning company requires about $40-$50 towards basic cleaning supplies. Not exactly a large investment.

A larger housecleaning business requires a larger investment. The business owner must provide workers' compensation, general liability insurance, bonding protection, cleaning supplies, office equipment, advertising, office space, and; most importantly, employee compensation. Obviously, a larger business can't compete with a smaller business on price alone. So, we don't.

I compare most large cleaning businesses with Superman. Superman was invincible, unless kryptonite was in his presence. That's us. We are the most customer friendly cleaning service in the world, but far from the most perfect cleaning service in the world. I know plenty of people who have used the same cleaning person for years and years. Their cleaning person charges them about 25% less than we charge. I have never once tried to steal that person's business because I know they are better than us. They personally clean everything with their own two hands. They probably know the house better than the homeowner. We can't compete with a great individual housecleaner. If you find one, hold onto them.

The problem is that most individuals aren't very serious about their occupation. Since the barriers of entry are so low, there's little reason to care. Some of our clients have told us that their previous housecleaner just quit showing up or quit caring. That's sad because it makes the rest of the industry look bad.

I have a dream. My dream is for our services to be respected. I want our business to be held in the same regard as your accountant or financial advisor. In other words, I want our employees to be regarded as professionals. The only way to accomplish that dream is to consistently satisfy each of our clients. It's a long deliberate process, but we can do it because we're here for the long haul.

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