Wednesday, July 19, 2006

Case Study Of A Maid Service Company

The vast majority of maid service companies compete in one area: price. They try to be cheaper than everybody else. I've discussed this subject in the past.

I guess this maid service didn't listen to me. Here's how this maid service got itself in trouble. (My opinion at least)

Step 1: The owners of the business needed to get their phones to ring. They needed customers in order to pay the bills. They figured that the fastest way to profitability would be to be cheaper than everybody else. So, they lowered their prices.

Step 2: The owners quickly found out that there wasn't much money left after they paid their employees. They figured that they needed to lower their wages in order to continue pricing their services so low. So, they lowered their wages to minimum wage.

Step 3: The owners quickly found out that nobody wanted to work for minimum wage. They figured that the only way to make this system work was to recruit immigrants from other countries. They figured they would work for next to nothing. So, they started hiring immigrants.

Step 4: The owners started making money. Sure, they never made anybody happy. But they didn't need to make anybody happy. As soon as they lost a customer, they would gain a customer. Because they were cheaper than everybody else.

Step 5: The owners got greedy. They started making their employees "independent contractors". Heck, their employees couldn't even speak English. What would they know about legal rights? They figured that they could make each employee a subcontractor; thereby bypassing cash-consuming employee rights laws. So, their company became a two employee company (i.e., the two owners)

Step 6: The owners got caught. And now they're paying the price. All $1.8 million of it.

Here's a quote from one of the owners:

"Rubio said she and her husband provided the department with information that showed they hired independent contractors and are exempt from wage requirements. "If we show (that we aren't breaking the law), I don't know why (the department) made this decision," she said. "This is a difficult time for us."

So goes the life a maid service company that competes on price. You have to sacrifice something in order to be cheaper than everybody else.

There's one, maybe more than one, in your neighborhood right now. Your neighbor picked them because they were cheaper than us. She's laughing at you because you paid us a lot more than she's paying. But you'll get the last laugh. Something will go wrong. It always does.

You get what you pay for.

No comments:

Post a Comment