The purpose of this post is to drop some insight on a business model you probably overlook everyday.
It’s generates a lot of money and has stood the test of time.
In this 5,000+ word guide, I break down how to get started. Deep dive into the good, bad, & “ugly”. Then lastly, how you can use a business like this to fund other projects or investments.
If you’ve been itching to get started in business but haven’t found that one idea yet, try this model. You will make money. How much or how little is completely up to you. Enjoy!
Table of Contents
What’s An Ugly Local Service Business?
The Business Model
Hiring Amazing Cleaners
Traffic sources ranked
What Happens Next… Execution The Good & The Bad
Create SOPs & a Company Handbook
Subcontractors vs Employees
30 Day Launch Guide
Making This Your Ugly Cash Cow
Success Stories That Will Inspire You
What’s An Ugly Local Service Business?
You may be thinking “what’s an ugly business?”. It’s a local service business that provides great value to a community but isn’t “internet sexy”, so it’s often overlooked.
Many of these businesses have been around for centuries.
Lawn service, cleaning service, pressure washing, window cleaning, plumbing, heating, ventilation, and air conditioning just to name a few.
Every community has them and they make bank.
They will always make money despite what time period they are in. They are in every neighborhood and there is a 9/10 chance you passed one on your way to Starbucks this morning.
People are naturally lazy and lack many skills outside of the ones they need to survive.
Ask someone to clean their own house who has never cleaned before, the house will not be cleaned. Ask someone to fix a clogged toilet, there is a high chance that they will make it worse.
The service business is very old but very profitable with new technology. There is a huge opportunity with service based businesses because none of the owners know how to market.
Go to Google and search any of the service businesses I mentioned above.
Try lawn care + [your city]. You will see a number of business come up in the search results. Go to all their websites. You will notice that most of them are horrible. Mainly because the owners come from a time when you didn’t need a nice website to get business. And many of them they still don’t.
They are known in their city or town. Get a lot of referrals and don’t know how to use the internet. They never had to use it and most old dogs don’t want to learn new tricks.
If you read the Millionaire Next Door they talk about American wealth at a time that was pre internet. A lot of the millionaire in small town own local service based businesses.
Some plumbers charge $45-$150 an hour for a job. How many hours and job would it take to make a million bucks a year?
Starting to understand what I am saying?
Imagine if they provide excellent service, got referrals, but also did excellent online marketing and had a predictable flow of customers come in?
Shit, imagine if they just built an email list and send promos out once a month.
The Business Model
I learned about a business model a while ago that really captured my attention. I first noticed it in MJ DeMarco’s Millionaire Fastlane. He started a company called Limos.com. They basically sold leads & advertising. He got it to six figures a month and sold it twice.
I saw the model again a couple years ago when I launched a subscription box company. People were launching these local service businesses. Getting jobs and subcontracting them out to licensed professionals and splitting the revenue.
- Do marketing to get jobs.
- Customers book with me, and I subcontract the job out to a cleaner.
- I take 40% they take 60%.
Run it from anywhere with a internet connection.
My type of business.
A lot of real estate developers do this when they get big jobs. They subcontract jobs out. Flooring, plumbing, clean up etc.
If a job is $250, you would get $100 and the subcontractor would get $150 bucks. You spend $20 getting customer. So you just netted $80 and didn’t do any work plus just got a customer.
So if you get one job per day valued at $250 and do a 40/60 split with a subcontractor, you make $3,000 at the end of the month. 2 jobs a day, $6,000. 3 a day, $9,000 and so on. The only limitation you have is the number of subcontractors you have who can fulfill the jobs.
You need to make sure that you are charging higher prices so you make a great margins. To charge premium prices you have to hire the best people to work with you and pay them well. If they are making $100 for a 3 hour job, they should be making $150 with you after you take out your cut.
How do you offer a premium service?
Go to Yelp & Google reviews and look at everything that makes the a businesses amazing. Then look at everything that makes a business suck. Those 2 star reviews and those 4-5 star reviews will tell you a lot.
Maybe you can improve on professionalism, arriving on time. Maybe certain things are missed during a job. If you can improve on these things then you get ahead of the curve.
Providing value and getting paid. All people care about is the result they paid for. If you promise 5 star rated service, but deliver 5.5 star rated service, they will refer you, leave reviews, and come back to you.
“Eugene how do you know about this?”
Well, I have a local service business that I own and operate. It’s a cleaning business. I get jobs and subcontract them out to local cleaners in the city. I will dive into this business more in a future post.
I focus on hiring excellent cleaners and paying them well. Next is providing an excellent customer experience. Everything else is secondary. The secondary items are branding, customer acquisition, and SEO.
Hiring Amazing Cleaners
Most would say “product & service should be first”. When you subcontract, your contractors are everything. Without them the product is non existent. Every person I know in this business says “ALWAYS BE HIRING”. They are the lifeblood to the business.
Seriously… this is the hardest part of ugly local service businesses.
You get amazing cleaners by being super strict when you are you doing hiring. This means having a number of elimination triggers.
An elimination trigger is an action that should be taken or not taken. It is small but is a tell sign of someone’s behavior. If they trigger this, they are eliminated.
Think of a bank teller who sees someone drop a dollar and then goes behind them to pick it up. Would you hire them at your bank? Probably not.
For example, I have people apply to be a subcontractor on Facebook or Indeed. After they apply they are sent to our hiring page where they have to fill out a super long and detailed application.
They are asked a bunch of closed and open ended questions.
We ask them about work history, times they had to make tough decisions, and so on.
Out of 100 people who apply on Facebook & Indeed, only 10-15 will actually answer all the questions. Half of those who answer set off the triggers mentioned above. They don’t want to do a background test. They answer in a short paragraph when asked for a bulleted list of how they would clean a trashed kitchen. Then 1/2 of those people actually schedule a call with us.
People don’t like to work. Majority are not dependable. So you have to be extremely, extremely diligent.
I think about what would make my wife or mother in law happy. They are my ideal customers and are extremely critical with businesses. If the customer service is off they won’t even continue a conversation. So these are the things I focus on for customer experience.
Convenience & Minimal Friction – A good customer experience means convenience. They should be able to schedule online without talking to anyone. It should be that easy. Be the Uber or Amazon of your niche.
How do you this? Software & flat rate pricing
Flat rate pricing: Transparent pricing. Most ugly businesses make you email them, talk to someone for 10 minutes then schedule a site visit, then give you a price they make up. Remove this. Make it easy.
Want you front yard cut? $100 flat.
Have a 1 bed 1 bathroom home you want cleaned? $120 flat.
This saves you headaches and makes it easier for the customer.
Software: Launch27 is an amazing software that does the following:
- Online payments
- Instant quotes
- Real time availability
- Multiple ways to offer pricing
- Reduce no shows
- Get feedback after each job
- Scheduling for your team
This software is the backbone of my cleaning business.
B. Excellent Customer Service – They should be able to talk with a human if they are unclear on something. Sounds counterintuitive but think about how happy you would be if you went to a website that was super easy to navigate but you were unclear on just one thing.
If you could talk or chat with someone who answered your questions and helped you book if you needed, that would be great wouldn’t it?
They should also get quick responses. We aim to contact them same day.
C. 5.5/5 Product – This happens as soon as the customer books. When the subcontractor comes to the customer’s home they want EVERYTHING they were promised and more.
We use a checklist to make sure nothing is missed. And we send out reminders to cleaners and customers so there is no miscommunication.
When you are doing a service, the minimum is to do 100% on the job. To go above and beyond, little things can take you over the top. Small, extra touches they were expecting. A discount on their next cleaning, calling them to thank them. This all pays and adds to the product.
These are by no means unimportant. Just on a graded scale, these would be the the As while the primaries are the A+s. People try to make these the primary then try to figure out the service and product part later.
Make the product/service the best you can and these will be easy.
Brand is essential to scaling your business. Colors, messaging, tone, all let the customer know who they are dealing with. When you hear certain names you think things.
Nike = Quality sports gear
Lululemon = Luxury Sports gear
Apple = Quality personal computing
Amazon = Fast shipping, low priced products
Netflix = Convenient on demand content
Louis Vutton = Luxury, high end fashion
So what is your brand going to be? Cheap, expensive, funny, serious?
My local service business is branded as a premium service. So we want to appeal to those who see the value in getting their homes cleaned. They make enough to afford an expensive cleaning service. Most importantly they value their own time enough to spend money to get their time back.
How are you acquiring customers. This is very important because it will drastically influence your profit margins and what you can do as far as scaling.
You don’t pay for marketing. Posting on social media, contacting your friends and family. Getting referrals. People coming across you.
This is great if you are just starting. Organic methods usually take a lot longer to scale. Organic acquisition is great once you have a defined brand and social proof.
Paying to run ads that drive leads. The fastest way to scale your business.
All the people I know in this industry crushing it are focused on paid acquisition. Mostly SEO and Google ads for local service businesses. Facebook ads are also common if you can get the market, media, message match correct.
Best investment you can make in local. All the people I know crushing it have great search engine optimization. You search a service they offer in their city, they come up on page one. They have good reviews and visibility.
Good reviews + branding + visibility + amazing service = Bank
SEO takes a while to kick into action but once it does, you will automatically see an increase in traffic, leads, and sales.
You pay Google to show up on page one, essentially skipping the SEO. You only pay when someone clicks.
If you can close these leads and get a positive return on investment this is like printing money.
Good SEO + Google Ads = All the traffic you will need.
A great service because so many people trust them. My wife checks Google reviews and Yelp reviews before we do anything. Yelp will block a lot of your reviews but if you get enough good reviews you will get a lot of quality leads.
You have to pay $5 a post. Quality of leads are iffy. I’ve gotten some horrible customers from CL. But some people are hip and have grown up on CL to find local services.
So you just have to vet them.
Other services. Home Advisor, Thumbtack, Next Door, Angies List.
Here is chart for you visual learners
Traffic Sources Ranked
What Happens Next… Execution The Good & The Bad
The things that go wrong
I have been doing this for almost a full year and can tell you that it isn’t as easy as it seems. There is a lot that goes on and a lot can go wrong.
If you hire the best people, then you can lower the chance of fuck ups happening. I’ll paint the picture below so you get a real idea of what happens.
Fuck ups on the subcontractor’s side
They will be late
This happens a lot. A good cleaner knows that there is traffic and will let you or the client know. People are usually cool with this if you give them a heads up. Don’t call 5 minutes before the scheduled time and say you will be late. That will piss people off. You can create a work around by doing arrival windows. People select a 1-2 hour window for the cleaner to arrive during. As long as you communicate why you use a window, people are cool with it.
They may not show up at all
Rarely happens but this is something that can happen if you don’t check in with you cleaners and send them reminders. I send reminder the night before and the day of via email and text.
They show up late/on time and do a decent job
Happens in the beginning if the cleaner has a certain way they clean vs what you promise your client. You have to let the subcontractor know what is included and not included. Let them know what the client expects and make sure you share a checklist.
They show up late/on time and do a horrible job
This means you partnered with the wrong subcontractor. Let them know it won’t work out. Work with someone else.
They show up late/on time and break or damage the client’s property
This happens. Hasn’t happened to me yet but I am sure it will happen. In this case you want to have general liability insurance as a business. You also want your cleaners to carry their own liability insurance. Usually they will file a claim and things get taken care of.
You can 100% guarantee one of the above will happen, so be prepared.
You will panic and get nervous. But know that you will get harden with this.
At the time I am writing this, one of my sub had an issue. One of their new workers arrived at job we assigned them and started cleaning. The booked job was a 3/2 standard clean. Turns out the house was in horrible condition and needed a deep clean. She was there for 5+ hours and had to leave to get her kids. She didn’t call her boss who usually would call me so I can increase the price. So I couldn’t raise the price because she already started cleaning and she had to leave early. On top of that the customer wasn’t contacted. So imagine the anxiety I had.
So what is the bright side?
You can set preventive measures for each instance. If something happens multiple times, you need to fix it. In service businesses, reminders & better communication usually eliminate most of the issues listed above. Many can be prevented by screening and partnering with the best cleaners.
You run into a weird situation that you think would never happen but it does make sure to address it on a frequently asked questions page on your website.
Create SOPs & A Company Handbook
Standard Operating Procedures SOPs are essential to any business.
SOPs break down everything step by step in text, image, and/or video format. The idea is that you should be able to give anyone an SOP and they would be able to complete the task without problem. You and your team don’t panic because everything is documented.
What I like to do is create a SUPER detailed step by step videos that walk the viewer through accomplishing the task step by step. I talk extremely slow and clear. You would think something is a little off with me but I learned that people would rather listen to you speak slow and clear vs fast and all over the place.
I use a screen recorder program like screen flow. This is a paid software. I also use Apple’s Quick Time screen recorder on the Mac. It’s free and works great. Plus the rendering time is very short since it exports as a .mov file native to Mac’s OS. You can upload the recording to Youtube or Wistia and link them in a document.
Videyard is another option. It’s an online record that allows you record via a Google Chrome extension. Once you are done you get the option to upload directly to Youtube or can opt to get a Vidyard link and just send or link that. You are notified when someone views you video also.
After I record the videos I add the SOPs to a my company handbook. This created in Google docs.
The handbook is detailed and large. I allow the readers view only. There is a table of contents so they can quickly jump to the issue they are having. When they jump to a section they get a quick overview of why the issues probably happens and a link to the SOP video.
Subcontractors vs Employees
So which do you use? Do you hire employees and pay them hourly to get more profit?
3 hour clean for a house you charge 200 for. You pay the cleaner $45 for their time. You pocket the $155.
Or do you partner with a cleaner and subcontractor jobs out? You get less profit. 200 for the house. You get 40% ($80) and they get 60% ($120)? At first glance you want the money. So I’ll give you the pros and cons of each.
Note = I am bias to subcontractors for a couple reasons that I will state below. I hate employees unless they are in a creative role where they can manage themselves.
1. Your way or the highway
You can train your employees the way you want. Have something you think will make your business 3x better? You can implement it immediately. You are the boss and they have to listen to you or they are out of there.
2. You pay them what you want
You are paying them for their time and labor so you get more money from each job you book.
If you are using subcontractors you have to follow VERY specific guidelines that must be followed so they are not classified as employees.
1. Turn over
Because you are not paying 25-35 an hours many employees of cleaning companies are quick to leave if they find another job that pays more or has more pleasant conditions. They are cleaning up after people and not getting paying much.
2. Lack of motivation
Unless you have great incentives and bonus structures set up, it is hard to keep an employee motivated. In any job. I have seen employee just leave a job and make up an excuse. They blatantly lie about things or just call out the day of a clean. It can really mess things up for you
3. You pay more than you think
When you have a cleaning company with employee you have a lot of expenses. You have to get worker comp. There are taxes that you may not think about. You have to get them insured.
1. Know the legal side first
You legally can’t tell them what to do, wear, how to clean and even more. You can recommend things but you can’t treat them as an employee. Because if you do the IRS will want that money from you. So this makes it extremely difficult when figuring out how to act and what to say. You have to do your research. California for example is CRAZY about this.
2. Dealing with their employees.
I told you that employees suck. So when you subcontractor has employees that don’t care it will affect your business.
3. Stealing clients.
Employees really don’t have the motivation to steal clients or go out on their own and do their own thing. Working with a subcontractor can be iffy. Hence the triggers convo earlier. If they show any signs of not being a good person, I wouldn’t work them. If someone seems good, I would have them sign a non compete just in case.
4. Turn overs
The turn over here is lower than employees from what I hear. But it still happens. I have stopped working with almost 8 cleaners in the past year. Not because of bad blood but because of moving, family issues, or not wanting to clean anymore.
1. They are the professionals
If you get a good subcontractor who is an owner & cleaner who just started their business but has experience, they are rockstars. Given that you did the screening and interviewing right, these are the best. Minimal follow ups needed and know that their success and growth depend on their ability to do great job.
2. You can be remote
Right now as I am writing this post I am with my wife visiting Medellin, Columbia and the business is still working. We actually have a 3 cleanings going on now. Because you don’t have to manage employees or check their work, you don’t have to be local in your local business.
3. Easy to scale
Like I said I am bias. The subcontractors I work with are amazing. No issues, or attitudes, and do good work. I treat them with the utmost respect because I know they are the lifeblood to my business. They aren’t your minions, they are people with a skill you need to run a business. You are partnering with them so again, respect them.
Even when an issue happens I make sure to put the customer first, but I know that 9/10 times the subcontractor didn’t miss something on purpose. They want to make money and keep a full schedule.
30 Day Launch Guide
If you have gotten this far then I’ll give you a 30 launch guide.
- Day 1: Figure out what you want to do. What industry do you want to be in? What brand do you want? I used the One Page Business Plan to do this
- Day 2: Look at the competition on Google & Yelp. How many competitors and what do the reviews say? Where can you improve?
- Day 3: Map out pricing & service
- Day 4 – 12: Buy domain, start building website. Use a pre-made theme from Theme Street. Great themes that you can install and edit right out the box. Use Launch 27 to handle booking/checkout. Set up your calling referral number with Twilio or Line2.
- Day 12 – 20: Start hiring cleaners. Post on Indeed & Craigslist & Interview them.
- Day 21: Set up your profiles. Social media, Google My Business profile, Yelp, Thumbtack, etc.
- Day 22: Review branding & website. Do you have text, pictures, focus on benefits vs features.
- Day 23: Start reaching out to friends & family letting them know about your business. You want to offer them a free or discounted cleaning in exchange for a review/feedback. Schedule cleanings for a week out so you can ensure everything is in order.
- Day 24: On boarding cleaners.
- Day 25-28: Do the legal stuff. Set up your LLC, get insured.
- Day 29: Rest
- Day 30: Launch. You should have a couple cleaning & reviews under your belt. Start posting on Craigslist, Facebook Groups, & bidding on Thumbtack.
This isn’t a business you can just sit back and let the money flow in and live a 4 hour work week. So here is the nitty and gritty of the day to day operations.
For purposes of this example let’s say you have 2 jobs a day.
Working the phones – With local service businesses people will call you. It’s shifting but a lot of people who own homes are a little older and want to get on the phone. So you need a phone system. Line2 or Twilio works.
With local service businesses people will call you. It’s shifting but a lot of people who own homes are a little older and want to get on the phone. So you need a phone system. Line2 or Twilio works.
Confirming & Scheduling Jobs – When jobs come in you need to check the cleaner’s schedules and make sure you can take the jobs. Once you confirm with the cleaners, you need to schedule.
Sending out reminders and completing jobs – You need to send out text and email reminders to the cleaners and the customers. Make sure the cleaners get there on time and be available to support them in case anything happens
Putting out fires – Solving any fuck ups that happens.
Collecting money – We put holds on cards for jobs happening the next day & we charge cards nightly to get paid for the jobs completed that day. We put holds on cards to ensure that we get paid and the client has money. Hotels and rental places do this. If a hold doesn’t go through we tell customers they need to update card info or we won’t be able to send out the cleaner the following day.
Marketing – Checking and launch new ads. Pretty simple.
There are other things you will need to do daily but those vary based on the industry and your work style.
Best way to do this is to do it yourself first then hire someone who can follow your SOPs and certain tasks.
Making This Your Ugly Cash Cow
Before you continue reading, take a couple minutes to write down what your goals are.
Here are a couple things to consider.
How much revenue you want to make a month. How much profit?
How many jobs do you need a month, a week, a day, to hit your revenue & profit goals?
What is your motivation behind starting a local service business?
What do you ultimately want to do with the business? Do you want to sell it? Keep it in the family? Expand to more cities?
Do you want to use this business to fund other projects?
My plan is to dominate my local market then expand into other niches that are local service based.
If you have a customer list of 2,500 who spend money on cleaning their homes, what else can you sell them? Pressure washing, landscaping, plumbing, handyman, moving, small odds and ends? You can 5x your revenue & profit just by offering more to an existing customer base.
My plan is to cash cash flow this business into real-estate projects. Commercial leasing & multi family units. Banks love when you have a profitable established business.
If I get an offer to sell I will if the price is right. If not the business will remain in the family and cash flow for life.
Success Stories That Will Inspire You
Here are some other examples of entrepreneurs who started ugly businesses. Some have used their ugly businesses to finance other businesses:
Maid 2 Clean
All of these cleaning businesses do a million plus a year.
Check out these case studies below. Warning, you will go down a rabbit hole.
Another entrepreneur I follow is Jawad Dashi. He is a beast of an entrepreneur. He started with a plumbing company. Got it to 1 million a year and then got into Real Estate. Currently is doing 50k plus in rents with only 10k in mortgages and HOA fees. #GOALS you could live on that for life or invest into other projects.
Strange Music CEO Travis O’Guin – This is Tech N9ne’s business partner. He ran a furniture business. 32 locations in 18 states. He started the business when he was 17 and developed it into a monster. He then took the profits and started investing into other projects like Realestate.
Then he got into Urban apparel when brands like Karl Kani & Fubu were big. Then he met Tech N9ne and told him “You focus on the music, I will focus on the merch”. His knowledge in the furniture business lead him understand warehouse systems and inventory. So merch was easy for him. You will notice that Tech N9ne is on Forbes list every year for independent artists.
These businesses don’t look so ugly now do they?
If you are looking to get started in the local service industry here are some resources to use.
- Launch 27 – A software for automating payment, quotes, scheduling. Worth every dime. You could have a one page website and get sales with this alone.
- Stripe – Payment processor to get paid
- Themeforest – if you want to build the website yourself
- Line2 – For your business phones and text messaging
- Checkr – For background checks
- Google Ads Course – If you want to learn how to run google ads
- Local Case Study Subreddit – Created by the guy who created Launch27 and Maids In Black. A great sub reddit where people share their journeys with their ugly local businesses.
- Rocket Lawyer / Legal Zoom – You get your business officially set up
- Insureon – To get your general liability insurance
- CashApp / Paypal – To pay your subcontractors
Get started. Getting started shouldn’t take you longer than 1 month. If you are taking longer than 1 month, then you are just fucking around and making excuses.
If you need help getting going then tweet me with your questions and I’ll help you out to the best of my ability.
Tweet me a #BOOM when you get your first sale.
I hope this post opened your mind to other possibilities out there with business. If enough people request it, I will start a series on my local service business where I chronicle it’s progress.
Keep it funky