SaaS Interviews with CEOs, Startups, Founders
Cleaning Marketplace Hits $1.2m ARR, Now Scaling with $35k Franchises
28 Jul 2021
Chapter 1: What is the main topic discussed in this episode?
Hey folks, my guest today is Neil Parak. He is building a tool called Made This, which is a cleaning franchise for vacation rentals. Neil, you ready to take us to the top?
Chapter 2: What is Made This and how does it serve vacation rentals?
I'm stoked. Let's do it, Nathan. Are you running one of these franchises or are you the creator of the brand and you sell franchisees the franchise?
Both. So I am the creator of the brand. I started this in 2013. I was working in tech venture capital for a few years before doing this kind of as a side hustle. So now I am running two corporate locations for this and we have two franchises as well. So we just started the franchise operations a few months ago.
Very cool. Okay, let's break into the business model, right? So what are you selling?
Cleaning services for vacation rental. So there is kind of a gap in the market where a lot of short-term rentals have popped up, Airbnb's, VRBO's, things like that. And they need a proper cleaning service, which could use a lot of tech, right? Typically, a lot of cleaners are not very tech savvy, but these vacation rentals have quick turnovers.
They need someone to be able to sync with their calendars, to automatically see when guests are checking out, to be able to report low supplies, damages, things like that. So we kind of help be the middleman between usually the low tech cleaners as well as the hosts, kind of automate the entire process for that. There's a marketplace model here. Exactly.
All right. Take me back to day one. Your first host that you connected to your first cleaners.
Yep. So it is what I'd call like a local marketplace model, right? Because we are a localized business. And this one part I want to clarify with vacation rentals, Airbnb, any local model reviews are so king, right? You can't just do like a... The biggest competitor is called Handy, which is like an Uber-type service for cleaning.
What we found is it can't really be like that for AirBs vacation rentals. That's why we're doing the franchise model, which is much more localized for that. Your question, Nathan, the first Airbnb host I connected, we started doing just residential cleaning.
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Chapter 3: How does the franchise model work for cleaning services?
Uh, cause that's, that's what I knew. I found out about this kind of on Reddit just as an idea. And I'm like, Hey, this guy's doing cleaning. I'll just do the same thing. And this is like a side hustle while I was working in BC. Um, so the first guy called me and said, Hey, do you guys do vacation rental cleaning?
By the way, there are people laughing and listening. Cause there's a lot of VCs that listen to analysts. They're listening and going, wait a second. I thought a side hustle was supposed to be like launching my own like software company. Your side hustle double down on this Reddit thread. I'm going to clean some houses here.
It's the most ridiculous thing if you think about it. From tech VC to cleaning company. That's exactly what I did. I mainly did it because I wanted to eventually leave and travel. I wanted some sort of side hustle to do then. It ended up becoming cleaning. I guess it could have been anything, but I'm very happy it was a local business. But yeah, it is kind of ridiculous when you say it out loud.
How much was that first job? What did you get paid? I think like a hundred bucks. We were undercharging like crazy. It was like barely anything. I was just stoked that we actually got something, right? Yeah. So someone called and said, hey, we need a cleaner for case rentals. I said, we don't do that. And then I looked into it more. No one else is doing it. High, high volume, right?
People are staying for three, four days at a time. So I realized how much more profitable it was than a regular residential. So I just started to curate it from there.
So now let's scale up to today. Let's look at last month's cohort data, right? So in July, how many houses did your marketplace help get cleaned? Probably about 600.
Wow. All in LA? LASF.
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Chapter 4: What challenges did the founder face when starting the business?
So that's where the corporate locations, even more if you count the franchise locations.
Okay. Interesting. And how many cleaners did you give work to? How many did it take to clean the 600? Sure. Probably about 20 to 25. Okay. Interesting. And are those 25 cleaners, are they on your payroll as fixed expenses or are they hired as needed based off the marketplace demand?
Good question. As needed. So they are independent contractors. Many of them have their own clients. However, our service does like a pretty heavy vetting process, five steps to interview them in person, everything to make sure they're fully vetted and they're reliable because Airbnb hosts need reliability above everything.
So they're vetted, they're on our system, we know them, and then we refer them at work, match them with clients, make sure things are smooth. And what is the average cleaning job cost, the homeowner? Sure. Anywhere between $125,000 to $150,000, I'd say on average. Some four bedrooms in LA are going to be like $300, right?
If it's just a mansion, some studios might be less, but let's say around $140,000 would probably be about the average.
So can I take like $140,000, $150,000 times a 600 homes, and that's about what, $90,000 in marketplace revenue last month?
Yeah. And look, there's fluctuations, right? Because many homes are going to be cleaned more often, right? Some are going to clean a lot less. So at least that amount is what you'd be looking at.
Well, I guess it was probably way higher than that. If you had 600 homes, but they booked for two weekends in July, you just doubled your numbers. Exactly. What was actual marketplace volume last month?
It'd probably be north of 100. The reason is right now would be I'm slightly slower with travel and everything. I mean, oftentimes people are staying for longer stays, not as much weekend hopping. It just depends on the season. Sometimes they're crazy busy doing so many turns. Some hosts are only there, like they're gone for summer and then they're back, right?
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Chapter 5: How many cleaning jobs does the marketplace handle monthly?
We have Denver, we have Myrtle Beach, and especially we had more and more franchise units. That's going to grow with themselves, right? And those franchisors will be able to make money themselves, hopefully copying our economics, right? We're going to show them the model, help them do it. And then that just scales with it.
I see. So the 100 grand a month you're doing right now, that's across two locations in LA and San Francisco. Yep. That's it. I see. Okay. Let's now go into the franchise model. So who did you sell it to in Denver and Myrtle Beach and what do they pay you?
Sure. So the franchise model, we charge $35,000 for the initial fee. And then we charge up 6% royalty is the amount that's charged for the ongoing fee. And there's other minor fees like tech fees, marketing fees, which kind of just are cost covers basically. Okay. So, yeah, that's the amount we charge. And then, you know, we just guide them and help them to get set up and grow from there.
And you've sold two so far. Two so far. So we launched at the very end of 2020. So been about six to seven months since launch.
And how much did those two locations combined do in project volume or cleaning volume in July?
Yeah, it'll be lower because they're just getting set up. Denver is up and running already. Myrtle Beach is just getting set up. So Myrtle Beach would be at zero right now because they're still in the setup phase.
Yeah.
Interesting. Interesting model. So most times when you're buying a franchise, the ones that you pay the most for are the ones that are coming with a proprietary system that you've built.
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Chapter 6: How does the marketplace ensure reliable cleaners?
Or you're helping them get like a leapfrog start that they couldn't get by themselves. So when I pay you $35,000 and I want to bring your service to Austin, Texas, what sort of systems are you giving me that you feel like are totally worth a $35,000 fee?
Yeah, sure. Honestly, I see this time collapsing. I've spent hundreds of thousands of dollars in mistakes. Simple things is like setting up a one-hour arrival window. It sounds stupid. It sounds so simple. Why do you have an exact time that they can arrive versus a one-hour arrival window? That takes a lot of testing to get to.
And that's one of a thousand things that we've tested to optimize what we're doing. It's also done in a completely remote way. So we teach you how to find remote labor, how to Pay them. It's almost like, let's say you could have a coach, but also you literally copy the business model and we set up all the tech stuff for you.
So I would say it's a lot of you're buying the systems, which will speed up what you're doing. Now, let's talk about the cost. If I could speed up what you're doing by two years, if I spent what I was doing by two years, I'm doing $100,000 per month run rate. How much is that in profit that I would have saved or gotten myself if I just paid someone for that speed?
So a lot of it is, hey, guardrails, we'll make sure you don't mess up. Make sure you don't make the same mistakes I did.
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Chapter 7: What is the average cost of cleaning jobs for homeowners?
It saves you a lot of time, headache, money. And then the second part is I think you'd be able to accelerate much faster. Lastly, there's just the brand effect, right? Is like we could start going after large partnerships. We could eventually go after Airbnb and say, hey, we're in X number of locations. Send us leads immediately, directly, right?
So I think there's a lot of economies of scale, both with partnerships as well as stuff like simple stuff you want to think about, Typeform. If you're an individual company, you have to buy your own Typeform. Of course, as a large brand, you could just piggyback off of our system. So there's just huge cost savings, which you don't even think about by not having to do all these little things.
I was hoping what you're going to dive into was addressing this question, which is Zapier and tools like Zapier right now, the valuations in the marketplace and SaaS, we're off to the freaking roof right now.
Have you figured out a way to actually templatize all of the hundreds of Zaps you've sent up to make your system run and actually white label that and copy that for your Denver franchise owner, your Myrtle Beach franchise owner, or do they have to set that all up themselves?
No, we do that for them. That is the proprietary information. That's the IP right there, right? Yeah, exactly. It's not our software, but everything we've created is like using Zaps and to talk to ActiveCampaign to sync to the booking software we use, which is completely customized to link to our website, which we completely customized.
So there's customization involved, which is extremely hard and expensive to copy. I spent $20,000 just on doing the UI testing for our booking forms.
How much of your money have you put into this?
Initially, to be honest, it was like $1,000 to get started and then started rolling more and more of the profits back into it. So for the franchise operations, I probably put $200,000 in to get that set up. Interesting.
Are you paying yourself yet or no?
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