Raji Kumar and Rama Kumar want to set up a home repairs and maintenance services company, Home Repair Shop. Through this company, they are looking at offering services such as electrical work, plumbing, carpentry and any other home-related contract work. The founders want to have a network of such trained people and offer this service to their prospective customers through their online platform. The founder siblings are providing the initial capital of Rs. 12 lakh to get the business started. This is their first entrepreneurial venture after working in the client servicing and marketing field for the last six and four years, respectively. Through this case study, we offer them some insight into the modus operandi of setting up this business.
Krishnan Ganesh, a postgraduate from the Indian Institute of Management, Kolkata, is a serial entrepreneur whose first brush with entrepreneurship was in 1990 at the age of 29. In the last 21 years, he has founded four companies (IT&T, a hardware maintenance company; Customer Asset, an international call centre and BPO; data analytics BPO firm Marketics; and TutorVista, an online tutoring firm) and successfully exited all four of them. He is currently a part of the founding team and a co-promoter of a few e-commerce ventures like BigBasket (perishable goods), Bluestone (Jewellery), Delyver (neighbourhood services delivery), BookAdda (books) and Mustseeindia (travel information). He shares his views on the modus operandi of setting up this business.
The founders can incorporate Home Repair shop as a private limited company as per the norm for setting up any professionally run business, keeping in mind potential capital infusion from investors or for raising bank financing at a later stage. The objective of the business is to provide easy and reliable access to high-quality skilled labour for routine home maintenance, primarily in Tier I cities. The important factors in this business are reliability and quality of workmanship – reliability in terms of timeliness of the service, availability of resources, safety and consistency, and quality from the perspective of output.
Getting a team on board
This is a highly execution driven business where a lot of attention needs to be given to micro details with the customer’s needs being met consistently. Hence, apart from the founders, the company needs to have highly competent people manning three important aspects of the business: operations with the onus on ensuring customer satisfaction; sales for customer acquisition and customer support or call centre management. The founders can get a strong core team on board by offering them a mix of equity and salary. Getting people with strong operational experience is important since this is a transactional business (as distinct from, say Internet portal businesses, wherein high tech founders can pull it off )
The modus operandi
Once the team is in place, the founders can do test marketing and get feedback about their service. But before that they must have clarity on their customer profile. Then, they can conduct a pilot study in a limited geography of a target Tier I city like Mumbai or Bengaluru. It can be conducted in an area densely populated by working professionals as they will be the ones willing to pay for time, convenience and reliability. During the pilot, the company should employ a limited, but full-time group of skilled force to ensure quality of service and genuine feedback. The pilot should be used to gauge the most popular service offerings (electrical, plumbing, carpentry), ratio between number of full-time and part-time workers, price points and peak-load timings.
These would serve as valuable inputs to tweak the service and identify key metrics required to monitor the business. The pilot will also help understand various issues ranging from operational challenges (scheduling, training and logistics) to managing skilled labour (customer interfacing skills, socio-cultural divides and so on). A pilot executed professionally, would itself become a launch pad for new markets through word of mouth and fodder for the media.
The pilot would also serve to validate the typical target customer segments, the pain points being addressed, the price range and other marketing mix variables before a full fledged roll out.
Handling the workforce
Considering the background of the workforce, the end-to-end delivery and service quality has to be managed by the company. This implies recruiting reliable and experienced workforce as full-time employees of the company with a provision for hiring part-timers for handling peak-time load. The workforce has to be trained and monitored by the company with incentives to keep them motivated so that attrition rates are kept low. This would require investing in a training school where all candidates, irrespective of number of years of experience, are put through a standard training and assessment programme in order to be absorbed into the company. And this will be one of the reasons for a consumer to pay a premium for the company’s services. Since there are no training schools for such workforce, the founders can create an industry standard themselves. It will attract employees and also give a certain mark of quality and professionalism for the service that is being offered. Apart from the core job, the training school can train them on soft skills – for instance, how to enter a customer’s home, deal with them, maintain cleanliness and maintain their tool kits.
There should be a well-defined feedback loop from the customer for various service touch points based on which the employee is incentivised, both monetarily and through non-monetary elements like badges and prices (like mobile phones).
Building the revenue model
The company can structure its revenue model and arrive at its pricing by looking at the current costs incurred by the customer for getting a service like this executed (should include cost of problem discovery + cost of time lost + cost of execution). Considering the one-stop solution offered by the company, use this input to arrive at a price point that keeps the service at an affordable, yet at a not-so-cheap level. The price points can be validated during the pilot mentioned. It is important to project the number of membership sales and service requests to be fulfilled to stay cash positive every month and structure the model accordingly.
The company can charge for its services either in the form of membership or on a per call basis. The membership plan (for three or six months etc.) would be a basic membership fee to become a part of the service and each call should entail a service fee. In addition to the membership fee, the minimum charge per call should be the service cost for one hour of service. All costs can be levied on an hourly basis at a flat rate irrespective of the type of work with additional billing only for actual hardware costs, if any.
The company has an option of working out a dynamic and flexible pricing model. A lot of work is based on the urgency of the service request they receive. For instance, if it is a working couple, then they would require the workforce during pre-office hours, post-office hours or over the weekend. Pricing can also depend on the urgency of work like a water leak or a locked door. So, the company can work out a differential pricing model, which is dynamic for such requests. At the same time, they should also recognise non-peak time work and offer discount to their customers. It gives a lot of flexibility for the company to schedule their work force in the most efficient manner.
Initially, the company will have to over staff. But how the company expands later depends on the traffic pattern. As the company grows, if they have good data analytics, then they can judge the request patterns well.
Marketing their services
The company should focus on low-cost direct marketing strategies such as handbill distribution in apartment complexes and residential colonies consistently to ensure recall and larger penetration. This should be done throughout the year to be effective and should be the primary strategy. They can also conduct workshops on home maintenance, related events built around similar themes within the apartment complexes and colonies to create brand awareness and to build a database of customers.
Additionally, they can focus on search engine optimisation and search engine marketing to drive traffic to the site through search engine discovery for specific keywords. The company can run referral schemes among existing customers with incentives such as reduced membership fees for referrals made. Another good way of marketing will be to ensure top-of-mind recall through media by publishing articles on home maintenance, tips and techniques to position the company as a thought leader.
Prepare for challenges
Working in an unorganised market like this, the company is likely to face multiple challenges, some of which include acute shortage of manpower willing to work full-time for the company, socio-cultural issues in managing and retaining them, lack of sensitivity of the resources towards customer satisfaction and interfacing roles resulting in delivery gaps, and scalability of the service across multiple cities owing to resource crunch. And it can counter this by investing in a pipeline to recruit and train fresh talent through its own training school to scale up the business.
This apart, the company is likely to face the risk that is applicable to any standard matchmaking market place, the risk of intermediation. The customers will directly interact with the workforce for future work contracts. However, in the long run, both the customer and the employee will realise the benefits of letting the company handle the work. The customer has the assurance of a reliable, good quality workforce entering their homes for such services with the onus of any issues lying with the company. The workforce will understand the job security and ongoing contracts that offer him assured income. The company should also adopt a zero tolerance policy and sack employees, who take up outside jobs.
More than competition, marketing their services will be a big challenge for the company and the customers paying the subscription for these services. The other big challenge will be how to increase the usage per customer – is there regular preventive maintenance tasks that cen be offered periodically on a scheduled basis rather than this being a break-fix maintenance solution
Once the company has settled down and has established itself in this space, it can consider expanding into other services like potential high-margin services including pest control, enter the corporate market through services such as maintenance, support staffing and security services. Finally, once it has a proof of concept in one part of a Tier I city with investments to be made by founders, the company can utilise the success of the concept to raise seed funding from angel investors. During the early stages of the business, funding can be done either by friends, family, own funds, angel or seed funds. Once the company establishes the proof of concept, then Series A funding is possible.
Things to remember:
- Objective of the business is to provide easy and reliable access to high-quality skilled labour for routine home maintenance, primarily in Tier I cities
- Have clarity on the customer profile
- Conduct a pilot study in a limited geography of a target Tier I city
- Recruit reliable and experienced workforce as full-time employees of the company with a provision for hiring part-timers for handling peak-time load
- Invest in a training school
- Work out a dynamic and flexible pricing model
- Focus on low-cost direct marketing strategies such as handbill distribution in apartment complexes and residential colonies consistently to ensure recall and larger penetration
- Focus on search engine optimisation and search engine marketing to drive traffic to the site through search engine discovery for specific keywords, once geographical expansion has been achieved
- Make the workforce understand that the company is offering him job security and assured income through ongoing contracts