Should I Start a Freelance Business or Build an Agency?
A service business is one of the fastest side hustles to get off the ground, and you can scale it by hiring other people to deliver the work.
But is there an advantage to staying a solo operator?
In this Side Hustle Showdown we’re looking at freelancing vs. building an agency.
For this debate, I invited a couple members of The Side Hustle Nation community who both run cleaning companies:
- Chris Schwab from ThinkMaids.com represented the agency side. We last heard from Chris in episode 294, where he talked about how he’d built his cleaning business to $60k a month in revenue, and scaled back his own involvement to just 10 minutes a day.
- Ken Carfango from SoloCleaningSchool.com represented the solo freelance side. Ken’s a former engineer and a father of 5 who’s got his cleaning business dialed in where he can knock out the work himself in just a couple days, and enjoy 5-day weekends with his family.
Tune in to hear both Chris and Ken discuss which business model is best for:
- Getting started
- Finding new clients
- Start-up costs
- How to exit
- And more
If you’re trying to decide which path you want to take, stick around to learn how to avoid the dreaded “valley of despair” that often afflicts service businesses, and how to get started on the right foot.
Related: The Freelance Skills that are Most In-Demand ($20-150/hr)
Table of Contents
Round 1 – Getting Started With Freelance Business vs. Building an Agency
Starting a Cleaning Business
“We were just looking for some different options. The engineering field was just not the environment that we wanted to be in…I saw great flexibility in the side hustle of a cleaning company,” Ken told me.
It was actually Ken’s wife that started the company. They both were doing the work at first, then in 2005-2006, his wife stepped back to be a stay-at-home mom.
They ended up selling that business to relocate, and started a new cleaning business in their new town.
Starting a Cleaning Agency
It was just before his final semester at college when Chris started brainstorming what line of work he wanted to do after college.
His options were limited because he knew he wanted to travel the world, and he was in an international relationship.
“I knew I had to have some sort of job that would allow me to work remotely,” Chris told me.
The two options he was interested in were web development, and starting a business. Not wanting to have a boss or be a freelancer, Chris leaned towards starting his own company.
He read some stories on Reddit about people starting local cleaning companies, so figured he put $500-$700 aside over summer to try this himself.
Chris said he saw a huge opportunity in this business model as “a lot of local companies were not marketing really well,” he said.
Related: The Sweaty Startup: How to Start a Local Service Business
He knew he could market his company well, he just needed to bring on some contractors to do the cleaning.
Getting Your First Customers as a Solo Cleaning Business
Ken’s first job came from the apartment complex he was living in at the time. His wife was talking to the property manager. He said he had a problem with the cleaners, and asked if she wanted to help out.
“I don’t clean,” she said. “My husband does though.” She called Ken, and he started cleaning apartments in his complex.
That same property manager connected Ken to a real estate agent, which got him into a preferred vendor network and access to 500 property agents in his area.
For the first year, Ken was rushing all over town cleaning for all those property agents. Many of these jobs were when someone was moving in or out of an apartment.
One-time jobs turned into recurring jobs, and over time he built up a network of clients that sent a lot of business his way.
How to Find Cleaning Jobs Today
Ken recommended setting up a Google My Business page. It’s free and helps local businesses get found in the search results.
He also recommended connecting with people in Facebook Groups and said this has been an effective way he’s found new clients.
“Find the people you want to serve, find out where they hang out, and go hang out there,” Ken said.
Related: The OPA Plan: How to Borrow Other People’s Audiences to Explode Your Sales, with Joshua Lisec
Getting Your First Customers as a Cleaning Agency
Chris said he found his first customers through a combination of Craigslist and Thumbtack.
(He doesn’t recommend using Thumbtack today, but back then it was a great way to find local clients and he used it to find hundreds of jobs in his first year.)
The two main ways Chris is finding customers today are:
- Google My Business – he agrees with Ken that Google My Business is the most important tool for finding new clients. Chris recommends putting time into creating a strong Google My Business profile and getting a lot of reviews.
- Local Service Ads – These are different from Google ads. Chris said he prefers them as he gets a consistent price per call and good quality leads.
If you can convert your one-time cleans into recurring customers, that’s more powerful than any form of marketing. “You have to build, early on, a very strong client retention system,” Chris explained.
Outside of these two channels, he’s also had some success with Facebook ads, mostly around holiday periods.
Round 2 – Start-up Costs and Growing the Business
Start-up Costs for a Cleaning Business
“Cleaning is probably one of the most inexpensive businesses that you can start on the planet,” Ken told me.
You’re not required to get insurance, but it helps with the trust factor. If you do, it costs around $400-$1,000 per year to get 2 million dollars of general liability insurance.
The rest of the start-up costs is the equipment to do the cleaning and a vehicle to get around.
“For $1000 or less, you’re up and running, and you can make that back in a few jobs,” Ken said.
Start-up Costs for a Cleaning Agency
As Chirs mentioned earlier, he put aside $500-$700 to start his business. He spent that in the first week setting up his website and paying for company insurance.
In the first month, he spent a total of $1,200. This included paying teams for some trial cleans (on his own apartment) and some marketing spend.
He ended up making around $2,200 in the first month and just about broke even after paying his contractors.
What Is the Ceiling for Working as a Solo Cleaner?
The main difference between working as a solo cleaner and operating as an agency is the inability to scale.
No matter how efficient he gets, there are only so many hours in a day or a week Ken can work.
Starting out, Ken recommended taking on any work you can get to build up your client base. Then you can start working on increasing your rates and becoming more efficient.
With Ken’s previous business, he was able to stack up all his jobs on two days a week. He ended up earning $50,000-$60,000 a year, and as much as $100 an hour.
He’s currently optimizing his new business and intends to work 3 days a week and hopes to hit $100,000 a year in revenue.
What Is the Ceiling for a Cleaning Agency?
Scaling up is the differentiator when comparing these two businesses.
Chris’ agency grew from $0-$20k a month in revenue in 90 days. But wearing all the hats and juggling all the tasks within the business quickly became hard to manage.
One Halloween, Chris had to cancel several cleaning jobs at the last minute. He forgot to check if his cleaning teams would want time off and booked them all into work — only to find out they had other plans.
This caused him a huge headache and made him realize he needed help managing his business.
He decided to hire a couple of VAs as office managers, which have worked out really well. Over time, he’s trained them to handle more tasks within his business and has slowly removed himself from the day-to-day running.
His VAs are paid to be available all day, but track their time and are paid for every minute they’re carrying out tasks.
(If you have a local service business, check out Chris’ side-side project, InoVALocal.com, which specializes in this exact type of support.)
Chris has also outsourced other areas of his business, such as sales and marketing. He tried various ways of doing this, but what found that hiring an expert in each field was the most effective.
Chris then negotiates a similar pay structure as he’s using with his VAs. He pays his team a higher hourly rate than he would if they were full-time, but only pays them for the minutes they are working.
Freelance vs. Agency: Time Required to Operate
Time Required to Run a Cleaning Agency
“I spend about 5-10 minutes a day on my cleaning business,” Chris told me.
He said a lot of people find this hard to believe as there are so many moving parts to his business. But this is the power of having an agency style business and putting all the key people in place to manage different aspects of the business.
The only thing Chris needs to do within his business nowadays is check-in each day — and he said he’s even bad at that sometimes!
Time Required to Run a Cleaning Business
Ken pointed out that a lot of small business owners go about growing their business the wrong way. Even as a solo freelancer, he’s been able to grow and scale his business through using good processes.
“You’re supposed to lead with systems and let the growth fill in,” Ken told me.
Cleaning is only one of the businesses Ken manages now. He also teaches people how to start their own cleaning businesses (SoloCleaningSchool.com) and has built up a community around that.
Working 5-10 minutes a day like Chris sounds good to Ken, but he didn’t want to go down that route. He’s happy working 2-3 days a week and providing enough money to support his family — as most people would be.
He said anyone starting out should choose to either:
- Go small and optimize and find your perfect business, or
- Go big and do it right
But don’t get stuck in the middle.
Round 3 – Profit Margins, Risks, and Selling a Business
Target Margins for a Cleaning Agency
Profit margins for an agency are going to be a lot lower than working for yourself because you’re paying everyone to do the work for you.
You’re going to need a lot more clients to turn over the same profit as a solo cleaner.
In the cleaning industry, “you want to aim for between 8%-30% profit,” Chris told me.
His own profit margin is working out between 12%-14% currently.
In comparison, on the freelance side, almost all of your revenue is profit, since you’re doing the work yourself.
Risks Involved in Running an Agency
There are some risks involved in running an agency, and Chris has had a few “tests” from customers.
He said some customers leave money out to see if the cleaners will take it. He’s also had an incident where a customer damaged some of their own furniture and tried to blame it on his cleaners.
Chris suggested your cleaning teams take before-and-after photos of the homes, to cover yourself against any cases that involve your word against the customer’s.
He’s also had a case where one of his cleaning teams went on to form their own business, while keeping all the client’s Chris had built up for them.
Freelance vs. Agency Exit Strategies
Selling a Cleaning Business
Ken sold his first cleaning business before relocating. Despite “being” the business himself, he said he sold his business for 3x annual earnings.
“I sold the dream,” Ken told me, “not the business.”
His buyer wasn’t happy in their current job, and he presented the dream of taking over the cleaning business, tripling his income while working fewer hours.
That was two years ago, and Ken said the business is still going strong and doing everything he told the guy he would.
Selling a Cleaning Agency
Chris explained, “I’ve really changed this past year and a half what I want out of my businesses.”
What’s important to Chris right now is giving back to his local communities. He’s becoming more active in community service and supporting organizations that are really important to him.
Another thing is that he’s intentionally reduced the size of his business the past year and a half.
He was breaking the 7-figure barrier but had reached the stage where he was comfortable with how his business was operating. He didn’t want to keep adding new processes to deal with the growth, so he scaled back.
The work-life balance of his staff is important to him, so he doesn’t want to keep adding extra pressure on his team either.
Related: Built to Sell: Creating a Business That Can Thrive Without You
Closing Arguments: Should You Operate as a Solo Freelancer or Start an Agency?
“You need to really figure out why you’re starting a business and what you’re trying to accomplish,” Ken said.
His and Chris’ business models are very different. You have to just pick a side that suits you more and stick to it, he said.
Chris said, “it’s all about balance.” Whichever model you choose, make sure you have a good work-life balance.
Links and Resources from this Episode
- Skillshare – Get two months of unlimited access to 25,000+ Skillshare courses free!
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