Consider It Done
Americans are the hardest-working people on the planet. If you doubt this, read The Overworked American: The Unexpected Decline of Leisure, by Juliet Schor (Basic Books, $14, 800-242-7737). Schor says Americans are working harder and longer than ever before. Many Americans are putting in 14- and 16-hour workdays just to get by. For the majority, this means 60 to 90 minutes less sleep per night. Schor isn't joking when she says that many Americans are working themselves to death.
Therein lie the seeds of an incredible business opportunity. The harder people work, the more services they need to make their lives easier. Hence, the market is ripe for service businesses--like corporate and personal concierge services--to take some time-consuming chores off their backs.
Ponder this: About 60 percent of American women work outside the home. That number is expected to climb to 65 percent by the year 2000, compared to 20 percent in 1950, according to Louis Harris and Associates, a public-opinion pollster in New York City.
The average person who works 10 to 12 hours a day will jump at anything to make his or her life easier, says Marge Lovero, president of the Entrepreneurial Center, a small-business training center in White Plains, New York. "If the product is excellent, the service exemplary and the price competitive, there is no reason why you shouldn't be successful," she says. "The rocket-like growth of the fast-food and take-out industries over the past decade proves that people will endorse any concept that simplifies their lives."
This doesn't only hold true for speedy food preparation, but for virtually anytime-saving service. When Mary Naylor observed the frantic pace of most professional people's lives in her native Washington, DC, she saw an untapped business opportunity. She launched Capitol Concierge in 1987 with $2,000 of borrowed money.
Capitol Concierge places concierge services in office buildings to provide personal and business services to their tenants. The concierges offer a host of services, from picking up dry cleaning and managing catered business lunches to picking up theater tickets, ordering dinner and shopping for clothes. "Personal service is the hallmark of the business," Naylor says.
It took almost three years for Naylor to get her company off the ground; now it boasts concierge desks in more than 85 buildings, housing 3,000 companies. Naylor charges property managers fees ranging from $2,800 to $3,000 per month (which just about covers her costs) to place an on-site concierge. The fee mostly involves services of the hunt-and-fetch type. "We are a broker of services," Naylor says. "We charge market-level prices. There are no markups or tips. We make our money on the service side."
Beyond the management fee Naylor is paid, she receives a 15-percent commission from the vendors--florists, travel agents, courier services--she recommends to her clients.
In the beginning, winning new clients was like pulling teeth for Naylor. It took her seven months to land her first client. "Building owners were reluctant to try me out because it was a new concept," she says. "I was an unproven entity without a track record. My first client was taking a big risk."
It was slow going at first but, once she proved herself, it was a lot easier to capture new clients. By 1991, she had concierge desks established in 55 buildings.
"Initially, it's very difficult selling a personal service, because it's an intangible," Lovero explains. "It's not like Naylor could show someone a product beforehand. First you have to get a client to allow you to perform your service successfully. Once that's accomplished, selling additional services is easy."
Naylor quickly learned that her first challenge would be selling value to her clients. That means daily problem-solving for her busy clients. Every client had raging fires in need of squelching: A busy, fast-track attorney needed an expensive gift for his boss' spouse. A high-level manager tied up in back-to-back meetings needed to have his kids picked up from school, delivered to a birthday party and returned home; just knowing the chores would be successfully executed amounted to a monumental load off the manager's back.
It sounds simple enough, yet Naylor also had plenty of moments of nail-biting angst while getting her company started. There were occasions when she'd spend an entire night shivering in the rain outside RFK Stadium in Washington, DC, trying to score a client a hard-to-get concert ticket.
Initially, Naylor defined "success" simply as "satisfying most clients' needs. "But there were times when she wasn't able to deliver. Promising to find a certain delicacy from an out-of-the-way gourmet shop or a rare flower from an exclusive florist is one thing, but delivering it is another. Naylor couldn't fulfill every client's difficult wish. In these cases, the client usually appreciated the fact that she'd tried her best. After years of ironing out the kinks in her business, she says her batting average is excellent. Today, she seldom disappoints her customers.
Lovero says Naylor has unearthed a gold mine of a business. "More important, it points out the need for personal-service businesses in the 1990s," she says. "It's an inspiration to other entrepreneurs searching for unmet services to provide. A personal-service business doesn't have to be as complicated as Naylor's. A simple, one-service business that lifts a time-consuming chore off someone's shoulders can be the foundation for a multimillion-dollar business."
There were no shortcuts in building Naylor's business. At first, each client was hard-won. Because there was no blueprint for starting this type of personal-service business--and no trade association to dispense helpful information--she had to learn on the job. In the beginning, she says, it was critical to keep her costs down. Concierges--her employees--were only hired as she landed new clients.
Naylor says long-term success rests on knowing what her customers--the tenants of those buildings--need. She provides a host of services by working closely with her vendors; her network of more than 50 vendors was critical in building her business.
It's up to the individual concierge in each building to develop relationships with and provide a shopping list of services to tenants. A skilled concierge is in touch with the tenants' needs, and those needs differ from building to building. The goal of Naylor's concierges was to find products and services for their customers.
Naylor quickly discovered the importance of hiring qualified concierges who had the skills to do the job. The ideal concierge, says Naylor, is extremely outgoing but also a team player. Most important, they not only enjoy meeting their customers' needs, but anticipating them as well.
As Naylor's business expanded, she built a database of her customers' needs. Knowing whether a particular customer spends more on catering than on flowers amounts to critical marketing information in terms of improving her service. "Success for the entrepreneur running a personal service rests upon constant vigilance," she says.
"The personal-service market is growing fiercely competitive," adds Lovero. "You can't take your hands off the reins for a second. If you do, you risk losing a customer to a competitor."
Lori Krolik offers many of the same services Capitol Concierge provides to her own corporate clients. Her San Francisco company, More Time For You, was launched in 1995 and offers a range of personal services for busy working professionals, including grocery shopping, errand running and home-office organizing.
The premise of Krolik's business is providing her clients with essential services. "The majority of my clients are professional people juggling their careers and personal lives," she says. "They don't have the time to shop and take care of basic housekeeping chores. They welcome someone who can come in and take them off their hands."
Krolik charges $25 per hour to run errands and $35 per hour to organize a client's home office. To handle all the errand work, she contracts a good portion of it out--at half her hourly rate. She performs most of the in-house organizational chores herself.
The good part of running a personal-service business, Krolik says, is that the operating expenses are minimal. Because most of her time is spent visiting clients, it doesn't pay to maintain an outside office. Working from home, it took less than $5,000 to get her business going; She spent $3,500 to buy a used car and used the rest of the money to pay for office supplies and the printing of a brochure to advertise her business.
But aggressive networking and public relations played the largest role in building her clientele. "I tried advertising, but it didn't really work," Krolik says. She found a hands-on promotional strategy that she engineered herself to be more effective. She mailed press releases to San Francisco newspapers and trade publications. One of the releases was picked up by the San Francisco Chronicle and resulted in hundreds of interested prospects. But the bulk of her clients were acquired through networking and word-of-mouth. Krolik joined local women's groups and business organizations and attended trade conferences. "I was very aggressive about spreading the word and telling people about my business," she says. "I haven't stopped to this day."
Because of the personal nature of her business, Krolik says most of her new clients come from referrals. "I offer a very specialized kind of service," she says. "My clients give me the keys to their homes so I can shop for them and take care of their chores while they're at work. That trust can lead to other clients." Publicity is great, she says, but a referral from a satisfied client almost always leads to new business.
"The ultimate key to success for any personal-service business is understanding your customer," says Charles Hofer, a professor of entrepreneurship at the University of Georgia in Athens. "The concept of providing personal service is not new. Yet it's even more important today, because the average American is time-starved. The trick is first finding a personal service that people need and then matching it with an appropriate market."
Hofer advises investing time getting a precise picture of your average customer. "Their educational level, how they earn their living and what income bracket they're in tells you a lot about their needs and goals," he says.
Once you have your product and have identified customers who'd benefit from it, the next vital step is finding the best place to market it. Lovero suggests checking out real-estate developers who own corporate parks and office complexes. "Forward-thinking real-estate agents, especially the ones who've created industrial complexes in suburban communities, are looking for entrepreneurs who can provide personal services for their tenants," she says. "The more services they can offer a prospective tenant, the more attractive the building. It's smart business, plain and simple."
Suburban and even urban office complexes allow a host of personal services to be offered to their tenants, including massage therapy, dry cleaning and barber services.
Lovero describes an enterprising woman who set up a shopping service in a tiny stand in a busy suburban office complex. "It sounds mundane, but busy working people, especially single mothers holding down full-time jobs, don't have the time to stock their homes with groceries," she says. "This smart entrepreneur has set a minimum order at $25. While her customer is working, she'll do an entire week's worth of shopping." When her part-time employees return with their orders, she packs them in her van. "At the end of the day, the groceries are bagged and waiting to be loaded in the customer's car. She makes a decent profit by employing a team of high school and college students, and marking up each order between 10 percent and 20 percent."
Business consultants advise starting off slowly and keeping costs down. "There are no rules for starting up a personal-service business in a new office complex," Lovero says. "Often, a real-estate manager will give you a small section of the lobby and not charge you any rent because you're adding value to the building. But that could change once your business takes off. He might charge a small rental fee, or maybe take a commission on your sales. It's up to you to cut a deal that allows a decent profit."
Lovero suggests establishing relationships with local real-estate agents and land developers so you can stay abreast of commercial building projects in your area; once a site is selected, buildings go up practically overnight. "It's imperative to move quickly, to make your pitch before a competitor gets there first," she says. "A good way to find out about building projects in the works is by checking with the chamber of commerce or a local chapter of a contractor or builders' association."
Hofer estimates that you can start a personal-service business for less than $10,000, and recommends working from home at first. "Be frugal," he says." Make only critical purchases, such as computer, phone, fax, paper, postage and basic office supplies."
Beyond prudent spending, Hofer emphasizes the importance of pricing your services appropriately so you can earn a decent profit. "This is where many novice entrepreneurs get into trouble," he says. "Typically, they tend to under price their services, which could eventually drive them out of business."
Do a cost analysis of your service. Look at the time it takes to perform a particular service, the number of working hours in a day and, most important, how much you need to mark up a service so you can realize a profit.
Pricing a personal service can be tricky. "You must look at everything connected to the service," Lovero says, "from equipment costs to, most important, the time that performing the service takes." She cites a student who contemplated creating a business that delivered complete dinners to busy suburbanites as they departed their trains in the evening. That involved meeting the customers when they arrived at the train station in the morning, taking their orders, then returning with their dinners when they came back in the evening. "The problem was that she couldn't figure out how to make time work for her so she could buy the food, cook it and then deliver it at the end of the day. Once she masters the logistics of her business, she stands a chance of making it a success."
In the beginning, Hofer recommends offering premium pricing to lure new customers. "For your first month in business, consider offering 10 percent to 20 percent discounts to attract customers," he says. "Once you've proven yourself to satisfied customers, they won't mind paying more when you raise your prices."
Also, don't make the mistake of expanding too rapidly. "Make sure you have the customer base and cash flow to support growth," Lovero advises. "If both these ingredients aren't working together, you'll fall on your face."
Lovero advises running your business from home until you can confidently project sales 12 months in advance and comfortably support a monthly rental. Don't hire employees until you have the sales to support them. In short, the best advice is to keep your concierge business lean and mean until you're on secure ground.
Depending on the personal-service business you're planning to launch, stick with essential supplies to get your business off the ground.
- Computer for bookkeeping and maintaining a customer database: $1,200
- Printer for mailings (preferably laser or inkjet): $350
- Telephone (two lines): $150 per month
- Business cards (1,000): $125
- Letterhead and envelopes: $150
- Equipment (cart or stall) for a business-on-wheels in a mall or an office park: $500 to $2,000
Bob Weinstein wrote about starting a Web-site design business in the August issue of Business Start-Ups.
Capitol Concierge, 1400 Eye St. N.W., #750, Washington, DC 20005, (202) 712-9001
The Entrepreneurial Center Inc., 108 Corporate Park Dr., White Plains, NY 10604, (914) 694-4947
More Time For You, 1440 Broadway, #204, San Francisco, CA 94109
University of Georgia, Terry College of Business, Department of Management, Athens, GA 30602, (706) 542-3724