How MaidThis Hit $100K Per Month in Gross Booking Volume Cleaning Vacation Rentals (Interview with Neel Parekh)

Introduction and Background

Nathan Latka

00:00Hey folks, my guest today is Neel Parekh. He is building a tool called MaidThis, which is a cleaning franchise for vacation rentals. Neel, you ready to take us to the top?

Neel Parekh

00:09>> I'm stoked. Let's do, Nathan. Are you

Nathan Latka

00:11running one of these franchises or are you the creator of the brand and you sell franchisees the franchise?

From VC to Cleaning Side Hustle

Neel Parekh

00:17>> 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.

Nathan Latka

00:33Very cool. Okay, let's break into the business model. Right? So what are you selling?

The Vacation Rental Cleaning Marketplace Model

Neel Parekh

00:37>> 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 at Airbnb, VRBO, 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

00:59>> 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 host, kind of automate the entire process for that.

Nathan Latka

01:10The marketplace model here.

Neel Parekh

01:12>> Exactly.

Nathan Latka

01:13Alright. Tell me back to, take me back to day one. Your first host that you've connected to your first, you know, cleaners.

Neel Parekh

01:20>> Yep. So it is what I'd call like a local marketplace model, right, because we are a localized business. And there's one part I want to clarify with vacation rentals, Airbnb's, any local model, reviews are so king, right? You can't just do like the biggest competitor is called Handy, where it's just like an Uber type service for cleaning. What we found is it can't really be like that for Airbnb's vacation rentals. That's why we're doing the franchise

01:43>> model, which is much more localized for that. Your question, Nathan, the first Airbnb host I connected, you know, we started doing just residential cleaning because 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 VC. So the first guy called me and said, hey, do

02:02>> you guys do vacation rental cleaning?

Nathan Latka

02:03No, by way, there are people laughing. Listen, because there's a lot of VCs that listen, analysts that are listening going, Wait a second. I thought a side hustle was supposed to be like launching my own like software company. Your side hustle is like, I'm gonna go double down on this Reddit thread. I'm gonna go clean some houses here in Hawaii.

Neel Parekh

02:16>> It's the most ridiculous thing if you think about it, like from tech VC to cleaning company. That's exactly what I did. I just go on that, Nathan. I mainly did it because I wanted to eventually leave and travel, right? And 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 it it is kind

02:37>> of ridiculous when you say it out loud. Now I'm thinking about that first job?

Nathan Latka

02:39What'd you get paid?

Neel Parekh

02:41>> I like a $100. We were undercharging like crazy. It was like barely anything. I was just stoked that we actually got something. Right? Yeah. Yeah. So someone called and said, hey, we need a cleaner for vacation 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? You know, people are staying for three or four days at a time. So I realized how much

03:00>> more profitable it was than regular residential. So just started to curate it from there.

July 2021 Volume: 600 Homes Cleaned

Nathan Latka

03:03So 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?

Neel Parekh

03:12>> Probably about 600.

Nathan Latka

03:14Wow, all in LA?

Neel Parekh

03:16>> LASF. So that's where the corporate locations, even more if you count the franchise locations.

Nathan Latka

03:21Okay, interesting. Yeah. And how many cleaners did you give work to? How many did it take to clean the 600?

Neel Parekh

03:28>> Sure, probably about 20 to 25.

Nathan Latka

03:30Okay, 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?

Neel Parekh

03:39>> 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 the 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.

Nathan Latka

04:00And what is the average, like, cleaning job cost the homeowner?

Average Job Price and Marketplace Economics

Neel Parekh

04:05>> Sure. Anywhere between $125 to like $150 I'd say on average. Some like four bedrooms in LA are gonna be like $300 right? If it's just a mansion, some studios might be less, but let's say around $140 would probably be about the average.

Nathan Latka

04:17So can I take like $140, $150 to 600 homes and that's about what $90,000 in like marketplace revenue last month?

Neel Parekh

04:24>> Yeah. And look, there's fluctuations, right? Because many homes are going 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.

Nathan Latka

04:36Well, I guess it could have it was probably way higher than that. If you had 600 homes, but they booked for two weekends in July, that's you just doubled your numbers.

Neel Parekh

04:43>> What was Exactly.

Nathan Latka

04:44What was actual Marketplace volume last month?

Neel Parekh

04:47>> You know, it'd probably be it'd probably be north of $100,000. The reason is right now would be a slightly 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? So you're probably looking right now north of a

05:09>> 100. And if we look at the

Nathan Latka

05:10economics on a $100 a $100 cleaning job, breakdown how it works. How much does the cleaner get?

Neel Parekh

05:15>> Sure. So it does depend on the cleaner, but you're looking at roughly 50% to 55%, maybe up to 60%. If we're outsourcing to a company, it could be even more. But let's say 50% to 60% is typically what you're pushing out to the cleaner. Marketing costs are, Nathan, as you know, the beginning you're doing a lot of marketing. Afterwards, it's mostly word-of-mouth referrals. So we spend maybe, I'd say five to 10% on, let's say 5% of

05:42>> revenue on marketing per month. Yep. Then we have some overhead expenses. So overhead expenses probably 10% to 15%. Other large expense I could think about would be

05:57>> credit card transaction fees, where which are pain in the butt, but that takes off 3% immediately. Yep. Then other minor software expenses here and there, just, you know, Zapier, things like that, just to connect everything, ActiveCampaign, things like that. So that'll add some fixed amount as well.

Nathan Latka

06:12So call it 50 to 60 to cleaner, then like another 30 ish all your costs. So basically profit is, call it $20 for a $100 job.

Neel Parekh

06:20>> Roughly, yes. That's that's pretty good math. Yep.

Nathan Latka

06:22Okay. Cool. So I mean, can I say sort of back in and say in July, you guys did about $20,000 in sort of, you know, profit or gross revenue at least, and then multiply times 12, it's like what, a $250,000 run rate, something like that?

Neel Parekh

06:34>> Yeah, yeah, exactly. I mean, we count the revenue as the top line, right? Because we take all of that in. So 20 would be probably profit. Net profit is kind of what you're looking at.

Nathan Latka

06:42Okay, cool. Yeah. Yes, sorry. That's obviously even better. You're at north of a million dollar run rate then and you're profitable, which is great. Now, are you bootstrapped as well or do you raise capital?

Bootstrapped From Day One

Neel Parekh

06:51>> Yeah, bootstrapped. Bootstrapped from day one. And the great part about the business model is like, it is pretty lean, right? You get a job, you do the marketing at the beginning, but it's highly recurring revenue. So especially when you get that client in, you keep them happy. You don't have to keep spending money in marketing to sell someone over and over and over. So we were bootstrapped since day one, have never raised capital and just growing

07:08>> from there.

Nathan Latka

07:09Yeah, and hopefully there's low turnover in your cleaners. If you paid out about $50,000 to them last month, 50% of the $100,000 total revenue. I mean, I think on average across 22 cleaners, that's like almost $3,000 a month for each of them. That's sustainable, right?

Neel Parekh

07:23>> Exactly. Yeah. Quick math. And look, many of them have other jobs, other clients that they take care of, you know. And the beauty of working with us is we give them the clients who let them know when the turnovers are. They could fill in their slots with anything they want after that as well.

How a Local Marketplace Gets Valued

Nathan Latka

07:37I always get asked, and you're the perfect person asked if you came from VC, how to value a marketplace?

Neel Parekh

07:42>> Let's say

Nathan Latka

07:42you are gonna go out and raise whoever.

Neel Parekh

07:44>> Right? Which VC firm are you with?

07:47>> It's called Kayne Anderson in Los Angeles.

Nathan Latka

07:49Let's say you're gonna go raise from Kane Anderson now. How do they value the marketplace model?

Neel Parekh

07:52>> So we would be valued at a local service model, right? Because it is local service. So let's talk about marketplaces though. A marketplace would be valued simply based off of comps because it's so tough to value it based off of any actual metrics, especially what's going on right now. So you'd simply look at the closest comps to the Marketplace. And you can take a look at the business model in terms of what is the revenue, what

08:14>> is the profit margins. But the reality with a Marketplace model, that's not to be as relevant. So I think comps is for sure number one is what you look at if you look

Nathan Latka

08:22comp right now?

Neel Parekh

08:24>> For us, it would be honestly another franchise cleaning company. So franchise cleaning companies trade at anywhere between, like, typically in normal times, six to eight times EBITDA. So that would be what a franchise cleaning company would trade at. And then obviously when the market has gone crazy, it's just based off the brand value, right, for large franchises. But that's the beauty of franchises is as you scale, the brand grows, the intrinsic value of the brand just

08:50>> grows much more, right? It's no longer based off of a local cleaning company multiple, it's based off of franchise multiple and the brand multiple.

The Franchise Model: Denver and Myrtle Beach

Nathan Latka

08:56So just playing that out for you guys, $20,000 a month in revenue, bottom line, 250,000 a year at a conservative like x multiple on EBITDA. Right? It's about a $1,500,000 valuation, something like that.

Neel Parekh

09:07>> Based off of corporate location alone. Right? So what we're doing with the franchising model, what I mentioned is just corporate location. We have Denver. We have Myrtle Beach. And especially we add more and more franchise units. That's gonna grow with themselves. Right? And those franchise owners will be able to make money themselves, hopefully copying our economics. Right? We're gonna show them the model, help them do it, and then that just scales with it.

Nathan Latka

09:26I see. So the $100,000 a month you're doing right now, that's across two locations in LA and San Francisco?

Neel Parekh

09:30>> Yep. That's it.

Nathan Latka

09:32I see. Okay. Let's now go into the franchise model. So Yep. So who did you sell it to in Denver and Myrtle Beach, and what do they pay you?

Neel Parekh

09:39>> Sure. So the franchise model, we charge $35,000 for the initial fee, and then we charge 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 our our cost covers basically. Yeah. So, yeah, that's the amount we charge. And then, you know, we would just guide them and help them to get set up and grow from there.

Nathan Latka

10:02And you've sold two so far?

Neel Parekh

10:03>> Two so far. So we launched at the very end of twenty twenty, so been about six to seven months since launch.

Nathan Latka

10:10And how much did those two locations combined do in project or cleaning volume in July?

Neel Parekh

10:15>> Yeah. 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.

Nathan Latka

10:27Interesting. Interesting model. So

What Franchisees Get for $35,000

Nathan Latka

10:30most 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. So, 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?

Neel Parekh

10:49>> Yeah, sure. Honestly, I see this time collapsing, right? 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 the cleaner arrived versus a one hour arrival window? That'd take a lot of testing to get to. That's one of a thousand things that we've tested to kind of optimize what we're doing. It's also

11:09>> done in a completely remote way. So we teach you how to find a 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

11:28>> doing by two years, if I spend 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. It saves you a lot of time, headache, money. And then the

11:48>> second part is I think you'd be able to accelerate much faster. Lastly, there's just the brand effect, right? It's 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. 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, right? Like if you're an individual

12:11>> company, you have to buy your own Typeform. Of course, as a large brand, you could just piggyback off of our system. So this is huge cost savings, which you don't even think about by not having to do all these little things.

Nathan Latka

12:23I was hoping what you're to dive into was addressing this question, which is Zapier and tools like Zapier right now, the valuations in the marketplace, SaaS were all through their fricking roof right now. Yep. 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

12:45have to set that all up themselves?

Neel Parekh

12:46>> No, we do that for them. That is the proprietary information.

Nathan Latka

12:49That's IP right there, right? I mean

Neel Parekh

12:51>> Yeah, exactly. It's not our software, but everything we've created is using Zaps and to talk to ActiveCampaign to sync to the booking software we use, which is completely customized to link their 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 booking forms.

Founder Investment and Going Full Time

Nathan Latka

13:13How much of your money did you put into this?

Neel Parekh

13:15>> Initially, to be honest, it was like $1,000 to get started and started rolling more and more of the profits back into it. So for the franchise operations, I probably booked $200,000 in to get that set up.

Nathan Latka

13:27Interesting. Are you paying yourself yet or no?

Neel Parekh

13:29>> Yeah. Yep. Paying myself. Well, that's good.

Nathan Latka

13:31So you're doing this full time now?

Neel Parekh

13:33>> Full time. Yeah. We we've been around since 2013. I quit my VC job in 2015, and I booked a one way flight to Colombia, and I was traveling for about five years while building this. And then COVID happened, so came back to LA and now posted in The US.

Nathan Latka

13:46That's very interesting. Okay. What's the you keep saying we. What's your teams, I'd say, full time folks?

Team Size and Growth Tactics: SEO and Google

Neel Parekh

13:51>> Sure. So we have about 10 people on operations. Give it I would say about eight full time, about two part time who are on operations for the home offices.

Nathan Latka

14:03And what are some growth hacks you're using to build both sides of the marketplace? You touched on your systems for getting reliable cleaners. What about getting more homeowners? Are you doing any interesting sort of scraping, any interesting data sources here?

Neel Parekh

14:13>> You know what's interesting is the local market, especially for Clean Air, feels like two years behind the time in terms of marketing. I think most local businesses are. So here's third party secret, it's such a hidden gem. As long as you do the stuff which is current, you are already ahead of the competition. 45% of local companies still don't have a website if you think about that. Most of them are doing like flyers, things like that.

14:34>> So as long as you're doing like SEO, keep your Google ratings pristine, have an awesome looking website, you're already way ahead of the pack. So small growth hacks would just be keeping on top of what especially Google, which is the king, is releasing. Right? For example, they release Google Local Services, get on that immediately. Growth hack that. Figure out how to optimize it, figure out why they show people at the top, just and kind of focus

14:53>> on everything Google is putting out and optimizing that. Because if you do that alone, you're already way, way ahead of the competition. Mhmm. So that's what I love about local market is like, you don't have to reinvent the wheel, just do it better.

Customer Acquisition Cost

Nathan Latka

15:04Do you have or have you been able to back into a CAC to get a new home on your system in LA?

Neel Parekh

15:10>> We have, and there's two different amounts. One would be for regular residential and one would be for vacation rental. Ours is probably about, I think last time I calculated a CAC for regular residential, I think it was about $66 Okay. Yeah. That's for them

Nathan Latka

15:26to be clean or just to get them on the platform and then it's earnings?

Neel Parekh

15:29>> Get them on the platform. You know, maybe they're one time customer, maybe they're a recurring customer, right? So the goal is for them to be a recurring customer because $66 per clean would not be profitable. That wouldn't work, yeah. But most of the customers we're getting, there's a sales funnel to get them on the recurring program.

Famous Five: Books, Tools, and Advice

Nathan Latka

15:44Very cool, Neel. All right, let's wrap up here, man, with the Famous Five. Number one, what's your favorite business book?

Neel Parekh

15:49>> Oh, you know, I don't know if there's a business book exactly. There's a book called Can't Hurt Me by David Goggins. Have you heard of it?

Nathan Latka

15:55Can't Hurt Me?

Neel Parekh

15:57>> Yep. No. That's great.

Nathan Latka

15:58I'll have check it Yeah.

16:00Number two, is there a founder you're following or studying?

Neel Parekh

16:03>> There is Jesse Itzler. Thank you. Yeah. He's the founder of ZICO and a few other things, but I just love him what he puts out.

Nathan Latka

16:11Number three, what's your favorite online tool?

Neel Parekh

16:14>> It's gotta be Zapier. I had a feeling that was gonna happen.

Nathan Latka

16:18Number four, how many hours of sleep do you get every night?

Neel Parekh

16:21>> Eight. I am I am useless unless get eight hours of sleep, so I actually get a full night's sleep.

Nathan Latka

16:25And, Neel, what's your situation? Married, single, kids?

Neel Parekh

16:27>> I am single right now.

Nathan Latka

16:29Okay. And how old are you?

Neel Parekh

16:31>> 32.

16:32>> 32. Last question.

Nathan Latka

16:33What's something you wish you knew when you were 20?

Neel Parekh

16:36>> I wish I would told myself to take bigger risks because you can make up for it because you have more time. So you use that time wisely. Network a lot because you have way more free time. So take risks, network a lot, and use your time wisely.

Nathan Latka

16:47Guys, MaidThis, it is a marketplace. It wouldn't surprise me though if he does end

Neel Parekh

16:51>> up with some sort of

Nathan Latka

16:51SaaS product here in the future to help these cleaners manage their businesses. We'll see what happens. But right now, the marketplace doing $100,000 per month top line revenue, 20,000 in profit. Just sold its first two franchises in Denver and Myrtle Beach at 35 k a pop plus 6% royalties, growing nicely, all bootstrapped, which we love. Neel, thanks for taking us to the top.

Neel Parekh

17:08>> Thank you, Nathan.

Nathan Latka

17:10One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

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