HOGARU — Why employing directly our cleaners works much better than a marketplace.

Oscar, Matteo and Gonzalo — Co-founders of Hogaru

Hogaru is a professional cleaning company for SMBs in Latin America. We serve over 2 thousand customers per month and operate in 3 cities. Our clients love our service (15x LTV/CAC) because they receive always the same trusted cleaner. How do we do it? Differently from marketplaces, we do not use contractors, but we employ our directly cleaners with social security and many benefits.

What are three things people should know about effectively running a marketplace?

Marketplaces usually fail since nobody wants to pay more for a middle man. Additionally, in high-touch services like cleaning, clients want to receive the same cleaner, which increases the chance that they bypass the marketplace and reach an agreement with the cleaner directly. Therefore, we decided not to be a standard marketplace, but a direct employer for cleaners. Direct employment allows us to control their schedule, so that clients receive always the same trusted cleaner. Additionally, it allows us to re-train our cleaners to maintain high quality. Most importantly, employing cleaners directly creates very high switching costs for them, so they churn much less than 1099 contractors.

What’s one thing you learned about running a marketplace that you didn’t know before?

Marketplaces are exposed to labour and legal risks of not “employing” properly the service provider. That is why at Hogaru we employ directly the cleaners, so that we do not have to worry about legal issues, nor the client does. Legal peace of mind is fundamental for us to focus on providing an excellent service.

Do we focus on customers or cleaners first?

We focus on supply first. We aim at providing “good jobs” so that our cleaners work with us for years. That is why we provide our cleaners with benefits like no-interest loans and access to subsidised education. Filling up supply with a great team of cleaners really spikes our clients retention. Luckily, happy clients lead to organic word-of-mouth referrals, which fixes the demand side too.

When we pivoted to be a direct employer over 2 years ago, people were calling us crazy. However, we are happy to see we are not the only ones to have taken this step. As the CEO of Hogaru, I believe that investing in the creation of good jobs through technology means to build a solid base for the sustainability and scalability of our business. Our goal: 100,000 direct jobs in the next 10 years.

Leticia, one of our top cleaner, is an employee since March 2015.