Around 2011, my company My Maid Service was experiencing very rapid growth, and I found myself wondering just how large could this thing become. With a young family, I did not want to leave the city, so I wanted to know how big the potential market was in Cincinnati, OH, for residential cleaning services. I asked many experts who all had guesses and opinions – gut feelings – but no one was able to give me a data-driven answer. I was very uncomfortable with this because I needed to know with real data how big could the business grow to be. So I started a large research process to answer my question.
After reading many market research reports, I finally found several data sources that all seemed to point towards one number: on average, 15% of U.S. households that earn more than $70,000 per year use a residential cleaning service on a regular basis.
Now I had somewhere to start. The first thing you need to do is adjust that $70,000 household income with a cost of living adjustment to get the comparable household income for my local market. My favorite website to get this information is www.bestplaces.net. Here’s an example, based on San Francisco:
Adjustment Data: San Francisco is 88% more expensive than the average U.S. city
Formula: Average x 1.88 = San Francisco’s adjusted cost of living
$70,000 x 1.88 = $131,000 = San Francisco’s adjusted cost of living
Once you have determined the target income in your area, you need to find out how many households there are at or above that income level. I like to use www.city-data.com to find out how many households are above my target income for each city I service.
Then we multiply the number of target households times 15%; remember, the national market research studies agree that 15% of households with the target income use residential cleaning services.
Example Data: 10,000 households in your market at or above adjusted cost of living
Formula: Households x 0.15 = Average Size of Your Market
Example: 10,000 x 0.15 = 1,500
So if there are 10,000 target families in your service area, it is reasonable that 1,500 of them will use a residential cleaning business on a regular basis.
Knowing also that the average consumer of a cleaning service uses a service every other week, they will spend roughly $2,600 a year on a cleaning service (assumes an average price of $100 per cleaning). Using this math, in my target area the entire market for residential cleaning services is roughly $3,750,000 per year.
Now once we know the total size of the market, you can look around and see how much competition you are facing in your market to decide what is reasonable. If there are only a few competitors and they are small, you may be able to capture 50% to 80% of the market. If you are in a very crowded market with strong competitors, then a more realistic goal might be to only have 10% of the market, at least to start with. This is an essential step in building both short-term and long-term growth goals for your business; it’s certainly no help to your motivation to set a growth goal your market can’t support.
Derek Christian is the owner of My Maid Service with locations in Cincinnati, OH and Dallas, TX, as well as a business coach through Cleaning Business Builders and publisher of CleaningBusinessToday.com. Derek is now an investor in several cleaning companies including My Maid Service Dayton and Real World Services Columbus.