Growing your client base to keep your flatline effect in check.
Clients come and clients go. It’s just part of the game in running a residential cleaning company. While it’s not too difficult to know how many clients you have today, or if you are gaining more clients than you are losing, estimating how many clients you will have a month, year, or 5 years from now can be more complicated.
If you know the rates at which you gain (client acquisition) and lose (client attrition) clients, you can estimate the number of regular reoccurring clients you should have at any point in time. As a general rule, house cleaning companies gain reoccurring clients at a more constant rate, where they lose them as a percentage of the ones they have.
Let’s assume a company gains an average of 10 new reoccurring clients per month and it loses an average of 5% of its clients per month. If this is a startup with only 20 clients, the startup loses 1 home per month (20 homes x 5% = 1 home) for a net gain of 9 homes/month:
- New Reoccurring Clients Gain per Month=10 Homes
- 20 Homes x 5% Loss per Month=1 Home Lost
- Net Gain of 9 Homes
You can see in the KPI Tip that a year from now this company would have almost 100 reoccurring clients.
- Clients Gained per Month=10
- Clients Lost per Month=5%
- Long Run Number of Clients=200
Still, gaining an average of 10 clients per month but now losing 5 clients per month (100 homes x 5% = 5 homes), the growth rate will have slowed to 5 homes per month:
In the long run, this company’s growth will flatline once it hits 200 clients:
- New Reoccurring Clients Gained per Month=10 Homes
- 200 Homes x 5% Loss per Month=10 Homes Lost
- No Change (Flatline Growth)
Divide the average clients gained per month by the average percent of clients lost per month to determine the flatline number of clients:
10 Homes Gained per Month/5% Homes lost per Month = 200 Home Flatline Point
A company can reduce the flatlining effect by decreasing its loss rate and increasing its sales. As the company gets larger, however, it will lose a larger number of clients each month, making it harder to grow.