{"id":2677,"date":"2019-02-02T20:06:41","date_gmt":"2019-02-02T20:06:41","guid":{"rendered":"https:\/\/www.bookingkoala.com\/blog\/?p=2677"},"modified":"2022-11-22T23:16:00","modified_gmt":"2022-11-22T23:16:00","slug":"how-much-should-i-pay-my-providers","status":"publish","type":"post","link":"https:\/\/www.bookingkoala.com\/blog\/how-much-should-i-pay-my-providers\/","title":{"rendered":"How Much Should I Pay My Providers?"},"content":{"rendered":"

[vc_row][vc_column][vc_column_text]If you never started a business<\/a><\/span> before, you may be wondering how much should I pay my providers?\u00a0<\/span>By providers, I mean; cleaners, dog walkers, movers, tutors, and other service type providers.\u00a0<\/span>That question sometimes can prevent people from ever starting.\u00a0<\/span>It can be a difficult topic for some, and in this blog post, I\u00a0will show you a proper strategy to follow to get off to the right start.<\/span><\/p>\n

IC versus W2 employee<\/span><\/strong><\/a><\/span><\/p>\n

The first thing when starting is to determine how you are going to hire your providers.\u00a0<\/span>Are they going to be independent contractors, or are they going to be w2 employees?\u00a0<\/span>This is important because based on this decision, the structure of your company will be formed.\u00a0<\/span>If you hire w2 employees, you will have much more control over your workers, and with independent contractors, you won’t have any or very little.<\/span><\/p>\n

Here is an example (image source<\/a><\/span>):<\/span><\/p>\n

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This often scares a lot of people when they first look at this, because it often makes them feel like the only choice they have is to hire W2 employees.\u00a0<\/span>That is not true.\u00a0<\/span>There are a lot of successful ways that you can hire workers as ICs. However, your company structure and contracts have to reflect that.\u00a0<\/span>I may write a blog post specifically on that in the future, so stay tuned and comment below if you’d like me to do that.\u00a0<\/span>Once you decide on the type of workers that you will hire, you will start to create your company<\/a><\/span> around them and your customers.<\/span><\/p>\n

Narrow down your audience and tailor your services<\/span><\/strong><\/p>\n

Now, before you start hiring, decide which clients in your industry are the right clients for you.\u00a0<\/span>As an example; if you’re in the cleaning industry<\/a><\/span>, are you going after large homes or small apartments\/condos.\u00a0<\/span>Both of these clients have different expectations, and when you are just starting, it’s near impossible to satisfy them both.\u00a0<\/span>Clients with larger homes will expect teams while owners of smaller apartments\/condos will be fine with one individual.<\/span><\/p>\n

The same goes for the providers.\u00a0<\/span>Teams of 3 won’t be entirely satisfied going to a small job, and an individual won’t be satisfied performing a large job themselves.\u00a0<\/span>You need to find a balance that will satisfy the customer, the provider, and make you the most money.<\/span><\/p>\n

Here is an example:<\/strong><\/span><\/p>\n

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See how in this example, one person makes more money, and you also make more money.\u00a0<\/span>That means that doing smaller jobs only, and focusing on sending one person per job can be very beneficial to everyone.\u00a0<\/span>Not only are providers making more money, but you are tailoring your service and making it perfect for a specific customer.\u00a0<\/span>The providers are also less likely to complain, which will lower your churn rate significantly as well as customer complaints.<\/span><\/p>\n

Optimize over time<\/span><\/strong><\/p>\n

One thing to keep in mind is that you don’t need to make everything perfect when you start.\u00a0<\/span>You can always optimize later.\u00a0<\/span>For example, if you feel like you can lower the pay by 5% or $2 per hour, without sacrificing the performance of your company, then test it.\u00a0<\/span>Hire your next set of providers at the new rate and see what happens.\u00a0<\/span>Sometimes it may take several years to find the right structure<\/a><\/span> that works for your company.\u00a0<\/span>Don’t be afraid to test.\u00a0<\/span>After all, saving 5% when doing $1,000,000 in revenue is $50,000 extra for your business.<\/span><\/p>\n

Tailoring to more people<\/span><\/strong><\/p>\n

Now that you’ve customized your service to a specific customer, you can start to branch out if you are ready for another challenge.\u00a0<\/span>From our example above, if you started by doing only smaller homes, you can now expand to larger houses and perfect that specific customer next.\u00a0<\/span>Later you can go into a specific type of commercial service or even start with post-construction and master it next.\u00a0<\/span>Personalization is critical, and you cannot do all the services at once.\u00a0<\/span>You need to perfect every part of your service to scale your business.\u00a0<\/span>This is also why we segregate everything inside BookingKoala.<\/span><\/p>\n

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Some providers refuse to go to specific zip codes, and we block those zip codes from ever being matched with them.\u00a0<\/span>As you can see if I unselect a zipcode or a specific location, that provider will never receive a job from that particular location or zip code.\u00a0<\/span>These things are essential because it offers personalization towards the provider, which will make them happier and lower the churn rate significantly.\u00a0<\/span>Hence, why you cannot start offering all services to everyone.<\/span><\/p>\n

Hire your first provider(s)<\/span><\/strong><\/p>\n

Now it is time for you to start hiring your providers.\u00a0<\/span>You don’t need a fancy office to interview people either.\u00a0<\/span><\/p>\n

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I’d highly advise you to read these two blog posts:<\/h6>\n