In the last decade, startups in the tech industry and Silicon Valley did not need to worry about where their next investment capital would come from or think about sacrificing growth for profitability. Between 2014 and 2015, venture capital available for private companies and startups broke records. As a result, many startups spent a lot of money on growth and expansion at the expense of profitability.
Handy, a company that connects people looking for home services, https://www.handy.com/services, with independent service professionals, spent millions on expansion and market penetration since its inception in 2012. The company even acquired two of its rival companies, Mopp and Exec, in the process. Another close competitor, Homejoy, went out of business thanks in part to its growth-oriented focus.
The Turning Point
In 2014, investors advised Handy.com to stop focusing on growth and penetration into new markets and instead concentrate on consolidating the 28 it served. Hanrahan pressed pause on the company’s growth plan and started improving its customer service. He realized that a happier customer base means a reduced need for contacting customer service staff. Furthermore, a happy staff resulted in a higher retention rate as well as a reduced need for onboarding assistance and recruitment.
According to Hanrahan, the best way to become profitable and improve unit economics is by getting its service professionals more jobs and optimization. Handy has had to cut down on its operation costs by reducing its staff as well as relying on organic growth and referral channels. Since implementing its optimization systems, including the online boarding system, Handy has reduced its $1.5 million monthly expenditure by over 15 percent.
Hanrahan is confident that by mid-2017, Handy will become profitable even after budgeting for expansion into new cities and launching a new service vertical. Umang Dua revealed that the company would raise more venture capital in future but on its terms.