From idea to replacing full-time salary in 4 months • Hacker News Board

Re: From idea to replacing full-time salary in 4 months

#61

Post by courtewing » Mon, Apr 16, 2012, 1:12 PM UTC

gojomo wrote: post #19

dangrossman wrote: post #10

Earlier quoted context omitted.

I haven't read every comment he's made yet, but skimmed many of them... Why can't they be contractors? He said they're providing their own transportation and supplies. So he's just handing them clients and appointments, and a checklist of cleaning tasks to complete and a few limitations on the supplies used. Isn't that analogous to handing a contracted software developer a requirements document and a deadline?

It's possible if he does everything right. But the presumption by determining authorities seems to be in the 'employee' direction, so it's very easy to slip up. Does he tell them when to work? Employee. How to do their work (a checklist)? Employee. Provide supplies? Employee. Do they wear a 'Maid In Black' uniform? Employee. If he were a matching service, it might be easier. But, he's extending his brand/guarantee/mo…

This is interesting and surprising to me. I wonder how, for example, Comcast manages this.

Comcast has a huge independent contractor network that they use to subsidize their full-time on-site tech support. All of those contractors wear Comcast shirts, have Comcast written on their trucks, must meet customers at the times that Comcast schedules, and do receive at least a portion of their supplies from Comcast.

Re: From idea to replacing full-time salary in 4 months

#62

Post by tptacek » Mon, Apr 16, 2012, 1:15 PM UTC

DanielBMarkham wrote: post #59

Since everybody else is pointing out how poor his employee compliance is and that he's picked a freaking hard row to hoe, I'll praise the guy. Awesome job! This is the internet equivalent of going door-to-door. In fact, I bet you could combine this with going door to door and see sales really take off :) The scaling thing Edw brings up doesn't concern me right now: you are in the throes of kicking ass. Later on reali…

He has a "detaileddddddd" checklist of how he wants the work done and a training program. His lawyer is going to tell him that they're employees.

What's worse is, the better he does, the more clear-cut this issue gets. His key business metric is employee turnover, and anything he does to improve this increases the likelihood that his employees will be relying on him for most of their wages.

This is a "too good to be true" scenario. He's defined a fixed-price service with rigorous standards to be delivered across a major metro area with 8 known-good workers and is making $1000/month on it. To be compliant, some of that has to give: his business will have to look more like a placement or dispatch service, or he'll have to make way less money.

The IRS reclassification thing will be painful.

Re: From idea to replacing full-time salary in 4 months

#63

Post by rsynnott » Mon, Apr 16, 2012, 1:22 PM UTC

chc wrote: post #5

patio11 wrote: post #4

He's essentially figured out that cleaning is one of many services which would have lower barrier to entry if it were not regulated. He is, of course, right. I sincerely hope for his sake that he reinvests profits into bringing himself into compliance with e.g. employment taxes, workers comp, etc.

Are you saying you think it's illegal for the maids to be 1099 workers?

I'm not sure about America, but in most countries I'm familiar with, it is ultimately the decision of the tax authorities whether people who work for a company are employees or contractors. There's generally a well-specified test for this.

Certainly, in this country, the maids would be unambiguously employees.

Re: From idea to replacing full-time salary in 4 months

#64

Post by tbergeron » Mon, Apr 16, 2012, 1:23 PM UTC

edw519 wrote: post #53

This time next year on reddit: "From working my ass off 90 hours per week running a business that wouldn't scale to nice salary/benefits for 40 hours. I'm taking home the same net and I feel like I'm on vacation." I don't want to sound too snarky and I really admire OP's initiative and ability to make things happen, but this just doesn't smell right. It's easy to get excited by nice revenue in the beginning (as he sh…

I understand the train of thought you're having. It may not be the best kind of business scaling-wise but if done right he could open some more somewhere else and horizontally scale that way. Everything can be scalable when pushed into the right direction.

More branches = more employees = almost automatic administration = more money.

Those are only my opinions, therefore not facts.

Re: From idea to replacing full-time salary in 4 months

#65

Post by tptacek » Mon, Apr 16, 2012, 1:24 PM UTC

courtewing wrote: post #61

gojomo wrote: post #19

Earlier quoted context omitted.

It's possible if he does everything right. But the presumption by determining authorities seems to be in the 'employee' direction, so it's very easy to slip up. Does he tell them when to work? Employee. How to do their work (a checklist)? Employee. Provide supplies? Employee. Do they wear a 'Maid In Black' uniform? Employee. If he were a matching service, it might be easier. But, he's extending his brand/guarantee/mo…

This is interesting and surprising to me. I wonder how, for example, Comcast manages this. Comcast has a huge independent contractor network that they use to subsidize their full-time on-site tech support. All of those contractors wear Comcast shirts, have Comcast written on their trucks, must meet customers at the times that Comcast schedules, and do receive at least a portion of their supplies from Comcast.

They're currently being sued for this.

Re: From idea to replacing full-time salary in 4 months

#66

Post by rsynnott » Mon, Apr 16, 2012, 1:24 PM UTC

courtewing wrote: post #61

gojomo wrote: post #19

Earlier quoted context omitted.

It's possible if he does everything right. But the presumption by determining authorities seems to be in the 'employee' direction, so it's very easy to slip up. Does he tell them when to work? Employee. How to do their work (a checklist)? Employee. Provide supplies? Employee. Do they wear a 'Maid In Black' uniform? Employee. If he were a matching service, it might be easier. But, he's extending his brand/guarantee/mo…

This is interesting and surprising to me. I wonder how, for example, Comcast manages this. Comcast has a huge independent contractor network that they use to subsidize their full-time on-site tech support. All of those contractors wear Comcast shirts, have Comcast written on their trucks, must meet customers at the times that Comcast schedules, and do receive at least a portion of their supplies from Comcast.

Are you sure that they individual support people are self-employed? If they merely work for a contractor company, that would be okay (assuming they're employees of the contractor). Otherwise, it sounds odd.

Re: From idea to replacing full-time salary in 4 months

#67

Post by rsynnott » Mon, Apr 16, 2012, 1:25 PM UTC

toyg wrote: post #23

gojomo wrote: post #19

Earlier quoted context omitted.

It's possible if he does everything right. But the presumption by determining authorities seems to be in the 'employee' direction, so it's very easy to slip up. Does he tell them when to work? Employee. How to do their work (a checklist)? Employee. Provide supplies? Employee. Do they wear a 'Maid In Black' uniform? Employee. If he were a matching service, it might be easier. But, he's extending his brand/guarantee/mo…

> the presumption by determining authorities seems to be in the 'employee' direction Note that this is not done on a whim: these laws and interpretations were introduced because employers were systematically exploiting workers, hiring them as contractors just to work around their established rights. And it works both ways, really: having a clearer set of rules reduces the risk for costly litigation when something hap…

> Note that this is not done on a whim: these laws and interpretations were introduced because employers were systematically exploiting workers, hiring them as contractors just to work around their established rights.

While this is the most common form of abuse, it is sometimes also used as a means of tax evasion by the employer, employee, or both.

Re: From idea to replacing full-time salary in 4 months

#68

Post by tptacek » Mon, Apr 16, 2012, 1:27 PM UTC

grey-area wrote: post #43

gojomo wrote: post #19

Earlier quoted context omitted.

It's possible if he does everything right. But the presumption by determining authorities seems to be in the 'employee' direction, so it's very easy to slip up. Does he tell them when to work? Employee. How to do their work (a checklist)? Employee. Provide supplies? Employee. Do they wear a 'Maid In Black' uniform? Employee. If he were a matching service, it might be easier. But, he's extending his brand/guarantee/mo…

I imagine initially both sides would be happy to treat the relationship as contractual. It's a great way to start when you are not sure of demand, and the cleaners you employ have other clients anyway (I'd say that makes them definitely not employees unless and until this is their main income). The ones who have now quit other jobs to work with him are of course de-facto employees, and he'll have to treat them as suc…

Both sides are probably happy because the cleaning workers probably aren't paying taxes at all.

If they were, they would be extremely unhappy with this arrangement, because 1099 employees pay both halves of FICA ("self-employment tax").

One possible way this pans out: eventually, he ends up with a worker who gets a notice of imputed liability from the IRS; that notice threatens to put the worker into bankruptcy, and so he calls an IRS help-line or his state labor board or an attorney. The IRS reclassifies all his employees and now threatens him with bankruptcy.

Re: From idea to replacing full-time salary in 4 months

#69

Post by courtewing » Mon, Apr 16, 2012, 1:28 PM UTC

ricardobeat wrote: post #24

toyg wrote: post #21

Earlier quoted context omitted.

He's not playing golf all day: he did design and commission the scheduling system he now operates, and provides ongoing advertisement and management. From what he says, it looks like he gets $40 to $60 per job, whereas cleaners get $15 to $30 per job -- they work in team, so it's $30 to $60 in total (it's all pre-tax, from what I understand). Not a terrible arrangement, to be honest, especially in the Land Of The Fre…

I know, and I don't mean to put down his effort (as I said below, there is some value added). But they are just being exploited by a smaller company - it's the same. edit: what is with downvotes lately? This is not a contest, feel free to join the discussion.

This is a sentiment that I see frequently on HN, and I'm not exactly sure why. I was a "questionably" contracted employee for awhile, and I never once felt exploited by the company, and I'm confident that they never felt that they were exploiting me.

Sure, being contractors might not be ideal for them at the moment, but they are the first 8 employees at the company. There are additional benefits to being in that situation.

In addition, we have no idea how much they do or do not understand their employment status. It is convenient for us to jump to the conclusion that the employees are ignorant about tax law, but that very well may not be the case. Just like in any other service industry, there are plenty of educated and informed workers in the mix, especially when you start looking at those that tend to excel in that particular field (he did say he now only hires top notch folk, after all).

I guess what I'm saying is, the discussion about W2 vs 1099 in this case is both valid and valuable, but let's not jump to any conclusions about who is exploiting whom.

Re: From idea to replacing full-time salary in 4 months

#70

Post by DanielBMarkham » Mon, Apr 16, 2012, 1:33 PM UTC

tptacek wrote: post #62

DanielBMarkham wrote: post #59

Since everybody else is pointing out how poor his employee compliance is and that he's picked a freaking hard row to hoe, I'll praise the guy. Awesome job! This is the internet equivalent of going door-to-door. In fact, I bet you could combine this with going door to door and see sales really take off :) The scaling thing Edw brings up doesn't concern me right now: you are in the throes of kicking ass. Later on reali…

He has a "detaileddddddd" checklist of how he wants the work done and a training program. His lawyer is going to tell him that they're employees. What's worse is, the better he does, the more clear-cut this issue gets. His key business metric is employee turnover, and anything he does to improve this increases the likelihood that his employees will be relying on him for most of their wages. This is a "too good to be…

Thanks. I only read the initial post.

Yeah, you can't get into how to do the work. Also using anything called employee turnover is a dead stop.

But I still think it's salvageable, simply because there are so many independent cleaners out there already. This industry is heavily independent. I think he really needs to look at his structure, pronto.

I'll play devil's advocate just a bit more for the crowd. Many times startups skirt all sorts of rules and regulations when getting off the ground. I'm okay with that -- startups are always a bit subversive, and if you listen to your accountant and lawyer you'd never take any risk at all. But you can't go on like that for very long.

EDIT: Here's a possible setup: place the jobs on cards and put on the wall. Have the cleaners bid for the jobs. The checklist could just be the terms of contract completion, and you'd have to make sure the checklist was not a job description. Whether or not the contractors conspire to set the price or anything is none of your concern. You're simply a clearing house for very small cleaning contracts.

I think it's very doable. His business and income is really in chasing down people who need cleaning and people who can provide it. That doesn't have to have anything to do with employees. But it won't work as you've described it.

I was just blogging about this. Many times you find value and struggle with the model. http://news.ycombinator.com/item?id=3847651