The right business model — and its right execution — is what determines whether a startup goes big or goes home. The renowned author of Business Model Generation,
Alexander Osterwalder, says, “A business model describes the rationale of how an organisation creates, delivers, and captures value.”
The business model is pivotal to the growth of a company, helps in earning revenues, raising funds, and running the operations. Business model innovation comes not only from innovators but also from understanding and learning from other business models. This is exactly what home service startup Lifeasy, which was launched in 2016, did to figure out what would work for it.
Most on-demand home service providers work on two business models — marketplace or aggregation. A marketplace model facilitates sellers’ services or products on one platform and prices are fixed by the latter under their respective brands — such as Flipkart — whereas an aggregation model onboards service providers and fixes prices under one brand, like Ola.
The main challenge in both these business models in the home service sector is execution. “These models are facing challenges as companies have to rely on freelance or independent technicians to deliver the services on behalf of them,” says the founder of Lifeasy, Rakesh Gupta.
The Delhi-NCR-based Lifeasy instead decided to tread the path less chosen by adopting a full-stack (end-to-end) delivery model, in which the startup relies on its own team members to accomplish the task at hand instead of depending on sellers or partners. “By doing this, we could bring a lot of quality and customisation to our customers,” says Gupta.
Lifeasy’s biggest competitors, UrbanClap and HouseJoy, which are leading the hyperlocal charts, have aggregated and hybrid (aggregation plus in-house technicians) models respectively. They too had to adapt their business models to the Indian market to survive the hyperlocal business bubble burst.
The Indian home services industry is said to be worth close to $100 Bn with an average ticket size of $295 (INR 20K) per household per annum.
Home Services With Assured Quality — That’s Lifeasy’s Promise
Once it decided to steer clear of both these models, Lifeasy developed a platform to serve its end-to-end delivery business model for home services. Then, it built a team of in-house technicians from scratch, and trained them in resolving tasks across as many as 18 home service categories. The aim of the end-to-end business model was to ensure quality and consistency of services.
While starting up Lifeasy, the founders also infused their learnings from a previous stint in which they worked with cable operators, says Gupta.
The founders infused about $184K (INR 1.25 Cr) from their personal savings to start up the company. Initially, they gained a deep understanding of the various aspects of service delivery, customer expectations, operational issues, and technology requirements.
The bootstrapped consumer service startup was officially launched in April 2016, ready to foray into the online home service segment to try and succeed with its new, then untested business model. Even Housejoy migrated to a hybrid model only in August 2016.
“We have listed all the popular home services along with the prices on our platform. Our operator gets an in-depth brief on the requirement from the customer before sending technicians, and also gets post-service feedback,” Gupta explains.
Currently, the startup has 125 technicians to cater to the hyperlocal on-demand market in Noida, Ghaziabad, Delhi, Faridabad, and Gurugram. It has a total team of 170 at present.
Finding technicians for the unorganised sector, that too those who could multitask, was one of Lifeasy’s biggest challenges. “There’s a lot of responsibility that comes while catering to this domain — to hire technicians or service people and train them. Though they come with their own expertise, they aren’t familiar with the corporate working environment. So we have to train them again,” Gupta says. “We had to bring in more manpower and did a lot of word-of-mouth marketing to hire technicians,” he adds.
Lifeasy Is Cash Positive, Targets $7.3 Mn Revenue By 2020
The startup recently announced that it is now a cash-positive organisation. In FY 2017-18, the company’s annual revenues were approximately $474K (INR 3.25 Cr) and its monthly revenues was $36K (INR 25 lakh). “From March 2018 onwards, we have been generating revenues of $72K-$87K (INR 50 to 60 lakh) per month, up from $102K-116K (INR 7-8 Lakh) in the corresponding period in the previous year. This is why we are a cash-positive organisation now. Operationally, we are at a corporate level, we have no losses,” explains Gupta.
Gupta claims that Lifeasy is the first startup to be cash positive in the on-demand home services industry in India.
According to an Inc42 report, UrbanClap and Housejoy have pulled off their own business models to emerge as the two top players in the online home services segment with FY16-17 revenues of INR ~11 Cr ($1.6 Mn) and INR ~32 Cr ($4.72 Mn) respectively.
Lifeasy was founded based on the idea that technical manpower density is more important than brand visibility. “Considering this, we invested more in hiring the team and making ourselves visible digitally to generate the requirement area wise,” says Gupta.
The startup plans to cover a significant portion of the Delhi/NCR market while slowly expanding its presence to Bengaluru and Mumbai. It is currently in the process of raising funds as it plans to reach the $7.3 Mn (INR 50 Cr) revenue mark by Q1-2020.
On the service delivery side, Lifeasy plans to scale up its operations to 500-600 services a day from the current average of 150 services. The startup claims that it has completed a total of about 30k services and deliveries. It completed 4k orders in FY 2016-17 and more than 25k in FY 2017-18, with a revenue stream of $479K (INR 3.25 Cr).
Players In The On-demand Home Service Market
Hyperlocal services continue to be the hottest category in the startup domain in India. “The copious rise of Internet users, surge of payment options, increase in geo-location aware devices and increased demand for insta-delivery, have paved the way for hyperlocal businesses in India,” says an Indian Hyperlocal Market report by Inc42.
Apart from UrbanClap and HouseJoy, Lifeasy also directly competes with befikr, a Delhi/NCR- based home service provider. The startup recently raised about $2 Mn in a Series A funding, which it plans to utilise it to expand its services in Pune, strengthen its technology infrastructure, and for brand building. Other startups catering to home services in Delhi include EZ Home Services, helpguru, easyfix, and Zimmbr, among others.
Lifeasy maintains that its current cost per acquisition (CPA) is much lower than other existing players “as we don’t need to generate extra leads for independent technicians.”
Going ahead, being a manpower-intensive model, the major challenge for Lifeasy will be to scale up fast without compromising on the defined quality parameters.