Mom-preneur eyes options to create residual revenue

When Debra Cohen's contractor-referral service had more business than she could handle, she segued into teaching others the business.

Now thanks to Cohen's guidance, more than 300 companies from New York to Alaska have modeled their operations after her Hewlett-based service, Home Remedies of NY Inc.

After collecting a fee for showing them the ropes, Cohen receives no royalties or licensing fees; each startup operates under a different name of its choosing. Except for charging firms a yearly Web-hosting fee of $150 for management software, Cohen derives no other income from them.

And therein lies her challenge, she said.

"I never worried about the residual because I was doing so well," said Cohen, who scored revenues of $698,000 in 2004, her best year to date, but typically generates between $250,000 and $450,000. Last year revenue tumbled to $100,000 because of her father's illness and death, which made it difficult to focus on the business, she said.

Residual revenue streams are important to small-business owners because they protect "against business fluctuations and lost productivity," said Janet A. Lenaghan, associate professor of management at Hofstra University's Frank G. Zarb School of Business. They give owners time "to step away from the office" and create "a better work-life balance," she said.

RAPID GROWTH

Cohen launched Home Remedies in 1997 as a service that prescreened contractors, averaging a 10 percent commission for customer referrals that resulted in work. But two years later, unable to handle the demand for her service, she expanded into helping others duplicate her business model, which she named the Homeowner Referral Network, or HRN. Last month she launched Aging inPlaceReferrals.com to drum up more contractors and leads, and give HRN owners another business marketing tool.

Cohen started Home Remedies as a stay-at-home mom-preneur and continues to operate that business and HRN from her home. She investigated franchising Home Remedies, "but it was too big a proposition and complicated."

HRN charges startups a one-time fee, from $1,995 for a 91-page manual and unlimited leads,up to $6,995 for services that also include management software, 10 hours of consulting, a custom website and e-newsletter.

Cohen's one employee, her husband, helps run the company and handles bookkeeping, while freelancers handle Web hosting and administrative tasks such as billing.

Cohen is toying with the idea of licensing Home Remedies to second-tier real estate companies looking to stand out by offering "comprehensive concierge service" for homeowners.

But licensing is not an inexpensive way to achieve a residual income, said Harold L. Kestenbaum, an East Meadow franchise attorney who has spoken to Cohen about her options. Under state law, a New York-headquartered business that charges a fee to companies to license its name is considered a franchise, he said.

ALTERNATIVE FRANCHISING

Franchising would mean spending as much as $25,000 for legal and accounting work, including trademark registration, Kestenbaum said. Also expect to pay $15,000 for a consultant to produce an operations manual and $2,000 to $5,000 a month for marketing to "get franchise prospects and leads," said Kestenbaum, author of "So You Want to Franchise Your Business" (Entrepreneur Press, 2008).

Ken Stein, managing director of The Kensington Company, a Roslyn Heights business broker who Cohen has also contacted for advice, suggested she "monetize her website as a place for consumers to find the proper contractor, with contractors paying for leads or consumers joining as members." Depending on what her agreements with her current HRN firms state, "she could develop a premium service that would provide additional information" about the leads she offers them, Stein said.

Cohen nixed franchising because of the expense but is attracted to the idea of monetizing her website.

Since she is snagging only about 30 leads a month through her website and the HRN network, Cohen expressed interest in partnering with an online lead-generation firm to increase leads, add value to her service and create a residual income. "I need someone who has that kind of expertise," she said.

AT A GLANCE

Name: Home Remedies of New York Inc., Hewlett

President: Debra Cohen

Established: 1996

2013 revenues: $100,000