Blue-collar entrepreneurs say it's getting harder to turn a profit as competition for 'sweaty startups' heats up

• "Sweaty startup" describes business ownership in traditionally blue-collar industries.
• Sweaty startups are facing challenges from inflation and increased competition.
• Private equity interest in blue-collar businesses is rising, adding pressure on small operators.

Patrick Hocker, 35, never envisioned owning a pest-control company. He waited tables at 18, married young, had kids, and became a security guard.

After meeting someone who worked in pest control, he got into the industry himself and, after a layoff, decided to start his own business in 2020. He knew his market in northern Virginia could be profitable because of its higher household incomes.

"I always said I wanted to own my own business one day, but I didn't want it to be in pest control," Hocker said. "Pest control is not sexy. It's dirty. It's hard, physical work."

He said that he spent $5,000 on startup costs including new equipment for his company, Bluebird Pest Solutions, and that he relied mostly on word of mouth and Google reviews to build the brand.

However, his four-person company isn't growing as fast as he hoped. He said he thought inflation had made customers more budget-conscious.

"We've found that people are taking a lot more time this year to make a decision about who to hire, or if they're going to hire someone for pest control, there seems to be more of an emphasis on price over necessarily buying value in that service," Hocker said.

Rising prices for vehicle-maintenance supplies and labor costs have eaten into his profits. He said he'd been "playing financial catch-up," as he's relied on this business as his family's sole source of income and cashed out his retirement fund to finance it.

Hocker is running a " sweaty startup ," a term coined by the entrepreneur Nick Huber, who owns nine such companies and has amassed communities on X and Reddit. Sweaty startups are blue-collar businesses , often in unglamorous or laborious fields like septic services, car washes, or lawn care. It's what your grandparents would've just called a small business, but it was a tongue-in-cheek answer to the Silicon Valley-style entrepreneurship being glorified in culture at that time. The community boasts success stories of profitable car wash owners and successful vending machine owners.

"If you look at who is truly wealthy in these small towns, people who are eating at the nice restaurants and at the nice country clubs, you'll find that they didn't have new ideas at all," Huber told BI. "They didn't have tech startups aimed at changing the world, and they didn't build a billion-dollar business. Most of them did something common or boring, and they just did it uncommonly well."

While some sweaty startup owners told Business Insider they loved the work and felt fulfilled, many said it was becoming harder to scale up. Though consumer spending has been on the rise since 2020, with a marked shift from goods to services, business owners generally blamed customers' tightening budgets. The reasons likely also include high interest rates and increased competition.

Growth is challenging, but sweaty startups still provide plenty of opportunities

Huber said he saw sweaty startups become more popular in the first two years of the pandemic following mass layoffs and a rethinking of work. While some entrepreneurs go into these businesses hoping to strike it rich — some have even left Wall Street jobs to do so — many do so because they want more flexibility and time with family, financial risks be damned.

Huber said that in some ways the business landscape is getting harder for founders to break into. High interest rates have hurt owners borrowing cash to open their businesses. While the number of sweaty startup founders seeking venture capital is likely low, Huber said he's known it to happen.

"A lot of venture-backed businesses are in a lot of trouble and hurting right now," Huber said. "They raised a lot of money in 2021 and 2022, and now they're seeing the economic headwinds from inflation and are unable to raise their next round. They're kind of stuck."

Sources said private equity firms have been eyeing smaller businesses in these industries, which could tighten competition. For instance, private equity firm Alpine Investors has partnered with hundreds of businesses across industries such as HVAC, plumbing and electrical, roofing repair, and tree care.

The American Investment Council, a lobbying and research organization for the private-equity industry, estimates that private equity owns only about 2.5% of all middle-market businesses, or those earning about $10 million to $1 billion, in the US. Still, some small businesses look to private equity to scale their businesses in different markets, even if that means overhauling operations in some cases.

"Small businesses partner with private-equity firms because they provide access to capital and organizational support to help companies grow," Drew Maloney, the council's president and CEO, told BI.

Some business owners who left the corporate world to run a sweaty startup said it came with plenty of benefits but lots of stress about staying afloat.

Stan Chen, 36, worked at BlackRock , then in mortgage sales, and then at a global payments company before getting into a sweaty startup. His family operated restaurants in Boston for decades, and after years in the corporate world, he wanted to transition to a service-type business.

He said he "didn't want to have a boss, climb the corporate ladder, and deal with office politics." Referring to his family, he added, "If immigrants who barely speak English that came here with $20 can run a business of three to four restaurants and basically become millionaires and have a nice middle-class lifestyle, I'm pretty sure I can do it too."

He saw that BerryClean, a house-cleaning service in San Francisco, was for sale. After meeting with the management and employees — who he said reminded him of his family — he acquired the company in July 2019.

He said that when the pandemic hit he lost 90% of his business, but he applied for loans and improvised. The company built its own "mini Uber service," Chen said, offering rides in its 20 cars and minivans. When demand for cleaning picked up again, he sometimes worked 18-hour days to keep operations running. The company's washers and vacuums would regularly break down, and he would sometimes have to do laundry at his home to keep clients satisfied.

Operations have grown recently, and he said he's seen staff get their lives better on track and "achieve the American dream." Despite the company's growth over the past few years, though, Chen said business had gotten tougher recently with growing competition in San Francisco. He said he had to raise prices to keep up with inflation. He noticed that people wanted to spend less on cleaning services in his area, and the company dug into profits to increase its advertising.

"A lot of people get into this kind of business for the wrong reasons, because they listen to a podcast or they're on social media, thinking it's easy money," Chen said. "It's not easy money — it's the hardest money there is. You have to earn your keep every day, and you have to get your hands dirty. If you don't do a good job, you're fired."

Alejandro Florez, 27, the president of The Cleaning Pros of America in Bradenton, Florida, said the growing investments in janitorial companies in his area were in some ways antithetical to the idea of sweaty startups.

"A lot of small cleaning businesses are pulled up by the bootstraps, and we usually start them out of necessity as our only avenue of making money," Florez said.

Both of his parents were janitors , and when he was a senior in high school he started a small cleaning company that he grew by knocking on doors and cold-calling. He relied on trial and error and supplier advice for pricing, production rates, and cleaning strategies for different facilities.

He said this year he's had nearly $2 million in revenue with two dozen employees and over 30 clients. He hopes to grow over the next decade by expanding to Jacksonville or Orlando. Still, he said that because the pandemic helped the cleaning industry "massively," markets became much more saturated. He estimated that 45% to 55% of his overhead went to paying his employees.

"For our market, even though it's very profitable and attractive, there's a low barrier to entry," Florez said. "There's more people at the table wanting to eat from that table."

Florez said the growth of private-equity investment in his area had made competition even more difficult. Since 2021, he said, he's been approached by a dozen private-equity firms wanting to invest in his company, but he's turned them down.

"When you get private equity into the mix, they're bringing a different dimension of business and being able to scale it differently," Florez said. "There are firms that can operate on 10% net profit, which I can't do. There are firms out there that are being a lot more aggressive."

Trial and error to figure out what works

For some sweaty-startup owners, staying ahead of the competition requires bouncing from company to company based on changing needs.

Chris Salisbury, 35, has been an entrepreneur since he was 16. He started a small house-painting business while in high school and a few other companies in his 20s.

In 2016, he sold everything he owned; moved to Brooklyn, New York; and decided to start a new business while living in a wood shop. With two friends, he launched Spayce, a commercial cleaning and handyman company that worked with high-profile clients like BuzzFeed — Salisbury said the business brought in $120,000 in its first week and over $4 million in its first year.

During the pandemic, Spayce manufactured Covid barriers and secured new contracts with clients. Salisbury also launched the brand We Paint Kitchen Cabinets, which he sold a year later.

"I pivoted 100 times since COVID happened, but it did initiate the need to automate and start combining all of the things that I learned how to do by hand and being around these tech companies," Salisbury said.

Salisbury and his business partner then launched nuDoors in July 2023, specializing in cabinet-door replacements made mostly of recycled material. Though he didn't have much experience in the cabinet industry, Salisbury pulled from his past companies and asked successful people in the industry for help.

Salisbury said he and his partner spent over $1 million on new equipment to better automate their manufacturing processes but didn't spend a penny on advertising. He added that the company had grown each month since it was launched and that he expects it to be profitable by next year.

"The smaller shops are going out of business, not having any workers because they're doing the old way of doing things, and no one's filling the void between the big guys that are too big to talk to you and the small guys going out of business because they can't compete," Salisbury said.

Are you a sweaty startup owner or manager? Reach out to this reporter at nsheidlower@businessinsider.com .