The Exchanges

Q Yeah. Let's start with the customer. So when you were on back in, uh, August of 20, around August of 20, you said you had about 900 customers, but for those that are just listening now, what is a customer for you? Can you, can you, can you name one or two of them?

A Yeah. So we have, um, we have a B to B component of our business and a consumer. Um, we're 85% B to B, which is fleet in my world of car care, and then, uh, 15% consumer. Consumers would be like you and Austin, you need your car, your oil change, or something like that. Um, and then on the fleet, that's, uh, so the consumer part of business is very e-commerce-y, um, not super recurring, uh, et cetera. But then our fleet business is more SaaS. So these fleets have X number of vehicles, uh, They need services at a certain pace. The vehicles are driven, driven at a certain mileage. So like a SAS business, it has a predictable recurring, um, you know, not committed. There is some commitment there, but, but a, a very measurable, predictable kind of component to it. Um, within that bucket, the, our largest customers are rental car company companies. So we have all the large rental car companies are our customers, Enterprise Hertz, Avis Budget, Sixth, et cetera. Um, then we have a bunch of vehicle two point O companies. So these are next generation, um, car sharing networks, autonomous networks, uh, EV, uh, car sharing, uh, companies. And then the third bucket is logistics. So we work a lot with Amazon DSPs. So it's kind of fun to get back to my e-commerce roots on that. Uh, and then we, we have four other buckets of fleets, but those, those give you an idea of some of the customers t…

AI assessment note: “we have all the large rental car companies are our customers, Enterprise Hertz, Avis Budget”

Q So how do you, from a resource allocation perspective, what do you do? You look at, like, headcount per capita and make sure you've got one car with an X amount of million, or how do you measure that?

A That's an excellent question, because once you have these assets, it becomes a optimization problem, and the way we think about it is that the simplest metric is average daily revenue per truck, ADRT, is a metric we've come up with, and we're constantly optimizing that, and You know, so, so what you want to do is have the most number of, it's kind of like a Tetris game. It's kind of a fun simplification of it. So, so, so the board is the availability of the van with the technician, and then we're constantly trying to fill that board and, and put business in there. So some, some, because we have multiple different types of customers, it makes it easier. So, so a technician in Austin may spend the morning at a fleet customer out at the airport and then go pick up two or three services nearby. And that juices that average daily revenue per truck by having the mix of the consumer and the fleet business. Or maybe they go to AutoZone and do a vehicle, they do a rental car company, and then they pick up a Um, there's a, there's a car sharing network in Austin called Free to Move, so we work with them, so we may do some services for them as well. So the more customers we have in a geo, and, uh, be they B to B or B to C, the more opportunity we have to optimize what that truck does every day. Um, so we've been building up a ton of software on this. Um, Well, you know, there's this kind …

AI assessment note: “the simplest metric is average daily revenue per truck, ADRT, is a metric we've come up with”

Q Potential revenue. Interesting. Yeah. The other, there's humans involved here too. These aren't robots yet. So, so, and, and these are the person in Austin, for example, you said these are full-time folks, right? You're not, there's not a contractor network here.

A That's correct. Um, now we, we do build a contractor network because, um, when we do this fleet management as a service, frequently these fleets, um, like free to move in your city there, they'll say, we want you to take care of everything. Well, we don't do body work. We don't do, um, you know, other, other elements, heavy repair. Um, so that's where we're building a marketplace of third parties that we could pull in into the, the account and have them fix the windshields like safe flight as a partner there. Um, and then other services around the vehicle, but we'll do, We'll do the kind of the core of those services and be the primary coordinator of those services.

AI assessment note: “That's correct. Um, now we, we do build a contractor network because”

Q So that's 70 cents, 60 cents per capita in terms of net. Interesting. And in terms of, again, the costs, uh, obviously that, that, that eat up two dollars and 30 cents. The biggest I imagine is, is the people is the technician, right?

A Yeah. Yeah. And then, um, it's kind of interesting coming from the software as a service world. You know, I, I love 85% gross margins or whatever. Most SaaS companies have really high gross margins and I love that, but you, you end up spending it on sales and marketing. Um, you know, one of the really fascinating things about Spiffy that, that keeps me highly engaged, having, you know, spent 30 years battling for every lead and working them through a funnel, we have business that just shows up at our door that we turn away. Um, so there's, you know, when you create a better mousetrap and you're in the right kind of, uh, Megatrends that are happening. Uh, you, you don't have to spend much on sales and marketing. So our sales and marketing as a percent of revenue has gone down and it's sub 20%. Um, and I can see it getting to sub 10%. So, so what we burn up in labor and in cogs, we more than make up for compared to a traditional like software recurring revenue business in very low sales and marketing, very low R and D. Those 17 cities are on one software platform, and it could support 500 cities because it's in the cloud, right? So, um, so where we lack leverage in COGS, we gain it underneath the, the rest of the expenses.

AI assessment note: “Yeah. Yeah. And then, um, it's kind of interesting coming from the software as a service world.”

Q Yep. And if people are listening to this and they want to follow along as we capture more of your story here, they go to GetSpiffy.com. What will they see? What can they pay you for?

A Yes. So, um, we have a variety of different types of customers for, for the individual, um, it's on demand car care. So you either use our website or download an app and we will come to you and take care of your car. We started in wash and detail. We've added oil change and we're actually experimenting with tires. So we have a, um, you know, um, unlike Uber where it's a 10 99 marketplace, uh, our, we decided early on to take a page from Amazon's playbook. And these are our employees. So we figured if someone's going to be touching your car, which for many people is one of their top assets, we want them to be uniformed, trained, and using all of our equipment so that there's, they're, they're doing the best job possible. So a, um, so through our, our app, uh, which is the highest fidelity experience, you can manage everything around your car. So we come to you either at work or at home, take care of your vehicle and take that off your to-do list. So busy entrepreneurs like your listeners, uh, should be right in their wheelhouse.

AI assessment note: “it's on demand car care. So you either use our website or download an app”

Q Oh, that's what you meant when you said fleet. So that's like, what is that? Like Uber cars or?

A Yeah. So we've partnered, we work with Uber, Lyft, Turo. Um, our biggest fleet customers are rental car companies. Um, so the big guys, Enterprise Hertz, Avis, Advantage, et cetera. Um, You know, the, what's been really interesting with the pandemic is they got hit very hard early on, like the rest of the travel industry, but they've come back very rapidly because what's happening is let's say you're in Austin and you want to go to, you want to come visit me in Raleigh. You're probably not going to fly. Most people's confidence in the airlines are very low. Um, they have the highest COVID concerns with being on an airplane. Um, so people are driving a lot more So if you were going to drive from Austin to Raleigh, that's like a, an hour trip, I would estimate. Um, you're probably not going to want to put that on your 2009 gray Prius that has a check engine light. So you're probably going to, you know, it's a very good economical decision.

AI assessment note: “we work with Uber, Lyft, Turo. Um, our biggest fleet customers are rental car companies.”

Q So then fast forward, how do you exit this business? This was recently, right? Well, relatively recent, in 2013. So four years ago, how'd you get out of channel advisor and why?

A So, so we had, uh, uh, you know, uh, another person in the business. I always, I always kind of believe in succession planning and knowing what you're good at and not good at, and I'm a product guy. And, you know, once you get up to a couple hundred people, just making sure little things like you're doing regular performance reviews and, you know, you have a hiring process and you're measuring your sales team. Um, I'm not really good at that stuff. So, uh, I brought in a COO to help me with that. And he did a great job and it enabled me to focus on the product and marketing in areas that, that I felt like I could add the most value. Um, and then after, after we went public, you know, talking to the, the, the COO got promoted to president and he was real instrumental in the IPO process. It just felt natural. I felt like, you know, I wasn't really learning much more and he wanted to step into the role as CEO. Uh, and you know, I just felt like it was a great time for him to To, to mature and take that step. And, and I could kick myself upstairs to exec chairman and still be involved and still be an involved founder, uh, just not involved in the day to day.

AI assessment note: “I could kick myself upstairs to exec chairman and still be involved”

Q fifty million in 2000 to go to a year later. They say, we're going to shut you down. We got to go after Google. You say, don't put us in that briar patch. You buy it back for somewhere caught around a million in 2001. Now this eventually goes public in 2013. So, uh, that was new to you, right? I mean, you've never taken a company that big before.

A Yeah, that, that's true. It's always been my aspiration, and I remember, um, when I was a kid, my dad was a business person, and he got Fortune Magazine, and I remember the Microsoft IPO, and it said, the cover had a picture of Bill Gates, and it said, you know, Microsoft's hundred million dollar deal, and I was like, what, what is that? And I learned about IPOs for the first time, so I've always had it as a goal to take a company public, and you know, my, my first company, you know, I really couldn't see how I could get over 20 or thirty million in revenue. Auction was really a lottery ticket. And then with Channel Advisor, I said, I really want to find something that has a bigger addressable market that I can kind of ride for a longer term. And I was in a financial position to be able to do that. So, so that, that's kind of what the goal was in O-one spinning out Channel Advisor was to kind of say, let's, let's really moonshot this thing and see how big we can get it. And if we can do an IPO.

AI assessment note: “Yeah, that, that's true. It's always been my aspiration”

Q want to get to in the States to get 85% coverage. I imagine if I was the VC writing the last check, they're going, wait, Scott, you're in almost half right now doing a twenty million run rate. So are you saying like the max opportunity here is a forty million dollar run rate? Obviously your answer is no. So how do you generate more revenue per city over time?

A Yeah. So there's the maturity of the city. So in most of those cities, we're just doing fleet, right? So we haven't turned on consumer. Um, uh, and then, uh, you know, one of the metrics I use is if you look at our Raleigh market, which is one of our, our biggest ones, it's our home market. We're getting, um, you know, three dollars for every million people in our per capita. So, so, so that's kind of the ceiling, uh, that I'm aware of right now that we can get to. When I apply that to our 17 markets we're in, it's already like eighty million. Um, so then, You know, so, so there's, there's a penetration in each city. Um, and then the other growth drivers we have are more services. So I mentioned we're experimenting with tires. So, uh, rolling out tires everywhere and then lines of business. So we're really only consumer in five of our markets. We, we, we turned on a little bit of it, um, for, for a pandemic in 17, but we pulled back on that because fleets come back. So, um, and then, you know, there's, we're always looking at new kinds of lines of business or channels. So another one we're experimenting with is, Our, our B to B customers ask us if we can work on larger trucks and things like that. 18 wheelers and box trucks. Um, part of the, the, you know, the, the supply chain for e-commerce is running so hard. The trucks have no time to stop. So they have the check engine lig…

AI assessment note: “So there's the maturity of the city... other growth drivers we have are more services”

Q Interesting. What did Hertz do before you? Did they have their own full-time employees doing this?

A This is a fun story, and this is kind of part of the interesting things about startups. You, I liken it to, you're, you're pulling a string on a sweater, and you never know, like, what's gonna, are you gonna unravel the string, or is it just gonna pop out there, right? So we, we introduced oil change right after you and I talked. I think we were probably in pilot mode with it because it was the number one requested things consumers wanted. They wanted us to come and do an oil change. So we had to innovate and create a truck that could do wash and oil, and we did all this stuff. And then serendipity happened. One day we were literally doing a wash at a rental car partner. And the, the oil truck had oil branding on it. Spiffy oil change. And the guy literally said, oh my God, you do oil changes. We said, yeah, we're, we're working on piloting it for consumers. He said, look at those 60 cars over there. They're waiting on an oil change. And we asked the same question, but you have mechanics on staff. Why aren't they doing it? The way the math works is They pay these ASE certified mechanics, 30 to 50 dollars an hour. And when you pay someone that much, their triage list is, you know, uh, you know, engine problems, brakes, batteries, anything else but oil change. So, so they really don't want them working on oil change because an oil change has a perceived value of 40 dollars. Um, a…

AI assessment note: “they let them accumulate, and then they valet them to a quick loop place.”

Q Okay, and so, and there's like 800 or 900 then consumer customers every month. Yep. Interesting. Do you see recurring patterns here? Do they get their car serviced once a month?

A We do. It's kind of addictive. Um, so, um, and, and in the, you know, uh, it's kind of like, you know, you, you, most people don't drink Starbucks every day and it's kind of a treat, right? So, um, getting your car spiffy, it's a treat. We do skew, um, you know, higher on the female side versus the average internet, um, you know, um, yeah. So, uh, so there's a lot of moms and they're like, you know, Right now, everyone feels like your life's chaotic. This pandemic has kind of created things we can't control. So having your car clean is one of those things that's just kind of very, um, you know, for a lot of people is very pleasing. So, so to put some math on it, I know you're a math guy, uh, over 60% of our revenue each month is from existing customers on the consumer side. Like it's like 95% on the fleet side. So there's a high recurrence on the fleet side, obviously. You know, once you're in with, like, Enterprise and that's 17 locations, you're gonna do a lot of business with them. We also work with, like, U-Haul and Carvana and all those guys we mentioned. So, so yeah, so there's, um, you know, there's a high recurrence on a monthly basis, um, and then most of our customers, the average consumer washes their car every six months. We've got monthly washers, quarterly washers, six months and annual. So, you know, there, there's a variety of, of use cases we see.

AI assessment note: “over 60% of our revenue each month is from existing customers on the consumer side”

Q Huh. Very cool. Well, Scott, this is a heck of a story. It's fun. I mean, you also have so many, you didn't even talk about this, but I mean, you sit on so much like transaction data here too. I mean, you could eventually get into sort of that model as well. And it's a percent of GMV, right?

A Yeah, where, where I think this goes, and I'm a big study of Amazon, is, um, we're developing this software stack that's pretty, it's an ERP for running a mobile first, a true, like, you know, we think mobile first, meaning phone, I mean, like mobile, like stuff, services come to you, digital services. I think where we go next is we're starting to license out our software. So, so, so this stack we have built, we could not have built unless we had built the company. So, um, that's, That's where I get really excited is we're essentially a software company that, that looks like a service business, um, and has SAS attributes to it. I think we've become a SAS business.

AI assessment note: “I think where we go next is we're starting to license out our software.”

Q That's good. Yeah. We're recording here on August fifth. So if people missed our first interview we did together, which is back on April 30th in 2017, give it a refresher. What's Spiffy doing?

A Yeah. So, so I started, uh, As you mentioned, channel advisor in the e-commerce world. So I love e-commerce and love this intersection of, of digital, digital, uh, you know, things going digital, or as Andreessen Horowitz says, soccer eating the world. Had my first Uber experience in 2011, and as an e-commerce guy, what it meant to me was we're gonna see services go digital like we've seen products go digital. If you look at, I'm also a hobby economist, uh, uh, and if you look at the GDP of the United States, consumer services are twice the size as consumer goods. So as an entrepreneur, I said, that's going to be big. So something twice the size of e-commerce is pretty large. And I think it's going to happen faster because it's taken a long time for e-commerce to get to where it is because we had to get digital payments and the phones and all this stuff, broadband, all this jazz, all that's in place now. So, um, started Spiffy as a way to explore this area. Um, I had previously owned, uh, some car washes. So this kind of intersection of digital services and taking care of your car was really interesting to me. Uh, yeah, that's decided to start Spiffy in 2014, so I've been at it about six years now.

AI assessment note: “this kind of intersection of digital services and taking care of your car”

Q If I'm Hertz, right, in Raleigh at the airport, I've got a hundred cars at that location, and I need you to clean them or oil change or whatever, vacuum them once every week, what am I going to pay you?

A Yeah. We'd like to bundle it. We call it, uh, you know, like this fleet management as a service. So F-M-A-A-S. So, so what we want to do is really, um, enter into one of our, and again, this is kind of like taking our SAS knowledge and applying it to this. So, so it's land and expand. So you, you know that really well. So we go in, usually, uh, our customer has an acute need, like an oil change problem. And, uh, we go in with that and then we want to take care of not only oil change, but wash tires, windshields. We want to take over the whole vehicle. And then we typically start with preventative maintenance, and there's another wedge, which is in, in fleeting and then, uh, removing vehicles, um, from the whole cycle. So, so what we try to do is get in there and do everything. Um, but, you know, of that fleet business, uh, about a third is oil change, a third is wash, and a third is other, which includes tires, brakes, light repair, windshield, odor elimination. We're doing a lot of that. Um, shout out to the cannabis industry. There, uh, we're, Freakonomics. That's, that's hugely benefiting us because as people smoke cannabis in cars, um, it creates a lot of odors, which is good for me.

AI assessment note: “We'd like to bundle it. We call it, uh, you know, like this fleet”