Spiffyrevenue & funding

Introduction hello everyone my guest today is scott wingo he's a four-time entrepreneur based out of the research triangle park region in the north carolina south carolina sort of area before spiffy he started channel advisor in 2001 and took it public in 2013. now he's exploring the intersection of digital services and car care scott you're ready to take us to the top i am how are you i am doing well how are you doing i'm doing great still in the research triangle park area i am yeah we just dodged a hurricane as of recording here so uh always always fun in this area so uh we we had a narrow miss so it was good to see that go by us and not hit us that's good yeah we're recording here on august 5th so if people missed our first interview we did together which was back on april 30th in 2017 given a refresher what's spiffy doing 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 digital digital 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 going to see services go digital like we've seen products go digital if you look at i'm also a hobby economist 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 i 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 and when you came out in 2017 Raised i think you said you'd raise about seven million bucks still seven million raised or did you raise additional capital uh uh you know fortunately knock on wood have been uh fortunate enough to raise more so i've raised a little north of 30 million okay and when did you do that was that in response to covet or pre-covet pre-covered yeah so in that in those three years from you know our two years from 17 to 19 we raised about 30 million uh 20 20 additional from kind of like when you and i last talked yep and if people are listening to this and they want to follow along as we capture more your story here they go to get spiffy.com what will they see what can they pay you for yes so we have a variety of different types of customers for for the individual 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 uh you know unlike uber where it's a 1099 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 doing the best job possible so a so through our our app 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 should be right in their wheelhouse so to say my check engine light on my 2009 great prius parked outside has been on for about six months for two reasons number one i don't believe it i think it's an upsell strategy by the manufacturer uh and number two i'm lazy and i don't have time to go stop by to get my oil changed and sit there in the car shop this is what you build spiffy for yeah it's kind of what part of the convenience economy um that i learned a lot about the ecommerce world uh the ultimate convenience is amazon prime right where people raise their hand and say i'll pay a hundred dollars to get my stuff faster and shipped to my house so that that is our customer on the consumer side is the busy uh person like you um or uh we have a lot of busy moms that use our service and yeah so you know no one ever woke up and said wow i'm really looking forward to uh spending an hour in this quick loop place uh with my great prius um or you know or the toyota dealer um covets amplified a lot of that kind of stuff as you could imagine so not only was it not fun before kohu but now you know um you know none of these lobbies are essentially clean and there's you know the uh the use of ppe is kind of scattered across these kind of folks and so so it's even like rest of of e-commerce we're seeing a pretty big lift on our consumer business from covet yeah so something i'm looking at your pricing now and comparing it to my notes from 2017. for some reason in my 2017 notes i have our rpoo down as a thousand dollars but now when i go to your site there are options where i can pay you 59 bucks to get the spiffy car wash for example did you move from enterprise to direct to consumer or something yeah what that is is um so uh prior to covid uh office parks are the number one channel for consumers and on average we make a thousand dollars a month at an office park so that's right yeah yeah our average selling price is like 65 um uh so definitely not a thousand dollars to take care of your car but yeah office parks we make a thousand dollar at the office park we get this kind of recurring revenue very sas like kind of a business model at office parks and then uh we're also since you and i talked we've really expanded our fleet operation um and also since you and i last talked we're now in 17 markets and i think when we talked we were probably in five 17 markets so what does that mean major cities yeah yeah so raleigh charlotte uh denver phoenix las vegas la san francisco new york washington dc uh orlando tampa miami to just kind of dallas if i didn't say that all domestic for now though right yeah yeah so what it let's talk real quick about the office park model because again when you came on i think you said you had about 170 office parks average was a grand per month so we kind of backed into a run right there of like a two million run rate from office parks no one today is going into office parks has that revenue completely lost at all basically to covid it has yeah we're actually starting to see it here in north carolina i forget where you're located but uh it's texas it's austin yeah yeah yeah i'm sure in austin uh we're seeing dallas as well um it's it's coming back um so as as we're in like phase four here in the north in the carolinas and people are starting to go back to their offices i do think it's going to be a year before it gets to some normalcy so was it before Monthly recurring revenue yeah uh so for us uh so from that we we were pre pandemic we're at about a 20 million run rate and office parks were about 4 million of that so we've grown it to 4 million arr yeah that's that's fascinating yeah so so for when the pandemic hit part of our pandemic remediation was to really swing hard over to the residential side so we replaced a lot of that with residential services um they're both proper for us but if we if we had our choice we would do office park but obviously we didn't have a choice with a pandemic so help let's let's understand that for a second so in let's just use july for example how many unique sort of consumers paid you at least a dollar for one of your services um that's a good question so every day we do a thousand services i would say um 150 a day are consumers okay so times 30 so 4 500. yep four kids custom okay so hold on so 150 are direct to consumer the other 850 are what fleet oh yeah so that's when you said fleet so that's like what is that like ub uber cars or yes so we've partnered we work with uber lyft turo our biggest fleet customers are rental car companies um so the big guys enterprise hurts avis advantage etc you know 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 are very low they have the highest coveted concerns with being on an airplane so people are driving a lot more so if you were gonna drive from austin to raleigh that's like a 18-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 gonna you know it's a very good economical decision my mom's gonna love you by the way we're going to we're going to take care of that uh the uh if i have to send someone from dallas yeah so so it's a very good economic decision for you to rent a car versus putting those miles on so what the rental car industry is seeing is they're almost back to 85 90 percent of pre-covered levels even though air travels still at like you know 10 percent yep and so just drawing the math if you've got sort of a 20 million run rate today which you mean about 1.6 million a month in revenue across the 1 000 a day starting those kind of services so 30 000 services sort of rendered that's like a average price of 53 bucks per service something like that 55 yeah on a blended basis so consumers kind of are on the higher end and then with our fleet customers we're literally going to locations and doing 60 services all lined up so our economics get better so we can offer a lower asp for for those kind of wholesale experiences for those 30 000 sort of services done obviously that's those 60 services are going to all belong to one hertz one customer versus 60 individual consumers Currently serving 900 customers we're going to their home as 60 individual customers how many total customers would you have again counting hertz just as one where you do 60 services uh we probably have 20 to 30 largely clients yeah okay and so there's like 800 or 900 then cut consumer customers every month yep interesting do you see recurring patterns here do they get their car serviced once a month we do it's kind of addictive um so and in the you know uh it's kind of like you know you most people don't drink starbucks every day and it's kind of a treat right so um getting your cars to feeds a treat we do skew uh you know higher on the female side versus the average internet uh you know 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 kind of very um you know for a lot of people it's 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 17 locations you're going to 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 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 on annual so you know there's a variety of use cases we see and of your you said of your 20 million run rate four million of that is the herzes the u-hauls the the fleet services or backwards backwards 16 million people yeah interesting what did hertz do before you do they have their own full-time employees doing this this is a fun story and this is kind of part of the interesting things about startups you know i liken it to you 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 the guy literally said oh my god you do oil changes we said yeah 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 ask 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 an hour and when you pay someone that much their triage list is you know engine problems brakes batteries anything else but oil change so they really don't want them working on oil change because an oil change has a prestige value of 40 dollars and you just don't want to spend more labor on it than it's worth so what they do is they let them accumulate and then they valet them to a quick loop place so so our our value prop is we say all right that's great but look those cars are sitting there for five days on average losing 50 a day in rental opportunity we're gonna give you a button on your phone you press that button say we've got 60 cars we'll be there in less than 24 hours usually you know for 60 cars we could probably be there in like 30 minutes and we're going to knock those out for you you don't have to valet them we'll do them in place you don't have to move them and you can get those cars back out rented instantaneously so that's that's once we discovered that um then we said well is this an anomaly so we started selling against that and we just found it's the case everywhere and no one had thought to solve this because it's just one of those things that you know they had a solution today that was good enough but we came in with a 20 times better solution that that they had never kind of thought of needing i'm curious what capex and your human labor looks like on this so how many of these trucks or these fleet these vehicles do you hold on your balance sheet depreciating assets yeah i'm a software guy so i'm glad you're sitting down so uh we wait we have 210 trucks across the united states oh my goodness and you've obviously you've purchased all them now you probably can't get them without putting all cash up right you can probably get loans on them yeah what's really interesting is there's a whole leasing infrastructure we've discovered around um this world so we lease uh 95 of it and you can even we put a lot of equipment in the trucks we lease that as well so so it really is converts it from a capex to an opex which is really nice what was the last city you opened in uh the last city we opened in probably let's say phoenix ignoring humans when you add up all your leasing and all your equipment rental and all that just to get the thing in place to then put a human in to be able to service the trucks and go to locations what does it cost you to open a new city um so ignoring humans yeah yeah so so just just the equipment is sub 20k oh oh wow okay that includes the truck and so what's the minimum you require first a place like phoenix is it one truck two trucks five yeah so we like to start a truck like that at like four trucks um okay and then a city like phoenix we start at four we start with a fleet client um it's kind of an anchor because that that lets us get the revenue up to kind of a million run rate and then we can layer in residential services um another this is actually a good time to bring this up another thing we're doing due to the pandemic is the number one inbound request we get is from people that want to franchise what we do at smithy um and we've been reluctant to do that because we wanted to really kind of get the playbook so that we could make it so that anyone could be successful with this also as a you know there's a lot of negativity around franchising um you know i've discovered there's a lot of snake oil and that kind of stuff so so during the pandemic we started looking at this and you're very data driven and so am i one of the things that drives me crazy is there are people like let's pick on austin there's people in austin that download our app and request a service every day and it kills me as an entrepreneur to have that just kind of fall on the floor so so we have way more demand than we can handle and some of it's out of our service area and when we do an analysis on that a very rich area um where we get a lot of demand is what i would call tier two cities so uh san antonio to kind of give you an example of a texas city that you'd be familiar with we'll never go to san antonio but it's a great city has population 500k i guess maybe approaching a million kind of a larger metro area that's a great space place for a spiffy location but we've decided we would like to franchise those kind of cities in this 500 800 000. so we've opened up franchising so what we what we tell franchisees which is true for ourselves as well is uh you know the the get started cash outlay is pretty small but then all in you know you start and you're you're losing money like any startup and then you kind of get to profitability um you know all in to get a city profitable for us is somewhere around 100 to 200k and a lot of it depends on how big we start so if we start with four trucks that's gonna be like the 150 we could start with two or three trucks and get it down to sub 100k okay interesting so you say you will never go into city like san antonio because you're saying you know what there's no way we get to like a max run right here of a million and we certainly can't scale it past that it's better to have a franchise model and let someone go make 700 grand a year yeah it's really an opportunity cost question so so we're going after the 50 largest metros owned and operated um and i come up with that metric because when amazon rolled out prime now they amazon's available everywhere right they have 250 fulfillment centers but they stopped at city 50 for prime now which is their same day delivery and when i asked the lady that runs that why'd you stop at 50 cities the answer is we can get to 85 of prime households by just being in 50 markets in the united states as a software guy never having done this geographical kind of board game thing that we do at spiffy i was under the impression we'd have to open up 300 markets to kind of cover what we want to cover but but amazon kind of you know i figured their data is pretty good yeah they basically kind of said no you can your roadmap's really 50 cities so that's what we're really focused on and we're in 17 of those 50 and those are the ones we've reserved for ourselves and so then we'll never have the the you know it's going to take us another five years to get those knocked out so we'll never have the opportunity to go to san antonio we would probably move to international at that point and go into canada or london or something like that um so so it creates this this nice kind of layer where we think franchising makes sense because you can build a very profitable business in san antonio that's a great business and just not on you know not a priority for us 210 trucks 95 percent leased along with all the equipment so you avoid capex it's more opex humans obviously are critical here someone has to drive the truck someone has to be a trained mechanic to service and do the oil change how many full-time employees do you have on your team today yeah right now we're at about 150 um and that's lower than the number of trucks and that's because of the pandemic so so at our peak we had about 300 technicians of the 150 today how many are technicians that they're that's our technician count we have about 40 people in headquarters 150 technicians so about 200 total people oh i see i see okay so 150 technicians interesting and so um what happens to the are you able to cancel the leases on the trucks you're not currently using or do you just have to eat that as op-ex yeah during these pandemic times we've been able to work out with our partners both for leasing uh you know facilities as well as leasing vans to to get some accommodations there to help during the pandemic this is interesting okay cool well listen we've got a lot of more questions here we got a lot of sort of growth strategy i mean a question i have for you is you say you're in 17 markets now yo stops for about 50 or 50 is what you 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 20 million run rate so are you saying like the max opportunity here is a 40 million dollar run rate obviously your answer is no so how do you generate more revenue per city over time yes 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 will 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 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 80 million um so then you know so so there's there's uh penetration in each city and then the other growth drivers we have are more services so i mentioned we're experimenting with tires so rolling out tires everywhere and then lines of business so we're really only consumer in five of our markets we we turned on a little bit of it 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 b2b customers ask us if we could work on larger trucks and things like that 18 wheelers and box trucks um part of the the you know the supply chain for e-commerce is running so hard the trucks have no time to stop so they have the check engine light like you do and so so we've rolled out in eight of our markets a ability to do higher you know larger trucks as well so so you know at some point i could see we could help dealers um and then you know the other area that's kind of very green for us is autonomous fleets there's a lot of innovation going on around the vehicle we keep track of and we have a lot of ideas of things we could do there as well so all those are growth factors that we haven't even really tapped into yet but but in your most mature market it's three dollars per capita top line revenue yeah it's an interesting way to think about the p l if we continue that down so can what can you hit net on three dollars per capita uh net 20 now and i think we can get to 25. okay 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 the people is the technician right yeah yeah and then um it's kind of interesting coming from the software as a service world you know i love 85 gross margins or whatever those sas 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 mega trends that are happening uh 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 d those 17 cities are on one software platform and it could support 500 cities because it's in the cloud right so so where we lack leverage and cogs we gain it underneath the the rest of the expenses scott this is good stuff let's wrap up i could by the way i could see you eventually i mean if you end up building like you know amazon one's last mile delivery they have a fleet of drivers but if you end up building like last mile services right where it's like now uh i'm gonna make this up uh directv is licensing your fleet to do installs of their routers when people buy new i mean you can sell that space for all kinds of stuff i imagine right absolutely yeah yeah we want to kind of start up the car and then provide more services we don't have to be anchored to the car um we could move into some home things but even even better um and you'll get this so i'm a obviously an amazon nerd um you know the genius of amazon is there a software company that that kind of built the software by building a retailer that has super low margins uh and then you know they they ultimately licensed that software out and that became aws as we know it today so i think we're building the operating system for a digital services company so even better i want to go to your electrician your hvac guy and say look nathan needs a digital experience he's you're going to have to have an app to work with nathan in three years because that's just going to be table stakes there's no way you know the austin electrician is going to go build an app um so so we can provide them that that really kind of high-end front-end experience and then also the back-end piece to go make that happen and deliver to you a much better digital experience smart mousetrap today with oil changes big tam in the future for being that platform i'm excited to watch it grow scott let's wrap up here with the famous five number one favorite business book uh it's a tough one i'm gonna go good to great number two is there a ceo you're following or studying um elon you gotta do it spaceships and electric cars doesn't get better doesn't get better than that number three what's your favorite online tool for building spiffy favorite online tool um i just found this really cool uh demographic tool for you know you can go into any area like i could go in austin and draw a circle within 10 miles of the airport and know the demographics of that city it's called spotlight so it's it's been super interesting for another again a software guy that's never done this geographic thing number four how many hours of sleep to get every night six and situation married single kids uh married three kids married and three kids good and how old are you i am 52 52 last question what do you wish your 20 year old self knew i would say buy as much amazon apple facebook netflix stock as you can that's different last time you said trust your instincts [Laughter] i love that guys there you have it get spiffy right now doing a 20 million dollar run rate servicing several thousand or a thousand a day basically car oil changes car cleanings etc a lot of their market 16 million of their run rate is servicing fleets like u-haul fleets or car rental fleets things like that but they also turn on obviously the consumer piece on that and each of these cities they're expanding to once they hit a million dollar run right they're in 17 markets right now looking to expand to the 50 top markets in the states which give them 85 percent coverage ultimately scott looking to build really the platform to do this sort of thing for anything services to a consumer's home or to a fleet's work spot spot scott thanks for taking us to the top that was a perfect summary i need you to go on vc pitches with me i'll have my people call your people all right scott one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day 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