Cherry was not a great idea. Had they done some research (well, the people who gave them 5.25 million dollars to waste away), they would have learned some very simple things. Disclaimer: I used to own and operate (as in also wash cars) a successful on-site car wash business. Closed it down because it was a pain in the ass to run.
On-site car washing (or any other type of on-site auto service (YourMechanic guys should pay attention)) is very low on margins, and competition is tough. You have to compete with every 13 year old kid who wants to buy a new playstation game and will wash cars for $5. You will also have to compete with every other joe who will basically wash a car for a couple of bucks. So creating a solid customer list is tough.
There are also logistics issues. Getting a group of car washers who are not complete and total fuckheads is impossible (I'd say its easier to win the lottery twice). Cherry tried to circumvent that by having sub-contractors, which in other words means giving some random joe $5 to wash some car. They only provided them with some basic equipment. If you have ever washed a car in the cold, you know that you need more than a fucking soap sprayer and a sponge. There is a lot of equipment needed to correctly wash a car in diverse weather conditions. Sub-contractors did not buy equipment because they were being paid shit. So, getting good employees is impossible, getting good sub-contractors is like finding out you have a rich uncle who died and left you money and that suddenly, every hot celebrity out there is hot for you.
There is also the issue that people dont give a shit about cancelling an appointment 30 seconds before it is due. That plus rain, shady owners trying to blame you for "missing stuff", and people who smoke. Its just a shitty business to be in. The only people who manage to do something in that market are the professional detailers. Those guys do make some good money, but have to spend a shitload of time on a single customer, and cannot (in most cases) reliably duplicate their business in order to have any horizontal growth. The high end market is also very competitive and customer loyalty is very high. No Porsche owner will have some unknown detail his baby in order to save $50.
Also, I so called this. This is one of those "investments" that makes you go "huh?".
Edit:
And here I was feeling bummed about wasting $600 on car washing equipment. 5.25 million bucks! Hell, give me $500k and I'll make Nuuton so awesome that people will say "Google? What is that?" :)
The tone will turn some people off, but this is I think a really good comment, full of details about a specific business based on experience.
Also, coming from consulting, I think I agree with you on the dynamics of subcontracting. People are going to think you're being hyperbolic, but a reliable stable of 1099 subcontractors you can bill out over cost is, fundamentally, free money. Consulting firms know this because staffing a consultancy involves accepting the sales-side risk and paying your team rain or shine. I get a little irritated every time I hear someone brag about a real-world business based on 1099 contractors working on a fixed schedule.
I apologize for the tone. But Cherry just pisses me off because so much money was wasted on that really bad idea. It doesnt even compare to a Facebook for cats kind of thing (which was an un-tested market). Car washing has been going on since carriages were invented (300 years go?). I just hate seeing good money being wasted.
Your sub-contractor part does hit me straight in the heart, because I'm a sub-contractor right now. Its not all rosy and nice, but I do get to work remotely and make my own schedule. It also allows me to work on Nuuton without having to worry about IP issues with an employer. But would still consider a good remote job offer. ;)
Edit:
I also have to add that I studied this market from every angle. Even went as far as testing an android app to get customers to order car washes through it. People would download the app and just create an appointment through the app to get their car washed. Payment would be handled by the app itself. But it tested horribly and the local market did not want it. In the end, its just one more business that did not work out. After a dozen or so, it doesn't make you feel bad about it failing. :)
Subcontracting is fine, right? It's building a business that depends on staffing subcontractors reliably that isn't; those kinds of businesses are basically predatory.
Yes, sub-contracting is fine, as long as you find good people to work with/for. I'm very lucky in that regard because I work with a great team and we build incredible stuff. But yes, as a free lancer I get a lot of requests from those predatory businesses. Makes me angry that so many people just want to scam and steal with no regard to the bigger picture.
I'm not a car owner so I have no stake in this fight but I feel the need to rebut some of the claims:
* Anything is low margin if you provide a commodity. By being a car washer, the only people you see are people getting their car washed. What you don't see is people who need to get their car washed but don't. Some proportion of those people don't because the existing interfaces are too difficult to use. I just used a pathjoy recently to clean my apartment and I was willing to pay a premium to use them because I have no idea how to otherwise find a good house cleaner.
* Staffing is hard but I think you exaggerate how hard it is. Lyft has managed to solve this problem successfully and I would argue Exec has as well so this is at least two existence proofs. Postmates and Instacart also seem to have solved this problem but I haven't had enough datapoints to confirm.
I think what a lot of companies in this space are unaware of is that, no matter what problem you ostensibly solve, you are also ultimately solving how to scalably acquire talent. I think one thing that has helped immensely over the last 4 years is that the recession has created a pool of under/unemployed resourceful people that these startups are now capitalizing on.
* Proper incentive structures can trivially solve the cancellation problem. Just charge a cancellation fee if you cancel within an hour of cleaning.
* Some people are going to be fucktards the best way to deal with it is to just treat it as a statistical phenomena and price it into your model. There are lots of things you can do to bias the natural level of fraud but, anecdotally, companies I've talked to seem to report that just "has to own a smartphone" is enough to cut fraud by a significant amount.
* Barring certain mathematical proofs, it's impossible to prove that a startup won't work, only that it hasn't yet. The reason to spend $5M is that if you discover a way that it could work that nobody else had the patience/foresight to discover, it could be worth many multiples of that.
* Anything is low margin if you provide a commodity. By being a car washer, the only people you see are people getting their car washed. What you don't see is people who need to get their car washed but don't. Some proportion of those people don't because the existing interfaces are too difficult to use. I just used a pathjoy recently to clean my apartment and I was willing to pay a premium to use them because I have no idea how to otherwise find a good house cleaner.*
People who don't wash their cars just don't care enough about their cars to wash them. That's it. Also, finding a good house cleaner is not the same as a good car washer. You can stroll into a tunnel type car wash any day of the week and not have to worry about a thing. Having a stranger come into your home to clean is really stressful. Congrats on finding a good service provider for that.
shalmanese 2 hours ago | link | parent | flag
I'm not a car owner so I have no stake in this fight but I feel the need to rebut some of the claims:
* Anything is low margin if you provide a commodity. By being a car washer, the only people you see are people getting their car washed. What you don't see is people who need to get their car washed but don't. Some proportion of those people don't because the existing interfaces are too difficult to use. I just used a pathjoy recently to clean my apartment and I was willing to pay a premium to use them because I have no idea how to otherwise find a good house cleaner.
* Staffing is hard but I think you exaggerate how hard it is. Lyft has managed to solve this problem successfully and I would argue Exec has as well so this is at least two existence proofs. Postmates and Instacart also seem to have solved this problem but I haven't had enough datapoints to confirm.*
Have you ever had a car washing business? How did you fare with finding a good staff?
* Proper incentive structures can trivially solve the cancellation problem. Just charge a cancellation fee if you cancel within an hour of cleaning.*
Oh charge a fee you say? How do you think I will do that? Credit card? Then I have to deal with chargebacks and lose even more money than not doing anything. Mail them an invoice? Not going to work. Please provide some insight into this because I do want to learn how you would do this.
* Some people are going to be fucktards the best way to deal with it is to just treat it as a statistical phenomena and price it into your model. There are lots of things you can do to bias the natural level of fraud but, anecdotally, companies I've talked to seem to report that just "has to own a smartphone" is enough to cut fraud by a significant amount.*
My model could only be priced at a given rate because of competition. By pricing in fucktards I would be pricing myself out of non-fucktards.
* Barring certain mathematical proofs, it's impossible to prove that a startup won't work, only that it hasn't yet. The reason to spend $5M is that if you discover a way that it could work that nobody else had the patience/foresight to discover, it could be worth many multiples of that.*
You are right. But it does not take 5.25 million dollars to prove that Cherry would not work. Just a couple of thousands to test at a local market. In fact, most startups these days don't need millions of dollars to prove their business model. They just need thousands, not millions. Thats why YC only gives people a small bit of money as seed. They know that there is no need to spend that much. Where you do need money is to scale the operations and that varies a lot from business to business. Cherry would have been able to scale without much money, because they did not do anything themselves (the sub contracted the work).
I do appreciate that you took the time to reply, but I have real world experience with this, whereas you only are speculating while using Silicon Valley startup logic to it. Doesn't apply (hardly ever, actually).
Agreed; it's always annoying when people with no experience in an industry claim that sketchy startup logic will somehow overcome real-world problems that have vexed businesses for decades (or longer). Employment, fraud, and customer development are all very difficult business problems, which is why so many companies have IPO'd by making them the slightest bit easier (i.e., Monster, Paypal, Salesforce).
By the way, visualcsharp, you've been dead for the past 16 days (at least). A review of your comments doesn't explain why, so you probably annoyed a moderator.
Almost every type of business has some barriers like the ones you mentioned when a startup tries to tackle it. The goal of a startup in that type of space is to overcome those barriers rather than shying away because of them.
There are even startups trying to make space travel safer, easier, and cheaper. That must really piss off some old hands at NASA who are aware of barriers X, Y, and Z that those startups will face.
For each of the barriers you brought up, have you got any ideas on how Cherry could've addressed them? One trick I've learnt in the past couple of years is that solutions don't need to be 100%. If Cherry had found solutions that worked 80 - 90% of the time for those barriers, they would probably be doing an alright job of overcoming them.
For each of the barriers you brought up, have you got any ideas on how Cherry could've addressed them? One trick I've learnt in the past couple of years is that solutions don't need to be 100%. If Cherry had found solutions that worked 80 - 90% of the time for those barriers, they would probably be doing an alright job of overcoming them.
There aren't any. The problem is that car washing is an extremely low-margin and low-volume business relative to other industries. High margins are measured in the singles of dollars; high volumes frequently means reaching double-digits in customers in a single day.
Cherry's business model actually increased the costs of business substantially by adding in costs for traveling, equipment, employee or subcontractor acquisition, insurance that would apply to infinitely variable service sites, and marketing costs that a normal car wash service would not have to deal with (note: making a distinction between a car wash service and a car wash facility; the two are separate and distinct business models). Thus, economically, it was essentially impossible for Cherry to succeed without first conquering the basic problems that dog existing car wash services.
Wouldn't focusing on owners of high(er) end cars be a way to go?
I know that I don't want a random kid to wash my 50-60-80k car, not do I want keep using those $8 a pop touchless carwashes at gas stations all the time. From time to time I wouldn't mind paying $50 to have the car handwashed and cleaned (but not detailed). Or this is too unsustainable?
In my local market there is a weird phenomenon. The price difference between premium and standard clients is around $5. I tested a lot of different price points, but there was always about $5 difference. Standard customers did also not want to pay anything above $30 for an exterior/interior wash/cleaning. My average sale was $20, if which I made about $6 (30%) in net profit. Not bad? Awful, due to the low volume aspect of the business. I could only do one client at a time, and spent about 45 minutes on each client. Could only book around 8 good clients in a day. It was hard work for little money (unsustainable). Then why did I do it? Because I thought that if I put out an app for people to use to book car washes through their phones, then I could scale the business by selling the sales leads to other on-site car washers and thus removing myself from the hard aspects of the market. I would get $1 for each lead while not lifting a finger. Problem is the app did not test positive at all. Not even in the iPhone (premium) market. I supposse it is a local thing, but I can't change that.
I did, and the bigger margins were just a couple of dollars when all was said and done. In the end, I was still wasting my time with either option. Not complaining because I learned a lot from it.
I use the $8 automated car wash machines because I'm often quite antisocial, and because I don't want to have to take all my stuff, items, and things out of the interior of the car.
When I go through all the trouble of stripping the car, I can just drop it off at a detailing place near the office and get them to pick me up again when it's done.
The sustainable solution to this is to have children and then train/force them to wash your car for you.
There was a HN post or comment about this a while ago. What if the $50 guy you called to wash your 80k car scratches the paint? The company probably cannot get insurance for such damage, so they will have to pay you a paint job for $10 or whatever their profit would have been.
Some of these "real-world" business models are broken because the industry is commoditized. One one hand, the margins don't exist to offer customers a discount (remember, you're inserting yourself in the chain, so need to take some of the profit). On the other, there isn't enough value-added in the product to demand a premium; there's a mechanic on nearly every street corner in every town.
These products need to work for both buyers (people in need of car repair) and sellers (mechanics). In this case, the buyers see some obvious benefit, but what are the sellers gaining?
I agree that this business could have been proven with less money, however, I don't think they wasted all $5.25M on Cherry. From the article it sounds like they are closing down Cherry and pursuing another idea.
It is bubbly that a startup with limited traction raised a large round before having product/market fit and a business ready to scale, but their lucky they have supportive investors who probably believe strongly in the team, thus letting them try something new instead.
On-site car washing (or any other type of on-site auto service (YourMechanic guys should pay attention)) is very low on margins, and competition is tough. You have to compete with every 13 year old kid who wants to buy a new playstation game and will wash cars for $5. You will also have to compete with every other joe who will basically wash a car for a couple of bucks. So creating a solid customer list is tough.
There are also logistics issues. Getting a group of car washers who are not complete and total fuckheads is impossible (I'd say its easier to win the lottery twice). Cherry tried to circumvent that by having sub-contractors, which in other words means giving some random joe $5 to wash some car. They only provided them with some basic equipment. If you have ever washed a car in the cold, you know that you need more than a fucking soap sprayer and a sponge. There is a lot of equipment needed to correctly wash a car in diverse weather conditions. Sub-contractors did not buy equipment because they were being paid shit. So, getting good employees is impossible, getting good sub-contractors is like finding out you have a rich uncle who died and left you money and that suddenly, every hot celebrity out there is hot for you.
There is also the issue that people dont give a shit about cancelling an appointment 30 seconds before it is due. That plus rain, shady owners trying to blame you for "missing stuff", and people who smoke. Its just a shitty business to be in. The only people who manage to do something in that market are the professional detailers. Those guys do make some good money, but have to spend a shitload of time on a single customer, and cannot (in most cases) reliably duplicate their business in order to have any horizontal growth. The high end market is also very competitive and customer loyalty is very high. No Porsche owner will have some unknown detail his baby in order to save $50.
Also, I so called this. This is one of those "investments" that makes you go "huh?".
Edit:
And here I was feeling bummed about wasting $600 on car washing equipment. 5.25 million bucks! Hell, give me $500k and I'll make Nuuton so awesome that people will say "Google? What is that?" :)