Car Service For The Masses

[agoodfriend]

After being stranded a a regional airport I conceptualized an affordable on demand car service for the masses.

The Elevator Pitch

• Unlimited access pick-up/drop off luxury car service.
• Unlimited trips to a maximum radius 15km or 9.32 miles.
• Unlimited Individual Pricing: $39.95 per month.
• Commercial Pricing: $39.95 per call with fare splitting should customer incur additional mileage*
• Interactive GPS app to call or schedule trips. Includes trip summary and expense reporting.
• Users will be paired with one principal driver and an alternate to build rapport.
• Drivers are security services or executive protection certified
• White glove airport pick-up/drop off service.
• Fleet of 2020 Volvo XC90 Excellence and 2020 Lincoln Continental Coach Door Edition vehicles.

Areas Served

• Greater Los Angeles Area
• Washington D.C. Maryland, Virginia (DMV)

Perks

• Streaming Media Service (Bloomberg, CNN, WSJ, HULU, Netflix, Spotify)
• Our app allows customers comfort and media preferences to be saved so when they enter the vehicle it is as they would expect it.
• Plush teddy bear for those travelling with children

Competitive Differentiator

• We are more cost effective per mile than Uber Black or competitive car services
• We don’t our drivers like people and not commodities. They are all employees.
• Our objective is to hiring predominately armed forces veterans and former police. The safety and security of our customers is paramount.
• We try to pair clients with the same driver, same car.
• We’re committed to green energy eliminating petrol fleet by 2023
• We will never ask for nor do we require tips. Providing excellent service is our reward
• The wait for a car may be a little bit longer however customers may always schedule trips knowing they will have the same driver, same great experience.

Commercial Industries Served

• Hospitality (Hotels, Boutique Hotels and Resorts)
o As part of our growth strategy we will propose hoteliers offer the (airport) service to complimentary to customers.
o Hotels pay $39.95 per trip however should a customer require our services during their stay we split the fare for every mile thereafter.

• Studio (Film, Television and Web Media studios)
o Airport pick-up/drop off
o Time + Miles pricing
o Livery Service (Dedicated driver for the day)

• Executive Detail (Corporate executives and Government officials)
o These drivers are former police or armed forces professionals with certification
o Time + Miles pricing

Growth Strategy

• We will begin with a modest fleet serving our commercial clients first. (Margins are 30%)
• Our commercial services will cross-pollinate the consumer business and help grow brand awareness and subscription as customers must download the app to use the service.
• Following a few quarters of consecutive growth and profitability we will launch our unlimited consumer service. ( A loss leader {unprofitable} but a growth accelerator)
• Following an initial round of funding we will purchase/lease a commercial space to facilitate growth and reduce overhead. (Vehicle maintenance and cleaning in-house)
• Our objective is for the unlimited subscription service to become the model much like it has become for streaming services. Once our model has been proven successful we will begin an aggressive M&A strategy of acquiring and consolidating competitors.
• Upon reaching our 250,000 subscriber milestone our unlimited service will increase to $79.95 per month.

Marketing Strategy

• We will launch our unlimited service on a referral basis. Those interested in the service who are not referred by an existing member will be invited to join our waiting list. Exclusivity breeds envy and excitement.
• Relying predominately on word of mouth we may run ads on LinkedIn, Instagram and YouTube. Our ad campaigns will be simplistic catering to our industry verticals or unlimited service. Each ending with our catch phrase “Ask a friend” a nod to our exclusive referral only strategy.
• Each user will be granted a username upon downloading the app. This username will also serve as their referral code.

Thoughts, feedback and even criticisms welcomed.

 

[7an13l]

@agoodfriend I really like your post, it's clean and well laid out, but..

Respectfully,

I think this is a horrible idea, over and above the pricing just not adding up.

1. Your biggest individual users have the biggest negative margin.
2. You spunk all your setup monies into depreciating metal, and still have to get the initial base
3. Employing the drivers is touted as cost-prohibitive in US by incumbents
4. What kind of service levels can you offer to serious business clients in exchange for them subsidizing individuals? How does demand impact this?

The beauty of Uber/Lyft is its capture of producer surplus by minimizing opportunity cost. You offer SCHEDULED trips (worse, with specified drivers) without any hints of comprehension with regards to how this will affect your platform in actuality. I also don't see anything like ML/AI/Algos to underpin, manage and optimize growth should it occur.

Apologies if this sounds 'cunty'. I am fascinated by this sector and would be interested to hear any thoughts on the above.

 

[mfhorn]

@7an13l

The beauty of Uber/Lyft is its capture of producer surplus by minimizing opportunity cost

Being a rideshare driver, this is exact. There are multiple other drivers who they can route requests to per demand and location without necessarily tying you (1 particular driver) down (in terms of time and money). This would represent a great cost and inefficiency in the OP's idea unless he had a well-managed and scalable fixed-cost structure.

 

[7an13l]

@mfhorn Thanks

I don't perceive any point where the inefficiency problems of prebooking are overtaken as once scale kicks in software can predict demand frighteningly well.

As a driver, I'm really interested in any ideas you could throw in to improve this 'all you can eat' concept for rides (or similarly even food delivery)

 

[agoodfriend]

@mfhorn So the question becomes is having a dedicated driver worth it? Studies often dictate that consumers are more likely to patron a business establishment where the recognize and have a rapport with the service provider. The goal is to pair subscribers (whether commercial or individual) With one driver. This of course may not always be possible so an alternate will be assigned upon registration. This model certainly represents an inefficiency but perhaps the Fringe benefits (referrals, market growth) will outweigh these. I surveyed Uber Black and Executive Car Service users on Quora in advent of writing this business abstract. The consensus was the experience was not always uniform. Different drivers, different Driving styles. Moreover they often requested the same driver be made available on their next trip.

 

[agoodfriend]

@7an13l I appreciate you taking the time to provide this valuable feedback. Please find my responses below..

1. “Your biggest individual users have the biggest negative margin.” We anticipate two verticals; commercial (Hotels, Studios etc) and individuals. We hope to launch the commercial side first as it is profitable. For hospitality the pricing strategy is as follows: Offer your customers complimentary airport pick-up which they can factor into your booking price OR we will split the fare 60/40 with the hotel for customers who call on our service during there stay. For Studio’s and Executive the pricing strategy is cost plus.
2. “You spunk all your setup monies into depreciating metal and still have to get the initial base.” We intend to purchase our fleet directly from the manufacturers at a price 35% below retail as ‘program cars’ with a manufacturers buy back program. So yes the assets are depreciating but the yield from each vehicle will cover the depreciation. I’m not sure what you mean by initial base.
3. “Employing drivers is touted as cost prohibitive in the US by incumbents” Certainly hiring skilled drivers is cost prohibitive. Hence our focus on hiring military and armed service vets. U.S. government offers several grants to subsidize the cost of training and hiring veterans. We intend to capitalize on this as it will aid to offset our initial hiring and training cost. Additionally if you’ve read the news lately a 9th circuit court ruled that U.S. based ride sharing companies must offer employee protections to contractors who work full time hours. We rather be ahead of this curve by hiring drivers directly. It’s good marketing and it aligns with our core vision and values.
4. “ What kind of service levels can you offer serious business clients in exchange for them subsidizing individuals? How does demand impact this? Good question! To clarify we intend to launch with commercial service only. Once we have proven ourselves in the market then and only then will we launch the unlimited service for individual consumers. It will lose money from the onset but it will also lead to significant market growth. The strength of the commercial business should be enough (profit) to subsidize the consumer side. Commercial rides are for the most part scheduled at least one day prior so demand models can be created to anticipate staffing needs.
5. “The beauty of Uber/Lyft is its capture of producer surplus by minimizing opportunity cost.” Yes this is true and we intend to emulate that model. The benefit of starting with the commercial side is that we will have developed models to anticipate demand. For instance we will know how many airport pick-ups the W Hotel has scheduled on a given day. Likewise for our Studio or Executive service lines they are for the most part scheduled. With this info our A.I. Demand models can anticipate just how many OnDemand drivers would be required on a given day. This is scalable as we grow and extend our services to the individual consumer.

It may very well be a bad idea. But I’m passionate about it so we will see where I can take this.

 

[7an13l]

@agoodfriend Thanks for responses, interesting stuff.

1: I understand the commercial first idea. I do question the term 'profitable' and 'cost plus' as I fear to cost a ride, booked in advance, and allocated to a set driver is almost voodoo. I'd say the operational cost, the opportunity cost, and the "furlough cost" are all components

Have you studied how your initial rollout capacity might expect to fare VS a real-life distribution of demand? These trips might pay more, but be *less* 'profitable' if an impressive level of occupancy is not maintained.

Studios, especially may want Service Level Guarantees for leadtime/availability. What's your ratio between fleet:SLA?

2: Is someone prepared to lend you money to essentially lease these new, expensive cars? - Who covers the maintenance, are you tied to these models/a certain dealer? My fagpacket maths just doesn't see enough utilization to make this work in a traditional setting (not, for example, leveraging the demand lows of a rental fleet or something)

Initial base: The first group of users. The referral idea is cool and all, but a decent launch in those cities might be many millions in paid incentives alone.

3: Not hiring skilled drivers as a business plan seems problematic at first sight. I might argue the reason the government offers subsidy and grants to potential employers is that these people struggle to assimilate into civilian life and have for decades been in frighteningly high percentiles for some very bad outcomes. Most notably, drug and alcohol abuse is not a good look, nor is violence.

As a directly hired employee, any issues may become a your responsibility although the degree these offset any savings through subsidy may be hard to estimate. I do read the news, often actually, but have not seen any competitors sharing your core vision, nor boldly going a step further than worker status distinction toward actual employment.

4: This seems to be a classic chicken/egg situation and perhaps a more tangible level will be needed to get these initial clientele.

Similarly, you will have at this point, employed full-time vets who will need something to do so it may, in fact, be a case of trying to fit the demand needs to the existant supply model/operational considerations. Failures to provide prescheduled rides can cause a big shock to supply liquidity and inherently increase inefficiencies.

5: I don't feel you emulate this model at all. Given your airport example, your AI efforts to judge supply are not that helpful as you already have a platoon of full time employees and a rank of leased cars both costing money regardless. I might be (and likely am) a pessimistic wanker, but I just don't see how your plans to scale out of loss leading transactions can work, given that the efficiencies of scale other ridehaling companies have are a direct function of a model you are not emulating.

Sorry if I am again, cunty... but I really do like and admire your passion and drive and keen to hear any thoughts you may have on above.

 

[agoodfriend]

@7an13l I appreciate your response and I apologize for the delayed response. Please find my answers to your questions below..

“I don't perceive any point where the inefficiency problems of prebooking are overtaken as once scale kicks in software can predict demand frighteningly well.”

Point well taken. In the traditional car service model pre-booking is standard. Given the industries the typical car-service serves; film/TV studios and hospitality particularly, on-demand accounts for 10-15% of their call volume. This model will ALSO account for on-demand request with drivers who are ‘floaters’ either un-scheduled or drivers who have gaps in their schedules.

“I understand the commercial first idea. I do question the term 'profitable' and 'cost plus' as I fear to cost a ride, booked in advance, and allocated to a set driver is almost voodoo. I'd say the operational cost, the opportunity cost, and the "furlough cost" are all components.”

The pricing is at an exploratory stage these numbers are not set in stone. Let’s assume that we can offer a car service relative to our competitors priced 10% less to entice new subscribers with subscription structure, on demand option offered in a clean U.I. (App) as a value-add. I would expect us to be profitable from the onset, assuming of course we can manage our fixed cost (salaries, vehicle amortization and maintenance). Cost-plus is a good framework when the model is at the preliminary stage. Eg. fixed cost plus 20% as an example. Again these numbers are fluid as more research is required.

I’m not sure why you view pricing scheduled rides as ‘voodoo’ this is for the most part the industry standard for car service. I will provide another illustration. CNN request car service for Wolf Blitzer, Eric Burnett and Chris Cuomo from their homes to the studio and back to their homes in the evening. They’re required to be on set Mon-Fri at 1:00pm, 4:00pm and 7:00pm respectively . This provides a set schedule for 3 people with 4.5 hours drive time.

“Have you studied how your initial rollout capacity might expect to fare VS a real-life distribution of demand? These trips might pay more, but be less 'profitable' if an impressive level of occupancy is not maintained.”

Yes, our initial rollout capacity will be elastic to our demand. The advantage of starting with commercial (scheduled) is one can anticipate demand and demand distribution as the business grows. I intend to start with a small fleet of 6 cars/drivers with an occupancy of 80% . We must account for the travel time to pick-up locations which I expect will be around 20% assuming drivers are strategically located.

“Studios, especially may want Service Level Guarantees for leadtime/availability. What's your ratio between fleet:SLA?”

Yes, SLA’s are standard in the industry. I don’t foresee any challenges in adhering to our SLA targets. These targets will include schedule adherence, wait times for on-demand request and implementation times of new routes.

“Is someone prepared to lend you money to essentially lease these new, expensive cars? - Who covers the maintenance, are you tied to these models/a certain dealer?”

Excellent question! Cars will be purchased outright (by myself) so they remain as assets albeit depreciating assets on our balance sheet. This will benefit us come our initial funding round. Maintenace cost are tricky as it hard to accurately forecast depending on the model of cars. According to research maintenace including car cleaning in the Los Angles area will account for 15% of our fixed cost. Maintenace will be outsourced from the onset. The long-term goal is to bring all maintenace in-house. In-house mechanics and car retailers.

“My fagpacket maths just doesn't see enough utilization to make this work in a traditional setting (not, for example, leveraging the demand lows of a rental fleet or something)”

I can appreciate that. I have contacted a few wholesalers who can deliver our initial cars (2019 models) for 40% below list price (new). As we grow and have greater purchasing power we can purchase from the manufacturers directly, however this is a long-way off.

“Initial base: The first group of users. The referral idea is cool and all, but a decent launch in those cities might be many millions in paid incentives alone.”

Another good observation, the initial base of users will be commercial clients This will require a skilled and experienced executive sales force. Yes sales incentives will drive the bulk of our initial cost however I anticipate ROI on SPIFS within two years. Where we save is not spending on marketing during this time which in my experience yields fewer conversions than sales.

“Not hiring skilled drivers as a business plan seems problematic at first sight. I might argue the reason the government offers subsidy and grants to potential employers is that these people struggle to assimilate into civilian life and have for decades been in frighteningly high percentiles for some very bad outcomes. Most notably, drug and alcohol abuse is not a good look, nor is violence.”

You may be right. I’m not married to this strategy. I’ll have to research further. That said , few of the ride-share drivers had any professional driving experience and they acclimated quite well with infinitesimal training provided from corporate.

“As a directly hired employee, any issues may become a your responsibility although the degree these offset any savings through subsidy may be hard to estimate.”

Additionally I am not married to having all drivers as employees from the onset however I do strongly prefer this to having contractors. Demonstrating loyalty and investment to our drivers should lead to reciprocity and should curb workplace attrition and poaching. This model can be dynamic and include F/T, P/T and Flex drivers all of whom set their own schedules.

“This seems to be a classic chicken/egg situation and perhaps a more tangible level will be needed to get these initial clientele.

Similarly, you will have at this point, employed full-time vets who will need something to do so it may, in fact, be a case of trying to fit the demand needs to the existant supply model/operational considerations. Failures to provide prescheduled rides can cause a big shock to supply liquidity and inherently increase inefficiencies.”

Hiring/Schedule will be predicated on demand. I will not hire our initial 6 drivers until we have sufficient SLA’s in place.

“I don't feel you emulate this model at all. Given your airport example, your AI efforts to judge supply are not that helpful as you already have a platoon of full time employees and a rank of leased cars both costing money regardless. I might be (and likely am) a pessimistic wanker, but I just don't see how your plans to scale out of loss leading transactions can work, given that the efficiencies of scale other ridehaling companies have are a direct function of a model you are not emulating.”

For clarification our model will begin as a traditional car service with the addition of an interactive app with a clean U.I. For scheduled rides, on-demand rides and schedule changes. Said rides should not be loss leading given the examples provided above. We plan to scale according to our business growth and demand. Sales = SLA = New drivers/additional routes. This business is absolutely scalable as it does not differ from the traditional model and to my knowledge the car-service/limousine industry remains profitable and competitive.

The consumer side of the business which will come much LATER once our commercial model has proven successful will emulate the traditional ride share model. I would’nt get to hung up on features such as ‘choose your driver’ as they’re not at the core of our offering. Our value-add over traditional ride-sharing services is our “all you can eat” unlimited* plan which offers our existing customers (actors, on-air personalities, hotel patrons) the opportunity to use our service outside of our commercial agreements. As word of mouth spreads and it will generate additional subscribers. Remember we have a referral program and waiting list to manage growth and demand.

“Sorry if I am again, cunty... but I really do like and admire your passion and drive and keen to hear any thoughts you may have on above.”

I don’t think you’re being cunty at all, I appreciate you challenging my thesis and I view this exchange as a productive thought experiment to validate my business plan. These are good questions.

The questions I ask myself are should we introduce a subscription model to our commercial clients? What are the economics of offering an “all you can eat” unlimited service for business? How does one price this service, will we offer licences akin to a software model? Wolf Blitzer has unlimited business travel through CNN for $100 per month? Is offering an unlimited service for business a value added benefit that will drive sales growth as it would for consumer?

 

[davidpat]

@agoodfriend Pretty solid idea. But $39.99 per month unlimited service, Do you think you can make profit put of it?

 

[agoodfriend]

@davidpat Initially no but as I mentioned above as a loss leader it will help grow market share. Once the subscription base reached 500k it will increase to $79 per month.

 

[junebug72]

@agoodfriend Lol and you what, go bankrupt the day after? You think people are ok with double in price of something at that high a ticket price?

You are nuts my friend. Absolutely nuts.

 

[agoodfriend]

@junebug72 Thank-you. You have to be nuts to be an entrepreneur and a disruptor. The commercial side of will subsidize the unlimited service initially. Once the market has acclimated to the unlimited model we will raise the price gradually until we reach a profitable pricing model which is $79 per month for unlimited 24/7 car service.