A Product Market Fit Show | Startup Podcast for Founders
00:14:37 · Mark, Pablo Srugo
[00:14:37] S1: They were using a very longstanding incumbent called Store Your Dorm that would charge four to five times what we would charge to do the same thing. Taking a step back, that is probably why we were inundated. We did a great job getting our name out there, and of the people that saw us, they booked with us. Then the next year, our student rush was way bigger than we saw in 2017 just because we had plastered the subway with our ads and built more credibility and so on and so forth. The moment we exited consumers, and students, I should say, we went to the typical storage consumer, which was someone that lives in a home or a condo that needs excess space. I remember we graduated from the U-Haul to a Mercedes Sprinter van, and we're like, oh, this is a Mercedes. It's super high-end. In reality, it's just a big minivan. We didn't wrap it because to wrap it would cost $3,000 and fuck that, that's way too expensive. We only raised 500k. Let's be frugal, but as we still did all the pickups ourselves, and I did all the customer support myself, all the sales, and all the inbound management, I could feedback loop what consumers were saying on the ground, what they were complaining about to support, what they wanted to see, and so on. I remember doing a pickup one day and the husband and wife, we were picking up their sofa, the wife was whispering because we were just in Nike athletic gear and shoes and we thought that that was nice but obviously, it wasn't branded and — [00:16:07] S0: You got the Mercedes-Benz, you got the Nike gear, you're good to go.
00:16:07 · Pablo Srugo, Mark
[00:16:07] S0: You got the Mercedes-Benz, you got the Nike gear, you're good to go. [00:16:10] S1: Yeah, big ball. We probably should have thrown on spinners on the truck as well just to really wrap it up, but they were like, "Oh my god, is this a scam? They're going to steal our furniture?" I just remember thinking like, shit, we do not do a great job. We have this little clipboard with this poorly colored printed manifest that looks like shit. I'm like, if we're going to take possession of people's things and be in their home, we need to show up a lot differently. The next week, we had this really cool truck wrap designed, slapped it on the truck, $3,000 later, we went to the cheapest screen printing shop to get Second Closet shirts printed. In the end, we ended up getting a look and feel that when we showed up, that never happened again. It was a micro pivot of how we invest capital because now, those people might go tell other friends like, "Hey, I had a great experience with this branded business and it was super legit. Stored our stuff, they brought it back. Same people, same experience." I just think that we were very receptive to those little things over time that ultimately helped us build a business that was highly recurring revenue and had a high referral base.
00:17:20 · Pablo Srugo, Mark
[00:17:20] S0: They talk about how you have to be close to your customers and it's examples like this that bring out what that really means. Small data is so important in those early days. Obviously, as a founder, you hope you're not the one doing the deliveries, you're not the one doing customer support, but in the beginning, it's critical that you do because you get these little tiny nuggets that have such outsized impact. [00:17:43] S1: One of the things that we learned was that people wanted to book their logistics in storage whenever they wanted and on their schedule. We had a wide range of demo, young families, single people, our oldest client was 94 years old. I had to convince her to give me her credit card over the phone, and she was like, "This is a scam." I'm like, "No, it's not, here's a link to the Toronto Star. Click it and you can read about us." She's like, "Oh, okay. I know the Toronto Star, and you're in it so that probably is legit enough." I remember taking a call at 2:00 AM. We use Grasshopper as our 1-800 line, and it's the cheap, again, having a 1-800 versus a 416 or 647 number totally changed the game because it made you look bigger. We hired this British voice actor to do our intro because it sounded nice and sophisticated. We did little things like that that dressed up the experience, and of course, it was available 24/7. I was the guy that was answering the call. At 2:00 AM, I get this call, and I'm groggy. [00:18:46] S0: Is that normal? You get calls in the middle of the night and you just pick it up?
00:18:51 · Mark
[00:18:51] S1: If my phone rang, I would pick it up whenever because it could have been a sale. I was like, we want to be available for the customer. They're like, "This must be a big company. They're answering the phone at all hours of the day." I would always be available and have a notebook to take down orders, or have my computer with me so I could pop it open and hotspot, and then book the order, and that customer ended up booking at like 2:30 after I had told them about us and what we're doing and that sort of thing. I would never tell them who I was. There was multiple Marks in the business. There was a Mark in the office and a Mark on the road. I remember just going through crazy, crazy stories where this one Russian lady that we went to was trying to convince Mark the mover that Mark in the office agreed to free storage for a certain amount of time. I'm like, I don't think he did, but let me go call him. I'll have him call you. I would go to the van, I would say, "Hey, Mark, I need you to call." I would wait five minutes because there has to be an interaction between the Marks. Then Mark from the office would call the client, and then obviously, Mark from the office, he needs to call Mark from the van back, and then Mark from the van would go back and talk to the client and be like, "Hey, did that clear things up?" Little things like that to just make sure that we were always punching above our weight class just from a look and feel perspective was important. Look, experiences like that and being on the ground, I would not trade it for the world. We were doing moving and driving for the first year of the business, and our investors eventually were like, "What the hell are you doing? Hire people and start to grow." We were growing, we had filled up a ton of space.
00:20:12 · Pablo Srugo, Mark
[00:20:12] S0: How much did you grow, that first year you hit 20,000 I think in a month or so, where were you a year later? [00:20:19] S1: Our first year, we did a couple hundred thousand in revenue. The next year, we did 1.6 million. It was like an 8x, and it has grown considerably since then. We're fortunate to be doing over nine figures of revenue now. [00:20:35] S0: I'm just curious, were the margins a challenge back then? What kind of margins were you looking at, and did investors care?
00:20:42 · Mark
[00:20:42] S1: Margins were actually really good. I really liked data. I really like playing around with the look and feel of things. Tying the analytics behind marketing to this bootleg Photoshop instance that I had, to change our copy and our visual look, to drive conversions and A/B test things, anyone can get into that pretty easily. The tools are pretty straightforward. We were able to get our customer acquisition cost down considerably to what the lifetime value was. That made our marketing cost, which traditionally is the biggest thing for a D2C business or a consumer business, really low. Then logistically, we had very good margins on storage because we were selling by the piece, but we could co-mingle them in our warehouse. It was really, really high margin once we had the product in our warehouse. That's why we offered free moving initially. We just wanted to be frictionless. Move your stuff into storage for free and we'll bring it back to you. We wanted just people to convert. Over time though, I think about a year and a half in, we started to hire a lot more movers. We had a lot more trucks. I was like, we really should recuperate more of this cost and try to cost recover. We said, what's a nice easy, approachable price? We said, let's just try charging a dollar per minute per mover while on-site at the customer home. This way, they're not paying for travel time or gas or truck fees or insurance. Just a dollar per minute per mover while on-site. Sounded simple enough. We're like, great. No one batted an eyelash at it. That line of business started to generate tens of thousands of dollars a week, a month, et cetera. We scaled it up, and because there was no pushback to me, Mark the CS guy, or Mark the mover, when we did that, we said, okay, why don't we try to increase the rate one more time? We said $2 a minute is probably too high per person, it'll be $120 an hour. Let's go halfway, let's go $1.50. Totally like FMA. We got a little bit of pushback but we were able to sell against it and demonstrate that it was still valuable. It was at that moment that we knew that we had reached a place where the market would clear, it was a good equilibrium price, and because consumers were happy with it in the end and they should feel like they're paying for a premium service. We knew that we had a good price point.