(1) How has your previous employment experience aided your position at carwow?I started my career with Deloittes banking and capital markets audit team in 2010. It was just after the financial crisis had hit and I was interested in finding out how capital markets and the banking industry worked. At Deloitte I got a lot of exposure to the differing financial processes of companies with different scale and risk levels. This experience is invaluable now when Im working out the level of financial processes carwow needs and how those scale proportionally as the business grows. However, the most important thing I gained as an auditor was the confidence to say “I dont understand” and ask simple questions to gain that understanding. Carwow is fast-paced and people are genuinely excited about what we are doing and how we are growing the company. However, as FD my role is partly to act as a sanity check to ensure that the exuberance doesnt become irrational. I then joined Gousto, a VC backed startup that delivers recipe box kits, as Financial controller. We grew the company exponentially in that time, going through three rounds of fundraising, insourcing operations and making massive improvements in terms of revenues and margins. At Gousto the CEO was passionate about the importance of stretching, stressing and playing with the model of a growing company. Only by doing this do you get a real understanding of the levers at your disposal and where the company should be targeting its resource. Obviously this mindset now pervades what I do at carwow. On a practical side, I also started to get to know the benefits and pitfalls of viewing the business through a variety of non-gaap metrics. Something that was new to me was the LTV/CPA calculation and cohort analysis for understanding the speed and value of return on marketing spend. (2) What have the highlights and challenges been during your tenure at carwow? The challenge that I think about the most is, and will be for several years, managing the tension between profitability and growth. How do we ensure that the growth we are created is sustainable and will result in the business’ long term profitability rather than just a short term pop Therefore, where do we invest our resources to ensure this Its a theme that pervades almost every decision; from whether we hire someone to what cost per sale our marketing team should be targeting. As for highlights, a few months after joining we raised 12.5m in a round led by Accel Partners (early investors in Facebook, Spotify etc.) which was testament to both the product and team that the founders had managed to create. Personally though, seeing that 12.5m land in our bank account was a great feeling. It was a mixture of relief at the process finally being over and joy at the ability it gave us to really grow the company both in the UK and to setup in Germany. (3) What are the key skills needed for a CFO looking to make it big in the automotive industry At carwow what we do is far simpler than for the majority of the industry. We dont hold stock or have manufacturer targets to hit and we dont have to make investments in a franchise. If we were a normal automotive business I wouldnt have the right background and knowledge to run the finance side of things. (4) Carwow is scaling quickly. What is the FDs role in achieving growth I think the failure of a plethora of internet/ecommerce based startups can be attributed to the concept that growth by itself was an end, funding would continue to come and this mixture would eventually magically lead to profitability. I see the FD role in a business such as carwow as a check on this impulse. The FD’s role isnt about growth, per se, it’s about ensuring growth is at the right level, of a high quality that is both sustainable and manageable. It is quite easy to look at a few growth metrics (for example, site visitor numbers) which are increasing and conclude that things are going well. However, unless you know the cost to get those visitors in and their propensity to purchase there is no check on quality of that growth. Similarly it would be disastrous if the marketing team brought in thousands of new customers willing to buy who were unable to as we didnt have the level of customer support in place (or the website crashed). The FD as part of the business planning process should have a good oversight on this and be able to ensure that the business finds the growth both sustainable and manageable. (5) What are your plans for the company The most important thing for the company to focus on is keeping solving genuine pain points in peoples lives. Our core product in new cars is still a long way from being complete, so over the next few years we are going to keep investing in product development. It’s often said that people would rather go to the dentist than go to a car showroom. We plan on changing this but are not there yet. We need to keep developing our product to improve the ease and quality of interactions between dealers and consumers. There are several areas we are working on; showing manufacturer finance prices and allowing users to get indicative finance quotes on the site and showing an actual live inventory on a dealer’s forecourt. The new car market for private registrations is about 1.2m units a year, and we see a major focus as improving what we do in this core area.
We also are starting to look at showing customers the different options they can get for the same price. So if they are looking at a brand new A3 Sportback, what other cars (of differing ages) can they get for the same amount. This is currently next to impossible to compare and would allow the consumer to consider all the options. We sold our first car in Germany in May and are hoping to show that what we are doing is capable of solving this pain point in more markets than just the UK. If things look good we will look to gain similar traction in Germany as we have done in the UK. (6) What has been carwows strategy for scaling up until now? The strategy has been all about managing both supply and demand in the marketplace to ensure both sides find the marketplace fruitful. We started by relying on digital marketing but have invested heavily in areas that have to, over the long term, push our marketing mix away from paid for channels. The most important strategy in this respect has been to introduce customers to the website earlier in their buying journey. Around a fifth of our staff are in either the written or video content teams and weve invested to ensure what we are producing is of both the highest standard out there and genuinely useful to car buyers. The level of success of the company will ultimately be dependent on our ability to build a brand synonymous with great car buying. Weve also been fortunate in that weve followed the story of Truecar (a fairly similar business model in the US) and seen how they really neglected the interests of dealers. Again weve invested a large chunk of our budget and time in meeting as many dealers face to face and understanding what we are doing that works for them and what doesnt. (7) Are there particular challenges in the automotive sector that one wouldnt come across in any other sector The dealer manufacturer relationship is a difficult one to understand and I am still getting my head around it. It leads to a load of sub-optimal outcomes for dealers, consumers and manufacturers. The car manufacturers and dealers enter into a franchise agreement. Manufacturers set volume and quality targets which if dealers hit they get substantial bonuses. This can often force them into pre-registering a car (effectively buying it themselves) to hit the target and get the bonus. The dealer becomes the car’s first owner and can’t sell it on for a set number of days (under DVLA rules) and then will sell on for a lower price than they would have been able to. Dealers also, once theyve reached their bonus targets, will then not want to sell too many cars as then their target for the next year (and the levels at which bonuses are due) will be higher. The other side of this is that the manufacturers have to have a dealer network as they need geographic coverage to both sell and service their cars. This means, that the manufacturers need to ensure dealers make a certain level of profit in order to keep them in the game. In the past this was done with the franchise agreement acting as allowing the dealership a local geographic monopoly. None of these dynamics work especially well for the consumer, driving very different levels of customer service and pricing by dealership that vary by time of the month/year. By Shan Schutte
Share this story