Mobile tyre repair startup Road Runner has almost completed a $2 million raising at a $9 million post-money valuation, however co-founder John Shim wishes he’d realised how hard business really was during his 24 years advising SMEs at PricewaterhouseCoopers.
“I used to wonder why my clients weren’t implementing what we’d agreed were all these great ideas,” says Shim, who with former Adshel managing director Steve McCarthy launched Road Runner Mobile Tyres in March 2013.
“Now I know. There’s new and unexpected challenges every day, you just can’t preplan for it all.”
For instance in April, Google’s algorithm tweak to favour ‘mobile friendly’ sites on mobile searches wrongfooted Road Runner, ultimately costing it $20,000 to build its third website in as many years. However with 60 per cent of its bookings now coming from mobile devices – many of them from motorists standing on the side of a road after suffering a puncture – Shim says that investment was annoying but worth it.
The lack of harmonised road safety regulation across the three states where Road Runner’s 15 company-owned service vans now operate is another cause for heartache.
“In NSW we’ve got to deal with pink slips, where its just random vehicle inspections in Queensland and Victoria,” Shim says.
“Then in NSW they’re about to change the qualification regulations for wheel alignment personnel. It’s a constant compliance nightmare.”
The view from the PwC office tower had also obscured the harsh realities of unfair dismissal regulation.
“It takes six months to get rid of an underperformer because of all the performance hurdles you have to jump. The problem is that small business doesn’t have six months to carry someone, I can see now how it kills a lot of them,” Shim says, while envying the USA’s lack of equivalent unfair dismissal laws.
With turnover of $2.5 million in 2014/15, Road Runner doesn’t qualify for ‘small business’ goodies like the $20,000 instant asset write-off for sub-$2 million companies.
If the government was serious about fostering enterprise, it would provide payroll tax breaks for companies up to perhaps a $10 million turnover, Shim suggests, as well as assistance with the high costs of occupational health & safety compliance.
“As a brand new start-up, we have provided 15 staff at a cost of $1.5 million,” he told the AFR in March.
“And yet we’re not profitable yet. We’ve probably paid about $500,000 in taxes in the form of GST and payroll, but our shareholders have not got 1¢ back from their investment.”
These frustrations have forced Shim to wind back his initial growth targets. Australian tyre retail is a $4.6 billion a year industry, according to IBISWorld, and in that context Shim had expected Road Runner to be turning over $4-5 million by now. Road Runner will have raised a total $5.5 million across three rounds at the completion of the latest round.
To accelerate growth, Road Runner is building on its initial direct-to-consumer presence with a corporate offering, now featuring on employee benefit programs for the likes of Telstra, Westfield, Arnotts, Mortgage Choice, Sony and perhaps not surprisingly, PwC.
The founders are also negotiating with the roadside assistance arms of the big car insurers, like NRMA in NSW and RACV in Victoria, to become distribution channels for Road Runner.
“You call NRMA today, they can only change your spare tyre, they can’t repair a puncture or replace a tyre, so that’s a service we can hopefully offer their members.”
One thing that hasn’t surprised Shim is the hardball tactics of the established tyre retailers.
“We’ve got no hope of getting favourable volume pricing from the tyre makers with a retail presence like Bridgestone or Goodyear, but luckily there’s enough now who don’t retail and will deal fairly with us.”