Kevin Graham: Hi guys, Kevin Graham here and today on the podcast, I have another one of the businesses that featured on Shark Tank Australia. He appeared in the first season of Shark Tank Australia, with his business, which at the time he was just getting started with and he's continued to grow it since then. So, please welcome to the show, Travis Osborne.
Travis Osborne: Thanks very much, Kevin.
Kevin Graham: For the listeners who might not know about you and your current business, can you give us a brief rundown on who you are and what mobiletyreshop.com.au does today.
Travis Osborne: Mobile Tyre Shop's a very simple business. We do everything you do in the tire store, but with the convenience we do it either in your driveway or at your workplace. We sell all the major brand times and we come to you seven days a week. That garage purchase of purchasing tires is now done at your home or work.
Kevin Graham: Now, this sounds like the sort of problem that people are facing the world over. Can you tell me a bit more about the competitive landscape on a global basis, and what that industry looks like?
Travis Osborne: The reality is everyone is now time poor. Clearly, there's been a push for an Ecommerce platform. We see ourselves very much as the widget of tires. Where we've got all the major brand entire companies supporting us with direct accounts. You're able to go on to our website, mobiletyreshop.com.au. Choose your tires, you then select the time and date and location. We come to you. That business model has been working in Europe for about 10 years. In fact, the company we originally based our model around, they're now running 2,600 vans across Europe and there another number of examples with several hundred vans.
Travis Osborne: So, the concept has been proven and very successful throughout Europe and the US. We're the first to bring that concept to Australia. We're now in a position where we've got offices in all major capital cities.
Kevin Graham: How big is the fleet these days?
Travis Osborne: We run 33 vans at the moment, with 45 full-time employees operating seven days a week.
Kevin Graham: In which cities?
Travis Osborne: We're in Melbourne, Sydney, Brisbane, Adelaide and Perth.
Kevin Graham: Right, so all the major capitals.
Travis Osborne: All the major capital cities, which enables us to work with major fleet companies and mainly metro area in those capital cities.
Kevin Graham: You don't sound like someone who's worked in the tire industry your whole life. So, can you tell me a bit more about how you got started in your entrepreneurial journey and what led up to you starting Mobile Tyre Shop?
Travis Osborne: My background was very much in the property industry in retail property. I work with the likes of Westfield, the Gamble Group, and was very much retail development. In that time, I got to meet a lot of retailers, understand retail. I then was appointed National Development Manager with Gloria Jean's Coffee. At the time, we grew that business to over 500 stores.
Travis Osborne: I was probably always looking for a franchising business, where you had the opportunity to one, I was looking for something with a large market. The Australian tire market's worth $5 billion. So, I was looking at something that could actually grow. When I was on holidays over in the US, I saw the original concept. At the time, with no experience in tires or the tire industry, I thought that was novel. I probably came back to Australia and wanted to be a customer. Found very quickly that the concept didn't exist in Australia and wasn't available. To be quite honest, I couldn't find a reason why it shouldn't exist because it was such a practical and simple idea.
Travis Osborne: From there, obviously, we grew the business, but it was really driven from a customer's perspective that buying tires is the ultimate garage purchase. Sitting in a greasy tire store, there's the anecdote of drinking really bad coffee in a plastic cup. Nobody should really do that in this day and age.
Kevin Graham: Usually I like to find out when you started the company and the reason you started it. Now, you've sort of alluded to that way. You've spoken about the size of the market, you saw it on holidays in the US, came back to Australia, tried to find. Realized that a service like this didn't exist yet, and you wanted to be a customer yourself. Can you tell us a bit more about when you started it and if there was any other reason other than wanting to be a customer yourself of a business like this, did you decide to start it?
Travis Osborne: When I originally saw it overseas, that was in early 2012. From there, the company essentially launched in July 2013. At the time, I was working a second job, and it was essentially an experiment to see, is there a market for it? We talk about a lot of companies have done a lot of research and due diligence. Really, for me it was talking to two or three mates. Essentially saying, if we could buy tires for the same price, and someone came to your house and did it on the weekend, or they came to your work, would you use that concept? Through a couple of beers and a few barbecue discussions, everyone was supportive of the concept and really from there, which was mid-2012, I'd launched two vans and a very basic website. It wasn't till July 14, did I actually decide that there's actually a real business model here. It was not long after that I appeared on Shark Tank. I'd only go in full-time in that business three or four months before appearing on Shark Tank.
Travis Osborne: We filmed the original episode of Shark Tank in December 14, which appeared on television in February 2015. It wasn't a long period between filming and appearing on television.
Kevin Graham: Right. Before the show, you talked a little bit about building the minimum viable product version of this business. Can you explain what the MVP of Mobile Tyre Shop looked like?
Travis Osborne: Okay, it was really as simple as going out, leasing two vans. I realized I needed more than one van to understand the opportunity of movements, of business and getting around. We were only in Melbourne and it was really just to see, one in the eastern suburbs and one in the western suburbs. Really, it was building a website, which we built very cheaply overseas. From there, I was one of these people, I build a website, everyone will come to it. You learn very quickly, you can have the best site in Australia. If there's no marketing around that website, or no SEO, no one's going to go to the website.
Travis Osborne: We just started looking at ways without spending a lot of money of getting people to the site. What we found is once they were on the side, almost to my surprise, they're actually ordering tires, and we were then supplying directly out of a retail store at that time. Buying a bit cheaper, getting it going and finding that we had vans moving around Melbourne, which were resulting in sales.
Kevin Graham: You've touched on a point that a lot of people don't necessarily realize. That is that, just building the website isn't enough. You need traffic, you need visitors to that site. How did you go about getting those visitors? Was it paid traffic or SEO, and what steps did you need to do there?
Travis Osborne: Initially, we didn't have any money to do SEO and paid traffic was very expensive. It was really, we were out there speaking wherever we could. Always out there talking to car clubs, I was talking to sporting clubs. We sponsored our local Aussie Kick Football Club. Initially, in the first 12 months was really about word of mouth. We realized that my ability to get out there and talk to people was clearly not going to be sufficient enough to grow the business.
Travis Osborne: It was at that point, we started looking at Google AdWords. I did the Google AdWords myself in the first 12 months very poorly, which in hindsight probably cost me a lot of money. But as we grew, we appointed an agency. We went through two or three different agencies until we found a company that just we felt comfortable with. Once we're in that position, we understood what our funnel looked like and our cost of customer acquisition. Once we were able to feel comfortable with that, it was simple arbitrage that we knew that if we spend X on AdWords, it would result in so many sales. It took us a while to get that right. Once we got that model right, we were pretty much pushing ahead, and we knew the model what we wanted to achieve. At about that time, we were just starting to understand it, is when we went on Shark Tank.
Travis Osborne: The amazing thing with Shark Tank was the massive exposure we received. On the show we agreed terms on a deal. But what the amazing thing was the next day we had 700 phone calls for people wanting tires put on their cars remembering at the time we were only in Melbourne, and we only had two vans available. So, the next day, we probably picked up the equivalent of a month's work. A lot of those customers we just couldn't service at the right time. So, we lost a lot of that benefit. But what it did give us was the fact that we could understand there is a desire for this market. For me, we started increasing our AdWords and growing the business primarily on the back of our exposure on the television.
Kevin Graham: One of the things that you touched on there was understanding the customer acquisition cost and how much you could spend on that. Now, I know a lot of direct to consumer brands like yours will often actually lose money on the first transaction with the hope that they'd get a repeat purchase from that customer. Are you guys one of the ones where you're profitable on the first purchase?
Travis Osborne: Look, our average sale is at a point where we are profitable on the first purchase. But we've been amazed at how many times those customers come back to us. As a business, we're now approximately six years old, which is the second life of a lot of our original customers. We're now getting them on the return visit without the cost of the SEO and the AdWords et cetera. More than, I think it was last count, about 34% of our customers last month were repeat customers. What it's showing is our Google reviews, everything is at a point where our customers love what we do, and they're returning the average tire customer who buys tires once every four years. There is a long period between return visits. For us, we do need the first event to be profitable.
Kevin Graham: I never really thought about how frequently I replace my tires, but I always thought it was a lot sooner than that, but maybe I just drove a lot more kilometers.
Travis Osborne: It generally is a rule of thumb, it's four tires every four years. It's essentially one tire a year on average, and then assume you get a puncture or two, through that period also.
Kevin Graham: Right. Before we hit record as well, you mentioned that you see the business as a logistics business. Can you explain the business model of how Mobile Tyre Shop works to the audience?
Travis Osborne: Certainly. I very much approach the business from an operational and logistics perspective. Unlike a traditional tire store that goes and leases a premises. Holds a certain amount of stock. When the customer arrives at the store, you essentially get sold what the tire store has on the shelf. Our business operates that we don't hold any stock, everything is run just in time. When we talk to a customer, which we do a same day delivery, we don't even have the tires when we sell them. We have three deliveries a day from the major tire companies.
Travis Osborne: If you talk to us at one o'clock in the afternoon, we'll get those tires delivered to one of our vans, and then fitted on the same day. Really, where the opportunity arises is we don't have the real estate costs, we don't have the costs of holding stock. What that enables us is to give the customer the choice of all the major brands. At last count, we offer over seven and a half thousand products, which for a tire store is impossible to keep in stock. What we've done is conditioned our suppliers that we need those tires literally within an hour of ordering. So, we're selling a product that we haven't even ordered at the time we're selling it, and then enables us to be cost effective a whole transaction to keep the costs down for everybody, which we can pass on to the customer.
Kevin Graham: Right. That's a really good thing where in your case, you don't even have the tires on hand at the moment that you're placing the order, but then you can then go out, buy those tires. You've probably got 30 or 60 day terms with your suppliers as well. So, you're collecting that revenue and then able to pay that invoice at a later date. That's really good. It's always great when you can build a business model like that, which helps reduce your costs and then allows you to pass on those savings to the customers. It creates this win win win scenario.
Travis Osborne: From an accounting perspective, we're cash positive. It enables us, we don't have dead stock, we don't have stock sitting on the shelves. Every cent we spend has already been prepaid by the customer, which enables us to pass those savings on back to the customer.
Kevin Graham: Now, when you're on Shark Tank, you mentioned the idea of the business becoming a franchise model where each van would do around 900K to a million dollars per year in revenue in Australian dollars with a profit to the owner operator of around 90K. Now, how is the franchise model developed out for you guys?
Travis Osborne: Okay, what we chose not long after the show, we actually realized those numbers were certainly more than achievable. What we actually found was the reason a lot of companies look at franchising is their ability to fund vehicles on the road. We found with the model and the turnovers we were achieving on the first two vehicles, it was more cost effective for us to go and lease more vehicles, having employees, training employees, so all of our staff are employees. We're now running 45 full-time staff.
Kevin Graham: Right, That's a long way from the two vans where you initially started with.
Travis Osborne: Correct. We always knew the model was going to be strong. What we probably didn't appreciate was how good an opportunity it is. When we went on the show, we were really focusing on the retail customer sitting to one side that we probably didn't even appreciate at the time. You've got a lot of fleet companies, large businesses, where they've got their staff on the road. When they're not on the road, it's costing them money. Two thirds of our business now is business to business; major fleets, big Ecommerce companies.
Travis Osborne: We've actually realized we were missing an opportunity just targeting the mums and dads. We still do a great job for the mums and dads, but there was a lot of opportunity in the fleet market, keeping these drivers on the road, making money for these companies.
Kevin Graham: Right. It definitely makes sense as something where if you have a fleet customer on board, they're going to be ordering a lot more from you than a mum and dad who might have one or two cars that they need to replace tires on.
Travis Osborne: We find ourselves in meetings with fleet managers that manage tens of thousands of cars now and we've just realized waiting for that mom and dad to chew through their tires every four years, while it's a good business. The other opportunity is we do a lot in car rental space for example. We've got vans out of the airports changing tires every day. Those cars are on the road all the time. They're driven probably a little harder than leave the family four wheel drive. We're finding we're doing a lot of work in that space as well.
Kevin Graham: That just reminds me of a Top Gear quote, where Jeremy Clarkson is in a rental car and describes it as being the fastest car in the world. It makes sense, people don't care about their rental cars as much. So, I'd imagine their wear on tires would be a lot higher, in addition to all the extra kilometers that they're running up.
Travis Osborne: Certainly. They're fairly heavy on their tires. But the other aspect is the rental cars are very cautious of customer safety. We're well and truly on top of making sure when that car goes out to a customer, those tires on that vehicle are going to be very safe.
Kevin Graham: Yeah, making sure that it still has enough tread on it and all that.
Travis Osborne: 100%. Whereas previously, a lot of these vehicles at the airport were being driven to tire stores. They were sitting at tire stores waiting to be done. We've solved that hustle by coming straight to the airport. The vehicles themselves don't leave the compound of the rental company, and it's all done on site. So it's a win win for both parties.
Kevin Graham: Can you tell me about a point in the business where you started to get some initial traction, and what do you attribute that success to?
Travis Osborne: To be quite fair, when we went on Shark Tank, it's common knowledge, we didn't openly take the investment. To be quite fair, we didn't really know how to spend it, let alone what to do and bringing on business partners. We just probably at that point still didn't understand the model. We were working through. It was about another 18 months before I took investment from a party, and that was often when it's your own money, you can afford to spend a bit more time learning the business essentially without the concerns of shareholders and investors pushing for return.
Travis Osborne: But it was really prior to launching the business. We've done a lot of research on what was happening overseas. We knew the Ecommerce market was growing very strongly. Last year in the UK, 17% of all tires were sold online. So, we always knew that was growing. It was just the convenience of the mobile. We knew what we were doing. But we knew it's just going to take time, and nor have we had the money to promote ourselves as much as you would like. If you've got pockets of money, you're just going to keep promoting yourself.
Travis Osborne: We've grown our logistics, we've grown our accounting. All our backup house has grown at the same level as the business. We're at the point of now, we're about to have significant growth. In fact, we've just ordered another 20 vans. So, we're very confident in our business model, and we've recently just brought on some new investors into the business to help us to achieve that. But it's fair to say we've always been confident by just watching what's been happening overseas that the model was there. We just had to make sure we did it properly. We've probably been slower ... We could have moved a lot quicker in hindsight, but I've always been very pragmatic in that, let's make sure it works before we go and spend a dollar.
Kevin Graham: That's the wisest and safest way to build a business is slowly and gradually reinvesting the profits rather than taking a huge bunch of capital and trying to grow faster than the demand might otherwise be there.
Travis Osborne: You often see people spend other people's money a lot quicker than they spend their own.
Kevin Graham: That's for sure. One of the things I like to cover on this show is not just the amazing parts of business. A lot of podcasts and business shows always tend to have this survivorship bias, where they only end up speaking to the success stories. One of the questions I like to ask is, can you tell me about an unexpected crisis that happened in the business and how you handled that?
Travis Osborne: It's really being on top of cash flow has been the ... We've had situations where we had to look at my credit card in the early days to say that we knew staff wages were due on a Thursday, we paid our staff. Often, I'd be looking to say, well, we've got a couple of accounts that are outstanding. These customer is due. He normally pays pretty well. We're expecting him to pay on a Monday.
Travis Osborne: We had a situation where one of our largest customers had normally paid by direct transfer, and we're expecting that money to hit the bank account on a Tuesday. We've opened the mail that day and they've paid by check this week. As you know, in the old [inaudible 00:18:19] still a check was taking four to five days to clear. What I'd realized was waiting five days for that check to clear, there wasn't enough money to pay salaries. You look at your credit card, you look at all your overdrafts, everything. It's really the challenge with any business is building on top of cash flow. That's probably the biggest lesson I've learned. On paper, you can be making a profit, unless the money's in the bank, you can't pay your bills.
Kevin Graham: Those sort of cash flow crisis moments that you're describing can be really tough to go through. Because you know that the money is coming, but we just don't have it right now. But we need to pay these expenses or the wages or whatever else. Keeping those lights on can be tough at times.
Travis Osborne: What a lot of people often forget is the staff get paid before the owner. It's keeping them happy, keeping them convinced. I've got some great staff that have been on board for a long time now. When I told them that there must be a problem with the bank, and I can't understand why the money's not in your account, I've had to look at them half sideways to say ... I don't know the time whether they realized the money wasn't even in my account. We had to wait another day.
Travis Osborne: But then you look back now and they're certainly part of the challenges of any business. They don't get easier with size either.
Kevin Graham: Yeah, bigger business size, bigger cash flow problems.
Travis Osborne: There's 45 families waiting for me to pay them each week or monthly as it may be. As I said, once again, they get paid before I do.
Kevin Graham: We're six years into the business now. What's one thing about your business that still makes you excited today?
Travis Osborne: We're not even touching the surface of the opportunity in the market. We should have 300 or 400 vans around the country. The tire industry itself is a $5 billion as I've mentioned. Looking at the UK market, if it's 17% of the market over there, we're sitting on an $800 million industry that really hasn't even been touched in Australia at the moment.
Travis Osborne: I've just got back from a conference in Italy. One of the American companies came over and they're doing 1.3 billion US selling tires online, and you just appreciate how big these markets are. But Australia hasn't even got ... One of the best things about our business is we've been growing at over 300% a year, and still no one even knows that our business exists, which shows how much opportunity we've got in the market.
Kevin Graham: Wow. So, 300% year on year growth. That's insane.
Travis Osborne: Since appearing on Shark Tank. In the last four years, we've grown back to back 300%.
Kevin Graham: Wow. Where do you see the future of this business then?
Travis Osborne: It's now [inaudible 00:20:58] at the wheel. We've recently raised some capital through private equity group, and they're really taking us on that journey. Now, we're learning a lot from them at the moment with the view that it should we should be at 100 vans this time next year. Because what we've done, we've proven the model works for 33 vans. Now, we've invested heavily over the last 12 months in systems for a new ERP accounting system through the business. Which even 12 months ago we wouldn't have considered or been in a position to afford.
Travis Osborne: Now, we're backing up our systems, investing in management. Its been interesting the last six months on taking an active step away from the day to day management of the business. I have to say, it runs a lot better without me there on a day to day basis. My role is now very much looking at what the business looks like in 12 months’ time, to 18 months’ time and really looking at where our growth opportunities are.
Kevin Graham: Do you see that especially with Venture, I know that typically they want to try and run a five to seven year timeframe and then exit to someone. Is that the pathway that you're going down?
Travis Osborne: We've got a very active strategy where we're looking for a cash event within the next two to three years. Whether that's through an IPO or a major trade sale. What the exciting thing is for our business is the amount of interest we're getting from the major tire companies now, a lot of them have been aware of what we're doing. But it's not until probably the last 12 months, that they've actually noticed that we're actually achieving some big contracts.
Travis Osborne: In still saying that, there's still a very big market for everybody. I'm sure, some of the bigger chains still don't worry about us, but there's definitely a market there for us as well.
Kevin Graham: Right. If you guys are working towards that cash event in the next two to three years, then I'm definitely going to have to have you back on the podcast once you've been through that to give us an update on all that. Because I really enjoy hearing about those sort of stories.
Travis Osborne: Yeah, I'm looking forward to it myself. Hopefully, recording from an island somewhere on the North Queensland coast.
Kevin Graham: An island that you own maybe.
Travis Osborne: Hopefully, let's see.
Kevin Graham: All right. We're moving into the next section of the podcast now. Can you tell me what book or books do you think had the biggest impact on you deciding to become an entrepreneur?
Travis Osborne: I'm a reasonably active reader, but as far as business books go, there's not a lot there. What I do read a lot of is biographies of people where they've taken ... It's often a lot more about the people than it is about the business itself. We see the books in relation to growth. A lot of it, I take with a grain of salt. Because a lot of those books don't talk about the hard work and the 14 hour days and things that go into running a business like this.
Travis Osborne: Who can I recommend? I'm just trying to recall. I haven't got someone right at the tip of my tongue. But as I said, a lot of it is what I keep coming back to in our business is, it's people dealing with people, not businesses, dealing with businesses. It's pretty simple. It's do what you say you're going to do, when you're going to do it. If you're not going to do it at that time, let them know.
Travis Osborne: A lot of businesses, when I first started looking at Mobile, said, we'll be there from 8:00 till 12:00 in the morning. For us, it's really about exact times. But getting back on the books, I really don't have anything immediately for you. But I will think about it for you.
Kevin Graham: Just to wrap it up, where can our listeners connect with you?
Travis Osborne: Certainly, obviously, it's mobiletyreshop.com.au, but we're also active on Facebook. By all means, click on to my LinkedIn, mention the podcast and we'll certainly look after you.
Kevin Graham: Awesome. Well, I'll include links to all of those resources in the show notes to this episode. Thank you so much for your time this afternoon, Travis. It's been great having you on the show and hearing more about the history and then growth of Mobile Tyre Shop.
Travis Osborne: Kevin, really appreciate the opportunity. Thank you.