Dear all,

I thought that while I am not officially allowed to work, my best value that I can bring to the company is to give my honest opinion to you as owners and business leaders. I know you have a lot of experience in life in general and in business, but I think we as human beings have our own blind spots and sometimes we are infatuated with our ideas and hence can’t see the whole picture.
I am not in a position to give you advice ( I try to take advice ONLY from people who I would change my seat with) but I think I got some valid points that could help us improve our business.

I really value your time and know that this kind of reports should be kept as short and concrete as possible, but I have consciously decided to go with the 20-minute read because I want to hone in on details not just bullet points. I hope you will stay with me until the end.

After reading Ray Dalio book “Principles” I understood what it means to be radically open-minded. It means recognizing your two barriers: your ego and your blind spots.
Most of us like to see ourselves as open-minded. However, the challenge appears when someone pushes us out of our mental frameworks and our truths. Being Radically Open Minded is willing to accept that what we believe might not be true.
It is almost as if we were asking people to constantly prove us wrong.

I think that the information I am about to bring you is not absolute truth but rather a humble opinion and I feel it's necessary to discuss every point below in person.

I am writing this because I firmly believe that there is no-one else in our organization who will tell you the raw, unrefined truth about Parkable Classic. This report is not related to PfB because my knowledge is not relevant to speak on this part of our business.

I will start off with a quote from a book I read recently.

“My experience is that the majority of owners and CEO’s in the earlier stages of their businesses don’t seem to understand how much endurance plays a role with being successful. Instead, they focus on the idea of running as fast and as far as they can. The problem with such a mindset is that the faster runners often get tired and slow down, especially when all their energy goes into something that doesn’t materialize into revenue as expected. How many times have you heard people looking at someone else’s advertisements on social media and say, “That makes no sense”, or “I can do better”? In reality, the question should be, “Can I sustain the intensity longer?” Many of us believe we can do better than the concepts we witness, but the true question is if can we be creative, effective, and precise to sustain this level of discipline for the years to come, not just one year.”

I am sure you know about my experience back in Tallinn. I want to dig into it a little bit more to give you a better overview and compare my experience to our business here.

I have mentioned it many times before, but when I left Tallinn, I knew that no matter who will come and take over the work will find it enormously hard to find new leads and even harder to sustainably close them with pace. To me, it was clear that consistent month to month growth was over. Now it was time to maintain what we had built and take opportunities if they present themselves. I understood that in this business you can’t grow forever.
So, based on my understanding and beliefs I humbly think that our business model will face nearly unconquerable resistance after a certain period of time (in which we are now) in small cities such as Auckland and Brisbane. Here are the reasons why:

Limited opportunities —
There are only as many carparks out there as there are, carparks are not being built day in day out. There are only a limited amount of opportunities to grow and it's very likely we have reached our peak.
As I’ve said previously many times — I know every single corner of the city, every single street and every carpark out there, you name it, I’ve been there.
We only have Ponsonby, CBD, Parnell, and Newmarket. They are all so small pockets that it’s almost impossible to not know about good opportunities except these few limited opportunities behind closed doors that we really might not know about, but even if we knew… It would not change anything from the long-term perspective.
We are expecting our business to grow sustainably for years to come with exactly the same approach as we have now. I think this is not realistic.
How to solve this? I am the last person in the room who will say that something is impossible, but I really do not see any solution to it with Classic. What we can do is to switch to another model such as acquire competitors parks or create partnerships with them, get into parking houses etc but this is a much longer topic and requires a whole different approach.

3 Cycles of P2P parking company:
I think it’s important to understand the cycle of our Classic business which in general consists of the following stages:

Launch a new city -> invest in human resources + assets.
Take it by storm within 1–2 years -> Pay base + commission reward model.
Maintain the partnerships and grow slowly if there are opportunities -> Cut monthly costs, keep them as low as possible. Create a lean profit machine and get the investments back.
Repeat.

When it comes to the third cycle, at this moment we are trying to get to the next cycle. In this cycle, we are expecting to grow our revenue numbers in the next 4 months at a much better pace than we have had previously.
To me, it is very unrealistic.
If we are really serious about the numbers, we need to find another way.

Signs:
I have heard many times now in Sales Scrum that our numbers have been flat and it would be great if we could add some parks asap before the end of the month. I think this is the first sign we are in the 3rd cycle and we will hear the same thing many times over and over again. Being flat shouldn’t be a surprise because such is the business model.
It’s not that you can constantly make phone calls and close deals. There are only limited phone calls you can make on any given day based on your pipeline, very limited amount of leads you can close.

Profitability factor —
I don’t have to know our revenue and gross margin in order to understand that with the number of people we are employing and the model we are currently running our business will not become profitable considering that our opportunities to grow further are very very limited. It can only become a real business if we improve using our resources and overall efficiency which means reducing the number of people and increasing the workload and responsibilities, plus cutting out unnecessary activities that don't produce results.

Money and Margin
However you look at it, sales is the most important thing in business. Normally in organizations, a salesperson will cover his wage and many other people salaries in addition to that. However, this can't be applied to our business.
It's because the gross margin is tiny in general, and our commission is not as high as well. Our net take is very low compared to the effort and HR we have to put into the whole process.

Understanding the Parking Industry in general:
I think it's important to understand that profits in our industry are made in enforcement and after hours parking.
Car parking buildings are being leased out by car parking operators for more money per bay than they will actually charge the end customer. We have participated in many tenders back in Estonia and every time we were far off of the price that win. When it comes to leasing parking houses, it is normal to pay 125–150% for carpark even they come in big quantities. Enforcement and few hours staying parkers will cover the difference in the long run. In our model, if a person has subscribed for a park, we will keep the bay for him for 24h, not talking about enforcing and towing which I totally understand and can relate to, but it's important to understand that the only money made in our industry is actually being made from enforcements and frequent short sessions.
This explains why our competitors are charging a lot for staying for a few hours, but the monthly subscription and daily rate is actually affordable in most cases.

Business within the business model:
I think this is a really important one for the future and if I’d be owner this would be the only model I could offer my employees.
I have now worked on a performance-based salary in EU and now at Parkable, it’s fixed.
I think I have a feel and know the difference between these two from my perspective and as a benefit for the company.

If implemented to the culture, it will change the course of the whole organization. The difference is the drive, mindset, and hunger of those who really deliver the numbers that are much needed for growth. When motivated rightly, these people are able to perform at much better efficiency and pace. If everyone will level up in their mindset, it will make a humongous difference to the organization. It is compounding effort. Everyone gives their very best.

For my entire time back in Tallinn I was being paid base salary plus I got to keep 100% of the company cut for any site that I landed for 3 consecutive months.
On average I earned 2x the base as a commision. Let’s say I landed a site that produces 3k in revenue and I sold it out, the first month I got 900NZ and the same following 2 months. At the same time, I had 5–6 parks generating “passive” revenue to my monthly base salary and I was already thinking about where the heck I will get new ones so that the machine won’t stop printing.
In Estonia, I knew that if I don’t land any sites and do not sell any monthly subscriptions I wouldn’t earn any money and hence I became very creative. This made a huge difference in my mindset.
Few months before leaving I knew that it will become nearly impossible to make any extra cash and hence it was certainly time to leave. I knew it’s not worth hiring anyone new because it’s just maintaining the relationships with hosts and our core customers. In this phase (3rd cycle) of the business, it is enough if one person works in the company along with customer success. Everything else can be outsourced. The business is established and is now generating profit.

The idea is to give business development team all the tools and the best opportunities to earn as much as possible so that they are driven to take the new city by the storm. If they at some point stop producing results, it means that the growth period is over.
My message here is that no one else knows the market better than the salespeople do.
When the commissions dry up, it's a sign of ending the third cycle.
I know this is not something you will accept as truth and rightfully so, but I am convinced that growth with such pace as we had previously in Auckland is now over due to lack of opportunities. It's time to repeat the cycle and look for opportunities elsewhere.

The perfect scalable model:
Taking our experience from building a P2P oriented parking company In Auckland and Brisbane we have proven that if we got the right people and enough resources to start with, we can grow the business to some degree in any suitable city of the world. However, despite the fact that our own business here is not scalable, (we can only grow it to some degree) our model is duplicatable in other countries and cities.

Suggestion for scaling: to kick-start the business in any city the best model is 1 + 1 + 1. Few months old Parkable overseas needs just two full time (base + commission base) business devs, customer success, and outsourced accountant. Ideally, 3 uni students just driving around the city with scooters and searching for leads and documenting the city like agents would do. This will save so much precious business devs time so that they can focus solely on high-quality leads and closing them. Only making phone calls + meetings + proposals.
The perfect way to keep the magic 3 happy and self-motivated is to give them shares in the mother company (that’s what Kerb does when they launch) plus let them build their own business within a business, giving away shares in each countries company as well.

“If you want your employees to work as hard as you do, give them the same compensation which is owning the business.”

The salary system is the key here — the biz devs can keep all the revenue they can make as an individual and customer success gets a fixed salary. In this matter, it's self-sustainable from the very beginning.

At this moment our business is not scalable because it’s location dependent nor it is profitable because our total wages are much higher than the profit potential but surely there is a way this business can be run in a profitable way from the very beginning. The secret is simple — spending and thinking as if you do not have any funding at all. Not over leveraging. Staying lean.

Target markets -
I think we can separate our Classic part of the business into two main sections:

High Demand Parks — such as parks that will meet our critical success factors. Vacant blocks of land, vacant commercial real estate in between tenancies, any kind of unused parks at high demand area with more than +7 parks. These parks are providing us with real revenue, we can fill them with parkers and hence provide value to our Host.
ROI BE or positive.

Low Demand Parks — most of the time not meeting CSF — single bays, listings from Trademe, very low-value parks, very hard to fill since every carpark requires attention and care if we want to monetize it. Very hard to fill with targeting, and most of the time not worth our time to call nearby businesses. ROI negative.

Literally, if we face the numbers, LDP parks provide zero monetary value if we consider the hustle required. These parks are just adding bays to our platform which are in fact just numbers. I think to this day we haven’t proved our peer to peer model can bring in any real revenue.
The only way we can get real cash flow from them is if someone will subscribe from our organic customers which in fact is very rare. I assume around 90% of our single bays are empty 90% of the time. They provide zero value for the company. I know that we need pins on the map to show investors our BUM’s, but I think this part of our business doesn’t work at all, yet we are spending a lot of our effort to make it work. — Ad spends, Trademe listings etc… I am not sure whether we have done any calculations on how much revenue these activities have returned and how much we have invested in them? To me, It’s very clear this process is highly out of balance and I have mentioned it a couple of times before, but nothing has changed.

The question I have asked myself many times is if we are moving with such a fast pace and learning from our mistakes, evolving with the market, then why do we keep repeating what is not working?

Marketing -
For the end customer — I know that we want to be a parking company that is known as a brand and we are spending a lot of resources building brand awareness through social media, SEO etc. I think It’s important to understand that such awareness takes a very long time to build in one city or a specific location. Do we have the endurance to do this for years to come?

I think it’s important to know that most of our high-value CSF parks are full and we can monetize our parks by visiting the businesses around the area. It's just how it works. There is no better way to do it.
We don’t have to target the audience through paid advertising etc.
In my humble opinion, to some degree, we can agree that we are doing marketing as if we were an American Corporate, but instead, we are running a small business in Auckland.

For the Hosts — I am sure we are trying to get new parks by targeting potential hosts to rent out their vacant parks while they are being vacant (most of the time single bays which again provide no real monetary value to the company) and trying to catch bigger fishes along the way. But I think we are not reflecting enough on our numbers. Based on what I see from Pipedrive I think it’s clear that acquiring single bays is not our bread and butter. The idea is pure and good-hearted, but I think it’s time to dig into real numbers and understand that this just doesn’t work. This is something I am assuming, I can’t tell for sure as I haven't seen the numbers but I have a feel for it and I am pretty confident I am right. Hoping to be proved wrong.

Competition -
Based on how I see the market we will always have four kinds of competition.
The first type is Wilsons, Secure etc who have a massive advantage in terms of long-term contracts, unlimited funds, connections that have been built for decades. They also have unlimited resources to build Parkable-like platform as an add-on to their existing app which apparently Wilsons have done already.
The second type of competition is Trademe listings, P2P transactions without a platform. We don’t know how many parks are being leased on this model but I assume it’s a big number. If we ask whether people would like to do it through our platform, a good question to ask ourselves would be — would you sell your car for 30% less than it's valued and if so then what would be the motive?
The third type of our competition are small parking companies like Park Genie and Get Parked — they don’t have tech nor they have funding, but are profitable because that’s the only way they can survive. Lean companies. Here in Auckland, we are the only one out there but elsewhere we will find other similar companies competing with us in every city.
Essentially a group of two or three can build the same type of company without having any tech at all. The business model is very simple. So basically any entrepreneur minded person could become a competitor at any given moment.
Yes, our advantage is our team but again, the only fact that we are all fighting for the same piece of meat (parks)which are very limited makes it really hard.
The fourth type is companies like Kerb and Parkhound — they list all the bays from different sites, focusing mostly on single bays while trying to get as many bays on the platform and expand to as many countries as possible.

They are really scaling their business model in a way that we should be doing as well. Right now, from what I see we are focusing on growing our small size business in Auckland which has reached massive resistance when it comes to growth.

Understanding our Hosts:
When it comes to the highest values of our Hosts it’s clear that the most important thing to them is to earn as much as possible from their vacant parks and most of the time they don’t care who will deliver the cash. Now if we are talking about high-value sites with +15 bays, which is the most important part of our business, it is very likely that we are competing directly with the big money parking companies for those sites. If someone will consider calling Wilsons and ask for an offer, it is certain we will offer less than they do.

The difference is the relationship we are having with the potential hosts. I clearly understand the importance of keeping our hosts engaged and catch up with them as much as we can to see if there are any other sites that could be vacant.
To some degree, it is necessary and effective, yes, but it’s all based on our assumption that there are actually a lot of vacant sites and properties that we are not aware of. Again, in my humble opinion, this is just not true. If we are calling every single listing on Trademe and every agent in the city knows about our service to some degree and we know every corner of the city, what are the odds that there are a lot of opportunities that we are not aware of?
From what I see we believe that there are enough opportunities that would allow us to grow our business for years to come… As a business, we have to think long term.

Brisbane:
Having now spent 2 months in Brisbane I can say for sure that it’s possible to make this business moving fast and profitable at the same time IF applied the right LEAN business model and keep the budget tight — operating and thinking like a real startup with no funding.

The bigger city the better should be the opportunity to succeed thanks to the number of leads available in current space, it will give more time to the end of the cycle. However, if we start in a city where other similar companies have already done a good job, it's going to be hard.

My biggest concern when it comes to Genies becoming part of Parkable is that there is no way other competitors will allow any Parkable signs or any kind of branding in any given carparks. If we do it officially, all of our open sites will be shut down very quickly. You either have council consent or you will be shut down immediately, it’s a different market out there than we have here. It means that Parkable will be operating as an undercover parking firm and can’t do any marketing or branding on our main sites, which decreases the company value significantly in OZ. When it comes to pins on the platform I think we shouldn’t have problems monetizing single bays but again, there is no real monetary value there and in this instance, we will be competing back to back with Kerb and Parkhound who are already established in this city which makes it really hard.
When it comes to potential leads and new business opportunities, again, I know it’s not something you would like to hear but I see the same pattern occurring all over again— Brisbane is in a very similar situation as is Auckland. Yes, there are leads out there, but very limited and once they are gone they are gone. It’s getting tighter and tighter every single month.

Local competition in Brisbane: Kerb + Parkhound + GetParked. Get Parked is the main competitor who is bigger than Genies and has more sites. A very similar structure in terms of human resources, very few people working. It’s lean and profitable.

Focus:
I know you guys have a grand plan on how to combine Classic and PfB and scale the business worldwide using both models at the same time relying on that they will enhance each other and I am not here to tell you that it can’t be done, but we all know that chasing two rabbits at the same time can be difficult. Essentially what we are doing is we are building two different startups at the same time, with one funding. Both business ideas have a lot of competition worldwide, wherever you go (well, Classic does for sure) with possibly more capital available than we have.
Considering how much of our HR forces go into PfB in comparison to Classic, it seems that Classic is our main product. Just something to think about, what is the main focus?

For conclusion:

In my humble opinion, I think very few people from our business actually understand the whole picture as it is and it’s likely that they don’t want to admit the problems we are facing. Based on our new targets from now on I think that it’s actually not reasonable that they are based on our previous results, considering the market is always changing and is shrinking with every closed deal.

Again, I am the last person in the room to complain or tell that it’s hard or not achievable, but to me, being realistic, we are going to suffer a lot if we are serious about the numbers.
Especially if the numbers are required to secure the next funding round. In my opinion, both cities market conditions are not suitable for massive growth anymore. We could grow our numbers if we were to start from zero or if we’d have unlimited leads to make the first contact with but the reality is that we don’t. And even if we had, please keep in mind that some of the deals take a lot of time to actually close.

“If you’re not making more money than you’re spending, you need to think really hard about what you’re actually doing. Because when the money dries up … and it will … there are a lot of people and businesses who are going to get punched in the mouth.” Gary Vaynerchuk

Based on what I see as a business we are very highly overleveraged no matter how I look at it. Our business model is not sustainable in the long run and will not become profitable if managed the same way.

There has been a lot going around from Startup to Scale up, but in all honesty, I think we are very far from scale’in our business. What we are doing, in one word, is we are actually sustainably growing a small business in Auckland rather than scaling our business model to other cities and countries where it could become scalable.

With everything in mind that I just told you, I just want to make it clear I am happy to work for you and to do everything to my best ability to help you guys secure next round of funding and get Parkable to a much wider audience than just Auckland and Brisbane. I know that we are actually at a critical stage in our business where we have to show that we are capable to deliver the numbers and if not we can be in a place where we will not secure next round. If we will raise series A from real VC’s, the requirements will be much different and our case will be approached in a very different manner than it’s been until now.

I had to say my word because literally there is no one else who will tell you this.

Hope this will be the soil to make more informed decisions in the future.
Everything that I said is from a front row salesperson humble opinion, wishing everyone only the very best and with an intention to fight even harder next year.

Max