Radical Lessons From The Pedal Me Experience
During the first 4 years of Pedal Me we created one of the most efficient, fast-growing startups out there. There are some key things we did differently that allowed us to do that, and these are applicable to other businesses too - so I thought they were worth sharing. Challenge / discussion welcome!
First - WHAT we achieved:
We burnt far less cash than any other equivalent, logistics-based startup I could find data for. The next best lowest burn rates that I could find were about 3x ours, relative to revenue. From the data I could access, 10x more was representative of the norm.
Last time I ran the data (December 2021) we were about as close to profitability as Uber - once you'd removed Uber's leveraged "adjusted profits", which factored in increased valuations in Didi*
*The Chinese equivalent that Uber has a stake in from a share swap deal to prevent conflict / competition)...fed in part by Didi's holdings in Uber increasing valuations....a perfect hype circle...
This was despite Uber having over a decade headstart on us and ££ Billions in investment - while we struggled by on crowdfunded cash, from a bootstrapped beginning. And despite the fact that Uber was evading VAT and other employment-related costs (that they've since started to have to pay, here in the UK at least).
This does also slightly beg the question as to why venture capitalists and institutional investors were so slow on the uptake with us... More on that for another day.
This efficiency allowed us to deliver huge shareholder valuation increases. Excluding SEIS/EIS tax breaks, we grew shareholder values by 17x in 4.5 years, fairly reliably. We doubled shareholder value year on year, barring the initial Covid period - admittedly we did not reach a point where shareholders could exit, so this is all a bit theoretical.
Next - HOW - What were the key ingredients?:
1. Focus on the biggest costs, and think about reducing them holistically. Systems thinking. Trusting your staff will save you money.
Our biggest cost was staff time. By a big margin. The rule was "if you need something to make you more efficient at work, buy it and ask questions later".
We allowed staff to take bikes home; a benefit to them but also reduced dead time in commuting, and dead time for the company in outbound legs from our base to the first job of the day. It also helped them use the bikes to “do good deeds” (more later).
We focused on training riders to manage risks dynamically and systematically, allowing them to move faster. And then through ‘near miss’ reporting we would review and tackle the biggest risks systematically.
We replaced the entire fleet's brakes with more powerful units, eliminating a chunk of near misses and therefore preventing collisions. And by allowing riders to stop faster, we allowed them to ride faster too - increasing income per staff hour. Admittedly by a small amount, but we also reduced the number of brake pad changes and the staff time associated with this. It’s hard to over-emphasise how sensitive to income/hour variables our modelling of costs/income proved to be.
With vehicle downtime being a considerable staff time cost, we bought the best possible kit that broke the least. One piece of equipment alteration added 25% to the value of the bike at purchase, but eliminated a part that was breaking every 6 weeks. It was instead replaced with a part that broke every 18 months (or even longer), saving not only on replacement parts but also considerable staff time costs, and bike down-time.
This approach spread, with Urban Arrow changing their standard issue kit in line with the innovations we developed.
We standardised the fleet, spending to make sure that every bike had the same parts - to simplify training, reduce the number of parts we had to keep in stock, and allow faster maintenance tasks because our mechanics were specialists in repairing the parts that we had.
Over 4 years, using this methodology reduced our parts cost per hour by 60%. Overall staff time costs were much harder to track, but the savings were likely bigger. We grew our fleet from 8 bikes to some 90 bikes, with a move from 1 FTE mechanics to 3, even though we’d expanded our fleet more than 10x.
A bike completely breaking down half an hour ride from base, most likely resulted in a mechanic riding out to them with spare parts, bike swapping, and then fixing the bike on site - at least an hour in staff time, or about £50 of opportunity cost. Sometimes another rider would have to divert to rescue the consignment due to time constraints, adding another £25 of staff time to the cost.
We also achieved bike up-times that I understand were far ahead of what anyone else was achieving. With less than 5% bike down-time, Pedal Me was not only able to offer a more reliable service, but recuperate the additional capital investment that we'd invested into better quality parts, because we needed less spare bikes at any one time to account for bike outages.
2. Do the the right thing and build a brand that people can trust.
It's hard to overstate the value and power of trust, and how fragile a thing it is, how strong a nose for insincere behaviour people have, and how big an effect on business bottom line this has.
We tried to be all good. All the way through. As leaders, we paid ourselves last, and paid riders as much as was possible. We encouraged our staff to "Do Good Deeds". We gave our staff shares so that they could benefit from the company’s success. In our negotiations we went straight to what we wanted to avoid wasting anyone’s time. We were straightforward, upfront and honest.
We tried really hard to do the right thing by our customers, shareholders, staff - and it showed. In the fatigue on our faces, in the small decisions we took every day, in the messaging we sent out to the public. People would spot us about and think “that’s a good idea, I wish them well. Probably a bit of greenwash there though”. Then they’d do some digging and find there wasn’t. There was no background fleet of unbranded motors doing most of the work, with just a front end of bikes. There was no high paid leadership in ivory towers who didn’t understand what they were asking their people what to do. We were out on bikes too. The staff could tell you that, and did.
This got us exposure in places where we would never have otherwise been seen. Trust is an incredibly powerful lubricant in business. We got into big businesses on the strength of our brand. We secured slots on the BBC National News for our credibility. We got repeated coverage in all kinds of publications, across local, national and international titles because we represented something good.
3. Marketing by doing.
Our marketing spend? ~1% of revenue. Compared to about 6-10% which is typical for businesses.
And yet we had a constant stream of new customers. In fact, the main failing in our brand was generally our struggle to keep pace with demand growth.
We saw months of 40%+ growth on the previous month, and the company strained at the edges to keep pace. To try and offset what we knew was sometimes sub-optimal service because of the rate of growth, we put huge efforts into making it to these jobs. Our regular customers would be aware of this because it would be me or another senior member of staff turning up to get the jobs done.
Generate stories which resonate.
We created simple stories: narratives and bits of everyday theatre that conveyed what we were about but were cheap for us to create. It cost £250 to post a bike back from The Netherlands - or £250 for us to send a member of staff out there for a free holiday and cycle the bike back, with the additional benefit of speaking directly to the bike designers, getting to meet the Urban Arrow staff and try out the new models. So we rode them back, which generated a story with incredible resonance. It gave our staff additional kudos and showed the power and ability of our bikes and staff to cover substantial ground - tackling a major misconception held by potential customers that bikes could only cover a mile or two when moving stuff around.
We moved premises - including the industrial freezers we had on site - by cargo bike.
When we were asked to deliver a 15 foot high pink Dodo, we found a way to make it happen.
When a rider spotted an 8 piece brass band that were short an audience, we coordinated riders to take them to a busier space to everyone’s delight.
Then there were the everyday contributions made by individual riders to society, encouraged by our “Do Good Deeds” values. These included:
helping police chase down a thief by giving them a lift following the crim trying to abscond by foot
giving a child a lift back from the doctors (great work Braz)
taking someone having a heart attack to A and E without them having to wait for an ambulance - or having to get off the bike until they were inside the doors of the hospital.
Speak out with courage, because people respect and trust courageous voices
We spoke out. Repeatedly. Even when it wasn’t directly in our interests to do so. Especially when it wasn’t directly in our interests to do so.
We helped spread the word about Extinction Rebellion because they were doing incredible work spreading the word about the climate emergency - even though this carried some reputational risk to our brand because they were, after all, breaking the law. To up the ante we then amended our policies to make it clear that those who had been arrested for Non-Violent Direct Action would not be excluded from employment with us - and tried to get other companies to do the same.
We spoke out when stupid decisions were made by those who should know better, even when that carried some risk of backlash.
We did the right thing, for safety for our staff and members of the public, even when it drew quite a bit of criticism.
We framed ourselves against what we saw as tax-dodging and slightly evil corporate forces - even though that carried some risk of us deterring potential funders.
In summary - My Key Learnings from the Pedal Me journey:
Trusting your staff will save you money.
Think about the bigger picture, not just trimming costs off an individual line (the brake pad problem).
Eat your own dog food.
Do the right thing, and profit from it. Use your company brand to speak out with courage - it’s the right thing to do for society, and your business bottom line.
Generate stories which resonate and communicate your brand - what you can do and your values.
