Sunday, March 30, 2014

Six Key Decisions For Every Carshare Start Up

As a consultant in the field, I've talked to many entrepreneurs thinking about starting a carsharing company.  Almost always their first question is about technology — the telematic device in the car and the software for reservation/billing/fleet and customer management.  The next question is often about what I think about their choice of vehicles.

While technology and vehicles are important considerations, they are almost never the first things to consider and probably not the most important, make or break, decisions you'll face.  Preparing and delivering the recent webinars in Metavera's Should You Become a Carsharing Operator series got me thinking about what these priorities are.  So I'd like to offer an overview.

First a couple of general comments: many carsharing services have been experiencing 30%+ membership growth rates for a number of years.  The demographic trends indicate that car ownership has peaked in North America and Europe, so I expect these growth rates will likely continue.  Half of the 50 largest cities in the US do not have large-scale carsharing.  And, outside of Europe, Australia and Singapore, the rest of the world is untouched.  (But it may look different in these areas, since carsharing can provide "automobility" for the large segment of the population that may not be able to afford, and probably doesn't need to own, a car.

There's a variety of service models that get called carsharing: traditional (round-trip) services, and variants serving specialized markets, such as college campuses, government and corporate fleet carsharing, and getting closer to car rental model, there's unattended car rental (with carsharing elecronics but regular car rental rates and requirements) and variations on all of above. And, of course, there's one-way/round trip services, which are getting all the attention these days.

No matter what type of service you have in mind, there are some key considerations.  Here's my short list:


If you're not going to operate in North America or Europe, or if you have in mind a P2P carshare service anywhere, identifying insurance should be your very first order of business.   Carsharing insurance is more like a commercial auto policy, such as a corporate fleet or commuter van company might carry, not a personal auto policy.  And it probably isn't car rental insurance either - which is typically minimum coverage (in hopes of selling the customer additional coverage).  This means you have to dig deep to find insurance brokers that specialize in transportation.

And you will quickly find that insurance companies are in the business to make money.  They want to see that your company is going to grow sufficiently that the premiums you pay are worth their risk.  Don't waste your time, and that of insurance brokers, until you have developed a pretty well-defined concept with at least some basic financial projections.  Finding insurance is a slow process.  I can help speed it up.


While there are a couple basic pricing strategies that many companies use, this is one of the key factors that prospective customers will judge your service on.  While hourly with miles included is the norm for most of North America, it seriously limits the types of trips your service can be effectively provide.

Developing a good pricing model is more difficult than it seems, since people don't have much to compare carsharing rates to.  Ask yourself: is my pricing simple and understandable for the first-time user?  Does it provide a discount for more frequent users, both individuals and businesses?  The area of pricing, including membership plans and other fees, is a major topic that I spend time helping customers define and refine.  

Customer Service

Perhaps the aspect of carsharing that gets the least attention from start ups is fully developing a  customer support side of the business.  When you own a car, you provide your own customer service.  When you're a carsharing company, how you relate to the customer during the crisis times is where your reputation is defined.  And customers will let the world know when you screw up - via Twitter, Instagram, email to friends - but not necessarily back to you.  This cannot be overstated.  It's not necessarily about money, it's your companys attitude, as well.


Carsharing is still a new concept for most people.  Two competitors in the marketplace actually legitimize something that many people may have thought was marginal.  So your biggest competitor in your customer's mind is car ownership - not another carsharing company.

You have to address these concerns that your prospective customers have:

  • Will your service be reliable (a car available when I want it)? 
  • Will it be convenient (easy to make reservations or on-demand; ideally no more than 5 minute walk to the car?)  
  • Will it be economical (less expensive than owning a car, including parking)? 


What is the personality you want your proposed company to convey?  This is so essential it's often overlooked when working through all the financial and operational details of starting a new company.  What kind image is your service going to have: functional, fun, youth-oriented, luxury, cool, reliable, a cooperative/"sharing economy" business, a "local company" or a corporate brand?  As a good example, I point you to Autoshare — they have done an amazing job with their Keys to Wonderful campaign, moving beyond the functional "how does it work" and creating a lifestyle brand.   Beyond a great image, conveying that brand throughout everything you do is a challenge.

Business Plan

In addition to these questions, your business or operating plan needs to show how the day to day operations will be handled: Where will the cars be parked?  Are the assumptions in your pro forma financial projections realistic/reasonable? How many staff people do you need? Do you have a viable marketing strategy?    Are the vehicles leased or owned?  How often do you clean the cars?  Who's handling on-call duties on evenings and weekends?  And, of course, there are the telematics and carshare software platform decisions that may have been your first consideration.  I will offer this hint: rarely does it make sense to start out building your own system - you don't know how all the pieces of your business fit together yet, so how can you design a system to manage it?

Carsharing is a low-margin business so you really need to hit come out of the gate running - whether you're a car rental firm planning a carshare subsidiary, a non-profit in a small community, or a large corporate venture.  As a consultant,  I know I can help you avoid wasting a lot of time and money getting your business off the ground  — you know your local market, I know the industry.  

I am flexible in the way I work with clients — by the hour or day, or by the project.  The most basic way I work with start ups is by reviewing the business plan and offering comments and suggestions.  In addition, using the resources of Team Red I can also provide demographic and geographic analysis to help identify the most promising neighborhoods, conduct survey, etc.

Here's a link to the slides from Should You Become a Carsharing Operator webinar presented by myself and Julian Espiritu of Abrams Carsharing Consulting and sponsored by Metavera.  If you'd like to contact me use the link at the top right of this page.