Dissecting Startups- Clutter Pile 2: Numbers
Jun 27, 2019
Last post, we delved into Clutter’s hypothetical financial levers: Revenue and Cost drivers, specifically Monthly Subscription Revenue and CAC (Customer Acquisition Cost), respectively. I believe those are the biggest factors that Clutter has available to pull.
This post, I want to actually try to ballpark some numbers and put together a picture of what their business model might look like. Again, with this come disclaimers:
- I am not a financial expert, nor do I have any specific knowledge of Clutter’s financials
- I’m pulling only from publicly available sources of data
Digging into Costs
This is tricky. We went over a couple of categories last time though, and let’s build from there.
Operating Costs
- Warehouse rent- this is rented based on the Square Footage used, along with an estimated operating expense (aka NNN), so if your base rate is $.90 SQFT/Mo and $.20 NNN/Mo, you’re going to pay $1.10 per Square Foot per Month. This also means that as the company’s user base grows, so too do their storage costs
- This, of course, may change if Clutter owns their warehouse spaces. This becomes a fixed cost instead of a variable cost, and this model overestimates the true cost
- This model also may underestimate the true cost by not accounting for insurance to protect users’ belongings. However, it doesn’t seem like the cost would be much, as Clutter’s basic Security Warranty Policy promises a payout of $1.00 per pound in aggregate per user up to a maximum of $1000 (so your $1500 LG OLED TV will be paid out $57)
- Cost of Delivery / Pickup for existing customers (aka Input / Output or I/O)- customers can request items be delivered to them from their storage unit or additional items be added to their storage. This will be a function of Labor and Distance driven. Based on Warehouse Lead and Associate job postings on their Careers page, it looks like the company has warehouses in:
- Tracy, CA (servicing the Bay Area)
- Des Moines, WA (servicing Seattle)
- North Bergen, NJ (servicing NYC)
- Monroe, NJ (servicing NJ)
- Franklin Park, IL (servicing Chicago) So they are never too far away from their markets
- This cost is particularly dangerous to Clutter, because high I/O will incur insane cost without additional revenue to offset it. If, say, a user is using this twice a month and expecting delivery within a few days, that will probably tip that user into unprofitability
- First-time pickup- customers will get completely free pickup. The cost here come from the same sources as the previous item: Labor and Distance driven
- Wages- pretty straight forward math here: just multiple the average salary and number of HQ employees, and do a similar calculation for hourly Warehouse employees
- CAC- let’s leave this as a question mark for now, because the other numbers will show us how much budget is left for Marketing to play with
Estimating Revenue
This part is pretty easy. Revenue comes from two places for Clutter:
- Monthly subscriptions- I pulled some numbers from their website price preview and stored them here. Some observations:
- More expensive regions = more expensive subscriptions
- In the second tab, you can see by ZIP Code for the Los Angeles area. If we assume the warehouse is in Fontana, CA (based on a job post for a Warehouse Lead in Fontana), we can see that they also increase prices by distance from warehouse
- Inconvenience fees- these are fees assessed in case you make an appointment and miss it. In the grand scheme of things, they are negligible, but they do serve to offset wasted I/O trips