Overview and Summary of Clearshield
Imagine you take your car into your local auto and lube shop. While you’re waiting, an employee approaches you, “we noticed you have a small rock chip on your windshield. It’s no big deal, as part of our service we fix those at no cost through your insurance. Who is your insurance company?” After a few questions, you discover it costs you nothing, has no effect on rates, and can be done before your oil change is finished. “Sure. Why not?” you say.
This is what customers experience with our auto and lube partners across the country every day with our program.
Clearshield, at it’s simplest form, is an insurance claims processing company. We partner with auto and lube shops across the country to help them offer a free service to their customers, while we deal with all the backend work to get them paid. More specifically, when an auto and lube shop makes a “sale” (by offering our free service like described above), they fill out a little form and send it to us to take care of all the backend work. Similar to a medical billing company, we do all the processing and paperwork so the auto and lube shops can get paid. It costs the customer nothing, the insurance company saves a bunch of money because they won’t have to replace the windshield, and we (Clearshield and the lube shop) make money on the service. Truly a win, win, win scenario.
Why Our Partners Need Us
Right now in America, auto and lube shops are facing lower car counts and thus, lower revenues. This is primarily due to 3 things:
- Improved vehicle efficiency allowing vehicles to go longer without an oil change and maintenance.
- Longer dealer warranties that offer free oil changes and maintenance at their dealership.
- Increased DIYers (Do-It-Yourselfers) who want to save money and time.
Our program allows shops like Jiffy Lube, Grease Monkey, Meineke and other quick lube locations to increase revenue per car, but not increase the time it takes to get cars through their bays. Almost 30% of these cars has some sort of windshield damage that can be repaired. Normally these shops would either do nothing about the break or refer them to a glass shop to get it fixed. In partnering with Clearshield they can now offer a service that would have otherwise been difficult or nearly impossible to offer.
The biggest reason they need us is because Insurance billing and collecting from insurance companies is no small thing. It takes knowing the ins and outs of the insurance companies and figuring out how to get paid. It is for this reason we have developed our own claims processing software to manage the entire process and increase our efficiency. A few of our partners have tried doing the insurance processing on their own and failed miserably. An auto or lube shop doesn’t have time to do all this. Clearshield allows them to still tap into that revenue from free windshield repair without having to have a dedicated team dealing with the insurance companies. We do all of that for them.
In addition to all the billing and insurance, we also supply our partners with the products they need to do repairs, which makes it a no risk opportunity for them.
Competition
There is little to no competition that we experience. There are one or two groups, but neither that do things as conveniently and efficiently as we do. When we took the business over at the beginning of the year, past customers were excited to switch back from these competitors. Our program is designed specifically for our auto and lube shop partners, and they really like us. Now that we have turned the business around, we also now have a track record of high collections and quick payouts, making the barriers to competition even stronger.
The bigger factor we deal with is substitutes. Things like headlight restoration or other add on services that auto and lube shops could offer. Ultimately, however, our program is the only one that offers a truly no-cost add on service, and therefore is much more enticing to our partners.
The Numbers
Clearshield is a unique opportunity because the way the cash flows allows you to grow as fast as you’d like. Unlike other businesses that are cash intensive, costing you money to grow, Clearshield will leave you with more cash as you grow. This is because we get paid first, then we pay out our partners an average of 20 days after we receive payment.
A typical claim pays out about $62. We collect the entire amount. We then pay partners between $30 and $40.
The supply cost per repair is less than $1.
We have built a remote team of claims processors which costs us about $5 per claim.
So before our fixed expenses, we collect about $56 per claim before our payout to our partners, and about $21 after.
We estimate our fixed expenses at around $1,000.
This means after 50 claims per month we break even and start to become profitable (not considering debt or financing of any kind).
At 600 claims per month, we estimate around $11,600 in cash flow.
At 1,000 claims per month, we estimate around $20,000 in cash flow.
Of course we have an office that a new owner wouldn’t need, and we experimented with some expensive call dialing software that we have realized we don’t need and recently cancelled, so a new owner can immediately have more cash flow.
In short, a cash cycle that is very cash friendly, low fixed costs, and low cost per repair.
Valuation
We are selling Clearshield at what we believe is just under fair market value.
Our valuation is derived from the last 6 months of operation. We are not including the first 2 months since they represent our initial investment in turning the company around and don't represent normal operations.
We are valuing the company at 5 times earnings, based on an annualization of the last 6 months (average of the last 6 months time 2). We chose 5 times because Clearshield originally sold at a 5.6 multiple a few years back, and most insurance billing companies sell at greater than 5 times earnings.
The Opportunity For a New Owner
A new owner, with a knack for sales, could come in and do really well with Clearshield. As you’ll see, the systems and processes we have developed run really smoothly. Everything is documented, we have clear processes for our remote employees who handle almost everything, we’ve developed a strong culture of work and fun, and our tracking and dashboard show a pulse on how the company is performing.
A new owner, with the right skill set and the energy to drive sales, has an opportunity to do really well. A few years ago, Clearshield did around 1.6 million in sales for the year, something we expected to reach before our circumstances changed.
Summary
Windshield repair is extremely easy to learn and it is extremely profitable for the shops that provide it to their customers. It really is their most profitable service!
NOTE: We are selling the primary Clearshield business. We are not selling the product sales side (which you’ll see in the Profit and Loss statement is removed and not currently profitable).
Why We Are Selling
Clearshield has been a fantastic business. It produces cash, the processes and systems are running extremely smoothly, and there are lots of growth opportunities. But, unfortunately, the timing for us is just not right and a new owner, able to devote more time and attention, will reap the rewards.
My name is Jake, by the way. I was the first to hear about Clearshield a few years back when it went up for sale, and it seemed like a great opportunity. The only problem was I had already committed to an MBA program in Austin, Texas, which meant I couldn’t make it happen.
That was in 2015. In March of this year (2017), the original owner’s of Clearshield gave me a call. They had sold the business, and were carrying a loan. The new owners, however, were struggling with the business and defaulting on the loan. They asked if I wanted to take it over.
I did, of course. I loved the business model because there are thousands of oil, lube and auto shops in every state across the country, and lots of opportunity for growth. Even more exciting was the fact what we offer customers and partners a free service. All they have to do is offer a no cost windshield repair to their customers and we all get paid. I also loved the business model where cash came in first, then it was paid out (it’s like selling a product and then buying it). The only problem was I was in the process of launching an elementary school, and only had a few months of part time work I could put in before I had to step out.
I had written it off when one day I was sitting with Braydon and Jordan (Jordan’s my brother), and mentioned it to them. I didn’t realize they would be interested, and we quickly put a deal together to purchase the business.
We spent the next few months breathing life back into Clearshield. We rekindled relationships, retrained partners, and brought on new customers. We created processes and systems for processing claims and brought on new (remote) employees. We built incentives and tracking. We went from 70 claims generated the first month, to 650 last month. It was strange because it wasn’t that complicated of a business, but the owners who had defaulted just didn’t do the work. We quickly ramped up sales over the next few months and turned it profitable. Lots of work and lots of fun. The entire processing side now runs smooth, and our 4 remote employees, from the Phillipines, handle nearly everything. The next phase for Clearshield is to simply pour in more customers to a system that already works.
That’s where we are hitting the road block. Braydon’s role has always been sales. He has a strong skillset there. Most of the business relied on his ability to fulfill that role. Unfortunately for us, Braydon has had other commitments to another partnership/business where they sell binoculars. It’s increased in sales and complexity, leaving Clearshield a bit without him.
This means it would fall on Jordan to do some traveling, which we already new wouldn’t really be an option since he just had a newborn baby. Not to mention he was a key piece of building the processing side of the business, and sales isn’t quite his cup of tea.
So that’s where we are. A business that is growing with a fine-tuned processing arm that just needs someone to push through more customers. Even though it’s tough to let it go, we know what happens when the proper attention isn’t given to a business like this. We truly feel it’s an opportunity for the right person to come in and continue it’s growth. We just know it’s not us right now.
Income Statement