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July 25, 2008
Carchex: Driven To Succeed
Maayan Jaffe
Staff Reporter
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Honk. Beep. The essence of “car” permeates every inch of CARCHEX in Hunt Valley. Less than a decade in the making, the company — which helps consumers select, inspect, purchase and protect their automobiles — is bursting at the seams. The brains behind the steering wheel is Jason Goldsmith, 32, thin and swanky.
A Pikesville native, Mr. Goldsmith acquired CARCHEX in 2003 — almost by accident. He was searching for a ‘96 Jaguar convertible on eBay, and located one in Portland, Ore.
Not about to purchase it sight unseen, he Googled “pre-purchase auto inspection,” and CARCHEX popped up. He phoned the company, and in 48 hours the car was inspected — and found to be a flop. He used the company five more times, and by the sixth try realized he didn’t need the car so badly but would rather have the assets to CARCHEX.
“The guy had a great idea for a business, but he didn’t really know what to do with it,” said Mr. Goldsmith. “It was a perfect opportunity.”
Mr. Goldsmith sold his interactive advertising agency, GoldNet Marketing, to e.magination in 2000 and was preparing to sell TheLoanPage.com to Battery Ventures at the end of 2003.
When Mr. Goldsmith took over, CARCHEX was a mom-and-pop operation, with 25 inspectors nationwide. As owner, with partners Ben Fenlon and Hyun Lee, Mr. Goldsmith’s first steps were to revamp the company’s logo and Web site, update its technology infrastructure and build a larger inspectors base. Today, the company has more than 900 inspectors.
“It was early on for eBay. They were having the issue of, ‘We have a lot of visitors to the site and a lot of listings, but not a lot of transactions actually happening on the Web site,’” said Mr. Goldsmith. “We partnered with CARad — owned by eBay — with eBizAutos and Auction123, dealer listing template companies, so when the dealers were putting their listings on eBay, they would say you could get an independent, third-party inspection from CARCHEX for this vehicle.”
Word of CARCHEX got out. Mr. Goldsmith said it was a great branding exercise for the company, which became known to level the playing field between buyers and sellers. But inspections are a low-ticket item ($100 or $120 each), and he quickly realized to grow revenue, he would have to look for other opportunities.
So Mr. Goldsmith entered the warranty side of the auto business, offering warranties to customers in place of the standard dealership warranty.
“It was such a great business for us because our competency as a management team is online lead generation/lead monetization — finding a way to make money from the leads we generate,” he said.
Unlike his work in the mortgage business, where there is a mature market with a plethora of lenders and brokers to buy leads, Mr. Goldsmith found there was no one to sell his leads to on the warranty side. So he created his own sales team, turned the leads he garnered from the inspection business to the team, and had them sell warranties.
“We are just a re-seller in that sense,” he said.
Although CARCHEX warranties are handled through a third party and there’s a mark-up, it’s as direct as you get, said Mr. Goldsmith, and you can save as much as 60 percent off the dealership price. Dealership warranties generally have a 50 percent mark-up, and since they add it into your payment plan, you pay interest on it as well.
But Mr. Goldsmith said he doesn’t like enemies — and he’s smart enough to know the more business partners you have, the more business you have — so he concurrently started offering extended warranties through dealerships.
“One of the things we learned is there’s a way to be the dealers’ friend and help them reach their consumers,” he said. “We went to the dealers and said, ‘After the customer leaves the dealership, effectively remarketing to them is something you have a real problem with, and we can help remedy that.’ We extract vehicle and mileage data from the [dealer management system] and approach customers as their manufacturer warranty is about to expire, and they might consider an extended warranty.”
If the customer buys one, CARCHEX and the dealership split the proceeds. Most recently, CARCHEX added its Car Buying Concierge, doing all the negotiation and shopping for a consumer for his or her next car.
“We are there to hold the customer’s hand,” said Mr. Goldsmith.
That was Dan Shuman’s experience. Mr. Shuman, CEO of the C-Mart store, said he had a car inspected by CARCHEX and the service was “fast, efficient and professional.”
“Jason is the kind of entrepreneur every business school should be teaching its students about — smart, aggressive and making sure he leaves the customer happy,” he said.
However, Mr. Goldsmith, a Beth El congregant, never went to business school. His Towson University degree is in psychology, he said, which helps him manage people effectively.
His youth is also a plus. When he began in Internet marketing, he said business people were looking for creative guys on the cutting edge. He considers himself still in touch, but also surrounds himself with people younger than himself — even on the senior level.
“To understand how you tap into MySpace, Facebook, those kinds of tools for business, you need young people that really understand that experience,” he said.
The recession is actually helping CARCHEX. Mr. Goldsmith said people are turning to used cars 4-to-1 over new cars, which are the foundation of his business. He’s even planning to hire 75 new people over the next 12 months.
Situated in Hunt Valley — where there is ample parking and public transportation from Towson, Timonium, Pikesville, Lutherville, downtown Baltimore and southern Pennsylvania — Mr. Goldsmith said he thinks he’ll have his pick of quality staff. That’s important, he said, because “you want to surround yourself with people that are smarter than you, particularly in their disciplines.”
Business, he said, is about hard work. “I’ve been involved with CARCHEX since its inception,” said executive vice president Lawrence Dorman of Owings Mills. “I’ve seen it grow from a handful of people to an organization approaching 100. We still have that ‘Roll up your sleeves and get done what needs to get done’ attitude. As the company gets bigger, we still have the excitement of a start-up.”