How Activeconversion CEO Fred Yee grew to $2.2M revenue and 200 customers in 2019.

hello everyone my guest today is fred yee he launched a company called active conversion which is set out to help is setting out to help make advertising easier for b2b companies this is red second software startup and third company fred you ready to take us to the top uh yes i am all right so what does active conversion do and is it a pure play sas company um you know in technical terms it might not be considered a pure play but we uh surely do uh we probably provide a few more services than the uh the usual pure play uh sas company and how would you how would you split that though like last 12 months if you like what percent of revenue was service would you say well our services are actually wrapped into our recurring revenue so we don't necessarily split it out like that but i guess as a percentage of effort maybe twenty percent okay fair enough i'll get into why it's our target market we are one of the few companies that work with industrial type b2b companies so the guys who make stuff manufacturing uh service providers that work out in the field you know making things work building plants building factories that sort of thing and they're not very sophisticated when it comes to marketing at all and that's basically what we provide so we help them with those parts and what do they pay on average per month or per year to use your technology our average is roughly around 900 a month okay 900 bucks and then when you launch the company what year actually we launched back in 0.7 okay 2007. and did you bootstrap the company or did you decide to raise early on no we bootstrapped then we hit 08 which was if you recall a bit of a nuclear winter for uh tech and then you know after we did the sort of things we did we found that we could probably do okay actually uh which is sweat equity bootstrapping so no capital into the company to date what total capital no capital raised oh yeah no capital raised but we've put capital in i you personally yeah i've had a separate company where we've made some money and we're able to work off of that that's great now how many of these manufacturers are you working with today in terms of customers we have close to 200 okay that's very good so 200 customers and back in take me back to 07 for a second how did you get your first two three customers well see we weren't actually going after industrial companies then this was early days of marketing automation so uh uh we went we just reached out to companies and how are you getting customers today maybe that's a better question yeah that's a better question we use uh various methods uh our tried and true is is going direct and by going directly we reach out to to our targets how via linkedin email phone mostly phone how do you get their number uh we have a a guy in-house that gets the data for us do you know where he gets it though uh he visits her website uses linkedin how do you find the website you want to go after in the first place though uh we do a lot of research there and again we're so niche with going after industrial companies not really all that difficult and i should add we use something called connected cell that you may have heard of connected what connect and sell okay yeah what does that do it does all the dialing so we have a guy who sits on the phone and it dials out and it does the navigating through the phone screen and when one comes up our ae he just sits on the line doing emails or whatever else he's doing and all of a sudden they'll pop up and then he starts to talk to them that's great what quota targets do you have for most of your aes are they kind of million dollar new bookings a year half a million or more they're close to about a million okay annualized recurring revenue yeah and how many of those folks do you have we have two okay and do they always hit their quota uh yeah actually lately they have we have things that are working pretty well we also have another method which i haven't gotten into is we have a number of partners in the publishing side for the industrial market again so these are guys who run content and to pay for that content they run ads so they sell ads we work with their advertisers actually to make that advertising work that much better okay so 200 customers 900 a month you're doing 180 000 a month right now in revenue roughly and where were you about a year ago well actually a big leap uh we were probably only about 120 customers last year oh so what's that mean in terms of revenue exactly one year ago um ballpark about like 100 grand yeah 100 a month roughly yeah yeah okay that's good growth and then i mean are you burning capital and then making up for that hole with your own personal money are you guys operating cash flow positive today well it's uh depends on how you cast it i suppose we feel that we're at uh break even we're actually making money but we reinvest so much back into sales and marketing to acquire more customers right we're working at a rate of roughly uh 10 per month 10 per month what you're burning 10 000 a month no uh adding 10 customers okay so with all your expenses i would argue sales and marketing are critical to growing your business right so i'd include those obviously in your span are you burning capital or you're right at breakeven i think if we include that we're burning a bit okay like 5 grand a month 10 grand 100 grand a month uh i'd say around 10 grand are you okay with that in terms of when you go to sleep at night it doesn't keep you up i if i'm getting uh the 10 customers per month i sleep like a baby because i can always finance that yeah yeah so 10 customers per month the 900 bucks pop you're adding basically nine thousand dollars a month in new new monthly revenue yeah that's good any investor worth their salt will say look at that going that's over a hundred new customers each each uh year right to burn 120 grand you know what's your team size today how many total people we have about 25 people 25 okay very good and then look churn's critical in a sas company when you look at your last 12 months what's revenue churn been on a gross basis on a revenue basis it's roughly about 18 a little higher than what you want okay but do you have your expansion revenue more than making up for the 18 loss yes by how much the delta on that that's tough question we don't measure that per se we measure more on loss of customers do you know what your net revenue retention is uh i actually don't measure that either so do you know of the customers that signed up exactly one year ago 18 of them will obvious of the revenue will churn do you upsell the others more than 18 so you get back to break even essentially on that cohort yes we do okay that would mean net revenue retention is greater than 100 then yeah okay what do you upset me that means your expansion revenue is at least 18 making up for the 18 churn what are you upselling against right now specifically on the pricing plans we we uh um we've increased pricing and we've added velocity to our customer acquisition we also have what on expansion revenue has nothing to do with with customer acquisition uh upsell revenue is about historical customer code it's not new customer ads so what are you upselling to old customers is my question is a number of seats number of new features some utility metric well i can only uh bring into play what we measure and that's that we are adding one of our our key parts of our business model is to naturally add uh services revenue so back at the beginning of the uh the conversation we had mentioned that we we have a customer base that's very [Music] say low in terms of capability marketing capability sure so we probably add another 20 in services revenue yep yep that makes sense and then what are you spending fully weighted to get a new call at 900 a month customer do you know uh what was that again what do you spend fully weighted sales marketing paid advertising conferences outreach whatever fully weighted customer acquisition cost on a new 900 a month customer oh it's been coming in uh ranges obviously each month but we look for it to be under 5 000 a month your total spend monthly or the cost to get a new customer cost or cat costs okay so the cost to get a new 900 a month customer is five thousand dollars okay so that would put your payback period at somewhere like six months right okay very good and where are you spending that money besides sales people commissions you have said you have two of them oh uh in terms of marketing yeah reach the data that i was telling you about earlier paying for uh facilities sometimes we have uh programs that we run with our publisher partners okay very good all right fred let's wrap up here with our famous five number one what's your favorite business book you know the one i probably comes to mind the quickest is predictable revenue by aaron ross yep number two is there a ceo you're following or studying uh well i guess there'd be a a number of them but one i really like a lot is the guy running blackberry right now which is not exactly a pure startup yes okay number three is their favorite online tool you have for building your company well nothing necessarily fancy using trello okay number four how many hours of sleep to get every night uh it's been getting better lately but i try to get at least seven and what's your stitch and how old are you uh that i'd rather not disclose but you're your usual startup 30 30 years young right yeah okay we'll go with that all right and what's your situation married single kids uh been married a long time with two kids okay very good and uh take last question what do you wish your 20 year old self knew [Music] how to hire great people guys hire great people active conversion they're doing about 180 000 a month right now on revenue up from 100 grand just a year ago serving 200 kind of industrial clients helping them with their outbound marketing they age paying 900 per month uh today they're burning about 10 000 per month they're bootstrapped which obviously i love 25 people on their team churning eight percent of their revenue annually but they're expanding that same cohort 20 402 net revenue retention spending five grand to get a new nine hundred dollar per month customer so six month payback period healthy economics fred gee thank you for taking us to the top thank you