How Alleyoop CEO Stephen Hays grew to $21.1M revenue and 45 customers in 2024.

hello everybody my guest today is stephen hayes he's the ceo and founder of alley-oop a demand generation agency that fully realizes the culmination of sales marketing tech automation and creative thinking over the past decade his company has grown from 10 to 50 people and has been honored to drive revenue for companies like adobe discoverorg and cleveland golf they provide the ultimate assist to growth-minded companies all right stephen you ready to take us to the top i am thank you you bet hey what you're doing must be working because discoverorg just you know paid a lot of money for their number one rival zoom info so that's all you right well all would be uh overstatement for sure i have to tell you discovery org is one of the best companies we've ever worked with they would have done amazing things without us but i think if you ask them they'll tell you that we've certainly been an important part of their growth story but uh they were gonna do they were gonna do great things regardless the way they're built the way they're wired and the type of people that that work at discovery or just an exceptional organization back in episode 15 17 uh henry came on and talked about how they passed 165 million bucks in arr and he broke down how their sales operation worked even down to the ratio of sdr to account executive customer success rep and how the cs folks are responsible for expansion and they are quota carrying as a team walk me through how your lead generation services kind of feed into the machine he's built internally yeah so what we found is the way we start with the company kind of evolves over time as they grow and we grow with them so when we started with discovery work they had two sdrs they were kind of trying to figure out does this work what year was this it was five years ago okay approximately five years ago um so i flew out met with henry and said hey listen you guys have the most amazing platform i've ever seen more of the world needs to know about it and good things will happen when you get in front of the right people and so we scaled the heck out of it and we offered to them just technology that maybe they weren't quite ready for in-house uh we offered them capability what was it what was some of the tech just some automation um outreach type sequences at the time we were using a different platform than we do today and some of it's a bit dated in terms of even talking about it well tell us what you're using today what automation platform we use today so today we use outreach for that particular part of the outbound engine at that time we were using three or four different tools to accomplish what we do today with outreach yep that's very good again we had we had and manny's killing it as well he thinks he'll hit 10 million per quarter uh here by the end of q2 and that was episode 1136 so you're you are riding the backs of wales that's for sure yeah and outreach outsourced part of their sdr function to us early on as well and one of the benefits you see is even a company like outreach who has an amazing sdr function we help them kind of learn a little bit grow a little bit and best practice is sharing and competition yeah when they outsource part of their function to us their internal teams production went up by 20 so let me ask you a question i could imagine a ceo listening that's going yeah but i i love what nathan and steven are talking about right now i'd love to i'd love to pay stephen to do this but it makes me nervous putting something so critical to our business externally how what would what advice would you give that ceo to manage that risk well i think you have to look at the company's history who've we done it for how do we do it and i think if there's not cultural philosophical and operational alignment you shouldn't do it if you're someone who can't handle not seeing and knowing every single thing then outsourcing is not an option it just you should do it in-house because it wouldn't be fun for anybody but there's certain parts in your life in certain moments in your life where you have to make decisions that equate to scale and equate to success and a level of success you simply wouldn't have found on your own being a solo type person or company mindset um so what i would say to you is there's probably three thousand companies that do what we do there's probably three or four of them that if you really care about your brand and you really care about operational aspects of the business and it's not results at all costs there's only three or four companies that you could outsource to yeah so it's actually not that hard of a decision even when you think of it through the right lens yep no but by the way this is um this is a space is extremely hot you know if people want to build this same kind of thing internally just your software costs per person that you have operating the machine can get expensive and i'm looking at some of your pricing starting at 2500 bucks a month going up to five grand a month for 1500 target prospects for either you know meetings or demos et cetera i mean so i can see where there's cost savings here and efficiencies what about knowledge right so if if if if a henry uses you uh for for discoverorg and then uh their competitor a zoom info came along and said hey we want to use you too um wouldn't discoverorg be concerned about the the knowledge they've essentially paid you to learn building their system you would just think give to zoom info well there's different types of things that we do with certain companies so i'll give you you know i can tell you flat out that we've turned down working with every every uh discoverer or competitor on the market okay so you need to offer exclusivity we do we don't offer it to everyone and we don't offer it always but it's certainly an option and discoverorg was worthy of that loyalty and that commitment and no no regrets and certainly we've done that for others so stephen do you um if i was in your shoes uh and this this isn't a good trade of mine but it is a natural human one when i read that henry's passing 160 million bucks in arr and just double the size of his business buying zoom info so call it 200 250 million bucks right as a private b2b sas company that's one of the larger ones and maybe he's following maybe a qualtrics route right where they then go get bought up by someone big i can't help but think my gosh i wish i took equity instead of making henry pay me 2 500 bucks a month back five years ago uh do do you ever take equity for these and if so have you ever ever taken equity it turns out to be worth nothing uh yes and yes and i asked henry i made that offer to henry uh all those years ago uh he said no yeah yeah cool yeah he had double done on himself that's funny he did yeah but you know what um them is a referral and a reference and and telling our story in a way that we couldn't tell our story that you know it comes back yeah it comes back in a big way regardless of it's not just financials so yeah so stephen my audience is going to learn two i think things from this you know the next 10 minutes of this one is you're running your own business and how you grew it but the second is they're all sas my audience is almost all b2b sas ceos and they're trying to build their own internal engines and they're going to learn from you how you did it for other people so let me focus on the former first your business is it a true agency or do you have true recurring predictable revenue we have true recurring predictable revenue okay so there's a software component underlying the human aspect right now there are software components um but it's a subscription okay essentially that includes technology okay marketing services sales resources and consulting okay so our programs all come with playbook design they all come with database services they all come with creative services so for most of our customers we're building a package that includes video production explainer video production uh call 1 analysis and recommendations we're aligning to someone doing a demo we're going to make darn sure their demos top notch we don't want to align to someone who has a bad demo and no offense to them their demo might just be bad their product might be great so we're going to help with that so it's a bit it's a subscription that includes different layers of services depending on when someone comes to us how how fully baked or not baked they are their product might be fully baked but their go-to-market strategy might not be so we have an in-house agency data team tech team services team to support that effort because we also don't want our sdrs going to market half-baked either that's not a rewarding experience we want them to be professionally supported and have success rates that far outpace industry averages so they can have success and make money too yeah so stephen how kind of walk me through on average what's the company going to pay you per month for kind of again your average plan sure so a digital only plan that replace replaces someone putting say hubspot in uh is 2500 a month okay so that includes data content services creative services delivery of messaging to the market and it includes lead generation and response management what's the end point though of your of that part of the process if i pay you that is it a scheduled meeting or skill what is it it's a lead so it's okay uh scoring of interaction of content and responses okay got it and then what i assume it's more if you then have if i pay you to take that lead and actually get them booked on a demo it's what that's right so the next level is called so that first offer we call nurture the second one we call nurture pro and nurture pro puts a partial resource on the program so they're into book meetings okay got it so low volume and then i assume you probably upsell from there um so give me give me an average what is the average you know group that's paying you paying you like five ten grand a month-ish or what's it look like uh no our average is uh probably 15 to 20. okay got it yeah so you're you are not a um kind of low-touch high-volume organization you're kind of like maybe they start at 200 bucks a month but you quickly get them up to 10 15 20 grand a month henry i'm sure was way higher than that yes and no i mean our company's evolved over the last three years pretty rapidly so we productized our offering so that we never had a 2500 a month offering yeah we had an offering that if you weren't going to spend 500 000 a year we just weren't going to work with you you couldn't so it was ineffective right we just you know we didn't we didn't have an interest in or didn't have the capability to productize at that time but over the last year we realized there's lots of value in pieces of what we do and parsing them out and offering them as a standalone product has a lot of value for our customer and for us we really didn't want to walk away from growth-minded companies anymore we wanted to be able to have a way for someone to get started yep and the reality is if you want to get started and you want to do hubspot by yourself it's very cumbersome it's very time consuming and the failure rate's really high yep how many how many customers are you working with today uh we have about uh 40 45 customers at any time okay and do they do you see a point at which people say listen steven you've been amazing but we're at 20 sdrs now you giving us the playbook that's going to allow us to scale to 100. we're going to stop paying you here for a little bit and just take this playbook you built for us and bring it internal i mean do you see that happen or no it happens a lot less than than it used to and i think as the sdr function has matured you know there's there's 50 000 job openings on indeed.com for sdr right now most of those are multi-head counts so there's probably at least 100 000 open wrecks for sdrs in the united states the average cost to run an sdr in the us right now is ninety seven thousand dollars a year yes in a high cost city it's 123. so people are thinking so here's how people are thinking about it today i can incubate with an outsourced provider it's a great way to learn but people don't really want to run a production sdr function in-house anymore if they don't have to there's just not a lot of reason to do it even if you go to google and they have an sdr team and you go and you say who's the sdr team at google today and you go back in six months they're all different people yep so yeah the turnover rates that's by the way that's how a company like manny's grows outreach grows so fast is they only have to sell to one sales person that sales person will work five jobs over the next two years so they go to five accounts yeah so the new way to run an sdr program is to run a strategic internal str program so if you're running an account based marketing program or an enterprise play you can put your sdrs in house on top of that so instead of having 20 you might have four got it now your ae feeder team which is wonderful right it's a great way to pay go you're paying an sdr but they're going to become an ae so it's a self-funding thing but the truth is when you have 25 30 sdrs only four of them are going to become aes that's right yeah so you get you're getting the same benefit without having without the need to have another 20 to figure that out so you can outsource your production sdr function to us or someone like us and you can in internally do your strategic sdr team and you get all of the benefits you get scale yeah you get just stephen i want to jump in because i get i think my whole audience understands the product they totally get the value they totally get why you're why you're successful we have we're short that nuance is really different this strategic sdr team is a new thing like people are thinking about it very differently now than even they were a year ago instead of experimenting with them bringing on fixed cost sales people and then burning and churning through them as they work or don't work they have a swat team of highly talented ones they work with you to do the testing and it makes more sense and the production the scale yes yeah okay good uh we got about two minutes left here so i have a couple other questions i want to rock it through when did you launch the company what year 2010 2010 okay and have you bootstrapped or raised bootstrap that's great so so totally boots dropped this uh what so 2010 walk me through you got your first 10 customers well our first big customer was regis offices which one regis ah okay like the hotel chain no uh office space so the uh before there was a wework there was a regis yep how can how did you get them uh web lead believe it or not and how did the web bleed find you what were you doing to attract them uh we were doing seo okay what was the search term do you remember i i don't remember i wish i did it's like the first dollar bill of your business i wish i remembered what that was but i don't was it accidental or did you have a team specifically focused on like five strategic keywords we it wasn't accidental it was strategic i had hired a gentleman who's a scientist um in seo before anyone was really doing that and he was just amazing and so we just did that that's great and talk to me a little bit here about growth so if you've got 45 or 40-ish customers today at 15 grand a month we can obviously back into whatever 600 650 grand a month is that accurate it is and where were you about a year ago uh four four something okay i mean that's how that's healthy growth um have any vc firms tried to acquire your company and basically bring your whole organization in-house for all their portfolio companies you know it's something that i thought would would happen like open view venture does this as a service for their portfolio a lot a lot dude yeah i've talked to some firms about it i think i think they all just want to do it on their own honestly yeah okay makes sense and then what's your team size today uh we have about 70 people 7-0 and where's everyone based oh we have an office in buffalo new york and san juan puerto rico new york oh that's great i was gonna say it's much better right now i think probably being in puerto rico where it's warm and hopefully sunny versus new york right it is yeah all right um very good and then um obviously you're well your bootstrap so i assume you're operating at breakeven or casual positive right yeah and then walk me through uh churns so when you look at you're not net because i think your net's probably way over 100 with your expansion revenue but when you look at your gross revenue return annually what's that at about um i don't have an exact number on that for you the way we measure things some things get bigger some things get smaller we don't lose a lot of customers a lot of customers change upgrades yeah so it's very fluid but we don't lose many customers at all so what's net revenue retention look like again i assume it's above 100 yeah do you measure or is that something you don't measure well i measure it but not the way you think i don't measure it like a software company measures it but i kind of measure it and our comp plans are based on retention and those types of things but um i i don't the way i measure probably isn't very relevant to your audience and it probably isn't something that i would add much value in the well it is it is relevant i'll tell you why everyone's trying to drive expansion revenue right everyone trying to get someone to go from 2500 bucks a month to five grand or 10 grand a month at the same time you'll have some accounts in that same cohort that sign up that same month maybe decrease by ground a month so net net what i'm trying to see is i assume you have predictability around you know a 200 a month customer and year one is gonna expand to a five grand per month customer in year two what is that expansion like what expansion do you model in your pro forma to you know plan things like hiring decisions sure so we expect our mid to enterprise customers to expand 20 25 a year okay yeah our new market the low the lower end smaller market i don't have great data on that yet well yeah and that and that cohort is a little more harder harder to predict very good and then what's it look you probably ask customers the same question before you decide to sign them or not what does it cost you an average to get a new customer fully weighted um it probably costs i i don't have a great number but it's it's probably three to four thousand dollars okay so pay then you're getting your money back there now you know two three months max yeah yeah very nice i mean our yeah our our engine our internal engine is quite good uh you know we well better be that's what you sell that's right we are i always say guys we need to be a product of the product don't do it if you're not gonna do it right absolutely all right stephen let's wrap up with a famous five number one what's your favorite business book uh favorite business book is probably good to great good number two is there a ceo you're following or studying um i study all of our customer ceos and learn so much from all of my interactions with them certainly henry is is probably my favorite uh person i've you know one i shouldn't say that he's he's someone who's very memorable to me and very important to me um but there's certainly others number three what's your favorite online tool for building the company besides outreach since you mentioned it already discoverorg number four how many hours of sleep to get every night uh on average yeah probably five okay and what's your situation married single kiddos married five children holy mackel and how old are you i am 44. for wow you are busy man okay um last question what do you wish your 20 year old self knew uh to move to california move to california faster guys there you have it go ahead that's right that's it get moved to california get into sas earlier and uh explore guys there you have it from stephen again 45 customers paying him about 15 grand a month to help them automate their sales process whether it's a lead a meeting a demo whatever big companies like discoverorg are using him first customers back in 2010 regis office space he got them via an seo term he had optimized for doing about 670 grand a month right now in revenue up from about 400 grand just a year ago so healthy growth profitable bootstrap team of 70 between new york city and puerto rico they assume 25 year-over-year expansion kind of in their planning process and they're on their mid on their enterprise and mid-market account spending caught three or four grand to get a new customer so healthy payback period there stephen thanks for taking us to the top my pleasure thanks for inviting me