How Attivo CEO Len Reo grew Attivo to $9.6M revenue and 240 customers in 2024.

hello everyone my guest today is len rio he's the founder of ativo group a team of people passionate about efficient business processes and the information systems and automation that support them experts in erp such as sap business one and cloud hosting a tivo group is a national operation that is focused on manufacturing and distribution companies len you ready to take us to the top absolutely all right so your software is called ativo help me understand who your customers are who are you selling to uh we work with small manufacturers and wholesale distributors as well as certain types of service companies and by small i i mean 2 million to 30 million in revenues those that are on their first real true erp implementation journey that is not a journey i think that anyone really looks forward to no one wakes up and says i'm excited about my erp system today so how do you get them addicted to your platform what's your onboarding look like well it's it's really about solving business problems for them they don't wake up and say i've got to have erp yeah i got to solve this this headache today and and consequently those headaches um are what we solve the true business problems of inventory control and production management and product costing and pricing and commissions and everything that goes with it now these everything you just mentioned is very different depending on the type of manufacturer that you are are you an all-in-one solution that any manufacturer can use or have you monopolized one specific niche well we serve a a fairly wide variety of of manufacturing companies there are many that have better you know vertical solutions because of their unique process like oil refineries and things of that nature um we work um when we go to market we focus specifically on complex industries food and beverage pharma medical device metals manufacturing anything where there's a high degree of quality control traceability of product production scheduling and supply chain uh complexity um is where these tools are most valuable and len when you do get a customer onboarded i'm sure you have a wide range of how much they pay you per year but on average what's a company going to pay you to use your software well a 10 user implementation typically arranges about 16 to 20 000 per year it's all subscription software so you know a 10 user system is really about 1500 per month yep yep okay and that's great now help me understand put some color around the seat right so if someone buys 10 seats for 20k who is like what's the job title of the people using those seats usually these would be people that are in finance such as the controller and the accounts payable clerk as well as the purchasing manager and folks in production and and uh planning uh as well as all the customer service and and uh um sales sales persons as well mm-hmm and give me the back story here len i'm curious when did you launch the company what year actually goes back to 1993 93 i was four years old holy cow i know we were connecting uh five thousand dollar pcs with netware um blue you know cables and and working with dos software back in those days wow so you correct me if this is wrong you sort of have an agency and at some point you say we should build software for your your current business today like take me from 1993 to you know you know to where we are today sure so we we are primarily value-added resellers so our product ativo all-in-one is the sap business one application as adapted for ease of implementation by our team but previous to this we had worked with other software developers and over the years they some have risen and some have fallen or been you know gobbled up by a larger entity um but the sap relationship is an extremely strong one they even have a a chief partner officer at the big table at sap so they're very committed to a channel sales methodology i see so you don't have engineers in your platform building proprietary software you are packaging selling and helping people get onboard sap software well we do have developers and and programmers for the purpose of personalizing the deployment to solve the unique workflow processes that are required the the package software comes with many tools that allow it to be almost like a it comes out of the box you know highly usable but it's also like you know molding clay we can also adapt it to um unique requirements of our particular implementations and so is this twenty thousand dollar sort of per seat fee something that goes on forever or does it start and stop after you implement and complete implementation um it is subscription software so it does continue okay um um from there forward but it replaces the need to have to spend um to write a check for six figures to buy the license up front like the old model was some three four five years ago um i see and you know it shifted the lifetime value of the customer from that just that first year there was a large transaction to being a 10-year relationship and so how many customers are you serving today we currently have about 240 active customers holy cow okay so that's a i mean this is a lot of customers can i take 240 times 20 000 a year on average what's that like five million a year in revenue something like that uh i wish you could but why why can't i well many of them have been around a long time and you know purchase software through the old perpetual model as compared to the subscription model so we're we're just continuing to service them providing technology uh assistance and technical support um going forward so they're that whole group of legacy customers is is kind of on maintenance if you want to consider it that way i see i see okay so it sounds like maybe you're below 4.8 million a year in revenue can i ask you what you did in 2020 uh about 3.2 million okay and and what did you do the year before that and how are you getting the growth um the growth is coming through uh some fairly aggressive marketing um such as uh you know email marketing uh blogging um actually uh referral marketing is very strong for us we we work with a nationwide organization called provisors of accountants and attorneys and consultants and uh so referrals are a very important part of our our growth and and so if you did 3.8 million in 2020 what did you do in 2019 do you remember i think we did about 2.9 oh wow you know that's that's so so that's actually pretty i mean that's pretty healthy growth two point nine to three point eight million are you doing this drop or did you raise capital no it's all it's all bootstrap we love that we love that so so how do you think about the enterprise value you're building inside of a tivo i mean is it just a cash cow for you and your family or can you sell this one day um we can definitely sell this enterprise one day um it does have a lot of value because we're now switching that revenue model to monthly recurring revenue and we're you know we're working with you know sap and other major developers with very standard tools such that it can be incorporated and rolled up into someone else's organization or we could go the esop route which might be a very uh strong consideration for us as well i have a lot of very talented people on this team what do you think you'll finish this year with revenue-wise um we'll probably do 3.5 3.6 i would think okay so a bit of a decline from last year why is that you think well you know the the pandemic has had a little bit of an effect um on being conservative uh we have seen a significant uptake in interest as the optimism has come back so we may actually go past that but um i never like to jump out ahead like to surprise people on the upside we love that now if someone was trying to compete with sap a great acquisition for them to make might be one of sap's top value added resellers like you have you had in those acquisition conversations um yes we have there's there are many organizations out there who are interested in um continuing to acquire organizations like ours is approximately 700 or 800 um sap resellers for the product line that we work with around the globe um and there are a couple of very large ones who are continuing to grow via acquisition oh so so it wouldn't be a competitor sap it'd be someone that does what you do when they want your 240 customers oh you know it could be it could be someone outside of it it could be someone in the dynamics world interested in expanding their their reach so to speak and that would be the easiest way to get on on board with a new product line starting from zero and trying to learn a new erp product is a long long road it's a good three four years and half a million dollars of learning um so it's a lot easier to acquire selling your baby is a very very personal matter you've been growing this baby since 1993 from a personal perspective what would go into a decision to say yes i'm going to sell the business today to another sap reseller oh it would be the fate of my employees because how many of them are there uh there's 20 okay and i you know they they would be my first concern you know how would all of them be be handled um in in that transaction uh because they are the ones who have put their careers into you know the business as well as i have mm-hmm and what do you think what would you want to see happen there they all have continued employment at the new reseller or something else oh yeah absolutely yeah and some kind of a of a bonus as a result of the transaction um it all depends on how it gets structured yeah so let's say that you feel good about that how would you value the business today well it always comes down to a multiple of ebitda right so um you know even though we we've we've had continued sales our profitability hasn't um followed that trajectory of sales as well as it should so i have a little a couple of years of work to do to make sure that that ebitda is maximized and and then then it's the whatever formula three four five six seven ex ebitda but the the other aspect of this is continuing to shift the the the income stream to recurring revenue we're about 60 percent there um we need to get to say 80 90 um recurring revenue without any large without any one large customer being you know the driving force behind that would your largest customer today pay you uh probably six seven hundred thousand a year oh wow so there's a concentration risk there for sure right so i've gotta get past that and over the five million mark it's kind of like a psychological thing where more people are interested yep now that makes sense now on 3.8 you did last year what was ebitda where you basically break even it was basically break even yeah yeah interesting and and again you think most your growth going from 3.6 million now just to call it 5 million next year is going to be converting more people into recurring revenue streams right yeah and so that's a little longer in terms of building the the base that's a lot more customers because at 20 000 a piece it takes a bit to to get there but the the margin on that twenty thousand dollars is much greater than it would be otherwise that's right and now have you bootstrapped this line to date absolutely it's a hundred percent from scratch sorry i think you said that earlier i just want to confirm but i mean that gives you more optionality right there's not some reward or vcs you have to cater to correct very cool let's wrap up here with the famous five number one len what's your favorite business book business but i'd like to say good to great but um um yeah that's probably one of my favorites number two is there a ceo you're following or studying i'm a big elon musk fan that that guy is absolutely brilliant and fearless many many would agree with you number three what's your favorite online tool for building a business oh that's interesting i just found a brand new one called seamless.ai it kind of replaces hoovers and all of the other kinds of database of prospects and who's who in the business in real time number four how many hours of sleep are you getting every night religiously i get eight hours to sleep sometimes more sometimes a little bit less but i am i am not wanted to cheap out on the sleep absolutely not and len what's your situation married single kids uh married uh married for 30 years actually with uh with two adult children wow and how are you um just turned 67 67 but feeling young tell us what your 20 year old self something you wish he knew well um i guess the the thing i would have told him is in business the way you look is the way you are and that's and it couldn't be more true than with the age of the internet people perceive you the way they see you the way they hear you the way your written word comes across the way you look is the way you are guys ativo consulting len has been at it since 1993 many sas companies are scaling with value-added resellers today we got into his head he is a value-added reseller of the sap tool he's got over 240 customers paying average 20 000 per year did about 3.8 million dollars last year in revenue up from 2.9 million the year prior about breakeven right now wants to reach about 5 million in revenue before looking at you know hey is there a sale opportunity here but only if his 20 employees get taken care of we'll see what happens len thanks for taking us to the top thank you nathan i enjoyed this one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you 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