How Attivo Reached $3.2M Revenue and 240 Customers Reselling SAP Business One (Interview with Len Reo)

Introduction and Company Overview

Nathan Latka

00:00Hello, everyone. My guest today is Len Reo. He's the founder of Attivo 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. Attivo Group is a national operation that is focused on manufacturing and distribution companies. Len, you ready to take us to the top?

Len Reo

00:18Absolutely.

Who Attivo Serves

Nathan Latka

00:21Alright. So your software is called Attivo. Help me understand who your customers are. Who are you selling to?

Len Reo

00:27We work with small manufacturers and wholesale distributors as well as certain types of service companies. And by small, I I mean 2,000,000 to 30,000,000 in revenues. Those that are on their first real true ERP implementation journey.

Onboarding and Business Problems Solved

Nathan Latka

00:45Mhmm. 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?

Len Reo

00:56Well, it's really about solving business problems for them. They don't wake up and say, I've gotta have ERP today. I gotta solve this headache today. Consequently, those headaches 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.

Vertical Focus and Target Industries

Nathan Latka

01:20Now 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?

Len Reo

01:31Well, we serve a fairly wide variety of manufacturing companies. There are many that have better vertical solutions because of their unique process, like oil refineries and things of that nature. We work... 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 complexity is where these tools are most valuable.

Pricing and Subscription Model

Nathan Latka

02:15And, 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 the company gonna pay you to use your software?

Len Reo

02:25Well, a 10 user implementation typically ranges about 16,000 to $20,000 per year. It's all subscription software. So, you know, a 10 user system is really about $1,500 per month.

Nathan Latka

02:40Yep. Yep. Okay. And that's great. Now help me understand. Like, put some color around the seat. Right? So if someone buys 10 seats for 20 k, who is... Like, what's the job title of the people using those seats usually?

Len Reo

02:51These 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 planning,

03:07as well as all the customer service and and sales... Salespersons as well.

Company History Since 1993

Nathan Latka

03:12Mhmm. And give give me the backstory here, Len. I'm curious. When did you launch the company? What year?

Len Reo

03:17Actually, it goes back to 1993.

Nathan Latka

03:19'93. I was four years old, Len. Holy cow.

Len Reo

03:24I know. We were connecting, $5,000 PCs with NetWare, blue, you know, cables and and working with DOS software back in those days.

Nathan Latka

03:36So 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, to, you know, to where we are today.

Len Reo

03:49Sure. So we we are primarily value added resellers. So our product, Attivo 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, some have risen and some have fallen or been gobbled up by a larger entity. But the SAP relationship is an extremely strong one. They even have a Chief Partner Officer at the big

04:24table at SAP. So they're very committed to a channel sales methodology.

Nathan Latka

04:31I see. So you don't have engineers in your platform building proprietary software, you are packaging, selling and helping people get onboard SAP software?

Len Reo

04:40Well, we do have developers and programmers for the purpose of personalizing the deployment to solve the unique workflow processes that are required. The package software comes with many tools that allow it to be almost like a... Comes out of the box, you know, highly usable, but it's also like, you know, molding clay. We can also adapt it to unique requirements of our particular implementations.

Nathan Latka

05:12And so is this $20,000 sort of per seat fee something that goes on forever or does it start and stop after you implement and complete implementation?

Len Reo

05:21It is subscription software, so it does continue

Nathan Latka

05:21Okay.

Len Reo

05:21From there forward, but it replaces the need to have to spend, to write a check for 6 figures to buy the license upfront like the old model was some three, four, five years ago.

Nathan Latka

05:21I see.

Len Reo

05:21And, you know, it shifted the lifetime value of the customer from that... Just that first year where it was a large transaction to being a ten year relationship.

Customer Count and Revenue

Nathan Latka

05:51Mhmm. And so how many customers are you serving today?

Len Reo

05:54We currently have about 240 active customers.

Nathan Latka

05:58Holy 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, 5,000,000 a year in revenue, something like that?

Len Reo

06:07I wish you could, but...

Nathan Latka

06:10Why why can't I?

Len Reo

06:12Well, 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 just continuing to service them, providing technology assistance and technical support going forward. That whole group of legacy customers is kind of on maintenance, if you want to consider it that way.

Nathan Latka

06:37I see. I see. Okay. So it sounds like maybe you're below 4,800,000 a year in revenue. Can I ask you what you did in 2020?

Len Reo

06:44About 3,200,000.

Growth Tactics and Referral Marketing

Nathan Latka

06:46Okay. And and what what did do the year before that? And how are you getting the growth?

Len Reo

06:50The growth is coming through some fairly aggressive marketing, such as, you know, email marketing, blogging.

07:01Actually, referral marketing is very strong for us. We work with a nationwide organization called ProVisors of Accountants and Attorneys and Consultants. And so referrals are a very important part of our growth.

Nathan Latka

07:17And and so if you did 3,800,000 in 2020, what did you do in 2019? Do you remember?

Len Reo

07:23I think we did about 2.9.

Nathan Latka

07:25Oh, wow. I mean, okay. That's that's so so that's actually pretty... I mean, that's pretty healthy growth. Point nine to 3,800,000. Are you doing this all bootstrapped or did you raise capital?

Len Reo

07:34No. It's all it's all bootstrapped.

Enterprise Value, 2021 Outlook and Acquisition Interest

Nathan Latka

07:36We love that. We love that. So so how do you think about the enterprise value you're building inside of Attivo? I mean, is it just a cow for you and your family or can you sell this one day?

Len Reo

07:48We can definitely sell this enterprise one day. It does have 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 very strong consideration for us as well.

08:20I have

08:20a lot of very talented people on this team.

Nathan Latka

08:23What do you think you'll finish this year with revenue wise?

Len Reo

08:26We'll probably do 3.5, 3.6, I would think.

Nathan Latka

08:30Okay. So a bit of a decline from last year. Why is that you think?

Len Reo

08:34Well, you know, the the pandemic has had a little bit of an effect. I'm being conservative. We have seen a significant uptick in interest as the optimism has come back. So we may actually go past that, but I never like to jump out ahead like to surprise people on the upside.

Nathan Latka

08:53We 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 any of those acquisition conversations?

Len Reo

09:11Yes. We have. There's There are many organizations out there who are interested in continuing to acquire organizations like ours. There's approximately 700 or 800 SAP resellers for the product line that we work with around the globe. And there are a couple of very large ones who are continuing to grow via acquisition.

Nathan Latka

09:34Oh, so so it wouldn't be a competitor SAP. It'd be someone that does what you do when they want your two forty customers.

Len Reo

09:40Oh, you know, it could be someone outside of it. It could be someone in the Dynamics world interested in expanding their reach, so to speak. And that would be the easiest way to get on board with a new product line, starting from zero and trying to learn a new ERP product, is a long, long road. It took three, four years and $500,000 of learning. So it's a lot easier to acquire.

Team Size and Employee Considerations in a Sale

Nathan Latka

10:10Selling your baby is a 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 gonna sell the business today to another SAP reseller?

Len Reo

10:23Oh, it would be the fate of my employees because...

Nathan Latka

10:28How many of them are there?

Len Reo

10:29There's 20.

Nathan Latka

10:30Okay.

Len Reo

10:31And I... You know, they they would be my first concern. You know, how would all of them be be handled in in that transaction? Because they are the ones who have put their careers into, you know, the business as well as I have.

Nathan Latka

10:31Mhmm.

10:46And what do you think? What would you want to see happen there? They all have continued employment at the new reseller or something else?

Len Reo

10:52Oh, yeah, absolutely. And some kind of a of a bonus as a result of the transaction. It all depends on how it gets structured.

Valuation, EBITDA, and Recurring Revenue Goals

Nathan Latka

11:00Yep. So so let's say that you feel good about that. How would you value the business today?

Len Reo

11:06Well, it always comes down to a multiple of EBITDA, right? So,

11:14know, even though we've had continued sales, our profitability hasn't 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.

Nathan Latka

11:32I see.

Len Reo

11:33And then it's the whatever formula, three, four, five, six, seven X EBITDA. But the other aspect of this is continuing to shift the income stream to recurring revenue. We're about 60% there. We need to get to say 80, 90% recurring revenue without any large, without any one large customer being, you know, the driving force behind that number.

Largest Customer and Concentration Risk

Nathan Latka

12:02What's your largest customer today pay you?

Len Reo

12:06Probably

12:08$600,000 to $700,000 a year.

Nathan Latka

12:11Oh, wow. So there's concentration risk there for sure.

Len Reo

12:14Right. So I've gotta get past that and over the 5,000,000 mark. It's kind of like a psychological thing where more people are interested in it.

Nathan Latka

12:24Yep. No. That makes sense. Now on 3.8 you did last year, what was EBITDA? Were you basically breakeven?

Len Reo

12:30It was basically breakeven.

Nathan Latka

12:32Yeah. Yeah. Interesting. And and again, you think most of your growth going from 3,600,000 now to, call it, 5,000,000 next year is gonna be converting more people into recurring revenue streams.

Len Reo

12:32Right. Yeah.

12:43And 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 $20,000 is much greater than it would be otherwise.

Bootstrapped Confirmation and Famous Five

Nathan Latka

13:00That's right. And now have you bootstrapped this, Len, to date?

Len Reo

13:03Absolutely. It's a 100% bootstrapped.

Nathan Latka

13:05I was gonna say, sorry. I think you said that earlier. Just wanna confirm. But, I mean, that gives you more optionality. Right? There's not some board or VCs you have to cater to.

Len Reo

13:05Correct.

Nathan Latka

13:05Mhmm. Very cool. Let's wrap up here with the famous five. Number one, Len, what's your favorite business book?

Len Reo

13:19Favorite business book? I'd like to say Good to Great. But,

13:24yeah, that's probably one of my favorites.

Nathan Latka

13:26Number two, is there a CEO you're following or studying?

Len Reo

13:31I'm a big Elon Musk fan. That guy is absolutely brilliant and fearless.

Nathan Latka

13:31Many many would agree with you.

Favorite Tools and Personal Background

Nathan Latka

13:40Number three, what's your favorite online tool for building a business?

Len Reo

13:45That's interesting. I just found a brand new one called seamless.ai. It it kinda replaces Hoovers and all of the other kinds of, database of prospects and who's who in the business in real time.

Nathan Latka

14:01Number four, how many hours of sleep are you getting every night?

Len Reo

14:05Religiously, I get eight hours of sleep, sometimes more, sometimes a little bit less. But I am I am not one to to cheap out on the sleep. Absolutely not.

Nathan Latka

14:15And, Len, what's your situation? Married, single, kids?

Len Reo

14:19Married. Married for thirty years, actually

Nathan Latka

14:19Wow.

Len Reo

14:19With two adult children.

Nathan Latka

14:24Wow. And how old are you?

Len Reo

14:24Just turned 67.

Nathan Latka

14:2467, but feeling young. Tell us what your 20 year old self, something you wish you knew.

Len Reo

14:34Well,

14:37I 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 your written word comes across.

Nathan Latka

14:57The way you look is the way you are, guys. Attivo Consulting, Len has been at it since 1993. Many SaaS companies, they 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 an average $20,000 per year, did about 3,800,000 last year in revenue, up from 2,900,000 the year prior. About breakeven right now wants to grow to about $5,000,000 in

15:20revenue before looking at, you know, hey. Is there a sale opportunity here? But only if there's 20 employees get taken care of. We'll see what happens. Len, thanks for taking us to the top.

Len Reo

15:29Thank you, Nathan. I enjoyed this.

Nathan Latka

15:33One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. 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, 1PM

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