How Backoffice CEO Felix Rodriguez grew to $936K revenue and 300 customers in 2019.

hello everybody my guest today is felix rodriguez he's a serial entrepreneur he started built and sold three tech companies just graduated from 500 startups patched 24 fixing his own paying accounting and finance four smbs felix's ready to take us to the top yes yes nathan all right how many by the way how many episodes have you listened to uh over 300 now i love it we're talking about four you're a fan of this show you know what to expect so this will be a lot of fun yes for sure i've listened to some of them a couple of times too i love it i love it all right back office what are you guys doing and are you pure play sass so we are made accounting and finance for small to medium-sized businesses and uh yes definitely we're pure place sas with a little mixture of customer onboarding uh for the types of services that we provide customers don't really sign themselves up since it's north of a hundred dollars plus per month yep okay so the average customer is paying north of 100 per month yes about 150 160 now okay amazing and these folks uh these folks that are signing up um are how many people are on the team typically like or or what what do you bill against so we do it based on the size of the company we look at their revenues we look at uh how how frequently they want their books done uh whether it's weekly monthly or even daily we can scale with the company and the fees are related to you know the frequency and the size okay and put this on the timeline for us when you launch the company uh january of 2018. 2018. okay so fairly new very good how many customers have i scaled to today uh we're over 300 now getting close to 400. very good so where i mean walk me through how you signed up 300 customers and under kind of 12 months where'd you find them so mostly direct and through partnerships with accounting firms that don't want to focus on bookkeeping they rather do consulting work and file taxes name an accounting firm that's driven you the most in in terms of new users or customers so we have a small one here in florida called uh saloon and associates and they're a cpa firm that does both personal and business taxes for high net worths that's s-a-u-l saul and associates uh z with a z as as uh zebra z-a-u-l yes amazing okay how did you know that cpa firm did you work there and then leave and build this form or what was a story no so i'm actually a network engineer i've been building companies and accounting is one of those things that we always face that was never at the core however without the right books you couldn't get funding couldn't get a loan and you know frankly couldn't even execute on the business plan so um it's something that's vital and uh when i launched it it was just a hypothesis i wanted to know if other uh business owners felt like me like this is something we could offload so that we could focus on our core sales and marketing do you give zoll and is a kickback on the 150 a month for any customers they drive you um actually we give them the tax work okay so they basically improve their margins now do they pay you directly or their customers pay you their customers pay us directly that's just one of the channels on how we get customers um the others are direct to customer and uh through franchises okay name a franchise you work with that has driven you customers uh exxon mobil gas stations what tell me more yeah yeah absolutely so exxon mobil sell individual franchise to uh an investor that wants to be an operator in a business and what they do is they provide the gas and uh they just you know provide you with the wholesale gas deliveries and you sell cigarettes and candy and water and uh on top of that you make a small margin on the actual uh gas that's being sold through the station interesting okay so exxon is basically saying the reason you should franchise an exxon thing instead of one of our competitors because not only do we give you a gas you make a margin there we'll also hook you up with this very cool back office software that'll help you run your business better so bundle absolutely and we also have allstate agents as well and they're the same they're all small business owners that have a blue a blueprint a playbook on uh on a small business that works and they're able to leverage that franchise to get all the existing operational knowledge so that they have a better chance of being successful interesting but you have worked your wizardry and you are not this is not costing you anything you're not paying any of your partners any referral fee affiliate for your kickback they're using you because you bring them efficiencies absolutely and on the accounting side you could just focus on doing taxes and you don't have to worry about employees because the biggest pain is once you hire one bookkeeper you got to hire a second because when they need to go on vacation or if they get sick guess what you don't want to be left holding the bag doing the work so 300 customers 150 a month you're doing about 45 grand a month today in revenue no we're much higher so at demo day we went through 500 startups that just concluded in february of 20 uh you know the last day of the month on february it concluded at that point we were doing about 600k in arr and we grew the ar from 10 000 a month to over 60 000 a month in just three months so hold on so which of my numbers is wrong 300 customers or an average price point of 150 a month so uh the average price point it kind of starts at that and it scales up okay got it so let's see uh so how much are you doing now per month today sixty thousand you said about sixty thousand yeah actually no altogether close closer to closer to 80 now nathan okay so got it so you've got 300 customers paying something more like 260 bucks a month something like that puts you about 80 000 a month in revenue absolutely yeah and when you look at the cohorts you can split them up between small business medium business depending on the size they're all paying different prices fascinating taking back six months how much mr were you doing in december of 2018 uh about 7k a month okay so are you lying to me are you really about 10x the revenue in six months no we really grew so when we got into 500 startups um the funding that had come into the business was you know i put i put the money myself and then we had to wait a couple of months after the start of the uh the accelerator to get the funding and once we got that funding we were just growing like crazy well dude i love it i mean i'll tell you guys now full disclosure i'm an lp and pat matthews on active capital which led your was it your series a felix c round series c so how much have you raised how much total do you raise uh all together with pat's about two point three i gotta call pat and go pap man you got behind a killer i love this feast i went from seven grand a month to 80 grand a month in under six months so you're making me money man indirectly i love it yeah no absolutely we're really we're really just getting started now we're really uh we just brought on a full-time cpa to help out because we uh we have the ability to sell higher plans five hundred a thousand two thousand dollars a month it doesn't really end at around the 260. so how'd you decide on the 2.2 to raise is it you managing for number of months of burn you want covered or how did you get to the number uh actually it was interesting so the first batch of money that we got was friends and family and myself and 500 startups that was about 300k and uh by the time pat put in the money we still had some money in the bank we had about 100 over 100k in the bank so we weren't really burning money um we were really looking to deploy capital in a smart way to make sure that we have enough people to onboard the new customers so how much today do you have in the bank after this round something like two-ish most of the cash most of it okay so about two then right two yeah yeah we we haven't really burned much of the cash okay how much are you burning per month right now or are you profitable no we could be if we wanted to but we're really focused on growth right now so we're preparing ourselves to burn anywhere from 30 to 50k a month yeah which which seems if you got two million in the bank obviously people can do the division that's plenty of months of runway right relative especially relative to your growth um so 2 million cash in the bank you do the 2.2 with this raise what do you hope you'll be able to drive revenues up to before you have to go raise again so we expect to reach profitability and uh also really focus on the product side of things so if we think we can scale 10x what we're doing with the next infusion of capital um we're gonna do that so probably i'm going to say in a year we'll go out we'll go out and raise again and accelerate the growth how much do you hope to have an arr in a year uh i'm going to say three to five hundred thousand dollars a month okay got it so again so q3 2020 ideally raised again hoping to have about 300 north of 300k a month in ar at that point or an mri at that point yes that's correct yeah that's great and do you think most that growth will come from again more partnerships like allstate and exxon and zhal's cpa in florida yeah we're going to continue to focus on what what's been successful it's pretty scalable um as i said before it's really just onboarding customers that's really the challenge in our business because folks who are paying five hundred a thousand two thousand dollars a month are not going to sign themselves up okay so well let me let's dive into that which turn look like today uh over ninety percent of our customers stay with us once they get on-boarded okay interesting so so that's annually obviously you're extrapolating you haven't been around a full year i don't think but you have about 10 churn per year in terms of revenue yeah so we've been around a little over a year now so we launched in in jan um and uh historically it's been in the high 90s okay got it so about 10 revenue turn annually wait so what were you doing in terms of monthly recurring revenue about a year ago we had just started so like maybe a thousand two thousand something small yeah i mean the first month we probably did about a hundred and two hundred dollars a month yeah yeah crazy it was so crazy nathan if i have to tell you how i started it i would literally uh go to the bathroom take a shower with my phone so i could see if the bookkeeping number was was was ringing and then i jump out the shower and say hello back office that's just crazy that's so funny all right 10 churn do you have meaningful ways to drive expansion revenue yet oh yeah absolutely upselling customers our model is built out so that as these businesses scale we're able to increase our monthly mrr directly from our existing base okay so like how how what's your expansion of the core that signed up a year ago how much did you expand them by um i'm gonna say we haven't focused on it without focusing on it at least 10 percent has grown okay so you think you churn 10 but you gain back 10 in terms of upsell so net revenue retention around 100 right now absolutely we we think we can eventually get to net negative churn because the more we speak to these customers the more we uncover opportunities to actually generate more uh yep and what's your team size today how many people uh we're 15 now and then how aggressive are you being with your team and your cash in terms of acquisition so to sign up someone paying 200 bucks a month what are you willing to pay for that uh we've been very lucky actually um maybe i'm gonna say two two months worth of revenue okay i mean that's pretty good and you're i mean you're doing it hesitantly i mean do you have a lot of paid programs right now or no it's really partnerships and the biggest expense in terms of acquisition is you traveling to the new cpas and signing up as partners uh we do mostly everything through the phone nathan we don't really go anywhere yep yeah interesting cool okay so two month payback period four hundred dollar cash so where is that 400 bucks being spent typically uh you could say a live person right to onboard okay some kind of commission okay so you're you do you have sales people oh yes we have three three currently three yes and are they one of them one of them is my co-founder are they uh quota carrying uh my co-founder is not yeah one is they're they're really not they just want to make money yeah well but do are they on a fixed salary or do you incentivize them somehow to like they get a cut if a customer expands or gets successfully onboarded so the way we the way we treat it is they do get a salary and they also get uh the revenue they generate the first month from uh commission they'll get that as a commission i see how do you know if a lead that closes today was because of salesperson x versus it would have converted organically anyway oh we tracked the whole pipeline using salesforce everything is tagged we have a whole customer journey that we're tracking in our crm so we can see when they're up sold who spoke to them initially which channel they came in through interesting okay very cool and by the way what batch of 500 did you go through which which area uh batch 24 but what geographical was it in san francisco san francisco and we got a we got an investment from the general fund and also from the fintech oh so you were working with marvin then oh yeah absolutely marvin was uh the main the main person in the program there him and i were just in dublin speaking and we go out to dinner and he's like nathan you got to try this dublin beer this cider it's really weak don't worry about it this this guy has me drinking like got like we're both tipsy before you know it dancing at bars having a lot of fun but i love that guy so so you have you have marvin on your side you got pat on your side i think you're going to be a big success right that's how it works no it's great i mean the whole 500 family was supportive we also had this other this other guy who went through the batch before his name was artem and he was like really focused on just growing revenue and sas and metrics that mattered he basically said to us when we came into the program look it's great you got in congrats now the next four months you're gonna get judged on how fast you grow and are you an animal are you a killer can you grow the revenue that's really what matters yeah why did you did you have other terms with the growth that you had you must have other term sheets on the table for for this most recent raise it was very difficult from the sense that um the initial investors wanted to continue to fund so by the time i went went out on the street i could only really accept one institution because there wasn't much of the round left who were your initial investors 500 startups and a few angels from new york uh california and uh we have we have a couple of florida folks as well so the total the total round you just raised was how much total again uh it's about 1.9 and how much did they take versus you let ins like pat take uh i'm gonna say about almost a million bucks it was like folks who were part of the program so they they put in a million yeah they were like well we'll we'll take this much interesting and i was like uh i'm just getting started guys so we had to go back to pat and ask pat if we can increase the amount of the round yeah because there wasn't really much left it was it was it was it was weird i would say i've been through this before but it was weird in a good way and it certainly made it challenging though well as long as you first off i love pap pal was my first investor back almost a decade ago in college at virginia tech when i was like 19. so and obviously i'm an el penis fund so i respect the heck out of him but i mean the only risk in taking more money is you're taking a little bit more dilution unless the valuation is also increasing with like the money amount increasing the challenge there then is you know how quickly can you grow into that valuation right yes absolutely yeah very cool all right man let's wrap up here felix with the famous five number one what's your favorite business book uh the yard of the start by guy kawasaki number two is there a ceo you're following or studying right now jeff bezos he's a killer he's going for everything he's not leaving anything on the table i love it number three what's your favorite online tool for building your company um i really like yesware i like to see where people stand when you send them an email a communication felix number four how many hours of sleep you get every night about seven all right in which situation married single kids um i'm married with uh two kids and uh a 18 year old oh wow okay and how old are you i am 40. 40. last question what do you wish your 20 year old self knew how hard building a team is and if you're building a team you better go big guys it's tough building a team go big backoffice.co they went from seven grand a month in revenue to 80 grand a month in revenue over the past six months talk about hyper growth they are helping people streamline their back offices specifically smbs 300 customers paying 260 bucks a month right now churn is 10 annually in terms of revenue but expansion is 10 so net revenue retention right at 100 which is obviously healthy they're burning about 30 to 50 000 a month right now with over 2 million in cash in the bank team of 15 as they look to scale with their most recent round of funding felix thank you for taking us to the top thanks nathan appreciate it