How Botkeeper CEO Enrico Palmerino grew to $27.2M revenue and 500 customers in 2024.

hello everyone my guest today is Enrico Pommery no he's the C is a serial entrepreneur in the accounting sector with the launch of his most recent company bought keeper he introduced the world's first robotic bookkeeper which combines machine learning and AI with skilled accountants to automate bookkeeping for companies of all sizes there by writing them with the highest accuracy and fastest fastest insights at the lowest costs and riku are you ready to take it to the top yes ok it takes a special it takes a special kind of person to get excited about book bookkeeping tell us what's wrong with you actually inside joke and the company is I hate bookkeeping and so it's a very ironic that I started a bookkeeping company but you know I thought for all of those like me who hate bookkeeping and who are you know just kind of fed up with the process its time-consuming it takes a lot of work it requires a lot of time to manage bookkeepers they inevitably make mistakes they're human you know what do you expect but for everyone who wish that there was a better option that's kind of where bot keeper started and any concept because you know maybe we can make bookkeeping sexy and and be something that people desired and provided a lot about that and what's the revenue model is a pure place ask company you know your place ass we do have some services that sit on top of the sass but not charges like extra services so it's all just baked into that fixed monthly fee kind of like you look at that it's like onboarding and retention yeah we look at its all-you-can-eat fee so everything under the Sun whatever you could you need whether it's collection calls or it's talking to like a real person it's included in that fixed monthly fee that you pay that's based on your transaction volume and what's you know with the average customer pay per month would you say average client pays somewhere around five hundred dollars a month so you know not talking a whole lot of money you know we replace like put it in perspective we were placing part-time bookkeepers for a couple hundred to five hundred dollars a month we replaced full-time bookkeepers for a couple grand a month you can replace controllers for like maybe three grand all right how are you measuring usage is it like number of quick book entry ledger files what is the utility metric so usage for our clients is based on transaction volume so how many transactions are we processing how many bills are we paying invoices are we sending quantity not not amount quantity yes so in other words like yeah it could be it could be one transaction for a million but they're gonna pay you less than a million transactions for $1 correct yes so let's say you send an invoice out to someone and that invoice has a hundred line items on it but as far as the accounting goes you really only care to account for that invoice as a whole like a 200k invoice then that's just one one item I see okay and how many customers have you scaled to today we have over 500 companies every support that's great well I want to get more the back story here but I mean it sounds like it's pretty healthy 500 folks at average 500 a month you guys are north of 250 at this point per month we're getting close or round there yeah we have some clients that are smaller we have some clients that are you know way smaller but yeah definitely what's the two millionaire are what would you do last month last month we did somewhere around a hundred and thirty eight hundred 40k okay no 40k and that's pre professional services yeah yeah we basically expect will be over a hundred and sixty six probably by the end of this month that's great so that lets us hit the 2 million dollar runaway so we're growing a decent Club where were you a year ago a year ago we were about 3540 K oh wow okay so I mean pretty substantial growth I want to dive more into kind of how you drove that growth but give me more the backstory here so what you're drill on chin we launched in 2015 most of 2015 building the product getting like the first beta out there we've launched the beta or alpha in the fall the Alpha proved to be quite well we basically were able to show in that alpha with a couple of our clients that we could clean up years worth of bookkeeping in a matter of a couple weeks which is by like bookkeeping standards like next to impossible and not only was the cleanup very fast but one of those companies end up getting acquired within a month after we presented the financials which meant that our financials went through an audit they were looked at like scrutinized and the fact that they passed with no issue said okay cool we not only had we figured out a way to do this really efficiently but we've been able to do very accurately so in January 2016 we launched the product or like the no version one of ba keeper and what you do first year revenue do you remember all in first year I want to say it we did so 2016 we did you know somewhere close to 300 K that's pretty good yeah not bad and then by the end of 2017 we did over a million and so we expect you know the end of this year we'd like to do somewhere around four or five yeah no that makes a lot of sense um how are you bootstrap dur if you raise money we raised money recently so we were bootstrapped all the way up until the fall of 2017 so I funded it I was fortunate to have had a couple other exits prior to lock-keeper that you know provided me the means to do that but coming into 27 n to 2017 early 2018 we raised four and a half million from with ignition partners as our lead and then we had all their investors including like matthew at 500 startups trevor at correlation ventures a bunch of other VCS and several local entrepreneurs yep how much of your own money to put into the company before getting outside money probably close to about a million dollars okay so I mean that's a fairly healthy amount you've had some CSS what was your most successful exit prior to bot keeping a bot keeper that would be think light so start a business that similar like very same concept as ba keeper use decision trees algorithms to automate certain processes and workflows except we did it with lighting and how you analyze design and manufacture LEDs and that business we grew to you know about 60 employees eight and a half million and recurring revenue and then get acquired mm-hmm why did you make the decision to sell that why was the right time the lighting market is a tough market so if you think about it you're building a product that lasts for 10 years so very slow resale cycle the other thing is you built a product that's so efficient that if you had our model was this pays you save or cost-saving base model you know you can't go around and do that again the next round like you're just paying for the product and if you saw what was going on the lighting industry that you had a lot of people dumping a ton of money in this race to the bottom in terms of pricing that I felt like okay we're capturing revenue very quickly we've got this recurring kind of payment subscription component to our business that you know means that we'll have revenue for at least the next five years and you know it's kind of like anything right like if you you show that upward quick trajectory you can get a really nice valuation and the thing I worried about was okay as prices keep coming down and coming down drastically you know we went from selling given lighting units at about you know anywhere from 100 135 dollars a unit per luminaire that could be like a highway light or something that's being done to you know 35 $50 a unit oh well start you start having to sell like you know fortunately our growth was fast enough that we were the volume of units was still increasing rapidly but you eventually light up the world and you know the the opportunities start to slow down yeah so that's a good tagline I like to light up the world right people can tell they're whatever they want from that all right back to back to bot keeper so churn is obviously critical in the SAS because it's tell me about your turn so we have from a revenue retention standpoint we have a negative charge which is really cool negative a minimum of 20 points negative positive of 34 I mean a the low end negative 20 at the high end negative 34 so basically we retain a hundred and twenty one hundred and thirty four percent of all of our revenue every year that's thanks to you know our clients growing upgrading their packages remaining on with bought keeper may be rolling out different components of our service and then you know from a turan standpoint we turn like somewhere around maybe four percent four to six percent of our clients obviously we deal with a lot of start-up monthly or annually annually and we've turned a total of about six percent since founding so that's not that's not the horrible actually so if your gross revenue churn is six percent but your net revenue retention is 124 it means you're expansions about 30 percent year-over-year yeah yeah I mean it's really healthy what are you doing to drive such I mean low low churn do you I mean have you dialed in there's this one thing you've got to get a new customer to do in the first 24 hours to make them super sticky so the I think keeping where we've seen churn is around client signing up and either having really unrealistic expectations as to what can be delivered in short order like you expect us to crawl through you know maybe three years worth of books and clean up all your financials and deliver a board presentation and board ready numbers in two days it's probably not going to happen we are really good at what we do but you know we can't work magic yeah yeah but in you know if you gave us like a two-week timeline or three week timeline we can turn that around and do something that you no one else can do it's just a matter of you know expectation on this magic thing that spa keeper so I think that's that's one of the things that we vets I'm sure and where people think it's a you push this magic button used to sit back you watch and then everything just happens we've had some people sign up where they sign up and once again kind of this whole idea that like you push a button they don't integrate their data feeds or expand you know and how it feeds you need by the way is it like a stripe connector I mean think of it it's like mint if you've ever used medCom we all we literally need you to do is enter a username and password for like your bank your credit card and maybe payroll and a couple other things that you could go to town and do like link up your google analytics and social media and CRM system I mean the more data you give us the more reporting and stuff we can give you yeah but if you won't spend the two minutes doing that it's very hard for us to do anything for you and if you won't hop on a phone call with us you know despite like numerous emails and and calls to do so then we can't really do anything for you and eventually you turn out cuz you're like I'm paying and I'm not getting any what percentage of your current customers would you say our SAS companies um maybe 20% okay so not a ton no it's I mean we have such a broad sweeping range of clientele so it's startups that are building software intact we have startups that are companies that are manufacturing products we have cleaning companies and dental practices we have consult we have restaurant chains we've got some large media companies we've got supermarkets so it's it's literally just anyone that needs bookkeeping you could switch the bot keeper and we guarantee save you 30% of your spine what's your CAC what do you paying to acquire these customers it depends like on which channel so you know kind of fall in average maybe pay a couple grand to acquire and that would be like fully weighted yeah and you know we've got a long retention rate on most of our clients so what do you assume lifetime value is I assume at least four years already [Music] so four so four I mean if we take earlier I think is interviewing like 130 with 450 customers which means their pain was at 260 bucks a month on average or 3 grand a year so I mean if you've got a four year thing that's at least 12 grand an LTV at a minimum right yep interesting and so if you do though that we're basically are spending you know if you think about it we spend say $1 to generate at least time at this point and we're trying to drive that up to 20 in terms of lifetime yeah in terms of lifetime in terms and like you know a combination of like lower the cost right so if we can you know spent half of what we're spending right now to generate the same revenue he gets on the same dollar to generate twice the wrath did you do do you know your metric in terms of dollars spent for one new dollar of air are not one new dollar of lifetime value yeah it's it's literally one for time right now like on the nose exact you can spent what did you just tell me though that you spend two K to generate a new $260 per month customer no we spend to K to generate an average client of about $550 ah got it I'm taking your historical numbers 4 and 50 cust or sorry 500 customers at the 130 right now you're saying new customers are signing up it's 2 K and the average price is 550 correct because we have a lot of clients too that will come in through our all's that might be the smaller clients so we will get a lot more volume in smaller clients but those aren't necessarily the ones that are clicking ads and stuff and buying gotten sales tactics okay but just be clear too even at that number so 550 a month is what that's sixty sixty six hundred per year and you're spending two grand to get that so it's one two three not one to ten but I oh I'm sorry I'm going for it yeah yeah yeah you're doing it that's a saying which is fine you're measuring lifetime I would just curious what it was for it ARR yeah yeah okay cool that's those are really healthy economics where is most of that weight coming from my inside sales team tell me about your team size today so right now we have a team of eight that's going to become a team of 13 they are what we call brand ambassadors because we don't do hard selling we don't like we're not we don't do presentations very rarely do we do proposals is more for our very large clients that require like they want a lot of detail in a contract and everything in place majority of our clients are going to our site clicking the package and and signing up that way so our brand ambassadors more than anything they're going out there and just educating people that there's this new way of doing bookkeeping you know don't hire a contractor don't hire an outsourced firm don't hire an employee literally just sign up right here you'll get 24/7 services the poor it'll cost 30 to 50 percent less than any of the other options it's more accurate it has unlimited reporting it scales up with you against cheaper as you get bigger so just letting people know that there's that option and then you know all those benefits basically sell themselves yeah into N is the whole team based where team is scattered now across LA SF New York New Jersey Massachusetts Saran Maryland super yeah our team in the u.s. is where total 50 people now oh oh I thought you said eight people you're a total of fado eight on the sales team yeah god I'm 50 people total I said I was doing the math going Wow his revenue per employee is through the roof with eight people no I wish yeah all right good stuff here we go let's wrap up with the the famous five number one what's your favorite business book favorite business book say probably traction number two is there a CEO you're following or studying right now half clock is always been like one of those individuals the CEO founder about the North Face so he's always been one that I look up to and I've got a lot of guidance from number three what's your favorite online tool for building the business I don't I think I've recently started to like a tool called 15-5 it's a pretty good platform for managing the team doing like one-on-ones check-ins you know staying on top of objectives I'd say that's my thing 55 0 & 5 or 15 one five one five five okay got it one a one five five got it 15 5s Oh 15 5 yep very cool all right number four how many hours to sleep to eat every night five it's pretty good in a situation married single you have kids marry two months ago oh wow congratulations and how old are you I am 29 29 alright last question what he was you're 30 are your 20 year old self nil I wish my 20 year old self knew the importance of like a discipline and structure on a business so like the it's funny like I'm now with this business and even like the last started to be able to like stamp out okay this is how this is a great process for sales and marketing this is a great way to like set up procedure manuals this is how we're gonna run meetings etc and if my 20 year old self I think we could have probably taken my first business a lot bigger than we did if we weren't chasing our tail as many as much blog do you talk about that stuff anywhere like how you run a meeting how you put procedure drugs together I don't know it uh if I did I'd have you know I'd be averaging four to five hours of sleep yeah guys area Manrico launched company in 2015 after successful exit in the lighting space to use about a million bucks of his own money to fund this for many years bootstrap then raised four point five million bucks again to help fund his team of fifty building this tool bot keeper which makes and saves you significant amount of money on a record-keeping reporting board reports or just monthly close outs ranging from SAS companies to media companies to restaurants and everything in between they've got about five hundred customers paying paying about 200 XT bucks per month right now on average 130 grand in monthly recurring revenue that's up from 40 grand in mor just about a year ago so healthy growth he's got six percent gross revenue churn but he's net revenue tension revenue retention annually 124 percent so healthy expansion there and then healthy economics in terms of payback and everything else Enrico were rootin for you thank you so much for taking us to this OP thank you sir have a good rest here day