How Buzzsprout CEO Tom Rossi grew to $5.6M revenue and 3.3K customers in 2024.

hello everyone my guest today is tom rossi he's one of the co-founders of the product development company higher pixels he's been leading the company since 1996 and has seen it shift from a client services company to a product company higher pixels currently has four products buzz sprout stream care tick and donor tools each product has been built with ruby on rails and continue to be actively developed today all right tom are you ready to take us to the top sure which one of these which one of these babies is the one you care about most it's the biggest in terms of revenue oh you're asking me to pick my favorite child yeah uh i think buzzfront is the one that we gravitate towards a lot just because it's fun you get to deal with interesting people and it's a you know it's kind of a fun product to work on let's focus on that one then what's the product do and is it a pure place sas company sure so buzzfrow uh helps people get their message out there to the world so we've been we've been doing that since 2008 and it started uh we were working we had another product called m sites which was a content management system we had people that needed to get their audio out and they struggled with you know how to do that and that eventually became podcasting you build an rss feed and people subscribe and listen to it so we built buzz sprout um for that audience was mostly churches and right after we launched it we just started having people sign up from all over the world really who wanted to you know they wanted to get their audio out there and it was really complicated and we made it very very simple and so to this day that's what we're focused on with buzz proud is making it really simple for you to be able to get your message out and what and what's the pricing model is it a sas model yeah totally a sas model um price is based on the number of hours of content that you upload every month so again our audience is they want it simple if they're low-tech users and so we don't charge for megs and gigs we charge for hours they get a certain amount of duration that they can upload every month we also have a free plan for people that are just getting into podcasting so they can experiment with it and try things out and we'll host their content we give them a limited amount of content two hours every month that they can upload and then from there they can um we'll host it for 90 days that's great so give me an average what's the average customer paying per month right now would you say um probably somewhere around fifteen to nineteen dollars that's probably our average so this is definitely not like a kind of enterprise hundred thousand dollar per year kind of account you're focused on volume right yeah yeah definitely and that's kind of the way that that we want our products to be right so that way you don't have that client that can just demand changes um we can really build it the way that we think it should be built and we're not beholden to you know some contract that we have with somebody who's paying us you know tens of thousands of dollars spoken like a guy that has come from a consultancy right all right very exactly when did you guys launch the bus sprout product what year 2008 2008 okay heck of a year to launch a company and then what have you scaled that to today in terms of total customers um probably on the order of i mean it's definitely the tens of thousands is the number of podcasts that we currently support um yeah but you have a free you are free you have a free plan too though so i'm just curious in general like are you talking a thousand how many paid yeah we don't we don't share those numbers but yeah it's in the thousands okay so okay can we just put a big range on that so between a thousand and five thousand is that fair sure yeah yeah okay good um i mean look at the reason i do this i wanna understand growth right so if i take a thousand times that fifteen dollar average price point that puts you at you know fifteen grand a month today about for this product is that about accurate sure sure i mean yeah it's it's in the right it's a it's a lot more than that but okay we don't share we don't share those numbers because we don't want to focus on that it's not what we got what we got into it um i think what's important for people to hear is that it's profitable it's very profitable you don't have to uh you know make a million dollars a month to be a very profitable company yeah especially when you bootstrap it we didn't we've never taken any money from anybody and we've been profitable since the day that we launched because even if you're making you know a couple hundred dollars that's more than what it's costing us to uh to host it yeah yeah so you know no tom i by the way you're you're almost hedging like this is a weakness i actually love it when i find a bootstrap ceo and like i actually wish people like you had more confidence to say this is where we're at and we're bootstrapped and it's profitable and we're happy doing it and it's exactly what we want um i mean and the reason i i don't i don't go after data just for data's sake but what i do know is that people listening will basically say oh i'm in that range i don't have to raise capital i could be tom and do it too so i mean it would be really helpful for me i mean can you give me a better range of where you're at i mean are you at just south of a million bucks run rate right now or uh but i don't think that's what's important i think what's important for your for your listeners to hear is within the first year we're making whatever five thousand dollars a month which is great because it's growing every month and so when you look at your numbers is it growing because if it's growing then you can you can say hey i can i can map out my future right so what do you want what are you growing at what are you growing at what are you growing at you every year your year over year we're doubling okay that's that's great it's great growth yeah yeah and and i think it's it's tracking along with the industry but like you said i love for bootstrappers to to hear look you don't you don't need to accept money from outside you don't need to hire a massive team for years it was really just two of us it was just uh kevin um one of my partners and i and that was it and he won today now there's uh there's 13 of us in the company but we're you know spread out across four different products yeah so who just whatever product that we're actively uh developing on how many just focused on this product none none we all float between our different products i see i mean okay so how does that how does an a week look like i mean a lot of people have troubles building one product you're building four people would say like is the switching cost there alone would be immense yeah so that's we don't do a lot of switching especially during the day um but what will happen is we work in work cycles so we'll work for a six-week work cycle and in that work cycle we'll have certain projects that we're working on and so some of them might be on buzz sprouts some of them might be on tick um and we'll just work on those projects however we want to chunk up our work so typically what will happen is you'll you know you'll pick one product and you'll work on that for a good period of time and then maybe you want to take a break and you want some variety and so then you go and you work on one of your other projects for one of the other uh products yep yeah that makes good sense um and where's everybody based jacksonville florida okay good so the whole team's down there yeah we don't have any remote workers yet but we would like we would like to be able to do that in the future that's good um take me back to again doubling down on on uh buzz bro the product obviously you're focused on um sure customer growth where are you getting most of these new customers most of our customers are coming through either organic searches paid acquisitions through affiliates or search engines okay like paying the google adwords we're not doing we haven't done really well with twitter or facebook but uh google has done pretty well for us that's great and affiliates working with affiliates people that are actually out there building content that can link back to us um you know that's been a good growth strategy for us and what's the incentive structure there is at 30 per month as long as the people they drive are still paying you monthly or what's the structure it's different depending on the affiliate but it's uh we'll either do a single payment so this is how much you get paid every time you refer somebody and it's a portion of the lifetime value of a customer um or if it's somebody who's got a massive network you know we might work out a different arrangement with them how do you have confidence so a lot of people have gotten themselves in trouble paying out a percentage of ltv on a sign up because you don't know if that affiliate's cohort is going to perform like your historical cohort so you're going to base like the ltv payment off your historical cohorts not the cohort from the affiliate how do you make sure you keep that in check we track it we track it but they they are in line so people that come through an affiliate have there's not a higher churn rate associated with those or anything like that so we look at those numbers um and we're really confident in our ability to to calculate that because we've been doing it for so long well no it's not but it's not about you that's the thing is like i've seen people sign up new affiliates and those affiliates can use a different strategy or they're marketing to a different cohort that just doesn't have the same economics and your platform has nothing to do with you it has to do with the traffic they're sending right and so that's why we track so what we do is we track so we i can look at what a churn rate is for a particular cohort but you've already paid them that fee percent of the lifetime fee up front when they drove you the customer in the first place right so that's the risk is you're paying them up front exactly that's what i'm trying to understand all right so if we were to find we we haven't seen this but if we were to find that an affiliate was sending us you know trash signups or trash uh you know they only get they only get paid on a paid conversion um but if we found out that they were churning at a higher rate or they weren't as valuable as other customers then we would you know pay them a different rate you'd go back and renegotiate it and say listen it's not yeah yeah that makes sense based on ltb yeah yeah totally um when you look at kind of fully weighted cac so including any people writing or doing your seo strategy or managing your affiliate network to acquire a new 15 a month customer what are you typically paying fully weighted cac uh it depends on the channel that it comes through so if it's coming through an affiliate we typically will pay thirty dollars for well i say that i think it's forty dollars that we pay because we give twenty dollars to the affiliate and we give twenty dollars to the person that was referred through the affiliate um so that way they have some incentive to give to you know hey if you sign up you'll get twenty dollars and i'll get twenty dollars so really it's about twenty forty dollars is what we'll pay for uh an acquisition through an affiliate and then with google um you know it's it's whatever it's you pay all all over the map but always less than whatever the ltv is well definitely but ltv is what we're looking for okay so that can be dangerous though right so if a customer stays with you for six years what you're saying is if you take your six year ltv you're willing to pay three years up front to google well if you if you sign up more customers on google you're paying basically three years of revenue up front you get into a huge cash hole so how do you manage that you manage your cash don't spend money you don't have so that's kind of the way that we've done it in the past is we'll dial it up and back a dial it up and back based on how much cash we want to spend but what we've found is as you as you uh start paying for those acquisitions it also raises other other numbers all of a sudden your organics start to go up all of a sudden your affiliates start to go up and so it's really hard to capture all the value you get out of those paid acquisitions but you're right um when we originally started doing it the mentality was hey if it's a dollar more then uh if it costs us a dollar less than the ltv why wouldn't we do that well now we know the answer well because cash is worth cash and so you don't want to spend you know all that money and then have to wait 10 years to recoup it so yeah super dangerous to associate ca i know people like to say three to one cac to ltv i just think what's way more important is payback period how long does it take you to recover the cash that you put into acquire the customer what is that for you generally one or two months um it depends on it depends on a lot of factors right if they come in through an affiliate like i said it costs forty dollars so if they average fifteen 15 a month so you can do the math and figure out three four months before you recoup it on an affiliate referral and then google depends on what cohort they kind of fall into how much we paid to acquire them generally those still not kind of four to six months okay it's much longer yeah longer yeah typically it'd be more like a year at least that's still pretty healthy even at a year um what do you assume lifetime value is on most of these accounts um anywhere between three to five hundred dollars okay and so we keep it conservative we'll typically say 300 yeah 300 bucks that's good so i mean i can kind of well well let me ask you when you look at churn obviously churn is critical in this kind of business what is your churn less than two percent that's the logo turn per month yeah yeah our turn per month is somewhere between one and two percent that i mean that's good so i mean if i take one divided by .02 percent you could argue that a customer stays with you for 50 months five zero months on average times that 15 price point that gives you 750 ltv but you're being conservative and saying we're just going to plan around 300 or 500 exactly yeah that's smart that's really good i love how you're running the business i think it's really smart i just one thing that i'm envious of is i don't know how you juggle four balls at once uh that's just something that's something that we struggle with too so don't worry yeah no no it's interesting um a lot of it goes back to the work cycles that we were talking about earlier you know we kind of adopted that from uh base camp um you know we've we've tracked really well with base camp um when we did client services when they were still doing client services it's 37 signals and we've followed them ever since and it's and it's really helped us a lot and one of the things that they've started doing uh was work cycles and i talked to jason freed at a conference some years ago and we started incorporating it here and it's really helpful because you're you're pretty much heads down working for six weeks and so that one on one on one project um or if it's a small project you might be able to take on two or three so we call them small batches or large batch uh projects but it's only for six weeks and so it really gives you permission to say you know what i'm gonna put the blinders on and just focus on what needs to get done for the six weeks yeah yeah that makes this a lot of sense tom all right let's wrap up here with the famous five number one what's your favorite business book favorite uh good to great good degree it's probably though it it doesn't have to be crazy at work the new base camp book i'm a big fan of but good great it probably has affected uh has affected my thinking about business for the longest period of time number two uh is there a ceo that you're following or studying that the rest of us might not know about probably probably not jason jason freed and david hendermeyer hanson are the ones that i'm tracking with the most right now yeah number three what's your favorite online tool for building the business favorite online tool for building uh base camp so base camp is our um primary method of communicating and managing uh the whole team being able to communicate with one another and collaborate number four how many hours of sleep are you getting every night i'm trying for eight i'm trying what do you get though uh seven seven i get between seven seven and eight okay i'm trying i'm using the uh the the fitbit tracking which is a little bit misleading because it it's more accurate because what it's doing is it's actually tracking all the times that you kind of wake up for a minute or two in the middle of the night but uh it's funny i'm trying i'm trying to get eight but it's so hard so hard to go to bed early yeah and what's your situation married single kids uh married with four kids holy mackerel you're busy okay how old are you i am 46 40. see now we know why there's four companies there's one for each kid that's what we're waiting on here right all right all right last question here tom what do you wish your 20 year old self knew oh man gosh probably the client service is a lot harder than you think it's gonna be yup guys client services are harder than you think that's why he's pivoted towards product type services currently building buzzsprout.com they launched it in 2008 out of their agency there's now 13 people that focus on it in kind of six week periods everyone based in florida economics wise they've got between a thousand and five thousand customers paying 15 bucks a month so call it between you know 15 grand a month up to 75 grand a month somewhere in that range growing 100 year-over-year bootstrapped which we love bootstrapped two percent logo churn per month so obviously uh that assumes a 50-month ltv he's conservative though and assumes on a dollar basis it's 300 bucks they spend up to 40 bucks to acquire a customer so anywhere between a four and a 12-month payback period depending on what channel it comes through but healthy growth tom thanks for taking us to the top no problem thank you