How Clickdimensions CEO Paul Colella grew Clickdimensions to $44.4M revenue and 3.6K customers in 2020.

hello everyone my guest today is mike dickerson he's the chief executive officer of click dimensions the leading marketing automation solution for microsoft dynamics 365. he joined click dimensions from pgi a global provider of web conferencing software and collaboration technology where he served as executive vice president of strategy and business development and now he developed partnerships with some of the biggest players in the technology industry including microsoft before that he started pgi's global collaborative services division growing it from 86 million to 240 million in revenue and serving as a trusted advisor to some of the most recognized brands all around the globe mike are you ready to take us to the top absolutely all right tell us about click dimensions for folks that have not heard of the company what do you do and how do you make money is it pure place ass uh it is a pure play sas it's a marketing automation company uh focused primarily on b2b the thing that makes it a little bit different is that the company was uh built originally in the microsoft dynamics ecosystem built natively on the dynamics platform okay and ultimately developed a unique distribution system in that uh um in that market which is um special because there are about seven thousand martech firms out there and i think one of the key things that the founders of the company did was that they picked a um a distribution scheme and a segment of the market that they could really dominate in and and protected themselves from the vicious comp competition that was going on in the rest of the martech uh industry i would agree with you a lot of people overlook this but i think the most effective thing you can do in a crowded market is find one channel and monopolize the heck out of it it sounds like your guys and your folks did that what year was launch when did they create this it was launched in 2010 great uh startup story a guy who had had one successful uh small business operating out of his basement had uh connected with a developer in tel aviv israel who was writing code in his parents apartment the two guys had never met they had an idea for a company and they worked it and from that without taking any venture capital they built it up to uh a company that by the time i came in had 2 800 customers and was doing almost 20 million dollars in run rate revenue when did you come in what year uh january 23 2017. oh well okay okay so fairly recently and what would they come to gra over the past 12 months yeah so we're we'll do about 40 million this year we grew 36 last year to just uh almost 31 million last year okay that's great so from 31 million to about 41 million in terms of ar this year where's most of that growth coming from new customers or expansion revenue uh new customers uh i think that's one of the the opportunities that excited me about this business was they had a very uh efficient uh customer acquisition cost and a really efficient machine to acquire new customers and the opportunity to sell those customers a second and the third product seemed um seemed like a great uh great potential and are you referencing the dynamics kind of channel for distribution still or are there other ones you've discovered we really focus on the dynamics channel and if i were to look back at what the real genius of the guys that started this company they really understood the microsoft dynamics uh channel uh they understood how they made money they understood how to connect with them they understood what it was like to live in a business that is dominated by the world's largest software company and they really connected well on that um and so uh what we've really taken um you know the opportunity to do is to leverage our very effective cost of acquisition and allow us to build out uh you know a complete digital marketing portfolio for b2b customers and we get to do it in a domain where frankly we win more than our fair share of customers because of our dynamics expertise so we're sticking in the uh in the dynamics ecosystem it was primarily the growth came through new logos but we've been working on that uh cross-sell and upsell motion for the last nine months and mike you talk about your effective cac what is your cac today what are you spending to acquire a new customer fully weighted um i'll tell you what our cact our ltv to cac ratio is because about our exact numbers but uh we're operating at about a 7x which is um pretty darn good yeah no that's great now let me ask you a different question that will kind of help me understand about how aggressive you're being uh how aggressive are you being with payback period you happy to wait 24 months or you want to be 12 months or six months or less yeah so uh you know i'm sort of like standard sas businesses to be you know under 12 months 12 months or less if you can do it we're a good bit less than that um and you know one of the things that's that's really unique about this um channel model that these guys built uh that would be very hard to replicate and very you if you were looking at a business plan that said hey i'm going to build a business that has 650 active partners that's how many partners we've done at least one deal with in the past year to build that from scratch would seem you know intimidating if you look at what does that mean i'm like sorry partners i thought you had one big one which was it which was dynamics no it's the it's the there are 7 000 microsoft dynamics partners who sell dynamics install dynamics configure it migrate data all of that kind of stuff um so those are are essentially our sales force and of those uh 650 did at least one deal with us in the last 12 months of those 650 60 of them have 10 consultants or less so this is a real long tail phenomenon that these guys built up um and would be hard to replicate what's the kickback there are you paying like 30 of the arr or something like that how do you incentivize these guys yeah so um also interesting normal sas um uh you know sort of commissions can range and then microsoft world 16 to 20 can range up you know 40 and higher uh in other places but the real uh beauty of this model was let's take a typical deal say it's a you know 75 seats of microsoft dynamics my numbers may be a little bit off but that might be 120 000 of microsoft uh you know uh subscriptions probably a hundred and twenty thousand dollars of implementation fees and maybe ten thousand dollars of click dimension software on which that partner might make you know a 21 margin so what's the deal well the thing is that 10 that 10 000 was the fuel accelerant that helped them win that much larger deal including the 120 000 of services which is really their main business so there's no kickback no there is a kickback it's 21 but the the point is that 21 of 10 000 is um pales in comparison to the fact that they actually won a 250 thousand dollars yeah they used your feature set to win the deal in the first place they used the feature set yes but more importantly than that they used our uh cell with sales motion so our sales force is expert in marketing automation digital marketing and microsoft dynamics most of the dynamics partners are really strong in it and in implementing crm they are not marketing people they couldn't tell you you know what seo is all about they couldn't tell you about uh you know how to build the effective nurture tracks so what we do is we are effectively a product sales specialist for uh sis that looked a lot more like itse and mike is this recurring or is it on first year contract value oh it's recurring and that's a big deal for us we're helping a lot of those in perpetuity in perpetuity um as long as the customer stays with us yeah and the idea is that you know a lot of these guys are struggling with how do they make their their business cloud resilient and so we spend a lot of time working on how we can help them not only make residual margin on the software of ours that they sell but how they can build recurring subscription-based managed services around digital marketing and how sticky is it obviously trend is critical in a sas business what's you're going to just churn today yeah so our churn's about 15 which is higher than i'd like it to be logo or revenue uh that's logo um on a constrained basis for a year that's uh yeah that's saying that he bad if it was per month we wouldn't be having this conversation um so uh uh yeah and the uh for our customer range this is also something that's unique normally you would say back with your your thesis in the beginning find a segment of the market focus on it and drill it our focus is customers who use dynamics that's the that's the segmentation dimension we have customers that range from fortune 500 firms to small firms with 50 employees and uh the differences in churn between the smaller and the bigger are are significant if i were to look at our our larger customers the churn rate is is on a logo basis is much below 10 yep yep and look at a 15 logo term per year that means you could kind of back into this is dangerous to extrapolate like this but you could back into kind of a six month lifetime value essentially well i would hope six years but sorry did i say six months i meant six years exact sears all right good and still bootstrap today are you guys raised so um in 2016 in may of 2016 the company sold to private equity firm excel kkr that focuses on mid-market uh uh sas companies and it enabled services so...