Closet Tools Revenue & Valuation (2024)

hello everyone my guest today is jordan o'connor he was born and raised in rural western new york he went to engineering school and worked as an electrical engineer for seven years he started closet tools that's closets dot tools as a way to pay down student loans and transition to full-time founder when it made more than double uh what he made at his full-time job all right jordan you ready to take us to the top let's do it all right how much in debt were you coming out of college uh so combined with my wife is about 200k wow that's incred and what did you study was it electrical engineering yeah so i went for electrical engineering she went for health science but my mine was mostly about 150 i did i loaned out everything housing everything and you know and didn't have any help there so it was 100 loans that paid through college that's i mean so so i mean what are you thinking as you graduate is it a scary feeling were you already married were you already with your wife at that point or your girlfriend yeah so i pretty much got married uh about six months after i graduated and it you know of course the six six months is right about when the loans start being due and uh so i was thinking once i once the payment started coming in and it was like you know 1500 bucks a month or something like that and that was on like the low end that's like pushing out like 30 years or something uh i was like wow this is not really what i signed up for uh put the budget pretty tight for sure and so how did you i mean you took a full-time job though out of college right yup yeah so i transitioned i did a like an internship out of college and i transitioned right into full-time employment um and my wife she actually got pregnant pretty early in her marriage so she just stayed home with the kids so it was just a single income so how old are you today so i'm 28. and you graduated what year uh 2015. so okay so so you said you did electro engineering for seven years so you were already doing this when you were still in college yeah exactly yeah it was the same job but just different label on it basically yep i i see got it so sorry and you said you're 20 how about 20 what today 28 28 today okay interesting and and graduated five years ago so um when did you i mean help me think through the transition of like you're balancing your expenses your student loan debt pregnant wife you have a job right which you know you know you know them well because you already work for them in college i mean what were they what were they paying you a full-time salary right out of college um i think i started at like 72k something like that cost of living is really low here so the salaries are pretty low where are you um uh close to rochester new york um yep so you know it for the area that's pretty average pay um especially starting out just getting to college and stuff like that but um you know the the net take-home pays like you know 4200 a month or something like that um and so between my debt and my wife's debt it was like almost half of our income was going to student loans which was kind of crazy and she wasn't working right because you have the kid right yeah exactly yeah crazy okay so what is closet tools doing when did you launch it so i started that uh just over two years ago it's an interesting story so i actually started it for my wife so she actually started selling clothes on poshmark just as a way to get some additional income and she was doing a lot of manual tasks the way that poshmark's set up you have to share your items and you have to engage with other users and stuff like that and she was spending a lot of time doing that and i looked at it i was like i feel like i can automate that and i was just in the middle of learning some web development stuff and you know learning javascript and so i wrote a little script it automated a few things she was using it her closet was doing really well with it and i wrote a blog post about it uh on my personal blog and then it was maybe a few months later google picked up on it i started ranking in some uh seo for some seo terms and i started getting emails from people saying like you know can i use this like what does it do how does it work um and so that was kind of in the back of my mind for almost a whole year uh before i even started closet tools um i i kind of had that validation of like people want this thing um and and so that's kind of how it got started what how were they finding on google like what keywords were they searching uh so i had written like a like kind of a short blog post like this is a poshmark you know automation script so anybody that's searching that right like poshmark automation um poshmark bot those types of things my my post started coming up in those search results yeah you rank you have one article that brings in most of your organic traffic it's at closet dot tools forward slash poshmark hyphen bot and you rank number one for poshmark sharebot poshmark bots poshmark poshmark algorithm uh and these bring you several hundred clicks per month so this is this was how you got your first customers then um no well so i mean that's today right uh two you know two years ago i i bought the domain right so you don't have all that traffic coming in um how much was that i mean it was just a you know it was like 12 bucks a year or something like that it would you know it's nothing crazy but my initial traffic actually came from reddit there's a poshmark subreddit and they were pretty lacks back then about poshmark bots and stuff like that so i actually was like hey i made this thing uh give me your email and i'll give you the the beta script for free and then you give me feedback and then so i did that and i got about 150 sign ups uh for the free one and then um i took uh about two months and kind of wrapped it around a sas package so you know i did billing and stuff like that and made an actual gui for it and um and then i flipped it on them and sold it for 30 bucks a month and that's and i got i think 10 10 customers the first day of the 150. yep that's amazing how many customers today uh just just about a thousand now wow okay and what are they are still still paying about 30 bucks a month each yeah i i haven't changed the price i priced it high early it was definitely like looking back i never would have charged that but i know like sas advice all along is like charge way more than you think it should be um so i did that i honestly should increase the price a lot today there's a couple features i came out with recently where people are making hundreds of dollars a day using it so i certainly could increase prices but people like that it's you know reasonably priced so so mm-hmm and and so a thousand paying 30 bucks doing about 30 000 bucks a month right now in revenue yeah just about i mean i have annual subscriptions it's 250 a year so i'm at like 28k yeah i mean still impressive and significantly high what is that annually that is about 360 000 annually or about six times your full-time electrical engineering salary out of college yeah yeah uh yeah trust me it's it's kind of crazy and it's been interesting because it's been so uh not slow but just like consistent um and it's because of the seo so that's one thing i kind of wanted to talk about is like how seo has been a main traffic driver um there's a real big stigma against poshmark bots on poshmark a lot of people are against them because it's you know it's automation it's kind of like cheating right um and so if you try to advertise on social media you get eaten up these people are in the comments like this is garbage like you're a bot like nobody likes you but by ranking on seo you're just getting the people that are looking for the thing that you're already offering and so these are the people that are you know incognito mode like oh i want a poshmark but you know and so by ranking for all those terms that's you know that's that's how i've been consistently able to add the right people to the tool and so it's just been growing from there you've also written great pieces like you know postmark selling tips post mark tips tips for selling on poshmark and these do well for you as well yep yeah and so i had studied a lot of seo things um you know years ago and so i knew exactly how to rank for specific keywords and of course nobody else is writing for these things so you know it was very easy to rank for them but i also did a good job to make sure that i was writing the best content so i wouldn't get outranked by some other competitors or anything like that yeah that's right i mean you targeted the volume on all these keywords they're all under 600 searches per month but because you rank number like one or two or three for all of them you're getting like 80 90 clicks like exactly on each of them um and these are long i mean i'm on one of the articles right now i mean i can tell this takes a long time to write nothing sexy or fancy but it's clear there's h1 tags it's clear the h1 tags are like strategic right it's clear you put a lot of thought into this yep yeah yeah yeah it's all strategy um yeah that's that's that's been huge for me and i think um uh you know over the last two years i kind of wrote them all very quickly in the beginning and then i'll do like a 2020 update right where i add some stuff for for now but it still ranks good yeah how many star you put out how many total articles you have uh it's something like six or something it's nothing not a lot guys so there i mean there you have it right your seo strategy doesn't have to be like launch a blog and hire twenty thousand writers and dollars you can just hyper target six what fix six things update them once a year make sure they're smart and build a 30 000 a month business right jordan that's the way to do it that's right what were you at 12 months ago in terms of revenue um i mean do you want me to look or you want me just guess look tell us what you're doing too so what tool do you use to track this uh so i use all stripe for everything um let's see 12 months 12 months i was at 12 basically 12k 12 000. okay interesting and you've done all this bootstrapped right yeah 100 bootstrapped and you know it helped having a job so you know i didn't have any you know it's not like i quit my job i actually kind of had them both in sync for about two years um and so i you know yeah it's 100 bootstrap would you ever raise capital if it was on the right terms uh i don't think so i think i would only ever sell really um i i think the market's very uh it's not huge um and i think that i don't know i i actually don't know how big it is but i know that there's a bot that was you know it's been in existence for a long time many years before mine was and you know it's got like 6 000 users or something like that so that's i feel like that's kind of the market size um so i don't think it's worth like you know pumping you know a million into it or something to see if you can capture the whole market um how are you capturing the market today are you doing any paid stuff like what's your cap to get a 30 a month customer yeah you know i don't actually know what my cac is um i actually don't do a lot of tracking but i do i do about 3k in google ads so it's all those same keywords that i rank for seo wise i'm still i'm doubling down on those and running ads on those too and how many customers do you get per month um right now i'm about 420 i got in the last month so i'm doing over 10 free trials a day uh how many new customers yeah so new free trials would be new uh you know about 420 in the last month i've done but so you're paying about seven bucks if you're spending three grand seven bucks a trial but how many of the trials convert to paid uh 40 okay got it so to call it 200 ish on the 3 000 spend so you're paying like 15 bucks to get a 30 a month customer yeah yeah rough math that sounds about right i mean yeah that math that math works that's also impressive i mean you have a thousand total customers and you're adding 200 new customers every month that's like a crazy that's a high high growth rate yeah it's growing faster now than it ever has really um you know i don't know i think um i think word of mouth honestly is a huge driving factor if there's a very you know the people that actually use bots they you know are very close with each other so they actually talk about it a lot um but i also think i actually just started doing advertising uh back in march i think february so i mean that just obviously amplified that uh the free trials i was doing probably closer to like um you know 200 free trials you know several months ago a month yeah that's interesting yeah i mean would you why wouldn't you go try maybe raise like 60 000 in like debt so you don't have to sell equity and use that money to run some ad experiments to keep fully fueling this growth um i don't know uh mostly because i don't know what would actually happen obviously i could probably pay it off and it would be fine but for now it's actually kind of nice that it just grows consistently because i'm able to manage you know i have to do all the customer support you know i have to do anytime anything breaks you know because it's a third-party app it's not like there's an official poshmark api um you know things break when poshmark updates the site i have to spend all night fixing the app so that the next days people can use it um jordan try try something with me real quick on your computer go to go to founderpath.com and scroll down to the second part you'll see a big calculator okay okay and type in like okay you're doing three grand a month in ads let's say you want to run experiment and spend another 5k type in like type in like 60 grand okay okay what's it tell you on the left right above the purple button it'll say hey can you take 60 grand now and make more than x and mrr what's the x uh 1670. yeah so that's the question could you take 60 grand today and add more than 1700 bucks a new mrr oh um i would say of course i mean i think i could do that anyways though i think that's the probably the difference for me but oh yeah 100 mm-hmm interesting yeah i mean the the whole thing i guess it really is sort of like what you want to do with the company do you want to sort of keep growing it exactly how you're growing it and you're content with that and you feel like if you try and grow faster it could break so you don't want to invest additional capital um which is fine a finance or two by the way yeah yeah i think uh yeah i've always been hesitant to to grow it too fast i guess um especially because i am you know just one person you know and i don't really want to hire a team i would much rather just be me it's much less responsibility on my end so you know like the last month you know i just told you i had my third kid like i had you know i didn't write a line of code for an entire month and you know i just answered some emails and stuff like that that was basically it so it's kind of a nice pretty sweet gig for now yeah i can imagine what's churn look like what's annual revenue churn or monthly revenue churn um the churn numbers are i don't think they're completely accurate but it says 15.4 percent right now um yeah it says it's high churn but the way i have it set up is if like if they miss a billing payment um then they are immediately churned but there's a significant percentage of those people that come right back on if they miss a payment or something like that so and that's monthly monthly 15 or annually um that would be in the last uh that's the last 12 months because i had it set up so 15 annual churn yeah yeah that's actually not horrible for this price point um interesting very cool and obviously profitable right i mean so you pay yourself you pay sell on ad spends i mean what are you profiting per month basically like 20 grand yeah it's ridiculous at this point yeah it's something like that it's kind of crazy so yeah 20 25 something like that so so what i mean if someone came to you and offered you something like you know 5x ebitda multiple so if you're doing 25 grand a month in profits that's two that's 300 grand a year in profits essentially if someone offered you like i don't know some multiple on that would you take a deal um i don't know i think uh i'd want to get it a little bigger if i got probably above maybe like the two million three million mark i'd probably take it um i did get some offers several months ago but i was making you know 20k they wanted like they wanted to do like 600k or something like that and i was like yeah i mean i'm gonna do that anyways probably so you know in the next year or two so i don't know it wasn't really worth it for me yeah yeah not worth giving up your freedom yeah exactly yeah very cool man all right let's wrap up with your famous five number one favorite business book uh favorite business book i like deep work cal newport that's a good one number two is there a ceo you're following or studying um uh no not really number three what's your favorite online tool for building your company i thought i'd say stripe number four how many hours of sleep to eat every night uh it changes uh the last week probably about five uh but i try to get eight yep yep anywhere in between yeah cause you're 28 three kids married right yep yep last question what do you wish your 20 year old self knew um i wish my 20 year old self knew how to code guys there you have it closet tools closet.tools he came out of college with 200 grand in debt took a 72 thousand dollar engineering job annually then launched his own company to help his wife that tool is now doing 30 000 a month in revenue 20 000 in profit um making you know four five six ex what he was doing in a full-time job scaling nicely all bootstrapped over a thousand customers paying 30 bucks a month congratulations jordan thanks for taking the top thanks man thanks for having me