How Ecrs CEO Pete Catoe grew Ecrs to $95.2M revenue and 4K customers in 2024.

hello everyone my guest today is pete cato he's an entrepreneur by nature and an executive in practice he founded ecrs in his early 20s in 1989 to be exact with a simple vision that the microprocessor and software a world would transform retail allowing local and regional retailers to not only compete but win against their national competitors he believes great companies are built on one idea one customer and one employee at a time like a great oak tree it takes time to build a company that lasts with deep roots and consistent driving purpose and he's dedicated his career to building that kind of company all right pete are you ready to take us to the top absolutely all right so what's the company you do specifically and what's your revenue model how do you make money we are a we make software for um for healthy storage grocery stores food cooperatives pharmacies we do everything from single store operators to regional uh regional chains uh use our products but we specialize in complex retail environments high volume complex retail environments so we do point of sale back end edi supplier integration um you know the automatic reorder we do the entire the entire stack and and what's your business model how do you make money we make money through we sell licenses and we sell sas services at uh kind of like an ecosystem so our core product is a license and then we have all types of sas products that connect into it um for instance we have a loyalty system called loyalty bot and that's a sas product just be clear though these are these are ones that you own or these are affiliate partners that you market yeah we own our entire stack um most of our products based on open source um not all that most of it is and um in terms of of the tools that we use to build our system so it's a it's it's we own our own stack and it's you know it's a it's a uh it's not really behold the one one um one of the major players out there so give me a sample before we kind of learn more about your background an average customer using you what are they paying per month or per year you know uh it's all over the place i mean we have small uh we do a lot of we also do uh vending uh employee break rooms all over the country and you know so those units those systems are uh where you'll they'll buy the kiosk and they'll pay a hundred bucks a month uh for the services for the software and and services um we have you know a couple thousand of those we have um you know retail grocers who buy licenses from us and pay us yearly support upgrades as well as they sign up for a lot of our services that we offer um so in our company we have around 4 000 customers we generated around 30 million a year um and we're growing you know right now we're starting to really we're sitting ready to have an explosive year coming up so we're on our way i know 100 million that's great and sorry you cut out right when you said it how many customers you currently serve four thousand four thousand and we do about 30 million a year right now and yep i got that i got that part the the the 30 million you're currently doing is that all pure play sas revenue is there any hardware sales or professional services built in yeah there's special services in there there's hardware sales in there but most about 90 of it is um software and software licenses and uh and services okay services yep yeah that's great um so i want to put this on a timeline real quick so founded in 1998 what was the first product 89 sorry 1989 what was the first product out the door obviously cloud wasn't big back then no no it was a dos product and we integrated cash registers to uh back room systems we wrote the back room systems so that's where we came from and so we were the company was bootstrapped i think we started with like seven thousand dollars uh and we just we just never stopped still bootstrapped completely bootstrapped love that pete that's good stuff where are you guys based we're in a really neat place boom north carolina which is becoming a tech a tech center i mean it's a it's right next to appalachian state university which has a world-class computer computer science uh uh school and great analytics school great design school so you know so we're based out of boone north carolina and um which is very unique place it's a college town tourist town and how what's your team size today and how many of them are based in in headquarters there we have about 150 we have 150 employees 150 plus employees probably we're adding someone every week it seems now um and i would say 80 percent of them are based in in boone then we have the rest spread all over the country uh also in canada any particular function in canada that is the reason you have them up there no i just have i actually have one person in canada okay you just want to throw canada some credit yeah i have a lot of canadian customers all right there you go there you go customers okay so so 1989 150 folks today doing about you know on track for about a 30 million run rate about 90 of that is pure sas what's growth look like so about a year ago what was your run rate you know our growth right now we kind of stagnated uh kind of like it was a bill last two years have been a building been building for us and um we're getting ready to bust out because we're we're kind of we're adding a lot more regional players larger and larger players uh are coming to our our product stack so uh you know it's been it's been it's been flat for us last two years kind of like building years for us okay so so you're doing about you're doing about 30 million in in terms of run rate about a year ago as well uh i think we're up this year we're up like 10 percent okay so maybe call it 20 28 million something like that yeah we kind of do that over the years we just we'll we'll flatten out for a few years and then we jump up thirty percent and flatten out again and jump up talk to this teacher talk to me about churn that you know obviously a lot of small businesses go out of business what's your churn today and how do you manage it well my favorite scene i think my favorite business saying i've ever heard was when michael dale said he requires he acquires one customer he acquires his competitors one customer at a time and that's kind of what we do we really really work hard to keep our customers our you know we don't really have a noticeable attrition rate um it's not you know because we're not a pure sas player it's there's more involved when you put a system like ours in it's more of a commitment it's more of a community of customers and uh so we just don't have a high turn rate what what is it i mean how low is it so in a year how what percentage points off revenue might you lose well we won't lose the customer we might not resign for the support agreement they'll probably continue to use the product so if we would probably lose two two percent maybe three percent not revenue two percent of customers i don't know what the revenue number is it's insignificant well i thought you said that they don't that they don't typically can't they just cancel the service room but they keep using the products so you keep the customer come and then they'll come they'll turn it back on you know someone might be having hard times or whatever it might be but it's very rare for us to lose a customer yeah so in that in that case that's three percent's not customer churn you still have the logo what you're saying is you lose the service agreement maybe for a year so that's revenue churn yeah yeah the revenue like i said it's so small it's um on the dollar wise it's very small um i don't know i should know that but i don't know that's okay i i mean i was just i was just curious it's just like not even on the radar so so since mean a lot of people use churn to then back into lifetime value which then helps them like decide how aggressive they can be to acquire new customers so since your churn is so low how aggressive are you being to acquire a new customer what do you pay to acquire them we're we're very picky on customers we bring on um because our product takes a commitment and you're you're kind of joining a community of other other customers and um and so are we how much does it cost to bring a customer on um it really depends on how big a deal it is um so to sign someone up you know if you have 30 million in run rate today with 4 000 customers each one on average pays 500 or 600 bucks a month so to onboard that kind of customer what would you pay to get that revenue what would i pay for that revenue we're probably our i think our sales calls are probably running around 25 percent you know to sign a customer up 25 percent of what first year the initial investment yeah it's probably costing us about 25 and pete just be clear initial investment meaning what they pay you in the first year yeah setting up getting set up and and and buying the licenses and things like that yeah it's probably around 25 percent okay so someone if they're paying you 500 600 bucks a month their first year kind of acv is about six or seven grand what you're saying is you're willing to spend about a quarter of that or 25 of that to acquire them absolutely okay got it that'd be about 1700 bucks...