How Fisiononline CEO William Gerhauser grew Fisiononline to $1.1M revenue and 24 customers in 2018.

hello everyone my guest today is mike brown he's the founder and chief enthusiasm officer out and inventor of the patented fission digital asset management platform it's also a sales enablement platform he attributes his experience to serving as a u.s navy submariner and u.s navy diver as the foundation to his success as a corporate executive and entrepreneur mike are you ready to take us to the top i am all right you bet thanks for joining me i appreciate you coming on thanks for your service and so tell us about fission why do you attribute success in the marines to your success here uh at fission well um slap your mouth calling me a marine i'm a navy guy right now oh i made the cardinal sin yeah former uh in a past life i've had about uh 30 some years of business since i was in the service but just the whole dedication to a purpose to a central purpose uh the dedication to something bigger than yourself the leadership attributes i gained all of that when i was in the in the u.s navy very proud of it and i'm i'm very thankful for those that continue to serve let's dive into the company uh what's the company do and how do you make money what's the revenue model well um my my background in business was in the health club business for many many years of product that many people across the country now and actually in canada as well know lifetime fitness and that was a monthly dues annuity business model uh that was very very successful the business that we're in is very simple right we're a cloud-based patented cloud-based technology but what we do for large enterprise companies is we simplify how they distribute their brand materials and we simplify how they enable their front line employees and their sales teams to use that material and in that they pay us a one-time setup and a monthly license fee and it's a you know 82 percent gross margin business so it's a good business there's no there's no uh workout equipment you have to buy to get launched there right no it's interesting you know we in uh in the fitness game you'd have to continue to go out and develop additional uh locations at 25 30 35 million a pop with fission you know we've got about eight million total invested uh to date which is far below our competitors in the industry we've gotten a great deal of traction but we can have unlimited memberships in the cloud from these various different uh global companies that we serve that's right and ignoring the setup fee originally on average with the customer paying you i mean are we talking a grand a month at 10 grand a month 100 grand a month well i have i have two stratums of customers we look at it as kind of the smb market my smb market is probably 3 500 a month okay on average right my enterprise level uh ranges in the 15 to 20 000 uh a month we've got some that are as high as 30 35 000 a month right so it's a fairly big range but all blended we've we have tripled our monthly annuity uh as a on an average client basis in the last year we've doubled the total annuity value just in the last 12 months while still while still driving revenue growth yes yeah because you know if you have one if you have if you have one million dollar month customer it's easy to just fire the rest of them and lose revenue but increase your rpu yeah that would be that would be pretty risky i don't think we have any customer right now that represents uh more than five percent of our total revenue okay and what give me the revenue breakdown in those two cohorts are they 50 50 or is the enterprise make up way more uh enterprise right now is probably managing to be two-thirds of the total revenue we actually discovered you know all small businesses start out and you hope somebody wants to sit down and have a cup of coffee and hear your story right so you typically get focused on small business because they're easier to get into well we have found that the the attraction selling into the small business channel is harder to accomplish than selling into the large corporate global enterprise channel because they don't have a tech muscle to understand digital asset management or they've got a bigger pain point right so it's a it's a multiple uh it's a multiple of problem uh at the global enterprise so if i'm a small business with 50 or 100 employees versus an enterprise that has 20 000 frontline sales reps uh the the dynamic of problem created amongst 20 000 sales reps if their off-brand message is a huge pain point so we have learned through trial and tribulation right that calling on global enterprise is our sweet spot and what have you scaled to today in terms of total customers using the platform um i'd like to keep that you know we're uh dozens we're not hundreds yet but we're dozens uh and we have eclipsed now uh on the annuity run rate of over a million that's great here on the annuity basis so it's kind of a critical point and we should see uh we should see 3x at this year that's really great now where were you can you give me a sense since you shared kind of you just passed a million can give me a sense of growth where were you at about a year ago uh half that are you okay so you had about 100 over your growth yeah we've got 100 january to january in our annuity uh which is awesome and we should see 3x that by the time we end this year so it's really starting to take off for us and we haven't had this cycle on enterprise uh it's it's really something that you have to be mindful of uh enterprise is probably easily in the tech space 15 months on average from the time that you uh you engage until you have a uh a profitable generating client right that's right that's right now and we haven't talked about your extra revenue kicker here which is you you kind of smooth out cash flows a bit with an upfront it sounds like setup fee of some kind right correct it's minimal and and strategically it's designed to stay underneath an organization's capital expenditure um uh guideline right because once it goes above the capex guidelines for a company then it typically needs a higher level sign off we try and stay at the operational level uh with the companies that we serve yep you mentioned you've invested about eight million so far was that all money that you've raised you fundraised or is that from cash flows half of it is mine not a hip national bank both branches right and uh and the other half is from uh friends family small business folks that that know my track record and so forth and we're just now going to be going out and doing a larger race sometime this year oh that's great if just to the next level right how do you think about well let's get more let's put some time stamps on this so we understand more the story when was year one uh we've been at this now six years six years okay so 2011 was launched and and we kind of puddled around with it a little bit i i was retired at the time i had i had cashed out my chips from the lifetime fitness casino yeah that public and i left that company about four years after we went public so it took us a couple years to develop the first product the market wasn't quite ready for it yet we've only seen in the last 24 months where digital asset management and localized digital asset management has really become the norm prior to that everybody was focused on getting their crm in place salesforce or getting their marketo or eloqua lead generation machine uh in line and now they're all scrambling to say hey how do we control our digital material and that's that's when we really started to see the lift yep and obviously the sas company churn is critical you have an upfront fee which probably helps create a little bit more stickiness you know because you know they're serious customers signing up what is your churn today and how do you look at that number um the industry will say will suggest 15 annual attrition logo or revenue churn uh a total contract site so they'll they'll not renew or they'll cancel we haven't seen that yet we're probably less than we're probably about a third of that so we've been really really blessed uh and i and i attribute that to the exceptional service that we provide post uh integration and setup of our tech right tech is one thing and it solves a problem but people still do business with people i don't care what industry i don't care what business you're in you're talking to another person and you're helping them solve a business problem a pain point and so you have to be focused and keep it real you also fit i mean people watching the youtube version of this if i had digital assets i wanted managed you fit the profile i mean just talking to you like with the background and the navy how articulate and you talk very precisely i'm like if i want to trust someone with all my digital assets you fit the model perfectly so it makes perfect sense and i'm irish and you're irish i mean how can you go wrong that's funny all right very good and um talk to me more about the economics here what are you willing to spend to acquire these customers and how quickly do you like to get your money back you know it's uh we're really not at that level of specificity yet i mean we've got a ballpark on it you know it probably costs us several thousand dollars to acquire to acquire the the client sure our setup we typically make uh on the setup barely enough to break even on the actual setup itself very labor intensive in the front end but long term this is an 82 gross margin business model...