How Hireology Reached $20M Run Rate Across 5,000 Locations in 2018 (Interview with Co-Founder and CEO Adam Robinson)

Introduction and Inc 500 Background

Nathan Latka

00:00Hello, everybody. My guest today is Adam Robinson. He's the cofounder and CEO of Hireology, a venture backed hiring and talent management platform named the top 50 best worst... Workplace by Inc. A top company culture by Entrepreneur, and number 94 in 2016, and number 332 in 2017 on the Inc 500 list of America's fastest growing private companies. Adam, are you ready to take us to the top?

Adam Robinson

00:22Let's do it.

Revenue in 2016 and 2017

Nathan Latka

00:23Alright. Very good. So update us real quick because I know when you obviously apply for Inc, you have to report things like revenue figure. Where were you in 2016 and 2017?

Adam Robinson

00:30We were just a shade under 17,000,000 of GAAP revenue in in '17 and just under 9 in 2016.

What Hireology Does and Who It Serves

Nathan Latka

00:39That's great, okay, now tell us what the platform, that's a big old hook right there. So now tell us what the platform does for people that aren't familiar.

Adam Robinson

00:45Yeah, we're everything that an owner operated business needs to be good at the people side of their business. So we focus our talent technology platform on branded business networks like dealer networks and franchise systems. So over the last four years, we've grown in specialty markets like automotive retail, one in nine new car dealerships in The United States run Hireology to build and keep their teams. We're in over 130 franchise brands and 5,000 owned and operated locations

01:17individually that are part of some branded network, and that nuance really matters in our value proposition.

Nathan Latka

01:23Yeah, so 130, we can think of 130 almost like logos and that's across 5,000 locations of those logos, is that accurate?

Adam Robinson

01:30That's correct.

Pricing Model: Per Location Per Month

Nathan Latka

01:31Okay, and how do you price? Do you price based off logo or per location?

Adam Robinson

01:35We price per location per month based on employee count at that location.

Nathan Latka

01:40Interesting. And what is, that's obviously, you know, knowing how to price and what to tie your utility value to is a tricky thing to figure out sometimes. How did you come to that kind of being your equation?

Adam Robinson

01:51Yeah, that's the question. We started our business in 2010 and we were a job slotting model. So you could buy a one job opening subscription to Hireology and it'd be the platform for what you need on demand. So we were selling to the market we had access to, which is small businesses that didn't have a lot of resources or anyone selling to them, right? And so we've grown from there. Now what we find is, as we've

02:14expanded the platform and the breadth, our value prop is really based on servicing the number of employees that you have. So if you're trying to maintain headcount of 50 employees, that means you're running a certain size career site, you're running a certain number of job ads and marketing spend, you're running a certain number of interviews, tests, assessments, drug and background screens, and we price based on your revenue, or sorry, your employee footprint, and that drives our

02:41revenue and pricing.

Blended ARPU and Account-Level Economics

Nathan Latka

02:42Interesting. So if we look at it on the 5,000 number, not the logo number, on average what's the location paying you per month would you say?

Adam Robinson

02:51Really depends on the industry. Blended, you're looking at about $250 to $300 a month.

Nathan Latka

02:59Okay. So a tricky price. Well, maybe not, but a lot of people that are in that like $100 to $203,100 dollars ARPU range, it's tricky because it's usually not enough to put touch on the sale. Right? But it's also not cheap enough where the sales will be no touch on the website. Right? You have to put something on it. How do you manage that balance?

Adam Robinson

03:16Well, you would find digging in is that the average owner in some of our largest markets own four to six locations. So that location ARPU of $300 really is more like 1,500 to $2,000

Nathan Latka

03:32I see, yeah. So essentially you're still selling bulk deals, right? But per location, And it's the three

Adam Robinson

03:37what's different in our markets and the reason why it's you know, tough to get into this space is because those four locations are typically operated as four independent LLCs with four different ownership structures.

Nathan Latka

03:37Wow.

Adam Robinson

03:37Maybe owned by a common holding company, but the ownership structure is different. So if you're a traditional HR tech company selling to a centralized HR team at corporate, that doesn't exist in our customer base. They're decentralized networks, different ownership structures, and requires

04:07a completely different tech stack to pull it off.

Current Run Rate and Growth Targets

Nathan Latka

04:09That's interesting. It seems like you obviously are pulling it off 5,000 locations, $300 a location puts you at about 1,500,000 a month today. Is that generally accurate?

Adam Robinson

04:17We're actually a little bit north of there.

Nathan Latka

04:17Okay. Good.

Adam Robinson

04:17So we're we're, you know, run... Running close to one seven.

Nathan Latka

04:23That's great. When do you think you'll pass two?

Adam Robinson

04:26Third quarter.

Nathan Latka

04:27Oh, great. That's great. And that would then put you out, what is that, 20,000,000 run rate coming out of this year or something like that?

Adam Robinson

04:3320 now, 27 at the end.

Nathan Latka

04:34Oh, good.

04:35That's good growth. How do kind of forecast what growth targets you wanna hit? Like how do you know that you wanna go for 27 after doing a 17 year?

Adam Robinson

04:43We look at our addressable market and we look at what's possible and then we look at what's our maximum efficiency to get at our maximum growth rate. So we don't wanna blow it out, have our acquisition costs go off the charts, have our LTV to CAC ratio crater, it's just not worth it. So we're trying to build the best business we could build, which is the right amount of hyper growth, right? There's a point beyond which

05:14it's just not worth getting that incremental customer because you have to pay too much, It's just inefficient. So we, you know, I think, you know, we're proud of our capital efficiency in the way we approach this.

CAC Payback Period and Capital Efficiency

Nathan Latka

05:22Tell me more about that and maybe let's approach it from a payback period number. How quickly you like to get paid back on your CAC?

Adam Robinson

05:28Generally, we love ten to eleven month paybacks, know, and if we're fully loading in customer success and support, sometimes we do it, sometimes we don't, depends on the analysis we're running, you know, that'll stretch it a little longer, but on core sales cost, you know, we're inside of eleven months most

Nathan Latka

05:45That's of the good.

05:46So kind of backing the math out of that, you're spending somewhere between $3,000 and $5,000 to get a new location?

Adam Robinson

05:51That's correct.

Nathan Latka

05:52Yeah, that makes a lot of sense. Where is the spend most effective for you to the extent you can share?

Growth Tactics: Book and Thought Leadership

Adam Robinson

06:00When we can get in front of prospects, that's the most effective. So we do a lot of old school. It is thought leadership publishing. I've published a book.

Nathan Latka

06:09Crank It's the

Adam Robinson

06:09called The Best Team Wins: Build Your Business Through Predictive Hiring, which has really had a huge impact on our business. And yeah, I mean, we're showing up instead of being paying to speak, we're being paid to speak. It really makes a difference. We're seen as a thought leader in our markets. We really get to know our industries and our verticals, and so it's really, it's made a difference. So when we can show up and there's 400 people in

06:34a room that could all buy from us, you know, move out with 40 or 50 customers. That's a good use of time.

Funding History and Rationale

Nathan Latka

06:39It's a great use of time. Walk me through funding, So I don't think you're bootstrapped. How much have you raised and why'd you make the decision to raise it all?

Adam Robinson

06:46Yeah, we've raised somewhere in the neighborhood of about $31,000,000 to date. That's come in three different rounds, A, B and C, most recently at the beginning of this year. And we did it because we saw a market opportunity and there's a window on that market opportunity that closes, and we frankly thought we could execute this strategy, win these markets, and return capital to shareholders in a way that make them pretty happy. And so we saw the

07:17opening and went for it.

Competitive Landscape and Market Size

Nathan Latka

07:18Yeah, it's fascinating to me, Adam, how many sound companies there are in this exact space? Like we had the iCIMS folk, know, Khan was on recently, you know, he's cranking, you know, well north of a 100,000,000, obviously bootstrapped, just killing it, moved into a new office. You got Gusto, you got Zenefits was just on. How is there so much space for all of you?

Adam Robinson

07:38Well, problem by the way, I mean, iCIMS is just a world class organization and Colin's killing it. Mean, it's just, you you're gonna aspire to be as well run a $100,000,000 business as that one, but it's a universal problem and it's a persistent problem. Companies are really bad at the people side of their business, and as the economy expands, workforce expands, the problem expands, the number of companies created We'll always have this issue. Big companies have

08:08this problem, small companies have this problem. Problem's never going away. And so it's all businesses with employees have this issue. That's a big market. I mean, is tens of billions of dollars opportunity just in The United States.

Nathan Latka

08:22Yep. Are you playing at all? I think I don't know if it was Jay or Collin, Jay at Zenefits or Collin at iCIMS that said that they were just now expanding product line into the kind of job recruiting ad spend market, which I guess people spend 15,000,000,000 on recruitment related ads annually. Do you have any products to hit that space or no?

Adam Robinson

08:39Yeah, it's just so interesting. I mean, I'd consider thought leaders in this space all are coming to market at the same time realizing the same thing, that companies are not only bad at hiring, they're bad at advertising, their opportunities, I mean, they just light the world on fire with their money. And we have a product we call Applicant Engine. We launched in January. We've been in the market for six months with that product. We think it's

09:04bigger than our core market.

09:07Think a lot of the smart players see it and are going at it. And that is traditionally you'd spray your money around a bunch of job boards and hope you get some applicants. Now it's really more, you know, companies like TMP have operated in this space that, you know, that own Monster with a traditional agency model, I'll help you spend your ad money. Programmatic is gonna own that market in five years, and it's companies like ours

09:31and iCIMS and others that are gonna help customers do that. And that can happen at all segments of the market. Enterprise and large mid size where iCIMS plays and down to small mid size and small business where we play.

Net Revenue Retention and Upsell Strategy

Nathan Latka

09:44Yep. Churn, what are you at?

Adam Robinson

09:4790 plus percent net revenue retention annually in our markets.

Nathan Latka

09:47That's pretty good.

09:54At your price point, you're not selling huge $250,000 annual con, maybe some are, but it's not your kind of your key sale. Can you get to net negative, or should I say over 100% net revenue retention annually at this price point?

Adam Robinson

10:07Yes, and in fact we expect to do that by the end of next year.

Nathan Latka

10:10And what will be the main growth driver of that? How will you get there?

Adam Robinson

10:13It's gonna be new products. So we think hard about how we configure our product bundle. We want to go in with what we'll call an essentials package and upsell over time. So what we've learned over the years is even if we have the opportunity to sell a customer everything, probably shouldn't because they're going to churn if they're paying for stuff they don't use or see the value in. And so there's a lot of excitement at the

10:36front end. We're generally the first HR tech in the door, so we can sell them more than they need, or we can sell them everything they think they wanna buy. We've been very good at pulling the deal sizes down and upselling over time, which is a trade off, but it pays for itself in churn and revenue expansion. You know, you've got a much more sustainable business.

Nathan Latka

10:56And what do you assume lifetime value is on these folks?

Adam Robinson

10:59You know, we measure that, you know, both three, four, and five years generally to run our scenario planning.

Nathan Latka

11:08Interesting. Yeah, the LTV number is always a tricky one to actually use when you're making strategic decisions because it can change and fluctuate. But if you assume three year minimum at $300 a month, that's 12 there in lifetime value minimum.

Adam Robinson

11:19Yeah, I mean, and the thing we think about in

11:23our senior leadership discussions is let's not worry so much about these theoretical SaaS metrics. Lifetime value could theoretically be infinity if we do our job. And so let's focus on building great product, delivering great value, servicing customers and keeping them on the platform, and lifetime value is going to be what it is, longer is better than shorter. So let's not navel gaze and be theoretical.

Nathan Latka

11:47I like that. I love navel gaze, has not heard that term before, but I assume that means you're looking straight down, looking at the short term the whole time, right?

Adam Robinson

11:54Well, looking at your, you know, just kind of picking the lint on your belly button, trying, you know, thinking about problems and, you know, meanwhile, you know, the thing's on fire right in front of you and you're not even seeing it.

Team Size and Office Locations

Nathan Latka

12:03Yeah, what's your team size today?

Adam Robinson

12:05We are 170 today.

12:09We see an opportunity in a window in what everybody thinks is pretty late stage of the economic expansion, but everybody's been saying that for the last three years. And so we have the opportunity and the capital to really push it and lock up some market, and so we're in the middle of a pretty big hiring push.

Nathan Latka

12:28That's great, and where's the team based?

Adam Robinson

12:30We are in Chicago, Illinois. I've got a bunch of reps in the field that are home based around the country, and then our engineering team is 100% home based and remote throughout The United States.

Famous Five: Books, Tools, and Habits

Nathan Latka

12:41Oh, that's great. So Chicago and remote locations. Very good, Adam. Let's wrap up here with the famous five. Number one, besides your own, what's your favorite business book?

Adam Robinson

12:49My favorite business book changed last year. It's Shoe Dog by Phil Knight.

Nathan Latka

12:53And what was it before that?

Adam Robinson

12:55Business favorite before that, I was a big fan of Seven Habits. That that is a book that's had a big impact on me.

Nathan Latka

13:02Two good ones.

13:03Number two, is there a CEO you're currently following or studying?

Adam Robinson

13:06CEO I'm currently following or studying.

13:11You know, the short answer is not not not one that pops the top of top of mind here. I I spend a lot of time reading latest and greatest mark... Market intel business every day. I mean, I'm... You know, I'll read four or five newspapers a day. Electronic, some actual paper versions of newspapers.

Nathan Latka

13:30Like the traditional side. That's good. Number three, Adam, what's your favorite online tool for building a business?

Adam Robinson

13:36Favorite online tool for building our business? Well, I'll tell you the tool that's most important to our success is Salesforce.

Nathan Latka

13:41Yep. Number number four, how many hours of sleep do get every night?

Adam Robinson

13:46Five and a half to six.

Nathan Latka

13:47Okay. That's pretty... Okay. That's... You're you're you're skimping there a little bit. What's your situation? Married, single kids?

Adam Robinson

13:52Married, four children.

Nathan Latka

13:53That's why.

Adam Robinson

13:54Nine and under. Our, Our one year old got up last night, decided she wanted to party at about 03:00. So I'm a little groggy right now. Yeah.

Nathan Latka

14:03That explains the five, six hours. And how old are you, Adam?

Adam Robinson

14:07Turned 42 on Saturday.

Nathan Latka

14:09Ah, exciting. Very good. Last question. What do you wish your 20 year old self knew?

Adam Robinson

14:13Take more risk sooner because it's a lot easier to bounce back back then. So I I wish I would have pushed it all. Things that were a big deal just weren't.

Nathan Latka

14:13Yep.

Adam Robinson

14:13They just weren't. I just put... Pushed it harder, and I'd be a lot farther.

Nathan Latka

14:26Guys, there you have it. Take earlier risks. Take bigger risks earlier in your life. If you're listening right now, you're under 30, go for it. Stop sitting around. Adam launched Hireology back in 2010. He's now helping over 5,000 locations across a 130 different brands. Really, again, hire more effectively, onboard more effectively, and just bring a lot of waste and pull a lot of waste out of the hiring and recruiting process. They're growing rapidly. 2016, 9,000,000. 2017

14:50scaled to 17. Today, they're at about $1,700,000 a month in revenue, hoping to go up to 27,000,000 in terms of run rate by the end of twenty eighteen. Currently 90% net revenue retention annually. They're spending, you know, three to five grand to acquire these customers targeting eleven to twelve month payback period. A 170 people between Chicago and other remote locations around The US. Adam, thank you for taking us to the top.

Adam Robinson

15:10Thanks for having us back.