How Employ Inc CEO Pete Lamson grew Employ Inc to $192.1M revenue and 7K customers in 2024.

hello everyone my guest today is pete lamson he is focused on building a company called jazz hr he's also a results oriented executive with a 25-year history of strategic metrics driven approaches to accelerating revenue he's focused on the global small business market with deep experience and b2b high velocity new customer acquisition as ceo of jazz hr lamson is responsible for jazz hr's strategic direction company performance day-to-day operations and services support center for his revenue teams pete you ready to take us to the top it's great to be here again nathan and yes i am all right so jazz hr folks missed that first episode what are you selling to people so we provide recruiting solutions for small businesses which we define as companies with between 25 and 500 employees and what we do is we replace in our target market most customers are using some version of microsoft office which is excel docs and word documents and email inbox management so we provide we replace that with a very simple to use software solution that is very affordable easy to use and with uh industry leading support so is this sort of workflow and admin management for smbs or helping them hire or both helping them higher helping them higher okay so the obvious question anyone listening is well wait a second what's pete doing now no small businesses are hiring right now or at least most aren't because of the virus so i i think it depends on on where uh you're looking um in fact we have had the most jobs posted most new jobs posted with by jazz hr's customers in the history of our company with just the past month in july how what was that number how many posted just over 40 000. wow and okay well wait so this is completely different than what i would have predicted the data would say so what are you seeing when you dive into those 40 000 applications what are you seeing so it's in the areas you might you know when you hear them they're sort of intuitive so we're seeing a hiring explosion in things like logistical support you know all the companies and people that are involved in in those trucks coming down all of our driveways every single day with the things we need to work from home we're seeing a lot of work in healthcare we're seeing a lot of work a lot of hiring in technology um so the hiring is shifted away from from some industries tragically such as restaurants and and and uh retail stores and and fitness centers and so forth um but there are jobs being created elsewhere and by the data we're seeing uh literally at record levels and help me understand what a small business might pay you to use your platform where they pay on average per month yeah so our account average is a little under 200 dollars per month okay so very consistent doesn't it just just it's designed to be affordable and our pricing starts as little as just 39 a month so you can you can get the ball rolling in an even more affordable way but averages i guess a little under 200 per month and launch date for the company was what year 2009 and you came on what year uh tail end december of 2015. okay got it and we covered guys how pete came in in a last interview back from uh march uh march 28 2018 so we won't dive into that today but give us an update uh pete when you came on last you guys had just broken about 3 500 customers what do you have today just under 7 000. wow okay so incredible where did most that growth come from over the past two years um in terms of industry or by channel or answer it however you define it so um well i'll answer both ways so so we're industry agnostic we do have uh clusters uh of industries or verticals that are largely focused around where hiring has taken place over the last few years so we see a lot of work in manufacturing we saw we'll see a lot of work at a lot of hiring and technology health care financial services non-profit just to name a few um but no one vertical within our business is more than five percent of our business so it's a really nice even distribution which candidly in a time like this also gives us some downside protection that's right um and then in terms of of how we're acquiring them um when i joined jazz hr we sold only through direct means so in other words kind of the one-to-one relationship of jazz hr to a small business customer we launched indirect sales or channel sales um not long thereafter and that today is almost 50 of our new business and growing i would expect it would be more than 50 by end of this year or beginning of next and what that allows us to do is move beyond the one-to-one nature of our direct customer acquisition which is still important and we will remain 100 committed to um to the one-to-many nature of uh channel or indirect relationships so we partner with a number of different uh human capital management um and payroll companies uh who in turn offer jazz hr to their customer bases and whether you're acquiring via a channel or direct via paid spend or something else a bunch of writers doing great seo work when you look at your sort of your fully weighted blended cac what would you put it out to get a 200 a month customer so we are right now just under a 12 month kind of payback so we're a little just about two thousand dollars yeah are you happy with that um you know not unhappy i mean i think it always can be better and and that you know part of our move from direct to indirect is in fact to to impact that i mean there's no free lunch but for for indirect what typically happens if you do it well is your cap will go down but you're shifting that cac to to success driven revenue share so it's a more efficient use of use of a cost of capital um so your cap goes down your gross margins go down too because you're paying a rev share as does your arpu if you're thinking at it on a net basis but um but that's a driver of our continued improvement will continue to be a move towards indirect which not only as as you know drives drives cac um but also increases velocity of acquisition diving deeper on this indirect channel strategy that you launched about 18 months after you joined the companies about 2016 and now it's responsible for more than 50 percent of your business we just had such almost almost 50 percent almost 50 okay we just had sachin gupta on with hacker earth and he articulated how that company has now grown they're about to break five million dollars in arr they've passed uh he told us 500 customers super healthy economics in terms of retention you just launched a partnership with them how does that work um i'm sure that the the company again is hacker earth yeah um so heck i i can't comment on the uh well you know i'll tell you everything that that you might want to know about our business i'm not going to talk about anyone else's business that's kind of that that starts to get into territory that i i wouldn't share but but certainly you know we have some partners that that perform more than others um partnerships typically do take a little bit of time to get up to speed but we're dedicated to helping all of our all of our partners perform as best as they can got it uh yes sorry and maybe this is because chuck brownfield is the one quoted in this press release saying we're thrilled to integrate with hacker to empower teams to hire talented engineers faster what i'm trying to get at here is with this surreal like a real idea of a channel party or hack earth what does that actually look like so are they putting a button for jazz hr inside of hacker earth or vice versa what is that how does it actually work so it varies partner by partner um and we first we off we allow them to offer jazz hr to their customers either on a resale or a referral basis so um whichever they're more comfortable with so in all cases there'll be generally some form of recruiting promotion on their website and that their sales teams will will be offering to their customers um their customers either then are referred to us in which case then we would work with their customer um if their customer chooses to purchase then pay them a revenue share in perpetuity um for the first time as long as that as long as their customers are are paying us we are paying them we don't limit it after a 12-month period do you have any claws in that agreement sorry i don't want to put you off there but do you have any i mean one of the things i talk to vc's all the time about just margin improvement in businesses and and one quick way to get margin improvement in a business obviously if there's channel partners a big chunk of it is to have a clause and that channel partner agreement and all your channel partner agreements that say you have the right to buy out that rev share for for looking 12 months at any point in time that way if you go out and raise 30 million bucks you essentially buy back whatever your rep shares with that partner so 30 margin right for a forward looking 12 months do you have that clause built into your channel partner agreements or no no no and we wouldn't you know yes mathematically that will work and it'll look good in a spreadsheet and yes you will improve your gross margin short term it's also a great way to limit sales yeah yeah i mean you know because that after a period of time that partner can just switch to a competitor of ours um we use it as a as a retention strategy where they get to the point where they're getting a nice chunk of change from us every...