Mortgage Coach Revenue & Valuation (2019)

my guest today is dave savage he is the founder and creator of a company called mortgage coach more specifically he's a mobile tech pioneer and a mortgage industry agent of change renowned speaker and keynote at mastermind events sales rallies and strategic industry events he's committed to educating and preparing lenders and loan officers for the digital mortgage revolution today's interviewed more than a thousand industry leaders and the mortgage coach channel has been described as the most valuable youtube channel for mortgage professionals dave you're ready to take us to the top yeah let's do it man all right very good so youtube's your main channel huh how many views will upload get once you put it up uh i mean it's a b to b so i mean on average probably 500 views you know our our biggest views are like 10 000 ish you know when i have big guests that almost every video gets at least 500 views so you're using this to grow the software side of your business which i believe is mortgage coach.com is that right yeah well i mean i would say when i create content it's two-fold it's one to add members we're sas technology companies so we always want to add members but we want to get more adoption of our technology so a lot of the interviews are with top producer and loan officers that use our tech and we're trying to get them to inspire other loan officers to use our tech so help me understand your model on on mortgage coach is it a sas platform yeah it's a sas technology platform okay and on average what are users paying per month to use it 90 a month per per user we've got over ten thousand users that's great so ninety thousand a month and i mean can i take ten thousand times ninety and that obviously gives us your revenue no because only about two thousand of the users are individual loan officers at ps90 and then um the other 85 of our network or corporate deals and um let's just say there's a 20 ish you know those are those are based off of the size of the relationship okay if i take let's just assume the minimum if i take 2 000 which you just said are paying 90 bucks a month that puts out about 180 grand a month in sas revenue is that accurate that is accurate okay and then help me understand growth on that cohort so a year ago how much were you doing per month would you say i mean our our individual user network has been pretty pretty flat i mean we we don't put a lot of resources behind that we're a enterprise first sas company so we're we really look at those as like leads and you know maybe that maybe that side of our business has grown ten finish percent okay over a year well how many enterprise platforms and yeah you're more i sus you're more enterprise totally understand maybe let's focus there instead so you said eight thousand of the ten thousand are enterprise deals yeah okay and what does that mean what do you mean what does that mean when an enterprise uses you what does that mean are they using you yeah the mortgage company would buy us and roll it out to their loan officers so the loan officers sales people for the mortgage company would use our platform company would pay us and then they'll make it available to their loan officers and is that still those 8 000 mortgage companies paying you on average 90 bucks a month or they pay you more no no it's less it's less why does the mortgage company pay more than the individual mortgage broker well they don't they pay the the individual loan officer you know it's like one loan officer signing up and the enterprise would pay less i mean there's they're buying 50 100 our biggest enterprise client has a thousand you know licenses so they they get a volume discount got it so all in all you have about 10 000 paid seats whether it's the loan officer paying for one seat directly at 90 bucks or a bulk deal with someone paying for a thousand seats correct okay fair enough that makes a lot of sense and then instead of trying to get the different models on those different cohorts when you look at just a blended average per seat cost it costs your entire user base what would that come out to it's not 90. it's less than that yeah yeah i'd say 60-ish 60-ish okay got it so that would put you at 600 grand a month in revenue is that right yeah okay and that and that growth rate year over year are you kind of 10 20 double in year every year where would you put it out well last year we were a little over 10 a year before we were 30 um our goal is 30 year-over-year growth okay that's great now have you bootstrapped the company are raised yeah i total bootstrap founder raise i love started it many years ago i love i love the fact that you've been able to get to that scale bootstrap is actually i mean that's extremely impressive so if you're growing ten percent year over year that means you're doing what about 550 000 a month a year ago 600 000 a month no i mean it's it's you know i would say coming out of the meltdown you know 2008 we really you know shrunk a lot and then we have um you know we've had years where we've grown up to 30 and here's where we've you know grown 10 ish what i'm trying to get to is the past 12 months you said you grow 10 percent is that right yeah i gotcha is that right 10 yeah okay so if you're at 600 grand a month today 10 growth i mean you came up from 550 grand a month about 12 months ago that would be 10 correct okay just want to make sure there um what's driving most the growth new customer additions or driving more revenue inside of mortgage brokerages by getting them to add more seats a little bit of both i mean i would say last year it all came from growing existing accounts adding members with existing clients that would either acquire another company and you know turn on more users um and then you know we add probably um you know 20 new logos 30 new logos a year that's new lenders to the network yep and they individual lenders or brokerages that service a lot of lenders indiv lenders individual mortgage bankers okay so you have 10 000 total right now and you're adding 20 million that's users that's users no the 20 is like a brand like a got it you know the name of the company there could be 50 loan officers there could be you know hundreds of loan officers got it how many folks are on your team building this uh we've got about 30 employees okay 30 folks and uh i assume break even because you've your you're bootstrapped right well we're profitable okay so profitable and what what why are people signing up for this so i assume they get pitched all the time on tools like this what's your unique mousetrap why do they love you well it's it's conversion lead conversion i mean we are i don't know if you're familiar with the the book called the challenger sale but we are a sales effectiveness platform so we're not a crm we integrate with all the technology of the mortgage space and we and they buy us to get improved conversion you know we deliver a better conversation and you know the actual thing that we do is help a loan officer deliver mortgage options in a way that's a competitive advantage most loan officers quote rates here's your monthly payment here's your closing costs with mortgage coach it's crafts to charts it's an omni channel platform it's got video streamed into it so it's a it's a sales effectiveness uh technology platform okay and do you have a sense i mean how effect i mean effectiveness can be measured on how sticky it is right how addicted are your users which can be a measured by churn so over the past 12 months do you know where your churn rate has been yeah we i mean anybody that creates more than 10 total cost analysis never leaves so any churn that we do have it's from someone never using it you know signing up gym membership never show up but once someone uses the product we never lose them and we've got a 90 plus percent retention rate okay so less than 10 of you know churn revenue annually correct and expansion does the expansion on that same cohort and more than make up for the lost 10 percent yeah that's so that's how we're growing well you can grow by adding new customers and have no expansion fair enough fair enough right but we're growing through a combination of new brands and growing existing clients yeah so just so i make sure because i don't want to misrepresent you and your success you've had the customer base that signed up exactly a year ago you'll lose over you know they were new you know today 12 months later you'll lose 10 percent of their revenue but that same cohort you got other customers in that same court to upgrade their accounts by more than 10 percent so your net revenue retention is above 100 is that right yes okay what's going through your head you're thinking well i've just tried you said that i just wasn't completely following you on that i mean our net retention numbers are less than is less than ten percent well that doesn't make any sense if your net retention is less than ten percent that means you're churning almost your entire customer base every year oh well no well i'm saying we're losing 10 we're maintaining 90 retention yeah so what i'm asking is when you're that you know let's say 10 customers signed up a year ago paying you 100 grand per year you lose ten percent of that revenue so now it's only nine yeah i'll lose one correct i'll lose one of those well it's not about it's not about it's not about dave the logo count it's about the revenue the logo makes up so if you have a hundred thousand bucks that's signed up in a cohort a year ago losing the revenue by the way go ahead you're cutting out with me oh yeah i know i cut out what i was saying is it's not about the logos it's about the revenue the logos make up so if you have 100 000 a new contract value you signed up a year ago right you're saying 90 000 of that will renew that's 90 retention and my question is do you more do you upgrade those accounts when you were new by more than ten thousand dollars the ones that stay so you make up that churn hole some do some don't it just depends could we could lose revenue because the lender lost loan answers like there well of course i mean it doesn't matter why you lost it it's just trying to measure trying to understand your metrics right so okay got it so we'll just put no expansion revenue for now 90 net revenue retention that means you're retaining again about 90 annually so so that's that makes sense there that's good how are you you've done an incredible job getting new customers i mean 10 000 is not easy to grow to so what's the secret there what mousetrap have you used i mean mainly sales sales to sales you know enterprise sales people i do think we've done a very effective job of building our brand in the mortgage space and the combination of our youtube channel and our facebook group mortgage coach productivity mastermind has definitely helped us you know build the brand create leads create growth but you know all the new you know call it new lenders that we add they come through you know enterprise sales force how many so of you said 30 people on your team right now how many of them are sales well i've got four in um customer success managers managing and growing existing relationships and three going out and bringing in new lenders okay four success reps and then how do you generate the leads for the three that are going out like account executives closing new deals yeah everything from them you know just making calls going to events we use hubspot as our crm and marketing automation platform combination of you know social email and phone calls context and how aggressive are you being dave kind of on getting new customers in the door right so if a new seat is again you know 10 bucks a month or sorry uh uh what did you say what did you tell me uh 60 bucks no weighted average 60. yeah 60 bucks how aggressive will you be in terms of signing that 60 a month customer up uh we don't do tremendous amount of discounting you know we do we also price on a cost per transaction so they have closed loans um we don't we don't discount very well sorry when i look at fully weighted cash that would include your three sales people right and including a direct paid it include any affiliate spending any kickbacks partnerships so like you know any affiliate or partnership okay you have three people sales yeah yeah again even with enterprise sales there's cac associated with that that's what i'm asking you so if someone signs up for 60 bucks a month right or what is that 720 bucks a year will you spend a full 720 bucks to get them signed up at the beginning what do you mean in terms of what's our cost per sale exactly including including commissions and head count expenses yeah i guess we probably do yeah i i you don't track that number well i track it but i don't have i don't know that metric off top my head and i probably wouldn't share it but i i don't i don't know the magic crop top in my head okay so what's your i mean as you're growing this company right 30 people today you're doing speaking on the side you have a facebook group youtube channel i mean what's your next big you know what there's six months left in 2019 what's your next big revenue target what do you want to hit by the end of 2019 we we want to hit 30 growth this year so you know we want to add you know another million and a half to two million dollars in revenue um two million dollars in revenue this year okay so yeah so i would say my main focus is closing new brands and you know growing existing clients yeah so if you if you do 2 million in total revenue this year that'll get you really excited yeah definitely extra incremental revenue well no no sorry total revenue this year if you hit what do you want in total revenue this year you think eight million yeah yeah yeah two incremental that's your where your growth is coming from and when did you launch the company what year well it's a 20 year old business but i mean coming into the meltdown in 2008 it became a much smaller business so i would say the company you know 2.0 mortgage coach really started in 2008. okay but started originally in 2000. it will i originally founded the company in 1998 is just kind of a side project i owned a mortgage company and it was a hobby company that i had and i i founded it as a you know a passion project yeah that's great do you have any plans to raise capital uh i do think you know we get um we get a lot of folks coming after us every year and i think it's likely that we will raise some capital this year if you do raise what's the right amount to raise what will your target be yeah i don't know we've been talking about that but i would say it wouldn't make sense to do a deal for anything less than five million you know yeah i think that would be what we're thinking about right now and then you've i mean you've protected the hell out of this thing and you should i mean this is an incredible bootstrap story which i love the whole idea of kind of slow growth you've done the chugging so you don't want to raise that capital and then take a huge hit on the equity side so i mean generally speaking what valuation would make you happy in terms of what you raise at i'm not going to comment on my valuation right now it's not what your valuation is it's what you'd want to be at when you do decide to erase yeah i'd rather not you know comment on what i think evaluation is right now again i don't want to know your evaluation right now but someone who's bootstrapped their company you have a target in terms of the equity you may or may not want to give up when you do raise would you try and stay below a certain percentage when you do decide to go raise well yeah but i don't really have a target on that you know i'm more looking at what what is the valuation of the business and you know don't want to comment on that okay you understand i'm not asking what you're at right now i'm trying to get a sense of how you think about it in the future so if someone came and offered you 5 million bucks today for 50 of the company you obviously would not do that exactly so again i'm trying to let i'm trying to get in your head and understand how you're thinking about valuation not reveal numbers of your actual company right now but how do you how do you think about valuation of the company like what do you mean how do i think about it do you look at it in terms of uh it's based off your customer base or no the tech is your biggest advantage or no it's an ar multiple there's all kinds of ways to value a sas company yeah i mean it would be probably a multiple on sales you know i mean that's how that's how the investors that i talked to would look to invest in multiple of our sales uh-huh okay very good all right let's go ahead no go ahead i don't mean to get you off oh no i'm just gonna say you know like i think on the low end people are you know three times and on the high end eight all right you know those are the numbers that we typically hear in the marketplace yeah so if you raise the end of the year and you hit your eight million mark 3x would be 24 pre and about 30 post right so you can do the math there in terms of your selling what is that you know five percent well no i mean you're getting up and you're getting up there where you're still selling you know 10 15 of the company bootstrapped let me ask you a question would you ever do you really want to take the equity hit would you ever consider using debt to drive the growth of the business so you keep full control yeah yeah we're considering that yeah yeah interesting very good all right let's wrap up with the famous five number one what's your favorite business book um favorite business book uh simon cynic's book number two is there a ceo you're following or studying right now i mean i always follow facebook pretty closely so mark zuberberg um yeah that's the one number three what's your favorite online tool for building your company besides your own for building my company well probably i mean i i love what we do on youtube and i think it's an incredible tool of growth and education in our industry okay good so youtube that's your that's your answer yeah but i mean in terms of tools i use and i love i love slack i mean slack has really helped us you know culturally and communication internally so if you're looking for a internal business tool i'll give slack the nod and if you're looking for outside tech that helps us uh you know drive our mission and educate the marketplace youtube number four how many hours i sleep in every night eight seven okay obsessive i use sleep track it i average right now i'm a little under seven hours of sleep a day that's what i need and what's your situation married single kiddos married two kids and how how are you uh 54. last question what do you wish your 20 year old self knew um would i wish my 21 year self knew gosh i don't know what i would do different man i've had a pretty fun life man it's not what you'd be different maybe think about in terms of what's a lesson you tell your kids right now assuming they're kind of 18 19 20. never sell real estate buy it never sell it like i you know there's some houses i wish i would just sold guys there you have it never sell real estate coming from the real estate guy no just kidding all right he's built a great company this is the this is the whole there you go this is the whole story of what we call slow growth dave launched company back almost 20 years ago almost a total reset in 2008. bootstrapped his way growing 10 20 year-over-year to 600 000 per month right now and revenue over 10 000 again users using a platform across many hundreds of lenders paid on average 60 bucks a seat that's up from 500 grand 550 grand about a year ago again all bootstrapped growth which is just nice to hear team of 30 as they look to scale only churning about 10 of their user base uh each uh each year they are profitable maybe raise 5 million bucks later this year we will see dave thank you for taking us to the top take care man