How Moz CEO Cananda Francisco grew Moz to $67.4M revenue and 34K customers in 2020.

hello everyone my guest today is sarah bird she serves as the ceo of moz the most trusted authority in online search with powerful seo and local search platforms that improve the position of your brand locations and competitive rank in search results before ma sarah practiced law and traveled the world she regularly speaks about entrepreneurship business models search marketing women in tech and fostering and inspiring company culture sarah are you ready to take us to the top yes let's do it all right so um for people that are not familiar with moz help us understand what you guys do and then are you guys still pure place ass yes sir that's great and tell us what you do just a high level in case folks don't know absolutely moz is an all-in-one seo platform we help you win at organic search there you go all right now customers and they're paying for this and they have a lot of different cohorts but on average what are they paying per month to use the tech yeah you know we do have a lot of different cohorts we have over 34 000 different customers so we could go into a lot of micro segments but we won't today so i'm going to roughly lump it into what we would call our smb segment what we would call our mid-market segment and on the smb side people are paying about sixteen hundred dollars in a lifetime on the enterprise side they're paying about 200 000 in a lifetime okay and can you can you just because there's a lot of things that go into lifetime right for example if you're translating a lifetime could be 100 years or it could be one year returns really high right can you help us understand what that means on a monthly level so an sm is going to pay what 10 20 bucks a month on average yeah i know an smb is going to spend about 140 a month on average and that what's really important about that s p side of the base at moz is that we have a very organic funnel we practice what we preach which means we get all kinds of people coming to our funnel the good news is we don't pay a lot of money for those folks right our customer our cost of customer acquisition is so low that we have a 5.5 times lpv to cap ratio on that smb side of the business and we get full payback including costs in month three okay so so basically a 5.5 l2 day cac ratio if if ltv is 1600 it would mean cac is about 290 on 140 bucks a month so two to three months payback period yeah so it's a very very profitable side of the business but it's a very noisy side of the business what do you mean and what i mean by that is we have a lot of customers to come into maz and uh for example a lot of business owners who think i'm going to do my seo this month and they don't understand it as a as a job as a professional marketer's job that needs ongoing care and support and that actually blends art and science and you really have to be quite technical and have the ability to make changes to your website so often they will come in they will play around and they'll quickly discover oh this is a real this is a real job and it's not really for me and so they'll turn out the good news is we haven't actually paid um i haven't paid any money for those folks right they found us so what's interesting is the turn curve on those first like three four or five months is really really high a lot of people turn out but what is that like eighty percent forty percent yeah it's closer to that eighty percent right but and it and it's it's it drops off quickly each month right month one is real bad and then two minutes and then four should flatten right yeah and then it goes to a beautiful long tail so much so that when you get past month nine we have an annualized turn rate of less than five percent yeah so this is the first i love that you break it down this way because a lot of people just look at churn like it's equal every month and it's actually just not it really isn't right so like if you have five percent in our funnel yeah yeah most fast companies qualify their customers or they're buying customers that are already qualified and because we're not buying the customers and they're you don't talk to a single human being right you just sign up you just put your credit card in that for mods that means we have more unqualified customers than i think the typical staff company and a lot of people say sure you've got to fix that you got it like wow that's a big problem and which i remind folks it's only a big problem if we were spending a lot of money to acquire them if there was a heavy cost of service or a heavy distraction of which there really isn't because there's very self-service right or if you're relying on a big valuation because you have to do the next round and not have to be a down runner you need healthy sas economics right exactly but we're even a positive right we're even a positive we're cash flow positive so how much last year were those numbers um how much last year were those where the with cash flow or yeah either one well so last year what do we focus on this year is that all right yeah so this this year we're about um 60 million in revenue last year just five million review okay that's ebitda 15 you said revenue okay got it so 60 million in terms of run rate so december basically of 2018 you're saying you ended at a 60 million run rate or right about there and you plan to go to about 70 million right by the end of this year so about 10 million new ar bookings this year yeah that's that's the goal that's great okay so so help me understand how you break down these two very different cohorts so people find you i want to understand how your sales team is operating so let's start with your total team size how many people on the team today we are about 180 people okay and how many of those folks are quota carrying oh my gosh do you know six okay so six are quoted no that's good so how do you model out right there's a lot of people that have this kind of these two separate cohorts and they always wonder well if we have sales people and they're harvesting from these these these kind of closer to free tiers called 140 bucks a month right what do we what do we put out in terms of their quota versus their total pay so some a lot of people say five to six to seven x some push it as high as 10x in terms of again total sales comp relative to the ar target right the new bookings target for the rep what do you put your ratio at yeah so we are targeting a 5x um and and just to be really clear right like we the the self-service side of the business is so different than what we often say with edward enterprise internally but really it's mid-market for i think how most task companies think about it so if you hear me use the word enterprise it's really mid-market by how most people would think about it right but we treat those very very differently and we're relatively new to the direct sales channel i would say maybe in the last three or four years and we acquired a company last year that is all direct sales that company is called stat so that part of the company that channel is run very differently and the economics look very different right yep can you break down the the so 34 000 total unique customers how many do you put in your enterprise court versus your s b cohort the enterprise customer cohort is about 600 of that total okay yeah interesting so you definitely see kind of 80 20 rule yeah absolutely yep that's right and there are about 30 of the revenue yeah oh okay good okay not as much as i would have thought that's good nice distribution so 34 000 customers total again doing about and just to put a fine point on that right that is one of the reasons moz is so profitable it's because the self-serve side of the business is very profitable and then we can use that cash to cover the cost of acquisition so other startups and they're growing their enterprise business their direct sales channel they need to take outside funding to cover the cost of customer acquisition as they're building up the business and we use the cash generated from the self-service side of the business to fund the cost of acquisition and for that more stable enterprise customer base which is why we don't need funding on the horizon yeah how much have you raised a date about 30 million why so you guys but you haven't when was the last raise what year oh gosh what year was our last race 20 20 16 i see 2015. yeah have so you guys it's harder for you to pull like i'll call polo wistia because you know they only raised less they could use debt to buy out the investors if you guys try to use it to buy investors you'd have to i don't know probably raise like 90 million they want a 3x minimum um i mean have you considered that is it something doable or no no we have not considered that at this time we're not really focused on that they're not there's no pressure from those early investors to get liquidity no i wouldn't say pressure to get liquidity i mean the business is healthy the business is stable i mean it's also a great it's a great time and market so i would say it's a conversation we're always having and in fact we have a lot of conversations you know ongoing from people who are interested in the business and interested in this kind...