How MP CEO Jason Maxwell grew MP to $209.7M revenue and 1.3K customers in 2024.

hey folks my guest today is jason maxwell uh he's founded a company called mp which is formerly called mass pay uh wired for hr in 2004. the company's been recognized on the inc 5000 was eight times apart from mp jason found fed up with cancer a non-profit focused on cancer research and prevention he lives outside of boston with his wife and his four daughters jason norton takes the job thanks for having me nathan you bet thanks for being here you're in a very very hot space hr tech you've got big folks like vista buying up icems and bullhorn you've got others rolling up jazz hr and these sorts of firms where do you fit in the whole ecosystem so we fit in really the human capital management space along the lines of paycom pay core paylocity adp paychecks zenefits uh those are our primary competitors um we approach the space a little bit differently and that our technology is non-proprietary we support a platform called isolde which is a human capital management suite that encompasses onboarding sorry isove i soft got it so you're paying basically to white label their tech so really your distribution company yes we sell implement and support that platform and we provide services around it i see sort of like how someone would be like a sales force service provider to help you install salesforce yes do you have engineers on the team we don't okay got it so there is no there's no tech yeah i mentioned that in my email um i wasn't sure if i fit into the like prototype pro it's still interesting it's not it's not it's not usually what we have on but look part of building our company's distribution so right and services right a lot of stats going to scale they build services in so no that's not a bad thing i'm just trying to get your full story here so so when did you i guess when did you first start selling or using i solved and selling services around it what year so in the beginning uh so we're a 17 year old company but we've partnered with isolved in 2012. okay so what were you doing between 2003 and 2012. we were a pure payroll service focused on smb um when we made the transition to isolve that was really designed to be a catalyst to reinvent ourselves into more of an hr technology and services provider why was it payroll service not working payroll service was just getting increasingly commoditized so um you know there were a lot of players in the space and where the the need was for even small business was um to help companies with health healthcare report reform help companies to transition to a more remote workforce on board and off board employees electronically deal with multi multi-state taxation issues um so there was a big shift um between like 2008 and 2012 especially in lower mid market companies which we consider consider to be 50 to 500 employee companies to transition off you know pure payroll technology server um platforms to cloud-based solutions that did a lot more than just payroll okay so your margins were getting compressed because it was being commoditized yes the the pricing power of the large players in the space was really commoditizing um the industry and then you had you know the introduction of companies like gusto which came in with you know really low pricing working a lot through the cpa channel so especially especially in the smb space payroll was increasingly commoditized so jason what was your best year between 2003 2012 most revenue so our best year in terms of year-over-year growth was 2011 we experienced 44 year-over-year growth so uh what was the actual number though uh um that goes back a long way so i'm gonna guess it was growing from at that point you know two million to three million okay two million if you're so your fastest growth is from your first dollar to like your first ten dollars right a thousand percent you know you know growth but two to three got it in 2011. you didn't shut that did you shut it down completely in 2013 and when you pivoted no no we transitioned our clients off a legacy payroll software platform uh to isolve and we started to you know build out the the competency of our team to support other areas of hr tax so employee benefits administration time keeping onboarding off boarding hr workflows and really position ourselves to pursue lower mid-market companies rather than smb so it was a shift from payroll to hr technology and services and also a shift from smb to lower mid market so did you have your own tech team back then were you building your own payroll service were you also licensing one back then too yes we were we were supporting one platform then we transitioned over the entire client base okay two years to isolate so i saw so how many customers are you working with now when i solved so we work with 1300 clients wow okay and what do they pay what's the model so the the model is based on a per employee per month fee um you know it it scales up anywhere from eight dollars per employee per month up to about forty dollars per employee per month depending on the level of services that uh ins and functionality of the software platform that companies subscribe to thirteen hundred bucks times eight is that eight employees of 1300 uh comp logos so we have 1300 just over 1300 logos our average client has 29 employees our largest client has 3200 employees um got it so at eight at eight on average eight employees sorry 29 employees at eight bucks to see the average customer's paying like 250 bucks a month something like that in smb yes yeah okay what's your what's your highest customer pay you like don't name them but what's the most expensive so our largest client pays us about four hundred thousand dollars annually um we subscribe to basically all of our services yeah they get everything right for that price they get you they get a personal handwritten gift card on valentine's day from you directly right okay so 1300 logos and then you said on average 29 seats right so you've got almost 40 000 seats you're supporting on the platform multiplied by eight bucks a seat what's that 320 grand mr or something like that so we're over that so our the low end of the spectrum is eight dollars per employee per month the high end is 40. um average is 13. okay got it so you're getting closer to like half a million a month yes our average deal value is 6500 and we'll do 10 million in revenue this year so we'll cross the 10 million in recurring revenue um mark in 2021. and where are you like right now what'd you do last month in terms of the revenue run rate where 650 000. oh wow okay got it so 650 thousand dollars per month right now you passed 10 million right by december where were you a year ago in terms of mr do you remember mri where 2020 was an interesting year um really because a lot of our clients downsized um so we only realized four percent growth last year which was our lowest growth year in terms of you know year-over-year numbers um so we were i would say you know five hundred thousand five hundred thousand a year ago yeah interesting okay well this is great so so why i mean this is pretty meaningful why hasn't i solved just acquired you to bring you in-house full-time so isolt has approached you know a lot of companies like us in their ecosystem um so they are growing through m a um you know where we're pursuing a path of 25 million dollars of recurring revenue in the next uh five years um so uh we think there's opportunity to differentiate in our space really with our business model providing you know wrap around services focused on hr compliance hr training um hr infrastructure and talent acquisition okay but have you bootstrapped the business i did i bootstrapped the business um so you used to own 100 i do okay jason 100 got it so so if isolf came to you and offered you what's a what's an agency multiple tony but uh something probably like you know three would be high 1.5 would be average i imagine are you super profitable um we are profitable we bring about eight percent of the um to the bottom line um annually you know we go through cycles of of hiring so on an annual basis you know we're driving about eight eight percent of net income um yeah that's 500 600 grand the bottom line this year or something like that yeah yeah i mean how would you value the company today so the companies are valued really as a multiple revenue um and uh you know typically companies like us trade anywhere from two and a half times revenue to you know five times revenue that's top you've seen that agencies trade for top-line revenue at those multiples yes really not ebitda not even uh interesting so then would you would you sell for 25 million bucks all cash up front today no okay so so what what what and so why is that yeah i like growing the business i feel like we we can position ourselves well um i feel like there's um a ton of opportunity to to be a stronger regional provider and and make some noise in our space so um you know what's your team size today how many people we have 70 people seven zero wow okay and how many engineers zero so zero engineers okay yeah news reps excuse me uh sales rep we have an account executive team of 12 we have an scr team of five um and we have a customer success team of two okay fair the folks that carry a quote of the aes uh how big is the quota usually typically uh it averages around four hundred thousand dollars um for newer aes they scale up to that level uh for more experienced account executives it could be as high as 650 000 of annual recurring revenue interesting that's what you want them to close per year yes yeah do people keep like a lot of services can be tricky right so...