Founder Interview
How MP Built a 1,300-Client HR Tech Business With Zero Engineers (Interview with Founder Jason Maxwell)
- Interview Date
- August 4, 2021
- Interviewee
- Jason MaxwellFounder
Company Metrics at Interview Time
Customers (2021)
1,300
Net Dollar Retention (2021)
105%
Avg Contract Value (2021)
$6,500
CAC Payback (2021)
20 months
Team Size (2021)
70
Historical Snapshot
These numbers were reported by Jason Maxwell during a 2021 interview and are a historical snapshot, not current figures. See MP’s current numbers.
Key Takeaways
- 01MP serves 1,300 customers as of 2021, with an average of 29 employees per client
- 02The largest client pays above $400,000 annually and subscribes to all services
- 03Average pricing is $13 per employee per month, ranging from $8 to $40
- 04Jason Maxwell expected 105% net revenue retention in 2021, a better year for expansion than the company's recent ones
- 05Customer acquisition cost is $11,000 against an average deal value of $6,500, with a 20-month payback period
- 06MP reinvests about 26% of revenue into sales and marketing
- 07The business is profitable and fully bootstrapped, with Jason Maxwell owning 100%
- 08MP has 12 account executives, 5 SDRs, and 2 customer success team members
- 09Average client tenure is more than six years
Company Metrics at Time of Interview
| Metric | Value | Source |
|---|---|---|
| Customers (2021) | 1,300 | Founder interview, 2021 |
| Avg Employees per Client (2021) | 29 | Founder interview, 2021 |
| Largest Client Employees (2021) | 3,200 | Founder interview, 2021 |
| Biggest Customer Annual Value (2021) | $400,000 | Founder interview, 2021 |
| Pricing per Seat (low) (2021) | $8 per employee per month | Founder interview, 2021 |
| Pricing per Seat (high) (2021) | $40 per employee per month | Founder interview, 2021 |
| Avg Pricing per Seat (2021) | $13 per employee per month | Founder interview, 2021 |
| Avg Contract Value (2021) | $6,500 | Founder interview, 2021 |
| Net Dollar Retention (2021) | 105% | Founder interview, 2021 |
| Controllable Churn (2021) | 4% | Founder interview, 2021 |
| Non-Controllable Churn (2021) | 6% to 8% | Founder interview, 2021 |
| CAC (2021) | $11,000 | Founder interview, 2021 |
| CAC Payback (2021) | 20 months | Founder interview, 2021 |
| Sales and Marketing Reinvestment (2021) | 26% of revenue | Founder interview, 2021 |
| Team Size (2021) | 70 | Founder interview, 2021 |
| Engineers (2021) | 0 | Founder interview, 2021 |
| Account Executives (2021) | 12 | Founder interview, 2021 |
| SDRs (2021) | 5 | Founder interview, 2021 |
| Customer Success Team (2021) | 2 | Founder interview, 2021 |
| Year-over-Year Growth (2011) | 44% | Founder interview, 2021 |
| Year-over-Year Growth (2020) | 4% | Founder interview, 2021 |
| Avg AE Quota (2021) | $400,000 ARR | Founder interview, 2021 |
| Senior AE Quota (high end) (2021) | $650,000 ARR | Founder interview, 2021 |
| Avg Client Tenure (2021) | 6+ years | Founder interview, 2021 |
| Profitable (2021) | Yes | Founder interview, 2021 |
Growth Breakdown
Customers
MP serves 1,300 clients as of 2021, with an average of 29 employees per client and a largest client of 3,200 employees. The average client has stayed with MP for more than six years, reflecting strong retention in the lower mid-market segment.
Team
The company employs 70 people in total, with zero engineers, 12 account executives, 5 SDRs, and 2 customer success team members. The business is built around selling, implementing, and supporting the isolved HCM platform rather than building proprietary technology.
Profitability and Funding
MP is fully bootstrapped, with Jason Maxwell owning 100% of the company. The business is profitable, and reinvests approximately 26% of revenue into sales and marketing while bringing net income to the bottom line annually.
Growth Trajectory
MP experienced 44% year-over-year growth in 2011 during its payroll-focused era, but 2020 was its lowest growth year at 4%, because a lot of clients downsized. Jason Maxwell says the company is doing a much better job in 2021 and expects to finish the year at 105% net revenue retention, on expansion within existing accounts.
Growth Strategy
Pivoting from Payroll to HCM Platform Services
Jason Maxwell describes SMB payroll as increasingly commoditized by the pricing power of the large players in the space, with low-priced entrants like Gusto arriving later through the CPA channel. MP partnered with isolved in 2012 and moved its entire client base across over two years, repositioning itself as an HR technology and services provider for lower mid-market companies with 50 to 500 employees.
Per-Employee Per-Month Pricing Model
MP charges between $8 and $40 per employee per month depending on the services and software modules a client subscribes to, with an average of $13 per seat. Clients move up the range as they subscribe to more of the platform and services, which is where Jason Maxwell expects the year's expansion to come from.
Heavy Investment in Sales and Marketing
The company reinvests approximately 26% of revenue into sales and marketing, supporting a team of 12 account executives and 5 SDRs. Despite a 20-month CAC payback period, the model is sustainable because average client tenure exceeds six years.
Wraparound HR Services to Drive Stickiness
MP bundles applicant tracking, payroll, benefits administration, onboarding, offboarding, and HR compliance services together, making it operationally difficult for clients to switch platforms. This contributes to low controllable churn of 4% annually.
Regional Differentiation Strategy
isolved is growing through M&A and has approached companies like MP in its ecosystem, and asked whether he would sell for $25,000,000 in cash today Jason Maxwell says no. He wants to keep growing it — "I feel like there's a ton of opportunity to be a stronger regional provider and make some noise in our space" — and is pursuing a path to $25,000,000 of recurring revenue over the next five years.
Best Quotes
“So we fit in really the human capital management space along the lines of Paycom, Paycor, Paylocity, ADP, Paychex, Zenefits, those are our primary competitors. We approach the space a little bit differently and that our technology is non proprietary.”
“So our best year in terms of year over year growth was 2011, we experienced 44% year over year growth.”
“So we work with 1,300 clients.”
“So the model is based on a per employee per month fee. It scales up anywhere from $8 per employee per month, up to about $40 per employee per month depending on the level of services that and functionality of the software platform that companies subscribe to.”
“So our largest client pays us above $400,000 annually. They subscribe to basically all of our services.”
“So the low end of the spectrum is $8 per employee per month. The high end is 40. Average is 13.”
“So our client acquisition cost, our average deal value is 6,500 and it costs us about 11,000 to bring on 6,500 of revenue. So typically we break even at like the twenty month mark.”
“So we've really got a model where we're investing about 26% of revenues back into sales and marketing and we're bringing 8% to the bottom line. So it's pretty predictable from that standpoint and we keep our average client for more than six years.”
“Churn is very low and it's really hard for companies to transition from one HCM platform to another.”
What Happened Next
This page captures MP's business as Jason Maxwell described it in 2021, when the company had 1,300 clients, a bootstrapped team of 70 and no engineers, and expected to close the year at 105% net revenue retention. He still owned 100% of the business and was pursuing a path to $25,000,000 of recurring revenue over the following five years. The figures here are a point-in-time snapshot and will not be updated on this page. Visit MP's live company profile for current metrics and any developments since this interview.
View MP’s current profile and metricsFull Transcript
Chapters
- 0:00Introduction and Company Background
- 0:25Where MP Fits in the HR Tech Ecosystem
- 0:38Business Model: White-Labeling isolved
- 1:40History: From Payroll Service to HCM Platform
- 2:24Why Payroll Was Commoditized and the Pivot
- 5:27Current Customer Count and Pricing Model
- 6:23Largest Customer and Average Deal Value
- 8:48Bootstrapped Ownership and Profitability
- 9:27Company Valuation and Growth Ambitions
- 10:27Team Size and Sales Structure
- 11:23Churn, Retention, and Net Dollar Retention
- 12:41Customer Acquisition Cost and Payback Period
- 13:16Sales and Marketing Investment Model
- 13:41Famous Five: Books, Tools, and Personal Life
Introduction and Company Background
Nathan Latka
00:00Hey folks, my guest today is Jason Maxwell. He's founded a company called MP, which is formerly called Mass Pay, wired for HR in 2004. The company has been recognized on the Inc. 5,000 list eight times. Apart from MP, Jason found Fed Up With Cancer, a nonprofit focused on cancer research and prevention. He lives outside of Boston with his wife and his four daughters. Jason, you ready to take us to the top?
Jason Maxwell
00:23>> Thanks for having me, Nathan.
Where MP Fits in the HR Tech Ecosystem
Nathan Latka
00:25You bet. Thanks for being here. You're in a very, very hot space. HR tech, you've got big folks like Vista buying up iCIMS and Bullhorn. You've got others rolling up JazzHR and these sorts of firms. Where do you fit in the whole ecosystem?
Business Model: White-Labeling isolved
Jason Maxwell
00:38>> So we fit in really the human capital management space along the lines of Paycom, Paycor, Paylocity, ADP, Paychex, Zenefits, those are our primary competitors. We approach the space a little bit differently and that our technology is non proprietary. We support a platform called isolved, which is a human capital management suite that encompasses onboarding
Nathan Latka
01:07Can spell that, sorry.
Jason Maxwell
01:10>> isolvedD.
Nathan Latka
01:13isolvedD. You're paying basically to white label their techs. So really your distribution company.
Jason Maxwell
01:17>> Yes. We sell, implement and support that platform and we provide services around it.
Nathan Latka
01:23I see. Sort of like how someone would be like a Salesforce service provider to help you install Salesforce.
Jason Maxwell
01:28>> Yes.
Nathan Latka
01:29Do you have engineers on the team?
Jason Maxwell
01:30>> We don't.
Nathan Latka
01:31Okay. Got it. So there is
01:33no Yeah.
Jason Maxwell
01:35>> I mentioned that in my email. I wasn't sure if I fit into the like prototype profile.
History: From Payroll Service to HCM Platform
Nathan Latka
01:40No, it's still interesting. It's not usually what we have on, but look, part of it in our company is distribution. So right and services, right? A lot of stats going at scale, they build services in. So no, no, that's not a bad thing. I'm just trying to get your full story So when did you, I guess when did you first start selling or using isolved and selling services around it? What year?
Jason Maxwell
01:59>> So in the beginning, so we're a seventeen year old company but we partnered with isolved in 2012.
Nathan Latka
02:05Okay, so what were you doing between 2003 and 2012?
Jason Maxwell
02:08>> We were a pure payroll service focused on SMB. When we made the transition to isolved that was really designed to be a catalyst to reinvent ourselves into more of an HR technology and services provider.
Why Payroll Was Commoditized and the Pivot
Nathan Latka
02:24Why was the payroll service not working?
Jason Maxwell
02:26>> Payroll service was just getting increasingly commoditized. So,
02:32>> there were a lot of
02:35>> players in the space and where the need was for even small business was to help companies with healthcare reform, help companies to transition to a more remote workforce, onboard and off board employees electronically deal with multi state taxation issues. So there was a big shift between like 2008 2012, especially in lower mid market companies which we consider to be 50 to 500 employee companies to transition off pure payroll technology server
03:17>> platforms to cloud based solutions that did a lot more than just payroll.
Nathan Latka
03:22Okay, so your margins were getting compressed because it was being commoditized?
Jason Maxwell
03:27>> Yes, the pricing
03:30>> power of the large players in the space was really commoditizing the industry. And then you had the introduction of companies like Gusto which came in with really low pricing, working a lot through the CPA channel.
Nathan Latka
03:47So
Jason Maxwell
03:47>> especially in the SMB space, payroll was increasingly commoditized.
Nathan Latka
03:54So Jason, what was your best year between 2003 to 2012 most revenue?
Jason Maxwell
03:58>> So our best year in terms of year over year growth was 2011, we experienced 44% year over year growth. Our And
Nathan Latka
04:06what was the actual number though?
Jason Maxwell
04:09>> That goes back a long way. So I'm gonna guess it was growing from at that point 2,000,000 to 3,000,000.
Nathan Latka
04:19Okay, 2,000,000 to 3,000,000. Let's say your fastest growth is from your first dollar to like your first $10 right? A thousand percent growth but two to three got it in 2011. Didn't shut it down completely in 2013 when you pivoted?
Jason Maxwell
04:32>> No, no. We transitioned our clients off a legacy payroll software platform to isolved and we started to
04:42>> build out the competency of our team to support other areas of HR tech. So employee benefits administration, timekeeping, onboarding, offboarding, 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.
Nathan Latka
05:10So did you have your own tech team back then? Were you building your own payroll service? Were you also licensing one back then too?
Jason Maxwell
05:16>> Yes, we were supporting one platform then. Transitioned over the entire client base for two years to isolved. So isolved, so
Nathan Latka
05:25how many customers are you working with now at isolved?
Current Customer Count and Pricing Model
Jason Maxwell
05:27>> So we work with 1,300 clients.
Nathan Latka
05:30Wow, okay. And what do they pay you? What's the model?
Jason Maxwell
05:32>> So the model is based on a per employee per month fee. It scales up anywhere from $8 per employee per month, up to about $40 per employee per month depending on the level of services that and functionality of the software platform that companies subscribe to.
Nathan Latka
05:511,300 times eight, is that eight employees or 1,300 comp logos?
Jason Maxwell
05:57>> So we have 1,300, just over 1,300 logos. Our average client has 29 employees. Our largest client has 3,200 employees.
Nathan Latka
06:07Got it. So at eight, on average, eight employees, sorry, 29 employees at $8 a seat, the average customer is paying like $250 a month, something like that.
Jason Maxwell
06:16>> In SMB, yes. Yeah.
Nathan Latka
06:18Okay. What's your highest customer paying you? Don't name them, but what's the most expensive?
Largest Customer and Average Deal Value
Jason Maxwell
06:23>> So our largest client pays us above $400,000 annually. They subscribe to basically
06:33>> all of our services.
Nathan Latka
06:35Yeah, well, they get everything right for that price. They get you. They get a personal handwritten gift card on Valentine's Day from you directly.
Jason Maxwell
06:41>> Right? Okay.
Nathan Latka
06:43So 1,300 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 $8 a seat. What's that $320,000 in MRR or something like that?
Jason Maxwell
06:55>> So we're over that. So the low end of the spectrum is $8 per employee per month. The high end is 40. Average is 13.
Nathan Latka
07:06Okay, got it. So you're even closer to like 500,000 a month?
Jason Maxwell
07:11>> Yes, our average deal value is 6,500 and we'll do 10,000,000 in revenue this year. So we'll cross the 10,000,000 in recurring revenue mark in 2021.
Nathan Latka
07:24And where are you like right now? What'd you do last month?
Jason Maxwell
07:27>> In terms of the revenue run rate, we're $650,000
Nathan Latka
07:32Oh wow, okay, got it. So $650,000 per month right now, we'll pass $10,000,000 right by December. Where were you a year ago in terms of MRR? You remember?
Jason Maxwell
07:41>> MRR, '20 was an interesting year really because a lot of our clients downsized. So we only realized 4% growth last year which was our lowest growth year in terms of year over year numbers. So we were, I would say 500,000.
Nathan Latka
08:02500,000 a year Yeah,
08:05Okay, well, is great. So why, I mean, this is pretty meaningful. Why hasn't isolved just acquired you to bring you in house full time?
Jason Maxwell
08:11>> So isolved has approached a lot of companies like us in their ecosystem. So they are growing through M and A. We're pursuing a path of $25,000,000 of recurring revenue in the next five years. So we think there's opportunity to differentiate in our space really with our business model, providing wraparound services focused on HR compliance, HR training, HR infrastructure and talent acquisition.
Bootstrapped Ownership and Profitability
Nathan Latka
08:48Okay, but have you bootstrapped the business?
Jason Maxwell
08:50>> I did, I bootstrapped the business.
Nathan Latka
08:52So you still own a 100%?
Jason Maxwell
08:54>> I do.
Nathan Latka
08:55Okay. Jason owns a 100%. Got it. So if I saw it came to you and offered you, what's an agency multiple to on EBITDA? Something probably like, you know, three would be high, 1.5 would be average, imagine. Are you super profitable?
Jason Maxwell
09:07>> We are profitable, we bring about 8% to
09:12>> the bottom line.
Nathan Latka
09:14Monthly?
Jason Maxwell
09:15>> Annually, we go through cycles of hiring. So on an annual basis, we're driving about 8% of net income.
Company Valuation and Growth Ambitions
Nathan Latka
09:27Yeah, it's $500,000, $600,000 to the bottom line this year or something like that. Yeah. Yeah, I mean, how would you value the company today?
Jason Maxwell
09:35>> So the companies are valued really as a multiple of revenue.
09:45>> Typically companies like us trade anywhere from two and a half times revenue to five times revenue.
Nathan Latka
09:53That's top, you've seen that agencies trade for top line revenue at those multiples. Yes. Really not EBITDA?
Jason Maxwell
10:00>> Not EBITDA. Interesting.
Nathan Latka
10:03Then would you sell for $25,000,000 all cash upfront today?
Jason Maxwell
10:06>> No.
Nathan Latka
10:08Okay. So why is that?
Jason Maxwell
10:11>> I like growing the business. I feel like we can position ourselves well. I feel like there's a ton of opportunity to be a stronger regional provider and make some noise in our space.
Team Size and Sales Structure
Nathan Latka
10:27You know. So, What's your team size today? How many people?
Jason Maxwell
10:30>> We have 70 people.
Nathan Latka
10:31Seven zero. Wow. Okay. And how many engineers?
Jason Maxwell
10:35>> Zero.
Nathan Latka
10:36Zero engineers. Okay. Sales
Jason Maxwell
10:39>> Excuse me? Sales reps, reps. We have an account executive team of 12. We have an SDR team of five and we have a customer success team of two.
Nathan Latka
10:48Okay, fair. The folks that carry a quota, the AEs, how big is the quota usually?
Jason Maxwell
10:53>> Typically it averages around $400,000 for newer AEs, they scale up to that level. For more experienced account executives, it could be as high as 650,000 of annual recurring revenue. Interesting.
Nathan Latka
11:09That's what you want them to close per year? Yes. Yeah. Do people keep like a lot of services can be tricky, right? So like if people pay you to like keep them set up on isolved, what makes them keep paying for the seats every month? Like how sticky is this? What's churn?
Churn, Retention, and Net Dollar Retention
Jason Maxwell
11:23>> Churn is very low and it's really hard for companies to transition from one HCM platform to another. And really the reason for that is companies hire us for our applicant tracking system, payroll, employee benefits administration, onboarding, offboarding. So the transition from one platform to another is a significant amount of work. So typically, we measure controllable churn and non controllable churn. So controllable churn for us is clients we lose to rivals. So in a given year that
11:58>> averages about 4% and then we typically experience six to 8% of non controllable churn, which is our clients get acquired or they go out of business.
Nathan Latka
12:09What does net dollar retention look like? How much do you expand historical accounts to make up for the 10% churn gap?
Jason Maxwell
12:14>> So we are doing a much better job in 2021 than we have in recent years. So we will be positive net revenue retention this year
12:25>> by a modest amount. So 105% net revenue.
Nathan Latka
12:28That's great. So if you turn 10% control plus uncontrolled and you expand 15, your net is 105. Yes. Yeah, that's great. Net dollar retention, that's good stuff. Very cool. How are you getting new customers? What's your CAC?
Customer Acquisition Cost and Payback Period
Jason Maxwell
12:41>> So our client acquisition cost, our average deal value is 6,500 and it costs us about 11,000 to bring on 6,500 of revenue. So typically we break even at like the twenty month mark.
Nathan Latka
13:00How do you make up that cash gap? Like is that, I mean, is that hard? Does that put stress on the business?
Jason Maxwell
13:04>> It does. It puts stress in the business. As we've grown, we've been able to absorb that cash flow impact
Sales and Marketing Investment Model
Jason Maxwell
13:16>> more easily. So we've really got a model where we're investing about 26% of revenues back into sales and marketing and we're bringing 8% to the bottom line. So it's pretty predictable from that standpoint and we keep our average client for more than six years.
Nathan Latka
13:37That's great, very cool.
Jason Maxwell
13:39>> So the lifetime is strong.
Famous Five: Books, Tools, and Personal Life
Nathan Latka
13:41Through the roof, yeah. Jason, good stuff here, man. Let's wrap up with the famous five. Number one, favorite business book.
Jason Maxwell
13:46>> Favorite business book. I'm going old school, How to Win Friends and Influence People by Dale Carnegie.
Nathan Latka
13:53Number two, is there a CEO you're following or studying?
Jason Maxwell
13:57>> CEO, I follow or study. I'm a big fan of Angela Duckworth, who's not a CEO, she's more of a behavioral psychologist, I think she's getting a lot of great material on leadership.
Nathan Latka
14:11Yep, she's a good one, a good book too. Number three, what's your favorite online tool for building the business?
Jason Maxwell
14:16>> Favorite online tool for building a business? We love ZoomInfo.
Nathan Latka
14:20Huge ZoomInfo. Henry's been on the show many times, hell of a story there, good stuff. Number four, how many hours of sleep do get every night?
Jason Maxwell
14:29>> Average of six and a half.
Nathan Latka
14:30Okay. And situation, married, single kids?
Jason Maxwell
14:33>> Married, four daughters.
Nathan Latka
14:34Wow. You're a busy guy. How old are you?
Jason Maxwell
14:38>> I am 42.
Nathan Latka
14:3942. Last question.
Jason Maxwell
14:40>> What's something wishing you when you were 20?
Nathan Latka
14:45Who?
Jason Maxwell
14:46>> Invested in multifamily real estate.
Nathan Latka
14:48Are you doing it now?
Jason Maxwell
14:51>> No.
Nathan Latka
14:52Too expensive now, right?
Jason Maxwell
14:54>> Too expensive now.
Nathan Latka
14:55Guys, MP. Si hyphen HR launched in 2003 purely as a payroll service group, about $3,000,000 in revenue up until 2013. And Gusto killed them, pushed down margins in the SMB space. They pivoted. Now they do 7,800,000 right now in terms of run rate and services revenue, helping people install the tool called isolved, applicant tracking system, onboarding, offboarding, all that stuff. They work with over 1,300 customers that make about almost 40,000 seats. Each customer
15:20pays about $600 in ACV. They're profitable. They take 8% to 10% of the bottom line every single month. So call it $50,000 to $60,000 of the bottom line every month. Team of 70 totally bootstrapped. Jason, thanks for taking us to the top.
Jason Maxwell
15:31>> Thanks so much, Nathan.
Nathan Latka
15:35One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM
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