How Optifinow CEO John Mcgee grew to $17.6M revenue and 50 customers in 2024.

hello everyone my guest today is john magees an enthusiastic entrepreneur that has started multiple businesses that are geared to solving everyday problems for businesses with innovative solutions he's a native southern californian loves the outdoors in any sport that includes a ball and a scoreboard john you ready to take us to the top i am nathan all right nice to meet you too so you're building optifinenow.com what's the company do and how do you make money well we're a cloud-based sales and management solution so we offer a platform of sales tools that uh everyday sales people have a need for from crm to sales enablement to marketing automation to uh content management content enablement and then reporting and analytics so it's a platform of all those solutions as opposed to having one solution for crm one solution for sales and marketing and one solution for enablement rolling it all into one platform so that your sales team can log into one place use one thing and just be more efficient and more effective and uh doing the day-to-day episode pricing-wise are you guys pure play sas model yeah we're a pure sass model yeah interesting okay and then give us an idea on average what's the customer going to pay you per month for the tech so the pla since it's a platform of services we offer kind of a sliding price scale based upon what modules of software you're going to use and so that's that sliding scale runs between 75 dollars per user per month on the low end up to 150 dollars per user per month on the high end and so there's eight different software modules that the client can choose from to deploy into their enterprise so we sell to the enterprise customers if we move let's move away from the per seat i'm actually curious at just the enterprise level the average team signing up with you is going to be about how many seats oh i'm sorry that's okay yeah typically in the 50 to 100 range is is kind of that market that we're that we're real strong in right now okay we're going after the mid-tier on purpose uh mid-tier there's a real strong demand in mid-tier companies that are having problems they spend you know trillions of dollars a year in terms of their sales teams and their sales organizations and yet most of them are only achieving maybe a 40 percent of quota uh so lots of research out there gartner has research out there all of the big guys have research out there that if a company can build a a best practice sales process that that takes them from a 40 quote achievement to a 90 quote achievement so john just to be clear you'd say a good sweet spot average for you is a team of 50 signing up paying 75 bucks a seat so about four grand a month per brand something like that yeah typically most of our clients are closer to a hundred hundred dollars per seat because of the of the combination of modules that they're using okay so a hundred percent that would just mean it's maybe on average fifty five grand a month instead of thirty seven hundred so 50 is on the low end in terms of users and typically our sweet spot's right in that hundred user range okay so maybe it's a hundred users at a hundred bucks a pop so around ten i'm picking up i'm picking up what you're putting down okay um all right put this on a timeline for me man when did you launch the company uh we launched the company in 2015 at 15 and 16. we're all around development of the product line 17 i was just exiting another company that started in 17 and then 18 is where we were at full scale optifine now so wait how were you building 20 between 2015 16 and 17 how are you building this company while you're still exiting another one just what we do man entrepreneurs you know we have adds so we're doing multiple things at the same time were you ceo and founder of the other one as well yes so how did you did you have investors in the old one yeah so you owned 100 right right oh okay okay so this was like a side project for you between 2015 2017 and then once you sold your other company you go win all in on this one correct so are you like super rich now or what that's the end goal right that's the end goal no in all seriousness though a lot of people listen and they go well when you sell a company look by the way i think most people build wealth in terms of being comfortable by selling too early then they use that momentum of the sale to go into the next thing it sounds like you've done that perfectly i mean can you share what you sold the last company for uh we're not allowed to share because of the of the disclosure rights on the agreement but we did well on the sale of that company and we are uh investing a lot of the proceeds from that sale into this company i see let me ask my question differently then how much of your own money have you put into this new company well in the development cost and and then uh ongoing expenses we're in the millions of dollars in terms of that we've invested in the company and so why choose to do that i mean you you could say that you're now a proven commodity why not go raise some capital risk other people's money instead of putting in your own no well definitely i mean so that's that's part of the model of have you raised company typically right oh i lost you there for a second it's okay john have so sorry maybe have you raised capital outside not yet okay we're just beginning that process for the for this company i see okay so self-funded today any co-founders or just you again uh i have a brother partner oh like an actual brother actual brother and partner not like a bro like bra like a couple of old irish guys a couple mcgees together in the statement a brother from the same mother okay very good all right um let's uh let me let me understand some more here so 2015 up to 2017 you're building you're scaling your channel you really go to market kind of 18 ish and now obviously in 19 how many customers have you scaled to today oh we're we're still small we're in the you know the 50s in terms of customer base we're in the uh tens of thousands in terms of user base why do you say 50 is 50 uh brands using you small well because this is a mass market approach so you know we're looking for thousands of customers as opposed to tens of customers but john i mean can i do the math 50 customers paying 10 grand a month i mean that's half a million bucks an mrr yeah well it's not a bad model yeah it's just you know we we see this is a huge opportunity there's a there's a significant demand in the marketplace for this especially in the mid-tier markets they have sophisticated sales and marketing needs of the same sophistication as their large enterprise competitors but they just don't have the it resources or the it it budgets to do some of the real large like a sales force type of deployment so optifine now with all of its pre-integrated modules gives them an easier solution quicker to market lower cost opportunity to get that kind of sales process embedded into their sales organization which is going to increase their voting yeah no i totally get the product i think so just because you are at about 500 a month today yeah in that range and so and you and you turned on pricing in what and what year well we actually had customers back in 15 and 16. oh okay really beta stage so we have customers that are two and three years old i see where so where were you a year ago in terms of mrr oh half of that so john i mean that's pretty good if you're basically bootstrapping doubling year over year now these are obviously small numbers but it's still healthy yeah yeah we're not we're happy with where we're at but we know there's a lot more opportunity there for us where is that expansion where's the the doubling of the company over here coming from adding brand new logos all together or expanding historical cohorts a combination thereof i mean we we've we've built a good business off of a referral network so far i mean uh so we haven't done you know we haven't gone major market in terms of sales and marketing effort on our own instances yet we wanted to make sure we had a good solid product in the marketplace we were proven with some really great customer stories so that we can then take that success and and prove that in the marketplace and so that's where we're at today and then how are you doing this in terms of your internal kind of machinery what's your team size today total and how many of them are sales people sales people have a few right now we only have uh three sales people and then in terms of overall team it's only in the 30s right now okay about 30 folks and everyone based up there in california yeah primarily based in california we're we have some remote employees but most of us are in california okay very good so 30 folks um california you you're bootstrapped today but you put in your own money uh your kind of share equity with your irish brother your real brother um talk to me about i mean how much are you burning right now would you say per month uh details of that i don't have to i've stopped my head but we're doing okay in terms of our burn rate going to go up significantly as we start to do you know big mass market sales and marketing push what i'm asking is you mentioned you're about to raise and i know entrepreneurs are always trying to figure out what should i get burned to pre-raised to make sure i hold my own leverage and don't get wiped out right from greedy vcs so when you say you're burning money you're funding this obviously all with your own money you just put more money in the company right right so we're not we're so the company is not break even yet we're funding it through our own proceeds today uh we think that there's a bigger opportunity that if we were to take on some money that we can grow this thing and scale it up quite a bit no no john i get that i get that i just don't understand where you're at today you just said the company is not break even you're funding with your own proceeds but those two statements can't go together if you are funding with your own proceeds you'd be break even well no the the proceeds are coming out of our pockets to to fund the the burn rate together you're personally funding the burn rate not out of company revenues yeah yeah now can you i mean generally how aggressive are you talking like more than a hundred grand a month in net burn no no oh okay okay fair enough good all right so you could get break even very quickly if you want to go raise with leverage right yeah okay talk to me about raising i mean you said you're thinking about it why is now the right time you've done this before that's a great question and we're actually going back and forth on the topic i mean should we hold off on raising money now and grow it to another level uh off you know organically or is the market hot and we should take money now so that we can grow it to that level in a quicker time frame so we're we're debating both those topics back and forth and we're talking a number of people that there's a lot of interest in us right now so that's another another reason you know because of the successes we've had and we're starting to develop a name in the marketplace vcs are starting to reach out to us to see if we're interested in doing that so we're playing both sides right now to try to determine what's the next best thing for us to do um would you no matter what taken go ahead i'm sure i said we have business models for both and we're trying to we're kind of a deliberation stage right now which which is the which is the business model we're gonna follow why take dilution in the form of working with the vc instead of doing something like venture debt no those that's another great question i mean those are all those are all on the table we're not i see we're not limiting ourselves to that we're exploring all the different options in terms of what kind of capital we want to raise if we were to race what do you like about venture debt over vc well the dilution principle i mean you know just the there's no dilution there's no doula right yep yep interesting and is there a firm that you really like right now in terms of venture.lighter sas capital wit espresso svb we've talked to a number of those uh so uh we're in conversations with a few of the companies that you've already mentioned here today so there's just opportunities for us to think about and as entrepreneurs and business guys we have to be thinking about what are the options available to us and what's the right one for us and based upon our business and where we're going churn it's critical in any sas company what's your turn today and how do you keep it low well another part of our software our offering is not just software we are a software company but because of the market that we're going after that mid-tier market we try to keep our churn rate down by by offering a white glove service that's important in these markets that we're talking about this mid-tier market range who doesn't have necessarily as i mentioned the it team or the or the sophisticated sales management team in place so by offering a white glove service we're going in there as almost a consultative partner with them that offers software in addition to our consultation of of sales process so what is the number that would say your last 12 months like annual revenue churn is what well our churn rate on customer retention if you want to look at it from that perspective we've only had a uh last year was a seven percent customer retention uh seven percent that's on a logo basis they're not a revenue basis yeah i don't have the numbers on the revenue basis for you today are they basically equal no because it depends on some customers are you know in the 50-seat range and some customers are in the 100-seat range yeah yeah it's definitely lower than seven percent or you think it could be higher you churn some bigger customers lower than seven percent okay so the second question i have on that is um how much did you expand that same cohort by does it more than make up for the lost revenue yeah yeah we've grown year over year because due to the lost revenue and the lost customer base how so how much do you expand a cohort by typically year over year well from year over year between 17 and 18 we grew in the 70 range so the overall company or the cohort by cohort do you mean the customer base yeah so if you take the all your signups at the beginning of 2018 right that signed up in call january and you look compare that to just january last month you have x percent that churned and on that same cohort they also some of them expanded by some amount how much did that cohort expand by and did it make up for the lost revenue on that same cohort yeah so that's what i'm saying so we grew year over year in the 60 to 70 range in terms of that cohort that you're talking about that includes the loss of the of the lost customers in that same time frame which also so on a revenue basis and on a customer basis was a growth of the 60 to 70 percent okay got it so what i'm trying to get to ultimately is net revenue retention which is a function of expansion minus contraction right so i i don't have the the actual net revenue numbers for you to share i'm just saying in in terms of you know as you saw our model is at 50 to 100 so we've lost seven percent of the customers from the previous year but gained another 60 to 70 percent of new customers in that same so the net revenue would follow the mirror along with that but john you know cohort analysis on on this stuff doesn't include new customers it's a it's it's a function of it's a function of the revenue that those customers made up if that makes sense so net revenue retention annually it sounds like you're above a hundred percent i'm just trying to figure out figure out by how much i i'd have to get back with you on that yeah let me let me try asking this a different way if someone signs up with you in year one with an average of 50 seats on average by year two how many seats do they expand to sorry i didn't understand that's what you're looking for yeah so uh expansion within customer is oh geez that's probably closer to 50 to 60 percent with each customer that we have because we because of this modular run piece but then we add the social sailing piece or the sales enablement piece so they can we can continue to expand each customer base because our product offering has this modular approach where they can get comfortable with us on one of our modules but then add modules two and three and four over the years as well as add individual users that by taking on one team or one division or one region then adding additional regions and divisions across it yep no makes good sense now to get that customer in the first place again call it call it 10 grand a month that's what you told me earlier the average kind of was um what are you willing to spend on fully weighted cac to get that customer fully weighted customer acquisition cost oh okay so we our customer acquisition cost is around 3 500 per customer okay so from lead generation to close customers so just to be clear you're paying 3 500 bucks to get a 10 grand a month customer correct 3 500 one time and then 120 grand a year customer what are your use i mean do you pay your sales people any commission at all yeah yeah so all fully loaded that's what i'm saying so all fully loaded is that our customer acquisition from lead generation to sign close customers 3 500 then you have ongoing customer expense from that point so i'm just talking you asked me on customer conversion from lead to customer so from inbound leads and with our conversion ratios it costs about thirty five hundred dollars per yeah it's extraordinary acquisition i'm my face looks like how it does because that's extremely extremely low i mean let's assume all that cost was going to the sales person commission they just closed 120 000 acb account you're paying them less than three percent no i'm talking about customer acquisition costs right fully weighted cac includes commissions i was just talking about lead lead costs to acquisition so customer acquisition cost i can get into more deep you have you're asking a lot of detailed financial numbers and i don't have everything in front of me here but so i was talking about from a cost of uh you know from based upon the number of leads we bring into customers closed the cost of lead to acquisition is 3 500 that does not include sales commissions why would you not include sales commissions in that number that's cac we're looking at well you asked me i i don't have those numbers in front of me i'm talking to you about marketing costs to generate it to generate a live customer yeah sorry fully weighted cac you i mean includes marketing costs like i just don't have all those numbers i've got to share with you got it that's fine that's totally fine i mean but so but on average what do you pay though on commissions on 120 000 sale is it kind of standard of you 10 20 percent of first year acv yeah it's it's a we have a sliding scale over the number of years the customer has been with us but it starts in that range that you're talking about you got i got it got it so ten to twenty percent of a hundred twenty thousand dollar acv you're talking their sales commission call it fifteen twenty grand something like that so you add that to thirty five hundred and kinda back into like a 28 29 ish k acquisition by the way which is extremely healthy that means your payback period is still under you know three four months right right so we're doing we're happy with where we're at but again you know we haven't gone mass markets so we know that those numbers are going to adjust as we start to you have room to do that though like i mean if you wanted to spend 120 000 bucks to get the customer right that's i mean that's a 12 month payback that's still pretty healthy um so you have room right yeah um last question here and don't don't be offended by this but how are you so big with such an ugly website actually we have a website under development right now okay there's an ugly website out there check back in a month there'll be a new website it's just it's so funny because sometimes the and again don't be offended sometimes the ugliest websites i get them on the show and i'm like these people like are doing no revenue this thing is so ugly but no actually it's they're doing so well they have no time or energy and they don't need to update the website so it's old it's the old story of the the the sh the shoemaker's son doesn't have good shoes [Laughter] all right let's wrap up john with the famous five number one what's your favorite business book uh it's a tipping point number two is there a ceo you're following or studying uh a number of them actually so pick one that might everyone might not know okay number three what's your favorite online tool for building the company optifine now besides your own besides our own uh probably marketo number uh four how many hours of sleep to get every night uh about six okay not bad and what's your situation married single kids married with older kids now how many three three very good and uh and how old are you i am 57 57 last question what do you wish your 20 year old self knew uh that this probably the weakest muscle on your body is the one between your ears and so to to fight through the fear of doing something uh fear shouldn't be the roadblock that we put in our in our own path and uh so that's all about believing in yourself and believing in the vision that you set and be able to communicate that out and uh be a true leader guys optify now helping sales teams be more productive he just bootstrapped pays f passed 500 grand a month on revenue up from 250 grand a month just a year ago so doubling year over year they've got 50 customers paying on average 10 grand a month founded in 2015. again bootstrapped burning about 20 grand per month in capital john is the founder is obviously covering that delta that burn right there with his own personal finances team of 30 in california net revenue retention north of 100 healthy payback period but obviously they'll extend that here in the future uh they're currently at four months look send that here as they get more aggressive on marketing and sales john thanks for taking us to the top thanks nathan