How Paloalto CEO Sabrina Parsons grew Paloalto to $15.6M revenue and 100K customers in 2018.

hello everyone my guest today is sabrina parsons she is the ceo of palo alto software the company behind the best-selling business management software live plan the company is dedicated to serving the needs of entrepreneurs and small business owners and offers an entire suite of software and tools to help startups plan manage market and grow their businesses sabrina's overseeing the transformation of software from a desktop software company to a cloud-based software company sabrina are you ready to take us to the top absolutely all right so tell us what tell us what the company does and today are you 100 pure play sass or is there still some desktop software stuff there's a little tiny bit of desktop software left about i don't know two percent of our revenue okay um but for the most part we are a hundred percent sas cloud palo alto software has a mission of helping people succeed in business that's our mission we're very mission driven um and the products and content and online tools that we develop are all about helping small businesses and entrepreneurs do better strategic planning strategic forecasting and financial management and particularly the financial management issues that most small businesses have surrounding cash flow understanding cash flow forecasting for it and being more strategic about their financial drivers in their business so that they are cash healthy and they grow and as they grow they understand the cash needed to grow their business that's great and so what do these smbs and mid market companies pay you typically per month to get access to all this technology so we a couple of different ways that they can interact with us we've got an online content site bplans.com and that is completely free and it's got thousands of articles free downloadable templates 500 free sample business plans the entire business plans that people can look at and that's all free and we are big believers in educating and we think that when we put out really high value content and we educate people for free eventually some of them will come back and they'll buy our products and most of our products are in the range of about 20 per month for two active users so we really try to focus on pro products that help make a difference for small business owners but you know it's about the price of a latte a week that's great well it's hard for them they have a lot of things they have to deal with so 20 bucks a month is a fair average then huh yes that's about when did the company launch what year so the company's been around for a long time the windows software business launched actually in um 1987. i took over the business in 2007 and that's when we really switched strategically from developing windows software to developing online sas software and we expanded our reach from just being a business planning company and providing business planning content and tools to actually providing online strategic financial management tools so that includes business plans but also strategic forecasts and really focused more on a modern lean approach to business planning and financial management totally get the product i think it makes a lot of sense so since 2007 when you jumped in how many small business customers have you scaled to oh wow since 2007 we've had over 2 million customers which is great just be clear sabrina those are 2 million still actively paying today so in different ways and forms not all in the same product so um some of them have come in in you know one side of the business and bought one part of the product and come in on the other side of the business and then we have some new products but yeah so um and then on the online content site which is all free we serve even more we serve two million unique small businesses every month on vplans.com yeah yeah hold on serena sorry i don't mean to cut you off but i want to make sure my audience clearly understands this because i want to get to your free model in a second but first going back to the paid channel for a second so just to be clear you've got two million small businesses paying you per month on average 20 bucks a month for the software so roughly that depending yeah roughly that okay so that would be that would mean you're doing about 40 million dollars a month so we don't disclose any of those numbers but you can do math and you can do you know separate things but yeah so we are well sabrina hold on hold on hold on something's not something's not matching up there i mean that's not just a math error that's like off by a factor of a big amount so so what's wrong there is it you don't actually have two million paying customers or it's a higher or lower price point we've had over 2 million paying customers in terms of active customers at any given time the average is different so it's not necessarily 20 but i don't want to i probably shouldn't go down the path of lots of numbers because being private we don't disclose all the numbers so we don't want people to do backwards math and get to any numbers so in a given time in um say live plan we'll have over a hundred thousand paying subscribers but then we've got uh um some other tools we buy center pro and outpost and so we've got a variety of tools and the live plan on average is 20 a month on some of our other tools it's more expensive and we've got um other trainings and packages that are in the thousands of dollars and we've got other things that are upgrades and they're five or ten dollars and so we have a variety of offerings so it's not an average of 2 million but we've had and we've had over 2 million customers in the live plan cus uh product they're not all actively paying us right now yeah so why have they so why you said 100 000 active right now why you know the reason i'm asking this sabrina is because we've seen a lot of really great smb companies i think gail at constant contact built an incredible business but she never got the respect of public markets in terms of her her evaluation because churn was so high and it's hard to build a sas company in the smb space because smbs go out of business so so you've had two million come through your system there's only a hundred thousand active today are you what are you doing what has been the most effective thing you've done to decrease churn and a hundred thousand in the live plan product but more overall so in terms of trend you write customers are going to turn out because of survivability right so the average small business starts today and more than 60 percent of those small businesses that start today will be out of business in five years so there's going to be a natural turn in survivability um in terms of how we address it um if you are actively financially managing and planning your business you have a better survivability so anyone whether they use our tools or not if you actively engage in planning and financial management you will grow 30 faster according to a research report by cranfield university professor who did a 10-year cohort there's other research reports like that that if you actively plan your survivability is better so that helps us in terms of overall churn when you compare to say any small business tool provider who you know constant contact is a utility tool they're providing an email marketing tool but they're not necessarily dealing with the financial management side which is usually why a business goes out of business so our small businesses have a better survivability and then overall well sabrina let me stay on the smb here for a second so gail on the public cause there they were turning about anywhere between you know six and seven percent of their customers in terms of logos per month what you're saying is you're below that figure because you're financially essentially what you're providing is more it's more necessary than email marketing so yes absolutely it is um but there's different cohorts so the planners who come in and they're just doing planning they're gonna turn at a little bit higher than that five to six seven percent the people who come in which we call small business management dashboard first because we have uh part of our tool is called a dashboard they're actually turning out at much lower than that because they're coming in to actively manage so we follow different cohorts because of the device people find us and it depends on what cohort you're in and that's where we're actively trying to manage our business to get more people into that management space because our turn for that cohort is way better um because uh you know a monthly turn of say six percent is actually an annual turn of over fifty percent yeah seventy two percent yeah yeah i mean yeah so when you say that your management tool is lower i mean are you talking like sub two percent per month like how low can you get it so our management tool depends if so lots of different factors if you connect an accounting solution then that turn is getting down there it's not quite two but it will hover somewhere between three and four if you connect an accounting solution if you don't connect an accounting solution you're still below that you know five to seven percent so we're better than the 50 annual turn if you come in and you're a startup and you're wanting to um get access to capital and you're looking at our tool for just that purpose so we call that you know an event driven they're not really thinking about running their business better they just want money they want capital whether it's an sba loan or an angel investment those are people who come in already knowing that they're going to use the product for a short term so some of those we will transition to a different cohort and some of those we won't so that turn is probably more at the you know six to eight percent turn so how do you serena how do...