How PhoneWagon CEO Ryan Shank grew to $1.4M revenue and 750 customers in 2020.

hey guys my guest is ryan shank he's the co-founder and ceo of phonewagon a call tracking and two-way business texting product for agencies all right ryan you ready to take us to the top let's take it to the top sweet man all right so for first example call tracking is very fragmented a lot of players in the space how are you differentiating yeah super crowded space uh everything you know especially like phone calls numbers minutes very very commoditized one of the things that we're doing uh we're differentiating in a few ways one uh design and just flow a lot of a lot of companies in the space have been in the space for a really long time and have just gotten so just like heavy so kind of taking the approach of like a zoom right it just works it's beautiful it's easy and you know you can go in and you can actually just you know make make it make it work from uh from the beginning the other thing we're doing is we're adding in and layering in a lot of like automations and true like voice and and like uh telephony features so you know uh like if there's a missed call so think of like an active campaign or you know something where you can build kind of like triggers and rules like a zapier right like if this happens then this happens based on either phone calls missed calls voicemails things like that and a lot of times you know uh that is the majority of the leads happening for most service businesses um right now is through the phone um so so that's one of the things ways we're differentiating uh in such a crowded kind of call tracking analytics space yeah and give me kind of a sweet spot so on average what's the company going to pay you per month or per year to use the technology so we're working with a lot of agencies right now our average agency pays about 115 a month and has an average of like three to four clients with us we have some customers you know that are paying 3000 a month they have you know 150 clients and we have some that's just the actual business not an agency pays like 45 bucks a month but blended average across the base is 115 bucks a month okay and what is the base today how many customers so it's right around 750 uh agencies as customers so 750 times 115 yeah that's good so then what's that put your monthly revenue at right now so right at like 87 uh 86 we actually just passed 87k today congratulations by the way the 80 the 83 the 83k a month number is a big one huh yeah we just hit that uh actually in june uh late june i believe we hit 83 we dropped a music video called we hit a mill it's on spotify did music videos on youtube uh we dropped a lot of like you know uh products that we use intercom slack tom tong's name jason lemkin's name so it was a really cool like sass video that we did just to celebrate the milestone and to get some momentum for uh for the company were you a rapper back in the day uh i was a wannabe rapper i actually was a rapper at uh my high school talent show so i mean pretty much pretty much the same thing you're basically two chains right this is undiscovered undiscovered talent sas founder and soundcloud rapper in one i mean come on all right i love that now where is most of the growth so sorry you're at 87 000 bucks a month today where were you a year ago ah good question um year ago we were probably uh so what was so what is it august of 7 august of 18 we're probably like 35 35 k so where is that most most that growth coming from adding new agencies all together or expansion revenue so we get a ton of expansion revenue we've actually had net negative revenue churn like five out of the last six months so what happens is you know a lot of our customers are agencies as soon as they add clients you know they're adding additional numbers additional usage with us as well so you know we'll see you know 2 000 bucks a month 2 500 bucks a month in expansion revenue every single month 1500 bucks a month insurance our our net negative uh you know retention is our net negative churn every single month is is there uh you know we had one month where we had to flush out a bunch of old accounts so uh so we didn't hit it but that is uh that is one thing that we're seeing a lot of good growth from um we're also seeing growth kind of just going back to the question uh you know we're basically like cold calling into agencies and we're doing a lot of content stuff so calling in agencies we sort of figured out a way to uh to be able to kind of get an angle in start having a conversation with them move it into a demo and our demos are closing at like 70 right now so we can get we can get these guys onto a demo our product is selling itself 1500 intern per month 25 2600 expansion that would mean on a percent basis it's about 24 gross annual revenue churn and 48 expansion for 124 net does that sound about right yeah yeah okay interesting so let's go back to the demo flow here for a second you said 70 of demos convert to paid yeah how many demos per month so that's the thing that we're trying that's the thing that's actually been on on the decline right now so i mean we were doing like 40 to 50 demos per month honestly within the past few months we've only been doing maybe like 20 to 30 demos per month and then we obviously get you know sales that are don't go through the same flow they don't get a demo they'll just either sign up for a free trial and then either auto convert um you know or whatever but uh yeah right now it's just like 20 about about 25 demos per month okay and how many new customers total business why are you adding per month uh so we're adding gross new ad we're adding about 40 to 50 per month um and then again we'll churn out maybe 20 and then so like you know net new ad 2025. oh so you're churning out 20 20 customers that make about 1500 a month in revenue exactly yeah yeah interesting okay very cool so that makes a lot of sense break down the sales process for me so what's the team size today and how many quota carrying reps uh so currently just have one quota carrying ae no sdrs uh we sort of leaned out recently in our sort and our focus really more on like product and marketing today uh so we just have one quota carrying rep uh quota is 2500 bucks a month in uh in in new mrr gross new mrr that's gross plus expansion um and yeah so we had a team of of sdrs and we found uh you know we're getting to we're getting to the prospects uh we're able to kind of get through to them but the thing is we didn't have like the right features or the right integration so i was like look let's take a step back on growth we know that we can do it we can get there but until we have it there's no point in getting to these guys spending all this money getting them to you know get on the phone and then it's like hey we're losing out on deals because of a feature or something like that so we're pulling back right now focusing on product uh engineering and at the same time just put down a lot of like content and everything and then we'll ramp it back up once we have a lot of these like integrations how many engineers uh so we have five engineers right now and total team sizes how many total team size is eight eight okay cool yeah that's good so interesting um interesting so how i mean is the quota is is your one quota karen guy is he hitting or she hitting quota uh they have not been they have so right now we just we have one we just uh scaled back to one rep um so he's gonna hit quota this month um so we had multiple reps i honestly i think we had too many uh based on the current volume that we have uh so they weren't hitting they weren't getting quoted though how are you getting new leads in the top of funnel yeah so it's it's right now we're getting a lot of referrals from uh from different agencies plus uh about a month and a half ago i actually launched a daily podcast sort of inspired by yours where i interview agencies or owners uh and that's actually been working really really well so we'll go in i'll say hey i want to do a podcast with you we'll do a 15-minute podcast they'll tell me tactical things about their agency and then you know just in that conversation uh they'll end up like saying hey you know we could use your software uh so that's been working out really really well is the podcast the other thing is just again a lot of times either a client will work with an agency they'll spin off from the agency and go to another agency so we're sort of getting a lot of sort of like bottoms up clients that way like hey i was using phone wagon with my last agency uh when they go to another one they will and then a lot of referrals uh and then we're doing it we're getting probably 20 uh 20 of our leads so we'll call it like you know maybe 20 uh leads per month from paid ads as well so we'll do you know we're doing a lot of like google ads per month unpaid on paid total rb spending yeah we're spending about 15k a month on paid we're doing it between like g2 crowd cap tara google ads um and then some social stuff but yeah captain is a really good source obviously for like pretty much all sas companies yeah that's interesting uh okay very good and so when you when you add all this up so to get a new 115 a month customer what are you paying fully weighted cac uh fully weighted tax rate around like seven hundred fifty eight hundred bucks okay so yeah you got it what is that like a seven six seven month payback period something like that uh seven months right yeah yeah on revenue or on gross margin i mean i do it on gross margin usually so that's fine yeah yeah but yeah i don't know explain that explain a lot of people ignore gross margin in this but it is a good thing to measure so basically if it's 115 let's just say gross margins uh call it 75 right so i'll just do 75 percent of 115 so i'll really look at instead of um 85 yeah so i'll do 85. so if it's like you know call it 800 bucks it would be like 800 divided by 85 and i'll use that as the actual payback period uh instead of so it'd be like nine you know nine ten months yeah so yeah your payback is more like nine or ten months exactly yeah yeah good stuff man okay cool so we'll talk about funding and bootstrap the company are raised if so how much raised so we've raised 1.7 uh so we were bootstrapped in the beginning um i funded it with bootstrapped i funded it with my you know my own money in the beginning uh we went through tech stars right after tech stars we raised a 1.2 million seed round uh and then that was actually in december of 2017. from there we've only raised another like four or 500 k convertible note in january of 19 and that's it so we're pretty pretty lean we're actually going to be profitable uh within the next two months and uh so we're sort of controlling our own destiny you know i'm not you know our philosophy and my own personal philosophy is like i don't want to play the like you know have to raise go big it has to be a 300 400 500 million exit for everyone to make money like i want to be able to like control our own destiny and look if we see you know 100 million exit here that i want everyone to feel good about that versus if we've raised you know 25 million dollars then it's like 100 million dollar exit and people are like ah it's like you know 2x for investors or whatever it is right so what are you burning per month right now uh right now we're burning right around like 30k and it's declining yeah yeah that's that's good um okay so and by the way so 30k obviously on 85 top blind people can do the math there percentage-wise it's not horrible um how are you going to drive that cost i mean how are you going to get closer to break even driving costs down or trying to drive growth faster or a commodore both so our number one initiative that i'm super excited about is we're moving off of twilio twilio is incredibly expensive it's obviously like the number one you know biggest cost that we have in terms of line item uh and so we're moving away from twilio we're building our own sip stack which is you know basically we're our own like voip provider we're going to move to uh other carriers and other providers so that's going to save us that's good we're going to basically cut that cost which is how much which is right around about 45k right now and it's going to holy crap that's a ton dude yeah i know so that's it's going to cut down to around like 15 to 20k so it's that's going to be like our most material move right now and that's been the number one initiative of the engineers for the past like three months it's a pretty big deal and it's hard to do um and that's why i think so many people just stay on twitter because it's so easy you just get started and operate really really fast but you know if that's like the majority of your business is driving phone calls and text messages um it just gets really really expensive really fast um so yeah so that's that's how we're gonna drive that down uh we're really really we actually are partially off of twilio already uh and then the other thing is just we're just gonna continue to stack you know three to six k in net new mrr per month so as that stacks as the costs go down off of twilio uh we'll hit break even then we'll be we'll be good um so yeah so if a company like call rail or something teases like a good add-on approaches you and says hey ryan man we love this thing we need a rapper to add to the team we'd love to buy you for you know 15 million bucks do you sell no we don't sell for 15 million though what's the price we we don't sell to them why don't why don't you like them no no not that i don't like them um i've heard great things uh i've heard great things about them um um no so what's what's the price i mean the what's the price that's a interesting question the price today no i mean you don't actually have to answer it i'm just trying to get in your head in terms of how you think about you know if you got a good offer would you take it yeah i mean so here's the thing is like i want we're not staying in call track and call analytics we're actually moving into like being our own you know voip provider kind of going after like the ring centrals and like that world having the call tracking the call analytics on top of it having the um the automations on the back end as well plus being two-way texting provider so we just think that this thing can be a lot bigger than just this call tracking space it's called analytic space so you know obviously like while that does sound like nice and everything but it's like at the end of the day i want everyone to to feel really really good about it and the thing is we think we have the opportunity to build this platform that we can we can build like a massive company on top of it not just again not just in this like small lane of like call analytics which is like maybe less than a billion dollar market total right if we're going after like the telephony space and telecom kind of mixed with like light crm automations and everything like that's where the it gets really really interesting and i think the numbers can get really really big so i don't want to just be a tuck in like even though like we haven't raised and i'm saying i definitely want to keep optionality like we don't want to be this like you know small little like quick flip and i said that from the beginning it's like i don't want to be a quick flip like i want to be in like i'm in this mentally for another like five to ten years like i'm not doing this for like two to two to three year flip love it all right let's wrap up with the famous five number one favorite business book favorite business book uh good to great number two is there a ceo you're following or studying you know who i really like michael rubin i think he is the man from fanatics and owner of 76ers yeah number three and scooter braun i'm gonna say too i think i think scooter braun is a man too yeah he's uh do you think do you think all this all this flak he's getting from miss uh miss swift is warranted or no no it's not warranted are you kidding me no he bought a company like what do you mean do you think artists should own their own music if that's the deal that they cut then that's the deal they cut but if they didn't if they didn't make that deal then they can't just like my analogy in my head is like because she's like you know this is my artwork and i don't own it it's like do you think any artist ever likes maintains just owns their art especially like they're like number one pieces right even you know the creators of companies they sell the companies they don't own the companies like picasso or like i don't know any famous artist like they sell they paint it and they sell it and that's like the arrangement that they go into so if they want to do it then i think that's the uh that's the deal they should have cut number three what's your favorite online tool for building your company intercom number four how many hours of sleep to get every night uh seven and situation married single kids single no kids running around not that i know of no how old are you two whoa thirty-one i want to say you're definitely not twelve all right last i was gonna say 29 but that was two years ago last question ryan what do you wish your 20 year old self knew um just you can do it just swing for the fences like i actually have a quote i wrote down it's like what would you do if you what would you do if you knew that you could not fail um so i just think i would just like have gone for it way earlier just had the confidence i think there's a lot of value in earned confidence so it's like you got to kind of like do it to like actually have that confidence but just know that you can do it and just swing for the fences because like everyone out there is the same same as as you are guys there you have it ryan shank phone wagon just broke a million dollars in terms of run rate up from 400 grand in terms of run rate just a year ago good growth 750 customers paying an average 115 per month they're burning about 30 000 a month right now that's changing quickly as they get off of twilio which makes up 45 000 of their monthly expenses they've raised 1.7 million bucks eight people on the team five engineers one sales person 24 gross revenue churn annually 48 expansion for 124 net spending anywhere between seven and ten months of first year uh contract value to acquire the customer in the first place as he looks to scale ryan thanks for taking us to the stop thanks david