How Phorest CEO Ronan Perceval grew to $50M revenue and 10 customers in 2024.

hello everyone my guest today is ronan percival he's the co-founder of demon ware which is a matchmaking service used in call of duty that was acquired in 2007. he then founded forest on evergreen principles which are building a company to last for generations over 70 of the 150 employees are ordinary shareholders not options forest is now serving over 5 000 salons and is the leading salon software company in europe ronan are you ready to take us to the top yeah all right all right so you go from a matchmaking service used in call of duty to salons how the hell does that happen uh yeah good question um we actually didn't initially plan on getting into salons but i ended up getting a job in a salon as a as someone working the front desk and just as a part-time job while i was in between gigs and that's how i got interested in the industry so it was a it was something very unexpected that's pretty funny okay so tell us what the company does for salons so we're um booking pos um sas platform for salons so we do all their you know everything that they they do in the cell from booking appointments managing their client records managing their stock control doing their staff reporting payroll basically any admin task that the salon does um we try to automate in some way through the system freeing up their time and giving them more time to work with their clients you mentioned transactions and sas true or false your main revenue stream is sas and then you take some very small cut after transactions uh i would say about 65 is sas 35 is transactional in some way oh well okay that's actually that's actually pretty high um so let me just let me just ask about the sas side of things for a second so if we have solano owners listening right now the average salon owner that's paying you what are they going to pay you per month just on this just to use the software not the transaction fees um just to use the software anywhere from a hundred dollars a month to two hundred dollars more okay got it so you're very much oh that's annual monthly oh monthly okay but you're still very much in the smb space then huh yeah we're 95 percent of salons are our independent operators right so they're like one location so let me ask you a question they go out of business a lot which means churn on your end can be frustrating at times what's your churn rate today and how do you keep it low so we've pretty good trend rate for this industry of six percent logo chair per annum per year per year wow that's extremely low for this this space why is it so low what have you done um well just we provide a huge amount of value for salons and also we help them grow their business so so they have 12 percent of salons go out of business every year so that's the actual churn rate for the industry and we're half that mainly because if you're using our product you're going to be doing better than the competition generally so they're more likely to stay in business i'd say that's probably the main reasons that's amazing how many how many swans have you scaled to today five thousand five thousand and those are not those are actual paid salons not like free salons for users yeah that's five thousand paying customers do you implement a freemium model to get these customers how do you get so many no um we experimented with freemium but it didn't work a lot of free users and very little number of those converting to paid so we moved to a paid only model for the last five years and um that's worked phenomenally well for us it's better because people the salons that sign up with us uh are serious about using the product and getting value from it so they tend to to be easier to onboard if that makes sense easier to get them using all the value in the product because people pay attention to stuff they pay for yeah like we're not the cheapest provider in the market we're probably one of the more expensive um for what we're doing um but that works well for us so we tend to attract the sort of mid to high end independent salons so a salon that would have like more than five people working there yep yeah and what's your kind of top growth channel that's not a really obvious one like not google ads or facebook ads but is there something you're doing kind of in the trenches that's really working nicely to find these kinds of lawns yeah well like just give you an example like in the last 12 months and we've probably onboarded 1600 salons something like that and half of those come from content so i've come from our own content channel so we'd have a quite a big podcast for sale owners a blog events things like that interesting that's something that might be not expected which well a lot of people say content marketing which isn't valuable and actionable because that can mean so many things can you name a specific piece of content on your blog that has performed the best in terms of helping you onboard 1600 new new salons um yeah there's a couple of articles that are like evergreen that are always in the top two or three red articles and they've been around for a couple of years and i don't have it to hand but i'll yeah i can do you know the search term off the top of your hand that you rank really high for yeah um yes we rank number one for 700 different items around salons so things like um uh yeah we really quickly uh top salon signs i think is an example of one interesting and how did you did you create all this with humans or did you do something kind of automated where you you knew what the top search terms were for salons you then pumped out a bunch of these articles like created from from like a piece of code or is it all humans it's uh oh it's all it's all humans but it's it's using data i mean like things like um we're testing a lot of different content so we probably put out you know a different piece of content every day and so people we're tracking you know how those picked up and and things get a lot of traction that might develop into a much larger piece of content i see we have an seo team then with particular bits of content to make sure or come back with feedback on search work keywords that we might might lead to a bit of content around that if that makes sense so you put out you put out kind of little acorns and then if they show any sign of life your seo team will go in and then optimize optimize optimize and you'll make it maybe longer more keywords more value or even develop it into an ebook you know you know etc etc so and then that ebook might get to number one for something that gets a decent amount of search volume i mean some of these terms when we're saying 700 terms some of those are better you know they might only have five people a week looking at yeah yeah per month yeah exactly that's great um and the so so let me understand your team breakdown how many people are on the team today and how many focused on content or events or things like that so we have 170 in the team i would say a uh [Music] we've got i think we've got about six full time on content wow and then another another four you know around that between seo and data and uh events and things like that that i kind of backed off some of that content in terms of in terms of the blog is that on top of wordpress yes uh the blogs on wordpress yeah i see and the 170 or is everyone based in dublin no we've about 110 in dublin and the rest around the world so we'd have 25 in the uk about 12 in the us and then the rest are just three or four in germany in australia you know and then sporadically remote workers wherever they want to be dublin and remote and ron put this on a timeline for me when did you launch the company what year so and so we've had like kind of a longest journey we started in 2005 when i left demon where and that was the salon you worked at yeah so i was working the salon between 2004 and 2005 and we've we were bootstrapped pretty much all the way until um until 2011 when we did a seed round so the company had about 15 people in 2011. um and and then you know it started to grow properly from around then i would say you know if that makes sense um and uh how much raised today so we we raised a million in 2011. and then we didn't raise again until this year when we did 20 million oh god that's so very patient and effective with capital i like that why not so there's a couple of firms right now like wistia and things that have raised like a million they've gotten kind of good scale and instead of going out and raising the 20 million like you just did they said you know what it's really nice to be in full control and they go buy out the early investors did you that ever cross your mind or no yeah absolutely so one of the things what we've done is we've the majority of the company is still owned by myself and the employees so we've kind of made a pledge to each other that we will always maintain full ownership and full control because sometimes you can own the majority of the shares but an investor will have rights in their voting rights yep the ability to force a sale or something like that you know they're not used that often but they have that so we don't have that in our agreement so that the firm that we took in this year they're not actually a fund it's it's evergreen capital as well so there's no timeline on when they need a return who who was the investor a company called susquehanna growth equity they're basically yeah yeah i mean look growth equity does have a timeline but i would say they're so big you're safe it's not a fund so the you're it's just uh it's they're not set up as a fund even though they're called susquehanna growth equity and so the cash said they don't have any requirements and when they need a return how do they how who are their lps it's their own money so there's a company called susquehanna it's a software company bootstrap software company here and they basically put half their profits into this it's basically like a bank i know look it's more complex than this it's a bank account yeah they and then whenever an exit does come it goes back into that bank campaign that's great well they show your dna then right bootstrapped like you guys are probably very similar yeah they've like they've about 18 companies in their portfolio they've invested in the last 20 years and they're all would have started bootstrapped that's all that's great right that's what they invest in yeah that's great and then in terms of i want to talk more by the way about how you've managed to structurally set up everyone kind of owning a piece of the company but i want to get back to that in a second in terms of scale today you know 5 000 customers paying on average 100 bucks a month that puts it about 500 grand a month is it accurate uh no so um you asked me for the sass piece yeah so sorry sorry yeah sorry just sass 500 grand a month uh yeah a bit more about 600 okay and then i can i can multiply that by basically 1.3 to get up to you know add the 35 transaction yeah like we we've just closed like we're coming to the end of this year and we'll do about 13 million euro this year so that's that's great that's great million dollars 60 million dollars yeah congrats and you've got a nice foundational base under that which is that pure kind of sas revenue what did growth rate so if you're doing 600 grand i don't know how much you know about smb sas but mostly smb sas companies um they're 40 or 50 transactional like so if you look at like um well i'll run it but just be clear like sorry i don't mean to cut you off i mean so we've interviewed about 3000 b2b ceo so i see this pattern all the time very rarely i mean you're you're in 10 15 years now so you have a transactional model very rarely do i see someone in the smb space less than five or six years old have a transactional component yeah yeah so i'm talking about companies that are 10 years plus yeah yeah like the com public s infusionsoft yeah yeah like you shopify my body all these guys they're all forty percent fifty percent transactional at this stage yeah totally yeah i think the is where transactions is so important to the real value is that like small businesses don't want to sign up to big contracts right so you you need to generate revenue through value and that's usually easier to do through transactional basis because they'll they'll keep using it but they know they can stop it at any time but they won't as long as the value still that's directly attributable yeah so whereas like uh signing up to a three-year you know contract or whatever it might appeals to a large enterprise but doesn't appeal to an smb so you if you really want to like the companies that really nailed it in smb like even into it or whoever like there's you there's always a some sort of transactional revenue stream over 30 40 i in my from what i know but i agree with you when you're smaller and we would have been the same when we were smaller yeah what year did you what year did you did you launched the transactional model well we actually have two so payments which is the very common transactional model right so we've only been doing payments for the last three years but we actually have another transactional model so that we we do quite a lot of revenue through sms notifications yep and we charge those transactionally so that's we've been doing that for 10 years that's like a margin between what you have to pay the actual the the the cell tower versus what you bill through per text to the salon that's good and real quick here because we're out of time growth rate so if you're doing 600 or 650 right now just pure play sas today what were you doing on that just sas about a year ago uh that's up 53 i think year and year oh that's great so so call that that would have been what 420 grand last year about a year ago that's healthy growth yeah 400 something we were yeah i think we were doing monthly for it again that's wonderful and then our you guy obviously just raised a ton of capital i s maybe it is sitting in the bank maybe it's not are you guys casual positive today uh yeah we've been cash flow positive for so no plans to use the capital just gonna sit in the bank and it's gonna look pretty no i think we're gonna well a couple of things were um yeah there's a few things that we're going to do with it but it's going to allow us to expand a bit more in the u.s take more risks but we'll still try and do it cash neutral if that makes sense but we have buffer there in case it doesn't go right and right it sounds like you're about to get more aggressive but right now how much are you going to pay to acquire a new 120 a month customer and on sales and marketing fully weighted fully weighted fully weighted including onboarding costs and everything like that three thousand worth hundred dollars okay okay you so you knew that i mean you knew that pretty quickly you're making basically a lifetime value calculation and what does that pay back is that it's transactional in terms of the lifetime value because yeah for us like we've got year a lot a long time of lifetime value you know our transactional history that we were able to use and see with client customers and things like that so um yeah we're 15 months 50 months look that's health that's that's pretty darn healthy so very good all right let's uh let's wrap up ronan here with the famous five number one what's your favorite business book um well the old school one was good to great and which i'm sure everyone mentions but my favorite for the last year or two has been um good strategy about strategies number two is there a ceo you're following are studying uh i love uh shopify so and from their ceo damn just like those guys are amazing yeah number number three what billing tool do you guys use um our own but we're about to move to zorah interesting okay number four how many hours of sleep to get every night [Music] um well i have three young kids so unfortunately only about six hours holy mackerel okay so three kids married i assume yeah and how old are you at 39. last question what do you wish your 20 year old self knew um to uh yeah get started earlier i think you know so we started i started this was about 26 and i probably should have started three years earlier guys get started earlier forest.com helping salon owners scale nicely in the smb space currently serving over 5000 customers doing about 600 grand per month in revenue that's just their sas piece they're doing call it 12 13 million bucks in annual revenue when you add on their transactions and payments component on top of that that 600 grand per month is up from 420 grand per month just a year ago so about 53 year-over-year growth they tried freemium didn't work ended up doing moving to paid model about four or five years ago again now working nicely 21 million raised to date all the employees are actual shareholders in the company which i love 170 of them based all around the world mainly though in dublin six percent annual logo churn healthy for a space that turns 12 per year just naturally again spending about 15 months of lifetime value on acquisition ronan thanks for taking us to the top yeah thank you nathan take care