How Proposable CEO James Kappen grew to $300K revenue and 500 customers in 2018.

hello everyone my guest today is James Tappan if you haven't heard of him before he is a designer and entrepreneur who loves solving problems using technology his current company is proposal James are you ready to take us to the top sure all right tell us about the company what's it doing how do you make money so proposal helps solve the pain in the sales proposal process so trying to help with moving things from Microsoft Word and legacy platforms onto the web creating a web-based document that could be tracked and and updated in real time so kind of a you know taking the sales document and moving it online basically trying to create some automation for companies that need you know some more processes and for their sales proposals so how are you winning customers over from other folks on this base like doc send so we're kind of focused our you know our platform looks like a document it looks like a Google Doc a lot of these kind of newer platforms it's kind of a you know they're using it for marketing they're using it for sales it's kind of an all-in-one kind of thing we're focused on the proposal process itself so creating the proposal drafting the proposal getting a manager approval sending it out and getting an e site getting an e-signature to close the deal so really focused on that specific process whereas some of these other platforms are focused on everything from marketing to sales to document management that sort of thing so you mentioned signing but I mean how do you beat point solutions they're like write signature DocuSign and many of the others in the space yeah so they're completely focused on the signature itself but document the signature signature Z signatures are becoming a commodity everyone does these signatures now they're all legal most of them are legal it's kind of the the general consensus that a signing is a legitimate way to sign documents and close deals so you know instead of kind of using a service like proposal and then exporting to PDF uploading to another service getting it signed we just sort of include the e-sign all within this one smooth workflow of sending a proposal out sorry did you just argue that one who is your different than dachshund is that you just do the one thing versus doing marketing and sales and everything else but now you're arguing that you do more than the point solution so which one is it so like I said before the proposal process is a specific process it's a it's a sales document specifically for proposing a deal but quotes or or a bid so I think you know you see you know the docq signs and these that it's it's really about the signature so it's you can upload any kind of document you want and get a signature whereas we're saying you know consolidate it into kind of a single workflow and not kind of bouncing the document out to a signing product and then moving it out to a redlining product moving into dropbox dropbox to store it you know kind of bringing all that into one kind of smooth workflow for you know people to do a lots of proposals and what's the revenue model is it a pure play SAS yes okay got it and give me a general sense of size of customers what do they pay per month on average would you say um well our smallest plan now is $39 per month per user so we kind of go from there up to you know some some bulk discounts for larger customers okay I just to avoid going on every different customer cohort what would you say the average you know pays per seat um like 39 you think it's higher than that it's more like 50/50 okay good and give me more the back story when did you launch this thing so it's way back in 2009 okay what were you doing back then what what did you quit to do this yeah so right out of college I started an ill-timed advertising company paper advertising company here in Santa Barbara a magazine in fact so kind of the worst time to do that all the print advertising space was really going downhill quick so kind of work my way out of that lost some money and decided hey you know I'm gonna spend any entrepreneurial time I need to focus on the internet because that's where I saw people excelling even in the downturn so I thought hey some of the some of the you know things I learned during that process of doing the the advertising piece you know I saw some holes in the sales process and thought hey this web-based sales tracking solution might be helpful to me and others and what have you scaled to now today in terms of team size how many folks are with you we're still a small team so we're five of us okay everyone in Santa Barbara know we're all spread out oh great why Indiana that's great yeah and would it be scaled to in terms of customers using the platform so we're right around 300 okay and is this just you kind of nose to the grindstone hustle and hustling cold email and how are you getting these guys you know we have kind of an interesting lead magnet source we have a lot of proposal templates on the web that rank really high so we get kind of a lot of folks coming through that and we rank well organically for Proposal software the term proposal software and a few other terms where you know folks are coming you know to purchase software like ours you're talking about like your agency proposal templates social media proposal Web Design proposal etc right right yeah interesting it's a beautiful layout by the way I'm looking at it right now it looks great now in terms of in terms we mentioned the 300 but I want to make sure - are those companies using your those are the seats total seats using you so I haven't looked within the last week so I'm not you know totally up on what's happened in the last couple weeks but we have actively I just looked at the active user count we're right around we're over 500 active users what does that mean though is that like those paying seats those are paid seats paid seats okay so 500 paid seats 300 businesses so on average 1.7 seats per business something like that sounds right interesting okay now can I take that 500 number times the 50 number you gave me earlier and assume you're doing about 25 grand a month in revenue mm-hmm that's about about right and you've bootstrap this thing or you raise capital yeah there was a little seed around actually launched through a company called sprout box back in Indiana out of Indiana University they had kind of a shark tank esque kind of thing happening in 2009 and of winning that competition with this idea so I got some a seed round of funding they kind of produced the MVP how much was that that's what we've done that was 250 K okay was it that was a convertible note though right not equity that was equity but that was oh wow - it was 200 grand how did you value the company back then great question it was like yeah I was like a baby yeah was so mean what are they did where they take ten twenty percent for that amount of money um you know I won't say at this point but how many years I mean this was years ago right yeah they probably they probably have this on their website somewhere I mean this was like seven years ago yes so they just save me - save me the searching what did they wear they take for that amount of money um I mean how much equity how many shares do they take yeah just I mean most of these accelerators they say we're gonna give you a hundred grand for 10% of the company I mean these is usually public so I can either go do the work and research it or I can just tell me yeah so it took 30 percent okay and is that is that they do that every year with a new company whoever wins yeah they did for a period of time and I think they they've adjusted their model accordingly it's really aggressive it is it was very aggressive do you regret that no I'm thankful for it it gave me an opportunity that I wouldn't have had being a designer and not having the team in place so that's kind of what they were able to do is kind of take folks like me with with hustle and an idea and kind of provide the team to build the MVP give the kickstart get it off the ground what are you growing at right now year over year would you say um I think let's see doubling tripling flat no I think we were we were we were flat I think last year to this year so 12 months ago you were Steve doing about 25 grand same as today right right okay and so is this I mean is this your main gig I mean it has been yes okay what what you like look if you were deep in thought when you're ranching that what's going through your head I'm an entrepreneur so I'm actually you know I have lots of other projects kind of in in the mix like I'm sure you do too so this has been my main focus Sun can be anything is there another project you're more excited about and you're like wait should I mention on the show if my investors here they won't be happy exactly okay so why not just sell this company for a quarter of a million give them their money back and go to your other thing because then I wouldn't get a payout okay well what payout do you okay change the number to get whatever payout you want why not sell the company then go do your own thing yeah I would be interesting what would you sell I mean what kind of analogy would you look for and try terms I've come up with a deal I might have to think about that yeah I'd have to do some soul-searching yeah I mean if he takes twenty nine nine years kind of kind of working on then you know ya sunk costs are tough right but I mean if you take 25 grand and multiply times 12 what I mean sounds you're doing about call it 300 grand a year right now on revenue I mean it's not crazy to say I mean you're flat that's the problem but I mean it's not crazy to say you get one or two x at least a RR I mean that could be an interesting six-figure payout for you after you pay folks back mm-hmm yeah no definitely what would you invest the money in great question I don't have a good answer that's why you just said you know what your number one other idea is yeah I would I would invest some in other projects for sure but you don't know which one yet yeah exactly got it got it makes good sense what is churn at right now um you know that's a great question it's too high let's you say that what's too high like if your flat year-over-year you can just look at how many people you add it over the past 12 months that means you lost the same amount since your flat I mean generally how many customers are you losing per year you know I don't have a number for you right now okay well how do you know it's too high if you don't know what the number is any is too high right not necessarily if you have zero turn it might mean your price points too low nobody's churning mm-hmm suretrend can be a good thing sure sure yeah no we've been we've been between five and ten percent monthly yeah and that's a logo turner revenue churn pardon me that's the logo churn or revenue churn when you say logo churn what do you mean like that's just just raw number of logos that have left you versus the revenue they make up so companies where ARPU is very different across customers they'll tend to look in revenue churn as a more reflective example of company health yeah customer count customer customer counter okay and why are they leaving when you ask them why are they leaving no it's interesting this space is getting more and more competitive so I think there's there's other you know there's sometimes you know our product when people don't get fully engaged in it it's easy to jump to a competitor it's like once they've kind of learned the system and you know I feel like education has been a part of it in a lot of cases it's hard to you know one of the main friction points actually is moving their content from wherever they have it Microsoft Word Excel Dropbox getting it into our platform and so when people don't quite get their content and it's not as sticky the folks who have kind of embraced it and said hey we're we're moving onto proposal where we're using this as our kind of proposal tool works for them works for them yeah right all right James let's wrap up here with the famous five number one what's the last business book you read don't make one up if you don't have one just saying down okay good number number two who's the last CEO in Santa Barbara yeah dinner with bill Evek bill Evek yeah bill company called aptX app text interesting number three what's your favorite online tool for building the business besides your own intercom number four how many hours of sleep to get every night nine nine okay and what's your situation married single you have kids married no kids no kids okay that's good and how old are you 34 34 last question what he was your 20 year old self new focus on finding something that you're good at and you enjoy as quick as possible as fast as possible there guys have it from James launch proposal back many years ago when a business competition with it I was in 2009 got 250 grand of seed funding for 30 percent his company is now five people totally remote which is great again helping you manage proposals they do customer acquisition really effectively via templates that rank very high on Google five hundred seats paying about fifty bucks a month so 25 grand a month in revenue flat year over a year mostly due to high turn five to ten percent per month in terms of logo churn but he's an entrepreneur he's talented he's got ideas we're gonna watch him James thanks so much for taking us to the top awesome thanks Nathan