How Rantandrave CEO Nigel Shanahan grew to $28.5M revenue and 285 customers in 2017.

hello everyone my guest today is Nigel Shanahan he set up rant and rave after a poor experience at a motorway service station he believes consumer emotions drive their behavior and accompanies our revenue he's on a mission to change the world of customer feedback from dull surveys to a conversation that customers want to have Nigel are you ready to take it to the top I'm ready alright rant and rave dot-com is the company name what do you do and how do you make money well Ram to rave sort of does what it says on the tin Nathan customers are either normally ranting or they're raving and when they're ranting they're probably deciding in their own hearts whether they want to stay with the business if they're raving they actually love the company and they end up trying to tell lots of other people about it but most businesses most brands aren't getting it right and in my opinion surveys the antithesis of really what a consumer wants they just want to get it off their chest in their own words in their own feelings yeah and what your business model is it's a sir it's a SAS business Nathan yeah okay very good and give me a sense of kind of the size custody of customers you're working with are these small companies what do they pay you on average per month typically we our average order value annual is about a hundred thousand UK and the sort of businesses we deal with are Barclays Bank Manchester United Harrods Marks and Spencers you know DPD the biggest home delivery company in the UK premi��re in you know one of the biggest hotel chains how many are you working with total how many customers about 285 well okay so I mean you've built a pretty healthy customer base especially that about about at that level I mean if I do 280 five times at Evarts contract value I mean you guys are doing well north of what two point three million a month oh yeah or what is that what second about two annually about 28 five annually more than that yeah more than that we don't tend to disclose but I understand you're an expert to find out what don't give me too much credit we're just starting you might not like me very much by the end all right but that's fair looking I do I like getting numbers because it makes any other advice you give that much more credible right because they know you walk the walk so tell me about the backstory when did you launch oh well we actually don't launch the company in 2000 but there was a management buyout in 2006 and that's when rant and rave came to me I mean I'd actually sat at a service station and our business was all about sending messages out on behalf of brands to customers and I sat there at the service station thinking we send all these messages out on behalf of brands to their consumers we don't know what they're thinking and feeling when they're receiving the experience of not just receiving our messages our voicemails and text messages and the emails and all the things we did but the whole thing about having they really feel about the brand and the experience they're getting and what they gonna do in the future and it just came to me that actually walks in the marketplace today is a brand interrupting the flow of a customer's thoughts and asking them hey you know would you like to take a survey and then as soon as the customer says yes they say fantastic these are the questions we want to ask you which is you know to my mind is the wrong way around so that's when we started I didn't catch the first part you said something about a 2,000 minute or 2006 management buyout tell me that yeah yeah so we had VC funding up from 2000 to 2006 okay for what company the same one it's the same company and we've actually rebranded it around some raid but it was actually called rapid communication back in the day but as the feedback part of what we do became more prominent that's when we rebranded okay so Nigel let me see if I can decode this accurately mm a company launched it grew and raised capital how much by the way it was just over two million UK okay they raised 2 million UK between 2000 2006 the VCS were going oh this thing's not growing like we thought we should probably figure out a you know way to wind this down and get there maybe they already wrote it off but you and maybe some other people on that first team saw an opportunity in this one piece of the product they built you bought the VCS out probably at a discount spun it out and now you have a clean cap table in the new businesses that accurate you've got it yeah wow that's a pretty damn good guess for not no carpets now you got you got it smack on I mean essentially what happened though was that we were doing well I mean we were growing we weren't growing at the rate of she wanted us to grow up and rant and rave the concept of the feedback part I hadn't actually gone through it with the VC so it was growing in my own mind but I knew they were growing restless and their restlessness was really about a relationship that we had we bowed a phone we were going out to the marketplace via Vodafone to Vodafone's enterprise customers so the likes of Barclays Bank of Vodafone's enterprise customers and we had a an offering that was branded co-branded so his Vodafone Rapide back in the day so all of us stuff we were doing was broadcast communications mainly text messaging all around sort of a journey the lifetime journey of a customer and it just came to me the rant and rave concept but I knew that the VCS weren't very comfortable at that stage and I wanted to find out where their lack of comfort lay and their lack of comfort lay in the fact that the Vodafone relationship wasn't gonna go global and that's what they invested in the business for they wanted it to go beyond the UK Nigel how are you involved though in the business before 2006 did you just know the creators are you or you were actually playing I left IBM to find the business we got business angel funding and then beyond there I got VC funding and then 2006 initiated a management buyout and bought it back out now how did you is so first off this is a great story I hope you will talk about this because there are so many people that raise too much capital and then two three years after their last round they realized this isn't gonna turn into what the VCS want to turn into and everyone feels stuck and they don't know how to get out a management buyout is a beautiful way to get out so can you tell us details how did you negotiate this well it was interesting because I was actually gonna I was actually gonna walk away from the business I'd been diluted to such an extent that I actually thought I would restart how little do I leave I was down to 5% he I was down to 5% in terms of dialouge in it was all ratcheted based on not just financial performance but certain objectives they'd laid in and to be honest with you I was incredibly naive back in the day so I got down to 5% me and my partner because we actually set the business up together you each end five percenter together no we both had 5% yeah in total we had 10% and what happened was prior to the 2006 I actually removed him from the business as well which was really difficult sort of thing to take so suddenly I was out on my own and I went to Warwick business school I'm an alumni I've got an MBA from Warwick worried business school I went to somebody who'd become my mentor and he said to me don't set up another company you know don't let them force you well actually turn back and say you want to you want to talk to them about you know getting some cash out for them and I I just didn't know where how to do that but he ran me through the entire strip so the negotiation he had me on remote control it was absolutely fantastic so what did you end up paying to get that that basically buy up the two million that they bought earlier just over a million okay great so you basically crammed gonna make this up but you basic created eight hundred nine hundred grand and kind of value just with smart negotiation and it was clean you cleaned up the gap table now you're on the new company you've got it the reason that the V guys just to be clear I want to underscore this the reason that Nigel have leverage here is because one his other partner was out he had very little left the the VCS knew that he had to run the company if Nigel if they're thinking oh my gosh Nigel's about to leave they're more likely to do deal with them and that's partly Nigel I think what gave you the leverage to come in and say I'll buy you out for you know a million bucks 100 percent where did you get the million well that was I mean I remortgage my house on several occasions I got faith friends family a bit from the bank I got it from all sorts of different places it was absolutely frightening and what was the revenue at the time he did the deal crikey the revenue was you know I can't actually remember but it was something like it was something like 1.4 million okay might I say that because were you able to use the historical P&L and balance sheet of the company to go to the bank to raise from them via the company you personally guaranteed it yeah that's right absolutely that's how it happened so smart okay very good and then did you was it just you in 2006 or did you bring on like another co-founder at that point no it's just me John May so now you're in a great position yeah I mean what we did is we actually use the relationship with Vodafone which was sort of on the was somewhat on the decline really I mean other VCS wanted it to go into Vodafone South Africa Vodafone Australia etc etc we didn't think that was possible because Vodafone was just this collection of independent businesses with one logo behind it it was really difficult to go do business it was like a net new sale so I I we pulled back and focused ourselves on the Vodafone UK relationship what we actually managed to do was to pull away from the relationship and have Vodafone financially support the withdrawal so we ended up trading by the end of that year we actually were trading independently with all the businesses sorry directly with all the businesses that we actually prior to that I had a relationship through Vodafone with got it ok now let's fast forward today what's team size 105 ok and have you raised or every bootstrapped it since the beginning bootstrap since then wow that's great ok so outside of that first million you're totally bootstraps yeah ok and what are you paying right now to acquire these new customers so this is like cost of acquisition yeah you're fully weighted CAC or whatever you look at by the way that's not a metric you look at tell it to matter how you look at it it's not really what we look at I mean we're only actually just really going into this sort of the you know the big SAS metric so we don't run with with CAC as a as a metric so I could really tell you what it is that I can tell you what the makeup of the team is to go and acquire businesses but I couldn't tell you what the CAC is how how many people on your team right now are dedicated to sales and marketing ok yeah so we've got five heads in marketing we've got eight heads in new business sales what is that like is that like onboarding or like account managers there no there there are new business sales enterprise sales guys ok so they're hunting it yeah yeah they're hunting and then to support them we've got five people in a new business tele sales team got it's a five five and eight it's about 18 people from sales and you know closing the sale and maybe onboarding a little bit yeah yeah ok that's healthy and then what about once you sign them up do they stick around what's your churn we're at 95 percent retention rates at the moment so on a local basis of revenue on both oh that's that's really healthy how do you reach negative revenue churn yet no okay no if you think you will soon or no yeah we're on the cusp of doing that's great I'm so almost net negative and then because you're bootstrapped you've got to really manage your payback period in terms of whatever you're putting out to get these new customers do you look at that on a weekly or monthly basis or no you don't look at payback period we don't actually look at payback period okay so how do you manage cash flow is it just kind of a monthly cycle you look at the P&L and kind of go from there well actually I mean we from a cash flow point of view we've always done rewards done pretty well with cash I mean to the extent that actually we were we found we had a bit of a shake-up in our finance team about two 18 months ago because we were running into situations where we really we weren't just getting the money in on time and as a result of that we didn't have cash flow problems but what we just found out is we just weren't we went we went for an audit as we started to think about lining ourselves up for investment to do international growth and and what we found were that you know our debtors ledger was just ridiculously high and that we weren't getting the money in in smart enough fashion so as a result of getting that done we've actually completely we completely reshaped our finance team got it now have you kind of each month are you spending anything on Google Ads Facebook Ads things like that any direct paid channels we tend to focus a lot of our stuff on LinkedIn so we've got a lot of focus our BD team really do they've all got the sales navigator on LinkedIn and they do the premium stuff on doing no like direct ads a lily some some direct ads but it's really miniscule compared with all the other things we focus on okay and about how many new customers do you add per month would you say good question about we're probably running at about five new thought fortified each month so yeah not massive because he said you know it's a significant Enterprise sale each time we do it yeah I know it makes sense I'm trying to back into kind of a rough fully weighted CAC I mean if you have 18 people and I assume let's assume a conservative low set call it maybe 60 grand a year that's five grand a month times eighteen people that's 90 grand a month kind of on your sales and marketing team signing up four to five new clients so you can kinda back into a CAC of around 18,000 very good yeah I think I think that's about right but what do you you get that payback really quickly right to our peoples are people signing up for annual plans right off the bat yeah I mean our typical deal of a deal deal length is two years okay God but but my point is in terms of the actual cash hitting your bank I said you know what I mean how is that so so you told me already your average contract value is about a hundred grand in year one but how's the cash work on that it's it's it's bill dinner is thirty days in arrears subscription was per mo me tenth hour of the year yeah per month okay got it so if you spend eighteen grand to get them and you're making your billing you know eight grand a month for a hundred grand you know for the full year I mean you're still but I mean that's a healthy payback period under three months and that works yeah that's about it yeah yeah that's impressive okay and then you soon you said lifetime value you said is about that's the average contrabass two years but do you have customers I'm sure that have stayed with you for longer than that right what do you see yeah what do you submit in one lifetime value is we're just working out at the moment but it's funny because we've got a mix of two businesses really we've got a business that really isn't a SAS business it's actually a broadcast it's a broadcast messaging business it's more like a telecom software provider layered onto that is a SAS business so we've got sort of a mixed business model so some of the clients we've got for example you know in the UK we've had clients for over cabacas we've had them for over 14 years as a clout well that's impressive okay and where's the where's the team based where you guys are based we're all based in Coventry I mean I've got a lot of people who work from home now but our UK headquarters is Coventry such key on the Warrick University Business Park as such that's great last question here Nigel what are you growing out here every year in terms of revenue on subscription 35% and you said on subscription what are their other models there well because we have a usage of the back of the subscription and typically a pound worth of subscription buys in 30 pence worth have sort of usage if you understand what I mean I do I do and what we try what we're trying to do is actually meld those two business models together and that's and for me that's sort of the best way of doing this and every pound of subscription pulls in about 30 pence 30 UK pence worth of abuse egde mm-hmm interesting that makes good sense I mean so just to get your growth right here so back in December 2016 if you're growing thirty percent year-over-year you were doing somewhere around seven hundred and ninety ish grand and then again you know through you know grow that what on you said you grew 3x or thirty percent thirty thirty-five percent o subscription growth got at 35 euros said yeah okay yeah so you were doing somewhere around like 1.7 1.8 last year this time o monthly revenue yeah yeah that would be about right yeah yeah great growth really healthy growth Nigel Congrats let's wrap up here with the famous five number one what's your what's the last business book you read it's the full disciplines of execution number two is there a CEO you're following or studying right now um yeah Tony Robbins number three what's your favorite online tool ah crikey um [Music] it's gotta be LinkedIn or last bit lame isn't it right yeah that's okay I don't think you're lame number four how many hours of sleep to get every night cheese I'd love to say egg but it's about 6:00 okay and situation married single you have kids married with children how many two children 22 and 23 that's great and Howard are you Nigel fifty one fifty one last question take us back 31 years when he was your 21 year your 20 year old self anew the people make the difference every which way and don't just don't trust everybody all of the time you know be really careful there you guys have it from Nigel people make the difference he founded his company back in 2000 raise two million in venture capital wasn't growing as fast as the VCS wanted they essentially wrote him off got rid of his co-founder he was gonna walk away than his best friend or one of his advisers said Nigel take it to him buy him out he got a great deal raise mortgaged his house raised some from friends and family raised a million bucks bought out the two million basically stake that the B C's had bought earlier on now the companies totally bootstrap since 2006 they've got a team of 105 folks out there in the UK serving 285 customers or they're helping them more really in a much better way gather customer feedback the relationship there is much better the way he's tackling it again doing about 1.7 million in monthly recurring revenue twelve months ago in December 2016 now doing about 2.3 million or north of 2.3 million per month for super-healthy run rate economics have to work because he's bootstrap they're killing it Nigel thank you for taking us to the top is a pleasure why do you why do you laugh I just that because that was a rollercoaster [Laughter]