How Sandhillsdev grew to $3.7M revenue and 15K customers in 2020.

hello everyone my guest today is pippin williamson he is a nature loving farm boy that somehow found his way into computers internet and business he runs a company called sandhills development they build e-commerce and membership software for websites but you're ready to take us to the top absolutely all right so i'm looking forward to this i found you on indie hackers where i think you stated the revenue i mean you were doing somewhere between two and three million bucks right yep what what what do you think you'll do here in 2020 with covet well so i can tell you our plans have changed a little bit uh we're originally estimating that we'd uh break four million um however just announced last week we actually sold one of our products uh which has caused our monthly revenue to fluctuate in the last couple of months and so we're still trying to figure out exactly where we're going to be uh since we no longer have the revenue from that product coming in but last month we did 311 000. that's great so tell us about that product what product did you sell uh we sold actually our membership platform uh so we'll have to adjust our tagline just a little bit uh so it was called restrict content pro and it was a wordpress membership plugin uh that basically allowed site owners to sell memberships so annual monthly daily any kind of membership any type of content that you wanted to walk away behind a membership interesting so that's obviously hot space people a lot of people believe today that community is sort of the new moat for any piece of software membership sites are a key piece of community how much of the 311 that you did last month 311 000 in revenue was from the membership tool uh uh for last month zero uh because the sale actually went through before last month but at the time that we sold it it was doing about 50 to 55 000 a month okay got it so a good chunk but not a majority of of your monthly rates right yeah interesting okay so why did you decide to sell it's 255 000 bucks a month i assume it's high margin why sell uh it was doing uh very hard margins uh frankly it wasn't something that we originally planned to sell uh but the opportunity arose and we've always tried to approach business with a mentality that everything is you know has a possibility of being sold at some point um and the right opportunity arose and what we ultimately decided was that it allowed us to narrow our focus uh at the time we were running five different product brands um and there was a little bit of overlap between them between the membership and e-commerce tools that we built and so transferring one of them basically allowed us to narrow our focus and we kept our whole team so we didn't transfer any of our team members with the product uh only the product so we effectively were able to hire three new people uh without actually hiring anybody because we took the people that were working on the product and have put them onto some of our other projects the toughest part about any sale like that obviously is number one finding a buyer that you think is gonna treat your customers right and then secondly seeing if buyer will potentially pay you what you want to let the tool go right so walk me through both of those let's start with the harder one first which is how do you think about valuation um valuation-wise we i mean frankly we had to look at it from a [Music] the price had to be right for us uh because it's like we mentioned earlier it was a profitable product already uh it is something that we had been running for a long time we had been uh running it for about eight years uh we were very comfortable with it we had a lot of long-term plans for it and so if we're gonna do it the price had to be right um so we basically came up with a valuation based off of annual revenue um and estimated profits for the next few years uh and basically told our buyer this is what we need and if we can meet there uh then we can make a deal where was your headed i assume what you're about to tell me it wasn't the actual price because there's probably some negotiation but when you first store went into this what was the sort of revenue multiple you guys were hoping for uh we wanted somewhere in the two to three x annuals and why did you come up with that like when you were sitting down with your team what was that why was two to three x the number uh number one it was a number that i felt that i could reasonably get um i thought it seemed fair from a buyer's perspective you know we can we can say that we would love to have 10x annual but you know it's probably never going to happen not not in any kind of reasonable negotiation so we really wanted to try to find a balance between what do we need to justify this and what is somebody reasonably going to pay because they're going to try to regain their investment um and in this case we didn't sell it to a private equity firm or somebody that is more not just able but maybe operates off of a business model of larger gambles we sold it to another team within the wordpress ecosystem and so we had to make it make sense for them too so so did you sort of end up in that two to three x range we did i can't say exactly where we got due to our contract um but it was uh definitely in the range of what we wanted fair enough and that you know there are a limited number of buyers in this space i mean was it public is the buyer gonna is it have they made an announcement hey we just bought this tool yeah yep it is public it all went live on september 1st uh and so if anybody wants to check it out you can go to sandhillsdev.com we wrote a blog post there uh and the buyer was ithemes ithemes.com which is a one of the brands under the liquid web family oh very cool very very cool okay so that's done congratulations on that you know how a little more cash to play with so what do you do you know personally as an entrepreneur that's a nice moment now you still have a business doing it sounds like 250 000 ish per month without the 55000 tool right or is that 311. okay no we did 311 without that member without it so you still have a tool that's doing 3.6 million a year in revenue now is that 3.6 million in revenue is that more like consulting or is that a true sas product on the e-commerce side so it's a combination of sas products and self-hosted products so we run we still run four separate um product brands uh and so that 311 is a combination of all four of those um with the largest being uh about 130 to 150 000 and the smallest being one to two thousand a month um what's the largest all of all you name it like what's the website for yep affiliate wp.com and what does it do your largest product it is an affiliate marketing tool so any it's a for membership or store owners anybody that's basically running an online e-commerce business of some kind if they want to run their own uh affiliate program and they want to own all of their data and maintain the tool themselves we basically build a software product to let that to do that um and i think people are going to love your story listening to this they just heard you you did a deal at two to three x if someone's listening right now in that space and goes oh wait a second that's doing 1.2 oh no it's doing what 1.5 million in arr i would pay i'd pay 3x right now to buy that would you sell that too uh you know so i said earlier that we try to approach everything with the possibility that may one day be sold um at this point we have no plans to sell it uh it is something that we're having a lot of fun with and it is our biggest money maker for sure now it also means that you know it could negotiate the highest price um and so you know we can i can't say what the future holds for us at this point we are building for the long term and we are aiming for longevity yep which is one of the reasons why we sold our other product well yes so you get again you can't say the exact number but two to three x fifty five thousand dollars a month in terms of ar it sounds like something you know be something between one and two million bucks coming into the company how do you decide where to invest in that for the long term like what does that actually mean sure so the first thing that we're uh wanting to do after the sale is make sure that we still have profitability so we operate on a model that we will always aim for profitability because that's the only thing that we can ensure that keeps the business alive we are 100 bootstrapped self-funded business we have no outside investment and we're all privately owned um and so at that we typically aim for about the 20 profit margin and when we sold off restricted content pro that was basically the loss of that revenue was majority of our profit margin so what we want to do at that point is operate for the next couple of months carefully um but also very strategically to make sure that we can still maintain a monthly profit margin you know we can with enough cash in the bank obviously we can take on losses for a few months no problem uh we can actually take it off for quite a few months but we still want to retain our month-to-month profit margin so the first strategy is just just pay attention see where we are um we we don't have our numbers from uh august yet but we think we've already achieved that profitability margin again uh and so then basically we get to decide if we want to make some strategic investments uh for long-term growth whether that is hiring or acquisition uh we can choose to just sit on it and you know not really do anything just have a nice cash cushion in the bank uh or a combination of both so on the 311 thousand dollars you did last month what was profit margin on that was it totally wiped out so your breakeven last month we incurred a loss uh but that's because we made some uh significant investments that you know are ab abnormal expenses if you will uh this month unexpected will show a profit or got it uh the month of august you got it and you you can go back up to 20 percent i mean obviously you're going to show a loss if you spent a bunch of the one to two million in investments right last month but when the business normalizes you think you'll be back at you know crank in 10 20 40 grand the bottom line i i think we'll see 10 to 20 profit margin by the end of the year yeah yeah interesting um okay very cool and so let's keep going down this because you said he had four products your big one his affiliate tool doing 115 000 a month what's under that uh easy digital downloads which is a e-commerce platform for selling digital products and it does about 70 000. interesting okay what's under that uh wp simple pay which is a simple e-commerce tool basically allow uh simple payments through stripe.com uh for website or business owners uh and it does about uh 40 to 45 000 okay and that's the last one right uh nope there's two others uh so there's uh sugar calendar which is a small event uh event management tool um you know for any kind of business that manages events uh whether it's just building an event calendar or you want to do event ticketing um that's our newest product and it's still working on getting off the ground and it's about a thousand uh and then we have another tool that is actually part of our other brands which is our payouts service and this is our most uh sas product if you will everything else is more self-hosted it's not exactly a software as a service but more of a software product that we provide to you for your own systems but we have a what's called the payout service uh which primarily at this point integrates with our affiliate marketing tool affiliate wp that basically handles the payment processing and propane your affiliates uh and that one uh is fluctuating a lot uh but uh last month it did about seventy eight thousand okay and what's what's the did seventy thousand on gross on on how much transaction volume in terms of how many transactions how i assume you take a percent of the payments that go through so yeah so basically 78 000 was the amount that we processed for other businesses and we take a three percent cut okay got it yeah so so at three percent after all fees yeah so it's not 78 it's it's 78 top line but gross gross revenue would actually be about twenty three hundred dollars three percent of 78 grand yes interesting yeah so that one potentially obviously scales really nicely as you grow volume right right because that one you know with a traditional uh product or sas business every customer you add on is about the same dollar you know if you have a 50 50 a month plan every customer adds fifty dollars a month uh with a pale service like this it all depends on what the business is doing that you bring on so we could have one customer that does 50 a month in processing we could have another one that does 50 000 a month in processing and so you know we could add five customers that but that could potentially be the difference of 150 000 yep that's interesting okay can you and can you break these down for me real quick in terms of customer accounts so how many customers on affiliate wp.com uh i'm gonna have to give you ranges because i don't have signs in front of me uh i feel like wp is around the uh i think 10 to 15 000 active customers at this point oh wow okay so that is if that's doing 130 000 per month each each person is paying what like 10 bucks a month no we have it priced out uh so our starting plan today is 149 uh but they used to be down uh to 49 a month was the lowest price uh we've changed prices three times in the last uh six seven years uh and so we have a lot of customers that use that are still grandfathered in uh we used to also do annual renewal discounts uh the earliest renewal discount for forty percent then we dropped it to thirty percent then we dropped at twenty percent and now we don't have renewal discounts but anybody who purchased before those were removed are grandfathered in so our annual uh customer value is between i think lowest right now is 34 up to um 200 uh 299 per year okay got it um but if we take the cheapest you just said right which was i think you sorry you said 39 34 30. 30 30 34 and 30 cents yep pretty yes so divide that by 12 and that gets you your monthly yeah yeah yeah yeah oh those are that's an annual value just gave me yeah so everything we don't do any monthly values we do everything in annual got it so but okay still even multiplying that um i guess the better question is of the 10 to 30 because you've done so many pricing experiments which is fine of the 10 to 13 000 customers you have how many of them are still paying i guess you said you don't have any monthly um they're all annual right correct yeah yeah we don't do any monthly billing got it okay fair enough cool and then um what about easy digital downloads uh that one off the top my head i couldn't tell you um i could pull it up if you would like real quick though um it's it's just a one-time cost well so easy digital downloads is a premium product so we have a free base product and we have a lot of premium upgrades and so one customer might have five different uh premium upgrades one customer might have one one customer or one user might have zero uh to date affiliate uh sorry easy digital downloads is installed on somewhere between 50 and 75 000 websites and then each one of those users may or may not be a customer all right 50 to 75 000 websites that's great and then what do we what about wt's wp simple pay uh wp simple pay is in the range of three to five hold on i'll just tell you this one if i can pull up real quick numbers don't stick in my head super well yeah no worries so wp simple pay is one of is our small it's not the smallest but is the the second smallest after restricted content pro which we got rid of um and it currently has uh 4 300 active customers okay so what they pay about 10 bucks a month on average um so just like our other ones it's all annual billing um our lowest price point at this at right now is uh 49 no 99 um and just like our other products we've gone through a series of price changes it's also a product that we acquired um just about a year and a half ago and the previous owner had also done a lot of different price changes and experiments and so like affiliate op we have customers all over the board in terms of their their uh uh their calculated monthly value yeah well it's doing 540 thousand dollars annually at a 45 000 a month you know a target right now which means on average customers paying 125 bucks a year yeah yeah tell me about the tell me about french you bought you bought the company how did you find it how did you find it and how did you go through the process of hey we should buy this sure so uh it was originally started and owned by a guy named phil dirksen um and he's a guy that i've known for a long time um i've been in the wordpress world uh and building software products for the wordpress platform for about 10 to 12 years and phil dirkson was a guy that i got to know pretty early on just by going to conferences and uh and meeting each other there uh and about two years ago uh it's funny we actually had a we had a podcast and we were doing a conversation about acquisitions and selling your product or buying other products and literally right after that podcast episode was recorded uh he sent me an email and said hey do you want to work together i'd be interested in merging wp simple pay with sandhills development so we started the conversation took about six months of back and forth uh and eventually we basically came to an agreement where he bought into the company uh and his basically his selling uh the price for wp simple pay was equity so we gave him equity in the company and he gave us wp simple pay interesting and how much revenue is wp simply doing when you when you did this deal uh it was doing about 22 to 24 000. oh wow so you've doubled that year over year almost yeah that's incredible um okay so you come up with a price point was it similar to your two to three x you mentioned earlier yes it was okay interesting so 24k a month obviously times 12 is what 300 000 per year at a high end 2x you're basically saying there's about a half million dollars worth of stock that instead of you guys paying phil you just basically can you agree on evaluation of sand hill and you gave them that stock that's correct how do you structure that for someone else i want to copy that strategy do you give them the stock all up front or do you put them on you know one year cliff for your vesting schedule sort of deal so uh that one uh at for santa's development we do have a vesting period for all owners there are there's five of us partners um but with his we actually considered his fully vested uh because basically his value was the five to eight years of wp simple pay that he had run beforehand and so we basically said we have all of your history on this product we're going to consider you fully vested when you come in yup yeah i think that makes perfect sense talk to me about your team today how many folks on the team 26 and how many engineers uh roughly 15 15 and where's everybody based uh so the majority of us are all in the united states but we do also have uh nigeria united kingdom and new zealand let me pick one explain nigeria sure so one of our software developers there uh he primarily works on our affiliate mp product and payout service um uh he's based there in uh legos and we've always operated as a fully distributed company uh we're fully remote uh and so we really don't care where you are uh you know where you live or where you're traveling um because everything's been remote from day one that's great talk to me about churn critical on a sas company let's just focus on one of your products to make it easier right so let's just or which is there one you want to talk about turn uh so i i roughly uh averaged these before we hopped on and we do about four to five percent okay was it fairly consistent across each company or was one really high one really low uh they were all between four to five well one of them was a little bit higher uh sugar sugar calendar was about seven percent uh which is our smallest product but it's so much smaller than the others that i kind of ignored it from the mix so four to five percent monthly revenue churn is about 48 and on an annual basis is that accurate um i'm not good with turn off the top of my head sorry i guess the real question is that four percent number you just gave me that's monthly churn correct yes according to stripe it is yeah yeah yeah great yeah so then we can just multiply by 12 to get to that 48 number do you guys have a sort of a clear path to expanding a customer in other words upselling them from one product line to another or upgrading them on a feature set or things like that uh yes and no uh it depends on what the customer is so there are some of our customers where up upselling them to our other products makes perfect sense so for example if you are a wp simple pay or an easy digital downloads or prior to the sale a restricted content pro customer all of these are customers where you are running a business of some kind you are taking money in and it probably at least for many of them make sense for you to have an affiliate program and so we'll upsell you to affiliate wp if however you are an affiliate wp customer and you are already running your store and say something like woocommerce upgrading you to easy digital downloads doesn't make any sense because you already have the payment processing side of your business taken care of um and then so if we're going from any of our products besides the affiliate program will upsell to affiliate wp if they are an affiliate wp customer then we upsell them to the payout service how are you getting new customers for affiliate wp and how many did you add last month um we basically are a word of mouth and referral marketing so we have quite a few uh sorry not referral marketing affiliate marketing we have basically a pretty large list of affiliates that go out and promote us on their own blogs especially in the inside of the wordpress world um and the woocommerce space we do some of our own uh content marketing as well but i would say the vast majority of it is either word of mouth or referral marketing okay word of mouth or referral so what's a good question to understand your affiliate program so maybe this is the right question uh last month how many affiliates got paid at least one dollar of our own affiliate like affiliates promoting our products or using our payout service using your product like you're selling people into your products uh one second and i can probably tell you so our we don't so our affiliate program i'll be honest it's a little bit small but basically i would say we have on any given month 15 to 20 people that earn at least a dollar okay but then we'll have about three to four that are doing the somewhere between five hundred and three thousand dollars okay got it four to five earn 500 or 3 000. that we said 3 000 yes and this would be specifically for our affiliate product yep yep and and so the one or two earning 3 000 a month that is what 30 of the customers they help you sign uh what's the pay what pay what do you pay out oh we pay them 20 20 okay got it so if you're paying someone 3k in terms of affiliate commissions a month that means we can multiply by five right so they they've helped you get 15 000 an mrr yep that's interesting really interesting okay so that's your main go to market is the are the affiliate how do you find new affiliates uh that's something that we've really never done up until now uh we're right now we're actually working on uh an affiliate strategy specifically to do that uh in the past we have simply relied on our position inside of the community so in the wordpress world uh there's a pretty strong community of bloggers and other people that do a lot of just affiliate marketing is that's their standard business um and we've always been um i guess pretty well connected to all of them i used to do a ton of speaking at conferences and meeting a lot of people so i know most of them face to face um and so when we were originally building out new products uh that group of people were always interested in uh getting on promoting our products and so we still have that strong base of original affiliates and they're really the only ones that we we really use but we're looking at expanding into actually doing some some more intentional outreach all right pippin good stuff let's wrap up with the famous five number one favorite things book uh small giants by beau burlingham number two is there a ceo you're following are studying jason free base camp number three what's your favorite online tool for building your company besides on your own uh i'd have to say stripe okay i can't run my business without stripe i think i said you're updating your you're refreshing your certified as we chat which is great number four how many hours of sleep you get every night i stride it for eight okay and situation married single kids uh married three kids oh wow busy guy how old are you i am 31 31 last question what's something you wishing you when you were 20 uh that is okay to slow down and not work 18 hours a day so i tonight today i sleep eight hours a day and i work uh eight hours a day or or less sometimes but i used to you know i would i would do the grind i'd get up super early and i would work super late or i'd do all-nighters and it led to a lot of burnout and frankly i think i could have avoided all of that and had you know an extra year of productivity if i just accepted and realized early on that you know it's okay to work an eight-hour day that's why what a story sand hills dev a couple months ago they were doing 360 370 a month in revenue then they sold off one of their products for strict content pro which was doing fifty five thousand dollars from they sold it at a two to three x multiple are now using that cash to reinvest in their other four critical brands the biggest one being affiliate wp.com with 10 to 13 000 paying customers on annual plans they're doing 130 000 a month on that product easy digital downloads another 70k per month add it all up they're doing about 311 000 a month in revenue right now with profitability targets in the 20 range from with a very nimble quick team 26 folks on the team 15 engineers their main go to market strategies and a 20 affiliate they also affiliates pro their products that's how they grow thanks for taking us to the top absolutely thank you nathan one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to make sure you get notifications when we do go live i wouldn't want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas founders you want to get in there we've probably talked about your tool if you're running a company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that at nathan laca.com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode if you enjoyed it click the thumbs up we get a lot of haters that are mad at how aggressive i am on these shows but i do it so that we can all learn we have to counter those people we got to push them away click the thumbs up below to counter them and know that i appreciate your guys support all right i'll be in the comments see ya