Shopperapproved Revenue (2024)

hello everybody my guest today is Scott brand Lee he is the CEO and co-founder of a company called shopper approved he's a lifelong entrepreneur and has been building software for over 20 years he co-founded the company in 2010 and in 2016 made the Inc 500 list in 2017 they made the list again and we're also number seven on the Utah 100 list all with no outside funding or investors which I love Scott are you ready to take us to the top yes I am okay so if you did all Inc thing your numbers are public what were you working you know what you do in a revenue last year alone 2016 we did about 4.7 million I'm sorry that was 2016 or 2017 2017 end of 2016 three point seven three point eight okay what do you think you'll break this year we're on track to do over six that's pretty good okay so call what is that fifth forty fifty percent year-over-year growth is good bootstrap tell me about the company what do you do so we've actually been developing software for a long time we've built over 30 different software products and shopper approved is our biggest one so we're kind of unique in that respect we're who is logo Scott is just an agency you launch with somebody's or what no so I first started out with my dad we built some companies called trust guard Rhino support free privacy policy calm and then in 2010 I started building shopper approved with one of the people that worked for us his name is Kara Pearson and we ended up becoming business partners and we've built other software companies since then Oh interesting so what do you focus most your time on out doing as consulting or launching software or do you focus on shopper approved exclusively me personally I focused mostly on shopper approved and then my other business partners focus on the other companies okay so tell us more about shopper approved what's it doing and how do you make money so shop recruit is kind of unique there's two different types of review companies online active review companies and passive review companies passive are more like when consumers can go leave a review on any company what we do is active reviews where or business driven reviews where the business hires us to collect reviews for and that way we collect reviews from everyone equally which we feel gives a better score interesting okay and how do you make money so we charge the businesses a monthly fee okay on average what do they pay per month it depends on the size of the business but I would say between 100 and 150 a month okay 150 that's healthy and and what are they paying for like the ability for you to collect reviews on them yes so they pay for our review collection service and then our syndication service we actually have partnerships with Google Yahoo and Bing mm-hmm and some other companies where we syndicate their reviews to those sites so if you go to google and you see 5-star listings next to a pay-per-click ad we're one of about ten companies that have the ability to do that now let me ask you a question as a CEO running a brick-and-mortar location I generally only pissed-off people leave reviews it would be I would never pay someone a hundred bucks to make those shitty reviews more public but it sounds like you've convinced people to do that yeah so that's the difference right like there's those that's mostly the passive review companies because passive reviews are skewed negatively right so like if you for example like Newegg right everyone's heard of New Age yeah if the electronic store right yeah so if you go to like Trustpilot and their people are just leaving passive reviews that are pissed off their scores like 1.2 but if you go to like reseller ratings who who knew in hires to actively collect reviews for them their scores like 4.90 interesting so your whole pitches will put some human touch on this and get you more like get your people who love you get them to take the time to write the review to counter the negative stuff exactly we give everyone an equal chance to write a review good or bad and we don't incentivize those reviews which ends up giving customers the most accurate representation of the company fascinating when did you launch company 2010 and what have you scaled to today in terms of total customers we've passed seven thousand customers seven thousand those are pay actual paying customers yes I feel paying customers that's great I mean so if I take the seven hundred times the 150 can I back into what about I mean that would say a million a month on revenue I don't think you're that big yet right no because what we've done and I don't know if every company does this but as we've grown in our prices of increase we've grandfathered our clients in at the prices that they originally paid god well that's that's really really smart um last month what do you do in total revenue just in the month close to 500,000 okay 500,000 got it so yeah that helps me understand how much legacy kind of grandfathering you have cuz if I take the five hundred thousand divided by seven thousand that's an average are poop I think about seventy bucks a month but what you're saying are new people you're adding are paying your updated price points which are between a hundred and fifty a month yes what about turn turn is point zero eight percent you did your homework how do you listen to the show yeah but the reason I did my homework is because we almost got we almost sold out a couple of years ago and and Goldman Sachs made us figure it out that's hysterical why did you all move will first off that point a wait number that is what is that logo churn per month yeah that's that's monthly churn rate yeah but is that logo or revenue churn that is revenue Oh revenue churn okay so you're at about you're at about what does that come out so you're about one percent annually annual revenue turn I know eight times twelve months now it's ten ten percent point well what we do is we do point zero eight times twelve well we added up over the year but it ends up to be about ten percent okay for the year point but point is it just to be clear the point zero eight percent churn times twelve I think comes out to one percent sure not 10 percent annual churn okay so it's point twenty two point eight percent got it that's fair enough okay so each year that's okay so each year you're churning about ten percent of your revenue that's actually really low that's a healthy business yeah thanks are you driving any expansion revenue or you just have one price point we have paisa page you grow pricing model do I love that pay as you grow yeah what we found is that our customers are very sticky and so when we get almost 100 percent of our revenue driven by direct my call centers direct calls to our two different businesses and so what we do is we can actually project how many reviews they'll get within a year and then we lock them in at a fixed rate for life that's really smart that's really smart now what are you paying to bring on these customers in the first place what's your CAC it's about four hundred dollars and where are you spending that 400 bucks typically in our in our call center got it so because we didn't have any money when we started and we needed we wanted to go to call center out what we figured is because our churn rate was so low if we paid most of the first year's revenue to our sales agents we could make up the difference in the following years yeah it's been really successful for us well even have $4 attack in seventy and a hundred bucks a month price when you're getting your money back and for four months that's a healthy payback period right you're still bootstrapped right yo yeah we're in fact we're kind of anti VC at this place and everybody else in our industry is sold out and we're the only ones that happens what's your team size today we're less than thirty which is kind of cool because like Trustpilot and yoko they've they've had over a 100 million in bc and they have between 300 and 500 employees and we have less than 30 and we're giving we're neck-and-neck with are you killing them and we're on the same level come on Scott you're a killer deep down I want to bring the killer out so what's funny is like we they do these press releases like yeah we just hired 550 people right we're like what the crap do they do every day yeah when I see press releases like that I see we just added five hundred fifty an expense to our PNL right now we're burning now we're burning more every month so so let me ask you a question you said you almost sold out to goldman sachs what your job was sellout that was 2014 and whoops oh you were doing two and a half million bucks a year at that point or something like that yeah why was goldman touching that it seems like a small deal it was actually part of a we were actually going to sell to another rating review company and goldman sachs was backing them and so they made us follow the same rules so they were basically doing due diligence for a company that they were behind yeah and what happened so the deal it took almost a year to do and at the very end we just it just fell apart and thank goodness it did because we took off after that it's been so much fun what um what happened though I mean did you walk away or they change the price they lowered the price or what um we got to the end of the negotiation so the negotiation and Goldman Sachs had their worst month in history and they just decided to shut down the deal what was I assume it's far enough back now you can talk about this well I mean what was the deal sighs are we talking like a two million dollar deal or 10 million in 20 millas there was 12 million okay so it's about 6x your revenue at the time which is a fairly healthy multiple for you 12 million now where they did the company that was buying it that Goldman that was backing did did the company already have that money in the bank or was golden gonna have to invest more to fund the acquisition I think they had part of it and Goldman was gonna coming back the rest interesting really interesting so okay so that deal fell through good thing for you guys you're still bootstrapped you're less than 30 people put your capitalist hat on for a second how do you make yourself filthy rich from this what I mean is strategically how do you and your co-founders and maybe even your employees personally pull money out of they cut like how do you make yourself wealth from this besides having it all locked up so the company is very it's it's very profitable at this point make how my cell bottom line up 10 20 percent to the bottom line more Wow okay yeah way more than that but so what we what we've been doing is taking the money out and investing it into other companies Oh interesting okay so so wait what I'm gonna make this up let's say you do five million in the next year and let's say 50 percent goes to bomb bottom line 2.5 million you'll probably keep some of it in there so you have some runway but let's say you take pull 2 million out what is the vehicle that 2 million goes into and how do you make decisions about what companies to invest in um so because we've been developing software for so long we actually have a very cific process that we follow to validate ideas and then to build them and so we know going through that validation process we're pretty confident what business businesses we want to get into and how how they're gonna turn out over time so that's kind of the determining factor that the businesses that we are going into in the future what space do you like to get into give me the criteria everything that had so it's got to be sexy it's got to be sticky it's got to have recurring revenue we have to be able to sell it in a call center it has to be able to be developed within six months and it has to have low low customer support interesting so when you say has to be sold in a call center that means the price point has to be high enough to support that touch right right yeah what do you think a minimum is about hundred dollars remaining yeah yeah interest really interesting and so how many deals have you done like how many different companies there yeah so we've built over thirty but we probably have five that are currently actively running and we're building and an average revenue like sub a million are these scaling pretty quick there's there's a couple that are around a million there's some in the six-figure range and then we're the ones that we're just building and getting to the higher level any like how do you exit some of those are you interested in selling any of them no so how do you manage all of them at once I hire amazing people in all the people we build systems and then we hire project managers to run each individual company fascinating that's it but you hold all the cap table which is great right that's smart I love it Scott is a smart man Scott let's wrap up here with the famous five number one what's the last business book you read so business thought I'm gonna have to say my own book software secrets because when I built when we wrote the book helped us solidify our processes to help us be more successful number two is their CEO you're following or studying Russell Brunson I just I love him to death I love everything he does and I love his integrity number three what's your favorite online tool for building your business has to be Google Docs I use it every day number four how many hours of sleep to eat every night seven and what's the situation married single you have kids I'm married have four kids okay how old are you 42 okay last question what do you wish your 20 year old self knew I wish I would have appreciated the journey more enjoy the journey you guys heard here from Scott he's now going all-in his latest venture called shopper approved it is a ratings system essentially that allows people to leave good and bad ratings they get all of them tied into one scaling quickly almost sold it for 12 million back in 2013 thankfully they did not it fell apart companies launched in 2010 and now 30 people in Utah bootstrapped serving 7,000 customers paying on average 71 bucks a month so last month that about 500 grand in revenue hoping to break 6 million in ARR by the end of this you're only churning about 10 percent of our revenue annually which is healthy paying 400 bucks to acquire these customers getting paid back in the first four month healthy economics healthy money velocity scott thank you for taking us to the top you bet thanks thing