How Skubana grew to $18M revenue and 1K customers in 2018.

hello everyone my guest today is chad rubin he builds e-commerce businesses fresh out of college in wall street he took his family vacuum business online and built his own direct consumer e-commerce business called crucial vacuum he grew it from zero to a 20 million dollar evaluation in just seven years he happens to be a 200 top 250 amazon seller and he co-founded skubana with his friend and built one of e-commerce hottest operational software chat are you ready to take us to the top let's do it all right how do you get first off how to get excited about vacuums well you don't really i grew up in the vacuum industry so uh it was a very sort of nice transition to starting my own direct consumer vacuum filter business but then i capitalized on a passion we started making coffee filters so i love coffee interesting okay so i had you on about a year and a half ago and at that point you told me you had about 300 customers you were doing i think about 3.6 million bucks in annual revenue 12 employees and had about 1.9 million raised so before we get into kind of updates on those numbers tell me for people that are just now tuning into this episode and missed the last one what do you do and is it a pure play sas model so subana is a pure play sas model where one year commitments build monthly for our clients really focusing on advanced sellers and we're an operational platform so the point when someone checks out on shopify or amazon all the way to the point of delivery we do everything in between to make that happen so orders inventory algorithmic purchase orders and analytics all in one platform instead of using fragmented softwares what's an algorithmic purchase order so imagine in the old days or even today right now people go through all these reports how many do they need to order when do they need to order it with what vendor at what cost what's the minimum based on the lead time using technology to automate that process so now you're just approving purchase orders so we have a system that takes all the velocity from all the different channels you sell on and will literally automatically place a purchase order for you awaiting your approval with a bow on top so it's replacing it's replacing a human labor and doing it much quicker than what a human can do that's really the benefit of technology okay and so most of your customers in our what e-commerce brands yeah retailers uh and direct consumer brands and what yet today in terms of total customers we're we're approaching quadruple digits uh in since we last spoke may our our company has grown uh probably 4x on our employees i mean 3x maybe are we 27 employees right now okay uh so we've experienced a tremendous amount of growth and we just came and hired quick enough yeah i mean that's a good thing so yeah you're at 13 employees last time we spoke you're up at 27 now where is most of hiring come from our sales people engineers marketers it's account managers to support our our customers along with engineering okay and have you done anything like introduce additional products to increase the average price each customer is paying you are you still people are still paying you what i think you told me about a thousand bucks a month is the average yeah it's grown significantly from there uh we just started swimming a lot more upstream the product has matured we fortified the platform you know we're adding features but now we're focusing more on large features that have a large impact okay what would you say the average is that now are we talking like five grand a month 10 grand a month 100 grand a month uh it's increased significantly since a thousand was our sort of old man now now our min is 1400 okay uh to start just to just to get in the door and it goes all the way up from there imagine you have huge huge power users and then you have a long tail of kind of more smb commerce brands but i mean is it fair to say an affair averages around your minimum 1500 bucks something like that yeah i think that's a that's a fair average okay but again it's broad spectrum yeah why'd you decide to um why i mean are you generally when you're thinking about with your engineering team new product are you generally saying will this product serve our enterprise cohort or will this product serve our smb cohort so we actually so we just came away from sasser and we decided to change a lot of our feature uh feature request modules like think about it we have all these features coming in from sales from account managers from current clients from potential clients so we're prioritizing features of what's gonna actually service uh a massive problem for our current clients and future clients uh that everyone can use right so it has to be feasible desirable uh and viable so yeah that's what we're judging based on and now we're just focusing on big features so yeah when we are adding features we think about okay is this gonna make us a lot of money yep well hey that's a good thing i'm a cat i'm a capitalist too so i appreciate it now you said you grew about 4x you told me last time you're about three million three and a half million bucks in ar are you guys doing 12 15 now we so i think even last time we spoke we don't like publicly disclose it but we've grown as you can see if you think about our employee ramp up the same way our revs have ramped up as well okay so you've doubled employee base i can generally back in and say okay maybe you've about doubled in size yeah okay and just to be clear yeah yeah those numbers by the way all i'm doing is just obviously and you know this i'm just taking the customer count times the rpoo so if you said i think you said you said in a weird way but you said quadruple digits so north of a thousand customers multiplied by that minimum of fifteen hundred i mean you guys have to be doing at least one point five million if the per month your arithmetic is close have you have you bootstrapped or did you raise an additional capital so we just we've literally been using the capital that we have and we're actually less about taking money we're more about making money got it so you had the you haven't raised any more than the 1.9 you last raised and only 880 000 of that was actually and you can see it's on crunchbase was actual like investors outside of myself okay got it so was it part of that debt as well or no that was all just your money plus so you put in a million investors put in 900 or was part of the million venture debt no a million is my is my contribution not part of the cap table and then 880 is brian lee from shoedazzle honest company legalzoom uh james thompson who one of the early uh employees of amazon who's founder of the prosper show so uh we've had and of course friends and family yep yep that makes good sense um talk to me about growth what i mean that was about again a year and a half ago i think we last spoke but over the past 12 months are you generally double in year over year quadruple year over year what are you aiming for same same run rate that we've been that we've been focusing on we've been as you scale and grow obviously new new issues and problems arise so for us we're really really doubling down this year at least on marketing because we don't have a marketing team believe it or not we have literally scaled this business with no marketing team whatsoever i want to tell me i want to dive more into that in terms of how you've you know quadrupled your customer base since we last spoke but again back to my question over the past 12 months have you about doubled like what has been the growth uh if you look at the employee growth we i think we just talked about this yeah but why do you but why do you keep why do you keep attributing company growth to how many more employees you have that just means more costs it does mean more cost but if you actually are ramping up more account managers means you have to service more clients so all of our town managers need to be managing the the clients that we have so again we don't publicly like we have stakeholders we don't publicly discuss our numbers but i'm trying to give you a guide so are you when you think about how you're operating the business then and should i make more hires this month or should i not make more hires per month are you looking at the bottom line and saying i want to stay right about breakeven or are you looking at i want to keep a ratio of this many customers per account manager uh i think it's actually a mix of both but it takes us about a year to ramp up an account manager to get them to be to to like run like efficiently into the manager appliances we have a very very large platform so we have to think about okay what's the ramp up time the new clients that we're bringing on board but also since we're like nearly bootstrapped right we need to think about we'd be very financially disciplined with our capital so we can't just spend frivolously on all types of things like other sas companies do today so 27 people how many of them are account managers i think we're at 14 now roughly okay it's a fairly significant amount and then how many engineers uh 10 okay so that's the majority of your team that's 24. we just hired and we just yeah we just hired a project manager we're looking for another developer and another account manager and where you guys are based so that's the other big change so we used to be only dev's only engineering team in new york city and then the rest of the team was in jersey uh in our other office and now we've actually started building our team in new york city uh just because it's been very very difficult to find talent in jersey interesting but i imagine it's way more expensive in new york it is way more expensive but there's also like there's veterans and talent that we can tap into versus trying to train from the bottom up and learn from paper cuts and you're talking development or a's bringing their own rolodex to the table exactly the second but both both are i mean yeah so we've been traditionally hiring account managers that uh don't have much experience never been in a sas in a sas world and we're really flipping that now since we're hiring new york city we're hiring people who have been in sas that have like already onboarded clients so it's not it's for them it's less about rolodex it's more about like they have knowledge they've been in this industry for a long time and they can bring everything they learn from their previous companies over to our company sure tell me about your churn churn so that was i think i just partially addressed some of our churn talking about how we prioritize feature requests and so we've been prioritizing feature requests based on hey this is the most android client that we have and they're paying a lot of money let's try to prevent them from leaving the platform to now let's actually like if someone needs like a serious feature that no one on our platform needs that's custom ware and we need to really focus on our software so we're starting to start pick and choose clients that should be on our platform instead of just accepting everybody onto the platform yeah i think controlled churn can be a healthy thing what are you guys at though would you say in terms of turn annually i think we're right at the right now if you look at our addressable churn we're right at the average three to five percent okay what is addressable what do you mean addressable churn so so since our platform has changed tremendously uh since inception you'll notice that we have a different type of client base it's legacy on our platform and i think most sas companies suffer from this as well yep so we have your initial initial og clients discount and monthly plans exactly they also probably are underpaying for the platform right yep 30 different names and stripe for all the different products you created early to test right exactly so to me those are legacy clients that are also non-contractual clients whereas now we have a contractual model on our platform uh punching much more upstream so that's the first one is you've got your legacy clients that i don't i don't count as addressable churn got it and then and then you have these like large you have certain clients on our platform that uh sort of maybe should have never been on the platform like they need something that's very very very very special and that we did it in the early days but we probably wouldn't do it again today just to bring them on the platform so address will turn three to five percent that's i think that's normal and i think that's uh that's right where we are but obviously we're working our butts off day in and day out to make sure that we can uh even lower that even more and just be clear is that annual logo churn or annual revenue churn logo term okay logo churn now i imagine i mean have you guys reached net negative revenue return when you add back expansion revenue when you add back expansion revenue have we reached negative churn uh that's a good question i have to dig into the numbers a little more okay uh yeah well i only care about i only care about numbers that you look at so that's not something you look at we'll skip over that but so you're what you care about in terms of churn you're just looking at at gross annual logo churn right now it's three to five percent okay got it interesting um you mentioned you're scaling this thing with with you're essentially the marketing guy i mean how are people finding you what what i i would ask you a cac number but it sounds like you're not doing any direct paid spend no direct paid spent outside of we do have an inbound sales person right that manages all the inbound leads that come our way and then we also have one outbound that we just activated in september of last year so you could technically count that as you know as your as your attack uh do you look at cac or no you don't care about it right now right now i have so many things to care about i'm focusing on keeping current clients and how do we find new ones in a rapid way to scale this thing and get to where we need to be ignoring your legacy folks and only focusing on the kinds of new customers you want to be adding kind of where you're focusing the product at what do you assume those clients when they join your platform based off your historical data on that same cohort how long do you expect them to stay with you like what do you assume minimum lifetime value is oh it's had a minimum of a year right because we have a year contracts but we're a very sticky platform think about it you're using our platform to run and automate your entire business on top of that we have an open api where they connect all these other integrations into our platform which enhances the stickiness yep so for us uh i mean i i think that we're doing a great job and i think that if you look at it we have about eight i would say ltv it's probably 18 months yup and that's just being very conservative but like once clients use our platform they don't quickly leave like we're a necessity we're not a luxury platform we're a necessity totally yeah i know that's i i asked for a conservative measure and it sounds like that's a conservative thing is 18 months at 1500 bucks a month obviously at an average i'd be about 26 grand minimum but i imagine you have many that have paid you way more than that even if you look at your current customers yep interesting um good so and again the company launched in 2015 right okay and you're not raising right now absolutely not who are you selling to right now uh what clients mean no no i'm trying i'm trying to see you're not being you're not in any acquisition talks right now are you shopify no no no no no you wouldn't you wouldn't sell the shopify if they offered you 100 million bucks my min is 500 million firstly 500 500 yeah yeah that's our number that's interesting for sure our number uh but yeah i think we're still early we're still believe it or not we are extremely still early stage and we're barely scratching the surface which is why i'm like looking to see how do we ramp up our inbound marketing efforts how do we ramp up our outbound because i think we're again just scratching the surface yeah all right in commerce all right chad let's wrap up here with the famous five number one what's the last business book you read last business book that i read uh expert secrets russell brunson that's a good one number two is there a ceo you're following or studying right now uh i really like the founder of base camp yep jason free jason fred yeah number three what's your favorite online tool for building skubana online tool for building skubana uh in terms of what building what like what you use on a daily basis to just build and grow the company are there tools you use tools that we use we use hubspot we use jira we use slack we use trello for for a lot of our blogging and content calendar so i'm in that frequently but yeah we're using the traditional tools i think most most companies are using we're using intercom which actually we're looking to deploy even further after talking to them at zaster that's great number four how many hours of sleep you get every night i'm actually a good sleeper seven seven eight hours that's good that's good today and what's your situation man you married single you have kids married i've known my wife since college we were college sweethearts and we have a cat named collie and uh kids are that's that's probably part of the future plan that's that's on the product roadmap right uh-huh all right and how old are you chad uh 32. all right last question what do you wish your 20 year old self knew uh i wish i i probably should have started my entrepreneurial effort sooner right i knew i was an entrepreneur deep down inside but was kind of scared to do it and so i i needed to get fired from wall street after three or three or four years of working wall street from 7am to 2am so probably would have rather started in college and i wasn't the social norm back then but i think that would have been uh fun to do he goes from vacuums to wall street to coffee filters to e-commerce started scuba in 2015. his team's now is 27 people based up there in new york city and jersey helping over well well over a thousand customers e-commerce brands scale get more efficient understand purchase history inventory things like that growing rapidly fifteen hundred dollars a month is kind of a minimum rp so somewhere in the 1.5 million range is a healthy minimum in terms of mrr three point three to five percent annual gross logo churn which he feels like is addressable churn obviously healthy there minimum lifetime value there 18 months at 26 grand scaling and i love this part basically bootstraps chad thank you so much for taking us to the top thank you so much for your time appreciate it