How Speak2Leads CEO Sammy James grew to $690K revenue and 50 customers in 2019.

hello everyone my guest today is sammy james he started meshing uh mashing up tefoni with ivr 30 years ago to create new revenue for radio and tv he helped create the first ad-supported internet radio station and first song recognition application for terrestrial radio pre-smartphone and was first to convert an internet form inquiry into a phone call now he's building a company called speak to leads to convert form leads into calls sammy you're ready to take it to the top do my best all right so is this the pure play sas company it is i mean you could call it a cast company which means communication as a service because we blend sas with communication with telephony telephony how you pronounce telephony just for those of you who have been making that mistake so uh so when i talk about sas right what i really mean is sas is a recurring revenue stream that's predictable that allows you to make better hiring decisions things like that so cass that's whatever you want to call it doesn't matter to me but generally speaking it's a recurring revenue stream that's predictable and easy for you to build on sure okay um very good so put this on a timeline for me when did you launch the company uh speak to leeds uh was incorporated uh february uh 2010. okay 2010 and give me a general sense of kind of where your head was at that point did you you know have to make this work you quit your corporate put all your money in kind of thing or what no actually i was running a full-service uh ad and agency and uh doing a lot of you know traditional uh marketing uh from broadcast and then of course online because this is during the transition back then you know a few years after google launched really uh so web forms were just starting to become a thing about 13 years ago and um and so our clients were asking for a solution because their their sales teams were saying hey you know this internet thing is really a pain in the ass is we hope it goes away we don't like people inquiring via a form it's difficult to get in touch with them and they were literally throwing the lead in the trash because they were the leads were being distributed via like a copier you know they were just they would print them out and distribute them and anyway uh being a traditional sales rep i guess they did weren't comfortable with having to pick up the phone and calling the lead so that's what they came to me to complain about as that started to become more and more pervasive and that was about 13 years ago as i said so i said well why don't we just turn the form into a phone call and then the sales people will be happy and so i set about doing that you using a very primitive you know kind of uh uh language i think was asterix at the time you know for for telephony and i'm not a programmer but i'm just somebody who who loves uh tinkering with you know what's possible and um so anyway developed a prototype it worked really really well so hey sammy sorry i don't want to get out of ourselves here and i want to get a bunch in so just real quick so 2010 you launched the company the first line of coders written i assumed then as well how much did you spend on the mvp before your first dollar revenue [Music] uh i don't know not much you know maybe maybe ten thousand dollars or something like that just just just are you are you a developer did you develop the initial lines of code no no i'm i'm i'm a guy with ideas okay so who so you you were able to pay a developer just ten thousand dollars i hired a contractor and just paid him by the hour and just and just you just worked it just slowly worked it's over over time develop the product by the hour with a contractor yeah so sam that's my question right so you you were able to spend 10k on this contractor right to build this entire mvp and then you that 10 grand enabled to get your first dollar of revenue yeah okay when was first dollar revenue how long did it take to code um maybe you know six months um it was very basic but uh we got you know one of our clients to volunteer a friendly client and he volunteered to to be the guinea pig and yeah so then of course it evolved i mean then we blew the whole thing up once we realized this was viable as a business on my mind thinking everyone was complaining about not getting enough leads and needing better quality leads and and my thought was always well what are you doing with the leads you're getting and not really taking full advantage of what the opportunity presented you know uh by a lead is so that's that's where i kept focused and um and so that that's that was uh basically the great so you launched the mvp in 2010 uh you get your first customer you obviously go through some pivots like every company does give me a sense today how many customers are you serving very few um probably direct maybe 50 okay um and then we have some resellers maybe 20 okay we all have sub accounts under them yeah okay and give me a general sense so people are understanding okay i get this my sales team wants to be able to you know pick up the phone call right when the form is filled out your technology helps make that a seamless process what are people paying on average per year to use this technology that you've built we charge on a per lead basis and so i'd say the average the average client spends about 800 bucks a month and it depends on so we charge on a cost per lead flat rate all in everything all inclusive you know for that so the telephony everything else we are going through a whole new restructure in terms of our pricing right now and and so uh we will be raising our prices that's that's kind of the strategy going forward because we got to get out of the dead zone we have very small some very small clients that are kind of killing us in terms of our you know support and operation side and we've got to we've got to move move away from that and and just go up market a little bit i mean but 800 bucks a month i would say takes you out of smb range well thing is i mean that's comprised by clients that are spending ten thousand dollars a month and some that are spending 150 and we i just want to lop off the bottom part of the of the market it's just they just take too much time and so i mean i know you're going to ask this question what's our cac and basically it's zero because we've done no marketing and not i'm not proud of that it's not like smart what's your team to size today how many people six i've got a you know a cto a customer success manager and then you know for three people on that team and me okay is anyone are there any sales people with traditional quota no okay so there's like three people essentially doing something related to customer onboarding support marketing and you right and then my cto yeah yeah so by the way like you have no direct cac you're not running facebook ads but you do have a fully weighted cac it's those three salaries divided by new customers that worked out to about 400 bucks yeah yeah so good so so so fair enough uh 400 bucks and then take me back into you said you had one in just your cto do you have any more engineers or just one no we do basically a hollywood model i hire people as i need them so we have a you know we have a development team but they're not on on you know they're not on payroll they're just contractors have you bootstrapped the company or did you decide to raise capital uh bootstrap but i did i did raise some angel money and uh through uh a team that came in that was gonna help me grow the company uh and so basically took the angel money used part of it to pay their salaries you know plus options and it didn't really generate anything i mean it helped when we when we rebuilt the platform because there was an engineer a sales guy and an operations guy and the the engineer earned earned his sami so how much did you raise from the angels 250 okay and what year was this 2011-ish yeah okay so they're still on the cap table today uh yeah as far as options go yeah and they have 10 years to exercise so you know they'll probably be off pretty soon yeah okay well that's not a good thing that means they are looking at the company saying it's not worth converting the options it's not growing very fast yeah that's okay yeah it's not growing it hasn't grown fast it's been just steady well my point is if they believed in you if you look i have options in a ton of companies i'm an alpine bunch of funds i always will exercise options if i believe in the founder always so i mean them not actually i don't understand why you would brag about that being a good thing that they want exercise options i'm not saying it's a good thing but i mean i'm not saying they haven't but uh that they're not gonna exercise the options but it's okay with me if they don't i'm not going to be i'm not i'm not going to take that as a bad sign yeah well by the way it's not good or bad it just it just is i'm just curious how why you led with you know you know i hope they don't or doesn't look like they will um talk to me about churn so when you're selling on a per lead model like this i mean churn is usually a big issue because people have more leads in one month and less leads in the next so what's your turn today and how to keep it low uh it's about uh zero logo churns about three percent and then you know zero or negative churn you know in revenue well sorry on a grow on a gross basis so ignore expansion revenue on a growth space is what's revenue churn hmm um three percent okay you think it's equal to logo churn something like that and that's monthly yeah okay so when you say then you have net negative churn what that would mean is your 36 gross revenue churn you more than make up with by increasing the customer prices on historical logos by more than 36 percent is that accurate i'm not sure if that's accurate but yeah conceptually yes it is accurate in terms of the percentage i'm not i'm not 100 sure but yes we do um make up for uh logo churn probably on just retention because our retention is average lifetime value is 27 000 so it's about you know that's where we sit right now and how are you calculating that number that's just based on the average uh length of our clients you know over over the court history of the company and the and the average that they spend during that time four years one divided by 36 percent annual return which is three percent monthly which you just told me is about a 33 month lifetime value at 800 bucks a month that's about 27 thousand dollars which i think is how you get to that number yeah um you said though that you have net negative revenue net negative churn the only way to have net negative churn is to more than make up that 36 percent churn with expansion so how are you calculating net negative churn um well it was just based on running the numbers and looking at what what the revenue looks like against you know the current client base and and churn and and growth and and kind of in getting there from from from that you know when you say growth what are you including in that growth number are you including new customers you add yeah new customers yeah okay yeah so yeah maybe that's where there's a disconnect right and a lot of people a lot of people do this you know churn and retention is a measure of cohort it's it's a lagging indicator of a core that signed up some time ago you actually don't include new customers with with when you're measuring churn now that that obviously new customers drives your company growth rate but it doesn't impact net revenue retention um so i just want to make sure i understand this because it because it impacts basically if you have an expansion model or not do you have meaningful expansion revenue on historical accounts will you double or triple their price point year over year pretty predictably no um as you mentioned that is totally based on what if they're growing as a company we grow with them right because if they grow their lead volume which you know growing companies tend to increase their lead budgets and they increase their lead volume so and that's how we grow with that we can't drive though it's such a tricky pricing model though sami because you could make the argument that lead volume could decrease if they needed less leads because they're moving to enterprise so they're now going to pay you less because you're priced off lead volume many people argue that's not a not a powerful value metric to price against why are you pricing against that well because the market i'm not going after enterprise i mean you know we've entertained it but but the market that we're addressing is a market that relates to you know in their budgets how much they're spending per lead they measure everything based on leads like what was my conversion rate per lead what was my cost per lead what was my and so it's all driven by you know their own uh framework of per lead and so when i say this is a per lead cost they relate to it quickly they can in their mind they go got it i do 400 leads a month i do 800 leads a month they know what their average lead volume is per month they get it real fast and and the other thing i want to say is this i i purposely did not want to get caught into the telephony conversation of cost per minute i wanted a just a flat rate because you always lose that conversation because someone can always beat you on a cost per minute basis this is not a telephony play i'm not a telco i don't give a ding dong about telephony honestly it's just a it's just a channel communication fantastic sorry my point is you are pricing across your entire base on a per lead basis that is making a massive assumption that a lead is worth the same to all of your customers my point is leads are worth very different very different to different people customers that are attracted or willing to pay like a like for our service on top of their cost per lead our customers that typically have a fairly decent uh revenues you know associated per lead so let's take education for example you know like if you're a for-profit school it's gonna cost like somewhere between ten and twenty thousand dollars for per student okay to enroll you know that's a pretty significant number and if i if you can increase the conversions by a small percentage by adding a couple of bucks per lead that's a good that's another let me ask you a question sami if someone has gets 100 leads per month from you versus someone that gets a thousand leads a month from you who who will pay more we don't provide leads no no no if someone's using you to process 100 a month versus a thousand leads per month who will pay more they both pay uh the same per lead you know we do have different plans which i'm blowing up and and going into a double axis you know kind of okay so what are they paying per lead if it's the same per lead there there was a discount for more leads my question is pretty simple i'm just trying to get a i'm just trying to compare apples and apples here someone with a hundred whether you wanna give me a per lead cost or let's say you were paying a dollar fifty elite for a hundred leads and you're paying a dollar per lead for a thousand so one person pays a thousand the other person pays 150 bucks okay so here's my point the person paying 150 bucks a month right with only 100 leads let's say those leads if they converted our hundred thousand dollar contracts for that person the person getting a thousand leads a month if they convert those they're worth 50 bucks a month okay right yeah you your pricing model is so not aligned with the value that they're capturing it's just it's true so by the way i'm i'm not providing necessary solutions i'm just which is probably you know not not the best way to ask a question but like i just feel like this pricey model is totally not what it should be relative to what you're providing i get it some people they just it's a steal it blows their mind you know because because they they see i mean i have a client with a furniture store that increased their uh conversions by 30 the first month they plugged us in it was it that was uh 300 grand to them yeah 300 000 in sales by just and it would it cost them probably you know what five hundred bucks i mean not much yeah yeah yeah but i it's so difficult to try to you know base it on uh their revenue per i mean yeah look if i was building your company sammy my onboarding would look like this screen one before i asked for an email a local anything would be uh what is your first year contract value on average some people are going to say 10 bucks and we're going to say 10 million then my everything after that would be based off what they said that lead was worth like if it's the 10 million dollar contract value because that's ultimately where they get more value right is if you help them close larger value leads even if it's less volume you're way more valuable oh yeah some some of my clients are like hey i don't care if i get 10 leads a month they're very valuable so i'm willing to pay but they're paying you like 10 bucks a month right now or something ridiculous no no minimum and i'm going to raise the minimum to get you know but they have to pay a minimum to up for 100 leads yeah the point is you keep talking about in terms of number of leads and i'm saying i just think that is not the right thing to price against because you're ignoring the value per lead which is like a thousand x different across your customers yeah i get it i know i'm leaving a lot on the table i i get it yeah well okay so today you got 50 customers 800 bucks a month that's about 40 000 a month in revenue is that right yeah we're doing it but we and then we have some ancillary revenue we're doing about 55 something like that and you know we're 55 000 a month yeah okay and is that all that sass yeah okay it's all stats and so where were you exactly a year ago if you're at 55 grand a month well about the same place i mean you know you know it's like we're very flat i mean we're starting to what happened is about a year and a half ago i just said okay i've got to i've got to rebuild you know all the processes of the company in order to scale and um because i kind of got tired of being this flat you know company and wanted to grow because i'm not going to live forever okay so um all right so first thing i had to do is just restructure everything operationally so that we could scale you know in terms of onboarding scaling telephony is not a problem okay that's the technical side easy but it's operation side on boarding tightening that up all that jazz so now that we've done that uh we're now going to start marketing we're going to raise our prices and we're going to start doing marketing for the first time in the history of the company really so we plan on growing aggressively over the next three years very good well look we are out of time so quick one word answers here for the famous five number one favorite business book i'd have to say good to great okay number two is there a ceo you're following or studying several through just different podcasts uh tim ferriss's podcast [Music] number three number three what's your favorite favorite tool for building your company um i'd say pros uh process street probably number four how many hours i sleep to get every night about seven intermittent hours okay and how old are you sammy 62. okay now you said how many you so situation married single how many kids married one child he's 18 months old oh you got you got your full plate my man all right last question what do you wish your 20 year old self knew i would say manage yourself manage your reality not your image yep guys there you have it speak to leads helps you take a form input and directly create a call to your sales rep so they can close faster 50 customers right now paying called a grand per month doing about 5 000 a month in revenue uh flat year over year bootstrapped company well raised about 250 000 bucks in angel money back in the day but today team size of six uh 36 gross revenue churn annually with a payback period right now of uh basically instantly penny spending 400 bucks to get a new 800 a month customer sammy thank you for taking us to the top sure my pleasure