How SuiteCX Reached $708,000 in Pure SaaS Revenue as a Bootstrapped Company, Then Sold to QuestionPro (Interview with CEO Valerie Peck)

Introduction and Company Overview

Nathan Latka

00:00Guys, suitecx360.com launched fifteen years ago. It's a consulting plus SaaS play. The pure SaaS revenue a year ago was about $708,000. On track to do 1.8 this year. And one of our other podcast guests heard Valerie on the show had mutual connections and actually bought Valerie's company, call for a $3,000,000 headline number. She is now happily working at QuestionPro, building that team. Learned a ton and, again, hoping to grow this year. She did it all bootstrapped,

00:27which we love. Hey folks, my guest today is a familiar face, Ms. Valerie Peck. She's the Founder of suitecx360.com. It's Customer Experience Design and Diagnostics. You may remember her, she came on the show a while ago and she's got some news to share. Valerie, are you ready to take us to the top?

Acquisition Announcement

Valerie Peck

00:44>> Absolutely. So Alright. Exciting What happened since we last spoke? Yeah. We've been acquired. So it's really interesting. We're one of the unicorns that actually in this interesting time and age has gotten acquired. We've been talking to a number of people. And one of the things that was really important to us was fit. Right? So there's different ways of growing your business. One of them is getting investment and more people and little wind beneath your wings. And

01:14>> so in talking to Vivek, who was introduced to us by mutual friend, Mandel, and he'll come to play in a moment as well. We started finding all sorts of common

Why QuestionPro Was the Right Fit

Valerie Peck

01:27>> opportunities. We plug a hole for QuestionPro because they didn't have a tool to pull a lot of their different products and tools together. And they fill a lot of little holes for us because they have the tools that we normally use on the consulting side of the business. So the way the deal went down

Nathan Latka

01:46Well, Valerie, hold on before it, let's leave it as an open look so the audience can listen in

Valerie Peck

01:50>> as For you

Nathan Latka

01:51context guys on Valerie, again, she came on the show back in April 2022 and shared that they were doing about $65,000 a month in MRR, so about $700,000 per year. They were serving 30 customers and their model was about a $10,000 setup fee. People were then paying a $26,000 ACV. Their largest customer was paying a 100,000 per year. The smallest was 5 k per year. And in 2021, they had a nice blend of consulting services, professional

02:14services, and pure SaaS growing nicely. She's bootstrapped, they're growing 10 to 20% year over year. So she retained her optionality to do whatever she wanted. She had no board, she had no crazy evaluation she had to sell for. So Valerie, on that note, first off, correct me if any of that was wrong, but on that note

Board Structure and Networking Role in the Deal

Valerie Peck

02:31>> Well, we did have a board, but they're very flexible and have been with me because they the two three of them were my my partners or the founders of Peppers and Rogers. So they all were all for what we were doing in the loop of all of this. And in fact, Peppers is a good friend of Vivek's. So one of the interesting things when you do networking and acquisitions, a lot of time the who you know

03:01>> as well as the what you know becomes important. So when people try to triangulate around whether a deal is good or not, right, it often comes down to the people as well as the numbers you so quickly, put it out. Mhmm. So that was really interesting. So after it was a good, probably four months of up and back with a couple of little halts in the middle. We came to an agreement and, we sold the intellectual

Post-Acquisition Client Win: $550K Contract

Valerie Peck

03:29>> property of the consulting firm to SuiteCX. And then, the team at QuestionPro purchased SuiteCX. So that was back in October 2022. And we've had a little ramp up since then. So we've got a little bit of a grace period to start understanding how we're going to integrate our business as well as integrating the products and solutions. And in the meantime, we got a whale of a client, one that had been our client for a couple of

04:01>> years, doubled again what they had been doing from a functional perspective with us. And I think our contract was 550,000. So that was a nice welcome present for Vivek and his team. And since then, we've been apace doing pretty much the same thing as we have been doing. And now we're just on kind of the precipice of really starting to take an integrated approach. So our editorial calendar, our webinars, all of our marketing tools and tactics

04:36>> and things like that have all been percolating a little bit as we've been running as a fully separated subsidiary. But now we're starting to fold things in, Right? So that's gonna be really interesting. We're gonna

Revenue Outlook Inside QuestionPro

Nathan Latka

04:47check-in with us later. Inside of QuestionPro, what do you think just the SuiteCX business line will do in revenue this year?

Valerie Peck

04:56>> We're expected to do between 1.8 and 2,000,000.

Nathan Latka

05:00Okay. And are you wanting Yep. To do

Valerie Peck

05:03>> Rather than the 20% increases, we're looking for a 50% increase.

Nathan Latka

05:09That's great. Then take us into the details of deals

Valerie Peck

05:11>> 70 like 5% there now.

Nathan Latka

05:14Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

05:37your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

06:02get a different valuation. A VC is gonna pay a different valuation, private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this is

06:23not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired, the valuation and the multiple. Maybe you're

06:49going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but if

07:11you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into the

07:37interview. Deals like this die a thousand deaths before they close. Take us into the war path. Tell me tell me all the times this deal almost died. Why did almost die? What were the terms?

Valerie Peck

07:48>> Well, there were two really critical pieces. Critical piece number one was really getting to an agreement on the FIT. Again, that was really important to us. How would we be working with the different departments? And, you know, the the kind of the bottom line was, gee, I can go to anyone and get surveys now. How am I going to deal with getting just a QuestionPro survey tool? Are we going to be able to be open for

08:15>> our existing clients because they all have different tools, including QuestionPro, or are we going to be closed? Right? So it was important for me to stay open, but then appropriate cross sell the QuestionPro tools because that was really an important thing from an integration perspective. And then the second piece was a very interesting one that I think a lot of startups have. We are a qualified QSBS company, which in short terms means that

QSBS Status and Deal Structure Complexity

Valerie Peck

08:47>> we incorporated under the terms that if we stayed in business for five years and then we sold under this particular incorporation phase, we had no capital gains for any of the shareholders. Now that's really sweet for the person who is selling the company. Unfortunately, buyers are set up so that they want to do an asset purchase. And an asset purchase then results in a 50% capital gains cost for the sellers. So interestingly enough, our tax code

09:17>> is not designed to be particularly conducive to M and A. So, it ended up being kind of a decision whether or not, the buyer, Vivek, was going to gross up what we got so we would be made whole from a perspective of him being able to write off the assets or the alternate way of him buying stock, not being able to write off as much, but letting us end up in a better position from a capital

09:43>> gains perspective. So that went up and back. And that probably was the most difficult for everyone to deal with because it a

Tax Strategy and Deal Navigation

Valerie Peck

09:54>> lot of effort on either side to be able to mitigate that. So fortunately, I have a really good M and A attorney and tax guy, and he came up with some really good solutions that help mitigate that. So we got over that speed bump.

Nathan Latka

10:10Like what?

Valerie Peck

10:11>> Well, one or two of the things is how you allocate your resources and R and D fees. So how much you can write off from an R and D development perspective. And then what we actually did, interestingly enough, is a couple of my shareholders said that they would waive their shares so that we could then pump those up a little bit. And the two founders who did most of the work, my CTO and myself, we get

10:39>> a little bit of a bump so that that allows to have a little bit of a lower selling price so that we then, all came out as a win win.

Nathan Latka

10:48So what was that? So your key

Valerie Peck

10:50>> there is get a great tax person and a great accountant when you're doing this.

Nathan Latka

10:56Yep. So what was the headline acquisition sort of deal price? Not cash, not earn out, just the headline deal number.

Valerie Peck

11:04>> Yeah. It was, well, if you were looking at three years, it would be about probably 2,000,000.

Nathan Latka

11:10And why did you say three years?

Valerie Peck

11:13>> Well, because we did an installment sale. Another thing that's very typical in an opening my total umbrella here. An installment sale allows you to, well, allows the buyer to make sure that they're buying something that's going to keep going and keep making money. And the seller has some satisfaction of being involved in that over time. So think of it as a house, right? You have a down payment. And then based on your terms and conditions, you

11:42>> have subsequent payments to not only the team that is staying on, but the shareholders that are probably going to be bought out.

Nathan Latka

11:51I see. So $3,000,000 headline price looking at all the potential earnings over the next three years, how much of that was cash upfront?

Valerie Peck

12:01>> I'm not at liberty to say based on our agreement, but it would be, if you were doing a three year agreement, one could assume that it would be close to something like that.

Why Valerie Chose to Sell Rather Than Keep Running

Nathan Latka

12:10Like one third. Yeah, yeah, fair enough. Yeah. So let's Again, we're talking about hypotheticals now because you can't confirm or deny this, but the company's already doing about 1,000,000 a year in revenue, right? If you sell for 3,000,000 headline price and let's just say hypothetically only a million of that is upfront, then why not just keep running it yourself? You're already doing 1,000,000 a year.

Valerie Peck

12:32>> Very interesting. Again, that was a significant decision point of what we should do, whether we run that or not. Right? And there were a number of good reasons for it. The first good reason was the opportunity for me to grow back into my consulting roots and to do more of what I loved and less of what I really frankly didn't like, which was software sales. So that's where Mark Mandel comes in. He was part of this

13:00>> introduction and deal. He loves doing software. I hate it. Now I get to be free and have a global consulting practice as a capstone, frankly, to my career. And the software side gets well taken care of by Mark and his sales team. So that was a big consideration from a lifestyle perspective.

Nathan Latka

13:19So Mark has been retained by QuestionPro now. He's an employee

Valerie Peck

13:21>> of Yes, he is now VP of sales for North America.

Nathan Latka

13:25Oh, very interesting.

Valerie Peck

13:26>> Yeah, for CX. Yeah.

13:29>> And again, so that was very helpful. A couple of the other people in the team wanted to step out and do less. So that gave me the opportunity to let them do that and to bring some new people in. And

13:45>> probably, don't know. I mean, I've done a lot of work when I was at KPMG and PWC and money training, all those elements as you probably well know is that money in the hand is worth a lot. So in order for me to make that headline, I would have had to triple in size personally. And in order to do that, I would have to then go back to my 401ks and rob them again of almost that

14:14>> much money to be able to make the money back again. So having an investment like that over the period of time that you're saying is far more, the cash flow is far better when you're doing an alignment in a sale like this as compared to trying to make it yourself bootstrapping. You

Nathan Latka

14:33talked about the qualified QSBS company, I believe what you're I think what that is, you're talking about QSBS. Right?

Valerie Peck

14:39>> Yes.

Nathan Latka

14:40Yeah. Yes. So, guys, just quick quick breakdown on this because then I wanna ask about the 3,000,000 deal price. QSBS, if you are common if you're a common stock owner and you've held your stock for more than five years and you sell, you can shelter. It's usually up to about $10,000,000 assuming you're not setting up a bunch of trusts or something like that. So it's $10,000,000.

Valerie Peck

14:56>> With lots of red lines of what kind of company it is as well. Yeah.

Nathan Latka

15:02So So that would

Valerie Peck

15:02>> theoretically tighten those rules quite a bit.

Nathan Latka

15:05Theoretically, though, like if you sold for $3,000,000, I'm making this up now at this point, and you and you personally made a million dollars in cash from the deal, theoretically, you shouldn't have to pay any taxes on that. Correct?

Valerie Peck

15:18>> Correct. Correct. Now, part of that overall deal though is salaries and benefits and perks and spiffs. So if you look at that total deal, it is not just a cash price deal, it's a mix, which is another thing that was, again, for where we are in,

15:36>> you know, if I was 28, I might want a different deal.

Nathan Latka

15:40Yep. So help me understand this. I guess where I'm not following the rest of this, would a 50% cap gains cost for Vivek and the buyer, I guess I'm not understanding how that correlates with the QSBS shelter.

Valerie Peck

15:49>> So if I had to pay taxes, so say it's a $100,000. Right? He's gonna give me a $100,000 that's sheltered. Right? Or he's gonna give me a $150,000 that's taxed.

Nathan Latka

16:02But why would you choose to not shelter the money you make on this? You have QSBS.

Valerie Peck

16:07>> Because he wanted he wanted an asset deal because he can write a 100% of the cost of the company down immediately in year one.

Nathan Latka

16:16So you can't use QSBS if it's not a full sale. If it's an asset sale,

Valerie Peck

16:20>> If you it's not a sale of stock, stock's the thing. So this is the friction point that the tax code has set up that buyers and sellers have to navigate because it makes it so that it is either, you know, a benefit of to one or the other,

16:42>> which are almost opposite, right? So if you buy stock, the buyer can't write off those assets. If they buy assets, the seller has to pay tax on the stock.

Nathan Latka

16:58I say, you can't use QSBS coverage there.

Valerie Peck

17:01>> Correct. And

17:05>> again, there's probably, I don't know what the subset of those types of companies are, but in the Valley and where I grew up in the Bay Area, that was something that, you know, fifteen years ago when we started SuiteCX, that was a real feather in a cap of somebody who was trying to optimize their career of having this particular thing. That's where our attorney came in and said, you know, let's grab this opportunity because it is

17:33>> a big one.

Nathan Latka

17:34Well, congratulations on your capstone.

Famous Five: Books, Tools, and Life Lessons

Valerie Peck

17:36>> What an exciting moment for you and I can't wait to see what you and Vivek do. Today, though, we're out of time. Let's wrap up with the famous five. Number one, what's your favorite book?

17:47>> Right now, actually, it is Peppers and Rogers Managing Customer Experience edition number four.

Nathan Latka

17:55You're very consistent. That was also last year.

Valerie Peck

17:57>> What did you say? Well, it's all doggeared now and I give it to everybody.

Nathan Latka

18:02That's awesome.

Valerie Peck

18:03>> There's a few others that are good as well.

Nathan Latka

18:05Number two, is there a CEO you're following or studying?

Valerie Peck

18:09>> Interestingly enough, I'm following what's going on with First Republic right now. Yep. Number So the CEO and team there, I think, are navigating a really difficult situation quite well from a customer experience perspective.

18:28>> Yeah, money is certainly a confidence game and we're seeing that.

Nathan Latka

18:32Three, what's your favorite online tool for building SuiteCX?

Valerie Peck

18:36>> For building SuiteCX?

18:40>> Actually, I'm having quite some fun with ChatGPT.

Nathan Latka

18:44There you go.

Valerie Peck

18:45>> I just did a poem for SuiteCX.

Nathan Latka

18:48That's awesome. How many hours of sleep are you getting every night?

Valerie Peck

18:52>> I am now back to six hours of sleep again. It's awesome.

Nathan Latka

18:56That's great.

Valerie Peck

18:57>> And I think last time you said not married, six kids. Is that still accurate?

19:03>> Happily not married for seventeen years now with my significant other, who is our CTO.

Nathan Latka

19:09You are married?

Valerie Peck

19:11>> Nope, nope, we're happily unmarried for seventeen years.

Nathan Latka

19:14Oh, amazing. Okay, six kiddos, six kiddos. And did you celebrate a birthday since we last spoke? You said you were 67 last time.

Valerie Peck

19:22>> Yep, well, 68, yeah. Well, happy. So I'm, yeah.

Nathan Latka

19:25Happy late birthday. Last question.

Valerie Peck

19:27>> Still on the right side of the turf.

Nathan Latka

19:29That's right. Well, you've got the energy of a 20 year old, so I can't wait to see what you do next. Last question, Valerie, something you wish you knew when you were 20.

What Valerie Wishes She Knew at 20

Valerie Peck

19:38>> I wish I knew how difficult it was to actually start up and run a business beyond knowing the thing that you know, all the things that went around it so I could have gotten smart sooner.

Nathan Latka

19:51Guys, suitecx360.com launched fifteen years ago. It's a consulting plus SaaS play. The pure SaaS revenue a year ago was about $708,000 on track to do 1.8 this year. And one of our other podcast guests heard Valerie on the show had mutual connections and actually bought Valerie's company, call for a $3,000,000 headline number. She is now happily working at QuestionPro, building that team. Learned a ton and, again, hoping to grow this year. She did it all bootstrapped,

20:19which we love. Valerie, thank you for taking us to the top.

Valerie Peck

20:22>> My pleasure. You have a great one. Don't do anything I would do.

Nathan Latka

20:26One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. 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 one

20:51p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two 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 SaaS world, whether it's

21:12an acquisition, a big fundraise, a big sale, a big profitability statement or 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 SaaS 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

21:34are saying. Sign up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. And 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

21:54counter those people. We got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. See you.