Switch Revenue & Valuation (2018)

hello everyone my guest today is bruno san roman she's a business developer graduated in international relations uh and with a master's in political sciences and now is a digital nomad yogi and supporter of a plant-based life she's brazilian 28 years old living in the netherlands and the freedom of managing switch.cm her company from home is unique a gift from the founder and former owner of switch we'll jump into the story today but bruno are you ready to take us to the top yeah definitely okay so what is switch.cm and and what's your revenue model how do you make money so yeah we're set as uh foreign properties we offer the three main basic functions that this business owners need to manage their properties we offer pms profit management system functions a channel manager built-in channel manager and a booking engine for their website okay and are they paying you a sas type fee yeah so they pay us either monthly or annually our pricing plans are very simple just based on how many channels and otas they connect to and we don't really charge based on size of properties or revenue we have a simple simple fee based on on the channels okay and so describe kind of what the average hotelier might pay you per month for your tool so if there are very small so they just i don't know connect two to two channels they may pay us uh nine euros or nine pounds nine us dollars per month in an animal plan and up to 49 or 55 per month if they connect you up to seven channels okay so what would you say the average customer pays you though nine or ten bucks or closer to 40 or 45. our average ticket is around 30. okay uh yeah most of our the median and um and small properties nowadays they connect to four channels which is our basic plan so bruno that's 30 a month correct yeah that's great so let's get some of the let's pick up some of the back story here so you it sounds like you maybe bought this company from someone else or they passed it on to you when did the original founders create the company and how did you come to control it so basically the founder created because of their own frustration with existing pms and channel manager in the market so he had some hotels in bali new york and seasonal hotels in london and yeah he just found it very frustrating to use the existing services he tried many softwares at the moment and then he saw the opportunity to develop his own in what year it was 2014 the end of 2014 okay and he met brilliant developers in bali and they just started developing a easy system user-friendly and they saw the opportunity of offering the system to other hotel owners as well so they yeah they build their own channel manager they started growing in bali first with a small sales team and then in one of my travels to london back then i was working for wordpackers which is another travel related uh platform for for work and travel and uh so back then i i met them because they were using wordpackers and i met the owner and he was like wow so you visit many hostels um you also yeah you work remote so why don't you start working for switch uh showing the our platform to this hostess that you also visit to to discuss about work package so then i started doing some sort of freelance work for both companies and yeah he liked the development and how i was getting more business for switch so i i quit the work with wordpackers and started doing business developer for switch and the company grew a bit but they also had some financial problems basically because they were not really charging a big fee for for users they were using those strategy of premium and premium and then what year was what year was this that you took over uh it was basically in 2016 that i joined the team but then in april 2017 they sold the company to to a new company to fly miami and bod tag team based in myanmar and singapore and then since this company acquired switch i became the managing director so i'm not the owner per se but i worked mostly as a ceo of flight of switch.m well i hope you at least have equity or something uh yeah i do okay good good yeah all right and and what have you scaled to today in terms of total customers so since the acquisition we changed completely the the growth model and the strategy the pricing and so on uh we have grown 150 percent uh in terms of users and um yeah basically so what does that mean in terms of total customers today uh we have 200 plus in 40 countries oh wow that's great okay so so 200 kind of customers across 40 countries you know paying 30 bucks a month that would mean you're doing about 6 000 per month in revenue is that accurate yeah yeah almost dead okay we still have some framing users from from the past um yeah the best sure but free free users obviously don't feed free users don't feed obviously your revenue right because they're not paying they're free yeah exactly they're still yeah we continue honoring those um yeah the sales strategy from before but we do uh offer some upgrading models for them as well okay and if you go back a year in december of 2017 about how much were you doing then per month do you remember it was less than thousand less than a thousand okay so we'll say maybe a thousand bucks so going from a thousand to six thousand a month is actually way higher than 150 percent year over year growth yeah yeah that that's correct well but you didn't do the difference but you just said you just said that you're growing about 150 year-over-year so is it 150 or is it way more no yeah it was in terms of uh the quantity of users oh i see the number of customers got it got it because of the the average ticket is a little bit different sure and walk me through now you know it sounds like early on you were getting customers because you were doing all the traveling and you were the woman on the ground yeah breaking down walls how are you getting customers today so um we do have a sales team on the ground again making calls and doing appointments we have been doing also a couple trade shows uh in the region myanmar and indonesia bali these are our main uh market focus markets at the moment and then we also have um a small sales team in eastern europe it's another focus market of us and um for 2000 for the end of this year and next year we're focusing on a bigger district prisons so we want to put more money on pay-per-click and have a better seo and be more out there and what are you spending right now to acquire a customer in terms of fully weighted calc if we do count on salaries and and labor reports it's quite a lot still like how high um i would go up to 40 to 50 a month per year well why do you say 40 to 50 per month once you get the customer it's a one-time cost to get the customer so you're saying 40 bucks up front to get a new 30 a month customer yeah yeah but we do yeah i i consider the the the lifetime as well so then the the customer card team just to give the support oh i see what you're saying what you're saying is it costs you 40 bucks to land a customer and you spend 40 to 50 bucks every single month supporting that customer yeah more or less yeah okay so that 40 or 50 books you spend up front to get the customer where are you spending that right now besides salaries yeah we do have a small budget for road shows so we're seeing new places and and the travel up there and a small budget for uh promoting social media and channels and um yeah the the couple trade shows that we've done this year also it's included in that that's great and churn is obviously critical in a sas company like this what is your churn and how are you thinking about keeping that low yeah we do believe that putting more money on on promoting a reactive sale so we just will be there and then customers will come through the pay-per-click or through the website through our searching engines we do believe that this may be it's a way to it's a pathway to grow for next year so sorry my question is about churn which is how many customers you're losing what's your turn today per month oh yeah we still have that um so our counseling rate is around two to three users per month okay out of 200 so that's about that's about what one percent two percent a month yeah yeah that's pretty good we do believe it can be it can be zero it's just a matter of um yeah we want to optimize a little bit uh the setup moment and the online training we do all for now yep great makes good sense and what's the total team size today we are 16 in house and 19 considering also freelancers okay and everyone's spread out around the world yeah correctly we only have three persons based in an office in myanmar and one actually in singapore but the rest work from their home happy and free so so doing six thousand dollars a month obviously is not enough to pay 19 people so is the parent company just still sinking money into this to grow it that's yeah that's correct i see so what i mean what's the next goal what do you want to grow revenue to and how do you think you're going to get there yeah we believe we need to focus on on growing the customer base um it's to you the our website our internet-based phase is still not um 100 ready to just put more money on on digital marketing but we do believe that this is a way of growing our customer base got it very good bruno let's wrap up with the famous five number one what's your favorite business book um i totally forgot this name it's about coaches uh culture map culture coach culture map culture map spell it c-o-l-t-u-r-e map culture map got it culture map very good number two is there a ceo you're following or studying right now um no not really number three what's your uh what's your favorite online tool for building the company um trello i usually extensively a number four how many hours i sleep to get every night seven and bruno what's your situation married single kiddos i'm single i have a boyfriend okay here in the netherlands for already four years oh great so not married no kids no okay but i do meditate every day and this is really important for my sanity and and clarity of mind i like that i think that's good do you mind me asking about how old you are i'm 20 28 28 very good and last question what do you wish your 20 year old self knew that um drinking a lot is not a really playful area for yourself guys drinking a lot is not good right that's it that's the easy one there founded actually really joined switch.cm which is hoping helping hoteliers manage their business many years ago call it two three years ago when the company was sold she took over as managing director now they're serving about 200 different locations that each pay 30 bucks a month so six grand a month in revenue up from a grand in revenue just about a year ago so healthy growth a team of 19 obviously burning cash the parent company continues to invest the 19 are based all around the world 2 logo churn per month so fairly low there as they look to scale up to thousands of hotels using them bruno thank you for taking us to the top thank you nathan