Kitovu Revenue & Valuation (2018)

hello everyone my guest today is tom cameron he's abandoned a structural engineering career in 1997 to pursue internet technology he's founded multiple small businesses and two internet sas companies he currently lives in brisbane australia where he co-manages a co-working space and manages his company to do vue and still has a hand in a web consulting business he founded 18 years ago tom are you ready to take us to the top ah yes i am all right so so what is to do view and is your revenue model purely a sas one uh yes so to do view is a uh a sas solution providing a suite of productivity tools to freelancers and uh small and micro businesses uh and yes yes our revenue model is purely sas that's great so what are people paying on average per month for this kind of tool uh well it's nine dollars per user per month and our average team is around three uh users so it's actually quite small and quite cheap that's great so maybe 27 bucks per new logo three team members that that's correct yes that's great and when did you launch this company what year uh it was 2014 we started up with the idea we didn't really go live until about a year or so after that okay and and kind of why get into this space it sounds like get your hands full with consulting business co-working space a bunch of other stuff yeah well i've spent the last 20 years really working in small business uh myself and really i didn't i couldn't find a tool that gave me the solutions that i needed for the price that i thought was acceptable and i really felt that there was a space there for a solution for really small micro businesses and freelancers it makes a lot of sense and it looks if you're incorporating kind of crm project management time tracking and billing for freelancers and consultants all in one spot yeah that's exactly exactly right you know there's a lot of talk about uh plugable solutions and and building solutions from multiple different sources but the reality is for a lot of small businesses that can turn out to be an expensive complicated and ineffective uh approach uh my analogy has always been when you put the camera in the phone it became a completely different type of solution so bringing those things together can behave completely differently and so what have you scaled today in terms of kind of total customers on the platform we've got around 5 000 customers but to be honest around 500 of them are actually paying customers we have a free solution for freelancers okay got it so 500 uh kind of paid and can i multiply that times 27 to get mrr correct okay so about 13 000 bucks a monthly recurring revenue that's right yeah that's great and what does growth look like so if we go back a year to november 2017 what were you doing per month then uh we were doing about a quarter of what we're doing now so we we've 400 in the last uh 12 months that's great obviously small numbers are nice but growth is growth right so we can we can still use the big percentages where is most that growth coming from um to be honest it's spread out internationally uh we've we've never chased any particular market our only limitation at the moment really is english-speaking uh small business and our advertising is entirely global we get about a third from the us and america's about a third from europe and about a third from the rest of the world and tom have you bootstrapped this entirely yes so uh out of my revenue from other businesses bootstrapping myself yep that's really great and walk me through a kind of story because of 2014 you launched the company what do you get today is it just yourself or do you have a team it's literally just uh myself and a couple of developers from within my other business uh and then a couple of contractors and freelancers i've got a little bit of help with you know content development um a little bit of marketing help that sort of thing yeah keeping costs very low everyone's in brisbane um although some some from overseas okay very good so call maybe you know one two three maybe full time and then have a little small army of consultants and freelancers to help you out when you need it that's correct that's correct yes that's great um at this kind of price point churn is typically an issue smbs go out of business a lot so what is your turn today and how do you manage that well to be honest you you've zeroed in on our biggest problem um the churn is a bit over three percent per month um and that's definitely a concern for a month three percent per month yeah time is that logo churn or revenue churn [Music] oh sorry sorry that's um that's logo churn yes which actually equates very very similar to revenue yes so our biggest approach at the moment is is focusing on getting the right fit of customers um really rather than focusing on how to maintain customers who might be unsatisfied with the products we feel that the best approach is to focus on bringing the right people in and finding the right market um and then obviously just making sure we can engage them uh throughout the entire process and in terms of acquiring new customers are you doing any you know paid spend or is it all organic no actually about 40 percent of our traffic to the front of our website is from paid traffic um so that tends to be a range of google adwords uh facebook a little bit of being and but also the software directories like get app and captura so they tend to be our best sources of traffic and so okay what do you to get a new kind of 27 per month customer what are you paying to get that customer typically okay we're paying well we i've done the sums backwards we get our revenue back in about six months six six to seven months okay so um it depends a bit on the source we've got some sources that are very cheap and very effective but we get a small amount of traffic from them we've got other sources uh that get us bigger traffic but obviously they cost a bit more okay so i mean if six months times obviously 27 bucks in terms of what they pay per month would put your cac at about 162 dollars does that sound about right that sounds right yeah and name like a cheap channel but with not a lot of traffic okay cap terra capetera and get app um listings on the software directories clearly people are going straight to those directories to find uh products that meet their needs and that traffic is very high quality traffic we get a very good conversion rate at the front end of the website how do you get reasonably of about between 15 and 18 percent of those people who come to the front website actually sign up for a free trial no they don't start paying they sign up for a free trial okay um and then other sources of traffic tend to sign up for a free trial more around the five to ten percent range and how many trials do you need to get a new paid account um we're getting around a four percent conversion of trials to a new account so if you get 100 from keptera or gitapp you'll get about four new customers yep that's great so why not pay more to get a higher placement on git app and captera and g2 crowd we're finding we're just getting outbid by everyone else they're paying much much higher bid prices um to the point where to even try to get beyond uh their positions we'd have to pay five to ten times what we're currently bidding um but so it just simply becomes uncommon very quickly and really that's something i've learned is that because we're in the space of very uh new products and small micro businesses um we simply can't bid against the companies that you know have a much more expensive offering and therefore can i so it's a challenge why aren't you all in on this it sounds like you're doing multiple things at once but this thing kind of requires full attention if you really want to get it to a million bucks in revenue or five million et cetera yeah my my plan is definitely to pivot i mean i'm my plan is to build this up to a point where i can then phase out of the other business and then go on to this full time in focus so you know obviously that's a tricky thing to do um but i've made my decision that i believe it's worth it um certainly with the growth that we've seen over the last 12 months if i can keep that up for another 12 to 18 months i'll be in a very good position then to start pivoting completely uh and also what do you mean pivoting changing the current product or selling this and doing something else sorry sorry pivoting my whole business structure in a sense of getting rid of the consulting business and then focusing a hundred percent on the startup i think um yeah so uh at the moment you know i still need to achieve revenue from my other businesses would you ever sell the software product and then double down on the agency it's it's no i i think i'd probably want to stick with the software product it's it's it's my love it's what i want to do uh i'm seeing with the growth that i'm seeing in it and and the reward for effort i think it's definitely the space i'd like to be if anything what i might do is source uh investment in the future but only when i feel that i really need it and uh and i'm in a position to control um to some extent you know the structure of investment very good all right let's uh let's wrap up here tom with the famous five number one what's your favorite business book i'll go right back to crossing the chasm um [Music] some time ago i read that and it just changed it just changed the way i think yep number two is there a ceo you're following or studying currently uh probably i've always followed richard branson i i like what he does and i've always followed him yeah number three what's your favorite online tool for building the company probably i'm still using the google app suite i find i i use it throughout the business building charts building graphs um a lot of a lot of spreadsheets yeah google apps and uh next question how many hours to see are you getting every night oh actually i sleep pretty well i sleep pretty well probably you know six to eight hours okay and what's your situation married single kids yeah i've got one um and yeah married one kid tom and how old are you i'm 50. 50. last question what do you wish your 20 year old self knew um i wish i was brave i wish i would take a few more chances i was probably at that time i was probably too hesitant and uh really didn't go out and try things um stuck with the more traditional part of uh career i should have done this as much earlier guys there you have it take more risk go after it sooner coming from the guy that created to do view back in 2014 again helps freelancers manage billing time management a bunch of other stuff uh you know sending out invoices they passed 500 customers paying 27 bucks a month so 13 000 bucks per month in revenue that's up from 4k per month in revenue just a year ago three percent logo turn per month spending 162 bucks to get a new customer at 27 bucks a month so six month payback period team of you know one or two people within a small you know three four group of freelancers working on a need basis all based down in australia tom thanks for taking us to the top no appreciate your time thanks very much