How Trainual Reached 2,500 Customers and a $120K Monthly Ad Spend in Under Two Years (Interview with Founder and CEO Chris Ronzio)

Nathan Latka

00:00You're gonna love this interview. Just got done editing it. I'm glad I got it live for you. I'll be in the comments for the next thirty minutes hanging out, answering any questions you have. In fact, leave a comment below about data points or what you think is gonna happen to the company, and I will respond to every comment. Additionally, if you're just loving the content, click the thumbs up and I will go and check out your

00:18profile as well and give your videos some love as well. In the meantime, enjoy the interview.

Introduction and What Trainual Does

Nathan Latka

00:25Hello, everyone. My guest today is Chris Ronzio. He's the Founder and CEO of Trainual, a SaaS platform for entrepreneurs and employees to get their business out of their brain by documenting and delegating the processes in their company. Chris, you ready to take us to the top?

Chris Ronzio

00:38>> Yeah, let's do it.

Nathan Latka

00:39So I thought about you earlier this week because we put out a big piece on GitLab and, we had Sid on the show. And one of the things that he credits to so much of his success for scaling his remote team is his employee handbook, 700 pages worth of stuff. This is this kind of what you're helping companies do document this stuff?

Chris Ronzio

00:53>> Yeah. Policies, processes, procedures, best practices, like everything that the company knows collectively, we want to put that in one place so you can access it as you scale.

Nathan Latka

01:02And so for people that missed your first episode, give us the quick update here. When did you launch the company? What year?

Company Launch and Funding History

Chris Ronzio

01:08>> January 2018. So it's been almost two years.

Nathan Latka

01:112018. That's great. Now bootstrapped or raised?

Chris Ronzio

01:15>> Bootstrapped.

Nathan Latka

01:15Even today, totally bootstrapped.

Chris Ronzio

01:17>> So we did a convertible note round just after my last episode last year. So December 2018, we bootstrapped the whole first year and then this year, the convertible notes have grown us to this point.

Nathan Latka

01:27Okay. How much did you raise on convertible notes? Hey, Chris. Much? 50?

Chris Ronzio

01:33>> 750.

Nathan Latka

01:34Oh, $750K. Okay. Do you looking back, I mean, did you need that capital, or was it more like a cushion, a fluffy thing?

Chris Ronzio

01:41>> We did if we wanted to keep scaling our advertising. That had you know, scaling our ads on my credit cards, it got us to where we were, and we wanted to keep it going.

Nathan Latka

01:49So how I mean, how aggressive are you being? Like, last month, you're talking, like, $30K a month spent on ads?

Ad Spend and Primary Growth Channels

Chris Ronzio

01:54>> No. Last month, we were probably a 120,000 on ads.

Nathan Latka

01:58Okay. So is this your main growth channel?

Chris Ronzio

02:01>> It has been to date, but it's starting to flip where we're getting more of our signups from organic now just based on how much content marketing we've done.

Nathan Latka

02:09Okay. Well, so let's dive into that. So you launched in 2018. People are buying who is buying this typically? Is it head of HR?

Who Buys Trainual and Pricing

Chris Ronzio

02:16>> It could be HR, it could be operations, could be sales managers. So it's anyone with a team that they want to train or get up to speed faster. People use us for onboarding their new employees and then for just keeping everybody consistently up to speed on the newest stuff.

Nathan Latka

02:30Okay. And so what are they paying on average per month for this or per year?

Chris Ronzio

02:34>> On average, they're a little over $100 a month. Okay.

Nathan Latka

02:37And are

Chris Ronzio

02:37>> you, like, 1,300 a year?

Nathan Latka

02:38Are you upselling against, like, number of seats or feature based upselling? How do you upsell?

Chris Ronzio

02:43>> We have two packages that are split based on features. So the premium one has, like, built in screen recording and and animation and GIPHY and stuff like that. The base plan just doesn't have that. But then it's based on 25 user increments of seats.

Nathan Latka

02:5625 user increments of seats. So it's essentially staged buckets, basically.

Chris Ronzio

03:01>> Yeah. So the big utility of our app is it's tracking everyone individually being trained up to speed, up to date. And so we didn't wanna sell per license per user and have people share logins and kinda game the system. So 25 user buckets kinda match with the stage of a company.

SEO Growth and Backlink Strategy

Nathan Latka

03:17Yeah. Yeah. Very interesting. Now you have really invested in your SEO game since the last time you came on. So according to Ahrefs, you've added almost 400 referring domains over to 2,300 backlinks over the past twelve months. How are you doing that? Is it internal? Do you hire an agency or what?

Chris Ronzio

03:33>> No, we do all of our marketing internal. So it's been just a lot of outbound PR efforts. We've started doing a lot of content on our website, guest posts. We sponsored events. We sponsored podcasts. So we've gotten a lot of traffic from those things.

Nathan Latka

03:45Okay. Interesting. So what is the team size today? And what's the title of the person managing kind of the backlink the SEO growth?

Team Size, Engineers, and Sales Reps

Chris Ronzio

03:52>> So team size 24 today. And, my brother actually is our CMO, and he's still managing all the the marketing content.

Nathan Latka

03:59Oh, very cool. Okay. Who owns more of the company? You or him? Me. Oh, nice. Are you older too?

Chris Ronzio

04:07>> I am. So I came along for the ride.

04:09>> Yeah. I love that.

Nathan Latka

04:10Alright. So 24 folks full time. How many engineers?

Chris Ronzio

04:13>> Six. Six. Okay.

Nathan Latka

04:14Any quota carrying sales reps at this price point or is it too low for field to field sales?

Chris Ronzio

04:20>> No. We've got two sales reps, but they're a 100% inbound. So it's more about just talking to customers that need extra help.

Nathan Latka

04:27Interesting. Okay. So ad spend scaling, like a lot of people have this thing where if I just raise, I can just spend a $100K a month and it'll work. You're actually are now spending that much per month, but I imagine it wasn't just a flick of a switch. Right? Talk to me about some of the learning curves on that.

Scaling Ad Spend and Lessons Learned

Chris Ronzio

04:40>> Yeah. So the ramp went up pretty consistently. When I was on here last year, I think we were spending 30 or 40,000 a month, and we went up to 50 and then 55 and then 60. And as we were doing it, we're constantly measuring our acquisition cost, how many sign ups per week we have, and then making sure that a huge swath of those customers aren't canceling as soon as they get in the app. Because that's

04:59>> a challenge that we saw last fall, we brought in a huge wave where we, like, doubled our customer count in a month. And then we saw, our our churn spike because we got a lot of bad customers. So we were a little more careful about how we ramped up, but it's just been swapping out better creative and saying what messaging resonates with the customers that are staying the longest and what case studies do we have from

05:20>> you know, we've got 200 customers doing this particular thing. Let's make a case study out of it and target our marketing a little more. So it's just gotten a little more sophisticated, I'd say, in the last year.

Customer Count and Year-Over-Year Growth

Nathan Latka

05:29And so how many customers are you now working with today?

Chris Ronzio

05:32>> We're just over 2,500 now.

Nathan Latka

05:34Okay. That's significant.

Chris Ronzio

05:35>> This year. Yeah.

Nathan Latka

05:36I mean, you were at 600 last time you came on the show.

Chris Ronzio

05:39>> Right. It's been a big year.

Nathan Latka

05:40Yeah. That's great. I mean, congratulations. So 2,500 at a $100 a month. I mean, that's $250K a month in MRR. Is that about right?

Chris Ronzio

05:47>> Yeah. That's we hit that last month.

Nathan Latka

05:48That's great. That's up I mean, that's up from, again, about 60,000 exactly a year ago, right? Almost three, well, no, four or five x year over year growth.

Chris Ronzio

05:57>> Yeah, so we should end this year at the about 3.5 ARR.

Nathan Latka

06:02Yeah, that's I mean, this is this is like the kind of story you love hearing. Now, let me ask you a question. Would you ever get to the point and kind of pull a pull a Zapier where you essentially actually pay back that convertible note instead of converting it and doing an equity round?

Convertible Note Structure and Investor Terms

Chris Ronzio

06:14>> No. So we had an interesting trigger in our convertible note where once we hit a certain revenue threshold, the ability for me to pay back went away. So it was investor friendly. Oh. But but I was good with it because I didn't wanna be in a position where we're spending all the investor money, and then I don't have the money to pay them back if they demand it. So it was it was kinda like they took

06:35>> a flyer and and they get the reward for that.

Nathan Latka

06:38Oh, that's interesting. So it sounded something like we'll give you 750 at like a 6% interest rate and like a 20% discount. But once you hit like, I'm making this up $2,000,000 in ARR, we get 10% of the company.

Chris Ronzio

06:50>> Yeah, it was like that. So interesting. Yeah. So so it's kind of creative, but so is everything we do, I guess.

Nathan Latka

06:57Why did you choose to use convertible notes instead of actual just regular debt?

Chris Ronzio

07:04>> So at the time, we didn't really have many options for regular debt. So I was looking at, you know, the revenue based lending and what I could get from them as a multiple of our trailing ninety days MRR and and, the convertible debt, could get a lot more of. So and for and it was also a few close, contacts. So it was kinda like these had been advisers that helped on the business, and they wanted to

07:27>> come in and be a part of it.

Nathan Latka

07:28Yeah. Would you consider if you wanted to raise more? So to avoid you have equity, would you consider going out and raising debt today? Traditional debt?

Chris Ronzio

07:35>> Yeah, absolutely. I think, I think, yeah, that's a great view. If you've got a marketing vehicle that's working like we do, I think that's a, absolutely a good option.

Nathan Latka

07:45What would be enough where it's worth your while to actually take it? Like, is $500K, you know, three, four months of ad spend meaningful to you, or would you try and raise more?

Chris Ronzio

07:52>> It'd have to be more, I would say. Interesting. Because what yeah. Because it depends on the debt structure. You know, if you're only taking a few months of of ad spend, then a few months you blow through it, and now you've got some multiple of that debt or at least some fraction of the debt that you've gotta pay back and you're servicing debt, it doesn't keep working for you. Mhmm. So I feel like it would have

08:11>> to be a, a longer term amount of money.

Nathan Latka

08:15When you say longer term, if someone offered you, I'm gonna make this up, you know, $700K on a three year term, right, flatline. So it's not an RBF. It's not percent of revenues, flatline interest rate at call it somewhere between, like, 14 to 20%. Is that kind of structure more interesting to you because you can use that to drive MRR today?

Chris Ronzio

08:33>> Yes. I would say if if the interest rate was low enough and you can model it where our payback period is, you know, call it four months today, If I can bring in all those customers with some accelerated ad spend and have new cash flow to service that debt over the next window of of time, it could make sense. It would just depend on the the structure.

Nathan Latka

08:51Interesting. Alright. I might be sending you a term sheet after this. What what what just to get the juices going. So churn was 48% gross revenue churn annually about last year, but your cohort size was small because you just launched. What's what was gross revenue churn over the past twelve months?

Gross Churn and the Four-by-Four Activation Metric

Chris Ronzio

09:06>> So it's gone down a bit, but it's still in the high thirties, low forties. So it's what we've saw though is that the customers we bring in, if they if we can get them activated, which means that they've added a few users, create a few things inside Trainual, they stick.

Nathan Latka

09:19Wait. What be specific. What is create a few things Okay.

Chris Ronzio

09:23>> So four users and four subjects is our metric. Four by four. We've got posters of like a Jeep driving up a hill all over the office. So if they do a four by four, churn is under 1% monthly. It's like a, like, point 7% monthly, which which is really where we wanna see overall churn trending toward. And so our game is how do we invest enough in customer success to ramp those customers up quickly, guarantee their

09:46>> success. Now not all of them that sign up are are ready for the tool. So part of ramping up our customer success is identifying, hey. This probably isn't a good fit for you yet. Let's not convert you. So we're so we're evaluating that.

CAC and Payback Period

Nathan Latka

09:59And what is CAC look like today to get a new $100 a month customer?

Chris Ronzio

10:03>> $350 to $400.

Nathan Latka

10:05Okay. So that's about the same as what it was last year, about three to four month payback period. Yes. Which I mean, which is helped by the way, like there are so many companies, Madwire is a great example of this playing almost at this exact same price point in the SMB space where their churn is high, call it even higher than yours, but their payback period is so fast and they're spending and they're adding so much new

10:23they know that two customers are going to 10x their price point five years from now from a new cohort of a 100, and that's all they need to make the cohort profitable. So it works. Right.

Chris Ronzio

10:34>> Right. And you get so much great knowledge from the cohort and the the the ones that are churning. Like, I think one of the things we've done well in the last year is we've gotten scientific about why people cancel and calling customers and having conversations, and it's like free market study research. You know, they signed up, gave us a month or two or three months of of revenue, covered their acquisition costs, and we learned how to

10:56>> get better in the future. So I I think it's healthy if the economics work.

Nathan Latka

11:00Makes total sense. Now are you guys burning cash today to drive growth?

Cash-Flow Breakeven and Openness to Equity

Chris Ronzio

11:05>> Surprisingly, we just crested the profit cash flow profitable mark. The the and that's due to annual sales. So annual sales coming in the cash flow from those, you know, keeps our it keeps us right about breakeven. Whether we we start to burn, take on new debt, take on equity, it's kinda up in the air right now. But, that's that's where we're at, and I feel like it's a good place to be.

Nathan Latka

11:28Would you do a big equity round right now or no?

Chris Ronzio

11:33>> What was that?

Nathan Latka

11:34Would you look at equity right now if if a VC came to you and said here's x for x percent of the company, would you look at it?

Chris Ronzio

11:39>> Yes. And the reason would be if it was strategic, if they've done a small business scaling path before, if they, you know, they've they've got connections for us, they've got, you know, there there's, I think, more reasons to take equity than beyond just the the financial side of it. So I'm open to anything.

Nathan Latka

11:58Who's your dream VC?

Chris Ronzio

12:02>> The the, the one with the best terms.

Famous Five Rapid-Fire Questions

Nathan Latka

12:06That's the best answer I've ever heard of that question. Alright. Let's wrap up, Chris, with the famous five. Number one, favorite business book.

Chris Ronzio

12:15>> We I just read Radical Candor, and I I was listening to it. I listened twice, and it was so helpful for where we're at in our team size.

Nathan Latka

12:21Number two, is there a CEO you're following or studying?

Chris Ronzio

12:26>> I'm in, I'm in this group called SaaS Academy with 75 other CEOs. And so I'd say all of them, like my peers are who I'm studying.

Nathan Latka

12:33Yep. Number are you close to David at Jetpack Workflow?

Chris Ronzio

12:36>> Yeah. He's great.

Nathan Latka

12:37Okay. Good. Number three. What's your favorite online tool for building your company?

Chris Ronzio

12:41>> ProfitWell.

Nathan Latka

12:42Number four, how many hours of sleep are you getting every night?

Chris Ronzio

12:47>> About seven.

Nathan Latka

12:48Okay. And what's your situation? Married, single, kiddos?

Chris Ronzio

12:51>> Married, two kids.

Nathan Latka

12:52Okay, good. You busy guy. Last question. What do wish your actually, how old are you?

Chris Ronzio

12:56>> 34.

Nathan Latka

12:5634. Okay. What do wish your 20 year old self knew?

Chris Ronzio

13:01>> I would say, like, do it my dad always said, do it now growing up. Like, and he meant carry my shoes up the stairs or whatever. But I feel like when I go to a conference and I get a good idea and my brother and I go back to the hotel room and execute that night, that's when we see the biggest results. So I would say just do do things now.

Nathan Latka

13:18Trainual, guys. Helping brands, small businesses, document processes that ultimately are what drive the business growth. Launched the company in 2018. Over 2,500 customers today. They're doing $250,000 a month in revenue, up from $60,000 a month just a year ago. So over 300% year over year growth. Their number one engine ad spend, $120,000 spent last month to get new customers, spending about $300 to get a new customer or 400. So about a three to four month payback

13:41period. They did raise $750K on a convertible note to drive some of that growth. Now 24 folks on the team, six engineers, two quota carrying sales reps, still about 40% gross revenue churn come down a little bit, but look, it works with the other unit economics. Chris, man, we're rooting for you. Thanks for taking us to the top.

Chris Ronzio

13:55>> Thanks, Nathan.

Nathan Latka

13:58Do you guys know I fight like heck to get these data points for you from these CEOs that rarely do these kinds of shows? If you want more shows like this, make sure you subscribe right now. We're trying to 10,000 YouTube subscribers by the end of September here 2019, and it would mean the world to me if you clicked now to subscribe. Additionally, I've got two more great interviews for you. If you want more data points

14:21from the world's leading SaaS CEOs, click and watch one of them right now.