Ubiweb Revenue, Valuation & Funding (2024)

hello everyone my guest today is dan di loretto he's the co-founder of ubi web with 15 plus years of sales experience 15 and online marketing he developed a turnkey on one solution for smbs for their online marketing primarily targeting canada currently he started out of his basement with one partner and bootstrapped their way so far over 700 clients and over 20 plus colleagues dan you're ready to take to the top absolutely all right introduce us to your partner here with what's patrick working on this is pat so i am the head of sales so i run more the sales side and patrick is more the president so runs more the operations component um that's it so both of us started this uh the shindig out of our basement or my basement our basement my basement uh in 2017. and who owns more equity 45 45 and somebody somebody wow very good right down i like that that's very is this someone else's vc did you raise capital or no you're bootstrapped bootstrap so what happened was actually a childhood friend of mine i gave him this idea back in the day and he started as a pilot project at a web agency of his own and we had the concept of you know potentially leasing websites and doing open-ended leases and turnkey solutions for small business owners that just don't have the time to deal with this and want to centralize everything with one person so we started this in 2014 or 13 and he picked up about 15 20 clients uh with zero sales effort never courtesy called them barely followed up with them and they stayed for over two and a half three years so basically validated the the model and the concept and then we decided to go all in so he became our web provider if you will i guess our manufacturer of our websites um and in exchange he took a percentage of the business how when did you guys launch the company your first customer what year 7 2017. that was our first client but we inherited the 15 or 20 clients that were on before us as a project which we how many customers today we're about 700 we have about 550 live and 150 to 200 signed that are going live in the next three or four months because we're always signing three six months ahead of time what does it take to get a customer live what's that mean yeah sure so um one of the biggest challenges is uh the type of person that we uh rather type of business that we that we target so that's a lot of blue collar um these are people that are super busy in their day day-to-day so what does it take to get someone online tenacity making things simple and a streamlined onboarding process and then afterwards that that streamlined customer experience is essentially my job from day one in my job so these customers these 550 that are live currently about how much they pay you guys per month to use the technology the rpa right now is at about 265 monthly 265 okay and has that i mean is that been pretty consistent over time are you guys drastically moving sort of up or down stream upwards so i'd say that about two years ago in our first year we were around 181.90 um and now we're just slowly there's organic growth because people are throughout the years will upsell themselves to our packages because every year you have the option of downgrading renewing or changing your package upwards um and then so you have your organic growth within your churns our turn is actually 109 so that's part of well that would be that would be not good churn your retention your net retention is 109 yes so sorry my organic revenue our organic revenue grows nine percent we don't lose clients basically yeah let's come back to that in a second real quick so 550 customers at 265 dollars a month i mean you guys are doing 150 grand a month right now in revenue something like that basically which is what a 1.8 million dollar run rate a little over because we sell google ads as well we do sem so that's not a subscription based model that's an add-on product how much ad volume do you guys process per month currently out of all the ad spend not much our media spends around 60k a month so okay for your for your customers yeah so we have about a 30 management fee on top so we're making about 20 25k monthly on that yep is that included in 150 000 per month or it's extra that's on top that's gravy yeah interesting that to me sounds like an interesting growth opportunity right if you can get that 60k up to 600k or 6 million that starts becoming very interesting so we don't like that revenue too much because it's less profitable and a lot of time and energy versus our subscription-based model uh or our our wise if you will our website as a service the advantage there is that when we have that client they don't leave and the more they spend the higher they become they become more approachable we're a very competitive industry so we don't like the big spenders i know that's interesting but this the least you spend the harder is to poach that person and with the service we give it's very difficult to get one of our clients that's that's fair so you're going to go for a high volume of customers at a lower rpo versus less customers paying you you know putting millions through your platform per month you got it i've never had 10 clients at 500 a month of google ads than one of 5k fair enough fair enough let's go back to the churn stuff they were just talking about your i understand your net revenue retention is about 110 or 109 but peel back that onion for me there's two components that your gross revenue churn and then you add back your expansion to get to 110 what is your gross revenue turn annually so our existing clients in other words our existing client maybe i'm answering your question incorrectly but our existing clients uh actually grow nine percent without any new just because they upgrade their packages i know i understand i understand that what i'm asking is if you look at your customer base from exactly a year ago some portion of those folks will have churned and others will have pay you they'll pay you more now the amount they pay you more is nine percent higher than the amount that churn which is why you have 109 net retention what i'm asking is what is gross what percent did you lose before you add back expansion that's it's about five percent it's about five percent it's hard to tell we lost this year and pat that's five percent monthly or on an annual basis on a manual basis okay got it so five percent gross over new churn you then got to get up to 109 so you have about 14 15 expansion that gives you the 109 net revenue retention bingo where's the expansion coming from are you upselling seats or product what are you upselling packages so like we have three packages bronze silver and gold uh whereas i'll give you an example of bronze is just a basic website with zero seo then we have a mid-level lesson then we have a higher end seo so you go anywhere between 180 a month and 500. so a lot of people will go with their bronze or silver because they don't really know us they're hesitant we want to build a rapport and then usually in year two the trend is the renewal or the migrate up a package how do you do this stuff at scale right so you upsell your silver plan things like quarterly search engine optimization you introduce three topical keywords um things of this nature i mean are you actually going out publishing articles getting backlinks to every client yeah so we work with uh work with a lot of different partners nate that help us some of this is is technology we've developed internally and some of it is also partners that we partnered up with that allow us to do this at scale obviously you know we when we started bringing on these partners we looked at um doing some of this stuff internally and oftentimes the cost just completely outweighs even if we have you know funding from a vc or we're able to to get funding just the cost to maintain it and continue to grow with our growing customer base it doesn't make sense but if someone has done it has done it well so it's just a question of going out there and getting the best partners possible yeah interesting i mean that takes a lot of work i mean if you assume 550 customers are on a plan like that and you've got to give them three backlinks written right in articles on your partner blogs per month i mean that's 1 500 guest blog posts you're essentially making per month unless you put one blog post up and you can link to six of your customers in one shot i mean how do you scale this so to be honest our the blog posts is not something that we do at the uh at the level of um we're actually working on another product which will actually have that type of uh seo that level of seo rather um the type of seo that we do for these are more as smbs and in rural less competitive areas so blog posts aren't really necessary to go get that uh that top fold um or rather h1 tags will do the trick basically h1 tags backlinks um a good site structure google best practices when you build the site is going to go get you usually a top three picture you're a plumber in a rural city with a population of 8 000 people it's not very cutthroat yeah but so how do you go get a backlink let's say tom the plumber in idaho once needs one backlink that says plumber idaho on another blog don't you have to go find that partner and get a blog post written with a backlink backlink might be the wrong word citations is essential okay what's the difference uh a backlink is really going out there and like you said uh making a connection with a blog getting that link out there whereas a citation might be you know a link on yellowpages.ca uh oh i see yeah got it okay so and you guys have scaled this all since 2017 bootstrapped corrector have you raised not well we raised we've gotten money from iq which is investment quebec which is a government body program it's funding from the government to help grow small businesses and then you have the bdc in canada that's the bank of development of canada once again it's a mandated bank just for entrepreneurs so we've gone maybe 250k 300k of funding through these two and then a couple hundred grand through banks so 300 grand total raised but none of it's been none of it's been dilutive zero yeah interesting what is bdc charge in terms of interest rate eight and a half points any any no warrants or anything zero and what that's pretty good that's not bad um talk to me about your team today how many folks so we're about 20. that is comprised of sales is at the moment uh six seven uh and the rest is on the operational side so everything from onboarding specialist customer service agents uh to obviously web developers um and uh campaign managers and we have a small seo team that's actually growing very fast because obviously the demand uh in terms of our higher packages is becoming more and more how many um engineers are on the team uh engineers so i guess uh in terms of our own uh how we produce websites uh we use a uh we're not building wordpress sites or anything like that so we're essentially building um we have a web builder that we've created that we're actually is part of our own ip and that we're actually integrating into our own crm erp that we're building at the moment i won't give too many details on it now because it's not it's not in place yet uh but having said that uh it the the system that we have in place allows us to basically use graphic designers to build websites okay so you don't have any engineers on staff that help you productize your offering so the ten percent the monetary shareholder that's that other web agency we tap into them when it comes to tech dev so one developer yeah so they have they have the whole team they have the whole team of devs yeah got it so i mean i mean how do you manage margins in this business i mean you guys are you profitable today yeah yes we're profitable today uh our margins um roughly 60 65 points on a grosser net basis sorry 65 points you mean 65 percent got it on a net basis though are you taking money the bottom line 100 000 in top line sales each month yes so we have two salaries and we take dibs okay interesting i mean that's a great way to do it so so 150 000 a month like last month in revenue how much will actually you know hit the bank in terms of cash flow our positive cash flow let's say on any given month is going to fluctuate between 10 and 40 k bear in mind that what happens is we're scaling up our sales force we went from two sales reps to six uh in a very short amount of time and sales reps take about one to three months to develop and then the units that they sell are gonna start going live usually within two to four months so there's this two to six month burn rate that really hurts uh in terms of salaries of sales reps where there's just no revenues coming in the bootstrapping is that burn rate of sales reps it makes total sense i see it all the time i mean i usually see ramp furious taking three to six months uh so if you figure out what you're doing faster that's great what are you setting quota at for those sales reps two sales a week per rep two sales a week per reps and what price point pardon so two sales a week at 265 a month so they're adding about 500 a month in new mrr per week yeah that's that's and i would say that they're always hitting that roughly got it so 500 a month in new again which is new mrr they do that weekly assume a four week month means they're adding on average two thousand dollars a new mrr per rep you got it or twenty four thousand bucks an ar per rep you got it how do you make that math work that's not enough arr to pay like a reasonable you know a commission so our secret sauce i guess for a commission is we take a two month security deposit when we sign an agreement um and that's the last two months of your last year with us so that we use that that is straight up used to pay the sales reps commissions it basically is the equivalent of their commission so so if i'm a sales rep and i'm working for you guys and i close two thousand dollars a month a new mrr what percent will i get on that mrr the average commission payout is 600 a unit and they have a base salary so our our target salary for a rep is between 90 and 110. so this is where i'm confused if your target on target earnings so assuming the sales rep hits quota that that person can earn base plus commission of a hundred thousand dollars per year but they're only adding seventy two thousand dollars a new arr the math doesn't work seventy two thousand per month per year no per year yeah um sorry no no sorry i said that wrong there no no it's not even 72 it's 24 000 they're adding 24 000 a new arr because they're adding two huh they're in that per month so times that by 12 months starting 300k here once they're at scale but the first year for example they're going to do nothing the first two months because they're being onboarded maybe a month three they do a thousand of new sales and then they eventually scale but yes they get to the point where eventually at full capacity they're adding 24 000 in new uh mrr annually which is equivalently 300 000 in arr so full on target earnings 100 grand on quota target 300 grand most companies that hit like scale that ratio looks more like five to one versus your 300k to 100k how do you sort of just walking through thinking of why you set the commission structure up this way we said it this way because um all of our leads are outbound there's no inbound leads here so i i'm assuming that the people that you deal with offer freemiums or have marketing plans in place or do drip campaigns or whatever it may be the six people behind me on this side they just cold call all day long so we give we provide them lists we scrape sites whatever it may be we find competitors and then we just try to eat them alive okay so to do that straight cold calling much more intensive so we want to reward them for their efforts and we didn't even talk about this but we do a residual we offer a residual program so every unit that you bring in the next year that they renew you get a flat commission per year so that snowball effect kicks in because two things one we want to reward loyalty of reps that stay with us for a long time and it's hard to find good talent and to keep good talent and at the same time we want to reward integrity of this sale so why flat if you're awarding integrity a sale you give you'd give percent base it's not a flat yes then what you're doing is you're encouraging reps to sell the biggest packages possible and our mindset has always been to have the best customer experience possible and to listen to your client and sell them the package they need if we renumerate them too much based on dollars sold then they're going to force packages that clients don't need in other words think of the average plumber that refuses business books six months in advance for the last five years they won't need our gold package they need our bronze but if we force the gold on them they're gonna probably churn at a higher rate exactly so why would your sales person do that when they know that plumber's to churn in one month and they're not they're going to miss out on the full year in the second year of commissions you already have an incentive in place to disincentivize selling something they don't need the yeah i mean the answer is the simple answer to that is that sales reps this is a general blanket statement but sales reps are definitely going to uh let's think they're not going to so much think about the long-term reward of things it's a small incentive just to encourage loyalty more than it is to i guess incentivize someone to to to sell a specific package okay yeah whereas that you know that the infrastructure right off the bat is what's going on the renewal is everything and that's what we've made blatantly clear and that it's much easier to satisfy an existing client than to go get a new client it's much less effort yeah that is why you wouldn't sell a plumber a plan that they're you know they're not going to use and that they're going to churn in two months you already sort of have that built in so i get it i get it you're testing it's great um um so i mean how do you go from a two million one point eight million dollar run rate just call it a four or five million dollar rental how do you scale this thing so i you wanna break that down um how much time do we have let me let me be more specific to save us time do you think it's going to come from expanding your current customers to paying more or no you've got to widen your top of funnel go get more custom more net new customers i guess we'll do it i'll answer the question in three different parts so the first one is you're obviously going to scale more sales reps so the office here is actually tripling in size in the next three to four months we're just starting construction um so we're gonna go to about 20 reps in the next 12 to 18 months the second thing we're going to do is we're obviously always focusing on upselling and cross-selling our existing clients with new add-ons and we're signing partnerships with uh i don't even heard of booksie or and there's other ones as well so we're looking at partnerships to cross-sell and add new products to our existing stream and just include into our packages and that ties into the third one uh through those partnerships that we're going to obviously do lead gen for them we're going to bring in new revenues for those partnerships we're going to end up the idea here is to have a give and take relationship obviously so through these partnerships be able for them to cross-sell our products uh so this is this is something that we've started working on uh at the beginning of 2020 and we had a lot of partnerships and now we've just closed on which is telling you about the tech that we're talking to you about right what we're basically doing here these guys what they're trying to do on our team is trying to build a cash cow to launch us into the next step which is reselling and creating inbound leads through partners that get asked all the time do you guys do websites let me just say no so instead you say yes you send them somewhere and then you just get recurring why would someone keep paying you after the website's built so the way you have to see it is like a car and that's that's that's our sales pitch right so when you look at a car it's not just the price of the car but it's the maintenance it's your driver's license it's the gas it's the warranty unless you're lazy as like me and your oil change light's been on for three years and that's most of these the types of business owners we're dealing with that's exactly what we're dealing with people that have websites still in flash they don't have websites the google my business page is a picture of their house it's just it's a mess it's backwards they get cold called and they buy placements on directories but they only have their own website so it's saying listen let's keep things simple you tell us all your clients are word of mouth what is word of mouth in 2020 it's hey this is my roofer well what are you gonna do you're gonna google that roofer simple as that so you need to have that clean image to convert that lead and protect it got it cool so channel partnerships will be a test you guys run as you continue to scale your sales team very good guys let's wrap up here with the famous five number one pal let's start with your favorite business book uh favorite business book i'm actually um into one right now you had recognizing i'm scaling up there you go number num dan number two is there a founder you're following or studying currently uh i'm big on i'm actually big on coveo i don't know if you were there for sas north i don't know if you saw that that keynote i follow him very well because he's from quebec so which company coveo ovo spell it oh kovio yeah yeah yeah very good number three pat favorite online tool for building your company sorry cut off yeah yeah your favorite online tool uh favorite online tool for uh building my company um yeah that's a good one and let's take it home here with you how many hours does sleep eat or night how many years of sleep do i get a night yep hours five to six i give credit to my kids in the business on that one okay so what's your situation married single how many kids so i'm married i have two kids age four and six fat same thing he's married to kids are age zero and two zero okay congrats that's exciting dan how old are you i'm 33. all right last question what's something you wish you when you were 20. something i wish when i was 20 was that i might you know i'll give you a gary vaynerchuk one uh micro patience macro so micro speed macro patience so all good things take time but you have to hustle on the on a day-to-day would be patient big picture guys ubi web dot ca they've just passed a 1.7 million dollar run rate serving 550 customers another 150 about to sign they're profitable taking 10 000 and 40 000 a month to the bottom line but now they're really closer to breakeven as they look to scale their sales team they've got quota set at 288 000 a new arr again built in annually seven folks on that team 20 people on their total team one engineer uh five percent gross revenue turn annually 14 expansion 109 net revenue retention done most of this bootstrap they have been very creative with funding they raised about 300 000 but all non-dilutive talk bdc banks etc grants things of that nature up there in canada as they look to continue to scale dan pat thanks for taking us to the top cheers one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 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