WhatConverts Revenue & Valuation (2024)

[00:00] Founders, what's going on? You guys know I love in person events and they are back. The recording you're about to hear is from our most recent event where we had hundreds of founders come together, share intimate details, templates, KPIs, OKRs about their business, and it was something special, something special. We'd love to meet you in person. If you want to see the next live events we have coming up via our schedule. The link will be down [00:23] below in the description. If you're listening on iTunes, check this out on YouTube, you'll see the links in the description. Or you can just Google Founderpath or Latka next event. We'd love to see you in person. In the meantime though, enjoy this recording. It's a good one. [00:36] >> Good morning. So I'm Michael Cooney, one of the cofounders of WhatConverts. So how we got started is I was running a digital marketing agency. And I had a web developer that worked for me for about seven years. He got an offer from corporate. He went away. And eight months later came back and he's like, Corporate isn't working for me. So I'd like to come back but I don't want work for you. I was like, okay. He [01:03] >> says, do you have any ideas where we can build a company? And I was like, as a matter of fact, that's just come from a client meeting And we had doubled the leads for this client in our campaign. I walked into the room and I said, hey, we doubled your leads. Isn't that great? And he's like, I don't know. Were they good? Were the leads any good? I'm like, yeah, sure. But he says, can you show [01:26] >> them to me? Well, I can, but to get those specific leads, you know, there was like 500 leads and I'd have to get 100. It was like gonna take three hours of work. So I was fed up. And I said to Jeremy, you know what, this lead tracking and reporting issue has been going on too long and we need a solution. So I said, if you can help us, if we can track all phone calls and [01:49] >> forms being filled in and chat back to the marketing responsible, store all that and report it, I think we can build a really strong company. And so he went away and the first thing he started was like how can we track every form on any website across the world without requiring them to change the form? So he went and worked on that for a week. Came back to us, I got it. We got it organized. And [02:12] >> that's how we started the company. So we went and played a round of golf. And at the end of the round of golf, Jeremy and I, we had a discussion. We said, Look, how are gonna set this up? We said, Let's do fiftyfifty. He'll develop the product and I will go ahead and do the sales and marketing. So we wanted to do Bootstrap. And through our journey, this is the growth. You can see in the first [02:35] >> year, we started in March 2015 and we grew almost to $100,000. And I've got little labels there. So the first million, it took us four years to get to the first million because we're still working in the agency while we are building the product. And I call it the scary phase. It's scary because there's a lot we don't know. And there's so much advice going on and a lot of advice you get on Twitter turns out [03:00] >> to be wrong. So, [03:04] >> also, in addition to not knowing what we're doing and just trying to figure out the SaaS space, we came up against well funded companies. So there are a lot of companies in this space. You know, call tracking was one of the areas where there's a lot of well funded companies. And it turns out to be the feature that converts really well for us. So, on all these companies, there's a billion dollars of funding. So, I call [03:27] >> it the scary phase because we're like, well, should we get funding or should we stay bootstrapped? [03:33] >> We chose to stay bootstrapped, and the reason for that is, number one, over the years I've heard stories of founders starting companies, getting investments, and if they don't get traction, they're just in for a whole lot of hurt. And we weren't sure if we would get traction. We didn't know if the product would be well received. So that was the first thing. We wanted to avoid the risk. We wanted to build it in our own time [03:54] >> and make sure [03:57] we got traction. Michael, real quick. I'm in the back of the room to your left. There's a lot of people in this room. Actually, your hand. Guys, how many you started your SaaS company as an agency or professional services? Raise your hand. This is like by far the number one theme from successful SaaS founders starting as an agency. You did that. Speak spend more time speaking about how much revenue did the agency do? Are you still running [04:14] it today? And how did you use the agency contracts to learn about the SaaS product you could build? [04:19] >> Yeah, sure. So, I mean, running an agency, I actually started an agency in South Africa, is still going. Now my brother runs it. And I have one in The USA as well. So, combined, we were less than 2,000,000. We're probably about 1,500,000. The agency in The USA, I just still manage about a handful of clients, and I sort of dog food our WhatConverts product with them. And then, South African agency is still running. They're about a [04:46] >> team of 20. So, I think I covered everything. Anyway, so that's the reason we decided to bootstrap. Cause we're still getting some funding from the agency, and we could build it out at the same time. We also wanted the optionality. We didn't want investors getting involved and changing, you know, controlling how we develop things. So, we just wanted to stay focused on sorting the problem we had. Then, the other thing is we wanted to grow value [05:12] >> before we got funding. So, the reason for this is people say to you, Do you want a tiny piece of a huge pie, or do you want the whole pie? Well, we're like, Well, we want the whole pie, and when it comes to the stage, we want a huge piece of the huge pie. [05:26] >> Okay. [05:28] >> So, when do you decide how you can skip funding? So, bootstrap versus funding. And I'll put it into three distinct buckets. You've got your problem, your product, and the promotion. So, with the problem, when you create a product, you're solving a problem. And if can't, if there isn't a problem to solve, you're gonna find it difficult to get your message across. You're gonna find it difficult to get sales. So, really have to have a real problem, [05:53] >> and you have to understand that problem. And it really helps if you've lived that problem. So, as the agency, I'd lived that problem for twenty years, and more funding wasn't gonna help me define the problem any better. The next step is the product. Would having funding help us build the product? Well, my arrangement with Jeremy was he was gonna build the product. And we could've got more developers on the thing, but what we found is we [06:21] >> sort of lucked out. Jeremy had worked for me for seven years so he understood the problem really well. And he had the development skills. So, that focused development allowed us to create a product and innovate where we came across certain features. And we just felt that if we had other developers who didn't understand the full problem, we wouldn't have created as good a product. So, it was a slow burn like getting the product developed. But at [06:46] >> the end of the day, we feel that we have a much better product. And you'll see as I speak that that product allows us to compete with well funded companies. The last one was promotion. This is one area where we do feel pressure from well funded companies, and I'll show you an example of that in a bit. So, let's dive into the problem. So, by living the problem, what this enabled us to do is not only [07:12] >> develop a great product, but it's also enabled us to develop the messaging. When we're talking messaging, we're talking to our target market. We know what they're feeling. We can position the product to solve the problem very nicely. So, that's allowed us to grow 60% year on year since we started. The other thing I've got here is avoid shiny objects. So, once you start a product and you get customers, what you're going to find is everybody's got [07:39] >> ideas. And you have agencies come to you and they say, Gee, sorry, I'm not very good at a mic. You'll have agencies come to you and say, Hey, we need you to develop this this feature and if you do, you'll grow 10x. And you get lots of these, lots of suggestions, and you have to have a framework on how are you going to avoid these shiny objects? So, we call this our one hundred year test. Can [08:02] >> I go back? [08:06] >> There we go. Okay. We call it our one hundred year test. And it's just a simple framework where it's like your core value of your product. If you look one hundred years ago, was it true or was it valuable? If you look 100 years in the future, do you still see it being valuable? So, we took, for instance, call tracking. This is one of the main features we have. And we look back one hundred years ago, was [08:27] >> call tracking valuable? Well, it wasn't really anything. So, no. Well, let's look 100 years in the future. Is call tracking gonna be valuable? And I think call tracking's already becoming a commodity. Is it still gonna be valuable? I doubt it. So, call tracking isn't our core value. Then we look at, okay, was marketing valuable one hundred years ago? Absolutely. Will marketing be valuable one hundred years in the future? I believe so. And if it's not, Google's in [08:55] >> a lot of trouble. So, we see marketing as our core value. And how we determine our values is we collect a lot of lead data and attribution and we use that to make better marketing decisions. So, it's sitting under the umbrella of marketing. So, our core values is surrounded by, or it's around our lead data and marketing attribution. So, that's our one hundred year test. The next thing. So, this is an interesting story. So, Jeremy and [09:25] >> I were playing golf again. Jeremy's a golfer. I used to be a golfer. Now, a runner. I plan to go back to golf. But, we were walking from the ninth to tenth hole, and I remember this meeting very clearly, and Jeremy turns to me, and he's a man of few words, and he says, Michael, we have to have the best customer support of any software company. And I'm like, Yeah, sure. Yeah, it's important to have support. [09:46] >> He says, No, you don't understand. He says, I absolutely hate it. When I send in a support ticket, it takes twenty four hours for them to respond, and then the response is not helpful. So, we are gonna have technically competent support people that respond like within fifteen minutes. And I was like, Settle down, Jeremy. Okay. So, kudos to Jeremy. I mean, he's made sure that this happens. So, in the early days, people sent in support tickets. [10:14] >> He would respond within fifteen minutes. And our support team is not really a support or a customer service team. We call ourselves solution providers. So, if somebody comes in with a problem, we understand what are you ultimately trying to achieve, And then we provide a solution so when they walk away, they have a real solution. And this has enabled us to become a real growth lever and it's become a competitive advantage. And if you go to [10:38] >> G2 and you look at the reviews about WhatConverts, most of them talk about our support. It really stands out. But they also talk about our product as well. So, here's one example. [10:50] >> Just talking about how great the support is and how good it is. And we get this feedback quite often. So, that support has really been a great endeavor. It's almost as good as having a super product feature. [11:04] >> So, the product, having a better product, we believe, [11:10] >> has really helped. And in one area that's really helped is, of companies that start with us, 70% that start with a free trial, they become customers. So, we didn't think anything of this, but when I shared this metric, or this conversion metric with some people, they were astounded. You mean of every trial that you get, 70% become customers? And we're like, yeah? And they said, okay, that's incredible. But, I think it comes back to that technical [11:40] >> customer support and onboarding, as well as having a great product. So, what I mean by a better product, or a great product, you'll see this is our menu, our features, our feature set. And you'll see we have three buckets. We've got lead tracking, lead management, and lead reporting, which is analytics and insights. And so, what we do is we use call tracking as a mousetrap. The reason we use call tracking as a mousetrap is it converts [12:07] >> really well. It's the only lead type that requires a third party software to work. So, we get people in for call tracking at a low fee. It's $30 a month. But once they join us, we automatically track their forms as well. Or we get their permission. So they join us for call tracking and then all of a sudden they're getting all their leads tracked with all their marketing attribution and then they're getting this great reporting as [12:32] >> well. So it's just by having that great product and it's obviously better than our competitors who are well funded, has allowed us to grow and compete even though we're dealing with all these well funded competitors. Another benefit of having a better product than your competitors is you can use a land and expand strategy. So, our land and expand strategy is around marketing agencies. We don't have a sales team, or we haven't had one. We plan on, [13:00] >> we're currently building one. But in the early days, it was pure software sales. We didn't have a sales team. So, the idea was when an agency shows interest, our focus was, let's just get one client. Just try us out in a free trial. We're not asking you for money. We just ask you to try and test us with one of your clients. So, it's a very soft sell and the hurdle's really low. It's a free trial. [13:24] >> Come on, give it a good go. And we even, it takes time. There's friction in time getting somebody to try your product. So, we said, Look, it's gonna take you five minutes and we'll do the rest of it. So, we show the benefits with one client. They clearly see that the product's a lot better. It gives you a lot more than they expected. They came for call tracking and they get a whole lead tracking platform. And [13:46] >> then, they bring over all their clients. So, this has enabled us to be very focused on targets that give us multiplication. So, we don't have to have a huge sales team. Just the ones that come in. We just get a lot out of them. And this is how we measure it. So, is our land and expand chart. It's basically monthly revenue. Interesting thing on this chart, you see the little dip at around sixty months? That's COVID. [14:15] >> So, we're going nicely. And what you'll see is there'll be staged as sort of linear growth, and then there's these bumps that just increase. So, what happens here is we offer a usage based pricing, and we have very low churn. So, we continually add new customers and that's the linear growth. But the way you see sort of the exponential growth, that's existing customers using our product more and more. And we just found that the usage based [14:41] >> pricing really helps. So, what we found is people start at $30 a month, but on average, they end up spending four to five times that a month, with some other customers spending in many thousands per month. [14:55] >> And this led to an acquisition offer. Okay, sorry, I've got click troubles. [15:03] >> We went on this podcast. I don't know if you're familiar with it. It's a guy called Nathan Latka. [15:10] >> So, we were on his podcast, we shared revenue, and then after that, a competitor came along and made us an offer of 7 x. So, we were doing 2,100,000 ARR at that stage, and they offered us 15 to 20,000,000. And our response was, We appreciate the offer. This is not a small amount of money. This is great. But we like the game. We enjoy the game as we find it rewarding. And if we take the money, [15:38] >> we're out of the game. So, I know Henry just said, It's not fun. I'm telling you, man, being bootstrapped, growing, and being profitable is a heck of a lot of fun. I enjoy it a lot. So, we kept on growing. So, from that chart, you'll see here that we are now at we're actually at 3,600,000 now. [16:00] >> We're glad we didn't take the money. So, if you take a seven or even a 10x multiple, you can see the valuation is a lot higher than if we had taken it earlier. So, the third bucket is promotion. Now, you're gonna ask, What are you talking about Google Ads? Everybody does Google Ads. It's crazy. But there's more to Google Ads than you realize. And before I get to that, the next point down there says, our agency [16:24] >> focus, because of the land and expand, we have a fairly small amount of customers, but we're serving 40,000 paid companies. And that's purely from the multiplication effects of going through agencies and franchise companies. So, our software is currently installed on 40,000 company websites. Okay, let's get into Google Ads. This is actually year one, this chart. And there's a few key things here. You can see the green line at the bottom. We started with a couple $100. [16:56] >> Now, why Google Ads is important to us is, obviously, conversions. And search marketing, I call it the Triple T effect. [17:05] >> You've got targeting, timing, and it's trackable. So, you're targeting people right at the time when they need the product, and you can track everything that goes on. So, what happens here is you dream up any keyword that you think will convert. You put it into Google. You set a budget. You create the ads. Anybody can do this themselves. And then, watch for the data. Which keywords get the most impressions? Which keywords get the most click through [17:33] >> rate? And which keywords get the most conversions? That data is so key in determining your messaging, determining what you target, and determining what content you're gonna develop for your organic strategy, which comes next. So, in year one, what you'll notice is we have a 64% impression share. And what that means is every time somebody searched the keywords we were targeting, 64% of the time we would be somewhere on the page with our ad. And that was [18:02] >> twenty fifteen. Our impression share was great. [18:06] >> And we actually came at the tail end of the call tracking space. Call tracking went through a big disruption in 2011. It was a hot trending topic. We got in at 2015 fairly late. And for the first year, we got great impression share. But let's see what happens year two. The impression share drops to 28%. And this is where we felt the pressure of funding. The competitors decided they want to buy market share, and they just [18:34] >> jacked up the cost per click for things like call tracking. So, before, it was $8 for the top spot for call tracking. Within a year, and with the funding, that top spot was now $120 per click. And, when you're selling a $30 a month product, and you may need 10 clicks to get one sale, you're spending $1,200 to get a $30 a month sale. It was like, Yeah, that's a bit crazy. However, even with the lowest [19:04] >> share, we still got more conversions than the year before. We had to spend more and we're still getting that valuable data. But we then started looking at Google organic strategies. So, in year two, these are our top four marketing channels. One, the one that brought the most was Google Ads, even though we were under pressure there. The second one is direct traffic. So, here's a little secret and an insight that many people don't know, is when [19:32] >> you advertise, your direct traffic increases. So, we actually attribute a portion of our direct traffic to our marketing channels. [19:41] Michael, to your left, what percent? [19:45] >> That's just whatever. 30%. Wait, [19:48] you just made that up. Come on. [19:49] >> Yeah. No, I sort of, I just, what I've seen is, and obviously I see the accounts of many different companies. For example, I've got one company. It's a company called AirSkirts that use us. They started marketing with us and they had a very small direct portion. They started doing Google Ads and that direct portion just increases. Pretty much the similar amount as they're putting into Google Ads. They started with a budget of $5 a month. They [20:15] >> ended with a budget of $35,000 a month. And because with our software, can track it. It gave them the confidence. But what was interesting is as the Google Ads increases, so does the direct traffic increases. So it's almost [20:29] To [20:29] >> give you an answer, Nathan, it depends. [20:33] I'm not publishing this podcast episode. Just kidding. That's great. [20:37] >> Is that because the secrets are too valuable? [20:39] There you go. [20:42] >> Other thing you'll notice is the blue is Google organic. And what you find is insights from the keywords, you start building content around that. And because you know the problem, you can really provide authority in the content pieces you create. It starts developing traffic. [21:01] Go, sorry, real quick. Before we go on, no one knows and this is my fault because I edited your slides on the last slide. What is the y axis here? [21:07] >> The y axis is the number of sign ups. [21:09] Free or paid? [21:10] >> Paid. It's a free trial, and then 70% of those become customers. [21:15] Okay. There you go. [21:17] >> Okay. Last year, this little label says 2022. This is actually a chart from 2021. These are our marketing channels that drove our sign ups. So, you see Google Organics now in the first spot. And Google Organic is really important. What you'll find is, in the first year, Google Ads is [21:38] >> great. You can pay to play. But as you grow and you keep on going, you add content, Google organic's just gonna keep on delivering. So, we're getting sign ups from content that we added five years ago. And the key thing, why I think it's a hedge against well funded companies, is you can really focus on the top keywords that deliver a lot of value. And even if your competitor does a similar amount of thing, there's 10 [22:02] >> spots in organic. So, if you get second or third or fourth spot and they get the one or two, you're still gonna get more than enough to compete with them. So, I really recommend content marketing, Google Organic, using your authority in the space to create great content. Another secret that well funded companies may be able to create 1,000 pages of content. What ends up happening is a very small percentage of those pages actually generate the most [22:32] >> of the value. So, if you can find out what pages generate the most value, you can be very effective. So, next goals. [22:42] >> When we started the company, our goal was to get to 2,000,000 ARR. We thought with two founders it was gonna be terrific. And we got there in about, I think, six years. And the interesting thing is, once we got to 2,000,000, we thought we would've made it by then. We got to 2,000,000, and Jeremy and I went for a round of golf. And we discussed this like, hey, we're 2,000,000. This is what we thought. What do [23:07] >> we do now? And we had a fairly small team. We were nicely profitable. We could live a very nice life, or we could exit. And we were both like, you know what, we're just getting started. We've barely scratched the surface of what we set out to do. The next goal is 10,000,000. This was set a year ago. And so, we're one year in. So, we're now at 3,600,000 ARR. And, the interesting thing is, if we just [23:31] >> apply a 70% growth this year, we'll get to 5,900,000. Another chart says 5.2, but it'll be 5,900,000. And then another 70% year of growth will get us to 10,000,000. [23:43] Go forward one slide, Michael. What was that? Go forward one. [23:47] >> Oh, forward one. [23:51] >> There you go. That's the one. Okay. [23:55] >> Thanks, Nathan. Okay. So there's a 10,000,000 goal. That's the next one. Some interesting things. As your team grows, new challenges come about. And on the previous slide, we wanna be more mission driven. The reason for that is I sent a I did a homework assignment for our team. I said, Give me the five top benefits agencies have using WhatConverts. Our team went away, they did it. I collected all the benefits together, and we came out with [24:21] >> 16 different benefits. So, you'd think that's a good thing. You know, Wow, we've 16 different benefits. No, it means we're totally misaligned and nobody knows what we really do. So, we've realized our product messaging has a few issues. We really got to nail that down. And then, yeah, just get more mission focused on what we're trying to achieve with our company. [24:44] >> Okay. So, I just showed you, if you've got a problem that people really want to solve, you can create a product that solves that problem. That means you're gonna be able to make sales very easily. And then, you just multiply that effect with some promotion and live a happy bootstrap life. [25:02] Guys, give Michael a round of applause.

Introduction hello everyone my guest today is michael cooney he started his first business in 1999 in south africa and is still in operation today he personally moved to the uk in 2001 to have a more politically stable business base and then moved to the usa in 2006 the u.s based as his ua us-based clients began to increase over the years he more from an industrial directory to a digital marketing agency in 2014 a co-founder and he began discussing how to solve lead tracking and reporting problem with marketing clients they officially launched what converts in march 2015. michael you ready to take us to the top i'm ready all right so is what converts an agency or is it a sas play it's success play yeah okay it was born out of the agency so i was running a digital marketing agency at the time and i mentioned the industrial directory because our business model was generating leads and tracking those leads has always been a pain so this has been a problem i've dealt with for the last 20 years and eventually my co-founder he used to work for me and then he went away to the corporate world and didn't like it and he came back and he said hey michael um i don't want to work for you but i want to work with you so i said you know what if we can solve this lead tracking problem and i was already using call tracking from another provider but it wasn't solving the completely tracking management and reporting problems that agencies have and individual clients so we got together he took a look at it and we were able to figure it out and how much equity how much equity gave him oh we we shared it i don't say i don't see it as me giving him we started a new company where we both got 50 50. 50 50 equity split okay that's gutsy and what year was that when you launched um well we started in 2014 but we launched march uh 2015. okay so how long you spent about a year on your mvp how much cash did you guys spend getting it built before your first dollar revenue we i mean jeremy kept consulting um so we didn't burn any cash i kept on running my agency i had a team so i've been i love having a team because it allows you to do more things so i was able to continue getting an income from the agency while we built what converts i see how much agency money did you pour into what converts if if any none oh none two separate businesses oh it's just purely as soon as we started getting clients and charging that's when the the transactions came that so the only cost really was bit of hosting space and um our time to build it that's amazing okay so launched uh back in 2014 50 50 equity split with with your co-founder um how what are customers paying you today on average to use the technology so we have customers from 30 a month all the way up to several thousand dollars a month but if you take the average across everyone it's it's around 180 to 200 dollars a month and which cohort are you more excited about the enterprise folks or the 30 a month folks both good answer we got a politician on today good answer michael i mean we love the income from the high level guys because they just drive a lot of level um a lot of volume and once they set up you know it doesn't take much to keep them going but we also like the lower level guys we don't like having our our eggs in one basket where you got you know too much money coming from a few players how large is your largest contract um in in terms of monthly or acv yeah yeah yeah we're talking like 100 grand or something like that yeah uh north of 100 grand okay got it very okay so so you you you do then potentially have like your top whatever five customers make up into something like 80 to your revenue you can see power laws there i wouldn't say 80 percent um they're probably 20 20 to 15 percent and now 10 to 10 to 15 around about there okay fair enough but then we do like um a lot of the agencies who are several hundred dollars to a thousand dollars that's a nice sweet spot for us um but you know we also know that the smaller company companies become bigger companies and they introduce us to new people so um we treat all our customers the same everybody gets the same support we treat them as people and we don't have a support team we have a solution providing well with solution providers so everybody that comes in we want to make sure we solve not their call tracking and lead tracking problems we want to solve the objective of what they're trying to achieve it all makes sense and so with that kind of focus how many customers are you now serving today Currently serving 1000 customers so direct customers you're looking at a little over a thousand eleven thousand uh one thousand oh one thousand k so it's a one thousand um we're north of one thousand customers but we serve around fifteen thousand companies so what happens is like we have agencies some agencies are several several hundred clients so our software is great for agencies we have a three level uh account structure so you as an agency can manage you know a thousand two thousand um clients if you like with our products that makes a lot of sense yeah even though we have a thousand direct paying customers you know we serve 15 000 uh companies and do you do those agencies have you recruited them to sell your product and then you get a cut of the sale we um we really give them the tools we we plan on improving that you know with a partner program but at the moment we sort of give them the tools and you know so they buy one subscription and then they can sell it through to the end customer you don't sell them like a number of seats that they can resell to customers no i see the stage okay that's part of our future plans but it's not available yet yep yep yep okay so 200 a month average rpoo 1000 direct Monthly recurring revenue customers you guys are around 200 a month in revenue is that right we're getting there just a little shy then okay how should i like how much did you last month one system to 180. so you're so close you got a couple more days before 2020 closed out you thinking you break 200 or no no no no normally in november and december or flat months october is a good month um so i don't think we will break through 200. but i mean i don't know if i mentioned to you it's just like we've been doing this for five years and it still feels like we're just getting started um the potential of our product and how you know the the product is so much better than our marketing and so you know this next year we're really excited about where we're going mm-hmm now have you guys raised capital you're Bootstrapped bootstrapped we bootstrapped we love that uh which means so are you profitable today taking out profits and dividends are you reinvesting everything you're operating a break even yeah we do take dividends we do take profit out and also with our team we like to take a percentage of the profits and distribute it as well oh you have to share this michael this is by far it's one of the top questions i get bootstrap founders of profitable businesses want to launch their own profit sharing programs to reward their employees they're always not sure how to set it up i mean to the extent you can share can you talk to us about how you set that up of 180 000 that comes in every month how much goes out to teammates well we're currently doing an annual one we're looking at quartzly but yeah from the overall profit that gets and we definitely take a slice of this and then we distribute it to the team and then we we do have a calculation based on how long the team members have been with us at sku so if you've been with us longer you get more and then also based on your your salary there's an adjustment so let's just role play for a second let's say you finish this year i mean how much profit you think you'll finish this year with um 300 000 okay so let's say i've been with you for for two years walk me through like what should i what am i calculating in my head how much of the 300 grand am i going to get probably um yeah i don't want to yeah that's a bit sensitive because it gets down to team members and who gets what and all that so i don't know so you okay so you can't you can't do a hypothetical with me yeah so i mean hypothetical um yeah i don't i'm not comfortable um that's okay what's what's the structure though is it is it a fixed rate or is it like if you've been you know we have a 100 pool to distribute the pool is 300. employee one who's been here the longest you're getting x percent or is it a flat a flat rate not not a percentage of the 300 it's a percentage of the i see so we take we take a slice of the 300 we set it aside and that purely goes with employees and then well we said team members no employees and then that is split based on how long they've been with us and their their compensation their ic okay right across the full team yeah i see it makes a lot of sense okay i mean we look at you know um which is stock shop stock options or share options and all that but we just found that as the income comes in and as we profitable we wanted to go direct to them i'm tired of the stories of people that get stock options and then they get nothing they're not worth anything yeah how many people are on the team today there's eight eight of you guys how many engineers two two okay and are you planning to stay bootstrapped for any plans to raise we um at the moment bootstrapped um we do want to increase the team we we're adding on the sales side to it to increase the team men the team size so we're looking to add about four people in the next year do you need to raise to support that growth and if so how much do you think you'd raise we don't need to raise to support that growth but we're sort of looking at the stage now where if we can see a path where increasing or getting capital that will generate um additional revenue or help us meet those aggressive goals and then we can effectively allocate that capital that's productive i think for the first time we're looking up and saying you know what that make they make that may make sense yeah so we we're healthy we think we can grow like adding the 14 members and um increasing our campaigns and all that with what we currently do from profit um but we're thinking we we may want to be more aggressive now and michael do you have any quota carrying sales reps or no no no that's yeah we currently we're in the process of employing um seeking them out at the moment so how do you set up i mean hiring that first salesperson is a big is a big step what quota do you put them at we your um pro reports helped a lot you know i was thinking a ton about this last week so that's why i'm asking yeah they came at the right time and i like the overall total earnings you know like five times um you know quarter to get the um yeah so if we sort of round you know getting the base at you know 50k and then enabling them to double that i like that model um we did connect with somebody who's a vp of sales or another sas company that's been through this growth uh period that we're going through and he's gonna he's currently consulting with us and he'll be setting up those initial team members oh that's great now you know obviously sales reps are great but if customers don't stick they just churn right so what's your churn rate look like today yeah i got this wrong the last time i was on your thing i said five percent and then you said well that's 60 annually so i looked at this and our current churn rate is like 1.8 percent monthly on a monthly basis but when i look at it annually it's like four percent four four four and a half percent and okay so how does that how does that work well how i was trying to figure that out and i didn't get to put enough time into it but basically when you're looking at the monthly churn rate it's basically how many you had at the beginning and how many have at the end so of the people sign up so normally when people sign up the biggest drop-off is in the first month yep you know so they start off as a trial they become customers and then we may get a little bit of drop off and then um once it gets past month three they're pretty much sticking for a longer period so that's why you know i can see it you know there's a 1.8 total drop off uh in the first month but then over the year it may extend to you know four four and a half percent yeah yeah so really what what you're saying is um well this all comes down to what you're putting in the denominator when you're calculating turn right are you looking at only the last 30-day signup and then how many of those first three days churned which should be a different churn rate than if you're looking at your total customer base and how many turned over the last 30 days because the numerator in that case would include ones you just signed up this month that then churn in the first 30 days and to make the number way lower yeah i think that's that's the case we look at the total then what we add to the total and what was lost in total yeah if you just take a snapshot of exactly one year ago your total paid accounts and and then subtract gross revenue churn so if you're doing 100 a month one year ago and only counting those customers so ignore new customers added just 100k from last year let's say you go down to 90k so 10k a month churned but then you expand the ones that stick with you and they add another 20k a month then you have net revenue retention of 110 percent effectively yeah do you look at those numbers no and i want to but we have we we don't look at them yet but um we have we have really good expansion revenue [Music] that's the quote of the year i don't know but it's good i know i don't know what it is but i know it's good all right i mean we have a chart that we see and as customers uh come on we see you know Customer acquisition cost like they start in a 200 a month account and then they you know next thing you know that a thousand dollars a month and then you know some of them go into four or five thousand dollars a month yeah and what are you willing to pay to get a 200 a month customer and that's another thing i wish i had better metrics on but you're probably looking at between 150 to 300 um that's great i mean it's a month to a month and a half long payback right it's pretty quick yeah exactly so the 30 a month accounts you know that they're going to take longer but we have enough of those that you know end up paying a lot more yep yep over time if someone came and offered you seven million bucks all cash up front to sell the company about a three and a half x multiple would you sell that was quick yeah [Music] [Laughter] there's so much potential in our company that's what um our product and what it is underneath that's not being realized yet it's pretty powerful yeah all right michael on that note let's wrap up with the famous five number one favorite business book um i don't have one at the moment at the moment i just seek out people i'm wanting to learn from and let's talk about that who's the ceo you're following or studying um again no in particular like just individuals like on twitter when i find people and particularly investors i know last year i said ben chestnut but yeah no one in particular number three what's it what's the online tool that you use the most besides your own we still do subscribe help scout a lot yup number four how many hours of sleep are you getting every night seven to eight and situation married single kids married with three kids wow busy guy how old are you i'm 48 48 last question what's something you wish you knew when you were 20 michael um understand value just you know one if you really understand value you it helps your decision yeah the whole thing understand your value the value of your product the value that you provide to your customers if you can understand value you'll do well what converts guys just broke with two million dollar run right doing about 108 000 per month just last month the lead tracking and reporting platform go check them out average customer paying 200 bucks a month call it a thousand customers uh today they are profitable which is great this year you know caught 300 000 bucks going to the bottom line and he incentivizes his team members so don't get stuck with useless options actually has a revenue sharing or profit sharing program again all bootstrapped fueled the initial mvp uh while still running his agency as they look to drive those initial 100 customers michael thanks for taking us to the top you're welcome thank you nathan 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 buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 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 sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something 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 sas 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 are saying sign up for that at nathan lacka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode 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 counter those people we got to push them away click the thumbs up below to counter them and know that i appreciate your guys support all right i'll be in the comments see ya

hello everyone my guest today is michael he has over 20 years of experience and a big journey generating leads for clients he's tracking and reporting leads which has been a consistent pain point throughout his digital marketing journey himself and jeremy developed what converts their current company as a complete lead trucking and reporting solution for marketers michael you ready to take to the top i'm ready all right so the company is what converts.com help us understand what you guys do and how you make money yeah pretty much like like you said we track leads and then we enable you know people to report on those leads so a lot of our clients are marketing agencies and when they do work for clients they generate leads we help them capture all those leads so if you're and one of the big things marketing agencies were missing was call tracking and if you go to our website it looks like we're a call tracking company it does um yeah it does and that's done intentionally because that's the trending area um it's a trending service so people they want call tracking they go to your website yeah that's what i want and once they start using us for call tracking they very quickly start using us for form tracking chat tracking and even ecommerce so call tracking is your mouse trap that's it yeah exactly um we want to move away from it in the future i think you know it's becoming a much more crowded place the call tracking space and we do intend to you know focus more on the lead tracking and lead platform um in the future so when you look at your customers when they sign up for your platform and they get signed up on all your other products on average what's the company paying you per month or agency paying you per month to use the technology so i've averaged it all out and you're looking between you know 180 to 220 a month so some some are at like 30 dollars a month and some are several thousand a month yep this is uh this is a tricky space though because it's like it's a little more expensive where people don't want to just do a touch credit card swipe on a website but it's too cheap for you to put human touch on it with an inside sales team so what does your sales motion look like how do you get new customers we're just an inbound funnel we get a lot of word of mouth um once agencies use this and the clients use us even if their client moves from the agency they want to take what converts with them so that's been the main one that brings us some people just talking about direct referrals but you know ppc marketing a lot of review sites so if you go see the review sites we get a ton of five star reviews you're talking about cap tara g2 crowd captain we uh we haven't put a lot of attention to g2 crowd at this time because that's a funny sight once you're tied into them um if you don't continually generate reviews you slip down their grid and i think it looks bad so once you commit to g2 crowd it's a your work starts it's a never-ending cycle yeah and we just um at this stage you know we on captera we on um google you know they're the google my business reviews things like that we're also on the google partners page so um we're stuck there g2 crowd we have a page then we have a few reviews but we purposely you know would prefer not to get into that yeah what's the team size today how many folks we have six people and have you have you guys basically bootstrapped or have you raised capital yeah we bootstrapped yeah but dude you know i love that if you're a listener you know i love that i don't believe you you don't have to you're a capitalist you want to you want to grow big become a you've heard you've heard about the book and no i like bootstrap because i think you build wealth quicker that way in many cases you build wealth quicker as a founder yeah the main reason we don't want to look at investment is we like control the product and we what i like with our business we're growing and i hate the growth plateau i never i'm scared of the growth plateau you know so i always want to be growing yeah but i don't want to grow too quickly just yet because we um we're still learning a ton and we've got a solid product i think we're better than our competitors in a lot of areas and we're tightening down those areas and adding features and functionality that really speaks to our core value yeah so um yeah we're getting ready to you know you know increase that growth rate so help me understand growth today how many customers have you scaled to it's well it's a difficult thing because we um our software is used on 10 000 websites just your agency partners just agency partners you're looking at i think i looked the other day looking at close to 400 agency partners okay and then they serve over 10 000 kind of end websites yeah and in addition to that we have individual companies so we've got several hundred smaller companies or medium-sized companies using us direct without the agency so if you add up all just all your direct users the agencies plus the smbs how many total customers you're looking around 700. okay that's i mean that's a healthy amount can i take the 700 times the 180 180 kind of rp you gave me earlier to calculate mrr yeah it's about 126 a month yeah we're a little bit lower than that but yeah right on that's that's awesome and then um what about growth rate so a year ago what were you doing a year ago um you mean for the whole year for 2018. no just take me back in a year uh what were you doing in terms of mrr mrr a year ago we were probably looking at 60 to 70 000. and what'd you finish with in december of 2018 that would have been six months ago do you remember about a hundred thousand okay good so you went from 12 months ago like 60 000 to 100 000 in in december to 126 now i mean this is this is nice growth yeah what's going on what's the mouse trap i mean but besides the review sites and stuff are there any other ways you're getting new customers the um i would say you know seo is growing over time you know it's organically growing we haven't put too much effort into it but uh that area is growing nicely and we plan to put a lot more effort into that area yeah um well i want to kind of dive deep here for a second on the captera stuff but let me let me just round out your story for a second put this on a timeline for us when did you launch we launched in 2015. okay and what what year did you do any revenue in 2015 or no yeah i mean our first month we did like 30 bucks and it was an existing client from one of my agencies um and then yeah i think by the end of the year we were just a couple of hundred i mean no no sorry um a few thousand and then we quickly grew from there i wish i i had the child i've got i've got all the revenue in the spreadsheet but no that's okay that's okay and are you today are you burning capital are you casual positive we've never burned capital we've always been profitable yeah so what would you take to the bottom line like 10 or do you operate right at zero percent you you always reinvest everything now we're at about um i looked at about 15 to 18 percent okay so that would be about 24 000 a month to the bottom line on 126 000. yeah i said a little bit lower okay yeah that's still healthy that's i mean you're building a great business i love that um and then before we talk more about captain stuff churn's critical especially at this price point what's your turn today and how do you make sure you keep you know improving that we so it turns around about five percent um monthly yeah monthly okay so so 60 turn per year yeah okay and is that logo basis or revenue basis that is logo basis is revenue lower yeah what is logo basis well the only the only reason people measure those two differently is if you're if you have serious differences in your rpoo so churning a ten dollar a month customer is way better than churning a ten thousand dollar a month customer so revenue churn would be you know you know 10 000 in revenue lost if you lost the big guy but only one logo okay yeah that's logo tune um yeah and what happens is like we do a free trial and our conversion to a new account is like 70 80 percent um and then once we've got those accounts the first what's the two three months are pretty crucial and we see a decent drop off there but once they get beyond four or five months they're pretty much sticking yeah um which turn drop to and like months three four five six i don't have that data but you know it's getting better it gets better and uh like we got our turn and retention chart and once you get to like five six months it's sort of you know you don't see any more drop off yeah yeah do you know what expansion looks like annually how much do you expand an account no we don't okay so the nice thing about call tracking is as they use it more and they use more calls and more numbers that increases so there definitely is an expansion just from them using more well do you know what net revenue retention is so your gross churn is you know 60 you then make up probably some of that with expansion on those cohorts do you know what that number is i don't okay we do we do need to track more but um you know and there's lots of reports i want but we're more focused on you know users and just giving them what they need and um we're worried about revenue we very um we look at the revenue and we just but we look at top line figures we haven't really got into the weeds with our data yeah yeah well yeah there's obviously some optimization you can do with 60 annual churn you guys will figure that out over time but uh you the nice thing is you're in no rush because you control it you're bootstrapped you can do whatever the hell you want which is great exactly um fully weighted cack so to get a new 180 a month customer do you know what you're spending to get them all in yeah so that's difficult because of the seo component and the the referral kind of component but we see anything from 150 to 300 dollars yeah that's super i mean that's super so it's less than a two month payback period i mean that's really healthy yeah well if they become like an agency client and they use it it's good but if they're like a thirty dollar because we have a thirty dollar plan so if we're spending three hundred dollars for thirty dollar plan it takes longer so yeah yeah but on average you're getting up you're getting them up to again about 180 bucks a month something like that yeah okay when you look at the average um rp of 200 yeah exactly that's healthy okay let me go deep here on the captain stuff real quick so i'd love to understand so first off are you only placed there organically or do you also pay captera money for sponsored placement we pay to be you know it's a pay-per-click model yeah so help me i did this with a couple ceos on interviews yesterday it was very very telling because there was serious diminishing returns in other words the person that pays for the number what i'm going to look up you guys up real quick okay you're under call tracking software that tag so right now call rail is is is paying for the number one spot then in voca then phone wagon call cap and then you guys are down there as well and the the number of clicks that each of those companies gets for every extra thing you are down the drop-off is like significant so do you know how many clicks you get per month from captera yeah you're looking in between 100 and 200 per month okay so you're getting 120 per month and what do you pay them cost per click i believe so we've played with it and and that's the funny thing is those guys the call rails and the invoker as soon as you bid to go above them they immediately go above you yeah so call rail um i don't know if i can reveal how much they've set their cost per click but it's uh access in excess of what um they they they said to like a hundred dollars a click yeah yeah well and they've raised like they just raised like 70 million dollars or something ridiculous that's it did you speak with andy i forget who it was but i just know i heard that number like oh my gosh yeah they they value the company like 160 million they've raised 70 million um and yeah that's interesting i i looked at that carefully and after the razor had a good chat with andy who's the ceo and i looked at the um you know i read the lost and founder book by rand fishkin yeah i've been very interested in the different models to go to market because obviously if you don't raise your risk because somebody can move quicker than you um but you you know you lose you know i'm i'm talking to the con you know the person who knows the space well well let's keep let's keep though let's i want to keep narrowing down though on you so about what are you playing per click about do you know five to six dollars okay interesting so if captain at the top for that keyword is called a hundred-ish and then two three four you're five down you're paying you know about five to ten per click getting about 100 or 200 clicks per month how does that cohort convert when they hit your website is it healthy it's decent in terms of quality from cafeteria we wouldn't say they're the best quality um we find you know people coming directly through adwords or better quality converters captain is decent you know like it's definitely worthwhile being there but um we're not too upset when we're not one or two position up there yeah okay good so so you would never i mean do you go in and try and like right now you're in the fifth or sixth spot i mean could you go up and pay a little less than call rail but knock invoke out of the number two spot and would that drastically increase your your leads from the site or no it will increase it yeah it's uh it definitely increases it but they they've got a little uh notification so as soon as you output somebody else's let them know yeah so i've done it and i i played around with it to see like let's try this and within a couple hours they're bidding above you so all that's happening is everybody's paying more for the same results yeah that's interesting so do you know how many clicks call rail gets i bet you it's in the order of two three thousand a month i don't know if it's that much i would probably think 67 to 800. oh interesting okay okay so not a ton then um okay very interesting so i mean would you recommend then these review sites as a go-to-market strategy for new companies and you know similar size as you um the problem is there's so many review sites you know there's um there's a lot of them and to me once you start generating reviews asking your customers to go leave a review on five different sites it's just a pain and you you know you're starting to annoy them yeah so um and also we don't want to pay people for reviews so every single one of our reviews our you know customers like that product and they go give us a review best way to do it yeah whereas the other guys they get a budget and they say hey leave a review for 25 bucks and it sort of waters it down they leave bad reviews we like real heartfelt real reviews and we just feel the the integrity of that will play out over time yep very good all right let's wrap up with the famous five number one what's your favorite business book i was going to say like from good to great i like that but that lost in founder i i wouldn't say it's the best business book but i just love the way how transparent he was yeah and had a lot of lessons number two is there a ceo you're following are studying i don't like the big ones i don't think i learn a lot from them but i like the guys from like mailchimp and chestnuts or um you know guys in our space um i like to look at what they're doing number three what is your favorite online tool for building your company we like help scout number four how many hours of sleep to get every night probably seven and what's your situation married single kiddos uh married with three kids oh wow and how are you i'm 47 47 last question what do you wish your 20 year old self knew michael i thought about this one um i would tell them understand value and also trust the process but verify it what converts.com helping companies caught with call tracking whether it's an smb or an agency serving 700 customers right now paying 180 per month so they've broken 126 000 a month or thereabouts in revenue that's up from 60 000 per month just a year ago a lot of growth coming from review sites and seo paying about 300 bucks to get a new customer their churn is a little high right now at five percent per month but he's working on driving that down the nice thing is they're profitable 20 000 a month going to the bottom line they've raised zero dollars six people on the team again scaling and nicely michael thank you for taking us to the top thank you nathan appreciate it