How Time Doctor Achieved 202% Growth in 2020 and Built an 8-Figure Bootstrapped SaaS (Interview with Co-Founder Liam McIvor Martin)

Event Context and Introduction

Nathan Latka

00:00Quick context. This was recorded March twenty eighth and twenty ninth. So a couple weeks ago at my live event, saasopen.com. We had a thousand software CEOs there. If you missed it, we hope to see at the next one, September fifth and sixth in New York City, saasopen.com. But for now, let's jump into the recording.

Key Marketing Channel Statistics Teased

Liam McIvor Martin

00:19>> SEO has a 202% return on ad spend. Paid ads has a 155% return on ad spend, and email has a 127. Bootstrap companies grow faster than their venture backed counterparts, past 10,000,000 ARR.

Nathan Latka

00:35Hey, folks. If we haven't met yet, my name is Nathan Latka. I launched and sold my first software company back in 2015 and went on to write a book about it, which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies. Thank you so much for that. After the book, I launched this show and one went on to create founderpath.com. I raised a large fund to do non dilutive deals with b to b software

01:01founders. So far, we've invested in over 400 software founders totaling a $150,000,000. Here in 2024, we're doing three to four new deals per week. So if you're looking for capital and don't wanna give up equity, go sign up at founderpath.com for free to get your offer. Alright. Let's jump into the interview.

Nathan Latka Introduction and Founderpath Overview

Liam McIvor Martin

01:20>> I wanna start out my talk with a question because I always like to start out my talks with questions. And usually, these questions are something that I talk about around a couple other founders. And this question, the more that I thought about it, the more that I realized it was actually a lot more complicated to answer than initially when I asked it. And that question is, how do we build billion dollar bootstrapped SaaS companies? How many

Talk Opens: How to Build Billion Dollar Bootstrapped SaaS

Liam McIvor Martin

01:48>> of you guys are bootstrapped right now? Just a raise of hands. Perfect. And how many are venture backed? Okay. Cool. You guys are gonna be pissed off, but don't worry about it. It it you're gonna learn something from this as well. So here's some interesting statistics. Bootstrap SaaS medium growth rate is 28.5% from three to 20,000,000 ARR. That's pretty good. Another statistic that I saw was SaaS median growth rate over 10,000,000 ARR is 24%. So growth

Bootstrap vs Venture Backed Growth Rates

Liam McIvor Martin

02:18>> goes down obviously a little bit as you're scaling the organization. However, if you split out venture backed companies, Bootstrapped actually grows 6.7% faster than venture backed companies. Now isn't that very counterintuitive? Don't you usually have a bunch of people that are at conferences like this and say, no. No. You need to raise money because that's gonna allow you to grow faster. But no. Bootstrap companies grow faster than their venture backed counterparts. Past 10,000,000 ARR, they actually

02:55>> grow faster than their venture backed counterparts. There is a lot more failure rate on the smaller ones, but once you get past that 10,000,000 ARR mark, Bootstrap actually grows faster. So this was really weird for me because I thought to myself, okay. So if we want to build more billion dollar bootstrapped SaaS companies, we have to start to think differently. Because to be completely honest with you, the information is different. The conflicts are different. The economics

03:19>> are are different. The culture is different. The business is different. But in my opinion, it is better. And that's not just my opinion. That's a fact. So how do we build billion dollar bootstrapped SaaS companies? Well, my answer is that bootstrapped SaaS needs a different playbook than venture backed companies. We need a different methodology in order to be able to build those types of companies. And I would also add on that bootstrapped companies learning from venture

Bootstrapped SaaS Needs a Different Playbook

Liam McIvor Martin

03:52>> backed companies is counterproductive to their overall growth. So we've seen a lot of bootstrapped companies. We've seen a lot of venture backed companies that have talked over the last two days at SAS Open. But what I really wanted to do was focus specifically on the 13 counterintuitive insights that I had bootstrapping an 8 figure SaaS. Now, this is the slide to say, don't leave the room. I know what I'm talking about. My name is Leah Martin.

Liam McIvor Martin Introduction and Time Doctor Background

Liam McIvor Martin

04:19>> I'm the co founder and chief innovation officer at Time Doctor, which is just a really great way of saying. I basically just get to play around with the research and development team all day long, which I've been loving by the way over the last year. I'm also the co organizer of running remote, which is the largest conference on remote work. I also co wrote the same titled book, running remote, which became a Wall Street Journal bestseller

04:40>> last year, teaching you everything you need to know on building and scaling remote teams. And I'm really passionate on focusing on understanding how work works. And my second passion is actually working with SaaS businesses. We have team members in 46 different countries all over the world. And they all work seamlessly because we've understood remote work at scale. And when I was working on this talk about a month ago, I was actually in this little coffee shop

05:05>> in the Phifei Islands. Does everyone know where the Phifei Islands are? One person. Okay. It's in Thailand. And I just realized in this moment as I was writing out this talk, if I had raised venture money, I would have never been able to do the cool and fun stuff that I currently do now, me and my cofounder, because we can't just go fuck off to, you know, Thiefy Islands for two months. So it's also a lot

Insight 1: If You Cannot Measure It You Cannot Manage It

Liam McIvor Martin

05:32>> more fun. So first insight that I have is if you can't measure it, you can't manage it. And probably a lot of people know this quote. It comes from Peter Drucker. But probably a lot of you don't know that Peter Drucker actually stole this from this guy, Lord Kelvin. And I actually like this one more. If you can't measure it, you can't improve it. And I stole it from this guy, David Skock, who actually did a

06:00>> really great talk at web summit last year about SAS metrics. If you're interested in checking that one out, it is amazing. But in our organization, everyone has a number. And if you don't have a number, you can't work here. That's very simple. So when you start working inside of Time Doctor, you need to be able to have some type of quantifiable, trackable goal to work towards. And this is our version. And again, I'm gonna give everyone

06:25>> access to this at the end if you're interested in downloading all of these reports. So this is our top level executive dashboard. We have leading indicators and we have lagging indicators. We have three different colors, which is red, yellow, and green. Green means everything's doing great. Don't worry about it. Maybe we should have actually set a more aggressive goal previous quarter. Yellow means maybe this person is not gonna actually hit their target. We should probably pay

06:52>> attention. And red means there's a fifty fifty shot of this person not hitting or this department not hitting their goals or not. Just from looking at this dashboard, where were our problems for this quarter?

07:06>> Any ideas? It is PQLs, MQLs, deals, pipeline. We totally miffed we totally whipped this particular quarter on our improved targets. So we work on that, obviously. And we spend 90% of our time on the reds. We spend 10% of our time on the yellows, and we spend none of the time on the greens. We basically just set a more aggressive target for next year. Next one, camels not unicorns. Reduced resources eliminates optionality. When you have a

Insight 2: Camels Not Unicorns and Making EBITDA

Liam McIvor Martin

07:34>> ton of cash, it's really easy to be able to work on crazy new things and go in directions that you wouldn't necessarily be interested in pursuing in the first place. You kinda solve problems with money. And we see a lot of this with a lot of venture backed companies. But I actually almost wanted to make this one of my counter intuitive insights, is make EBITDA. For everyone that's here right now, who has some net profit, some

07:59>> EBITDA in their books? How many have like 5%? Keep your hands up. 102030%? Woah. You're buying the drinks. Okay. Thank you very much. So in my opinion, one of the things that my my financial adviser actually sat me down about six years ago. And he said, Liam, you have 94.5% of your net worth in a private company that you can't sell. You

08:28>> need to start taking some risk off the table. And so we did. And and that's very counter to grow at all costs. Reinvest everything you possibly can inside of this business. And in my opinion, that was the that was the right move to make, which was start to make some profit. And it completely protected us against a lot of problems that we had down the line. I would say 10% is good is a rule of thumb

08:53>> minimum. 20% is where I would really put the target at. And 30% is if you think that there are going to be some rough economic times in the next couple quarters, boost yourself up to 30% EBITDA to protect yourself in terms of that downside. Next one, large TAMs equals bad for bootstrapped companies. Again, this is probably something that people are not gonna like very much when I say this. But these three books, how many of you

Insight 3: Large TAMs Are Bad for Bootstrapped Companies

Liam McIvor Martin

09:20>> have read Crossing the Chasm, Blitzscaling, or Scaling Up? Almost everybody. Right? And what they teach is that and I'm just using Crossing the Chasm as an example. You should be focusing on your early market segment, not the big mainstream market. So when we started Time Doctor, we had a probably a billion dollar total addressable market. Now post COVID with everyone using remote work, our industry became a lot bigger. It's probably worth 20 to 30,000,000,000 at this

09:51>> point. And so we recognized that if we wanted to start the same business today, we would never do it because we just don't have the resources to be able to do it. And there are lots of competitors right now that are raising $50,102 $100,000,000 to be able to compete against us, but they've gotta overcome the entrenched brand that we've built, which is very, very difficult for them. And we actually were terrified around 2021 because we had,

10:16>> like, seven companies that raised over a $100,000,000 to come directly after our market. And so far, none of them have really penetrated the market that badly because we already had that early market segment. So focus on the markets that are early. I would say below 10,000,000,000 is where I would really go. But if you can get it lower to a billion dollar total addressable market that you think is gonna grow in the future, that's where you

10:38>> should go. Another honorable mention here is a lot of people talk about innovation, but you should really just talk about the dollars and cents. This is a great book, traction. Has anyone read this book before? Couple people. It's amazing. Stop focusing focusing about how to get from zero to one and just focus how to do that particular thing. Next one, remote is the best option, which obviously is gonna come from me, but I'll give you a

11:01>> couple statistics to be able to reinforce that. Remote workers are 35 to 40% more productive than their office workers. They have a higher engagement than on-site employees. On average, they save seventy two minutes of their day just on commuting. So if you have your in office employees and your remote employees and you let your remote employees sleep for seventy two more minutes per day, you will have more productive employees. They say between 600 and $6,000 yearly.

11:29>> They have a 93% of working professionals believe that remote work positively impacts their mental health. 51% of working professionals prefer fully remote. 46 prefer hybrid. 4% for some reason wanna be in the office twenty four seven. I don't really know why that is. And then lastly, there's a 50% higher retention rate in in compared to their in office counterparts. And lastly, it's more fun. As I said, I get to go to the Phi Phi Islands. I

11:54>> get to travel around the world with my co founder and all the other employees that work inside of the company. So it's a lot more fun. And one other statistic, which I'll push to you guys is pre COVID, why Combinator saw that 16% of their startups were started remotely. Today, this cohort, 82% are partially or fully remote. So if you wanna be able to build products for the remote tech platforms and future, remote is definitely the

12:23>> direction to go. If you wanna learn more, go to running remote. That's my conference that we run end of this month actually in Lisbon, Portugal. It is a lot of fun. Talk to me afterwards if you wanna go. Next. There's one to three ways to get customers. That's it. Very, very few companies, if you look at their user acquisition funnels, actually do more than three, four, five significant sources of user acquisition as you see them scale.

Insight 4: Remote Is the Best Option

Liam McIvor Martin

12:51>> Here's a survey to be able to prove that out. This is a survey of $118,100,000,000 dollar plus companies. This is where they've deployed all of their revenue. They are basically all of their marketing channel revenue. You can see there's a lot in organic social media. And then you can see the absolute horrific return on investment for organic social media. Tweeting is not a strategy for anyone that's interested. What you need to focus on is SEO has

13:20>> a 202% return on ad spend. Paid ads has a 155% return on ad spend. And email has a 127% return on ad spend. Do SEO, paid ads, and email in that order. If your CMO tells you to do anything different, they don't know what they're talking about. Next, build product number two at 10,000,000 ARR or below 40% year over year growth. When we first started Time Doctor, about a year and a half into it, we decided

SEO, Paid Ads, and Email Channel Rankings

Liam McIvor Martin

13:49>> to build this other company, which is called staff.com. And we thought that in the two sided marketplace space, everyone was doing it wrong, and we would do it right. So we ended up building this URL. We we bought this URL, which was very expensive. It was, like, $550. And we built this two sided marketplace. Year one, we were doing 86,000 MRR. Year two, we were doing a 112,000 MRR. So the business completely collapsed in on itself.

14:16>> And while that was happening, Time Doctor was growing at 60% year over year. No problem whatsoever. And we were applying no marketing, no engineering resources into it. It was just running. So focus on your winners. Don't start losers before you actually scale up your winners. If you have something that's working, just keep doing it. I know that founders hate that, but keep doing it. Next. More than 10,000,000 ARR, you are a retention company. You are not

14:47>> a customer acquisition company. I don't know if anyone uses Chartmogul here. We use it. A couple people. So these are our numbers in 2019. You can see that new revenue, which is the dark blue section, was about 40% of our overall revenue breakdown. In 2023, it was about 15% of our overall revenue breakdown. We are an expansion company now. We are not a user acquisition company. So we've deployed a lot more resources to CS, making sure

15:18>> that we retain our customers, making sure that they're happy. As we just talked about in the previous talk, what to measure, CSAT, NPS, net retention referral rate. We actually have an NPS of over 56 right now. So we're doing quite a bit better than Alvaro, which is obviously something else that I could talk to you about. Next one. Brand is the most important thing. Plus past 10,000,000 ARR. I really do believe this. So when COVID happened,

15:50>> a lot of companies just went and bought our product because they were like, well, we don't really have a remote team, but we identify what you guys do, which is time tracking for remote workers. And then when COVID happened, we just saw a massive, massive influx of revenue coming in. And we didn't really know where it was coming from, but we recognized long term that it was from our brand impression. And if you have a company

16:10>> that's worth more than 10,000,000 ARR, particularly if you have a large customer base, let's say more than 10,000 customers, they're going to talk and that referral engine is something that's going to feed you to a 100,000,000, in my opinion. How do you test this? Well, you increase prices and you see if they stay. That's one of the best ways to test that. We did that through experimentation, and we actually it was one of those things that

Insight 6: Product Led First, Sales Led Later

Liam McIvor Martin

16:32>> we should have done it ten years ago and we didn't do it. We realized that there was almost no impact on conversion and churn by raising our prices by 20%, which just automatically raised revenue by 20%. Next, product led first, sales led later. So this is a bit of a story of March 2020. And everyone kinda knows what happened in March '20. The entire economy completely imploded, exploded, exploded for real work, imploded for everything else. So

17:04>> February 2020, we were doing about 20,000 in new business MRR. By March, we were doing a 115,000 in new business MRR. And by April, we were doing 212,000 in MRR. We literally took the sales team that was working on about 10% of all deals. And we said, if you're working on and a $100,000 ARR deal would be important to that sales team. And we all of a sudden said, only work on million dollar deals. So the

17:34>> product led engine actually converted all of those customers. 98% of our customers were converting through our product led model where a lot of our competitors didn't have that. And they basically wasted all of those leads where we ended up actually being able to get them. Funny story. We had a g 20 country literally deploy on our software

17:58>> through a PLG model. I don't know how the credit card worked, but they deployed 500,000 employees on the system. And we went down for like an hour and a half. It was absolutely insane. And then we called them and we were like, stop. Stop doing this. We're gonna shut down your account. We'll try to onboard you properly. And that resulted in 202% growth in 2020. But again, by focusing on the actual PLG base, we could have

18:26>> our sales team focus on the cream on the top. And a sales team is gonna cost you a couple million dollars to really deploy at scale. So it's incredibly important that you keep those costs small. You build the product so it can sell itself, and then you add the sales team on top. Next, pay less attention to competitors. Here's a couple slides to be able to reinforce this. This is Forbes, Statista, top reasons why startups fail.

Insight 7: Founders Will Try to Self Sabotage

Liam McIvor Martin

18:51>> There's also something from Fractal. Again, is just stuff that I googled. Get out competed is the fourth and eighth top reason why startups fail. Ran out of cash is the second most important one. If you're bootstrapped, you don't run out of cash because you live within your means. And you don't have to actually invest in time in raising capital and going after all of these. I mean, you guys know that have raised capital. It sucks up

19:17>> a ton of energy and time. And so by removing that and focusing on just building and servicing customers that don't even know that your solution exists, particularly if you're in early side of the crossing the chasm process. You're going to be much more successful than focusing on your competitors that maybe own 2% of the overall market when you own 1% of the overall market. Next, and this is the most important one. Founders will try to self

19:48>> sabotage. If things are going well in the business, you're gonna do stupid stuff to screw it up. And I think the reason why is because founders really like chaos. The company was born out of chaos. It was a very chaotic process to be able to say, we're gonna do this thing that no one's ever done before and I'm gonna do absolutely every job inside of the organization. You're gonna do stupid stuff like you're gonna build a

20:15>> product that has no correlation to your original customer base. You're gonna not answer emails properly. You're not gonna work on partnerships the way that you should have been. You're just not going to focus on the things that matter because either consciously or subconsciously, you want to be able to sabotage the business. Because when you sabotage the business, there's more chaos. And then you are in a state of chaos which makes you unhappy consciously, but very unhappy

20:40>> subconsciously.

20:42>> And it breaks down into two big categories. Either number one, you believe subconsciously that you don't deserve to build a billion dollar business. Or number two, have limiting beliefs.

20:55>> So your friends, your your your cousins, your parents, whoever it is, they don't want you to succeed and that intrinsically becomes a problem for you. I had to work on this actually for years. I was scared of telling people that I'm rich. And it's one of those things that even triggers me right now because I think to myself, all rich people are lazy assholes that just kinda sit around all day and don't do anything. But the

21:24>> reality is that that was subconsciously holding me back from actually saying, well, I wanna build a billion dollar company, and I wanna be able to execute on that strategy and not become something that I hate. And that took a lot of therapy to be able to solve it. One last story I'll leave you with. I had a friend of mine and I went to his office. And literally in his office, he had a little sticky note

21:50>> that read, your mother truly believes you deserve this. And to put it up there just to be able to get past that mental block. If you're having that type of mental block right now, talk to me off stage. I'm happy to be able to help you. I spent hundreds of thousands of dollars on therapy to hopefully change that type of mindset in my own head. But it's so important to be able to get past that self

22:13>> sabotage because you will not succeed otherwise. The books didn't get here unfortunately. I was supposed to do a book signing, but they were not shipped in time. But if you have any other questions, that QR code has all of the documentation that I just went through and including this talk. And if anyone wants to chat with me, I'll be around. Thanks a lot.