Luke Sophinos
speaker
126 appearances
1 recordings
1 series
first heard Sep 2024
last heard Sep 2024
Luke Sophinos’s voice in public audio — every appearance, attributed to the second.
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Yeah, so I've broken these down actually into like individual scorecards. So there's a couple that I really like here. So the first one that I love that I think is dying for a vertical SaaS business is machine shops. So why is machine shops interesting? Well, going back to that list, it's 262 billion or 240 billion in revenue. There's 22,000 of them. and it's beautifully segmented, right?
So the higher this number is the better. This is basically a score. So I'm taking all thousand industries and this is up at the top 763. So if I actually look at machine shops, it checks a ton of my boxes because it's highly fragmented. There's a healthy amount of small businesses to go after, mid markets to go after and a few enterprise.
And the average machine shop is doing 2 million a year in revenue. right? There's 17,000 of them. So this looks like a perfect place to build a vertical SaaS company right now. It's got a beautiful market size, beautiful segmentation. And then I have a couple on the list here that kind of things I look at after that initial piece that we'll go into.
Yeah. So look, I didn't know anything about trade schools. I went to traditional education. Like I had family that went through the trade school route, but I, you know, I lived in California. I was like the tech guy. Right. I started my business in college.
And, you know, obviously if you have the domain expertise and you spent a bunch of time in machine shops, right, you're going to be a step ahead of someone who hasn't. But, And there's a correlation with successful outcomes and actually having the industry expertise, but it's not a requisite at all.
So, you know, we've built one of the biggest vertical SaaS businesses in the country for trade schools. And it's, I didn't know anything about trade schools until I started a decade ago.
I mean, look, I think it takes, again, it's back to more of this is science versus art, right? So you have to go and you have to learn everything about machine shops as you possibly can. And there's opportunity in boring, right? And I don't look at... Vertical software is boring because I think it's incredible problem set. It's a puzzle that you got to put together.
And the way that I try to learn about machine shops, and this I'm sharing now on my screen, something from Toast S1. So Toast is a publicly traded vertical SaaS business. A lot of people know about it. They do restaurant software, right? And what they did in their S1 is they actually visualized a restaurant in every aspect of its operations end to end.
And so this is a very important part in determining if there's an opportunity in machine shops beyond the few characteristics that I talked about, right? So you have to map out the entire customer journey and the entire operations of the businesses within the industry that you're going to serve.
So in Toast S1, they literally have visualization of every aspect of the restaurant, the back office, the kitchen, the bank, the delivery piece, right? The actual restaurant itself, the bar, you know, people at home that are trying to find out about the restaurants with websites and marketing. And so you have to really understand machine shops, even if you're in Tribeca.
And I did this at Korsky too. So here's my example for trade schools. Like we have, We understand, all right, the first piece of a trade school is admissions, right? It's finding students to enroll them. The second piece is actually training them. Well, how does that look? It's not actually a classroom setting. Like they're training them in a garage, right?
And they're training them with a real car for an automotive example. And then you have all these other bits and pieces. I don't have to go into all of them. The IT team, the student services, the compliance and regulatory piece, the placement group is actually responsible for getting folks in there.
And as you actually visualize the end-to-end operations of the businesses within the industry, this is how you start to actually identify where is the software opportunity and how big is that software opportunity.
Yeah, no, totally. It doesn't necessarily need to have a huge physical component to it, but you have to map out and visualize the end-to-end operations of any industry that you're intrigued about, you wanna go after. I mean, that's the nature of vertical software. I have over a thousand industries in here, right? Pharmacies, restaurants, banks, chiropractors, gas stations,
you know, IT services, right? Home centers, home healthcare is a really interesting one. Furniture stores is a really interesting one. Churches. Um, there's so many industries that, uh, I have a thousand, the better business bureau has over 5,000. Um, and so it's the science of, and we're, we haven't even scratched the surface yet. We're just getting started, which I love, but it's how big is it?
What's the segmentation? And then let's actually map out and understand kind of the end business operations, um, and what that looks like from A to Z. All right, let's keep going.
So there's a couple other things that I like to do beyond that piece. I'll jump back to the scorecard here. So the first piece is outside of, now that I've mapped out that particular end-to-end operation, something that's really important to do is get your hands on as many P&Ls as possible. So you wanna look at as many P&Ls as you can from as many businesses in said industry as possible.
So an easy place to start is looking at like publicly traded companies within that space and looking at their P&Ls. Another hack that I love is I talk to as many bankers within that industry as possible. Bankers are an incredible source because they buy and sell companies all day and they typically are industry focused.
And so when you get your hands on a bunch of P&Ls, you actually start to understand where are these companies spending money? And so like one of my core beliefs in software is you have to build software that either increases revenue decrease costs or prevents customer churn. And then depending on the industry, a fourth one would be maintains compliance.
So some industries highly regulated that becomes like a need to have and not a nice to have some industries don't care about it, but every single business and every single industry, the CEO is trying to, and the owner is trying to increase revenue, decrease costs, prevent as much customer churn as possible. And so I want to understand when I look at those P&Ls, like where's the money going?
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