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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Appearances
Yeah, I don't care if you, you know, take a percent of the booking because it's going to be on top of what I'm getting. So no money out of my pocket. You create this cool digital experience for the customer. Like I don't have to send somebody out until they pay me. Awesome. So then they go and they launch a CRM. And so now they're moving down the entire life cycle of roofing companies.
I bet you next, they're gonna build like the ERP, right? Like they'll get to the all-in-one. They didn't start with the all-in-one, but they built this wedge product that enabled them to, it was a reputation prover. It was easy to implement, right? And it was easy to get in the door. It was a marketing led customer acquisition approach.
So you know what's easier, Greg, than acquiring a net new customer? Acquiring an existing customer. right? So it's so much easier for me to sell something to somebody that already uses my product than it is for me to sell someone who's never used anything. So they're like, yeah, those guys had a great proposal tool. Like, let me look at their CRM. Maybe we want to move off of ours.
And now I'm willing to pay like a SaaS based kind of monthly fee for that CRM, as opposed to this transaction kind of business model on the wedge product. That was like a beautiful, and I'm, you know, if you ever have the founders on, I'm sure I got some of that wrong. That's like, what I've heard through the ether, but that's like the perfect wedge into software, uh, you know, CRM.
And I'm sure the next step for them is like all in one.
Absolutely. The other thing I'd add to it too, that's really important in vertical SaaS is if you can build a wedge product before or after the transaction, you can eventually own the transaction, right? And so let's talk about that for a second. Like adding payments into your vertical SaaS solution is the way to like build massive, massive companies in vertical software.
And so every single big industry specific software company owns the transaction. All right, so let's unpack that a little bit. let's say toast, remember we've talked about toast restaurant software, right? If they go out and they say, Hey investors, we're going to build an all in one software for restaurants. There's, um, I'm, I'm using rough numbers.
It's like generally, generally accurate I think, but there's like a million restaurants in the U S and we're going to charge, you know, 10 bucks a month. Uh, and so now you do the math on that. What's a million times 10 bucks. It's not a lot, it's 10 million. All right, so our software market size is 120 million, right? So like VC is gonna look at that and be like, that's not big enough at all.
If you're bootstrapping, absolutely big enough, right? But now what happened with Toast is they said, wait, we're gonna actually implement payments and we're gonna take a piece of every single transaction that flows through those restaurants. Well, those million restaurants do 1 trillion in revenue.
And so now our market size went from 120 million to like, you know, whatever, a couple percentage points, 1%, 2%, depending on their take rate, probably a little lower than that, of a trillion dollars. Like very, very big difference. So it's one, it's all these VSAS companies can scale insanely quickly by adding payments.
And so if you can build a wedge product before or after the transaction, and hopefully before and after the transaction, you eventually can capture the transaction. And I see like we implemented payments at CoreScape before they were using PayPal. Like trade schools were literally processing payments through PayPal. So, okay. I already have all the students that use my app every single day.
They use it to clock in and clock out of class. They use it to track their skills. Like it's obviously they would way rather the student pay through our solution where we already have all the accounts made. We know their schedules, you know, we know everything about them versus I got to go create an account in PayPal. And now I got to like,
export all the transaction records into like my Excel sheet and figure out who's late on their payment and who's, you know, who's not. And how does that look on like a school by school or program by program? And now like, it's, it's, it's, it's an effing nightmare. So vertical specific payments is like a beautiful, beautiful opportunity. And it's typically not a wedge.
It can be, but if you can map into that, you can build a really big business.
Yeah. So pricing, I think, is the least thought about thing in software, which is crazy. It should probably be one of the most thought about things in software. My approach is pretty basic, but I think it works. So my approach is I understand how much does the thing cost that I'm solving, right?
And once I figure out how much the thing costs, I shouldn't say cost, how much are they paying for the thing that I'm solving today, right? And then I can look at actually coming up with some sort of pricing model. So let me go, I'll give you a concrete example. So we came up with a retention tool. We kept hearing from all of our end customers that student retention was a problem.
They had a bunch of students that were dropping out of their trucking school. And so we said, OK, we're going to build a tool that like analyzes all of their academic data and their attendance and and basically floats up a risk score that tells you which students are at risk in real time.
And then we're going to automatically text those students who are like trending in the wrong direction and try to motivate them via text, you know, with resources and ways to get back on track. right? So then we said, okay, well, how much is tuition for a school? Well, it's $20,000. All right. If we assume, well, what's the school's retention rate? Well, right now it's like 70%. Okay.
So what we found out was like, they were losing millions of millions of dollars every year on this problem. And so if we're able to build a solution that like saved five students, Right. Who are halfway through the program and they're each paying twenty thousand dollars to go to this program. That was serious.
And so now I'm able to price my product way high because I say I can, you know, look, we're forecasting that we're going to save you X amount of students. That translates to Y. And so this is what we're going to do for you. And then this is how much our product costs. Over time, I was able to look at all the customers that use this and say, hey, our average lift is three percent.
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