SaaS Interviews with CEOs, Startups, Founders
1086 Sales outreach tool hits $1.2m ARR, would you sell for $4m? No!
15 Jul 2018
Chapter 1: What is the main topic discussed in this episode?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Jake Atwood. He's the founder and CEO of BuzzBuilder.
He's also an author and keynote speaker who's focused on helping companies discover new ways to attract customers and grow their business. He enjoys disrupting the status quo, and his e-books and blogs have been read by more than 500,000 people worldwide. Jake, are you ready to take us to the top? I am. Let's have some fun. All right. What is BuzzBuilder, and how do you make money?
Buzz Builder is a tool for sales reps that helps them find new customers. So for both entrepreneurs and salespeople who don't like to cold call, don't like to prospect, are frustrated at chasing leads, it uses a combination of cold email campaigns and website analytics to help you locate the customers that want to buy from you, and then it helps you connect with them.
And is this like, okay, I want to connect with the head of Forbes, type in Forbes.com, and you'll spit out all the emails on that domain? That and then we help you identify people based on certain trigger events that might have a higher likelihood of needing your product.
So if you're a recruiter, we can find companies through certain search tools that are currently hiring for positions on Indeed.com that you can fill. And then we'll give you their contact information and then help you with messaging through various email campaigns to reach out to them and connect and then start the conversation. Interesting. And what's your revenue model? Is it Pure Place Ass?
Yeah. It is per seat, and it's basically a recurring revenue model on a monthly basis. Okay, and on average, what do people pay per seat? Average is about $115 per seat, and about 51% of our user base are solo entrepreneurs. The other 49% are small and mid-sized sales teams. That's great, and how many of them are you serving today in terms of paid customers?
We've got about 350 companies plus another 350 or so entrepreneurs. Okay, and so give me that in terms of seats. Total seats is just over about 1,500 seats to date. Got it. Okay, wow. That's pretty healthy business. Now, I mean, can I take the 115 times 1,500 seats and generally back into a month-recurring revenue of about $170,000, or is that not accurate?
Not quite, because we can't publish our exact revenues to date because we're going after some VC. But, you know, we've got some folks we've grandfathered in, obviously, from several years ago. At lower price points. At lower price points, of course, yeah. Can we generally say you're north of $100,000 a month? Yeah. We're close. OK. Yeah. You'll break it this month. Yes. Come on, Jake. Yes or no.
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Chapter 2: What is BuzzBuilder, and how does it help sales reps?
Are you more of a get it done just to the point type of person? Are you more of a analytical person? Are you more of a social person? And based on that profile, we know number one, where to find them. And then number two, how to communicate with them most importantly. Interesting. What are you growing out right now year over year? So we've grown by 300%. In the last three years.
So just over 100% a year, year over year. Okay, got it. So if you're doing around 100 grand today, what you're doing 50 grand 12 months ago and 25 grand 12 months before that? About that, yeah. I mean, that's pretty darn good growth. Yeah, yeah. And it's all been from cash flow and it's all been just grinding it out. Now we're at the point where we're going to go after some venture capital. Why?
Are you bootstrapped right now? We are bootstrapped and, you know, it's not a good thing to be undercapitalized. And now we've got to the point where we've got the sales model figured out, the business model figured out. It's time to pour some gas in the fire. Is churn under control? Churn is under control. It could always be better, of course, right? What is it?
It's roughly, we've got about a 75% retention rate where when you're talking to entrepreneurs and sales reps, it's actually much higher than average. Yeah, so you're churning about 2% of your logos every month. Yeah. Interesting. And why are they churning? A number of reasons. I mean, there's the obvious reasons such as, oh, I haven't used the tool or my business has changed.
There are times when an entrepreneur might start the program and we give them all the help in the world, but certain people I think just have a tough time adopting new technologies, new ways of thinking. And what is, you know, a lot of people when they look at onboarding and churn, they've identified a few things they know they have to get a new signup to do to be sticky.
What is the one thing you know you've got to get a new buzz builder user to do so they stick? The most important thing is they need to create their first campaign within the first seven days. And we know if they built their first campaign, the rest is gravy. And we help with everything. We help with the messaging, with templates to make sure they've got their first campaign built.
And then there's all sorts of places they can grab contact lists from so they can then load those in and send the first campaign out. So ideally, we like to see them launch their first campaign within seven days. And what's your team look like today and what percent, you know, how many people on your team are dedicated to that onboarding? So we've got two people dedicated to onboarding.
We've got a client success manager that handles a lot of the training. We've also automated a lot of the training. So we do weekly public training sessions. We've got a whole video library. We've got what's called video or BuzzBuilder University.
And we launched that recently where it's not just the technical training, but what we learned that people need and the number one reason they were failing with a tool like BuzzBuilder, just failing to implement it, is because they lacked a process. And especially a lot of entrepreneurs, they really don't have a cohesive sales process.
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Chapter 3: What is the revenue model for BuzzBuilder?
How many people, how do I follow up effectively? How do I work through the objections I'm hearing and so forth? So what's your total team size today? So we've got 10 people on the team that are dedicated employees and a number of contractors and, uh, and folks we outsource to. Got it. And year one, when did you launch? We launched officially, the beta went on for a few years actually.
I was a consultant and in 2008 we launched the beta and we officially launched the product four years ago. Okay, got it. So you would have launched in what, 2013? Yeah. So what the hell happened between 2008 and 2013? That's like six years. Yeah, so I was a consultant. Basically, I was building the product for myself initially, and it was an idea.
It was a product under the umbrella of a company called Ovation. And I was a consultant. I'd go out and I'd do a sales consulting job, coach them on how to generate leads more effectively. And one day I had the idea for the software and I just hired a developer to kind of toy with it. And we kind of just kept working on it and tweaking it over the years.
And we put it in front of a few clients and say, okay, why do you like it? What do you like? What don't you like? And I really built it through input from clients. I learned early on the idea of build it and they will come only works in field of dreams. we wanted to build a product that had a lot of input from clients.
And then, um, there came the day when I knew that I couldn't be doing the consulting and buzz builders. So in 2013 is when I closed on ovation as the consulting business. I hired my first official. How much revenue had the consulting business done before you shut it down? Um, I was in about Percy about three 50 a year. Okay. And consulting, you know, that it was just me. I was a solo consultant.
Well, you basically took that to your bank. So that's who you're giving up. Yeah, and it was a leap. It's always one step back before you can take two steps forward, it seems like. So now today, in terms of getting new customers, what's your CAC? What are you spending to acquire these guys? Not much. The thing is, we drink our own Kool-Aid. Our cost of acquisition is less than $200 per client.
Okay, is that per seat? No, that's per customer. So that would be, it's a little less for going after solo entrepreneurs. It's more automated. Our cost for acquisition for entrepreneurs typically right now is less than $150. And you said it split 50-50, right? So 50% of your users, which you have, let's see, 1,500 of, are solo folks. And then the rest are 350 kind of enterprises that pay what?
It sounds like that'd be like four or five seats on average each, right? It's actually, yeah, four to five seats on average. At $115 a month. Yeah. So last year, our average customer between multi-user and solos was $4,900 for the annualized. Yeah. Yeah. So if you spend $200 to acquire those guys, you're getting paid back in like less than two months. It's a healthy payback period. It is.
And the majority of our leads come either from referral from website leads through SEO. And then a large percentage of them come from outbound cold email campaigns that our team launches. So again, we drink our own Kool-Aid. That's great. And with the 2% gross or logo, or sorry, logo churn monthly, that means the average customer do one divided by that stays with you for about 50 months.
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Chapter 4: How has BuzzBuilder grown over the years?
And that first 500 will be debt, or you'll do it as priced equity, you think? No, we'll do it as equity. We're going to do initial crowdfunder round, it sounds like. We'll probably have $100,000 coming in from two or three investors that are private investors. And then we'll bring those on board the next couple of months, it looks like.
And then at that point, we're going to do a second seed round for an initial $400,000 at a bit higher equity. Got it. And for these early guys getting in, what have you valued the company at? How did you have that conversation? So the valuation was based on roughly a 4x multiple on revenues. And then when we do the second round, it'll be based closer to a 6x multiple. Got it.
So 4x would be, I mean, I'm taking $100,000 a month multiplied times 12, $1.2 million. You're talking about a $4 or $5 million pre-money valuation. Exactly. So let me ask you an interesting question. If someone came to you and said, hey, I'll write you a $4 million check to buy the whole company, which makes you, I think, it's a pretty interesting life event for you. Yeah, yeah.
Why not just take a deal? Would you take a deal like that? Well, my wife and I have had that conversation a couple of times. Would she kill you if you said no? A year ago, maybe. But we've talked about this and The industry is so big and it's still in its infancy that the upside is enormous. It's very competitive, though. It's very competitive. It is.
So I think in five years, it's going to be a very different feel of the industry. So that's the other reason we're raising capitals. We do have a plan to grow this up, explode it, and then in five years have an exit strategy or potentially sooner if we get someone that comes along that gives us a really, really good price. Interesting. So you would not take the sure thing.
You would not take a $3, $4 million offer today. No, I got to think big. Interesting. I tell you what, there's a lot of people I've worked with. They'll say, Nathan, I didn't want to take the $980 million offer because I wanted the billion dollar thing to put on my LinkedIn profile. And you know what they did?
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Chapter 5: What strategies does BuzzBuilder use to retain customers?
10 years later, they're selling for $5 million because it failed miserably. So I mean, I'm always a fan of hit the singles, hit the doubles because it requires way too much luck to go be the next Mark Zuckerberg. Yeah, and we don't have aspirations or any desire to go to a billion dollars.
I've got a number in mind that once it gets past that number and that number of employees- Come on, Jake, what is it? Probably not having fun anymore. You know, let me just say, we know of a couple of companies that have sold for between 30 and $40 million in our industry recently. Name one. And that's got a good, well, ToutApp for one.
So they won't get- ToutApp did not sell for between 30 and 40. They sold for $5 million after raising 16 million. It was a total wash for everybody. Total wash. Okay. So I was given misinformation. So, you know, this is where it's interesting. We're, we're growing fast. We're very competitive. I feel like we're doing a good job outselling the rest of the industry right now too.
And at the point where we see that it's, it's going to be a different game. It's ready to, it's time to sell. Interesting. Well, we'll see what, we'll see what happens. We'll have you on hopefully once per year between now and then and stay up to date. All right. Yeah. All right, Jake, let's wrap up here with the famous five. Number one, what's your favorite business book? Um,
I'd say how I raised myself from failure to success in sales. I think any good businessman really knows how to understand sales. That is a long ass title for a book. It's a long, long name. It was written a hundred years ago to how I raised myself from failure to success in sales. It's about selling. It's about perseverance. It's about entrepreneurship. Yeah. Number two.
And where are you based again? Location wise, Minneapolis. Okay. You know, name the last CEO you went out to dinner with in Minneapolis. Uh, actually the last CEO was, uh, uh, April Davis actually. And of all things, she owns an executive matchmaking service. Oh, are you, are you, well, you said you have a wife, right? Yeah. I'm helping her with her business.
So we formed an executive round table and I don't like to surround myself with just people that run businesses exactly like mine. I want to have some diversity and it's amazing how you pick up ideas from people that sell to a completely different audience than you do. Okay, it's not trying to match up single executives with each other to get married. It's to facilitate intros. Got it.
Right, right. Number three, besides your own, what's your favorite online tool? Right now, I'm just really loving using, well, there's a number of tools. Gosh, Crystal Nose has got some really interesting things they're doing with buyer personas right now. And that's going to be the inroad to the next level of hyper-personalization with messaging, I think.
Number four, how many hours of sleep do you get every night? Six. That's good. And what's your situation? When my three-year-old's not waking us up four times. Is it just one kid? We've got two actually, but the nine-year-old, she's good to go. All right. And how old are you, Jake? I am 43. Last question. Take us back to your 20-year-old self. What do you wish he knew?
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Chapter 6: How does BuzzBuilder ensure successful onboarding for new users?
Launched BuzzBuilder back in 2008 as an idea for himself when he was consulting. Finally got serious about it in 2013. Quit the $350,000 consulting gig. Launched his own company himself. Now he's up to 10 people. Totally bootstrapped. He's serving about 1,500 customers paying $115 a seat. So doing about $100,000 per month in revenue. 2% logo churn per month. 24% obviously annually.
Spending about 200 bucks to acquire a customer. Really healthy payback period. Now looking potentially at going out and raising capital, but again, bootstrap today. Again, helping folks with outreach, automation, and conversions to drive sales. Jake, thank you so much for taking us to the top. Thank you, Nathan. Been a pleasure.