SaaS Interviews with CEOs, Startups, Founders
1274 Does it make sense for him to measure churn?
19 Jan 2019
Chapter 1: What is the main topic discussed in this episode?
Launched his company, Sales Insider, just three months ago. Now working and placed about 14 folks in sales jobs in the SaaS world, making 750 bucks a client. So 10,500 bucks a month right now in revenue. Burning anywhere from five to 10 grand per month as he ramps up. He's raised about 300 grand to drive growth. Three people total today, remote, too early to talk about most economics.
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 of 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 Isaac Garcia.
He's a three-time SaaS founder, CEO, and startup advisor. He was co-founder and CEO of Central Desktop, a SaaS collaboration platform aimed at marketers and creative teams. Central Desktop was acquired by PGI, which obviously is public, in 2014. Isaac is currently CEO and founder of Sales Insider, a talent marketplace for SaaS sales professionals. Isaac, are you ready to take us to the top?
All right, I'm ready. Let's do it.
So tell us about the company. And I'm curious if it's more a pure plate SaaS company or more like a recruiting agency where you're taking a percentage of first year salary.
Right. So we are basing our model off of a traditional taking a piece of salary, but we're trying to flip it over into a subscription model. So whenever we make a hire or whenever a client makes a hire through us, what we do is we say we'll take 12% or we take 1% of the base salary of the sales rep. And we spread it out over 12 months.
So rather than paying 20%, 25%, 30% up front, they're spreading it out over a 12-month period. And then whenever they do another hire, it kind of kicks off another subscription, another subscription. So you have a series of 12-month subscriptions that are constantly going. And you're saying, well, are you going to lose your customer after you make a hire or two or three?
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Chapter 2: What is Sales Insider and how does it operate?
We're transferring the risk of someone making that hire through a recruiter, in this case being us, through our marketplace, and that risk is being transferred to us. So we're only going to be taking, you know, $750 on a particular hire that's kind of coming in over a month. So you need, just like SaaS, some capital to kind of hold that burn a little bit up front.
And so what's your team size today? How many folks?
Today we only have three full-time, so actually I would say they're, you know, kind of like semi-founder teams. And then we have doctors to help us, whether it's on design, a little bit more in the dev stuff. And we're going to be probably hiring about two more SDR type sales, early stage recruiter type folks.
And everyone's remote.
Chapter 3: How does the subscription model work for hiring in SaaS?
Everyone is remote. Yeah. Isn't that cool? The new model.
Yeah, I know. It's great. It really is. So, I mean, I guess part of what I'm trying to think about is like, how do you think about churn? Because every 12 months there's going to be revenue churn and your trick is to make sure they're hiring velocity continues to increase.
So I think there's two things going on in SaaS right now. You're getting this concept where annual contracts are actually starting to get signed less. There's more and more happening on a month-to-month basis, right? Whether it's Slack, whether it's other types of folks that they've moved their billing cycle to, we've got to win your business every month. And that risk is transferring away.
And I'm 100% SaaS, I know ACV, I know churn. I've been working on that for years and years, but the trend is moving the other direction, right? So this sort of aligns a little bit more with that. The other thing is- Wait, wait, sorry, Isaac, sorry.
I didn't follow you. Even if you're on a monthly contract, you can still measure churn.
Yeah, no, you could. Yeah, absolutely. You still can. But oftentimes people are locking in customers for two, three years and they're masking their churn, right? Customers stop using the product a year into it, six months into it, but they're locked into a two or two or three year contract. That happened a lot. That's the central desktop, right?
Yeah. I mean, look, what I would say about that, by the way, is if the revenue stays because legally it's there, you don't have to maybe count it as churn, but you know, it is a churn indicator if the client hasn't logged on in a year and a half. So the activation goes down.
And there's a trend, I don't know, even like Jason Lemkin on the Sastra Group. I mean, they're often saying, hey, just let the customer out. If you're going to try to grow your business, you got to win that business every year, no matter what. Every month.
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Chapter 4: What is the average customer churn rate in sales teams?
To me, this kind of aligns with that. Every month, every year. That's right. So this aligns with that. And it's going to be a little bit interesting to kind of see how we measure out churn that way. Do we think of it from a number of placements? Is it, you know, customers that stop using us that kind of move away?
I'm kind of thinking a little bit more against wallet share, where people are hiring, using two or three different sales recruiters or in-house recruiter or whatever it is, kind of measuring how much of that wallet share are we able to move towards sales insider.
Yeah, interesting. Okay, very good. What are you paying to get a new customer? What's fully weighted CAC today?
I mean, it's kind of early, you know, with so early, a lot of it's organic. It's through my own network. It's through kind of reaching out through LinkedIn and emails. We're not doing any paid advertising today. So everything is organic on an inbound basis or something that's kind of on a personal outreach. So I don't think it's a useful metric today.
Yeah. What about, obviously you've raised some capital. I assume you're probably burning today. Are you burning cash?
We're burning, yeah.
Like are you talking like a couple thousand a month?
Yeah. Yeah. Yeah. It's like we're like at a kind of break even type thing. Oh, guess what? We're going to hire two more people next month. OK, we're going to be burning about 10 grand next month. Right. But, you know, as our hires kind of kick in, it goes away.
Yeah. Interesting. Well, I mean, obviously it does take time to it does take time, obviously, for the hires to ramp up and drive to drive sales growth.
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Chapter 5: What is the current revenue model for Sales Insider?
Break more things. I broke a lot of things when I was 20. I'd say keep breaking more things. And when Amazon dips in 2008, buy it as much as you can.
There you go. Break more things by Amazon from Isaac. Again, launched his company Sales Insider just three months ago. Now working and placed about 14 folks in sales jobs in the SaaS world, making 750 bucks a client. So 10,500 bucks a month right now in revenue. Burning anywhere from anywhere from five to 10 grand per month as he ramps up. He's raised about 300 grand to drive growth.
Three people total today, remote too early to talk about most economics. But Isaac, thank you for taking us to the top.