SaaS Interviews with CEOs, Startups, Founders
1392 $104m in ARR and Bootstrapped?!?! How?!
17 May 2019
Chapter 1: What is the main topic discussed in this episode?
Hello, everyone.
Chapter 2: How did JB Kellogg become the top CEO according to Glassdoor?
My guest today is JB Kellogg. He's the co-founder, co-CEO, and CEO of a company called Madwire and Marketing 360, a tech-enabled marketing company combining integrated marketing software and technology and professional marketing services, the talent, through one powerful platform. He was named the top CEO in the country by Glassdoor in 2016.
Chapter 3: What unique business model does Madwire operate on?
JB, are you ready to take us to the top? Absolutely.
Chapter 4: How does Madwire achieve $175k in revenue per employee?
Thank you for having me. How does Glassdoor do that?
Chapter 5: Why is Madwire focusing on helping small businesses with marketing?
Top CEO, what's that mean? It's based on employee feedback.
Chapter 6: How has Madwire scaled its operations with outside funding?
So the reviews and the different feedback forums that they can respond to through Glassdoor, they just capture that analysis every year and then compare that against other CEOs out there and essentially just kind of rank them top down based on the feedback and the ratings on that. And how many teammates do you have?
Chapter 7: What strategies are in place to track and manage churn?
We have about 600 people now here. So pretty good base.
Chapter 8: How does Madwire ensure profitability with customer acquisition costs?
So you just bribe the hell out of them, right? That's how it works? I wish it was that easy. No, they proactively kind of do it. I mean, we have employee reviews every year. We do kind of annual reviews or biannual reviews. And generally, we'll ask them, hey, if you haven't put your feedback on Glassdoor, please do here and there. But other than that, it just kind of comes through naturally.
That's great. Of the 600, it seems like you have two very different business models with very different margin structures. You have SaaS, and then you have professional services and kind of on the marketing side, the talent side. Break down the revenue for me. What percent is SaaS? What percent is professional service? Well, it really is very much of a hybrid. You kind of need you need both.
You can't necessarily do like, for example, we don't have customers essentially that are 100 percent service or 100 percent SaaS. It's kind of a combination. So it's a little bit difficult when you look at it that way. But the margins actually are actually pretty similar with our service based businesses or services. The margins right in that 60 to 80 percent range.
What we've done is optimize their processes and build technology in place to automate a lot of stuff at scale so that they can offer the quality service, but do it in a scalable way so that the margins are good. On the SaaS side, our margins are generally around 80 percent. When you look at it that way. So it's a little bit better, but they're actually pretty close. That's interesting.
OK, I mean, like most the second, you know, the most expensive thing on your P&L each month is headcount. And usually when I hear service, I hear people. Right. And now, obviously, these are tech enabled people, but it's still people, which is why you go down maybe as little as 60 percent.
But it sounds like still pretty healthy margins compared to a typical agency that has 30 to 40 percent margins. Absolutely. Yeah. And that's just the technology we've built to help them, um, do quality work at scale. Um, so that, uh, you know, we can improve upon those margins, but one, one number that we track is revenue per person.
Um, we always track that and we try to improve that revenue per person year over year. And we compare that against other companies in our space. You know, some of them are a hundred percent SAS, like HubSpot, um, and other companies like that. And when we look at it, generally our revenue per person, even though we offer the service elements,
is better and so those companies even though they're sass they actually have more people that are working for them just to maintain the sass solution and the support than we do even though we're also adding services so so that's something that we're proud of across a cohort of about 25 we just did this analysis across about 25 000 sass and pure employees pure play average revenue per employee in terms of ar is about 137 000 how far above that are you guys
It's changing a little bit with our onboarding, but we're right in the $175,000 range. We're trying to get to around $225,000 or so over the next three years with optimization. Look, that's healthy. $175,000 is great. By the way, that puts you at about $105 million per year in revenue? Yep, right on pace for that about right now in terms of the run rate. Yep.
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