SaaS Interviews with CEOs, Startups, Founders
874 How This $10m+ Agency Keeps 85%+ Gross Margins
15 Dec 2017
Chapter 1: What is the main topic discussed in this episode?
Good morning, everybody. I wanted to just quickly remind you if you love B2B SaaS and you're loving all these CEOs I have on, remember you can get all of their data in a big, beautiful spreadsheet at getlatka.com. That's G-E-T-L-A-T-K-A dot com. So I hope you're enjoying the month. I love December. I love the holidays. And here is our program for today.
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 Bob Gilbreth.
He's the co-founder and CEO of Ahology, a data-driven social and influencer marketing company with clients like Nestle, Kraft, and Costco. He's the author of The Next Evolution of Marketing, published by McGraw-Hill, and was named an Advertising Age Top 50 Marketer. He's got degrees from NYU and Duke. Bob, are you ready to take us to the top?
I'm ready.
All right, tell us what Ahology does and what's your revenue model. How do you make money?
I'd say the big picture of what we're doing is help large brands grow. And that's connecting them with seeing new trends in the marketplace, providing new content, usually from new voices such as influencers, and helping them reach those consumers they're targeting on social media, which is where everybody's looking for ideas today. And we have multiple revenue methods.
We have a self-serve software for our trend tool. We also do campaign work where we're bringing in influencers, essentially trying to work in whatever format the large marketers are expecting and most comfortable with.
Yeah, but I mean, so is this like a SaaS model or it's a paper campaign model or what?
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Chapter 2: What is Ahology and how does it generate revenue?
And I'm not fundraising right now. So it's almost at this point, the bootstrapping is happening. And what we're looking for now is it's not companies that are just kind of focused on a SaaS model. And it's more of seeing the revenue model we have, repeat business, the margins, the profitability, you know, kind of the revenue rate we're getting at.
So what do you mean the revenue rate you're getting at? We're kind of over the $10 million a year rate right now.
Oh, you mean in terms of just what you're doing annually?
Yeah, so you think about exits. It's not a pure place to ask. At the same time, it's a great business. And as we look for partners, and if we did raise again, which we really don't have to, it'd be somebody who's not just going over the same SAS playbook.
So fair to say, based on the numbers you gave earlier, about 3 million of the 10 is SAS based and the rest is really the agency work. Sure. Yeah. Okay. And, and, uh, look, the reason I still want to go back to this question, because the reason I'm asking this is you've done something that I haven't come across before, which is raise capital when the majority of your business is agency.
So there are people listening right now that have tried SAS for failed to get their first customer, and they have gone to professional services, and they have a million dollar agency, and they're trying to scale a little SaaS business inside the agency, they can learn from you how you raise capital, right? I imagine your early days like that. So how did you raise?
What are those conversations sound like?
Yeah, I think the conversations are, you know, first of all, you say agency, never say the word agency.
Yeah.
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Chapter 3: What is the balance between SaaS and campaign revenue models?
6 to 7x ARR? Yeah. So, I mean, one of the key differences and I think what was talked about in their product as well as those are is having some kind of unique technology. It's not necessarily a SaaS that people are logging into every day. For us, it's a source of trend data that no one else in the market has.
We've been building up this data for five years, and it allows us to get better margins. It allows us to help brands see where they should be going in terms of their campaigns. It's also something we're putting into programmatic media buying to get better results. I mean, literally...
we can double or triple the paid social results of any brand that we're working with just by applying this trend data that we have and using that in the creative process. So again, that's something that it's real and it's different and it's unique and it's technology.
Guys, I get asked all the time, Nathan, you host all these interviews, hundreds of them per month. How do you do them efficiently? And guys, the answer is simple. People always agree to my calendar, back-to-back meetings. I batch my interviews to stay very efficient. And the way that I do it is I use a tool called Acuity Scheduling at nathanlatka.com forward slash schedule.
And the reason I use them is very simple. They keep my no show rate very low because they send out reminders about when the interview or the meeting is coming up. And also they make it very easy to schedule time, right? I don't have to go back and forth via email 10,000 times with people I'm trying to meet with. Okay, at nathanlatka.com forward slash schedule. Helps me so much.
And by the way, look, I like have so many meetings. I'm the best at meetings. Okay, I do them back to back. Very, very efficient. You guys know me. many people say I'm the most efficient they've ever seen. Okay. So I use the tool. It's so efficient. And by the way, I got Gavin. I said, Gavin, he's the CEO. I said, I want a great deal for my people.
He said, Nathan, well, most people get a 14 day trial. Isn't that great? I said, no, he's given us a 45 day free trial at Nathan Latka.com forward slash schedule. That's not going to stay up forever. So go get it now. Nathan Latka.com forward slash schedule. What is your mixed gross margin out of curiosity? I assume it's lower than SaaS, but higher than agency.
I'd rather not get that deep into the business here, but it's it's outstanding. I mean, it's like you.
But come on, Bob, you can't say outstanding without giving me a range.
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Chapter 4: How does Ahology ensure customer diversification?
And that's really what I think is the disruption that's happening across advertising right now. People have more ways to block ads or ignore it. The only thing we're left to do to get a marketing message through is to actually add some value to their lives.
And so I wrote the book, you know, basically nights and weekends over the process of about three years to kind of represent this idea, you know, kind of coined the term marketing with meaning, which became really what our agency was about and kind of gave us a little bit of something distinctive and different.
And, you know, it is powerful when you walk into a CMO's office and throw down a book and, you know, show here's what we believe, here's what we're going.
Now, why did you work with McGraw-Hill? Like, did they give you a big advance or why not self-publish? It was probably quicker and cheaper that way.
Yeah, I could do another two hours on that one. But, you know, really we wanted the kind of the endorsement and the quality message that would come from a traditional publisher. It was a long process. You know, we had to pitch it. We did get a payment from that, which was nice and helped fund some of the marketing.
More or less than like 50 grand on the advance.
It was, I think it was like 40.
Okay. So healthy.
Back then, I don't know what the market is now. I haven't tried to sell a book lately. You know, it's different. And I'll tell you also having the book that was published has helped me get a lot of speaking engagements around the world.
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Chapter 5: What was the origin story of Ahology's founding?
I mean, some of it was, you know, getting fees and travel expenses and some, you know, more where I could get in front of, say, clients to help pitch our company.
Mm-hmm. Makes good sense, Bob. All right, let's wrap up here with the famous five. Number one, what's your favorite business book? Innovator's Dilemma. Innovator's Dilemma. Number two, is there a CEO you're following or studying right now?
Jeff Bezos. Everybody is.
Everybody is. That's good. Number three, is there a favorite online tool you have, like Acuity Scheduling?
Uh, I mean, uh, lately lever is my favorite. L E V E R. Oh, okay. Which we use for a recruiting process and interviewing, which I'm doing a lot of lately.
Okay.
And, uh, how many hours of sleep do you get every night? Oh, I get, I get full eight. I'm up at five 45 to run every day though.
That's good. What's your situation? Married single half kids. Married, uh, 21 years. Oh, wow. Two teenage daughters. And how old are you now? Forty five. All right. Last question. Take us back 25 years. What do you wish your 20 year old self knew?
I think I would tell myself that it's OK to get a degree in economics and that would actually help in my business career. I think today it's those liberal arts types of classes are more relevant than just getting a business degree way back then.
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