SaaS Interviews with CEOs, Startups, Founders
978 Why Sole Founder is OK Burning $40k Cash and Bootstrapping
29 Mar 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 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 Sam Saltis.
Chapter 2: What is the main topic of CoreDNA and its revenue model?
He is a technology entrepreneur with over 20 years experience in growing online companies and executing digital strategies. He's currently the founder and CEO of CoreDNA, a SaaS digital experience platform, that's a DXP, that is disrupting the way website properties are built and managed. So Sam, are you ready to take us to the top?
I am ready, Nathan. Let's go.
All right, good. So tell us about CoreDNA. What's the product actually do and what's your revenue model? How do you make money?
Excellent. So CoreDNA is a pre-built SaaS platform that brings together over 80 applications for agencies and end customers to use to build out hundreds of different solutions, including e-commerce, CMS products, intranets, and franchise portals. So we're trying to disrupt the model of having to redevelop platforms or software every time you want a new solution. We provide it out of the box.
We provide all the infrastructure security and over 1,000 updates a year, and you pay a flat fee. The way we make money, we charge people a subscription that starts at around $500 a month, and it goes right up to about $10,000 a month, depending on consumption. And consumption is based on exactly how much utilization your website has. So we don't penalize you for selling stuff.
We don't penalize you for making money. We want you to have as much traffic as possible.
So what would you say the average customer pays you per month?
The average guy at the moment pays us around $2,500 a month. This is an American customer. So, you know, we've only been in the market less than a year in terms of selling. I arrived here just over two years ago with my family. The genesis of the product was out of a web company that I owned and I still own, but I've put management into place. And I decided to launch it into the U.S.
market thinking that it was the best place for it to accelerate.
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Chapter 3: How did Sam Saltis bootstrap CoreDNA without external funding?
We're actually close to 200 grand a month in MRI. And the reason for that is that the clients here are paying us at least two to three times what we used to pay in Australia.
Oh, I see. So across your 25 customers, I mean, they're really actually paying closer to about eight grand a month.
Yeah, that's right. There you go.
Yeah. Interesting. Okay, great. So I was going to say with that headcount and bootstrapped and only 60 grand in monthly recurring revenue, you're burning cash like crazy, but not at 200. That's a little more, you're closer to cashflow being profitable.
Yeah, look, the way I run my business, and some people agree with it and some don't, I actually set my burn rate fixed. I say I'm going to burn this much money each month, and whenever I make money to close the burn rate, I actually invest it in people. So I keep the burn rate consistent. I know how much I want to spend over the last 12 months.
I've spent that money, and I know how much I'm going to spend in the next 12 months.
what is that number today and how do you come up with those numbers? Like do you have a math equation you use or what?
Yeah. So I kind of look, the way I look at it is I'm willing to spend over 40 grand a month and burn 40 grand a month in the market. And what I do is every customer that I bring on, I actually then add more people into the mix. So I recently picked up a couple of customers. I added some extra salespeople and some marketing people, and I will keep that number going at that rate, which again,
You know, some people look at it and say, oh, why don't you go just raise money and make your life easier? And I just go, no, I think this is until I have exact market fit. And until I understand the market here, I prefer to kind of just burn slowly.
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Chapter 4: What challenges did Sam face when launching in the US market?
And he told me they just passed 40,000 customers and 24 million in annual revenue. So they're doing about $286,000 annually. in revenue per employee. And I said, wow, why is this working? And I said, you know what? I'm going to try it. So I went to prosperworks.com forward slash love your CRM signed up and it immediately became clear why it worked.
Those of you that love growth hacking, you should go to that link just to see how they do the onboarding. That's prosperworks.com forward slash love your CRM. In short, it's like magic. You know, I'm not the guy that, you know, finishes the sales call and then takes the time to actually put data into the CRM. They have this magical way of just doing it. And it's a beautiful thing.
So every morning when I wake up, I just go, okay, what leads are ProsperWorks telling me to reach out to because they're most likely to close and it works so well. And you guys know, I love money and I love only focusing on the leads that are going to close. So I encourage you to try ProsperWorks or sponsoring the show. Check them out at prosperworks.com forward slash love your CRM folks.
That's again, prosperworks.com forward slash love your CRM. What are you at now turning to economics in terms of churn?
So we do less than 5% a year.
And the reason for that- In logo or revenue churn?
in revenue churn. Good question. Yeah, in revenue churn. And the reason for that generally is people don't understand the value proposition or we're not good enough at explaining the revenue and delivering as far as saying to people, hey, this product allows you to scale. You never have to replatform. And people still think the old concept of design, build and destroy.
By the way, Sam, by the way, I think that's actually, that's too good of a revenue retention rate. Like, have you ever thought about the fact that that's actually you're not churning enough? You are probably leaving money on the table. You should probably double your prices.
No, I haven't. Actually, that's a really good point.
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Chapter 5: How does CoreDNA's pricing structure work for customers?
I don't know the exact number, to be honest with you. I heard it in one of your podcasts and I went, I better go work that out.
What's the range though? Is it below 10 grand a customer?
Oh, yeah. Way below. Way below. Below a grand? Yeah. No, no, no, no, no. Because I've now just put on salespeople, and as you know, they cost money. So if I'm taking it all in, I'd say it would be probably at least two months worth of subscription.
Okay, so if your subscribers are paying about $8,000 a month, you're willing to spend up to like $16,000 to acquire them?
Yeah, and they stick around for at least four to five years. Because once you've built an e-com, a multi-tenant e-com, and you're scaling globally, the last thing you want to do is change platforms.
Okay. I just want to make sure I'm clear though, because a second ago I said, is CAC around 10 grand? And you said no way lower. Then I said, okay, is it 16 grand? And you said yes. So I want to make sure I understand you right.
So the reason it's higher than 10 grand is because I offer commissions to the agency partners to bring them on. So my internal CAC in terms of what I- Fully weighted. Yeah, that's right. So, you know, when you're a partner of Cordia now, you get the first month subscription delivered to the salesperson. And that's a really interesting incentive.
But if I think about the internal cap, it's much less than that.
And then you assume lifetime value is what, three, four years?
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