SaaS Interviews with CEOs, Startups, Founders
Do these 9 things to ensure your way to $50 Million ARR
14 Mar 2024
Chapter 1: What strategies can help achieve $50 million ARR?
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Yeah, my name is Mark Douglas. I'm CEO of LCB Tracker. We're a labor compliance software as a service company for large construction projects across the country. We manage over $200 billion worth of projects that are active in our system now. We have over 2,000 clients.
Chapter 2: How did the guest bootstrap their company to success?
Many of them are government agencies, but also large contractors and subcontractors. Oh, there we go. So I'm sorry, I have a bad disc, so I've got to have a little chair here to work through this. But I'm going to talk to you about operations, how we operate as a company.
And I think this is a little different than a lot of the presentations because it's going to be about how do you build a business over 20 years? And I did it all bootstrapped. I'm going to be talking to you about culture, strategy, and value, all with a twist around operations. A little bit about us. We were $1 million in 2011, and we're $25 million this year. 100% bootstrapped, zero debt.
Chapter 3: What is the importance of having a clear vision for a business?
We plan for profits of $1 to $2 million every year, and all the rest goes into our growth plan. That's how we've done especially really well over the past six years. In fact, we've been within 1% of our annual revenue goals and annual expense targets each year for the past six years. What I'd like to talk with you first is really your why. It's your vision.
I think this is probably the most important thing you do, and it's got to be super clear. And I'll be talking to you about the how or the way you do it. And then your cornerstone is your culture that will develop all this. Our why statement is empowering people to build better communities. And how that works out is it's really external and internal.
I believe you have to have it both inward facing for your employees and external towards your clients. It's how we base the premise of all our decisions. So is it something, are we helping a community? Are we helping better families? Are we helping an individual? It's our guidepost for everything. The Ritz-Carlton why is we are, ladies and gentlemen, serving, ladies and gentlemen.
And what they believe is the workers, the maids, everybody, they believe that there are ladies and gentlemen that are serving the people coming into their hotel as ladies and gentlemen. So it's an external and an internal why. It's very effective.
Chapter 4: How does company culture influence business operations?
See, our software helps our clients hire Americans into a construction career, into apprenticeship programs, into a carpentry job, into a plumber's job. And often these are disenfranchised workers. They're formerly incarcerated or foster care. Our clients often have targeted work groups where they want to hire a big group of people.
A project, LAX is a $14 billion project we have, and they're targeting about 1,000 people to be hired from formerly incarcerated or foster care or in poverty in those areas. So that's a big part of what we do, and we help our clients hire those folks. And so this is how we help them build a career into their life, which helps their community. So it all fits together in our vision and our plan.
Really, what's also very important is you have to have your destination. You have to tell people where you're going. And our plan is we want to be the sole provider of labor compliance and workforce management solutions for all public and private construction in the United States. And that's our five-year plan. We've got about 20% of it now.
And then what goes right along with that are core values and behaviors. And we have two simple words with that. And the reason we have that is because it also is the core balance of where your people are gonna be thinking and how you want them to embody their work and their lives at your company. So we made it really simple, give and do it. And so each word represents something.
The G represents give with a passion and purpose. I for live with the utmost integrity. D for provide value in every engagement. E for cultivate a culture of excellence. And the do it side is dedicate yourself to completing your tasks. O for take ownership. And I for we inspire and encourage innovation. And T for think before you react.
So everything we do is regarded as to promote those values and those behaviors within our culture. So after you have that all established, you're going to be looking at strategy. The second thing is, this is something I think we do most, and I think this is probably the most important thing you can take away from what I would have to share with you, is our strategic planning process.
The first thing we do is we have a six-month strategic planning process that starts in June and ends in November.
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Chapter 5: What role does strategic planning play in business growth?
The board sets the first three top priorities in June, which are the company priorities. And then in July, each department does their SWOT and they set their priorities aligned with the company priorities. In August, we do manpower planning with the financial model. And then in September, we lock in the KPIs. We do usually four to six top objectives that will align with the three priorities.
And then we publish our first financial model, which is gonna be the model that's gonna be the resources required to deliver the top objectives that the departments are planning. And then in October, we do a financial model that's final, and we publish it.
And then in November, we have an execution meeting where everybody comes to the table, they present what they're going to deliver that year, and then we all sign off on it. So we have a very systematic approach. We start in June, we end in November, one thing a month, and we get it done, and it's super effective.
Like I said, we've been 1% on target with expenses and revenue every year for the past six years. So what does that look like for 23 for LCP Tracker? Well, our top three priorities that the board came up with was digital marketplace, product strategy, and scalable platform. And so we drove that down into the department level and we said, well, okay, how do you help us do this?
And so the top five objectives came out of that. And the first one being what we call Project Monarch. And that's what we, is a rewrite of one of our core software products, replatforming, because it needs it. And that aligns with the product strategy.
under number two and number four salesforce and netsuite we had to do a major infrastructure upgrade to to move to our scaling we want to scale a lot faster and we had a lot of problems with salesforce and netsuite very i was in fact i was a number 700 customer for salesforce back in another business and i rolled that license over so i'm like a very early adopter of salesforce so we have to actually rewrite a lot a lot of that software
And that falls under scalable platform. And then we had a reporting backlog, a huge reporting backlog. So we put a big effort into fixing that. And then also what we call CSO, which is our customer service offering, which is going to coincide with a whole digital marketplace offering our products that can be bought online a lot easier than we currently sell them. So that's how it rolled out.
What we have each department do and each top objective, we get an owner for that and we get a senior executive owner and a manager who will own those projects. And we have them develop milestones and deliverables for the year. And we manage this on a monthly basis. They come back to the whole team. The whole management team gets to see, how are we doing on those objectives each month?
It's an hour meeting.
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Chapter 6: How can businesses create value for their customers?
Everybody does it in six, seven minutes. But they report, how are they doing by milestone, by objective for what they're doing? And this is a great way to, hey, did we resource you properly to get your objectives done? Or are we behind? And so every month, and so we almost always deliver everything unless we have some kind of contingency that happened. But this is a great way.
It's very simple, very simple chart, but you can really keep your company on track with delivering your objectives. And then we take it down a step further and we have a KPI, some kind of measurement for everybody in the company that's all directed up to the goals of the person. I know this is a bit of work sometimes, but you got to measure this either weekly or monthly.
Don't so the minimum we do is a monthly KPI review of everybody, every department. And it's super important that you have this involved because then that'll keep you on target for your your your plan as well. And then just as important is that financial model. So every department is empowered to have their own budget, their own resources, and we align that into the financial model.
And my CFO meets every month with the department head, and they look at the budget. Are you on target with your KPIs, your objectives? Do we hire your resources? Are you on target with your expenses?
And it gives you a little bit of flexibility to roll because you're able to then, if you're having a bad quarter, you can go, well, let's slow down the hiring and then maybe relax on some of the objectives because that gives you the ability to still maintain your number one goal, which is your profit, right?
And then the final thing under strategy is, obviously, you all know this, we have to develop great software. So I just wanted to share a few things from my experience on what I think are really important aspects to developing great software. We have this thing we call shiny objects in the company, and we really got to stay away from shiny objects. Stay focused on your goal. That's a huge thing.
I'm probably the biggest culprit that has created problems for shiny objects. I've gotten a lot better at it. Be laser focused on your core offerings. Don't take shortcuts on your architecture. That's a huge one I've learned. If you do, it's going to cost you a lot of rewrite.
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Chapter 7: What are effective ways to engage with employees and clients?
I think the number one issue today and going forward, if you're not aware of it, is you gotta be security, not only cybersecurity, but data security. States are passing laws for privacy and there's gonna be huge lawsuits. If you're doing business in California and you have any private data, you gotta follow all kinds of new rules for your privacy data.
I think if you're not paying attention to that, really look deep into that. Privacy data is a huge thing coming. Virginia, Colorado, I think another state is just about to pass something. And then I also believe you've got to properly staff your product management teams, your QA, your engineering, and dedicate them to each product line. Don't cross them over to different products.
You'll get a lot more efficiency when you keep them on one single product line. And then you've got to give the development team some margin. they often don't have any margin and that's their biggest gripe. They're getting too many shiny objects and then they can't get them what they want. So I think those are my big top things about how you develop great software.
So let's jump into number three, creating value. And I think this is a, a huge impact that we have with our customers. And we have about a 97% return on our customer, ARR return customer annually. Some of my customers have been with me since 12, 15 years. The first thing you gotta do is you gotta create value with your customers. You gotta give that customer experience.
But I don't mean just with your software. I mean with your people. Every single touchpoint that you have with a customer has to be creating value. So when the accountant talks to them, when the support person talks to them, they can't just be like, get them done. They gotta feel valued. They're not gonna remember what you did for them. They're gonna remember how you made them feel.
We have a thing at the company we call fanatical support. We have no rules on the amount of time a support person will take with a customer. They will talk to them about their kids, and we don't completely encourage that, but literally, there's no rules.
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Chapter 8: What critical lessons can be learned from successful SaaS companies?
We don't judge them by the amount of time or the number of calls. We do surveys on them all the time, and we judge them by the happiness factor. How happy are our customers? And that has paid huge dividends. We have a great reputation with all of our users, and they just love our company because they feel...
you know frankly we have a lot of things that don't work that great in our software i mean our software is great but there's things that bug our customers and we can't fix them all at once so but they don't ever complain about us because they love how we treat them and i think that's one of the most important things you can do is treat your customers with extreme value uh i mentioned the risk carlton the risk carlton gives two thousand dollars
to even the maid, and they're authorized to spend that on any customer that is in their hotel to make sure they're happy. That just shows you that you go to a Ritz, you know you're gonna feel good about being in that place, right? That's the attitude we try to give our employees and our customers. And then engagement. Being with your people and in person is,
I found that to be our biggest success. We go to seminars. We show up onsite at their client's site. We drive. You can't do it for a lot of the small customers, I understand, but if you've got major customers, you've got to go meet them. You've got to meet them where they're going. You go to their trade shows. You have dinner with them. Whatever you can do to build relationships.
And the second thing is taking care of your employees. You know, I'm sure you all take good care of your employees, but we have a phantom stock program. We have a 401k. One of the things we do on our 401k is we have instant matching. We don't have a vesting period. What I'm trying to do is do the same thing, empower people to build better communities, which includes my own people.
So I want to enrich them as quickly as possible. The faster they're financially healthy, the faster I'm going to grow because they're more settled. I don't lose them. We do staff retreats. We have an annual staff retreat. We bring everybody in the company to a hotel for three days, and we network, and we enjoy each other. Every department does their own retreat. We get together.
We make sure there's bonding and relationships and holidays. We have a 3.6% churn rate. The average SaaS company is 14%. So if you do right and you empower, you build and take care of your employees, you're going to keep them a lot longer, and it's a lot cheaper to keep employees. And then empower your people.
the talk yesterday about transformational management, is you've got to let your employees run the business. You've got to have them, it's really about the KPIs, the measurement, and getting them that plan and then letting them run with it. You've got to have a really flat structure so that you don't have a lot of decision making at one level and then everybody just follows suit.
The Navy SEALs are arguably the best-run organization in the world. They almost always win. And they have no more than six people reporting to any one person. And every SEAL in the field can make decisions as needed. So you have to have decision-making all the way down the level as low as you can in the chart. And then one final thing, I think I'd give you the, I'd call it the CEU warning label.
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