SaaS Interviews with CEOs, Startups, Founders
He Makes $4m Selling Other Peoples Software, Inside The Head of A Power Reseller
04 Apr 2021
Chapter 1: What is the main topic discussed in this episode?
can I take 240 times 20,000 a year on average? What's that, like 5 million a year in revenue, something like that? I wish you could. You are listening to Conversations with Nathan Latka. Now, if you're hearing this, it means you're not currently on our subscriber feed. To subscribe, go to getlatka.com. When you subscribe, you won't hear ads like this one. You'll get the full interviews.
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We've got to grow faster.
Chapter 2: What is the main focus of Len Reo's business?
Minimum is 100% over the past several years.
Or bootstrap founders like Vivek of QuestionPro. When I started the company, it was not cool to raise. Or Looker CEO Frank Behan before Google acquired his company for $2.6 billion.
We want to see a real pervasive data culture, and then the rest flows behind that.
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My guest today is Len Rio. He's the founder of Ativo Group, a team of people passionate about efficient business processes and the information systems and automation that support them. Experts in ERP, such as SAP Business One and cloud hosting. Ativo Group is a national operation that is focused on manufacturing and distribution companies. Len, you ready to take us to the top? Absolutely.
All right. So your software is called Ativo. Help me understand who your customers are. Who are you selling to?
We work with small manufacturers and wholesale distributors, as well as certain types of service companies. And by small, I mean 2 million to 30 million in revenues, those that are on their first real true ERP implementation journey.
That is not a journey I think that anyone really looks forward to. No one wakes up and says, I'm excited about my ERP system today. So how do you get them addicted to your platform? What's your onboarding look like?
Well, it's really about solving business problems for them. They don't wake up and say, I've got to have ERP today. I've got to solve this headache today. And consequently, those headaches are what we solve. The true business problems of inventory control and production management and product costing and pricing and commissions and everything that goes with it.
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Chapter 3: Who are the typical customers of Ativo Group?
So it sounds like maybe you're below 4.8 million a year in revenue. Can I ask you what you did in 2020?
About 3.2 million.
Okay. And what'd you do the year before that?
And how are you getting the growth? The growth is coming through some fairly aggressive marketing, such as email marketing, blogging. Actually, referral marketing is very strong for us. We work with a nationwide organization called Provisors of Accountants and Attorneys and Consultants. And so referrals are a very important part of our growth.
And so if you did 3.8 million in 2020, what did you do in 2019? Do you remember? I think we did about 2.9. Oh, wow. I mean, that's, that's so, so that's actually pretty, I mean, that's pretty healthy growth. 2.9 to 3.8 million. Are you doing this all bootstrap or did you raise capital? No, it's all, it's all bootstrap. We love that. We love that.
So, so how do you think about the enterprise value you're building inside of a TiVo? I mean, is it just a cash cow for you and your, your family or can you sell this one day?
We can definitely sell this enterprise one day. It does have a lot of value because we're now switching that revenue model to monthly recurring revenue. And we're working with SAP and other major developers with very standard tools such that it can be incorporated and rolled up into someone else's organization.
Or we could go the ESOP route, which might be a very strong consideration for us as well. A lot of very talented people on this team.
What do you think you'll finish this year with, revenue-wise?
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Chapter 4: How does Len Reo onboard new customers to his software?
We have seen a significant uptick in interest as the optimism has come back. So we may actually go past that. But I never like to jump out ahead. I like to surprise people on the upside. We love that.
Now, if someone was trying to compete with SAP, a great acquisition for them to make might be one of SAP's top value-added resellers like you. Have you had any of those acquisition conversations?
Yes, we have. There are...
many organizations out there who are interested in continuing to acquire organizations like ours is approximately 700 or 800 sap resellers for the product line that we work with around the globe and there are a couple of very large ones who are continuing to grow via acquisition oh so so it wouldn't be a competitor sap it'd be someone that does what you do and they want your 240 customers
Oh, you know, it could be someone outside of it. It could be someone in the dynamics world interested in expanding their reach, so to speak. And that would be the easiest way to get on board with a new product line starting from zero and trying to learn a new ERP product is a long, long road. It's a good three, four years and half a million dollars of learning.
So it's a lot easier to acquire. Selling your baby is a very personal matter. You've been growing this baby since 1993. From a personal perspective, what would go into a decision to say, yes, I'm going to sell the business today to another SAP reseller?
Oh, it would be the fate of my employees. How many of them are there? There's 20. And they... they would be my first concern. How would all of them be handled in that transaction? Because they are the ones who have put their careers into the business as well as I have.
What would you want to see happen? Are they all have continued employment at the new reseller or something else?
Oh yeah, absolutely. And some kind of a bonus as a result of the transaction. It all depends on how it gets structured. Yeah.
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Chapter 5: What industries does Ativo Group primarily serve?
Now on 3.8, you did last year, what was EBITDA or were you basically breakeven?
It was basically breakeven.
Yeah. Yeah. Interesting. And again, you think most of your growth going from 3.6 million now to call it 5 million next year is going to be converting more people into recurring revenue streams. Right.
And so that's a little longer in terms of building the base. That's a lot more customers because at $20,000 a piece, It takes a bit to get there, but the margin on that $20,000 is much greater than it would be otherwise. That's right.
And now have you bootstrapped this, Len, to date?
Absolutely. It's 100% bootstrapped.
I was going to say, sorry, I think you said that earlier. I just want to confirm. But I mean, that gives you more optionality, right? There's not some board or VCs you have to cater to. Correct. Very cool. Let's wrap up here with the famous five. Number one, Len, what's your favorite business book?
Favorite business book? I'd like to say good to great, but yeah, that's probably one of my favorites. Number two, is there a CEO you're following or studying? I'm a big Elon Musk fan. That guy is absolutely brilliant and fearless.
Many would agree with you. Number three, what's your favorite online tool for building a business?
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Chapter 6: What is the average cost for companies using Ativo's software?
Religiously, I get eight hours of sleep, sometimes more, sometimes a little bit less, but I am not one to cheap out on the sleep. Absolutely not. And Len, what's your situation? Married, single, kids? Married. Married for 30 years, actually.
Wow. With two adult children. Wow. And how old are you? Just turned 67. 67, but feeling young. Tell us what your 20-year-old self, something you wish he knew.
Well, I guess the thing I would have told him is, in business, the way you look is the way you are. And it couldn't be more true than with the age of the internet. People perceive you the way they see you, the way they hear you, the way your written word comes across. The way you look is the way you are, guys.
Ativo Consulting, Len has been at it since 1993. Many SaaS companies today are scaling with value-added resellers. Today, we got into his head. He is a value-added reseller of the SAP tool. He's got over 240 customers, paying an average $20,000 per year, did about $3.8 million last year in revenue up from $2.9 million last year.
the year prior, about breakeven right now, wants to go to about $5 million in revenue before looking at, hey, is there a sale opportunity here? But only if there's 20 employees get taken care of. We'll see what happens. Len, thanks for taking us to the top.
Thank you, Nathan. I enjoyed this.
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