SaaS Interviews with CEOs, Startups, Founders
He's 36 Year Old SaaS Dad of 2, Gets 8+ Hours of Sleep, Business Did $640k in 2015, EP 312: Dave Nevogt
22 Jun 2016
Chapter 1: What is Hubstaff and how does it operate?
This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base. You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have. I'm now at $20,000 per top. Five and six million. He is hell-bent on global domination. We just broke our 100,000-unit soul mark.
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You're listening to episode 312 of The Top. Coming up tomorrow morning, you're going to hear from Ethan Appleby. He's not an artist, but he sold $5 million worth of art in 2015. How'd he do it? Top Tribe, good morning to you. Our guest this morning is Dave Nouveau.
He's the co-founder of Hubstaff.com, which helps virtual teams communicate better through automatic time tracking and activity tracking. He's been running online businesses since he was 23 and now manages a team of 15 remote employees focusing on growth and product at Hubstaff. Dave, are you ready to take us to the top? I am. Thanks. Let's do it.
So first things first, tell us what Hubstaff does and how you make money. Uh, time tracking mostly, uh, have a lot of agencies and startups that track time to projects by companies use us for, uh, billing clients, things like that. So, uh, uh, we sell the product as a SaaS based business. Um, it's going well. Awesome. Great. So tell us more, tell us more about it.
How many, uh, what year did you launch it in? Yeah, so we launched it in 2013. First paying customer is the end of 2013. Okay. And self-funded or did you raise capital? Yeah, we've raised zero. So it's all self-funded. I love that bootstrap. How much did you put into the business yourself? $26,000. So my partner and I are in 50-50 partners. So he put the same amount.
Oh, so you guys split the, that's interesting. So you each put in 26K. So you had about 52K to work with at the beginning and you just split the company right down the middle, 50-50. Yes, sir. Is that, what happens when you guys disagree on something? Well, we generally don't disagree, honestly.
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Chapter 2: How do Dave and his partner handle disagreements?
I got pretty lucky in that fact. Well, I mean, obviously, yeah, no, I mean, that's the answer everyone wants to give. But let's say some point, let's say you get a great offer to sell the business and you want to sell it and he doesn't for some reason. I mean, how do you, literally, the company could get stuck in a tie, basically. How do you break ties?
Uh, well, I think, you know, honestly, I think that common minds are the smart thing will prevail. I mean, hopefully, you know, we could work that out. Um, I think that, you know, to make a long answer short, we have, we have the shotgun clause in our contracts. So yeah, I am. Yeah. Explain that. No, I'm sure listeners are not all listeners are going to explain that real quick. Yeah.
So the, the, the way it works is that basically, um, The one person, if there's a disagreement, one person makes an offer to buy the company. If that, then the second person can either accept or reject that offer and go from there. So let's just real quick. So everyone clearly understands that Dave. So let's say we have an offer to sell a business. I'm just going to say it's $10 million.
You're saying, you're saying, Nathan, I don't want to take it. And I'm so walk through how that would work. Yeah. So you say, uh, I forget which one, which, which example you gave, but basically if I, if I'm the one that does not want to sell the company, um, and my partner Jared does, he wants to take the offer and there's a, there's kind of like a stalemate and it gets really bad.
Um, then basically what would happen is that, uh, Jared would come to me and say, for fine. Um, you know, uh, I am willing to buy you out at, you know, let's say $12 million or something like that. And I could either say then if I'm the one that holds on to the company, I could say yes or no. So you'd have to pay 50% of the $12 million valuation.
So you'd have to pay him $6 million to buy him off the cap table or go the other way and take the offer. Yeah. Very cool. Okay, great. So let's dive deeper into some of the metrics. So how many as of March 2016, how many paying customers are you guys at? Uh, man, we have, I think, you know, 2,600. Okay. So, so pretty, so pretty healthy.
And what are they, tell us what they're, how are they signing up? What are they paying for? They're signing up for time tracking software. We have apps for Windows, Mac, Linux. We have apps for Android and iOS. And basically, these apps will track time. They record activity. So if you are on the run, they record GPS locations.
If you are on your computer, they record mouse, keyboard movements, not the exact keystroke or anything, but just the general activity level, how active you are, and then basically screenshots, what software is being used, that kind of thing. And generally, the business owner signs up because he has some kind of a distributed team experience.
overseas or or in the states um and then also we are getting in some more uh service field technician type companies so like what is the average customer paying you if you add it all up average customers paying us uh 34 a month per month okay so and i think you do you mean like the average business and many of them have let's call it on average three to five seats Yep, exactly.
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Chapter 3: What metrics define Hubstaff's success in customer acquisition?
We, we, yeah, we are. Yeah, exactly. I was about to say you have the $0, $5 per month, $9 per month. I'm wondering which one is the most popular. Yeah. So right now, like 33% choose the premium plan, $9 a month. So we've got premium plan. Yeah. And then, and then, yeah. And that's all.
And I, when I quoted you 2,600 customers, I mean, that's all the paying customers that doesn't even include all the, all those $0 plans. Uh, so our basic plan is five. Our premium is $9 per month per seat. And basically, uh, right now, 33% choose the premium plan. So what would that put your, the call in March, 2016, what was your MRR that month? Uh, The big milestone, I think, right?
You just passed the million dollar... We're just about to pass it. Yeah. Yeah, that's great. Yeah, guys. It's always a fun... Dave, it's always a fun congratulations to when a SaaS company passes that magical $88,000 per month. That means you basically pass a $1 million run rate. So congrats. You're close. Congratulations, man. Yeah, it is a big deal for me. Yeah, it's great.
How big is the team currently? So right now we have about, I think, uh, 11 on development. And then I have about eight, uh, on marketing and customer service. I maybe, maybe, maybe nine. Okay. So call it 20 full time. Yeah. So do you mind me asking just headcount costs per month? All right. What is that? 50, 60 K. Yeah. Uh, Nope. Nope. We, we are lower than that.
Um, we are, uh, no, you pretty, pretty close. I think we're like 46. So is everyone, everyone's not, everyone's not full time then. Yeah. Right. Yeah. Yeah. That's correct.
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Chapter 4: How is Hubstaff's revenue structured and what are the key figures?
Uh, it's, it's, So we're at like 40, I think we're like 46,000, but that doesn't include Jared and I. And also... You know, yes, you're correct. We do, we do contractor type relationships. So I let my people work as much as they want. Sometimes it's more than 40 hours, sometimes less. We pay hourly.
So basically it's kind of like if you're tracking time, we use our, we all, we use our own system. So if you're tracking time, you're getting paid. And basically we don't put a cap on it. And we also don't tell you, you have to work a certain amount of hours. And so are most of these customers as well signing up for you guys SMB focused? They're small businesses? Yes. Okay. Cool. Yeah.
Average size is like 5 or 6 employees. Okay, great. So let's go back to some of the unit economic stuff. So 34 is the average revenue per user. Obviously, the company is growing. How many new customers are you adding per month? Yeah. Well, I'll tell you, so we're, we're adding about five or 6,000 a month in MRR.
So a number of customers, like 270, I'm not quite sure how it works out with like churn and that, but we get about 270 new per month. Okay, cool. So, so that would put what your growth rate at somewhere around 7% in MRR growth. Yeah. We were like higher in March, you know, on average. Yeah. You're right about all. Okay, great.
And the, do you guys have insights yet into things like customer acquisition cost and churn? Yes, I track all that. I do a good job of tracking that. So what's churn? Yeah, so churn, and we use bare metrics too. Oh, okay, great. It's all public and we make it all public. So it's like churn right now is, we're happy with churn right now. It's like 3.9%. Okay. Yeah.
And is that MRR churn or customer churn? That is customer. And I think MRR is like 4.4. Yep. Yep. Yep.
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Chapter 5: What strategies does Hubstaff use for customer growth?
That's great. So 4% churn. And then in terms of lifetime value, so if you're at 4% churn, is it fair to say the average customer is staying with you, what, for about 25 months or about 2 years? Yeah. So lifetime value, I think is around... It jumps around a little bit on BareMetrics, but I think it's around 660 right now. Yep, yep, yep. Okay, cool.
And the lifetime value of a customer, what is that at right now in terms of dollars? Yeah, it's $660,000. $660,000. Great. Okay, cool. So why doesn't that math work? So if I take 25 lifetime value in terms of months and multiply that times the ARPU of $34, that comes to $850,000. Why is that higher? No, yeah. I don't know. I don't know how long they stay with us. It might be less than that.
Okay, okay. OK, great. Yep, that's helpful. And then you guys are where are you based? Uh, Indianapolis, we have, uh, my co-founder and I are both in Indianapolis and, um, we have a lead developer here as well. We have a, uh, our lead, another kind of lead developer in Chicago. And then, uh, we've got a big team in Eastern Europe.
And then, um, I've got a lot of people all over the world for marketing, really a lot of people in the States, a lot of people overseas. And what is the, uh, so Indianapolis, you guys must be like a big, a big fish in a, in a small sea, I imagine, huh?
Well, we actually, Indianapolis has a pretty good, has a pretty good, it's not, you know, it's, it's, it's not massive, but we're actually pretty small for, for Indianapolis. Indianapolis has a lot of marketing text on it. I mean, we have, you know, a big like exact target Salesforce here. Oh, okay. Deliver is here. There's a lot of big companies here. Those are big. Those are really big.
Um, okay, cool. Take us. I know I keep going back to you in economics, but I forgot to check it on this one. So with the lifetime value of about 680 bucks, what are you willing to pay for a new customer? So right now, well, willing to pay, I mean, what's the rule? Like, I mean, I like to, I would like to keep it under like 200 right now. We're lucky right now. It's like at like 90. Okay. Got it.
And how, where are you spending those marketing dollars? Uh, content SEO, the, the obvious stuff, man, for, for, uh, for, for SaaS based businesses where, you know, directories, um, you know, we get, we invest in our, in our people and that, and that includes our overhead as well. Those, those, those CAC numbers, those include. So it's a full weighted cost.
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Chapter 6: How does Hubstaff maintain low customer churn rates?
The marketing salaries are divided pro pro into that. Okay. Yeah. And, um, And yeah, I mean, I'm real happy with it. But, you know, really what it comes from is we have a viral aspect. So a company will come in and have contractors, brings contractors in. And then basically those contracts, they bring in five.
Those contractors also work for other companies and they invite their other managers in. So we have a nice viral effect going on. No, it makes a lot of really good sense. The, I mean, the reason I'm asking man is because you've got a pretty highly ranked in terms of traffic site. Alexa has a 26,000. So you're doing something right in terms of content marketing.
Well, well, the thing is, so that's, that's a, that's an important thing to look for. Um, A lot of that is the team members coming to the site. That is not all people. Oh, okay. Got it. That makes a huge difference. That's why I'm going. These guys are crushing it on something. I got to figure out what the answer is. I wish. Hey, I wish.
What are you guys getting in unique website views just to like your blog per month? Yeah, blog, it's about 40,000. Okay, so you're getting 40,000, you're converting about 270 of them into new paying customers. That's pretty good. That's to the blog. Now, it doesn't all come from the blog. We get a lot of people coming in just to our main site as well.
We get about 20, I think about 26,000 new to the site, new visitors per month to the website, and then like 40,000 to the blog. So that's kind of the way the numbers work. And if we break that funnel down of the ones that hit your home, so 20,000 hit hubstaff.com, how, what percentage click the start free trial? Oh, you know those numbers? Yeah.
So, uh, well, I do know that we are converting the homepage converting about like 7% right now. Okay. Okay. That's great. Okay. That's into, that's into the free trial. Yeah, so if you're getting 20,000 unique and you're getting 7% of those times five, so you're getting about 1,300 clicking free trial and then 270 convert. Yeah, we're getting about 1,350, 1,400 new companies per month.
New trials per month and then 270 to a paying customer. Yep. Awesome. And what about you guys must be building because the content is so strong, like an email list.
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Chapter 7: What is the significance of taking risks in business according to Dave?
What size is yours? How would you have you built that, too? Well, that's something that we're working on. We don't have we really don't do a good job of that, to be honest. We are working hard on it to correct that, really. But we you know, really, that all comes down to you got to have you got to lead with that awesome content. And so that's what we're starting with.
And then you we haven't got the sauce quite right for that, but we're working on it. What are you at right now? Uh, I don't even, I don't even know. It's small. It's small. It's like, it's like 3000. Yeah. And then how many total users do you have? Like total free trials over your whole life? Have you, have you processed? 21,000. Okay, great. So super healthy, man. Awesome.
Well, Dave, before we get into my favorite part of the show, if people want to connect with you or the business personally online, where can they do that? Yeah, just David Hubstaff is my email address. My Twitter is D-N-E-V-O-G-T. My blog, I write like a growth blog, how I grow the company. You can see it when you go to the blog and just click on growth.
Okay, Top Tribe, do not forget your chance to win $100 right here on the podcast every Monday. It's very simple. You just subscribe to the show on iTunes. And then once you've done that, text me to prove that you've done it. My number is 703-431-2709. Subscribe now and text me to enter. 703-431-2709. Okay, Top Tribe, I have to tell you, many people go, Nathan, you came out of nowhere.
Your website's growing so fast. How'd you do it? The answer is simple. So I use HostGator. I don't know if you guys know that, but I use HostGator. And the reason I do, they have like about 4,500 free templates I can use because I don't code. They've got a great e-commerce plugin. And guys, I bug the heck out of their support. They've got 24-7 support. which I love.
So what I've done is I've worked with him. You guys know I make great deals. If you go to hostgator.com forward slash Nathan, you can sign up, get your own domain for 30% off and a 45 day money back guarantee. Okay. Again, I make great deals for you guys. Go to hostgator.com forward slash Nathan to grab that now.
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Chapter 8: What advice does Dave have for aspiring entrepreneurs?
Awesome. Awesome. Awesome. And real quick, Hey, before we, before we again, wrap up again, my favorite part of the show, what was 2015 revenue? What were you guys at? 2015 revenue, if I remember right, we were at about like 675, something like that. Yep, yep, yep. That's really healthy. And do you guys have any plans to raise capital or are you looking at acquisition offers?
You just want to keep building the business or what? Oh, well, Jared and I, luckily we're on the same page here again, but we, we want to stay bootstrapped. We want to stay. We believe that like, if we can build this business up to like, you know, four or 5 million, um, annual and, you know, just live our lives where we want to live it, that would be a great thing. Yep. Yep. Awesome.
Well, hey, Dave, I really appreciate it. Again, Top Tribe will link to all of Dave's links and content in the show notes at NathanLatka.com forward slash the top 312. Again, forward slash the top 312. All right, Dave, we're about to get to my favorite part of the show. Do you know what time it is? Yep. It's time for The Famous Five. Are you ready? Yes. All right.
First one, Dave, what is your favorite business book? Uh, 80, 20 principal by Richard cock. Yep. It's really, really good one. Okay. Next. Is there a CEO that you're following or studying right now? I really like, uh, hitting Shaw's newsletter. I listened to a lot of what he says. Um, is that how you found that article I put out?
uh i believe it was yes yeah i don't remember exactly but i believe it was yeah guys if you want to learn more from heaton really a great leader in sas he's raised 10.8 million dollars with kissmetrics and he's self-funded crazy egg he's neil patel's kind of right hand man we interviewed him in episode 28 at nathanlaca.com forward slash the top two eight dave good guy to follow there number three is there a favorite online tool you have like fresh books
Oh, man. I mean, we just spend all of our time. I know it's common, but we spend, you know, almost all of our time in Google Docs. In Google Docs. Okay, next question. Yes or no, as you're building this empire, are you getting eight hours of sleep every night? I get more. Oh, nice. That's great. And what's your situation? Are you married, single, do you have kids? I'm married.
I have two little boys, four and five right now. And yeah, I typically, I've always been an early to bed, early to rise type of person. And what, how old are you? I am 36. Wow, awesome. So you've got, this is just proof, right? You don't have to kill yourself as you're building a SaaS company. You can do it in a balanced way as a dad and get plenty of sleep, right? Yeah, yeah, yeah.
Totally, yeah. And to be honest, I mean, we've, you know, I've had, this is like my third company now. So I've, I've lived through that stage, but, uh, you know, but right now I am not, I, you know, I'm getting over eight hours sleep. Yep. I love that. All right, Dave, uh, last question. Take us back 16 years, man. What do you wish your 20 year old self knew? Uh, that taking risks is, is okay.
Uh, I'm, you know, taking risks is the ideal way to get to what you want. Um, I think that you'll learn a ton, um, through the experience. If you go through that, that time of taking risk, um, even if it ends up where it doesn't work out, you're going to end up better for it. Top Tribe. Always remember that right from Dave. Take risks. You're going to learn no matter what.
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