SaaS Interviews with CEOs, Startups, Founders
Want $100m in revenue? Copy these lessons from ZenBusiness CEO Ross Buhrdorf
21 May 2024
Chapter 1: What is the main topic discussed in this episode?
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
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check it out right now at getlatka.com i lay in bed and pray for customers to come to the website have you more than doubled since 2021 oh my god yes okay great so in 2021 you did 41 million so today he's doing more than 80 he tricked me Ross, you've got such a great story, though, because obviously you were in the driver's seat at HomeAway, but you weren't necessarily the founder front line.
What was that experience like? And specifically, what was it like when you signed or the founders told you we're selling for $3.5 billion to Expedia? Well, first, I need to correct you, $3.9 billion. There we go. $400 million, $400 million extra. We don't want to lose that. Well, I mean, it was great. I mean, we went public.
We raised all this money, and then we went public, and then we sold to Expedia. And still to this day, Expedia says, you know, it was their best acquisition. we let them a great product. That's great. Well, we're going to close the interview with more on the Expedia deal. But first, we want to learn a ton about Zen Business.
Over the next 20 minutes, we're going to focus on customers and how Ross thinks about serving the customer, not being stuck in a SaaS business model, which I think you do extremely well. We're going to talk about deals that he's been through, both he bought a bank, why did he buy a bank?
And then we'll also talk about capital to an extent, how he's capitalized the company, how he's using it to fuel growth. So on that note, what does Zen Business do while people get a shot at your homepage here? Yeah, I mean, I think... The fundamental issue for entrepreneurs nowadays, and we really focus on first-time entrepreneurs, it's scary going out there and doing it on your own.
So what we do is we provide everything to launch, run, and grow a small business. We primarily focus on service-based businesses, primarily because those are the businesses that get created.
So, think of it, we start with the formation, whether it's a S-Corp, LLC, then we go into all the compliance that you have to do, then taxes, accounting, website, banking, marketing, just everything a small business needs to get up and running, all in one place. That's why the previous, you know, we are a platform. We've always been a platform. We're a SaaS platform.
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Chapter 2: How did ZenBusiness grow from $40M to $80M in ARR?
We surveyed our customers. Ross, before you talk about the survey, you did a very smart survey process. You have receipts to back this up. This is what the website looked like in 2018. I always want to bring context, right? Because you don't want to learn from a founder doing $100 million of what they're doing now.
You want to learn what they did to get there so that you can match it to where you are right now. So this is what you launched this. This is how you described it. Pay zero. to file plus state fees. Was this like a PLG motion or what did the funnel look like when you started? Yeah, it very much was a PLG motion. And I tell everybody I lay in bed and pray for customers to come to the website.
And they did. Yeah, I mean, we started out at free. Then we went to paid. And now the market is, you know, we've been so successful. Now the market has went back to zero, which is where we've went and You launched, though, a combination.
Chapter 3: What was Ross Buhrdorf's experience at HomeAway?
And this is what's fascinating. These were the six products that Ross launched in 2018. And if you guys look at these, only two of those six have a dash month after it. Only two of them. Two of them are fixed fees, so you could say services. And then one is PLG free. Were you thinking about all the business models, or this is what your customers asked for?
We were initially just trying to disrupt the incumbents. And so a free offering is always the best way to do that. And we're back to that right now. It's very competitive in this space. So this is news, because you moved from 2018 to 2020. This is what your pricing looked like. So why did you move from what we just saw to this? Because we were leaving a bunch of money on the table.
How did you know that? That's a good question. Because, you know, the problem with a zero cost off, well, let me put it this way. The market wasn't at a zero cost offering. So, I mean, I think you have to very plugged into the market. Now the market is at a zero cost offering and everybody's there. At that time, we were leading it. And it got us into the market. It got us our rounds of funding.
It got us our customers. And early on, we were just really trying to get that motion and to discover. So the long answer is we discovered our customers willing to pay a lot more for the formation piece. And then the real trick here or the real learning, and this is nothing new in hindsight, is that customers want a simple solution presented to them. They want everything in one place.
You know, we are the system of record for our customers. Ross, back that up, though, because this is your current pricing page, and it looks like the opposite of simple. Yeah, well, yeah, it is. But this is where the market is. Sorry. This is where the market is. Now, that's not really true. It is a simple pricing. You can either get starter, pro, or premium. It's simple. It's right there, right?
That's right. It's simple there. But I'll challenge you with any consumer-based SMB product.
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Chapter 4: What strategies did ZenBusiness use to acquire customers?
This is pretty simple. And again, it's not, to your previous speaker, love him, maybe he'll come on as a consultant for us, is, you know, we're the platform play. We've always been the SaaS platform play. We, in some sense, we've created this complexity. Initially, it wasn't complicated. Now it's complicated because all of the other folks in the space, you know, they have to check the box.
Oh, we've got what Zen Business does. We've got what they... Well, you said you were leaving money on the table in 2020. You moved from this pricing to this pricing. Can I ask, have you more than doubled revenue since 2021 when you made these pricing changes? I don't know. You know, I'm very cautious because it's so competitive about what do you think our revenue is?
Well, I don't want to guess that, but I'm trying to let you get out here with just a percentage. Have you more than doubled since 2021? Oh, my God, yes. OK, great. So in 2021, you did $41 million. So today, he's doing more than $82 million. He tricked me. He tricked me.
So today, he's doing more than $82 million of revenue, which may be north of that, reading body language and these very expensive shoes. No comment. No comment. I had to push him so hard for this. We were having a great time. You were in your studio. It took me until a minute 1147 on the podcast to finally, I said, I used actually, we're going to learn from Andrew here in a second, Warner.
He's going to interview the next guest. But Andrew, one of his tactics if you're launching a podcast and you want to get data and do it in a polite way is it's called a low ball, basically. So I said, you can see the text. I said, Ross, I think you're doing out a 40 million run rate today. And he jumps in and says, we're well north of that. You cut me off. Yeah, yeah. So they're doing well.
He can't comment too much on that. I want to go, though, into you weren't just sleeping on your bed and praying. You were testing a lot of growth. Early on I was, because we didn't know what we were doing. But we figured it out. Fair enough. How did you figure this out? Almost the majority of your SEO traffic is coming from a programmatic SEO, the state name plus LLC. Yeah, I'll tell you what.
This is really DNA for us. As the founding CTO at HomeAway, HomeAway even made it into the Google book as the vertical search for vacation rentals. So we were a top 10 rated organic search on the face of the planet. There's a lot of HomeAway folks. There's a lot of LegalZoom folks. There's a lot of Expedia folks now at Zen Business. So that DNA we took over. And we've done 15 acquisitions.
10 of those acquisitions were organic search position. So this is inbred for us. Let me just say that in a way. So just to be clear, you looked at people that ranked high for search keywords, and that drove your M&A strategy. You go buy that business just because they ranked high for a keyword. That's right. That's right. And then we integrated that.
So I guess the point is that in our segment, we do a lot on paid search. We do a lot with affiliates. We do a lot with every single channel. And we do a tremendous amount with brand also. But organic search has got to be key to make sure that that CAC is something that your business can sustain, especially when you're consumer-focused. We've got to get out in front of our customers.
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Chapter 5: What role does customer feedback play in product development?
No, absolutely. In general, yes. Let's keep going down the funnel. We'll end with the customer story, which you just alluded to. They click these keywords from Google Search. They land on this page. How did you get Mark Cuban to agree to this? And how is this converting for you? Well, I got Mark Cuban to agree to this because he saw a great product. I went and pitched him.
I went through the process and through my network. I think it was a long shot, but for all of the folks out of here, I mean, starting a business, and again, I want to get back to this, is that when we help our customers, we feel like our customers. I mean, our employees have side hustles. We encourage it. We give them free subscriptions, and it really drives the quality of the product.
This is a good slide for you to talk about your product strategy, and then we'll go on to the banking. So how are you bucketing your product strategy today?
uh well i mean i think it really is this uh launch uh run and grow uh so everything that you need to to launch and this is becoming even more important you know when you do a formation people come to me and say hey should i use a lawyer to do formation i said absolutely not not only will they do it wrong because they don't do tens and hundreds of thousands of these like we do.
We make damn sure we do it right, have AI. So we do a great job on that. Then they won't keep you in compliance. You know, depending on what state you go to in New York, you have to put an advertisement in two newspapers. Did you guys know that? We facilitate that. To file an LLC in New York. To file an LLC in New York.
And then there's all kinds of different states, 50 jurisdictions, and then the District of Columbia. So there's just a bunch for a compliance point of view. And it's important that you're up to date. And now they've got the new federal law, the Corporate Transparency Act that came out. We handle all of that for our customers, too. So we make darn sure that they're handled.
So that's that whole compliance piece. And then, you know, just running your business, it's, you know, the taxes, the accounting. We do the invoices and payments. Which of these business models right now generates the most revenue for you, the left side, taxes, accounting, or the banking and finances? I mean, I... Or you don't think about it that way. We don't think about it that way.
I mean, it's... Are you making money on a credit card? Are you taking 1.8% gross interchange? We're making money on everything. Otherwise, we don't... Round of applause for making money on everything. Otherwise, we don't do it. I mean, you know...
I'm on a, I mean, banking for us is really about, it's one of the, it's the number one, next to taxes is the number one thing that small businesses are worried about. Like, oh my God, I just did a formation. You know, what kind of filing do I, you know, what kind of formation should I do? And what are the tax implications? So we help them with that.
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Chapter 6: How did pricing changes impact ZenBusiness's revenue?
The next thing they need is a bank account. You got to separate your finances. And I'll tell you, this is the greatest story, which lines up with your previous speaker. So I'm training with my trainer. I'm in his gym. And I said, hey, listen, Bobby, if I get myself hurt here, I'm going to sue the hell out of you. You better get an LLC to protect yourself.
He said, and I know a way you should do that. So he goes and does this whole process. And then he comes to me. He says, hey, I want to use my local bank. Great. We're fine. We hook up. to any bank you need to. And then the next question, which I knew he was going to ask, is like, OK, how do I do that? Well, you need to print out your formation documents.
You're going to have to make an appointment. at the bank. You have to go down there and then wait a couple days for them to run the process. And then he pauses for a second. Well, what do I have to do to use your bank? Oh, you have to answer one question and push a button. What's the question? You know, what kind of business do you run? And do they have to deposit a certain amount on day one?
Well, no. I mean, after, that's just to get the process going. I see. They just have to push a button, answer one question. It depends on... what kind of business it is, what the question is. But they hit a push button, and that's it. And then the process starts. I'm going to dig here for a second. There are a lot of SaaS founders thinking about adding a FinTech play.
So a couple quick questions here. Do you do KYC and AML internally? Well, so the answer is yes. And with banking as a service now, and there's a lot going on here, is we sit behind a charter. So just talk. You've got to be a joust. Joust. Well, now, Joust was, that was an early acquisition, and Joust got us into, got us into fintech.
Now, we've evolved from now into banking as a service, so we use a middleware piece of software. Who do you use? Oh, my gosh. Unit, Treasury Prime? Unit. Unit. Okay. And... And then we've... Who'd you get the charter from, though, if it wasn't from Joust? That's the hard thing. No, no, we don't have a charter. We sit behind a charter. So Unit sits in front of a charter.
And then there's many banks as a service. So Joust was a fintech that was sitting on somebody. They didn't own a charter. I thought that's why you did that acquisition. No, no, no. No, they didn't own a charter. I see. Okay, so you're sitting on Unit. Unit plus you do the KYC AML. It sits on top of a...
Unit's general model is there, does Unit pay you kickbacks on deposits, you know, midpoint minus 75 or something? Yeah, I mean, we, yes, we make money at every part of it. And it's great, and I mean, to your previous speaker, is, What we do as a SaaS platform, we've already acquired the customer. So for a bank, I know right now I can give you a bank pays because I don't want a bank board.
They pay up to 500 bucks for a customer. We've already acquired that customer. We can either, and we do a deal with Bank of America. We send customers over to Bank of America if they want Bank of America because many of our customers want to write checks. Most fintechs don't allow you to write checks. Everything has to be done. How many credit cards do you have in circulation right now?
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