SaaS Interviews with CEOs, Startups, Founders
What you can learn from Vista Equity's former head of pricing
29 Jul 2022
Chapter 1: What insights can we gain from Vista Equity's former head of pricing?
So last year we worked with 106 SaaS companies. Oh, wow. This year we're going to do more than that.
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.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey folks, my guest today is Marcos Rivera.
He's the founder and CEO of Pricing.io, a B2B SaaS pricing expert who uses street smarts to help companies capture value and unlock growth. With over 20 years of experience, he has a knack for effortlessly delivering complex ideas, helping his clients out, leaving them feeling more confident. Again, now building pricingio.com. Marcos, you ready to take us to the top? I am. Let's do this.
All right. So you've also got a book coming out, which we'll talk about in a second. But first, Pricing.io. When did you launch the business? What year?
2019. I launched in the summer of 2019. So we're about three years old.
And I see verbiage related services on the website. Are you building? Are you flirting with software on the back end yet? Or is it all people?
Yep. So today it's all people, although I think the ultimate goal would be to start introducing some tech behind the scenes, to start introducing some other levels of scale. But at this stage, we are full on services, all people, some of it, most of it being one time and some of it recurring.
The reason I love this is a lot of the most successful SaaS companies come out of agencies. So maybe a year, two years, three years from now, you're sitting on a billion dollar SaaS company, right? And it started off here, pre-revenue with just an agency. So tell us about the agency. What are you selling?
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Chapter 2: How did Marcos Rivera launch Pricing.io and what services does it offer?
Yeah. I would say price intelligently comes up a lot or profit well. I know that they may be shifting a little bit with the recent announcement with paddle and everything that they're doing. But they do a great job of offering some good survey services to figure out willingness to pay, things like that, which a lot of folks take, run with, and use.
But they don't really get into how do you implement this stuff? How do you actually figure out how do you implement a discounting matrix? How do you make sure that you can actually pull this off on the other end? How do you do an executive price increase, for example? All those things we get into, and that comes from a lot of the value creation background that I have.
Mm hmm. And I want to get into some of those playbooks here in a second. But what do you know? I mean, what is profitable charging these days for these sorts of things? Is it half a million and bigger?
No. So ProfitWell, believe it or not, I actually had someone tell me just a couple of weeks ago, they said, yeah, ProfitWell today won't even get out of bed for 250K, quote, what he said. Now, I think their engagements do kind of range around that low six figures from what I've seen. They have different models out there. But yeah, that's what he told me as his last conversation with him.
Yep. Okay. So let's just so people can really get in your heads. I want you to get sort of street cred with my audience. I don't want them to see you as just like a consultant, right? So tell us about how you helped the SaaS company execute a price increase and what was the result?
Yeah, absolutely. So I'm actually not much of a consultant. I'm more of an operator because I've built software and sold it my whole life, which is a funny story. But the real deal here is how do I help companies figure out how to price? So the first thing we do is we get into where is the growth coming from? Like, are you actually going down market, up market?
Are you trying to increase your profit? Are you trying to gain a bunch of market share or network effect? That's going to tell me, okay, which options are available to you from a model perspective? Then we get into your customer base. Who are you selling to? And no, small, medium, and large is not good enough anymore.
I actually help them figure out either on a maturity curve or complexity curve what these customers really want. Then we design and craft an experience for each group. So that means onboarding, implementation, of course, features, services, all those things. And then we price that. Once we get that granular, the pricing problem gets a lot easier after that.
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Chapter 3: What pricing strategies do SaaS companies need to consider for growth?
So what do we do? How do we get with the number? We actually then take the ROI calcs for that specific experience. We look at data we get from their customers in terms of what they find important and less important, and we apply factors there. We also look at their historical data and see what kind of pushback they've done on their current price points.
or where there may be massively discounting. And we triangulate all that with the competitive Intel that we also do. We'll do like secret shopper and go out there and find like different price points out there in the marketplace. And we'll use that to come up with a price envelope. That's the secret here. And then based on that envelope, Nathan,
Well, what does envelope mean? Is that a range or what does that mean? It's just a range.
It's just a range with all those inputs. And say all these inputs point to $40 to $80 per user, for example, right? And if you look at that range, if you're trying to maximize profit, you go on the higher end. If you're trying to gain market share and get a lot of growth, you go on the lower end. And then from there, you start applying what I call psychology tactics.
So things like making the pricing actually easy to absorb, easy to say, easy to sell. And that is the final piece of the puzzle is making sure that the pricing is super simple for some customer to understand. So that way you can break away from any confusion and frame it the proper way.
All right, as you guys know, I am hunting for a founder that I think is gonna grow to 100 million bucks in revenue with just them as the only full-time employee. How are they gonna get there? Well, they're gonna automate all their tasks. They're gonna hire contractors. They're gonna have an internal learning management system for all those contractors to have high, high, high output.
And the question is, how will they do it? Now, I haven't found that founder yet, but I have found people who are close, including Netcore. They've bootstrapped to $95 million of revenue and $12 million in profits, and they rely on this very unique tool called Rocket Lane.
They use Rocket Lane to write playbooks, reuse those playbooks internally to grow Netcore things like how to do a webinar, how to do a live event, how to push code. They also use it to track, plan, and manage resources and time efficiently across all of their dozens and actually hundreds now of team members. And it's also a collaborative central space for you and your customers.
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Chapter 4: How does Pricing.io structure its client engagements and pricing?
You can ask your customers feedback for mock-up feedback, have your design team edit, then get your customers feedback all in this one tool. Now, they listened to the show. They reached out. They said, Nathan, we think folks will love it. I said, you're right. Give me a great deal. They did. You guys can try the tool for free at NathanLaka.com forward slash Rocket Lane.
That's NathanLaka.com forward slash R-O-C-K-E-T-L-A-N-E Rocket Lane. Check it out today. Try it for free. Really interesting. Now, guys, I was burying the lead here, but Marcos is the real deal, right?
He was with Vista, which is one of the most, I would maybe argue this, most successful software company in the world when you add up all of the combined businesses, maybe second largest in terms of revenue in the world these days. But you'd basically ran as part of their consulting arm, right? All the pricing and pricing optimization, correct?
Yeah.
That's correct. So a little over three years there, I did pricing across the whole portfolio. I think I worked with companies like Marketo, Ping Identity, MindBody, Tipco, you name it. I've worked with all those companies. And you can imagine the pattern recognition engine really firing as I did the companies and also their add-on acquisitions as well. So it was hyperspeed.
Yep. No, we've had Andre on many times in a bunch of Vista portfolio companies on, and I always ask them about pricing. And I mean, one of the, one of the things I'd be curious to ask you about is when you're looking at potential acquisition, now this is hypothetical, obviously, but for say Ping Identity, and you're saying, okay, they've got a thousand customers paying 10 bucks a month.
We think if we buy this company for this valuation on paper right now, it's expensive at 15X. But when we cross-sell the $2,000 average ACV, this is going to be the pickup rate. And actually, now it's cheap. How do you run that modeling? And is that the thought process that someone should go through when they think about an acquisition in terms of pricing?
I think it's very important. I think once you start thinking about, when you think about the upside potential, right? For me, PE is potential equity, not private equity, right? So you're really trying to capture that.
And the way you frame that, and this is where it comes down also with the market pricing models that I asked my team to make sure that we're building, is how do we get that net dollar or net revenue retention number higher, above 125, 130, 140%?
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Chapter 5: What are the major factors influencing SaaS pricing models?
So I advise and invest in a lot of smaller companies. And so we'll do like mini engagements to help them out.
Yeah. I see. I mean, can you build a million dollar agency doing this? Can you break a million bucks this year? We actually have. Okay, there you go.
At this stage. We're doing pretty good.
All right. So why write a book? I wrote a book. It's a lot of freaking work. It takes a ton of time. It's painful. Why write a book?
Oh, man, you said it. I really underestimated the effort to write a book. But there are a couple of things that went behind this. One is I really wanted to give a tool or a playbook for a lot of those hardworking SaaS entrepreneurs out there to demystify pricing. A lot of folks, Nathan, they're guessing, they're copying. And they're sort of leaving it to the wind.
And I think that's leaving a lot of their growth potential on the table. So if you give them this playbook, which sort of makes it a little bit more approachable, gives them some really hard-hitting, quick tactics to implement, I want to help these SAF fleets, I call them. They're out there working hard every day to really capture their values.
That makes a lot of sense. So when does the book come out and where can people find it?
Yeah. So it drops August 16th. It is available for pre-purchase right now on Amazon, on Barnes and Nobles, anywhere books are sold. And yeah, super excited about it. And I can't wait to come out. It's a lot of me poured into that. 23 years of pricing just poured into my book. I put a fun spin on it because I grew up with hip hop in my early days growing up in the Bronx.
So I infuse a lot of these hip hop lyrics into the chapters just to make it a lot more fun to read.
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Chapter 6: How can companies effectively implement pricing strategies?
Yes. He's a smart guy.
Number, uh, uh, what's your situation today? Married single kids, married two kids, two kids. And how old are you?
I am going to be 45 on Saturday.
Well, happy early birthday. That's great. Last question. Something you wish you knew when you were 20.
Ah, man, so many things. I would say the number one thing I wish I knew I was 20 was I spent so much time building networks. I'd rather build trust than networks, meaning meaningful relationships where you do something for others. So trust over trust.
Guys, there you have it. Spent three years of Vista Equity doing all kinds of pricing optimization. Said, you know what? I'm going to strike out and do this on my own. Launched his own agency, pricingio.com. This was several years ago. Now 10 people full-time there. He helped over 106 companies set B2B SaaS companies last year, optimized their pricing.
He does more than a million bucks a run, right? Just on the agency, but now has a book coming out. Book coming out, streetpricingbook.com. Check it out. Drops August 15th, pre-sale now. Marcos, thanks for taking us to the top.
Thanks for having me, David.
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