SaaS Interviews with CEOs, Startups, Founders
You won't believe the profits this $10m revenue bootstrapper makes
06 May 2022
Chapter 1: What insights can founders gain from in-person events?
Founders, what's going on? You guys know I love in-person events and they are back. The recording you're about to hear is from our most recent event where we had hundreds of founders come together, share intimate details, templates, KPIs, OKRs about their business. And it was something special, something special. We'd love to meet you in person.
If you want to see the next live events we have coming up via our schedule, the link will be down below in the description. If you're listening on iTunes, check this out on YouTube. You'll see the links in the description or you can just Google founder path or Latka next event. We'd love to see you in person. In the meantime, though, enjoy this recording. It's a good one.
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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Good morning. So I'm Michael Cooney, one of the co-founders of What Converts. So how we got started is I was running a digital marketing agency. And I had a web developer that worked for me for about seven years. He got an offer from corporate. He went away. And eight months later, he came back, and he's like, corporate isn't working for me.
So I'd like to come back, but I don't want to work for you. I was like, oh, OK. He says, do you have any ideas where we can build a company? And I was like, as a matter of fact, that's just come from a client meeting. And we had doubled the leads for this client in a campaign. I walked into the room and I said, hey, we doubled your leads. Isn't that great? And he's like, I don't know.
Were they good? Were the leads any good? And I'm like, yeah, sure. But he says, can you show them to me? Well, I can, but to get those specific leads, you know, there was like 500 leads and I'd have to get 100. It was like going to take three hours of work. I was fed up and I said to Jeremy, you know what? This lead tracking and reporting issue has been going on too long and we need a solution.
So I said, if you can help us, if we can track all phone calls and forms being filled in and chat back to the marketing responsible, store all that and report it, I think we can build a really strong company. And so he went away and the first thing he started was like, how can we track every form on any website across the world without requiring them to change the form.
So he went and worked on that for a week, came back, says, I got it. We got it organized. And that's how we started the company. So we went and played a round of golf. And at the end of the round of golf, Jeremy and I, we had a discussion. We said, look, how are we going to set this up? We said, let's do 50-50. He'll develop the product. And I will go ahead and do the sales and marketing.
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Chapter 2: How did the co-founders of What Converts get started?
We wanted to build it in our own time and make sure week of traction.
Michael, real quick. I'm in the back of the room to your left. There's a lot of people in this room. Actually, raise your hand. Guys, how many of you started your SaaS company as an agency or professional services? Raise your hand. This is by far the number one theme from successful SaaS founders, just starting as an agency. You did that.
Spend more time speaking about how much revenue did the agency do? Are you still running it today? And how did you use the agency contracts to learn about the SaaS products you could build?
Yeah, sure. So, I mean, running an agency, I actually started an agency in South Africa, which is still going. Now my brother runs it. And I have one in the USA as well. So combined, we were less than 2 million. We're probably about 1.5 million. The agency in the USA, I just still manage about a handful of clients and I sort of dog food our WhatConverts product with them.
And then South African agency is still running. They're about a team of 20. So I think I covered everything. Anyway, so that's the reason we decided to bootstrap, because we were still getting some funding from the agency, and we could build it out at the same time. We also wanted the optionality. We didn't want investors getting involved and controlling how we develop things.
So we just want to stay focused on sorting the problem we had. And then the other thing is we want to grow value before we got funding. So the reason for this is people say to you, do you want a tiny piece of a huge pie, or do you want the whole pie? Well, we're like, well, we want the whole pie. And when it comes to the stage, we want a huge piece of the huge pie. Yeah. Okay.
So when do you decide how you can skip funding? So bootstrap versus funding. And I'll put it into three distinct buckets. You've got your problem, your product, and the promotion. So with the problem... When you create a product, you're solving a problem. And if there isn't a problem to solve, you're going to find it difficult to get your message across.
You're going to find it difficult to get sales. So you really have to have a real problem, and you have to understand that problem. And it really helps if you've lived that problem. So as the agency, I'd lived that problem for 20 years. And more funding wasn't going to help me define the problem any better. The next step is the product. Would having funding help us build the product?
Well, my arrangement with Jeremy was he was going to build the product, and we could have got more developers on the thing, but what we found is we sort of lucked out. Jeremy had worked for me for seven years, so he understood the problem really well, and he had the development skills. So that focused development allowed us to create a product and innovate where we came across certain features.
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Chapter 3: What challenges did they face during the early stages of their business?
And if you do, you'll grow 10x. And you get lots of these, lots of suggestions. And you have to have a framework on, like, how are you going to avoid these shiny objects? So we call this our 100-year test. Can I go back? There we go. Okay. We call it a 100-year test.
And it's just a simple framework where it's like your core value of your product, if you look 100 years ago, was it true or was it valuable? If you look 100 years in the future, do you still see it being valuable? So we took, for instance, call tracking. This is one of the main features we have. And we look back 100 years ago, was call tracking valuable? Well, it wasn't really anything, so no.
Well, let's look 100 years in the future. Is call tracking going to be valuable? And I think call tracking is already becoming a commodity. Is it still going to be valuable? I doubt it. So call tracking isn't our core value. Then we look at, okay, well, marketing, was marketing valuable 100 years ago? Absolutely. Will marketing be valuable 100 years in the future? I believe so.
And if it's not, Google's in a lot of trouble. So we see marketing is our core value. And how we determine our values is we collect a lot of lead data and attribution, and we use that to make better marketing decisions. So it's sitting under the umbrella of marketing. So our core values is surrounded by, it's around our lead data and marketing attribution. So that's our 100-year test.
The next thing, so this is an interesting story. So Jeremy and I were playing golf again. Jeremy's a golfer. I used to be a golfer. Now I'm a runner. Plan to go back to golf.
But we were walking from the 9th to 10th hole, and I remember this meeting very clearly, and Jeremy turns to me, and he's a man of few words, and he says, Michael, we have to have the best customer support of any software company. And I'm like, yeah, sure. Yeah, it's important to have support. He says, no, you don't understand. He says, I absolutely hate it.
When I send in a support ticket, it takes 24 hours for them to respond, and then the response is not helpful. So we are going to have technically competent support people that responded like within 15 minutes. And I was like, settle down, Jeremy, OK? So kudos to Jeremy. I mean, he's made sure that this happens. So in the early days, people sent in support tickets.
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Chapter 4: How did they achieve significant growth in their first few years?
He would respond within 15 minutes. And our support team is not really a support or a customer service team. We call ourselves solution providers. So if somebody comes in with a problem, we understand, what are you ultimately trying to achieve? And then we provide a solution. So when they walk away, they have a real solution. And this has enabled us to become a real growth lever.
And it's become a competitive advantage. And if you go to G2 and you look at the reviews about what converts, most of them talk about our support. It really stands out. But they also talk about our product as well. So here's one example. And just talking about how great the support is and how good it is. And we get this feedback quite often. That support has really been a great endeavor.
It's almost as good as having a super product feature. So the product, having a better product, we believe has really helped. And in one area that has really helped is of companies that start with us, 70% that start with a free trial, they become customers. So we didn't think anything of this, but when I shared this or this conversion metric with some people, they were astounded.
Like, you mean of every trial that you get, 70% become customers? And we're like, yeah. And they said, okay, that's incredible. But I think it comes back to that technical customer support and onboarding as well as having a great product. So what I mean by a better product or a great product, you'll see this is our menu with our features, our feature set. And you'll see we have three buckets.
We've got lead tracking, lead management, and lead reporting, which is analytics and insights. And so what we do is we use call tracking as a mousetrap. The reason we use call tracking as a mousetrap is it converts really well. It's the only lead type that requires a third-party software to work. So we get people in for call tracking at a low fee. It's $30 a month.
But once they join us, we automatically track their forms as well, or we get their permission. So they join us for call tracking, and then all of a sudden they're getting all their leads tracked with all their marketing attribution, and then they're getting this great reporting as well.
So it's just by having that great product, and it's obviously better than our competitors who are well-funded, has allowed us to grow and compete, even though we're dealing with all these well-funded competitors. Another benefit of having a better product than your competitors, is you can use a land and expand strategy. So our land and expand strategy is around marketing agencies.
We don't have a sales team, or we haven't had one. We plan on, we're currently building one. But in the early days, it was pure software sales. We didn't have a sales team. So the idea was when an agency shows interest, our focus was let's just get one client. Just try us out in a free trial. We're not asking you for money. We're just asking you to try and test us with one of your clients.
So it's a very soft sell, and the hurdle's really low. It's a free trial. Come on, give it a go. And we even, you know, it takes time. There's friction in time, you know, getting somebody to try your product.
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Chapter 5: Why did they choose to bootstrap instead of seeking funding?
So we said, look, it's going to take you five minutes, and we'll do the rest of it. So we show the benefits with one client. They clearly see that the product's a lot better, gives you a lot more than they expected. They came for call tracking, and they get a whole lead tracking platform. And then they bring over all their clients.
So this has enabled us to be very focused on targets that give us multiplication. So we don't have to have a huge sales team. It's just the ones that come in. We just get a lot out of them. And this is how we measure it. So this is our landing span chart. It's basically monthly revenue. Interesting thing on this chart, you see the little dip at around 60 months? That's COVID.
So we're going nicely. And what you'll see is there'll be stage that's sort of linear growth, and then there's these bumps that just increase. So what happens here is we offer a usage-based pricing. And we have very low churn, so we continually add new customers, and that's the linear growth. But where you see the exponential growth, that's existing customers using our product more and more.
And we just found that the usage-based pricing really helps. So what we found is people start at $30 a month, but on average, they end up spending four to five times a month, with some of our customers spending in the many thousands per month.
So a bit of a surprise for you today, and many of you know this, but some of you don't. There is a cheat code as a software startup to getting your finances right. And that cheat code is called Pilot. They do bookkeeping, tax, and give you financial expertise perfectly customized for every single founder. And it's not just automated. This is critical with accounting because...
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We went on this podcast. I don't know if you're familiar with it. It's a guy called Nathan Netka. Oh, yeah. So we were on his podcast. We shared revenue. And then after that, a competitor came along and made us an offer of 7x. So we were doing 2.1 million ARR at that stage. And they offered us 15 to 20 million. And our response was, we appreciate the offer. This is not a small amount of money.
This is great. But we liked the game. We enjoy the game because we find it rewarding. And if we take the money, we're out of the game. So I know Henry just said it's not fun. I'm telling you, man, being bootstrapped, growing, and being profitable is a heck of a lot of fun. I enjoy it a lot. So we kept on growing. So from that chart, you'll see here that we are now at 3.6 million now.
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Chapter 6: What strategies did they use to develop a competitive product?
Is that because the secrets are too valuable?
No.
The other thing you'll notice is the blue is Google organic. And what you find is, insights from the keywords, you start building content around that. And because you know the problem, you can really provide authority in the content pieces you create. It starts developing traffic.
Sorry, real quick, before we go on. No one knows, and this is my fault because I edited your slides on the last slide. What is the y-axis here?
The y-axis is the number of sign-ups.
Free or paid?
Well, it's a free trial, and then 70% of those become customers. There you go. Okay. So last year, this little label says 2022. This is actually a chart from 2021. These are our marketing channels that drove our signups. So you see Google Organics now in the first spot. And Google Organic is really important. What you'll find is in the first year, Google Ads is great. You can pay to play.
But as you grow and you keep on going, you add content, Google, again, it's just going to keep on delivering. So we're getting sign-ups from content that we added five years ago. And the key thing, why I think it's a hedge against well-funded companies, is you can really focus on the top keywords that deliver a lot of value.
And even if your competitor does a similar amount of things, there's 10 spots in organic. So if you get second or third or fourth spot and they get the one or two, you're still getting more than enough to compete with them. So I really recommend content marketing, Google organic, using your authority in the space to create great content.
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