Dan Martell - Scale Your SaaS Company Beyond 10k MRR

00:00:00.040 How many times have we negotiated with somebody

00:00:02.200 and we're like, well, how about we do this?

00:00:03.560 And they just go, awesome, let's do that.

00:00:05.320 And I was like, that was way too easy, right?

00:00:08.520 And then they're like, oh, I would've done it for way less.

00:00:11.000 And you're like, geez louise, all right.

00:00:26.080 Robert, how's it going?

00:00:27.440 Good, Dan, how you doing?

00:00:29.080 I'm doing amazing, I'm excited, I appreciate the time.

00:00:32.680 To help everybody out who's watching or listening,

00:00:34.960 can you share the name of the product,

00:00:37.500 who you serve and what problem you solve for them?

00:00:40.980 Absolutely, so Robert Ducharme, CEO of routezilla.com.

00:00:46.800 We help home service providers never lose a lead

00:00:49.460 because of poor scheduling.

00:00:52.300 Very clear, very awesome.

00:00:54.300 And Robert, how long have you been doing this for?

00:00:57.640 We actually started this back in the idea first came to fruition back in 2012.

00:01:04.500 And so we've been at it for some time, but probably wasn't until recently where we've really refined our pitch and our market and our product and everything to go to go after, you know, the opportunity that we're sort of going after today.

00:01:18.220 So 2012 to now, and then what can you share about the size of the business current traction?

00:01:23.320 uh so currently we are just over 10k uh mrr um we've worked with companies like tesla and home

00:01:31.960 service providers in 70 different countries uh we've got a team of about 10 people now we raised

00:01:37.640 a bunch of funding in the fall and we're building a rocket ship cool i love it well obviously robert

00:01:44.280 uh sounds like you've got a lot of different things that you're uh considering working on

00:01:48.680 what can i help you with specifically well specifically i've got a little bit of a list

00:01:53.400 here actually that i wanted to go over if you've got a little bit of time here dan uh so we're

00:01:58.040 launching a partner program and i'm trying to decide on what is a fair commission percentage

00:02:07.240 to to give our partners so we have we've kind of bucketed or put our partners into three different

00:02:12.600 buckets we've got obviously our solution partners um referral partners and affiliate partners and

00:02:18.200 And so we realized that on the solution side of things, we're we're looking at more of a real long term play where we're going to be working together more intimately on an ongoing basis.

00:02:31.000 So does the number for them need to be different? How do we approach that versus versus an affiliate?

00:02:37.360 We're really just asking to drive traffic to our webinar and let us take it from there.

00:02:43.160 yeah i mean to me there's there's and i love that you have them separated when i think of partners

00:02:49.700 it's such a loaded word i literally was just coaching a client and they were talking about

00:02:54.240 you know a partner but essentially they were talking about like a marketplace that they built

00:02:57.900 an app for and they were like that's a partner and i'm like kind of i i get the idea essentially

00:03:03.180 we're borrowing other people's audiences to build our business um the one that is traditionally used

00:03:10.520 for kind of like how do we share the upside is the typical like affiliate partner right i'm assuming

00:03:17.400 because you have you know customers in all those different countries at the 10k a month level

00:03:22.200 that your product sells like a customer pays you probably between like 50 bucks and 200 bucks a

00:03:26.600 month kind of thing yeah 250 on average yeah yeah so you got 250 on average which means your annual

00:03:32.040 contract value is kind of like you know 2500 bucks or or what what that might be right so

00:03:38.120 So yeah, so it's like most people the threshold,

00:03:44.160 I would say a great way to think about

00:03:45.620 is between 10% and 40%.

00:03:48.140 10% if all they do is send you leads

00:03:51.960 and you do all the heavy lifting, right?

00:03:53.780 They literally just get you a sign up.

00:03:55.260 I remember at one point Netflix was paying people 20 bucks

00:03:58.520 for a trial sign up.

00:03:59.780 My buddy Corey was running around the mall

00:04:02.020 signing people up on his iPad,

00:04:04.600 cause he was making literally 200 bucks an hour

00:04:07.340 convincing people to start a free trial with no credit card.

00:04:10.840 It was literally like, get an email,

00:04:13.300 let us take care of it,

00:04:14.420 we'll give you 20 bucks for every email.

00:04:16.020 So, you know, if there's very little being done

00:04:18.820 by the partner, then 10% is kind of like in that range.

00:04:25.520 And then on the upper end, you know,

00:04:27.080 and then you can talk about like multi-year,

00:04:29.000 lifetime value, et cetera.

00:04:30.500 Then on the upper end, it's 40%, right?

00:04:33.000 And you could even go, I've seen go 50 or 60%

00:04:36.680 what's called a lighthouse customer or a lighthouse partner right or um kind of like a name brand

00:04:43.400 person that their involvement will help you go close 30 other partners so it's worth sometimes

00:04:49.400 to give up 50 lifetime value of a customer to go get you know 50 other ones just like them

00:04:55.720 that's only at 30 right there's some roi calculations that you can do some simple math

00:05:00.760 because of the name brand association but that's typically the ballpark which isn't great because

00:05:06.280 because it's a 4X difference between 10% and 40%.

00:05:09.300 I would say if you said like,

00:05:10.680 give me a number that feels fair, I would say 30%.

00:05:14.040 But the truth is, is that it all depends on your partners

00:05:17.220 and what options they have in the market

00:05:19.100 and what your competitors are doing.

00:05:20.540 Because if your competitors are all giving away 50%

00:05:23.460 and they've been around for a bit longer

00:05:25.320 and their product's a little bit more mature,

00:05:27.380 then that's the competitive set you're competing against

00:05:30.240 for getting their partners.

00:05:32.720 If there's not a lot of partners currently doing this

00:05:35.280 and you have like a more relationship-based partnership,

00:05:38.880 then you might be able to get away with 30%.

00:05:41.380 And then there's the decision,

00:05:42.840 if it's desirable of them to do lifetime value,

00:05:47.160 or maybe the first three years, the first two years.

00:05:49.220 Sometimes I'll see people will do the first year at 30%,

00:05:52.800 the second year at 20%, third year at 20%,

00:05:56.160 and then they're done, right?

00:05:57.380 They kind of set the threshold,

00:06:00.420 but that's assuming that you've got great retention.

00:06:03.160 So there's no answer to this,

00:06:05.160 other than like anything, what's the market willing to bear?

00:06:09.240 What's the market need to hear

00:06:10.600 for them to want to engage with you?

00:06:12.620 So as you go to the partners

00:06:15.080 and you kind of present your offer,

00:06:17.100 listen, see if they respond.

00:06:19.160 If they say stuff like, well, yeah,

00:06:20.780 but I've got this other company that does what you do,

00:06:22.700 maybe different, and they're giving me 50%,

00:06:25.500 you might have to compete against that.

00:06:27.260 What resonates the most with you, Robert,

00:06:29.440 as I share that kind of idea?

00:06:31.240 Um, yeah, well, I mean, I mean, well, all of it, I mean, it's interesting.

00:06:35.920 There's a lot of, there's a lot of questions in there, there to answer, um, you know, especially

00:06:40.780 looking at the competition and we're kind of in a space where there's definitely some

00:06:43.980 big players who maybe aren't necessarily doing what we're doing, but they're crowding the

00:06:48.580 space and they're, they're crowding the, you know, they're taking the eyeballs of our target

00:06:52.260 audience.

00:06:53.040 And so we're up against that a little bit.

00:06:55.080 And so we definitely need to make sure that, uh, what we're offering is appealing, um,

00:07:00.680 is competitive in that sense one of the challenges i think i see kind of looking at this is um like

00:07:09.080 you talk about ltv and like okay you bring on this partner and how many other partners did they

00:07:13.320 potentially give i think maybe the challenge of looking at that is saying well what

00:07:17.960 okay let's let's break that down let's say this partner you know we're going to give them

00:07:23.080 we're going to give them 10 or we're going to give them 20 because we know they're going to

00:07:27.480 bring on that these other partners below them um what's the math that we do there is you talk about

00:07:33.640 ltv like do we do um what the expected ltv is for them and all the potential partner other partners

00:07:41.880 they might bring on board and what is the percentage of that when i say the partners they

00:07:47.000 bring on board i just mean that you'll be able to easily attract because of their association

00:07:52.280 Not necessarily that you got to give them 20% and the other person 10% or 20%.

00:07:56.500 But what you want to do, and you bring up a good point, is you can even set up minimums, right?

00:08:03.180 So let's say a partner says, well, I want 40%.

00:08:05.980 You'd say, well, what's the minimum commitment you can make?

00:08:09.260 And they go, what do you mean?

00:08:09.960 And say, well, I'll give you 40%, but it means that you got to generate a certain amount of volume.

00:08:14.160 And they might say, well, I can get you 10 new customers every month.

00:08:16.540 It's like, perfect.

00:08:17.160 How about we do 20% on the first 10

00:08:22.660 and then if you get over 10,

00:08:24.580 we'll give you 30 or 40% on all them and all the new ones.

00:08:28.240 That way, you win, they win.

00:08:31.140 They think they can do that, that's great.

00:08:33.040 We'll paper it that way.

00:08:34.200 So like, it's kind of like even like sales commission,

00:08:36.640 you wanna hit some quotas

00:08:37.740 and then you can do accelerators above that.

00:08:39.960 To me, I think about it the same way as,

00:08:41.620 and I see this happen all the time

00:08:43.020 where like a name brand thought leader comes into a company

00:08:46.900 and they're like, I can get you 100,000 customers

00:08:49.940 and I want 10% equity in your business.

00:08:52.400 It's like, all right, I will give you 10% equity.

00:08:56.260 I'll give you 1% equity

00:08:57.840 for every 10,000 customers you bring me.

00:09:00.360 And they're like, oh no, I don't even wanna do it.

00:09:02.400 It's like, perfect.

00:09:04.200 I'm calling your bluff

00:09:05.180 because if you feel confident you can do it,

00:09:06.780 then we said the same thing.

00:09:07.800 We just made sure that is action first, reward second,

00:09:12.200 not reward upfront, hopefully they do the action.

00:09:15.080 Does that make sense?

00:09:15.920 Yeah, absolutely. And so my next question is kind of piggyback off of all that and like dive into a specific partner conversation that we're having right now with a solution partner where they've got some major like national brands that they want to bring on board with our products.

00:09:32.220 So they've got a product that our product would integrate into nicely, would create, would make their product more sticky, would give their, would enhance the value of their product to their current customer base.

00:09:45.080 And I kind of see with them, like we're just bringing the solution to the table that they can resell.

00:09:52.000 They want to put their margin on top of and make a little bit more money off of that.

00:09:55.920 They might be wanting a lifetime percentage of the Rootzilla, what they're charging for Rootzilla to their clients.

00:10:04.840 And in that case, so the question then comes down to, OK, how are my investors going to feel about this?

00:10:11.500 you know i've just locked up a percentage of the company's revenue to these guys

00:10:15.840 ongoing for eternity or is there a way that we can get out of that potentially at some point

00:10:20.980 down the road or would we even want to do that or we'd mess up the whole business model and

00:10:26.260 potentially lose these guys as a customer so so that in that scenario specifically where would

00:10:31.980 you start off in the negotiations with that partner and where would you be willing to go to

00:10:36.700 based on what parameters yeah i mean the reality of anything you do in your business is as long as

00:10:44.220 you set up the terms of service accordingly which most default kind of eula's uh user uh end user

00:10:51.740 licensing agreements have is the ability to change pricing right and it's it's kind of one of those

00:10:58.220 things where like you have to do that because if somebody bought your company and you didn't have

00:11:02.540 that they'd be like hey i like i can't buy your business because i have no ability to change

00:11:06.940 pricing because you didn't have the right agreement in place to give me that freedom

00:11:10.780 so the truth is that as long as you have that then you can always kind of adjust down the road i mean

00:11:16.460 it's just like sales commission when you build sales team i remember my first sales guy ever

00:11:19.900 hired his first year he made 380 000 right he loved it i loved it he made about three and a

00:11:26.620 half million for me in net new sales that i didn't have um but i also told him it was

00:11:32.220 super rich and long-term that would not be the case and what happens is you start building out

00:11:38.300 a model and understanding you know the the real cost to deliver the product and the overhead of

00:11:44.700 managing an account and just over time you kind of say well that just doesn't make sense financially

00:11:49.500 if i'm trying to hit you know 87 gross margin then i only got this amount of money that i can apply

00:11:54.460 to cogs and i can you know i've got to build all these things and so the truth is is you want to

00:12:00.060 to do what feels fair today to get the deal done and just know that it's probably very unlikely

00:12:06.340 both ways that they're going to commit to you for the next fucking 10 years or you're you know what

00:12:12.440 I mean like it's never 100 both ways and that if there ever is an issue where you've got investors

00:12:18.360 or you're going to exit and they don't like it you can typically unwind it just verify with your

00:12:22.980 legal team that that's the case yeah okay okay so it allows you to move forward without feeling

00:12:29.220 like you're locked in.

00:12:30.880 And I mean, I guess that a starting point

00:12:33.340 would be obviously try to keep the term to a minimum,

00:12:37.500 but in your back pocket,

00:12:38.580 maybe that's where you're willing to go.

00:12:40.520 Yeah, you always start with them.

00:12:42.000 I mean, it's negotiation 101.

00:12:43.440 It's like, hey, I would love to do that.

00:12:45.320 What do you think the volume could look like?

00:12:46.900 They say, well, I think we can do this.

00:12:48.740 Perfect.

00:12:49.580 What kind of success fee or affiliate commission

00:12:52.780 are you thinking of?

00:12:53.680 They go, well, I think we'd want, I don't know, 10%.

00:12:57.220 and you might've been willing to go 20,

00:12:59.260 you go, geez, 10% seems a little high,

00:13:01.460 but you know, it sounds like the volume is going to be there.

00:13:03.880 Are you willing?

00:13:04.720 And then you like, are you willing to set a minimum?

00:13:07.340 You know, if it's below this is 5%,

00:13:09.320 but if it's this is 10% and they go, yeah.

00:13:11.260 And you're like, perfect, let's do that.

00:13:13.140 I mean, that to me is how I always negotiate

00:13:15.800 because I've just learned it over the years

00:13:17.620 that my perception and somebody else's

00:13:19.420 are usually completely different.

00:13:21.340 And I hate to be on, I mean,

00:13:23.040 how many times have we've negotiated with somebody

00:13:25.280 and we're like, well, how about we do this?

00:13:26.660 and they just go, awesome, let's do that.

00:13:28.420 And I was like, that was way too easy, right?

00:13:31.600 And then they're like, oh, I would have done it for way less.

00:13:34.080 And you're like, geez Louise, all right.

00:13:36.220 Next time I'm gonna ask the other person first,

00:13:38.920 but that's just basic negotiation.

00:13:41.900 So I would say it works the same way,

00:13:43.200 especially when you're trying to build something new,

00:13:46.420 really the first few partners,

00:13:48.240 you just gotta be honest with them and say,

00:13:49.780 we've never done this before.

00:13:51.340 It's something we're investing in.

00:13:52.900 It's a meaningful part of our business going forward.

00:13:55.820 We wanna co-create it with you.

00:13:57.320 What are you thinking?

00:13:58.960 Does that make sense, Robert?

00:13:59.880 Yeah, a hundred percent, yeah.

00:14:01.620 As we lay in the plane on all the different things

00:14:03.920 that we've talked about today,

00:14:05.160 what are kind of the top two or three things

00:14:07.000 that you heard that resonated the most with you

00:14:09.480 that you feel is gonna have the biggest impact going forward?

00:14:13.520 Yeah, I think mostly it's just looking at,

00:14:15.820 you know, like these terms aren't forever,

00:14:18.060 and especially being the fact

00:14:19.500 that we're in the technology space.

00:14:21.480 I mean, I know that I'm well aware of the fact

00:14:25.200 10 20 years from now what we're doing is probably going to be obsolete so um i you know perhaps we

00:14:31.520 shouldn't be as concerned about that as we should be about ensuring that we're setting profitability

00:14:37.040 up you know for the win today and tomorrow and the next day and that far down the road as long

00:14:42.960 as our terms and conditions are are built in such a way where they're flexible and we can opt out

00:14:47.920 of them and we're not sort of handcuffing uh potential acquisition or in our investors um

00:14:54.880 in any way then i think there's not a whole lot to fear be open up the up front with these guys

00:15:01.040 but the fact that this is a new uh maybe our first crack at it so we're learning as well as they are

00:15:06.240 and we want to just establish something that's fair and is a win-win for everybody um i mean i

00:15:11.920 think that's my biggest biggest takeaways from the whole thing for sure huge i love it robert

00:15:17.040 super fun combo and I hope you have an amazing rest of the day.

00:15:20.960 Okay. Thanks, Dan.

00:15:22.560 Have a great one. Cheers.

00:15:23.600 Bye.

Dan Martell - July 25, 2022

Scale Your SaaS Company Beyond 10k MRR

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