← SaaS Interviews with CEOs, Startups, Founders
SaaS Interviews with CEOs, Startups, Founders
How He Scaled a Niche SaaS to $14M/Year With No Funding
00:23:43
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- [00:00]
A
Our monthly revenue is going to be $1.2 million this month.
- [00:03]
B
You said you're doing 1.2 million a month, right? So you're doing about 14 million a year. When I hear BDC, I think the publicly traded business development corporations. What does BDC mean for Bali?
- [00:12]
A
In automotive speak? That means Business Development Center. Our software. If you've ever submitted a lead for a vehicle and gotten a call back or you're due for service or you've got a recall and the dealership's called you, that's what we do. Our software does it.
- [00:26]
B
And Scott, how much do you and your other co founders still own of the business today?
- [00:29]
A
My family plus one of our co founders own about 85%.
- [00:33]
B
Someone offered you 70 million, all cash today for 60% of the business. Do you take the deal? Hey, folks, my guest today is Scott Davis. He is the president and co founder of Valley, the leading communication platform for automotive BDCs. He's got over 20 years of experience in automotive retail operations and BDC strategy. Scott, you ready to take us to the top?
- [00:53]
A
Yes, sir. How are you doing, Nathan?
- [00:54]
B
I'm good. It's good to meet you. Now, is this like, you know, if people are going on the road and they see cars for sale on the side? It's a car dealership. Are you installed in the dealerships as well or just the maintenance and repair shops?
- [01:03]
A
We're Frank Franchise Auto Dealers is who we work with. So there are 18,000 in the U.S. we work with almost 2,000 and. And hopefully we'll keep growing.
- [01:14]
B
And Scott, that's 2,000 individual locations or 2,000 logos, brands.
- [01:18]
A
Yeah, 2,000 individual rooftops.
- [01:20]
B
Almost individual. Okay, you said 2,000 individual rooftops. Again, that's just. That's the maintenance shop, that's the car dealership, that's the sales center, whatever it is.
- [01:29]
A
Yes. Yeah.
- [01:31]
B
Okay. Okay, Very cool. Okay, take us more sort of into the story here. So we have your product featured here on our website. Walk me through. I mean, where can I find or where. Tell us about your most popular product.
- [01:41]
A
So most of our customers use us for their service, bdc. We replace their desk phones or manual processes. Basically, we built an automotive data matcher on top of a contact center solution. What is very common for dealers prior to volley is to not have software for this. They use desk phones, they printed off lists and. And we, you know, we put a system in place that they could actually make money in their bdc.
- [02:08]
B
Okay, so can you point to me somewhere here on the screen? Is there like, is This a shot of that part of the software product?
- [02:14]
A
Yeah, that's the call call screen that they're in. The agents go from record to record. There is no robo dialing in Volley. It is called email and sms. But what we've done is we've helped the dealer build a plan and they go from action to action and the dealer is 100% visibility into what's happening.
- [02:35]
B
Are you selling them leads as well or is it just to manage their current leads that they generate?
- [02:39]
A
Yeah, we're 100% SaaS software. We're not selling market fulfillment or leads or anything like that. So we do integrate with most of their data sources. We've loaded 5 billion humans, human beings into Volley and de duped them down to about 244 million customers. So we just make it easy for them to run their business and help.
- [03:02]
B
Me get an understanding if I want to use all these software products that you just gave us. An overview on. What's the average dealership going to be paying you per month or per year?
- [03:10]
A
It depends. So a single dealership is going to pay between 1,500 and $2,000 a month. Most of our customers are dealer groups. They use them at the enterprise level and we do it by the size of the store. So we have a Tensor group that pays $6,000 a month. We've got a tensor group that pays $13,000 a month.
- [03:29]
B
Okay, and when you say size of dealership based off what number of cars.
- [03:33]
A
Number of leads, what based on their consumable. So average number of repair orders a month, average number of car sales they sell, et cetera. Dealers don't like variable pricing. So we've got to kind of bucket them and take the good or the bad with what we sell.
- [03:48]
B
I guess I'm not following that. So ten store group paying six grand a month for car sales or average number of repairs versus this 10 store group paying 20k per month, that feels like variable pricing. They're paying more if they do more car sales and more repairs.
- [04:00]
A
Well, what I mean is, is the size of these dealerships is a lot different. You may may have a little rural VW store that does 400 repair orders in a month. You may have a one in in the city that does 2,000. So when I say variable, we charge the dealer based on how big their dealership is. And we've used the size of these dealerships to estimate the consumables and what we need to charge to make it a good deal for them and for us to make the margins we need to make.
- [04:31]
B
Okay, and of the 2,000 roofs. Right. That you're servicing, to use your language, how many store groups is that?
- [04:38]
A
We send about 300 invoices a month.
- [04:41]
B
Okay. Okay. So pretty. The average store group has about seven. Seven or eight roofs. Yeah.
- [04:46]
A
Yeah, that's a pretty good guess. A lot of our dealerships are enterprise customers. They want to combine this all in one view, and they make it easy.
- [04:56]
B
And you just gave an example of a store group, 10 paying 6k and another same size paying 20k. If I tried to pin you into an average, is it fair to say the average store group will pay something like, you know, 10 grand a month, 15 grand a month?
- [05:06]
A
I think the average rooftop for US pays about $1,000 a month. Now that is for our core product. We've. We have another. We have another product. Have you ever received on your phone a call that was labeled potential spam?
- [05:23]
B
Yeah.
- [05:24]
A
So dealers are. It's epidemic for dealers. A lot of customers will flag their calls as potential spam. So we will. We bundle that into volley. We also sell it separate. About half of our customers just buy that from us. And it's a few hundred dollars. Hundred dollars a month depending on.
- [05:43]
B
Okay. Between.
- [05:44]
A
Just. Just say it's an average of three to four hundred dollars a month for our average customer.
- [05:49]
B
Okay. Well, Scott, because you have two. You have car dealerships and then you have store groups, and they're. They're different 2000 roofs and 300 store groups. So the price points sort of are over. But. But I guess to just sort of make the math easy for my audience. If the. You said the average rooftop is paying about a grand per month, right?
- [06:04]
A
Yeah. Yes.
- [06:05]
B
Okay. And I. Can I multiply that times the 2000 car dealerships sort of back into your monthly revenue?
- [06:11]
A
Yeah, our monthly re. About. Well, it's. It's going to be $1.2 million this.
- [06:16]
B
Month, so that's incredible. Congratulations. How's that feel?
- [06:20]
A
We bootstrapped it. I love what we do. I wish I didn't feel like I had to learn every lesson the hard way, but we're pretty proud of it. We need to do a lot better, but it's going to be a great year. It's up to us to do a good job.
- [06:34]
B
When did you launch the business? What year?
- [06:36]
A
2017. We put on four. Four customers and we ran with them, myself and a couple technical co founders. We ran with them all through 2018 and practiced on them. We started selling to vendors of automobile dealers first just to build out the product. And we started selling direct to dealer in late 2020, of course coming out of COVID So put our first dealer on in March of 2021 and it's been fast and furious from then.
- [07:09]
B
Do you remember your first million dollar year? Yes.
- [07:13]
A
Yeah, it was, it was 2020, so sure felt a lot easier at that point. But I wouldn't trade it.
- [07:22]
B
You were still at four customers there, right? Or no.
- [07:25]
A
By 2020 we had about 40 automotive vendors using it. So okay, 40 call centers, service dealers. Yeah.
- [07:37]
B
So you were sort of in a pilot phase with four customers from 2017 to 2019. You really hit the gas in 2020 and went from zero to a million dollars of revenue basically in 18ish months across 40 customers. How did you get those 40 customers? What was the strategy?
- [07:49]
A
I had a. Just a nonsense part of the story here, but I owned a bunch of pizza places and I hired a marketing person to run it for my stores. And pretty soon I'm doing all this database work for this chain that we are franchise in. And I started working with automotive dealers in 2002 and there was a company called Driving Loyalty. We sold it in 2015. I had a pretty good network, so we didn't actually add a sales manager till 2023.
- [08:20]
B
So how big was the team in 2020 when you hit a million revenue?
- [08:22]
A
2020, we had 10 full time employees. In June of 2023, we had 19 total employees, 15 full time. And now we have 63 employees, 58 full time.
- [08:37]
B
Okay, wow. Well, and if you're doing, you said you're doing 1.2 million a month, right. So you're doing about 14 million a year divided by that 63. I mean that's really good. What is that? That's 230,000 of revenue per employee. That's pretty efficient.
- [08:50]
A
With my old company, I always felt like I could never make good decisions because I was always adding the person for when I got. And so I had very strict rules at the start since I wrote all the checks. I didn't have some of the pressures that other people have and it was painful. I'm getting buried somewhat in admin, but I'm very strict of how we've added added workers. We need to move faster now. It's honestly, it's harder to spend the cash we're sitting on than, than you think because you don't want, you know, it's. It's a precious commodity to have and you want to do it efficiently.
- [09:24]
B
Well, tell me about your champagne problems. How much cash Are you sitting on.
- [09:29]
A
I don't know if I want to publicize that, but we, we've, we've been very strict with our margins, our retention. We need to step on the gas. We'll just say that.
- [09:39]
B
Fair. Fair enough. If you. I won't push you on the cash number. Can you share, though? What's your profit margin on average the past couple of months?
- [09:46]
A
About 16%.
- [09:47]
B
Okay. That's pretty good. So, yeah. So you as a capital allocator, trying to think about growth. How do you decide what to do with that money? Because if you're doing 1.4 for top line. Right. What is that? That's $240,000 a month of basically free cash flow. You got to figure out how to reinvest.
- [10:00]
A
Yeah, we're trying to hire, we're trying to build out some products, and we've done it all. I mean, like I said, these hard lessons we seem to learn over and over and over. You know, where do we spend it? We are rounding out a few of the products we're trying to aggressively. Our sales team now has 12 people in it as of Monday. And we could add to that. It's a good question.
- [10:23]
B
Tell me, tell me more about your sales team, because this is a very niche sort of sales. Like, are these folks, do they carry a quota? What's their base plus commission? How do you structure that?
- [10:31]
A
So the, the average salesperson, so seven of them are AES. I've got a manager and then four SDRs. And they have their quota each month for the AES is $8,500 of new arrival in, in monthly MRR.
- [10:47]
B
So, okay, so they have to add 8,500 of new MRR each month or about a hundred thousand of new ARR every month.
- [10:54]
A
That's our goal now. No, that 8, 500 times 7 of the AES. We've got a different, different plan for the SDRs. So 8, 500 for the, for the AES, what is that? Seven? That's about 60 grand in MRR. That's our goal for the month. We also have a couple of allied partners who we're hoping to get some revenue for as well. We're trying to step on it as far as.
- [11:20]
B
Is that fair? I mean, is that a fair statement then? Are you, Are you adding about 100,000 of new ARR per month the past couple of months?
- [11:27]
A
No, no. A fair statement would. We added 66,000 in MRR in November. And, but that's another.
- [11:36]
B
That's about a mill. That's, that's pushing like 800,000 of ARR though.
- [11:41]
A
Yeah, we, we've got a good product. We've, we've just kind of pushed it up to the starting line.
- [11:45]
B
Yeah, you're so humble. I feel like I have to pull, I have to make you brag about yourself a little bit here.
- [11:49]
A
I love what we do. I don't take any of it for granted. Anyone out here listening? You know, it's funny when, when we talk about this, entrepreneurs always daydream like the next pro, the next feature is going to save them and everyone's going to flock to buy it. We are at the, at the part now where we need to go get the customers. This is a selling function. We have a product called Pulse, which we rolled out, which is A.I. call intelligence. We'll rounded that out by nada. Nada is the National Auto Dealers Convention in early February. We'll have a very, very, very strong offering there in the market. And it's time for us to, to not wait for something to happen. We gotta go and get it now. And I mean, you know, you do thousands of these podcasts, everyone thinks that they're cleverer than everyone else. We're at the stage where we need to get off our behinds and get this, get this going.
- [12:46]
B
Yeah. What I find is that the most successful software companies, they all use the same 33 growth tactics. Everyone thinks they're doing something new and different, but generally speaking, they all grow using one of these 33 ways. And I don't want to miss your unique genius because it's not every day I talk to someone that's making their AR and SDR relationships work. Right, but you're doing account based marketing, Right, with your team of 13 or 14 folks, the seven AES have 8,500 of new MRR per month quota, which means if that hits their quota for the year, they've helped at 100k of new MRR or 1.2 million of ARR. Scott, if I am one of those A's for you, what is my base salary and what commission am I making if I add a million of revenue in a year?
- [13:30]
A
Yeah, I mean, I think that we've got a percent of revenue that we pay out over the first four months and a bonus system, you should be able to make about a buck fifty in commission. And then their base range is based on what their, what, you know, what their experience level is. So someone we promoted is a little lower. And then, you know, and then what's.
- [13:55]
B
The range there on base? Like 50,000 up to 100,000 maybe.
- [13:59]
A
75.
- [14:00]
B
To 175 to 100. Okay, so just to repeat that back to you. Those AES, depending on their seniority they can make between 75k and 100k base per year. And if they hit their quota target, which is about a million of new ARR per year, they can add maybe another 150,000 of commission for on target earnings of about 250k on a million of new ARR.
- [14:18]
A
Yes.
- [14:18]
B
That's great. That's a 4 to 1 ratio. That's a profitable sales rep. Did you come from sales? You already knew that or you figured it out the hard way? Trial and error.
- [14:25]
A
It's, it's hard lessons. I mean trying hard, working hard. Yeah, I mean we've, we've, we've read all the same books and, and Scott.
- [14:35]
B
Take a look at this chart. Any here. So I want to make sure I'm not missing any other tactics you use that maybe you took for granted but you're actually a genius at. You just told us about your ABM strategy. Are you doing anything like affiliates or selling through value added resellers or doing paid ads? Anything else on here that you're using?
- [14:51]
A
Yeah, so I had to put our reading glasses on for this. We, we do a lot of content. We've got, we do at least a customer video a week. We do a lot on LinkedIn. One of the interesting things about automotive and, and I've had a hard time getting marketers who, who wanted to actually be more than just a keyboard cowboy. One of the hard things about, about automotive is a stock pond. There's 18,000 franchise dealers in the US and, and then whatever in, in Canada and we just have a handful there but we know who they are so we're, we're very aggressive in, in going and getting them directly. We do, we do have a couple, we have one reseller for that, that dealer identity product I mentioned. I've got one more relationship that I think will, will be quite a good channel this next year. So I mean that's our plan. Hopefully, hopefully we can add 50 to 60 internally and we can add another 20 or 30 outside of that and it'll be a great year.
- [15:58]
B
And Scott, how much do you and your other co founder still own of the business today?
- [16:02]
A
So this is an interesting deal. It is. I've got a lot of family, family members working here with me and it's not always easier working for your kids but so I've done some estate.
- [16:14]
B
Your kids work for you or you.
- [16:16]
A
Work for them, they work for me, but they're pretty strong. A lot of them. My family plus, plus one of our co founders owns about 85% and then our other work, employee pool, those type of things own the rest.
- [16:33]
B
Okay, but no outside investors?
- [16:35]
A
Not yet, no.
- [16:38]
B
Interesting.
- [16:38]
A
And really at this point, I'm not opposed to it. I actually don't mind the thought. It's been a long time since I've had a boss. Maybe maybe 30 years. I'm not opposed to the pressure that it would take to have that. But it has to be accretive to the shareholders. It has to be a reason why we're going to move much faster at this point so all things will rest.
- [16:59]
B
I've got a. Yeah, I've got a lot of growth equity folks that listen to the show, so they're going to want me to ask this question thing back into your growth rate. You said you broke a million of revenue in 2020. You're at about 14 million today. We missed the middle part of the journey though. What year did you break 5 million of revenue? Do you remember?
- [17:13]
A
Yeah, 2023. We did. So is 1 to 2.4 to, to 4.8, to 6.7 to 9.6. Have I added the years right?
- [17:30]
B
You got it, you got it. A million in 2020. 2021 is 2.4, 2022 is 2.4. 2023 is 6.7. Next year, 24 is 9.6. This year, 14 million. Healthy, healthy growth rate.
- [17:44]
A
So about, about 50% I think we're going to be 46% this year. So our, our margins are, are pretty good. I'd like them a couple of points higher.
- [17:57]
B
But Scott, this kind of vertical specific SaaS, you know, before I would be trading at somewhere between maybe, maybe 10 and 20x top line, you know, depending on the growth from you got with. Now the question is, well, wait, vertical niche SaaS is, is good, but we want to make sure they're not going to get replaced by AI. And if so AI play, then you can still get that 15, 20 sort of multiple. Do you have an AI angle today?
- [18:18]
A
Volley. We just kind of lucked into this and we do, we do have to answer that question every single demo we're on. We do have our own internal strategy for a digital service assistant. Of course. Pulse is AI call intelligence, which we already have in our platform. One of the things that we kind of lucked into was we just learned that we're the perfect layer for the dealer in between the robots and the humans. You know, it's, it's compared to what they were using before with blindly doing things with desk phones and transfers and, or emails out of the blue, SMSs, et cetera. So it's a part of our strategy, our vision of the company is to become the platform for dealer communication and that's what we're focused on entirely. AI is part of it. We're also going to plug in to everyone else.
- [19:07]
B
Well, if you get really aggressive and you want to go buy other companies with your own cash flow plus maybe a partner, you know, I'm obviously running FounderPath, my fund. We fund these kinds of roll ups all the time. 5 $10 million sort of debt checks where you keep all the equity. So my self serving pitch to you is if you, I've got about 10 companies you should go buy that also sell into the same space but don't directly compete with your product. Would you ever consider a roll up strategy like that?
- [19:32]
A
You know, I'm churning through a few of those thoughts right now.
- [19:36]
B
Interesting, interesting. Well, let's stay close. It's really incredible what you built. Anything that you want to touch on that we haven't already touched on related to your entrepreneurial journey here?
- [19:44]
A
You know, I don'. I'd like to not have you feel like I was humble or promotional. I think it's all right in front of us, you know, I guess the thing I'd like to touch on is I know that this needs to be monetized at some point. I'm not the only shareholder. I've got to enrich the other people around around me. I think it's perverse to build a company to sell it. You need to build a company to provide good value. And then you know, lo and behold, I've sold 16 restaurants. I've sold two other software companies. That's always been my focus. It'll continue to be. I'm going to try to run these like I'm going to own them forever. And I feel like that's the only way to do it. And I think if there's one model or message for everyone out there is that that's what's important is you know, you don't matter till you matter. You know, if you want to be valuable then you've got to really provide value. And that's what kind of bothers me about this whole thing is I think people look at, you know, the opposite view as I'm, I've got the end in mind instead of really, really being valuable. And that's, that's, I'M going to continue to focus on that.
- [20:54]
B
Well, you've built great value. And if you do want to create liquidity for your shareholders, you want to think potentially about a growth equity round or something down the line. It's in your blood. You've sold pizza shops. It sounds like other things in the past. So let me ask this question. If someone offered you 70 million, all cash today for 60% of the business, do you take the deal?
- [21:10]
A
It depends on the strategic partner. I'm not opposed to it, obviously. That would be, it'd be good money for, for our shareholders, and I would, I would have to thoughtfully consider that. It depends on who it is. I still want to work and I'm always going to work, for sure.
- [21:30]
B
How old are you, Scott, if you don't mind me asking?
- [21:32]
A
I'm 57 and I'm never quitting.
- [21:37]
B
Are you married?
- [21:38]
A
Yeah. Married. My wife would kill your.
- [21:41]
B
Your spouse would kill you, right? If you, if you retired and stayed home all day, she'd say, please, go get a job.
- [21:45]
A
Yeah, she. I've been married 34 years. She, she knows what she's stuck with. And, yeah, I'm never gonna quit working now. When I'm, when this journey is done, I'm gonna do something else. I'm excited for the next chapter, but this is three to five more years for sure for me. What's that?
- [22:04]
B
I was. No, go ahead. As a minority owner, as, as, as.
- [22:07]
A
As going for the second bite or, you know, I'm, I don't know. You know, I'm really wrestling with a lot of those things right now, mainly because I want to make sure that I'm doing the best for Volley, the best for my customers. So this is an interesting timed podcast. If I feel like I just, I've just done a ton of talking.
- [22:29]
B
No, you've been great. You look, I think you have a lot of growth equity firms reach out after this a lot. Listen to the show. They get great deals done from the show and you've built really something special here. So thank you for sharing your story with us as we wrap up here. Where can people find you online?
- [22:41]
A
My email scottalli.com if you go to volley.com there's all sorts of forms and, you know, we're not hard to catch.
- [22:50]
B
Guys, there you have it. Valley launched back in 2017 with four customers. They treated those customers really well through 2019 before breaking their first million of revenue in 2020. They broke 6 million of revenue in 2023 today, doing over 14 million of revenue. They've sold their software product to 300 different store groups that spans over 2,000 rooftops. Think Car dealerships, car repair shops, things like that. Really incredible, really incredible revenue metrics. They've been bootstrapped. There's 12 on their sales team with healthy 7 AES on the team with a healthy ratio in terms of their quota target to on target earnings. Still own majority of the business as they've seen scaled. He still wants to do more. 57 years old. It's a family business plus some. Plus a bunch of other friends. 63 other friends. As Scott continues to scale Bali. Check it out. Scott, thanks for taking us to the top.
- [23:40]
A
Thanks, Nathan, Appreciate it.