Joe Troyer 0:00
Right, if you were speaking with a new new SAS owner and new SAS company, you know, really looking to prepare their go to market strategy with everything that's happening right now. The cost of money, the value of money, the pending, you know, potential downturn, whatever you want to call it, you know, COVID everything that's happened and where we're at right now, like, what advice would you give them?
Sam Jacobs 0:21
The advice I would give would be, which is always the advice I always give is hire the sales team last, right before before you build out a big go to market function, which is expensive. Make sure that people like your product that they are using your product that they and that they're renewing your product.
Podcast Intro 0:39
Welcome to Show Me the nuggets. We're each week, Joe chats with world class entrepreneurs to find out the key principles, strategies and processes that lie behind their outstanding achievements. Now, your host the No bullshit serial entrepreneur, Joe Troyer.
Joe Troyer 0:56
So when you look at the world of SAAS, I'm curious, when you look at the world of SAS, the owners, the the the people that are running these businesses, like who are your top three and four people in this space that you follow, and that you'd like following?
Sam Jacobs 1:11
No, no surprises. I follow Jason Lumpkin, from Sastre. He's very, very smart. He's prolific. He's seen the movie a bunch of times. He's probably a little tougher than me, you know, and I don't think that means he's a jerk. I just think that means that he's probably he's somebody where, you know, he's willing to make the tough decisions. And he's also, by the way, built a non recurring revenue business that is on the path to 100 million, which is faster the events business, which is really, really cool.
Sam Jacobs 1:38
So that's one person that I that I look up to, and that I admire. I I also I enjoy, you know, the guys from the all in podcast, David Sachs Shamar. I'll have to Jason Calacanis and David Freeburg. Because, again, they they are really really savvy investors, you know, you can disagree with their politics, but they have a good point of view on how to build a long term sustainable company. And then you know, when it comes to my friends in the CEO pavilion, which is the community of CEOs that I run, you know, there's a lot of amazing people awesome on the CEO sales talent agency, AJ Bruno, the CEO of quota path, Brennan Metcalf, the CEO of place, so but the big names, you know, the people that I really do look up to probably, probably three Jason Lemkin, Nick Mehta, and then probably David Sachs, I would have to say, but not first, politics.
Joe Troyer 2:26
Perfect, love it. A follow up on kind of the state of the market today. Right? If you were speaking with a new new SAS owner, new SAS company, you know, really looking to prepare their go to market strategy with everything that's happening right now. The cost of money, the value of money, the pending, you know, potential downturn, whatever you want to call it, you know, COVID, everything that's happened and where we're at right now, like, what advice would you give them,
Sam Jacobs 2:53
the advice I would give would be, which is always the advice, I always give us hire the sales team last, right? Before you build out a big go to market function, which is expensive. Make sure that people like your product, that they are using your product that they and that they're renewing your product.
Sam Jacobs 3:09
Now, what's the what's a what's a follow up very specific tactical item from that. I think, you know, if everybody says charge 12 month, upfront annual contracts, that's true. It's great for cash collection, it's not great if you're super young company, and you're trying to understand whether people actually like your product, right, because you are delaying the feedback, you're delaying the moment of truth for 12 months.
Sam Jacobs 3:31
In that case, I would actually sell shorter term agreements when you're first starting off, so that you can get the churn data, right, because one of the biggest mistakes you can make is, you start seeing 12 month agreements, maybe a year and a half ago, your first batch of early customers, they all renew, because maybe you paid more attention to them than you normally would have. But then you really started getting going like a year ago, and now you're late.
Sam Jacobs 3:55
But meanwhile, you thought that customers were renewing you build out a big sales team thinking you've got product market fit. And then the real cohort of renewals actually turns and ends up telling you that your thing is not that good. But you're but you've already built out a big sales team. And now you're faced with a much more difficult problem. So I would just say, really try and use as much data and information as possible before you hire and invest in a big go to market function.
Sam Jacobs 4:18
Because you just don't want to be in a situation where you thought your thing was, you know, amazing. Turns out that people think your product isn't amazing. It's okay. They start cutting it in a time like now, but you've got a big sales force that you've got to support.
Joe Troyer 4:30
I love that. That's great advice. Yeah. I've been there dealt with that firsthand. You know, we we sold our first first product wasn't available on a monthly subscription. We were really good though, at sales. So we sold a lot of it, but it really didn't solve the problem, right? Prospects did think that it would, but the adoption was really bad. So we thought that this thing was growing. It was the best thing since sliced bread. And so the first year renewals came up
Joe Troyer 5:00
Right. And then it was like basically the company's over, Everybody go home. And I mean, it wasn't that bad, I mean, but pretty close. And we ended up reviving it and figuring out the problems, but it took a long while. And to your point really delayed, the inevitable of us figuring out that there was a problem, right now would have been better to sell like a three month contract and just get the feedback right away.
Sam Jacobs 5:20
And that would have helped you fix it, iterate and not, and not tell yourself a story that wasn't true. And then having to face the reckoning a year later.
Joe Troyer 5:28
100%. So I'm curious. You know, that's great advice. I'm curious what you think of what we do. Now, when we, when we go to market with a new product or service, we sold our existing customer base, we sell monthly subscriptions. But we, we we go for the annual discount as well. Right. And our goal is to sell 30% on an annual discount, we'll give about a 30% discount for people taking that we throw in some extra bonuses that really have no extra cost of goods, right, but that people do value. And what we found is, you know, on any promotion, any launch any campaign that by doing that, like we double all our cash collected, but we still reserve 70% or so in monthly sales, so that we kind of had the best of both worlds like that strategy. love it, hate it.
Sam Jacobs 6:20
It just depends on I would look at the cohort churn data I don't have. It sounds good. You know, I, it's about how your customers use the product, and it's about how they engage with it, I will tell you that pavilion offers, as of today, monthly and annual subscriptions, and we're getting rid of monthly by tomorrow or by within the next few days.
Sam Jacobs 6:38
And why is that? We're doing that because we feel like the monthly subscription doesn't isn't enough of a commitment to force people to actually engage with the experience. And it's sort of the same reason that like maybe Equinox, or a gym doesn't charge just monthly, like they have an initiation, they need their you need to have enough skin in the game that it forces you to figure out how to use this thing.
Sam Jacobs 6:57
And, and so but if, but that's specific to every business in every category, and if you find that you're, you're dead, we've also found relatedly that our monthly subscriptions churn at twice the rate that our annuals do. So again, you know, it's all about the data, if it turns out that your thing is super useful, and that people really appreciate the monthly benefit.
Sam Jacobs 7:20
And there's no difference in churn or there's no difference in engagement, then I would continue to do it. But it's, I'd have to look at more information to know.
Joe Troyer 7:28
Yeah, it's it's interesting little tweak, nonetheless, that that's working well for us, but still early, still too early to tell if it's winter. But yeah, appreciate your feedback.
Joe Troyer 7:37
So can you share with everybody a little bit about your book, I was looking on your website, and just ran across it kind of folks finish first. Love, love the love the title?
Sam Jacobs 7:50
Yeah, the books about really the founding of Pavilion and the ideas behind the community. And, you know, obviously, it's a riff on nice guys finish last, which is, you know, basically the idea that, like, you have to be a bastard in business to succeed. I think you. And the point of the book is I listen, I think you need to be tough. I don't think you need to be a pushover.
Sam Jacobs 8:10
But I think you can approach business with a more with a different kind of perspective on compassion on helping others before you ask for help on building relationships, not transactions, not needing to get every last dollar out of every negotiation, but really taking a longer term perspective on your business and your career. And I think if you do that, I've personally had a lot of success. Again, I'm it's anecdotal, and it's not a it's not a, you know, deeply researched book with a million data points.
Sam Jacobs 8:37
It's really this is what happened in my life. I wasn't getting the results that I wanted. When I was approaching it from this perspective, I tried approaching it from a different perspective and started getting different results. So that's what the books about it was a Wall Street Journal bestseller for a couple of weeks. And you know, getting good feedback on it, people are actually reading it, which is, which is always nice. And an audio book is coming for those people that don't like to read. It's coming in a couple weeks, please,
Joe Troyer 8:59
yes, we'll make sure to put the link in the show notes to both versions, we'll make sure we update. I'm a big audible guy. And I know, I see our referral clicks to Audible. Definitely, most of our readers are for some reason, and everybody loves audible.
Sam Jacobs 9:13
You know, I think it's easier for most people to consume it when you're on the treadmill when you're on a walk when you're doing something else when you're working out. So yeah, that was fun. I got to test drive the professional actors that were doing the reading I'm not doing the reading but there's there's actors that do it. So it was a pretty cool.
Joe Troyer 9:29
Gotcha. Yeah, that's awesome. So if you don't mind, I'd love to ask you just a couple of questions about you know, taking on funding. Sure. Yeah. So from the get go like was that a goal of thought when did that happen?
Sam Jacobs 9:43
Not a thought. I didn't think it was a fundable business to be completely honest. And I was having too much fun just being my own boss and being profitable. And then I got an email from a venture capital firm and took the call because I do take every call, because I don't you know, I want to I want to understand what the market is.
Sam Jacobs 9:59
And they took a look at financials it was last year. So it was a frothy funding environment, I will admit, you know, I don't think I'm so special that I'm not part of the market. And they offered $25 million to invest in the company. And there was also a secondary component, meaning like, not all of that 25 million went into the company.
Sam Jacobs 10:16
And it was just a life changing event for me and sort of too good to be true. And so, and also, they've been incredible partners, they've been really and I have not been, you know, the best CEO, I have a lot to learn a lot to improve. And there's a lot of things that I want to get better at, but they've been patient with me as we've grown the business. And, you know, we're Forex since they invested, which is good.
Sam Jacobs 10:37
But there's, there's a lot more to go. So, you know, that was that was a little bit of the background, it was one round with, there's a board of directors, it's just me and this other guy, Peter Fallon, and so far, so good.
Joe Troyer 10:49
That's awesome. And for people that don't know, can you talk about a little bit what a secondary is what that means, and why it was impactful for you.
Sam Jacobs 10:57
Sure, secondary, just primary means, you know, when you when, when a big, when somebody invests money, right, most of the time, it goes into the balance sheet of the business, it goes into the company, that would be primary, secondary, it doesn't go into the company, it changes hands between early shareholders and the person investing, right, it's like selling a stock. So secondary means that I was able to sell some of my shares to the investor. And that means that I was able to take money off the table, in addition to putting money into the business. And, you know, that's obviously the goal.
Joe Troyer 11:26
100%. So that makes a whole lot of sense. When you said you got a secondary, it's like, Alright, great, you know, looking at the revenue numbers that you do, you know, or that you were doing before they came on board, you know, obviously very profitable business, you should be with those revenue numbers. You know, so, in similar circumstances, you know, I've looked at a business and said, you know, what, why would I ever raise? And so that's why I asked, I think, you know, your answer was very fair, the secondary along with it, the valuation, you know, a frothy time to raise, you know, frothy valuations, you know, in a good partner makes perfect sense.
Sam Jacobs 12:03
Yeah, I mean, and, again, I, you still, for me, just to be extremely clear, like, I, for me, for a long time, I viewed you know, investors as kind of like the enemy in a way. But the way I view it today is that they're my partners, you know, so it's great that I took some money off the table, but I'm trying to make some money, you know, I want to I don't want to be, you know, a partner that just, I don't want this to be the end of the line for the business or for them, they're trying to earn a return to their limited partners, I actually invested in one of their funds. So I'm a limited partner now.
Sam Jacobs 12:36
And I just want to make sure that, you know, I deliver on, on the promise that they showed me, so that's what I'm working on doing.
Joe Troyer 12:45
That's awesome, man. So, in wrapping up, I want to ask you one more thing. So I feel like at the end of every podcast, they always ask, like, what are your top three books, I like to do something a little bit different. I've recently since starting this podcast, giving myself permission that if a book sucks, or if I just don't enjoy reading it, like, I'll actually stop, and I won't suffer my way through it for the next, you know, three months. And so I always like to ask entrepreneurs that I respect that I liked that I've had on the podcast, you know, what's, what's maybe one book that's made the biggest impact on the way that you do business, the way that you see life, and wow,
Sam Jacobs 13:21
the biggest book that's made, the biggest impact on me is a book by Michael singer. It's called the Untethered Soul. And it's a book, it's really just a book about being alive. It's a book about
Sam Jacobs 13:37
it's hard to explain, but basically, about existing and about happiness. And it's about what's happening inside your head. It's kind of about God in a way, but what is what it's about your soul, specifically. But the biggest point of the book is that happiness is a choice. And it is a choice that you make, and that you can make no matter what, and the corollary and the parallel that I draw, because a lot of people have conditions around whether or not they're going to be happy, I'll be happy if I'll be happy if I have these XYZ things. And,
Sam Jacobs 14:12
and I have decided in my life that I am going to embark on a practice meaning repetition and every day of trying to be happy, trying to be grateful, and trying to try to be a good person. And so what does that mean? Like, in practice, that means that I obviously don't want this to happen. And this is a little gruesome, but like, I love running, it's my favorite pastime. And I've decided that no matter what happens, meaning, like if I get hit by a car, and I'm a quadriplegic, or paraplegic, I'm still going to be happy.
Sam Jacobs 14:39
But as long as I have a breast and a heart that's beating, I don't care what happens to me, I don't, I am going to be happy and I'm going to find a way to do it. And that idea really comes from him and it's a very powerful idea and he walks you through how to think about it. So I thought that was a great book, life changing book for me.
Joe Troyer 14:57
I love that man. Perfect timing for me. Thank you for that. I just got recommended that book and I literally just downloaded it, and it's like,
Sam Jacobs 15:04
Oh, amazing. Are you on Audible? So the first chapter, the first chapter is, I don't want to swear. But it's it's mind blowing. Because he's like, you weren't not the voice in your head. That wouldn't make sense. You are the thing listening to the voice in your head. I had to think about that for a couple days.
Sam Jacobs 15:27
Anyway, thanks so much for having me on the show.
Joe Troyer 15:30
great, man. It's been a pleasure. Thanks for coming on and sharing your knowledge, your background, your history, your lessons, you know, so far and pavilion, we really appreciate it. I'm going to make sure to link up everything that we talked about in the show notes. I saw you look like you're pretty active on LinkedIn. I'll put a link in there. Is there anything else that you'd like to kind of push in front of the audience or share with the audience?
Sam Jacobs 15:50
No, just that, you know, if you're if you're an executive and a revenue function of working at a high growth company, you need help you need support, you need training, go to join puglian.com If you want to email me with questions, Sam at join fillet.com And I just appreciate everybody's time. Awesome, man. Thanks, Sam. Really appreciate it. Have a good one, guys.
Transcribed by https://otter.ai
