Delivera
Delivera launched in 1999 in the email marketing space. Host Nathan Latka described founder Neil Burman as someone who had been in SaaS for a long time, and Burman said he had been building the company for many years before the 2016 interview.
Delivera sells email marketing software that helps clients sell more. Burman described the business as a high break-even model with low variable costs, so adding customers was the main lever for profit. Clients use the platform for email, text messages, postal mail through marketing automation and drip campaigns, and connections to social media and call centers. Burman said this multi-channel approach brings customers the best return on investment.
As of December 2016, Delivera had 500 direct paying clients and a couple thousand more through resellers. Burman said the company finds new customers through three marketing buckets: inbound marketing, outbound marketing, and event marketing. An eight-person sales team backs these efforts and closes orders. Customer spend ranged from a $75-per-month account to accounts worth tens of thousands of dollars a month.
The company's numbers were strong on retention and growth. Gross monthly customer churn was 1.5% in 2016, with a goal of 1% for the next year. Burman estimated average customer lifetime at about 42 months and lifetime value near $35,000. Customer acquisition cost was $1.08 for every $1 of annual contract value, with a goal of $1, which meant the company did not recover its acquisition spend in the first year. Burman acknowledged that faster growth consumed more cash, which limited how fast Delivera could grow organically.
As of December 2016, Delivera was generating about $416,000 in monthly recurring revenue, and Burman expected to reach $4.8 million in revenue that year, up from roughly $4.2 to $4.3 million in 2015. The company was debt-free and had not raised outside capital, though Burman said it was exploring debt financing through KeyBank's Key Capital Markets division. Burman said the company's growth had been entirely organic, and the team had grown to 48 people, mostly based in Indianapolis.
- •Retention is the engine here: at 1.5% monthly churn, the lifetime value of a $10,000-a-year customer is high enough to justify spending on acquisition even though payback takes about a year.
- •Sustained growth with no outside capital shows the business model works, since the company funded expansion from its own revenue despite a cash gap on every new customer.
- •Selling to many businesses across industries and size bands spreads risk and lets the company grow without depending on one customer segment.
- •A multi-channel product (email, text, postal, and social) raises the value of each account, which supports the pricing and the retention rate.
- 1.Calculate lifetime value from average monthly contract value and churn rate, then set a customer acquisition cost ceiling based on it before scaling spend.
- 2.Run three distinct acquisition channels (inbound, outbound, and events) and staff a dedicated sales team to close the orders they generate.
- 3.Track customer acquisition cost against annual contract value and aim for payback within the first year to keep cash flow manageable.
- 4.Expand each customer's usage across multiple channels so that retention and revenue per account both rise over time.
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