- How many times have we negotiated with somebody
and we're like, "Well, how about we do this?"
And they just go, "Awesome, let's do that."
And I was like, "That was way too easy, right."
And then they're like, I would have done it for way less."
And you're like, "Geez Louise!"
All right.
(upbeat music)
Robert, how's it going?
- Good, Dan, how you doing?
- I'm doing amazing.
I'm excited, I appreciate the time.
To help everybody out who's watching and listening,
can you share the name of the product, who you serve
and what problem you solve for them?
- Absolutely.
So, I'm Robert Ducharme CEO of routezilla.com,
we help home service providers never lose a lead
because of poor scheduling.
- Very clear, very awesome.
And Robert, how long have you been doing this for?
- We actually started this back in...
The idea first came to fruition back in 2012.
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
the opportunity that we're sort of going after today.
- So 2012 to now, and then what can you share
about the size of the business current traction?
- So currently we are just over 10k MRR.
We've worked with companies like Tesla
and home service providers in 70 different countries.
We've got a team of about 10 people now.
We raised a bunch of funding in the fall
and we're building rocket ship.
- Cool, I love it.
Well, obviously, Robert, it sounds like you've got a lot
of different things that you're considering working on,
what can I help you with specifically?
- Well, specifically, I've got a little bit
of a list here, actually that I wanted to go over,
if you've got a little bit of time here, Dan.
So we're launching a partner programme
and I'm trying to decide on what
is a fair commission percentage to give our partners.
Now we've kind of put our partners
in a three different buckets.
We've got obviously our solution partners,
referral partners and affiliate partners.
And so we realise that on the solution side of things,
we're looking at more of a real long term play.
We're gonna be working together,
we're intimately on an ongoing basis,
so does the number for them need to be different?
How do we approach that versus an affiliate,
we're really just asking to drive traffic
to our webinar and let us take it from there.
- Yeah, I mean, to me there's...
And I love that you have them separated.
When I think of partners, it's such a loaded word.
I literally was just coaching a client
and they were talking about partner
but essentially they were talking about
like a marketplace that they built an app for,
and they were like, that's a partner,
and I'm like, kind of.
I get the idea.
Essentially, we're borrowing other people's audiences
to build our business.
The one that is traditionally used for kind of like,
how do we share the upside is
the typical like affiliate partner, right.
I'm assuming because you have customers
in all those different countries at the 10k a month level
that your product sells,
like a customer pays you probably
between like 50 bucks and 200 bucks a month kinda thing.
- [Robert] Yeah, 250 on average.
- Yeah, so you got 250 on average
which means your annual contract values kind of like
2,500 bucks or what that might be, right.
Yeah.
So it's like most people...
The threshold I would say,
a great way to think about it is between 10% and 40%.
10%, if all they do is send you leads
and you do all the heavy lifting, right.
They literally just get you a sign up.
I remember at one point Netflix
was paying people 20 bucks for a trial sign.
My buddy Corey was running around the mall
signing people up on his iPad,
'cause he was making literally 200 bucks
an hour convincing people
to start a free trial with no credit card.
It was literally like, get an email, let us take care of it,
we'll give you 20 bucks for every email.
So if there's very little being done by the partner,
then 10% is kind of like in that range.
And then on the upper end...
And then you can talk about like multiyear
lifetime value, et cetera.
Then on the upper end, it's 40%, right.
And you could even go, I've seen go 50 or 60%
for what's called a lighthouse customer
or a lighthouse partner
or kind of like a name brand person
that their involvement
will help you go close 30 other partners.
So it's worth sometimes
to give up 50% lifetime value of a customer
to go get 50 other ones just like them
that's only at 30%, right.
There's some ROI calculations that you can do,
some simple math because of the name brand association.
But that's typically the ballpark, which isn't great
'cause it's a 4X difference between 10% and 40%.
I would say if you said like,
give me a number that feels fair, I would say 30%.
But the truth is, is that it all depends
on your partners and what options they have
in the market and what your competitors are doing.
Because if your competitors are all giving away 50%
and they've been around for a bit longer
and their product's a little bit more mature
then that's the competitive set you're competing
against for getting their partners.
If there's not a lot of partners currently doing this
and you have like a more relationship based partnership
then you might be able to get away with 30%
and then there's them just decision,
if it's desirable to them to do lifetime value
or maybe the first three years, the first two years.
Sometimes I'll see people do the first year at 30%,
the second year at 20%, third year at 20%,
and then they're done, right.
They kinda set the threshold
but that's assuming that you've got great retention.
So there's no answer to this other than
like anything what's the market willing to bear?
What's the market need to hear
for them to wanna engage with you?
So as you go to the partners
and you kinda present your offer,
listen, see if they respond.
If they say stuff like,
"Well, yeah but I've got this other company
"that does what you do maybe different
""and they're giving me 50%,"
you might have to compete against that.
What resonates the most with you Robert
as I share that kind of idea.
- Yeah.
Well, all of it's interesting,
there's a lot of questions in there to answer,
especially looking at the competition.
And we're kinda in a space
where there's definitely some big players
who maybe aren't necessarily doing what we're doing,
but they're crowding the space
and they're taking the eyeballs of our target audience.
And so we're up against that a little bit
and so we definitely need to make sure
that what we're offering is appealing
and is competitive in that sense.
One of the challenges I think I see
kinda looking at this is...
Like, you talk about LTV and like,
okay you bring on this partner
and how many other partners did they potentially give?
I think maybe the challenge in looking at that is saying,
well, what...
Okay, let's break that down.
Let's say this partner, we're gonna give them 10%
or we're gonna give them 20%
because we know they're gonna bring on
these other partners below them,
what's the math that we do there?
You talk about LTV, like, do we do what the expected LTV is
for them and all the potential other partners
they might bring on board
and what is the fair percentage of that to give up?
- Well, so when I say the partners, they bring on board
I just mean that you'll be able to easily attract
because of their association
not necessarily that you gotta give them 20%
and the other person 10% or 20%.
But what you wanna do, and you bring up a good point
is you can even set up minimums, right.
So let's say a partner says, well I want 40%.
You say, well, what's the minimum commitment you can make.
And they go, what do you mean?
And say, well, I'll give you 40%
but it means that you gotta generate
a certain amount of volume.
And they might say,
"Well I can get you 10 new customers every month."
It's like, perfect.
How about we do 20% on the first 10,
and then if you get over 10
we'll give you 30 or 40% on all them
and all the new ones.
That way, you win, they win.
They think they can do that, that's great.
We'll paper it that way.
So it's kind of like even like sales commission
you wanna hit some quotas
and then you can do accelerators above that.
To me, I think about it the same way as...
And I see this happen all the time where like
a name brand thought leader comes into a company
and they're like,
"I can get you a hundred thousand customers
"and I want 10% equity in your business."
It's like, all right, I will give you 10% equity.
I'll give you 1% equity for every 10,000 customers
you bring me and they're like,
"Oh no, I don't even wanna do it."
It's like perfect.
I'm calling your bluff, because if you feel confident
you can do it then we said the same thing
we just made sure that is action first reward second,
not reward up front hopefully they do the action.
Does that make sense?
- Yeah, absolutely.
And so my next question is kinda 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 wanna bring on board with our products.
So they've got a product
that our product would integrate into nicely.
Would make their product more sticky,
would enhance the value of their product
to their current customer base.
And I kinda see with them like we're just bringing
a solution to the table that they can resell,
they wanna put their margin on top of,
make a little bit more money off but they might be wanting
a lifetime percentage of of the Routezilla,
what they're charging for Routezilla to their clients.
And in that case...
So the question then comes down to, okay,
how are my investors gonna feel about this?
I've just locked up percentage of the company's revenue
to these guys ongoing for eternity
or is there a way that we can get out of that potentially
at some point down the road or if would
we even wanna do that or we'd mess up
the whole business model
and potentially lose these guys customers?
So, in that scenario specifically
where would you start off in the negotiations
with that partner and where would you be willing to go to
based on what parameters?
- Yeah, I mean, the reality
of anything you do in your business
as long as you set up the terms of service accordingly,
which most default kind of ULAs
end-user licencing agreements have
is the ability to change pricing, right.
And it's kinda one of those things where like
you have to do that because if somebody bought your company
and you didn't have that they'd be like,
"Hey, I can't buy your business,
"'cause I have no ability to change pricing
"'cause you didn't have the right agreement
"in place to gimme that freedom."
So the truth is that as long as you have that
then you can always kind of adjust down the road.
I mean, it's just like sales commission,
when you build a sales team...
I remember my first sales guy ever hired,
his first year he made $380,000, right.
He loved it, I loved it.
He made about three and a half million for me
in net new sales that I didn't have.
But I also told him it was super rich and long term
that would not be the case.
And what happens is you start building
out a model and understanding,
the real cost to deliver the product
and the overhead of managing an account.
And just over time, you kinda say,
"Well that just doesn't make sense financially.'
If I'm trying to hit 87% gross margin
then I only got this amount of money that I can apply
to cogs and I gotta build all these things.
So the truth is is you wanna do what feels fair today
to get the deal done and just know that it's probably
very unlikely both ways that they're gonna commit to you
for the next 10 years or you're...
You know what I'm mean?
Like it's never a 100% both ways.
And that if there ever is an issue
where you've got investors
or you're gonna exit and they don't like it,
you can typically unwind it.
Just verify with your legal team that that's the case.
- [Robert] Yeah, okay.
- So it allows you to move forward
without feeling like you're locked in.
- And I mean a start point would be obviously try
to keep the term to a minimum, but in your back pocket
maybe that's where you're willing to go.
- Yeah, you always start with them.
I mean it's negotiation 101, it's like,
"Hey I would love to do that.
"What do you think the volume could look like?"
They say, "Well, I think we can do this."
Perfect.
What kind of success fee or affiliate commission
are you thinking of?
They go, "Well, I think we'd want, I don't know, 10%"
and you might have been willing to go 20.
You go, "Geez, 10% seems a little high,
"but it sounds like the volume's gonna be there.
And then you like, "Are you willing to set a minimum?"
If it's below this it's 5%
but if it's this it's 10%.
And they go, "Yeah."
And you're like, "Perfect, let's do that."
I mean, that to me is how I always negotiate
because I've just learned it
over the years that my perception
and somebody else's are usually completely different
and I hate to be on the...
I mean how many times have we negotiated with somebody,
and we're like, "Well, how about we do this?"
And they just go, "Awesome, let's do that."
And I was like, "That was way too easy, right."
And then they're like, "I would've done it for way less."
And you're like, "Geez, Louise."
All right, next time I'm gonna ask the other person first
but that's just basic negotiation.
So I would say it works the same way
especially when you're trying to build something new,
really the first few partners
you just gotta be honest with them and say,
"We've never done this before
"it's something we're investing in,
"it's a meaningful part of our business going forward,
"we wanna co-create it with you,
"what are you thinking?"
Does that make sense, Robert?
- [Robert] Yeah, a 100%.
- As we lay in the plane
on all the different things that we've talked about today
what are kind of the top two or three things
that you heard that resonated the most with you
that you feel is gonna have
the biggest impact going forward?
- Yeah, I think mostly it's just
looking at like these terms aren't forever
and especially being the fact
that we're in the technology space.
I mean, I'm well aware of the fact
that 10, 20 years from now what we're doing
is probably gonna be obsolete.
So perhaps we shouldn't be as concerned
about that as we should be about ensuring
that we're setting profitability up
for the win today and tomorrow and the next day.
And it's that far down the road
as long as our terms and conditions
are built in such a way where they're flexible
and we can opt out of them
and we're not sort of handcuffing potential acquisition
or in our investors in any way,
then I think there's not a whole lot to fear.
Be open, be upfront with these guys, with the fact
that this is a new, maybe our first crack at it.
So we're learning as well as they are
and we wanna just establish something that's fair,
and is a win-win for everybody.
I mean, I think that's my biggest biggest takeaways
from the whole thing, for sure.
- Huge.
I love it.
Robert, super fun combo and hope you have
an amazing rest of the day.
- [Robert] Okay.
Thanks Dan.
Appreciate it. - Have a great one.
Cheers. - [Robert] Bye.
(upbeat music)