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Dec 4, 2019 · 17m · top-founders

1593 Why His SMB Churn is 6% When Everyone Elses is 12% doing $12m in ARR across 5000 Salon Owners

Ronan Percival · 9m spoken Nathan Latka · 6m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this interview, Nathan Latka speaks with Phorest Salon Software founder and CEO Ronan Percival about scaling his business management platform to over $12 million in ARR across 5,000 salons. Percival details Phorest's hybrid SaaS and transactional monetization, evergreen funding model, inbound SEO acquisition engine, and strategies for achieving an industry-low 6% SMB churn rate.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 40.6% of the talking time here. How this is scored →

Nathan as informed peer 5.0 Guest teaching 3.3 Guest disagreement 2.0 Nathan pushing back 3.8
05100:0010:001:10–4:52 · Nathan as informed peer 4/10 Transition from Gaming to Salon Software and Product Core Nathan explores the transition from gaming to salon software and quickly validates pricing and churn rates. Ronan explains the 6% annual logo churn benchmark compared to the 12% industry failure rate.4:52–8:36 · Nathan as informed peer 4/10 Inbound Content Engine, SEO Strategy, and Global Team Nathan presses Ronan to move past vague marketing terms and name specific high-ranking blog articles and search keywords. Ronan details their strategy of seeding small articles before expanding them into evergreen ebooks.8:37–11:27 · Nathan as informed peer 5/10 Bootstrapping History, Capital Efficiency, and Evergreen Funding Nathan questions whether growth equity investors truly allow evergreen timelines without exit pressure. Ronan corrects him by detailing Susquehanna's unique balance-sheet structure rather than a traditional limited-partner fund.11:27–15:51 · Nathan as informed peer 7/10 Financial Metrics, Payback Periods, and Growth Economics When Ronan questions Nathan's knowledge of SMB SaaS revenue splits, Nathan immediately cuts in to cite data from 3,000 B2B SaaS founder interviews. Nathan then works through CAC, payback periods, and SMS margins.1:10–4:52 · Guest teaching 3/10 Transition from Gaming to Salon Software and Product Core Nathan explores the transition from gaming to salon software and quickly validates pricing and churn rates. Ronan explains the 6% annual logo churn benchmark compared to the 12% industry failure rate.4:52–8:36 · Guest teaching 2/10 Inbound Content Engine, SEO Strategy, and Global Team Nathan presses Ronan to move past vague marketing terms and name specific high-ranking blog articles and search keywords. Ronan details their strategy of seeding small articles before expanding them into evergreen ebooks.8:37–11:27 · Guest teaching 5/10 Bootstrapping History, Capital Efficiency, and Evergreen Funding Nathan questions whether growth equity investors truly allow evergreen timelines without exit pressure. Ronan corrects him by detailing Susquehanna's unique balance-sheet structure rather than a traditional limited-partner fund.11:27–15:51 · Guest teaching 3/10 Financial Metrics, Payback Periods, and Growth Economics When Ronan questions Nathan's knowledge of SMB SaaS revenue splits, Nathan immediately cuts in to cite data from 3,000 B2B SaaS founder interviews. Nathan then works through CAC, payback periods, and SMS margins.1:10–4:52 · Guest disagreement 1/10 Transition from Gaming to Salon Software and Product Core Nathan explores the transition from gaming to salon software and quickly validates pricing and churn rates. Ronan explains the 6% annual logo churn benchmark compared to the 12% industry failure rate.4:52–8:36 · Guest disagreement 1/10 Inbound Content Engine, SEO Strategy, and Global Team Nathan presses Ronan to move past vague marketing terms and name specific high-ranking blog articles and search keywords. Ronan details their strategy of seeding small articles before expanding them into evergreen ebooks.8:37–11:27 · Guest disagreement 3/10 Bootstrapping History, Capital Efficiency, and Evergreen Funding Nathan questions whether growth equity investors truly allow evergreen timelines without exit pressure. Ronan corrects him by detailing Susquehanna's unique balance-sheet structure rather than a traditional limited-partner fund.11:27–15:51 · Guest disagreement 3/10 Financial Metrics, Payback Periods, and Growth Economics When Ronan questions Nathan's knowledge of SMB SaaS revenue splits, Nathan immediately cuts in to cite data from 3,000 B2B SaaS founder interviews. Nathan then works through CAC, payback periods, and SMS margins.1:10–4:52 · Nathan pushing back 2/10 Transition from Gaming to Salon Software and Product Core Nathan explores the transition from gaming to salon software and quickly validates pricing and churn rates. Ronan explains the 6% annual logo churn benchmark compared to the 12% industry failure rate.4:52–8:36 · Nathan pushing back 4/10 Inbound Content Engine, SEO Strategy, and Global Team Nathan presses Ronan to move past vague marketing terms and name specific high-ranking blog articles and search keywords. Ronan details their strategy of seeding small articles before expanding them into evergreen ebooks.8:37–11:27 · Nathan pushing back 4/10 Bootstrapping History, Capital Efficiency, and Evergreen Funding Nathan questions whether growth equity investors truly allow evergreen timelines without exit pressure. Ronan corrects him by detailing Susquehanna's unique balance-sheet structure rather than a traditional limited-partner fund.11:27–15:51 · Nathan pushing back 5/10 Financial Metrics, Payback Periods, and Growth Economics When Ronan questions Nathan's knowledge of SMB SaaS revenue splits, Nathan immediately cuts in to cite data from 3,000 B2B SaaS founder interviews. Nathan then works through CAC, payback periods, and SMS margins.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 61.7% · guest 38.3%0:00 · Nathan 61.7% · guest 38.3%3:00 · Nathan 32.2% · guest 67.8%3:00 · Nathan 32.2% · guest 67.8%6:00 · Nathan 25.5% · guest 74.5%6:00 · Nathan 25.5% · guest 74.5%9:00 · Nathan 35.6% · guest 64.4%9:00 · Nathan 35.6% · guest 64.4%12:00 · Nathan 36.3% · guest 63.7%12:00 · Nathan 36.3% · guest 63.7%15:00 · Nathan 54.6% · guest 45.4%15:00 · Nathan 54.6% · guest 45.4%
Sharpest disagreement ▶ 10:32 Ronan rejects Nathan's assumption about growth equity fund timelines

Ronan firmly pushes back against Nathan's assertion that growth equity always has an exit timeline, insisting their investor operates with evergreen balance-sheet capital.

 Hardest push from Nathan ▶ 5:28 Nathan refuses generic content marketing explanation

Nathan interrupts the discussion to insist that vague mentions of content marketing are unhelpful and forces Ronan to name specific keywords and rankings.

 Biggest teaching moment ▶ 10:37 Ronan details the evergreen balance-sheet structure of Susquehanna

Ronan clarifies that Susquehanna is not a traditional institutional LP fund but an evergreen corporate vehicle funding investments out of company profits.

 Nathan holds their own ▶ 12:25 Nathan asserts his domain knowledge with 3,000 interview database

When Ronan patronizingly begins explaining SMB transactional revenue splits, Nathan cuts in to establish authority by citing his background interviewing over 3,000 B2B SaaS CEOs.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Transition from Gaming to Salon Software and Product Core 4312 Nathan explores the transition from gaming to salon software and quickly validates pricing and churn rates. Ronan explains the 6% annual logo churn benchmark compared to the 12% industry failure rate.
Inbound Content Engine, SEO Strategy, and Global Team 4214 Nathan presses Ronan to move past vague marketing terms and name specific high-ranking blog articles and search keywords. Ronan details their strategy of seeding small articles before expanding them into evergreen ebooks.
Bootstrapping History, Capital Efficiency, and Evergreen Funding 5534 Nathan questions whether growth equity investors truly allow evergreen timelines without exit pressure. Ronan corrects him by detailing Susquehanna's unique balance-sheet structure rather than a traditional limited-partner fund.
Financial Metrics, Payback Periods, and Growth Economics 7335 When Ronan questions Nathan's knowledge of SMB SaaS revenue splits, Nathan immediately cuts in to cite data from 3,000 B2B SaaS founder interviews. Nathan then works through CAC, payback periods, and SMS margins.

Statements from this episode (18)

Disclosure
Ronan Percival Founded Phorest After Taking a Salon Front Desk Job
“We actually didn't initially plan on getting into salons, but I ended up getting a job in a salon as a, as someone working the front desk just as a part-time job while I was in between gigs, and that's how I got interested in the industry, so it was it was som…”
Ronan Percival Dec 4, 2019 ▶ 1:21
Disclosure
Phorest Generates 65% of Revenue From SaaS, 35% From Transactions
“I would say about 65% is SaaS, 35% is transactional in some way.”
Ronan Percival Dec 4, 2019 ▶ 2:18
Assertion Supported
95% of Hair and Beauty Salons Are Single-Location Independents
“95% of salons are independent operators, right? So they're like one location.”
Ronan Percival Dec 4, 2019 ▶ 2:56
Disclosure
Phorest Achieves a 6% Annual Logo Churn Rate
“So we've, Pretty good trend rate for this industry of six percent logo churn per item. Per year.”
Ronan Percival Dec 4, 2019 ▶ 3:09
Assertion Supported
12% of Salons Go Out of Business Annually
“So, so the average, 12% of salons go out of business every year, so that's the actual churn rate for the industry, and we're half that”
Ronan Percival Dec 4, 2019 ▶ 3:28
Disclosure
Phorest Scaled to 5,000 Paying Salon Customers
“Yeah, that's 5000 paying customers.”
Ronan Percival Dec 4, 2019 ▶ 3:55
Disclosure
Phorest Abandoned Freemium Acquisition Due to Low Paid Conversion
“No we experimented with freemium, but it didn't work. A lot of free users and very little number of those converting to paid. So we moved to a paid only model for the last five years.”
Ronan Percival Dec 4, 2019 ▶ 4:01
Assertion Not checkable as stated
Content Marketing Drives 50% of Phorest's New Salon Acquisitions
“We've probably onboarded 1600 salons, something like that. And half of those come from content. So I've come from our own content channel.”
Ronan Percival Dec 4, 2019 ▶ 5:08
Assertion Not publicly verifiable
Phorest Ranks Number One for 700 Salon-Related Search Terms
“Yes, we rank number one for 700 different items around salons, so things like yeah, really quickly top Salon signs. I think is an example of one.”
Ronan Percival Dec 4, 2019 ▶ 6:00
Assertion Partly supported
Phorest Raised $20 Million in 2019 After Eight Years Without Fundraising
“So we raised a million in 2011. And then we didn't raise again until this year when we did twenty million.”
Ronan Percival Dec 4, 2019 ▶ 9:19
Disclosure
Phorest Founders and Employees Pledged to Maintain Permanent Majority Control
“The majority of the company is still owned by myself and the employees. So we've kind of made a pledge to each other that we will, we'll always maintain full ownership and full control.”
Ronan Percival Dec 4, 2019 ▶ 9:52
Assertion Not checkable as stated
Susquehanna Growth Equity Operates Evergreen Capital Without Exit Timelines
“So we don't have that in our agreement so that the firm that we took in this year, They're not actually a fund. It's evergreen capital as well, so there's no timeline on when they need a return.”
Ronan Percival Dec 4, 2019 ▶ 10:15
Assertion Supported
Phorest Reached 13 Million Euros in Total Revenue in 2019
“We'll do about thirteen million euro this year. So that's great. Million dollars, sixty million dollars, something like that.”
Ronan Percival Dec 4, 2019 ▶ 11:59
Assertion Partly supported
Shopify and Mindbody Generate 40% to 50% Transactional Revenue
“Shopify, MindBody, all these guys, they're all 40% to 50% transactional at this stage.”
Ronan Percival Dec 4, 2019 ▶ 12:50
Insight
SMBs Resist Long Contracts, Making Transactional Pricing Essential
“I think is where transaction is so important to the real value is that like small businesses don't want to sign up to big contracts, right? So you need to generate revenue through value and that's usually easier to do through transactional basis because they'l…”
Ronan Percival Dec 4, 2019 ▶ 13:00
Assertion Not checkable as stated
Phorest Pure SaaS MRR Grew 53% Year-Over-Year
“That's up 53%, I think, year and year.”
Ronan Percival Dec 4, 2019 ▶ 14:27
Assertion Not checkable as stated
Phorest's Fully-Weighted CAC Is $3,500
“Fully weighted, including onboarding costs and everything like that were 3500 dollars.”
Ronan Percival Dec 4, 2019 ▶ 15:22
Assertion Not checkable as stated
Phorest's CAC Payback Period Is 15 Months
“Yeah, we're 15 months.”
Ronan Percival Dec 4, 2019 ▶ 15:46
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