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Mar 8, 2019 · 16m · top-founders

1322 How to Move from Service Business to Pure SaaS

Connor Lee · 8m spoken Nathan Latka · 6m spoken
0:00 / 0:00

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Entrepreneur Connor Lee explains how he leveraged client insights and cash flow from his B2B sales agency, HipLead, to build and launch Sona, a specialized people data management SaaS platform. Host Nathan Latka analyzes the operational metrics, team structure, and strategic trade-offs of transitioning from service-based consulting to pure software.

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 41.2% of the talking time here. How this is scored →

Nathan as informed peer 6.2 Guest teaching 2.8 Guest disagreement 1.6 Nathan pushing back 5.2
05100:0010:002:11–4:48 · Nathan as informed peer 5/10 Launching Sona to Solve People Data Management Nathan quickly catches Connor mixing up ARR with MRR and immediately clarifies whether Sona's $28k is bundled inside the $150k MRR total. Connor describes Sona as an integration-first CRM layer.4:48–7:19 · Nathan as informed peer 7/10 Transitioning from Service Agency to Pure SaaS Nathan presses aggressively on HipLead's slow growth over 20 months and does on-the-fly math showing the core business is essentially flat once Sona's revenue is subtracted. Connor defends using the service cash flow to self-fund SaaS development.7:19–10:10 · Nathan as informed peer 6/10 Customer Insights, Product Beta, and Churn Metrics Nathan confronts Connor on his previously claimed 1% churn rate, noting that service agencies typically experience much higher churn. Connor educates him on how HipLead operates by providing an ongoing data subscription after outbound campaigns are set up.10:10–12:34 · Nathan as informed peer 6/10 Differentiation in Data and Team Structure Nathan points out the hyper-commoditized nature of email contact data and urges Connor to cut his safety nets and abandon service work. Connor explains his light-touch human curation model.12:34–15:50 · Nathan as informed peer 7/10 HipLead Revenue Breakdown and Valuation Strategy Nathan calculates an estimated valuation multiple for HipLead's standalone data stream and presents a hypothetical $500k acquisition scenario, citing Hootsuite as an agency-to-SaaS transition model. Connor declines the theoretical offer to keep customer research insights.2:11–4:48 · Guest teaching 3/10 Launching Sona to Solve People Data Management Nathan quickly catches Connor mixing up ARR with MRR and immediately clarifies whether Sona's $28k is bundled inside the $150k MRR total. Connor describes Sona as an integration-first CRM layer.4:48–7:19 · Guest teaching 2/10 Transitioning from Service Agency to Pure SaaS Nathan presses aggressively on HipLead's slow growth over 20 months and does on-the-fly math showing the core business is essentially flat once Sona's revenue is subtracted. Connor defends using the service cash flow to self-fund SaaS development.7:19–10:10 · Guest teaching 4/10 Customer Insights, Product Beta, and Churn Metrics Nathan confronts Connor on his previously claimed 1% churn rate, noting that service agencies typically experience much higher churn. Connor educates him on how HipLead operates by providing an ongoing data subscription after outbound campaigns are set up.10:10–12:34 · Guest teaching 3/10 Differentiation in Data and Team Structure Nathan points out the hyper-commoditized nature of email contact data and urges Connor to cut his safety nets and abandon service work. Connor explains his light-touch human curation model.12:34–15:50 · Guest teaching 2/10 HipLead Revenue Breakdown and Valuation Strategy Nathan calculates an estimated valuation multiple for HipLead's standalone data stream and presents a hypothetical $500k acquisition scenario, citing Hootsuite as an agency-to-SaaS transition model. Connor declines the theoretical offer to keep customer research insights.2:11–4:48 · Guest disagreement 1/10 Launching Sona to Solve People Data Management Nathan quickly catches Connor mixing up ARR with MRR and immediately clarifies whether Sona's $28k is bundled inside the $150k MRR total. Connor describes Sona as an integration-first CRM layer.4:48–7:19 · Guest disagreement 2/10 Transitioning from Service Agency to Pure SaaS Nathan presses aggressively on HipLead's slow growth over 20 months and does on-the-fly math showing the core business is essentially flat once Sona's revenue is subtracted. Connor defends using the service cash flow to self-fund SaaS development.7:19–10:10 · Guest disagreement 2/10 Customer Insights, Product Beta, and Churn Metrics Nathan confronts Connor on his previously claimed 1% churn rate, noting that service agencies typically experience much higher churn. Connor educates him on how HipLead operates by providing an ongoing data subscription after outbound campaigns are set up.10:10–12:34 · Guest disagreement 1/10 Differentiation in Data and Team Structure Nathan points out the hyper-commoditized nature of email contact data and urges Connor to cut his safety nets and abandon service work. Connor explains his light-touch human curation model.12:34–15:50 · Guest disagreement 2/10 HipLead Revenue Breakdown and Valuation Strategy Nathan calculates an estimated valuation multiple for HipLead's standalone data stream and presents a hypothetical $500k acquisition scenario, citing Hootsuite as an agency-to-SaaS transition model. Connor declines the theoretical offer to keep customer research insights.2:11–4:48 · Nathan pushing back 4/10 Launching Sona to Solve People Data Management Nathan quickly catches Connor mixing up ARR with MRR and immediately clarifies whether Sona's $28k is bundled inside the $150k MRR total. Connor describes Sona as an integration-first CRM layer.4:48–7:19 · Nathan pushing back 7/10 Transitioning from Service Agency to Pure SaaS Nathan presses aggressively on HipLead's slow growth over 20 months and does on-the-fly math showing the core business is essentially flat once Sona's revenue is subtracted. Connor defends using the service cash flow to self-fund SaaS development.7:19–10:10 · Nathan pushing back 6/10 Customer Insights, Product Beta, and Churn Metrics Nathan confronts Connor on his previously claimed 1% churn rate, noting that service agencies typically experience much higher churn. Connor educates him on how HipLead operates by providing an ongoing data subscription after outbound campaigns are set up.10:10–12:34 · Nathan pushing back 5/10 Differentiation in Data and Team Structure Nathan points out the hyper-commoditized nature of email contact data and urges Connor to cut his safety nets and abandon service work. Connor explains his light-touch human curation model.12:34–15:50 · Nathan pushing back 4/10 HipLead Revenue Breakdown and Valuation Strategy Nathan calculates an estimated valuation multiple for HipLead's standalone data stream and presents a hypothetical $500k acquisition scenario, citing Hootsuite as an agency-to-SaaS transition model. Connor declines the theoretical offer to keep customer research insights.

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

0:00 · Nathan 71% · guest 29%0:00 · Nathan 71% · guest 29%3:00 · Nathan 25.4% · guest 74.6%3:00 · Nathan 25.4% · guest 74.6%6:00 · Nathan 26.6% · guest 73.4%6:00 · Nathan 26.6% · guest 73.4%9:00 · Nathan 27.3% · guest 72.7%9:00 · Nathan 27.3% · guest 72.7%12:00 · Nathan 44.4% · guest 55.6%12:00 · Nathan 44.4% · guest 55.6%15:00 · Nathan 64.9% · guest 35.1%15:00 · Nathan 64.9% · guest 35.1%
Sharpest disagreement ▶ 13:19 Connor rejects agency buyout scenario

Connor pushes back on Nathan's hypothetical acquisition valuation, arguing that the customer insights gained from HipLead provide an invaluable advantage for his SaaS product that money cannot replace.

 Hardest push from Nathan ▶ 6:57 Nathan challenges revenue growth claims

Nathan bluntly questions Connor's claim of growth by doing live math to show that subtracting the new SaaS revenue reveals the core service business has remained completely flat over nearly two years.

 Biggest teaching moment ▶ 9:26 Connor clarifies recurring data subscription model

Connor explains how his agency retains customers with near-zero churn by transitioning clients from active outbound management to an ongoing recurring data feed.

 Nathan holds their own ▶ 13:56 Nathan cites Hootsuite agency transition precedent

Nathan demonstrates domain expertise by citing how Hootsuite originated as an agency before making the hard decision to cut service ties entirely to scale pure SaaS.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Launching Sona to Solve People Data Management 5314 Nathan quickly catches Connor mixing up ARR with MRR and immediately clarifies whether Sona's $28k is bundled inside the $150k MRR total. Connor describes Sona as an integration-first CRM layer.
Transitioning from Service Agency to Pure SaaS 7227 Nathan presses aggressively on HipLead's slow growth over 20 months and does on-the-fly math showing the core business is essentially flat once Sona's revenue is subtracted. Connor defends using the service cash flow to self-fund SaaS development.
Customer Insights, Product Beta, and Churn Metrics 6426 Nathan confronts Connor on his previously claimed 1% churn rate, noting that service agencies typically experience much higher churn. Connor educates him on how HipLead operates by providing an ongoing data subscription after outbound campaigns are set up.
Differentiation in Data and Team Structure 6315 Nathan points out the hyper-commoditized nature of email contact data and urges Connor to cut his safety nets and abandon service work. Connor explains his light-touch human curation model.
HipLead Revenue Breakdown and Valuation Strategy 7224 Nathan calculates an estimated valuation multiple for HipLead's standalone data stream and presents a hypothetical $500k acquisition scenario, citing Hootsuite as an agency-to-SaaS transition model. Connor declines the theoretical offer to keep customer research insights.

Statements from this episode (11)

Disclosure
HipLead generates $150,000 in monthly recurring revenue
“No, a 150 in MRR currently.”
Connor Lee Mar 8, 2019 ▶ 2:36
Disclosure
Sona has reached $28,000 in monthly recurring revenue
“So we built a product called Sona and it's go Sona.com and we're doing about a hundred and I'm sorry, but 28,000 in, in MRR already with Sona.”
Connor Lee Mar 8, 2019 ▶ 3:22
Assertion Not checkable as stated
HipLead has over 50 active customers
“We have 50 plus customers.”
Connor Lee Mar 8, 2019 ▶ 4:52
Disclosure
HipLead remains mostly bootstrapped after an initial $200,000
“Yeah, we've stayed at that level. We haven't raised, we're still bootstrapped more or less and stayed at that kind of level.”
Connor Lee Mar 8, 2019 ▶ 5:36
Disclosure
HipLead's agency revenue funds development of new SaaS products
“Yeah, I mean, we might in the future. That's definitely a possibility, but you know, as a, you know, as a bootstrap company Hipplead's, Hipplead's revenue is, is, is growing, is paying for development and all of that on the other products.”
Connor Lee Mar 8, 2019 ▶ 6:44
Assertion Not checkable as stated
Lee: HipLead has worked with nearly 300 B2B SaaS companies
“We, you know, we built Sona, basically, because we had a lot of insights into how, you know, we worked with over, I think, now, 250, almost 300 different companies that are all SaaS companies, B to B SaaS companies”
Connor Lee Mar 8, 2019 ▶ 7:21
Assertion Not checkable as stated
Lee: Sona has experienced zero churn in two months of beta
“Yeah, so with Sona, I mean, we have, we've had zero churn.”
Connor Lee Mar 8, 2019 ▶ 8:45
Disclosure
HipLead employs 5 people in San Francisco and 12 globally
“So we've got five in SF and another 12 around the world.”
Connor Lee Mar 8, 2019 ▶ 11:49
Assertion Not checkable as stated
Lee: HipLead data-only clients pay around $1,000 monthly
“Somewhere around a thousand a month.”
Connor Lee Mar 8, 2019 ▶ 12:59
Insight
Running an agency provides invaluable insights for building SaaS products
“I really like hip lead just Continuing to run it is because it just, it gives us a great amount of insight into what a lot of different companies are doing and their problems, and that's hard to, that's really hard. Well, you can't put price on it. It's very e…”
Connor Lee Mar 8, 2019 ▶ 13:43
Assertion Supported
Hootsuite started as a service agency before transitioning to SaaS
“A lot of the most successful SaaS companies, I mean, Ryan at Hootsuite, that started as an agency.”
Nathan Latka Mar 8, 2019 ▶ 13:57
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