Jul 26, 2018 · 19m · top-founders
1097 CMS CEO: How to Move 1 Time License Model doing $1.5m Annually to SaaS
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 episode of The Top Entrepreneurs, Nathan Latka interviews Brandon Kelly, founder and CEO of Pixel & Tonic, detailing how Craft CMS scaled to $1.5 million in annual revenue as a fully bootstrapped company and is transitioning from perpetual licenses to recurring SaaS-style revenue.
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 44% of the talking time here. How this is scored →
Nathan as informed peer 4.1 Guest teaching 3.3 Guest disagreement 1.6 Nathan pushing back 3.4
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:53 Brandon rejects acquisition and growth-at-all-costs
Brandon firmly dismisses Nathan's suggestion to sell out or chase massive exposure through a giant acquirer like HubSpot, prioritizing community and autonomy over ego payoffs.
Hardest push from Nathan ▶ 14:57 Nathan presses Brandon on why not cash outNathan refuses to accept the difficulty of pivoting business models without asking why Brandon does not simply sell the business for $2.5 million and take a windfall.
Biggest teaching moment ▶ 4:49 Brandon breaks down developer tooling vs drag-and-dropBrandon disabuses Nathan of the notion that Craft CMS is a no-code drag-and-drop tool, clearly framing it as an advanced developer environment for custom HTML/CSS content modeling.
Nathan holds their own ▶ 2:01 Nathan breaks down the flaw of one-time licensingNathan demonstrates strong SaaS business knowledge by immediately pinpointing the structural cost and support liabilities of perpetual one-time licensing.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Introducing Brandon Kelly of Craft CMS | 4 | 3 | 1 | 3 | Nathan probes the software business model and immediately points out the inherent support and cash-flow risks of one-time licensing. Brandon agrees with Nathan's critique, candidly admitting it was an 'insane' legacy choice. | |
| Market Positioning: Craft CMS vs. WordPress and Squarespace | 4 | 5 | 2 | 3 | Nathan asks how Craft CMS competes with WordPress and Squarespace, assuming it might offer drag-and-drop simplicity. Brandon educates Nathan on developer-focused bespoke architecture and custom content modeling. | |
| Financial Metrics, Bootstrapping, and Customer Scale | 5 | 4 | 1 | 4 | Nathan does live unit economic calculations attempting to reconcile customer count with annual revenue. Brandon clarifies the difference between total community developers, paid licenses, and free tiers. | |
| Team Structure, Operations, and Event Sponsorships | 4 | 2 | 1 | 3 | Nathan questions how Brandon acquires customers and challenges whether spending thousands on conference sponsorships generates a trackable ROI. Brandon explains word-of-mouth dynamics and accepting anecdotal marketing returns. | |
| Sponsor Segment: Thinkific Online Course Platform | 4 | 3 | 1 | 2 | Following the mid-roll Thinkific sponsor read, Nathan asks Brandon how he balances reinvestment versus personal distributions. Brandon details their 15 percent reinvestment floor and formal employee profit-sharing plan. | |
| Transitioning to Annual Update Fees and Plugin Store | 6 | 5 | 4 | 6 | Nathan aggressively challenges Brandon on why he does not simply sell the company for $2.5M to an entity like HubSpot. Brandon holds his ground firmly, explaining that sustaining a 10-person independent CMS is rare and that personal pride and community integrity outweigh a quick exit. | |
| The Famous Five Rapid-Fire Questions | 2 | 1 | 1 | 3 | Nathan walks through the standard rapid-fire questions with lighthearted banter, catching Brandon when he mistakenly states his age as 28 instead of 32. |
Statements from this episode (15)
Craft CMS licenses average $260 per sale
“So we've got on average, probably selling about 200 and
60 dollars a license.
We have a 200 dollar license and a 300 dollar license.”
Kelly says WordPress is not built for complex bespoke websites
“It's not built for
Bespoke websites.
So inevitably if people do a lot of development with WordPress, they get to a point where they just are tired of fighting with all these built in themes and you know like eventually the site design requirements get to a poi…”
Craft CMS generated roughly $1.5 million in annual revenue in 2017
“Yeah, well, that was about what we did last year, actually, right there.”
Craft CMS has 6,000 active developers and 6,000 lifetime paid customers
“The community size is about 6000 active developers. We also have about 6000 unique customers over the duration of the product.”
Pixel & Tonic spends up to $20,000 per conference sponsorship
“Yeah, I mean, like, up to 15, maybe 20.”
Pixel & Tonic cannot track conference sponsorship ROI directly
“It's honestly, like, there's no way to track the returns. We've tried so we just kind of trust that it's working out for us, and it does.”
Kelly: Pixel & Tonic reinvests at least a 15% profit margin
“We try and keep at least a 15% margin going back into the company.”
Pixel & Tonic introduced an employee profit-sharing plan in 2017
“And then as of last year, we introduced a new profit sharing plan. So I'm actually giving it right back to the employees.”
Craft CMS shifts to SaaS with $60 renewals and 20% plugin cut
“We're moving away from one off licensing. So for example, if you spend 300 dollars on a license today then a year from now you'd be due for another paying 60 bucks again for more updates. Then beyond that, we also have a commerce product that is kind of the sa…”
Kelly predicts Craft CMS plugin store will support 20 full-time developers
“So it's not, you know, it's no WordPress, but we do expect once the plugin store hits and some of these plugin developers feel more incentivized to actually charge for their work. We'll probably have a good handful, you know, 20 people or so that are making, y…”
Bootstrapping a 10-person CMS company is unheard of outside the enterprise
“Excluding the enterprise CMSs, most CMSs are done by one or two or three people on the side of their day job, you know? And so the fact that we've been able to fund a 10 person company full time working on this thing is unheard of for the most part within our …”
Pixel & Tonic intends to grow Craft CMS independently without outside acquisition
“Right now there's just zero motivation to change any of that. You know, we want to continue growing it. We have a lot of different ideas for how we can grow it. You know, we want to get it as large as we can on our own.”