Oct 11, 2017 · 23m · top-founders
809: How This $12m Accounting Biz Moves from On-Prem to SaaS Model
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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, host Nathan Latka interviews Centage CEO Barry Clapp to explore how the budgeting software provider transitioned from legacy on-premise software into a twelve-million-dollar cloud SaaS platform. Clapp outlines the company's capital-efficient scaling, migration pricing strategies, inside sales machine, and path toward seventeen million dollars in 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 37.4% of the talking time here. How this is scored →
Nathan as informed peer 4.9 Guest teaching 2.4 Guest disagreement 0.6 Nathan pushing back 2.4
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 5:21 Correcting funding addition error
Clapp firmly stops Latka from adding an extra $9 million tranche on top of the $13.5 million total capital raised figure.
Hardest push from Nathan ▶ 8:58 Challenging $30M ARR assumptionLatka uses Clapp's stated unit metrics to suggest the business has already surpassed $30 million ARR, pushing Clapp to clarify the on-prem revenue mix.
Biggest teaching moment ▶ 9:06 Explaining the legacy on-prem revenue realityClapp educates Latka on the reality of enterprise migration, showing that 70% of clients are still paying legacy annual maintenance fees rather than full SaaS ACVs.
Nathan holds their own ▶ 8:58 Latka's instant ARR extrapolationLatka quickly calculates total ARR on the fly using ACV and customer counts to test the financial consistency of the numbers provided.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Promotion for the GetLatka SaaS Database | 4 | 2 | 0 | 1 | After an initial promotional plug for the GetLatka database, Latka introduces Clapp and inquires about Ascentage's value proposition. Clapp straightforwardly explains how the platform automates complex budgeting workflows historically managed in Excel spreadsheets. | |
| Capital Efficiency and Competing in the Budgeting Market | 5 | 3 | 1 | 4 | Latka presses Clapp on his total fundraising amount after finding discrepancies in his pre-interview notes, prompting Clapp to clarify that total funding is $13.5 million inclusive of recapitalization. Clapp details competing against heavily capitalized players like Adaptive Insights while targeting mid-market accounts. | |
| Pricing Architecture, Seat Tiers, and Customer Metrics | 6 | 4 | 1 | 4 | Latka attempts to calculate ARR by multiplying 1,000 customers by a $30,000 ACV to see if they hit $30 million in ARR. Clapp corrects this assumption by explaining that 70% of clients remain on legacy on-premises maintenance contracts at much lower price points. | |
| Revenue Milestones and Implementation Training Services | 5 | 2 | 1 | 3 | Clapp discloses reaching $12 million in revenue with roughly a third derived from hands-on implementation and training services. When asked directly about customer acquisition cost, Clapp admits he does not track the exact figure off the top of his head due to rapid growth. | |
| Churn Management, UI Redesign, and Expansion Upsells | 5 | 3 | 1 | 2 | Clapp discusses historical retention rates of 80% on legacy shrink-wrapped packages and how rewriting the application's UI will drive retention past 90%. Latka gently corrects his own math mistake during an exchange on expansion upsell percentages. | |
| Marketing Strategies, Viral Campaigns, and Ad Spend | 5 | 2 | 0 | 2 | Clapp details a viral marketing video centered on Excel's 40th birthday that resonated with demographic CFO buyers, as well as their $100k monthly multichannel marketing budget. Latka verifies standard SaaS gross margins and velocity of paid spend. | |
| Promotion for TheTopInbox Acquisition and Deal Case Study | 4 | 1 | 0 | 1 | Following a mid-roll advertisement for TheTopInbox, Latka walks Clapp through the Famous Five rapid-fire questions. Clapp shares life and career advice around pursuing equity early in one's career before Latka recaps the company's metrics. |
Statements from this episode (17)
Clapp: 70% to 80% of organizations use Excel for budgeting
“So, 80%, 70 or 80%, depending on who you listen to, of people use Excel for their budgeting.”
Clapp: Centage spent $3M-$4M rewriting its on-prem software into SaaS
“And it was an on-prem model until last year. And we converted the product, we invested it on a few, three or four million dollars, and rewrote the entire product. To be a cloud-based, you know, a hundred percent SaaS-based product.”
Centage raised $13.5M total, primarily utilizing $9.5M for recapitalization
“No, 13 and a half million, we raised originally nine and a half million, and a lot of that went to recapitalize the company actually.”
Centage is being tracked by KKR and Accel for future investment
“We've been talking then mostly to New York based and California based ones. So we've talked to everybody, KKR and just everybody. We went to this You know, forum where we presented to all the top players and Excel and everybody else. And so they're all trackin…”
Clapp: Centage's ACV is $35,000 to $40,000 per year
“The average customer is about 35, 40,000 per year.”
Clapp: Centage has around 1,000 customers and 10,000 users
“So we've got about a thousand customers probably 10,000 users, because each customer has an average of 10 or so users.”
Clapp: Centage customer base is 30% subscription and 70% on-prem
“So I would say it's probably about 30% subscription and 70% on-prem.”
Centage SaaS pricing is 5x legacy on-premise annual maintenance fees
“If you were to approach us today and want to buy Budget Maestro Nine, our new product, you would pay something much more, maybe five times as much as a current customer is paying for their annual maintenance and support.”
Centage generated approximately $12 million in revenue in 2016
“We were at about twelve million last year.”
Centage targets approximately $17 million in revenue for 2017
“We're looking to be about seventeen million.”
Centage derives roughly one third of revenue from onboarding and training
“About a third of our revenue.”
Barry Clapp: Centage will reach 90% retention with SaaS model
“So our retention rates have risen from 75% a few years ago to over 80% now, and when we go to the SAS model, we know we can get them to 90%, you know.”
Centage CEO: Upselling consistently generates 10% to 20% of revenue
“We've always done about
10 to 20% of our revenue in upselling.”
Clapp: Centage's typical buyer is a 40-60 year old CFO of a $200M company
“Our customer happens to be usually a 40 to 60 year old man, you know, he's the CFO of a
Two hundred million dollar company.”