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Oct 16, 2016 · 21m · top-founders

EP 449: SMB SaaS <3% Churn, $5M Raised, $200k MRR Helping SMB's Manage Relationships with Hatchbuck CEO Don Breckenridge

Don Breckenridge, Jr. · 9m spoken Nathan Latka · 9m spoken
0:00 / 0:00

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In this episode of The Top, host Nathan Latka interviews Hatchbuck CEO Don Breckenridge to explore how the all-in-one CRM and marketing automation platform scaled past $2.5 million in ARR while keeping SMB customer churn below 3%.

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 48.8% of the talking time here. How this is scored →

Nathan as informed peer 4.7 Guest teaching 1.9 Guest disagreement 1.7 Nathan pushing back 2.7
05100:0010:0020:001:39–4:18 · Nathan as informed peer 5/10 Introducing Don Breckenridge and Hatchbuck Product Overview Latka demonstrates familiarity with SaaS pricing mechanics, usage tiers, and expansion revenue. Breckenridge readily explains Hatchbuck's user and contact tiers.4:18–6:34 · Nathan as informed peer 4/10 Hatchbuck Origin Story and Target Market Gap Latka clarifies the distinction between total users and paying accounts. Breckenridge shares the origin story of noticing a market gap between Mailchimp and enterprise CRM/automation tools.6:34–9:24 · Nathan as informed peer 6/10 Capital Strategy and Revenue Growth Trajectory Latka drills into fundraising structure and rapidly calculates monthly run rates from annual figures. Breckenridge details their rolling pre-Series A capital strategy.9:24–12:18 · Nathan as informed peer 6/10 Mastering SMB Churn and Defining Target Persona Latka pressures Breckenridge to disclose gross customer churn, throwing out a high figure (8-9%) to force an answer when Breckenridge hesitates. Breckenridge defends his hesitation before confirming ~3% churn.12:18–15:25 · Nathan as informed peer 7/10 Inbound Marketing Engine and Unit Economics Latka performs live mental math on lifetime value and target CAC using Breckenridge's stated 3:1 ratio and churn figures. Breckenridge elaborates on Hatchbuck's inbound funnel.15:25–17:36 · Nathan as informed peer 4/10 Team Structure, Scaling Vision, and Acquisition Rejection Breckenridge rejects a hypothetical $10M acquisition offer outright. When Latka estimates month-over-month growth rates, Breckenridge corrects his compounding math.17:39–20:39 · Nathan as informed peer 1/10 Sponsor Promotion: Toptal Pre-Vetted Developer Platform Contains a mid-roll sponsor ad for Toptal followed by standard, friendly Famous Five rapid-fire questions.1:39–4:18 · Guest teaching 1/10 Introducing Don Breckenridge and Hatchbuck Product Overview Latka demonstrates familiarity with SaaS pricing mechanics, usage tiers, and expansion revenue. Breckenridge readily explains Hatchbuck's user and contact tiers.4:18–6:34 · Guest teaching 2/10 Hatchbuck Origin Story and Target Market Gap Latka clarifies the distinction between total users and paying accounts. Breckenridge shares the origin story of noticing a market gap between Mailchimp and enterprise CRM/automation tools.6:34–9:24 · Guest teaching 1/10 Capital Strategy and Revenue Growth Trajectory Latka drills into fundraising structure and rapidly calculates monthly run rates from annual figures. Breckenridge details their rolling pre-Series A capital strategy.9:24–12:18 · Guest teaching 2/10 Mastering SMB Churn and Defining Target Persona Latka pressures Breckenridge to disclose gross customer churn, throwing out a high figure (8-9%) to force an answer when Breckenridge hesitates. Breckenridge defends his hesitation before confirming ~3% churn.12:18–15:25 · Guest teaching 1/10 Inbound Marketing Engine and Unit Economics Latka performs live mental math on lifetime value and target CAC using Breckenridge's stated 3:1 ratio and churn figures. Breckenridge elaborates on Hatchbuck's inbound funnel.15:25–17:36 · Guest teaching 5/10 Team Structure, Scaling Vision, and Acquisition Rejection Breckenridge rejects a hypothetical $10M acquisition offer outright. When Latka estimates month-over-month growth rates, Breckenridge corrects his compounding math.17:39–20:39 · Guest teaching 1/10 Sponsor Promotion: Toptal Pre-Vetted Developer Platform Contains a mid-roll sponsor ad for Toptal followed by standard, friendly Famous Five rapid-fire questions.1:39–4:18 · Guest disagreement 1/10 Introducing Don Breckenridge and Hatchbuck Product Overview Latka demonstrates familiarity with SaaS pricing mechanics, usage tiers, and expansion revenue. Breckenridge readily explains Hatchbuck's user and contact tiers.4:18–6:34 · Guest disagreement 1/10 Hatchbuck Origin Story and Target Market Gap Latka clarifies the distinction between total users and paying accounts. Breckenridge shares the origin story of noticing a market gap between Mailchimp and enterprise CRM/automation tools.6:34–9:24 · Guest disagreement 1/10 Capital Strategy and Revenue Growth Trajectory Latka drills into fundraising structure and rapidly calculates monthly run rates from annual figures. Breckenridge details their rolling pre-Series A capital strategy.9:24–12:18 · Guest disagreement 4/10 Mastering SMB Churn and Defining Target Persona Latka pressures Breckenridge to disclose gross customer churn, throwing out a high figure (8-9%) to force an answer when Breckenridge hesitates. Breckenridge defends his hesitation before confirming ~3% churn.12:18–15:25 · Guest disagreement 2/10 Inbound Marketing Engine and Unit Economics Latka performs live mental math on lifetime value and target CAC using Breckenridge's stated 3:1 ratio and churn figures. Breckenridge elaborates on Hatchbuck's inbound funnel.15:25–17:36 · Guest disagreement 3/10 Team Structure, Scaling Vision, and Acquisition Rejection Breckenridge rejects a hypothetical $10M acquisition offer outright. When Latka estimates month-over-month growth rates, Breckenridge corrects his compounding math.17:39–20:39 · Guest disagreement 0/10 Sponsor Promotion: Toptal Pre-Vetted Developer Platform Contains a mid-roll sponsor ad for Toptal followed by standard, friendly Famous Five rapid-fire questions.1:39–4:18 · Nathan pushing back 1/10 Introducing Don Breckenridge and Hatchbuck Product Overview Latka demonstrates familiarity with SaaS pricing mechanics, usage tiers, and expansion revenue. Breckenridge readily explains Hatchbuck's user and contact tiers.4:18–6:34 · Nathan pushing back 2/10 Hatchbuck Origin Story and Target Market Gap Latka clarifies the distinction between total users and paying accounts. Breckenridge shares the origin story of noticing a market gap between Mailchimp and enterprise CRM/automation tools.6:34–9:24 · Nathan pushing back 3/10 Capital Strategy and Revenue Growth Trajectory Latka drills into fundraising structure and rapidly calculates monthly run rates from annual figures. Breckenridge details their rolling pre-Series A capital strategy.9:24–12:18 · Nathan pushing back 6/10 Mastering SMB Churn and Defining Target Persona Latka pressures Breckenridge to disclose gross customer churn, throwing out a high figure (8-9%) to force an answer when Breckenridge hesitates. Breckenridge defends his hesitation before confirming ~3% churn.12:18–15:25 · Nathan pushing back 4/10 Inbound Marketing Engine and Unit Economics Latka performs live mental math on lifetime value and target CAC using Breckenridge's stated 3:1 ratio and churn figures. Breckenridge elaborates on Hatchbuck's inbound funnel.15:25–17:36 · Nathan pushing back 3/10 Team Structure, Scaling Vision, and Acquisition Rejection Breckenridge rejects a hypothetical $10M acquisition offer outright. When Latka estimates month-over-month growth rates, Breckenridge corrects his compounding math.17:39–20:39 · Nathan pushing back 0/10 Sponsor Promotion: Toptal Pre-Vetted Developer Platform Contains a mid-roll sponsor ad for Toptal followed by standard, friendly Famous Five rapid-fire questions.

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

0:00 · Nathan 79.3% · guest 20.7%0:00 · Nathan 79.3% · guest 20.7%3:00 · Nathan 19.5% · guest 80.5%3:00 · Nathan 19.5% · guest 80.5%6:00 · Nathan 42.5% · guest 57.5%6:00 · Nathan 42.5% · guest 57.5%9:00 · Nathan 26.5% · guest 73.5%9:00 · Nathan 26.5% · guest 73.5%12:00 · Nathan 42.3% · guest 57.7%12:00 · Nathan 42.3% · guest 57.7%15:00 · Nathan 42.2% · guest 57.8%15:00 · Nathan 42.2% · guest 57.8%18:00 · Nathan 79.9% · guest 20.1%18:00 · Nathan 79.9% · guest 20.1%21:00 · Nathan 97.8% · guest 2.2%21:00 · Nathan 97.8% · guest 2.2%
Sharpest disagreement ▶ 16:26 Breckenridge flatly rejects acquisition buyout hypothetical

Breckenridge responds with an immediate, emphatic 'No way' when Latka asks if he would take a 5x ARR $10M acquisition deal, asserting the value of their scaling phase.

 Hardest push from Nathan ▶ 10:52 Latka boxes Breckenridge into revealing churn metric

When Breckenridge hesitates to share churn metrics publicly, Latka refuses to let it slide and tosses out an exaggerated 8-9% figure to force an accurate number.

 Biggest teaching moment ▶ 17:15 Breckenridge corrects Latka's MoM compounding math

Latka suggests that doubling YoY requires 7-9% MoM growth, but Breckenridge politely points out that due to compounding, doubling only requires 5-6% MoM.

 Nathan holds their own ▶ 14:29 Latka computes LTV and allowable CAC in real time

Latka demonstrates deep SaaS metric mastery by converting gross monthly churn and ARPU into average lifespan and a $6k+ LTV, deducing Hatchbuck's $2k CAC cap.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Introducing Don Breckenridge and Hatchbuck Product Overview 5111 Latka demonstrates familiarity with SaaS pricing mechanics, usage tiers, and expansion revenue. Breckenridge readily explains Hatchbuck's user and contact tiers.
Hatchbuck Origin Story and Target Market Gap 4212 Latka clarifies the distinction between total users and paying accounts. Breckenridge shares the origin story of noticing a market gap between Mailchimp and enterprise CRM/automation tools.
Capital Strategy and Revenue Growth Trajectory 6113 Latka drills into fundraising structure and rapidly calculates monthly run rates from annual figures. Breckenridge details their rolling pre-Series A capital strategy.
Mastering SMB Churn and Defining Target Persona 6246 Latka pressures Breckenridge to disclose gross customer churn, throwing out a high figure (8-9%) to force an answer when Breckenridge hesitates. Breckenridge defends his hesitation before confirming ~3% churn.
Inbound Marketing Engine and Unit Economics 7124 Latka performs live mental math on lifetime value and target CAC using Breckenridge's stated 3:1 ratio and churn figures. Breckenridge elaborates on Hatchbuck's inbound funnel.
Team Structure, Scaling Vision, and Acquisition Rejection 4533 Breckenridge rejects a hypothetical $10M acquisition offer outright. When Latka estimates month-over-month growth rates, Breckenridge corrects his compounding math.
Sponsor Promotion: Toptal Pre-Vetted Developer Platform 1100 Contains a mid-roll sponsor ad for Toptal followed by standard, friendly Famous Five rapid-fire questions.

Statements from this episode (12)

Insight
SaaS pricing should tie multiple value metrics to customer usage
“The smartest pricing structures I've seen in SaaS from the fastest growing companies, they always have multiple value metrics that would, that are used, that are tied to usage that encourage people to basically increase their ARPU or pay you more and more ever…”
Nathan Latka Oct 16, 2016 ▶ 2:56
Assertion Not checkable as stated
Hatchbuck ARPU is just under $200 per month
“It's just under 200 dollars a month.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 3:57
Disclosure
Hatchbuck serves over 1,100 customers and 4,000 total users
“We've got over 4000, somewhere between 4045 hundred users on the system. And somewhere between the, probably about 1112 hundred customers on the system.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 6:04
Disclosure
Hatchbuck has raised over $5M in capital
“And then we've raised over five million since.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 7:08
Assertion Not checkable as stated
Hatchbuck generated just under $2M in 2015 revenue
“2015 just under two million.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 8:32
Disclosure
Hatchbuck surpasses $2.5M in ARR
“We're about two and a half or over two and a half million of ARR.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 9:00
Assertion Not checkable as stated
Hatchbuck maintains approximately 3% monthly customer churn
“We're around a three percent of churn”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 11:14
Assertion Not checkable as stated
Average SMB SaaS monthly churn is between 3% and 7%
“In the SMB space, you'll see an average of three to seven percent.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 11:30
Assertion Contradicted
HubSpot achieved 0% net revenue churn around 2015
“I know that HubSpot recently, I think in the past year hit zero percent revenue churn.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 11:55
Disclosure
Hatchbuck relies entirely on inbound marketing with zero outbound sales
“So we have, we're fully inbound marketing. We don't do any outbound.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 13:00
Disclosure
Hatchbuck CEO would instantly reject a $10M buyout offer from EIG
“No way.”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 16:28
Insight
SaaS startups should pivot to scale acquisition at $1M to $2M ARR
“With these SaaS companies, you spend several years building the foundation, building the product, building the team, building everything. And then once you get to say one, two million dollars of M of AR, then you, then the goal is to grow and scale the busines…”
Don Breckenridge, Jr. Oct 16, 2016 ▶ 16:34
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