The Exchanges

Q Yeah, 72%. Yeah, yeah. I mean, yeah, so when you say that your management tool is lower, I mean, are you talking like sub two percent per month? Like, how low can you get it?

A So our management tool depends if, so lots of different factors. If you connect an accounting solution, then that turn is getting down there. It's not quite two, but it will hover somewhere between three and four. If you connect an accounting solution, if you don't connect an accounting solution, you're, we're still below that, you know, five to seven percent. So we're better than the 50% annual turn. If you come in and you're a startup and you're wanting to Um, get access to capital and you're looking at our tool for just that purpose. So we call that, you know, an event driven. They're not really thinking about running their business better. They just want money. They want capital, whether it's an SBA loan or an angel investment. Those are people who come in already knowing that they're going to use the product for a short term. So some of those we will transition to a different cohort and some of those we won't. So that churn is probably more at the, you know, six to eight percent churn.

AI assessment note: “It's not quite two, but it will hover somewhere between three and four.”

Q slash Nathan, but you gotta do it now. Again, HostGator.com forward slash Nathan. Sabrina, how do you know, cause you could slice and die with a, with a sample size this big of millions of users on a free plus paid thing, you could slice and dice data all day long and get nothing done. I mean, how do you decide what cohorts to slice and what not to slice?

A We're really looking at what we call the golden path in the software. That then drives to more usage. So we know that if you can connect an accounting solution, you are worth more to us. So we are looking at the cohort of people who connect accounting solutions, and we're looking at their golden path. What do they do? What drives them to connect the software? So we're not, you're right, because you can get mired in data. So we're trying to focus in on the users that we're seeing have the longest lifetime value, and then understand what did they do, and how do we encourage other people to do the same thing? So we try to be mindful. And then over the course of the last six, seven years that Lifeline has been allowed around, you can also strategically say this quarter, we're going to focus on this type of user and we're going to dig into that data and we're going to do some tests and we're going to see if we can move the needle while watching another cohort that we've already put in motion and put some tests in place.

AI assessment note: “focus in on the users that we're seeing have the longest lifetime value”

Q That's great, and so what do these SMBs and mid-market companies pay you typically per month to get access to all this technology?

A So we, a couple of different ways that they can interact with us. We've got an online content site, bplans.com, And that is completely free, and it's got thousands of articles, free downloadable templates, 500 free sample business plans, the entire business plans that people can look at, um, and that's all free, and we are big believers in educating, and we think that when we put out really high value content and we educate people for free, eventually some of them will come back and they'll buy our products, and most of our products are In the range of about 20 dollars per month for two active users. So we really try to focus on products that help make a difference for small business owners, but you know, it's about the price of a latte a week. That's great. You know, it's hard for them. They have a lot of things they have to deal with.

AI assessment note: “most of our products are In the range of about 20 dollars per month”

Q Well, Sabrina, hold on, hold on, hold on. Something's not, something's not matching up there. I mean, that's not just a math error. That's like off by a factor of a big amount. So, so what's wrong there? Is it, you don't actually have two million paying customers or it's a higher or lower price point?

A We've had over two million paying customers in terms of active customers at any given time. The average is different, so it's not necessarily 20, but I don't wanna, I probably shouldn't go down the path of lots of numbers, because being private, we don't disclose all the numbers, so we don't want people to do backwards math and get to any numbers, so in a given time, in, um, say, live plan, we'll have over a 100,000 paying subscribers, but then we've got, uh, Um, some other tools. We've got Health Center Pro and Outpost, and so we've got a variety of tools, and the live plan on average is 20 dollars a month. On some of our other tools, it's more expensive, and we've got, um, other trainings and packages that are in the thousands of dollars, and we've got other things that are upgrades, and they're five or 10 dollars, and so we have a variety of offerings. So it's not an average of 20 for two million, but we've had, and we've had over two million customers In the live plan, uh, product. They're not all actively paying us right now.

AI assessment note: “They're not all actively paying us right now.”

Q never got the respect of public markets in terms of her, her valuation because churn was so high and it's hard to build a SAS company in the SMB space because SMBs go out of business. So, so you've had two million come through your system. There's only a 100,000 active today. Are you, what are you doing? What has been the most effective thing you've done to decrease churn?

A And a 100,000 in the live plan product, but more overall. So in terms of churn, you're right. Customers are going to turn out because of survivability, right? So the average small business starts today and more than 60% of those small businesses that start today will be out of business in five years. So there's going to be a natural turn in survivability. Um, in terms of how we address it, If you are actively financially managing and planning your business, you have a better survivability. So anyone, whether they use our tools or not, if you actively engage in planning and financial management, you will grow 30% faster, according to a research report by a Cranfield University professor who did a ten-year cohort. There's other research reports like that, that if you actively plan, your survivability is better. So that helps us in terms of overall churn when you compare to, say, any small business tool provider who, you know, Constant Contact is a utility tool. They're providing an email marketing tool, but they're not necessarily dealing with The financial management side, which is usually why a business goes out of business. So our small businesses have a better survivability.

AI assessment note: “if you actively engage in planning and financial management, you will grow 30% faster”

Q What's the next big revenue target? Oh, stretch goal. One that makes you uncomfortable.

A Um, well, it has to do with our new product outpost. We had a product that kind of was a forgotten kind of, you know, stepchild product called email center pro. It's a great product. We have very loyal customers, but we got so focused on live plan. We weren't doing a lot of development. We're a smaller company. We didn't want to take on investment or debt. So we kind of put ECP on the back burner. We have redone that product and it's, In somewhat of a beta right now, but the ECP customer base has a turn of less than one percent and lifetime values in the 5000 dollars. And it's just a really solid product that we just didn't do much.

AI assessment note: “well, it has to do with our new product outpost.”