02:00 Hey, welcome back to the show and I'm so pleased today to have Nick Fogle with us because he's got some good stuff to talk to us about. Nick, will you please tell us who you are and what do you do?

02:11 Hey, yeah, my name is Nick Fogle. I'm currently the CEO and founder of Churnkey. I've built a couple of businesses over the years and that's really what I'm into is building the next big one.

02:22 Love it, love it, and you said churnkey, not turnkey, right?

02:25  Yeah, kind of flue words there. Churnkey, we help businesses of all shapes and sizes with customer retention. Yeah.

02:32 Okay, and that is the name of the game. I mean, we talk a lot on this show about churn, and we talk a lot about losing customers faster than you can gain them, and what do you do to keep them, and all that kind of stuff. Give us the backstory. Like, why are you out to solve this problem?

02:49 Yeah. So we actually encountered churn firsthand at our previous business. We were growing and it was great. You know, like any business, you want to focus on the positive. You focus on growth when things are working. It's amazing. And then COVID came around and our churn had been pretty high already. It was like 10, 11 % per month. And it grew to be 15 % per month. By the way, this is a little meta, but we serve podcasters at that other business. It was a podcasting tool. And you know, It is hard to be consistent with podcasting. So there's this phenomenon called pod fade where podcasters would either record in batches like seasons and then they'd cancel our product or they would just do three episodes and then they're like, this is way too hard. I'm going to cancel. And we, we really dove into that problem and we ended up finding a way to solve it after spending a fortune on consultants, by the way, but we spent a year, spent a year, working on it and fixing it. And it's not to say consultants couldn't fix it. It was that we had a more fundamental problem we had to address with the software. And when we sold that business, we knew immediately what we wanted to build next. We felt this pain firsthand. We knew that, hey, this is a trillion dollar market worldwide. Like subscription businesses annually are a trillion dollar market. And this is a big problem. We wanted to automate it and make it easier for businesses to combat churn and improve retention and just have better outcomes as a business and for their customers.

04:13 I love it. So when you're talking attrition rates and what should people be expecting, I think a lot of people in this audience are kind of in that mode of building that recurring revenue model. As they build it, what should they expect? Like what's a reasonable attrition rate that they can look at and say, okay, I guess I'm not doing that bad or maybe they can say, okay, I'm horrible. What am I doing wrong?

04:36 Yeah. Yeah. It's, it's good to know the benchmarks of like, you know, the best companies and you know, there, there's also this thing, most businesses fail, most SaaS businesses fail. So we don't even learn, we don't even get the stats from them, but of the businesses that survive, you know, let's talk about two different kinds. It's easy to separate and think about two different types of software businesses or subscription businesses. One sells to consumers, you know, everyday people. One sells to businesses. First, let's talk about the consumer focus. So think of Netflix or anything that you as a consumer or individual might purchase on a recurring basis. A solid churn rate on a monthly basis, still high, but 5 % to 7 % is pretty strong retention numbers there. A lot of businesses we see have 8 % or higher. And any amount of churn is bad. You can always be improving it. And the cool thing about subscription businesses too is like, since it's recurring, if you save a customer, it's not just like you're getting that payment for one more month. You can get a full lifetime value reset. So it's like, if you have any turn at all, you know, there is revenue that you could bring forward by keeping those existing customers or more of them from leaving. I just talked about consumer businesses, like B2C. B2B is even lower. You know, good B2B businesses, they usually want to be like around 2%, 3 % monthly. Some of that's failed payments, some of that is voluntary cancellations. But the best businesses tend to have less than 2% monthly churn.

06:14 And why do you see that? Why do you see such a difference in the B2C versus the B2B?

06:20  It comes down to the buyer. If you think about a business decision, it can take a while to get consensus amongst a team. So when you buy something, there's a lot more intentionality that goes into it. It fits a business objective or a business goal. And the bigger the business that you're serving, the less likely it is to trend. Because just as hard as it is to close a large enterprise or mid -market deal, it's about the same difficulty of losing it. Because they have to go over and achieve consensus that we want to buy this thing. And then when they want to cancel it, like we've got to achieve consensus and decide that we want to cancel it versus consumers buy things on a whim. You know, it's like, let's try this out for a month.

06:56 Yeah. Totally, interesting. Now I can totally see what you're talking about and I feel like that's definitely something to consider. When you are developing product out there, for those listening, you're developing product, there is a very different type of buying cycle and a very different type of turn cycle with B2C versus B2B. And if you're still trying to discover which end of the market you wanna play with your product, really think about that because sometimes, Client acquisition is your thing and you're really good at nailing B2B clients. Sometimes you're more of a consumer guy and that's okay. Both are good, but I love the benchmarks you just set there on thresholds of a pain you should expect in these two marketplaces.

07:39 Yeah, yeah, exactly.

07:42 So Nick, why? Why are you setting out there to solve this? What did you discover in your business that's gonna help other businesses?

07:52 So we spent a year solving this problem. So we spent an entire year trying all of these different things. And we learned a lot about churn. We were familiar with churn because we'd worked on it for years. We'd done little things to try to improve it and try to reduce the churn rate we had. But after working with consultants, we learned a lot from working with consultants, but we realized, well, okay, advice alone isn't going to solve the problem. And even some of the high level suggestions didn't solve the problem. We started working within the product. And as we started to find measurable results, we realized these weren't unique to our product. These were problems that any subscription business would face. And even before we launched this as a fully fledged business, we broke out that component of the product we had into a dedicated solution and we ran beta tests. So we had other companies that had turn problems and we had a few beta companies. And they got tremendous results. And as we saw that it was repeated once or twice, it was like, okay, this is a no brainer. Let's do it.

08:54 Right, right. So you actually saw positive results with actual clients before you jumped in and said, let's go solve this for lots of people.

09:03 Exactly. Yeah.

09:04 I love it. That's such a smart thing. You know, I see a lot of people trying to raise money and throw money at their company when they haven't even solved the problem once for anybody. And yet they go in thinking they can solve everyone's problems. What you did in solving your problem first, then solving for others and making sure that it did have a track record and you got testimonials, all that good stuff. Then you saw the path to growth. Looking back on it, Is there a moment in time in the launch of this business where you thought, okay, that's it. Let's jump in and nail this particular problem.

09:43 Yeah, there were a few different moments. I would say that with the previous business, we knew that we were going to sell that business. It didn't have the alignment with the founders. It was like, we were working with podcasters. We didn't have a podcast. It was kind of like, all right, well, we know we want to exit this business eventually, but we also knew that we weren't going to exit and retire. Like we wanted the next thing. So it was helpful to have like the next thing in mind already, particularly something that we tested. We knew it was a pain point, you know, that, that sort of thing. So that was kind of the analysis that went into it where it was like, Hey, it might work. It might not. Let's give it a shot. And then if it doesn't work out, we can move to the next thing. Yeah.

10:23 I love it. I love it, I love it. So what you're saying is when you were thinking exit, one of the best decisions you had was, you know what, we'd rather solve this problem than that problem. Maybe we can sell this off and focus on the one we like solving more.

10:38 Yeah. Yeah. It was, it was kind of like, we have seen what it's like to work in a business to consumer focused arena. And we realized that, okay, well, this is what a B2C business is like. There's a lot of fun there. There are these viral loops, you know, it's, it's kind of a lot of dopamine hits. We knew B2B wouldn't have that. It would be different, but the stability and the consistency was kind of a better match for what we were heading toward.

11:02 I love it. That's really cool. And for those listening, pay attention to what Nick is saying because a lot of you think that the business you start at first is a business you gotta stick with for the rest of your life. And Nick, I love the mindset that you had in trying to determine, is this something I wanna do long -term or is this something that's a stepping stone into something else potentially? How did that go through in your own head? What was that progress look like?

11:27 For the first business or the new business, like thinking of it as a stepping stone.

11:32 The evolution into the second, yeah.

11:34 Yeah. Well, it was really this idea around founder business fit. And I think we knew ultimately like that we might not be the best founders to run that first business long -term, but you learn all these skills in the process of growing a business that are transferable. Now some aren't, and we had a lot of pain when we first started the business, the new business, because it was like the marketing efforts and sales efforts we had for the first business. They, they weren't applicable in the new environment, but it was, you know, that the things like grit and patience and just persisting and listening to customers, listening to the market, those are the sorts of transferable skills that you just get better at. It's like a muscle. The more you do it, the more you have pattern recognition and you can identify these pain points that people will pay you to solve that might not be immediately obvious if you're a brand new founder. When we started the first business, I think this is kind of right on point with your messages. We had this mindset of, I call it the field of dreams mentality. Like if we build it, they'll come as in like, we're going to build this, this awesome thing that we want. And by making it awesome, like it guarantees customers. And that was not true. We spent about 12 to 18 months on this platform. That was amazing. It was just what we wanted and we couldn't monetize it. I mean, we had very little revenue. but the funny thing is. The thing that became successful for that first business was basically throwing away all the work we'd done and driving in on a key pain point that we'd found by working with podcasters and creators and radio shows over the last few years. And when we honed in on that, we had a very narrowly focused product that solved a real pain point. Suddenly people were paying us to solve a much more simple problem.

13:24 Isn't that funny?

13:25 Yeah.

13:26 That's something most people don't expect, is that sometimes you make better money solving a simpler problem than thinking gotta be the Swiss army knife and solving everything. It's a lot harder to scale than if you just niche down and serve a very specific target mark. Is that what you said?

13:40 Yeah, exactly. By knowing who your customers are and knowing precisely what you're solving, it's much easier to market, much easier to sell.

13:47 Awesome, so when you jumped into this business of churn, really the concept was, hey, I had this problem, I really know this problem, I wanna help other people with the problem. Is that kinda where your mind was at?

14:02 That's exactly right. Yeah.

14:07 And so how did you market research that? What was the trigger of like, okay, this is gonna go?

14:08 Well, it was a hypothesis. Like in business, you're constantly making these hypotheses and you're trying to understand, all right, well, how much time and capital do I want to put behind this bet? And we had a lot of evidence based on our own experience. And then we started working with new businesses in this like beta period where we were doing a lot of exploration, understanding what customers needed, what was helpful, what wasn't, what worked at scale. Businesses are all different too. So like churn can be different, as I mentioned at the top of the call, it can be different for different businesses. So, we use that period of time to really decide, is this something we want to double down on or is it just like a simple product that we can just kind of let it do its passive thing.

14:47 Totally, totally. But when you're talking about a trillion dollar industry, like you mentioned, within that, is there a specific target of recurring revenue models that you're trying to hit? Like what is your problem, what is your problem, your product, solved best and who are you trying to niche into right now?

15:05  Yeah. So I'll tell you the mistake we made initially was just looking for other founders that looked like us. We were just looking for small kind of bootstrapped companies that seemed like, Hey, these people are like us. So maybe this product will work for them. and we exhausted that market pretty quickly. And we found that that actually wasn't like we were, we were kind of anomalous. Like a lot of these smaller guys are not even thinking about churn. They're like, I only want to talk about growth. I don't want to talk about anything negative. If you say the word churn, it's just lights out. 

15:35 That's funny

15:36 Yeah. Yeah. So then we started kind of shifting our focus, building out more product that could cater to broader businesses. So we started going up market. So less other people that look just like us, more toward larger businesses. So businesses of like 10 to 20 people that weren't quite large enough to have like a big engineering team to build out some of these tools themselves. And so that was like the second iteration. And now we're in the third iteration of like who we're going after. And by the way, we work with subscription companies of all kinds from car washes to box companies to SaaS subscription, subscription SaaS businesses. but you know, this most recent evolution has been around. Well, even large companies have really big turn problems and it's a harder sales cycle. It takes longer. But the need, they're spending a lot more money on this problem and they're doing it inefficiently. So we found a huge opportunity here by moving up market to even larger organizations.

16:36 I love it. So tell me this though, could you have made that jump to larger businesses at the start of this business or do you feel like it was important to kind of go through that cycle of these three iterations you just talked about?

16:49 I don't think we could have gotten here had we not made some of those. I call it mistakes. I mean, we were closing deals. We were building the revenue. That timeframe was really important to build out the product and to gradually build it out by listening to the market. Not again, not building what we think businesses need, building what businesses tell us they need. Table stakes are really high too. If you're in B2B and you're going after, you know, you're whale hunting, you're going after large organizations, you're going to have a very complete polished product that addresses all these different integrations. And that's not something that we could have done out of the gate without taking a huge risk, investing tons of capital, and it could have flopped. So I'm pretty happy with the way we went about that.

17:32  And so you've completely bootstrapped at the beginning. Have you raised money since or are you still bootstrapping?

17:38 We have, yeah, we raised a small, kind of like an angel round about a year in. We were fortunate because we had some proceeds from that business sale that we could use to kind of fund our own lifestyles and put some capital in the business. But then recently we raised a seed round. We're still not, you know, the crazy venture backed, you know, unicorn moonshot, you know, we're a real business. Yeah. And that people ask, you know, you run a startup, it's like,ultimately I...

18:03 Alright. Your normal is what you're saying.

18:04  Well, yeah, but I  run a business. Our job is to be profitable and make money over the long term. So that's the outcome I'm optimizing for is to be a really big profitable company. And we did raise funding from a growth equity fund that has total alignment with that vision, which is rare. We're very fortunate to find the investors we found.

18:26 Love it. Love it, love it. You know, I don't wanna spend the whole time talking about that, but I will say, like, was there something that you could share with the audience of choosing the money versus letting the money chase you? Was it intentional that you chose the specific funding partner that you used, or were there a lot of options? Tell us about that just real quick.

18:50 Yeah. Yeah. it's a very difficult decision. We were dogmatic in our previous business about bootstrapping. Some of this was because that business wasn't VC fundable. We got rejected so hard from VCs. It's kind of this chip on your shoulder. Like we did it without our, we never want outside money again, you know, that sort of thing. but with Cherokee, it was like, well, this is a big opportunity and there's a lot different areas we can have, we can put capital work from growing a sales team to spending more on marketing, getting in front of companies, sponsoring conferences. There's just a lot of different ways that you can grow. So when it came time to get, to explore that decision, do we want to take on institutional funding? One of the critical drivers I had was like, can we put this capital to work? based on the amount, you know, we were thinking of raising, like where, where are we going to put this to work? We're not just raising money to do it and take a wild guess. And then when it came time to find the right partner, it was really about alignment on vision. Is it somebody who's looking for a hundred X return? Because what they'll be pushing us to do is maybe change our whole business model and chase something totally different to ensure that there's that moonshot unicorn opportunity. Or is it somebody that is aligned who is looking at this as a real business that's already demonstrating a lot of value and you know, maybe they're happy with a 10X return which is very much in line. Hey, if we don't 10x the enterprise value in three to four years, something's really wrong with the business from our point of view too. So that kind of alarm that was very helpful. And ultimately it resulted in the funding ramp.

20:26 Thanks for sharing that because I think a lot of people do get scared when they're raising money of they feel like they're being too picky. And it sounds like what you were able to do though is find a group that was aligned with the way you think about your business and was aligned with the fact that, hey, if this doesn't work, we should be making some changes along the way because we see this as a huge growth opportunity.

20:47 Exactly. Yeah, finding the right partner was key because it's like not just the money, but what else can they bring to the table?

20:53 100%, 100%. So, excuse me, talk to me a little bit about mistakes you made. I mean, were there challenges in growing in this style of business that you didn't foresee? You talked a little bit about the difference between B2C and B2B, but is there anything that you'd be willing to share about some challenges you faced and what did you do to overcome those?

21:14 Man, there are a lot. There are a lot, you know, you have an exit and then you start over again. You're like, I can just do the same thing in a year or two. Like reuse all that knowledge. Some of that, like I said, is transferable, but a lot of it's not. And you've got to have a beginner's mind when you enter a new market with a new business model. So I think maybe ego was a big problem initially, but we were just like, why don't, why isn't this working? And we almost threw in the towel, about a year in, it was like we were growing so slowly and we were just expecting these crazy results having just exited from a really great revenue trajectory. And we were expecting the same thing. So one of it was mindset, how we came into it. But as we started to see progress, I think one area where we could have benefited more was hiring sooner, which you often hear people who hire too fast. We were just so stuck in our ways about not looking for external funding being very risk -averse. And by the way, this was when the markets had just cratered, like 2022, 2023, the funding markets were dried up. We're still pretty depressed, funding markets are, but we were just very cautious. And I think we could have grown a lot faster if we had hired sooner. We were just constantly redlining with burnout and trying to scale with just three or four people. That's that is a recipe for burnout if you do it too long so the moment that we started hiring and being able to delegate and and have more specialization of labor amongst the team We can kind of breathe again and not work every night and every weekend So yeah, I think that was another mistake we made by not doing that sooner

22:54 I love that. And share with me a little bit because you bring up a very interesting topic for a lot of people of hiring. I would say that the most common problem I see with founders is when they first start hiring, they're generalists. They hire people that can wear lots of hats and do lots of things and kind of your buddy type mentality of hiring. You just mentioned specifically you hired specialists, people that were really good at specific tasks you knew you needed to have done. How did you go about doing that? Did you build an org chart? What was the way that you found a higher best?

23:30 Well, I'd like to say that we had that we had it the right way initially, but the truth is we did not. you know, I'm a very much a journalist, you know, I was a lawyer and I wrote the code for the first app and then started doing sales sales. So, you know, the good news about that though, is you, once you, as a founder, once you've done every job at the company, you know what you need for that role. And I think there's an argument to be made. It's like, if you're growing and once you know what each role takes, you can do a much more effective job of hiring. So, I think those first few hires that we made, it was like, okay, well, this is somebody that we're still a small team. They can, they're broad enough where they can do different things, but ultimately they have this one skill set that can solve this area and I can take this one area off of my plate.

24:14 100%, 100%. That is such the right way to think about it in my opinion. And for those listening, if you are not, if you are not doing that and you're not hiring based off of things you need to pull off your plate because let's face it, you're not the best at it, do it. Get the things that you're not the best at off your plate as fast as you can and into the hands of someone who's more experienced, better qualified to do that thing for you. Nick, how has that helped you?

24:42 I mean, it's been tremendous because I can work on the business rather than in the business all the time and being, you know, being so reactive. Like you can't think out where do we need to be in six months? Because you're so like, how do I get through today? Because there are all these customers, there are all these issues, you know, that I have to address. so I think that that would be the biggest thing and just, you know, peace of mind. I read a book last year around the time that we were going through this hiring phase. It's called buying back your time. That's Dan Martello wrote it. It was really good and it was just, it called me out on so many things where I clearly wasn't valuing my time and I was not thinking about what is the business sacrificing by having me working on all these things in the business, but not focusing on long -term strategies.

25:30 Yeah. Yep, yep. so valuable. I love it. You know, Nick, this has been a really fun conversation and I love the topics you brought up because they are things that need to be addressed by so many different people and they fail to address them the way you have. And I think a lot of that has to do with your experience and having exited a company before and knowing what it takes to get it to where somebody can buy it, take it off your hands and still make it succeed. So in closing, I'd love to know like, Did you figure all this out yourself? Do you have people you leaned on? Are there people that kind of mentored you through parts of this or where are you at, man?

26:09 Definitely could not do this by myself. I wouldn't want to. you know, in our first business, it was just me and another co -founder. We eventually brought in a third partner and looking back at that business, it was like, wow, we could not have done that without one another to compliment each other and to have a sounding board for sanity. And within Trunke, we actually had four co -founders. So we like basically doubled the number because I knew how valuable that was to have a core team of people. The business wouldn't be here today without, you know, the other co -founders I've had as a sounding board for, you know, emotional support and just to have people who are really great in certain different areas to kind of get us to where we are today.

26:44 I love it, love it. Thank you for sharing. Is there anyone particularly you'd like to give a shout out to?

26:49 Yeah, Rob Moore, Baird Hall and Scott Hurf, those are my co -founders. We've sacrificed a lot of blood, sweat and tears to get to this point and definitely couldn't have done it without those guys.

27:00 I love it. That's a great shout out. I love the way that you've strategically placed yourself with people that can help you and not just pull you down and try and grab on your coattails. Sounds like everyone's gonna bring in different specialties in the business. Is that the way you feel?

27:15 Yeah, yeah, it's really having your key area too. It's also helpful with ownership. So it's like, all right, well, you know, the buck stops with you in this department.

27:25 Love it, love it, awesome. Nick, this has been a really valuable time and I appreciate you taking the time to be with our audience and our audience, if you haven't learned anything today, it's probably because you weren't listening carefully enough. This thing was chock full of amazing feedback and amazing ways to help you grow and scale your business. Nick, thank you so much for your time today and the rest of you, feel free to check out his product down below. We got links to the company and check it out. Because if you're in a SaaS type business or have any kind of recurring revenue at all, your churn is, it can't be emphasized enough how valuable it is to keep people that have already bought paying you for the product service you deliver.

28:10 Thanks Todd, this has been fun.

28:11 Awesome. Nick, thanks so much. And the rest of you will catch you up with you on the next episode. Thanks so much.