Hey - Marc here.

Happy Saturday morning, motivated B2B SaaS Founders!

Here's at least one tip to keep in mind as you grow your B2B SaaS company:

Today's issue takes about 5 minutes to read.

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In today's issue, I share some key takeaways from a recent interview between Nathan Latka, the host of Daily Interviews with SaaS Founders, and David Brennan, the CEO and founder of Safety Evolution. They discussed how he grew by 400% by acquiring his smaller $450k ARR competitor without using cash.

David Brennan is an experienced CEO, SaaS co-founder, and safety professional. He's driven by a passion for technology, focusing on creating user-centric software disrupting the safety industry. He's passionate about building and creating high-performing teams at Safety Evolution.

About Safety Evolution

So often, workers would fill out a compliance document to protect the company. Safety Evolution moves companies away from that. There are so many constraints with paper and other types of communication wherein you can't actually see what's happening in the field.

Whenever they have employees, they must ensure three major things stop events from happening. They must be trained, have experience, and be verified. Their safety program does all that and gives the tools to the worker.

Their ideal customer profile is oil and gas service companies and construction contractors with a 500-1000 employee range. They look at safety as a function of your business and better understand how they can change safety from compliance to an actual tool that helps your bottom line, protects your workforce, and is proactive in what it does.

They purchased one of their competitors, Safety Tech, and did about a 180-degree pivot in their product. They went from a very rigid system to now that was very designed for those smaller companies.

P.S. When Nathan and David spoke in 2020, David had about 43 customers at $170 per month and $100k a year in revenue. Currently, they've got 155 companies at about $650k in annual recurring revenue.

Challenges

The competitor they acquired had more revenue than they had.

David got away with giving them just 40% because he had a strong team and Safety Tech’s CEO, Ryan Quiring, saw the potential of their product. They also had a lot of incentive to join because of this, and it just made sense. There was also a strong co-founder aspect of it that Ryan would have support for.

Advice to Other Founders

Value each entity to decide how much your partner will own when you merge.

Merging with a startup means that you have to figure out how much each entity is worth. This is like the backward way of doing it because you can play value metrics all you want. Unless you have EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), you don't have anything to value.

There is power in having a network.

In October of last year, David went to Dan Martell's SaaS Academy and got an invitation to call Ryan Quiring of Safety Tech. They had a couple of meetings and realized they were on the right track in terms of where they wanted to go with their product. It was just a match made in heaven.

Study your competitors’ pricing.

They used a monthly pricing model, pushing them down the idea that they needed to raise capital. What they realized is what they were doing is signing companies up on a reduced annual contract. When he saw those numbers, he realized they could get them to sign up for this kind of contract.

Bonus

David’s favorite book is “Five Dysfunctions of a Team” by Patrick Lencioni.
He follows tons of CEOs but watches Dan Martell a lot.
His favorite online tool for building Safety Evolution is ClickUp.
He gets six and a half hours of sleep, depending on the night.
David wishes he knew that everyone doesn't think the way he thinks, so he could give them a little more room to be who they are as human beings.

TL;DR

Safety Evolution broke $54k a month just recently, up from $18k a month a year ago. A lot of that growth came from acquiring $450k of ARR when they bought their smaller competitor called Safety Tech, to which they gave 40% equity in the combined company to get that deal done. It was a non-cash deal. Which is great. He's proven that if you have an enterprise motion, they've got their biggest customer already paying $55k per year, which is currently about eight percent of their total ARR. He's obviously going to look to continue with that motion as they look to break a million-dollar run rate.

P.S. Here is a link to the full interview if you are interested in listening to the full episode: How he grew 400% by acquiring his smaller $450k ARR competitor without using cash.

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See you again next week.

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