Bootstrapping to $10 Million: Lawline CEO David Schnurman ( Part 4)

Sramana Mitra: You had about five employees. What revenue level did you reach with them on board? How many people did you have when you hit the one million point and five million point? Can you give me a sense of the scale of the operation?

David Schnurman: We got to a million with five employees. That was in 2008. 

Sramana Mitra: Two years in?

David Schnurman: Yes, I started in 2006 part-time, but it was two full years in. 

Sramana Mitra: That’s pretty quick for a bootstrapped company.

David Schnurman: We had no financing. It was very quick, so I thought I was going to the moon. Within five years, we scaled from zero to five million, then we got stuck to five million for five years. 

Sramana Mitra: How many people did you have in the zero to five million phases?

David Schnurman: We grew to 20 people, then we doubled it to 40 at one point, because we built an entire internal sales force of 20 people. The whole thing imploded when I realized that the COO who was managing the sales team was scamming the company and taking marketing leads and saying that they were sales leads.

The whole thing was a disaster. I had a 20-person sales force that essentially, within two years, was closed down. 

Sramana Mitra: Let me ask you a technical question in that fiasco. Would it be a good idea to use a sales force in selling at that price point in a B2C mode?

David Schnurman: That’s funny because that’s something that we grappled with for a long time. The answer is no because we stopped doing it. It worked but you can never keep good people at that level because they couldn’t make enough money. 

Sramana Mitra: That’s exactly where my question comes from. At that price point and that average deal size, it has to be sold with marketing and not with high-touch selling, especially in B2C mode.

David Schnurman: The reason that it worked though is because it was a deadline-driven product and everyone had deadlines. We weren’t cold calling people who may or may not be interested.

We were cold calling people who, within two weeks, had to complete their courses and we had a great product that solved their needs. It worked. It added a million dollars to the bottom line over a given period, but it couldn’t grow past that.

To your point, it almost felt like rearranging deck chairs on a crew ship. You are getting a million from here but are you just taking it away from AdWords. The proof is in the pudding when we do it. That’s why we stopped it up. I don’t regret doing it. The thing with marketing is that sometimes you feel like you want to do more. You can’t just sit and wait for the emails to come in, so I was trying to do more. 

Sramana Mitra: Did you then go in the direction of AdWords? Was that your primary customer acquisition strategy? 

David Schnurman: For a long time, AdWords was our primary strategy. Then, the person I said who was the MBA from NYU wrote a memo of how he was going to build an email system to take over the revenue for Lawline. We built a large email list. We started getting a lot of revenue through email marketing. 

Sramana Mitra: Where was the list coming from?

David Schnurman: You can buy the list since they are all attorneys. They are published by the state. 

Sramana Mitra: What year did you make the switch from this experiment on using salespeople to going back to pure marketing?

David Schnurman: It was probably in 2011. 

Sramana Mitra: Was that around the time that you hit the $5 million mark as well?

David Schnurman: We hit the $5 million mark in 2012 or so. 

Sramana Mitra: Why did you think it stalled after that in terms of growth rate?

David Schnurman: What’s interesting is that it stalled, but it wasn’t a plateau that wasn’t moving. Every year we were losing as many customers as we were getting. We were working our ass off at that time. From the outside, it didn’t seem like we were doing much, but we were working very hard.

We weren’t retaining customers and it makes sense because it’s a deadline-driven business. Some people don’t have deadlines every year. Some have it every three years. We didn’t have a subscription plan as well. It wasn’t like we were necessarily losing customers. They just have to come back next year and maybe they would or would not be interested. Retaining customers was killing us. 

This segment is a part in the series : Bootstrapping to $10 Million