Craig Hewitt of Castos: why a $19 SaaS is the hard road

Full transcript

Edited for reading. Select a time to play the audio from that point.

Moving back to the US from France (00:00)

Alex: All right, so the question was, what have you been up to, Craig?

Craig: Yeah, so it’s been a few years since we caught up. Since COVID, right? I think we talked during COVID last. I was in France. We’d been living there. We lived there for a total of five years, and we moved back to the US about three, three and a half years ago. We’re living just south of Boston.

We moved for a few things. It was like a composite endpoint, right? We moved for schools and education a little bit. We moved for taxes a little bit. We moved for family, because we have older, aging family. And the time zone was just challenging, with all of our customers being in the US and us living six hours ahead, because I was doing stuff like this. We’re podcasting at 8 o’clock at night, and it’s hard.

Alex: Appreciate it. Appreciate it.

Craig: Dude, totally. My pleasure. I know you know as well as anyone, right? It’s just tough.

So we moved back, and largely it’s been a really good move. We have middle school age kids, and they’re super happy and thriving and doing really great. It was a bit of a cultural adjustment to come back to the US, but it’s been good, and it’s nice to be here. I’m going to more conferences, and I’m plugged into the ecosystem of startups and business a little more.

Castos today: hosting and a production service (01:22)

Craig: From a business perspective, I’m still doing much the same stuff. I’m running Castos. We folded PodcastMotor, which is how you and I knew each other originally, into Castos five or six years ago. So Castos now has two parts to the business.

About 70% of the business is SaaS, from a revenue and headcount perspective. We’re a podcast hosting platform, so our customers are you: people who have a podcast and want to publish it to Apple and Spotify, with analytics, monetization, all that kind of stuff.

And then we’re still doing the done-for-you editing and production service, which has evolved a ton since we first started, because there’s now video and fucking Riverside and short clips and all this stuff. We’re in the fourth or fifth incarnation of podcasting as an industry since we’ve been involved in it.

Why YouTube comes first (02:28)

Craig: And if I’m honest, I think for most people, creating content like this should be, from my perspective, primarily for YouTube. The podcast is kind of a secondary thing, right? Practically, you’re recording this on Riverside and whatever. But I think strategically, the most valuable real estate on the internet is YouTube. It’s not even close.

Alex: I love it. And I love it because I looked at what happened to HubSpot’s SEO, and how much AI Overviews is eating everything. I actually just got off a call before this, which is why I was scrambling around like an idiot when we jumped on. It was with someone in the marketing space, and they’d had a series of contract cancellations from big companies, because everything’s moved to AI. They were right there, nose to nose with that change.

So talk to me more about YouTube. Dude, I don’t know. I’ve always struggled to just do a one-out conversation. I can’t wax lyrical to a camera and create that type of content. But I’m with you on the idea that it’s a big search engine, and you can actually own the real estate a little bit. What do you reckon?

Craig: Before we even get there, to me the thing about YouTube is: is it a search engine? Is it a social network? Is it a content platform? They have the concept of posts now, so it’s like an Instagram. And then there’s the TikTok kind of thing, YouTube Shorts. I have a 12 and a 14-year-old. They would literally spend all day on it, just watching YouTube Shorts, the same way someone would watch TikTok.

So I think from a platform perspective, it’s the only thing of its kind, where you can go there to get everything now. And sure enough, they’re going to introduce the concept of DMs and conversations. It already happens with their community feature.

From a business perspective, when you talk about AI, I feel good that we’re not really being affected. If you’re a content marketing, blogging agency, you’d be getting your shorts handed to you. But I think maybe we’re getting positively impacted by it, where people say all the written stuff, like you said about HubSpot, is just garbage, SEO, whatever. The play for SEO now is: can you show up in the LLMs?

But sure enough, you and I having this 45-minute conversation is authentic and genuine, and it can’t be faked by AI, as of today at least. So I think that’s where YouTube and podcasting really are going to shine. That’s the hypothesis, and it’s true so far. Our business hasn’t suffered because of AI.

As for YouTube, man, I think it’s super hard. I say it’s the most important thing, but sure enough, we don’t publish every week even there. I publish my podcast to YouTube, and that’s the biggest thing I do. I’m trying to get more into it, but it’s really hard. It’s not just, “I’m going to stare at the camera and talk for 10 minutes.” It’s: what am I going to talk about? Am I going to script it out? Then I have to get a teleprompter. Then I have to be able to read from the teleprompter properly and not sound like a robot. But something like this, where we have energy and dialogue, is a lot easier.

Moving from service to software (06:18)

Alex: OK. So let’s dig into this evolution of podcasting, because there are a couple of things that are interesting to me. One, you’ve made the jump from service to software. Just about everyone I can remember who was in service either wanted to scale like crazy or transition to software. You somehow navigated that, which I think is useful to talk about. But also, how did you do that as the market was moving around you? It feels like there are a lot of moving parts in there.

Craig: Well, we raised a little bit of money. Not a hell of a lot. We raised just short of a million dollars, so that’s something. We hired people and went pretty hard at the market on the software side, both from a product and from a sales and marketing perspective. I have lots of war stories I can talk about there.

But I think the reality is that the services side has always been pretty hands-off, mostly because it hasn’t been my primary focus since we started the software. And interestingly, that’s changing again now.

So, to answer your question fully, the services were humming along. We got inbound leads because we’d done just a ton of SEO, and so we’ve always just kind of gotten customers. We signed up a customer and had the onboarding call today, and they actually found us through ChatGPT. So, search. That has paid off.

That playbook just doesn’t exist any more. I don’t think you can start a product or a service today, start blogging and doing SEO, and expect to win.

So largely we had customer acquisition taken care of. The team and the process and all that were there, and I just did sales and signed up customers. So I was able to focus a lot of my time on the software side of things.

Why a $19 a month SaaS is hard to grow (08:35)

Craig: What’s so interesting now, and this is happening in real time, is realizing that the big opportunity for the company probably isn’t on the SaaS side, because it’s really tough to compete there.

What we do versus the other folks in our space is the same. I don’t know where you host your podcast. But whether it’s with us or someone else, I think the reality for most people is that the thing we do is the same as everyone else. The 80% they care about is storing files and delivering them to Apple. We do some other stuff, but I don’t think it’s that important to so many people.

Plus, it’s just really hard to grow a multi-seven-figure SaaS business at $19 a month. But growing a productized service at $2,500 a month is not as hard.

The ideal services customer (09:40)

Alex: So there’s the commoditization of that software layer. If the opportunity is not there, then where is the opportunity? Or is it top secret, and you don’t talk about it until you go ahead and execute?

Craig: No. I think the opportunity is in the services. Our ICP is so clear right now. We have this one customer who personifies it so much. He’s a wealth advisor, a financial planner in Kansas City. He has a team of about a dozen people. He knows exactly who he wants to talk to. He has endless amounts of stuff to talk about. He has a really established brand. So the podcast just fits into that, and he just wants us to take care of editing and producing it for him.

He doesn’t want a whole lot more that stretches us. He has endless amounts of stuff to talk about, so he’s not going to churn. He’s not so big that he’s going to take it all in-house. And those are all the reasons people cancel our service. So it’s pretty straightforward. We just need to find 30 more people like him.

Alex: The initial thought I had was, what’s going to prevent someone like that from in-housing? Maybe it’s the price versus the value delivered. If he wanted to figure out how to stitch together all of the different things that you do, and do them as well as you do them, then that’s going to cost him double, something like that, maybe more?

Craig: Yeah, yeah.

Alex: Is that something you sell on, in how you position your service? Do you do a “these are your alternatives, and this is what that looks like”?

Craig: We don’t. We should. It’s a really good point.

I think people come to us for a couple of reasons. One, they’re starting a new podcast, and they say, “I don’t want to figure all this out. I just want you to tell me what to do.” That’s great. The second most common reason is, “Either I’ve been doing this myself, or I made my marketing person or my EA figure out how to do it, and they’re kind of rubbish at it. We want a real team to do it, so that my marketing person or my EA can actually do their job.”

So I think they’re probably doing that math: the resources I’m allocating to this other thing just don’t make sense, in dollars and cents, versus what they would pay us.

The roll-up idea (12:28)

Alex: So, with my acquisitive hat on. I’ve been thinking about this because I’m jumping back into the space, getting to talk to everyone and seeing what they’re all doing. I’ve seen this explosion of podcast-producing productized services. (The people who like alliteration are going to love those Ps.)

My first question is, why not raise some capital, run a bit of a tender process or something, and go out and roll up a bunch of those companies? You have a really clear ICP. And given the mechanics and the profit margins, it’s scalable. This is the question I asked at GoDaddy: can you scale it by 10x without 10x-ing your cost base? With something like this, because the numbers are so big, it feels like it’s possible.

Craig: I don’t know. I think something we would run into decently soon is a layer of middle management, which just makes me want to throw up.

We have a head account manager right now, and then several account managers, and she’s a kind of player-coach. She’s not sitting above them. She’s working with them directly with customers, and then overseeing some of their stuff. I think you could multiply that in the pod model, so you’d have several of those and they’re all horizontal. And then at some point you’d have to have management: this is the customer experience manager, and this is the ops manager. That’s all fine, but it would introduce some direct overhead.

As for rolling up, man, to be honest, I’ve been mentally pretty removed from this side of the business for five years, since we raised money. We raised money not for this, but to grow the SaaS side, and so I was just going super hard on that. This side was, “Oh, I need to get on a call for this,” or there’s a problem, or an account manager quit, or whatever. So it’s interesting to be coming back home a little bit.

I think your point is very fair. I love the roll-up model. We looked at doing it on the hosting side. And I’m surprised somebody hasn’t done it, because it all makes sense. If you’re doing the same thing as everyone else, the economies of scale, that math, should all work out.

Middle management and service at scale (15:28)

Alex: The challenge on middle management… sorry, you go, you go.

Craig: I know, I hate it when people turn the tables on me when I’m interviewing. But I’ve never done that. What’s the downside to it? If you say, “Hey, this is our plan. Let’s roll up a little bit, prove the model, then raise some money and go do this.” What’s the downside, other than it just doesn’t work?

Alex: Look, I think it’s valid. I’ve been noodling on this because I’ve jumped back in full steam to see what’s going on in the market. Brigitte had her company acquired. She had a PR productized service. Jackie was acquired. She was doing podcast notes, and it was interesting, because AI just came in and ate that immediately. So her timing was wonderful. Jake’s doing really well with his agency, scaling and figuring all of that out.

So I’m seeing lots of buoyancy and still good opportunity. It still feels like there’s plenty of hay to be made while the sun’s shining. It seems obvious to me. And then I think, well, why don’t I just go and do that? So I thought I’d bounce it off you.

The challenge I’d have, and this is where more of the thinking is important, is if there’s inefficiency built into the model. If, by virtue of how you provide the service, you need a layer of middle management, I’d be challenging that notion. As we know, middle management is a shitty job to be in. But it’s also a shitty job to have in the business. They don’t have quite enough influence to go deep and do the stuff that needs to get done. They pass things through and go between. But you need to pay them enough to keep them motivated. It’s just a shit role. As someone who’s been caught in the middle management zone a few times, I’m speaking from experience.

But I would argue that you could do some org design, with incentives and tooling and those sorts of things, and with the level of skill you have in the seat, to cut that layer out. You organize by volume of clients, and have really clear and mechanical numbers all the way down. It’d take a bit more doing. Training would have to be more robust. Quality control would have to be more robust.

At GoDaddy, when we started to scale, our ratio of team leader to service provider was something like one team leader to 15 or 20 people, and then it started to balloon out to 25-ish. Then you just have to get really, really good at making sure that people know their KPIs, they’re held accountable to them, and there’s a lot of transparency in what’s being produced. It’s like the build-in-public notion, but you do it for the service providers within the team, so everyone sees their performance. No one wants to be in the bottom five. You drive all of that behaviorally. That’s the direction we needed to go, because of the question: can you 10x the revenue without 10x-ing the cost base? The constraints help. They help you through that thinking.

I’m sure there are a bunch of people who have jumped into this, and they’ve probably lucked into those good clients that you’re looking for as well. Maybe they don’t even realize what they’re sitting on. Or, because of the scale of their operation, they’re still a consultant, still doing that work, and making $80,000 or $100,000 a year to do it. So I’m on board with this thing that I just pitched myself 10 minutes ago.

What productized services sell for (19:35)

Craig: There’s definitely been some turnover in our business. I know of two acquisitions in the last year and a half or two, directly at our level. But they’ve not been roll-ups. They’ve just been horizontal, if you will.

Alex: Do you know anything about numbers or multiples, or any of that sort of stuff?

Craig: I think it was about three times EBITDA, which I think is pretty standard, with a decent earn-out, which I think is also standard for the average productized service.

Alex: If you took your top 10 competitors and rolled them up, in napkin math, does that make sense, if you could do it at a reasonable EBITDA multiple?

Craig: Oh, man. Just because I’m an idiot, what does “make sense” mean? Being able to service the debt?

Alex: Well, it depends on your goals, right? You’ve raised some cash. Usually when you raise cash, not always but generally, there’s an expectation of some kind of outcome, unless you raise through a fund that’s more profit-sharing and founder-friendly. Are you in the exit category, or the profit-sharing kind of fund?

Craig: We definitely have optionality. We raised through TinySeed, and then we raised a SAFE round afterwards. I think the folks on the SAFE want to get paid. TinySeed is cool either way.

Alex: Yeah. And that also depends on ownership and board seats and all that other stuff. But let’s just assume all things are equal.

Craig: I don’t know of an acquisition that doesn’t make sense at three times EBITDA. I think most people in our space have a gross margin of 50% at least, which I think is pretty standard, and then it gets down to 25 or 30 at the bottom line. So that’s pretty solid.

SaaS margins and the grass that looks greener (22:05)

Craig: What’s interesting is, like you said, everybody either wants to scale the service or go to SaaS. What I’ve found is that SaaS is so sexy because it’s 100% margin. Every incremental customer doesn’t cost you anything. True.

But unless you’re a developer, to have a proper, stable, functioning team where you’re not in the weeds all the time, you need to be doing a million bucks, because you’ve got direct overhead. Our direct overhead to AWS and Cloudflare is more than 10%. So that’s just 10% that’s gone. And you have developers, and you have support people, and you have designers, and you have product people, and all this kind of crap. Gosh.

I think SaaS would get really fun at 3, 4, 5 million, because you could basically have the same team and just service three times as many customers. But at a million or two it’s still a bit of a drag, which I never thought I would say.

Alex: Grass is greener, right? Everyone who’s a consultant wants to scale a service. Everyone who’s scaled a service wants to go to software. Everyone who’s done software… well, I don’t know where I land in that ecosystem of people looking at greener grass.

Coaching is really fun. I enjoy it. It’s very intrinsically rewarding. Sometimes I want to be an owner, an equity owner or a partner, because I see a ton of possibility. I can see those opportunities. But by virtue of doing that, you can’t be objective. As the coach, you’re supposed to be focused on the person, not the business, because the business is the extension of the person. Then you’ve got two masters, and you’re worried about your back pocket versus what the person’s going to do. So I’ve thought about those things. That would be my version of grass is greener.

But if you were to do the roll-up, and you’re using it as fuel for the fire, shoveling all of that profit back into growth, into marketing or sales or whatever you need to do to grow software to break-even, it’s hard for me to see where that wouldn’t make sense. I might be making a real mental shortcut here.

Craig: No, I think it’s a very valid question, because there are a lot of people in our space, to your point. And I think probably a lot around our scale. And people like to get an exit. An exit feels good. They might be tired.

Alex: I’ve had a bunch of these thoughts just because I’ve had fresh eyes. I’ve come from Canva. It’s not that money wasn’t an issue there, but if you needed to do something, you could figure out a way to do it, so it wasn’t a constraint. They weren’t spending wildly on a bunch of shit they didn’t need. But if it solved a problem, you could back it, and you could go and get it done.

Coming back into this space, there’s sometimes a ceiling of constraint on what you think is possible, due to your run rate, or the scale that you understand, or the market dynamics. It creates these blinders. It’s been really fun for me to jump back in and see some of these patterns, these things I’m noticing in some of the services. And it speaks to the fact that they still solve a real problem. They’re still profitable. They’re not sexy, but they pay the rent and do the job.

Taking one model into other verticals (25:55)

Craig: I have a friend, one of the folks who acquired one of our competitors, who is taking the productized model and applying it across several different functional areas. Writing, maybe, and podcasting is one, and then you can imagine the others. Do you see that happening? Where it’s, “Hey, I’ve figured out the mechanics of sales and marketing and ops and all that kind of stuff, so we’re going to assemble the team and go do this thing here, then this thing over here, and then this other thing over there.” Do you see that happen often?

Alex: There was a time we fielded inbound interest from, I think it was IVP, Insight Venture Partners or something. This is back in 2014, because we had that content marketing engine where people would find us and say, “Oh, this is cool. What’s this about?” They reached out and I had a call. It was a low-level call with an associate, and then it graduated to a partner call.

They could make sense of the model. They could make sense of the overall market opportunity. And what they put to me was, “If you can do WP Curve, but do it for all the platforms and do that really well, then that’s venture backable. We would get behind that.”

Now, at the time, I was so blinded by WordPress. I had those blinders on about how annoying WordPress was to use. We hadn’t quite figured out how to not have sites go down, how to have disaster recovery, and all the stuff that comes along with managing the janky spaghetti sites that we sometimes had to manage. The pain of that felt exponential. It also didn’t feel like the pain would be the same for a Weebly or a Squarespace or a Wix as it was for WordPress, and you couldn’t do as much work on them.

In retrospect, having seen the inside of how GoDaddy works, and what service and support looked like there, I’ve really turned that around. I think the idea of a service layer is possible. It could be support for everyone, or ops for everyone, or sales, these vertical chunks of things that you could do. But I think the pricing, and the scaling up and scaling down of the services each customer needs, would make it a pretty bumpy business.

We saw this at WP Curve. You’ve got a broken site. Your urgency and your need to fix it are through the roof, and your price sensitivity is quite low. You’ll pay a bunch to get that fixed, because it’s an immediate pain. With something like marketing or sales, if you’re really successful with those, you hit a threshold. If the CEO or the founder is not organized enough to capture that demand or manage it, they’ll probably want to dial it down or back it off. Or you get to a place where, if you’re charging them four to six or eight grand a month for a productized service, they can go and hire an SDR, or go and hire a person, and maybe get a bit more throughput.

I love seeing people come into this space and say, “I can take this model, systematize and operationalize everything, and then nail it.” Because it’s so much more complex than that. Oh my God. But I really like the early view: “I’ve had success in this particular vertical, so I can take my Midas touch to all of these other verticals, and it’s all going to work.” That’s where you really start to learn that these things are so different. Take podcast production versus WordPress support. Different rhythms, different dynamics, different customer expectations, different pricing, different profitability. I’d love to talk to that person, just to understand what they’re thinking.

Can you do it again somewhere else? (30:00)

Craig: You touched on a good point from a founder psychology perspective. Part of the reason we’re still doing what we’re doing is that it’s a good business. I’d give it a B, if I had to give it a grade. It’s not an A, but it’s not a C or a D or something like that.

I also often question my ability to do this well somewhere else. I’m not trying to humble-brag, but gosh, I’ve done pretty well. We’re a seven-figure business that’s profitable, and all this kind of stuff. You see some people do it over and over and over, and you think, gosh, what the heck, the Midas touch. But you also see some people who go and exit for $2 million, have to get a job pretty quick, can’t figure this shit out, and probably should not have done that. You know?

I don’t know how to figure out whether the skills you have are transferable to another opportunity. But that’s real, and it should be real for everyone who has a successful business and is thinking about something else. You’ve got to be real with yourself. Can you do this again in WordPress support, or whatever? Or LinkedIn ghostwriting, which is the productized service du jour, I feel like.

WordPress, Canva and the pull of variety (31:35)

Alex: Ooh. Yeah. Here’s my take, spicy take. WordPress is no better than it was 10 years ago. I actually posted something on LinkedIn about it, published it and then took it down. My point of view was that after 10 years, I would hope that it was better. I would hope that it was easier to understand. I would hope that the UX made sense. Then you try to update a header and it disappears off one page. You add some CSS over here, install a plugin. You’re chasing this mouse around, trying to figure out what the hell is going on.

There’s still a massive opportunity in that market. Anyone who wants to go and get it can get it. As for me doing that again, I reckon if I really wanted to do it, I could. I talk to people who are trying to do it, trying to imitate the model, or even buy up agencies and run support. I’m more than happy to help them. But my point of view is that I’ll be more intellectually stimulated, and probably have more personal growth, by having more exposure to different industries and different verticals.

Jumping into Canva and working there in product opened up this completely new thing to me. GoDaddy was at scale and publicly listed, but about 20% at the time was held by private equity. It was super focused on just driving up ARPU. You’re getting calls from customer service people all the time. Then I go into this environment at Canva, with Mel, an absolute savant of a CEO, one of the smartest people I’ve ever shared a room with. Unbelievable product vision, and very steadfast in creating the most delightful experience, with that mentality and that frame.

Again, I think it comes back to what you value. Will you eat volatility in between to have that variety? I know from my personal experience that the attraction of variety is really meaningful to me. I love to talk to different people who have different backgrounds and different skill sets. But I’m also not trying to service a mortgage. I don’t have kids. I don’t have that level of responsibility, where I have to have heaps of consistency.

So I think it definitely comes down to the founder. But it’s a real trap to think that if you do it in one vertical, you can go and do it in another. WP Curve was a great business with a great outcome. Dan had a mailing list of 6,000 people when we launched. He’d worked on that for years. He’d been actively blogging. He’d tried to build a software company and hadn’t had success with that. So we had a base. Now, we didn’t make any sales off that mailing list when we promoted to it, because they were interested in his story and weren’t necessarily good customers for us. But they were massive promoters, and they would talk about the service.

If I’m jumping in and trying to do a WP Curve in, what year are we, 2025, my game plan is very, very different. Content arguably doesn’t work, or works nowhere near as well as it used to. So the ability to run the business and scale it is real, but going to market and getting through that early crunch is so difficult.

Considering all of that, that’s why I look at the roll-up model and ask: in which verticals could this be true? When does it make sense? If it’s an existing company that’s got some version of scale, can you add on top of that? And when doesn’t it make sense? Because it’ll seem like someone’s got a productized service, but when you get behind it, there’s really no, I want to say, motor.

Craig: There’s a dude with a Trello board, yeah.

Alex: Oh, man. They’re playing six different instruments and doing three people’s jobs. You get into it and you think, oh, that’s not it. So that’s an extended answer, but that’s my take.

Craig: Yeah, makes sense.

Favourite customers: churches (36:08)

Alex: So, software. War stories, challenges. The entry price point is $19, and the top tier is, did you say $199?

Craig: Standard pricing is $19, $49 and $99. Then we have a $500 plan, and enterprise is up from there. We have handfuls of enterprise customers and a handful of what we call premium, and 90% plus of our customers are on the $19 plan.

Alex: I can’t ask you who your best customers are, but who are your favourite customers?

Craig: Churches.

Alex: Churches? How come?

Craig: They’re like our financial planner guy on the services side, but on the hosting side. They need this thing that is very straightforward. They’re going to upload their sermons on Sunday, and they need them to go out. They usually have a WordPress site that they integrate it with, because they have a bunch of other stuff going on. That’s the persona of our WordPress users: they have more going on in their brain than just their podcast. So the podcast needs to be on the site and integrated pretty fully.

They’re never going to stop. They’re never going to run out of stuff to talk about. And they have money. Those are the only three reasons people ever cancel: I don’t podcast any more, it’s too expensive, or I just don’t want to do this.

Alex: Do they have Righteous Gemstones type of money?

Craig: Some of them. You’ve been in the US, so you know these megachurches. Some of them are absolutely enormous. Some of them are just the Baptist church in Indiana that wants to put the sermon up on Sunday.

But that continues to be an unexpectedly good customer for us. Coming into it eight years ago, I never would have said churches have a podcast. But now it’s a representative example of what a really good customer is. There are other people who aren’t churches who have all those same characteristics. Whatever that looks like, that’s our best customer.

What a good customer looks like (38:40)

Alex: We got to a point, I think it was about two years in, where there were some attributes, and if you stacked those attributes up, it generally meant it was a good customer. It was someone who was actually spending money on marketing, whether that was paid advertising or creating content. They were building a mailing list, or trying to sell something online. They’d invested in hosting that was better than the industry standard, so they were generally on WP Engine. There was an existing motion that they were going through, and we just happened to slot into that really nicely.

Those people would pay the most and ask the least of us. And what I found in support was that if people had a shitty business, they were having a shitty time, and they’d often take it out on the support people. When someone’s got an established business and they’re doing all right, they’re a little bit more pleasant to deal with.

It took a while to get to what those attributes were. At the start, you think, we’ll go after a category, or a different market, or a group, or a community. But ultimately I think the lesson is, if you’re early and you’re trying to figure out your ideal client profile, look for those attributes. They just so happen to be churches, which is kind of what you’re getting at. They have those attributes.

Craig: Yeah, 100%. I think our ideal customers actually sound very similar. Our ideal customers understand the value of content. They probably started blogging first and then said, “Gosh, that doesn’t work any more. I need to do something else to represent my brand.” So they want a podcast. They know what they want to talk about. They’re in some kind of evergreen content world. So churches, or the financial industry, or sports oftentimes, are good customers too. That’s what a good customer looks like.

Getting customers at $19 a month (41:05)

Craig: I think the challenge in the business, which you were getting at with the price points, is customer acquisition. At $19 a month, you just don’t have that many customer acquisition options. Across the hosting platform we average about $29, 30 bucks. That’s what the average person pays us.

Paid, which we’re experimenting with right now and have been for several months, is really hard. Something like outbound, or putting together a sales team, is super, super hard. So then it’s content. Well, gosh, content’s really different than it was two years ago. Then there are referrals and affiliates and partners, which we lean into pretty heavily, mostly on the technical side, like integrations.

Alex: I spotted Castos in Riverside and I was like, yes.

Craig: Yeah, stuff like that. We integrate. We’re recording this in Riverside. So Riverside, and Descript, because we’ve got a lot of folks editing in Descript. Obviously WordPress, a bunch of membership platforms, and Kit, formerly ConvertKit. We integrate with a lot of those places, thinking, what other stuff do our customers do, and how can we make it easier for them there?

I think the reality is, if you’re a WP Engine, where the average customer is probably paying them 500 bucks a month, the world’s your oyster. You can throw all of the marketing and customer acquisition options at the market. At a lower price point, you just can’t. Especially if you’re now bootstrapped again, or self-sufficient, you just can’t. Even when you raise the money, you’ve got to get paid eventually. And we didn’t raise enough to where we’d just be dumb with our money. We tried, but not quite.

Alex: Clip that. It does happen, though. I’ve seen a bit of that in my recent travels.

Feature gates and usage-based pricing (43:18)

Alex: The fact that the price points still exist tells me that they make sense. It’s economically sensible to have them, and not kill the 19 and not kill the 49. Is graduation through the product suite the play?

Craig: What the price points are made up of is mostly feature-gated. At 49, you get republishing to YouTube. If you’re not recording video, we convert the audio to video and publish it to YouTube. We have an integration with Headliner, which does the audiograms, and you get that on the middle plan, the growth plan. On the pro plan, it’s video hosting, because some people do video podcasting, and we do some advanced analytics. Custom domains come in at 49 now, I think. So if you don’t have a website and you want to use the Castos website, but on your own domain, that’s at 49.

We’ve played around with usage-based pricing, and with not having it and being completely unlimited. Then people take advantage of you. And it’s kind of wrong to have “fair use” as an asterisk next to your pricing. It’s 49 for most people, but we might hammer you with a $500 bill. That just doesn’t feel right.

The metric that makes the most sense for us is bandwidth. You could say bandwidth or downloads or whatever, because that’s just what costs us money. Everything else doesn’t really cost money, but the number of times a file is downloaded costs us quite a bit. That’s a bummer, because then it’s, “Gosh, Alex, congratulations. Your podcast is really successful. Now you get to pay us more money.” It’s what a CRM or an email service provider would do, but it doesn’t go over very well in our industry. So the short version is, we don’t see a lot of people graduate between the steps.

Three versions of Craig in the business (45:30)

Alex: And there’s a big enough market to run it with 90% at 19. I’m just trying to do the mental math to figure out total addressable market and profitability. We haven’t had this conversation, on or off camera, about what your goals are with the business. If I was to assume, from what I know of you, you’re happy to learn, happy to build, happy to grow. You try to extend yourself through the business. Is that reasonable? Is this the Craig of 2019 that’s so near and dear to me?

Craig: Just like we’re in the third or fourth incarnation of podcasting, I’m in the second or third version of myself in the business, which I think is healthy. Some people never see it, because they grow and they sell, and they’re doing one thing the whole time.

We had the figure-it-out bootstrap phase, which was super terrible, to your point earlier. Then we raised some money and were growing very fast. COVID was very good to us, like a lot of people in our space. Then we had to get to profitability, a bit the easy way and a bit the hard way, which means letting folks go. And now we’re profitable and growing.

We’re not growing super fast and we’re not super profitable. So we’re not an acquisition target to folks. And I’m not going to sell the business for an average exit, because I’d much rather just keep doing this. I like it. And I can’t imagine something exponentially better, I guess, is the other part. Like I said, we’re kind of a B business.

I started doing some coaching last year. I called it the seven-year itch. It literally is the seven-year itch. That’s a saying in the US, right?

Alex: Yeah. At seven years, you have wandering eyes.

Craig: Seven years into the business, I was like, gosh, I need to, like you said, talk to different types of folks and be intellectually stimulated with something different. So I did some coaching. I still do some of it. I have a handful of clients that I coach.

Alex: That’s awesome.

Craig: That satisfies that part of life. But I really like the business still. I really do. Will I exit someday? Probably. Do I see that happening right now? No, because it’s just not that kind of business right now. And that’s cool.

What multiple would he sell for? (48:25)

Alex: Do you know what your multiple would be? We don’t have to talk about dollar numbers, just the multiple, because we haven’t revealed what your ARR is or any of those sorts of things. If Mr or Mrs or Ms Acquirer came to you tomorrow and said, “I’ll give you X multiple for what you’re doing,” do you have a threshold for what you’d be happy with?

Craig: Gosh. I don’t. I don’t really know, I guess. Productized services and SaaS are most different, maybe, in that a high-growth, seven-figure SaaS business is typically valued on revenue, whereas a productized service is valued on EBITDA or SDE or whatever.

Alex: Unless you sell to a strategic.

Craig: Yeah, right. And then it’s whatever they think. So we would get valued on a combination, or each side of the business would get valued separately, or something. I don’t really know.

We went pretty far down the path about a year and a half ago, and that’s what they did. They said, “We value this over here at about 1x, on the services side, and we value this over here at 2 or 3x revenue.” That’s pretty reasonable, I think. Something like that.

Alex: Would you sign for that, at this point in time? And let’s blend it, because I’ve seen higher multiples for the service side. If there’s a hungry buyer who sees how it plugs into a bigger org, they can eat it on a tax write-down and then scale it as soon as it lands, so there’s upside in that. But all in, 4x, 5x, do those sorts of numbers get your eyebrows raising?

Craig: It’s not amazing, you know. That’s the thing.

Things are weird right now. Just imagine being here. Things in the US are super weird, and things everywhere, because of what’s going on in the US, and in AI, and God knows what. I said this to someone the other day: there’s more uncertainty than I’ve ever seen, including COVID. COVID for us socially was horrendous. For us as a business, it was whatever. We were remote already. People don’t have to go anywhere to use our service. If anything, they were using it more, because they couldn’t go and do other stuff.

I say that because right now there’s a lot of uncertainty, but our business feels pretty solid and insulated. We haven’t really been affected by this stuff. But say I just had a bunch of cash and I had to figure out where to put it, and that was the cash I was going to need if my daughter wants to go to NYU in four years. That money has got to make money to send her to NYU in four years. That would be more stressful than just continuing to do this. And that’s the math for me.

Variety and seasons inside one business (52:10)

Alex: There’s a lot of experience and wisdom in that. I count you as someone who’s had a few innings. You’ve done things that you didn’t love in earlier parts of your career. You have a great level of introspection to figure out exactly what’s important to you. When I hear you play that back, it goes through these steps: what is it that I need? What is it that I’m focused on? The reason I asked that question in the first place is that I felt it would have to be pretty extraordinary for you to get excited about it. And even then, you’d probably play devil’s advocate on it anyway.

Craig: I’m just greedy, maybe.

Alex: Well, I don’t know. I think you’re quite settled. You’ve had time to view the greener grass, inspect it, make sense of it, and then put it in the context of what your world is. When you’re scrambling and you’re early, and you’re trying to figure stuff out and get some momentum, or maybe even build some profile, which is a trap, it can be easy to take those opportunities without fully considering them.

Frankly, I think it’s a nice position to be in. You’re working on a business that’s healthy, that you’re interested in. There’s variety in the changes of the market, and it’s enough of a riddle and a puzzle that it keeps you coming back, and it’s challenging and interesting in that way. It definitely hits a bunch of different attributes that I think are important for an entrepreneur, whether they know it or not.

Take the variety part. Early days at WP Curve, we’ve got this thing that’s growing. Then we say, we’re going to start a podcast. We’re going to build some plugins. We’re going to start a community. I’m trying to think of the other stuff that we did. Dan wrote a book. I went into consulting. I did all of those things just to get that sense of variety, because fixing WordPress sites was pretty consistently boring. It’s the same thing over and over again. So it’s nice to hear that you have that breadth of view, and you recognize that you’re onto a good thing. It’s awesome.

Craig: I think in a lot of businesses there’s the ability to get that variety within the business. I’ve had different hats and areas of focus. We’ve talked about the software and the services side. But even within either of those, it’s, OK, this is the season. That’s how we talk about it. This is the season of quality on the software side, fixing a bunch of bugs and improving UX. OK, now it’s the season of building features and really expanding this thing. And on the services side it’s, OK, this is the season of, we’ve got to get better at video. How are we going to do that?

I’ve definitely been burnt out, though. The times I’ve been burnt out are when I don’t have optionality. When I have to do something, and there’s no one else, and we don’t have the money to go and hire somebody, and I can’t just make this thing go away.

It’s funny. In our family, my kids both say, “Don’t ever sell the business. Why would you sell a business that’s making money? That’s dumb.” My wife is the opposite. She’s like, “Sell that thing, give me some money, and you go figure out what to do next.” So that’s funny.

But I think the healthiest way to look at the business is as an investor, which is probably really hard, because we have emotional attachments to it. What Warren Buffett would say is: OK, how are you allocating your most precious resource, time? And what are you getting in return for that?

That’s the math I’m doing. We’ve been pushing really hard on this one side of the business for a while. It’s not amazing. So shift over here and do something else. Or at some point it will probably be, “I’m done with this, but I don’t want to sell it, because it’s a good business. I’m going to bring somebody in to do stuff, and I’m going to go and do something else.” Me not being involved every day doesn’t mean I have to sell the business.

Burnout (57:00)

Alex: Talk to me about burnout. You mentioned the times you felt burned out were scenarios where there’s no one else to do that type of work. Do you have specific examples of it? And were there any indicators leading up to you starting to feel burned out? In my conversations with people, I generally get a sense of where they’re at in the first minute, just from their affect, their tone, the amount of energy they bring to the conversation. Especially when you’d expect them to be excited to chat, and you get to talk to them and they’re just kind of, “Hi, how’s it going?” You need a minute? You good?

Craig: I saw this on Twitter, which is where all the world’s information comes from: burnout only happens when you don’t believe that the result of your efforts is worth it. It’s a version of cognitive dissonance, right? And that’s exactly it. I’m doing this thing, I have to do this thing (that’s the layer I would put onto it), and it’s just not doing any good. That’s when it’s really shitty.

As a business owner, it’s mostly operational stuff. If I put my individual contributor hat on, which is mostly marketing, like doing podcasts and YouTube and stuff like that, that’s fine, because I do it or I don’t. I don’t have to do that. But I have to manage the team. I have to make sure we have enough money in the bank to make payroll, all this kind of stuff. And sometimes I just don’t want to do that stuff, because, gosh, it’s just lame. But sure enough, it has to be done, and I’m the person who has to do it.

Alex: Have you found you’ve hit that threshold of burnout the other way? By the other way, I mean running too hard and too fast at something where you should be pacing yourself. That’s another way I see it pop up in founders.

Craig: Kind of, I guess. It’s a bit of an aside, but you see all this stuff about the solopreneur online right now. I just can’t imagine anything worse, because the thing that I love is having a team. I don’t love getting in the weeds of doing the work, but I love talking to the team. That’s where I want to live. Like, “I’m the idea guy.” No, but I have the vision. I have the strategy. I want to help coach up the folks on our team and make sure we’re allocating our resources to the right places. That’s where I want to sit.

I would be burnt out super fast as a solo guy, because it doesn’t give me energy to sit and write a freaking PowerPoint or a blog post or whatever. That’s just not it. So if you’re asking me, have I been burnt out, or would I get burnt out, by just going too hard at one thing, that 100% would be it. If you said, “OK, you wear all the hats again. Good luck.” That would be terrible. I think that’s partly a function of my age, or my time in the business, too.

Hiring salespeople without leads (1:00:55)

Alex: You are what I would call, in the most complimentary way possible, an experienced campaigner. So, well placed.

I was looking back at our conversations circa 2019 as prep for this call. One of the things that was pertinent back in those days was figuring out sales: getting sales nailed, either by bringing someone in or doing it yourself. At the time you were digging around, trying to figure out what was ideal for you. And I have to ask, where did you land on that? It sounds like you’re still customer facing, still jumping on the calls and talking it through. Is that something you now enjoy? Or is it part of having a smaller SaaS company, where it’s important for you to be the face as the founder? How did you progress with that?

Craig: We definitely had sales folks. After we raised some money, that’s what we did. We hired a couple of sales folks. They sold on both sides of the business.

And here’s the mistake we made. If you learn anything, please learn this. Raising money and hiring salespeople is bad if you don’t have an equally scalable way to generate leads. We were like, “Cool, we have salespeople. Now they can go sell stuff.” Well, you have to have people for them to talk to who are qualified. That was the big mistake we made.

It was nice in that we have handfuls of sales calls a week at the most, and I didn’t have to do those. They were closing a good number. I learned a ton about how to onboard and train salespeople, because it turns out you can’t just say, “Hey, go listen to my last 12 sales calls and do what I did.”

Alex: Yeah, it doesn’t work.

Craig: It doesn’t work. And gosh, we will hire another salesperson soon, because I think it’s good leverage. My skills are probably better suited to the marketing side, especially with where marketing is these days. I need to be the face of the company, and I’m cool with that. I don’t have to be the one on the sales calls. So that’s probably our next hire.

We’ve done it all. I was obviously the only person in the beginning. We had a part-time salesperson, and then COVID happened and the leads just went, because the world shut down. He said, “You know, I’m going to go do something else.” And I was like, “Cool. We don’t have any leads, so that’s fine.” Then we had a period where I was back in the chair. We hired sales folks. It just didn’t work out. We let them go, and I’m selling again now.

It’s interesting. I think the conventional wisdom would be that sales is the last thing the founder hands off. I think the nuance is that sales strategy and management is the last thing the founder hands off. But doing the calls? Sure enough, the thing we sell is so straightforward. You have a podcast. We produce it. It’s this much.

Alex: I love that, yeah.

Craig: Anyway, the end of that is I would hire a salesperson. That’s the next hire we’ll make.

Scripted sales calls (1:04:46)

Craig: Interestingly, I went to a two-day workshop with Alex Hormozi last week.

Alex: You know what? I kind of like his stuff.

Craig: Super, super smart guy. A really, really good event. They’re two-day things in Las Vegas. If you’re at the seven-ish figure level, I think it’s really appropriate.

They said every sales call in their organization is 100% scripted.

Alex: Ah, OK.

Craig: I was blown away, because my sales calls look a lot like this conversation. But now I absolutely would record all our sales calls, put them in ChatGPT and say, “Here are my last 10 sales calls. Build a script based on this.” And I would hand that to the person.

Because onboarding a salesperson is hard. They’re coming from selling some other kind of software, or they ran an agency, or whatever. They’ve never sold podcasting stuff. They don’t know who your customer is. They don’t know the things that you know to do a consultative sales engagement. So you’ve got to help them level up. There’s quite a bit to it.

The offer he turned down (1:06:10)

Alex: We’ve got divergent questions here, because we went down the mistake path and we went down the Hormozi path. We’re going to stay on the mistake path, and then we’re going to jump back to the Hormozi path.

Any other major mistakes that you learned something valuable from? Something that seems quite obvious in retrospect, but at the time you had strong conviction about going one way and ended up going the other.

Craig: When we rolled PodcastMotor into Castos, we had an offer on the table for somebody to buy it outright.

Alex: PodcastMotor?

Craig: Yep. Our Castos production service, as it’s called now, used to be called PodcastMotor, and somebody was going to buy that, because it was its own business.

In retrospect, that could have been a good decision. I don’t know. It’s hard to say. We have a bunch of places where we cross-sell, and we have a bunch of SEO juice and all this kind of stuff. I don’t know. But there’s probably a world where, if all I had to focus on was the SaaS side of the business, it would do better.

Alex: Without getting into the details, was there a decision point for you to not go through with that?

Craig: It was a really shitty offer. It was one times revenue with a three-year earn-out and all this kind of crap. But the math for me was kind of, ah, take a win. We had just joined TinySeed, I think, and I was like, “I’m going to go rule the world.”

Alex: It’s my time to shine.

Craig: It’s my time. Yeah. I think that’s probably applicable to a lot of folks: hey, just run one business at a time. I’m essentially running two businesses, or two business units in one business. It’s tough to do anything well, much less two things.

Alex: One times revenue. I don’t know. Knowing what I know, I don’t think I could personally make an offer like that with a straight face, having seen some of the inner workings of the business and understanding some of the machinations around LTV. And at that time, cost of acquisition would have been great. So, yeah. Tough.

Two days with Alex Hormozi (1:09:25)

Alex: All right. Hormozi. I have an old friend, a guy I’ve known for a dozen years, and I recently caught back up with him. Hormozi is definitely the new kid on the block for folks who are entrepreneurial. There was a time when Sam Ovens was the guy. He was in his suit, doing his thing in New York City. I think he had a bit of a come-to-Jesus and went down the software route. And now Hormozi is the big dog. Literally the big dog.

My friend hates him. I rate his stuff. I think he’s quite funny and he’s got some really good points. He does riff a bit. But what else did you take away from your time in Vegas? I’m assuming that’s a pretty meaningful investment of time and money, so there are probably a few people listening who would love to know what you took away.

Craig: I think it’s a very reasonable investment. It’s not crazy. Thousands of dollars for a two-day event. So, not insane.

The thing I took away generally, and one I talked about already, is to view your business as an investor. The most important thing I can do is be a good resource allocator. If you go up the food chain about 20 steps to PE, that’s all they do, right? I’ve always said the litmus test when you’re trying to make a decision is to ask, what would private equity do with my business? There are some answers to that which are super wrong, but there are a lot that are right, because they’re very smart, analytical, unemotional people. They’re going to make a lot of really good decisions.

So on a big scale, that was the biggest thing I took away. I need to start making more objective, data-driven decisions, instead of just doing whatever I want.

The specifics of that: I talked to a whole bunch of people. There were the other attendees, where the average revenue in the room was about $5 million, so legit. I talked to a lot of people about our business. “We do this, and we do this, and we do this.” A hundred percent of them said, “Whoa, the services side sounds really interesting.” Not one of them said, “Oh, you run a SaaS. That’s cool.”

And then there were the mentors and the folks who run it. He is essentially a private office, right, a family office. So he’s got a bunch of MBAs and all this kind of stuff. All of them said, “Yeah, that’s fine. Congratulations for getting a $19 a month SaaS business to where you are. But that’s the hard road.” I kind of thought that going out there. The best part of it was the conviction to believe that.

A photo studio that prints money (1:12:52)

Alex: I did a bit of digging, because I’m always interested when people reference businesses without saying specifically what they are. Hormozi talks about a photography business in some of his content. I think he’s a silent partner, but he’s an owner, whatever. So I did a bit of research. It wasn’t super hard to find what this photography business was. I can’t remember the name of it off the top of my head. But once I saw the pricing and I saw the packaging, I was like, this guy gets it.

They take these photos. It’s a studio for, I think, kids. They do dress-up photos, fantasy photos of kids being fairies and these different things. And when I looked at the pricing, it started at $500 and went up to $10,000 for a printed photo.

As far as maximizing the revenue from a transaction goes, knowing what the thresholds of pricing are, and not anchoring to time and materials but to the perceived value of the product, the equivalent is doing something in the wedding industry, where you’re charging three to five times the actual rack rate of something. I’ve got a lot of respect for someone who can do that. It’s not a business I’d necessarily want. I wouldn’t want to have a photography business, deal with the overhead of all that, and have to go into a studio and do the rest. I think it’s not franchised, but they’ve got multiple regional places. Dozens of them.

Craig: Interesting.

Alex: And that probably feeds into the validation, into understanding what a service can actually be. This thing looks like a money-printing machine, and it’s effectively a photo studio. I love stuff like that. It gets me so fired up. You don’t have to be some product savant who comes up with a brilliant idea, sees all the things other people can’t see, raises money and does all this stuff. You just provide a service, link your pricing to some sort of emotion and some sort of meaningful experience, and then print money. Hell yeah. It’s that easy.

Craig: No, I agree. He’s an easy guy not to like, because he’s coming out with the tank top and the guns and the flannel and the Crocs and all this kind of stuff. But if you just listen, he’s a pretty smart guy. And you could tell. He was up on stage just taking questions. He knows his shit forwards and backwards, about the whole stack. And his wife is more impressive on the people side.

Alex: OK. Good. Well, that’s one positive review. I’m going to share this podcast with my friend. Give him another go.

Where to find Craig (1:16:20)

Alex: Well, I think that probably brings us to about time, man. I’m so appreciative of you being willing to jump on and talk through some of the highs and lows. I’m stoked that the services part of the business lives on, and that you’re hearing me on the roll-up idea. There’s some brainstorming to do there. If people want to find out more about you and your business, where should they head?

Craig: Twitter is where I hang out mostly. I’m TheCraigHewitt there. I’m TheCraigHewitt on YouTube. And craighewitt.com. I post occasionally, but you can get in touch with me there. I’d love to chat.

Alex: And if people need podcast help, or hosting or production, where do they need to go?

Craig: Castos.com.

Alex: All right. Cool. Thanks, Craig. Appreciate it, man.

Craig: Thanks, man.