Luke Marshall On Acquiring Baremetrics and setting his sights on $10M ARR

Luke Marshall is a partner at Xenon Partners, where he takes a hands-on role with many of their acquisitions — honing each company's focus and delivering quantitative results. Most recently, he's heading Baremetrics.

Here's Luke on how he's taking it to $10M ARR.👇

Starting a civilian career

After a decade in the Australian Army, I began exploring a transition to a civilian career via an MBA and other supplementary studies. I was able to secure a role as a Digital Transformation Manager where I was tasked with scoping and implementing modern systems into a national organization anchored by legacy tech.

After a couple of years in this role, I was approached by a former colleague with an opportunity to work within a private equity firm that specializes in small-scale B2B SaaS platforms. I started as a COO within DreamFactory, a platform that instantly generates REST APIs that help companies bridge the gap between legacy data stores and modern applications. That's where I was introduced to the wild world of SaaS sales, product development, and SEO!

The secondary part of the role included continuing to build the Xenon Partners portfolio through acquisitions of small-scale, B2B SaaS companies that would benefit from a disciplined and operationally focused leadership team.

The majority of our products have been built by passionate founders who hoped to solve a problem, but just could not find that next level of growth. We don't have all the answers, that's for sure, but I love the idea that I can somehow help chaperone and see to fruition a founder's vision for their platform.

Heading Baremetrics

Over the past six years, I have moved between several of our SaaS companies as COO, CEO, and Board Advisor, as well as becoming a General Partner within the fund. In 2023, an opportunity presented itself for me to move back into a hands-on CEO role within Baremetrics, which we acquired for a $4M all cash deal from Josh Pigford in 2020. I jumped at the chance!

Currently, we are working to become the leader in subscription analytics by allowing our clients to track and monitor every single dollar that comes into their business and discover every insight needed to drive continued growth and success.

Since acquisition, Baremetrics has been growing at a reasonably steady rate YOY. Prices hadn't changed in eight years, so we changed the price in early 2022, and that resulted in a spike in revenue, but long-tail churn eroded some of those gains. Over the last 24 months, we've decreased churn by 50%, and that continues to be our focus.

Our next revenue milestone is $10M ARR.

Build a bulletproof tech stack

Baremetrics is built with Ruby on Rails with some React on the front end. We run several different databases, including PostgreSQL, SingleStore, and Redis. We are self-hosted on a private cloud network.

While I am not the founder, I've continued to build it with a focus on what the market needs.

Initially, Baremetrics was focused purely on Stripe and then branched out to other providers like Chargebee and Shopify Partners, to name a few. The challenges with expanding across multiple providers is the ability to reconcile how we ingest and process data from each source when they could be stored and categorized differently — i.e. plans vs product vs subscription.

If I were giving advice to new starters, I would encourage them to build a bulletproof tech stack. We are finding that as we have built the product out over the years and added new features and integrations, it has become harder and harder to be agile. The priority is often on getting new features out the door as quickly as possible.

You can get to a point where a single change in system A requires a change in system B, C, D, etc. So occasionally, it is worth reviewing how evergreen you really are.

Stick to two big rocks

Decrease the white noise. When goal setting for a quarter it is easy to keep adding priorities but you will quickly discover that if everything is a priority, nothing is.

We stick to a few core BAU goals that focus on New MRR, Churn, and Funnel, which are more often than not internal initiatives run by sales, success and marketing. We then look at up to two what we would call "big rocks", which would require a more consolidated team effort — like a new integration, UX changes, home page rebuild etc.

It sounds like common sense but when I work with founders who are frustrated with their progress, I often see 40-60% achievement of a dozen goals in a quarter without achieving 100% of one.

Revenue strategies

Baremetrics has a tiered pricing model for its core Metrics platform that expands as our clients' MRR grows. We are incentivized to help our founders "make more" — and in doing so, if they grow, we grow. We have expanded our offerings over time to include more value, including some pretty powerful forecasting tools that allow our users to build out future financial scenarios above and beyond simple budgeting.

Aside from Metrics, we also have our Recover dunning tool that comes with an ROI guarantee, so it is essentially free if we do not cover the required amount of delinquencies and failed payments per month.

Our future revenue strategy is tied to adding more value in our top-tier plans as well as expanding our lower-priced tiers into a more freemium-style offering. We recognize that it is hard for early-stage start-ups to stomach big SaaS subscription bills, so our free tier (up to 30k MRR) becomes quite appealing, and again we are then incentivized to help you grow above and beyond the free threshold.

Get ahead of AI search

Like everyone, we are constantly trying to find a funnel that can be predictably and reliably scaled. For the longest time, Organic SEO was king, and publishing quality content regularly was the best way to build an audience, so we had a regular cadence of fresh, useful content to drive our funnel.

Over the years, the biggest challenge has been staying in front of the Google search algorithm changes and ensuring that we have a multi-channel approach to marketing. Now more than ever, the implementation of AI search has completely upended search rankings, so the ongoing challenge is getting in front of our ICP.

Building brand awareness

We have a strong brand history and association with Stripe, so our funnel has been predominantly organic SEO and referral.

We also have a growing affiliate network, and we are now focusing on how to better rank for AI queries.

And we have attended several conferences over the years — most recently SaaStr and Stripe Sessions. Each time, it is great to hear the brand awareness that we still possess in the community.

We will look to continue our growth across social channels with an increased focus on genuine, helpful interactions on Reddit, as well as contributing to industry discussions on LinkedIn.

Parting advice

Stick to the basics and look to satisfy a very particular subset of your total ICP before expanding too far. Conduct rapid experimental sprints to find the resonant message and then double down on the winner. The backbone of all this is effective attribution, which is easier said than done, but nonetheless should be a focus.

The biggest pitfall is pursuing an ICP that you think should love your product vs. pursuing the ICP that is actually using your product.

Above all else, follow the data and sell to build. Ask your early users what they want more of and how much they are willing to pay for it. Each discovery call should also be used to gather intelligence on gaps in your product; not just pushing the hard sell each time.

And develop a constant feedback loop between our customers and product development to ensure a continually increasing value and willingness to pay.

What's next?

Baremetrics will continue to support its primary user base of Stripe and Chargebee users in the Metrics space, but we are also looking into ways we can help our clients in their total funnel management. We are currently working on better ways to break down net revenue by type (repeating vs. usage) to adapt to the more modern SaaS platforms, as well as allowing our users to conduct dynamic price experiments.

We hope to deliver some additional benefits in the client engagement space, including a lite email messenger, SMS for Recover workflows, and more flexible workflows for Recover and Cancellation insights (automated coupons, etc.).

Our main marketing site has all you need to understand more about our product, but we also have some really great resources in our Blog and Academy.

You can find us over on Reddit (although I have been told I sound too much like AI!). And you can find me on LinkedIn.