When Design Pickle launched in January 2015, the company started with three people and made $300,000 in its first year. Five years later, the bootstrapped design service is on track to earn $14 million with 505 employees — 470 of whom live outside the United States.
Russ Perry, Design Pickle’s CEO, says the service is “what you do when you graduate” from marketplaces like Fiverr and Upwork.
Instead of hiring designers for one project at a time, companies sign up for Design Pickle’s creative services at a flat monthly rate — an “all-you-can-eat buffet,” says Perry. “Whatever you pay per month is what you pay, no matter how much you request,” he explains.
The lowest tier plan starts at $399 per month, and Design Pickle’s average RPU is $512, Perry says, adding that the company has about 3,000 customers total — some subscribe to multiple plans. The company processes more than 12,000 design requests per day.
To keep overhead low, Design Pickle has recruited 470 quality designers from countries around the world, including Argentina, the Philippines and Colombia. At first, Design Pickle poached top designers from marketplaces like Fiverr and Upwork. Now, a dedicated recruiting team finds talented individuals.
Leveraging employees from countries where wages are lower than in the U.S. isn’t a new move, but Perry has a unique perspective on staffing and recognizes that job security is fleeting in the gig economy. “You can’t make a living working on a marketplace, like you can’t make a living cobbling together, jobs off Fiverr or 99designs,” he says. “We give them full-time rates, weekly contracts, benefits, all of that.”
Perry says Design Pickle employees make about $6 or $7 per hour, which is about twice as much as designers abroad can make in the local job market.
“Our goal is to be the best employer in every one of those markets,” Perry says.
Even with the significant full-time employee headcount, Perry says the company has a gross margin of 68% in “a good month.” Add in middle management and other costs, and he says profits are still around 60%
Two years ago, Perry and his partner did a $1.2 million in debt lending from Lighter Capital. Perry says debt was the way to go because the company has healthy cash flow.
“Our LTV is well over $4,000, and our CAC is anywhere from $600 to $700.”
Perry says he’s had informal acquisition talks with Fiverr, which offered to buy Design Pickle for $20 million — but he passed. “I knew there was a number for me to make it work, and we just weren’t there,” Perry says, noting that he’s still friends with the Fiverr team. “I think just the timing was off.”
Based on information from Russ Perry’s 2020 interview.
Featured SaaS Entrepreneur — Russ Perry of Design Pickle
Name: Russ Perry, age 37, married with three daughters
Where to find him: Twitter | Personal Website
Company: Design Pickle
Noteworthy: Perry attributes his success to his previous venture: a failed creative agency. “I made about every mistake in the book possible with that agency, which I actually think is like 85 percent of why Design Pickle has done well,” Perry says.
Favorite business book: “Ender’s Game”
CEO he respects: Cal Newport
Favorite online tool for building the business: Profitwell
Average # of hours of sleep/night: 7-8
Transcript Excerpts
How Design Pickle differentiates itself (hint: it’s not actually about design)
“We’ve built a system that optimizes creativity … I joke, anyone can go out and make a couple hundred thousand a year copying what we do. But there’s legitimate and really complicated, scalable challenges that you have to have. Like we’ll do 12,000 requests this week … We’re serving hundreds of thousands or millions of emails, and messages and all of that, and managing it. We have AI, we have all this tech. That’s the moat. It’s managing that, not just finding some cheaper U.S. designers and reselling their time.”
Convincing clients to stick around after they’ve finished a project
“Lifetime signups, it’s 25 percent, like we’ll retain 25 percent of our signups for life. But, we really focus our skill sales strategy on multi-month and annual plans. So, our numbers, we might have a client that would normally only stick around for three, four, five months; but we really aggressively look to sell them on a discounted 12 month plan, their first 90 days, to capture that full revenue.”
Incentivising employees without quota-carrying sales reps
“So, quota carrying is, they have a bonus, past their salary. They get incentivized on the percentage of the first deal a customer has with us. So, if that inbound lead only signs up for a monthly, they’re only going to get a percentage of that monthly contract. But, if they’re able to sell them into a three, six, or 12-month plan, out of the gates, then they’ll have a much larger … numerator for the bonus on the sales side.”
(Potentially) reselling services to recoup on M&A transactions
“I actually have this sort of weird fantasy … of like finding burnt out agency owners, and gobbling up their account managers, and putting them just all on our customer success team. And then, buying books of business that we could resell our services directly into to recoup on the M&A transaction. But, I haven’t been too aggressive about that. [I] was talking to one company out of South Dakota of all places … before COVID hit and just put the ice on that.”
Full Transcript Nathan: Hello everyone. My guest today is Russ Perry. He is building a company called Design Pickle, which is a platform that allows you to grab flat-rate creative services. He’s the world’s most successful flat-rate creative service. He leads a global team as they rethink and deliver a remarkable new way to find the perfect creative. All right Russ, you’re ready to take us to the top? Russ Perry: Let’s do it. Nathan: All right. So, this is obviously competitive space. I’ve used tools, obviously like Fiverr, and Upwork, and things like this before, Dribbles, maybe on the other end. Where do you put yourself on the spectrum of these content services, creative services? Russ Perry: We’re what you do when you graduate from those marketplaces. We find that our services is like the perfect blend between the benefits of a employee, but without the risk or the cost of that. And, you can dial it up, dial it back, add it, subtract it, really dynamic with the needs that you have. Nathan: When did you come up with the idea? What year? Russ Perry: 2015, after I unsuccessfully tried to run a creative agency for eight years. And, was an unemployed consultant trying to get help and I couldn’t find it on the marketplaces; and I was like, “Damn it, there has to be a better way to find reliable help.” And, then you know how the rest of that story goes. Nathan: Why was the agency on successful? Russ Perry: We never specialized. We were a generalist agency trying to do too many things to everyone. We couldn’t develop a process. We couldn’t develop a system. And, that was my aha moment, afterwards. It was like, look, I could just do really, I’ll even say it, kind of boring design, production design, straight level stuff. And, if I could get it, really dial in and optimized, I think I could have a different kind of business than trying to do everything under the sun. Nathan: So, that agency, just out of curiosity, I mean, it’s best year, how much revenue did it do? Russ Perry: We did it around 3,000,000 at our best year, but we were doing high ticket items. I’m talking half a million dollar branding projects, quarter million dollar trade show events. So, won and done huge monster projects. I never had more than eight clients at a time. And, it was unscalable and there was no sales system. I made about every mistake in the book possible with that agency, which I actually think is like 85 percent of why Design Pickle has done well, is because I got all my mistakes out of the way. Nathan: Okay. So, best year 3 million, there are never more than eight clients. And, what was the team size there about? Russ Perry: We had a team size of about six people here in Scottsdale. And then, this is when I kind of fortuitously tested the outsourced model. I had a partner in Buenos Aires, in Argentina, and we had 12 designers and creatives down there. And, the whole model was to try to use international teams to have a lower cost of goods. It worked on that part, but what I had miss estimated was, just not having a system for the projects; and so, we spent so much time redoing work, managing clients, we lost all our profits in the client management side of it. Nathan: Interesting. Well, by the way, six employees and a $3,000,000 in your best year, I mean, half a million per employee is not that bad. Russ Perry: Plus the 13 in Argentina. Nathan: Oh got it. Russ Perry: He was a 50/50 partner, so half my money had to go there. Nathan: Ah, I see. Okay. All right, so 2015, you jump into Design Pickles. So, walk me through your [inaudible 00:03:13] typical marketplace model, where do you make money? Russ Perry: So, it’s not actually, we’re the only service out there. All of our team is full time dedicated to us. And, this was a decision that I had from the very beginning is, I just knew how hard it is to always having to find someone, build that relationship, explain what you need, explain your brand. And from day one, our creatives have just worked for us. So that was, started with one creative, one project manager and myself; three people launching in January 2015. Russ Perry: I never wanted to actually be in between the client and the creative. So, our clients just work directly with the creatives and it was a super bootleg hack together system. The running joke is actually, if you knew what email address we used, you didn’t even need a paid account, because you could just circumvent the whole, paying us thing. And, we just launched from there, and just really looked at what is the average utilization that I could think of, of a client; and what they would need on a week-to-week basis. And, I was listening to a ton of startup podcasts at the time. I was like, “Shit, I just want recurring revenue, what’s a price I could pick.” And, I just picked that and went to market. Nathan: So, how many designers now are full time? Russ Perry: Around 470. Nathan: Okay, 470 full time. I mean, back in the napkin, I’m thinking, Oh my gosh, this guy’s head count expenses per month are through the roof. Russ Perry: It is. But, when you think about that, most of our VAT is our labor in other markets. This is where our cost of goods really comes into play. Because our gross margin is on a good month, 68 percent; when we start to grow and we’re adding middle management, it gets down to low 60s. But, our teams are in markets, I call them emerging markets, where they are on average making three to $4 an hour. If they want to get a job where we’ll start at six to $7 an hour. So, we’re 3x-ing their take home, still fractional, what you could hire here. And, tons of automation and systemization that we’ve built on the software side to streamline everything. Nathan: Of the 470 full-time designers, how many are not in the United States? Russ Perry: 470. Nathan: Oh good, they all in Argentina? Russ Perry: No, they’re in the Philippines, Mexico, Indonesia, Argentina, Colombia, moving into Peru, India, a couple of countries that are escaping me. So, our goal is to be the best employer in every one of those markets. You can’t make a living working on a marketplace, like you can’t make a living cobbling together, jobs off Fiverr or 99designs. And, that’s where a lot of those companies get their teams from, their labor. We give them full-time rates, weekly contracts, benefits, all of that. So, we can recruit from the best of the best. And, we’re also having a nice labor arbitrage as well, providing really good talent from countries that have a much lower cost of living. Nathan: Is that the growth play? Go on Fiverr and Upwork, sort by designers with most reviews to least, and go pick the top ones off and say, “Hey, instead of hunting every month, we’ll give you a guaranteed six bucks an hour.” Russ Perry: So, that was our play the first 18 months. And then, we ran out of people. Nathan: Yeah, not a bad way to get started. Russ Perry: We were just hunting on Upwork all the time. And you know, we just ran out of talent. Now, we have an entire dedicated recruiting team. So of the 470, not all are designers, they all at one point were, but we have HR, training, recruiting. All of the functional side of that is included in those numbers as well. Nathan: Interesting. Okay. So, let’s fast forward to today. How many customers are you serving? Russ Perry: Actively, we have 3,300 subscriptions, so a customer could have multiple subscriptions, depending on how much of our service they want. Nathan: How many unique customers? Russ Perry: I would say on that, a little shy of 3000. Nathan: And, can you explain to me why one customer, like one person might have two plans? Russ Perry: It’s unique economics, how much volume you get in a day? So each subscription, you have guarantees you a certain amount of creative output. And, if you just want more done per day, you can pay more, and buy up more of their time. Also, we do more than graphic design; we do right now, graphic design and illustrations. Later this year, we’re doing motion graphics, next year, copywriting, video editing. So eventually, you could build your own virtualized team with multiple subscriptions across each service. Nathan: Yeah. I mean, I wonder what a platform, like what you are building is the moat that you’re building, as Buffett would say, your ability to recruit globally, right. And, get people in a system that can deliver that talent, also globally. And then, there’s a spread between what an American company would pay for a great design from someone in Argentina, or is your competency a design competency? I think it might be a recruiting competence. Russ Perry: It’s not the design competency. We’re not winning any off Madison Avenue awards, here. What we are, is we’ve built a system that optimizes creativity, really, and I joke, anyone can go out and make a couple 100,000 dollars a year, copying what we do. But, there’s legitimate and really complicated, scalable, challenges that you have to have. Like, we’ll do 12,000 requests this week, individual unique requests. We’re serving hundreds of thousands, or millions of emails, and messages and all of that, and managing it. We have AI, we have all this tech, that’s the moat. It’s managing that, not just finding some cheaper designers compared to U.S. and reselling their time. Nathan: Yeah. Okay. So, of the 12,000 requests you get per week, first off, explain what that is? So, I’m on the homepage right now, as a request when somebody clicks one of these green buttons on one of your plans, 399, 995 or 499 a month. Russ Perry: No. That’s just your subscription to the all you can eat buffet of Design Pickles. So, we’re flat-rate. Whatever you pay per month is what you pay, no matter how much you request. Nathan: Oh, I see. Russ Perry: So, our entry plan is 400 bucks a month. We have a pro- real time plan, which plugs a designer into your Slack. So, you can actually have a nine-to-five designer in your Slack, into your own channel for a thousand dollars a month. And, that’s the flat-rate. So, it’s all about the utilization there. So, a request is just anytime you log into the app and you need something. Nathan: I mean, obviously people can pick one of these plans. What would you say the average price point, that a customer is paying per month? Russ Perry: I mean, our RPU is like $512, so it’s… Nathan: Okay, got it. Yeah, and if you just count by popularity, so sort of an average; is your 995, the most popular; or the 399 per month, most popular? Russ Perry: So by volume, it’s the entry plan, because it’s been around longer. But I laugh, the day we launched the $1000 plan, it’s easier to sell, the client stick around longer, our cost is negligible, it was like the running joke; like why didn’t we do this sooner. Nathan: Interesting. Yeah. And so, the upsells there are real time collaboration, same day delivery, API integration, and a couple of others. Which one of these upsells that are not available in the $400 a month plan, where the most powerful in terms of converting people from 400 to a 1000 bucks a month? Russ Perry: So, I wouldn’t actually say it’s an upsell or a conversion. There are two different audiences, but what people value the most, the value metrics that’s the most powerful is, I can talk to my designer real-time. Nathan: Got it. Russ Perry: The collaboration, drop it in a file in Slack, what do you think about this? Take a look at this. And, they’re little green dot turns on at 9:00 AM, and it turns off at 5:00 PM, and they’re there. They’re available. It’s pretty cool on that front. Nathan: Interesting. Okay. Talk to me about revenue growth. So, first year, do you remember how much you did? Russ Perry: We did 300,000 our first year. You want me to just go through all the years? Nathan: Yeah, why not. Russ Perry: 300,000, 1.2, 3.4, 4.2, 10. Nathan: Okay. Interesting. So, you did 10 last year? Russ Perry: Yeah. Nathan: What do you think you’ll do this year with the prices and everything? Russ Perry: We rounded down conservatively, we’ll be doing 14,000,000. Nathan: Interesting. And all of that, like when you look at your hiring plans, you have to have some sense of what of that is fixed, true SAS, sticky revenue versus, what is kind of one time kind of work. So, break down the 10,000,000 from 2019, how much would you put into that in a predictable recurring SAS revenue, that you can make hiring decisions around? Russ Perry: It depends on the time horizon. So, of the first year, zero through or month is zero through 12, it’s going to be around 50 percent. And, I’m going to explain something on the back-end, because these numbers might seem a little scary to an average SAS business. Lifetime signups, it’s 25 percent, like we’ll retain 25 percent of our signups for life. But, we really focus our skill sales strategy on multi-month and annual plans. So, our numbers, we might have a client that would normally only stick around for three, four, five months; but we really aggressively look to sell them on a discounted 12 month plan, their first 90 days, to capture that full revenue. Russ Perry: And, that’s just learning about the utilization of design. It’s not a sticky service, like an accounting tool or some other thing. So, we have to have a much different approach on how we capture that revenue from a client, because we know at some point, they might just change their mind, and not want to use us anymore. And there’s really… We have like a whole categorization of happy churn. I love you. You guys are amazing. My project’s done. Nathan: Yeah. And, there’s nothing to… But you see this in the event business as well. These sassiest come om my show and they go, “Nathan, I hate how high our [inaudible 00:13:01] is going” Well, if you do your job and do a great event, they’re going to stop it, and they’re going to come back next year when they do the event.” Nathan: Like, you can call it whatever you wanted to, but you have to understand how people are using the tool. So, this makes sense. I want to dig into the annual sales. So, first break your team down for me. So, what’s the total team size today? Russ Perry: Total team size is like 505 folks. Nathan: Okay. Including the 470 outsourced, kind of designers, managers? Russ Perry: We categorize it as HQ, because we do have a few people outside the U.S. on that side; sales, marketing, engineering, customer support, and then production. So, HQ plus production is about 505. Nathan: So, 35 is HQ. Russ Perry: Yep. Nathan: How many are engineers? Russ Perry: We have five engineers now. Nathan: And, how many are quota carrying sales reps? Russ Perry: Zero. Nathan: So, how do you motivate your sales reps to get the customer to go to annual in the first 90 days? Russ Perry: So, quota carrying is, they have a bonus, past their salary. They get incentivized on the percentage of the first deal a customer has with us. So, if that inbound lead only signs up for a monthly, they’re only going to get a percentage of that monthly contract. But, if they’re able to sell them into a three, six or 12 month plan, out of the gates, then they’ll have a much larger, I guess, numerator for the bonus on the sales side. Nathan: Okay. And then, talk to me about how you’ve capitalized the business, bootstrap review raised? Russ Perry: We are bootstrapped. And then, about two years ago, we did a debt lending, and just borrowed some money. And, that has been the best for us, because we [inaudible 00:14:46] cashflow really well. Our LTV is well over $4,000 and our CAC is anywhere from six to 700 per dollars. So, we can return on a client in two to three months, as long as we have the cash available. Nathan: Yeah. How much did you raise on the debt side? Russ Perry: 1,200,000. Nathan: Which firm? SAS Capital, Lighter Capital? Russ Perry: Lighter. The guys are Lighter. Nathan: Interesting. Russ Perry: I love it. I mean, I always joke. It’s like the sketchy college credit card, you get; high interest and it’s super easy to get. But they were easy… I mean, they understand it. It was a great decision for my business, because of my numbers. But, if I was selling a 25, $30 product without a big return immediately, I don’t know if that would have been the route. Nathan: What year was that, that you did that with Lighter? Russ Perry: In 2018. Nathan: Russ Perry: Yeah. So, I don’t know how many people have gotten this, we just got a term loan with them. Nathan: Got it. Russ Perry: So, I think it’s a newer product and they saw our numbers and… It was just 36 payments. We know what it is. We can budget for it. Easy peasy. Nathan: Are you comfortable sharing a range, what that rate is, that you usually see between like 14 and 25 percent. Russ Perry: You can probably do the math quicker. I just know our payments like around 60k a month. So, I don’t know what the… Nathan: Yep. That’s good. Okay. So, 6k a month, three year term, we can come back to that later, but interesting. So, this is by the way, a trend, I think you’re going to see a lot more companies using debt, especially healthy ones like this. Because, you can essentially then own, you and your partner, keep a hundred percent control of the company. Russ Perry: Right. Exactly. Nathan: Interesting. Okay cool. So, you’re expanding into additional spaces. Would you ever look at MNA right now? Are there any companies you go by? Russ Perry: So, I tease it…. Not anyone that’s like us, but I actually have this sort of weird fantasy. I don’t know if that’s like a right word of like finding burnt out agency owners, and gobbling up their account managers, and putting them just all on our customer success team. And then, buying books of business that we could resell our services directly into, to recoup on the MNA transaction. But, I haven’t been too aggressive about that was talking to one company out of South Dakota of all places, and before COVID hit and just put the ice on that. Nathan: Interesting. Yeah. I mean, there’s a lot of these Chrome extensions that are like color palette Chrome extensions, or like, small marketplace, that just fills it out, because they couldn’t get the chicken and egg problem done. But, I mean, the way I currently do this is, I will come up with one design, like a podcast logo, and I’ll give it to six people on Fiverr, and they’re all cheap, and I’ll get six options back and I’ll pick one. I used to use 99designs, but the quality was just like all over the place. It was very hard to get anything predictable. Russ Perry: Yeah. Well, when you’re ready to not have to even mess with that anymore, we’ll be here for you. I think, with Fiverr, they actually tried to buy us twice last year. And, they’re were on premium, but what comes down to when you need one every week or one every day, and you just want to send the info to someone, and not have them give them a brief, not having to go through the commerce checkout process; or sync it to your Asana. You just put the details in there and it zaps right over to Design Pickle. Nathan: Interesting. Okay, before we wrap up, so you said you at 1.2 from Lighter on a three year term, right? Russ Perry: Mm-hmm (affirmative). Nathan: So yeah, something’s wrong. I mean, unless it really is as high. So, if you’re paying like 60 grand a month, that basically means that you’re paying like a 40 percent interest rate. It’s 60 grand a month for three years, it can’t be that high. Russ Perry: It’s not that high. I know that. So, I must have gotten something off in that, and I’m the creative guy, remember, so. Nathan: Yeah. I mean, I have a thesis that, a lot of these lenders right now are lending based off the spread, they have to make, to cover their expenses, not based off the true risk of the SAS company defaulting. So, I look at what you’ve built on the surface, and it seems like a stable, predictable thing. I just think over time, that cost capital for folks like you are going to come way down into the 11, 12, 13, 14 percent range. Russ Perry: Yeah. I know it’s not the cheapest out there. It was just the easiest for us at the time, because we are not a pure SAS business. We’re a tech enabled service. So, it was harder for us to try to find other lending that would been, when we were smaller. Nathan: Yeah. What Fiverr offer you? Russ Perry: The first round was two or 3,000,000. The second round was 20,000,000. And then, I said no to both. Nathan: The second round was what year? Last year? Russ Perry: Last year. Yeah. Nathan: Interesting. And, why’d you say no to 12,000,000? Russ Perry: Off the record. There weren’t any term sheets, these were were casual conversation. Technically, they didn’t offer us anything, for the record. Nathan: Yeah, of course; but general chat. And, why no to 20,000,000? You own a hundred percent with your partner. Russ Perry: I loved actually the Fiverr team. Don’t get me wrong, I think they’re badass, I think they have a lot going through them, they were early adopter. I was a lot in what the deal was going to be, public stock, earn-out performance. So, it was just complicated and I don’t think it was the right fit. I don’t think we’re going to say no, I’m still friends with them. I knew there was a number for me to make it work, and we just weren’t there. But, I think just the timing was off. Nathan: Yeah. All right, let’s wrap up with the famous five. Number one, favorite book? Russ Perry: Ender’s Game, by Orson Scott Card. Nathan: Number two. Is there a CEO you’re following or studying? Russ Perry: Oh, I love Cal Newport. I don’t know if you can call him a CEO. He’s an author, but he does do a little coaching and speaking, so. Nathan: I’d count them. Number three, what’s your favorite online tool for building the company? Russ Perry: Right now, it would have to be ProfitWell, like I couldn’t live without it. Nathan: Yeah. Number four. How many hours of sleep are you getting every night? Russ Perry: Seven to eight. Nathan: Situation, married, single, kiddos? Russ Perry: Married with three daughters. 14, eight and four. Nathan: Wow. Okay. And, how old are you? Russ Perry: I’m 37. Nathan: Last question. What do you wish your 20 year old self knew? Russ Perry: Stop drinking immediately. It’s not helpful Nathan: Guys, there you have a Design Pickle. He built his own agency up to about $3,000,000. Now has over 3000 customers closer to a SAS model. 68 percent gross margins. They pay for designers time. They built a team of 470 off-shore designers, that are very talented making six, seven bucks an hour. Those customers pay between 500 and 600 bucks per month, on average. They will do about 14,000,000 this year, did 10,000,000 last year in 2019, processing over 12,000 design requests per days. Look to scale, own a 100 percent of the company. They bootstrapped, raised $1,200,000 in debt, a couple of years ago, building the company the right way. Russ, thanks for taking us to the top. Russ Perry: Hey, thank you so much.