ReachLocal Grossed $147 Million in ’08, Projects ’09 Growth
One of the big questions in local has been how well ReachLocal is doing. The SMB online advertising consultant was reportedly valued at $305 million after an October 2007 investment round. While ReachLocal says that number is “inaccurate,” the company’s ultimate success — still undetermined — would have important implications on the future of small-business marketing.
At this point, the company has expanded rapidly to 38 offices in the U.S., Canada, Australia (in 2007), and the U.K. (in late 2008). It has 800 employees, including 500 salespeople, and it has added display to its search offerings.
But we’ve also heard reports of scary levels of churn, both among customers and salespeople — something else the company says is inaccurate. While additional information isn’t provided on churn, a spokesman says its numbers are well south of the 60 percent+ levels cited in a recent report.
Now the company has opened the kimono a little, on the occasion of being ranked by Inc. Magazine as the 39th fastest growing private company in the U.S. The ranking is based on three consecutive years of revenues (provided to the magazine).
Specifically, the company reveals that it grossed $147 million in 2008 and is expecting even higher numbers for 2009, despite the sour economy. The company also released some macro data, noting that during the course of its history, it has fielded some 15 million phones calls and 10 million + online inquiries.
This Post Has 3 Comments
Lots of information I have encountered about ReachLocal is inaccurate. I sought out a rep to learn how they work, he’s been there 2+ years. Been impressed with service and results ever since.
If you do the math, you’ll see that they are very upside down in their cost structure.
Imagine if the average salaries are $50k/year for these 800 people. A fair and relatively low estimate.
Also, imagine that they pay out 5% commissions to their sales people of the gross revenue. I’ve heard that this number is closer to 7-11%, but let’s be conservative and say 5%.
Let’s also be conservative and say that they earn 30% gross margin on each customer. The other 70% would go to Google/Yahoo/MSN.
That being the case, here’s how the numbers sort out:
Total Revenue $147,000,000
Number of Employees 800
Avg Annual Salary $50,000
Total Salaries $40,000,000
Commissions 5% of revenue
Commissions (amount) $7,350,000
Gross Margin (amount) $44,100,000
Overhead 25% of Salaries
Total Employee Burden $10,000,000
Total Expenses $57,350,000
Operating Profit/Loss -$13,250,000
Am I wrong?
You have the right idea… Redo your calculation with the correct figures, here they are….
Gross Margin 49.7%
sallary: global average 58k per/rep
commission: global avg: between 10% here in the USA and 6-7% globally
Then factor in about 5-10 million in executive salaries each year at least.