RE:RE:Organic growth vs inorganic growth Good points you made.
So far we have a full year of results to test the effectiveness of the organic growth strategy and it has performed reasonably well. What I like about the organic growth strategy is that it's cheaper, doesn't require you to dilute shareholders and, at the same time you can pay down debt with excess cash.
The churn rate at 10% is way too high for me. With 1900 customers, this implies that every year about 190 customers leave the platform. With such a high churn rate, their s&m is likely just going to replace lost business without necessarily adding any meaningful revenue growth. With high churn rate and high cac ( customer acquisition cost) the organic growth strategy feels more like an organic "neutral" strategy. I have verified that sales in the last 12 months are $6,363,887 compared to the previous 12 months of $5,874,727 or an 8.3% y/y increase.
There are a lot of positives about the Q2 report. The free cash flow run rate (excluding non-cash working capital) is approximately $600k for the year. If we use Q1 + Q2 as an average then I have a full year run rate at just under $500k. For instance, it would take about 2 years with internal cash flow just to pay off the Kesm liability.
It's going to be interesting to see how the company navigates through these difficult conditions. They have $775,172 in cash but they also have $2,967,894 in long term debt with a current portion of $400k.
The company should:
1) drive down the 10% churn rate
2) focus on organic growth because it's cheaper
3) use any excess cash to pay down debt
4) wait for share price to move significantly higher before you think about diluting
5) acquire companies only to increase the stickiness of the revenue business model only
That's it for now.