What's up, everybody?
This is Cortland from ndhackers.com, where I talk to the founders of profitable internet
businesses, and I try to get a sense of what's going on behind the scenes at their companies
so that the rest of us can learn from their example.
Today I'm talking to Kevin McGardle, the founder of Shoresift Capital.
Instead of starting companies from scratch, what Kevin does is acquire companies, but
not in the manner that you might be familiar with.
The companies that Kevin buys are not VC-funded rocket ships.
Instead, he invests in smaller revenue-generating companies that are often run by small teams
or even solo founders.
Kevin's only been doing this a couple of years, but he's already bought something close to
30 companies.
Most of us entrepreneurs don't really consider buying a company to be a viable option.
We think that we have to start one from scratch.
My goal here is not only to learn what kinds of things that you as a founder can do to
sell your business to somebody like Kevin, but also to find out what kinds of lessons
Kevin himself has learned in the past couple of years, having bought so many companies
and find out if this is a viable path for other would-be founders to take.
So without further ado, I present to you Kevin McGardle.
I'm here with Kevin McGardle of Shoresift Capital.
Kevin, how's it going?
Great.
How are you?
I'm doing excellent.
So you are the founder of Shoresift Capital, one of the coolest companies that I think
a lot of people have never heard of.
And maybe the best way to describe what you guys are doing is through one of the things
that you told me over email while we were setting up this conversation.
You said that I think it's important for founders and entrepreneurs to know that there are exit
opportunities for your business that can be amazing and life-changing, but that don't
require selling your soul to venture capitalists or having to become the next to Uber.
What are those opportunities and how does what you're doing at Shoresift plan to that?
Well, it's a good opportunity to talk about a subject that I'm pretty passionate about,
which is not just because it's my business, but because I think a lot of your audience,
I think you're providing a different source of content for an audience that's probably
starved for it because the normal media channels are full of stories from sources like Tech
Crunch and other outlets like that that want to talk about what's the next Facebook or
what's the next Uber or, you know, these two kids from Dublin created a $9 billion company
called Stripe.
And those stories are amazing.
That's part of what makes America an amazing place to start and grow a company.
And it's so incredibly rare that I don't think most people should aspire to that.
And in fact, most of those home run success stories were probably started with the idea
of if I could just start my own company or if I could just be my own boss, that would
be a home run.
And I would have such a better life than I do today.
Or maybe they started with the idea of like, you know what, if I really crush this, I might
be rich, which people define that in different ways.
But I doubt each of those people, whether it's Zuckerberg or the Stripe guys, that my
goal is to have X, a gajillion dollars.
And I think the most of the successful businesses in this country or elsewhere are, you know,
more commonplace stories, things that TechCrunch won't cover because they're boring.
But you know, some enterprising person, young and old, could start a company and work their
tail off for three, four, five, eight years and build a really successful company and
sell it for what in almost any person's eyes would be a life changing amount of money.
And that could be anything from, you know, some people's lives would change with a hundred
thousand dollar check.
Most people's lives would certainly change with a seven figure check.
And that is a huge home run success story, and one that should be celebrated, and we
just don't hear that much about that.
We founded this company with the idea of we could roll up successful companies that were,
you know, ready to be sold at a stage of profitability and traction where they were sustainable.
We could provide some business discipline, experience, expertise, extra funding, extra
people, et cetera, et cetera, to help those businesses continue to grow.
And you know, I didn't set out to create another exit path for people, but I've realized that
it is an exit path that a lot of people don't realize is there.
And too much of the conversation online or at a conference or in the media is have an
idea, get funding from people that may or may not actually believe in your idea, but
they're just funding a whole thousand ideas in hopes that one of them is the next Uber.
And you work like a slave for those people, and the only success is either public offering
or sell for half a billion dollars.
And there are so many infinite levels of success along that path, even before getting funding,
which I don't think is a success in and of itself.
I just think what I like about Indie Hackers and your podcasts is that you are talking
to real people with real aspiration and yet reasonable expectations of what success means.
Not low expectations, but reasonable expectations.
Yeah.
I don't think I could have said it better myself.
And I've got a ton of questions to ask you about what you guys are doing at Social Capital
because you're the first person I've had on this podcast who's actually just buying companies.
But first, let's get some context out of the way so listeners have kind of an idea of what's
going on.
How big are you guys at this point?
How many companies have you bought?
Yeah, we don't release a whole lot of detail on financials.
Some people's like, the fund is X number of dollars or so many assets under management.
What we are public about is that we've been in business for a little over two years.
We've acquired 28 companies in two years.
Now that's a large number.
Some of those were very small transactions.
We kind of started small and stepped our way up to larger deals.
But more recently, and going forward, we're looking to do deals in the check size of somewhere
between $1 million and $10 million.
Twenty-eight companies is a ridiculous number to buy.
Only two years of being in business.
That's crazy.
It has felt very ridiculous at certain times, but keep in mind, they're not all very labor-intensive.
Some are very small.
Many were acquired and some were passive income type businesses that you hear a lot about
because the idea was to gain some cash flow, gain some knowledge, start to start stepping
our way up.
I'm very proud of the success we have and how large we've grown, but I don't want to
over inflate people's expectations of where we've been.
Yeah, not at all.
Even 28 tiny, tiny acquisitions would be a very impressive number in my mind and I think
in most listeners' minds.
But to go back to what you were talking about earlier, I think the way that you described
the startup landscape of these diametrically opposed visions of the Silicon Valley model
where it's either a billion dollars or bust versus what's going on on ND Hackers and other
parts of the world where people are really just trying to find realistic outcomes, I
think really strikes a chord with me personally, obviously, and with a lot of people.
What makes your story so interesting with what you're doing at SureSwift is that getting
acquired is something that's typically associated with those high growth startups.
These are companies that have raised money and they typically care less about revenue
and solid business fundamentals and instead they care more about using their funding to
prioritize growth above all else.
I think they tend to have more success achieving some sort of mass market dominance that makes
them attractive targets for strategic acquisitions to big companies or even more commonly, they
use their funding to build out a team of engineers that's attractive to a company like Google
or Salesforce just wants to hire talented engineers.
You rarely hear about bootstrapped and profitable and smaller tech businesses discussing acquisitions.
Usually people who are doing what we're doing, typically their only exit is making money
and generating revenue and hopefully riding that wave as long as they can.
Given that state of affairs, how did you decide to get into this business and what made you
think this is a good idea when really this is not something that people tend to associate
with NDE and bootstrapped businesses?
That is a lot there so let me give you a few comments on that.
For your audience and anybody either thinking about starting a company or who has started,
hopefully they've put some thought into this before they've started but I think it's important
to define success for yourself and I don't think looking to the outside world to define
success for you which is strategic acquisition or rocket ship growth or uniform valuation,
I hope that more of the world is starting to pay less attention to more of the real
people like us doing real work.
It might be an interesting story but then we move on with our days and we don't get
too distracted by it.
I think if one defines success for themselves, it's a lot easier to march down that path
and know when you're on the right track and when you're not.
For me, my story, success for me was about a change in lifestyle.
I shared with you before we started recording that I've been working in a corporate job
for 15 years and had built up a very successful career.
I had overachieved most of my financial goals.
I had fancy titles and lots of responsibility and I was just kind of done.
I wanted to do something different.
I had stopped being challenged by that and I had stopped looking above me at the org
chart and seeing the job that I wanted next.
I knew I needed a lifestyle change and so when I started thinking about before even
knowing what company to start or if in fact that was my path, I started thinking, okay,
what do I want?
Well, I don't want to take a big step backwards financially but it would be acceptable for
me to make a little bit less money if I were happier doing what I was doing.
For me, the company I was working at was hard charging, very aggressive.
There was always travel involved that took me away from my family and something of a
change in just that lifestyle, having a little bit more control over where I was when I traveled,
those sorts of things.
Those were all a benefit to me.
It was pretty easy to see that starting this company would help me toward that success
which I had defined for myself.
I think it's important for your listeners, your audience to think about that as well
as there's a lot of discussion on the forum and your podcast about what to do.
I think that's great providing discussion opportunities of like, okay, I know I want
to be an entrepreneur but I don't know the thing to do.
That's okay.
There's lots of discussion about kind of finding that path but I think there's a step before
that that I think the people should take which is why do I want to do this in the first place?
Those are probably easy answers you can tick down one through five like either I want control,
I want to work for myself, I want to be a small business owner, I want to be rich and
all of those are valid and good reasons, there's no better or there's no right or wrong answer.
But if you haven't taken the time to think about what do I want right now and then how
will I define success in three years or five years?
Those questions take you down very different paths when you're starting a business.
Yeah, totally.
And I think like you said, it's so relative and it's so easy to look at other people and
what they want and let that kind of guide your own decision making as to what you want
and that can certainly be a negative but I also think you can turn it into a positive
but just kind of taking advantage of how it works and the psychology behind it.
So for example, we tend to look at people who are close to us and we tend to look at
people who we interact with and we look at what they care about and that influences what
we care about.
So if you have a goal that might not be perfectly aligned with what society values, if you're
saying hey I want to start a business that's able to allow me to quit my job and take care
of my family whereas TechCrunch is blasting, you need to be the next Facebook or you don't
matter, you're just a lifestyle business, then maybe what you should do is find other
people to hang around who actually have the same goals as you and then they'll become
your new society and suddenly your goals that you personally want will be in alignment with
what the society around you wants and you'll feel a lot better about pursuing that stuff.
Absolutely.
Being an entrepreneur doesn't feel weird if you're surrounding yourself with other entrepreneurs
that find a co-working space where everybody else is trying to hustle and get something
off the ground or just I was fortunate to have a community of people that I was already
friends with that all ran their own businesses, everything from technology companies to hotels
to consultancies or whatever and for them they looked at me and they're like why haven't
you left this corporate job already?
It's weird because they knew me and they knew my spirit and my drive and whatever they wanted
to do.
They actually helped push me down that path but you're right, if you don't have those
people around you, whether it be family or friends, et cetera, that think it's unusual
or don't think that you can make enough money or don't think that you're well-equipped
to be an entrepreneur, they're going to reinforce those negative ideas that every one of us
already has by the way, no matter how successful somebody is, I believe there's a point in
every day or fall asleep every night or waking up every morning where we have those self-outs.
If you are able to surround yourself with people who are encouraging the best behavior
and the best parts of you and not encouraging the self-out, your chances of success will
go away now.
Totally.
One of the biggest problems that I think people face is taking the initial plunge to becoming
an entrepreneur.
For someone like me, it was pretty easy because I knew from an early stage that I wanted to
start a business even when I was a kid and I kind of started in college so I had no responsibilities,
no bills, no family to take care of, no mortgage, very low expectations and inexpensive needs.
I could just eat ramen and rent crappy apartments and even uproot myself.
I moved from Boston to San Francisco.
That was super easy.
But for anybody starting later in life, it's not that easy to become a founder because
there's a lot more friction among all those things that I just listed and that applies
to you because you didn't start your business until you were in your late 30s.
I think it'd be interesting to get into some of the nitty-gritty here and ask you, what's
the story behind how you got into this and how hard was it for you to make the transition
given that you had other responsibilities in your life?
Yeah.
So those other responsibilities were mainly a mortgage, a wife and four children.
And all of that is in contrast to somebody just out of college eating ramen in an apartment.
I had the extra challenge of being a US citizen living in Canada, which is I was there on
a foreign assignment for my corporate job.
And when I decided to leave that job, I had to figure out a valid and my family decided
we were going to stay in Canada for at least the short term to get the business off the
ground and make sure everything was stable.
I had to figure out how to maintain that residency and maintain my ability to stay in that country.
So that period of my life, even just thinking about it now, it was really hard, really scary.
I was fortunate to have a wife who understood kind of why this was important, not just for
me, but for our family long term.
We have always been a really good team and we just kind of talked through all the ins
and outs.
But it's actually in that sense, it was very much in contrast to you starting your own
business.
But in a sense, if you provide yourself options, if you live a life in such a way that you're
providing yourself options, then it's easier to take advantage of those options.
And what I mean by that is we as a family had always spent below our means.
So just because I got a raise from the job didn't mean I went out and got a bigger car.
Or if I got a big bonus, I didn't go blow it on a trip to, a month long trip to Europe.
We lived a comfortable lifestyle, we never wanted for things, but we always, always lived
below our means so that we were saving.
And so when I started crunching the numbers on, can I leave my company job?
And can I survive for what ended up being two years without paying myself, the math
worked.
If the math hadn't worked, it wouldn't have mattered.
When I say the math worked, I knew, okay, we had saved up enough money and we had stock
options, we had other ways to kind of fund the lifestyle that we were accustomed to without
me having a steady paycheck.
If that hadn't been the case, none of the other stuff matters.
Like, oh, you have a dream of being an entrepreneur?
I don't care.
I can't afford our lifestyle.
You want to stay in this beautiful city, Victoria, BC, and run your own business?
I don't care because the math doesn't work.
So same lesson for kind of back to business profitability over just insane growth numbers.
I live my life the way I prefer the companies that I acquire have been built and been run,
which is focus on the bottom line, make smart decisions.
And so it was that lifestyle that we had been on a path for my wife and I 15, 17 years of
living a fiscally conservative lifestyle that made it even possible for when this business
opportunity came up, we were able to say yes, have a plan and take that leap.
Yeah, it's great to hear about what you did because I hear a lot of very creative stories
about entrepreneurs who worked nights and weekends or who negotiated with their employers
to get a shorter work week or my friend Mike Parham, who started Sidekick, actually was
able to work on his side project while at work because they were related.
But it's also good to hear just like the practical approach, which is save your money and take
time off of your job and give yourself the runway to just build your business.
You don't need anything clever.
You just need a sound financial system.
Yeah, it doesn't matter whether you're early in your career or mid or later in your career.
All of us can live a little bit more conservatively than we probably do.
And if you do that, it just creates options.
Completely.
So the main thing I want to talk to you about today is about buying businesses because that's
what you do.
And as I mentioned earlier, I've talked to very few people, especially like Andy Hacker
type people, who've gotten their start by buying a business.
The vast majority of business owners are also the founders.
They've been there from day one running the entire show.
And most people who aspire to be founders are busy learning what I would call these
early business lessons.
For example, how do I build something that people want and how do I find my first customers?
And after that, how do I build a repeatable strategy for reaching more customers?
Whereas you're coming in at a later stage after most of that stuff has already been
figured out, what kinds of skills are important in this later phase and what kinds of problems
and challenges do you face that early founders don't have to worry about?
My skills are completely non-technical.
And I think that's what separates me from at least a good portion of your Andy Hacker
community to illustrate how non-technical the computer-based class that I remember most
from high school or college or even graduate school was word processing where in high school
I learned how to type.
That also happens to be the most valuable class I ever took pays dividends every day.
But I was actually a math and education double major in college because I thought I wanted
to be a high school math teacher.
I did that for a year and realized I didn't love it enough to sign up for that level of
pay and lifestyle for the rest of my life.
And I had a friend of a friend who worked at this company, a health care IT company,
and I was able to get into like a sales training program because I had demonstrated some level
of intelligence and sales acumen.
And they were willing to teach the technology and anything about health care.
So I kind of grew up and worked just like a business type of environment along the way
got an MBA in evenings just because I was kind of growing in my sooner career and realized
I was starting to be in the room with lawyers and accountants and finance people.
And they're using terms that I don't really understand and that I probably needed a little
bit more of a business foundation.
So that's why I went and did that.
I come at this industry and these challenges purely from a business and an operational
perspective.
So business school is what gave me a little bit of an itch to own my own business or start
my own business.
And I always kind of had this lingering idea that if I could find some genius technical
person with an amazing idea or some great technology, I could certainly help that person
grow a business.
But it wasn't something where I was actively pushing myself down a path.
So the business that I'm in now is kind of a perfect fit for my skill set in that I don't
have to have that next great idea.
There are tens of thousands of great ideas out there being developed now.
And I can acquire something where the idea is there.
They've gone through all the, not all, but they've gone through many of the trials and
tribulations of growing a business, getting traction, finding the magical product market
fit, having an audience, figuring out how to acquire customers, figuring out how to
have a reasonable level of churn if it's a SaaS business, for example.
And the founder has figured out a lot of the hard lessons.
And so we can come in, acquire the business, job one is just don't screw up whatever was
working for them.
And then we can apply the principles of just business discipline, operating ideas, other
business tactics or ideas that we myself and my team come with just from natural experience
on our own careers.
And we can apply the lessons learned in one particular portfolio company across the others
and hopefully take the business beyond what the founder who sold it to me was either capable
of or interested in, which is another kind of concept that I found really interesting
and a bit unexpected when I got into this is, if somebody's running an amazing business
that's spitting out cash and is that lifestyle business where they're not having to spend
60 hours a week, it seems like the dream scenario that everybody would want.
And of course, there's a financial incentive to offload it, that you could either continue
to collect monthly checks for the rest of your life, which is amazing, and that might
be somebody's goal, or you could have a, you know, as we said earlier, a life changing
one time payment and be out.
But I was surprised to find how many people had this amazing business that many of your
listeners and followers would aspire to.
And they were just kind of done, they wanted to do something different.
It wasn't they hated their business, and they're mainly been working five or 10 hours a week
on it, but they were just ready to hand it off to somebody who could continue to develop
it and, you know, kind of take it to the next level to use a cliche, but yeah, and that's
where where myself and I have a team of people who were amazing, technically, and have done
gone through all those peaks and valleys of growing businesses themselves.
So it's not that my team doesn't have that capability, but myself, I don't come at this
from a technical perspective, it's more, you know, a couple decades of business experience,
understanding what it takes to take a business and help it grow, understanding the discipline
required to really be successful in any business.
And so that's kind of my different angle on on this and I wonder if some of your listeners,
and I listen a lot, so I listen to your podcast, I you know, follow the form as much as I can.
And there's a lot of discussion on like, well, lots of different things, but find something
you're passionate about, build something, you know, have a blog, create a course, do
you know, and I wonder, are there other people like me who are listening to, you know, okay,
indie actors talking about entrepreneurship and growing a business.
Yes, I mean, I want to do that.
And okay, write some code and just put out my new valuable product.
Okay, I you've already said things that I'm completely incapable of.
So I would say, acquiring a business is certainly a reasonable path to entrepreneurship.
Now that the hard thing, if you're, you know, an indie actor, and it's a side hustle, nights
and weekends, it doesn't cost any money to cause very little money to start something
of a business and see how it goes.
Obviously acquiring a business takes capital, but there are ways to, to get there.
You know, just like if you're a developer, you go from having nothing to having a successful
SaaS product, there's ways to get there and it might just be your own sweat equity, but
it takes time and energy and a path and a plan with if I'm just a person with business
experience and no technical experience, and I want to go into business, there is a path
to get there.
And it might be, you know, raise money from people who trust me, it might be partner with
a technical person who could use some help, and it's just a slightly different path, but
it's still there for people who have the I think that the one ingredient that's common
among all of it is if you're passionate, and if you're dedicated, and you're willing to
endure what will inevitably be some hard times, there is likely a path for you to get to on
your entrepreneurship entrepreneurial journey.
So let's say I'm a first time entrepreneur.
How realistic is it for me to consider buying a business and taking it over instead of starting
from instead of starting one from scratch, and what kinds of things should I consider
and what mistakes am I likely to make in that scenario?
That is important to talk about, I think one should think about it in the same way of like
starting a business from scratch and writing code and etc, etc.
There's going to be there's 1000 ways you could screw it up.
And there's maybe a dozen ways to get it right.
So when thinking about acquiring a business, you should have the same sort of plan and
discipline as many of your listeners probably have like launching a business themselves.
So in an ideal situation, it's going to be something that you care at least a little
bit about.
If you just acquired some business because it's for sale and you happen to know the person,
but you have no interest in what they're doing, you're not going to be successful if you don't
have some level of interest in in that thing.
And there are enough businesses for sale that you can probably find something that you have
some interest in.
And there's all sorts of mistakes to be made.
I made it sound like, you know, kind of easy because founders have figured out a lot of
the hard things and, you know, they've got an audience, they've got, you know, recurring
revenue, they've got acquisition channels, but running an internet business is hard.
And there's all kinds of ways that it could get screwed up at any moment.
And the landscape is constantly changing about what works one day might not work the next
month.
So when a business is for sale, the seller and or a broker that's representing them is
going to make it look just wonderful and they're going to highlight all the wonderful things
and they're going to de-emphasize if not hide any flaws that they know are there.
So there is risk in doing this.
Not every acquisition is going to be successful and hopefully it's a little bit less volatile
than picking a stock, but there is that level of risk.
So I don't necessarily have like a perfect 10-step program of what to do if you are interested
in acquiring a business.
I think the most important thing that somebody could do if that is their path is treat the
acquisition of a business as if it were a full-time job.
And that may run counter to kind of the, you know, side hustle nature of, you know, start
something outside, get enough money and then quit your day job and go do that.
And that might be a reasonable path for somebody, but, you know, if you envision the prototypical
coder that's following you, if they're going to be successful, they're probably putting
in meaningful hours, either nights and weekends, or like you said, figure out a way to do it
in conjunction with their job or smaller workouts, but they're going to put in meaningful time
to develop that product, figure out how to market it, you know, make some mistakes, talk
to customers, all those important things are on that path.
So it's a different path if you're going to acquire a business, but you should be planning
to spend equally as much time to get it right.
So the positive is you could buy a business and be two years ahead of where you were if
you were starting it from scratch, but there are also so many factors to consider when
you're evaluating.
Like, what is the right business model for me?
What is something that I understand?
Am I able to kind of take over the any contractor's employees working on this business?
Or is it something that I'm going to have to do myself and pick up whatever that person
is doing?
If I'm not capable, if it's a solo founder, developer who created this thing and I'm a
business person, can I hire somebody to take over the developer type things that are going
on there?
And so I would I would say acquiring a business is absolutely a viable path to entrepreneurship.
And that doesn't mean it's easier or faster.
And to do it right, somebody should plan to invest the time and energy to get to that
answer in the right way.
It's just fascinating to me because I think probably a lot of listeners and I myself have
never really considered that to be an option.
Like I've never said, you know what, instead of starting a business, I'll just buy one.
I've always thought I've had to build it from scratch.
And I have so many questions about how you actually do that effectively.
For example, how important is it to know the previous history of the business?
Like how many details do you need to know?
Because I imagine it's somewhat disorienting to kind of jump into the middle of a business.
And you know, you've done your due diligence, you know what their business model is, you
know how they're getting customers, but you don't know the history, right?
You don't know every email that the founder sent and you don't know necessarily every
start and stop that they've had, every failed attempt at doing something that they've had.
It would be like joining the fourth episode of Game of Thrones without having watched
the third and having to make political decisions.
You'd probably end up dead very quickly.
So how do you look at the previous history of the businesses that you require?
I think it's important to get as much detail as possible.
I think anybody, there's a whole line of kind of thinking and content that you really could
provide to people on all of these things, like episode after episode, not just necessarily
with me, but there's a whole, I know you've had brokers on the podcast before.
So there's a whole mountain of content that's there.
I would say anybody looking to sell a business.
So put yourself in, you know, Cortland, if you're selling me one of your past businesses,
you would expect me to ask a lot of questions, right?
And I wouldn't necessarily ask you to supply me every email that you've ever sent because
frankly, I couldn't read it all.
And I don't know what that would tell me, but it's totally reasonable for me to say,
I want to see your financial records for the past two years.
And I want to know any, you know, critical relationships you have.
I want to see your customer list.
I want to know the, you know, bell care distribution of which customers pay, which amounts per
month if it's a, you know, subscription or a SaaS business.
I want to know any critical relationships you have either with suppliers or contractors
or, you know, if there's a particular customer that's bigger than the rest.
I want to know every detail about that one because that to me is risk if that person,
if that customer disappears.
So you know, we do as much due diligence as we can on a business.
And if somebody is actively positioning their business for sale, particularly if they're
going through a broker, that broker is going to force them to kind of get their information
together in a format that somebody like me is able and willing to consume it.
Just all of the analytics related to your business is like table stakes for doing something
like this.
So there's kind of a normal way of doing things in terms of this information is appropriate
and will be asked for.
And there's also probably a limit to that, not just in terms of like volume of, you know,
10,000 emails over five years, but like there's certain things you might consider trade secrets
that I might ask for, but people might not want to show unless we're into an act of like
we have a letter of interest that both parties decide we've aligned on most of the deal terms.
And now we're just kind of looking at more than any greedy items and I'm making sure
there are no red flags that haven't been uncovered already.
So there is kind of a standard set of expectations that buyer and seller would have.
And you know, I think every situation, it depends on the business that we're talking
about certain things that are very straightforward.
You don't need all that much information other than what you can see on a website and some
certain financial stuff and analytics to understand this is a fit or it is not a fit for me or
my company or my portfolio.
And then other businesses are way more complex and require way more time and due diligence
to get to that answer of is it the right fit for me?
And is this the right valuation, you know, whether I propose it or the seller's asking
for a number, is that number fair given all of the opportunity and risk associated with
that business?
So one of the most practical considerations that somebody in the market to buy a business
is going to run into is what you already mentioned, which is that it actually costs money to buy
a business.
You're not going to get it for free.
How cheap is too cheap in terms of buying a company and how much money should a would-be
purchaser really be expecting to spend at minimum?
You'd be surprised.
You can buy businesses for as low as like a couple grand.
I mean, that's not the market that I'm in.
But if somebody is looking to just get started, like those are out there.
You know, I think the more you can, well, there's two ways I'd like to answer that.
The more you can spend, the better off you will be for a couple of reasons.
If a business is worth more, it's probably if the asking price for a business is higher,
it is generally worth more because it's more stable, comes with less risk.
The other option is, let's say, you know, I don't even know what people would consider
reasonable.
Let's say somebody can squirrel away $50,000 or raise it from their friends and family.
We're talking like this is somebody making a decision, do I go to Code Academy and write
something over six months, or do I take more of a business path because I'm not a coder?
Well, let's say hypothetically, you could find $50,000, then a question that that person
should ask themselves, and I'm not going to give a right or wrong answer, but there's
kind of two options.
There are multiple options.
You could go find a business for $50,000.
It's probably going to be a way better answer than anything you could find for $5,000.
Or you could buy two businesses that are worth $25,000 or five businesses that are worth
$10,000.
There's some sort of a mix there, and there's pluses and minuses to both approaches.
So if you just take the two ends of the spectrum, either one business for $50,000 or five businesses
for $10,000, you know, on the one end of the spectrum, if it's one business for $50,000,
you can focus on that one thing and do that one thing really, really well.
The downside is there's risk with every single business.
And whether the seller knows the risk and is trying to hide it from you, or whether
something happens that nobody expected, that business could go south.
And all the $50,000 that you've invested in one business is now at risk.
If you buy five businesses for $10,000, you get that diversification risk of, you know,
of the five, you might have one that tanks for whatever reason.
You might have one that you can double in size and is a home run, and you might have
three that just kind of coast along however the seller had been doing it.
And so you spread your risk, but you also spread your focus.
Now you've got to worry about five businesses that may or may not be directly related.
So this is why I said that buying is definitely a buy-and-glat avenue for people.
And you've brought up a good point.
It doesn't mean you don't have to have a ton of money.
You could have just like a little extra money and start, and maybe even start and find out,
is this as fun as I thought it would be, am I as passionate about this as I thought it
would be before quitting your day job, as an example?
How did you get your start with SureSwift?
Because you said that you've invested in 28 businesses in the last couple of years, and
the first ones were a little bit smaller.
Did you go out and buy five businesses right off the bat?
Yeah, I was fortunate.
So at that time where I was kind of deciding what to do with my career, I was fortunate
to have a friend who was a repeat, successful entrepreneur in the software and internet-based
business space.
And I had on the table in front of me, the metaphorical table, really three options.
One was take another job with my current company and extend 15 years into 17 or 20.
Another was take a job with a competitor and move to Boston.
And then a third was there was a doctor in our local community that wanted to start a
medical device startup like Pure From Scratch, just an idea, raise money, build a prototype
going on that path.
And all had interesting things about them, and then it all had challenges about them.
The startup was the one that I got the most excited about, but I knew it could totally
go up in flames.
And so I had carried the most rest.
So I held my friend for some advice, and he said, after several conversations, you know,
I don't want to make your life even more complicated, but I've had this idea for a year.
And I think you would be perfect to run it.
And that idea ended up being sure swift capital.
So we pooled our money.
We started acquiring businesses and proved that the model worked.
And then we later brought in a few other business partners with more substantial equity funding.
We never really went out and raised a fund, you know, in quotes, like you'll hear a lot
of people talk about, whether it's a venture capital fund or a private equity fund, it's
more of a close partnership with people who knew each other, believed in an idea, and
we don't take in outside funding to this point.
And yeah, we started acquiring businesses, and as those were successful, we acquired
larger and larger ones, and yeah, that two year timeframe was really condensed, but it
was really kind of a, you know, I'd like to say on the thoughtful stair stepping of like
getting more and more aggressive and as we acquire bigger and bigger companies.
I think one of the problems that most founders run into, and one of the biggest challenges
really with starting any company is just growth, right?
How do you get users to come to your business and the numbers that you want, how do you
get them to buy, and how do you keep that process happening indefinitely?
And obviously, the stage that you're operating at when you're already buying these businesses
that have had some success, growing and maintaining that customer base is top of mind for you.
What are some of the techniques and the things that you guys do to keep customers coming
in the door to these companies that you buy and to grow them to bigger sizes than their
founders were able to?
I wish I could tell you that I had some magic formula that, you know, works every time or
that, you know, somebody hasn't thought of, you know, pay somebody to create an online
course and sell that, because building a course is also something of no talent in, but yeah,
it sounds boring, but it's discipline, measure everything, you know, we look very closely
at any piece of data that we can on, you know, what are our acquisition channels, if there's
a cost of acquisition, what is that, what are our churn rates, very simply, like, especially
in a SaaS or subscription-based business, customer happiness is a high, high priority,
and we call it customer happiness, not customer satisfaction, because satisfaction is too
low a bar, and customer success is kind of a trendy term these days, but like, I aspire
for customers to be happy, like, occasionally, I get a receipt in my email saying thank you
for paying your $99 for XYZ thing, and I'm like, damn, that's worth 200 bucks, I would
gladly pay that company, double what I'm paying, I'm happy with them, that's what we aspire
to for all of our customers, and so, yeah, I mean, it's boring, maybe cliche, but, you
know, discipline in trying to do the right thing every single day, and more commonly
discussed, but, again, we don't have some, like, secret answer, testing new things, so
I have the benefit of when I acquire a company, you know, I'm not living off of the profits
from that company, it kind of goes into the greater pool, and so I can take a little bit
more of a chance on a test, so whether that be try a paid traffic strategy that the founder
either didn't think they could afford, or didn't know how to execute, or, you know,
didn't, you know, have the mind space to kind of shift their priorities, we'll go take that
chance and give it, you know, two, three months, look at the data, and if it's working, we'll
double down and put more money into it, and if it's not working, we cut it, and we don't
look back at the, you know, thousands of dollars that we might spend on that as a failure if
it doesn't work, we look at it as like, okay, that's part of our process, that's how we
learn, whether that's going to work or not, whether that's a sound investment, if it's
not a sound investment, we cut it off, but we don't kind of lose sleep over losing that,
you know, several thousand dollars on that test, so I don't know if that is the answer
you're looking for, but we just, my career was built on doing the right thing as many
times as possible, and, you know, when you make a mistake, you admit it, you learn from
it and you move on and try not to make the same mistake twice, and that's the approach
that me and my team take with any business that we have under management is discipline,
discipline, discipline, do the right thing as many times as we can, treat customers really
well and, you know, don't be afraid to make a mistake, but then when you do, don't make
the same mistake twice.
Yeah, I think discipline might sound boring, but it's completely underrated because it's
so easy.
I mean, it's easy to make the same mistake twice, but it's even easier to make a mistake
as a founder and then just quit, right?
A lot of founders will run into a wall where their plan for marketing and getting their
product out the door and the hands of customers doesn't work out the way that they thought
it would.
But rather than having your approach, which is, okay, this is just one of many attempts,
you know, let's write it down in the books and then try another one, they get discouraged
and they quit.
Well, and even easier than that Portland is not being willing to take the chance and
make a mistake and just be complacent with the status quo.
So your forum, the internet, the podcast world is filled with advice on how to grow a business,
what to do next.
Like there is no shortage of ideas or suggestions.
A lot of them, it's not like they're counter to each other.
It's not like Portland's telling people to do A and the other guy's telling people to
do Z and it's completely opposite advice.
Mostly advice is kind of the same stuff and it's basic, what I would call blocking and
tackling things of like doing, making smart business decisions.
And I think it's often very, it's the easy path, we're not sure, be like, yeah, you know,
a different email marketing strategy might work, but you know, what's working now works
and I'm just going to stick with that or I'm going to, you know, in, in the case of, you
know, I've heard some of your, a lot of your podcast guests or developers, like the easy
path is I'm going to, I'm going to put my head down and write more code.
I'm going to harden this code.
I'm going to create a new feature and that those are all important things.
I'm not saying that's not, but we fall into patterns of things that we're comfortable
with and it's easy to do what we're comfortable with and discipline demands that you do those
things well and you also do the things that are uncomfortable and find out if they're
going to help you grow your business or not.
You speak in my language, Kevin, that's exactly what I think more people need to hear and
really internalize because it's kind of obvious advice if you hear it, but it's much harder
to actually do it than to hear it.
Yeah, and I don't want to make this sound like it's easy.
I mean, part of my job is in leading up a group of like super talented people is to
make sure we are taking a disciplined approach and not letting things fall through the cracks
and not, you know, we say like good is never good enough and businesses can always get
better and customers could always be happier and like, what are we doing on each of those
levels for every single business, every single day, every single week to improve those.
And I mean, even just saying it like that, it's exhausting.
And so, you know, this isn't for everybody.
I believe that you're going back to your question, is acquiring a reasonable path for entrepreneurship?
Yes, that doesn't mean it's any easier and to acquire more than one business gives you
diversification.
But as soon as you have two, it's that much more complicated.
So I'm fortunate to have found partners and funding that allowed me to get to a scale
of being able to make mistakes on every business and not have every one of them be a home run.
And you know, this is not necessarily the path for everybody because it is exhausting.
You and your audience know that it is very hard to run one business.
Go try running twenty eight and doing so with a disciplined approach and you know, and it's
not like it's all on Kevin, you don't get a team of just amazing, smart, talented people
that help me with this.
And I think they would all agree like this is hard work, you know, just because it's
fun most of the time doesn't mean it's not hard.
Yeah.
Ryan Hoover, the founder of Product Hunt has a good blog post that he wrote a long time
ago called Do Shitty Work.
And it's just a to-do list of things that needs to do for a startup.
And it's like, a lot of this stuff is shitty and you're not going to want to do it.
But you have to anyway if you want to move forward.
Yeah, it's shitty.
It can be boring.
It can be, you know, like grueling at times, but that's what builds successful businesses.
If you're only doing the fun parts, then you're certainly neglecting other important
parts.
Yeah, I would say, you know, I don't have a blog post about it, but I like to use the
time to fill a good pitch, so I'm a sportsman with sports analogies.
So to wake up and have on my board Do Shitty Work, that's not very inspiring, but to use
the baseball analogy, people always talk about like home runs or hitting grand slam with
business success.
And yeah, that's cool when it happens, but home run hitters strike out more than they
hit home runs.
I like the analogy of I'm a pitcher, and I'm going to pitch every fourth day, and I'm going
to throw 100 pitches in a game or more.
My job is to throw a good pitch as many out of 100 times as I can.
And that is less interesting, but it's easier to focus like I can go to sleep every next
day.
Did I throw a good pitch today?
And if the answer is yes, then I've done my job.
And because home runs don't happen often enough to keep you going between one day to the next.
So you've bought about 30 companies at this point.
Do you have any stories where after buying a company, your plan for sort of growing and
maintaining that company ended up failing spectacularly?
Or the opposite?
Have you ever had a plan that just worked a lot better than you expected?
It's interesting.
So I've been listening to your podcast for a while.
I'm going to tell you a story about a couple of businesses that are interrelated that was
a total surprise.
So I need you to tell me before this podcast airs, because I'm going to mention some businesses
and all of our contracts have confidentiality clauses in them, and it's more of a mutual.
We agree.
We're not going to talk about the financial details, and we agree when and if we announce
something publicly.
So here's the story.
I was at MicroConf, which is a conference that you've talked about on a podcast, and
I don't know if we were actually at the same conference this was last spring in Vegas.
Okay.
I went to this year's MicroConf in Vegas.
Yes.
Just like whatever, six months ago or within the last phone.
So we were in the same room and did not connect.
So let's not let that happen.
Yeah, definitely not.
So first night, cocktail hour.
I'm just there mingling, and I've run into a guy named Tyler Tringus, who your listeners
will know.
He's active on forum.
He's very much a fan of transparency and writes a lot of great content.
We just kind of get to chatting and, oh, Kevin, what do you do?
I acquire companies.
What do you do?
I have this business called StoreMapper.
And we talk.
He talks about his business and how successful it's been, where they're at trajectory wise,
et cetera, et cetera.
I'm like, well, that's really cool.
I mean, that's right in the wheelhouse of the types of businesses that we're interested
in.
Because we've got traction.
It's a success model.
It's lightweight, talented contractors, but not a lot of overhead, good customer base,
blah, blah, blah.
Let's be checking off a lot of our top 10 boxes.
And we kind of left it at that.
Great meeting you, exchange cards, we go mingle.
And following up with the conference, I just sent them, and I was like, hey, Tyler, great
meeting you, if you're interested in selling, give me a ring.
And I'll spare you the details of all of the back and forth.
But we started talking.
He's like, I'm not really interested in selling, but here's kind of where I'm thinking.
Here's what I think the path is for the business.
And Tyler is a very smart guy, studies the industry.
He really knew what he wanted, knew the pros and the cons of his business, frankly.
And he knew where there were holes, and he was just upfront about that, which I really
appreciated.
And so on one of our phone calls, he says, OK, Kevin, this is interesting.
Let's take it a step forward, but I don't really know to give you a couple examples
of businesses you've acquired.
And if your listeners go to our website, it's not real public about what's in the portfolio,
and that's with purpose.
So I'll give him a couple of examples, and I'm like, oh, there's other business that
we acquired called Mail Parser, URL is mailparser.io, acquired that from a German engineer in France.
And you know the punch in this story.
That's a guy named Moritz, who we also had in the podcast.
We had bought Mail Parser from Moritz maybe six months prior, and it was going really
great.
And Moritz is still like an extended member of the family.
I was just on track with him yesterday.
But I didn't mention the name.
I just said, Mail Parser is the business, in a list of like three, thinking that he
would go check out the websites and see if there's details on what we had released lately
or whatever.
So Tyler calls me 24 hours later, not giving me a hint of what was going on in the background.
He called me 24 hours later, and he's like, when you mentioned Mail Parser, it struck
a chord with me, because I remember I met Moritz at a conference in Paris.
I called him after we hung up, and Moritz had very good things to say about Sher Swift
Capital, and said it was a perfect fit.
And the transition went great.
Everything was great.
And he said, don't think twice, Elder Kevin, if it's the right fit for you and for your
business, Tyler.
And I was like, oh, you can't make that stuff up, right?
I meet Tyler at cocktail hour.
He happens to know Moritz.
They're friendly, and they kept in touch years after meeting each other at a conference.
And like four or five months later, store mapper is part of our portfolio, and Tyler
is still helping us transition it.
And the reason why, and Tyler knows that, coming on the podcast, he actually introduced
us before this drops to the public.
We agreed that he could announce on his blog or his email list that he had sold store mapper.
So that was the question about the timing.
But in terms of like, I can't remember how you phrased it, unlike these stories or what
surprised me, that was a surprise when Tyler, people talk about a small world, but that's
smaller than I thought it would be.
And the fact that you and I were in the same conference just a few months ago, and have
these similar ideas about the right and wrong ways to start a growing business, and how
to think about funding, how to think about how your personal life overlaps with your
business life, and my words, not yours, but yeah, that was like one of these stories where
I ended up telling a friend of mine over a beer, and he was just like, rolling his eyes
and shaking his head like, this sounds made up, but it's true.
And those are two of my favorite businesses in the portfolio, store mapper and mail person.
Have you guys ever made any big mistakes with buying a company?
I imagine when you first started that there was a lot of uncertainty there.
And there are probably some things that you would not repeat if you could go back.
Yes.
The mistakes are many and too many for this podcast.
But in general, I think, you know, you look at what I do is like investing, I make investment
decisions in businesses, and you always expect the best but plan for the worst.
And anybody who's made more than one investment and tells you that everyone has gone perfectly
is either lying to you or lying to themselves or both.
So you know, when a business is for sale, like I said that the seller and if there's
a broker involved, a broker will emphasize all the wonderful things and maybe be emphasized
any risks and despite, you know, as much due diligence as we could do and try and look
over every detail, there either might be something that was missed that happens rarely and probably
less and less so as I have more of a robust deal team that looks at every deal.
So I have my technical guy look at the code, I have my finance guy look at all the books
so that I'm not just relying on my own expertise or judgment.
But those things happen, you know, you could miss a key element that ends up hurting you
down the road.
But the more common thing, you know, we talked about the SaaS business, we have a couple
more of that but we have some content-based businesses in the portfolio because they're
easy to run, they spit out cash, it's pretty straightforward.
And you know, the ever-prisoners that's always there is that Google makes some sort of change
and also in a website that was popular yesterday is slightly less popular today.
And so we've had those things and so we just kind of try to control against those, we focus
more on SaaS today than we were in the past for some of those reasons.
But yeah, like I said earlier, business in general is hard, running an internet-based
business is harder, running a small internet-based business is harder still and so the reason
it's hard is because there's risk and surprises and challenges that come up and so we are
in no way immune to those things.
We just try to mitigate those risks or lower those risks as much as we can up front, be
prepared when they happen, you know, I've got stories of like websites being attacked
or somebody forwards me an email saying, it looks like someone other than you is now in
control of this business, you might want to look into that.
Yeah, I mean, crazy stuff like that didn't, you know, didn't end up, you know, we recovered
and luckily I've got, you know, we thought we had all the right plans in place and protections
in place, but you know, missed something apparently.
So those things happen and we just try to reduce the chances of those happening.
And if something bad happens, we have a plan to react and how to fix it.
So we're getting low on time here.
But to wrap things up, let me ask you, what are your long term goals as an entrepreneur
and was George Swift capital specifically?
Well, go public and sell for a billion dollars, I can't even.
Yeah, my long term goals are to, we're on a path already.
What I wanted was control of my life.
I wanted financially to be the same spot or better than it was in my corporate job.
I wanted to build a team of really talented people that I enjoy working with and that
I'm inspired by.
And so like, check, check, check.
Those are done.
Now it's about building a sustainable business and continuing to grow in, you know, creating
your return for myself and the other partners and kind of what path that takes.
It is still TBD, but we're, we're a buy and hold a company.
We do not set out to flip businesses after five or seven years.
So we make investments on businesses that we want to own for the foreseeable future.
And you know, that's, that's it.
And you know, I, I more and more want to kind of contribute to the ecosystem in general.
And one of the reasons why I'm glad I got connected with you is because I believe in
what you're doing with your forum and your podcast and kind of creating an environment
for people who want to get into entrepreneurship or are, and want to get better at it.
And so I'm investing my time and the company's money into certain ways to, whether it's sponsor
a conference or, you know, be on a podcast or contribute to a forum, because I believe
that this type of opportunity is immense and it's so good for so many people.
And I now start to look more at what we're doing as a really good, viable outcome for
many, many of the thousands of people that are your audience or other audiences similar
to yours.
So without sounding like this is a charitable endeavor because it is not like I am a hard
capitalist and it's about making money for me and my partners at the end of the day.
And I feel really good that for people like Ritz, people like Tyler, you know, some woman
listening to, to your podcast or a number, your forum, someday their life might be changed
by selling their business to shirts with capital or somebody like me, because not every business
is a fit for my portfolio, but I believe if there are more exit opportunities for successful
business people at this kind of smaller, moderate scale, frankly, the world's a better place.
And so I don't necessarily have a clear vision of like how I can contribute to that or what
the steps are to do that other than we're going to continue to acquire businesses.
We're going to continue to share best practices across those, help every business grow, provide
opportunity for founders who may want to continue to be involved, you can be involved in their
company or other companies that are part of portfolio.
We provide opportunity for dozens of contractors and freelancers every day, week, month, which
feels great to me, you know, long-term that those are things I think about, like we've
got a plan in the past, like continue to acquire and make money, long-term, I want to see what
we can do as a company and as a community within SureSwift to have an impact on the
broader ecosystem of entrepreneurship.
The world would certainly be a better place if there are more exit opportunities to incentivize
people to start these kinds of businesses and people who did had more options for success
in the long term.
And I think you've been doing this, you've been in this kind of mindset and place longer
than me.
Wouldn't you agree that we're already going that direction like Oh, yeah, for sure.
It's easier to start a business today than it was 10 years ago.
You know, I feel like it's easier to exit a business today than it was even two years
ago when I got into it.
And so I think that the world's moving that way.
My goal is to move it that way, maybe a little bit faster and maybe a little bit healthier
because sad as it is, there are other people out there that, you know, maybe have different
philosophy about how to do business, how to treat people, how to treat founders where
it's like a buyer versus seller relationship.
And I feel better if you're getting screwed.
And I don't take that approach.
And so my goal is to, you know, support the people that do things the way that I have
similar values, similar beliefs in what I do and what we do as a company, you know,
I think the chips will fall, hopefully chips will fall the right way that this industry
kind of just gets better and just gets healthier over time.
Could not agree more.
Did you tell listeners where they can go to find out more about what you're up to personally
and what you're doing at short-shift capital?
Yeah, you can drop us a line at www.sure-swiftcapital.com but the best way is email me kevin at www.sure-swiftcapital.com
or on Twitter.
Twitter is the one social platform that I put any time into.
It's at Kevin underscore McArdle and that's McArdle one C-M-C-A-R-D-L-E.
I am more of a curator and communicator than a, than a tweeter myself, but that's a, those
are the email and Twitter are the best ways to get a hold of me.
All right.
Thanks so much for coming on the show, Kevin.
Thanks for having me, Cortland.
It was really a pleasure and talk to you again soon.
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