MailChimp vs Infusionsoft: How MailChimp is Holding You Back

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Mailchimp-vs-Infusionsoft

I’m often asked by people that are unfamiliar with Infusionsoft if they should pick it, or a simpler software like MailChimp for their email marketing. What these people fail to understand is the magnitude of the differences between these two applications.

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Digital Marketing Strategy: Yanik Silver on How to Build a Successful Online Business

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YANIK 4IN X 6 IN X 300DPI X FC

Yanik Silver

It’s such a pleasure to me to have a chance to talk with a well-known entrepreneur like Yanik Silver.

Yanik has been selling since he was a teenager – his father enlisted him early on to help sell medical devices. That was some time ago, and since then Yanik has taken eight different products to the million dollar sales mark. And he’s not stopping any time soon. These days, in addition to running his business, he hosts a popular annual conference, runs an exclusive business mastermind group, and pals around with Richard Branson.

Listen now and you’ll hear Yanik and I talk about:

  • (01:45) Introductions
  • (03:25) How the Maverick organization started
  • (07:40) Long form sales letters and long form copy
  • (10:50) How Yanik sold his first information products
  • (12:00) How Yanik would recommend selling information products today
  • (16:00) Why Yanik’s life is better at 40
  • (20:00) Things Yanik learned from Sir Richard Branson
  • (23:00) Yanik’s advice for people who haven’t yet started a business
  • (29:00) The 10th Annual Underground Event
  • (35:30) Yanik turns the tables and interviews me
  • (36:50) How Yanik got his first bit of revenue

(Yanik is just one of the many thought leaders we’ve had on the Bright Ideas podcast. Check out some others here.)

Resources Mentioned

More About This Episode

The Bright Ideas podcast is the podcast for business owners and marketers who want to discover how to use online marketing and sales automation tactics to massively grow their business.

It’s designed to help marketing agencies and small business owners discover which online marketing strategies are working most effectively today – all from the mouths of expert entrepreneurs who are already making it big.

Click to Tweet: Yanik Silver on How to Build a Successful Online Business

Listen Now

Enjoyed this Interview? Here’s How To Leave us a Positive Review on iTunes!

If you enjoyed this episode, click here for more information on How to Leave Us a Positive Review on iTunes! Your review will help to spread the word and get more entrepreneurs like you interested in our podcast. Thanks in advance - we appreciate you!

About Yanik Silver

YanikSilverYanik Silver has successfully bootstrapped 8 different product and service ideas hitting the million-dollar sales mark from scratch without funding, taking on debt or even having a real business plan.

His story and businesses have been featured in Fox Business News, TIME.com, USA Today, SmartMoney.com, MSN Money, Conde Naste’s Portfolio.com, Entrepreneur.com, WIRED magazine, WORTH.com, The Boston Globe, The Wall Street Journal, and many others.

Yanik is the author of several best-selling entrepreneurial books and tools including Instant Sales Letters®, “34 Rules for Maverick Entrepreneurs” and “Maverick Startup”. He is the founder of the Underground Online Seminar®, 3% Forward and Maverick1000, a private group of game-changing entrepreneurs, out to change the way business is played.

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How Content Marketing Has Forever Changed How to Attract Clients and How You Can Take Advantage of This Shift

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Are you struggling to attract clients? Have you heard about Content Marketing, but aren’t yet sure what it is, or how to implement it? Would you like to be able to stop spending money chasing prospects and asking them to do business with you?

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Digital Marketing Strategy: Zvi Band on Growing His Saas Company from Near Zero to a Million in 12 Months

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Zvi Band 4in x 6 in x 300dpi x FC

ZviB

How often have you met someone and thought, “This would be a great person to add to my network, I really should keep in touch with them”?

Likely too often for you to actually keep in touch all of those contacts on any meaningful basis, right? Well, Zvi Band noticed that he wasn’t the only person with this problem. It wasn’t as though there weren’t a ton of tools to make those connections – from email to LinkedIn to phone calls or cards. What was missing was something to help maintain a number of relationships over a variety of channels. Zvi founded Contactually on the premise that there would be a ton of value in a product that made it easy to do this follow up.

To grow the customer base, he focused on integrations & partnerships, and he shares those details in our interview. He also shares a lot more of what helped grow Contactually to seven figures in just one year.

Listen now and you’ll hear Zvi and I talk about:

  • (03:20) Introductions
  • (10:50) Overview of results
  • (12:20) How they got their first 100 paying costumers
  • (18:20) Overview of how they handled integration and partnerships
  • (23:20) How they financed the very early stage
  • (26:20) How they dealt with the challenge of focus
  • (28:20) Overview of how they raised their first round of financing
  • (22:20) How they got into 500 startups
  • (34:20) What they did after getting the first round of money
  • (36:00) How convertible debt works
  • (40:20) Revenue generation after the 1st round of financing
  • (41:20) Overview of KPIs they watched in 2012
  • (43:20) How they paid attention to churn to reduce it
  • (47:20) Overview of best practices
  • (49:20) Do investors repeatedly invest?
  • (55:20) How and why the hockey stick happened

(If you’d like to hear from more successful software business owners, check out all the great Bright Ideas interviews and podcasts on this topic.)

Resources Mentioned

More About This Episode

The Bright Ideas podcast is the podcast for business owners and marketers who want to discover how to use online marketing and sales automation tactics to massively grow their business.

It’s designed to help marketing agencies and small business owners discover which online marketing strategies are working most effectively today – all from the mouths of expert entrepreneurs who are already making it big.

Listen Now

Enjoyed this Interview? Here’s How To Leave us a Positive Review on iTunes!

If you enjoyed this episode, click here for more information on How to Leave Us a Positive Review on iTunes! Your review will help to spread the word and get more entrepreneurs like you interested in our podcast. Thanks in advance - we appreciate you!

Transcript

Trent: Hey, there, Bright Idea hunters, welcome to the Bright Ideas
podcast. I’m your host
Trent Dyrsmid and this is the podcast for entrepreneurs who want to
discover how to use content marketing and marketing automation to
massively boost their business.And the way that we do that is, we bring expert entrepreneurs onto the
show to share with us the exact strategies that they have used to
achieve their success, so no gurus, no theorists.The only people who are on here are people who are actually in the
trenches, just like you, rolling up their sleeves and getting it done,
and this episode is no different.On the show with me today is a fellow by the name of Zvi Band, and he
is the cofounder of a startup software company that is called
“Contactually,” and Contactually, I have discovered as a result of
this interview, is just the coolest thing ever.It allows you to, basically, build and strengthen the relationships
that you have with your existing centers of influence, regardless of
the ways that you’ve been communicating with them, whether it’s been
Facebook or twitter or texting or email or so forth.I really, strongly encourage you to go and sign up for a free account
at Contactually, because I didn’t actually fully get it. I didn’t
understand the value of it, until such time as I did this interview,
and, by the time you listen to the first four or five minutes of the
interview, you will definitely understand that, as well.Now, the results that these guys have achieved have been nothing short
of amazing. At the beginning of 2013, they had just about $5000 a
month in recurring revenue, and, now, at the middle of October 2013,
they are at just shy of a $1 million run rate.So, that is pretty phenomenal growth, and in this interview, Zvi is
going to share with us how they came up with the idea, how they tested
the idea, how they raised their early rounds of financing, how they
further tested the idea, how they communicated with users.There is so much valuable information in this interview that you may
want to even listen to it twice.We’re going to introduce Zvi it just a quick second but before we do
that, I do want to give a shout out to the Bright Ideas Mastermind
Group. If you are a marketing consultant, solopreneur or freelancer
and you want to spend time with other people who are trying to build a
marketing consulting business and trying to use online marketing and
marketing automation to make that business grow faster, then you
really want to go and check out the Bright Ideas Mastermind Group, and
you can do that by going to BrightIdeas.CO/mastermind.There, you will find some information as well as a form to fill out
where you can apply, and you’ll book a call with Yours Truly, and
we’ll talk to see if the Mastermind is a fit for you or if you are a
fit for the Mastermind.So, with that said, please join me in welcoming Zvi to the show.Hey, Zvi, welcome to the show.Zvi: Thanks so much for having me, Trent.Trent: No problem. It’s a pleasure to have you on. So, we’re going to
talk a whole lot about
how you have built your software-as-a-service company Contactually.
Did I pronounce it correctly?Zvi: You got it.Trent: All right. And we got a lot of really good stuff I want to get
into. We’re going to talk
about what you’ve achieved. We’re going to talk about how you got your
first 100 customers.We’re going to talk about how you did your fundraising and what you’re
doing in terms of smart marketing, but, before we get into any of
that, because I’m sure that the vast majority of my audience does not
know who you are and doesn’t know what your company does.Please take a moment and set the stage for our discussion by
introducing yourself and giving your little, introduction to the
company, so that we have context.Zvi: Absolutely. My name is Zvi Band. I’m the cofounder and CEO of
Contactually. We’re
in early-stage startup, building a relationship marketing platform.
What we do is we know how important your relationships are to you.We analyze all of your relationships by pulling in all of your
contacts into one place, help you identify the relationships that are
most important for your business and then help you stay in touch,
proactively, every single day, in order to grow your business.Trent: All right. So, conceptually, that make sense to me, but dumb it
down as much as you
can. So, let’s just use me as a guinea pig or your target customer, if
I’m not your target customer.We’ve got contacts in Gmail and they’re on Facebook and I’ve got
people on twitter and LinkedIn and they’re all over the place. Is your
software solution helping me to make sense of that sphere of people?
I’m not sure that I get it yet.

Zvi: Absolutely. That’s a big part of what we do. As we rely more and more
on email,
Facebook, twitter, SMS in order to engage with the people who are
important for business, you know, they’re all over the place.

I’ve got some contacts in my Google Contacts. I have some people that
I talk to only on Facebook. Then there’s that guy I’ve been SMSing
with. Then there’s the people I’m emailing across the four different
email accounts I have, in keeping that organized is a very hard thing.

One of the first things that Contactually does is it pulls it all into
one place. We will [D-Dupe] it. For example, Trent, you and I have
spoken across two of my email addresses that it found those two and
put them in one place.

We’re also connected on LinkedIn. It found your LinkedIn contact and
your twitter profile, pulled it all into one place. I have a really
consistent idea of who Trent is and all the different ways I’ve spoken
to you.

Trent: Interesting.

Zvi: Then, what we do is we will then help you organize it. So, we can
say, “All right. Trent
is someone who’s important to me,” and then Contactually will then
make sure that because you’re an important person that I actually stay
in touch with you and build a better relationship with you.

Trent: And how does it do that?

Zvi: Absolutely. This is kind of one of the key things that are users
realized, that there’s
so many people who are important to us, but we end up spending most of
our day kind of putting out fires, responding to whatever’s urgent or
responding to who’s talking to us, instead.

What you can do is you can identify, saying, “All right. Trent is one
of my important contacts and all of my important contacts, you know,
make sure I keep in touch with them every 30 days.”

Then, by looking at all of your different online communications, we
can see that, “Hey, it’s actually been 31 days since I spoke to this
person.” Then contractual will see that “Hey, this is a person that
you’re starting to fall out of touch with,” and then we’ll send me a
reminder saying, “Hey, get back in touch with this person.”

For example, one of our top use cases is for a real estate agent. You
know, real estate agent lives or dies by their address book, and if
they don’t stay top of mind, most likely, one of their potential
customers will just work with someone else.

Trent: Absolutely.

Zvi: So, by setting a reminder every day saying, “Hey, here are five
potential leads that you
spoke to last month but haven’t spoken to recently,” they’re able to
better stay in touch and then grow their business.

Trent: And through the interface, am I presented… because I have not
seen it, I don’t have an
account yet. I’d love to mess around with it. So, maybe you could set
me up afterwards.

But is the interface such that I’m going to see you, and it’s going to
show me, in the last 30 days, the ways that we’ve communicated,
whether it was either twitter or Facebook or email or texting or
whatever?

Is it going to be all in that one place and is there going to be like
a kind of a summary or a audit trail of the things that we talked
about? Or, what am I going to see when I’m reminded that it’s time to
call you again or connect with you again?

Zvi: Absolutely. You’ll get a set of reminders from us, via email, in the
morning, and you
can, of course, choose to just drop someone an email and
Contactually’s architecture will pick that up and see, “OK. That you
and I reengage, we’re all set.”

But what you can do is you can click over to contactually.com. We’ll
show you everything in one place. Not only will it show every
Facebook, LinkedIn, twitter, email, SMS conversation between the two
of us, you know, spanning our entire history; I can also record notes
and it will show the notes to me.

Whenever you make a new contact in Contactually, it’ll find all of
their online profiles, like even their Pinterest profile, and pull
that all into one place. I’m basically given this command center where
I can see everything I know about you and everything Contactually is
able to find out about you, pull it all into one place, and then use
that as a way to quickly build a better relationship.

For example, I can send an email to someone and I can see that, “Hey,
they actually were talking about something recently online.” I can use
that as a way to reengage with them, much more quickly.

Trent: Yes. That make sense too. So, for a lot of people, their
contacts might live in Outlook
or, in my case, a lot of my contacts, in addition to being in Gmail,
are also in Infusionsoft. Does your app have any ability to make it so
that I don’t have to have more than one repository of all of my
contacts, so to speak?

Zvi: Absolutely. So, we have a number of different methods. One is you can
easily import a
spreadsheet of contacts. Most people, when they come on board to
Contactually, they’ll [give us], saying, “Hey, I’ve got five Excel
spreadsheets of contacts I haven’t spoken to recently.” They can
easily drop those into Contactually and we’ll automate that.

We also have a lot of integrations with other providers. So, we work
with MailChimp, Salesforce, Highrise, Google contacts, as well as a
whole host of other things. We’re working on an integration with
Infusionsoft and a few other services, but, right now, we also have an
API. So, we have a lot of people building integrations into our
platform, too.

Trent: OK. Any idea when the Infusionsoft one will be ready?

Zvi: I’m hoping, by the end of the year. So, I’ll definitely keep you
posted on that.

Trent: Yes. Please do, because I would be happy to use it and blog
about it for you.

All right. So, now that we kind of have an idea of what it is that you
build, this episode is really going to be about the whole process that
you’ve gone through to achieve this traction that you have done with
Contactually.

In terms of starting with the beginning, or rather the end, in mind,
how many customers or how much revenue are you guys doing right at
this point in time?

Zvi: Sure. So, right now, we have around 35,000 customers on the platform.
Probably
around 6000 of them are paying at the moment. Revenue, I can’t
disclose our exact revenue number, but we are getting very close to
hitting $1 million a year in revenue.

Trent: Terrific. OK.

Zvi: Yes. It’s been a busy year. We were nowhere near that in January.

Trent: Where were you in January?

Zvi: Oh, in January, I think, we’d be lucky if we were pulling in like
$5000 a month, or so.
We had really just spent 2012 proving that we weren’t crazy and that
people would pay for it.

Trent: Yes.

Zvi: And I think it hitting that $5,000 a month is a good sign that, “OK.
You’re not totally
insane,” and have spent 2013 doing nothing but growing it.

Trent: Yes. No kidding. All right. Let’s talk about how you got to the
first 100 customers,
because I think a lot of people are very interested in building
software as a service. There’s lots of competition.

There’s lots of challenges, and actually, the guy behind… Paul
Graham, from Y Combinator wrote a very famous article Do Things that
Don’t Scale. Did some of his advice fit into how you got the first
100, and, if not, how did you do it?

Zvi: Oh. Absolutely. I’d say, even at our stage, we still, constantly, do
things that don’t scale,
and only when they’re a success do we even think about how we optimize
this so we can kind of build a repeatable model out of it.

Going back to kind of how we got our first hundred customers, well,
kind of say “our first hundred paying customers,” getting the first
hundred people to just try out the product was just pretty easy.

Just tell family and friends, you know, post on a few blogs, talk
about it online, etc., but in order for us to get our first 100 paying
customers, we kind of started phasing in our paid model, and we
decided very early on… and this is a little different than what a
lot of, I’d say, Silicon Valley’s mindset is about.

We started out very early deciding that we wanted to be a service that
people paid for, and we ensured that not only were we building
features that people would be willing to pay for, but we were going
after markets of people that would pay for this, and that’s a very
important mindset that you have to have, early on.

Otherwise, you worry about attracting the wrong audience of people who
may like your product, may use your product, may give you lots of
input, but, at the end of the day, they would never pay for anything
like this, because it’s not valuable.

Trent: So, what you’re saying is, you went after markets where people
were expecting to pay
for this type of service?

Zvi: Absolutely. And, I mean, the easy way to figure out who’s going to
pay for a service
like this is who would stand to benefit from their business by using
something like this? For example, a common model that we kept
encountering is there are lots of people who are very, very obsessed
with their network, and it’s very important for them, and they really
like having a strong address book.

But, if you ask them to pay $20 or $40 a month, they’ll say, “No thank
you. I’ll just kind of stick with what I have.”

If you go to, say, a small business owner or a real estate agent or a
financial advisor and say, “Hey, this is a system that will, no
question, help you increase your business, help you get at least one
new client a month. If you get one new client a month, isn’t it worth
another 40 bucks a month? No question.”

Trent: Yes.

Zvi: What we started doing early on is, before we even knew what we were
fully
building out, before the platform could even take credit cards, we
already had a pricing page built in, and we would ask users, as are
signing up, which plan they wanted. That at least helped us qualify
users. W

e could start seeing who would be willing to pay for it, where they
were coming from, what price points they’re going after.

By then, we had learned enough about what features were important to
them and what price points that, when we rolled out our actual ability
to accept credit cards, we knew who we’re going after and we knew who
would be paying for this.

Trent: That was a very smart strategy. I hope people really appreciate
what you just said.
When it was free, I could sign up. Part of that sign a process told me
to pick one of the pricing options, but then I didn’t actually have to
pay for it. Did I get that right?

Zvi: You got it, and, I mean, the whole point of this is you want to be,
especially in the early
stage, learning as much as possible and you want to learn at all
costs, and you should not be trying to go for scale. You should still
be trying to go for quality.

Yes, I mean, of course, we’re not going to spend our time building out
a credit card processing system for something that’s going to change
every day, but you really want to ensure that your learning who’s
going to pay for it, what amount they’re willing to pay and then what
they’re willing to pay for.

Trent: So, when these early users clicked on, you know, “I want this
plan, that plan or the
other plan,” and they were taken… what did you show them next, “Hey,
we’re not ready to accept credit cards yet. Thanks for the feedback”?

Zvi: Honestly, no. We usually barely even mentioned that. People wouldn’t
even notice.
They would select a pricing plan as they moved forward or they would
get turned away and then we’d know, “OK. That’s a good learning
point,” but they would just continue with the sign up process.

Yes, they would just never… you know, they’d never hear more about
how they had to pay, up until we were finally ready to start accepting
credit cards. Then, we would go back and message them saying, “Hey,
we’re finally ready to have you upgrade.”

Trent: Yes. They kind of thought maybe they pulled a fast one and
you’d forgotten to
charge them perhaps.

Zvi: Yes. Exactly. And that’s fine for us. We had accomplished our goal of
learning what
people are willing to pay for.

Trent: OK. So, I guess I want to make sure that we really answered the
question of how do
you attract your first 100 paying customers. You told friends and
family. You got exposure on blogs. You participated in the discussion
in online communities, where you thought your target market hung out.
You got some traction. You put up a pricing page that you embedded in
the sign up process, so that these free users, you were able to
collect data on what they were interested in and what they were
willing to pay for.

Then, armed with the data, you decided, “OK. Now is the time to put
credit card functionality in,” and then you went back to those people
who had gone through that process and said, “Pay us.” Did I get that
right?

Zvi: You got it, and we were not… you know, we didn’t go with the model
of, from day one,
spending hundreds or thousands of dollars on Google AdWords or setting
up SEO pages.

We really just relied on talking to a lot of people, and a lot of
those people ended up being influentials who would help us and spread
out the word.

One thing we also did, just given that we didn’t have a lot of money
and really wanted to focus on getting off the ground, is we also
integrated with a lot of other platforms, and I would highly recommend
that people really consider integrations and partnerships when they’re
getting their early-stage product off of the ground.

I think, from very early on, we were integrating with Facebook, we
were integrating with Salesforce, we were integrating with Google
contacts and Highrise, etc., and, yes, it was hard to build, but, at
the same time, that also provided a link to a product that people were
already using, which made a conversation easier.

Trent: In your case… and, again, I want to make sure that I and the
audience really
understand what you mean by “integrations.” Let’s just use Facebook as
an example. Can you walk us through, specifically, what you mean by
you integrated with Facebook?

Zvi: Yes. Absolutely. So, when people can connect their Contactually
accounts with
Facebook, and what that will do is that will pull in all of your
Facebook friends into Contactually and then create contacts out of
them. It will pull in all of your message history in Facebook and
store those in people’s contact profiles.

Then, when you want to engage with someone, you can choose to send
them a message on Facebook, instead of an email message.

By having that integration, people would say, “Oh. Cool. I do use
Facebook, and this would be a valuable thing for something I already
have. Let me go ahead and sign up for Contactually and connect my
Facebook account.”

Trent: So, key take away there is to build something that increases
the value of something that
I’m already using.

Zvi: Exactly.

Trent: All right. Now you said “partnerships.” Can you talk a little
bit about specifically what
you mean by that?

Zvi: Yes. Absolutely. So, there’s an “integration,” which is just the
technical term. A
partnership can take many forms. So, for example, we have a
partnership with MailChimp, where, if you go to MailChimp’s website,
you’ll actually see in their app marketplace, they’re driving traffic
to Contactually.

So, it’s somewhat of integration, and some of them partnerships. So,
that’s another way.

We also did a bit of partnership with other similar tools. So, for
example, one thing we realized early on is that people who were using
Contactually would also be using a service like SAINTbox. So, for a
while, we were co-promoting each other.

People who were using SAINTbox would get a coupon code and a promotion
for Contactually and vice versa. So, those are the partnerships that
you can build, as well.

There are many different types of partnerships. We also have a
reseller program and affiliate programs as well. Those don’t
necessarily drive as much traffic. You really want to figure out how
you can get a lot of people at once, and integrating with these bigger
tools is definitely an awesome way.

Trent: Just because you integrated with Facebook and twitter and the
various social platforms,
doesn’t necessarily mean that the people who use those platforms are
going to even know that you exist. You still have to get on their
consciousness, somehow.

Zvi: Exactly. Many of the bigger ones have avenues for that. For example,
we have a
highly rated integration with Google apps. So, Google apps has the
Google apps marketplace.

People are going, looking all the time for add-ons they can get to
their Google apps organization, and, hey, Contactual’s there and we’ve
got something like 70-some positive reviews.

That’s a great way of driving traffic and actually getting eyeballs.
Chrome Web Store. We are featured on the Chrome Web Store. That drives
traffic to us every day, as well. MailChimp does also.

Then sometimes it may take a little bit of business development and
proving to them, “Hey, here is why we are beneficial to your user
base,” as we do with a lot of our partnerships, for them to actually
start actively promoting it, but a lot of times these bigger platforms
have avenues of adding onto their system.

Trent: Yes. That makes a lot of sense, because there are people, the
early adopters, are people
who are hanging out in the Chrome Store, looking for cool new stuff to
add into their Chrome, and then, of course, these early adopters are
probably a bit vocal, and, if they like it or don’t like it, they’re
going to be the ones leading you that feedback, which helps to get
more traction and more people and the cycle continues. Is that right?

Zvi: Exactly.

Trent: Interesting. So, in the very early phase, you were spending
most of your time, money
and energy to build these integrations and funding that out of your
own savings, friends, family, that kind of thing?

Zvi: Yes. We probably spent the first four months bootstrapping it out of
my previous
business. We were running a pretty successful freelancing business.
Then, around, actually, two years ago last week, we decided this was
serious enough that we really wanted some capital in order to fully
fund this out and start building a team, and that’s when we took on
our first round of funding.

Trent: OK. Which will get to in a second. Some people, self included,
are probably curious.
How much did it cost to get through that first four months, in terms
of not knowing your time, but if you weren’t writing code yourselves
and you had to hire developers, how much did you have to spend?

Zvi: I’d probably say, given the program that we had back at the time, I
probably say around
$10,000.

Trent: OK. It’s not a huge amount of money, that’s not a nothing
amount of money, but it
is, for someone with enough desire, $10,000 is probably an affordable
amount. You can find friends, family, aunts, uncles, that kind of
thing, who can all chip in, maybe, $500 bucks, and you can get $10,000
if you were motivated enough.

Zvi: Exactly. Now, granted, we were a development shop. So, we did have
resources, in-
house, to be able to execute it. Had we not, we may have gone about it
a different way. We may have spent a lot more time doing customer
development and building a landing page and proving that this was big
enough, before we ended up building out the platform.

Trent: Now, if you had gone the landing page route, do you think you
could have conveyed
the value proposition of what it is that you wanted to build, on just
a landing page? It seems to me like it might be a bit tough.

Zvi: It is a little bit challenging. I think there are definitely better
ways we could have gone
forward with it. We probably would have spent a lot of time thinking
about the sign-up process.

Mainly asking the right questions that qualified users as they’re
going through our sign-up process, to determine, “Hey,” and once they
get to the end, they absolutely need something like this and they’re
thirsty for something like this. We probably could have done that, but
you’re right.

One of the bigger issues we faced early on is we have a idea that’s
big enough and challenging enough that some people may not fully wrap
their heads around it until they actually have it in their hands and
they start to see the value in it that way.

Trent: And that was me, because, when I was doing my research for this
interview, of course,
I went to your homepage and I read all the stuff, but, at the end of
it, I was still like, “I don’t get it. What is this thing for? I don’t
need another contact manager. I’ve already got Infusionsoft. I don’t
need this thing.”

Zvi: Exactly. That’s obviously something… Even though we’ve got the
amount of customers
and revenue that we have, it shows that there is still a lot we have
to do to improve. So, we’ve got a video and a better marketing site
coming out with it.

Trent: Cool.

Zvi: I would also highly stress that video is often a really great way to
convey an idea.

Trent: And that would have done it for me, because I am the type of
person, and, of course,
everyone’s different, but I fit into the category of people like, “You
know, I don’t want to read a bunch of stuff, what if you could make me
two or three-minute-long video and I could just watch it and the light
bulb would go on,” that would be incredibly valuable for me.

Then I would have been able to go, “Oh. That’s why I would use this
thing. Oh. Yes. Now I want to sign up for it.”

All right. So, you got to a point where you had your first 100
customers, or so.

Zvi: Yes.

Trent: You use your freelancing business to fund it and then you
decided, “OK. We’re
getting enough traction, here, that we’re probably onto something and
we should probably try to make it grow faster.” Was that the thinking
that happened at that point in time?

Zvi: Yes. We wanted to grow faster, and, at the same time, one of the
biggest things that we
learned, and it’s a lesson I keep on learning, is the value of focus.
We were being distracted all the time.

By having a successful business in my freelancing business, it was
incredibly challenging to dedicate time to invest in something that
could yield absolutely nothing.

Trent: Yes.

Zvi: So, we knew that, OK, in order to take this seriously, we really
needed a “burn the
boats” type of situation. I knew I needed to shut down my current
business and really focus, full-time, on Contactually, and getting
funding was the vehicle that really allowed us to do that.

Trent: OK. So, you shut down the business? You didn’t sell it? Because
you wanted to keep
all the same people or why did you not just sell the business off?

Zvi: A lot of the employees and resources were coming with me…

Trent: Got it.

Zvi: … to Contactually, and, at the same time, I didn’t necessarily just
fully say… I sold the
business off, in a way. Being 100% client services, I was able to pass
off a lot of our clients onto other people who I knew and trusted,
and, for most of those, you can get affiliate revenue and things like
that.

Trent: Yes. OK.

Zvi: Yes. I essentially sold it off.

Trent: OK. So, let’s dive into this first round of financing, because,
again, I think a lot of
people would be very interested in what you had built at that point in
time and how you went about getting the money. So, let’s, first of
all, make sure that we understand, when you decided to get financing,
how much traction did you have? How much revenue and paying customers
did you have at that point?

Zvi: Now, this is back in late 2011. This was that kind of, I would say,
the height of the
incubator bubble when there were a lot of… it was getting to the
height and there were a lot of incubators around.

It was relatively easy to get into it. Since then, maybe, it’s got a
little bit harder, but, back then, we had around 150 customers. We
didn’t have any revenue at that point, but, like I was saying earlier,
we were putting people through the pricing page.

We knew that people were willing to pay for this and we could convince
an investor and say, “Hey, we’re really onto something. Here are the
competitors in the marketplace, here are the similar big companies in
the marketplace, so we know that there really is a market.

“Here’s the size of the market, and, by the way, we have a working
prototype and people have ‘XYZ’ to say about it,” and that was enough
that we were able to approach and incubator called 500 Startups, show
them everything, laid on the table, and we had an offer in our hand a
few hours later.

Trent: In a few hours. Wow. And are you able to disclose any of the
details of that offer, like
in terms of…

Zvi: Yes.

Trent: … valuation and amount raised?

Zvi: Yes. Absolutely. So, 500 Startups, at least back then, their standard
model was to give
you $50,000. They would invest in your company in and around $1
million post-money evaluation.

They would essentially take 5% of the company, very early on. Then,
you’d be part of their incubator bath for four months and then help
you grow the company from then on.

Trent: And aside from the $50,000, what kind of value do they bring to
the table?

Zvi: During the initial incubator, they brought on an incredible amount of
value by
having lots of mentors and advisers put in front of us. The having a
lot of resources available for us, like discounts for different
things, we could go talk to someone at Facebook or Google if we really
needed help with something.

Then, the most important thing that they really provided was this
pressure-cooker-like atmosphere, and, let me tell you, when you’re
told that you have four months before you’re going to be put in front
of the top investors in the world.

You really have to get your stuff together and you really have to
shine, otherwise you’re going to fail, you work… you put in so much
more work than you ever have in your life. It’s that kind of time
crunch that really allowed us to really concentrate and focus.

Since then, 500 Startups being one of the larger accelerators in the
world, we have thousands and thousands of other start up founders and
advisors and mentors available to us, at any point in time.

We’re still engaged in the 500 Startups community, to this point, and
we’re always able to ask any questions, get any resources we need,
etc.

I would think about, when you’re looking at different accelerators,
incubators, don’t just think about the value add for those few months,
but talk to people who have been in it for a few years and see the
value that you’re still able to provide.

Trent: Yes. I’ll bet it’s significant. By the way, I’d love to
interview some more of the folks
from the 500 Startups incubation. So, if there someone you could
introduce me to, to facilitate that, Zvi, that would be great.

Zvi: Absolutely.

Trent: OK. So, for people who haven’t raised money before, can you
give us some insight
into the process? I mean, it sounds like you guys went in…

So, let’s talk about how you got in. Did you get introduced or did you
just send a cold email in and say, “Here’s what we got” and you got a
meeting, and then a few hours later they agreed?

Zvi: One of the things that Contactually is really powerful about is
building a very strong
network, and it happened to be that I had, before building
Contactually, I had done a lot of networking and built up a really
strong address book here in the local tech community.

It happened to be that through my contacts, I knew one of the partners
of 500 Startups, and so I was able to get an introduction there.

I would say you should never try cold applying to any of these things.
You always want to find a way in and find a warm introduction.
Investors really will never respond to you, otherwise. So, absolutely,
I strongly recommend that you really start building your network now.

You’ll find that, yes, while a particular investor may be a very hard
person to approach, the entrepreneurs that they’ve funded and worked
with in the past, the entrepreneurs just like you and they been
through it and they know how painful it is to reach these people and
they’re able to help you if you can convince them to believe in you.

Trent: OK. So, you got the meeting, you went in, you did your
presentation, and, literally, a
few hours later, they had made you an offer?

Zvi: Absolutely. I think we were at the time where we had proved, just
enough, that we were
really onto something and I had built up enough of a reputation with
this particular investor that they knew that I was able to execute and
I was able to build a team around it and that I was really onto
something.

Trent: Interesting. All right. So, what happened after that first
$50,000? How long did the
money last and what were you able to accomplish?

Zvi: Absolutely. So, we initially focused on raising more money. So, by
that time, I had two
additional cofounders working with me. So, they were focused on
continuing to expand the product and really form that up into
something that people would use and pay for. While, my third cofounder
really focused on starting to figure out our sales and marketing
process.

I was then tasked with raising funding, and, for about four months
straight, initially, I did nothing but meet with investors, get
introductions, learn more about the fundraising process and ended up
raising, within the first three months of the program, an additional
$150,000.

Trent: At a higher valuation than the original round?

Zvi: Yes. It was slightly higher. It was convertible debt. So, with
convertible debt, the
valuation is always a little bit flexible. Instead of [a valuation]
you have a, which loosely translates to your valuation, but that
allowed… that’s kind of the common investment vehicle that allows
founders to raise a lot of money very quickly.

Trent: So, it’s pretty popular to use?

Zvi: Yes. Absolutely. If you look at a lot of the documentation out there,
convertible debt is
kind of the fastest standard way.

Trent: OK. So, for the folks here who are listening, who are
unfamiliar with what convertible debt is, do you want to just give us the
very quick overview of how it works?

Zvi: Yes. Absolutely. Convertible debt is basically saying… a set of
just saying, “Hey, I’m
going to buy a piece of your company at “X” percentage,” you know,
“I’m going to buy “X” percentage of the company at “X” valuation,
right now,” it’s instead saying, “Hey, I’m just going to give you
money now. It’s going to be debt.

It could be something that you have to pay me back at some point,”
but, instead of paying you back in just straight money, instead, it
can be converted to equity at a later point in time.

Trent: At the option of of the person who invested?

Zvi: It’s at the option of the person who invested, yes, but, primarily,
it’s almost never…
people almost never pull the money out. It’s, instead, converted when
there is an equity round of financing.

So, it’s usually written that the first time the founders raise an
equity round, or 18 months, whichever happen sooner, then they are
entitled to buy X amount of dollars worth of equity at that current
evaluation.

Trent: OK. So, let me just dial through this again. So, let’s say that
we, at this point, did a
$1.2 million valuation. I give you $100,000 in convertible debt. Six
months later, you raise more money at a $2 million valuation. I can
get the advantage of converting my debt into equity, back at the $1.2
million valuation? Is that correct?

Zvi: Exactly.

Trent: So, there’s some real incentive for me, for taking that extra
risk, for being the earlier
investor. Now, you, as the founder, were you personally on the hook
for this debt? Let’s say this stuff didn’t turn out very well, they
didn’t convert it, somebody owes them this money. Are they prepared to
take a pill or are you personally liable?

Zvi: No. No. No. There’s no personal liability here. So, I think we have
to be clear about
that. If we didn’t raise around the funding, it would have forcibly
converted over to equity at that valuation, later on.

Of course, we ended up raising funding before that time had passed,
but, no, we would not have been in trouble. I mean, it’s really used
as a vehicle that allows founders and investors to start to work
together, very early on, without the hassle and legal expense of a
full-equity [round].

Trent: Yes, because you could end up spending just a ton of money on
the lawyers.

Zvi: Yes, and when we raised our equity round, it definitely cost us at
least three times as
much to do an equity round as it did convertible debt.

Trent: Let’s say we we’re in that scenario. So, when you did your
convertible round, what did
you have to spend on legal fees?

Zvi: I’m having a hard time figuring out the exact amount, but I’d
probably say, and you
should probably account for maybe spending around, depending on your
lawyer, around $5,000 in legal fees, in order to get the convertible
debt up and running and fully execute around.

Whereas, doing an equity round, if you use the standard off-the-shelf,
series C [docs] maybe it could be around $10,000. Otherwise, it could
end up being quite a bit more.

Trent: Yes. OK. And you’re able to pay the $5,000 out of the money
that’s raised from the
round of convertible debt?

Zvi: Exactly. Yes. I mean, you can work… you can find lawyers that may
give you great
deals. Our lawyer is well known and respected in the area, for working
for startups, and he was able to give it at a discount.

Some lawyers may withhold their legal fees until you raise your first
equity round or until you raise a certain amount, etc. You can often
find lawyers that will negotiate with you for that, because they know
they’re not going to make much money off you early on.

They’d much rather keep you on the hook and make sure you become a big
company before they start charging you.

Trent: Absolutely. What is the name of the lawyer that you work with?

Zvi: We worked with Steve Kaplan [SP]. He’s the lawyer at Pillsbury, Shaw,
Pittman.

Trent: OK. Pillsbury, Shaw, Pittman. Okey-doke. Basically, the first
round was what
enabled you to focus your time on raising money for the second round,
while you… You said you had two cofounders?

Zvi: Yes.

Trent: And one of them is working on sales and marketing and one of
them is working on
product development? Is that correct?

Zvi: Yes.

Trent: All right. So, what happened next in the story?

Zvi: What happened next? The incubator finished up and we were really…
you know, we
moved back to DC, after being in California for four months, and we
really started to grow in the company.

At that time, we had started receiving a little more tech press.
People saw that we were fully out in the market and that we really had
a strong offering. We really started building out the product, just in
terms of turning on page features and actually expecting people to
pay.

We started figuring out the scale of marketing channels that we can
continually go after and started building a sales process and the team
behind that, as well, and we ended up spending most of 2012 focused on
nothing but that.

We hired our first developer and our first internal marketing person
and just kept iterating, more and more, on the product, until we had
reached what we saw was some level of product market fit, meaning that
we were able to continually get people in the door who loved the
product, started using it and would keep using it.

Trent: What were some of the key metrics or KPIs that you were focused
on during that 12
months leading up to the beginning of this year?

Zvi: Absolutely. We looked at just the number of users that we had in the
door. We
looked at the number of paying customers. We look at the number of
website visitors, and then we looked at the number of users who would
keep coming back to our site, every month after month.

We were pretty basic in the metrics we were checking back then. Now,
were a little bit more formal with it.

Trent: OK, and that repeat-users is a pretty important one, obviously,
because if people are
trying your stuff but they’re not using it again, you have kind of a
big problem.

Zvi: Absolutely, and one thing that… I mean, there are two things I
would really strongly
recommend for people, as they’re getting started. One is set up a very
strict process of every week collecting all of your metrics in a
document or in some particular place, and, then, at the same time, pay
very, very close attention, especially if you’re building like a B2B
or a SaaS business, at your churn.

What most people don’t realize is while you may be very happy with
people coming in the door and new sales and new customers, etc., if
you have a leaky bucket with people also leaving in droves, then can
kill you, from an investment standpoint and from a revenue standpoint,
if you’re losing 10% or 20% of your business, every month, just
because they stopped using it.

Trent: Yes. No kidding. Did you ever have a problem with churn?

Zvi: Oh, absolutely. I think that’s definitely something we have spent
even a lot of this
year I’m getting under control. We were sometimes losing upwards of 5%
of our user base a month, and a rule of thumb that investors look for,
they really look for something in the neighborhood of 2% to 3%.

It takes a lot of work, and that’s kind of where the real magic lies,
because you can have a great marketing site or great initial program
to get people on board, but, especially for building a product like
ours where you really need and expect them to come back, month-over-
month, and keep using it and keep getting value out of it.

You have to have a lot of things working correctly, and tracking churn
very early on. Ideally, if, from day one, you’re able to keep churn
under control, you’re going to have a really great business.

Trent: When you identified that churn was a problem, what were the
actions that you took to
try to reduce it?

Zvi: Absolutely. First off, is just learning. You really have to learn
exactly why people
are quitting. I mean, it’s probably one of the more enjoyable parts of
my job, but I still, to this day, call most people who cancel or
downgrade their accounts and ask them why.

Ask them why they signed up initially, what they liked about
Contactually, what they didn’t like about Contactually, what was the
straw that broke the camels back for them that finally caused them to
quit and then what we could have done better?

We do, definitely, a lot of learning, and, ideally, you start to see
patterns emerge. So, we started seeing that, OK, a lot of people just
said that they didn’t fully understand how to use the product. OK. We
have better training programs and we had a much easier to use user
experience.

They didn’t get the support that they needed. OK. We really needed to
invest more time in our support.

Again, it’s a common theme that we keep focusing on, is we learn as
much is possible, and the more you learn, the more things just become
obvious as to what you need to do.

Trent: Did you ask for people’s phone numbers during the sign-up
process?

Zvi: Yes. And that’s also a really great thing to do. Surprisingly, when
we first added a
phone number, we thought, “Oh my God. No one is going to enter this at
all,” but I would say the majority of our people, as their signing up,
have absolutely no problem entering their phone number.

Then, we’ll call them, as their signing up, ask them questions. Then,
as a cancel, we can ask some things, etc. So, whenever we need
anything, we can usually feel pretty safe that were able to reach
them.

Trent: Yes, I’ll tell you, those one-on-one conversations, there’s
gold in them there hills, isn’t
there?

Zvi: Absolutely. Just from an initial customer development standpoint,
it’s important. One
model that works really well for us, that we learned about from
Campaign Monitor is have a model of the inside salespeople who we have
on staff.

They’re not there to sell, but they’re really there to help activate
and to really help coach the customer to become a better user and the
better professional, and if you can help someone get the most out of
the platform that you’re building, it’s no question that, of course,
they’re going to upgrade.

Trent: Yes. No kidding. OK. You mentioned Campaign Monitor, so,
another SaaS
company that you modeled. What were some of the other SaaS companies
that were influential in your thinking about how to create your
product, and when I say product, I mean how it’s sold, how people sign
up, just the whole thing?

Zvi: Yes. Absolutely. It’s hard to identify any particular ones. I mean,
there’s so many best
practices that we took and learned from so many other platforms. Yes.

Our customer guru model was from companies like HubSpot. We definitely
have a higher quality of support, modeling after companies, you know,
spearheaded, like Zappos, where they focus on having really, really
great customer service.

One thing that we definitely strongly believe in, from a marketing
standpoint, and this we adopted early on, is we modeled our marketing
program after HubSpot, where we don’t spend as much time pushing our
product and telling people, “Hey, you should use Contactually.”

Instead, we really focused on evangelizing the importance of
relationships and how key relationships are to our lives and how to
better engage with people, better grow your network, etc., and, hey,
Contactually happens to be a tool that allows them to do that.

We are also users of Hubspot too, which is obviously similar to
Infusionsoft. So, we started implementing their software very early on
and following that inbound marketing mantra.

Trent: Now, I’m on your site. I don’t see a link to a blog.

Zvi: It should be in the footer. If not, I think they’re called “actions”
at the bottom of the
page, for sure. We try to convert most people in order to just sign up
for Contactually, but if you just go to, you’ll see that there are a
few big call to actions at the bottom of the page or midway
down the page.

Trent: OK. Why did you decide to go that approach, versus… And let
me go back to the
homepage here. Your call… What’s the primary call to action that
you’re trying to get… “Sign up and take a free trial,” I’m assuming
is it.

Zvi: Exactly. Yes.

Trent: OK. “For individuals, for teams.”

Zvi: Then, if you scroll down a little bit, down our site, you’ll see that
there are actually…
there’s a rotating carousel offering a few e-books that you can
download, and those, of course, go directly to Hubspot. We’re able to
capture you.

Trent: OK. That make sense. All right. So, where we in the story? So,
by the time that you
were… So, you had… You’d raised this, I think you said $150,000
round, or so, which was the second round, and then it sounds like, if
I’ve got all this correct in my head, it was about a year.

You sort of did that at the beginning of 2012 and then you kind of
existed on that money for 2012? Am I about right?

Zvi: Yes. So, what we ended up doing was, we raise that money kind of late
[in] 2011.
Then, in 2012, the first few months, we raised another $200,000, and
that was kind of more of like a bridge round.

That allowed us to say, “OK. We’re starting to get some traction.
Let’s get some additional money in the door and then really allow us
to accelerate more.”

I would say we never really focused on identifying particular rounds
of funding that we wanted to go after. Instead, we treated fund-
raising as an ongoing process, and we still do to this day.

We raised another $200,000 in kind of mid-2012, and that gave us more
than enough cash in the bank to go until early this year, when we
raised just north of $1 million.

Trent: OK. Is it always different investors, with each round, or do
some investors come back
for more?

Zvi: Some investors come back for more, and that’s a very important thing
that we do. We
still stay engaged with all of our previous investors. We have a
monthly newsletter. We are always on hand to answer questions and take
calls and really kind of ask them for advice and value.

That’s really important, because, especially as you start to bring on
big investors, they’ll often times look back at previous investors
and, if they don’t see them continually investing money, they often
ask “Why? Do we not believe in them anymore?” etc.

We were happy that, over the three rounds of funding, or so, that
we’ve done, we’ve had some investors who have invested every single
time.

Trent: OK. How much revenue traction did you get during 2012, because
you mentioned, I
think, at the very beginning… I don’t know if we were on air or off
when you answered this, but I think you said you were at $5,000 a
month at the beginning of 2013 and now you’re, it sounds like, closing
in around 80, or something like that. So, did revenue not grow much
during 2012?

Zvi: Yes. Revenue did not grow that much during 2012. We only turned on
our ability to
process credit cards, even, I think, in July, and then we kind of
spent the rest of 2012 just iterating on figuring out what our ideal
sales model is, what people are willing to pay for it, etc. In 2012,
we were still in a learning phase.

Trent: How did you facilitate that? So, we knew what the KPIs are,
users, customers,
traffic and repeat users, but I’m guessing there must’ve been a lot of
actual dialogue going on with your existing customers, to say, “Hey,
is this good? Is this bad? What needs he better?” Is that what you
mean by “iterating”?

Zvi: Absolutely. Yes. That was definitely incredibly important for us. So,
from very early
on, we had set up this practice of engaging with our users, sending
out surveys all the time, having an open email line, having a web chat
tool, so we have Olark on our site, so people to chat directly to us.

Then, we used a service called Intercom. That’s just Intercom.io, and
that allowed us to, very easily, identify, “Hey, who are the active
users? Who’s online right now? Who can we message and ask questions?”
etc.

We started building a dialogue and building a relationship with users,
many of whom we still have on board today, in terms of our active
users. We just kept learning as much as we could from them.

I mean, even just two hours ago, there’s a particular new feature that
I’m working on that I wanted to know more about. I built a survey and
messaged 200 or so of our users and ask them, “Hey, could you fill out
the survey and help us learn a little bit more?”

Trent: Very cool, and I’m guessing that the early adopter-type
customers are very, very willing
to participate and give feedback, because they like the product and
they want it to be better.

Zvi: Exactly, and early adopters will come and go. I mean, we definitely
have a lot of early
adopters who are using this because they thought it was a cool tool,
but now that we’re a premium product, it’s not as interesting for
them, and, that, we totally understand, but, over time, we start to
see…

You know, we can just look at the number of people who… Using
Intercom is incredibly powerful because we can just look at the number
of people who have signed in over the past seven days and just order
them by how many times they’ve signed in over the past year, and it’s
very clear, you know, we still see the same group of people who are
continuing to use this and hammer away.

We do things to incentivize them. One thing we do for a lot of are
very active users is we have what we call an “alpha testers group.” We
will release features before they’re ready for the public and allow
them to bang away on it.

That gives them some sense of exclusivity, but also gives us the
ability to have a lot more testers using it than just our team.

Trent: Yes, which is hugely valuable.

Zvi: Yes.

Trent: Then, 2013 rolls around, you guys raise $1 million bucks and
revenue growth
explodes.

Zvi: Yes.

Trent: Let’s talk about that. Why did you want the million dollars,
because I’m assuming
you are still probably burning cash, at that point, and maybe need to
keep reserves up? If that’s right, what you use the million dollars
for and what is it that caused the growth rate to hockey stick?

Zvi: Yes. Absolutely. I think, overall, the trend is we really focused
2012 on proving that we
had a business, and then 2013 focused on growing it. So, we kind of
expanded on all fronts. We obviously raised a much larger round of
funding.

We were five people at the beginning of 2013. Now, we’re just passing
16. So, we use a lot of our funding in order to grow our team, and, by
growing our team, that allowed us to have a lot more resources. So,
our marketing team went from one intern part-time to, now we have
three people fully focused on it. Our sales team used to be just our
cofounder.

Now we have three dedicated inside salespeople, one enterprise account
manager and things like that, and just having a bigger team and having
more resources, that has allowed us to just consistently grow the
business and, of course, having a very, very strong product behind it,
now.

It’s not just a little prototype that people play with. It’s something
that they use and rely on, every single day.

Trent: Yes. So, you’ve got three people in marketing and three people
in sales. So, the
marketing, are you guys… you’re following the Hubspot model. You’re
producing content like mad and making sure that it’s promoted like
mad, to draw as much traffic to the site?

Zvi: Absolutely. Yes. Then, of course, as people are coming on board or as
people may be to
set a conference or just kind of end up in our top of funnel, that we
educate them and deliver enough value to them and keep talking about
what Contactually is and how they can grow their business, etc., using
our platform. Then, those people come on board and then we do a lot to
educate them, as well.

Trent: So, at what point do the salespeople get involved. I think you
said it’s one someone
creates an account and they fill in that phone number. Shortly after
that is the salesman making an outbound call to say, “Hey, welcome
aboard. Let’s make sure you’re fully activated and training you and so
forth”?

Zvi: Yes. I mean, we keep iterating with the model, but the general
approach is, yes, as
people come on board, as we see that, hey, “This person is an active
user and seems to fit the criteria for someone who we really think is
going to be successful with Contactually,” we’ll sometimes reach out
with an email.

We’ll sometimes reach out with a phone call. Sometimes, they’ll reach
out to us and say, “Hey, could I have a coaching session to learn a
little bit more?” Then, we usually reach out. We’ll engage. We’ll have
a short 10 or 15 minute conversation. People are very friendly.

We usually have very little, just, you know, “No. Go away. Don’t
bother me,” kind of things, and then we focus on just providing a
little more value than they would otherwise. They know that we’re here
for help, and if they need assistance, they’ll reach back out to us.
Otherwise, they’re just better set up for success.

Trent: That is really, really cool. I’ve so enjoyed hearing the story,
and I’m sure there’s many,
many more chapters to unfold yet. So, before we wrap up, for folks
like me… For example, I’m actually involved in two startups, SaaS
companies that both serve the same market. They just solve different
problem, and that’s why two companies. What advice would you give…
One of them, we’re at 60 customers, 70 customers, and that when I just
became a partner by acquiring half of that company, and the other one,
we’re still in the development phase.

I use my audience here at Bright Ideas because the members of my
audience are the target customer. I’ve tried to do as many demos and
show the mockup and get feedback and so forth.

What am I not even thinking about doing with either one of those
companies? And obviously don’t know everything that’s on my mind. So,
it’s kind of a silly question, but I’m just looking for some advice
that I might not have thought of yet.

Zvi: Yes. Absolutely. So, I’ll give you kind of a couple… I’ll just give
you be one small
thing, one pretty beneficial thing and then just one high-level thing
that we do. So, one quick tip, when people first start to sign up for
your product or first start to get interested, collect their email
addresses, get their email address, and then you’re able to… you
know, then you have them in your system.

Then, most importantly, if they don’t finish signing up for your
product or they drop out at some point, send them an automated email
and ask them what happened, and you will gain so much information.

We just had a failed sign-up process where if someone doesn’t complete
their sign a process in 10 minutes, that we drop them an email and we
learn an incredible amount.

Two, at kind of a higher level, talk to everyone. We talk to our
competitors directly. We talk to users who hate us. We talk to users
who have tried other products. We talk to people who have signed up
and quit.

We just kind of focus on talking to everyone. We utilize Core [SP] a
lot for customer development, and just never be afraid to reach out to
someone and ask for a little bit of their time.

Most likely, you’re talking to another entrepreneur who has been in
your place, and they’re always happy to help you out. Even our
competitors, we honestly don’t consider our competitors as much
anymore, because, it turns out they’re people who are just as
passionate as we are.

Then, at a much higher level, we really strongly push the need for
consistent execution. If you ever get an impasse or you ever spent too
much time debating things or in meetings, just execute and do
something and learn, and we really, truly believe and subscribe to the
mantra that “shipping solves all problems.” We always believe in
releasing features before they’re ready.

If we’re unsure path A or path B to go down, we’ll launch both and
learn which one’s better, etc., but it’s building up the constant
mantra that, even now, as a 16 person team, we still do things that
break and fail and not everyone agrees with, just because we have that
mindset of executing first and then learning from it.

Trent: That reminds me of a piece of advice that I was given years
ago, and I actually made a
YouTube video about it. The advice was called “the best way to succeed
in business is to be in business,” and I didn’t get it at the
beginning, and for folks who maybe just don’t understand it, give me a
moment to explain it.

Or, Zvi, actually, you just did a really good job of explaining it.
The best lessons come not from thinking about what you should or
shouldn’t do, but from doing and making mistakes and falling on your
face and collecting what I call “skidmarks,” because those experiences
give you opportunities to learn what is working and what isn’t
working.

It is, in hindsight, some of the best advice that I was ever given,
and now you’ve given it to me twice. So, thank you for that.

Zvi: I could not agree with that more.

Trent: All right. So, we’re going to wrap up this episode, here. If
you want to learn more about
this, it’s Contactually.com. If you’re in your car, if you’ve been
listening to this, you’re going to be able to get to this episode at
BrightIdeas.CO/88.

I will have made links to everything that we’ve talked about. So, Zvi,
thank you so much for taking some time to be on the show.

Zvi: Thanks so much for your time, Trent. Have a great day.

Trent: You too. OK. So, to get to the show notes for today’s episode,
go to
BrightIdeas.co/88, and if you really enjoyed this episode, I would
love it if you would take a moment to go to BrightIdeas.co/love, where
you’ll find a way that you can leave feedback for the show.

That’s so incredibly important, because, the more feedback ratings we
get in the iTunes Store, the more people that discover the podcast for
the very first time. Whenever that happens, the more entrepreneurs
that we can help to massively boost their business with all the Bright
Ideas that are shared by guests just like Zvi.

If you’re not yet a subscriber, and you’re listening to this in the
iTunes Store, please come to BrightIdeas.co and do become a
subscriber.

When you do, you’re going to get access to my four-part “Conversion
Tactics Video Training Series”, plus, I do a whole bunch of really
other special stuff for subscribers that just visitors to the site
never see or never get to participate in. There’s lots of benefits to
becoming a subscriber.

That’s it for this episode. I’m your host Trent Dyrsmid. Thank you so
much for tuning in and listening to the Bright Ideas podcast. We will
see you again, in another episode, soon. Take care.

About Zvi Band

zvi_bandZvi Band is the Founder of Contactually, software that helps its users to identify and stay engaged with your most important contacts.

He’s also passionate about growing the DC startup community, and  founded Proudly Made in DC and the DC Tech Meetup.

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Welcome to the Bright Ideas Community of Entrenpreneurs

The #1 Problem with Webinars – And How to Fix It

Problem With Webinars

Problem With Webinars

When it comes to communicating your message to a group of people, there are few delivery mediums more powerful than a webinar.  When people attend your webinar, they hear your voice, they see your visuals, and then get to interact with your directly.

Sounds good, right?

Well, as good as webinars are, there is one big problem: how to promote a webinar so people will actually attend!

The fact is that every week, there are a ton of webinars to attend, so if you are going to make yours a success, you need to be clever in how you promote it.

How to Solve The #1 Problem with Webinars

While the solution I’m about to explain isn’t perfect, it is definitely a step in the right direction because, rather than rely solely on the webinar itself to convey your message, this solution makes use of some other forms of media.

To help you understand what I’m about to explain, have a look at the graphic below.

Flowchart

This plan was given to me by the creator of a course called Media Buy Academy (affiliate link).

When I promoted the media buying course, I sent three emails to my list.

The first email in the sequence told subscribers about a free PDF report that they could download. The purpose of the report was to provide value, as well as to increase interest in attending the webinar. Here’s the body of the first email:

mba-email1-2

The second email in the sequence told subscribers about a video that gave additional insight into what media buying is and why someone might want to learn about it. Here’s the body of the second email:

mba-email2-2

The third email was the first one to actually mention a webinar. Here’s the body of the third email:

mba-email3

The Results

By taking this approach, I was able to sell 6 copies of the course and earn $831 in commissions.

Six copies is no world record; however, given that I have never talked about media buying to my list before, and this was a $300 course, I consider the results to be pretty good.

By the way, I chose to promote this course because I consider media buying to be an essential skill for traffic generation and it is a service that you could charge a client a monthly retainer for. If you missed the course and would like to grab a copy, here’s the link.

Click to Tweet: The #1 Problem with Webinars and How to Fix It

Take a Multi-Media Approach

Whenever I have promoted a webinar in the past, I have only ever sent out emails to encourage people to register for the webinar itself.

What my ‘old’ approach lacks is the ability to provide information to those people on my list who might not want to sit through a 90-minute webinar – unless they were able to determine, in advance, that it would be worth their time.

By sending out a PDF report (easy to consume) and a short video (also easy to consume), I was able to build more interest in attending the live event than I otherwise could have.

How I’m Using What I’ve Learned for My Own Products

Having been given this promotional formula by a very successful marketer, I decided to immediately implement it in my own business to promote my content marketing course.

DMHPromotionalPlan

As you can see, I have followed a very similar approach in terms of the sequence of emails that goes out; however, as I don’t have a developer on staff, I have used Infusionsoft to help me with how emails #1 and #2 are handled.

Click to Tweet: The #1 Problem with Webinars and How to Fix It

Using Infusionsoft Instead of a Developer

If you look at the flow chart above, you will see that email #1 and #2 sent traffic to the same opt in page.

Why is that? The reason is that not everyone is going to open email #1, and as a result, they would have missed out on getting the PDF report. However, some people will get the PDF and they will also want the video.

How do I give everyone who opens both emails both pieces of content, while still giving both pieces of content to people who only open email #2?

The solution to this problem, assuming you don’t want to write custom code (which I don’t) is to use tagging in Infusionsoft.

Check out the image below to see the flow of the campaign that I designed for this:

dmh-affiliate-campaign

Figure 1

Notice the little diamond that follows the Download Content Marketing Success Report web form. The purpose of this ‘decision diamond’ is to look at a contact’s record to determine if they have a certain tag or not, and then route them down either the top sequence or the bottom one.

Here’s how this works: when email #1 goes out, some people go to the landing page and register to get the report. When this happens, they are routed down the top sequence. The image below shows what happens within that sequence:

DMH-PDF-sequence

Figure 2

As you can see, the first thing I do within this sequence is to apply three tags. One tag adds them to my newsletter list, one tag tells me that they have filled out the preceding web form, and the last tag tells me that they have been sent the PDF report. It is this last tag that will come into play in the decision diamond.

The next thing you see is that an HTTP post is sent. This is the part that automatically registers them for the webinar (I use GotoWebinar). To make this work, I also have to use PlusThis. Plus This is software that tightly integrates with Infusionsoft and makes it possible for me to do all sorts of advanced automation.

When email #2 goes out, because it offered an additional piece of content, I designed the campaign to send it out to everyone. I could have just as easily had email #2 go only to people who had not yet filled out the web form.

I thought about sending email #2 to a new landing page, however, if I took that route, the people that didn’t open email #1 would have missed out on the PDF report.

Rather than go that route, I decided to use the decision diamond to send a different follow up email out to the people that had already received the PDF report (the report also contains a link to the video I talk about in email #2).

dmh-decision-diamond

Figure 3

As you can see, the decision diamond checks to see if the PDF report has been sent yet or not. If it hasn’t they are sent and email with the report (report has link to the video within it). If the PDF report has already been send, they are sent an email with a link to a different download page that contains both the report and the video.

Hopefully, this is all making sense!

Now there is one last sequence that everyone goes through and that is the sequence shown in Figure 1. This sequence, called “Apply Tag” has only one purpose and that is to apply a tag called “send webinar replay” to everyone who’s been through either sequence.

Let’s Review

  • Webinars are a powerful way to communicate your message but getting people to show up is a challenge
  • By taking a multi-media approach, you will increase the number of registrants you get
  • By using Infusionsoft, you can avoid the need for a developer

Additional Resources

What’s Next?

Want to learn more about becoming a Bright Ideas affiliate? Our content marketing course/book sells very well, get more details here.

Want to learn more about how you can use Infusionsoft in your own business? Book a 15 minute call with me (no charge)

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Graig Presti on How He Used Creative Financing to Buy a 12 Person Marketing Agency

graig presti FC

GraigP

Graig Presti is one of the few people I’ve interviewed more than once for Bright Ideas. In Graig’s first interview, we talked about how he started from nothing to build a 7 figure marketing agency in his first year.

Graig was making so much profit from his agency that he wanted to invest it elsewhere. Since he’s every bit the business person, he ended up buying another business. It’s a move that has been both challenging and rewarding. Graig gives us the scoop on the purchase and day to day operations of his acquired marketing agency. If you’re interested in business acquisition, be sure not to miss this episode of the Bright Ideas podcast.

Listen now and you’ll hear Graig and I talk about:

(02:50) Introduction
(04:10) Why he bought another SEO company and his background
(08:50) How Graig funded his purchase
(11:20) Why he used an SBA load to fund the purchase
(17:50) Risks to the borrower with an SBA loan
(22:50) Overview of the terms of note
(27:50) Overview of how I bought a company with an earnout
(35:50) Overview of how he found a business to buy
(42:50) How he mitigated the risk of spreading himself too thin
(47:50) What things indicated to Graig that the business held a lot of potential
(49:50) How to retain the people in the business
(54:20) How Graig is dealing with some personnel surprises
(58:50) Why relying on a sales-based culture is a huge risk
(60:50) How sales staff compensation plans affect an acquisition

Resources Mentioned

More About This Episode

The Bright Ideas podcast is the podcast for business owners and marketers who want to discover how to use online marketing and sales automation tactics to massively grow their business.

It’s designed to help marketing agencies and small business owners discover which online marketing strategies are working most effectively today – all from the mouths of expert entrepreneurs who are already making it big.

Listen Now

Enjoyed this Interview? Here’s How To Leave us a Positive Review on iTunes!

If you enjoyed this episode, click here for more information on How to Leave Us a Positive Review on iTunes! Your review will help to spread the word and get more entrepreneurs like you interested in our podcast. Thanks in advance - we appreciate you!

Transcript

Trent: Hey there, bright idea hunters, welcome to the Bright Ideas
podcast. I am your host,
Trent Dyrsmid and this is the podcast for marketers and entrepreneurs
who want to discover how to use content marketing and marketing
automation to massively boost their business.And the way that we do that is that we bring proven experts onto the
show to share with us exactly the steps that they used to achieve the
results that they’ve achieved. This episode is no different.On the show with me today is a guy by the name of Graig Presti, who
has been on the show with me before and this is an episode unlike any
other than I have ever recorded, because instead of talking about how
to sell stuff and how to improve your marketing.Graig and I actually have a very detailed two way discussion where we
both share stories about companies that we have recently acquired.In Graig’s case, he acquired all of a company and in my case I’ve
acquired half of a company.In my case, I didn’t have to use any of my own money to do it and in
Graig’s case, he was able to only pay for a portion of the purchase
price with his own money.Then in the episode, you’re going to hear us go into detail of how he
structured the agreement to be able to buy a very successful business
that was 12 employees deep with significant amounts of revenue,
without having to write an absolutely huge check.If you have never thought of acquiring a business to achieve faster
growth, this is an episode that I really strongly encourage that you
listen to, because there are some absolutely wonderful stories in here
from both he’s and I’s experience and you’re going to get a whole lot
out of it.Before we welcome Graig to the show, I do just want to very quickly
tell you about the Bright Ideas Mastermind. If you are running an
agency or you are an independent consultant or a freelancer and you’re
looking for ways to make your business grow faster, go to
brightideas.co/mastermind and you’ll be able to learn all about the
bright ideas of mastermind and apply to become a part of it.It’s a very active group. We’ve got folks that are all focused on
achieving the same results and we’re all helping each other to move
forward in a short period of time that we can do all on our own.With that said, please welcome me in joining Graig to the show. Graig,
welcome back to the show for another appearance.Graig: Hey Trent, I appreciate you letting me on again. You’ve liked
my stuff before, so it
doesn’t seem like it’s annoying so I appreciate you letting me jump
on.I have some different stuff to talk about today, which I think the
response was very overwhelming on the last podcast, though I think
this is something that shaped people’s mindset a little bit on what
their current business is or what business they want to be in. This is
pretty cool stuff.Trent: With that said, people are wondering already what are these
guys going to talk about
today? Graig recently bought an SEO company and having founded and
sold a company and been through the whole cycle myself and actually
just last Saturday, I bought half of another company, I thought that
this would make for a very, very interesting discussion for people who
maybe haven’t thought of buying a company or are thinking about but
have never done it before and don’t really know what to do or just
want to vicariously participate in the experience as it were.So that’s why Graig and I decided to do this discussion. Graig over to
you, why don’t you tell us a little bit about what it is that you
bought?

Graig: People may or may not, you probably have new subscribers, so
just a quick overview, a
little bit about me because this is exactly why I bought the business.
I am the CEO and founder of a company called Local Search for Dentist.

Basically, over the last three and a half years, we have helped
dentists all over the world use the local internet to get more
patients in the cities that they serve.

It’s very nichey, very niche specific, services are very specific. At
a certain point, depending upon your goals, which mine are always
adding to my networks, adding to my overall streams of income, because
you never should have one stream of income, by the way.

That being said, I’m severely limited to what I can do. I can’t go out
and start to work with plastic surgeons or other doctors. I can only
work within the dental space. I was limited.

I started to look for the opportunity, basically, how can I go into
different markets without having to build everything from scratch?
Spend the next two years doing it, trying to spend a bunch of money to
build an infrastructure, hire, maintain those people.

As you know, Trent the quickest way to do that is to just leap frog
the whole process, find a business that’s for sale or maybe not for
sale and start to get the negotiations to acquire that company that
has the features that you’re looking for.

What I decided to do was go ahead and acquire another SEO local
marketing business that serviced all types of industries. That way,
that will be my slack adjuster so I can now go ahead and take my
already very good marketing system and plug it into another business
that’s underachieving it in my eyes and that’s exactly what I did.

That’s one method where people might be doing just one particular
thing right now. The quickest way to add on to what you’re doing is
like what you said. You bought a part of a company for a very specific
reason, probably very similar to what mine was.

You found a need that you knew, you went out to try to do it on your
own, number one, you’d be strung out. You’d probably give up and it
would take you two years to do it and a lot of money and that would
even be if you could finish it. Buying a business or a part of a
business is the next best thing.

Trent: There is a whole bunch of benefits to it and so folks, here’s
the things that Graig and I
are going to work our way through in the discussion that you’re
listening to.

First of all, how do you fund the purchase of a new business? I’m
going to ask Graig details about that. I’m going to share what I did.
I want to say in advance, that even if you don’t have any money, if
you have other assets, intellectual assets, you can actually acquire
portions of a business without any money at all.

I know that sounds fishy, but I’m going to explain exactly how I did
it, because I didn’t write a check to buy half this company and nor
did I have to write a check.

Graig: You’re a lucky man.

Trent: I’ll give you the details on that. We’re also going to talk
about how to find a good
business to buy and I’ll get Graig to share his story and I’ll share
mine, and then what to look for when buying a business in terms of the
finances, the marketing, the people and all of the other moving parts
for lack of a better term.

We’ll talk our way through that as well, and then assuming that we
don’t go too long talking about all that stuff, we’ll also talk about
how to deal with the lawyers and the bankers and the accountants that
may or may not be involved in the transactional.

The larger the transaction you’re doing, the more likely those folks
are going to be involved. That’s what we’re going to cover in this
podcast episode and I think that you’re in for a real treat.

With that said, Graig, simply from your laughing when I said I didn’t
have to write a check, you did.

Graig: I did.

Trent: What do you want to share about the financial cost of acquiring
this company?

Graig: There’s a myriad ways to go about buying a business and I’ll
let you talk about what you
did because that sounds like that’s pretty unique, but there’s a few
ways to do it. I’ll tell you the way that I did it and then I’ll tell
you there’s other ways to go about even offering it.

Depending upon your cash flow situation, everybody has different
amounts of cash, different amounts of net worth, but what I did was I
actually went into the negotiations talking about doing just a buy out
on a sketch book.

If the company’s worth a million dollars, basically I went and offered
them a million dollar note that we scheduled on a pay out. What that
allows you to do is one, the company is funding itself so if you’re
buying a profitable business, you don’t have to worry about stroking a
check. The business is going to pay the note to the former owner.

What that really allows you to do is obviously not have to fund it on
a large scale yourself, but it also keeps the seller in a very, very
secure situation. They’re not going to really screw around with the
purchase.

They’re going to be very forthcoming with due diligence. They’re going
to be very forthcoming with how the business works. They’re probably
even more willing to help you launder more than their minimum
consulting agreement.

They understand if they do anything sketchy, you’re just going to cut
the note off and you’re not going to pay them and you really have the
control. It lets you save cash. It’s basically self funded. That’s one
way to do it.

I went and negotiated and tried to give that a go the first time. That
didn’t work, but I still wanted the business, so the rule of thumb
there is always go with what you want right out the gate. I didn’t
want to write a huge check if they were going to take that offer.

Long story, short I went ahead and actually used an SBA loan. Here’s
why I did that. One, right now money is super cheap. Rates are at all
time lows and it basically allows you to get a better price for the
business because if you get an SBA loan, the seller essentially gets
cash.

You can really cut them out a nice big check and they’re going to be
gone and you can actually pay a lower price.

The caveat to that is the SBA loan process can be underwriting on your
home. It can be intrusive. It can be annoying. It can be stressful at
times, but the benefit is, the money is cheap. If you buy a profitable
business that funds itself and you can really get a nice price on the
business that you’re buying because it’s a lump sum.

I’m going to say this with a little bit of another caveat. You should
always keep a percentage of the sale as a note. Don’t do an entire
stroke the check whether it’s an SBA or whatever all up front, because
there’s always going to be things that you don’t know and what happens
is, what if you buy this business, they sign a non compete and six
months down the road, you find out that they’re stealing customers or
they went into business as a competitor.

If you already paid them one lump sum and you have no way to hold
money over their head, what are you going to do? You’re going to sue
them, it’s going to cost you all sorts of money, but if you have a
note for the balance paid out over the remainder for the rest of the
business, you can stop payment on that note and that’s going to be an
instant leverage point for you. That’s very important.

That’s what I did. I went through the SBA loan process, looking back
on it it really wasn’t that bad. It can be stressful at times, but I
got a really, really good price on the business.

I kept a portion of the business on a promissory note in the event we
did have any issues down the road. I didn’t anticipate any, but in
trend sometimes that stuff comes up. That’s really what we ended up
doing, was just doing an SBA with a promissory note.

Trent: Let’s talk a little bit more about the details on that from a
risk mitigation perspective on
the buyers, which is you. When you have an SBA loan, first of all what
percentage of the purchase price excluding the promissory note, do you
want to disclose any of the real numbers or should we just make up
numbers for the purposes of percentages?

Graig: Yeah. We’ll make up numbers.

Trent Let’s just say the business was a nice round number, $100,000 bucks.
Easy to do on 100
grand. What percentage was the purchase price held back on the
promissory note?

Graig: What percentage of the purchase price was held back? That
depends because the SBA
has their own rules for the promissory note. It’s actually a good
point.

Trent: That’s why I’m going down this road, so you can explain this.

Graig: You know that they require a certain percentage of equity in
the business already. I
think it’s 25 percent off the top of my head.

Trent: That was where I was going.

Graig: If you do a promissory note, and they’re going to use that as
equity, the SBA is going to
look at that as equity, I believe you cannot issue a payout from the
note to the seller, I believe it’s two years.

I can’t remember because we didn’t do this, but I remember being a
point of contention was you cannot pay that out for two years. You
have to have 25 percent equity in the business yourself.

Trent: You had to write a check for 25 percent of our $100,000 is that
correct?

Graig: Correct.

Trent: Then you went to the SBA to get another large percentage of the
$100,000 and then
some additional percentage of the $100,000 was held back in a
promissory to protect you. Is that correct?

Graig: Correct. Let’s do it this way. $100,000 purchase of the
business. That’s a letter of intent
and everything, $100,000. The percentage of the note, we’ll say was a
$50,000 note negotiated. You need to come up with $50,000 cash.

The SBA loan is going to be $50,000 cash. The SBA is going to require
25 percent of that be your equity, your cash. You have to put 25
percent of $50,000 down.

Trent: In that case you’re writing a check for $12.5 thousand, the SBA
is loaning you $37.5
thousand and the seller is carrying a note for $50,000.

Graig: Correct.

Trent: You’ve acquired $100,000 business for 12.5 percent equity out
of your bank account.
That was the first thing that I really wanted to get to because for
people who haven’t bought a business before and haven’t applied for an
SBA loan before didn’t know that the seller could carry a note for
some portion of the sales price. They might think, I can never afford
to buy a business but that’s not necessarily the case.

Graig: Exactly. Having that percentage of the note lessens the cash
burden and then the SBA
obviously you can get a really, really nice rate. You can get really
cheap cash and then the business funds that barring you buying the
business, by the way, it’s already profitable.

It should just self liquidate itself. You should just be paying that
with the business. It shouldn’t be a problem, which by the way the SBA
is going to do their own cash flow projections anyways so they’re not
going to lend to you if the business is going to crash.

Let’s be honest here with everybody that’s listening. This is actually
a good topic. If you’re going to borrow it from SBA, if you’re going
to get somebody who’s a multi millionaire who can fund it or whatever
it is that you want to do, they’re all going to go into really deep
inside the financials, look at the cash flow, cash is king.

They all want their money back. If they’re lending you at a six
percent rate, they want to know in the first month are you taking that
business over, what is the cash flow going to look like and they’re
going to run those projections.

If they’re uncomfortable with it and it’s inconsistent, one you might
not want to buy that business, two you’re not going to get your
lending even if it’s from a private lender. That’s important to know.

Trent: As the borrower from SBA, what is your liability in the event
that the business were to
default or you couldn’t make the payments or did you personally
guarantee the loan?

Graig: You always have to personally guarantee the loan. It won’t
otherwise let you. It depends
on what state you live in. You’re in Canada, right?

Trent: No. I’m in Boise, Idaho.

Graig: I thought for some reason you were in Canada.

Trent: I’m originally from Canada.

Graig: That’s it. It depends on what state you live in. For example,
I’m in Illinois so I have
businesses that I used as collateral, but in the state of Illinois
with the SBA, they require that I not put my house up, but essentially
by default they could go after the equity of my home.

For example, if you live in Texas, they have the homestead laws there.
They can’t do that. It depends state to state, but you have to always
personally guarantee a loan and at the same time, they may ask for
additional collateral whether it’s an existing business, a home,
things like that.

You’re always going to have to personally guarantee the loan. They’ll
make you take out a life insurance policy.

That’s another thing you have to remember is anyone you lend from even
a private lender that’s not SBA may require you to take out a life
insurance policy for the full amount of the amount borrowed because in
the event that you drive on the street and you get hit by a bus, who’s
going to pay for the loan?

You have to sign the life insurance. Little things like that that you
don’t know about, that you don’t anticipate. One thing to remember is,
this isn’t like a mortgage where it’s federally backed by the
government for a certain dollar amount.

There’s no guarantee that the SBA or a private whomever is going to
get their money. This isn’t a federally backed program like that. They
want to go ahead and make sure that they feel as comfortable as
possible. Little things like that.

Trent: Let me ask you a couple more questions about this because
there’s some more details I’d
like to extract. The questions I want to ask are about whether an
investor could have provided you with the 25 percent of the amount
borrowed from the SBA which was 12 and a half percent of the total
purchase price in our scenario, so $100,000 purchase price, you wrote
a check for $12.5 thousand. Would the SBA have cared if the investor
gave you the $12.5 thousand. When you buy a house, you have to do
proof of funds and you have to show–

Graig: They don’t care where the cash comes from. Basically, they just
ask for you to wire the
money over. As long as it was in your business account, whether it
came in there two days ago, they really don’t care and chances are you
would probably have an investor written into the purchase agreement
anyways.

So, when they look at that they would know okay, there’s an investor
here and that’s just cash. All they care about, Trent is are they
going to get their money? They really don’t care where it comes from
in a way.

Trent: That’s how it should be.

Graig: As long as the business is cash flow positive, you usually
won’t have any problems. If
you went and you needed a certain purchase price or whatever, they’re
going to evaluate the business too. They’re going to do their own
evaluation as well. They don’t really care where the money comes from.

Trent: How many years is the SBA loan for?

Graig: They give you options. I think I did a five year SBA, I
believe.

Trent: How about the note to the seller? What are the terms of that
note?

Graig: It’s all negotiable too.

Trent: Of course. With the seller you can negotiate anything you can
get them to agree to.
You’ve got payments to make on this SBA loan out of the cash flow of
the business. If you use investor money for the $12.5 thousand, so far
you’re out of pocket nothing.

In your case, you’re out of pocket $12.5 thousand, but you still owe
this other $50,000 to the seller of the business and you obviously
want to be very careful of how much debt servicing you have to fund
out of the cash flow of the business because you don’t want to have
negative cash flow. There’s no point in doing that.

What do the terms of the note look like?

Graig: We did a five year note at I think it was just a small
percentage. I don’t remember the
exact percentage in my head right now, but it was a five year note
paid out monthly. I don’t remember the exact percentage right now.

Trent: You did have a monthly payment to make to the investor at the
same time as you had a
monthly payment to make to the SBA?

Graig: Correct.

Trent My point of bringing that up folks, is that as I’ve said before, you
can negotiate just
about anything, so you may have in Graig’s case, he may have been able
to get the seller of the business to defer receiving any payments for
six months or one year or two years. There could have been a balloon
payment at the end of the note.

Graig could have put up his car for collateral on the note. The point
is, is it’s a white canvas when it comes to negotiating with the
seller. Having been a seller myself, the thing that you really have to
understand is that your seller, especially with smaller businesses
that are under $10 million in annual revenue, the seller might not
have that many options to sell it and they might really want out of it
for who knows whatever reasons.

Health, divorce, is bored stiff, hate going to work every day and
that’s part of the thing you’re really wanting to try to cover in your
negotiations is why are they wanting to sell.

In your case Graig, was this a business that was for sale or was this
a business that you talked someone into sell?

Graig: This business was for sale. It wasn’t like I approached, which
you can do that by the way
too. Approach the business and offer to buy it. You can do that too
but this was for sale. There was a broker involved so people need to
understand that portion of it as well.

Maybe we use this as a segue into our next topic, but dealing with the
personalities involved in a transaction is always an interesting song
and dance. It really is because you’re going to have different parties
with different invested interest, different viewpoints, different
angles and views on everything.

Some having done many transactions, some having done very little and
you know who to weigh in on what and as the buyer, you need to be very
mindful of people’s motives.

Trent: Absolutely. That’s so critical in what’s going to be important
to them in the negotiation
process. Graig, before we segue in how to locate a good business to
buy, I want to very briefly tell the story of how I acquired half of
this company. It’s quite a bit different than what you did and it’s
something that I think anyone could do given the right situation.

When I moved to Boise here, I was introduced fairly early on to a very
smart individual who had become very successful in the space that I’m
in and this is a guy that I had a great deal of respect for and he had
this particular company, is a software service company.

On my blog I’ll be talking about all the details on this but I think
just for the time being, I’m not going to mention the name of the
company or the name of the individual and I’m going to be a little bit
vague.

I’m not going to disclose exact prices. I want people to understand
the formula that he and I used to come to an agreement that didn’t
require to get an SBA loan. It didn’t require me to go and actually
write a check and his business was not for sale.

By spending some time with this individual, he and I started to
realize that our skills might be very complimentary and that the sum
of his energy and my energy, one on one would be two.

One and one would be three. I said to him, I would really be very
interested in acquiring to working with you to build this company
because it solves the problem that I’ve wanted to solve.

You’ve already got a little bit of jump start on it. He’s got 60 or 70
customers and it’s doing just a few thousand dollars a month in
revenue. This is not a big business yet by any stretch, but it is
profitable because self (?) of service, most of that revenue coming in
is profit.

I said, I would love to own half of your company and work with you so
that we could grow this into as big a business as possible.

From a sellers perspective at that point in time, he’s looking at me
going this guy’s kind of a stranger. I don’t really know that I want
him to just cut me a check for half of his company assuming we could
even agree upon a price, which I’ll talk about in a minute.

The seller doesn’t necessarily be fully vested to a stranger as a
business partner very early on. We decided that that wasn’t going to
work for him and I didn’t want to write the check anyway.

We decided to come up with a different formula and much like what you
said, Graig is we looked at the future potential of the company. We
determined what we both agree was fair market value from what he had
built so far and then we put that number on the whiteboard.

If I was to acquire of the company, I would owe him half of that
dollar amount that we decided was the dollar value of the business
today. I wanted to have my payments to him made out of future earnings
of the company, which is what we agreed to do.

One of his questions, because he hadn’t really been through this
before was if you don’t take that money out of the company and pay it
back to me, how does it get your market for me?

I said we could just accrue it as a salary on the books for you so
that you can take that money out at any time in the future, but from
the record keeping perspective, it is like I made the payment to you,
but it doesn’t make any sense to take money out of a company, pay tax
on it, only to put it back in. We were able to structure the deal in
this fashion.

If we achieve a certain target in revenue, that money that I owe him
to vest my half of the business will have been fully paid and that
will take, depending on how successful we are anywhere from a couple
of months to maybe a year.

My stock will vest according to certain revenue milestones during that
period of time until it’s fully vested. That’s good for me and it’s
good for him because it doesn’t put us in full on marriage so to speak
right from the get go.

I wanted to make sure that he had an out to give him comfort so if
you’re talking to anybody, here’s a way that you might want to do
this. If I’m him, I’m thinking what if Trent sucks? What if he doesn’t
add any value? What if I don’t want to be in business with this guy
after a month or two?

We set a minimum threshold for revenue over a certain period of time,
that if we did not achieve that through our combined efforts, he could
essentially say, you’re out and we wrote up an agreement to that
effect.

Why I agreed to that of course, is we figured out a formula. Let’s say
if we got 80 percent of the way to the revenue target. I have added
some value, but we just don’t like working together or he doesn’t like
working with me. We took the difference between what the current
revenue is and what that aggregate increased revenue was.

Let’s just say for human sake it was a $20,000 difference over some
period of months. He’d have to write me a check for half of that when
he “kicked me out”.

That gave me some comfort in that okay, well I’m not going to be
building this other guys business only to have him boot me out and I
don’t get any compensation for it.

From his perspective, he had a way to get me out if we found out that
we didn’t like working with each other or I wasn’t adding that much
value or for whatever reason that he chooses, he just doesn’t want the
relationship to continue. That is one way you can find out.

f it’s listed with a business broker, for example and Graig’s case,
which we’re going to talk about next. What I just described isn’t
going to work. If you’re out there networking in your space and I can
tell you more stories of people who have acquired businesses just in
this exact fashion.

But in the interest of time, I will not get into that, this formula
can work very well when you meet another individual who you think that
you would really like to work with and maybe that person has already
built a little bit of something and you want to become involved in
that from an owners perspective.

A formula that is kind of like what I just described is one that you
should consider and that you could talk to the potential partner
about.

Graig: Here’s the thing. What you described is basically called an
earn-out which is a
phenomenal way to buy a business, but, a huge but with that, depending
upon your skill set, your temperament, an earn out may not be a good
fit for you.

You have to be able to play nice with others. You have to be willing
to go into a business with a partner essentially.

That being said, it’s a very, very good way to go, but everybody
listening to the podcast is all going to have different personalities.
If you don’t play nice with others and you are kind of a lone wolf,
and earn out may be hard for you to stomach long term. Just keep that
stuff in mind.

For example, for me, there was a broker involved, but let’s just say
there wasn’t a broker involved. I would not prefer an earn out because
I like to do things my way and I like to be in control.

Whatever adjective you want to come up with that describes my
personality, I don’t really fit well into that scenario. For me, I
would rather just pay the cash and have complete control, but that’s
me.

That’s just both sides of the coin there. Some people are not like me
that really like partners whether they have a value in between their
ears or software or just something intangible, there’s good people out
there like that as well.

Trent: That’s a good point. In my case, I wouldn’t want the software
without my, now, partner
to go with it. If I could actually build the software for less money
than what we agreed was the value of the company that he built.

He had customers of course, so that’s a part of that value, but in my
mind, the real draw was to be and the same for him, in his mind the
real draw was to be partners with me.

That can, in some cases and hopefully in most cases it turns out
really well, but in some cases it can go south as it has done for
myself in the past and other folks. That’s what you have to have a
good shareholders agreement for or the shotgun closet.

Graig: By the way, always hire a really good attorney who’s done
transactions for years and
years and they will always make sure that you have iron clad
everything. Don’t worry about that.

Worry about it, but let them worry about it. Whatever purchase
agreement you choose or whatever it is, they’ll handle all the details
of that.

Make sure you just have a really good attorney for that stuff as well.
What do you want to go into next? Do you want to talk about the
personality portion of things?

Trent: No. Let’s talk about how to locate a good business to buy.
Obviously that’s a huge
challenge. If you can’t find anything that’s any good, then everything
that we’ve been talking about has gotten pointless.

Graig: Sure.

Trent: What did you do?

Graig: Mine is actually nothing special, nothing strategic. I will
tell you that what I did was I
was really looking around. My original plan was that I was going to
acquire other marketing firms in the dental space and I just wanted
their lists. I wanted to (?) market share in my space.

I just started fumbling around the internet looking for businesses
that weren’t for sale to offer them a price and try and suck market
share from them. I really just wanted their lists.

Then I started looking through, there’s tons of broker sites out there
that businesses are for sale on. Whether it’s biz by sell, whatever it
is. You have to sift through a lot of junk on there sometimes, but in
there are one to two to three to four good, solid businesses that are
worth looking into, digging into and getting a broker packet on.

That’s exactly what I did. I found a business on there with a
description that sounded like it was something applicable to what I
was doing, which was SEO and local marketing. I got the broker packet
and it was phenomenal.

There’s tons of broker sites out there. There’s also brokers in
general that you can call up and ask if they have any businesses for
sale. They’re the ones that are going to have access to the companies
that are for sale. They really are.

The drawback is that you’ve got to deal with them, but they’re going
to have the most fruit to pick. That’s what I did. I don’t know Trent,
what you recommend, but you probably have some other thoughts on that
too.

Trent: I think that the biggest thing is to really make sure that
you’re networking in your space
so that you know who the other players are.

I used to really make an effort with my last company in particular to
be really friendly with my competitors because the thing that you can
always count on is that people’s lives are going to change.

Divorce, health issues, any number of things can cause people to want
to pivot in their lives and they may put up a business for sale or may
want to sell a business that there’s absolutely nothing wrong with,
it’s just they have extenuating circumstances.

Like as Graig just explained, a lot of why acquisitions occur is
because you want to purchase market shares. It’s a quicker way to do
it.

There are risks to it of course, but it can work out very well. If
you’re not friendly with your competitors, then you’re not putting
yourself in a position where you might be able to buy them out at some
point or they might be able to buy you out.

Then in that situation, there’s always a little bit of trust because
you’ve known each other. You should have a dinner once per quarter
with a half dozen different competitors.

Not all together, just on an individual basis so that at a minimum
you guys are sharing notes and doing a little bit of a master mind and
you have to have people that are at a right mindset.

If you get someone who there’s not enough for everybody, they’re not
going to have dinner with you and they’re never going to share
anything but I think a lot of people out there, a lot of
entrepreneurs, the pie is so big.

There’s more than enough room for everybody. Besides, you’re not in my
geographic region or whatever. I’ll have dinner. I’ll do a Skype talk
with you or whatever it is.

It’s a way for you to build a relationship so if you are the buyer or
the seller in that situation, you don’t need to go to a broker. The
very first thing you could do is call.

Whenever I’m building a new company, I’m always thinking very early on
who might buy this thing one day, then I want to make sure that if I
have a half a dozen people on my list, so to speak that I’m having
dinners or communication with them on a once per quarter basis.

They always know what I’m up to and that way if I ever do find that I
want to sell or that I’m in a position to do so and they also know and
can see the success that I’m having and then one day maybe they’re
going to come to me and make an acquisition offer that’s just too darn
good to say no to. If you’re not doing the networking, none of that is
going to happen.

Graig: Yeah. I think that’s good advice. You want to almost befriend
them with that. Make it
less about the business and more about them. I’m sure you’re going to
have step that you want to keep close to your vest, but be more of
their acquaintance than talk about what you’re doing every day in your
business.

That will always get you farther than any other way. There’s myriads
of ways to do that, to go out and find businesses to buy.

One of the things you have to look at too is, what’s your goal too.
When I say that, it sounds like it’s just a cliche, broad stroking
thing but for me it was well, if I’m already running a seven plus
figure a year business, I’m running that, I do need another stream of
income. I do need something that’s going to be my slack adjuster right
there.

Adding other businesses to your portfolio of whatever so to speak is
phenomenal. Not only are you adding to your net worth, you’re also
adding to your yearly earnings, which think of the most successful
people you know in business. They all have multiple things that bring
income to them every single month regardless of what it is that they
do.

Some are related, some are unrelated. You have to look at it, really
that. For me for example, one of the reasons I decided to buy another
internet based company was that eventually, I’m probably going to
merge my two businesses together so that I can go ahead and sell that
business as one big business for a larger payday instead of chunking
it up. Those are the things you think of long term. Don’t think of
just in the moment.

Trent: There’s a point that comes out of this as well that I want to
ask you about. You’ve
mentioned having more businesses is a good thing, multiple streams of
income is a good thing and I agree with all that stuff, but there’s a
downside to this and I want to dig into how you deal with it.

You got more work to do, more things to focus on, more moving parts.
Like somebody who owns a Dairy Queen shouldn’t go get into the nursery
business because they don’t have anything to do with each other.
There’s no synergies or economies of scale or anything to take
advantage of.

You’ve just simply doubled your work load and sort of disadvantaged
yourself relative to your competitors who are only focused on running
a Dairy Queens or a bunch of Dairy Queens or only focused on running a
nursery or a bunch of nurseries.

In your case, Graig what do you speak to how you mitigated the risk of
spreading yourself too thin?

Graig: That’s a great point. Here’s the main thing. This comes from
doing your due diligence, is
you want to make sure that that business runs without its current
owner or flip that or your current business now runs without you.
You’re willing to take on the other one. You’re just shifting your
energy to a different business.

For example, in my particular case, my current business we mostly run
automated everything. I don’t deal with clients. I didn’t have a huge
amount of work every day with it. I had a little bit of time to put
into this new business.

At the same time, I also did my homework and found out they had a half
way decent team on the fulfillment side of things. They had a great
director of operations who ran the business day-to-day so I didn’t
have to deal with that.

Mainly I went in just dealing with just the sales and marketing aspect
of it which is what I like and which is what I wanted to do.

You make a great point in the sense that you don’t want to spread
yourself too thin. If the other business you’re buying has a great
team, you may even want to interview a few of those people before the
purchase.

That’s known to happen, interviewing sales managers and managers in
that business. It happens all the time prior to purchase, so that way
you’re comfortable with it. Like Trent said earlier, anything’s up for
discussion when you’re talking about negotiating. Making sure you have
a good team on the other side of things.

Like you said, if you’re in the Dairy Queen business, you don’t want
to go into the HBAC business, because you’re just going to be strung
out and that’s really true. Using unique skill sets matters. Having a
good team matters.

If your current business runs completely without you, you may be able
to take on another business no problem, but if you’re strung out right
now, sometimes the business runs into the ground.

Don’t go buying another business. You’re not a good fit for that right
now. Focus on getting your current house running without you and then
maybe look for other stuff. That’s really the path you need to take.

Trent: In my case, I will say before I decided, or I should say my now
business partner and I
decided to team up or become partners, I was pretty busy running
Bright Ideas and my other SaaS company and the agency. There’s lots
going on but it still made sense, because one, I’m not going to be the
sole guy in charge.

There’s still going to be, and he still has a super vested interest to
be super focused on it. Our ability, because we both have relatively
large followings of lists, our ability to cross promote and we both
have reasonably well trafficked blogs, it really did make a whole lot
of sense, even though it’s probably going to add to my workload a
little bit for awhile.

But the extra cash flow that comes out of that is probably going to
expedite my ability to also put some more people on my team and get
some of that stuff back off of my desk.

You definitely have to look at it on a case by case basis, especially
when you are going into business with somebody else as a result of the
acquisition. Maybe that is worthwhile.

If I was just trying to buy his thing and he wasn’t going to be part
of it, like I said, I don’t know, as a matter of fact a week earlier,
a guy had approached me and he looked at one of my plug ins that I had
built and he said “I want to turn this thing into a SaaS.”

I actually turned him down because he was only going to be able to
bring technical ability to the table which I could probably hire, but
he wasn’t going to bring any marketing, he didn’t have a list. This is
going to be all on me to make this thing successful.

I’m already working too many hours so I don’t want all that extra
weight on my shoulders, so I turned him down because of that. Even
though he was a very capable super technical, great track record smart
guy. The whole pie wasn’t there.

Graig: One of the things for me that you really bring up a good point,
which I think for me,
when I looked at buying this business was some of the green lights
that I saw were the fact that they had no automated marketing.

They were basically a sales-based business. They had no marketing
funnel, they had no system. It was basically a free consult you get on
the phone with a sales guy and he’s got a pitch, this ridiculous thing
and there’s no follow up. It was really archaic in a way. Very similar
to the pharmaceutical sales model.

You might look and that and be like, oh that’s terrible but that was
good because that means if it’s sound financially now and I plug some
of what I know in it’s going to be better. I

looked at some of the stuff I uncovered during due diligence as the
negatives, as a positive and I knew that to be the case and that was
what was attractive about it.

Trent: How many full time employees does this business have and is it
located in the same city
as you?

Graig: It is not in the same city as me. I think we have about a dozen
people right now that
work in that company.

Trent: Is it a virtual company or is it a company with an office?

Graig: It’s a physical fiscal office.

Trent: How do you plan to be, because you need to build a relationship
with those employees.

Graig: I’m moving there.

Trent: I was going to say, you’re going to be an absentee leader.

Graig: I’m moving there. I’m moving both businesses to that location
so people listening, you’re
not in a no income tax state, you might want to move to one. We’re
moving from Illinois to Texas for a lot of reasons, but the business
is one of them.

Trent: It just made a whole lot of sense.

Graig: It just makes a whole lot of sense and it’s just about our
environment overall. Currently,
I am an absentee owner right now, but very shortly I won’t be.

Trent: So we don’t need to go down that road.

Graig: Nope.

Trent: One of the things when you buy a business of that size which is
exactly the business I
sold, so I can probably make a good guess as to how much revenue it’s
doing, but there’s a lot of moving parts, there’s personalities.

What is your plan for making sure that the intellectual capital of the
business which is probably next to the customer the second most
important thing, or maybe it’s the first most important thing.

How do you make sure that just doesn’t walk out the door?

Graig: I think across the board as a general rule of thumb, I think
you want to keep the staff
intact for the first six months. Don’t make any crazy changes to
staffing for awhile. Make people feel comfortable with you and what
your vision is and where you’re going and really make that a part of
what you’re telling the people.

You may find some people just get up and leave based on the fact that
they were already going to do that anyway. This transaction made the
door open quicker for them, an excuse to leave, which may happen,
which happened to me, which I looked at it as a good thing because
they were already looking for a way to leave.

We’re a little fat. Our overhead’s a little high so that was okay. It
really comes down to understanding the skill sets of the people that
are there, whether you interview them one on one or whether you
learned from their manager, whatever it may be.

Don’t do anything crazy for the first six months. Let it marinate and
it will evolve into who needs who and who needs what. That’s really
what I heated against, that’s what I’m going to do. I think that’s a
good general rule of thumb.

Trent: Do the employees of this business, I’m assuming they don’t have
an equity stake, is there
any profit sharing?

Graig: Currently there is not. I would like to build that in but I’m
not going to build that until I
wean down exactly who are the winners and the losers? You don’t want
to share profit with people who are just dead weight, because then
that just takes more money away from the people who are actually
winners.

We’re still morphing into a nice, lean machine. We’re not going to be
there for a little bit because I don’t want to raise any eyebrows and
have people leave, like you said, jump ship. We’ll eventually get to
that.

Maybe in 2014, we’ll get to a nice profit sharing, but for now there’s
none.

Trent: You talked about the importance in buying a business where the
owner wasn’t vital and
generally in businesses of 12 employees, the owner is very vital
because they’re the ones slaying all the dragons, which is my slang
way of saying landing the new customers.

Graig: Or just dealing with putting out fires.

Trent: Sure. I guess the couple of questions I want to know is number
one, is this a recurring
revenue business?

Graig: Of course.

Trent: It is.

Graig: I don’t do anything without continuity ever. That’s just me.
Let’s talk about that for a
second. I bought this business under the impression that the business
ran without the former CEO. That’s what he told me. For all intents
and purposes, the evidence supported that.

It was very much like that makes total sense, but what I didn’t know
and this was after I took it over was that he did slay the dragons, he
did put out the fire. If there was a problem, he was the only person
that could answer that damn question.

Nobody had an empowerment to be their own people, whether it was micro
managing, whatever the case may be. No one could think for themselves
and he could issue that culture, but you don’t know that until you’re
in there. You really won’t know that until you’re in there.

Trent: He’s not telling you.

Graig: There’s just no way. That’s part of the risk. That’s always
part of the risk. You have to be
a strong person. You have to willingly be able to put your foot down.

For example, the people in this business, there’s a group of
individuals who just cannot think for themselves because they’ve been
conditioned to do so.

Part of my thing is empowering them to make their own decisions and
that was something we didn’t really anticipate until I bought it and
that was part of the risk I assumed. Now it’s up to me to fix that.

Trent: Going back to the note that you have to the seller, if stuff
really starts to hit the fan,
aren’t you in a position where you can say to the guy, hey man, if you
want to get paid out on this note, you need to come help me.

Graig: Of course, but there’s a slippery slope with that.

Trent: How so?

Graig: Bringing that problem back in is not necessarily a way to
cleanse it and move on. For
example, if I needed to bring him back in to fix stuff, I’m basically
saying to my current employees, Graig’s too stupid and doesn’t want to
do the work to fix it himself.

Trent: You’re undermining your own credibility.

Graig: I had to draw a definitive line in the sand. This is a really
good story because this is
actually a really good point that people need to understand when they
buy a current business is you’re most likely going to have turn where
the former owner is going to be on a consultant basis.

They’re going to give a 30, 60 days he or she’s going to be around for
that period of time to help you with transition in any way that you
want. They’re basically there to help you make this thing work. That’s
their job. Whether it’s client communication, whatever it is.

There’s going to be some cutting of the cord with the former owner.
They may have a problem leaving. They may not go home and roll around
in their bathtub of money. They may actually try to stay at the
office. They may actually try to tell employees what to do still.

My advice to your people is get them out of the office right away.
Give them one day to say their goodbyes, maybe hang around and meet
with the employees, break bread, whatever.

Then get rid of them, because what you’re going to find is especially
in a smaller business, there’s going to be confusion as to who goes to
who for what answer. I actually had to have a one on one conversation
with the former owner.

I said, “Hey listen, thanks for helping out today, but I think it’s
best going forward if you just work from home. If I need you, I’ll
email you. People are getting confused. They don’t understand that I’m
the boss now.”

That’s part of it. That gives you the strength to stand on your two
feet as the owner now. Then you got to be ready for the onslaught of
bullshit that’s going to come your way which is the complaining and
the whining and the I can’t think for myself.

There’s a lot of things to manage there, but if you’re strong and you
stay the course and you do the right things and you don’t enable,
you’re going to be fine. Take a few weeks to a few months to get these
people the straight and narrow, but you’ll be fine.

Trent: As the time that we’ve been recording this, how long have you
been the owner of this
business for?

Graig: Two months.

Trent: Two months? Has revenue decreased at all during the two months?

Graig: No. It hasn’t, but it hasn’t gone up either. We have a bit of
sales and marketing problem
right now in the sense that we’re a sales based culture and I think
we’ve talked about this in the past without last podcast.

When you’re a sales-based culture and that’s how your business runs,
on sales and sales people especially, you are going to be doomed to
fail unless you have tons of cash to go out and train and hire more
sales people.

Your revenue is going to be susceptible to their behavior and
performance. Bad place to be.

If you have a marketing culture, when the sales component, that is a
great place to be because the marketing is always going to drive the
business and it’s based on no one’s behavior other than the prospects.

For example, if all you do is just cold call or just dial leads, you
don’t do any other form of marketing and you’re just selling, well
your based on the behavior of those people and the performance of
those people.

Your sales people. It should be the other way around and that’s what
we’re dealing with right now. We have sales people who really are just
flailing in the wind.

Trent: They’re out there supposed to be making cold calls and they
don’t want to make cold
calls. They don’t know anything about blogging or content marketing
or anything like that?

Graig: No. It’s a little bit less complicated than that actually.
First of all, we don’t cold call
anybody. Let’s just be frank about that. I’m not sure if they have
quite enough of the skill set to be where I want them to be. I don’t
think they’re stone cold killers.

Phone sales guys need to be killers. I don’t think they’re hungry
enough. This is a good conversation about compensation for the sales
individuals. This is something that you need when you’re buying a
business.

How are the sales people compensated? That’s not only going to
determine performance, it’s going to determine a lot of other things,
your margin’s, etc. For example, the pharmaceutical sales territory
model is you get a book of business, you sell somebody something, you
get an upfront percentage of that order with that contract. Let’s say
it’s 15 percent.

Then the expectation is to earn that 15 percent, you manage that
customer for the life of their contract, keep them happy, deal with
problems, trouble shoot, listen to them complain, take them to lunch,
whatever it is. The benefit is upon the renewal of that order or
contract, you get that percentage again. It’s an incentive to stroke
that client and keep them happy. That sounds really good doesn’t it?
The way that’s set up?

Trent: Yeah but it doesn’t work.

Graig: That’s right. It doesn’t work.

Trent: The prize is too far into the future.

Graig: There’s so many problems with that. First problem is, you’re
taking your sales person
who is a sales person, they sell and making them a support customer
service person. Now they have to manage expectations and deliver
service on a thing they aren’t even fulfilling on.

You’re the sales guy so what do you know about the back end of
anything? Then when a client has a problem, you got to go, “Well,
that’s a good question, let me go to support.” And then you go to
support and then support tells you and then you go back to the client
and then you got the telephone game.

And then the client’s pissed that you can’t answer anything directly.
It just goes on and on and on.

That’s a service problem, but let’s talk about the real problem. The
one that impacts your business is you’re satisfying your sales persons
appetites. Instead of dialing and knowing that they have to make a
sale to feed their family, they know that they have renewals coming in
on the back end. I don’t need to dial this month.

I got ten renewals coming in. It’s 10,000. I’m fine. I don’t need to
dial. They may not need to dial, but you do because it’s your
business. That’s not the growth path you set for yourself. They’re not
hungry.

Then psychologically, they deal with four hours of bullcrap from the
customers and four hours of sales. Instead of selling eight hours a
day, they’re doing 50/50, so therefore you’re cutting down on your
potential to close deals.

Then let’s talk about the psychological aspect of them and losing
their edge. We all know sales people who are just stone cold killers
that can close anybody right on the phone. They’re just nasty. They
can sell their face off.

Trent: We mean nasty in the metaphorical way, folks just so you know.

Graig: Right. They’re just good, but if you take them and you make
them be a lion half the time
and they’re dealing more off the service end of things as an account
manager, they lose their edge. Their skill set dwindles down. It’s no
different than if you are a baseball player and you’re the DH.

All your job is just to hit and you’re just a really good hitter. What
if they go and they put you in the field? Instead of being in the
cage, you’re in the field 50 percent and you’re in the cage 50
percent?

Your swing is going to suffer because of that. You’re going to lose
your edge. That’s what that model doesn’t facilitate. It’s a terrible
way to do things. I inherited part of that by the way. That’s okay.
We’ll be better for moving out of that. You may find that you just
don’t have people that can actually close anyways.

One of my favorite ways to do commission is to do it on a tiered
pyramid on a monthly basis only, on sales only. Let support do their
thing. You sell more, you make more. That’s how it should be in every
sales based business period. You sell more, you make more. No renewal
nonsense.

Trent: Absolutely.

Graig: That’s just my little rant.

Trent: It’s a good rant. I’m actually running up now against a hard
stop.

Graig: It’s good. I think we covered a lot.

Trent: Yeah. We did.

Graig: Just a couple things that I think resources people will like
which I think is helpful.
There’s a couple books that I think everyone should just read. One is
“How to Build a Business and Sell it for Millions.” You can get that
on Amazon. Another one is… I can’t remember actually off the top of
my head.

Trent: Just send me an email after.

Graig: I’ll send you an email. I’m actually trying to look at my
bookshelf as I did it. “Built to
Sell.” There it is. That’s another great one. Gives you an idea of
what you need to do to build your business to sell it and on the flip
side, gives you perspective of what to expect on the other sides of
things as well.

I think everyone would get a lot out of this podcast because it’s so
different. Everyone’s always talking about selling stuff. This will be
a good stop gap for them to say, you know what? This was my long term
focus here.

Trent: That’s so very, very true. So few entrepreneurs, especially
first time business owners,
they’re so focused on I got to build revenue. They’re not thinking of
the long term strategy of what are you building.

What is it going to be worth because some really key decisions… I’ll
give you an example from my own past. At the six month mark of my IT
service company, I realized because I didn’t know nothing about
business when I started. I was a great sales guy but I didn’t know
squat about being a business owner.

I realized, wait a minute. My revenue starts at zero every month. This
sucks. I made it my focus to generate recurring revenue and so over
years time, we built a million dollars a year in recurring revenue
loan.

We had another million in sales of products and service software and
implementation and all the other stuff. I’ll tell you, nobody would
have paid me $0.10 for that second $1 million of revenue.

It was unpredictable, it wasn’t horribly profitable and there was no
real stick with the customer relationship if they’re just buying gear
off of you.

Graig: That’s a great point.

Trent: Whereas because I made this one decision, if I had literally
shown up for work that day,
made that decision, set that in stone and never came to work ever
again, that was the most valuable decision of the entire organization.

Assuming of course that we could acquire customers, which we did and I
played a big role in that. But that was what made my company worth the
$1.2 million that I sold it for.

If I hadn’t have had that million dollars a year in recurring revenue,
I would have just been another little worthless IT service company,
like the yellow pages was already full of. I hope that people get
that.

I hope people have hung around until the end of this podcast to learn
all this stuff, because we just gave away thousands of dollars worth
of free consulting if you’ve never bought a business before or if
you’re early in your businesses career, think about what you are
building.

How are you going to get out of it? Who’s going to buy it from you one
day? Because I promise you there will come a day when you don’t want
to run the business anymore, and if you don’t have that plan figured
out years in advance, you are not going to have the opportunity for
example, that I was so blessed to have to get a big check or a big
stream of payments over a number of years.

You just won’t have that opportunity. You’ll be forced into selling it
for ten cents on the dollar because you’re in a hurry or you didn’t
know who to sell it to or you didn’t have a strategy or didn’t build
anything anybody wanted to begin with.

Graig: One of the best advice that I ever received was somebody told
me that you should
always sell your business when you don’t want to sell it. What I mean
by that, is that when you go to sell it and you’re done, it’s too
late. You’re desperate.

Trent: Absolutely. There’s so much human psychology that goes into
that piece of advice. That
is very, very valuable.

Graig: Trent this was awesome. Let’s do another one in the future.

Trent: We should get you back in three months, four months. You can
talk about everything
that went wrong that you couldn’t predict and what you did about it.
Guaranteed, there’s some skid marks coming your way. There always is.

Graig: I didn’t even include the skid marks that have already
happened. Basically we just
covered a lot of broad strokes so we can get into some specifics. I
really want to delve into the marketing and selling of things and how
you deal with that when you inherit a business.

Since this is a marketing, your blog is more about acquiring clients
customers, there’s things on the back end that I think would be
valuable to talk about.

Trent: How about we do this. The link to this post is
brightideas.co/87. If you’re driving in your
car and you’re taking notes, hopefully you didn’t take too many risks.
I don’t know if I’m going to put Graig on the spot here.

I’m willing to do this. If you have questions about what we’ve talked
about so far, leave them in the comments. I’ll answer them. Hopefully
Graig will too. Graig?

Graig: Yeah, I’ll try to get on that and do the best I can.

Trent: As well, if you have questions that you want us to cover in the
next episode that we do,
again, just leave those in the comments and that way we can really
figure out what it is relative to this topic that you guys want to
hear and learn about and Graig and I will cover that in the next
episode that we do.

Graig: Sure. Sounds good.

Trent With that said, we’re going to wrap up this episode. Graig, thanks
so much for coming
on the show with me.

Graig: No problem. Have a good one.

Trent: To get to the show notes for today’s episode, go to
brightideas.co/87 and if you enjoyed
this episode, I would love it if you took a moment and go to
brightideas.co/love. There you’ll find a way that you can easily leave
feedback for the show in the iTunes store.

The reason that’s so incredibly important is that’s how we expand our
audience and every time new entrepreneurs discover the Bright Ideas
podcast, they get exposure to what you just got to listen to and they
get the opportunity to implement those bright ideas into their
business.

And whenever we do that, we’re just really helping a whole bunch of
people. Thank you so much in advance. If you would be kind enough to
leave the feedback, that would be terrific. That’s it for this
episode.

I am your host, Trent Dyrsmid and we’ll see you in another episode
soon. Take care.

About Graig Presti 

GraigPrestiGraig Presti, founder and CEO of LocalSearchForDentists.com, is a foremost advertising authority who operates with dental practices all around the planet, assisting them to leverage the internet so they can generate more telephone calls, reach more new patients, and bring in more revenue. His strategies begin to work immediately and continue to work month after month.

Presti specializes in helping dental practices dominate their nearby location by using confirmed regional Internet dental advertising strategies to help them dominate the top rated regional research engines like Google, Yahoo and Bing.

Presti uses easy to understand stories to help his clients comprehend how they can improve their internet presence. He is a repeated featured speaker at dental conferences and other venues.

Presti has mastered the art of bringing a flood of new patients into dental offices, and has undoubtedly established himself as a top specialist in his field. His considerable accomplishments, and his industry contributions, led him to be showcased as a Newsweek Magazine Champion of Health, Wealth and Success.

Thanks for Listening!

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Welcome to the Bright Ideas Community of Entrenpreneurs

December 2013 Traffic Report

DecemberTrafficReport

DecemberTrafficReport

Welcome to my December Traffic Report. To see November’s report, click here.

As traffic generation is a challenge faced by every entrepreneur, at Bright Ideas we’ve made a habit of publishing our traffic reports as a means of giving insight into how we are doing, what is working, and what isn’t. Plus, writing the report forces me to look! If you think this is helpful, please be sure and share this post.

Click to Tweet: Check out BrightIdeas.co latest monthly traffic report

Audience Overview

dec2013-audience-overview-web

As you can see from the chart above, overall visits were up 34.45% from 8,645 to 11,623 (a new record) and unique visits were up 42.82% from 4,615 to 6,591.

In looking deeper into where the traffic came from this month vs last, the biggest gains were as follows:

  • Direct traffic increased 74.77% from 2,699 to 4,717 visits
  • Twitter referrals increased 173.83% from 298 to 816
  • Facebook (mobile) referrals increased 446.94% from 49 to 268
  • Referrals from NathanBarry.com went from 0 to 351 (he helped me promote my book)

I suspect the reason Twitter and Facebook referrals were up so much was because I was aggressively promoting my Digital Marketing Handbook, as well as recruiting the help of others – and I’m happy to say that the book launch was a huge success!

 Conversions

dec13-conversions

The conversions overview has always baffled me. It’s not a particularly hard report to create, however, it never agrees with the data that I get from Infusionsoft. Being as I trust Infusionsoft more than I trust GA, I’ve appended the report with the actual data.

Landing Pages

dec13-landingpages

The conversion rate of our home page improved slightly, from 5.11% to 5.61% – although we didn’t make any changes to our home page.

Traffic Sources

dec13-trafficsources

As you can see, the largest portion of my traffic is from people typing in the URL – or at least this is my understanding of this report (if I’m wrong, I would love for you to leave the correct interpretation down in the comments).

A few months ago, we started to use campaign tracking links extensively in our emails, and you can see that emails to our list definitely account for a significant portion of our traffic. If you aren’t yet building a mailing list, you need to start now (check out our 2013 income report to see how incredibly valuable it is to have your own mailing list).

 Referral Traffic

dec13-referrraltraffic

Social media is an absolutely wonderful tool for content promotion (a topic I cover extensively in my book) and in this report you can see that Twitter, Facebook, and LinkedIn all made incremental contributions to overall traffic. What I cannot tell for sure is how many people saw our content on social media and then decided to type in the URL instead of clicking the link.

Summary

When it comes to understanding GA, I consider myself a complete neophyte. GA collects a ton of data; I wish I was better at interpreting it. That is part of the reason why we are going to publish traffic reports on an ongoing basis – we hope to get much better with our understanding of analytics.

If you are an analytics guru, I’d love to hear from you in the comments below as I, and the rest of our audience, would undoubtedly learn a thing or two!

Additional Resources

What Do You Think?

If you have comments or questions, please take a moment to leave them down in the comments. You will get an answer.

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The Anatomy of a Highly Effective Sales Call

call

Anatomy of a Sales Call

I love content marketing and marketing automation and have created a lot of content here on my blog to share what I have learned. I have even written a book about it.

When done correctly, content marketing and marketing automation are extremely effective at capturing leads and nurturing them towards the point where a lead becomes a customer. With that said, if your business requires more than “add to cart” to make a sale, content marketing alone is not going to increase your revenue.

You still need to know how to actually talk to your prospect and ask them to buy.

The one thing that I haven’t written a single post about is how to sell; which, given that I have 20+ years of B2B selling experience, is pretty hilarious.

Today, that changes. As wonderful as content marketing is, it doesn’t land clients. Talking to people is what does that.

Click to Tweet: The Anatomy of a Highly Effective Sales Call

How I Persuade a Qualified Lead to Buy

The headline I wrote is kind of a joke. The truth is that I don’t have some magic potion to persuade anyone to do anything they don’t want to do.

Noticed that I italicized that last bit, did you?

When I talk to a lead, I do have a very specific framework for the discussion because within 90 minutes of saying hello for the very first time, my goal is to close the sale and get paid.

I don’t want to write proposals and I don’t want to make follow up calls.

Experience has taught me one simple concept: qualified leads, if given answers to their questions, are generally ready to make a purchase decision in a very short period of time.

get a yesVirtually every time I have reached the end of my first sales call and not got a yes, I don’t end up getting the yes, no matter how many follow up calls that I make (note: throughout my career I’ve sold primarily to small business and there is almost never a committee involved in the buying process).

The Framework for Success

So….what does this framework look like? Good question.

It’s not complicated, but it is highly effective. Out of the last 4 times I’ve used it, 3 have said yes, and one is still thinking about it. I’ll bet he doesn’t buy from me.

Before I get into the details of the framework, I want to stress something incredibly important.

During a sales interview (what some would call a “sales call”), I almost never make a statement. Instead, virtually everything that comes out of my mouth is a question. Only when I get to the end of the conversation, assuming I have built a high level of trust, do I dare to make a statement or two.

Why is that? Simple. If I say something to you, you can (and will) doubt it. But, if you say it, it has to be true. Right?

Ok, so, with that said…let’s dive into the frame work.

Phase 1 – Setting up the Call

In the first part of the call, I want to accomplish a few things:

  • demonstrate to them that I’m not like every other nitwit who just starts verbally puking all over the place
  • let them know what to expect (so they will let their guard down and relax)
  • get a feel for their needs/wants/desires and motivation to change

Here’s what I generally say…

Mr X, thanks for getting on the call with me today. What I’d like to do, if it’s ok with you, is begin by asking you enough questions to help me understand what you are trying to accomplish, why it is important, and why you might want to change what you are doing now. Once I have gained a better understanding of your current situation, I’m going to introduce you to a framework for growing a business, and if you agree that this framework applies to your business, we’re going to use it to guide the remainder of our discussion today. Does that sound ok to you?

By setting expectations and giving them an idea of what is going to happen next, I have helped my prospect to:

  • relax (I’m not going to push anything on them)
  • be open to my questions and understand why I’m asking them
  • be curious about how I can help them

Before we move onto phase 2, I want to remind you of one thing: I can start a call like this because the prospect has contacted me to ask for the call. That’s where the content marketing part really pays off. If I didn’t do all the content marketing, they wouldn’t have ever found me in the first place!

upside down sellingAs a side note, if you’d like to learn more about the approach that I’m describing, I highly recommend a book called Upside Down Selling by Ian Altman.

Phase 2 – Ask Why They Took the Call

Once I have set the stage for where I plan to take the conversation, the next thing that I want to get a feel for is how motivated someone is to solve their problems. To accomplish this, I usually ask, “Why did you book this call with me today?” and then I follow that one up with “What are you hoping to get out of today’s call?

Based upon the answers to these questions, I generally have a pretty good feel for what their agenda is, as well as how motivated they are to make a change. If I feel the motivation is low, I will most likely ask more probing questions until I find what their hot button is (a hot button is the pain they are trying to solve).

Phase 3 – Conduct a Self Assessment

Now that I know what they want and how motivated they are, I need to gain a deeper understanding of how they feel about their business now. This is where I use my Lifecycle Self Assessment tool.

As all my meetings are done online (why drive to go see someone when you can do a face to face meeting online?), I direct them to the web page above and ask them if they are at all familiar with the concept. Most have  heard of it because they have usually consumed a fair amount of my content (see…there’s that content marketing stuff helping out again).

LifecycleMarketing

I then take a few minutes to walk them through the seven steps shown on the image above and ask them if they feel that this is a suitable framework for growing their business. Thus far, no one has ever said no.

When you go to the Lifecycle Self Assessment page, you’ll notice that I have a form under the image with a rating scale of 1 to 10 beside each of the seven steps. The goal here is to get my prospect to rate themselves on each of the seven steps. Each time I do this, plenty of discussion ensues, and, most often, their self assessment results in fairly low scores for the first three steps.

Can you image what would happen if, instead of asking them what their score was, I told them what I thought their score was, based upon looking at their website? It would probably be a short call…and they would very likely try to defend their sub-standard marketing.

The reason the self assessment works so well is because they are the ones doing the rating.

That isn’t the only reason it works so well though. The other reason this approach is so effective is that it affords me the opportunity to ask a lot of questions, and the more intelligent questions I ask, the more likely they are to continue to trust that I know what I’m doing.

Smart people don’t generally ask dumb questions, right? (oh, look… I just asked you a question instead of making a statement)

What Do You Want to Do Next?

Once we’ve completed the self assessment, we are normally 20 to 40 minutes into the sales interview and, by way of my questions, I have had numerous opportunities to display my “marketing smarts” to my prospective client.

The other thing that has been happening is that my prospect’s apprehension has largely been replaced with a desire to improve upon the areas where they scored themselves poorly.

At this point, I will usually say something like this, “Now that we have identified the areas of most need and I’ve given you a few examples of how I and past guests on my show have addresses these challenges in our businesses, we need to come up with a game plan to solve these challenges for you, right?”

They say yes.

Ok, well, what would you like to do next?

These 9 words, if used at the right time in a sales interview (trust has been built, needs have been identified, motivation is present) are incredibly powerful because it puts the onus on my prospect to give me an answer that will help them to move forward.

No one ever gets to this point in the call and says, “I want to think about it“. While I suppose they could say that at this point, I have never had anyone do it.

logic and emotionTheir response almost always is to ask me what the first step of working together is.

When they do that, they have made an emotional decision to work with me. Now we just need to create the logic to support the emotional decision.

Click to Tweet: The Anatomy of a Highly Effective Sales Call

Getting Agreement to Proceed

Earlier in this post, I made this statement: qualified leads, if given answers to their questions, are generally ready to make a purchase decision in a very short period of time.

A big part of being qualified is being able to afford what I’m offering. Rookie salespeople leave the price to the very end because they feel that they need to sell hard prior to announcing the price.

This is the wrong approach.

Instead of waiting to the end, once I have established that they have a need and are motivated, I will, at the earliest opportunity, let them know what working with me usually costs. By getting the price out in the open early on, you are removing it from being a possible objection later on.

So, with that said, here’s how I usually wind up the call…

When they tell me what they want to do next, I respond by telling them what phase one normally includes and ask them if they are ready to proceed. If they say yes, I send them a payment link and they pay by credit card.

It’s just that simple and, as I mentioned before, 3 of my last 4 presentations have ended this way.

If this sounds too easy to you, remember a few things about how my business works:

  • I produce a lot of content to position myself as an expert
  • People find me because we are good at promoting our content
  • They read or watch a lot of my stuff before they call me
  • They already know they have a need and have probably completed 60% or more of the buyer’s journey before we speak
  • When we do speak, I follow a proven framework (proven over my 20+ years of selling) to move them from “interested” to “ready to proceed”

Making a sale is the natural conclusion of a meaningful discussion with a qualified prospect. If they aren’t qualified, my chance of closing the sale are somewhere near zero.

Additional Resources

What Do You Think?

Do you have questions or comments? Do you agree or disagree? I want to hear your thoughts!

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