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Partner Marketing: Proven Tactics for Startups

partner marketing with Reid Genauer

Reid Genauer is the CEO of Magisto. Magisto uses artificial intelligence to transform ordinary photos and videos into professional movies. Currently they make about 10 million movies/month.

It’s fun to use ->> Go check it out

The topic of this interview won’t be on Magisto though, we will focus on partner marketing. Partner marketing has played a big role in the growth of Magisto.

Listen to this interview so you can understand what to expect with from a partnership and learn how to choose the right partners as you start or grow your business.

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WADE FOSTER FC RS 14

How Zapier Went From 0 to 250,000 Users with Wade Foster

how to raise money for your business - wade foster interview

Are you looking for inspiration and specific tactics and strategies to grow your business? Want to know how to raise money for your business?

Trent interviews Wade Foster, the CEO and one of the co-founders of a rapidly growing company called Zapier. Zapier integrates SaaS tools from different vendors using triggers and actions.  It currently works with 300+ SaaS apps and is growing by about 10 apps per month.

Zapier has about 250,000 users and has raised $1.2 million. Among the investors are 2 of the most prominent venture capitalists in the Silicon Valley.

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

  • (03:00)  Introductions
  • (06:45)  What did you do at the very start to test the idea?
  • (14:10)  What did you do after you signed up the first few users?
  • (15:30)  How long did it take to get to 1000 users?
  • (13:00)  What did you do after reaching 1000 users?
  • (17:30)  What was it like to be a part of Y-Combinator?
  • (19:00)  What had you accomplished by the end of the 3 months?
  • (22:00)  Tell us about the process of raising money.
  • (26:00)  What did you do with the money you raised?
  • (27:00)  What kinds of marketing activities worked for you?
  • (29:00)  What are some of the impacts of more integrations?
  • (30:00)  Tell me about the biggest mistake you’d made by this point.
  • (32:00)  How did you go about getting more integrations and users?
  • (34:30)  Why did you decide to be a virtual company instead of having an office?
  • (38:00)  What are the pros & cons of having a VC on board?

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

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Connect with Trent Dyrsmid:

Transcript

Trent:
Hey there bright idea hunters. Welcome to episode 151 of the Bright Ideas Podcast, I am your host Trent Dyrsmid and this is the podcast where we help entrepreneurs to discover ways to use digital marketing and marketing automation, to dramatically increase the growth of their businesses.

If you are an entrepreneur and you are looking for proven tactics and strategies to help you increase traffic, conversions and profits, well my friends you are in the right place. How do I make good on that promise? What I do is I bring proven experts onto the show and I get them to explain to me exactly the tactics and strategies that they use to achieve the results that they’ve achieved. In other words I find someone for you, who have been super successful and you get to look over their shoulders, with hindsight to their benefit and see exactly how they got where they arrived.

In this episode I’m very pleased to announce that my guest is a fellow by the name of Wade Foster, who is the CEO and one of the co-founders of a very rapidly growing company called Zapier. They have about 250 000 users, they have raised 1.2 million dollars and among the investors are two of Silicon Valley’s most prominent venture capitalists.

In this interview Wade is going to share with me the story of how they got started, how they found the idea, how they tested the idea, how they got their first 1000 users, how they got into Y-Combinator, what it was like to be in Y-Combinator, it’s a pretty exciting thing to be part of to say the least and so much more. So if you’re looking for some inspiration, or you are looking for specific tactics and strategies to grow your own business you are going to absolutely love this interview. Get your pen and paper ready because there’s going to be lots of notes that you’re going to want to take.

Before we do that: quick announcement: I’m constantly emailed by people asking me what tools and resources I use to run my businesses. I have made a list of all them and on that page some of them are affiliate links so if you to GrabTrentsBonus.com and you choose to use any of those affiliate links to buy whatever software that it is, my way of expressing my thanks to you for doing so and there’s instructions at GrabTrentsbonus.com for this.

Just send me the email receipt for the purchase you made will verify that our affiliate link was in fact credited
and you’ll have the opportunity to choose from of some of my paid products and I’ll just give one of those to you as a free bonus as a thank you for using that link. With that said please join me in welcoming Wade to the show. Hey Wade, welcome to the show.

Wade:
Hey Trent, thanks for having me.

Trent:
No problem at all, thanks for making some time to come on. We’re going to talk about the story of how you’ve grown Zapier and you can tell me if I pronounce that properly enough.

Wade:
Zapier makes you happier, is the trick.

Trent:
Being from Canada, I’ve got the French-Canadian thing in the back whenever I see ‘ier”.

Wade:
Yeah, you’re not the only one.

Trent:
Probably not. There is probably some folks listening to this who don’t know what Zapier is yet. We’re going to get into that and it’s an app that I use I think is really, really cool but before we get into that stuff and the story of how you build it, let’s first introduce you, who are you and for the folks in my audience who don’t know you are, who are you and what do you do?

Wade:
Sure, I’m the co-founder and CEO of Zapier, I was born and raised in Missouri, live in California now and I spend all my days trying to help businesses make their tools work a little bit better for them and that all happened through Zapier which is a tool to connect other tools.

Trent:
Ok, give us the simplest definition I guess, you want to call your elevator pitch, or whatever you want to describe it, what exactly is Zapier?

Wade:
It’s a tool that connects other tools, I kind of use this metaphor of triggers and actions, so you can do things like; when I get an email it automatically create a trailer card, or someone fills out my unbalanced page and automatically saves them to Infusionsoft. It works with 300+ SaaS apps, so pretty much any tool that you might be using under the sun, you can hook up and do these cool little automations between the two of them.

Trent:
Ok, so folks in my case, how Zapier came onto my radar screen, is as some of you probably know, I use HubSpot and I use Infusionsoft and I wanted to be able to connect the two so when certain things happened in terms of triggers in HubSpot, I wanted the record automatically copied over to Infusionsoft and I wanted additional triggers to happen and I wanted it all to happen automatically. For example when someone completes the middle of the final web form in HubSpot I wanted a record created in Infusionsoft and I want my cellphone to go off without writing any code at all, because I don’t know how to write any code at all.

I was able to make that happen and I to use one other tool called PlusThis.com but I was able to make that happen in five minutes. Zapier does make you happier and in my case it does. Alright, where are you at now, what can you talk about, can you talk about revenue, number of users and traction, what kind of traction?

Wade:
Yeah, the latest numbers we published is that we are at 250 000 registered users. Quite a lot grown, 10% plus month over month, adding probably ten apps or so to the platform every month; good growth and trying to go faster.

Trent:
Absolutely, which is the name of the game. You have also raised some professional capital from angels and a couple EC’s and of course that puts a lot of pressure on as well. We’re going to talk about how you did that, but before we’re get to that, now that people understand that this is a company that is going places, let’s go back to the beginning because so many entrepreneurs, they’re always wondering how I get started, how I take this idea, how do I find an idea or how I take this idea that I got and actually test it out without blowing a bunch of time and a bunch of cash. So way early on what did that look like for you guys?

Wade:
The idea was originally my co-founder Bryan Helmig’s and I know Bryan playing music and we’d gone to the same to the same school together and we were always working together on projects and things like that, he is the developer, I’m marketing. We just kind of tagged team on various things, one of the things that tended came up a lot was we’d get clients that asked things like: “Hey can you make my Woofoo contacts go into MailChimp for me?” Or “can you get my CRM contacts to go into Google contacts for me?” Just like these little import export sort of deals between two different services.

We would write the code to do that and it was more hassle than what it was worth, it was small enough and easy enough thing to do but it’s not particularly fun or enjoyable but was clearly valuable to the customers. We start to think about what would it look like if we tried to do this, is there really that big of a problem.

I remember going to 37 Signals’ high-rises, the CRM that they have and I remember going to their Hope Forum and there was a thread about Google contacts integration that was probably about four years old and it had, I think somewhere around 300 to 400 comments of people saying: “Plus one, I really need this, most important thing in my business” that sort of stuff. 37 signals’ replied saying: “Hey, we would look into this, if resources came along we might take a look at it,“ that sort of thing.

But after four years it’s clear that they do not have the resources to really make it happen and on the priorities
I couldn’t really tell you why it hasn’t happened. So I started looking at other forums for SaaS companies to see if the same thing was occurring and it absolutely is and people were asking for integration in their forums and it was just too much work for a lot of SaaS companies really.

So what we did we started by building a couple of integrations in trigger action style thing, so we started with PayPal, High-rise and sms. The three very first things that you could do on Zapier was when someone pays you, you could get a text message about it via PayPal, or you could save them to High-rise. So that’s how we started, it was only that, but it was small enough that we could start. If people had that specific problem then they had a tool that would work for them.

Trent:
Ok, so this is really good stuff. How long did it take to code that?

Wade:
We actually did it at a start-up weekend which is these 54 hour hack-a-thon deals; we have the very first prototype up in less than 54 hours.

Trent:
So you got this prototype, you tested it, you know how it works now you need to get users and when you got no users, getting users is really hard to do, so what did you guys do? Did you go back to that discussion forum and started answering these people’s questions?

Wade:
Exactly, we would jump on the comments and I wouldn’t just forum spam them and tell them you should sign up for Zapier today, I would actually try and be helpful and say to them here is the API doc’s for this service and here is the API doc’s for that service, here’s how you might go about solving this problem with existing tools that was out there.

Here is Odesk or Freelance.com or places where you can hire people that who know how to do this. Then I would also though mention Zapier would say on the very end I’m working on a project that can solve this problem, here is a link if you are interested in talking to me about it at all, you can give me your email and we can chat.

That was all we needed to do, when we would put those comments in forums, we wouldn’t get a ton of traffic from that, we might get ten visitors or so a day from a single comment, maybe even less, but about 50% of them would reply and give us an email and start a conversation with us, which was fantastic. When we just started we didn’t need 10 000 people on day one, we just needed ten people to talk to and get feedback to know if this was working.

Trent:
Yes, classic program to do things in the beginning that don’t scale, you can talk to people.

Wade:
Yeah.

Trent:
There’s no better feedback than being able to talk to people. You had some of that conversations, you get people using the stuff, what then?

Wade:
Once we had people using it, there was many months, probably six, seven months of just polish that had to go into it, the product; the initial prototype that we build out quite frankly was not very good at all. People would sign up and would be barely be able to use it, I’d have to handhold them on Skype and get them on calls like this and walk them through setting it up, which was of course is not scalable at all, but people was still eager enough to use the product and we kept refining it and refining it and making it better and fixing things that they would bring up to us.

We kept driving traffic to the site, trying to get more people to get more interested in it and after six or seven months we were able to have, I guess what we would call a V1 and it wasn’t a NVP any more, it was like something that was good, it wasn’t great but we were proud enough that we could ship it and open it up to the public and let anyone sign up.

Trent:
Got to love those early adopters, huh?

Wade:
Yeah, yeah.

Trent:
So this six or seven month window of time, is it just you and your co-founder, are you guys full-time and if you are, because there is no money coming in, where you on angel backing that point, we’re you on credit cards saving accounts, how’d you pay the bills?

Wade:
It was myself, Brian and Mike and we were living back in Missouri at the time and it was a part-time project, we had day-jobs. Mike was actually in school still, we would work after work for another probably eight hours honestly and we’d work on the weekends. We would try putting just as much if not more time into Zapier as into our day-jobs at point in time, trying to get stuff going and get the wheels turning, get a machine going that we could actually start making money.

Trent:
Were you guys all first time entrepreneurs at this point?

Wade:
Effectively yes, we’d done some freelance work, we had some mini projects but nothing substantial ever came out of that.

Trent:
OK, those 2 were writing code, what were you doing?

Wade:
I was spending a lot of time trying to drive traffic to the site and get people to talk to us and use the product, get feedback about how it’s working.

Trent:
This is a real labor of love at this point, probably three guys sitting in one room pounding back Coke’s and pizza’s on the weekend and that kind of thing.

Wade:
That’s not too far from the truth.

Trent:
Alright, you get to your V1 and you realize that there’s something here, any idea how many users you had at that point in time, after the six or seven months.

Wade:
We had about a 1000 people who had signed up and paid an amount of money to use it that was actually interesting, our Beta was paid for as well so you had to pay to get onto our Beta.

Trent:
Ah, brilliant, so you really knew that you had a product that people really needed, how much would you charge them?

Wade:
It varied, the very first one’s all paid, yeah I think the first dozen or so paid a hundred bucks, but then we moved it around after that just testing the waters and feeling where people’s paying points were, I think it got as low as five dollars at some point in time and maybe as high as $200-$300. It was a onetime fee, you paid that amount of money and we told people you get in for the lifetime of the Beta, we don’t know how long it’s going to be, but for long as it lasts, you’re in.

Trent:
Ok, so those people aren’t getting a free ride anymore now they have to pay like everybody else?

Wade:
Correct, but when we actually launched, we gave them a year free and try to be very generous with them.

Trent:
Absolutely, give the love to the early adopters as a big old thank you; they played a pivotal role on helping you figure out what to do.

Wade;
Absolutely.

Trent:
Ok, then what? You had a 1000 users, seven months deep, you get a little bit of…..was the amount of money coming in, was that enough to cover the expenses like hosting and all that kind of thing?

Wade:
I don’t think so, but we didn’t have many expenses in terms of hosting or anything either at that point in time. It was relatively small.

Trent:
So it paid for the pizzas and the beer?

Wade:
It did, it paid for very little, but it paid for something, a few hundred bucks a month at the time.

Trent:
What did you do at this point, you got a 1000 people that have given you money, you’ve validated your product, then what happened next?

Wade:
We started to think about we’re still part-time at this point in time, we really want to make this go, we got this thousand people who paid to get into this Beta, we also got an email mailing list that has about ten thousand people on it and we’ve got about twenty integrations with popular SaaS services and a lot more people that want to integrate with Zapier or that we want to integrate with them. We really wanted to go faster and so we started to think about how might we do this, we ended up applying to Y-Combinator and went through their interview process and getting in for the summer 2012 batch.

Trent:
Nice.

Wade:
Once we got in, we moved everyone out to California and that happened to coincide right with the public launch of Zapier, the V1 launch was almost at the exact time we got into Y- Combinator.

Trent:
For those people who do not know what Y- Combinator is, you want to tell them?

Wade:
Sure, it’s a startup incubator. Companies that you might have recognize that have gone through there included Dropbox, Air BNB, Reddit, Stripe, some really big internet brands have gone through Y-Combinator. It’s a bit of university for start-up if you will, but condensed into three months, but that doesn’t do it entirely justice, but that’s probably the best.

Trent:
What was that experience like because you are going to be around a whole bunch of really smart, well connected, driven people, it got to have some impact?

Wade:
Yeah, absolutely, we’re in with about 80 start-ups in our batch, they have a dozen partners or so, who has all been involved with start-ups, some really big name start-ups, big acquisitions and worked with some really smart people, you kind of just inundated with people who really know what they doing, which is a fantastic learning environment.

Trent:
Give us an example of what it’s like once you moved to California, day to day basis, how did your lives change?

Wade:
Probably the biggest thing was we rented a small two bedroom apartment and we hold up honestly for three months we’re mostly spent the time with each other, just coding and trying to get customers, just doing that pretty much twelve hours a day or something.

Trent:
Six days a week, seven days a week?

Wade:
Six, seven days a week, we pretty much took breaks when we wanted them, we’d go and see a movie here and there, but most part Zapier was the only thing we cared about for three months.

Trent:
At the end of the three months what was the outcome?

Wade:
By the end of the three months we launched publically, we had over 30 000 registered users at that point in time, we’d gone from 20 integrations to 60 integrations, we’d launched our developer platform which allowed other people to do integrations with us and then we went out and raised our seed ground of money.

Trent:
During these three months you’re in Y-Combinator, what did they give you in the way of resources?

Wade:
There’s a hand full of things, for one they had network that has hundreds of founders that are, either still running companies or have exited and are now working in place like Google or Facebook or SalesForce, so you have access to that network. You have their expertise as well, so you do office hours with the partners probably once a week, where you get to talk about the biggest problems that you’re struggling with at the time. It could be customer acquisition, it could be some tech problem, it could be whatever, some partner on the staff that has gone through that and knows that and you get to borrow from their expertise.

You get a small amount of money, but it’s honestly trivial compared to the other stuff. The biggest thing is the focus that you get out of it, the fact that we moved away from all our friends and family, for three months we we’re hold up in the apartment and weren’t doing anything other than Zapier, was probably the most important thing that we’d done. We we’re able to achieve far ship, far more code and we achieved far more in that three month period than probably any other time because of that focus.

Trent:
No kidding. And was burn out ever a problem during those three months?

Wade:
Not too much, I think because you knew that there was an end in sight, at the end of the three months its going be a little bit back to normal. You never really felt too burned out about it.

Trent:
So you get out, get your 30 000 users, you’ve got a ton of street credit because you’ve been in Y-Combinator, did they prove pivotal in raising the money that you raised next or how did that happen?

Wade:
I think that YC has best said, is it gets you a meeting, somebody will at least take a meeting with you, doesn’t guarantee that you will raise money. Interestingly enough of the people that we raised money, I think only one of them did we meet after we went through demo day, almost all of them we talked to before demo day or even before we got into Y-Combinator so they’d express interest and they’d been following along with us for quite some time.

Trent:
Were these friends and family or were they private equity guys? What kind of money?

Wade:
We had a few friends that we’ve made in the business world, so to speak, some angels that we’ve met through working on Zapier who’d been early customers or early adopters of Zapier and then we had two institutional VC’s involved.

Trent:
Give me some details, because there are a lot of people who have not been through the process of raising money and is quite amazed the first time you go through it, so give us some insight having gone through that.

Wade:
Yeah, the interesting thing is, now as a first timer you think the best thing that you can do is pitch VC’s or pitch investors or whatever, but I think that actually it is a bit of the wrong way to go about it. The best way to go about it is build a good company, build a company that gets traction, build a company that people want to pay attention to even if it’s not a ton of people at first, especially in tech, especially if you’re doing B2B tech, consumer tech that sort of stuff.

Investors are paying attention, they’re watching products trends, they’re watching hacker news, they’re listening to what their portfolio companies are using. So what was happening to us was we started hearing from investors who wanted to take meetings with us saying: “Hey, I heard about you from so and so, I really think your company has potential, I’d like to chat and see how we can partner.” Which was cool and is actually pretty flattering at first, but then you realize afterwards it’s their job to take meetings, they can invest, they have the option to invest in 100% of start-ups that they talk to and they can’t invest in the stuff that they don’t talk to. Their job is to try and get to talk to you as much as possible, but the fact that they reach out is a good sign.

Then from there a lot of what YC helped out with too is perfecting your pitch, understanding what it is that they care about and hoping you tell a story that is interesting to them when you are ready to raise money. What we ended up doing, the process that we took which may or may not be applicable to others, was that through YC while we’re going through we actually turned down all the meetings, we said, “Hey we are not looking to raise money right now, but we’ll reach out later when we are and let you know if that’s all right with you.” And most people were totally fine with that. Once we were ready to raise money we reached out to them and say: “We would like to chat, we would like to have a meeting now if you’re interested. ”

We tried to line up as many of those meetings back to back to back as possible, I think I took 40 meetings in a span of two weeks with various angel investors or venture capitalists that I could, pretty much anyone. The approach that we took was breadth first, depth second so as many, many meetings as possible to just get a sense of who’s the most interested, who might commit quick and is really interested vs. who is more just surface level interested. So by doing those 40 meetings at once, we narrowed it down to a handful of folks that we thought could really be good. Those were the ones we worked on closing and we were able to get that done in about three weeks or so.

Trent:
You raised a total of how much?

Wade:
$1.2 million.

Trent:
Are you able to disclose what the valuation was for the money raised?

Wade:
No, we actually raised on convertible notes, which is another thing you people will probably want to read up on, if you search for convertible notes, you can find out about it from Quora and I think there is pricing stuff on YC site about convertible notes as well, which is not equity, you raise at an evaluation cap that says like; the next time you raise are the amount that we invest and will convert as this amount or less, depending on what the evaluation is that you raised at that time is. It was actually raised on a convertible note and not an equity run.

Trent:
Was there any debt service on the notes in the meantime or is it just the fact that they’re locking in their conversion rates.

Wade:
Basically locking in their conversion rates is the thing that they’re trying to do.

Trent:
After you raised that money, what happen then? Did you go the status quo and started hiring people like crazy; did you spend on marketing, where did it go?

Wade:
The biggest thing that we wanted to get right away was someone to help out with customer support, at the time I was spending probably: I would wake up at about 8 o’clock in the morning and I would work from about 8:30 till 3pm just doing customer support and answering customer queries.

We wanted to get someone to help share that load that was the first person, we hired that person and then from there that actually bought us a lot of time to figure out how exactly we wanted to go tackle things. We knew we wanted to get more integration on board and we knew we wanted to do a lot more in terms of on the marketing frame, customer acquisition front and I was able to spend a lot more time on that.

Trent:
What was some of the marketing activities that you started and worked well for you?

Wade:
The biggest thing that we started doing was we got a lot more serious about how we worked with our partners, so when we launched an integration we made sure to follow a bit of a checklist, we would do a couple of things. We would write about it on our blog, we would make sure it was in our newsletter.

We would make sure that there is an in-app announcement; we’d make sure it was shared on social and things like that. In return we would ask that of partners to do these things because these things will work well, some of them would do some of them, some of them would do all of them, that was really helpful for us because our best customers are their customers.

It’s really targeted so when they send an email out to their customer base and say you can integrate with all these other things through Zapier, it is a really good messaging, really good touch point for us. We made sure that we were doing that sort of thing on an ongoing basis and doing guest posts on their site, getting listed in their market places and things like that, which would help drive more targeted traffic.

Trent:
Did you have enough traction at his point that these people were coming to you and saying, “We would like you to integrate with us” or are you still reaching out to people saying “We want to build an integration for you?”

Wade:
At this in point in time it’s probably 80% of people reaching out to us and 20% of us reaching out to them. We launched a Zapier developer platform that actually does allow them to integrate with us.

Trent:
Ok.

Wade:
That’s where we were pointing most of those people to, if they were interested its’ like go there, that’s the official way to hook into Zapier. And because we had so many integrations by then, in August of 2012 when we launched that platform, we had about 60 integrations, each month it was growing ten to fifteen integrations a month. It became work impelling for a service to hook into Zapier because of that.

Trent:
The more integrations that you have, does that mean you also have more integration to maintain, I would imagine that it does and that’s going to drive up you costs?

Wade:
Yeah, the more integrations we have, there is more of a lot of things, that’s more customers we can talk to, that’s more ways that you can hook up tools in interesting ways, there is also more support, it’s more ways that people can get confused when they sign up for the site, it causes a lot of other interesting things as well that we have to work through from a product standpoint and from trying to figure out the best ways to introduce people to the integrations that they really care about.

Trent:
So up to this point in the story, with hindsight to your benefit, what would you say is the biggest mistake that you made, because being an entrepreneur is really just a series of mistakes and hopefully not anyone of them kills you and get smarter as you keep going? We all know you made lots of mistakes. For the benefit of the audience to try and help them to avoid making mistakes, what would you say is the biggest one that you made so far, at this point in the story?

Wade:
I think probably the biggest one is we had 10 000 people on our sign-up email list, who would express interest in Zapier, which is a fantastic number for a launch list, it’s a nice beefy list to market to and potentially get to use your services once you are ready, however we made the mistake of never emailing them until we launched. Some of those email addresses were six months, nine months old before they ever heard from us.

As a result it was pretty stale, we got pretty poor open rates, pretty poor click-through rates, we got some people there, we got some conversions, simply because of the size of the list, but it was not nearly as effective as it could have been, had we been nurturing that list on an ongoing basis and staying in touch of them. If I could rewind the clock, I would have made sure that we would have at least written an email to those folks once a month at minimum.

Trent:
Yeah man, “Hey, this is what we accomplished in the last month, thanks for being interested in Zapier.”

Wade:
Yeah,I think the reason we didn’t do that, I think we just kind of got scared, someone in tech and I’m not a huge fan of getting a lot of marketing and promotional emails and things like that, so we just kind of talked ourselves out of doing it, when in reality the worst thing could have happened is someone said: “Hey I am just not interested in this anymore”. At least the ones that were, would have remembered who we are.

Trent:
Exactly, I think the mistake you made, you made their decision for them instead of letting them make it.

Wade:
Exactly.

Trent:
Because there’s and unsubscribe button and they can click it any time they want. This phase in the story, this is middle 2012?

Wade:
Late 2012.

Trent:
Late 2012, what was the next big thing that happened?

Wade:
From here the path is kind of laid out for us, at least in the short term. We know that we need to get integrations, we know that we need more users, so a lot of the things that we spent our time on doing was: how can we get more integrations on board and how could we get more people to sign up.

There’s nothing really special or fantastic about this, we didn’t have a crazy press event, some epic milestone that send lots and lots of people our way, it’s just a bunch of daily commitments to do, work on new integrations and work with our partners to continually get education and resources out there. Over time our traffic grew from smaller amounts to much, much larger amounts and our conversion rates increased and just kind of spent a lot of this stuff that you have to do on a daily basis to run a web business, just optimizing those bets.

Trent:
How many people were on the team at his point in time?

Wade:
We had four when we hired the support person and we were pretty meticulous about when we brought new people on, we brought someone in December of 2012, we brought someone on in March of 2013 and we brought someone on in August of 2013. As we felt needs, we’re spending a lot of time spending doing X, we could bring on a person who’s full time job could be X. That’s how we really thought about it, it was just a series of how can I fire myself from this thing that I am doing that is maybe a little more structured than some other task that I need to go figure out next.

Trent:
Absolutely, so no great landslide events, just steady digging in the dishes every day, coming up with a routine, executing the routine, finding people to fill the void where you need them. Have we pretty much come to the end of the story?

Wade:
There’s a lot of things that we ended up doing differently, like for instance early on we had to decide are we going to be a co-located team or distributed team, we’re a distributed team, so that was a big decision we made.

Trent:
Let’s talk about that one for a bit because a lot of people are faced with that decision. Why did you choose to go distributed vs. co-lo?

Wade:
Mike, my co-founder, when we finished YC, moved back to Missouri because he had a longtime girlfriend that was still in school there and wanted to be close to her. It was a decision made for us, we could have kicked him out of the company but that wasn’t really a decision, which was not an option in our minds truthfully. It was made up for us, he’s going to be distributed why not other people, so when we started hiring folks, we just didn’t pay attention to location.

We learned some lessons along the ways on how we do communication, how we do hiring, how you structure meetings and things like that, for a distributed team. We spent a lot of time just thinking about, not just how we build a product but how we build a company, a team and things like that.

Trent:
With hindsight to your benefit, do you think there was any downside to going distributed vs. co-lo?

Wade:
Sure, I think there are downsides; I do think the upsides far outweigh the downsides. The downside of course is when you’re in-person some tasks is a lot easier, like brainstorming tasks can be lot easier, sketching out product features and things like that can be a lot easier in person. Fortunately things like brainstorming are less important when you have a roadmap in front of you, you spend 10% of time brainstorming and 90% of your time just executing on that thing.

One of the things that we do to try and mitigate that downside is every six months or so, twice a year, we fly everyone out to a location somewhere, usually in the United States and get together for a week and brainstorm on some of those things, work on the product together, mostly just enjoying each other’s company because we don’t get to see each other except for those two times during the year.

Trent:
So it sounds like that there are maybe seven or eight people on the team at this point?

Wade:
We’re actually at thirteen now.

Trent:
Thirteen, and are you at a point where the cash coming in pays all the bills?

Wade:
Yeah, pretty much so. We mostly re-invest all of our profits into the company, so we are at about net zero every month, but revenue pays the bills.

Trent:
That’s a nice place to be. I’m curious what percentage of the 1.2 million got spent, before you were able to achieve cash flow or break even?

Wade:
Not much honestly.

Trent:
Wow, that’s nice.

Wade:
Yeah.

Trent:
It is and it isn’t because in hindsight you think why did we take all that money, we could have owned the whole thing; however I’m sure you would attest the benefits of the relationship that probably came along with that money, were they substantial?

Wade:
Absolutely, we still work with our partners, our investors on a monthly basis. I make contact with them usually more frequent than that with at least with one of them. You know with help of a partner, with help on a situation around this, just to get their advice and their feedback because these are smart people, been there done that before. They may not know our exact situation, but they can at least provide insight on how they have seen it happen elsewhere.

Trent:
Having a venture capitalist as an investor, I have in my travels read all sorts of good and all sorts of bad. What do you think the best and worst parts of having a VC in the bed is?

Wade:
There are a lot of good things, one is you get access to their portfolio companies, which can be important for us.

It’s great because you’re integrating with a lot of portfolio companies, you get to learn from their experiences, their access is really pretty, pretty, broad, you get access to a lot of stuff that you wouldn’t get access to, which is fantastic for when you have problems, you trying to learn about something, you’re trying to meet with customers, meet with partners, you can short cut a lot of that stuff.

The downside is that you’ve got someone now that’s not you, that you got to work with, I guess. It’s easier to make decisions when it’s just you, just make a decision and go, but it’s nice at times too to have outside sparring partner as well, it’s kind of good and bad on both sides of the table. Somebody give you a gut check, play devil’s advocate, things like that. The downside of course is you give up equity and some of your company but for the most part it’s worth it if you’re thinking about building a high growth tech company.

Trent:
And as long as you’re meeting their expectations I’m sure they’re actually quite pleasant to have, it’s when you fail to meet their expectations that it’s not so much fun.

Wade:
Sure and you know they are used to it, their business model’s is that 1 out of 10 is going to get ahead, most of the time your company’s not meeting the expectations they have, hopefully if you’re working with someone good, especially in the venture community, they’re going to help you work through a lot of those issues.

Trent:
What do you think your next hire is going to be?

Wade:
We’re actually hiring right now for a *inaudible* partner marketing, someone to really help work with our 300 plus SaaS companies to get education, help promote the partners, help promote Zapier and just do a lot of content creation to teach people of all the awesome stuff they can do at Zapier.

Trent:
What would the compensation look like for them because I’m sure there’s a few people listening to this that might think, “Hey I’m interested in that?”

Wade:
We pay very competitive salaries, depending on your experience, how long you’ve been in part; it will probably be able to meet your needs.

Trent:
And do they get equity?

Wade:
Yeah, equity is on the table as well.

Trent:
Interesting, ok, what have I not asked about that you think that we should cover before we wind up the interview?

Wade:
You’ve covered a lot of the nooks and crannies of Zapier, I’m sure we could go deeper on specific topics or marketing tactics and things like that but that could be an entire different chat.

Trent:
All right Wade I want to thank you very much for making some time to be on the show and chat with me. I found it very, very interesting and I hope that you have enjoyed yourself.

Wade:
Yeah, thanks for having me Trent, this was a blast.

Trent:
No problem at all, take care.

Wade:
You too.

Trent:
Alright, to get to the show notes for this episode go to BrightIdeas.co/151 and if you really enjoyed this episode and would like to help me spread the word, you could very easily do that at BrightIdeas.co/love and I thank you in advance for doing that. So that is it for this episode, I am your host Trent Dyrsmid, it’s been my pleasure to have you come back for another episode of this show and I look forward having you back for another one soon.

Take care and have a good day, bye bye.

About Wade Foster

Wade is co-founder and CEO of Zapier. His work has been featured on sites like WSJ, Forbes, Mixergy and TheNextWeb.

 

 

Paige Cambell

Key Insights Into Buying or Selling a Marketing Agency with Paige Campbell

Paige Campbell on buying or selling a business

Paige Campbell is the CEO of Grady Britton, a mid-sized advertising and marketing agency in Portland, OR. Grady Britton has been in business for over 40 years.

Paige started as an employee and, along with her business partner, ended up buying the firm from the prior owner. Subsequently, Paige and her partner went on to buy two more agencies.

Whether you are buying or selling a business, or hoping to in the future, you are going to find great insights when you listen to this interview.

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

  • (01:10)  Introduction
  • (06:35)  How did you make the transition from employee to owner?
  • (09:30)  Why didn’t you want to become an owner originally?
  • (16:30)  Please tell me about the next agency you bought.
  • (21:00)  What advise would you give potential agency sellers about starting to market their firm?
  • (24:00)  What terms are reasonable to expect as a seller?
  • (29:00)  What did the due diligence look like?
  • (34:00)  What advice would you give to the seller when surprises come up in due diligence?
  • (37:00)  How involved was your attorney in the process?

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

Leave some feedback:

Connect with Trent Dyrsmid:

Transcript

Trent:
Hey there bright idea hunters, welcome back to episode number 147 of the Bright Ideas podcast. I am your host, Trent Dyrsmid, and this is the podcast where we help entrepreneurs to discover ways to use digital marketing and marketing automation to dramatically increase the growth of their business.

If you are an entrepreneur and you’re looking for proven tactics and strategies to help you increase traffic, increase conversions and ultimately your profits; well my friends you are in the right place.
And the way that we do that is we bring on experts and we get them to share with us exactly what they did to become successful. No theories, no puffery just, “Hey here’s what I accomplished and here’s how I did it step by step by step.

This episode of course is absolutely no different.

However in this episode my guest is a woman by the name of Paige Campbell. And she is the CEO of a marketing agency by the name of Grady Britton.

We did this interview because Paige first of all was an employee of Grady Britton and along with her business partner ended up buying the firm from the prior owners because it is a very old firm; it’s been around for about 40 years.

And then subsequent to that, they went on to buy two more agencies.
The focus of this interview is whether you are looking to get bought or whether to buy, you are going to find great insights when you listen to the conversation that Paige and I have. We talk about how to get that conversation with potential buyers started as a seller in a way that does not show weakness, because that would obviously negatively impact your negotiation position.

We talk about what the buyer looks for in the due diligence process. We talked about what are the realistic expectations of the seller in terms of exit and the terms of the deal; how it is going to be structured. If you haven’t sold before, it is not all about price, the terms of payment are often times more important than the price.
For example, I’ll give you a billion dollars for your firm but I am going to be you one dollar per year over a billion years. That wouldn’t be a very good deal even though the price sounded really high.

So this is really going to be a very interesting interview for you if you are thinking of selling or if you are thinking of buying. But before we get to it just a quick announcement; I get a lot of e-mails from people asking me, “What are all the tools that you use to run your business?”

I have a list of those tools that you can get to at GrabTrentsBonus.com and as that URL name would suggest to you, when you use one of the affiliate links on that page, and I get a little commission from whoever’s software that you are buying, I give you the opportunity to choose from one of my paid products and I am going to give it to you for free as a bonus as a thank you for using my affiliate link.

So with that said please join me in welcoming Paige to the show. Oh and I should say that in this episode we had two technical glitches that I have never had in a hundred and ninety some interviews; two technical glitches so apologies in advance for the conversation being interrupted not once but twice due to these technical glitches.

Hi Paige welcome to the show.

Paige:
Thanks Trent

Trent:
It is a pleasure to have you on. We are going to talk about all sorts of interesting things here today with respect to the acquisition of other agencies, and my hope is that the folks listening to this, whether they’re looking to buy an agency or whether they are looking to sell their agency are going to learn all sorts of interesting things from the buyers perspective and that’s being you because you have bought two agencies.

But before we get into any of that, I would like to give an opportunity to introduce yourself to my audience, so that they know who they are listening to and give them some context for all the great stuff that we are about to hear.
So please tell us who you are and what you do.

Paige:
My name is Paige Campbell and I am the president of an advertising and marketing agency in Portland Oregon. The agency’s name is Grady Britton, and we have agencies that have been in business for the last forty years actually it is our forty year anniversary this year and has transitioned over the decades to be a brand focused agency. We do a lot of content development, social work, as well as digital campaigns for clients in the Pacific North West mostly with a national presents.

Trent:
Ok, so either you weren’t the founder or you are the youngest sounding seventy five year old I have ever heard of.

Paige:
Yeah it is true, not the founder, I am neither Grady nor Britton both of those names have since retired. I began purchasing the agency from the original founder who was Frank Grady about five or six years ago now and then became the president three years ago. I have a business partner Andy Askren who is our Chief Creative Officer and also owns sixty percent of the company with myself.

Trent:
Okay so let’s delve into a couple of details. Just roughly, what size is your company? How many people work there?

Paige:
The agency has 21 people, so midsized in the Portland market.

Trent:
And what size customer do you guys deal with?

Paige:
A huge range; on the larger side we work with a couple of customers. One being a large ship manufacturer that will remain to be unspoken, and the Portland *inaudible* on the B2B side is probably our largest account.

On the consumer national side we work with, clients I would say fifty to two hundred million dollars, it really depends on the industry. We do a lot of travel destinations marketing, food and beverage, and industrial B2B work.

Trent:
There is going to be some people listening to this who maybe work for an agency and would like to own one one day and I know that in our pre-interview I discovered that at one point you didn’t want to become an owner but eventually did.

So do you want to tell us a little bit about how you went from being an employee of this agency to being an owner? Let’s spend a little time on that and then I want to spend more time, probably the bulk of our time on how you have purchased two other agencies because there are quite a number of details that I want to get into in that part of the conversation.

Paige:
Okay sure, I had worked in the agency business prior to working at *inaudible*, four other agencies and worked my way up in the business from receptionist as my first job at an agency and was director of client services at Grady Britton.

At the time my predecessor Frank Grady, he was doing succession planning and he had a couple of options to be purchased himself or grow the agency to a certain size that would be more attractive to an outside party or to sell the agency to a team within or an individual within.

When he first asked myself and two other people here if they were interested in joining together and purchasing the agency my business partners said yes very enthusiastically but this has always been something that they wanted to do. Whereas I at the exact same moment said no I would ever be interested in doing this.

I think at the time it seemed a little bit overwhelming to me and I did not know the first thing about running an agency, and I had just never envisioned that for myself and so I was real quick to say no.
Thankfully I had two people, my partner now and also my predecessor who were very patient with me and gave me a lot of time to explore the notion and we had an ongoing conversation and I did some work myself, personal work to figure out if this was what I wanted.

I tried to make and educated and smart decision and eventually I came to the conclusion that I was committed to this industry, and I was not going anywhere, and eventually I would probably tire of being a director of client services and I’d be looking for something more challenging. So I came to the conclusion that the next step for me would be ownership and why not? Here I have this opportunity and it’s remarkable and there is a reason that that exists and I should probably go for it.

Trent:
So did you initially say no because you thought it would be too risky to become an owner?

Paige:
Yes, absolutely

Trent:
Let’s hang out on that one for a second because I think that is something that people would like to hear. Why did you think it was risky and as you made the transition and changed your mind and of course became an owner, did those fears end up being real or were they just fear?

Paige:

Yeah there is a little bit of all of that and what actually happened; I am definitely a conservative person by nature especially financially. For me it was incredibly risky. I am also a single mom and so most of my livelihood is in the equity of my home for example and I was in the case of putting a down payment down on the agency and such great payments and so on and I was going to become personally liable.

This is also in 2007 pre recession but as we moved forward and actually deal became more realistic and it was going to happen and I was coming to terms with that and also speaking with the PR-director who is now my partner and we were determining if we would be good business partners. There were a lot of things going on at the same time.

But the financial risk was paramount for me and I think what ended up happening in my mind was I played the game of it was like a mortgage and if I can get over the fact of the large amount then I felt I’m going to be strapped to for four years; treating it like a mortgage, every time I make a payment I am putting equity into something; then it did not seem as large and terrifying.

What happened as a result was we signed a deal and about six to seven months later the economy fell out and the agency really went through a tough time with layoffs and I had everything at stake in the business and so there was no choice. When you are in that situation there is literally no choice and you just work like you have never worked before and you dig in and do everything that you can.

And so my partner and I were both in that situation and had a lot to lose and the mental strength of not allowing that to happen. So, here we are today and the agency is thriving and we are hiring two more people this month, we will be at 23 now and we could dig our way out and made sure that we found a way to be successful.
But yeah I think that the difficulty was certainly in the fear of the financial risk and the livelihood of my family.

Trent:
So when the economy went into the tank the terms of the deal had already been negotiated and did not get re-negotiated?

Paige:
Yes. When the economy went tank the deal had been signed and immediately eight months after the deal had been signed, the agency was not worth what we had signed for. We worked under that premise and the continued payments for probably two to three more years. At that time the economy was still not in recovery mode and we slightly changed the terms of the deal; resigned on that lowering our interest rate. So now the terms have been slightly modified to our benefit.

Trent:
There is something that you spoke there that I am going to go back to because I went through it personally as well and I really want people to have a take away and you did what I call embracing economic pressure; in other words you buried yourself deeply in debt and with my last company I did the same thing.

I remember there was a point when I was hundreds of thousands of dollars in debt and the company wasn’t profitable yet but it was awfully close and at that point you just can’t give up because it is your economic ruin if you do and the magical thing that happened to you and it happened to me is you dig deep in and you go to personal resources that you didn’t know you had and you get it done and in your case it worked out very well and in my case it worked out very well.

So I bring that up only because I know one of the things that people that have smaller agencies or maybe they’re even independent marketing consultants really struggle with is how do I get from being this team of one to a team of a few and it might not be the right decision for everybody and I don’t dispel financial advice on my show.

But I would just say listen to what Paige just said and what I just said about embracing debt as a form of forcing commitment on yourself and maybe that debt is used to hire some additional people to help you become more productive and get more done and stop doing everything yourself. So don’t necessarily be afraid of it.

Paige:
Yes that is true and I think that I actually in the moment I honestly didn’t think of it like that I just had no choice.

Trent:
Me too.

Paige:
I had nothing else that was an option except digging down and figuring out how to survive out of this and I like the way that you framed it. And I did learn a ton about myself; I would not wish it upon anyone but I also wouldn’t have ever given up that experience. I know what it means to run lean now, I know how to do it and I know what indicators to watch in my business. There is really no better education.

Trent:
Yes you could not have bought that one at a college. Not for any amount of money. The great thing with this is that you get your tuition back, it’s called future earnings.

Paige:
Yeah.

Trent:
Okay. So now people have a little bit of an idea of how you came to be an owner of an agency, and obviously it wasn’t a horrific experience, because you have gone out and bought two more.

Paige:
Yes, as a matter of fact the acquisition was part of the strategy to get out of that place that we were. The business was changing a lot, the market was really unstable. The typical business for us would have been AOR relationships, long term contracts and such.

Those relationships worked but their budgets had moved by project basis and their internal change were being let go so I did not have projections anymore. I used to be able to look out and see at least for the quarter what I expected and to some degree for the year.

Not really having that any more, there had to be another way to stabilize the agency, and an opportunity presented itself to acquire an agency that was not fairing very well through the recession. We were not in a position of strength but we were a little bit more secure than they were.

Thankfully we have a very good reputation in town and the owners of that agency reached out to us as well as a couple of other agencies and opened up a conversation to ask if anyone was interested or able to acquire at that time. And we were interested.

The agency that offered the conversation had a nice make up of roster and talent that were very complementary to what we were doing. That was a very key thing that I know now and I should have applied that to my second acquisition that I did not. But I should have.

What was great about it was the first acquisition really complimented the services that we already had but was not duplication. At the same time they were unable to have all full internal creative teams and all full internal visual teams and they were struggling to bring a great creative product to their clients and their clients were taking note of that; whereas we had a lot of capacity for creative and digital teams in-house.

There were just a lot of places where, the puzzle pieces sit naturally together on a logistics and tactical way. On the other side of it, having a deep look at culture and what was going on at that agency and what the talent was there and to basket it with our agency. The stars really aligned nicely.

It was risky; financially we were in the thick of a recession and were looking for a way to stabilize the agency but there’s certainly acquisition cash going out the other way so, you have to figure out financially; you are buying the future there is no assets.

Trent:
Let me just interrupt you for a moment. We are going to come to the financial aspect of it in a minute but there are some other details I want to dig into from both the buyer and sellers perspective, and you now have the ability to give insight into both.

So from the buyers perspective the primary reason that you wanted to acquire this agency after they approached you was because you saw some talent and capabilities that would build in very nicely with your team and your bench would get stronger as a result. Is that more or less summed up?

Paige:
That is half the equation and the other half would be that I saw a client base that had long term capabilities to stabilize the agency financially.

Trent:
Yes absolutely, nobody is buying just expenses they are buying for revenue as well. Now having received the phone call from an agency that was struggling a little bit, what advice would you give to other people who are thinking that they might be struggling and may want to sell their agency but do not want to come across too weak or too vulnerable when they make the call or calls to potential suitors?

So what advice would you give to that person who is trying to market their company to start conversations the right way with a firm or firms that might be interested in buying them?

Paige:
Sure, I think something that is really important is start small, start with a couple of people in the industry or other peers in your city that you are friends with, that you have a relationship with, that you have competed against in respect or a couple of people that you have known in the business for a while that you can explore it with.

I think you should always come to the table with: “You know, we’re exploring a lot of options,” whether you are just tired and want out of the business, retiring or whatever the situation is, it is like “I am exploring a couple of different options in succession planning or moving this agency to the next level; one of them is acquisition, or selling and I wanted to reach out to you because I have always respected you.”

And you can approach it that way. Keep a lot of options on the table, and be open about that, so that it is an exploratory conversation and keep it that way. Then you are doing a bit of research into what is going to make the most sense for your agency, and keep your agency at the forefront of what is best for the people there or best for yourself and looking for a future match.

You are selling something that the benefit will come to you in the future too. So be really careful who you start engaging with in conversation.

Trent:
Now for the two agencies that you have purchased, and forgive me if I am getting my facts astray but if I recall our pre-interview correctly, the two agencies does not include the agency that you became a principal of. You’ve bought two more since then?

Paige:
Right

Trent:
Okay. So the second one did they approach you as well or did you approach them?

Paige:
On the second one, they did approach us but they had heard out in the market that we might be looking. So that owner had heard that via a little bit of word of mouth. It was true that we were looking so he then approached us.

Trent:
Okay and roughly what size were these companies in terms of number of people or revenue whatever you want to disclose.

Paige:
The first agency was around ten to eleven people in house at the time we acquired them. The second agency was about the same, ten to twelve.

Trent:
Okay so these are probably between a million and a million and a half dollars a year in revenue?

Paige:
Yes, I believe the first one was a little bit larger than that, I’d say two and a half million. The second one was about that size yes.

Trent:
So, when you have a company of that size to sell do you think that it is reasonable for the seller to expect to receive a cash payment and walk away? And if not what is the more likely outcome for them?

Paige:
No I do not think it is reasonable to expect that. The buying agency and you as the seller, you are selling the future possibility there and the buyer is buying the future possibility. There is a lot of things that have to work to move those accounts and that talent to actually being profitable and becoming what the buyer is looking for and in our case stabilizing our agency to another degree. So, knowing that situation and the first one, we were not interested in putting a big cash payment out.

I think the seller knew that this was going to be a buy out over a term over a certain period of time, based on the profitability or based on the revenue generated by the clients that they were selling. So, if you are selling you should remember that there is no hard assets that anyone is benefiting from that you actually should look for and sometimes sellers stay part of the acquisition for six months or something to transition the business.

So definitely if that is going to happen that needs to be considered. The competition, negotiations and all sorts of stuff.

Trent:
Did that happen in either of the two purchases or did you say, “We will pay you out over time but you don’t go to work here anymore?”

Paige:
In both situations we did say that. We will buy you out over time but we want to transition the business ourselves.

In both situations we brought over the key staff that really owned the relationships. This is unique now that I think about it, but in both cases the previous owner was not interested in coming over and transitioning the business.

Trent:
These two agencies; were they mostly project revenue models or did they have high levels of retainer income?

Paige:
The first one was more ongoing relationship. That is relationships with their clients which is what we were mostly interested in. I don’t think if they were being project to project based we probably would not have done it. We were looking for ongoing business and that is what was attractive to us.

The second acquisition was a visual agency. They were running more on a project by project basis and we were interested in that agency for other reasons.

Trent:
Like?

Paige:
They had some digital capability in house that we didn’t and we were looking at building it out and have a much more robust digital arm base. They had some developing talent and capability in there that we were attracted to.

They also which was kind of unique, they did have one large ongoing digital account that they were running a substantial amount of business with every month.

In our digital arm of our agency we had been running largely project to project. And I wanted a big stabilizing account that fed into that arm within our structure instead of running project to project. I was attracted by the big piece of business and then the additional capability that it would bring to our whole department.

Trent:
In either case of these two acquisitions before you make an agreement with the seller you know who their clients are, but you are not able to go and talk to the clients. So you have to take them at their word that the client relationship is intact and the terms of your agreement obviously are going to support that fact, in other words if a client goes away you are not going to pay as much.

What was it like once you made a deal and you started to tell the clients; I am assuming you would have acquired the key account managers that own those relationships and those people would have said to the folks at the clients that the company had been bought etc. Is that kind of how it went?

Paige:
The first part yes, of course you can’t go and speak to the clients before but you do need to do some due diligence there so what we did was of course a meeting with the owner and presidents of the agencies and we got real serious to do the due diligence around this.

We did a lot of talking about the client relationships, about the culture of the clients, about how well they thought they would transition, about the key personnel and staff, what the client was used to, what they thought they were looking for in the future, and where they had been underserved perhaps and all of that internal work and then we interviewed each of the staff members that were in relationship with or held the relationship with those clients to see if we heard re-occurring themes and information.

And in the case of the first acquisition we did we trusted the information a lot, we trusted those account managers a lot. You could tell talking to them that they really had great relationships with these clients and we felt if we could secure them and make them feel like this was going to be a great net outcome for them to actually have their agency be acquired and come into our culture and our environment, this could be successful.

They really had great solid relationships. From hearing that information their clients were looking for things that we really could provide and this account service staff were excited at being part of an agency that could really bring a holistic viewpoint to their clients. So everything lined up.
On the second one it was a little more precarious…

Trent:
Sorry, we are having a bit of a bandwidth issue here. I am not quite sure what the problem is but are you able to hear me okay?

Paige:
We spoke with the owner at length again which was a similar process and gathered a bunch of information about the clients and where they were with them and then when we interviewed some of the team that worked there we heard different perspectives.

So, this really put things into question for us because we felt that the account managers were the people in the day to day and they would have better indicators of what could be possible, and we felt that the owner was a little bit out of touch with the day to day work.

And so it was really important at that point to make a decision to bring all of the account team over. Also the agency was different, running project to project they had more of a sales approach vs. an ongoing relationship management approach.

Doing a lot of websites while in digital work it was project based they would work with the client from four to six months and then move onto the next project. So, there was not as much looking out to the future, it was more of can these people continue to sell digital work across the board.

And we were just going to transition the current projects in the queue complete them under contract, maintain the large piece of business which is what we were really attracted to in the first place and then continue to sell digital work across the agency.

Trent:
Okay, so they had one key client that was very desirable for you?

Paige:
Yes it was just a large size of ongoing month to month digital work, and that was attractive to us because our digital team had also been running project to project and always selling that pipeline and I was attracted to that idea of having a nice big stable piece of business on a month to month retainer structure to support the time between the next big project coming in.

Trent:
So what advice, when you go from letter of intent, which is like the first date of mergers and acquisitions where you say this is what I want, I’m interested, here’s the terms etc and then you go into due diligence and you uncover things that undermine your confidence or you start to realize that the person that you were about to go on the date with is a little different than you thought they were.

What advice would you give to buyers or sellers for handling the negotiation that is going to be required to alter the terms to now match the new reality? And let’s say you are the buyer, which you were so let’s give advice to sellers. So what would you say to people who were in that situation where you as the buyer now don’t want to pay as much as you said you would pay in the letter of intent because of the situation you have uncovered is different than what they told you?

Paige:
I would definitely look at it from the perspective of whatever changed in respect to the future of the business. There is always a scale, from one perspective, from the buyer’s perspective. “Yes it is greatly going to effect the future of the business.”

From the sellers you have the background of knowing your clients and knowing your team and really how solid and what situations those are in. And you can make an educated re-negotiation around that.

You have the benefit of having all that knowledge and experience that the buyer doesn’t have. So they are going to not want to take as big a risk of course, and I think that you have a lot of means to assure them if you actually think that it is not posing as big a risk or threat to the future of the business as the buyer might think.

In the case of the second acquisition that exact thing happened. There was a key talent that we were hoping to have join us with the acquisition; things were all wind-up at the last minute that creative director took another opportunity in the market and left. It was not a risk that none of the clients that the agency was servicing at the time would have jumped ship with this person; that was not what the concern was.

But that person was part of the talent that we were hoping to acquire in the transition. So the value of the company actually shifted.

Trent:
Was it by a meaningful amount?

Paige:
I think from the perspective of the seller yes. You bet. But the seller also agreed that we as an agency had done everything that we could to bring this person over and I think that they knew that and actually agreed with that and so I was not willing any longer to… that affected how I looked at the future quite substantially.

Trent:
So now let’s assume for the purposes of our discussion that you’re getting towards the end of due diligence and the buyer and seller are pretty much in principal agreed on everything. Somebody has to paper this deal up so that you can actually get it done. Is that where you brought the attorney’s in?

Paige:
Yes actually our attorney was involved from the get go from the point of the letter of intent and served as council because from that very beginning you are looking at things that you need to ask, information that you need, when are you reviewing the financial information. That needs to come up pretty early in the game and my attorney was partnered with me through all of that work.

Because you start to frame your negotiations just as that data and information comes in. You are talking about where you see risks, what makes you uncomfortable, “if we could pencil out a deal that was somewhere in this range I’d feel comfortable.” You are funnelling down to knowing that that deal is going to get the end result so I would not hesitate to get an attorney involved early on.

As you run along these things, you can get deal heat because you start looking out at the possibility of this and the possibility of that and this talent and that and you can quickly get your eye off the ball and forget what your objective was and doing the same from the beginning and having that council say “slow down” “it’s not worth it to pay this amount” to continue to provide that council and that ground in effect is very helpful.

Trent:
How much did you have to spend on legal fees?

Paige:
Let’s see. I can’t remember on the first one. My predecessor Frank Grady was still here and we were doing that deal together and I was already an owner but he worked that side of it. On the second one I probably spent fifteen thousand.

Trent:
Okay. So really fifteen thousand of insurance to make sure, roughly how much was that deal worth?

Paige:
I am not going to disclose the total. In the whole scheme of things it was very minor compared to the future benefit that we gained from that acquisition. I would easily do it again.

Trent:
So well worth it.

Paige:
The deal was definitely negotiated I feel… ((computer crash))

Trent:
For folks that want to either buy or sell are there any books or are there any websites that you would suggest and also if they wanted to get in touch with you what is a good way for them to do that?

Paige:
They can get in touch with me via my website: GradyBritton.com. On the contacts page they can reach out to me via e-mail which is probably the best bet.

Trent:
Can you just spell that for us?

Paige:
Sure. GradyBritton.com and in regards to blogs or websites or books, you know I didn’t really rely on any of those as resources through this process I had a couple of good business peers that I relied on and I mentioned I had an attorney that counselled me and kept me grounded and just other people in the business that had done it before.
I belong to a unique group of other agency presidents so I relied on them to ask for the tactical situational stuff. “Have you ever agreed to deal that comprised to something like this,” things like that.

Trent:
And it was very much the same for me. I have not bought firms, but I have sold so folks if you have questions from the seller’s perspective put it in the comments and I will be sure to answer them. I echo Paige’s comments, your legal council has been through this many times before, if you have picked the right one.

There are all sorts of entrepreneur groups that, I was in several mastermind groups and Paige has eluded that she is a member of one as well and that can be incredibly valuable. The big thing is that you really want to make sure that you talk to people that have actually done it before. Because in the scope of three quarters of an hour podcast we can talk, there are people that do workshops on this type of stuff for days.

The number and complexity of the details involved in a merger or acquisition of any kind are very, very large. Don’t let it discourage you, just go into it being aware that it takes a while.
These things do not happen overnight.

Paige:
Yes, eyes wide open for sure and yes in both cases it probably took a total of a year to go through the process from the beginning to the end to actually move in and actually have people established and see the benefit of the work coming into the agency.
It is a long deal. The second one was equally as long and actually was a bit more tumultuous. Both times eyes wide open and eye on the ball. And understand that it is going to be a large part of what you do and focus on in the immediate future for sure.

Trent:
And with that said with advice to sellers; if you think there is any way that you can do succession planning and sell your firm to people that already work there; speaking from personal experience. You are going to get more money because those buyers know exactly what they are buying you can get that deal done a lot quicker.
There is not nearly the same level of due diligence that is required. In my case the deal was done inside of thirty days. And I would encourage you to start planting those seeds several years in advance if you’re selling.

Paige:
That is right, several years so people really understand what they are taking on and their interest, passion and commitment is there and has been tested and it is a whole different beast moving from employee to ownership and it behoves both of you to try it on a little bit as you go before the deal is done.

Trent:
Alright Paige I know we are up against your hard stop now and mine as well I got to get on the phone and do another pre-interview with another founder so thank you very much for being a part of the show it has been a pleasure to have you on and I really apologise to you and the audience that you were cut off mid sentence due to my computer crash which has never, ever happened before.

Paige:
Good luck to you, thank you Trent and good luck to everybody.

Trent:
Great take care, bye-bye

Paige:
Bye-bye

Trent:
To get to the show notes for this show go to brightideas.co/147 and if you enjoyed this episode, please do me a favour and help me spread the word by going to BrightIdeas.co/love where there is a pre-populated tweet and all you have to do is click your mouse. That is it for this episode, I am your host Trent Dyrsmid, thank you so much for tuning in it has been my pleasure as always and I will look forward to having you back for another episode. Take care bye-bye.

About Paige Campbell

Paige Campbell has over 20 years of marketing and brand development experience, which includes building communications strategies for national and regional clients such as Xerox Network Printers, Bob’s Red Milland First Independent Bank.

In her role as President, Paige oversees the strategic team providing guidance and strategy for various accounts. She believes that creative ideas can come from anywhere and she is driven to make sure that our clients are benefiting from the best business counsel and creative strategy possible. She leads the agency with an unparalleled commitment to her team, culture and clients.

 

Kathy Leake

How LocalResponse.com Has Grown From “Failed Investment” to Over $10M in 36 Months

 

kathy-leake-interview_0

Kathy Leake has over 20 years experience in agency advertising. In 2007 she became an entrepreneur and started her first successful ad-tech company.

Kathy started her second company, Local Response, also in the ad-tech space in March 2011. LocalResponse has revenues of over $10 million and expects to double revenue this year. Kathy has a goal of starting multiple companies over the next 10+ years and maintaining a vested interest in each.

In this interview you will learn what the ad tech industry does, how Local Response is using commercial intent, how they collect data and how the brands they work with use it.  Kathy will also share how Local Response generates leads for themselves, and how they use email to open the door.

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

  • (03:00) Introduction
  • (05:20) Why did you start two ad-tech companies?
  • (07:30) How did you cross over from the services to technology side?
  • (12:00) How did you raise the funds to start your current company?
  • (16:00) What does your product do?
  • (20:00) How many people are on the team?
  • (21:00) What are the profit margins like in ad-tech?
  • (23:00) How do you generate leads?
  • (34:00) What does one of your first sales calls look like?
  • (39:00) What things need to be in place to have any type of a series A round for raising funds?

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

Leave some feedback:

Connect with Trent Dyrsmid:

About Kathy Leake

Kathy is currently the CEO and Co-Founder of LocalResponse, a company that helps marketers respond to real-time consumer intent. At LocalResponse she is responsible for positioning, go-to-market, revenue generation and general operations.

Prior to joining LocalResponse, Kathy was a Founder and Chief Revenue Officer at Media6Degrees, a Social Targeting company.  At Media6, Kathy developed the positioning, strategy and go-to-market blueprint for the company.  She successfully took Media6 to market and drove the company from pre-revenue to $20 million in revenue and $100 million valuation in 2 years.

Kathy came to Media6 with 20 years of advertising experience having worked at multiple Omnicom and WPP agencies such as DDB Needham, Ogilvy & Mather, TBWA/Chiat Day, Agency.com and Red Sky Interactive. At these agencies Kathy held executive, business development and media positions.

Kathy is passionate about creating new methods of ad targeting and has been published in numerous articles for industry leading publications including Ad Age, Ad Week, eMarketer, CMO.com, MediaPost, Business Insider, Tech Crunch, GigaOM, Mobile Marketer, Venture Beat and Internet Retailer. Kathy was named Mobile Marketer’s Mobile Women to Watch in 2013 and 21 Most Powerful Women in Mobile by Business Insider 2012 and 28 Most Powerful Women in Mobile 2013 by Business Insider. Listed on Forbes as Top 11 Women Who Started Amazing Companies and both of her start-ups are listed in Forbes America’s Most Promising Companies 2013.

Elyse Petersen 4IN X 6IN X 3000DPI X FC

How Tealet.com is Creating a Bridge Between Tea Growers and Tea Drinkers with Elyse Petersen

elyse-petersen_0

At Bright Ideas, we’ve talked with some great startups who’ve received support ftom 500 startups. This time it’s Tealet.com, a direct-from-farmers tea company dedicated to the growers around the world. Founder Elyse Peterson has devoted her time to creating a worldwide appreciation for the local farmers across the globe and in other food security campaigns.

From crowd-funding, kickstarter, 500 startups, and more, learn how Elyse used the digital landscape to get her business running. If you’re interested in alternate funding sources for businesses, you’ll want to check out this interview.

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

  • (02:00) Introductions
  • (07:00) How did you get the business started?
  • (10:00) How did you use crowd funding?
  • (12:50) How did you bring awareness to that Indiegogo campaign?
  • (16:00) What was in it for the campaign backers?
  • (20:00) What’s it like to get funded by 500 startups?
  • (27:00) What happened after 500 startups?
  • (31:00) What does it mean to be a part of the Las Vegas Downtown Project?
  • (32:30) How has Bitcoin inpacted your business?
  • (37:00) Please tell me about your community

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

Leave some feedback:

Connect with Trent Dyrsmid:

 

About Elyse Petersen

Elyse PetersenElyse Petersen is a Global Tea Ambassador with the International Tea Farms Alliance. She spent time working with tea farmers in Wazuka, Kyoto, Japan, and this experience inspired her to help grow tea culture across the U.S. and around the world. Petersen is an experienced international development worker in the area of food security, natural resource management, and sustainable food preservation; having served as a Peace Corps volunteer in Niger, West Africa and Antigua and Barbuda, and the Eastern Caribbean. Petersen graduated from Shidler College of Business with a Japan-focused M.B.A, and from California State Polytechnic University, Pomona, with a B.S. in Food Science and Technology.

Additional Resources

ADEEL AHMAD 4IN X 6IN X 300DPI X FC (1)

How Shopseen Attracted 2200 Customers in Just Six Months

adeel-ahmad_0

Sometimes, you can’t help but root for the little guy.

Adeel Ahmad was looking for a way to optimize the business end of things for small retailers, and with that idea, Shopseen was born. In this interview Adeel and I talk about how he saw the need for change, created his startup, and drew in a large customer base in a short period of time.

If you’re looking for ideas on startups, especially SaaS startups, you should check out this podcast.

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

  • (02:05) Who are you and what do you do?
  • (05:25) How did you got 2200 users in 6 months?
  • (08:25) How did you validate your idea?
  • (16:25) How did you get their first 10 customers?
  • (18:25) How did you determine how to price your product?
  • (22:25) Tell us about a time when an assumption you made was way off
  • (25:15) How has investor funding played out?
  • (30:25) How has your past been of help to you with Shopseen?

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

Leave some feedback:

Connect with Trent Dyrsmid:

 

About Adeel Ahmad

AdeelAhmad2Adeel started Shopseen soon after opening a vintage clothing shop in downtown San Francisco. Shopseen was built to solve the problems of operating a small modern retail  business, and soon it was spun off into its own startup. Previously, Adeel was an early software engineer at Context Optional, a pioneering social media management company that built a platform for large brands to reach and engage with a broad audience on social networks.

Additional Resources

ETHAN 4IN X 6IN X 300DPI X FC (1)

How Ethan Anderson is Growing MyTime.com into an Amazon for Local Services Merchants

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Co-founder and CEO of a successful startup, Google Product Manager, Harvard Business School graduate, and previously named to the Silicon Valley 100, Ethan Anderson has been making waves in the digital marketplace.

Learn how Ethan came up with the concept for MyTime, an appointment setting website that connects businesses and customers through a simple and timely web interface. Discover how Ethan came up with the idea, how he saw an opportunity in the market, and how he established a well funded campaign to get it off the ground.

This interview is a must-listen for those interested in startups and SaaS development.

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

  • (2:00) Introductions
  • (3:10) What is MyTime?
  • (6:00) How did you research the idea?
  • (10:00) How did you attract interest very early on?
  • (12:00) Why did you raise money so early?
  • (14:00) How did you start selling to early adopters?
  • (20:30) How are you using crowd-sourcing?

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

Leave some feedback:

Connect with Trent Dyrsmid:

About Ethan Anderson

Ethan Anderson, RedBeaconIMG_0307Ethan is the Founder of MyTime, a startup that allows consumers to instantly purchase services and book appointments from nearby businesses. He was also Cofounder & CEO of Redbeacon, which allowed consumers to request bids for home services. Redbeacon was venture backed and won numerous awards including the Grand Prize at the 2009 TechCrunch50 competition and Business Insider’s Startup 2010 before being acquired by The Home Depot. Prior to Redbeacon, Ethan worked at Google as Product Manager for Image Search and Google Video.  Ethan also worked in a number of internet strategy and marketing roles at The Clorox Company, Buy.com, and McKinsey & Company. He graduated with Honors from Harvard Business School and Magna Cum Laude from Duke University, where he studied Economics and Public Policy Studies.  He was recently honored to be named to the Silicon Valley 100 and 16 Up-and-Coming Silicon Valley Entrepreneurs You Need to Meet.

Additional Resources