Transcript of How to Prepare to Sell Your Business written by John Jantsch read more at Duct Tape Marketing

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Hello and welcome to another episode of the Duct Tape Marketing Podcast. This is John Jantsch and my guest today is Matt Watson. He is the founder and CEO of Stackify. He’s been a developer/hacker for over 15 years, and he sold his first startup, VinSolutions for $150 million. We’re going to ask him exactly how he did that. He started Stackify to solve the biggest challenge he had as the CTO of VinSolutions, so Matt, thanks for joining me.

Matt Watson: Yeah. Absolutely. Glad to be here.

John Jantsch: It’s always great to encapsulate somebody’s entrepreneurial journey in one paragraph but tell me a little bit about your story, your entrepreneurial story, how you got started with your first business, VinSolutions.

Matt Watson: Yeah. It sounds really good in a paragraph but we all know it was a lot of pain and suffering for several years, right.

John Jantsch: Yeah.

Matt Watson: I first started VinSolutions. Let’s see, at that time I was about 22 years old. I didn’t know the first thing about business. I was always very entrepreneurial. I grew up working in flea markets, and my family was entrepreneurial, not in the tech side of things or anything, but in different ways, and was always working side projects and jobs for people as a developer.

Was doing some side work for a car dealership and another gentleman came by that car dealership just asking, hey, do you know any software developers that can help me with this project, and that car dealership basically made the connection and I was the technical co-founder that somebody else was looking for. I was that hired gun in some senses. Does that make sense?

John Jantsch: Yeah, absolutely.

Matt Watson: It wasn’t really my idea. It was somebody else’s idea and then I sat down with this guy in Applebee’s and said, he explained to me the time he was basically trying to take photos of cars and upload them into the Internet and this was, you got to remember this was 2003, the iPhone didn’t even come out until 2006, people didn’t have digital cameras back then. They were very much a luxury item. It was a different day and age.

John Jantsch: Yeah, they were pretty crappy too. I had one, and photos on it were terrible.

Matt Watson: Absolutely. They’ve come light years from there, that’s for sure. Basically started as somebody of how do we take photos of cars and the pricing and descriptions of the cars, and put it all in one place, but then syndicate it. You can imagine the dealers advertiser on auto trader and cars.com, and their website, and all these different places, and sending that data, in all those different places and updating it every day would be a lot of labor to do manually.

We basically automated that and then the business grew over eight years to do a bunch of different things that were related to sales and marketing for car dealerships.

John Jantsch: Where was the headquarters for VinSolutions?

Matt Watson: Based in the Kansas City area.

John Jantsch: That’s what I thought. We didn’t talk about this ahead of time, but that’s what I’m standing in Kansas City, Missouri recording this.

Matt Watson: Yeah.

John Jantsch: That’s what I thought. In fact, I actually spoke at a conference in Las Vegas for digital dealer. I’m sure you guys had a big presence there.

Matt Watson: Yeah, we would have been there.

John Jantsch: Yeah. Let’s move to Stackify. I said in the intro and it’s funny how many founders of companies start companies because they can’t find something or they can’t get something solved, so they just solve it by creating a company. Would you say it’s fair to say that that was the genesis of Stackify?

Matt Watson: Yeah. I would say that’s the biggest strength and weaknesses, both of an entrepreneur is we’re problem-solvers, and sometimes we try and solve too many problems and get ADD, but I’m a software developer at heart, and been a developer for over 15 years and at VinSolutions is we’re a very high growth company and had every problem you can imagine from the performance of our applications, bugs, and the new features, and scalability.

Just the team, growing very rapidly and just to have the tools we needed to troubleshoot application problems basically and started Stackify really to combine all those tools together. Make them easy to use for developers and make it affordable, and that’s what we’ve done. It’s been six years of that now almost.

John Jantsch: Let me go back to your growth days at VinSolutions. I know one of the things of, you guys grew to fabulous heights, but even that company goes from a million to five million. At what point did you feel like you outgrew your ability, you and your partners, I guess in this case, ability to actually run that company?

Matt Watson: Well, so that’s a good question. Over that eight year, eight years of time, actually some of the partners come and went. The guy I originally started the company with was no longer there. Some new partners coming in, and at the end of it, it was really myself and another gentleman named Mike who was the CEO and I was basically the CTO and I was in charge of the product.

He was really good at sales and leadership and ran the company from that perspective and I took care of the product to making it work and luckily I was able to grow into it and to figure it out, and looking back. Even today, I feel like I’m still learning as a executive and a manager and the right ways to run a business and do things, and all of those things that just learning on the job. We were lucky enough to just work through it and make it happen.

John Jantsch: Would you say with Stackify that you intentionally said hey this is a problem and we’re going to solve a problem, because I think a lot of people think here’s a solution and we’re going to build a solution and they forget that there might not actually be anybody that knows they have that problem that they solve. I think a lot of companies get it backwards. Would you say that you intentionally build Stackify purely to solve an unmet need?

Matt Watson: I would. The problem we were trying to solve was giving developers access to the data that they needed. That problem is still the problem we’re focused on today, but the way that we solve the problem has actually changed over that six years. The initial solution that we built didn’t end up working very well and we did a little bit of a pivot around that and accomplished the same goal, but ended up doing it in a different way basically.

John Jantsch: Now, obviously nobody’s buying or if people are buying and saying it doesn’t work, that gives you the feedback you need, but do you have any ways that you intentionally stay close enough to customers to understand that?

Matt Watson: Well, I think that’s one of the things I’ve learned over time is one of the things I need to do the most of is talking to our customers and understanding the problems they’re really trying to solve, the pain points they have, what they think about our products, and to my own growth as an executive, and a founder, it’s something I’ve had to learn over the years, because my natural.

In the past, as a developer, I’d rather just hide in the closet somewhere and write code. As a founder of a company, a CEO of a company. That’s not what I should be doing.

John Jantsch: Yeah. That’s actually, it sounds like you made that transition but that’s actually one of the hardest transitions for, and I think particularly technical folks to make. I remember I was interviewing, Guy Kawasaki for the show and he said that of all the entrepreneurs he’s talked to over the years, the biggest challenge they have is managing people because most of them don’t really want to do that. Would you say that that proved true for you that that idea of managing people was a hard skill to learn?

Matt Watson: It is a hard skill to learn and I love our employees dearly, but managing employees is hard. It’s definitely, it’s the hardest part.

John Jantsch: Talk a little bit about how you attract clients today, and whether or not that’s evolved.

Matt Watson: Yeah, so that’s actually was our hardest problem, and if I have any feedback for any other founder is always, you got to understand who your customer is, how you find those people, validating that, how you’re going to find all of them and tell them that you exist. It’s your go-to-market strategy.

That is not the part that I figured out six years ago when I started. It took us three years to figure that out. We do a lot of soul searching around how do we built this product, when nobody knows it exist. How do we get it out to market, and we read a book, and I remember it was called, it was about traction channels, and there was like 18 different traction channels. Do you know the book I’m talking about?

John Jantsch: I think it’s actually called traction.

Matt Watson: Yeah. For example, I have things that are about writing a book, or speaking to events, to going to trade shows, or blogging, and content marketing, and paid advertising, all these different types of traction channels. One of them that was in that book was called engineering as marketing, which make sense to us, our customers are engineers, and so basically the point of that was to build a tool that our customers could use, that they would be searching for this tool.

They will get a lot of value out of this tool, but then that would help them learn more about us and buy our products. A good example of this is somebody like HubSpot who has different website, grader tools, and stuff like that. That people may go to their website and use, and that attracts you to HubSpot and you don’t even know it.

John Jantsch: Yeah.

Matt Watson: That worked well for us. We built a product two years ago that’s been very successful for us. We’ve had over 20,000 people download that free tool that we built, and the key metric there is if somebody has used that free tool, their conversion rate on our paid product is three times higher than those who have not. It was a huge piece of the puzzle for us.

That part of it was great. We saw the issue of how do we get people to know that our free tool exist, and it has grown organically very well, it has a viral effect at this point, but the other thing we really did a year ago was double down on our content marketing, so one of the biggest challenges we have is our customers are software developers.

Software developers don’t have telephones. They don’t want to talk on the phone. They are the first people to complain about any sort of spam and emails mayhem. They use AdBlockers. They’re very finicky about all those sorts of things. How do you reach them? For us, there’s one thing that is always true. When they have a problem, the first thing they do is they go to Google and they search for it.

Our whole focus over the last year has been really on content marketing and when we started this year, we were doing about 40,000 visitors a month to our website and probably 10,000 of those are from one blog post that we did three years ago. That got a lot of traffic, but today we get over 500,000 visitors a month to our website in the course of the years, so we’ve grown that more than 10X this year.

John Jantsch: That’s awesome. Let’s talk about getting a business ready to sell. You sold a business and I’m not sure what the goal is, if that’s the goal for Stackify, but did you get that business ready to sell intentionally or did it just happened because I know a lot of people, at certainly a long-term or maybe even a short-term goal, but I think there’s probably more to it than people realize, isn’t it?

Matt Watson: Well, our original goal was to raise capital. We started that company in 2003, and we sold it in the 2011, so you frame up the timing. In 2008, and 2009, we were really starting to grow. We were really hitting our stride, but that’s when the economy went south. That’s also when GM and Chrysler went bankrupt and Ford closed a bunch of stores. We were in the wrong industry in a terrible market, and so we couldn’t raise any capital.

Fast forward a couple years. In 2011, before we sold the business, we had a business that was making $30 million a year in revenue, but we’ve never raised any capital. It had been bootstrap the whole way, and so we were still wanting to raise some capital partly to infuse more cash in the business, because we knew the business was going to continue to grow at a very fast pace.

Our problem was we’d hire a support person today, but they wouldn’t be useful for three months or six months from now, but we couldn’t afford to hire a salesperson six months ago. We could never get ahead of the expenses, so we were really trying to raise some capital, and take some of the chips off the table, some of the key shareholders could take a little money off the table. Ultimately, we ended up selling it for about twice what we thought it was worth and it became hard to say no.

John Jantsch: Yeah. Were there, I guess the one question I had is were there things that you did intentionally that made the business attractive or made it easier to have a transaction or had you really run your business that way? Partly what I’m getting is a lot of people want to sell their business, but it’s actually very difficult for somebody to even valuate it.

Matt Watson: Yeah, we worked with a firm that was out in San Francisco that represented us, and so they ran a big process for us when we were trying to raise capital, to do that round. We were very prepared and we had the craziest forecasting spreadsheets I’ve ever seen in my life with pivot tables within pivot tables, and then another headache, and then another pivot table, however they do that.

I’d say we were really prepared, had all that stuff together. We had a great story. We had a great growth and again it just ended up being worth twice what we thought it was worth.

John Jantsch: It’s awesome. Did you learn some things then after getting out of that, I’m sure you’re like, okay, I’m going to start another business, but this time it’s going to be different and maybe you didn’t say that, but did you feel like there’s some things that you learn in your first go around that you’ve been able to bring into Stackify maybe earlier?

Matt Watson: Well, I would say I learned mostly how not to do things.

John Jantsch: Take a few of those off the list.

Matt Watson: Yeah. This was definitely been different as being the CEO of a company and being the founder. I was the sole founder. I decided I was going to do this on my own and so that was a little bit of a leap of faith as well. I would say things are just so different from one business to another. This type of product. Our go-to-market strategy. How we sell it. For everything that’s radically different and I think what bring forth more than anything is just understanding that it’s a journey.

Things are going to change and move and no matter what you plan, it almost doesn’t matter what you plan, because the plans always change. Just understanding that part of it and understanding being through a startup and the hustle that it takes. I think that’s the number one thing that I learned.

John Jantsch: I always love to ask this question to entrepreneurs. What’s the best thing about what you get to do everyday?

Matt Watson: I love talking to customers, and solving their problems, and getting their feedback. I talked to one of our customers yesterday, and it was just great to get that feedback from him, and he actually worked at one of our competitors in the past, and was just a huge fan of ours. It was just so cool to talk to somebody like that, but then also the fact that he had worked at one of our competitors before. It’s just that kind of feedback I think always makes your day.

John Jantsch: Who does make an ideal client for Stackify?

Matt Watson: Most of our customers are other software development teams. They range across all industries, all geographies. We have customers in over 50 countries, and from little [inaudible 00:17:46] software companies to a cruise line to an airline to companies like Carbonite who does online backup to a magazine. You name it, we’ve got it. It’s really just anybody that has a development team.

John Jantsch: I guess I always love to ask this too. What problem are you solving for them?

Matt Watson: Yeah, the key problem that developers have is that they’re trying to ship their codes as fast as possible. A lot of companies these days do releases every week, some do them every day, and the only way they can do that with any confidence is to have a tool like ours, that can help them find problems with their software, before they release it, during the release, or shortly after the release.

We’re really their eyes and ears to make sure that that release cycle goes really well and if there’s any kind of problem. We can give them all the data that they need to find it immediately.

John Jantsch: It’s not always just a code problem. It’s a device problem or different types of devices. You’ve got mobile devices and Apples, and PCs, and so I mean a lot of the testing has to be, it has to work on all of those, right?

Matt Watson: Yeah. A lot of things these days all run in a cloud, and even though they run in a cloud, that provides ton of benefits. Things like Microsoft Azure and AWS have problems too, so it’s always a bumpy thing and there’s always problems. That’s just the nature of technology.

John Jantsch: Matt, if people want to find out more about you and Stackify, where would you send them?

Matt Watson: At Stackify.com, which is S-T-A-C-K-I-F-Y dot com, and you can check out our product and look me up and shoot me a message if you have any questions.

John Jantsch: Awesome. Well, thanks for joining us, and hopefully I’ll see you out there on the road.

Matt Watson: All right. Thank you.