He Fired a $500K Client Right After a Layoff — Then Went $8M to $42M

0:00 We're not going to have work-life balance if you are somebody that's ambitious and wants

0:04 to build a company or wants to be in the C-suite at a Fortune 500 company.

0:09 You don't get eight hours for work and eight hours with your kids.

0:13 You're not going to achieve what you want to achieve if you have big goals.

0:17 My guest today is Kevin Rice, the co-founder and former president and CMO of Halfway,

0:22 the digital agency he and a partner started in a garage out of Cal Poly and scaled to 250 people

0:29 and over $40 million in revenue before selling for nine figures in 2021.

0:36 Were you thinking you would be able to make it through or were you concerned that

0:39 maybe it would potentially go to zero after that point?

0:43 Yeah, I didn't know. Absolutely worst case scenario was we had to scale all the way down.

0:50 She was like, whatever you think you need to cut, you need to double that cut.

0:55 I think a lot of people see this as a zero sums game or were there ways you could have balanced both?

1:01 No, I wouldn't have worked any less hard. I was working 12, 14 hour days. I was working my ass off.

1:10 What I would have done differently is in the time I had with my kids,

1:14 I would have been more intentional about it.

1:16 Those are some of the details. I also love how some things on the surface that look like they're

1:22 going to be negative or challenges end up being massive opportunities.

1:39 Kevin, take me back to the start of 2016. You just had laid people off because a bunch of projects

1:46 all wrapped up at the same time. What was actually going through your head in that moment before any

1:51 of it became the turning point that we know it is now?

1:54 Well, first of all, thanks for having me on. I really appreciate it. That was a wonderful

1:58 introduction. Thank you for all the kind words. 2016 was a very tough year for me. It was a tough

2:04 year for our company. If I were to take a few steps back, just to kind of say how we got there

2:10 was I started this company with my co-founder, best friend in college, straight after graduation

2:18 and in a garage. And then like a lot of startup stories, we went from a garage into a small office,

2:23 hired a few employees, and then just kind of started growing organically from there.

2:29 Originally, we were just kind of like a web design app development firm. And we kind of did anything

2:36 and everything for any industry like we would take on any kind of work we could get. And that's really

2:43 difficult to manage and really difficult to scale for a lot of reasons. You're constantly learning

2:49 new industries, new consumers or customers. You're learning new technologies. And so there's

2:55 always all this overhead and ramp up time. And it just really wasn't something that we could grow,

3:02 like scale consistently. And so we ended up getting these like really big enterprise tech projects.

3:09 Like our first Fortune 500 client was Applied Materials, a huge semiconductor company, right?

3:16 We started managing their Drupal website. And that was like a million dollar a year client.

3:21 And then we had a couple others like that. And so in 2015, we had been doing this for about six years.

3:28 We were probably at like 50 employees, something like that, doing about, I think we closed out

3:34 2015 at like 8 million in revenue. Now, the problem was is all of that 8 million in revenue

3:41 came from projects. So it wasn't a going concern for our clients. They would sign off on a capital

3:48 expenditure of $2 million. We'd launch a new website or a new app, but at the end of like

3:53 eight to 12 months, that project was done. And so we had to figure out where did these staff

3:58 roll onto? What's the next project? And unfortunately, at the end of 2015, after our best year ever,

4:05 right? Like we did 8 million in revenue. That was pretty amazing. We were in Q4 staring down

4:10 the barrel of just a massive cliff. Our revenue was, I forget the exact numbers, but probably

4:16 dropping 40% within six weeks. And we didn't have the financial reserves to keep people on staff.

4:24 It just wasn't, we didn't have that option. We didn't have that luxury. We weren't being like,

4:28 you know, greedy like you see in some of the headlines of corporations today where they're

4:32 doing cost cutting, but their profit is skyrocketing. This was an essential,

4:38 very tough decision that we had to make to reduce our staff. And so what you asked,

4:44 what was going through my mind? It was terrible. We had a very strong family culture, which actually,

4:51 I don't really recommend for business. I don't think family cultures make the most sense. And

4:55 maybe I'll get to that later, but that's the way we were, right? Like it was a family. I knew

5:00 everybody. I knew all their, their spouses, even some of their kids and having to walk in the door

5:08 that morning and go tell a handful of people on my team directly, while the other leadership had to

5:13 do the same for their team and sit them down and say, like, you know, I appreciate all of the hard

5:20 work because everybody was grinding really hard. Um, but after today, you no longer have a job.

5:28 That was a really painful moment for me. Um, one of the most difficult in my professional career.

5:35 So unfortunately, what like the results of that was like, we had to figure out how do we climb out

5:42 of this? Like, how do we like, this isn't the end of our story. We just need to figure out how do we

5:49 change direction? How do we make the right moves? How do we make the right shifts to get us back on

5:54 track so that, you know, we could rebound from this really like difficult, painful, uh, disastrous

6:04 situation that I couldn't blame anybody for, but myself, right? Like my heads were so far in the

6:10 weeds that had I just kind of seen the forest through the trees three months before, maybe we

6:18 could have done something sooner, you know? And so at the end of the day, I had to take full

6:22 accountability. Same with the rest of our executive team. There was nobody to blame but ourselves and

6:27 that sucked. I have a lot of questions, but was this before we fully unpack, was this the first

6:36 time you had to do something like that? Did you have many riffs before or was everything pretty

6:41 much going well up until that point? I had learned how to manage out under performers and there were

6:46 certainly times where I had to let team members go, but this was the one and only

6:52 layoff that we had to do in the company's tenure over the course of 13 years.

6:59 Were you thinking you would be able to make it through or were you concerned that

7:03 maybe it would potentially go to zero after that point?

7:06 Yeah, I didn't know. I absolutely, worst case scenario was we had to scale all the way down

7:14 and when you have advice from financial team members, like we had a VP of finance at the time,

7:21 she was like, "Whatever you think you need to cut, you need to double that cut."

7:26 And that's really painful because you're like, "No, no, no, we can do it with this. We'll be

7:30 all right." And she's like, "No, you need to cut deeper." I think we kind of split the difference.

7:35 I don't think we went as deep as she wanted to and we went deeper than we wanted to

7:42 as an executive team. But yeah, it was just a necessary... We had to make the decision or

7:50 yeah, for sure, we could have gone out of business. I mean, in this kind of enterprise

7:57 tech consulting landscape, you've got payment terms, right? Net 45, net 90 in some cases,

8:05 and you got to pay employees right away. So it was a really tricky kind of six-month period

8:11 where we had to manage things very tightly because one miss and a payment that wasn't

8:17 going to come for six months could have plummeted the company.

8:22 Yes, I can definitely empathize with that and it makes growth a little bit riskier and trickier.

8:30 A big question I have is after this, one, what were the moves you started to make?

8:37 But what I'm most curious about, how did you keep the team that stayed motivated? Because I've seen

8:43 this part handled so poorly, so many times. I've been in a company where there had been

8:49 a company they laid off half the team I was still left on, but immediately after that,

8:55 I was looking and I left probably in the next three months.

8:58 Yeah, and you had to deal with the survivor's guilt of being one of the few who did survive.

9:06 That's a difficult place to be in too, but of course you started looking because if there's

9:10 one round, chances are there's going to be another round. Okay, so two parts to that answer. One is

9:17 we made about four very strategic moves that changed the direction of the company. And at

9:24 the same time, we had to be very transparent with the team. So the day of, we brought all

9:31 people in individually, sat them down one-on-one, the layoff happened, and people left the office.

9:39 And then once we were done around mid-morning, we brought everybody in for an all-hands meeting.

9:47 And we took accountability. We said this is our responsibility. We didn't meet it,

9:55 and we're making these cuts because we have to. And we told them we cut as deep as we thought

10:02 we needed to in order to keep the company going and give us a chance to rebound and didn't make

10:10 any false promises because we couldn't guarantee that there weren't going to be future rounds of

10:14 layoffs. We told them we were going to do everything we possibly could. It started with how we carried

10:19 ourselves. There's some level of accountability and confidence of how are we going to get through

10:26 this. And then there's also just showing up and being visible around the team, being not going off

10:35 in a closed door, trying to solve it on your own, but interacting with team members more consistently.

10:43 And yeah, so it was kind of like all of that change management and the way that we had to

10:51 carry ourselves to help the team be inspired and feel at least some level of confidence

10:58 that we're going to get through this. And the way we did get through it was I mentioned there was

11:03 about four or so very deliberate changes we made to the company. The first was leading up to this,

11:11 we worked in every industry, financial services, B2B tech, healthcare, consumer retail, like all

11:19 over the place. And it's really hard to become proficient or it was really hard to become like

11:26 a master of something, let alone proficient if you're doing something new every project.

11:33 So we had just finished a project with Jamba Juice and we launched their first online ordering

11:40 and loyalty application. That was one of those just sheer luck type of bluebirds. I met their

11:47 CMO at a conference, we hit it off. She said, "Hey, we're going to do this new app project."

11:53 And nobody had really made the name for themselves in the restaurant industry. So we were invited

11:58 along with all the other usual suspects of agencies that do that kind of work. And thankfully I built

12:03 enough relationship and credibility that I think that kind of won us over. And we won that even

12:08 though we had no experience. And sometimes that's what it takes, right? Like getting lucky and then

12:15 taking a step back and realizing like there might be something more to this, meaning this is one

12:20 client that's investing in digital in an industry that is very legacy, very far behind. At that

12:28 point in 2015, when we did that project for Jamba Juice before the layoff, we were looking around

12:36 the restaurant industry and it was like Starbucks and Domino's were the only companies that had

12:40 invested in digital. Every other restaurant did not have online ordering. They had like

12:47 no real version of a digital loyalty program, no real CRM capabilities. Marketing was very limited

12:54 to just batch and blast. As we looked at it, we were like, "This industry has to catch up.

13:01 They don't have an option." We saw it in like travel and hospitality back in the mid to late

13:08 2000s, like everybody digitalized. And then we saw it in retail around like 2010, 2012. Everybody

13:14 started shifting to these more elaborate e-commerce experiences. So we just, we looked at it and we

13:20 said, "Okay, they have to make this investment." And we're going to be getting in early. Thankfully,

13:26 we just got some experience on this project and it was a beautiful like application that went to

13:31 market. So it's something we were very proud of, but we made the decision to focus purely on one

13:38 industry. And that wasn't necessarily something that like was an immediate cutoff, but it did

13:44 happen pretty quickly because we shifted all of our marketing efforts towards the restaurant industry.

13:50 We started talking to some of our legacy, like our clients that had been around for a while,

13:55 like within a year, we had kind of passed the torch of our client applied materials to another

14:03 agency. We kind of told them like, "We're not doing this work anymore. We're going to need to

14:09 help you find another agency." And they were fine with that, but that was half a million dollars of

14:13 revenue annually that was going to be off of our books. And this was just after we had done a layoff.

14:21 So not everybody agreed with that decision. We felt like enough confidence and certainty that like

14:30 just this industry has to make investments in digital. Like we've seen it from other industries

14:35 before. And so that was the first move. And that was a pretty big move, especially when

14:42 we put all of our marketing and sales efforts into a new industry that we had one client in.

14:48 The second thing we did kind of tied to that was we shifted from working on project-based engagements

14:55 to only engagements that could be a going concern. So with the restaurant industry,

15:02 our new types of work, we're going to be online ordering, CRM, loyalty, revenue driving digital

15:08 experiences and programs, because we figured if it's generating revenue and they can look at their

15:15 costs and the revenue, well, we can help them financially model that this investment with us,

15:20 if they spend a million dollars a year, it's going to generate 30 million in incremental revenue.

15:27 Then we can justify spending 2 million. We can justify spending 5 million a year.

15:32 And they're going to keep investing as long as they see the return on that investment.

15:37 If a brand came to us and said, "Hey, we need you to build this corporate website,"

15:42 we would just not entertain it. We'd pass it immediately. Didn't waste any time despite

15:47 knowing that we needed revenue, but more importantly, we needed the right kind of revenue,

15:52 the kind of revenue that could be stacked and scaled sustainably over time without leading us

15:59 towards another cliff. So that was the second move, was focusing on revenue generating solutions for

16:07 our clients. The third thing was, despite not having much capital, we did invest a little bit

16:15 in creating IP. We took two of our full-time developers and we wrote a reference architecture

16:25 code library that was essentially our baseline code that every time a new client came to us,

16:32 we could start with that code, we could deploy it, and then we could spend all of our effort

16:38 for the next six months customizing it for that specific brand. So where is there other alternatives,

16:45 like if we were in an RFP against Deloitte or Accenture, some of the big publicist agencies,

16:52 they would have to start from scratch every time. So their timelines were 12 months, 18 months,

16:58 sometimes longer to do the same kind of work that after we had built this IP, we could do in six

17:02 months consistently. So now we have IP that we invested in, and to my business partner,

17:12 Jesse's credit, who was just like brilliant with this sort of stuff, he structured our contracts

17:19 in a way that when we did time and material services for clients, we would license them,

17:27 our reference architecture, for a one-time perpetual license. So we still owned the core code. They got

17:34 a lifetime license to it. They could do anything they wanted with it, bring it in-house, they just

17:38 couldn't sell it. And then when they paid us time and materials to customize it, to create a more

17:45 bespoke, unique experience for their brand, we actually retained the rights to those customizations.

17:52 So one brand might say, "We need you to integrate with our Salesforce Marketing Cloud." And we'd say,

17:58 "Oh, well, we haven't done that before. That's going to cost X." Or this is where, like we typically

18:04 were more like roadmap modeled. So it wasn't like, "Oh, we'll do that for X amount of dollars." It

18:09 was more of like, "Okay, that'll be our focus for this sprint or this quarter." And once we built it,

18:15 we would take that code and bring it back into our core repository. And so now our IP was expanding

18:20 based on our clients investing in it. So that IP, we called it Nom Nom, which was just for an

18:30 agency. So I think Jesse or somebody came up with the idea. The original logo was like a cookie

18:36 monster kind of character. It was fun. But for me, like running sales marketing at the time,

18:48 I had to figure out how do I sell this? Because it's literally code. It's files of code. Like how

18:53 do I sell this to a marketer? And the way that actually like eventually the rubber met the road

19:01 was in our proposals, right? We would be pitching the same kind of work as other vendors, but we'd

19:09 be pitching it in six months. And we could very clearly rationalize that because we were starting

19:15 with a volume of code that would have taken us six months to write if we started from zero.

19:22 And so then something that felt very hard to sell and very ethereal became very tangible. And

19:31 although Nom Nom's revenue was maybe five, 10% of our revenue at any given time or year,

19:38 because it was a one-time fee, wasn't that substantial, but what Nom Nom did was it allowed

19:45 us to change our sales narrative. And that was kind of like the fourth thing that's kind of

19:52 tied into like go to market. By creating IP, this tied into our new go to market strategy.

20:01 Go to market really started with what is our differentiator? Because in the consulting

20:07 agency space, everybody says the same things. We have the best people. We have great culture.

20:14 We win these awards, best places to work. Look at our processes, our methodologies. I'll show you

20:22 80 pages of a keynote deck describing our unique methodology when in reality, every agency has the

20:31 same thing and they say the same things. So now we had something that was truly differentiated.

20:39 We had something that nobody else had in the market and it made us faster. So we didn't always

20:45 come in as the cheapest provider. Oftentimes we were about the same price, maybe slightly cheaper,

20:51 but not much, like more cost effective, but like in the same range as like the bigger players.

20:57 But what it did was our one competitive advantage was we had this IP that could help us get you to

21:04 market in six months instead of 12 months or 18 months. So now instead of selling Hathaway,

21:11 instead of selling Nom Nom, we were selling speed to market. So our entire sales narrative changed

21:19 because now instead of saying like, here's our features, here's like what this is going to look

21:24 like. Here's our credentials and our case studies and our processes. Look at us. Now all of a sudden

21:32 our sales narrative completely changed to be fully about the brand and what's happening

21:38 in their industry. So now it would start something like everybody in the restaurant industry has now

21:44 started to invest. Here's all the stats showing the tens of fifties of millions of dollars that

21:50 all the big restaurant chains are investing in digital and technology. Here's your competitors.

21:56 Here's what they're doing. And we kind of had a behind the scenes view. So we knew like,

21:59 okay, this brand is working with this agency and they're investing this and they're going to launch

22:04 here. And so we kind of show them like a maturity model of here's where you are. Here's where your

22:11 next competitors are in their digital maturity kind of path. And so we would create this narrative of

22:17 saying the only thing that matters for your brand right now is that you get something to market

22:24 and then you iterate on it over time. Because if you wait two years to get something live,

22:30 like I'm sure other proposals are coming in at, you're dead in the water. Everything's already

22:35 going to be changed in two years. And so we changed the buyer's criteria around what they

22:43 were looking for in a vendor partner. Like no longer was it about who had the best creative.

22:49 No longer was it about who's the cheapest or who has the best reputation or who has the most case

22:55 studies. Now all of a sudden, all they were thinking was who can get me to market fast enough.

23:00 And we knew by the time we sent them a proposal, we were going to be that person or that company

23:06 because we had nom nom. I think a lot of people underestimate the value of speed and the magnitude

23:14 at which people will pay for speed. And if anybody's thinking about it, you know, how much more do you

23:20 have to spend for DoorDash than going at yourself and getting it, but the speed and convenience

23:26 people will pay a premium for. And even if you price it similar, it's unbelievably more competitive.

23:31 And I think even same exact offer, but if you can focus on that access of value,

23:39 you can be extremely competitive.

23:41 I totally agree. And I appreciate the DoorDash reference since I just spent like 20 minutes

23:45 talking about the restaurant industry. And personally is on food now. So exactly.

23:51 I just had an Instacart delivery for a bottle of shampoo because my cat got into something and I

23:56 have no idea what it is and he's covered and there was no way I was going to be able to get

24:00 to PetSmart today. So like I bought a $15 bottle of shampoo, probably paid $12 in delivery fees,

24:08 but it needed to happen and I wasn't going to be able to do it.

24:12 Yeah. And I think if you find those opportunities where in almost anything times of the essence,

24:17 so I think for most services, products, anything that you're bringing to market

24:23 speed is going to be a big factor. I want to go back. If you don't mind to when you made the

24:30 decision to go into restaurants, one thing I always struggle with. I know a lot of companies

24:36 struggle with is how niche is niche enough? How did you know that it wasn't, oh, just anybody who

24:46 needed to create an online experience for their consumers. And how did you know, oh no, it needs

24:53 to be food service industry that does mainly drinks or has a drive-through or is like quick serve.

25:04 When do you know you're niche enough to be focused, but not too niche to where you're

25:09 cutting out market that you should be going after?

25:11 I don't know if you can ever be too niched because you can always expand later, right?

25:15 Like in 2020, we expanded into the convenience store industry because it was very,

25:21 there's very like, it was very adjacent. A lot of similar use cases, consumer tendencies, right?

25:27 But had we gone into C store and restaurants back in 2016, we would have been spread too thin.

25:36 It's about understanding where you can reach your addressable audience.

25:40 And for us, like we, this is probably the other part of that go-to-market topic. Our go-to-market

25:47 got built around restaurant industry trade shows and conferences and strategic partners.

25:54 So when we started working with Jamba Juice, we had the opportunity to work with this up and coming

26:00 tech platform that would later really run the entire restaurant industry. And that company's

26:06 called Olo. Olo is the e-commerce platform and kind of backend for pretty much every like major

26:14 restaurant chain. And at the time they were, you know, kind of early in market and we had helped

26:20 them launch a custom like app experience for Jamba Juice. And, you know, we integrated our

26:27 front end into their backend. And it was one of those things where there was this really

26:32 beautiful natural kind of partnership dynamic that emerged out of it because they were a

26:38 backend provider. We were a front end provider in order for them to win big chains and go up market.

26:47 They needed a great front end provider. And in order for us to win big chains, our front end

26:54 did nothing on its own. It couldn't take a transaction, right? It was just a, you know,

27:00 headless front end and we needed them. And so we could go to market together. And what that would

27:08 look like is we would go to conferences together. We would speak on stage with a client together.

27:15 We would host really unique, like we call them activations, but we'd go to a trade show

27:23 and all the other vendors would be like inviting perspective clients or clients out to like a

27:29 steak dinner or like wine tasting. And it'd be like 30 of these in one night that you could

27:35 potentially go to. So what we did is we started doing some really unique stuff. Like we'd take

27:40 clients and prospects out to a racetrack and go drive Ferraris and Lamborghinis.

27:46 Or we'd put them on a yacht and we'd do like an even a yacht cruise with photographers. And it

27:51 feel like they were at this like really fancy like Hollywood style party. And so we always did these

27:58 things with our partners that like kind of created the brand persona in the industry for us that we

28:05 wanted, right? Like we were edgy. We were kind of, you know, the cool kids in the space. And then

28:14 we would also produce content together. So if we were speaking on stage together, we would have a

28:20 white paper that people could download or we'd print them out and put them on the chairs. We do

28:25 branded swag together. So it was Hathaway plus Olo. And what this allowed us to do was really

28:32 tighten our companies. Our sales reps were tied to the hip with Olo and Salesforce reps. They were

28:40 daily texting about, Hey, did you hear that Burger King's going to do this? Or did you hear that

28:46 Dairy Queen's going to do that? And we were always like communicating to understand the landscape and

28:52 what was happening and making introductions for each other. So it'd be like, okay, Hey, we just

28:57 signed Arby's to do this. Let us introduce you to do that. And it just really brought our teams

29:04 together. And obviously a few like good early wins helped out a lot too. But back to your

29:10 original question of like, how do we know we were niching enough? We got very narrowly focused.

29:16 And then part of the answer to that is, is where do we want to go to get in front of our clients?

29:21 And I had a limited budget. So it was like, I had to make sure it was pointed at the right places.

29:27 And I knew that we would have spread ourselves too thin if we would have been like,

29:31 it would have been easy to say, Oh, we also work in the beverage industry because that's

29:35 kind of related or like I said, convenience or like retail, right? Retail is fairly similar to

29:40 like us are like different backend workflows and stuff, but there's similarities. But then

29:46 I would have had to go to very different events to get in front of my audiences. And I really wanted

29:51 to like double down and make the most impact in one industry, build a reputation, and then we

29:58 could grow into adjacencies from there. I like that as a heuristic of where are the events,

30:04 where are the people going? Okay. Maybe if all of those events, there were some beverage companies

30:09 there and although partnered with them as well, then maybe you keep that in the Venn diagram of

30:13 your universe of what your niche is. But I think lining it up with that marketing budget,

30:18 I think makes a ton of sense because yeah, you're splitting conferences,

30:22 you're not getting the virtuous cycles of your partners, bringing you more deals and doubling

30:26 down. I have a question on the partnerships though, because I've worked in a few companies

30:32 where we've had a tremendous partner motion. One of them, almost half the revenue came through

30:38 partnerships. I also noticed there were quite a bit of challenges managing that, especially with

30:46 channel conflict. If there's deals coming direct, I don't know what the relationship you had with

30:50 Olo was, but were there competitors to Olo where you had to manage who you're going to market within

30:56 a particular deal or how you priced or how you navigated direct deals? Did you have any of those

31:02 channel column conflicts going on? For sure. It's complicated for a lot of reasons. And it gets very

31:10 nuanced with Olo. No, they were like the 1200 pound gorilla in the room. We just aligned with them

31:17 and there wasn't really a lot of competition. There was a little bit, but nobody that was really

31:23 stacking up. But in other like CRM or loyalty platforms, there were, there were two or three

31:30 like big players. Because we were the consultant, after a few years of working in the industry,

31:37 our clients started relying on us, not to just build the tech, but even help them select their

31:41 backend. So we would run RFPs and we would run an RFP and give it to three companies that we had

31:48 partnerships with. Now we never took any sort of commissions or referral fees from any of our

31:56 partners, because in that case, if we were hired by a client, we would go tell all of those partners,

32:01 say, look, our responsibility is to the client, right? We're not playing any games. There's no

32:09 back channel. Like we're running a formal RFP. And if you guys can't handle that, and if you're

32:13 going to like get pissy about it, then you're not going to be part of this. And so we'd get

32:18 hired by a client, we would draft their requirements, we would formalize an RFP, we would put it out,

32:26 we'd review responses, and we'd make a formal recommendation on the back ends that are going

32:32 to sit behind the consumer experience that we were creating. So we had to manage that.

32:39 And there was definitely some people that were kind of pissy about it. But what we found was

32:44 every brand was unique. And with the exception of like Olo and e-commerce, like, you know,

32:50 there are three or four CDPs. And sometimes one of them would be a really good fit for one brand.

32:56 But not a good fit for another. And so we just tried to get very clear on

33:00 what our criteria was and, and help them get the right partner. On one hand, we became really

33:06 important to the vendors to the other partners, because they knew we had a hand in picking who

33:12 was going to get these big brands, because we're talking about huge companies, right? This is like

33:16 Panda Express and Burger King and, you know, like large chain restaurants, these are clients that

33:23 they all wanted. And so it kind of like put us in that position of power. But we also had to like

33:30 play Switzerland and, and kind of appease everybody. For partnership strategy, we would kind of tier

33:37 them, we would say tier one, tier two, tier three, tier one, we go to market together, we make big

33:45 investments and conferences. Tier two, we do like quarterly business reviews, we do account planning,

33:51 our sales teams are close, but we don't make a lot of investments. And then tier three was just kind

33:56 of like utility tools that like, it'd be nice to throw that in. This would be a helpful tool,

34:01 but it's not really a strategic enough platform to be considered for tier one or tier two. And so we

34:08 always thought about it like that too. And we do quarterly business reviews with tier one and tier

34:13 two. Yeah, you know, we were very closely tied together. We had, we eventually hired a strategic

34:19 like alliances director to help oversee all of this. Well, and I think it tees up so many things

34:27 when you can run a partner channel really well. I am curious because this is similar business I'm

34:34 building over here at LeanScale. What I'm hearing too is a lot of complexity on building the team

34:43 and the promises that you're making in delivery. I mean, I'm assuming you recruited certain people

34:48 that have certain skillsets, then you're graduating into things like running strategic RFPs for your

34:53 clients and doing different things, working through partners. I would love to hear what was

34:59 the talent management strategy, the recruitment strategy. How did you, cause this isn't really

35:06 that long of a timeframe. And I'm hearing a lot of change on the delivery side that had to take place

35:14 in a pretty short period of time. How did you manage that? And I want to clarify,

35:20 this whole run was bootstrapped, correct? Correct. Yeah, we never took any funding.

35:24 So you didn't really have much room for error to say, okay, well, let's raise a little bit. Let's

35:28 throw a bunch of enablement people in here and spend over there and let's recruit ahead of the

35:33 curve of demand and just make sure we have people ready to do all this real time. We had to figure

35:38 it out, right? Jesse and I started right out of college. We didn't go off and work at an agency

35:44 or consulting firm for a handful of years and then go decide to do this. We had no idea what

35:49 we were doing when we started like nothing. Uh, and we had certainly had a lot of misses early on

35:56 that were just like our first big agency pitch was with Taylor made golf. It was a freaking disaster.

36:03 Like I don't even know how we got into it. They're like director of marketing found us online. The

36:09 nicest guy ever. I had a phone call with him. I had no idea what he was talking about, but we

36:15 got us into the room. We showed up. They're expecting us to do like a traditional capabilities

36:20 presentation. We don't have that. We didn't even know that was a thing. Um, they asked us if we,

36:25 if we have any questions for them, didn't come prepared. It was like the worst experience ever.

36:33 So, you know, we, we had to like figure it out and we hired consultants and we hired executive

36:38 coaches. And eventually when we could afford it, we would hire from other agencies and other

36:43 consultancies and then like learn as much as we possibly could from people who have actually

36:48 done it in a like proper place. Um, but yeah, like it's a really complicated business.

36:56 And there were so many times that Jesse and I were like, why did we choose this? Why? Like

37:02 what masochistic tendencies were like, what were you thinking? Cause it's one thing to

37:11 bring in the revenue. It's another to deliver on it. And then it's another to line up your like

37:19 demand and your supply so perfectly that you don't have people sitting on the bench or you don't have

37:25 two little people that you can't deliver on the work. It's a constant, like looking at how does

37:33 our pipeline play out? If we close everything that's in 80%, if we close everything that's in 50%,

37:39 by the end of 2021, when we were acquired our sales, like conversion rates were like 80%,

37:48 like crazy for this industry. And so we were very strict about managing our salesforce instance.

37:57 And for the first couple of years, that didn't really help us. But after like five years of data,

38:03 we got really good at forecasting and we could look at our pipeline and know pretty well how much

38:11 demand we had and then how much supply of resources, but it was constantly a juggling exercise of

38:18 like, how do we hit? Cause the number one metric in this kind of business is utilization. Are your

38:24 teams utilizing? Everything flows from there. Like if, if you have high utilization, you probably got

38:31 good like profit EBITDA downstream. That was the one thing that I was always looking at was,

38:38 is our utilization like at the target or above? And it was a constant effort.

38:44 And yeah, it was just, it was like very tricky. One of the things that helped with that was

38:51 building our own IP. When we had a reference architecture and code libraries that we would

38:57 literally start with every project or every engagement. And we'd start with that. And then

39:03 we'd custom customize it for each brand. Now, all of a sudden our teams were only working in one

39:09 industry. They were working on one core code base and writing custom code constantly, like from

39:15 there, new integrations all the time. There was tons of complicated stuff we were doing,

39:21 but at least there was a foundation. So now all of a sudden our team members became much more

39:25 fungible and we would staff core teams per client. So there'd probably be 12 people working on a

39:33 client team. Well, if they had a slow week, because a client was slow on a review cycle,

39:40 we could transition people off, get them billable on another account. And so that fungibility of

39:47 having consistent industries, consistent platforms, consistent, you know, like strategic partners.

39:55 Now all of a sudden everything was a lot more fungible and we could really push on hitting

39:59 utilization targets. It makes a ton of sense. I'm over here taking notes. I think LeanScale

40:07 or Focus, B2B, SaaS and AI, all VC backed or growth equity backed. So very similar things,

40:14 similar tech stack at Salesforce HubSpot, Clay, Gong. And I have noticed that, but there are some,

40:22 I have a lot of questions sometimes. I'm like, are we niche enough? Should it be like B2B SaaS,

40:26 maybe a particular industry? Should we stay with a certain firm a graphic where like, wait till

40:31 they're scaled out to a certain point? We're taking on two people too early, too late. And I think

40:35 all of it comes down to that, that calculus is extremely hard. And I had the benefit before

40:43 starting Lean Scale. I ran RevOps for three companies. So I did forecasting. I ran the

40:48 sales forecast. I knew in theory how to do it. This is like the most advanced forecasting needed

40:55 because if you miss it, then all the wheels fall off. So you have to be tight on both sides.

41:02 Absolutely. Right. And that's where like dialed pipeline forecasting, tying into your operations

41:11 and all the levels of detail that you go down to like, how long does it take to hire a new employee?

41:16 How long does it take to onboard them? At what point are they actually up to speed enough to

41:20 put them on a billable client engagement? So we're constantly looking at the forecast of

41:26 what happens if we close 80% of our deals? What happens if we only close 50% of our deals? How

41:31 quickly can we spend teams up? And thankfully we had really strong client retention, again,

41:37 because we had IP and we did good work, but that meant we could always be kind of looking at adding

41:44 instead of backfilling because clients weren't going away and I didn't have to like backfill new

41:49 clients to do that work, to like to staff that team on. So for like 2018 to end of 2021,

41:59 it was just constant growth. We went from in that year where we did 8 million in 2015,

42:07 dropped down to 6 million, then we got it back up to like 8 million and then we finally broke 10

42:15 and then it was like 15, 22, 20, and 42. And so it was just like, you know, that's like going from

42:23 30 people at the bottom to 250 in five years. And you know, there's like big tech companies

42:30 that go grow a lot faster than that. But as you mentioned earlier, we were bootstrapped

42:34 and this was a, you know, time and materials style agency. So any, you know, every 25 grand a month

42:41 and new revenue was a new head count. Well, and also yes, those tech companies run up, but they

42:49 also, when they bring on that level of investment, like the founder equity, you can see these

42:55 companies like, Oh, we're valued at a billion dollars as same as like, Oh, we did like a

42:59 $50 million exit. Like the founder equivalent can be really similar. Oh, absolutely. I mean,

43:05 you see stories where founders end up getting nothing, right? Like I saw the founders of

43:10 Fandool, right? Like billion dollar valuation exit founders walk away with nothing because

43:17 of where they're at in the waterfall and preference treatments and how much they fundraise. And like,

43:21 you know, you have to be wary of taking these massive valuations because then you got to get

43:26 a bigger valuation next time. And sometimes that doesn't always happen. And as a founder,

43:30 if you're diluted too much, like you get very little. And so thankfully, like we never took

43:37 any funding. We just bootstrapped it and grinded it out. And so when we sold, you know, our team

43:43 was able to participate in that payout because, you know, we set aside a portion of our ownership

43:50 that Jesse and I had, because it was just the two of us who own the company, but we put aside a

43:55 portion and everybody has, you know, a type of stock options. And so when we sold, we had

44:03 engineers who weren't even like managers, but they had been with us for so long that, you know,

44:10 they had enough money to buy a house and it was like a life changing thing, right? Like

44:14 these are people who, you know, they're not directors or executives, but they, you know,

44:19 worked really hard and they've been with us for a long time. And overnight, like their entire life

44:24 changed. Well, I had a life changing exit. I was one of those employees in a company. I still have

44:31 the deal trophy right here from it too. And it was, yeah, in that realm of like enough to buy a house,

44:38 enough to like not have stress, take some bigger bets on your career, take some bigger bets. I

44:43 don't know if I would have had the confidence to go start something on my own without having that,

44:51 especially like having my family and everything going on at the same time. So it's huge. And we

44:56 absolutely did the same thing here at Lean Scale because I was like, that was so important to me.

44:59 I also feel like I put in more effort knowing like, Hey, I'm yeah, I'm an owner too. Like I,

45:05 if, if this pays off, um, I'm going to benefit as well. I, I would love, I would love to kind of

45:13 hear the run up to the exit. I think a lot of people have that as the end goal. A lot of people

45:21 have that on their mind. I know it's not super linear, like ABC get here, but are there certain

45:27 things that you did or certain dynamics that were at play that made that possible? And what advice

45:35 would you give to anybody kind of going through a similar run? Yeah. Uh, running a process to sell

45:41 your company is a second job. So expect to be working two full-time jobs during that time.

45:48 It's a lot, it's a lot of work. Um, we actually started in 20, 2019, entertaining a acquisition

45:59 and it was something that we got connected with somebody. He was putting together like a rollup

46:05 strategy. Um, he was what's called a fundless sponsor, meaning that he was putting together

46:10 the deal and then he had some private equity firms that were going to essentially invest in the

46:15 deal of multiple companies that got complicated. It got further complicated because COVID happened.

46:24 And as we were close to selling the company, we were in New York, we were doing meetings.

46:30 We were in New York like three days before meeting with private equity firms before the entire,

46:37 like the country just shut down. It was like, you know, the first week of March in 2020,

46:43 I was flying back from New York and like noticing people were kind of sick and hearing about this

46:48 thing called COVID and then like three days later, New York is shut down. So COVID happened

46:56 and they were like, Oh, we don't know what's going to happen with this COVID thing. Like,

47:01 let's just like tap the brakes here. I didn't know what was going to happen with this COVID thing

47:06 because all of our restaurants were mandated to shut their doors. I didn't know, like, does that

47:14 mean Burger King goes out of business and they have to fire us? Thankfully, that's not the way

47:20 it turned out. And, um, what actually happened was is we became the lifeblood of all of our clients.

47:29 They had to shut their doors, but the only way that they could keep getting sales and revenue

47:34 was through online ordering. And they had to do it in new ways. Nobody was doing curbside pickup.

47:41 Nobody was doing cashless payments. Nobody was doing all the things that you needed to have done,

47:47 let alone did they have the foundation to actually add those features. So most, there was a run

47:53 on the kind of work that we did both from our current clients and new clients. And like

48:00 in April, after like in the very beginning of COVID, like we had one brand come in

48:06 and we signed a multimillion dollar deal in five business days that normally would have taken six

48:12 months because of COVID. They were like, we were behind. We want to do all these things to support

48:20 our guests during COVID. We can't because we're on this like templated out of the box solution

48:27 that we literally don't know the code to. We can't do anything with it. So like we need you

48:31 to get us to market as quickly as possible. So COVID actually like was a boon for us.

48:38 And when these brands were shedding vendors left and right, we were the one vendor that was left

48:45 because we were the only one that was actually bringing sales in their virtual doors. This

48:51 company that was going to acquire us, tap the brakes, and they eventually circled back around

48:54 when they saw like, Oh, this is actually going really well for you. We're like, yeah, it is like

48:58 you're going to need to increase that price. That's right. And so they did a few times.

49:04 And at the end of 2020, we almost consummated an acquisition, but in the

49:14 like, I mean, it's hard to even say 12th hour because it was like literally the night before

49:19 it was like December 22nd. And we were supposed to sign the definitive paperwork on December 23rd.

49:25 The deal fell through. And what had happened was is midway through the deal, they brought in a new

49:31 like managing partner who took over the deal. And he was really just like cutting like, you know,

49:39 terms of the contract that would cut a hundred grand here, half a million here. Oh, they're

49:45 going to get to keep cash reserves of 2 million. We're like, Oh, like that's not how this works.

49:50 Like we had to keep the cash reserves. So then we had to go back to the company because we had

49:55 been pretty transparent that we're like entertaining offers and we're exploring different

49:58 possibilities. And we were expecting to announce it at our holiday party, which was supposed to be

50:06 in the beginning of December and then kept getting pushed and pushed and pushed. And so then like,

50:12 this was virtual, right? Our holiday party was virtual during COVID. So our holiday party's like,

50:17 you know, the 23rd, we're supposed to announce this deal fell through the night before.

50:23 And we're like, well, what do we do now? Like, so again, we had to kind of regroup. And thankfully,

50:34 Jesse was smart enough to say, okay, we're going to do it again, but we're going to do it with a

50:37 banking partner. And we went out and hired Canikor Genuity and they're the best in the business. And

50:44 they took us through a 12 month process. And in that 12 months, we met with 50 different company.

50:49 We put together our SIM. We met with 50 different companies. We narrowed the pool. They helped us

50:54 find the right partner for us. And eventually they got us acquired for three to four times more than

51:04 what we were about to sign a deal for less than 12 months earlier. Wow. That's incredible. That's

51:13 incredible. That's a lot more than your initial question. Oh, I assumed it was a story. I didn't

51:18 think it just happened overnight. And no, those are some of the details. I also love how some

51:25 things on the surface that look like they're going to be negative or challenges end up being massive

51:30 opportunities. Like that deal, not getting signed COVID happening and like, Oh, looks bad on the

51:36 surface, but it ends up being a massive tailwind. Well, you had such an amazing run and it's very

51:47 impressive to be doing this right out of school. Like, like you said, Hey, you didn't even work at

51:52 any other business or agency or anything before. And to be able to bring it all the way over the

51:57 finish line like that. I know at the same time, these are very challenging things to do as you're

52:03 building a family. And how do you juxtapose the career with what was happening at home?

52:13 And is there anything you think you could have done different to where you could have

52:18 saved both? Yeah, it's a great question. Somebody actually asked me recently and before I answer

52:24 that, I'll kind of share what was happening with me personally, because as you can surmise with all

52:29 of the changes in growth in the company, like there was a lot of pressure. It was a lot of stress.

52:33 Like one day I'd be dealing with a client who's maybe threatening to, you know, terminate a

52:38 contract, or I'd be dealing with a client who, um, you know, wants to increase their velocity

52:44 and we don't have the staff for it or like, you know, there's always the day to day stuff,

52:49 but it was always very stressful. Well, at the same time, personally, at the beginning of 2020,

52:55 before COVID happened, I had to make the difficult decision in my personal life to file for divorce

53:02 because my ex wife was struggling with alcoholism. And she had just given birth to my second son,

53:09 a few weeks prior. And then unfortunately, she kind of fell back into her alcoholism. And so

53:18 for safety reasons, I had to take my kids and I had to, uh, basically leave the house and move

53:24 in with my parents for a little while. And, you know, I overnight became a single solo full-time

53:32 father of a three and a half year old and a three week old. So I've got work stress. I've got the

53:39 responsibility of now solely taking care of these kids. Um, and then yeah, like two months later,

53:45 COVID happens. So it's like the pressure of the world. I felt like the pressure of the world was

53:49 on me and there certainly was a lot of pressure and the way that I dealt with that personally,

53:56 I don't recommend this, but the way that I dealt with that personally was I just disconnected

54:02 from everything emotionally, just completely shoved everything down, disconnected from myself

54:09 emotionally, which in turn has consequences. Like if you're disconnected from yourself,

54:15 it's kind of hard to be connected with your kids or your friends or your colleagues. So I was very

54:19 like robotic. And that's what I refer to as robot mode, where I was performing at the highest level,

54:27 crushing it productivity wise, but then I was completely disconnected from all of the emotions

54:33 that, you know, make this experience of life worth living. Um, so I was in robot mode for a while

54:41 until I started to realize that like, I could see behavioral stuff with my kids. I could see

54:48 the gap growing. Like as I was getting closer to the finish line in my career,

54:54 the gap between me and my kids was growing. And I just, a number of things happened that I knew

55:00 like I had to make a big change, um, because I was effectively sacrificing my kids for my career

55:08 success. Um, and you know, a lot of things needed to happen for that to change. And that's kind of

55:16 what I'm much more intentional about today. And that's, you know, where I've started my own

55:20 podcast, CEOs and ABCs to talk about that, like very specific topic of like, how do we grow in

55:26 our careers and still show up at home and still have energy, like still have gas in the tank to,

55:32 you know, be there for our kids, be present, be intentional. Um, you know, like family is

55:40 another organization, probably the most important organization in your life. And, um,

55:46 so I had to figure out like, how can I take all these leadership skills that I've been building

55:50 for 15 years? How can I apply them to being a better parent? Because parenting didn't really

55:55 come naturally for me. And, um, once I started doing that and I started looking at like,

56:01 all right, how do I do performance reviews with an employee? Now, how can I translate that in a

56:06 very caring, loving and nuanced way to, you know, working with my kids? How do I build systems at

56:14 work? And how can I apply that at home? Not making my kids, my employees, because that wasn't the

56:21 intention. The intention was to just use what I knew, the language, the frameworks, and apply it

56:26 in an area that just didn't come naturally, naturally to me. And that's where I started

56:32 to show up better. And that's where I started to become, I believe, a better father and leader at

56:38 work. Do you think going back, there would have been ways to have it all, or do you think you

56:48 would have had to give up some career opportunities in order to make that investment? I think a lot

56:55 of people see this as a zero sums game or were there ways you could have balanced both? Yeah.

57:02 So I should have answered your question earlier, right? Would I have done anything differently?

57:06 I was at a conference, uh, maybe eight months ago and somebody who was, uh, you know, building a

57:11 company had young kids asked me the same question. And after thinking about it, no, I wouldn't have

57:20 worked any less hard. I was working 12, 14 hour days. I was working my ass off. Um, what I would

57:29 have done differently is in the time I had with my kids, I would have been more intentional about it,

57:35 meaning I would have thought through how am I going to spend my time with my kids? You know,

57:39 what are we going to do today that builds connection that teaches them values feels meaningful,

57:46 right? Instead of just kind of coming home and just being default dad. Um, and the second

57:52 thing is I would have been more present. I was still reading the bedtime stories every

57:56 night. I was cooking and breakfast. I was making dinner, right? Like I was physically there,

58:01 but I was not emotionally or mentally present. So that's the second thing is, you know, if I

58:07 could have gone back or if I could, I would, I would have been more present in the moment.

58:11 Like I would have actually been there reading those bedtime stories instead of thinking about

58:16 my next sales pitch or leadership meeting. Um, and I think those two things, like more

58:22 intentionality and more presence, that's really the answer. It's not work-life balance. We're

58:30 not going to have work-life balance. If you are somebody that's ambitious and wants to build a

58:34 company or wants to be in the C-suite at a fortune 500 company, you don't get eight hours

58:40 for work in eight hours with your kids. You're, you're not going to be, you're not going to

58:44 achieve what you want to achieve if you have big goals. Um, but what you can do is if you're

58:50 working 12 hours and then you've got, you know, two or three hours with your kids,

58:56 make sure you think about how you're going to spend that time.

59:00 Right? Like you wouldn't go into a work week without having everything planned down to 30

59:05 minutes color-coded calendars, right? But I came home every day drained from work in decision

59:12 fatigue, not wanting to make another damn decision. Cause I was just totally drained from making too

59:18 many in one day. And then I wouldn't, I just, you know, just kind of be, I just exist and just kind

59:25 of like go around the house with the kids interact, but no real intention, no real plan. And so,

59:32 you know, now like when I'm with my kids, like I've got a pretty good plan going into the week

59:37 of like how we're going to spend our time together. I've got certain themes that I'm working on,

59:42 whether it's like there was a period where I was working on just like

59:49 brotherly connection between my two oldest boys, cause they were fighting a lot. And,

59:54 and right now I'm kind of more focused on like resilience and grit. Um, and so just thinking

1:00:00 about how to like, you know, disciple my kids and teach them and help them inherit values that

1:00:09 I think are important. So there's just a lot of forethought that goes into it. And then obviously

1:00:14 when you are in those moments, being fully present. Do you think it was simply just a

1:00:21 choice to be present or were there things that you needed to do for yourself that gave you the

1:00:27 capacity and energy to be present? It starts with a choice and then it's finding ways to not have to

1:00:34 rely on discipline. I'll give you an example, right? It's like putting systems in place that

1:00:41 become a forcing function so that you don't have to like always remember or be disciplined about it.

1:00:48 Right. So in order to transition from business mode or over to family mode, like I would purposely

1:00:58 bring a change of clothes change at the office. And then I was changing from like, you know,

1:01:04 semi-formal business attire, my, you know, president mode, and then putting on casual

1:01:10 clothes and going home to be in parent mode. And then as I walked in the door, like, you know,

1:01:17 my oldest son and I have a secret handshake that we do. And that's our reconnection ritual. And

1:01:23 after a long day at school and for me a long day at work, it's like, this is how we reconnect.

1:01:28 And then, you know, there's certain things like put the phone away. You're never going to be

1:01:33 present if your phone is in your pocket and you're getting Slack messages and emails and

1:01:37 text messages. So you just got to put that thing away. It's just full stop. And so yeah,

1:01:44 it's building in like systems just like you would in your career. You know, if you hate cold calling,

1:01:49 you got to figure out a way to make sure you cold call. And that might be, you know, doing it with

1:01:54 a buddy or it might be bookending it with things that you do want to do, or it might be like

1:02:00 having somebody hold you accountable and making sure that you're doing it. It's the same thing

1:02:05 at home. It's like having systems, rituals, routines, just little like tools that force you

1:02:12 to not have to rely on discipline. Well, personally, as a father of three,

1:02:22 of two girls, a boy, I have another boy on the way in a couple of months, also building a business

1:02:30 and scaling and dealing with everything that comes with running this type of company as well.

1:02:35 There's just pressure on all sides. I really, really appreciate you going deep on that topic.

1:02:41 And also I'm happy I have someone to bounce ideas off of and empathize with what we're

1:02:47 going through because it's a very, very challenging combination of things all happening at once.

1:02:52 And I just really appreciate everything you shared going through how you built the business,

1:02:59 the authenticity through the struggles that you had, the decisions and bets you made during that

1:03:05 pivot, I think required a lot of bravery. And I love that it worked out and you had a successful

1:03:15 exit through it all and then created the time to be intentional for your family. So Kevin, I just

1:03:21 big fan of what you've done and what you're doing. And I appreciate so much

1:03:26 that you're on our podcast. Thank you so much for having me. I really enjoyed it.

1:03:32 At this point, I just hope that the message resonated with somebody and helps them grow

1:03:41 in their careers, grow their business and still show up at home for their families. I'm sure it will.