Why Don't I Hire Managers to Take Over My SaaS Companies? | Sujan Patel Podcast

And why not? So we had this conversation before, like, why not put somebody, you know, like one of those high-profit ones, like, you know, Vlad and Norbert, why not just hire a, you know, a manager to take over it and, you know, still reap the upside and cash flow? And, you know, then it doesn't take too much of your attention and you can focus on it rather than selling it.

Um, yeah, it's a way to do it. I think, uh, I go back to like, I don't know, I don't know folks that could do it better than I would do it. And I have a fundamental problem of not doing it the best way possible. And so I'd rather just sell it than like, give it to someone else to like do something with it. Now, don't get me wrong. These are companies at like sub-$2 million CEOs. Very different skill set than hiring a real, I'd say real CEO, right?

Sure. Yeah.

I can go like a real CEO of a company that has potential to be tens of millions of dollars. I have no problem hiring those folks all day long. I mean, to find the right company to fit them in there. And, you know, but I'm saying, like, I feel like the sub-$2 million ARR companies, which we have, which we have a lot of, excluding a few companies that we own in the 8, they require, it's more like a growth hacker CEO, right?

Exactly, yeah.

I just don't jive with that. And it's like the risk factor of a, growth hacker CEOs, what if they just did it wrong? What if they don't know any better?

Sure.

Like, I'm just like, I hate to like sit on the sidelines and see someone succeed or fail and find other, know of 4 or 5 other ways to do it. You know, as a, I consider myself a coach more than like a manager for my team at Mailshake and others. I do like kind of coaching folks and doing it, but I think the jack of all trades kind of skillset, the companies are a little too big for, and then, but they're too small for like a real CEO and a marketing team, and like the whole full-fledged team, right? So it's like this medium space that I think it requires, in my opinion, to grow the fastest and make the most from that deal. It requires to be the savviest, right? It requires an edge. Like, what is my edge in growing My company versus another, like all my competitors, right? I'm better at it or like whatever. And I don't feel like the CEO I'd place would have that same edge.

Yeah. Unless they were successful in a similar industry or business and, right, like it takes a lot of things to check. Yeah.

And we were already, by the time we wanted to do that, we were already in the deals, right? What I would do in the future, if I want to bring a CEO on, I would structure them with equity. Right. Give them a portion of equity. But we didn't structure our deal that way. And so, like, I didn't want to redo it all to bring a person on that I wasn't 100% sure on.

Makes sense. Now, when you're looking at— so you mentioned, you know, $2 million as a floor in terms of size when you're looking at a potential acquisition target. Right now, when you look at a business, if you can, you know, break it down to one factor or element that really gets you excited about the opportunity, what would you say that What would you say that is?

Is the business like, is the product? So I'm only doing B2B SaaS. Is the product like, actually it's just the product, elements of the product. It doesn't even one factor. It's like, what's the product? And is this a must-have or a nice to have? I don't care about competitors. Like every one of my businesses. Well, first of all, the SaaS space is way competitive, right? Like there's just too many, there's so many people. So like, Competition, that's fun, cool. Like, that's actually a good sign that there's a market here. But I think I'm not worried about like having 20, 30. Mailshake has 82 competitors according to G2, right?

Yeah.

Fine, okay, no big deal, right? Biggest competitor, Outreach, billion. Smallest one, I don't know, like $10K in MRR, right? So like, it doesn't matter. But what's the product? Like, is it good? Like, do we have to rebuild it? Like, is it core? How do we make it core? Like, what's the potential of this product? If I could analyze a product 10 different ways, which I normally do, it is like I'm buying the product and everything that's kind of been done around it.

Mm-hmm.

And in most of our companies, the product is the growth engine. Marketing is fuel. Sales is like rocket fuel, but the engine is still the product. And without— with a shitty engine, I had to rebuild it. It is— then you buy the marketing and that's great too. These days marketing is more expensive than product, like meaning what it takes to build a product. But you have to be aware, are you buying a marketing engine or are you buying a product?

Yeah, there's a lot of that.

Very different. And I think there's the market— in my mind, the market's shifting to like, it's almost better off buying the marketing because it's It's less expensive and less timely than buying, building the product, but arguable of the risk factors. And, you know, I don't know. I wouldn't only invest on the marketing side with a poor product, but like, look at guys like Neil Patel, right? Neil bought Ubersuggest. Freaking good product, but Neil brought his traffic.

Yeah.

And the traffic, sorry, Ubersuggest traffic was ridiculous. All he had to do was figure out ways to monetize it. And then he combined it with his traffic, which made it like a huge funnel. And I think he got to pretty good growth, like multi-million in growth, just monetizing the traffic with the product, right?

Exactly.

So those are gems. Those are hidden gems and also situational, but I'm looking for more of that than like big company, that is under-marketed. And that was kind of our thesis in 2015 is like, we're good at marketing and operating efficiency. We can run it better and we can do a better job growing it than most around. And our thesis and concept now is like, well, look, everybody's doing this. There's lots of companies doing this. What are we really good at? We're really good at growing companies, operating them effectively, building teams, And where do we want to spend our time for the next 5 to 10 years, right? We've already proven out the concept. You know, I'd say 6, even the one that was, even the 2 deals that are bad, we're still up on. Like if we go sell them, they're still worth more or the same than we bought them for. So like, I'd say up being like we made profit along the way. So like net gain, but that's not the way you look at it because there's a time factor too, which means like—

Sure.

Did you, did you really want to $30K a year job for 5 years that you, even though you made money, you know, even though you made $100K in 5 years, it's still, you know, anyway. So yeah. Um, that, did that answer your question?

It does. Yeah. And I think that's what I love too. When we look at a business is like, you see those founders who are very product-focused and they've built, they just like, you know, they've, they're those wizards that just love building versus like going out and marketing it. They're scared to, uh, to market it, but somehow they've grown by one channel. And then you come in and you, you know, you apply a few more channels and, Just keep building on the product. Guys, I wanna shift gears on the investor side. When you're raising capital, 'cause you've done that with a couple of deals, external capital, what are your top 3 main ingredients to get, would you say, other investors on board to trust you into acquiring and managing a company? Is there something— I know obviously they trust your experience and your background, but is there these 3 things you say, look, this is what this company's doing, this is why you should invest in it?

Yeah. It's really, I don't know if there's 3. I think one is like showing your experience and sharing your experience is number one, meaning like I've got people that I email regularly whose money I don't have, but they know everything I'm doing right now.

Mm-hmm.

Why? Because I want them to know what I'm doing. If they want to, if they choose to get involved in our next deal, they can. They don't— I don't need— I'm not required. They're not even a shareholder, and all they've done is probably sign an NDA, but they could go and use that information to go buy another company or invest with another partner and whatever.

Interesting.

But by the time I ask for money, they know who the hell I am, what I've done, what I'm doing today, the lessons I've learned yesterday, and like what I'm thinking about tomorrow, right? So I think, I think there's that. That's number one, right? Like, if you're gonna go get money, build a relationship before you ask for money, right? Show your success before you ask for money, right? That's number one. I think number two is be very, very— like, provide clear updates. I've invested in probably, I don't know, 15 angel investments and like, at various like seed to Series A, and I hear from nobody. And this is not just my common theme, this is a common theme for most investors. Unless you're on the board, you don't hear updates. I want to help these people because it's my money. I'd like— I want to help them be successful, yet nobody really— actually, only one. I'm an equity holder of like an Uber for lawn care company.

Okay.

I can't say the name, Let's just say that. And they email me every week with updates about their company. And I'm like, I know what they're doing. When I have something valuable I can add, I will add it at that one point. Otherwise I just shut up and listen, right?

Yes.

But I know everything they're doing. And like, how much brainpower is it for me to know what they're doing every day? It's reading an email, right? Sending their, you know, they have a deck or whatever. Most of it's like an email. Here's what we— and then they're even smart. They have investor— this is an investor relations email, and they, at the end, at the bottom of the email, it's like, here's how you can help. I'm like, even better. You're telling me you need help here. Great. I do the same thing for my investors, and we've been doing it from day one, and my partner is actually the one who like got me on this bandwagon. Our updates to our investors are like 10 pages every month.

Really?

It takes me 2 days with my partner every month to write this update. But the thing that like, so we started doing this for the investor, but what the most value I got out of this was like, oh shit, this is what happened this month? Like when you're in the trees, right?

Mm-hmm.

It's hard to see like the whole forest and what's happening. And like, so you kind of get a vision for it. The other part of this is that like, oh, sorry, you get an understanding of the full picture, You are painting the picture and then you can eventually step back and like, oh, that was a shitty month. Or that was a really productive month. Or like, wow, we got our ass handed to us.

Yeah.

The other part of this is, um, when you look at your previous update and you're like, this is what I said I was going to do next month. And this is what I did. There's something different here. And so it's the do-say ratio that I've learned from like Heath and Shaw, like, I don't know, like 15 years, like 10, 15 years ago. of like, hey, here's the things you're going to say you're going to do. Here's what actually happened. Did you do that? Now, it's never 1-to-1, but if you're in the 70 to 80% range, like, that's an amazing, like, that's an amazing, like, place to be at. And, you know, sometimes you might, oh, I was going to do this, but like, that was a bad idea and here's why I didn't do it, right? And so, yeah, I think it's never going to be 1-to-1, but like, the closer you can get the do-say ratio to 1-to-1, It kind of matches, it helps you, like, not helps you, but it tells you like, are you actually executing what you're saying you're going to execute on? And I guarantee if you ever look at that in someone's life or business, it like the numbers, unless it's measured, it's under 50%. Probably.