SaaS Acquisition Stories w/ Rick Garcia - Founder and COO of G12 Communications

Foreign.

I am excited to be with Rick, who recently Micro acquired a couple companies for, I believe, high six figures and is the COO of G2 Communications. So, Rick, thank you for joining me on this podcast.

Yeah, man, it's good to be here.

Well, to kick things off, do you want to just maybe give a background of just yourself and maybe companies you acquired or your current parent company? Yeah, yeah.

So. So let's see here. I. I started. I started my first. Well, I. I've always been sort of an entrepreneur at heart, right. I've always had a side hustle. Right. I think. I think that's how a lot of entrepreneurs get started. It's like if you, you know, you kind of. You have a main job or you have a little job and you want to do something else and you create something, you think it's cool and you kind of just keep on. But I guess in 2011 is when I started my. My main company here. It's G12 Communications, right? So started in 2011 after the company that I was working for got acquired by Zayo. So a big fiber company. So that company gets acquired. You know, I leave it a little bit of cash and I go, I think I can start my own business at this point. Let's see if there's enough Runway, right? I go into debt, start G12 communications, and then it's a long haul. We're still building G12 communications, but we're significantly bigger now. But this year, actually, last year, I got excited about investing in small businesses and businesses that I can grow that are somewhat tied to what I do today. So today, G12 Communications is a voiceover IP provider. We provide services to businesses globally, mostly nationwide. And then I was like, okay, what can I do that's in that same sort of space? So I started an online sort of Shopify store called Teams Device Center. So everybody's moving to Microsoft Teams. So I thought we'd sling some headsets and Teams devices there. So we do that. And then I got introduced to Microacquire. And I think I wrote you a nasty gram one day because I was like, do you know that I wake up every morning now and look forward to the emails that I get from Microacquire? And it's like, instead of looking at my email that I hate, whatever email I should be looking at, I'm like, oh, let's take a look at Microacquire. That's like the first thing I look at every morning. So anyway, so, yeah, so in February, it became almost like, I don't know if you've ever gotten inside. And this is a bit of a sidetrack, but if you've ever been on this ebay kick, as an example, right. This is a long time ago, but you buy something on ebay and you're like, oh, that's cool. And you go buy something else on ebay, you start bidding on it. So you go into this little pattern of. Let me get a couple things. This is pretty cool. And so I engaged with the company on Microacquire. I knew of them outside of Microacquire, but they were on Microacquire. And we engaged a little bit and then I ended up buying them. And so we closed on that February 1st. And then again, you get so excited about shopping about businesses again, businesses that are in my area of expertise, essentially. So I'm like, oh, this would be great technology. This is a great technology to add on to whatever it is I do. So then I saw this other one and I thought, well, could I put a deal together for that? And the interesting thing is that I talked to the guys three or four or five months prior to I found them on Microacquire. But I talked to them. I don't know. Yeah, four or five months. And then one day I was doing this whole what's my revenue goals, my personal revenue goals for 2022? Literally up on my whiteboard back there, right? It's where it was. And I write one of the companies that is on Microacquire. I had already asked about their information. So I kind of thought about. I'm like, I like that business. I think that's pretty cool. So I put their name on there. And I had already talked to that first company. Well, out of the blue, the first company pings me and says, let's, let's meet for coffee. I'm like, well, I already talked to you and I didn't think you were interested in what I was interested in putting together. And so they pinged me a little later, but we had a really good conversation. And so he scheduled coffee with me, an in person meeting. They happen to be out of Seattle. So an in person meeting. And we put a deal together, like over coffee. And I was like. I came back and I was like, shit, I think I just bought another company. So that was kind of the. That was it, man. That was. So. Yes, two companies, February 1st, closed on February 1st, and then what was yesterday? And then closed on February 24th. So within three, three weeks of each other. Something like that.

Yeah. Pretty good timing. On this podcast because we scheduled this before you closed the second company, so that's awesome. What are the two companies? Do you mind? No, you don't have to.

But, no, not for sure. So Monster VoIP is another one. They're basically a VoIP company, just like G12 Communications. The brand is really cool, though, right? They got a young, hip, cool, cool brand. They have cool technology, you know, And I'm like, I like what they do. And Today we sell G12 into big organizations, hospitals, you know, school districts, government agencies. And that vibe at Monster voip was young and hip and cool and full of tech, right? So you go to some smaller businesses, and I think it's a great brand for. As an example for college kids to go share. So my dream, to be honest with you, is to have a nationwide massive college kid Salesforce for Monster VoIP. Because everybody, every business needs voice services. Everybody needs to transition from whatever they had before to something that allows them this sort of flexibility of hybrid work environment and stuff like that. And Monster voip is that. It's so. It doesn't. It doesn't. If I had young kids selling G12, I feel like it would taint the G12 brand because the G12 brand is, like, solid, like older folk communication. When I say older folk, I mean, like guys like me that have been in the business for 20 years.

You get enterprise sales.

Yeah, yeah, there you go. So it's like enterprise stuff, right? Whereas Monster is like, hey, let's go. Let's go talk to small biz and say, what do you need? Let's, let's. Let's give you something really cool, right? For a good price. Monster VoIP is one, and the other one is Engage Co. And Engage is really cool because they're. They're. It's like. It's like chat technology, but it's a bit different than everybody else, right? So everybody else has got AI and chatbots, and there's a million of them out there. Theirs is like, they're all about, like, hey, let's put a face on the website and show you who you're talking to. And if they're available, let's take a look at their presence. If they're available, you can chat with them right here. It's like exposing teams right? On your website as an example is what it's kind of like. And big customers like the Dolphins, the Cleveland Browns, the ncaa, the PGA Tour, they've got some cool, cool customers. So I'm excited to take that over and rebrand it. Keep the name, but rebrand it and kind of spice it up a little bit. And again, it's in the same space that I work in today. Right. So it's B. B2B sales, essentially for communication applications, Right?

Yeah. I, I love this strategy. I mean, it's basically just growth through acquisition. And with Monster Voice ap, you're essentially entering like a new segment of your existing market. Maybe. I'm assuming it's maybe SMB.

Yeah, it's SMB for Monster Be just straight SMB.

And then we were chatting before, but yeah, like, give college kids sales jobs. That's like the number one skill set. I always tell founders, like, please learn how to sell. It's like 90% of the job.

Yeah, yeah. I get inspiration from. I'll tell you this, when I was a kid, I think I was in high school, going into college, I worked for a company called Cutco. So if those of you know that's a grind there it is, vector marketing. Right. So it's like this whole cut go selling knives to your family essentially, right. Is what it is.

I'm a firm believer that like having like a SCR role or BDR role, you know, the demo setting role, just you're, you're at the bottom of the podem toll in terms of, you know, where you sit in the sales organization, but just what you learn from it, the rejection, just how to, you know, open up a conversation. I think it's just a skill set that just carries into like every single part of your career for the rest of your life.

100%. I don't know if you've been to this website. It's called Microacquire, right? And so they, I know a guy that works actually, they have, they have like, there's a ton of tech guys on there. And I say tech guys, software guys that are building amazing tools that build amazing sort of applications that I look at and go from a. I mean, I'm in, I'm selling to businesses every day and I look at them and go, I see where this fits. I see where this fits. I see where this fits. But they don't have the sales organization or the know how to build a sales organization or the idea to build a sales organization. What it looks like, right, That I feel like there's a lot of those. If I look at the listings and man, I look at the listings every single day, it's like, need a B2B sales team. Need a B2B sales team. Need A B2B sales team. Right? And that's like, that's like over and over. And so it's like when you know how to build sales teams and deliver and do some and do branding, well, this is. It gets to be pretty exciting because I look at this and go, boy, I could certainly leverage, you know, guys that have built and gals that have built an amazing product. And I can take that and I can brand it and either keep them or help them transition to me or whatever it is. Right. So I get it. I get pretty excited about it.

Nice. I love that. And I totally agree. I mean, there's the typical builder and then the scaler, you know, someone who knows how to scale the business. Somebody knows how to put the business together. You know, I guess my next question would be, you know, if you had tips for, you know, sellers. It sounds like if you're on Microquire every day, you're probably looking at a lot of different businesses. What are. If you had to give, like, you know, people looking to sell businesses on microcquire, like, two pieces of advice, what would it be?

Here, here's one that would be interesting because not, I think a lot of acquirers out there, and this is for the sellers. But I'm going to start with the acquirers may not be as aggressive as I am. As an example, like, hey, let's put a deal together. Here's what I can do and here's what I can do, but let's figure out how to put a deal together. Right? I like what your product is. So. So for a seller, I think if you're interested, if you're really interested in putting your business out there and selling your business, um, because particularly those that. That are just kind of hanging on and have already found a different project to work on, like, let somebody know you're willing to negotiate up front. Like, let somebody know this is what you. This is, you know, you're. You're willing to build, you know, good terms into, to attract someone to take it and do something really good with it. I'll give you just a quick example. I found another company on Microacquired that I had was in touch with. They were, I think, out of Italy. They were out of the Bay Area. They were a Y Combinator company at one point. I think they're back in Italy and they have a really, really cool platform. Like their platform, it was, I mean, it was for businesses to create content. Right. And I thought it was really awesome platform. And in my last conversation with them is that they were selling the technology to someone who's going to piecemeal it, essentially, right? And I'm just like, oh, gosh. Because, like, I get your vision. Like when I can sync with an entrepreneur and get their vision and understand what they're doing. And then I related to my experience because, like, I got a gray hair, man, you know, I've been in this space a long time. Then, you know, I'm just like, oh, man, I feel bad that somebody's tearing their, their baby apart, right? So, you know, before you get to a point where it's, it's going to be, you know, put to pasture, if you will, right? Give. Give somebody an opportunity to take it and run with it by letting them know up front that, hey, I'm willing to do something crazy to put it in the hands of someone who can do something really cool with it. So that's. I can. I guess that'd be number one, would be number two. Oh, man. For sellers. Yeah.

Yeah. You can't leave me hanging.

You know, if you, if you put the. And this is, this is, you know, I think put together a good information pack, right? If you put together a good information pack, think about a buyer and think about all the little things that a buyer is going to want and a due diligence process, right? I had the luxury of knowing my business probably better than other guys in my space, right? I think I know my business in the voice space better than the guys at Avonage or Ring or the big guys, right? I know this business very, very well, down to the penny. And so I know, you know, what it looks, right, From a financial perspective. What looks right for me, you know, other businesses, like an online business, like the chat business, I don't know the financials as well as, as I do the voice base, but put together a package that is that you put some time into. It's not just a snapshot of your stripe, you know, your stripe revenue. It's not a snapshot, a picture of your, of your account statements, you know, for your. From your bank, right? Those sort of things are. They're interesting and that's great that you can show that a spreadsheet showing all of your cost is cool, right? If you have a spreadsheet that shows all your cost, having a PowerPoint presentation on your market, right? What the market size looks like, who you're trying to sell to, who's your avatar, right? The people that, when I say, who's your avatar? Who are you selling to? Is it a niche business putting together a really good deck and a really good spreadsheet and then a really good sort of small. And it doesn't have to be crazy big. You don't have to spend weeks on this stuff, right? Putting together a spreadsheet is an afternoon. If you've got the information out of QuickBooks, let's just say, or if you've got your banking info and your billing info, then you can put together a cool spreadsheet based on what Stripe sends you, right? Or Stripe has available to you. And I say Stripe just because it seems like that's where everybody's at. But those two things, a spreadsheet and a PowerPoint and then some supporting information around it, right, Are very powerful. Right? And that's, and that's really it because a lot of the stuff that I see out there, it's, you know, here's our competitors, here's this, here's, you know, here's just our basic numbers, right? And then here's, even when you ask for additional information, it's not a full pack. It's just like, oh, here's a snapshot of this. Here's a little spreadsheet. You know what I mean? But, but give us some more, Give us some more detail as an acquirer. Give us some more detail about who your avatar is, what the market size looks like, what you know, what you know, do you expect, how do you expect to penetrate that market? You know, all those different things would be interesting. So I know, I know the voice space, I know the voice size, so I know how big it is. So I know that if I throw a rock out of my window, I can hit a potential customer. So who are your potential customers? Is it difficult to sell to those sorts of things? Right, But I think if you put together a couple things like that, you have a much better shot at getting at least a decent look from buyers that are interested in acquiring businesses.

That's really, really good advice because have you ever heard the saying, most startups are bought, not sold?

Oh, I haven't, no.

There's the saying, it's not true. It basically means Google shows up to your door and they're like, hey, here's your check. You got acquired. But, you know, a lot of founders don't understand, like, you actually have to, like, sell your business. You have to point out the opportunities, you have to point out the market. Who are you selling to, what's working, what's not working? And for, you know, maybe buyers like you, you're looking at a lot of businesses. So to stand out, even just like in sales, like standing out above your competition, you know, because you're probably looking at one deal or five other deals. And so the more information you can really, you know, show, number one, it just shows you're serious about selling the business. So that really kind of cuts, I'm sure, a lot of time for you and then to, you know, really just openly sharing, like, the opportunity of buying this business. I think. I think that's fantastic advice. So I guess, you know, my next question would be, you know, when. When you. When you think about, you know, where you want to take these two businesses, how far do you think you could take them? If I.

If I could ask, from an AR perspective.

Yeah. Like, are you. Are you looking to grow these substantially and resale? Are you looking to roll them into your existing company?

No. Yeah, I'm not going to roll them in. I'm going to keep them as separate entities. I'll tell you what I think is going to happen. I think Monster, as an example, can scale to. Again, that could be a massively scalable organization. So I think Monster, I could scale that to $10 million in ARR. Pretty not easily. It's been a long haul, G12, as an example, to get past that. But ultimately, I think It'd be a $10 million organization. Like, there's. There's no desire to just kind of get in and get out. Right. It's the space that I understand. I think I'd like to create. I enjoy creating jobs for people. So I think that's, you know, I think that's a pretty cool place because, you know, you treat your employees like. Like you would your family, essentially. And maybe people disagree with me, but I have a good connection with all of my team members. Right. And that doesn't matter if they're here. El Salvador, the Philippines. It doesn't matter, you know, because I've got, you know, employees globally. So, yeah, I think that is there. I think the other one, Engage. Oh, you know, I don't think there's a. There's a. There's a shelf life for that either, because there's so many. So many different businesses out there that use the Engage services. Because, believe it or not, there's the early adopters. Right. You've got the early adopters. I forget what the little graph is. It's called. There's something called some. Some theory or something.

Yeah, it's like early adopters. Yeah. Or early majority. Late majority, yeah. Mainstream and like laggards.

Exactly. So. So you look at this like, take a. And I'm going to use MySpace, you know, not the old website, this, but, but my, the telecom space. You look at that, you go a lot of people, I've been in the cloud PBX space since like 2007 or 8, right. Like a long, long time at my prior company and stuff like that. So you look at that, it's been a long time. Here we are in 2022 and now it's sort of mainstream, if you will. Right now everybody is transitioning to some cloud PBX platform. If it's not teams, it's gonna be, you know, some other cloud PBX platform. Right. So now it's like you're sitting here, you know, 12, 13 years later, 14 years later, and it's finally becoming seriously mainstream. So then I look at this chat business and, and everyone like the fancy stuff is the, you know, the AI chat bots, this, you know, this machine learning chatbot and all that good stuff. But there are millions and millions and millions of normal businesses that are just picking up a normal telephone every single day. You think those guys know what a chatbot is? You think those guys care what the chatbot is?

Right.

If they're changing tires as an example and maybe somebody's coming to the website, sure. But you know, whatever their business is, you know, there's, there's just so many businesses out there that don't know any of this stuff at all. Right. And so putting a chat platform into a business website that is showing the picture of the people that they could talk to to me is really cool. It may be kind of old, but nobody's doing it. It's, you know, their picture is here. I can go click on a picture if they're available and see their presence that they're open to chat with. I think it's really cool. So I think the, the, the shelf life is at least another 10 years for something like that. And I think that could scale to, you know, well over $10 million in ARR on its own.

I love your mindset, you know, so there's a lot of, there's multiple different types of buyers I speak to. Some are, you know, buy and hold. They usually will. Their goal is to reduce expenses, increase profitability. But I love your growth mindset because that's where I usually see most of the opportunity on micro acquirers finding, you know, really good products and then putting together, you know, stellar go to market strategy and executing on that.

Yeah, Scala, why would you like. I don't like to hold. Buy and hold it.

Great.

I can buy and hold and I can make, you know, 10 or 20 or 30 or 40 or 50 grand a month off businesses like this, right? And just kind of acquire another business, do the same thing. But like, my idea is to, like, there's so much more. I look at it just holistically and go, this is an amazing product. I want to get it out to the marketplace. Like, like, let's. Let's get it crazy big, right? And it's not to go and build an organization to sell. I really don't. Haven't thought about selling a business. I mean, I've got G12, and I think G12 is an amazing business. And I wake up every day loving what I do.

I can tell, like, it's like, I can tell you're a B2B sales guy. And I dig it, man.

That's it. I was a sales guy forever, turned engineer for a long time, started slash founder, and then now, like, I've converted to, you know, here, let's run operations. I actually just changed my title to chief revenue officer now because I've got some smarter people than me now that run operations inside of G12 as an example. And I'm like, yeah, this. Thank goodness we got much smarter people than me. I hate to be the guy that knows more than somebody because it's like, that's terrible because I feel like I'm woefully inadequate in that space. So, you know, it's pretty. It's pretty fun, man, when you scale an organization. So, yeah, I wake up every day loving this stuff and go, how do I grow other businesses, you know, that, that I, you know, could use my skill set.

That's awesome. Well, I got three more questions for you, and then I'm. I'm gonna let you run. But this is, this has been fantastic. The first question. So these are kind of just the last rapid fire. But if you had to give like one tip to just entrepreneurs in general, what would it be? I know that's super broad. It could be literally anything. Maybe it's learn sales. Maybe it's just if. If someone came up to you as an entrepreneur looking to start a business, what's the one piece of advice you.

Give them if they're looking to start a business? Don't do it. I'm just kidding. If they're looking to start a business, it's harder than you think. Like, it really is. Like, the grind is real. I'll tell you what, for everybody that's built a successful business, you've got to. You gotta, like, tip your hat and go, wow, that's pretty. That's pretty impressive because you've created something from scratch, right? And built something that people are buying now without your involvement. And that's really cool to see it evolve like that, right? Um, I would say prepare for. It's a longer haul than you think. If you think you're going to go build a business and inside of 18 months or two years, like, have money flying in the door, you're going to just like, yeah, I'm buying my Ferrari next week. This is exciting. I get to call myself an entrepreneur Entrepreneur on my LinkedIn profile and stuff like that. It's harder than you think. And it takes a lot of different people to help you be successful. And what I mean by that is this. I started. I can't tell you how many businesses I started semi started growing up, right? I sold. I had a domain called cigar box.com when I was like 18 or 19. I was spamming people before. Before can spam as an example, right? I did, like, you know, I don't know, I did a bunch of little things. And so none of them really materialized and they didn't materialize because I didn't have the right skill set from a business perspective, from a financial perspective, right. And when I met up with my partner at G12 Communications, my partner is a financial and legal.