The Route to Wealth and Freedom That No One Talks About with Paul Van Metre, ProShop ERP

I've just released a book, from grassroots to greatness 13 rules to help you build iconic brands with community led growth. We cover stories from big brands and small, all the way from Harley Davidson to HubSpot to Nike to Saster to Gainsight. To give you the frameworks to build a community led business that will take you from an obscure idea to a movement to a cult like phenomenon. Check it out at from grassroots to greatness dot com. The digital copy is on for 99 cents.

Making sure that you are building your company for the right reasons to support your clients and be all in on client success is so, so important. If we were trying to find product market fit and had something that people didn't really love and we weren't just hyper focused on helping them be successful, it's would have been a much more challenging process, you know, and we were fortunate that we built it to solve our own problems. So we were very intimately in the weeds with the particular challenges that our clients have. Since I'm the one that's on the front lines with them, I hear it often, you know, firsthand when they have something they really want or a feature they need or a new thing in the market that we hadn't thought about before, that's really your primary focus and the rest will kind of work itself out. Foreign.

I need some traction. You need some traction. Let's get some traction.

Hey, what's up innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host, Lloyd Lobo. We're a community of over 100,000 people just like yourself on a mission to help you get the methods, the money and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio, Asana, and many more.

Hey, Traction fam.

Exciting episode today. A little unconventional. The media has perpetuated this addiction to unicorn porn. I always say that, Right?

Right.

VC funding, let's chase VC dollars. Let's build this billion dollar company that is overvalued. And then we keep raising and raising, but in reality the world is run by horses, camels and donkeys that run the day to day business. And I'm excited to have Paul here, who is the founder of Pro Shop erp, built this company to scratch his own itch and then eventually over time built a very scalable bootstrap software company. And not too long ago raised $32 million from growth equity. And we're going to dive into all things bootstrapping and also the alternate Path to wealth and freedom that nobody talks about is like, hey, do you have to chase VC dollars? Or is there another way to live the life you want to live? So, Paul, welcome to Traction. Thank you so much for joining us.

Thank you, Lloyd. I appreciate being here.

Awesome. So you know you've got this unconventional story here and I say this a little tongue in cheek, right? Because back in the day, unconventional was taking lots of venture capital to grow the valuation your business round after round, right? The conventional method of growing business, you get customers that pay you, you make more money than you, you spend and you grow profitably. That was a conventional way. All of a sudden in 2023, that style of growing business has become unconventional because like I said, the media has perpetuated this addiction to unicorn porn. But I would like to dive into your journey, introduce us to one. What is pro shop erp and your journey, because it started out by scratching your head. You were running a manufacturing company, how did you go to software company? So walk us through the journey.

We certainly didn't expect where we would end up being today when we started. So I'll go back a little bit. I am going to say we instead of me because this has been very much a journey with my partners and my co founders together. So in 97, some friends and I started a machine shop right out of college. So machine shop, for those that aren't familiar, basically takes chunks of metal typically and curves them into precision shapes. And that basically is required to build anything in the world today. Every physical object made by humans starts with machining one way or another. So it is absolutely the foundation of the economy. The small businesses, small to medium sized businesses typically that make up this market. So anyway, we started one of those right out of college, funded by a second mortgage, grew that company for many years and during that time we started needing some ERP software. We came to learn that this was called. And when we did our own research and went out on the market to find a product, we just couldn't find anything that we thought was worth buying. So rather than buying something we thought was subpar, we decided to just build something for ourselves. Quite honestly, with no intentions of selling it to anybody else. We plugged away, just kind of heads down, building the company, growing the company and built this, you know, what turned out to be a fairly mature software product. We started building a software in 2000. About nine years later, our biggest machine shop customer saw the product. When they visited, asked us if we would sell it to them. We said no at first, but they were convincing enough that we eventually gave it a shot and it completely transformed their company and really sort of got us thinking that maybe we're onto something. So we took a few more clients over the next few years and then eventually decided that there was a bigger opportunity to build software than to make machined parts.

What an epic story. But some key learnings here, right, that is relevant for all. One is being maniacal on your ideal customer profile and the problems they face. In effect, you were your own customer for this, solving the pain points. And then your customers started seeing this and asking for this because nothing like this existed. And begrudgingly you sold them. And that, you know, proved over time to be a bigger, more scalable business than running an actual machine shop. And I see you're running a podcast called Machine Shop Mastery, so providing value and building a community that extends beyond your software to make your customers successful. So this whole journey to me sounds like rooted in customer love and helping your ideal customers become successful.

Absolutely, 100%. That is it. You know, we lived and breathed the problems that we were trying to solve for 17 years. That's how long we had our machine shop. And we became just incredibly passionate about the need for these small family run businesses typically to thrive. Like I said, they are the absolute foundation, the bedrock of the economy. Everything in the world starts with machining and it's a very difficult business. It's highly capital intensive, it's very competitive, and the margins are typically quite slim. And most of them are run by people that are expert in their craft, but they're not necessarily really brilliant business people. And so they need a lot of support with good processes. And it's traditionally, it's a pretty, at least on the sort of digitization side, a little behind the times compared to some industries. You know, there's a lot of reluctance to give up paper and adopt digital technology, but that's shifting now, which is great. But yeah, we absolutely are totally focused on the need to help our customers thrive. And so yeah, I started this podcast about a year and a half ago to just basically share with more experienced larger shops their learnings and teachings that they can provide to people coming up in the industry or wanting to start a shop. And it's been a lot, it's been a ton of fun to do that.

What were some key learnings in the early days? What was the realization, number one, that, man, I need to build software to solve these pain points that I'm facing in the machine shop. And at what point did you hit the this realization that my customers need.

This too, it was originally for ourselves. You know, immediately we started needing systems to organize things in the shop. Right. We needed ways to, quote, work. We needed ways to accept orders and manage orders and procurement and scheduling and all the shop floor operations and quality. And so we had a ton of needs and we started basically just billing spreadsheets. Uh, my partner Kelsey was sort of a, a whiz at Visual Basic macros and he built all sorts of really fancy Excel sheets. But those quickly realized, we quickly realized that was not going to scale. So as we did this research to find some better software, we just couldn't find anything that we thought was worth a darn. So we hired a guy named Matt to basically build something for us and he ultimately became the, the CTO of Pro Shop and one of the co founders here. But we genuinely just were completely heads down for years and it wasn't until this other customer approached us and asked us that we realized that there was actually a bigger opportunity and that a lot of companies were had the same exact pain points that we had and they just hadn't figured out a way to solve them. So it was definitely an eye opener to see the impact that it had on that company and then the next, you know, two or three that we brought on, it's not surprising that they had universal problems like we had because they're in the same exact type of business. And yes, we have been hyper focused on our icp. We're not really deviating from that. We are just very fixed on who we want to serve, who we can serve, and we're even quite selective in allowing companies to sign up with us. We don't allow anyone that wants Pro Shop to get Pro Shop.

I was going to ask you what was the initial goal you started with and how did that evolve over time. But it seems like you had a completely different goal in mind, which was to build a profitable machine shop and run it and then over time it changed into becoming this software company. So that happened in 2016 or sometime.

Around 2016 when your largest customer asked.

You to buy the software that was actually in 2008. Nine. Yeah. So we ran the company, we ran the machine shop for several more years after that.

Awesome. Awesome.

And what was it that made you.

One begrudgingly sell them the software and then how did you spot the opportunity in B2B SaaS being this big thing over time?

Well, again when they signed up with us and you know, they were one of our biggest customers from the machine shop side they were pretty convincing that they really wanted to get this and just how big of a difference it was compared to the what the software they were using to run their company at that time. So after deciding we would give it a shot, it was really their results and then their almost immediate wanting to refer us to other manufacturers that they worked with as well, AKA our direct competitors who were suppliers to them as well. And also just very similar results with those companies. Just really impactful increases in throughput and cost reduction and efficiency. And so it was through that few year period that we really realized if we're having this much success with just a very small handful of shops, and we know there's probably about 20,000 of these companies in North America, there's a bigger opportunity here and we could easily also we started seeing the glimpse of what an impact it had on the personal lives of these people. I often get the question people ask me, well, do you miss making parts? Do you miss the machine shop side? And yes, I do. It was really fun to be hands on and to make precision durable goods that go into space or into airplanes or into medical devices. But when you deliver a batch of good quality parts on time, you make the buyer's day, you know, the procurement agent or whoever bought it from you, you make their day, they're glad they came in on time. But it's a much different thing to have an impact on how an entire business runs, reducing the stress level, reducing the chaos of these companies, these individuals. And that just feels incredible. So I think we got kind of hooked on having that kind of impact on people and wanted to do it more and more.

How much was this biggest customer paying you, if you don't mind me asking, at the machine shop? Pre software. And what is the ACV annual contract value for your software? I'm just curious.

That company, we did over a million dollars in revenue with them over several years. So they were a couple hundred thousand a year? No. Maybe, yeah. A hundred thousand a year, maybe a little more. A couple hundred. But I mean our ACV with our clients is about, call it about 20,000 a year. So definitely less revenue than we were getting on the machine shop side with that one company for sure.

But definitely recurring. And so the total value over time increases and across multiple customers. I guess with the machine shop you got to go out and win new business every year, isn't it?

Absolutely. And like I said, the margins are very slim. Usually the net margin on a machine shop is in the single digits and maybe double digits. If it's A really well run company. But yeah, it's a difficult business and you're constantly trying to find new clients. It's extremely capital intensive. You know, the machines that, that we would use to make these parts cost anywhere from a hundred thousand to a quarter million dollars a piece. And you need to keep buying more machines and hiring lots of people to run them. So yeah, it's a challenging business for sure.

Definitely. So like with the software side of things, I mean you've got high gross margins probably in the 70s, 80 percentile. And then the recurring nature of it just makes it overall more valuable. I'm glad you chanced into this and saw the opportunity. But before you said in the early days you took a few customers just to validate it and they were seeing great value, they weren't churning. So you got to product market fit.

How did you then make the transition.

From a bunch of guys running a machine shop to being software founders? What was the first thing you had to learn? You probably needed to learn how to sell software, right?

Well, first we decided to sell the machine shop. So we went through a process of finding sort of an M and a firm to market us and went out on the market, found a buyer and sold the shop. And we actually sold the shop in 2014. But we didn't actively start selling Pro Shop until right at the beginning of 2016. We had some additional development we wanted to do to make it more universally scalable for, you know, for many clients. But yeah, we definitely had to learn how to sell software. It's a different process than selling machined parts. Although at the end of the day it's really just about relationships and people and having someone feel confident that you can solve their problems. And I've always, I was sort of the sales and marketing guy at our shop and still at Pro Shop today. And I always had a very collaborative, consultative type of selling process, just being transparent, showing what we could do, asking about their problems and just having a human to human conversation about how we could potentially solve that.

I think another key learning here is that you really understood the customer well.

Right.

You live that ideal customer profile. You are eating, breathing, drinking, sleeping, absolutely what they were. So it felt like your tribe, you're part of this community. So it didn't feel like you were.

Selling to them, but more like helping.

Them overcome their problems.

Many of which you faced and overcame yourself over time.

Absolutely. You know, we felt like we happened to stumble across or build something that really worked well for us and just were sharing what we had built with Other people and seeing if it also, if they had the same problems and same challenges. And we already knew that they did because we knew, like you said, we lived and breathed our own industry for 17 years. And even though all shops are different, they're remarkably common in the common challenges that they have. And this, the challenges that I'll call legacy software products didn't solve. So, yeah, it just felt quite natural and just talk and shop with people and that I think they appreciated that as well. The fact that we sort of had walked in their shoes and came from a bootstrapped machine shop funded by a second mortgage, a lot of them could relate to that because they had humble origin stories as well. And it just seemed to resonate. It was a slow 2016 was a little bit of a slow ramp. We brought on maybe five or six customers, but then 2017, it really started taking off.

Now what's interesting is though, given you came from an unconventional background running a machine shop extending beyond founders selling to the ICP that you live, to the ideal customer profile that you live now, you have to scale the team and hire people who are the first few people you hired. Like, how did you scale the sales team? How did you scale customer success? Walk me through the journey of the first few people you hired beyond just the founders going out and selling and onboarding customers.

So basically when we sold the shop and moved into software, there was four of us that moved over to the software side. There was sort of the three founders, me, Kelsey and Matt and Matt's brother, who was one of our main developers as well. And so, and we had four customers at the time, so there was four on four. We could play one on one defense is what I like to joke. But quite honestly, the very next people we hired were implementation people. Implementation in an ERP system, full front to end business system of record. It's intensive, takes a lot of training, takes a lot of. Takes a lot of work. And so we were very lucky as well that we had a pretty good network of people that we knew from our past. And so it was not hard to find people that already knew pro shop, that believed in what we were doing, that were really passionate about the industry and came on. So we hired several people in that area. We started hiring some people in client success and support. I will say that we were, I think, pretty early. We invested in a culture leader when we were about just over 20 people in 2020. So about, yeah, about four years in, we had about 20 employees. Right as we got into Covid, she actually Adrienne joined us like a month before COVID hit. And I think that was as a takeaway. That was one of the best people investments we ever made. Not only is she personally just incredible, but having a really fanatical focus on culture and values and mission is just so fundamentally important to recruiting and finding the right fit people. And so we grew then, you know, came out of COVID with well, about 85 today, but just grew a ton during that period of time with almost zero turnover because we were so focused on culture, so focused on fit, and just reinforced our values and our mission. And we're finding people that really cared about that as well.

What were your key learnings? I truly believe that culture is the leading indicator of growth. If you treat people with love and help them grow, they'll treat your business with love and your business will grow. A lot of people, they ignore things like values and culture in the early days. It sounds fluffy, but honestly, that's the thing that comes to bite you, right? Because then you have people just operating under all kinds of values and principles and there's no alignment. I think one of the biggest reasons why companies and relationships fail is lack of alignment. So I'm really glad you brought it up and you started with that as being one of the key things. What were some of the important things when she came on that were instituted that help you growth? Over a hundred people with near zero churn.

Yeah. So of course we're a pretty virtual company. We have employees all over the place. And so having people feel really connected even when they were. And keep in mind, during COVID everyone was completely isolated. Everyone was stuck in their homes. It's easy to feel isolated and alone. So we did a lot of very conscious work on making sure that we as a distributed virtual community were still pretty tight with our chat channels and happy hours that we would do a couple times a week and just getting together and talking and laughing and sharing things, making sure people felt supported even on how they're doing in their lives outside of work. Just Adrian was hyper focused on just making sure people felt supported by us and we were doing whatever we could to help them through Covid. And as we got past Covid, just continuing to make sure when she first started, we did not have really well defined core values and in a really well written mission and vision statement. So we focused on those things and that became pretty foundational for our hiring and our growth and our decision making over the next many years. And just from as simple things as like having people have incredible Onboarding experience in the first week or two with us, one of our core values is kindness. And we even put that into our job postings. You know, we're looking for kind people and that that word jumps out to the right kind of people, and they apply. So people, when they onboard, they say the experience is overwhelmingly positive and just so much friendliness and warmth and affection and welcome, and they feel just, just part of it right away. And I think that's super important. Building the systems to make sure people feel supported right away and feel connected to their team members. We started a pro shop pal kind of program where people got paired up with a more senior tenured employee as sort of their. Their pal. As they onboard their first few months, they could, you know, meet weekly and connect with each other and learn and ask questions. And that was quite successful and continues to this day. So, yeah, just really doubling down on all those things about culture, you know, and it's funny, when I started my own podcast, I figured it was going to be more about machines and metrics and things that are more technical. It's turned into mostly a podcast about culture. It's really been remarkable. So I completely agree with you. There's just a huge correlation between the companies that are successful and growing and how much they invest in culture.

I couldn't agree more. And I have seen companies fail entirely because they haven't invested in people and culture. And I think one of the key elements what I found is if your values are lip service, for example, if hiring and firing are not according to values, people will tune out and they'll just think it's lip service. For example, you say we don't tolerate toxicity and then you keep that one salesperson who's just being a D bag and not upgrading the CRM. Or you say we are very analytical, but every time there's an employee review, you're on your phone and you're not engaged. It's lip service kind of thing. So I like that you brought that up. Now you raised 32 million. It wasn't venture capital, it was growth equity. Right. Or P Intel's growth equity. What made you decide to take the money at the time you did? And why did you pick growth equity over vc? Maybe break that down for us and what that meant for the company.

So we bootstrapped from 2016 until 2020, mid 2023. And, you know, starting with four clients was just a nice sort of level of cash flow that we started with. And then we onboarded enough clients early on with a still Pretty lean scrappy team that we were cash flow positive from very early on. So we were able to fund our own growth out of cash flow without taking any external money for you know, most of that period of time. At the end of 2022 we were starting to see our bank account dwindling because we were needing to hire people at such a fast rate because we had so many clients signing up and they really needed that support and that onboarding, that client success. And it's always really important to us to kind of maybe over staff in those areas as opposed to being understaffed because especially with an ERP type product, you could have the best product in the world. If it's not implemented well, it's not worth a darn. So it was really important to us to make sure our clients had a really good experience there. So basically we kind of hit the growth rate where we just couldn't continue to fund it out of our own cash flow, out of the ARR and the one time fees from our clients. So we realized that. And I'll also say when we first got into the software business we thought it was going to be sort of a much smaller, more nichy little lifestyle business and it was not going to have the kind of scale that we ended up having. And I think that's because we had such incredible product market fit because we built it for our own solving our own problems which turned out to resonate with a lot of people. So the, the demand was bigger than we expected. And I think through this period we realized that we did have the opportunity to very likely become one of the market leaders in our space and we just didn't have the cash flow to do it. We were getting to a size that we were starting to eclipse the size that we had built our machine shop to in terms of revenue and people. And so we're sort of in uncharted territory is there as well. And just decided that for those reasons we also some of our competitors are taking some pretty big funding rounds and we realized that we could serve our clients better and serve more of them if we had a partner alongside with us. And of course can't ignore taking some chips off the table was definitely an important factor. You know, we invested a couple decades into this product and it was still a lot of that value was just virtual. Right. So for all those reasons we decided that the timing was right and I will say it was kicked off and I just. This will go down in the history books, I'm sure as many SaaS companies they're constantly being hit up by VCs and PE firms and almost on a daily basis getting emails and LinkedIn contacts and whatever. And for years we just sort of mostly round filed those like, no thanks, we're busy, we're fine, we're doing great. Occasionally if there was something that was of interest, we'd have a conversation and ask a little bit about with them. But mostly it was just for idle interest, really. No intentions of taking any funding. But Mainsail, who was ultimately who we went with at one point in late 2022, they said, hey, we're going to be in the area. Which is what they always say, would you be interested in having breakfast? And just a chat and said, sure, that can't hurt. And we had shared some very rough high level numbers with them and right in the middle of breakfast they opened up their briefcase, pulled out an offer and dropped it on the table unsolicited. And that definitely sort of shook things up a bit because the number in that, on that offer was way more than we knew our company was worth. Like it just, it wasn't even in our realm of consciousness about what, what was the value of what we built so far. We were just heads down trying to serve our customers and build our product. So with the culmination of, you know, we were getting tight on cash flow and not being able to grow as fast, this sort of unsolicited offer, we decided that maybe this was the right time to start a process to look at some funding in a, you know, and we, everything was on the table from just deciding to do debt to equity or, or whatever. So we did start a process, we ran it ourselves. We did not hire a banker to do this with us. We felt like after selling our machine shop, we had enough experience selling a business or obviously we were, we're not selling the company at that time, but in enough context and enough experience that we wanted to do this ourselves. So we did it. We basically reached out to, you know, maybe about 10 of the firms that had reached out to us in the past. That kind of seemed different enough that they sparked our interest. Maybe it was their investment thesis, maybe it was the people who knows what. So had a few conversations and then ultimately narrowed it down to three or four companies that we went into sort of the loi stage with and ultimately chose Mainsail. But we did a ton of reference checks and deep thinking and meeting and talking and deciding if this was really the right thing for us and decided ultimately that it was. And Mainsail Came out on top.

I've just released a book from grassroots to greatness 13 rules to help you build iconic brands with community led growth. We cover stories from big brands and small all the way from Harley Davidson to HubSpot to Nike to Saster to Gainsight to give you the frameworks to build a community led business that will take you from an obscure idea to a movement to a cult like phenomena. Check it out at from grassroots to greatness.com the digital copy is on for 99 cents.

Was the final offer after running the process better than what Mensail put on your table before you start the process?

Yes, it was quite a bit better. Yeah.

I'm glad you did run a process in many ways similar to what we went through at Boast, right. Like during the pandemic through our traction community that we run Radian growth equity firm came to the table, expressed interest, we never wanted to raise. We had bootstrapped this company to near 10 and I didn't even know what growth equity was. Yeah and we're like when they expressed interest in investing we're like we don't need investors. We're a profitable company and was at the point where the founders we could take a hefty paycheck. And then when they explained what growth equity was it made my jaws draw because I'd only worked or been a part of venture backed companies living in Silicon Valley and I knew the PE hustle was always very strong. It was like massive earnouts and long periods. I'd been a part of a P company so that was carry and the VC was man another journey after bootstrapping for 10 before you see any liquidity. So the growth equity made sense because you know, you stay, you have enough skin in the game to play the long game and then you have also enough chips off the table to deal risky in the short term. And that made a lot of sense. Now I'm curious if you're open to sharing what kind of revenues were you at before this growth equity became a reality for you guys?

I'm not going to go into too much specifics but we were above 5 million ARR somewhere in that range. I actually don't track our revenue as nearly as closely as they probably should which actually I think that's where it.

I think becomes a reality. Right. I think when you're looking at private equity, I think if it's below 15, 20 million they're not very interested and the VC wants to see the triple double path to a billion and a growth equity Fund. It becomes interesting when you just start seeing north of 5 million majority bootstrap, clean cap table capital, efficient growth and they want to probably 5 to 7x their investment in like 5 to 7 years or something in that range and it becomes a reality. It's interesting now you went from being machine shop operators to being software founders to now being investment bankers running a process. What made you decide that hey, you're going to run the process yourself versus hire a banker and perhaps like some tips on optimizing or running a process. Like how did you come up with the list of partners? How did you reach out? Perhaps just some tips for others listening here.

Well, first I will go back and just double click on some things you said we definitely didn't want to do VC nor were we growing fast enough for them to be interested and we didn't want to force higher growth than we were already comfortable with. Right. We were growing, you know, 50, 60% a year. That seemed safe to us, that seemed manageable to us. We didn't want to go triple digits and like stress the system and possibly have our clients have a less than ideal experience with us. So that was a big part of us not going down the VC route as far as the process we ran. I don't know, we just, we've always been kind of do it yourselfers where it makes sense. We decided that we thought we had enough experience already had this sort of pretty long Rolodex, if you will, of companies that had reached out to us in the past, kind of organized them into a spreadsheet with some of their metrics and some of their other information. And it became clear that there was half a dozen or so that seemed like it was a pretty good fit. They seemed pretty focused on the type of company that we were, the size that we were, the kind of investment they were interested in making. And for us it was also really important for us to take a minority investment. That's also, that's somewhat atypical of growth, growth equity. But for us that was a pretty hard and fast thing. So that also filtered out a bunch that were not willing to do that. And then I'd say one of the biggest things is just really be organized in the way that you are structuring, you know, the information of who you're dealing with and then get the timing right. You know, it was just really important for us to provide our information in a timing that allowed the Lois to all come together over a few day period because that gave us the opportunity then to really Step back and assess them and decide which one we wanted to kind of go down the path with. And we did lots of back channel references on every. All one of the. All of the sort of finalists, if you will. I'd say that's crucially important. Looking at the culture of the company, looking at the reputation is just of paramount importance. You know, there's so many horror stories of companies that have gotten involved with PE firms and that the experience turned out to be pretty bad, right? They didn't represent themselves quite the way that they ended up being. And so that's why we did a lot of back channel references reaching out, looking for companies that had worked with them in the past and maybe exited, even if they were not on the list of references that we got. And you know, the firms that we were down selected to were pretty high quality firms with good reputations, right? So we could have taken one of four offers and they all would probably would have been fine. But mainsail absolutely just stood out from the rest in the fact that their reputation was just absolutely impeccable. We could not find a single person that had anything bad to say about them. And then the fact that they were just very focused on our exact type of situation, you know, founder led, bootstrapped vertical niche ERP products, right? Like it couldn't get more perfect for what we were. And the fact that our sister companies, if you will, in the portfolio were other ERP products for other niche industries like heavy duty truck repair and flight schools and law firms and construction companies and commercial linen services and liquid waste management, very similar types of industries. And the fact that their products were sort of full stack, front to back run the whole business type of products meant that they had a depth of experience in exactly what, what we were about to go face, growing from 5 to 50 million or whatever it might be. And that was very comforting that they had. And then of course the other big thing in main sales favor was they had good half or more of their whole company is their operations team, right? They are experts in very specific parts of the business, whether it be implementing, I know, payments or sales and marketing strategies or acquisitions or operations or dev or HR or recruiting. So they just had a really big and really strong team that could help us in very much of a pull model, right? Not there to tell us what to do. They're very clear we're the experts in running our business. They will be there for us to support us and give us advice and give us support if we need help with anything in particular. So that was just one of the reasons that we ended up going with Mainsail as well.

Fantastic. The money, the chips off the table was good, the valuation was good. It was like you found your tribe, it checked all the boxes because I think that last one that you said, like they are focused on vertical erp, niche specific. It's like it's near impossible to find a fund that is that deep. And then you feel like, hey, I've found my tribe, right. And it just makes it that much easier. But ultimately though, if the financials, the economics doesn't make sense and everything else goes out of the window. So I'm glad all of that worked out and a lot of our considerations when we were doing the growth equity surrounded boasts were also very similar. And I can't stress enough, a lot of people just go call the references. But what you don't realize is when you bring on an investment partner, it's like a marriage like this journey just elongates another 10 years and you won't just get into a marriage with a stranger. And so you wouldn't call the references they gave you. You should absolutely back channel. You should find people in your network that they've taken money from them, been through exits, been through failures, all of the above, and just contact them to your network to back channel. And that is really important because people just give you the most glorified references. Right. And a lot of what people don't watch what they say, watch what they do. Their actions matter a lot. What did the due diligence process look like? Because a lot of founders that are bootstrapped running capital efficiently, they don't have the best systems in place. Right. And so what did you, what were the ducks you needed to get in a row? I still have PTSD from our due diligence process. But, but I'll take advice from you on if you had to do this again, what would be the top things or advice to somebody who's about to go through it? What would be the top things people need to have in place?

We definitely still probably have a little bit of PTSD as well. Is, you know, due diligence is a very intensive process. There is nothing that you can hide the firms that they hire to do, you know, to do legal and market and accounting. Due diligence are so good at what they do and will get into every single nook and cranny of your whole company. So if you got skeletons, your closet, don't assume you can hide them. Right. It's just not possible. So we thankfully, and I'll give full credit to my partners as for a lot of this, we were already a pretty process, systems driven type of company sort of living what we preach. That's what we're all about with our own software product is building really scalable business processes with Pro Shop. So we actually largely run our own company on Pro Shop, which is interesting. So I'd say the due diligence, although it was really intensive and challenging, it was also very validating in a lot of ways that they said, you know, you guys have a lot more process than we normally see of a company of your size and scale. And so they were quite pleased with that. But if I would say one thing that we could have focused on a little better is having probably better software for revenue recognition. We were kind of figuring out ways to do that in our own product, built some features to track it and it just was not turned out to not be super great. So we're implementing chargebee right now and having something where that's really solid would definitely be something I would make sure to recommend to people. But you're absolutely right. Just in general being process driven, being focused on systems and I'll also shout out. We were members of SaaS Academy for a long time. We actually still are. And some of the things we learned from Dan Martell and SaaS Academy were really instrumental in building the systems, especially on the sales and marketing side. That mainsail really appreciated and made that process fairly straightforward where they didn't feel like they had to come in and you know, overhaul whatever we were doing. Cause we already had a lot of good stuff in place from what we learned at SaaS Academy.

Fantastic. Dan's a great guy. He's been on the podcast as well.

Yep.

And one of the things also I'd like to add is a lot of bootstrap founders. We stinge on a couple of things. One of them being like hiring a finance person because they are very expensive and this is the one thing that can bite you in the ass during your due diligence. And especially like what you call is like SaaS revenue recognition. But effectively what it is is the modeling of how your recurring revenue flows. Right. Your sort of churn retention, renewals, upsells down, sells to the T at the customer level. Jangling together when you have hundreds of customers year over year, historically and forward looking is a pain and hopefully chargebee fixes that for you. But we had to jangle that together and it was extremely painful and maybe we could have short circuited hiring a cfo, outsourced nonetheless, who had been through that journey before for many customers, because that was everything else. Like your P and L is your P and L and all of those stuff are easy to get. But that customer file of three, the flowing of, you know, your recurring revenue upsells down, sells, cross sells and cancellations. And if you've not purchased a Revrex software, which at the time probably there were a few options, they're very expensive.

Sometimes they're very expensive.

It's a lot of very manual work. It seems like we have similar ptsd. So this is, this has been a good, good jam here. Now what are you signing up for when you do a deal like this? Like, do you foresee staying active in the business for the foreseeable future? What succession planning, how do you think about now as you look into the future?

We are more excited and more pumped and focused as ever in becoming the market leading product for our niche. So yeah, the three of us are very, you know, as active as ever all day, every day. The day the funds hit our account it was just business as usual. The next day just doubling down on building the best product we can and serving our clients the best we can. Just with a bit more resources now and a bit more backup of financial security expertise in our corner and just feeling really excited that we have probably the best shot of any company out there in becoming sort of the most widely used, most widely known product in our space.

And your energy levels are up because you don't have to worry about life expenses. In fact, you can live a little. So all of that changes and you can truly play the long game. That's why I love the whole growth equity model, right? It's not quite PE where you sell everything, earn outs and it's not the VC where you're signing up for triple double. And on a journey with no foreseeable outcome, or rather a zero sum game here, you have the best of both worlds. As we close out here, did this feel like magic to you? Like came out of nowhere? Did you have expectations going into this? Like, how did it feel?

It felt pretty special to be honest. Mainsail, all of the firms were highly selective, really only would be interested in investing in a really good quality company. But Mainsail in particular, you know, they speak with about 3,000 companies a year I think and they invest in like three or four. So if you make it on that short list, you can feel pretty darn good that you're doing something right. And the fact that we were just head down for all those years just really focusing on building the product and supporting our clients the best we could. It's just validating that we had done pretty darn well bootstrapping ourselves. And it's nice to have a level of financial comfort that will be fine no matter what. And we can almost then just make bigger bets on being more aggressive on what we can do with the company. One of the things that just resonated back many times over as we did all these references was people said that the amount they Learned in the 3, 4, 5, 6, 7 years they were with Mainsail, or still are with Mainsail was just the most incredible learning experience of their lives. Right. They Learned more in 5 years than they had their entire career before that. Just being in this ecosystem of really high performing companies that are just world class with what they do, being supported by a team that is equally world class is just kind of amazing. In fact, the timing of our deal went about a month longer than I was hoping for. We were hoping, I was hoping we were going to close by my 50th birthday. We weren't quite there. We were a few weeks over. But the point I was just going to make is Mainsail does several growth summits each year for sort of leaders in their respective areas, you know, CTO summits and sales and marketing summits. But we went to their CEO summit even before our deal had closed because it looked pretty certain. So they invited us to come down to that. And just the people that we met that were current portfolio members, independent board advisors that were on different boards with them, their own team, it's just the most incredible, high quality group of people that had probably ever seen in one spot all at once. And it was just really exciting and encouraging to know that we were going to be able to, you know, be a part of this group and learn from these people that just made it even more certain that we had made the right choice and that just, it was going to be a really fun ride for the next many years.

Fantastic. You know what's really funny? We have similar stories. For years I brought home no money.

Okay.

My wife's an ER doc at Stanford and when we started the company, actually my co founder's wife was articling legal and my wife was in residency. I was in unemployment. And like literally we made no, like not significant money. Sure, like, you know, our wives are paying the bill.

And for years I told her as a joke, I'm gonna retire at 40. And then July of 2020 happens.

And I jokingly tell her all our lead gen at boast was through hosting events now can't host this Traction conference and other events anymore. And so we started taking everything online rather than doing a big virtual summit. Started doing two live webinars a week. And then some stress happened. I still remember in July. And I'm like jokingly tell her, listen, I'm going to retire at 40. And she's like, Lloyd, you turn 40 in three months, right? Or four months, October.

And there was an opening and we hosted a small event and that's where Radian, the growth equity guys came to. And that's how it started. And we signed up for a 30 day DD process and obviously it extended to like went into October, but I kid you not, the week of my 40th birthday, the Wire hit the bank account. And it's something I've been saying since we got like for 10 years I'd been saying I'll retire 40.

And it's awesome.

It's a frame of mind, right? I mean by no means we're retired, but it's like ability to do what you want, where you want, with whom you want and when you want kind of thing.

Freedom in a way.

And they were shocked. Like you manifested this thing. So I gave you the.

Yeah. I'm a firm, I'm a firm believer in setting a vision and writing it down and believing it'll happen and pushing for it. I really do.

I never believed in it, but when it happened it for me it felt really magical, the timing of it. That's why the only reason I brought it up is because you said 50th birthday didn't quite hit there, but just after and, and like for me it was like around the same time as well. This has been such a great conversation. It just feel like we're living parallel lives in many ways. But as we close out, any final words of wisdom for bootstrap founders striving.

For growth and profitability, making sure that you are building your company for the right reasons to support your clients and be all in on client success is so, so important. If we were trying to find product market fit and had something that people didn't really love and we weren't just hyper focused on helping them be successful, it would have been a much more challenging process, you know, and we were fortunate that we built it to solve our own problems. So we were very intimately in the weeds with the particular challenges that our clients have. Since I'm the one that's on the front lines with them. I hear it often firsthand, when they have something they really want or a feature they need or a new thing in the market that we hadn't thought about before, that's really your primary focus and the rest will kind of work itself out. And the other thing I'd say, if people have co founders, just make sure you're super well aligned and you're just really tight. You hear so many horror stories of founders that kind of implode. And Kelsey and Matt myself now have been working together, well, Kelsey and I, for almost 30 years, Matt for 23 years. So I can't imagine going through this process alone. You know, it's just been incredibly comforting to do that with those guys. Just the focus on building the culture. Even great founders can't build a company that's enduring and high growth by themselves. They need to have a team that is fully bought into the vision. And so just making sure you're taking care of your people really empathetically, with a lot of kindness and love, as you say, that's going to make it all work out in the end.

Amen, my man. If you treat people with love and help them grow, they'll treat your business with love and your business will grow. And the other thing, what I love about your journey is you didn't set out to build society's definition of success. Chase Venture Capital and all of this stuff, you focused on building your own definition of success, focused on what's best for your customers. And ultimately there's more than one way to win. And I'll end with the quote, with what I started is the media has perpetuated this addiction to unicorn porn. But in reality, nobody talks about all the overvalued companies that raise a 30, 40, 50x during the pandemic. But now the market has gone down and they have to literally give up their cap table if they want to raise again. And these sort of silent shutdowns that are happening and asset sales, nobody's talking about them. In reality, the world is run by camels, horses and donkeys like us. And what you're doing is super commendable and a great inspiration to a lot of entrepreneurs. Wishing you great success, Paul and your team at Pro Shop erp, have a wonderful one.

Thanks, Lloyd. I appreciate it.

I need some traction. You need some traction. Let's get some traction.

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