Never Miss a Beat - Get Updates Direct to Your Inbox
What It’s Really Like to Bootstrap a SaaS Business & Sell to Private Equity
Jon Hainstock is a SaaS entrepreneur with decades of experience. He recently sold and exited his software business, ZoomShift, a tool that helps small businesses manage their work schedules and employee timesheets. Before this, Jon was the Co-founder of Tailwind Creative, a digital marketing agency.
Jon’s biggest professional goal is to be a full-time creator and the owner of multiple software companies. Currently, his creative outlets and hobbies include Ruby on Rails web development, music, photography, and local lead generation.
Here’s a glimpse of what you’ll learn:
- Jon Hainstock talks about co-founding and scaling his SaaS company, ZoomShift
- Mark and Jon discuss the challenges of finding a perfect product/market fit
- When should you start the exit planning process?
- Jon’s speedy selling experience, from the buyer’s proposal to closing
- What are the pros and cons of stock sales versus asset sales?
- The often difficult process of reviewing a software’s code when selling a SaaS business
- Jon talks about his initial reaction after selling ZoomShift—and the new projects that are on his horizon
- Jon’s practical and philosophical advice to up-and-coming SaaS entrepreneurs
In this episode…
Do you want to successfully build, scale, and sell a SaaS business? Are you looking for tried-and-true strategies for when, why, and how to sell your company? If so, this episode of the Quiet Light Podcast is for you.
In order to ensure the most successful exit possible, you first have to evaluate the transferability of your business. In other words: can your business thrive in someone else’s hands? By identifying and analyzing key elements of your business, such as staff, vendors, workload, and more, you can discover—and create solutions for—any issues that will impede its transferability.
In this episode of the Quiet Light Podcast, Co-host Mark Daoust sits down with Jon Hainstock, SaaS entrepreneur and former Co-founder of ZoomShift, to discuss the process of founding, scaling, and transfering a SaaS business. Listen in as Jon reveals the difficulty of finding a true product/market fit, how to begin the exit planning process, and why the most important question to ask yourself is this: are you happy in your job? Stay tuned for more!
Resources Mentioned in this episode
- Quiet Light Brokerage
- Mark Daoust
- Joe Valley
- Jon Hainstock
- Jon Hainstock on LinkedIn
- Quiet Light Podcast email: [email protected]
- Benjamin Bartling on LinkedIn
Sponsor for this episode…
This episode is brought to you by Quiet Light Brokerage, a brokerage firm that wants to help you successfully sell your online business.
There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light Brokerage wants to help you discover the right time and strategy for selling your business. By providing trustworthy advice, effective strategies, and honest valuations, your Quiet Light advisor isn’t your every-day broker—they’re your partner and friend through every phase of the exit planning process.
If you’re new to the prospect of buying and selling, Quiet Light Brokerage is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.
Not sure what your business is really worth? No worries. Quiet Light Brokerage offers a free valuation and marketplace-ready assessment on their website, quietlight.com. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!
What are you waiting for? Quiet Light Brokerage is offering the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.
Hi, folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.
Mark Daoust 0:29
Alright, Hi folks, Mark Daoust here from Quiet Light Brokerage. I’m the founder of Quiet Light Brokerage. We’ve been around since 2007, helping entrepreneurs prepare and exit their businesses in the online space that would include e commerce, Amazon, but also SaaS and content. And I’m super excited to be joined by Jon Hainstock today, Jon and I have a very good mutual friend. His name is Mike Pandle, I went to college, he was a roommate of mine, I’m actually the Godfather to his oldest daughter. And so when Mike introduced me to Jon, I was like, This is awesome. Any friend of Mike is a friend of mine. And to boot Jon is a pretty successful entrepreneur, in his own right, a successful founder of a SaaS startup, which he initially raised funds for, but then bootstrapped the growth of that business over the period of eight years and eventually did what so many SaaS owners hope to do, and that is exit those businesses. And Jon, you did it at a high level you sold to a private equity firm, which is, you know, a lot of people’s minds, they understand what’s involved in selling into private equity. As far as the size, we won’t discuss specific size of the deal, but it just means that you were successful enough to attract the attention of some serious institutional money, which is really, really exciting. So, Jon, thank you for coming on. Welcome to the show. And we’re looking forward to having this conversation and just getting a sense from you what that process was like,
Jon Hainstock 1:54
Yeah, thanks for having me. It’s great to be here.
Mark Daoust 1:57
Yeah, well, let’s, let’s talk a little bit about the company. And look, everybody in our audience knows that different founders are able to share different levels of information about their business. So we know it’s SaaS, is there any more that we can go into as far as the type of SaaS what industry you’re looking at? Or even just kind of who you’re targeting with with that SaaS company?
Jon Hainstock 2:18
Yeah, so ZoomShift is the name of the company. And it was or is scheduling software for hourly employees. It’s really designed for places like coffee shops, and retail, hospitality, stuff like that. So we had the scheduling component. And we also had payroll and time tracking in the in the app as well. And it came with a web app, and then a mobile app. And so our customers were typically kind of in that range of, you know, 40 to $50 a month, they’d be ending up paying us per user per month. And, yeah, so we saw most of our growth, actually, through organic channels through SEO and word of mouth. And that was the way that it kind of grew steadily over time.
Mark Daoust 3:04
That’s how did how did you get into that space? I mean, you’re a younger guy. It seems like a lot of industries that, that older professionals, and I’ll put myself in that group grow into is just experience and exposure to understand where the niches are. How did you get into that specific niche so early on?
Jon Hainstock 3:24
Yeah, that’s a great question we started with my business partner actually started it in Marquette so in college, and he applied for the market business school competition, you know, business competition with this app. And from there, I was able to release the product through an incubator company called 94labs, which is now known as Generator. It’s located at Milwaukee. And so it started off as just a portfolio project just to show showcase what my business partner Ben was able to build. And, and he really wanted to, to get into development and startups and all that kind of stuff. So it started there. And it started to grow some through direct sales locally, but then just naturally through SEO. And so that’s really where I joined the picture was as it started to grow naturally. My business partner and I were working together on our own agency, which is how we ended up meeting Mike Pandle. Great guy. And so we ended up focusing our energy back on ZoomShift when it started to gain traction organically. So it wasn’t something we were putting a ton of focus in. I think we were just pretty early. If I’m you know, looking back and thinking about how the industry is like taking a little bit of a turn, just in terms of like growth, it’s really kind of picked up over the last few years. But early on, there weren’t as many competitors and so I think we were just early enough to to have some traction with organic channels. So that’s how I I saw us getting into the industry, it wasn’t something super clever or super unique. I think it was just good timing.
Mark Daoust 5:07
Why isn’t that the truth for so many businesses? Right? It’s good timing that you got to get in and the industry kind of grows with you. Plus the organic channels. I mean, today, organic is still a good channel, but it helps a lot if you have that head start.
Jon Hainstock 5:21
Exactly. Yeah. Domain Authority, and just being around and trusting, you know, and search signals is still big. So yeah, I think that was a big part of it, for sure.
Mark Daoust 5:31
So what role did you have in the company as it matured?
Jon Hainstock 5:35
Yeah, so it was just Ben and myself for many years. And we were kind of teeter tottering between the agency and ZoomShift, we didn’t actually have formal roles. So it was kind of an interesting partnership, and that we both, you know, code, we both design to both, you know, kind of had our hands and a lot of different things and customer support and design. So it was almost like having built in redundancy, in a way. So we both worked a lot on product, we both worked on the marketing, shared a lot of things. So I would say my focus was primarily on the customer side, though customer experience. And then working with Ben to do the product development, and really figuring out, you know, how do we match what our customers are asking for and building it out? And then he was just like the coding wizard, just to make it all happen. And I would get in there too, with him. But he definitely, if he had a label would probably be more of the CTO at that at that way.
Mark Daoust 6:30
In that way. Yeah, small companies, labels are really whatever you need your label to be for the day. You got to be flexible when you’re small. I’m really fascinated by within the SaaS world of this idea of being able to find product market fit, right, because it’s, it’s, it’s so difficult to actually do and do well. And it feels like a lot of people go at it, attack it from an intuitive standpoint, or the iterations are really a glorified, grab a dartboard and start throwing at that dartboard. I would love to know a little bit about any processors or any discoveries that maybe you came across to be able to hone in on that product market fit, maybe it was just that maybe it was just maybe we should try this and see and see how people react. But what what sort of tools for those that are looking at us as a company either to buy and they want to improve it? Or maybe they own a SaaS company, and it’s starting to get hold, but it doesn’t quite have that great product market fit yet. Are there any processes that you found particularly helpful? With with narrowing that down?
Jon Hainstock 7:37
Yeah, I mean, I think for us, we, I’ll say that I don’t think we ever really hit what people would consider product market fit, where it just clicks, and you just start seeing all this insane growth, I don’t think we actually ever hit that I thought what we did well was positioned ourselves as, like a simple clean, you know, alternative to some of the other bloated products out there. And so when it came down to actually tracking our progress with something like that, it was, you know, putting the tracking in place with with segments, to pipe our data over to other tools, like amplitude or, you know, mix panel, or wherever we were tracking are our kind of usage. And then when we were just looking at, you know, core metrics along the way, like, what are what’s the health of the data? Like, what are what’s the health of the accounts? Are they are they coming back? And to us, like the big key metric was like engagement? Are they coming back after a few days. So we really simplified it. Initially, we kind of started off doing like all of this kind of lead scoring, we explored some other tools in that space called, you know, customer success tools, I’m trying to think of some of the ones that we tried. I can’t think of them off the top my head off to come back to that. But yeah, tried some of those tools and got fancy with it, and then ended up simplifying a little bit more and saying, let’s just focus on engagement, are people coming back and retention, you know, are people you know, coming back after two days? If so, that’s like a good sign, you know. And so I think you can get as complicated as you want with it, you can track every single event you can track, you know, to infinity. Or you could just look at like a handful of key metrics. And that’s kind of where we ended up in that hole. And that whole process, you know,
Mark Daoust 9:25
I’ve experienced that with another business that I own. It’s not SaaS, but it’s subscription based. And it was the same thing where we were looking at attribution models for our advertising, and trying to figure out these you know, how do we attribute the the cost of acquisition to the proper channels and and then, you know, what is the true cost of acquisition we were getting so fine, literally to a fault because we were starting to get some some weird noise in our data, right when Facebook was not paying off for us. So we shut off Facebook, and then we saw our overall numbers drop more than we anticipated. And it was really weird, sort of like something’s not Right in our tracking and the solution was just that, we ended up saying, let’s actually take a big step back. And let’s actually, let’s just look at the whole pie instead of the individual slices and just say, what are we spending? And what are we getting out of that spend. And then let’s back in from there into maybe some different ways of being a little bit more fine with it. But that, that idea of not trying to build the perfect engine right away, or get so fine, because it’s, you know, what I love about the tools, and a lot of the tools that you mentioned is that they do a great job of providing us user insights. What I don’t like about them is that they’re all still imperfect. And that’s not a criticism of them. It’s more of a criticism of how I think a lot of us use them or think what they promise that they can give us. So I love that that that idea of simplifying, did you ever run into the situation with this where where user feedback didn’t match necessarily what people were actually wanting? I know, I’ve seen this with another companies where users say, Hey, can you introduce x feature or y feature? Or I don’t like this about it? And so you change? Or did you use that user feedback much in in your product development,
Jon Hainstock 11:13
we always tried to, you know, consider what the customer wanted. And we always were taking down their their feedback, we ended up with a tool called canny just to keep track of everything. But you know, a lot of our product decisions weren’t based on feedback, it was mostly based on it, they were saying like, are we able to, are we able to, to justify putting this in, so a lot, a lot of it came down to is it worth the cycles on the development side to invest in these things. And so if it was a small, small bet, that could have a potentially bigger impact, we take a look at them. So an example of this would be a big bet would be, hey, we’re going to integrate with all these, you know, payroll providers, that that’s a, that’s a bigger bet that you would have to take a smaller bet would be, hey, we’re going to, you know, create a better, more robust report for the, for them to be able to tracks in this data and excel and stuff like that. And so a lot of times, we were really concerned about getting into really long development cycles, or getting it in over our heads to a place where we’re managing things that we didn’t want to manage, like code wise, you know, we didn’t want to have a bunch of, of debt and that way. So a lot of the decisions were really based on on that, like, is this is this going to be smart from a technical standpoint, because we don’t want to get in and over our heads, if it’s not going to make sense for the dollars coming out, you know, on the other side, and so it’s impossible to predict. So for us, it was just a matter of like, if this sounds too big, and we can’t really wrap our brain around it, like how it will work out technically, then let’s just pass and we actually had to do that a few times on some of the future features that people asked about. So yeah, that’s always a balancing act, there’s no right answer. It’s just constantly trying to make those trade offs as you go.
Mark Daoust 13:04
And I often find that interpreting what users say they want to what they actually want isn’t necessarily the same thing. So let’s talk about the you know, getting ready for a sale. And that that process is well, what I’d love to do, you know, for the duration of this episode here is to talk about, you know, the, the calculus in between you and Ben, as to Hey, maybe we should consider this. And, you know, did you formally explore those sort of exit options? Did you prepare for that, and what what that was like, so, eight years of running the business, when was it that you guys first a realized that you had something that might be sellable and be considered actually working on an exit
Jon Hainstock 13:49
I think pretty early on, we realized we had something sellable, we didn’t think it would be a meaningful number for a while. And so, we we talked a little bit about endgame, like, what our hope was, and, and stuff like that. And we always kind of positioned it as you know, the goal is that this is a means to an end so that we’re able to get our, our like, ensures some sort of a nugget that we can, you know, like have for the future. That was kind of the idea behind it. But we never really had serious conversations until we got approached by a couple companies along the way. And brokers and just people asking, like what, what our plans were, you know, often were contacted by VC seeing if we’re interested in raising and that wasn’t super appealing, although we talked about that, too, you know, just like what what are the implications? What would that look like? Maybe that’s an option for us. But we didn’t really take it seriously until we had some some brokers contact us and talk to us a little bit more about their, their partners and who they were working with and stuff like that. So I would say no Until the last couple years of doing it Really? Were we even considering it? Because we wanted to see how far we could get it ourselves. So, yeah, yeah.
Mark Daoust 15:09
So as far as preparing the business for sale, did you find that when you started those initial conversations? Did you? Did you have a lot of work that needed to be done before it made sense to actually get going? I mean, oftentimes, what happens for clients and not not every time, but oftentimes, you know, there’s homework to be done, you know, you have something valuable right now, but it would be great if you did X, Y, and Z. Before you, did you find that the company had that, or did you guys make great decisions along the way, so there wasn’t a lot of homework there.
Jon Hainstock 15:41
So it all happened pretty fast. So honestly, we didn’t do it’s not like we were building up to an exit as much as once we got into conversations, there was, you know, maybe a couple weeks time of letter intent Letter of Intent to due diligence, and all this kind of crazy stuff. So it was a pretty fast process in terms of once there was interest in, you know, in buying ZoomShift, going from that point to actually, you know, exiting was a pretty quick process. So we didn’t really have a lot of time to prepare, it was more, this is where the company is today. And we’re going to try to backfill the data if we if we need to, you know, for due diligence, and everything we need to do. But it wasn’t super messy. And it wasn’t super crazy, because it was a small organization. And you know, at the time, it was just the two of us, and then one customer support representative. So it’s tiny, you know, so it wasn’t a lot of moving parts. And, you know, we’d done the best we could keeping clean books, and, you know, keeping stuff tracked in profit, or nonprofit well, and bear metrics. And so I felt like, overall, we had a pretty good sense of where the business was at when we were contacted, which worked in our favor. But it wasn’t like, we were preparing for it. You know, it wasn’t like it was built to sell, it was more like, hey, it’s built for a two person, you know, team to manage. And, you know, therefore, it’s also kind of easy to sell, because there’s not a lot to it, there’s not a lot of things going on. Were you approached,
Mark Daoust 17:15
and for those listening might be wondering why I don’t know anything about the deal. It’s because we didn’t do the deal. Did you sell through a broker? Or did were you approached directly by the firm that bought that about, you
Jon Hainstock 17:26
know, we we sold directly, so we weren’t, we didn’t go through a broker. And that actually weighed in a little bit to the decision just because, you know, it was just something that we felt was was a little bit serendipitous, you know, and how it worked out, and just with the synergy between us and the people that bought us, and so are bought the company cashed in by us. So yeah, so it was I think it just worked out really well. And, you know, timing wise, it was like a really weird point, because we were we were kind of deciding, you know, do we want to try to hire and really, you know, go after this a little bit more, maybe potentially raise money? Or what are we doing? You know, like the conversation I think, happened a lot, at least for us was what are we doing? What is our goal? Do we want to exit this thing? Do we want to just run it? And definitely, you know, software does have like an end date? Like, at some point? What are we trying to get out of this thing? So yeah, when we were approached, it was, it was pretty good timing, because we were at a reset point where we’re like, okay, you know, maybe we could maybe we could do this, it would make sense for us to do it. So yeah, it’s just good timing on their part and contacting us.
Mark Daoust 18:40
You know, these stories are always fascinating for me to hear, because they are literally the one in 100. Right. So the company that actually completed the acquisition, I guarantee they spoke to a minimum of 100 companies before they found that right match, and those that are listening, that are buyers and have set up your own proprietary search, you know, how difficult this is for that serendipity, to hit, and to find a company that had your numbers together and was easily transferable. I mean, that’s that’s a pretty rare thing. But it’s a beautiful thing when it does work out. How long was you said it was a fairly quick from the moment that that they contacted you to fly to closing, do you mind if I ask what that total timeframe was about?
Jon Hainstock 19:22
Yeah, from you know, beginning to end it was maybe. Let’s see here, maybe like three months or so roughly. That’s it? Yes, it was really a tight timeline. And honestly, it would have been much quicker if we were able to get through the legal portion of it faster. We ran run into some hiccups simply because of the structure of the deal since it was a stock sale, not an asset sale. And so with a stock sale, the buyer kind of can run into some potential liabilities and because of that, they got to really, you know, be careful with their legal and because of that our lawyers didn’t love like the verbiage in the contracts. So there was a ton of redlining a ton of back and forth. And that really just added, you know, tons of time and money to the, to the sale, unfortunately. So I really, it was supposed to be more like a one month thing, you know, like it was supposed to be really quick, it got drawn out, really to to a really long process, in our opinion, just because of the way that it was feeling like there was so much back and forth. But I look back at it. And yeah, it was short, you know, it was a very short period of time. Most people closing deals, you know, it could take a year, year and a half are you no longer and then there, they have to stay on for a long time. And for us, we didn’t have to do that we literally we handed them the keys. And we kind of walked away. And, you know, we were in the Slack channel and available via email and call. But we were pretty much out of there by by February. So like a month and a half, maybe two months later, we were basically out totally. And I know that’s not very common for for founders, and you know, super thankful that that part of the process was was painless.
Mark Daoust 21:06
Yeah, no, I mean, a lot of what you went through is not very common. But it’s it’s I mean, it’s it’s kind of like the it’s the goal and the vision that a lot of us have for the exits. You know, the three month time window isn’t too terribly surprising. And if you ask me, where is the deal going to get held up? You know, lawyers are going to be one of my top suspects. As much as we love lawyers, right, we love lawyers, we have to remind ourselves that they’re out for our best interests, why a stock sale, I’m curious about that.
Jon Hainstock 21:36
All stock sales great for, for the seller, because they you know, in our situation, we were a C corp. And with a C corp. There’s you know, certain tax laws that allow you to not have to pay for capital gains on on, on profits of this of the sale of stock over you know, a certain period of time. So you need to have it held for five years. The actual thing is called QSBS and I’m not going to butcher everything that’s involved. But basically, you have to have a C corp organization structure, you need to have, you know, ownership of original issue stock for five years. And so there’s a couple other like qualifications in there, I think to basically what that means is like, you don’t pay, you know, federal taxes on a big chunk of that, right. So you don’t pay federal taxes on a stock sale, versus an asset sale, you’re gonna get crushed, like, it’ll be, you know, upwards of 30 40%. So that also weighed into the decision, it was like, if we could do negotiate a stock sale, that’ll save us a ton. And just in terms of putting more money in our pockets. And so we looked at it from that perspective of like this, this is a pretty unique spot to be in most people from what I hear, and I’m not sure you can tell me if this is true or not. Most people don’t see stock sales, unless they’re the deals are pretty large, like 10 million, you know, 20 million, something like that. And ours was in for that. So it was like, it seemed it seemed like a really good opportunity for us to do the stock sale. And it was kind of a that was like a no, like we had to have that was like a thing we had to have for sure.
Mark Daoust 23:21
Yeah, yeah, no, stock sales are fairly rare. Primarily, because you’re a C corp, most businesses are not C corps, that would be one major difference. of that. Now, there are benefits, like you said, from a tax standpoint, but there’s also we have an episode on tax mitigation strategies for the sale of a business, even under an asset sale, which is typically, depending on how you allocated 20 to 25% cap gains on most businesses, there are ways to mitigate that as well, in the program, my guess is with some of the delay that you guys ran into, it was a liability issue on the part of the buyers, right, you buy as a business, all those liabilities transfer 100%. There’s no barrier as opposed to an asset sale where there’s a change in ownership of the company. And so some level of of differentiation from the liability as well as the balance sheet liabilities don’t transfer over. It’s a fresh balance sheet.
Jon Hainstock 24:12
Exactly. And I think that’s where some of the, you know, the pushback, and some of like the tug and pull was was just like, you know, we were trying to do a deal that was not super common. And it wasn’t like a structure that, you know, our lawyers are super comfortable with because of the verbiage around it of the liability of the transfer. So yeah, I do think that really weighed into why it took so long. I think it was an asset sale would have been done much quicker. For sure.
Mark Daoust 24:42
Yeah. Yeah. You know, though, I mean, you bring up another point that I often like to make to people and that is that lawyers are, when you’re selling your business, you have an ecosystem of advisors, and they’re there to help coach you in a certain regard. If we think about it, like a baseball team, you have a pitching coach. You have a hitting coach, and they’re there. They’re for their own domain of what they doing lawyers fit into that ecosystem very, very well. But at the end of the day, I love that your lawyers didn’t necessarily love it. But it’s the direction that you went. Because you are the you’re the person making the ultimate decision about your business. And and, you know, people need to have that attitude going in. And if you had hired a broker to help out with that they would fit into that ecosystem as well. They are, they are a voice guiding you. And as much of where we get our name from a Quiet Light, right, we are an advisor to the eventual sale. So three months start to finish with most of the time being spent on the legal stuff isn’t bad. What was the due diligence process? Like I know, so many people who sell their business, that’s where things were difficult and hairy. But it sounds like your business was fairly simple and straightforward. So that may have been easier for you. What was that process? like for you?
Jon Hainstock 25:55
Yeah, the process was pretty straightforward. We had to open up our books, we had open up our code base, we had to do all those things that you would do in due diligence. And I think the things that we we uncovered, there are the things that were a little bit challenging were the same things. Like it was, why did you, you know, do it this way, with the books? or Why did you do this way with the taxes or this or that. And so it was really just making sure that the stock sale wasn’t going to get in the way, you know, on the accounting side, that the coding review the, you know, any of the marketing stuff, that was all, like, skimmed over, you know, it seemed like they didn’t really care very much. It was, it was straightforward, I should say, I shouldn’t say they didn’t care, it was just straightforward to them. They had worked with the technology before, which is Ruby on Rails, and so they were comfortable with that. And so, yeah, that part of it seemed to go pretty well. I mean, I think for a few weeks, it was just us everyday getting up and just answering questions, getting documents, you know, chasing down various, you know, vendor emails, or talking to our accountant or lawyer or this or that. So there was a ton of that. But I mean, that’s to be expected. So I don’t think it was super painful. I don’t think it was unusual. I think it was overall pretty, pretty good. Actually.
Mark Daoust 27:20
How did you guys handle the code review? This is an often times a sticking point. With a SaaS business, depending on how deep somebody wants to look at at the code. What was the arrangement that you guys had? Did you just hand over all the code? Or did you just open it up? portions? Did you do selections? Did you do walkthroughs? There’s 1000 ways to go about that. I’d love to know what you guys did.
Jon Hainstock 27:42
Yeah, we shared the repo with the developers. And we walked them through the code base and kind of some of the thinking behind it. Some of that was done real time. Some of that was also just done, just documented. And we used live videos to do asynchronous video explanations of things. So yeah, we tried to provide as much context as we could and just just be as open and as transparent as we could, I mean, we realized that there’s like risk there and sharing all that information. But we wanted to put our best foot forward and just, you know, show that we wanted to make the relationship easy and good. So and I shouldn’t say too, that, you know, with the partners that bought we, we ended up keeping a stake in the company. So both my business partner, my co founder, and I have 5% stake in ZoomShift moving forward. So the deal was really predicated around, like, how do we become good long term partners with them, and be as open and transparent as possible, don’t hide stuff, because it’s really only going to burn us in the future if we do that. So that that really made us just free to share everything, you know, the good, the bad, and the methodology, the thinking behind stuff, the why. So yeah, I felt like that was actually very, very easy. Like, it wasn’t something that we were resistant of, or, or anything like that. And they had a process. They’ve done it before. So we just followed along with their process. Yeah,
Mark Daoust 29:07
I love that aspect of it. I think what sometimes gets lost during these processes is, I have talked about this a lot, right? I think some people when they get into a sales mode, they get into thinking that like they need to act like Gordon Gekko from Wall Street, right where now we’re in the game, and we’re gonna play this hardball. And it’s so destructive at the end of the day for these transactions. I think it’s a testament to Union partners, to the attitude that you went into trying to be open, trying to be willing to share and understanding that there’s risk you mitigate the risk where you can, but there’s also a cost to every action that you take, and if you lock down, it lengthens things that makes it more stressful as well. So finding that happy medium between mitigation of that risk exposure, and then also understanding look, that buyer, they need to trust you if they don’t trust you done right. Right.
Jon Hainstock 29:59
We had earn the trust, we had to, you know, build the relationship. So we wanted a good partnership for the long term, you know. So that’s what we were going for. It wasn’t about, you know, it wasn’t about Yeah, coming in with this massive agenda, we wanted to make sure we were got our fair deal. But it wasn’t about, you know, twisting their arm to get it.
Mark Daoust 30:19
Right, right, what sort of level of inspection did you do on them? Obviously, you have stake in the company, so you had to make sure that they were a good company.
Jon Hainstock 30:28
Yeah, and that’s something I actually wish I would have done more of, I wish I would have talked to a handful of the founders that had been, you know, had gone through that process with them. So we didn’t do a ton of due diligence on them. I was familiar with one of the buyers personally, just from, you know, following them in the, in the, you know, on the internet and knowing knowing of him, so knew had knew he had some credibility there. And based on the companies that I saw them by, I felt like there was some solid credibility. So didn’t have a ton of homework into it. Like I said, I do wish that we would have taken the time to get to know at least one or two founders that they’d worked with, just to see what the process was like. And done that work. But we didn’t end up doing it.
Mark Daoust 31:13
Yeah, no, understand, understandable, it’s not commonly done. But it’s a good bit of advice for people going through this, especially with private equity, where there’s an equity role occurring, which for the most part, 5% equity is less than we typically hear. So oftentimes, there’s upwards of 25% equity role, and you gotta check to see the company you’re dealing with. If that’s a good partner, I hope things gone after the fact. Right? You you’ve closed the business, you’ve been away from it for a while now, you said that largely you were able to walk away from the business, you didn’t have long employment agreements, or anything like that, which again, is a little unusual, but but pretty awesome. All the same. What’s it been like afterwards? And I’m curious both from, you know, have you looked back on it and said, Boy, I wish I could have done X, Y, and Z differently, but also from a standpoint of what next? Because I think what we own and startup and you guys, you guys are bootstrapped. And so bootstrapping a company, it’s a unique thing, like you live and breathe that company when you’re when you’re bootstrapping, you know, you’re responsible for it. And it kind of gives a purpose and a mission of what I’m doing right now in my life. And afterwards, for some people there can be kind of an emptiness or not, like, emptiness in terms of lack of purpose. But what next? I’d love to know how that process has gone for you. And what are you looking at today? Now that your, your past this exit?
Jon Hainstock 32:38
Yeah, I mean, it’s, it’s one of those things, it’s really difficult because in our situation, we were caught off guard, we weren’t prepared for an offer or an exit or anything like that our intention was to continue growing ZoomShift for an eventual exit, but we hadn’t planned that far ahead. So, you know, ideally, you have something else to go to, you already have something cooking that you, you’re you’re working towards, and then you can kind of make that transition over to it. We didn’t have that. So it was literally like hand over the keys, you’re done. You know, like your passwords are taken away, you’re gone, you’re out, right. And that like, in one sense, is great, in another sense, kind of like, abrupt. And so I think for me, I was ready for something different. And so for me personally, even though it was abrupt, like, it felt like a real, real big weight off my shoulders, just to not have to think about the future of the company. So much of a founders life is forward thinking just like constantly being in you know, future thinking. And so it was nice, just to take a break from that take a little bit of relief from that stress. I’ll say a few months, and I started looking back at the moves that they started making. And I was kind of thinking I would see something that would just be so revealing to me, like, I’d learned so much and, and it really wasn’t, it was more of the same. So I thought they were going to come in and change everything. And they didn’t change very much. So that was really interesting to me to see is to realize that, I guess that was comforting in a way, you know, because on one and one hand, I wanted to think oh, they have this magic bullet that they’re just like waiting to use. But it actually felt nice to look back and to realize and watch them operate and say no, they just did what were what we were doing, but better and with more of a team and like, okay, like that makes sense. Like it’s more of the same. And we could have continued doing that we chose not to but it kind of felt nice, though, that it wasn’t like, Oh gosh, why didn’t we just see this one thing that we could have done and all sudden taken off, you know, and so during this whole period of time, it was like COVID hit, you know, pretty hard in March and that affected a lot of small business owners. course. So that effective ZoomShift. And so we saw that and honestly, I look back and I’m like, so I feel so blessed, I feel so thankful that we were able to, to get out before the wave of COVID, and just all the emotions and all the things that we would have had to deal with on that side. So I feel super fortunate timing wise, there. And then in terms of like, what I’m doing now, it’s, it’s really about trying to get back in the game, like, I wasn’t sure if I wanted to do software again. You know, I started looking at all these things with everything from, you know, owning self storage, and real estate and stuff like that to ecommerce and, or physical goods. And I just kind of came back to software, I really enjoy software, I like building products. And to me, it’s a it’s a great business. For me, when I look back at my my experience, it was never a bad business, it was something that you know, it was a great business. So want to be able to do that, again, try to do it a little bit differently if we can and use the learnings that we we acquired to do that, that go of it. But yeah, so that’s where I’m at. Today, I’m exploring a couple new ideas. I also have, I picked up like a really tiny SaaS or 50% of one, and just an odd and an odd deal as well. And that was kind of my entry back into the game. And just thinking a little bit about SaaS, again, just getting into that mindset after a few months. And so I have that going. And then I have these other ideas that I’m starting to brew on and work on with with a couple other teams. So that’s where I’m at today, I feel like pretty excited about the new ideas. And I’m working on and the teams around them and just excited to see what’s next with that in 2021.
Mark Daoust 36:48
That’s awesome. That’s awesome. First of all, thank you, thank you for sharing the story that you’ve had. It’s it’s a remarkable story. It’s like I said, it’s it’s the one in 100. And frankly, it’s probably not even though it’s good chances when we see them happen. So it’s cool to talk to you about this though. And to hear how that happen. on your end, I’m super happy for the company that that acquired ZoomShift, because I know how hard they have worked to be able to find a good company and a good target. I’m really happy for you and your partner as far as building something that was able to sell. I love one of the takeaways that I’m super glad that didn’t do anything radically different. Because Have you been thinking? Why didn’t we think of that? It’s always a worry, right? I talked to one private equity guy years ago who told me the secret of private equity is we have money. Yeah, you know, and they can pour some money into something. And sometimes that’s the best. He actually said, it’s an accelerant, like a fire, right? We’re just trying to accelerate everything with without money. And sometimes infrastructure, infrastructure and SaaS. Do you have any just overarching advice to somebody who is in that founder role that future looking always looking to the future sort of roll thinking maybe I might one day exit this company? I don’t know if I want to so they’re in the thick of it, maybe not in a place where they’re actually actively looking to sell right now? Does anything come top of mind for that? And I know this, these are tough questions to answer because it’s so open ended. You can go a million different directions with it. And it could be something as simple as wear your sunscreen if you’re going out on the beach.
Jon Hainstock 38:27
Yeah, I think my I think my thinking around this is more philosophical than anything then practical in the sense of really figuring out what you want out of the business. And if you’re satisfied and in how it’s going, and what your days are like, Are you enjoying your days? Like? Are you enjoying the game? Are you enjoying the market you’re in? I think so often founders, myself included, can feel like a little trapped in something because they’ve invested so much time, so much energy into this thing, and you feel such an obligation to keep it moving forward. So just to always be, you know, aware of where you’re at on that line in terms of like, doing what you actually feel you should be doing. And when you start to feel a little bit like there could be, there could be something else or something else is more interesting, something that’s, you know, can stand the test of time. It’s not just something that like, it’s not just shiny object syndrome, right. But you feel called maybe out of that. I think that’s the time to really start thinking about it. If you can, from a practical side, yeah, you know, get a good accountant. Get some good lawyers, like work through the details and make sure that you have all those things in order so that the transition of the business is easy and simple. I know that with the new companies that I’m starting, we’re writing first company and a remote first company with both of those. And so, that just means everything is documented. Everything is you know, put into a place where the context around it is given like our meetings are emitted are, our thinking is documented. And I think that really helps if you’re going to hand off the company to somebody else’s, to be a writing first culture, and to, you know, put in some practical stuff there and make sure you’re tracking and all those things are good. But ultimately, it’s a decision that like, just like any decision has trade offs, it’s not really a right or wrong, and you’ll want, you’ll want it to feel right or wrong, you’ll want to be like, I want to, I want to create my pros list and my cons list and have it just like makes sense. But at the end of the day, it’s a gut, you know, it’s a gut choice, it’s something that you have to really do some, you know, searching on some soul searching, and give yourself the space and the time to just, you know, absorb it, think about it, if you’re working with business partner, you have to be in alignment. Like I don’t, I’m of the thought that you’d never place business over your relationships, especially with a founder, you know, somebody else, or you’re going into business with. And so, to me, it’s always are we aligned, and if not, like, Okay, we got to, we got to get creative about something, if I want to exit, and you don’t, then we have to make sure that we treat each other really well through this process, and figure it out, so that neither one of us is just getting as getting the raw end of the deal. So I think for me, it’s always about, you know, getting self awareness figured out, getting an alignment with your, your team or your you know, in your founder, in this case, your co founder in this case. And then from a practical standpoint, yeah, there’s books, I mean, you can read stuff like Built to Sell, and all those kinds of things that help you just or articles and stuff. But I don’t think those are really what helps make a decision. It’s, it’s a gut check thing. It’s it’s figuring out what you really want to be doing. And if you want to stay in the game or not. And I think that that really is where, where I felt like, I got clarity on it all.
Mark Daoust 41:50
You know, I know you said that. That wasn’t very practical, more philosophical. And I typically like to have my guests end on the last word with that. But I think what you said there, it encapsulates very, very well, for anyone that is in the position of buying or selling, if you’re in the position of buying, there’s always the natural question of why is somebody selling and you encapsulated very well there where we see most people, right, it’s that that gut that understanding that it’s just time to sell. And on the sell side, I remember I was at a conference two years ago, when somebody told me or asked me, they said, When should I sell my business? And I told him, I said, Well, hopefully never, right. I mean, hopefully is great, and you love it your entire life and you don’t you’re just making money, and you don’t ever come to the point of selling because that’s a wonderful thing to be able to do. He was a bit surprised by that. But I think again, it comes down to the idea of knowing when to exit. It’s not just a financial decision is not just a strategic decision. These things do take place they do they do have a place in your decision making process. But there’s another element there that soul search that you talked about. Yeah, it’s somewhat philosophical, but I think it’s practical as well. And if you’re in the position of owning a business, and you’re thinking about selling, that has to come into play, so I think it’s terrific advice and the carries weight, because you just went through the process yourself. And it came kind of out of the blue for you guys. where this happened quickly, which again, I think is awesome. But I love it. I think it’s I think is really good advice. Jon, thank you so much for coming on. This has been a wonderful conversation.
Jon Hainstock 43:25
Thanks for having me. It’s great.
Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast subject or guests, email us at [email protected] Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.