The Agony and Ecstasy of Selling My Business| Jason Eckenroth, ShipCompliant | BoS Europe 2017

Jason Eckenroth, Founder, ShipCompliant

Jason shared some of the things he did to make ShipCompliant the successful business that it is. More importantly, he’ll talk about the mistakes he made in selling and what he wished he had realised before he did. He believes ‘Exit by acquisition’ should not be the only manifestation of success for bootstrappers.

Video, Hangout, & Transcript below

Video

https://businessofsoftware.wistia.com/medias/apr9ntg2tb?embedType=async&videoFoam=true&videoWidth=640

 

Hangout

https://businessofsoftware.wistia.com/medias/3d308hybbx?embedType=async&videoFoam=true&videoWidth=640

Transcript

Jason Eckenroth: Hi, everybody! Good! So I thought that it was very fitting Alex your talk was I found very optimistic around growth and future and possibility and I’m about to turn us into very dark presentation. Not really, but I do want to start, I thought I’ve never shared this story, this first story with anyone and I thought I could share it with you guys – my assumption is we have a lot of founders and business owners here, can you raise your hand if you only did it? Good.

So let’s get in the right frame of mind first! Can you all close your eyes? Since I can see you, I know you got your eyes closed. Everyone close your eyes and think back to a moment professionally perhaps where you felt the most alone, where you had felt like you were facing the most important decision of your life, you felt an incredible amount of insecurity around it. So much so you couldn’t share it with others because you’re the strong leader, you’re the CEO, you’re supposed to have all the answers. Think and capture that moment. Now keep your eyes closed through the rest of my presentation please!

Ok, so I had a moment like that and it was a little difficult. And frankly the reason I haven’t shared it is because I was really ashamed of it and still perhaps I’m a little embarrassed we’ll see how it goes. Ok, it’s 11 pm 9 hours until closing. I just stepped out of dinner the night before I closed with the CEO of the acquiring company and it had been about 2 months since I signed the letter of intent to sell my business. When I signed that letter of intent, I’d gone through all the logic and I decided ok this is the right decision and move, it was 2 months earlier. Why, 9 hours before closing I had my confidence around that decision evaporated? I rolled in that dinner hoping it would fill me with more confidence but it did the opposite. I couldn’t really place it either because the facts hadn’t changed but it was 24 hours before closing. And as I was leaving that dinner, my chest became very tight, I felt like tingly, like how I’m feeling right now talking to you. And I get in the car and start driving pretty slowly home and am thinking I feel kind of drunk, maybe that’s what it is, the alcohol. We drank, oh my god what am I doing? I see a police officer in a car and my mind starts thinking if I get pulled over, there’s no way we can close. I can’t get to that, what kind of an outcome is that? My mind starts thinking we get pulled over, we don’t have to close. And that’s when I really, really got down. Like, how in the world did I get myself to a position where I was leaning on something so terrible as a way to escape the responsibility of falling through with the decision I’d made? Why the hell was I having so many second thoughts? I really couldn’t put my finger on it. I couldn’t put my finger on it, it was like a wave of inevitability, like a sea pushing in. We’d spent a lot of money on legal and everything was lined up to close the’s next morning. Yes, there were people that were counting on this, other shareholders. Everyone’s friggin mind had sailed. My executive who knew about the deal, I knew it in their mind they’re already working for the next guy. So how the hell do I turn that back? And was I just reacting to this like indecision? And was it irrational of me? Was I gonna throw away this deal because of an irrational fear? Maybe I’ll get to the f word later but I’m not there yet.

7 hours to close

Ok, it’s 1 am, 7 hours till close. I’m home, I’m chatting on Slack with my forum mates. I’m in a CEO forum full of other entrepreneurs and they were like Jason, you got this! It’s last minute butterflies! And I just didn’t know what everyone around me was solid on. So now it’s 3 am, 5 hours till close. All my channels are dark, my friends on the other advisors that were several time zones away they’re all sleeping. My wife is asleep upstairs and my mind is so clouded and all my self-confidence around this decision has evaporated. And I felt the weight of 17 years of building a business and all the little decisions and all the time I stood up for what I thought was the right way to do something or build a durable business, to step into something that was painful, all came down to this moment where I’d lost absolute, complete confidence that I was gonna make the right or the wrong decision. Every which way I looked at it and – one of my favourite things to do when I’m stuck is I think about how a decision will affect me and I make a decision like ok, how is this going to affect me. And I think how it will affect others. And I tend to get a lot more energy when I think how it will affect others. And I just couldn’t slice it. This was either gonna be the most selfish thing I’d done in my life, punch my ticket, walk away with the cash and leave the customers and employees hanging to deal with what came next. Or it was gonna be the most selfless thing because I was walking into the complete unknown. Walking away from something I’d build in the last 17 years of my life, that was it. And I had no idea what was gonna be on the other side of it. And I was just stuck and eventually I went upstairs and went to bed, 5 hours to close.

So let me rewind the clock, give you a little more context. So 17 years or so earlier, I started a software services company with one of my best friends in college. This was us celebrating our first deal. It was for a winery and there’s the wine bottle. We didn’t realise we’re not supposed to pop the cork and drink it from the top. It was a $250 bottle. Dead poor college students. And over the next several years, now I look back at it a bit romantically. Those were good times but when I actually think about it, there’s plenty of times I don’t want to go through again.

The business was a bad business, it was an unsalable consultancy and it took me a few years to figure that out and meanwhile I’m reading about all these amazing funded companies and people selling and it created a mythology in my mind that that was the definition of success. But at the same time I felt that that ship has sailed. Fortunately we built a team, we iterated it and discovered a niche, launched a SAAS business in 2005 called it ship compliant. It was a compliance software for a winery – a niche of a niche of a niche. And even in the three niches we had competition but over the next 10 years, bootstrapped that business slowly, steadily, linearly. We had a 72 net promoter score, loved by customers! We had systematised our HR and recruiting and hiring so we were recognised as one of the best places in America to work. And over that journey I threw what I thought was an accident, I created a business that gave me a tremendous amount of meaning and purpose.

The culture we created was centred on a very clear purpose which was to create remarkable experiences through service relationships and technology. And that was a tall order in alcohol compliance. But it motivated people, it motivated me. And also our core values, and they were authentic empathy, feel it, own it, take responsibility for outcomes, shape it, passion, scale it, 1+1=3, like our bootstrapping roots and crush it. Just freaking crush it! Our competitive spirit! And these values ended up showing again and again in my decisions going through all of that.

This is our spirit board. We did weekly huddles with the team. Very transparent, refocusing the team every week on what we were doing. So around 4-5 million in ARR, it was – life was good. It finally felt like we had made it, we created a sustainable margin on our revenue, the culture was doing well and I found personal purpose in leading a team of that size. There’s a point before it was a burden. And it no longer became a burden, I saw the impact I could have as a leader for others and it really filled me with purpose.

But at the same time we hit that first summit. Nothing was ever good enough. I was always never celebrated the win, I always looked for the next summit. And unbeknownst to myself, I had developed a real aversion from being willing to walk from one summit down into the valley and to the next summit. I wanted to walk on one summit and get on the moving walkway to the escalator on the next summit. And very subtly, the mind-set first with me but then it permeated the whole business that we shifted, from playing to win to playing not to lose.

This set us up for a bit of tenderising. Let me talk to you about a tenderising. Everybody knows what a meat tenderiser is. A few years before we sold, we were looking to buy businesses and I hired an investment banker to help me with the deal and stuff. We’d had a number of offers out, the responses from the entrepreneurs were ridiculous for the size of the business. Ibanker guy, this too expensive. He says you’re never gonna get a deal done or buy a business for a reasonable amount if it’s a founder led business. It has to be tenderised first. Really? Well tell me more about tenderising. Well you know, their growth has got to start to slow, maybe they hit some technical issues, they start losing some of their key employees and the culture starts to shift. Maybe the self-confidence of the leaders starts to shift? And they no longer think that everything will be going up, they’re worried about being over the top. And I was in a niche and for years we worked against some of these tenderising potentials like market size. We went from our first niche and grew that up and built other products and kept squeezing that growth curve up and up. I thought we had it nailed. I thought I knew what to look out for, but actually, I’d set myself up for one of the toughest moments in my business. If you’re interested in all those different ways that your business could die, you can read this book. Mistakes Milionaire’s Make by Harry Clark. I call it nightmare food because it’s like 40 stories about entrepreneurs losing it all. So my list of tenderising moments, he kind of fills it back out.

So my moment. So my moment occurred I think in around 2013, and I’d started to believe and I had advisors kind of suggesting this that – and I read it all over the place. The company outgrows the founder. I hit some ceilings and wasn’t able to push myself as a leader through them and maybe I just need to go back to being a start-up, who am I to be the CEO? When you are the sole founder of business, you’re not there through democracy, nobody hired you. Self-appointed dictatorships! And if nobody agrees with you, they’re gone! So it doesn’t really – there’s no feedback that you’re the right guy for the job and I let that get in my head. So I decided I do need to hire someone. I’ll hire an operator, to run the business. I will get out of the way.

So we made this hire and I knew almost right away it wasn’t the right fit. But I was in a jam, I had gone out to my board, to my team, I said this is the guy. Can I just change my mind in 2 weeks? How irrational is that? I’m the founder that won’t let go. I’m not creating the space. It’s a blind spot of mine, how am I supposed to know what my blind spot is if it’s a blind spot? So I decided I had to wait for the data. And I couldn’t go around him and check in with my team. My heart’s telling me this isn’t the right guy, he’s screwing this stuff up. They would tell me are you kidding? This is great! Meanwhile he’s handing out promotions and not firing anyone.

But time went on and unfortunately my hunch was right and 10 months through attrition, to a collapse in sales, a complete collapse in accountability within the organisation, our growth rate just plummeted and I felt like my business was water spilling through my fingers. And all of a sudden, my mind-set shifted I’m not getting to the next summit, I’m about to run this sucker over the top. Crap! It was a moment where we could have definitely just continued to crater down and we certainly were not – it wasn’t a very valuable business at that moment for a lack of growth.

So in that moment I started to think and reflect more and more on phrases I’d heard, seminars where I saw people I admired speak and something I just kept coming back to. I fired that guy and I was blaming that guy for the lack of growth and the disillusion of my culture but that was wrong. People quit their bosses not their jobs. You get the organisation you deserve. The bottleneck is always at the top. If I were to believe that and I do believe it, and I’ve seen it again and again. If I keep digging why did you leave? They left because of the boss. Why? Because I hired that manager and I failed to create an environment that set a better growth with the team. I was gonna take responsibility for this. It was a moment where I felt very much lost and it felt like it couldn’t get worse and it was right in those moments that I made two of the most important decisions I’d ever made in the business.

The first was – how many of you are an EO or a YPO or have heard of those organisations? That’s a self-organising group of founders and some of the most dynamic and inspirational folks I’ve ever encountered all seemed to have gone through the same program. STAGEN leadership program. I enrolled myself, it was in Dallas, Texas. It was 15 months and it completely shifted me as a leader. My background was in civil engineering, I had no – and I started my company in college. I had no bosses! The last boss I had was in an amusement park in Pennsylvania. So I didn’t have those role models, I didn’t know how to lead and manage but I decided I was gonna commit to doing that. The second decision, my staff gets all the credit. They found a way to do what we’ve done to alcohol and apply it to every business that was selling goods in the US, to automate their sales tax compliance. So we radically changed our total available market. We’ve been playing these little sandbacks and all of a sudden – boom! This was a massively hig market but it would take a lot of capital and it was risky. There was a lot of stuff we didn’t know what to do before but that one decision changed our value of the business. If I was interested in selling that was a massive move.

Ok, so pretty quickly after that, like the business started to turn around, we got our growth rate back. The culture started to gel again and instituted a stronger level of accountability. We moved into this new adjacency and all of a sudden we started getting offers. Strategic buyers started to show up and within a 90 day period I had 5 companies saying we love what you did in beverage alcohol and we love where you’re going in the sales tax. Why don’t you join up with us? There’s many ways to look at it and I often feel this way, a company should be bought not sold. And I was against hiring a banker and putting my company in the auction, putting a prospectus with a silly name – project oh no, and it talks about my company and gets distributed around to every private banker, competitor and former employee. But the flipside doing it the way I did it was like a frog in water the degree gets turned up little by little and it starts with, this is interesting, I admire that company, let me just see what the offer is. At the very least they will validate where we are in the market. I take that information and I have to start defending my information and the next thing you know I am selling my business to somebody. It moves really fast. So we went from not even thinking we were selling to having a letter of intent in front of me and probably 60 or so days.

So the offer, I’m at the moment where I’m looking at it and it all makes logical sense. We were as a company, I felt at a local maximum. We turned things around, we’re charging ahead in our niche, and we had found our adjacency. If I didn’t sell now, my next opportunity may be in 5 years. Was I really ready to commit to another 5 years? I didn’t know, I’m still quite tenderised. The offer hit the number. A few years earlier, I sat down with a wealth advisor and figured out what the number would be. And I hit it, beyond hit it. The exec team was enthusiastic. Everyone says this is amazing! You have to take this deal. The partner appeared to be the right fit, a natural expert in where we were going. And it felt like this was the right next level for the business.

Personally, I felt after 17 years, I told myself maybe I just need to let go of what I have to make room for what was next. It was this belief that opened my mind to becoming more comfortable with the unknown cause I hadn’t been that comfortable with it, everything in my life was iterative. This was a step off the cliff into the mist and trust that it would all work out.

So from that letter of intent, I’m back to 3 am. You guys already know how much of a wreck, an emotional piece I am at that moment, and what keeps going through my head, what I was trying to get to was asking myself how does this affect me, how does it affect others? I couldn’t get resolution to it. It swung both ways and I knew that at the end of the day, I will be walking away. I own 70% of my business. And I will be the one that will have the parachute, not anyone else. I go to sleep thinking ok this is some food poisoning. I will wake up and be super clear the next morning. So, we gathered the exec team and I shared what was on my chest and they were enthusiastic, let’s do it! I thought this is just an irrational fear of mine, afraid of the unknown. So we did the deal, a very anti-climactic release the papers and you have 17 lawyers on the line saying papers are released. That was $20,000 in papers released. Ok, 30 minutes later I get with the CEO and we gather the team and we make the announcement. And it’s like this, everybody’s staring at me and I took a picture of the moment.

So before I tell you what happened with the team, I want to share a lasting lesson. I’ve share this with other entrepreneurs because to encourage them to not underestimate the power of this. And it is that at that moment, no one will stand between you and the deal. You have to depend on yourself solely to make this call. There’s no safety net. If you are absolutely, crystal clear what you want in life, it makes that decision so much easier. So you can think about it and how it serves your life and goals but if you’re not clear and you’re depending on whether if it’s a good or bad deal and getting it like I was in my head, analysing all the little aspects of it, no one will stand between it, or slap you across the face and say dude. You know, when your best friend is up on the altar and the priest says does anyone object? And you stand up and say yeah, I do. Dude, not a good idea. No one will do that, it’s between you and yourself.

This is Mark Zuckerberg:

‘some big companies wanted to buy us, I didn’t want to sell. I wanted to see if we could connect more people. Nearly everyone else wanted to sell. Without a sense of higher purpose, this was their start-up dream come true and it tore our company apart. After one tense argument, one of my closest advisors told me that if I don’t sell the company now I will regret that decisions for the rest of my life. Relationships were so frayed that within a year or so every single person on our management team was gone. That was my hardest time leading Facebook’.

Jason Eckenroth: Be super clear before you step into the eco boosting waters of talking MNA cause it will mess you up and your company. Sometimes it’s good cause maybe that’s what you need but it definitely will.

So release the papers!

Making the announcement to the team, it looks just like you guys. Took a picture. It didn’t help my communication strategy that it also happened to be April Fool’s day. That was a pretty elaborate joke, where’d you get that guy? Yeah, so the rest of the day was a blur, the team was kind of a blur. I will share the number one question, the first thing all the members of me team asked me and they only asked me privately Jason, what’s your contract for? How long do you have to stay? And I couldn’t – I didn’t know if I could do it or not and I didn’t want to tell them the truth. I didn’t have to stay, I had total flexibility. We were in a very strong position. But I didn’t want that to freak them out, like I was just going to mic drop and walk. But honestly in my heart I didn’t know if I was going to mic drop and walk. The day before the deal, I had no idea if I would because I didn’t own it anymore, I would instantly fall out of love with the business and would be ready for what‘s next. I had no idea how I would feel.

So I go to bed that night really intoxicated, wake up the next morning with a splitting hangover and a bolt of lightning through my chest. As clear as day I realised I had a new purpose. I was not gonna drop the mic and walk, I was going to stay, I was going to lead the company through the integration, learn and make the most out of this situation. I’d made the decision, I was going to own the decision. I wasn’t gonna leave the mess to someone else. I was going to do right by the buyer and make sure this thing didn’t fall apart, do right by my team, by myself and my family so it filled me with a ton of purpose. We went about taking a very lovey dovey culture driven company and fitting into a larger private equity backed organisation 10 times our size.

You know, I’d heard all the time it’s like a trope, that little companies and what a great company and it got bought and it’s all screwed up. It’s always on the buyer. My lesson is that it’s not on the buyer after seeing what happens immediately post-sale. It’s on the team as much as it is on the buyer. If the company that’s being acquired can’t do the following 3 things.

Number 1, no victims. If you sit and wait for change to happen – I will see how this thing plays out with the buyer, I’ll see if my role stays the same or they take away my ping-pong – then you’re screwed. We need creators who see a problem and challenge and say I choose this or that. We really had to educate our team and focus on that ourselves.

Number 2 was cynicism. That’s so in the culture, I didn’t realise it it’s the Kryptonite to culture. The second that my team just said and made assumptions about what they saw coming down the pipe, we had to kill that and we killed it by being extremely – if we had a shit popsicle, we would call it that.

The third was core value discipline. We’d been a core value driven business but now the stakes were high. We had to apply them to every hiring, firing or management decisions etc. I will skip through some of these in the interest of time. So, how did we do? There were so much learnings out of this, I learned so much. But we kicked ass. We had tripled our growth rate from when we let go of our operator, we were back to the 30s. We doubled our headcount with absolute zero delusion of our amazing culture. We didn’t lose one employee to the acquisition, that’s unheard of.

Our customer Net Promoter Score stayed up in the 70’s. We maintained our margins and the moment, 10 months after close, we had even more accountable culture than we had before going in. The parent really helped create that urgency. People ask me how do you like working for the man? My answer is it’s thrilling. The highs are super high and it’s followed by some pretty deep lows, realising that I’m no longer in charge, followed by really big highs. But it was thrilling. It was a great outcome.

Everyone had to change

Lesson for me, everyone had to change and it wasn’t always what the business needed, it just freaking forced it. Cause if you didn’t change, you moved on and members of my exec team changed. Just like Mark said, everything changed post-deal cause the stakes were high. I wasn’t gonna leave the business in a crap state, I changed massively. One of the forcing functions for me, all the bureaucracy from the integration took up 30-40% of my time. Sitting on conference calls talking about Outlook email servers. That forced me to get out of the weeds, I got out of the way of my team. I only thing I had time to left to do was to lead and manage not to do any longer.

We were acquired, again

So January, February last year we were acquired again. I got the notice. And it was a London based private equity firm that bought it from the first private equity firm. And very quickly, you know, when you have a new acquisition like that it’s 5-7 year time frames, I’m not leaving the parent business. I don’t have a long term role, it was time for me to go. And so that was decided pretty fast and ahead of my original schedule, and so I left the business, I think in March of last year. And I was in this space again. I had completely, I was freaked out the night before close and I didn’t get that freaked out, since. I was full of purpose, it was exciting and annoying sometimes and all of a sudden I was out, completely out. For the very first time in 17 years I didn’t have a company, employees or an industry. I had a lot of time on my hands and my wife was like what are you doing here? You’ve never seen me at home? I was standing in lines behind retired people, I’d never seen that time of day.

And so that began actually a really difficult time, everyone assumes like wake the frig up, Jason! You should be grateful! Look at how much money you made! Why can’t you be more grateful? But I was not feeling right inside at all. Very depressed, the next 6 months were very difficult. I tried to busy myself. Immediately after leaving, my family and I decided to move to Barcelona. We’d never even been there. I was like honey, my theme this year is new! And she’s like all right, let’s see where that goes. So we moved to Barcelona and I get there and I meet an expat and entrepreneurs that sold their businesses and moved to Barcelona. And one day, he suggests this white paper and it was phenomenal, it was the first thing I encountered that really, really nailed what I’d gone through.

Loss of Three Things

It’s called life after exit and actually it was commissioned by wealth management firm through Columbia business school to interview these entrepreneurs what they sold and what made them happy post deal. They found all these entrepreneurs share the same loss and it was how they dealt with it or how they were prepared for it that predicted their happiness post-exit. The first loss was a loss of community. The moment I left there’s non-competes, and non-work. It’s not even just physical like legally. And this is reasonably stuff, I’m not complaining about it but you are definitely removed from your community, of customers, employees, industry. Sometimes I want to sit down and shoot the shit but I can’t – they’re not around. Community of entrepreneurs, I have less in common with those that are still in the game and are still building. You lose your purpose, I had a strong one pre-deal, I lost it for about 12 hours, but found another one immediately thereafter and now I was out in the drift again. Applying purpose to anything I could but it wasn’t really working. The third was a blind spot of mine, I had no idea how much life depended on the inane foundation of meetings, getting into work at 9, there’s a rhythm to it and a little bit of discipline. When I was in it, I was dreaming at this 4-hour work week. I got no responsibilities. I was there and got it and I was really miserable. I was adrift in a sea. Eventually in Barcelona I set up appointments for myself and started to recreate some of the structure around that.

No one’s feeling sorry for me, I know that I took a risk in sharing this story because everybody – we there always think it’s roses or we put ourselves in that person’s shoes and think god, I just want to be with you. Why aren’t you more grateful for this? I want to tell you I’m grateful and am filled with gratitude every day. I live a blessed life. I’ve learned so much But I have a desire within me to always learn and to iterate. 1+1=3. That means I don’t have to experience it and then it’s gone. It means I must build on it.

Have your cake and eat it too

So when people ask me Jason do you regret selling? No, not at all! Without hesitation I don’t regret selling, I made the best decision with the information and capabilities I had at the time. Jason, would you sell it again? No. based on the information I have today. I didn’t need to sell it to go through those transformations. And it drove me crazy because I started to run across so many other entrepreneurs that were going through the same boil the frog scenario. They’d optimism had got clouded a little bit. They were like I’m just kind of tired of this space and I have this idea for another start-up. Dude, you have no idea how hard it will be to build it without a platform without the programmers or a ready-made audience of customers to test it on. A distribution network, you’re starting from zero and looking back in time in rose-coloured glasses. I started to really focus on what is it that makes how could I have my cake and eat it too, how others did that. Here’s some examples.

These are all privately held businesses, founder led, bootstrapped. Mail chimp, 37 signals, 1-800-got-junk. What were the things that these guys had in common? How did they navigate through those tenderisations? And they had them, it’s not just been roses for them. I found looking at my own business, looking at others that I’ve admired, I felt like I found 3 things that if I could talk to Jason in 2011 and say every business goes through seasons dude. It’s been too long since you’ve seen winter, but winter’s coming. But you’ll get through it. Don’t be afraid of it when it arrives, just embrace it! It’s part of the journey. All right, thank you future Jason.

Three Keys to Staying Sovereign

But there’s 3 tactical things I would have done. Number 1 was a commitment to evolved leadership. These guys have continued to invest in themselves as leaders and transform themselves. I kidded myself, on my card it said CEO, I wasn’t a CEO but a manager, or less. I was a flat pancake of a company owner at some point. You go from founder to entrepreneur to CEO. It’s not a straight line and not everybody makes that transition. And if I can’t do it, then I got to hire someone who can. And unlike my hire, it’s possible to find that number 2 that you make beautiful music with. I’ve seen it and I talked with enough entrepreneurs to know they went through the same thing I did. But they looked for the right partner to fill in their blanks. So that commitment to evolved leadership.

Number 2, there’s a long term strategic roadmap. Alex’ presentation – sitting in the audience if I was 1-2 years ago, before I sold, I’d be filled with optimism. There’s another way for me to think long term. What is my 20-year plan? What if it was legally forbidden for us to sell our businesses? We’d be forced to innovate and not sit on the golden goose until it’s dead. But to take it and put it to someone who can maintain it and start iterating on the next thing. The best businesses that last 100 years aren’t doing the same thing they did 100 years ago.

And the third is taking chips off the table. Now I had a profitable business and I was able to take the money out but that was a big turning point to me when we got to the reasonable level of profitability. You don’t have to sell the business to get that nut taken care of. Many of us have a mortgage, we have college debt, our kids’ education to pay for, our retirement to seed. How much money really does that take? 1-2 million dollars? The utility of that first 2 million is massive. You want to add on the glory money on top of that? It won’t make it easier to pay the first two. What would it take you once you get to the first moment of success to enjoy it, check your ego at the door, do it – best way to do it is through cash flow and profitability. Another way is to bring on a strategic investor that’s in line with your view. 37 signals did that. Jeff bought into their business no pressure to sell that company.

So as I start to talk to more and more entrepreneurs in Barcelona and the US, I realise that that feeling of loneliness I had going through my deal that as a bootstrapper it’s different for me than if I had raised a bunch of money and had VCs around the table telling me it’s time to get out. It’s different and there really wasn’t a way for me to find others easily that can relate. I kept having these conversations with entrepreneurs saying we could be leaning more on each other. So a few of my bootstrapping friends and I created an organisation called Sovereignty. It’s meant to be a community of independent businesses that are committed to building for the long term. I’m not against selling, I’m just for operating from a position of strength. I’m for the fact that independent businesses are great for communities, for entrepreneurs, for the employees and customers. And I just desire that as a society, we can move a bit away from glorifying the exit as the only manifestation of success and we can celebrate that we have real businesses that are creating real jobs that have long term growth prospects.

So I hope some of this share made a little dent in the way that you think about exits, and encourages you or forces you to think about how and what you can do to let your business work for you to achieve your dreams and hopes and whether an exit is a way to go it’s fine. Or maybe it’s not and there’s definitely other paths. So I’ve 6 minutes for questions and I would love some questions if anyone has them!

Q&A

Audience Question: I think I remember my question. Jason, one of the points you made was about sovereignty, my question is do you think you could have engineered a solution which might have felt a bit like an exit but you were still involved with the company? More time or maybe it’s not as involved but you’re still the owner of the business?

Jason Eckenroth: Yeah, I absolutely could have engineered a way to move beyond it. One of the ways that I’ve seen is creating a holding company. Someone I met and talked to post-exit was Joel Spolsky. And if you guys remember Fog Bugs, it was that business plateaued many, many years ago. He just put it in a box and changed the type of people that work on it and let it sit there and it’s still sitting there I think. And it iterated other things like Trello and Stack Exchange and on and on. If you did something like that with a holding company above it – I think one thing I didn’t talk about is just that growth, I was addicted to growth. It was like an adrenaline rush for me but it was important for my culture cause I really believed in people and I had to give my team upward ability and a growing company creates those opportunities. A stall growth company, the best people leave. And they leave not because they don’t like you but there won’t be as many opportunities. We had to keep iterating and that’s a model where you can create future opportunities for your best people.

Audience Question: That sounded like a rollercoaster ride. Do you feel you have the stomach to start again from scratch like you were talking about before?

Jason Eckenroth: Whether I have the stomach to start something new goes back and forth. What feels the best right now is that I find I discover an entrepreneur technical founder that’s found a product market fit and he or she is frightened of scaling that business. What I learned I love to do was scaling the team and building it to the next level and would love to be a partner to that individual. I think that would be the best way for me to skip the painful parts and go right to where it was fun.

Audience Question: You talked about how post-acquisition everyone has to change. Can you talk about some of the techniques you utilised to help facilitate that change that was required?

Jason Eckenroth: Yes! The empowerment dynamic is a book that is focused on a drama triangle. A lot of drama comes from an acquisition. You’ve just made a change on behalf of other people they had no say in. Of course they feel like a victim. That was a learning and awareness we had to develop across every single person in the company. So we bought this book and we held little seminars with it as part of onboarded new employees. Remember we doubled our headcount during that 18 month period. That was one that was really important. Another was we leaned in to our transparency. So sharing everything we knew with the team twice a week. We had the Tuesday huddle, it was fast only 9-minutes long. And the Friday 404, another company huddle. A bit longer, ending with announcements, core value shootouts but all focused on our objectives.

Audience Question: So at those scary moments with the opportunities and those things will cost a lot of money, much more than it’s coming in. I’m a believer about sovereignty and hearing people saying you should be raising money. From your experience have you had suggestions on ways to keep control and counter moments when the income is not as good?

Jason Eckenroth: Yes. There’s two types of bootstrappers I found in the world. Those who ran their business focused on profitable growth and those who ran to break even under the guise of we reinvest all our profits in growth. They may do that, but committing to growing profitably forces you to be more exact on how you’re spending that money. I think an important component of committing to an innovative or long range strategic plan is to have the ground cover of a decent margin in the business so you can use that profit to make experiments, take risks, to play and also to weather the business in case of turbulence. Cause you may have this great idea about the next thing you need to go do but if you haven’t built margin into your business, the second things get shaky, you let go of that dream and you’re back to just holding on to what you got and someone else will take the place for you. I think margin is the keystone to that. Otherwise there’s a lot of great content around iterating.

The last thing I will say is a lot of companies, one of the most underrated assets we have, you have once you get to a certain scale, is you have a built in distribution type. Use your existing customers to experiment on new adjacencies. Maybe they do one thing that you can test with and move in another market. It was powerful in beverages cause there’s only 10000 wineries in the US.

I have a bunch of content that I send out to entrepreneurs that reach out to me and say ‘I’ve got an offer, I’m trying to figure out what to do’ and I’m like ok here’s the stuff. If anyone is interested in receiving that, please send me an email at jason@sovereignty.com and I’d be glad to kick it back to you.