Kevin McArdle bought my SaaS. For millions. And now, I get to talk to him about all things acquisition. In our chat, we discuss the importance of annual exit planning for startup founders, we explore the mindset and framework necessary for building a successful and sellable business, as well as the benefits of stepping outside of your normal workplace to think strategically.
Arvid Kahl 0:00
Welcome to The Bootstrapped Founder. Today, I’m talking to Kevin McArdle. Now, he was very instrumental in my founder life. He acquired my SaaS business. So we’re going to have a conversation about acquisitions, preparing for your exit, building a bootstrap business that other people actually wanna buy and how to get to that point, how to go through the process and what to think about during building your business, not just when it’s time to sell but long before that. Here’s my conversation with Kevin.
Thanks so much for being on the show today. I have one thing to say to you: you changed my life. I just wanted to tell you.
Kevin McArdle 0:37
That is the nicest thing that anybody said to me in a very long time.
Arvid Kahl 0:41
It really is, like, we built Feedback Panda, the SaaS business that we sold to the company you worked at and the company you led and the company that acquired us. And it was the most life changing thing that ever happened to me. I think after meeting Danielle, my co founder
Kevin McArdle 0:57
Yeah
Arvid Kahl 0:58
You know, the person that I spend my life with,
Kevin McArdle 1:00
Good to clarify that
Arvid Kahl 1:01
If there was another person that had a massive impact on the trajectory of my life, let’s just say that, it would be you. So a big thank you from me for this. And it’s really nice that you found the time to talk to me today. You have a lot to share about private equity and acquiring businesses, building and operating SaaS businesses. And I’m excited to hear what you’re currently working on and what the future has in store. So thanks for being on the show. And it’s really nice to talk to you again.
Kevin McArdle 1:29
Oh, it’s always a pleasure to talk to you, Arvid and pleasure to be on the podcast and talking publicly, I think for the maybe for the first time. And it’s very nice of you to say that. But you know, I played a role in the success that you and Danielle had, but I was lucky to be the one to acquire Feedback Panda. And if it wasn’t me, it would have been somebody else that, you know, gave you the exit that you were looking for. But I’m just so excited for you and Danielle and all the success you’ve had.
Arvid Kahl 1:59
Oh, thanks so much. Well, you wrote the nicest email and we had the most wonderful conversations with you. So it was really easy to pick you, let’s just say that. Like you had such a nice friendly and uncomplicated way of interacting with us that made all of this, it made it very easy to trust you and the team. I think that’s one of the things that you did so well in this whole you know pre due diligence but already kind of due diligence phase, right? When you’re selling a business and you’re acquiring a business, both parties kind of poke at each other to see if it’s legit because there are a lot of people who are not legit in the field, unfortunately. So you allowing us into you know, the business and all the people that work for you and having chats with them. That’s why I’m with Tyler. Tyler Tringas, whom I have another podcast with, right? He was the first person
Kevin McArdle 2:48
Of, course. Arvid and Tyler Catch Up. I’m a fan, you know that.
Arvid Kahl 2:50
Thank you so much. Oh, great as fan. I’m super happy. But first of all, thanks for listening to that show. Because that’s good to know that anybody’s listening. But really like Tyler was the first person we called in our kind of seller side due diligence that we did with you, right? Because we needed to make sure all the people that sold, were they okay or you know, like that they run into any issues? And we had such a cool chat with him. And he was so energetic. And so he talks so kindly about the business and particularly about you that it came very easy to chat with you and then go through the process of getting acquired. So that was really cool.
Kevin McArdle 3:30
I have a huge smile on my face as viewers can see because it just brings back such great memories of I remember specifically sending that email to Danielle. And I’ve told this story publicly because it makes me smile. And her response was just a very kind and polite, “No, thank you, not interested.” I was like alright, well that’s fine. I have a new friend on the internet. And that’s a good thing for the day. And then in the background, I find out later she told me called Tyler, I think spoke to another person who had sold us a business and then she came back like emailed back I think a couple of weeks later. It was like, actually, Kevin, we’re considering it. Let’s have a chat. And so yeah, that whole process, it was easy on our side too. Because you know you two built such a great business. You’re such a great team. You had your, you know, things in order and you know, we’re ready to sell and had done the right things to prepare. And so yeah, it was win-win all the way around.
Arvid Kahl 4:28
The whole process was fun for me like everything in between, like even me recording this eight hour video for the software engineer that was supposed to take over my work just going through the codebase. Like no sane person does this. But in that moment, it felt like just a joyful activity knowing how well it would be received, right? Like the whole process was just kind of a give and take obviously because we needed to spend a lot of energy both on running the business and on preparing everything for the acquisition, but it never felt forced. It never felt like the pressure, that was never on. And I think that is one of the things that I admire the most about you in this process, how you were guiding it without like pushing it. That was such a sensitive way of dealing with people who are already like I was mid burnout at that point, right? I was super stressed. And people don’t want to lose their baby. They want to lose the business and all that. So you handled that with such care. You know, I’m a fan, but I just want to do it publicly just admit, I’m a big Kevin McArdle fan.
Kevin McArdle 5:29
Likewise, this is just, you know, Arvid Kevin fan club meeting
Arvid Kahl 5:33
I guess. Let’s just compliment each other for another hour. Why not?
Kevin McArdle 5:38
Yeah, Arvid we’re already losing listeners. So why not just continue. But, you know, it’s funny, like some of the things you said, like, you know, because selling a business is a stressful process. I’ve been on the other side of that and the fact that you said it was fun. And I’m sure there was some stress in the background too. But like that, you know, the compliment you paid me earlier, it’s sort of funny and funny or weird to me in a way is like, it’s just kind of how I act and who I am because, you know, I’m a human being. And I know, you know, we just do business with other human beings. And I don’t like dealing with a-hole. So why, but like, it’s shocking how much people say the way I do things is different. And the experience is different. And you know, it just blows my mind that other people don’t have the same approach of just being a human being. Don’t think that you’re smarter than everybody else in the world. And don’t be a jerk, don’t put pressure on people because people don’t mostly don’t respond better in pressure situations. They usually perform best when they’re comfortable and happy. And, you know, I like how you phrase it with like, guiding without pushing, I think is what you said, but I may steal that.
Arvid Kahl 6:52
Please do. Feel free to steal whatever you like, you gave me so much already. I’m gonna keep doing this. This reminds me of something, reminds me of, I think like Paul Graham wrote this book, like Hackers & Painters. And in that, he has an essay on how schools, the system that we are kind of socialized in really pretty much reflect prisons in terms of the dynamics, the social dynamics that happen within them. And I’m getting somewhere with this, right? The idea is that you are put into this kind of confined system that you’re not allowed to leave, which is like the premises of the school. You have these weird internal social dynamics, you have like the nerds and the jocks. And you have like gangs in prisons, that kind of are equivalents of bad like you’re part of one of those groups, but not both. And the people that are there the biggest stars in prison, like the strongest and most violent, like most fear inducing people turn out once they’re released, to have no standing in society whatsoever. And it’s pretty similar in schools too, right? Where the bullies then don’t find jobs because they’re way too aggressive. And they don’t value actual human relationships. And that reminds me of many people who have been conditioned in a system like this, that you have to kind of elbow your way through society and then they end up at a spot. I think the Peter Principle applies here where people get kind of promoted to the point where they just at the limit of their capacity, right? And I think Peter Principle says something else about it. I’m just trying to keep it friendly and loose here. But the idea is that people who have this kind of behavior, they get to a certain point, but not further.
Kevin McArdle 8:35
Yeah, they hit the ceiling.
Arvid Kahl 8:36
They hit the ceiling because people at some point, they don’t take it anymore. Like either they are also pretty aggressive, which you know, kind of creates more conflict or they are at the point where they are enlightened enough to understand that you get way further with kindness and with being passionate about something and opening up to people than closing off and trying to grab, grab, grab and this is mine, mine, mine and you better stay down, right? That kind of behavior just doesn’t fly in most groups of people particularly not, I guess, the founder community where people really need each other because it’s such a strong community.
Kevin McArdle 9:11
That’s interesting. People really need each other. And at the same time, people have independence.
Arvid Kahl 9:16
Yes
Kevin McArdle 9:16
Do you know what I mean? I think people need each other by choice versus like a corporate environment where you have to sort of play the games to advance in your career. If you’re the controller of your own destiny, you’re a founder. You don’t need to build community with other people in your situation. It’s beneficial to do so. Yeah, I haven’t read that essay. I’ll maybe go back and look at it. But I think and I hope society’s evolving a little bit because I see and it’s you know, as we’re recording, it’s the time of the year where kids are graduating and moving from you know, I’ve got a couple of moving from one school to the next and I see the way kids interact with each other today and it’s sort really not perfect. But I think it’s less clicky than when perhaps we were in school and Paul Graham, you know, it’s an interesting comparison schools to prisons because like, you just can’t leave. And there’s a person in charge of making sure you do what you’re supposed to do. But I think the educational system is certainly still has its flaws, but I think it’s evolving in a lot of good ways in terms of like, more belonging, you know, kids treating each other as like, we’re all one big group versus I’m a jock. And I can only be defined by that, but it’s so situational, right? Like and the Peter Principle, you know, there’s one human being that I can remember who is the epitome of the Peter Principle just being promoted past his competence level. And I always picture that person when I hear the Peter Principle. And there’s also people we know that like, just bullied people through their whole lives and are incredibly you know like successful by what you know, like a business or economic way by doing that. And unfortunately, people look at them and say, well, that’s the way that you succeed in business. So
Arvid Kahl 11:11
That’s the thing like the media attention on those people either attention that they created for themselves because they are sociopathic enough to allow for this, right? They don’t hold back or because they stand out so much. And use agencies or you know, the tech crunches of the world, they take a look at them. And they just think it’s so clickbait generating, I will have a headline that works. That is really unfortunate. I’m glad that you say this about the evolution of the educational system. And I have this feeling that I guess the digital transparency, the fact that we are interconnected and everything that happens happens everywhere immediately, right? When you hear something happen or something happens, you hear about it within 30 seconds if it’s important. That didn’t used to be the case in the 60’s, 70’s and 80s, where you would have the full day before the kids could report back to the parents and if at all, right? You would have a delay in stuff. And that changes the immediacy of how behavior is rewarded or punished in these situations. So I guess that helps. And by shining a light just on the system and make it fairer, make it more equitable and that stuff. And I have a feeling that’s it’s almost the same in the entrepreneurial community and particularly with people sharing their stories like building in public or just being more approachable and being more allowing more insight into their businesses, that creates more equitable, more fair and more accessible businesses in the space that I’m in. And let’s just call it the indie hackers SaaS founder community, as specific as it gets. When I see people build in public and I’m just realizing this now. So you’re part of the thought emergence here.
Kevin McArdle 12:49
Yeah
Arvid Kahl 12:50
The fact that they have feedback cycles with the whole community, often surfaces, accessibility issues was so much earlier than when the founder would have thought of them, right? So yeah, I’ve had that with my own content, like people told me your blog is great. But I have dyslexia, I can’t read this, like, what do I do? So I had the option of either starting a podcast, which I ended up doing or having at least a little snippet of a WordPress plugin that automatically generates like an audio version of the article that I would write and that happened like three or four blog posts into my actual blog existing because people like myself from the beginning, I was already sharing everything I did. So they quickly could give me the feedback on, this is not accessible. This is kind of excluding people who have this issue.
Kevin McArdle 13:36
I understand you may not have come to that conclusion not as quickly or ever, right? Yeah
Arvid Kahl 13:42
I would have had more readers like that’s the thing that default is people can read and write and hear and see, right? That’s kind of the societal default. But obviously, not everybody is included in this group. But the group is big enough to kind of allow for these people to fall off the site and still turn it into something big, right? Which is why accessibility is so important.
Kevin McArdle 14:02
Yeah, that story, like I can read, I can see, I read very slowly. So I’m more of a podcast fan, but like, just knowing that you had that feedback took the step to say, well, let me try to make this more accessible for other people draws the “normal groups” of society to you more because like, well, at least Arvid gives a shit about like somebody who has trouble reading. I don’t look so it’s interesting that we’re talking about this and it’s no surprise because like, I love how your content is like founded in or like grounded, maybe it’s a better term in just kindness. You know, I like you talk about building an audience onTwitter and like conventional wisdom is like, hot takes that are extreme is what gets you clicks and follows and engagement and like, that’s kind of true. And I think that’s part of what is like, makes normal media and social media hard to consume a lot of times because everybody feels like they have to be polarizing. And then you step into the world and you’re like, well, what if I’m just a nice person and if I like, give people compliments and I just try not to be a jerk all the time. And I think part of what we get along is like, that’s my attitude too like, but it’s not from I don’t know how to say this. It’s not from like a business strategy perspective. It’s not like, oh, well, I think more founders will be attracted to me if I act like a human being and don’t have the sharp elbows. It’s just like, I don’t have the time or patience to live any other way. Like, this is just kind of who I am. And so long ago, I figured out like, just be who I am. And the right people will hopefully be attracted to that. And almost more importantly, the wrong people will be repelled by that.
Arvid Kahl 15:51
That’s right!
Kevin McArdle 15:53
And there are several examples of where I can think of somebody either not wanting to work with me or for me or choosing to sell to somebody else. And you know, on and on down the list or like choosing not to invest in my company. And there’s like, good, well, okay, check, process is working because we had somebody self select out of my orbit, so I’m going to keep doing what I’m doing.
Arvid Kahl 16:17
That’s so great. That is one of the things that I love about having like a public persona. You allow people to self select out. And it is not conventional wisdom to get rid of people from your potential audience, right? Because everybody wants numbers, numbers, numbers, bigger, bigger, bigger, but having the wrong people in your audience is gonna cause more damage than them actually self selecting out of it. And that is true for anybody, right? Audiences, customers, partners, collaborators, all of this, like if you have a group of the right people, no matter how small it is, your impact is gonna outsize the impact you have with a mixed bag of everybody who may or may not be vibing with you. Let’s talk about that business. Let’s talk about what you’re currently building because I was just going to throw in another compliment. Like, the reason that I can be this on Twitter that I can just be kind and friendly and empowering and motivating is because I’ve worked with and found people in the higher echelons of the entrepreneurial world, like yourself who are like this. Like I’ve seen in you and the people that you work with and the people that I got to meet through you, that it’s possible to do this at a super high level and be effective and successful and friendly and kind and all these things at the same time. So it is like motivation by example, that allows me to do this and now be this for other people myself.
Kevin McArdle 17:32
Yeah, that’s a cool thing is like you, I think you are now voted, you know, not to, I mean, I know how big your audience is, Arvid because I’m not the type of person who clicks a profile, how many followers do you have? So it’s like, I don’t know how many followers most people have. I’m sure your audience is gigantic. And that’s exciting to think about you being that example to other people because there are still so few example then like my platform of choice is Twitter. There’s still so few examples of just like kindness and positivity on that platform. And you know and people seeing all the success you’ve had in building an audience and building a huge podcast following and all that. But the other kind of, sort of, like I was saying, like, you would suck at it if you tried to do it the other way, you know, because you’re just not that person, right? If you were trying to like, you know, troll people and you know, insult people all the time, like, it would be inauthentic. You wouldn’t be good at it because that’s just not who you are.
Arvid Kahl 18:36
It would be so weird. It would be hard. I honestly
Kevin McArdle 18:38
I dare you to do that for a day and do it like next April 1st
Arvid Kahl 18:43
That would be fun.
Kevin McArdle 18:44
People would pick it out right away. But like just to spend the day just being a jerk online and see what happens.
Arvid Kahl 18:50
See, the thing is with anything online, like there’s barely any context, right? Twitter doesn’t have context because it’s text exclusively. It’s just the line of text. It doesn’t have your smile, doesn’t have like the subtle kind of tone of your voice when you like just insult somebody, but there’s a smile under it, right? It doesn’t come through if you just say “fuck you, everybody” on Twitter, like, it would be funny, but you know, like somebody would probably and that’s the thing. That’s why my thinking is in those moments, somebody probably just had a really shitty experience an hour ago. And now they’re on Twitter scrolling through and trying to find something positive. They see me telling them to fuck off. They don’t want to be that, right?
Kevin McArdle 19:27
Their bad experience
Arvid Kahl 19:27
You never know where somebody else is. And that is for good or for bad, right? You never know like how high they’re flying or how low they’re currently crouched on the floor, just like rolled up in the bundle because they’re going through something. So the default for me is trying to shift it towards the positive but it would be very interesting to just be like evil Arvid like Star Trek style just grow like a goatee like Spock and just you know be like from the evil universe for a day or two. Man, you’re right. I think there are too few people. Let me just make the world’s best segue at this point. It kinda sounds like it’s just like a little group of maybe chamber musicians like two or three. But wouldn’t life be better if they were in a much bigger band? What are you currently working on?
Kevin McArdle 20:12
I see what you did there. Well done. I didn’t know where you’re going with that. But yeah, so I think you’re asking about the new company. Yeah, Big Band Software is the new project. We just launched in March of 2023. Well, the company was founded December 1st of 22, but launched early 23. And yeah, the vision is to build a holding company of great software businesses. So we’re buying software companies, 1 to 10 million in revenue with no obligation to ever sell them, which is strange in our world. Usually transactions, you know, weirdly, the bigger the transaction, sometimes the shorter the cycle because investors want to put money into a business, grow it and then get that money out as quickly as possible. We just have a different approach. And partly because we’ve got like minded. I have two partners in this business, Chris Reedy and Jason Heath, both of whom I’ve known for five plus years. Chris, I’ve worked with before. And we had a similar vision. We’ve got some great investors who have given us the luxury of lots of capital to go spend over the next few years and they’ve got the same vision likes, let’s build a holding company. If we own great software businesses, why would we want to sell those? You know, let it compound over years and dare I say decades. And so yeah, on the surface, we are buying smallish software companies. But beyond that, we’re trying to do things quite differently than almost anybody that’s out there.
Arvid Kahl 22:01
So that’s what’s novel to me, like the difference between, like private equity as I know it and holding company. Can you kind of tell me what exactly you think is different between them?
Kevin McArdle 22:11
Yeah, so a typical private equity firm or fund would raise a bunch of money, tell investors, okay, we’re going to buy some stuff, we’re going to try to grow it, and then we’re going to sell everything in order to give you all of your money back. And that timeline would typically be somewhere between 7 and 10 years. So Arvid, please give me your money. And in 7 to 10 years, I’m gonna give you all of your money back, hopefully times three. And that’s the model. So that means let’s say, it’s a 10 year fund, which would be sort of at the long end of the range. But that, so I’m being generous. So now I’ve kind of got, you know, three or four years to spend all of the money that I’ve raised. And then I’ve got two or three years to try to grow those companies. And then I’ve got three or four years at the end to sell all of those companies. And to me, you know, there’s a couple of challenges that I’ve always seen with that. And the first is like, if you’ve got a great asset and it’s growing, why would you sell it? Like, that’s the dream for everybody. And I’ll come back to, there are a lot of reasons I love to say, there are 100 reasons why people sell a business and only one of them is money, right? So you’ve talked publicly about how you and Danielle, the business was great, but it was putting pressure on your marriage because all of the stress of the business. And that’s a great reason to sell a business that has nothing to do with money, like almost nothing to do with money, right? So I want to be clear, like there’s no problem with selling a great business. But being forced to sell that great business just because of the timing of your fund, I always had a problem with because what if you raise the fund, let’s say 10 years ago and you’re now obligated to sell all of those businesses during today’s economy? You know, would you choose to sell that business now? Or are you doing so just because you told your investors you were going to give their money back? So I don’t like the idea of being forced to celebrate assets if it’s not the right time. And I don’t like the idea of this like short term thinking, you know, I mentioned like, we want this thing to compound over decades plural. If you buy a business and you have two or three years to run it and then you have to start thinking about selling, the tendency is to make very short term decisions. So are we going to invest in research and development or do we hire another three salespeople? Well that trade off and this sort of a silly simple example but like, if I’m going to sell this business in three years, well, the default we will go higher to salespeople. Who cares about working down technical debt or you know, adding some feature what you’re improving a customer experience? So, you know, like just growth at all costs, trim expenses. These are the knocks against private equity is that it’s short term thinking. It’s very transactional for founders, which is a huge part of your audience, I know. You know, a lot of times your company gets absorbed by a bigger version of whatever you’re doing and the brand disappears and your team might get fired and your customers may or may not have a great experience. That’s another reason why I never really liked the typical private equity model. And so, you know, mid last year, I literally took out a blank sheet of paper and just started scribbling like, okay, if I want to, if I have the opportunity to build my dream company, what would it look like? Who would be involved? What would our strategy be? You know, what are the beginning, middle, end points? What is my job look and feel like? Who do I get to work with and talk to on a day to day basis? And I mean, like, knock on wood, it came together in many of the ways that I sort of dreamed about back when I was scribbling on that page. And that’s what Big Band Software is now today.
Arvid Kahl 26:14
That’s awesome. I like, the image of a big band, like the idea of a group of people each playing their own instrument, virtuously, right? But in harmony with each other. And just making fun music, like big band music, like I come from Dresden in Germany, that’s my birth town. That’s where I’m from. And we have a Dixieland festival there. Out of all places, in Germany, there’s a yearly Dixieland Festival and I grew up going to this as a kid. Like, we would be there and there would be these wagons full of bands, big bands too like, sometimes 20 people, just, you know, with trumpets and trombones and all that kind of stuff. So I have a very vivid, like, visual representation of just how enjoyable the ensemble of a big band can be. So seeing you picking that name and idea for something that I also see as something very joyful, something very positive, a business that doesn’t just take, grow, and then throw away businesses but actually embraces them. You should have called this like, it’s kind of embracing, it’s not a holding company. You don’t hold them, you embrace them. It’s an embracing.
Kevin McArdle 27:21
Yeah
Arvid Kahl 27:22
That’s how it feels to me.
Kevin McArdle 27:25
Let me go trademark embracing. No, that’s cool because part of in yield, like naming a business sort of evolves, right? And both of my partners are musicians. And we had lots of sort of, we kept circling around musical names, but I love Big Band for all the reasons. And our tagline on the website is business in harmony. And for a lot of the reasons you said like individuals who are excellent at what they do, but coming together to create something that’s bigger than any one of them could do. And the other thing that I love is like when like, just about everybody loves music, right? And it doesn’t matter what kind or type. Almost everybody loves, I have never met a person who doesn’t like music.
Arvid Kahl 28:12
Yeah
Kevin McArdle 28:13
And you jumping to the Dixieland festival in Dresden reminds me of like, right after we launched somebody else that I don’t know well but we’re sort of mutual followers on Twitter. He’s like, I love it. It reminds me of the second row. And I knew what he was talking about. He grew up in New Orleans and no, not the second row, the second line and it’s like in New Orleans, there’s always like, you know, marching bands, not in the traditional, like school band sense. But like, New Orleans is full of music. I don’t know how to explain this to people, hopefully, they know. But like, parties, there’s always a band marching through the street. And it’s sort of organized, sort of group and then the second line is just anybody who else is in the crowd has an instrument or an umbrella. They just want to dance like and so the name Big Band just made him think of that thing, which you could tell was a joyful thing for him just like the Dixie festival is a joyful thing for you. And also, just like, you know, another mutual friend, I was just emailing with Murich Dowsinger with you know, when we were talking about this, he’s just like, it feels human. Like, thank you. And like, of course, why do most people not name businesses and things that like? They’re all just collections of humans with a common vision and mission but like, we come up with these names that like are like feel more like robots than humans. So I’m glad it clicks with you and it seems to click with a lot of people and at the end of the day, it’s just a name and we gotta go, you know, do good things, but
Arvid Kahl 29:49
That’s right. Yeah, you have to kind of the name is goal, right? You want to accomplish this and it’s gonna be an interesting goal to accomplish. I want to ask you more from the perspective of a software business owner now because it’s kind of you’re building this company that is willing to acquire businesses, while then what do businesses need to look like to become part of a big band? It’s kind of what I want to know because many people, you know, they are trying to build a software business to, obviously, turn it into a lifestyle, you know, have revenue come in and live your life under your own control, without any external forces shifting around. But like we said, for many reasons, they might want to sell at some point. So what makes the business interesting for you in this context of the big band?
Kevin McArdle 30:37
Yeah, I love that question. Like simple things to point out, we’re looking for businesses that are 1 to 10 million in revenue, profitable and growing. They don’t have to be growing at 200% a year. They don’t have to be hugely profitable. But that’s sort of the niche that we’re looking for. That said, you know, there are a lot of different ways to create a wonderful business and it is a lot dependent on the founder and what their vision is. And so, you know, like, if selling to Big Band is an endpoint for somebody awesome, like, let’s chat. But I don’t think people should build their business to somebody else’s specifications. Does that make sense?
Arvid Kahl 31:24
Oh, absolutely.
Kevin McArdle 31:24
So I think we’re doing things differently than a lot of people. But if you build a great business, loosely defined, right? Like, there’s a lot of different ways to define a great business. And as a founder, you should be building, I believe you should be building the greatness that is in your head. Like whatever the people listening to this, however, they define great, go build that and somebody will want to buy it, whether it’s big band or somebody else. And so, you know, we look at a lot of things that many people do, like, you know, in a SaaS world, low churn is hugely important. And you don’t want a lot of customer concentration and these sorts of things. But it’s also like, it’s also the same advice of like, if you’re building a great business, what does a great business look and feel like? So let’s go aspire for that. And sort of like the sale takes care of itself is one way to look at it. And I sort of annoy myself because I’ll make two sides of the same argument immediately and contradict myself.
Arvid Kahl 32:31
Sure
Kevin McArdle 32:32
So the one side of the argument is build a great business and things will take care of itself. If you have a great business, loosely defined, however you define it personally. Someone will want to buy it when you are ready to sell it. The second side of the argument, I’ve started telling people for a long time, I’ve said it’s never too early to start thinking about an exit. I’m now like evolved that. I think exit planning should be an annual exercise, just like strategic planning. And I’m going to publish something about this. It’s sort of like half written. So I’ll make sure you see it early. And I can put it in the show notes, whether it comes out before or after the podcast. But just like we do like annual planning or strategic planning once a year, not we like not everybody does this. But that’s sort of conventional wisdom that one should do that. I believe one should do exit planning once a year as well, even if you don’t think you’re going to be selling for another 5 years or even 10 years because the exercise of exit planning makes you think about things that you don’t think about, you know, the other 51 weeks of the year. And so I think it’s a very healthy exercise for founders to think about that like, okay, at some point when I’m ready to sell, what are people like Kevin and others like him interested in? What do they care about? Am I checking off those things? And it’s not about Kevin. If I check off those things that will make my business healthier, it will make it better and easier for me to run. A great business to sell is also a great business to own. We know this. And so I’m going to, you know, continue to encourage people to make this an annual exercise. Because the other part is like, you might go into this annual exit planning exercise thinking, well, I don’t want to sell for five years but I’m gonna do this planning because Kevin told me I should and, you know, I’m gonna just follow his advice. 12 months from now, you might be in a different position or 6 months from now you might be in a different position. And if you haven’t thought about selling, if you haven’t thought about these things of like, what’s important and how do I get ready to sell my business, you’re not ready to sell your business. And so that’s again, one of the reasons why I believe there’s should be an annual exercise for founders because you don’t always get to choose when the right time to sell is and that could be a very positive thing. Somebody approaches you and says, I want to buy your business and you need to react to respond. Or it could be a negative thing. And unfortunately, I’ve had several situations where founder gets sick, founder’s spouse gets sick, co founder gets sick. You know, child, God forbid, gets sick. And like, all of a sudden focus needs to be on those things versus the business. And just being ready and having at least thought about the process and what to do, I think is super helpful and healthy.
Arvid Kahl 35:34
What would somebody ask themselves, like, during such an exit planning session? What would be the like, the most important things that you would do every single year? And maybe track them over time, obviously, because they change. But you know, I may be getting ahead of you here. But what will be the most important stuff?
Kevin McArdle 35:52
So at the top of the list is if you have a co founder, are we on the same page, right? So like, and the same page might be, I just talked to a couple of guys, they happen to be guys that have been best friends. And then they start a business and the business is going well. And it’s one of those like dream scenarios, right? Where you get to be in business with your best friend. And it’s, you know, good things happen. But one of them is like, well, I might want to do this for another two years. And the other one is like, I could do this forever. And they’re in their 30s. So it’s not huge conflict. But they’re not quite on the same page. So let’s talk about that, right? And another same page issue is, you know, somebody, you know, if you’ve got two co founders and one says, man, if I could sell this business and my share is $10 million, that would be amazing, life changing amount of money. I’d be totally happy with that. And the other co founder might say, I’m not selling unless I take home $50 million. Well, that’s a problem. And if you’re doing this on an annual basis and you do it early, it’s a discussion. If you wait five years and don’t uncover it or you don’t address it, it becomes a problem.
Arvid Kahl 35:57
Drama
Kevin McArdle 36:13
And then problem turns into conflict and drama. And unfortunately, co founder drama kills a lot of companies. And so that’s one of the things just like a check in and it doesn’t have to be only once a year, but making sure if there’s co founders or other owner, meaningful owners of a business. So like, if you have an angel investor who owns 1% of your business, you are not obligated to have this conversation with that person. But just understanding like, are we on the same page with timeline economic output? Life, like commitment to this? Like, are we working 100 hours a week, every week until we die? Or do we want to have, you know, a more easygoing, like, healthy, sustainable lifestyle? And, you know, those are the co founder dynamics is at the top of the list. Now, if you’re solo founder, obviously, that’s less important. However, might be good to have that conversation with a partner or a spouse if you have one. Because they are certainly a stakeholder in you and your commitment to the business. The other things that are important in like an annual exit planning exercise that may not be addressed in like a strategic planning exercise is, you know, how much am I involved in the business as a founder? And early stage, you’re involved in everything. You do everything. As your business grows and you start thinking about exiting, you want to be doing less than less. And I think that’s one of the things that you and Danielle did very well is sort of identify how do we delegate these things to team? How do I document what I’m doing so that somebody else can pick it up and do it? So those sorts of things are part of a annual exit planning exercise. And I love how you jumped to like tracking it over time. I was just talking to a woman who, we were having these discussions. Off the record, I won’t share who. But you know, she’s of the mindset where she’s like, I could do this forever. I’m like, awesome. Do it forever, if you’re happy. And if you start tracking this, like today, your answer is I want to do this forever. And next year at this time, your answer might be do it forever. And then two years, three years time do it. But then your four if you say, you know, maybe I can see the end of the runway and I should start thinking about this and then your five it’s like, I’m getting a little tired. If you do this just one point in time and let’s say it’s year four and the answer of your annual exit planning exercise is I can kind of see the end of the runway and I want to start thinking about this. You don’t have that. It’s not a trend. It’s just a this is how I feel right now. And so that’s a you’re a smart guy and you jumped right on. I think having the you can go back and like trend over time. How am I feeling about this and that’s doesn’t mean, if your trend starts to dip towards or go up towards, like, maybe it’s time to think about selling that doesn’t obligate you to think about selling seriously. But it’s a good data point and a good exercise to have with oneself or with one’s you know, co founders to, you know. It’s really important to set aside the time to have that thought and discussion separate from like, annual planning.
Arvid Kahl 40:26
I love this. And you know, what I love most about this is that almost every single point you just mentioned in your business exit planning strategy has almost nothing to do with the technical parts of the business, like the operational part of the business at all.
Kevin McArdle 40:41
No
Arvid Kahl 40:41
It’s all persons, all human
Kevin McArdle 40:43
Which is why it’s different. And the other point I’m making and like, annual planning people, you know, if you’re super on the ball, you might be doing it in October, November in preparation for the next year. If you’re less on the ball and you might be doing in January, February or like what do we hope happens this year, even though we’re a little bit into it, obviously, depends on seasonality and cyclicality of your business. It could be nothing but turning the page of a calendar is typically when people think about strategic planning for the business. I believe exit planning should be opposite. I’m going to recommend to people like late spring, summer, like most business cycles tend to slow down a little bit in the summertime. And because it’s a very different conversation with oneself or with one’s co founder, it should not be the same week of the year. Don’t do your business planning or exit planning. Because, yeah, you’re right. It’s all about sort of like how are you feeling up here. And in here, your head and your heart to say like, do I still want to do this? You know and like being honest with yourself? Do I still want to do this is different than how do I grow the business? And how’s the tech stack doing? Where’s the product roadmap? And how are my customers doing? I’m telling people set that all aside, this is a selfish, how do I feel? How do I feel with my co founder? How’s my spouse feeling about this business and is now the time to start thinking more seriously about selling?
Arvid Kahl 42:11
Yeah, that’s really cool. I really appreciate that. I think I’ve written about this a couple years ago. It was a consequence of me, like dealing with the sale itself and the process of building the business. I also had or redeveloped. Danielle and I developed this kind of check in with each other every couple of months. And I think we call this the founder business fit. Like if the founder is still good for the business because the business can operate if you build it in a sellable way. And that’s what you just said a good business is a sellable business. A sellable business is a good business, right? So if you can remove yourself from that business, that itself could be run by somebody else. And that doesn’t have to be you, right? It could be run by somebody and it is not kind of bound to the founder and checking in with yourself for this founder business fit. You’re right. The honesty part is probably the hardest in there like, among all the different things you can talk about, right? You can talk about like your vision and how much you would like a certain thing. But we all have these narratives in our mind about how life should be, right? Where we are supposed to end up because our parents told us that that is the dream that we are supposed to live or we ourselves have found that in our communities and now we want to live somebody else’s dream. So being honest enough to say, well, I need less than this or I need more than this to feel secure. That’s the hardest part. And I think for that, I love that you make this about the time of year too. I just had a thought because like when you do these sessions, when you do these kind of I don’t know if it’s called the summit or something but you take yourself away. You have your little conversation. You lock yourself in the room with somebody or just by yourself for a day or two and you just talk about this one specific topic, time of year and location, how much do you think that actually impacts what comes out of these conversations? Comparing like being at the beach having that conversation versus like being somewhere in the mountains in the winter in a little cozy little board cabin? You think that actually impacts what comes out of these things? I’m curious, what do you think?
Kevin McArdle 44:09
I do think there’s something to time and place and space and it’s all individual, right? Like so like on the beach, I would say don’t do it during your family vacation that is not like this is a business meeting or conversation even if you’re meeting with yourself and so don’t take family vacation time to do this because I don’t think that’s the right frame of mind to do it. And like for me, a small cabin in northern Minnesota where I live in the Twin Cities but going a little bit away into the wilderness would be a great setting for this. Other people it might have to be on a beach. Other people it might be like in a cozy cabin with snow outside like it’s all individual but I do think there’s something to not being in your normal workplace. It just lets sort of like your normal workplace, there’s always like distractions and things that you think you should be doing. But I think there’s a reason that people do like and it’s sort of gotten a little cheesy, but they like offsites is sort of like, oh, we’re gonna leave the office and we’re gonna go somewhere else and think about different things. It can be a little bit contrived. But I do think there is something like getting out of your normal setting to help you think a little bit differently than your day to day. And then beyond that, it’s all personal. Like, I jump to spring and summer because I’m a sort of anal annual planning happens in November so that January one, we know the plan and we’re executing the plan. And to me, I want it as far removed from that as possible. But you know, other people might have different ideas. And I don’t really care if you know, it won’t hurt me or bother me at all if nobody ever does this. But if somebody wants to do it, I would just encourage like it, make it an annual exercise, make it different than your typical business day.
Arvid Kahl 46:09
That’s a great idea. Yeah. And it will be unique to every, like every person really like when their best time is to have this conversation. It’s just an interesting idea to think, like if there are times or places that would like inhibit a good conversation or amplify it, right? The outcomes of it, that would be kind of cool. Thanks for sharing this, like I love the way that this is a thing, right? Like the exit planning strategy session, whatever you call it, that is a thing that can be well defined.
Kevin McArdle 46:38
Yeah, and that’s why I’m trying to define the thing and one of my friends and investors is Dan Martell and he always will, like come up with a bumper sticker phrase and then add TM to the end. So I’m trademarking annual exit planning, owned by Kevin McArdle because people ask me all the time, like, how should people think about like, going about a sale? And like, what is the right time and like, you know, I may even, you know, inspired by you, like, create a course about this. Not about like, making money or like gating the specifics, but just create some structure and help people think because, you know, like you and Danielle, I’ve been fortunate to buy businesses from 45 people over a period of time, actually closer to 50 if I think back further in my career. My partners have, you know, between all of us, we’ve probably acquired 60 businesses. We’ve also sold businesses and so like, we have a little bit of expertise in this. And so I want people to be successful, especially bootstrapped entrepreneurs who have, you know, fought their way to create a great business. And so making it like you said, a thing and not just, you know, read a blog or listen to a podcast and like that’s going to be what I go try to do. I think if it can be a structured thing that becomes like strategic planning. If you want to go find a strategic planning template, they’re easy to find. Annual exit planning is not as easy to find, yet, but it will, you know, I think making it a thing can be helpful to people. And so that’s why I’m putting the time in to sort of think and write and, you know, eventually will publish and maybe even turn it into a course or workshop type of thing.
Arvid Kahl 48:26
It’s really about the coining the term, right? And that makes it more accessible because people refer to it and they know what it is. And I think that’s what Dan is great at. And that is what you could definitely use.
Kevin McArdle 48:37
Dan is great about, yeah, like coined the term, create a framework, give people something that they can just pull off the shelf and, you know, take action. And the other thing and then we can move on from this point. But making it an annual exercise means that it’s something that you should just be doing anyway because I think there’s especially this is one of those weird nuances of like bootstrap indie hacker community. There’s sort of this, I think, unfair expectation that like people will and this may have come out of like, there are some very famous bootstrapped, you know, indie people based in Chicago who have said publicly, we will never sell a business. I think you know who I’m talking about, which is just unhealthy to use the word never or always in most cases. But you know, they were the leaders of this community for a long time and still people look up to them. And so there’s unfair expectation, like you’re going to do this forever, which that’s not how business works. Like every business transacts. It could be when somebody dies, but eventually businesses transact, you know and in the software world that we live in, people don’t hand businesses down to their children like manufacturing plants or you know, some of these older, you know, like a farm. Like that’s not how our business works. And so it is normal and healthy to think about the exit. And because of this weird dynamic that’s in the, you know, bootstrap indie thing, like, a lot of times people come up to me in real life if I see them at a conference. And they’ll open a conversation with, you know, Kevin, I don’t want to sell my business right now. But how would it work? Or what is it happens to my team? What happens to customers? What would I do? How would it be involved? Like? So they have these questions, which are normal, healthy questions, but they feel like they have to preface it with I don’t want to sell my business. And I don’t know if that’s just like, don’t get too excited, Kevin. We’re just having a conversation or but do you see, do you know what I mean? Am I making this up? Like, there’s this expectation of we’re going to do this forever. That’s not normal. Like, we don’t have to think like that.
Arvid Kahl 50:55
You’re not only not making this up. Like a couple of weeks ago at the point of when this is actually being published, I will have released an article that is titled, like, short live businesses versus forever businesses because it’s exactly this topic. Like people think that what they need to build immediately when they start building a business is their forever business. And it’s a bizarre idea because if you look at home ownership, right? People have a starter home and then they have slightly bigger home and then they move into forever home. But forever home is never the starter home, right?
Kevin McArdle 51:28
It’s not actually a forever home, rarely forever home is a forever home.
Arvid Kahl 51:31
Exactly! Forever homes don’t even work.. Exactly!
Kevin McArdle 51:34
Yeah
Arvid Kahl 51:35
If homes are something that even if it’s many years or decades, it’s still temporary. Why do we not consider businesses to have the same lifespan, particularly in a digital internet enabled society where a long living product is like five years maybe, right? It’s bizarre. I looked at and researching that article, I looked into the world’s oldest company. And apparently that’s a Japanese construction business that has been around since like 570 AD, like they’ve been around for 1500 years and they still construct buildings today as they were doing it back then. You can do this in the construction industry. But you cannot do this in the SaaS entrepreneurship industry, like even next week is probably going to be a different technology du jour that you have to use to, you know, build the coolest and latest in tech. So we have much different timeframes now that also should impact how we think about businesses, right? And my whole thought in this was, well, why don’t we actually consider our businesses to be something temporary as well, at least when we start out, right? And that’s the whole Rob Walling stair stepping approach too like, you built some things here, you see how they work if they were cool. And if not, well you try something else and then you step into well, now I have some kind of time freedom. I can now spend more energy on maybe solving bigger problems and then you exit that and then you get to your SaaS and you run this for however long you want, forever, whatever that means. I mean, the whole topic of like lifetime deals and stuff, I don’t even want to touch that, right? Lifetime of what? But if your business has a lifetime of like five years, that is still a successful business, particularly if you get to sell it to somebody who turns it into something else or winds it down, but transfers customers over to an equally interesting business. There are many ways. And it’s kind of like the cycle of energy in nature. Like we have fungi for a reason, right? Like they’re not just delicious when you cook them. They empower a whole system of cycling through material and I feel businesses should be considered something similar. Which means together to an end in this monologue of many things, that it is perfectly fine not to have to build a forever business. But to actually build a temporary business that you want to get from A to B through, that’s the idea. And for me, Feedback Panda was kind of that, right? Now I get to do this.
Kevin McArdle 53:56
Well, even if you were building, like the Japanese construction company, I’m interested to read your blog and learn more about that. But like, even if the business continues on, you may not be running it and operating it certainly even if it’s the same family that Japanese company has changed hands hundreds of times at this point. And so why wouldn’t we assume that whatever we are building as business owners, of course it’s going to change hands, right? Whether it’s you know, like the timing that I think right now today or you know, the timing that might change. Here’s another like thing that I’m going to release a secret into the wild. It’s okay to change your mind on what you think is going to happen, right? Like we might start and have a successful company that you say to yourself, I want to do this for the next 20 years. And in 12 months, your mind might change like we’ve already talked about. And so just understanding that businesses change hands and that’s certainly an important point in that business and in one’s life, right? Because if there’s a monetary reward for that, like, why wouldn’t you be thinking about that annually? You don’t want to think about it every day or every week and obsess over it because then it becomes a distraction. But that’s why I want to make it a thing. This is we annual Exit Planning is a thing that smart business owners do. And there’s a structure and a framework and Kevin will publish his thoughts on what it should look like or could look like and other people smarter than me, will say, cool idea, I’m gonna make it better. And hopefully, it becomes a thing, just like, strategic planning is a thing.
Arvid Kahl 55:38
I am very much looking forward to you publishing this for you to change the world of entrepreneurship. But honestly, I think, honestly, that is a change. You’re not disrupting it. But I think and that’s great because it doesn’t need more disruption. But you’re giving it the tool, we’re giving people the tools that they need to do something that they already want to do in a better way. So I think I love the idea that you’re turning this into a very, you should write about this maybe more extensively. Like, as I’m writing my third book, why I want to do the same thing but with building in public. Like I want to put this out there as a concept, as a framework, not just for for indie founders, but for anybody who wants to go from A to B, right? You can always kind of empower your community to help you and help them in the same way. So why not turn this phrase into something that people can actually use? And as I’m doing this, got a suggestion to you. Do more writing, I think the world needs these thoughts as a book.
Kevin McArdle 56:31
Well, I think, I need to do more writing. I’ve seen how successful you have been with it. I think you’re also I don’t consider myself a great writer. But I also know like, when I write something down, it helps me to think about it more clearly. So I have some clarity about this concept because I’ve been writing about it and haven’t published but yeah, as soon as we’re done recording, I will go tweet: annual exit planning is now a thing.
Arvid Kahl 56:58
Yes
Kevin McArdle 56:59
And then go around it from there.
Arvid Kahl 57:01
I love that. Well, since you’re already mentioned that, like where do people go to find out where are you sharing this kind of information? Where do you want people to find and follow you?
Kevin McArdle 57:11
Yeah, two great places, if you go to bigbandsoftware.com, we have a newsletter that I’m really proud of that we share our ideas. We also share links to, you know, smart people that we know in the world and what they’re publishing, talk about our team, talk about like hiring needs, those sorts of things. So yeah, just bigbandsoftware.com and you’ll get a pop up for the newsletter. And me on Twitter is the best way to find me Kevin_McArdle and McArdle has one. Sorry, one C, people always get that confused. And there’s more than one Kevin McArdle on Twitter, unfortunately. But yeah, I’m easy to find. And I love engaging with people on that platform as long as they’re, you know, kind and good spirited like you. So yeah and I love helping entrepreneurs. So whether somebody might someday sell to big band or not is immaterial. I just know that entrepreneurship can be very hard and it can be very lonely. And if I can make it even, you know, 1% easier or less lonely for somebody who’s out there working hard, then I’m happy to do that.
Arvid Kahl 58:19
You’ve certainly helped me and I know many people who you have helped in the past. And I know you are going to help hundreds, if not 1000s or millions of people, depending on how well your writing gets received by the community.
Kevin McArdle 58:32
Oh, that’s nice!
Arvid Kahl 58:33
But honestly, I’m super happy that you also just appeared on my show here today and shared what you’re doing, how you’re doing it and the kind way in which you’re doing it. So hey, man, thanks so much for being on. That was an awesome conversation. I’m so glad.
Kevin McArdle 58:47
It has truly been my pleasure, Arvid. I’m so grateful that you had me on. It’s so fun to talk to you as usual.
Arvid Kahl 58:53
Thanks so much. Have a good one.
Kevin McArdle 58:55
You too.
Arvid Kahl 58:56
And that’s it for today. Thank you for listening to The Bootstrapped Founder. You can find me on Twitter @arvidkahl. You’ll find my books and my Twitter course as well. If you want to support me and the show, please subscribe to my YouTube channel, get the podcast in your podcast player of choice and leave a rating and a review by going to (http://ratethispodcast.com/founder). Any of this, will truly help the show. Thank you so much for listening and have a wonderful day. Bye bye.
