High Volume, Low ARPU Sales Playbook

welcome to the stage Chris vandersluth thanks a lot oh don't do that what if I suck you'll want to take that back and trust me when I tell you that Nathan's stressing over whether I'm entertaining or not can the old guy deliver I don't know okay so uh as you said um my context is a little bit different uh than some of the things you may have heard today I'm not really on a track for an exit even though I've been uh tagged twice today by people who go would you like some money we'd love for you to exit

um you know I got into the business in 1984. founded it with a uh with a partner because I wanted to be in that business and that's true still today so that's going to color my comments a little bit as we talk about a few things um the business has gone up and down at different times I'm going to tell you about that um you know starting the very first year where I took home some thirteen thousand dollars out of the business that wasn't a good year for paying the rent and things uh are on track for this year to

be at about three so um uh so things are generally going quite well um here's what I want to talk about I really want to talk about three phases of the business starting with uh the first 10 years getting the business started uh getting to that first million and then the buyout of my partner um and then the next round that included industrial investor institutional investors who got into the business um and getting the business and then owning 100 of the business since and how

you need to focus on things um so we got started as a consultant firm two guys who had Limitless optimism knew that we could write any kind of code and deliver any kind of solution and it would only take us 20 minutes um we learned a lot in those first years but we also took on project management software uh to distribute so we became a Canadian distributor for project management software hard for some people to remember what the IT world was like

in 1984 but PCS were new that was a new thing PCS and offices that wasn't a thing um and so project management software available on a PC that was kind of a new deal and we wrote timesheet software to go with project management software that was really our first wasn't time control then it was just customized timesheet software that got us going our very first client was Phillips you know Phillips information system out of Holland we thought they called us

because we were so smart no they called us because they had tried to deploy a project management system four times we were given the attempt number five this the management didn't trust their own staff to do it anymore we didn't know that going in or we would have charged more I think but we arrived to put in the system which in the end worked great and a timesheet and that also worked great we've never sold to a client our size I mean we're now you know 20ish people

but we've never sold to a company of 20 people our clients since the beginning have always been kind of conditioned to larger size firms um and so uh so working in that space then started to bring us to a uh to the kinds of clients that needed project management and in some cases timesheets one of them was uh Canada uh Bombardier now you would say so uh Bombardier at right before Bombardier bought candid Arabic they needed defense based project

management software and they needed to track software uh and they need to software to track their projects great we could do that we understood how that worked one more time sheet system same thing for uh General Motors defense who make uh the light armored vehicle you know it looks like a tank but has eight wheels yeah so the lav was something that we were helping them work on we didn't work on the tank we worked on the project management of how that worked and so even though we were a small group

we were able to move that forward and coming to the end of the 90s we arrived into the early 90s into a recession that was my first if we have another one and you know the jury's out but that'll be my fourth but this recession meant that we had a 1993 year that was awful really a miserable year we generated a lot of loss for the size that we were at the time and my partner said I'm done we should let it go we are

already 100K in debt we should just let the company go bankrupt walk away and we'll start something new but I had a problem with that because I wanted to be in and he wanted to be out if you need to buy your partner out buying them out when they want to leave and you want to stay is a really good moment for negotiating um he wanted out and he didn't want to be saddled with assuming the debt he said well you'll have to assume the debt I said sure because I'm staying in I'd

already called our vendors and made arrangements and I mean I had to do things that I wasn't used to doing and in the end we found found a price for him that would work it was about a year's salary and we knew it was the right price because his wife said wait a minute if he buys this from you could he make millions and Don said well yeah and my wife at the time said well hold on a minute if we give them this money could we lose everything and I went yeah

and so we knew we had the right price so um so I gave Don a year's salary which I had to go borrow from family and friends and you know find the money to get going again stuff I was you know made me uncomfortable to go ask for money but I did and I paid them back and I got done out and I said we've got to shift the company I don't want to be a distributor anymore I don't want to be a consulting firm anymore what I want to do is I want to be a publisher let's take something that we could write hey you know we've done all these timesheets on a custom basis for clients let's just do a

timesheet we'll call it time control um and so we did that because it was low hanging fruit would be easy timesheets we've done it so many times turned out to just make that into a commercial product wasn't so easy but that's we got time control out as a product in 1994. so now we're in the publishing business now people that I used to we used to compete against a Primavera who's now an oracle product I called the president Primavera he tried to make me

a dealer multiple times I said Joel got a minute he goes uh yeah what do you need I go I need to be a partner he goes okay you're a partner gotta go and hung up um which was a very bizarre partnership conversation I've never had one quite like that again um but then I got a call a day or two later from this fellow John who says I've had a very strange interaction with Joel he says you're a partner now is that true and so yeah we became a Primavera partner used to compete now we're in Partnership because I can make

a link to your thing and we expanded the use of the product and so between 94 and 99 things grew um you know the number continued to go up in again hard to remember what life was like just pre Y2K how many people had software businesses pre Y2K just me one two okay so then you'll appreciate it but for the I.T business that was a a Bonkers time we had trouble keeping I.T staff they were in high demand from

everybody who had never done their Y2K stuff people wanted more and more money we had people coming into us for three four times during the year asking for raises and if you didn't have stock options if you weren't on the way to an IPO they were out so we made stock options and we talked about to some investors to say Well we'd like to you know work towards that kind of Life great so now we found a couple of investors who came in worked together and we cut a deal that included a whole bunch of bits included some debentures

you know loans that could be converted into shares that included some Equity it also included uh you know them co-signing for lines of credit and other things that came more from the bank all together we had access to about two million dollars we'd done about 1.3 the year before so two million dollars was no small thing I was like wow now we've got everything we need that was in November 1999. just in time for the tech crash of 2000 which started uh basically at Christmas

so terrible terrible timing you know looking back the whole curve had been going up well nobody really thought that it would immediately crash but there it was and so now I arrive over the next couple of years with Equity Partners who have a lot to say they're on my board they want me to grow they are still in the mind of we're on a hockey stick curve um and so we need to you know we need to grow no matter what the cost Amazon worked for Amazon they go look

they still haven't made a profit in 99 well that's true um but I wasn't Amazon and so under their guidance we built the business up to two million Rev by uh 2002. and that year that 2 million in rev cost me 3 million to generate so about a million dollars in losses and the investors went well it's all over each of them went back to their boards and said that's the last board meeting we'll have at HMS those

guys are toast we'll never hear from them again they were kind of stunned when six months later I called and said so we're having a board meeting are you guys coming they went what you're still here we said yes come on back because I wanted to stay in and I had to sweat blood that year and continue to to start cleaning up all kinds of things starting with the bank going we're calling the line of credit you owe me a hundred thousand dollars it's like okay uh and credit cards and other things so it's like piece by piece we had to make arrangements once again I was back in

that uh you know that place of I have to find this money to build things back together and over that uh over that year um you know then gradually I got a hold of things but I had to cut staff I cut half my staff on a given day in 2002. uh where by the end of the day I was literally in tears and so you know very hard these were all people that were you know kind of part of a family it was like 30 people in the company then and half of them went home that day all kind of stunned the last one to leave was my

CFO who went what me say dude you gotta you gotta be kidding me you know the numbers better than anyone how did you think you weren't on the list so uh we cut more people over the next few years between 2002 it took me until 2006 to finally get the investors out by that time I had paid off all the lines of credit all the credit cards I had paid back the debentures the loans and interest uh and all that was left was the last Equity portion

and so they said well you know we are kind of closing down these funds we'd like out I go that's an interesting coincidence because I'd like you out they go make us an offer give us a price I go one dollar literally uh which I sent them in writing uh and then they said don't ever send an insulting offer like that again ever and so I said okay well what do you want they go well you know 400 000. so I said no that's not happening um and so in the end they got about a year salary

um which was you know the irony of that was not lost on me like I clearly didn't get the message the first time um but I got that lesson uh in 2006 and I bought them out and if you added it all up together I bought them out in the end on about 16 cents on the dollar um but overall it was about 60 cents on the dollar if you included that adventures and everything else their lawyer when I closed that deal said you know you've done pretty well he says I've been their lawyer for all these Acquisitions uh the legal agreement to get the money was this

thick I still have it all in French and then a little addendum about an inch higher uh the the deal to get them out was uh three pages um so which suited me fine because I was gonna have to pay for the lawyer either way and so they said you've done well sometimes they failed sometimes they put two failed companies together to see if two failed companies could do better together but you actually paid some money back and you're out and you're in control so 2006 I arrived back he has like 16 cents on

the dollar uh their final payment was like 75k or something which again I didn't have we had been you know we had spent everything in terms of trying to pay things back so tough times but the the thing I want to impress upon you is that it it wasn't a challenge in terms of knowing where I wanted to go I knew where I wanted to be was in they wanted out which in the end as I look back on it with perspective I go I got in with a bunch of people that I

didn't have the same goals as me never knew anything about the product didn't really care only cared about the numbers and that's fine that was their business um that's on me right I was going to sign the agreement um and so that did not work out quite the way uh quite the way that I had uh I had thought okay so now we've got them uh you know we've been able to get them out of the business um we grew and I finally got them out of that last slice of the business in 2006

and went uh oh my God you know we're done uh These funds were all closing down at that time anyway they'd made their money in the late 1990s and uh the business wasn't quite as attractive in the early 2000s um and so they were happy they were happy to be out and I was happy to be back in So for me it's like there was a moment in 2006 I remember leaving the lawyers and coming back to the office and going okay

well I've got it back again I've got control and that was a moment of great satisfaction to me and yeah all the lessons learned and I blame myself for some of that and it hadn't gone the way that I thought but now it was ours again and we still had a core team of people who had been a long way about 10 people now who had been there all along the way and knew how to gone and knew how hard we'd fought and we're committed plus we had this great looking list of clients so we had you know these clients who were these Fortune 1000 clients well and money kept on coming in we don't want to

throw that away why would you close that right find the end of the cost curve and drag it down below the revenue curve but you can since my uh my uh reluctance to immediately talk to an investor to go yeah I'd love to cut a deal and I can tell you that a deal that I would get today would not be as good as the deal I got in 99. because I would not get a deal where I would be able to come to keep control only because I had more than 50 of control even with all of that stuff that

happened was I able to negotiate what we were going to do I still could determine who the president was what the direction was whether to close or not I mean that that's a big deal um and they had representation on the board but they couldn't decide so I couldn't cut that deal I don't think today um so now we have control of the business going so if we're not going to get investors and we're not going to have this hockey stick curve what have we got um you know we've got a um uh we've got

a business where we're going to have these big clients but we're still small what should be a guiding characteristic of that business and we decided as an organization that customer satisfaction should be that we wove it into our mission statement we put it into every bit of training became part of our HR um all of that became key this was the group that was available when we you know when we got started again and now we said we'd already pivoted several times we pivoted

to make the product a client server database product to make the product an Enterprise product that lived on a server to make the product a web-based product one of the first uh browser-based products and then we made it a web-based product again all new to the market uh we were at the edge of that um and our first mobile product we actually have a failed mobile product that was never released that we wrote for the Blackberry I still have a Blackberry with that code on it um that was never released and you know long story that I tell project

management people about when to cut your losses um and this is the product that exists today now that's the web-based screen there's also a mobile-based screen it's also still available on-prem or as a SAS if it's on-prem then we charge people an annual service fee and if it's SAS then you know just like every other SAS we just charge them for the you know the entire thing we kept the on-prem because the kinds of clients that we have turns out the Federal Reserve Board

of Governors doesn't want to use our SAS I don't know I think we're trustworthy but they went no no you're not even in the country so well you're in the country but the company's not so no um the U.S Coast Guard don't you know won't have uh you know won't have it in the cloud we could put it in the government Cloud we go they go no no it's going to come here in the office so that's fine so we we've maintained those things and tried to adjust to those to make it work for um for those clients so

um so that's a long story to getting to a business that's highly maneuverable um and that that makes people happy that being said end users could care less end users aren't happy with the timesheet that's what we built right a timesheet no end user wakes up on Friday morning and goes Friday it's timesheet day I mean we may have that fantasy at HMS regular humans do not they view the timesheet that they only spend five minutes or so looking at

a week they view that as a barrier between their week and their weekend so no one says oh thank God for time control we have as a goal for those for for end users make them the least unhappy possible ask them the fewest questions have it go as fast as possible have the numbers be right because a project management tool might be off by a thousand dollars at the end of the year but if your paycheck is off by a penny sooner or later you're going to roll into the payroll office and go I know

it's stupid I know I'm Petty I know it's only a penny but it's my penny and I want it so we have to work the quality of the costing for time controls got to work at that level that's different than a lot of people who go well we're just writing a timesheet it's in Excel it'll all be fine um so we can make time we can make managers and administrators super happy but the end users yeah not so much um so when we look at how we did that I just want to make sure I don't run over time

so when we look at how we did that we uh we wove it into everything our mission statement says part of our mission document says that our standards are that every client will be referenceable and if you meet with our our people and you're talking to them and a client has a problem something they are not happy with the whole staff like starts to adjust they become like a pretzel trying to fit into what do I need to do to make those people happy that's pretty much what we've uh what we created um we have I'm not sure if we're handing it out on the USB key or where it is but

we have like a whole course internally of what we do to make get client satisfaction so I included that in the stuff that we gave to Nathan and if you can't find it then you know ask about it um yeah the kind of people we hire we also one last thing about people are technical people we rotate them all every developer serves in QA every developer does technical support every developer does documentation every developer does uh does implementation because if you're a coder you should

have to go live with it with the client um you know how when you call for a technical problem and someone goes I'm going to escalate that to engineering we don't have that when you call Everyone's an engineering because that's the people that we have everyone's rotating in those posts from the most Junior to the most senior that helps hugely with customer satisfaction uh because you know somebody who can look at the code right now is looking at your problem um yeah so the these numbers you saw

already so if I go back just the last uh six years going back for recurring Revenue was at 68 even though we'd already had a SAS product uh for almost five years by then we've now reversed that so 74 or 70 yeah 74 of our Revenue in 2021 is recurring complete change from how the business is run and that really drives what we're doing uh we take about 20 of our profits and we give them to the staff we have a whole formula a little bit like this you heard

it this morning on you know how much time you've been here and what kind of salaries you have and what you're going to get and we're taking like you know last year there was about um 700k in profits so Nathan goes you took it all home I wouldn't know I took some home I kept some in the business um you know it's because if we do have another recession I'm already well padded and we're on track to do better than that this year so um Lessons Learned just because somebody comes in and has a

lot of money doesn't mean they have your business Acumen or your experience or your expertise in doing what you do it's a big lesson if you have people pitching you to give you money under whatever the conditions are you're the inventor not the person with the money and they didn't invent the money either they're going to provide it to you and if money is what you need in order to move forward then you'll get the money get the best deal that you can but don't give up on your expertise because somebody arrives saying well I had a

million dollar check and so therefore it's the oh therefore that you know I think those of us who've gone through that around once or twice have had to deal with um and then I guess the other thing is that a small company can be just as powerful with big companies we we competed against sap a few years ago for a particular client and um sap finally said we're going to give you our timesheet product for zero their original offer was like four million and in the end they said we'll give it to you for nothing and so we got a call

from the client saying you know they say they're going to drop their price to zero I go well you get what you pay for I guess I said but we aren't our product is actually valuable so you know we wish you good luck um so even big players can compete with that um and then that's it so uh you can reach out to me uh you know by email if there's something you want to talk about we didn't talk about time control really at all but it's an awesome thing uh so you're welcome to go by and take a look at that

um I'm going to be here uh the rest of the afternoon if people have questions for me directly feel free to come by and that's it thanks