Episode #031

How Kevin McArdle Quit His Job and Bought 28 Businesses in Two Years

Most aspiring entrepreneurs assume they have to start from scratch. But when Kevin McArdle left his job at 38 with a wife, a mortgage, and 4 kids, he wanted to get a head start. Learn how Kevin and his partners at SureSwift Capital bought almost 30 companies in two years, and how they're helping to change founders' lives through 6- and 7-figure exits.

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Transcript

Courtland Allen 0h 0m 7s

What's up everybody? This is Courtland from IndieHackers.com, where I talk to the founders of profitable internet businesses to try to get a sense of what's going on behind the scenes at their companies so that the rest of us can learn from their example.

Today, I'm talking to Kevin McArdle, the founder of SureSwift Capital. Instead of starting companies from scratch, what Kevin does is acquire companies. But not in the manner that you might be familiar with.

The companies that Kevin buys are not VC-funded rocket ships. Instead, he invests in smaller revenue-generating companies that are often run by small teams or even solo founders. Kevin has only been doing this a couple of years, but he's already bought something close to 30 companies.

Now, most of us entrepreneurs don't really consider buying a company to be a viable option. We think we have to start one from scratch. So, my goal here is not only to learn what kinds of things that you as a founder can do to sell your business to somebody like Kevin, but also to find out what kind of lessons Kevin himself has learned in the past couple of years having bought so many companies and find out if this is a viable path for other would-be founders to take.

So, without further ado, I present to you Kevin McArdle.

Courtland Allen 0h 1m 9s

I'm here with Kevin McArdle of SureSwift Capital. Kevin, how's it going?

Kevin McArdle 0h 1m 13s

Great, Courtland. How are you?

Courtland Allen 0h 1m 14s

I'm doing excellent. So, you are the founder of SureSwift Capital, one of the coolest companies that I think a lot of people have never heard of, and maybe the best way to describe what you guys are doing is through one of the things that you told me over email while we were setting up this conversation.

You said that, "I think it's important for founders and entrepreneurs to know that there are exit opportunities for your business that can be amazing and life changing but that don't require selling your soul to venture capitalist or, having to become the next Uber."

So, what are those opportunities, and how does what you're doing at SureSwift play into that?

Kevin McArdle 0h 1m 47s

It's a good opportunity to talk about a subject that I'm pretty passionate about, and not just because it's my business but because I think a lot of your audience… I think you're providing a different source of content for an audience that's probably starved for it, because the normal media channels are full of stories from sources like TechCrunch and other outlets like that, that want to talk about what's the next Facebook, or what's the next Uber. Or, these two kids from Dublin created a nine billion dollar company called Stripe.

And those stories are amazing. That's part of what makes America an amazing place to start and grow a company, and it's so incredibly rare that I don't think most people should aspire to that. In fact, most of those home run success stories were probably started with the idea of, "If I could just start my own company, or if I could just be my own boss, that would be a home run. And I would have such a better life than I do today."

Or, maybe they start with the idea of like, "You know what? If I really crush this, I might be rich." Which people define that in different ways, but I doubt each of those people, whether it's Zuckerberg or the Stripe guys said, "My goal is to have X-gajillion dollars."

And I think most of the successful businesses, in this country or elsewhere, are your more commonplace stories. Things that TechCrunch won't cover because they're boring.

But, you know, some enterprising person, young or old, could start a company, work their tail off for 3, 4, 5, 8 years and build a really successful company and sell it for, what in almost any person's eyes would be a life-changing amount of money. And that could be anywhere from… You know, some people's lives would change with a $100,000 check. Most people's lives would certainly change with a seven-figure check. That is a huge home-run success story and one that should be celebrated, and we just don't hear that much about that.

We founded this company with the idea of, we could roll up successful companies that were ready to be sold at a stage of profitability and traction where you're sustainable. We could provide some business discipline, experience, expertise, extra funding, extra people, etc., etc., to help those businesses continue to grow. And I didn't set out to create another exit path for people, but I've realized that it is an exit path that a lot of people don't realize is there.

Too much of the conversation online or at a conference or in the media is: have an idea, get funding from people that may or may not actually believe in your idea (but they're just funding a thousand ideas in hopes that one of them is the next Uber), work like a slave for those people, and the only success is either a public offering yourself or half a billion dollars. And there are so many infinite levels of success along that path, even before getting funding, which I don't think is a success in and of itself.

What I like about Indie Hackers and your podcast is that you're talking to real people with real aspirations and yet reasonable expectations of what success means. Not low expectations, but reasonable expectations.

Courtland Allen 0h 5m 40s

Yeah. I don't think I could've said it better myself. And I've got a ton of questions to ask you about what you guys are doing at SureSwift Capital, because you're the first person I've had on this podcast who's actually just buying companies. But first let's get some context out of the way so listeners have an idea what's going on.

How big are you guys at this point, and how many companies have you bought?

Kevin McArdle 0h 6m 0s

Yeah, we don't release a whole lot of detail on financials like some people, it's like defined as X number of dollars or so many assets under management, what we are public about is that we've been in business for a little over two years, we've acquired 28 companies in the two years.

Now that's a large number, some of those were very small transactions, we kind of started small and stair-stepped our way up to larger deals but more recently and going forward we're looking to do deals in the check size of somewhere between one million and ten million dollars.

Courtland Allen 0h 6m 36s

Twenty-eight companies is a ridiculous number to buy in only two years of being in business. That's crazy.

Kevin McArdle 0h 6m 42s

It has felt very ridiculous at certain times, but you keep in mind they're not all very labor-intensive. Some are very small, many were acquired, and some were kind of passive income type businesses that you hear a lot about because the idea was gain some cash flow, gain some knowledge, start stair-stepping our way up. So I'm very proud of the success we've had and how large we've grown, but I don't want to over-inflate people's expectations of where we've been.

Courtland Allen 0h 7m 13s

Yeah, not at all. Even 28 tiny, tiny acquisitions would be a very impressive number in my mind, and I think in most listeners' minds. But to get back to what you were talking about earlier, the way that you described the startup landscape of, like, these diametrically opposed visions of the Silicon Valley model where it's either a billion dollars or bust.

First it's what's going on on Indie Hackers and then other parts of the world, where people are really just trying to find realistic outcomes. I think really strikes a chord with me personally, obviously, and with a lot of people.

And what makes your story so interesting with what you're doing at SureSwift is that getting acquired is something that's typically associated with those high-growth startups. These are companies that have raised money and they typically care less about revenue and solid business fundamentals, and instead they care about using their funding to prioritize growth above all else. I think they tend to have more success at achieving some sort of mass market dominance and it makes them attractive targets for strategic acquisitions to big companies. Or, even more commonly, they use their funding to build out a team of engineers that's attractive to a company like Google or Salesforce that just wants to hire talented engineers.

But you rarely hear about bootstrapped, profitable, and smaller tech businesses discussing acquisitions. Usually people who are doing what we're doing, typically their only exit is making money and generating revenue and hopefully riding that wave as long as they can.

So, given that state of affairs, how did you decide to get into this business, and what made you think this is a good idea, when really this is not something that people tend to associate with indie and bootstrapped businesses?

Kevin McArdle 0h 8m 48s

That's a lot there, so let me give you a few comments on that. For your audience and anybody either thinking about starting a company or has started, hopefully they've put some thought into this before they started, but I think it's important to define success for yourself.

I don't think looking to the outside world to define success for you, which is strategic acquisition or rocket ship growth or unicorn valuation. I hope that more of the world is starting to pay less attention [to that]… More to the real people like us, doing real work.

It might be an interesting story, but then we move on with our days and we don't get too distracted by it. I think if one defines success for themselves it's a lot easier to march down that path and know when you're on the right track and when you're not.

So for me, my story, success for me was about a change in lifestyle. So I shared with you, before we started recording, that I'd been working in a corporate job for 15 years and had built up a very successful career. I had over-achieved most of my financial goals, I had fancy titles and lots of responsibility, and I was just kind of done. I wanted to do something different. I had stopped being challenged by that, and I had stopped looking above me at a board chart and seeing the job that I wanted next. I knew I needed a lifestyle change

And so when I started thinking about… Before even knowing what company to start, or if, in fact, that was my path, I started thinking, okay, what do I want? I don't want to take a big step back financially, but it would be acceptable for me to make a little bit less money if I were happier doing what I was doing.

For me, the company I was working at was hard-charging, very aggressive, there was always travel involved that took me away from my family. [I wanted] something of a change in just that lifestyle, having a little bit more control over where I was, when I traveled, those sorts of things. Those were all a benefit to me, and so it was really easy to see that starting this company would help me toward that success, which I had defined for myself. And so I think it's important for your listeners, your audience to think about that as well, as there's a lot of discussion on the forum and your podcast about what to do, I think that's great, providing discussion opportunities of like, okay, I want to be an entrepreneur but I don't know the thing to do. That's okay.

There's a lot of discussion about finding that path but I think there's a step before that, that I think people should take, which is, why do I want to do this in the first place? And those are probably easy answers, you could tick down one through five: either I want control, I want to work for myself, I want to be a small business owner, I want to be rich… and all of those are valid and good reasons. better, or there's no right or wrong answer. But if you haven't taken the time to think about, what do I want right now, and then how will I define success in three years or five years, those questions take you down very different paths when you're starting a business.

Courtland Allen 0h 12m 9s

Yeah, totally. And I think, like you said, it's so relative and it's so easy to look at other people and what they want and let that kind of guide your own decision-making as to what you want and that can certainly be a negative but I also think you can turn it into a positive by just kind of taking advantage of how it works and the psychology behind it. So, for example, we tend to look at people that are close to us and then we tend to look at people we interact with and we look at what they care about and that influences what we care about.

So, if you have a goal that might not be perfectly aligned with what society values, if you're saying, hey, I want to start a business that's able to allow me to quit my job and take care of my family, whereas TechCrunch is blasting, you need to be the next Facebook or you don't matter, you're just a lifestyle business, then maybe what you should do is find other people to hang around who actually have the same goals as you. And then they'll become your new society and suddenly your goals that you personally want will be in alignment with what the society around you wants and you'll feel a lot better about pursuing that stuff.

Kevin McArdle 0h 13m 6s

Absolutely. Being an entrepreneur doesn't feel weird if you're surrounding yourself with other entrepreneurs. Whether that's, find a co-working space where everybody else is trying to hustle and get something off the ground or just… I was fortunate to have a community of people that I was already friends with that all ran their own businesses, everything from technology companies to hotels to consultancies, whatever and for them, they looked at me and were like, why haven't you left this corporate job already? Because they knew me and they knew my spirit and my drive and what I wanted to do, so they actually helped push me down that path.

But you're right, if you don't have those people around you, whether it be family or friends, et cetera, that think it's unusual, that don't think you can make enough money or don't think that you're well-equipped to be an entrepreneur, they're going to reinforce those negative ideas that every one of us already has, by the way.

No matter how successful somebody is, I believe there's a point in every day, you know, falling asleep every night or waking up every morning, where we have those self-doubts, so if you are able to surround yourself with people who are encouraging the best behavior and the best parts of you and not encouraging thew self-doubt, your chances of success will go way up.

Courtland Allen 0h 14m 25s

Totally. One of the biggest problems that I think people face is taking the initial plunge to becoming an entrepreneur. For someone like me it was pretty easy because I knew from an early stage that I wanted to start a business, even when I was a kid, and I kind of started in college, so I had no responsibilities, no bills, no family to take care of, no mortgage, very low expectations, and inexpensive needs. I could just eat ramen and rent crappy apartments and even uproot myself— I moved from Boston to San Francisco, and that was super easy.

But for anybody starting later in life it's not that easy to become a founder, because there's a lot more friction among all those things that I just listed. And that applies to you, because you didn't start your business until you were in your late thirties. I think it would be interesting to get into the nitty-gritty here and ask, you know, what's the story behind how you got into this, and how hard was it for you to make the transition given that you had other responsibilities in your life?

Kevin McArdle 0h 15m 16s

Yeah, so those other responsibilities were, namely, a mortgage, a wife and four children, and all of that is in contrast to somebody just out of college, eating ramen and living in an apartment. I had the extra challenge of being a U.S. citizen living in Canada, which is, I was there on foreign assignment for my corporate job and when I decided to leave that job I had to figure to a valid… And my family decided we were gonna stay in Canada for at least the short-term, to get the business off the ground and make sure everything was stable… I had to figure out how to maintain that residency and maintain my ability to stay in that country, so that period in my life, even just thinking about it now is really hard, really scary.

I was fortunate to have a wife who understood kind of why this was important, not just for me but for our family and long term. We have always been a really good team and we just kind of talked through all the ins-and-outs, in that sense it was very much in contrast to you starting your own business but in a sense if you provide yourself options, if you live a life in such a way that you're providing yourself options, then it's easier to take advantage of those options and what I mean by that is, we as a family had always spent below our means so just because I got a raise from the job didn't mean I went out and got a bigger car or if I got a big bonus I didn't go blow it on a trip to, you know, a month-long trip to Europe.

We lived a comfortable lifestyle, we never wanted for things, but we always, always lived below our means so that we were saving so, when I started crunching the numbers on, you know, can I leave my company job and can I survive, for what ended up being two years without paying myself, the math worked. If the math hadn't worked, it wouldn't have mattered, but then I see the math worked, I knew we'd saved up enough money and we had stock options, we had other ways to fund the lifestyle that we were accustomed to without me having a steady paycheck. If that hadn't been the case, none of the other stuff matters. Like, oh, you have a dream of being an entrepreneur? I don't care, we cannot afford our lifestyle. You want to stay in this beautiful city of Victoria, BC and run your own business? I don't care, because the math doesn't work.

So, same lesson for kind of back to business profitability over just insane growth numbers, I live my life the way I prefer, the companies that I acquire have been built and been run, which is, focus on the bottom line, make smart decisions, and so it was that lifestyle that we had been on a path for, my wife and I, 15, 17 years of living a fiscally conservative lifestyle that made it even possible for, when this business opportunity came up, we were able to say yes, have a plan and take that leap.

Courtland Allen 0h 18m 36s

It's great to hear about what you did because I hear a lot of very creative stories about entrepreneurs who worked nights and weekends, or negotiated with their employers to get a shorter work week or, my friend Mike Perham, who started Sidekiq, actually was able to work on his side project while he was at work because they were related, but it's also good to hear just like, the practical approach, which is, save your money and take time off of your job and give yourself the runway to build your business. You don't need anything clever, you just need a sound financial system.

Kevin McArdle 0h 19m 7s

Yeah, and it doesn't matter whether you're early in your career or mid or later in your career, all of us can live a little bit more conservatively than we probably do and if you do that it just creates options.

Courtland Allen 0h 19m 23s

Completely. So the main thing I want to talk to you about today is about buying businesses, because that's what you do, and as I mentioned earlier, I've talked to very few people, especially Indie Hacker type people, who've gotten their start by buying a business. The vast majority of business owners are also the founders, they've been there from day one, running the entire show.

And most people who aspire to be founders are busy learning, what I would call, these early business lessons. For example, "How do I build something people want?", and "How do I find my first customers?" And after that, "How do I build a repeatable strategy for reaching more customers?" Whereas, you're coming in at a later stage where most of that stuff has already been figured out. What kind of skills are important in this later phase and what kinds of problems and challenges do you face that early founders don't have to worry about?

Kevin McArdle 0h 20m 9s

My skills are completely non-technical and I think that's what separates me from, at least, a good portion of your Indie Hacker community. To illustrate how non-technical, the computer-based class that I remember most from high school or college or even graduate school was word processing, where in high school, I learned how to type. That also happens to be the most valuable class I ever took, it pays dividends every day.

But I was actually a math and education double major in college because I thought I wanted to be a high school math teacher. I did that for a year and realized I didn't love it enough to, you know, sign up for that level of pay and that lifestyle for the rest of my life and I had a friend of a friend who worked at this company, Cerner, that was a healthcare IT company and I was able to get into, like, a sales training program because I demonstrated some level of intelligence and sales acumen and they were willing to teach the technology and anything about healthcare.

So, I kind of grew up and worked just, like, a business-type of environment, you know, along the way got an MBA in evenings just because I was kind of growing in my Cerner career and realized I was starting to be in the room with lawyers and accountants and finance people and they're using terms I don't really understand and that I probably needed a little bit more of a business foundation, so that's why I went and did that, but that industry and these challenges, purely from a business and operational perspective.

So, business school is what gave me a little bit of an itch to own my own business or start my own business and I always kind of had this lingering idea that if I could find some genius technical person, with an amazing idea or some great technology, I could certainly help that person grow a business. But, it wasn't something where I was actively pushing myself down that path so, the business that I'm in now is kind of a perfect fit for my skill set in that, I don't have to have that next great idea.

There are tens of thousands of great ideas out there being developed now and I can acquire something where the idea is there, they've gone through all the, not all, but they've gone through many of the trials and tribulations of growing a business, getting traction, finding the magical product market fit, having an audience, figuring out how to acquire customers, figuring out how to have a reasonable level of churn, if it's a SaaS business for example, and the founder has figured out a lot of the hard lessons and so, we can come in, acquire the business, you know.

Job one is just making sure you don't screw up whatever was working for them, and then we can apply the principles of business discipline, operating ideas, other business tactics or ideas that we, myself and my team, come with just from natural experience on our own careers and we can apply the lessons learned in one particular portfolio company across the others and, hopefully, take the business beyond what the founder who sold it to me was either capable of, or interested in.

Which, is another kind of concept that I found really interesting, and a bit unexpected when I got into this is, if somebody's running an amazing business that's spitting out cash and is that lifestyle business where they're not having to spend 60 hours a week, it seems like the dream scenario that everybody would want and of course there's the financial incentive to offload it, you know, you could either continue to collect monthly checks for the rest of your life, which is amazing and that might be somebody's goal or you could have, as we said earlier, a life-changing, one-time payment and be out, but I was surprised to find how many people had this amazing business that many of your listeners and followers would aspire to and they were just kind of done.

They wanted to do something different, it wasn't that they hated their business and they may have only been working five to ten hours a week on it but they were just ready to hand it off to somebody who could continue to develop it and kind of take it to the next level, to use the cliché, but that's where myself, and I have a team of people who are amazing, technically, and have gone through all those peaks and valleys of growing businesses themselves, so it's not that my team doesn't have that capability but myself, I don't come at this from a technical perspective.

It's more a couple decades of business experience, understanding what it takes to take a business and help it grow, understanding the discipline required to really be successful in any business, so that's kind of my different angle on this, and I wonder if some of your listeners, because I listen a lot, I listen to your podcast, I follow the forum as much as I can and there's a lot of discussion on, well, lots of different things, but find something you're passionate about. Build something, have a blog, create a course, and I wonder, are there other people like me, who are listening to, okay, Indie Hackers talking about entrepreneurship and growing a business, yes, I'm in, I want to do that, and okay, write some code and put viable product. You've already said things that I am completely incapable of doing.

So, I would say, acquiring a business is certainly a reasonable path to entrepreneurship. Now, the hard thing, if you're an Indie Hacker and it's a side hustle and it's nights and weekends, it doesn't cost any money to… It costs very little money to start something of a business and see how it goes. Obviously, acquiring a business takes capital but there are ways to get there. You know, just like if you're a developer, you go from having nothing to having a successful SaaS product.

There's ways to get there and it might just be your own sweat equity, but it takes time and energy and a path and a plan, well if I'm just a person with business experience and no technical experience and I want to go into business, there is a path to get there. It might be raise money from people who trust me, it might be partner with a technical person who could use some help, it's just a slightly different path but it's still there for people who have the… I think the one ingredient that's common among all of it is that if you're passionate and if you're dedicated and you're willing to endure what will inevitably be some hard times, there is likely a path for you to get to, on your entrepreneurship, entrepreneurial journey.

Courtland Allen 0h 27m 39s

So let's say I'm a first-time entrepreneur. How realistic is it for me to consider buying a business and taking it over instead of starting one from scratch, and what kinds of things should I consider and what mistakes am I likely to make in that scenario?

Kevin McArdle 0h 27m 53s

That is important to talk about. I think one should think about it in the same way of, like, starting a business from scratch and you're and et cetera, et cetera. There's gonna be… There's a thousand ways to screw it up and there's maybe a dozen ways to get it right so, when thinking about acquiring a business, you should have the same sort of plan and discipline as many of your listeners probably have of, like, launching a business themselves. So, in an ideal situation, it's gonna be something that you care at least a little bit about.

If you just acquire some business because it's for sale and you happen to know the person but you have no interest in what they're doing, you're not gonna be successful if you don't have some level of interest in that thing. And there are enough businesses for sale that you can probably find something that you have some interest in. And there's all sorts of mistakes being made.

I made it sound like, you know, kind of easy, because the founders have figured out a lot of the hard things and, you know, they've got an audience, they've got recurring revenue, they've got acquisition channels. But running an internet business is hard and there's all kinds of ways it can bet screwed up at any moment and the landscape is constantly changing about what works one day might not work the next month so when a business is for sale, the seller, and/or a broker that's representing them is gonna make it look just wonderful. And they're gonna highlight all the wonderful things and they're going to de-emphasize if not hide any flaws that they know are there, so there is risk in doing this.

Not every acquisition is going to be successful and hopefully, it's a little bit less volatile than picking a stock, but there is that level of risk. So I don't necessarily have a perfect ten-step program of what to do if you are interested in acquiring a business.

I think the most important thing that somebody could do, if that is their path, is treat the acquisition of a business as if it were a full-time job. And that may run counter to the side hustle nature of, you know, start something on the side, get enough money and then quit your day job and go do that. And that might be a reasonable path for somebody but if you envision the prototypical coder that's following you, if they're gonna be successful they're probably putting in meaningful hours, either nights and weekends, or like you said, figured out a way to do it in conjunction with their job or smaller work hours, but they're gonna put in meaningful time to develop that product, figure out how to market it, you know, make some mistakes, talk to customers, all those important things are on that path. So, it's a different path if you're going to acquire a business but you should be planning to spend equally as much time to get it right.

So, the positive is, you could buy a business and be two years ahead of where you were if you were starting it from scratch but there are also so many factors to consider when you're evaluating. What is the right business model for me? What is something I understand? Am I able to kind of, take over any contractor's employees working on this business or is it something I'm gonna have to do myself and pick up whatever that person is doing? If I'm not capable, if it's a solo founder/ developer who created this thing and I'm a business person, can I hire somebody to take over the developer type things that are going on there? And so I would say, acquiring a business is absolutely a viable path to entrepreneurship and that doesn't mean it's easier or faster. And to do it right somebody should plan to invest the time and energy to get to that answer the right way.

Courtland Allen 0h 31m 58s

It's just fascinating to me because I think, probably a lot of listeners, and I myself, have never really considered that to be an option. Like, I've never said, "You know what? Instead of starting a business I'll just buy one." I've always thought I'd have to build it from scratch and I have so many questions about how you actually do that effectively.

For example, how important is it to know the previous history of the business? Like, how many details do you need to know? Because I imagine it's somewhat disorienting to kind of jump into the middle of a business and, you know, you've done your due diligence and you know what their business model is, you know how they're getting customers but you don't know the history. You don't know every email that the founder sent and you don't know, necessarily, every start and stop that they've had, every failed attempt at doing something that they've had. It would be like joining the fourth episode of Game of Thrones without having watched the third and having to make political decisions, you know, you'd probably end up dead very quickly. So, how do you look at the previous history of the businesses that you acquire?

Kevin McArdle 0h 32m 56s

I think it's important to get as much detail as possible and I think anybody… There's a whole line of kind of, thinking and content that you really could pry the people on all of these things, like episode after episode, not just necessarily with me but there's a whole… I know you've had brokers on the podcast before so there's a lot of… There's a whole mountain of content that's there.

I would say anybody looking to sell a business, so put yourself in, Courtland, if you're selling me one of your past businesses, you would expect me to ask a lot of questions, right? And I wouldn't necessarily ask you to supply me every email you've ever sent, because, frankly, I couldn't read it all and I don't know what that would tell me. But it's totally reasonable for me to say, I want to see your financial records for the past two years and I want to know any critical relationships you have and I want to see your customer lists, I want to know the of distribution of which customers pay which amounts per month if it's, you know, a subscriptionary SaaS business. I want to know any critical relationships you have either with suppliers or contractors or, you know, if there's a particular customer that's bigger than the rest, I want to know every detail about that one because that, to me, is risk if that person, if that customer disappears.

So, you know, we do as much due diligence as we can on a business and if somebody is actively positioning their business for sale, particularly if they're going through a broker, that broker is going to force them to get their information together in a format that somebody like me is able and willing to consume it. Access to all the analytics related to your business is like table stakes for doing something like this so there is kind of a normal way of doing things in terms of this information is appropriate and will be asked for and there's also probably a limit to that, not just in terms, of like, volume of, you know, 10,000 emails over five years, but like there are certain things that you might consider trade secrets that I might ask for but certain people might not want to show unless were into an active like, we have a letter of interest that both parties signed, we've aligned on most of the deal terms and now we're just looking at more the nitty-gritty items, now I'm making sure that there are no red flags that haven't been uncovered already.

So there is kind of a standard set of expectations that buyer and seller would have and I think, every situation, it depends on the business that we're talking about. Certain things that are very straight-forward, you don't need all that much information other than what you can see on the website and some certain financial stuff and analytics to understand, this is a fit or this is not a fit for me or my company or my portfolio. And then other businesses are way more complex and require way more time and due diligence to get to that answer of, is it the right fit for me and is this the right valuation, whether I'm proposing to the sellers asking for a number, is that number fair given all the opportunity and risk associated with that business?

Courtland Allen 0h 36m 24s

So, one of the most practical considerations that somebody in the market to buy a business is going to run into, is something that you've already mentioned, which is that it actually costs money to buy a business. You're not gonna get it for free. How cheap is too cheap in terms of buying a company and how much money should a would-be purchaser really be expecting to spend at minimum?

You'd be surprised. You can buy businesses for as low as like, a couple grand. I mean that's not the market that I'm in, but if somebody's looking to just get started, those are out there. You know, I think the more you can, well, there's two ways I'd like to answer that. The more you can spend, the better off you will be for a couple reasons. If a business is worth more, it's probably… If the asking price for a business is higher it is generally worth more because it's more stable, comes with less risk.

The other option is, let's say, I don't even know what people would consider reasonable. Let's say if somebody can squirrel away $50,000 dollars or raise it from their friends and family. We're talking like this is, somebody making a decision. Do I go to code academy and write something over six months or do I take more of a business path because I'm not a coder. Well, let's say, hypothetically, you could find $50,000. Then a question that that person should ask themselves and I'm not gonna give a right or wrong answer, but there's kind of two options. There are multiple options.

You could go find a business for $50,000 that's probably gonna be a way better answer than anything you could find for $5,000 or you could buy two businesses that are worth $25,000 or five businesses that are worth $10,000 or some sort of a mix there and there's pluses and minuses to both approaches. So, if you just take the two ends of the spectrum, either one business for $50,000 or five businesses for $10,000 you know, on the one end of the spectrum if it's one business for $50,000 you can focus on that one thing and do that one thing really, really well. The downside is, there's risk with every single business and whether the seller knows the risk and is trying to hide it from you or whether something happens that nobody expected, that business could go south. And all $50,000 that you've invested in one business is now at risk.

If you buy five businesses for $10,000 you get that diversification risk of, of the five, you might have one that tanks for whatever reason, you might have one that you can double in size and is a home run and you might have three that just kind of coast along however the seller had been doing it. And so you spread your risk but you also spread your focus. Now you've gotta worry about five businesses that may or may not be directive-related.

So this is why I said that buying is definitely a viable avenue for people and you brought up a good point, you don't have to have a ton of money, you could have just a little extra money and start and maybe even start and find out, is this as fun as I thought it would be, am I as passionate about this as I thought I would be, before quitting your day job, as an example.

Courtland Allen 0h 39m 38s

How did you get your start with SureSwift? Because you said that you've invested in 28 businesses over the last couple of years and the first ones were a little bit smaller, did you go out and buy five businesses right off the bat?

Kevin McArdle 0h 39m 49s

Yeah, I was fortunate, so at that time when I'm was kind of deciding what to do with my career, I was fortunate to have a friend who was a repeat, successful entrepreneur in like, the software and internet business base and I had on the table in front of me, the metaphorical table, really three options. One was, you know, take another job with my current company and extend 15 years into 17 or 20. Another was, take a job with a competitor and move to Boston. And the third was, there was a doctor in our local community that wanted to start a medical device startup. Like, pure, from scratch, just an idea, raise money, build a prototype, go down that path. And all had interesting things about them and they all had challenges about them.

The startup was the one I got the most excited about, but I knew it could totally go up in flames, and so, you know, that one carried the most risk. So I called my friend for some advice, and he said, after several conversations, " I don't want to make your life even more complicated, but I've had this idea for a year, and I think you would be perfect to run it." And that idea ended up being SureSwift Capital.

So we pooled our money, we started acquiring businesses and proved that the model worked and then we later brought in a few other business partners with more substantial equity funding. We never really went out and raised a fund, you know, in quotes, like you hear a lot of people talk about whether it's a venture capital fund or a private equity fund, it's more of a close partnership of people who knew each other, believed in an idea and we don't take in outside funding to this point. And, yeah. We started acquiring businesses and as those were successful we acquired larger and larger ones, and yeah, that two-year time frame was really condensed but it was really kind of, I'd like to say, a methodical stair-stepping of getting more and more aggressive as we acquired bigger and bigger companies.

Courtland Allen 0h 42m 0s

I think one of the problems that most founders run into, and one of the biggest challenges really with starting any company, is just growth. How do you get users to come to your business in the numbers you want? How do you get them to buy and how do you keep that process happening indefinitely? And obviously, the stage that you're operating at where you're already buying these businesses that have had some success, growing and maintaining that customer base is top of mind for you. What are some of the techniques and the things that you guys do to keep customers coming in the door to these companies that you buy and to grow them to bigger sizes than their founders were able to?

Kevin McArdle 0h 42m 35s

I wish I could tell you that I had some magic formula that works every time, or that, you know…

Courtland Allen 0h 42m 43s

You don't?

Kevin McArdle 0h 42m 43s

Somebody hasn't thought of You know pay somebody to create an online course and sell that. Because building a course is also something I have no talent in. It sounds boring, but it's discipline. Measure everything. We look very closely at any piece of data that we can. What are our acquisition channels, if there's a cost of acquisition, what is that? What are our churn rates, very simply like, especially in a Saas or subscription-based business, customer happiness is a high, high priority and we call it customer happiness, not customer satisfaction, because satisfaction is too low a bar. And now customer success is kind of a trendy term these days but I aspire for customers to be happy.

Like, occasionally, I get a receipt in my email saying, thank you for paying your $99 for XYZ thing and I'm like damn, that's worth $200. I would gladly pay that company double what I'm paying. I'm happy with them. That's what we aspire to for all our customers. So, yeah. I mean, it's boring, maybe cliched, but discipline and trying to do the right thing, every single day and more commonly discussed but again, we don't have some secret answer. Testing new things.

So, I have the benefit of when I acquire a company, you know, I'm not living off of the profits from that company. It kind of goes into the greater pool and so I can take a little bit more of a chance on a test, so whether that be ,try a paid traffic strategy that the founder either didn't think they could afford or didn't know how to execute or didn't have the mind space to kind of, shift their priorities, we would take that chance and give it two, three months, look at the data and if its working we'll double-down and put more money into it and if it's not working, we cut it. And we don't look back at the thousands of dollars we might spend on that as a failure if it doesn't work. We look at it as like, okay, that's part of our process, that's how we learn whether that's gonna work or not and whether that's a sound investment and if it's not a sound investment we cut it off but we don't lose sleep over losing that several thousand dollars on that test.

So I don't know if that is the answer you were looking for but we just… My career was built on doing the right thing as many times as possible and when you make a mistake, you admit it, you learn from it and you move on and try not to make the same mistake twice. And that's the approach that me and my team take with any business that we have under management is discipline, discipline, discipline. Do the right things as many times as we can, treat customers really well and, you know, don't be afraid to make a mistake. But then when you do, don't make the same mistake twice.

Courtland Allen 0h 45m 47s

Yeah, I think discipline might sound boring, but it's completely underrated because… It's so easy, I mean it's easy to make the same mistake twice, but it's even easier to make a mistake as a founder, and then just quit. A lot of founders will run into a wall, where their plan for marketing and getting their product out the door and in the hands of customers doesn't work out the way that they thought it would. And rather than having your approach, which is, okay, this is just one of many attempts, let's write it down on the books and try another one, they get discouraged and they quit.

Kevin McArdle 0h 46m 17s

And even easier than that Courtland, is not being willing to take the chance and make a mistake and just be complacent with the status quo. So, your forum, the internet, the podcast world is filled with advice on how to grow a business. What to do next. There is no shortage of ideas or suggestions. A lot of them, it's not like they're counter to each other, it's not like Courtland is telling people to do A, and the other guy is telling people to do Z and it's completely opposite advice. Mostly advice is kind of the same stuff and it's basically, what I would call, blocking and tackling things, of like making smart business decisions and I think it's often very…

It's the easy path we're not sure of, you're like, "Yeah, a different email marketing strategy might work but you know, what's working now works and I'm just gonna stick with that." Or, in the case of, I've heard so many, a lot of your podcast guests are developers, the easy path is, "I'm gonna put my head down and write more code. I'm gonna harden this code. I'm gonna create a new feature." And those are all important things, I'm not saying that's not but we fall into patterns with things we're comfortable with and it's easy to do what we're comfortable with and discipline demands that you do those things well and you also do the things that are uncomfortable and find out if they're gonna help you grow your business or not.

Courtland Allen 0h 47m 42s

You're speaking my language Kevin. That's exactly what I think more people need to hear and really internalize because it's kind of obvious advice if you hear it but it's much harder to actually do it than to hear it.

Kevin McArdle 0h 47m 52s

Yeah, and I don't want to make this sound like it's easy, I mean, part of my job is, in leading up a group of super-talented people, is to make sure we are taking a disciplined approach and not letting things fall through the cracks and not… you know, we say good is never good enough and businesses can always get better and customers can always be happier and, like, what are we doing on each of those levels for every single business, every single day, every single week, to improve those. And even just stating it like that, Courtland, it's exhausting, and so, you know, this isn't for everybody.

I believe, going back to your question, is acquiring a reasonable path for entrepreneurship? Yes. That doesn't mean it's any easier and to acquire more than one business gives you diversification but as soon as you have two, it's that much more complicated, so, I'm fortunate to have found and funding that allowed me to get to a scale of being able to make mistakes on every business and not have every one of them be a home run and this is not necessarily the path for everybody because it is exhausting. You and your audience know that it is very hard to run one business, go try running 28.

Courtland Allen 0h 48m 28s

No thanks.

Kevin McArdle 0h 49m 13s

And doing so with a disciplined approach and it's not like it's all on Kevin, I've got a team of just amazing, smart, talented people that help me with this and I think they would all agree, like, this is hard work. Just cause it's fun most of the time doesn't mean it's not hard.

Courtland Allen 0h 49m 29s

Yeah. Ryan Hoover, the founder of Product Hunt does a good blog post that he wrote a long time ago called, Do Shitty Work. And it's just a to-do list of things that he needs to do for his startup and it's like, a lot of the stuff is shitty and you're not gonna want to do it but you have to any way if you want to move forward.

Kevin McArdle 0h 49m 43s

Yep. It's shitty, it can be boring, it can be, like, grueling at times, but that's what builds successful businesses, you know…

Courtland Allen 0h 49m 55s

If you're only doing the fun parts then you're certainly neglecting other important parts.

Kevin McArdle 0h 49m 58s

Yeah. I would say, I don't have a blog post about it but I like to use… I'm a sports fan with sports analogies, so… To wake up and have on my board, "Do shitty work," that's not very inspiring. But I liken it to, you know, to use the baseball analogy, people always talk about home runs or hitting a grand slam with business success. And yeah, that's cool when it happens, but home run hitters strike out more than they hit home runs.

I like the analogy of, I'm a pitcher and I'm gonna pitch every fourth day and I'm gonna throw a hundred pitches in the game or more. My job is to throw a good pitch as many times out of a hundred as I can, and that is less interesting but it's easier to focus on. Like, I could go to sleep every night and say, "Okay, did I throw a good pitch today?" And if the answer is yes then I've done my job. Because, home runs don't happen often enough to keep you going between one day to the next.

Courtland Allen 0h 50m 55s

So you've bought about 30 companies at this point. Do you have any stories where after buying a company, your plan for sort of, growing and maintaining that company ended up failing spectacularly? Or the opposite. Have you ever had a plan that just worked a lot better than you expected?

Kevin McArdle 0h 51m 10s

It's interesting, so I've been listening to your podcast for a while. I'm gonna tell you a story about a couple of businesses that are inter-related that was a total surprise. So, I need you to tell me before this podcast airs because you'll mention some businesses and all of our contracts have confidentiality clauses in them and it's more of a mutual, we agree, we're not gonna talk about the financial details and, we agree, when and if we announce something publicly, so here's the story.

I was at MicroCon, which is a conference that you've talked about on your podcast and I don't know if we're actually at the same conferences, it was last Spring in Vegas.

Courtland Allen 0h 51m 54s

Okay, I went to this year's MicroCon in Vegas.

Kevin McArdle 0h 51m 56s

Yeah, so just like, whatever, six months ago or within the last 12 months so, we were in the same room and did not connect so let's not let that happen next time.

Courtland Allen 0h 52m 4s

Yeah, definitely.

Kevin McArdle 0h 52m 6s

So, first up, cocktail hour, I'm just there, you know, mingling, and I run into a guy named Tyler Tringas, who your listeners will know. He's active on the forum, he's very much a fan of transparency, writes a lot of great content. We just kind of get to chatting, you know, "Kevin, what do you do?".

"I acquire companies, what do you do?"

"I have this business called StoreMapper." And we talked. He talks about his business and how successful it's been and where they're at trajectory wise, et cetera, et cetera. It's really cool, that's right in the wheelhouse of the types of businesses we're interested in cause it's got traction, it's a SaaS model, you know, it's lightweight, talented contractors but not a lot of overhead, good customer base, blah, blah, blah. Checking off a lot of our top ten boxes.

And we kinda left it at that. Great meeting you, exchange cards, we go mingle and you know, following up at the conference, I just sent him a note, said, "Hey Tyler, great meeting you, if you're ever interested in selling, give me a ring." And I'll spare you the details of all of the back and forth but we started talking and he's like, 'I'm not really interested in selling but here's kind of what I think the path is for the business." And you know, Tyler is a very smart guy, studies the industry, so he really knew what he wanted, knew the pros and the cons of this business frankly. Like, he knew where there were holes and he was up front about that, which I really appreciated.

And so on one of our phone calls he says, "Okay Kevin, this is interesting but I don't really know, give me a couple of examples of businesses you've acquired." And if your listeners go to our website, it's not real public about what's in the portfolio and that's with purpose.

So I give him a couple of examples and I'm like, there's this other business that we acquired called Mailparser. URL is Mailparser.io acquired that from a German engineer in France and you know the that's a guy named Moritz Dausinger, who you've also had on the podcast, WE had bought Mailparser from Moritz maybe six months prior and it was going really great and Moritz is still like an extended member of the family I was just on Skype with him yesterday but I didn't mention a name, I just said Mailparser is the business in a list of like three, thinking he would go check out the websites and see if there's details on what we had released lately or whatever.

So, Tyler calls me 24 hours later not giving me a hint about what was going on in the background, he called me 24 hours later and he's like, "When you mentioned Mailparser, it struck a chord with me because I remember I met Moritz at a conference in Paris, I called him after we hung up, and Moritz had very good things to say about SureSwift Capital and said it was a perfect fit and the transition went great, everything was great and he said don't think twice. Call Kevin if it's the right fit for you and for your business Tyler."

And I was like, oh! You cannot make that stuff up, right? I meet Tyler at cocktail hour, he happens to know Moritz, they're friendly and they've kept in touch years after meeting each other at conference and like, four or five months later, StoreMapper is part of our portfolio and Tyler is still helping us transition it. And Tyler knows that I'm coming on the podcast, he actually introduced us, but before this drops to the public, we agreed that he could announce on his blog or his email list that he had sold StoreMapper so that was a question about the timing.

But you know, in terms of like, I cannot remember how you phrased it, but like, unlikely stories or what surprised me, that was a surprise when Tyler, you know, people talk about a small world but that's smaller than I thought it would be and the fact that you and I were in the same conference a few months ago and have these similar ideas about right and wrong ways to start and grow a business and you know, how to think about funding, how to think about how your personal life overlaps with your business life, my words, not yours. That was one of these stories where I ended up telling a friend of mine over beer and he just, like, rolling his eyes and shaking his head, like, this sounds made up. But, no, it's true and those are two of my favorite businesses in the portfolio so I'm happy we met

Courtland Allen 0h 56m 48s

Have you guys ever made any big mistakes when buying a company? Because I imagine there's a lot of uncertainty there and there are probably some things you would not repeat if you could go back.

Kevin McArdle 0h 56m 57s

Yes. The mistakes are many and too many for this podcast but in general I think, you look at what I do as investing. I make investment decisions in businesses and you always expect the best but plan for the worst and anybody who has made more than one investment and tells you that every one has gone perfectly is either lying to you or lying to themselves or both.

So, you know, when a business is for sale, like I said, the seller and, if there's a broker involved, the broker will emphasize all the wonderful things and de-emphasize any risks and despite as much due diligence as we can do and try and look over every detail, there either might be something that was missed, that happens rarely and probably less and less as I have a more robust deal team that looks at every deal.

So I have my technical guy look at the code, I have my finance guy look at all the books, so that I'm not just relying on my own expertise or judgment. But those things happen. You could miss a key element that ends up hurting you down the road but the more common thing, you know, we talked about the SaaS businesses, we have a couple, well, more than a couple, but we have some content based businesses in the portfolio because they're easy to run, they spit out cash, it's pretty straight-forward and you know, the ever-present risk that's always there is that Google makes some sort of change and all of a sudden the website that was popular yesterday is slightly less popular today. And so we've had those things and so we just kind of control against those, we're focused more on SaaS today than we were in the past for some of those reasons.

But like I said earlier, business in general is hard. Running an internet-based business is harder. Running a small, internet-based business is harder still and so the reason it's hard is because there are risks and surprises and challenges that come up and so we are in no way immune to those things, we just try to mitigate those risks or lower those risks as much as we can up front. Be prepared when they happen. You know, I've got stories of like, websites being attacked or someone forwards me an email saying, "It looks like someone other than you is now in control of this business,"…

Courtland Allen 0h 59m 25s

Oh no.

Kevin McArdle 0h 59m 25s

"You might want to look into that." Yeah. I mean crazy stuff like that, that you know, didn't end up, we were covered, luckily I've got, we thought we had all of the right plans in place and protections in place but, you know, missed something apparently. So those things happen and we just try to reduce the chances of those happening and if something bad happens we have a plan to react and how to fix it.

Courtland Allen 0h 59m 52s

So, we're getting low on time here but to wrap things up, let me ask you, what are your long term goals as an entrepreneur and with SureSwift Capital specifically?

Kevin McArdle 1h 0m 0s

Well, go public and sell for a billion dollars like any of you would. My long term goals are to, we're on a path already, What I wanted was control of my life, I wanted, financially, to be in the same spot or better than I was in my corporate job. I wanted to build a team of really talented people that I enjoy working with and that I'm inspired by and so, like, check, check, check. Those are done. Now it's about building a sustainable business and continuing to grow and creating a return for myself and the other partners and kind of, what path that takes is still TBD, but we are a buy and hold company, we do not set out to flip businesses after five or seven years, so we make investments on businesses that we want to own for the foreseeable future and that's it.

I more and more want to, kind of, contribute to the ecosystem in general and one of the reasons why I'm glad I got connected with you is because I believe in what you're doing with your forum and your podcast and you're kind of creating an environment for people who want to get into entrepreneurship or are and want to get better at it and so I'm investing my time and the company's money into certain ways to, whether it's sponsor a conference or be on a podcast or contribute to a forum, because I believe that this type of opportunity is immense and it's so good for so many people and I will now start to look more at what we're doing as a really good, viable outcome for many, many of the thousands of people that are your audience, or other audiences similar to yours.

So, without sounding like this is a charitable endeavor, because it is not, I am a hard capitalist and it's about making money for me and my partners at the end of the day, and I feel really good that for people like Moritz, people like Tyler, you know, some woman listening to your podcast or a member of your forum, some day their life might be changed by selling their business to SureSwift Capital, or somebody like me because not every business is a fit for my portfolio, but I believe if there are more exit opportunities for successful business people at this kind of smaller, moderate scale, frankly, the world is a better place.

And so, I don't necessarily have a clear vision of how I can contribute to that or what the steps are to do that other than, we're gonna continue to acquire businesses, we're gonna continue to share best practices across those, help every business grow. Provide opportunity for founders who may want to continue to be involved, you know they can be involved in their company or other companies that are part of the portfolio. We provide opportunity for dozens of contractors and freelancers every day, week, month, which feels great to me. Long term, those are the things I think about. Like, we've got a plan and a path to continue to acquire and make money long term, I want to see what we can do as a company and as a community with SureSwift to have an impact on the broader ecosystem of entrepreneurship.

Courtland Allen 1h 3m 43s

The world would certainly be a better place if there were more exit opportunities too. Instead I see people try these kinds of businesses and people that did had more options for success in the long term.

Kevin McArdle 1h 3m 54s

And I think if you've been in this kind of mindset and place longer than me, wouldn't you agree that we're already going that direction?

Courtland Allen 1h 4m 4s

Oh yeah, for sure.

Kevin McArdle 1h 4m 5s

It's easier to start a business today than it was 10 years ago. I feel like it's easier to exit a business today than it was even two years ago when I got into it and so I think the world's moving that way. My goal is to move it that way maybe a little bit faster and maybe a little bit healthier, because sad as it is, there are other people out there that maybe have a different philosophy about how to do business, how to treat people. How to treat founders when it's like, a buyer versus seller relationship, and I feel better if you're getting screwed, and I don't take that approach.

And so, my goal is to support the people that do things the way that I, you know, that have similar values, similar beliefs to what I do and what we do as a company. You know, I think the chips will fall, hopefully the chips will fall the right way, but this industry kind of, it just gets better and gets healthier over time.

Courtland Allen 1h 5m 9s

Could not agree more. Did you tell listeners where they can go to find out more about what you're up to personally and what you're doing at SureSwift Capital?

Kevin McArdle 1h 5m 16s

Yeah. You can drop us a line at SureSwiftCapital.com but the best way is email me Kevin@SureSwift Capital.com or on Twitter, Twitter is the one social platform that I put any time into, it's @Kevin_McArdle. That's McArdle with one McArdle. I am more of a curator and communicator that a tweeter myself but those are the, email and Twitter are the best ways to get a hold of me.

Courtland Allen 1h 5m 46s

All right, thanks so much for coming on the show Kevin.

Kevin McArdle 1h 5m 48s

Thanks for having me Courtland, it was really a pleasure and talk to you again soon.

Courtland Allen 1h 5m 51s

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