Ear To Ear Podcast | EPISODE 1: Building Business Value: Insights on Growth, Exit Strategies, and the Power of Recurring Revenue

Transcript:

 

Introduction (00:00):

Welcome to Ear To Ear by Altaworx, a podcast for all things telecom.

 

Keith (00:09):

Okay. Welcome to Altaworx's, Ear to Ear podcast. I'm Keith Singler President of Altaworx and am up and with me. Today's special guest is Rickie Richey who is CEO of Altaworx. Aim up. Welcome Rickie.

 

Rickie (00:21):

Thanks for finally inviting me.

 

Keith (00:23):

Well, I had to get permission to get you on. I had to talk to legal and HR to make sure

 

Rickie (00:29):

The HR was the big concern, right?

 

Keith (00:30):

Right. They were probably the most concerned. Super excited to have you. Aren't you HR Technically, yes. Thanks

 

Rickie (00:37):

For inviting me

 

Keith (00:37):

There. Yeah, I had to give permission. You're welcome. I'm really excited about this session we have today. We're going to talk about business, we're going to talk about valuations. We're going to talk about bringing on strategic investors, which are going to talk about acquisitions and all types of things in that realm of what we're doing as a business. And first place I want to start is you have a really cool story about the evolution of your career and your career really started from a W2 employee, then you went into W2 plus commissions, then you went into all commissions, and then you decided to take the leap into starting your own business. I want to talk about that story and give us a little bit of background how that went and the evolution of you actually making the leap to start your own business.

 

Rickie (01:18):

Well, it actually started with some failed businesses first. So had a business selling seeds when I was a kid. What kind of

 

Keith (01:27):

Seeds were you selling here?

 

Rickie (01:28):

I don't remember. They were just seeds, right? I that didn't do it. And then I had a sunglass business while I was in college. Didn't sell lot sunglasses either. And then after I got out, I had a restaurant equipment business, which no, actually I take that back. I had a bakery equipment business first. So traveled all over the place, sold a bunch of big bakery ovens, did some grocery store stuff, got offered a job, said thank God I went back to work for somebody. So then I quit that job and then started a, what did I do now? I take that back. I worked for the Civic Center in Birmingham running the food service there, which was a huge job. And then I did that in mobile, which was another huge job, and then got tired of the food business and started a restaurant equipment business. So did that for a couple of years. And then what I realized there was most of my customers were going out of business, 50% of 'em went out of business.

 

Keith (02:16):

It's a tough industry.

 

Rickie (02:17):

Tough business, right? Yeah. Terrible business model. Kept selling the same stuff. So then they decided I want to get into technology business, and that's how we ended up where we are today. So I went to work for a BellSouth partner doing orders, same thing as some of the folks in our office do today, and then quickly got into sales, became their top sales person. So

 

Keith (02:35):

You just flipped totally from one vertical to the next and said, Hey, I got to get out of the restaurant industry. I got to get into tech.

 

Rickie (02:41):

For me, it's not really, it's a sales thing. It's not really a technical thing. Just like our software as a services business, selling voice services, it's all the same. It's really helping customers, figuring out we can have an impact on their business and doing that. But yeah, owning my own business has always been about not having people tell me what to do. So not so much as being an entrepreneur, but being able to move quickly through different challenges and not kind of be stuck in the same place forever. I think it's more about that for me than it has been about starting technology businesses or anything like that. It's more of a personal thing and then helping other people kind grow and do the same thing.

 

Keith (03:20):

So your personality sort of led you to, Hey, I need to make a choice. I certainly don't like to work for anybody else. I would rather somebody not be telling me what to do. I want to be able to call the shots, make bigger impacts, help my Customer solution

 

Rickie (03:34):

It's about the pace of the career. It's like when you know that you could be doing more and doing things further along, sometimes you just got to create your own opportunities, and that's essentially what I did. It's like I wanted to do these other things, so I don't want to sit around here and wait for other people to decide. It's time for me to do 'em.

 

Keith (03:50):

So you're ready to run faster than you were running.

 

Rickie (03:52):

Absolutely. Yeah, absolutely.

 

Keith (03:54):

So are you running at the pace now that you were hoping to run when you made that choice?

 

Rickie (03:58):

Well, we're speeding up.

 

Keith (03:59):

Yeah, we can run faster for sure.

 

Rickie (04:01):

Right. With our recent changes, I think we're running a lot faster, and it's really one of those things you can ask Lydia and Jamie. It's always been fast change. We always adapt and adopt and change things so that the pace is really the thing that's exciting about maybe doing different things. But again, it goes back to the personality. It's like that's just my personality. I want things to evolve quickly because I lose interest fast. So we have to evolve quickly and keep up with changing industry. And that's the good thing about tech industry. It's always going to change. If you wait two years, it's going to be 50% different than it was two years before.

 

Keith (04:35):

No, there's no doubt about it. Your experience in the equipment business, whether it be restaurant or a different type of equipment business, then rolling into a service industry and then coming back, talk to me about some of those lessons that you learned in each one of those on how you wanted to shape your business after you were working for somebody else.

 

Rickie (04:55):

Yeah, I think the slow grind is the non-recurring revenue businesses. Restaurant Christmas business was same. You start over every month,

 

Keith (05:01):

Every month.

 

Rickie (05:03):

Even when we got in the telecom space, it was the same thing. I think we were selling premise based IP phone systems, which was in 2001 was when nobody else was doing. It was a business model that allowed us to not have a lot of people, which we still do today with our automation still the same thing. We try to limit the head count. That's why we have such a high revenue per employee. But that goes all the way back to starting the business and do an IP phone system. So we could do the support remotely, which is really a type of automation. I guess from the standpoint of we were using internet to support our customers. Everybody else, if they had to go do a phone system programming, they had to drive out there and do

 

Keith (05:39):

It. Yeah, rolling trucks is expensive. Having

 

Rickie (05:41):

AX is expensive. So the model was that let's just make sure that we can support our customers remotely. And I think I've told you this story before we started the largest shopping mall company in the United States from Fairhope with one service vehicle. So the model was strong, and then like I said, but that business still was a non-recurring business. So really, I guess the lesson you learned over time is you got to figure out how to make the same amount of money every month without having to sell anything. If you can get to that point, you've done something, right?

 

Keith (06:12):

Yeah. Let's talk about that. The recurring revenue model is really what drives value for a business. When somebody's coming in and they're looking at a business and they're saying, Hey, this is worth X, Y, Z, oftentimes what we see is the one-time revenue models, they're valued at much lower valuations than recurring revenues. Because you mentioned to yourself, Hey, I can close up shop right now and I know how much money I'm going to make next month because I know what I have under contract. That's valuable. So talk to me about the evolution of how you moved your business from starting over every month to that monthly recurring revenue. Was there a big risk there?

 

Rickie (06:50):

Oh, yeah. When you

 

Keith (06:50):

First took that leap.

 

Rickie (06:51):

Yeah. So when we first took that leap was really, we started working on about 2006, 2007, building SIP trunking and stuff. And so it was a slow expensive process where today it's not. I mean, we went to one of the largest telecom companies, VoIP companies or UCaaS companies in the region. And to ask the white label when they said, no, we don't do that. So now that conversation would be an easy one. But back then you had to build your own platform. You had to figure out compliance and taxation and all those things, and all those are easy, but it took a lot of time and it took a lot of money. So we went from two and a half million dollars a year to $865,000 a year. But if you turn around and you start stacking up the revenue as opposed to just doing one-time wax, it grows pretty fast.

 

Keith (07:36):

Yeah. So how did that conversation go with your management team at that point in time when you finally came in and you communicated it to them and said, Hey, we need to make a change. We're going to pivot 180 degrees from what we're doing now. How did that go? Was there some fear? Was there some Reaction?

 

Rickie (07:51):

Well, the first thing is, and they'll deny it now, it's like,

 

(07:56):

Why would we want to bill a customer? And even some of the people that supported us in the industry were like, why would you want to bill? Why would you own the customer? Why wouldn't you rather get commissions? Well, it is just like we talked about earlier, is once you start stacking those customers up, you don't have to do that much. You and I remember we had dinner with some folks in Dallas this past week, private equity guys, and his comment was pretty really kind of validates what we're talking about. He says, yeah, we did an exercise where we took out everything in the business and said, what would happen to the business if we just quit doing everything except supporting the customers we have today and how much money would we make? It was like that kind of tells you the story of the recurring revenue is what drives that business.

 

(08:36):

The other stuff that we're doing, and they were doing one besides supporting the existing customers is trying to grow the business. But at the same time, if you decide you didn't want to grow the business, you just want to live off what you had, you got a pretty long runway there before it probably spirals all the way down to zero. And we've seen some people like that. I think you and I talked to somebody about their business who was doing the same thing that was just letting it kind of glide down slow path to them being totally retired. They didn't want to sell

 

Keith (09:04):

It. Yeah. There's a big difference between a lifestyle business and somebody who is using that to support a lifestyle, and then somebody who is building a business that has tremendous value proposition to where they can start to think about what's the next move. Oftentimes entrepreneurs don't think early enough about what that would mean for an exit strategy, and then doing so they miss a lot of steps where they can build some equity value within their business to make it more valuable for when they want to exit. Talk to me about some of those choices that you made within your organization, management philosophy, sales philosophy. Talk to me about some of those things that added value to the business to where you can grow it to where you want it, not just today, but also tomorrow.

 

Rickie (09:55):

And so the first thing that most people don't think about is the one thing you have to be able to do is if you decide to exit, it doesn't matter how you do it is to prove to people the value of your business. So that means that when you get to the point where you're ready to exit the people that are going to acquire your business or will require proof that what you did last year you can do next year. So a lot of people don't think of it in those terms. It's like the private equity guy or the strategic partner that comes to you and says, Hey, I want to buy your business, really wants to know. Show me how you can prove to me that we'll be able to do this same thing next year. So when you start out, you really need to start out with that in mind.

 

(10:32):

I got to build this business where it's clean, it's understandable. People can look at it and go, well, yeah, that makes perfect sense. This is what you're doing. I understand that completely, and we feel like that if we acquire this business, then we can do it again next year. So you got to start that in mind is how do I build my business? So when people look at it as transparent, we've done that with dashboards, we've done that with making sure our books are right. We are careful with compliance, so anybody can come in and work for us. I mean, I think you could probably see that when you came to workforce in finance that it really was not hard to understand what we were doing and how well we were doing and those kinds of things.

 

Keith (11:08):

Yeah. So it's interesting you say that. I don't want to touch on that. When I was interviewed, the first thing I did was I went to dinner as my first interview. I signed an NDA and I was shown the financial statements almost as a test to see what my financial background would lead me to deduce from.

 

Rickie (11:28):

Were there any math steps involved in that?

 

Keith (11:30):

There was a little bit of math. I didn't write on anything on a napkin or anything like that, but I did use my phone to calculate some quick numbers because I'm not very good at math. It's also why I'm not in finance anymore. But I signed an NDA and I looked at the financial statements and I was really surprised at how clean the P & L was. And it wasn't just clean. It was understandable. There were certain sales buckets that made sense that corresponded with cost of goods sold buckets. I could easily say, Hey, mobility, yes, sales, cost of goods sold. Yes, wireline sales, yes, wireline, cost of goods sold. And in my head, I can understand the health of those products based on the gross margin, voiceover IP, same type of thing, other fees and services. And then getting down to the SG a portion of the financial statements. I was very happy with that. Most of the time when a vice president of finance or a controller position or a CFO position comes open, oftentimes it comes open under some duress to the business. Yeah,

 

Rickie (12:29):

They're a mess.

 

Keith (12:29):

There's some stress there. They left. Maybe that guy saw the writing on the wall. Maybe they're fired for doing something stupid. But when I looked at the financial statements, I noticed that you guys had put a lot of work. We as an organization, put a lot of work into that. Talk to me about the conversation that you had with a banker a few years back.

 

Rickie (12:46):

So really, we got the business grew to the point where, and I don't even remember what the dollar amount was, but where we really, I thought it was a good idea for us to go out and get a line of credit with a bank. So a friend of mine was president with the bank, so we took him to P & L and he goes, this is a mess. And we thought it was actually halfway decent. But then he went through and said, here's the way it needs to be organized to where somebody can look at it and really understand it. And so we went back and rearranged our P & L, rearranged our balance sheet in a way that made sense for a bank to look at it, and we were able to get a line of credit, and we've been borrowed money from banks ever since.

 

(13:25):

But it is one of those things that you don't think about it. You're doing well. You can understand your P & L, but a lot of times you've got to really think about it and figure out if you can find somebody to tell you from a different perspective what it should look like, not just what you think it should look like. It may make sense to you totally. I mean, you may not care, but then at some point in your career, you're either going to want to exit, you're going to go to a bank, maybe you want to do a partnership or roll up or talk to private equity. You really need to start thinking about what do I need to make this P & L look like so other people can sit down and understand it.

 

Keith (14:01):

It's got to make sense. It doesn't just have to be clean. It has to make sense. It has to tell the right story about how well the business is doing. The income statement balance sheet statement of cash flows. That's the world that I lived in. So understanding that Altaworx and AMOP had such clean financial statements was something that added value prop for me coming in and looking at the organization as someplace that I would consider working. If I came in and I looked at the P & L and the balance sheet and looked an absolute mess, that's a big red flag for me.

 

Rickie (14:31):

You could make yourself look good though by fixing it.

 

Keith (14:34):

I could make myself look good by fixing it. The good thing is I didn't have to, right? The good thing is I was able to understand the business much quicker and getting back to equity value, having clean financial statements is a huge value add for a business. You mentioned relationships with bankers and having someone come in and do some due diligence, oftentimes that due diligence cycle is much quicker when somebody understands your financial statements and the story that you're telling about the prospectus of a business makes sense compared to what's on the financial statements they jive. So I think that's a huge value add that we've been able to do. And businesses out there, when they're thinking about how their business is valued, they should spend some time in their financial statements. They should really push themselves and challenge themselves and see, how do I have things categorized?

 

(15:20):

Do they make sense? Am I planning around the P & L? Am I planning around how to put things that somebody else can look at the story and really understand it? Because, and I've talked to bankers and brokers and private equity folks, a lot of times they have a hard time understanding the core business. The financial statements oftentimes can help them understand it better, especially if you're the one telling the story, and then they look at the corresponding financial statement and say, okay, yep, that makes a lot of sense. But a lot of times they don't understand it,

 

Rickie (15:54):

And

 

Keith (15:54):

Messy financial state can make it

 

Rickie (15:55):

Even worse. Ultimately, at the end of the day, I didn't realize it was going to turn into an accounting conversation. Well,

 

(16:01):

Sometimes, really at the end of the day, what they're trying to figure out is how to make my money back, right? Sure. So if you make it so complex that they can't look at your P & L and say, well, I see a path for me to get my money back or grow this business in a way that allows us to do another exit down the road, buying it not to own it forever, just like you can never convince me that anybody starts a business and doesn't at some point think that they're going to sell it, most people don't leave it to their kids. Like I said, I'm trying to think. Maybe one or two people I've known in my entire career that actually left their business to their kids, 70% of business, I don't know who told me this the other day, are sold because somebody wants to retire.

 

(16:39):

So that if you're not thinking about it now, you need to stop and say, Hey, why did I start this business? Did I start this business? I got tired of working somewhere else. But ultimately, at the end of the day, it's like you're going to have to stop working in this business at some point. So that means you're going to either try to sell it or you're going to try to maybe do a roll up with somebody else and make it bigger and then sell it. But like I said, if you're not thinking about it from day one, then like I said, it's going to cost you a lot of money at the end when you finally just say, Hey, I'm 65 years old. I want to retire. I'm 50 years old. I want to retire, or I want to go do something else. We've talked to some folks that really just got into business. It was a family business and ultimately decided they wanted to go do something else.

 

Keith (17:26):

So along the lines of making sure that you have the right things in place and clean financial statements is a really big choice that you made to bring in the right management team. So as you've built this business, your management team has kind of, it's swelled some, it's contracted, some. You have had some turnover on the executive team, but talk to me about how important it's for you to find the right people to be in the right seats and how that's added value to these organizations.

 

Rickie (17:54):

So ultimately, it goes back to this conversation about who you're going to sell your business to and to prove to them that they can grow the business and make more, which means that you have to prove to them that the business doesn't need you.

 

Keith (18:08):

That's a really interesting point.

 

Rickie (18:09):

That's what you have to do. It's hard to do because you love doing it. You wouldn't be doing it if you didn't enjoy it. But ultimately, at the end of the day, you have to figure out, how do I get myself out of this and make it run by itself? And that's really the goal you should have too, as well as having clean financials, making sure that you can run the business without you, which makes it nice too, because like I said, one time, somebody came to me wanting do a roll up and said, Hey, we can put these five companies together and we'll all grow faster. It'll be worth more money. And by the way, you can do whatever you want to do. It's like, well, I already do that. I already have that job. So that's not a real good sales pitch. But that was because we really tried hard to make sure that the business could run without me. Now, that doesn't mean to say that I don't bring value, but at the same time, if I stepped away, it wouldn't inhibit the operations of the business at all.

 

Keith (18:59):

Yeah. You've put a lot of time and effort into making sure that that was the case. I mean, during covid, you were out for

 

Rickie (19:05):

Probably a month. Yeah,

 

Keith (19:06):

Almost a month. And when you came back to the business, it was still healthy. You're still running. The management team had done a good job of steering that through those hard

 

Rickie (19:14):

Times. I really don't think you'll know I left.

 

Keith (19:18):

You were certainly missed, but you'd put in a management team in place that knew the direction and understood what was on the VTO, right? Absolutely. And

 

Rickie (19:28):

Understood what the

 

Keith (19:29):

North Star was. So you just keep working towards that, and when you jump back in, it was a seamless transition, right? Yeah.

 

Rickie (19:34):

It's just really just bringing value. It's really, you almost have to divorce yourself from the operational process other than making sure that you have clear goals and everybody understand those goals and you have the right people in the

 

Keith (19:44):

Right seats. And part of that was EOS. Yeah,

 

Rickie (19:47):

Absolutely. Having EOS has made it. We were already at the point where it didn't need me, but having EOS really put the guardrails around a lot of stuff and it made communications better. I think that was the big challenge was the communications piece.

 

Keith (20:00):

Yeah, communications accountability is a big deal too. Yeah,

 

Rickie (20:02):

Accountability too. We've had some issues with that for sure.

 

Keith (20:05):

Having a certain level of accountability from the top to bottom and being able to put it into practice in amended solution like EOS from the top to bottom. If you don't have that level of accountability from you all the way down to our most newest, our brand new employee, if we don't have that level of accountability, it just kind of goes off the rails and you might as well not do it.

 

Rickie (20:24):

Totally. Yeah. Because I've had people work for us that claim new EOS backwards and forwards, but the big piece that they missed out on was the accountability piece. Really, accountability is really probably more important than any in the US is either people hold themselves accountable or the organization hold 'em accountable to what's in their seat. If that's not happening, then the whole thing falls

 

Keith (20:46):

Apart and all those things kind of go into accountability, the communication, the follow through, all that's about accountability, the meeting cadence. So it's all about accountability. Do you think having a management solution in place in our organization like EOS adds value to our business on the open market?

 

Rickie (21:01):

Yeah. That goes back to can you prove that it is going to do what you say it's going to do, and how easy is it somebody to integrate into that business? So you've seen it since you've been here, moving people around because of the structure, it's really kind of easy. I mean, we have people changing all the time and sitting in new seats, but because of the structure in the EOS, the communications, it's easier for us to do that than it is. Not to say that we're perfect at it, but it's much easier for us to move people from place to place and have them understand what's going on in the business. Hopefully they already know because we try to communicate and it makes it easier for them. And most of the time when we move people, they're people, they raise their hand and say, Hey, I want to take that challenge on. I want to be sit in that seat. It is very rare that we move somebody into a new seat that doesn't ask for it. I can't really think of a whole other, well, no, even you ask for sales.

 

Keith (21:53):

I was going to say, Hey, I did that.

 

Rickie (21:54):

But really, if you think about it, I can't think of an instance where we told somebody they had to change jobs that we said, Hey, we have this opening and you may want to take it on. And almost always somebody raises their hand, says, I'll take it.

 

Keith (22:05):

Yeah. It's interesting from being here for two and a half, almost three years, every job opening that we've had in the organization, somebody from another team has raised their hand and said, I'd be interested

 

Rickie (22:17):

Yeah, I've thought about that. But yeah, it's absolutely seems like every single time

 

Keith (22:21):

Everyone that I could

 

Rickie (22:22):

Recommend, which is that's that grow and evolve of our core value, it's grow, evolve. So that means that we have to have people that aren't afraid to take a new challenge on.

 

Keith (22:30):

Yeah, that's another point is our core values. Do you think having a strong set of core values adds value to the business?

 

Rickie (22:37):

Well, yeah, it does. I mean, we already had the core values that we had. It took us only 12 to 15 minutes to do our core values when we got to that part in EOS. So because we already knew what they were, and we looked at 'em every quarter and nothing changed. We looked at 'em for another business we're starting yesterday. Lydia and I looked at 'em and it was like they're the same. If we're involved, they have to be the same. We can't have different core values for different businesses because it has to be the

 

Keith (23:08):

Same. Hey, getting back to people, raising their hands and able to be successful moving across organizations. I'm pretty a big example of that within your organization. So for those that don't

 

Rickie (23:22):

Know, you used some math classes too. Yeah, so

 

Keith (23:25):

When I came on, I came as the VP of finance. I was fired as the VP of finance and installed as the VP of sales. Half kidding. When I first started, I did joke with the employees that I wasn't good at math and everybody, some people were concerned about that and wanted to know if that was the real thing and know it wasn't a real thing, but it's still the running joke. But after some sales, some movement into sales team and wanting to run a little faster, much like you did when you wanted to start your own business, I wanted to run at a faster pace. I raised my hand and said,

 

Rickie (23:58):

Yeah, I spent time in accounting and decided that that's boring

 

Keith (24:01):

Stuff. And we spent way too much on accounting on this podcast too. So we're trying to transition into

 

Rickie (24:07):

More. It's a good education for running a business. It

 

Keith (24:11):

Is. But I raised my hand and said, Hey, how can I help in this area? I have zero sales background. The beautiful thing about that is we have a sales philosophy in the organization that's around the AXIOM sales kinetics philosophy. So take a couple minutes and talk about what AXIOM means to you, why you chose that sales philosophy to instill in the organization and how you've seen that grow our sales over the last two years.

 

Rickie (24:41):

So I was introduced to AXIOM in 2006, and it's probably the most meaningful thing, and Bob still talks about today. Bob Nichols is the founder of AXIOM. Amazing guy, business partner and great friend. But the one thing that I got out of a sales manager training class that was sponsored by GTE because we sold Threecom phone systems, was that you really have to find your differentiator. And that takes time. I mean, it's taken a lot of time, but it is also, I think one of the things that I've got to AXIOM more than a lot of people have is it really has to be a systemic thing. It is individualized for sure, from the training standpoint of trying to make you more proficient and understand how to really talk to somebody about their business and understand what it is that they're trying to accomplish and see if you fit into that at all.

 

(25:29):

But like I said, when you start looking at it on a business level is your company, it's like what makes us different? So we went out, it took us a long time to do it, but it's that story I told you about taking Forest to Las Vegas and saying, going into that room right there, and it's a half a million square EXPO and say, go in there and see how many people do what we do. And he came back and said, everybody. And so really the goal there has always been how do we build things that are different? We did that initially with selling VoIP phone systems because not many people were doing that, but over time, everybody caught up to us since we had to go back and say, Hey, wait a minute, we're not different anymore. We're the same as everybody else, so let's go back and find ways of doing that.

 

(26:09):

So we did that with Catapult. We've done that with AMOP. Those are things, if you look at AMOP now, we have people, huge companies that are international companies that are looking around trying to find things that are the same as ours, can't find 'em. So really the first thing is AXIOM. If you take the standpoint of, Hey, it really is what makes us different, and it's all based on business impact, it is not like a lot of people, and I see this all the time in our businesses, they come up really cool stuff that solves zero problems. Just because you think it's cool doesn't mean it solves a business problem. So you have to really start out with that. Looking at everything that you do as a business is what problem are we solving? What impact are we having on a business? And then you have to drill down to the individual level, the seller like yourself when you get in.

 

(26:55):

Our goal as the company is to have the most positive impact on you by helping you be more proficient, giving you the right environment to sell, having good products, having the right support, having us execute on your sale. I know that's in my sales career. I've been in places where I outsold the company. The company couldn't keep up with what I was doing. That's one of the reasons I'm in technology and not in the food business. I was selling in the food business, and those people couldn't keep up with what I was selling and delivering it. So maybe I'll try technology. I've always had a little bit of hand in technology when I worked from area and Aramark, I did some technical projects, but really it comes down to how do we have the most impact on business? How do we have the most impact on our sellers and customers and helping them grow and be more efficient? That's the conversation you and I've had recently about some of your sellers is how do you help them become more proficient? The formula is sales is the output of activity type of proficiency. You're not managing sales, you're managing the activity and you're managing the proficiency and the output just as sales. You don't manage sales.

 

Keith (28:01):

And for us, we've been able to grow sales tremendously with a small sales

 

Rickie (28:06):

Team. We had dinner with those folks in Dallas the other day, and I said, guess how many salespeople we have? He's like, he thought it was way more than three.

 

Keith (28:16):

It looks like it's way more than three. But AXIOM is really what sets us apart from other technology companies that don't sell through that method. AXIOM really allows us to be a wonderful listener. I tell people all the time, if you learn how to sell through AXIOM, which adds tremendous value to the customer and by and large to the business as a whole, if you're a good listener, a prospect or a customer will tell you exactly what you need to

 

Rickie (28:43):

Know in order to go to that. One thing you pointed out to me, and it's that one thing that I think I'm good at is finding that one thing in the conversation. That

 

Keith (28:49):

One thing,

 

Rickie (28:50):

Yeah. It was like you look at some of the deals that we've closed recently was that one thing the guy said that a lot of people would've just breezed right by

 

Keith (28:57):

A ten second snippet in an hour long conversation can mean the deal.

 

Rickie (29:00):

It was like, Hey, I'm trying to do this. I'm trying to do that. It's like, Hey, I just want to be more proficient. It's like that doesn't have anything to do with price. And most people are trying to figure out how I can save you money. Especially in our business, they tend to be commoditize themselves and try to be the least expensive, which really is not. AXIOM teaches you it's about business impact, whether it's making 'em more efficient and by automating some processes for 'em, or sometimes it's about reducing expenses, which doesn't necessarily mean that your product is cheaper. Maybe you've made them more efficient and they can eliminate some labor or different things like that. So once you eliminate labor, guess what? You just reduce their insurance costs. It reduced their rent costs. So now all of a sudden you've made their business, you've reduced their expenses, not by sacrificing the price of your product, but by building solutions that help them become more efficient.

 

Keith (29:50):

We say it all the time in the business, it's business impact first, technology second.

 

Rickie (29:54):

Right?

 

Keith (29:55):

I've,

 

Rickie (29:56):

That's why I say I'm not a technology guy. I'm really a business guy in a sales

 

Keith (29:59):

Guy. I would consider myself the same. I'm more of a business guy than anything else. And trying to find that solution is really what sets us apart. That's why our sales are growing so fast and this year, especially seeing the rocket fuel that's been added to our business through really being more proficient at AXIOM has added a ton of value to our business. I'll tell you a funny story. I've had the privilege to interview and hire for several sales roles over the last year, and I had a guy tell me that he could sell ICE to Eskimos as his tagline. That interview lasted about 30 seconds longer. It ended 30 seconds after he said that because that's not who we would look for.

 

Rickie (30:40):

Yeah, Eskimos don't need

 

Keith (30:42):

Us. Yeah. They don't need it. And we're not in the business of selling something to a customer that they don't need or it's not a solution that's going to impact them. So for me, having AXIOM in our sales culture as our sales methodology for us adds a ton of value. And for entrepreneurs out there, business owners, business leaders, if you don't have a sales solution or a sales methodology and you're trying to wing that on your own, asking is something that can add a ton of value to you.

 

Rickie (31:12):

And I think too, what a lot of people miss and I asked this question with Bob, we were in Jacksonville and that last time was like, who are the best AXIOM sellers? Who gets it right? Most not everybody gets it because some people think selling is about tricking people and doing stuff, and it has nothing to do with that. It has to do with figuring out how you have a going to impact on their business. If you can't, then you need to move on because you only have a certain amount of time in your week. Right? But what Bob said, and this makes total sense to me, is that people in finance and sales engineers are the ones that really do the best in action because they understand about ROI and business impact and that kind of stuff. Just from the nature of being in finance.

 

(31:48):

You look at everything from how is this going to impact the business When you make a decision on what cheap staples to buy like Noah does, he buys the least expensive staples. He's trying to have the most positive impact on the business. But it goes back to that where it's like a lot of times sellers, if you look at people that have been in sales and they have 12 different jobs and they've worked two years, that's because they're unsuccessful because they think that selling is, Hey, here's my contract. Press hard signing. I'm going to pressure you into buying something or going to trick you into buying something. It has nothing to do with that. It has to do with you being able to recognize how you can have the most positive impact on their business or help them achieve whatever that gap is. They say, Hey, I'm here today and I want to be here tomorrow, and if you can help 'em with all that stuff in between today and tomorrow, then you'll win the business.

 

Keith (32:38):

Yeah, it's interesting. The business impact question can go both ways. You can talk about, and we've talked about financial statements, a good culture, core values, a sales methodology, a management philosophy. All those things add value. Tell me about some things that you've seen either inside our organization over the years that you've tried to root out or with people that that have owned businesses, that have choices that they've made, that have devalued their business, that have actually made their business turn and go the other way. What are some things you've seen that really have hurt them when they're looking to the exit strategy and they decided either to do A or B and they've chosen wrong? What are some of those things?

 

Rickie (33:19):

Well, that kind of goes back to our original conversation. It's like how does a business owner make his business transparent to somebody that comes and looks at it? So if you go back and look at Catapult, Catapult's a billing as a services platform, compliance is a services. We have several large customers. I mean, a lot of our Catapult customers come to us because they know they're deficient in that area of compliance and billing. They say, I got to fix this because now all of a sudden my business is billing $10,000 AMOPnth or 15,000 AMOPnth. It's becoming important to me now I got to make sure it's right. And so we see that time and again where they come to us and say, Hey, help us fix this deficiency in our business so one day we can exit. And that's exactly what people do because a lot of people understand that, Hey, I'm devaluing my business by not doing this, or I'm putting myself in a position where I might get fined.

 

(34:11):

So when you look at the AXIOM, it's not all about, sometimes it's about efficiency. Some of the safety and security, it is about how do I protect my business? A lot of times, because people buy based on fear. Most of the time, I'm afraid that I'm going to get fined or I'm going to afraid my business is not going to be worth as much. So Catapult really feels that gap. That's a good example of how we look at somebody's business, say, Hey, I want to sell this business one day. Well, let me tell you how to do that. I'm going to give you a catapult, buildings and services so you don't get dinged for compliance, and then I'm going to give you a product set that's going to help you grow your revenue, and now all of a sudden, those two things grow the value of your business.

 

Keith (34:48):

Yeah, yeah. We've talked to, well, part of my job, taking a step back, part of my job responsibility is to go out and identify opportunities for us to buy other businesses. And in doing so, we have found that during the due diligence stage, there's a lot of telecom companies out there that miss the mark on very basic telecom taxation and compliance principles, and in doing so, are not candidates for us to buy. So if you

have a company out there that is just charging sales tax when they should be charging universal service fund tax

 

Rickie (35:24):

On a product, all the other state taxes, 9 1 1 and all

 

Keith (35:28):

The other things, interstate, interstate taxes, and you have a business that doesn't necessarily do that properly or they've got some bad advice, or maybe they haven't felt like they were big enough, maybe they think they're di minims from a tax standpoint, we have walked away from so many deals because of that reason us coming in there, if we were to buy them, have to jack up prices 30%, collect more from that customer in order to cover the taxes,

 

Rickie (35:52):

Run the risk of losing those customers.

 

Keith (35:53):

Losing them

 

Rickie (35:54):

Just after you bought them. Yeah,

 

Keith (35:55):

Exactly. So it devalues that business. Us having a solution that bridges that gap has been tremendous for us because that conversation can easily flip to, Hey, we can actually take care of that issue for you. Here's how we would do it. Let's use the Catapult program to be able to do that, and then all of a sudden those customers are on our platform, and when it comes time for them to want to exit, guess what? They have an extra strategy with somebody that values them even more because they're already on our platform.

 

Rickie (36:22):

Yeah, absolutely.

 

Keith (36:23):

Yeah. So it's been neat for me to see the M&A model work in that way instead of just walking away from those people and just saying, Hey, that's something, let,

 

Rickie (36:32):

Yeah, we can help you. Let me help you. We help that you with that

 

Keith (36:35):

And have a product and a solution that can actually get them there.

 

Rickie (36:38):

One of our big best resellers came from me calling people about buying their business. So they became a white label partner. They use our Catapult program, so they're in a position to where down the road if they say, Hey, we want to sell this business for us. It's just a logo change on their bill, and that's good for us long term, but it's also we've helped those people meet their goals by saying, Hey, we want to be a compliant telecom carrier and have products to sell. So that's really about it, business impact. The guy comes to you and says, Hey, I want to white label your voice platform. Well, tell me about that. What do you want to accomplish? Right? Sure. I want to grow my revenue. And I would eventually you carry that conversation on and say, Hey, what's your exit strategy there as well? I want to understand that. I know we're just talking about white label billing, but at the end of the day, what do you want to do?

 

Keith (37:26):

Let's dig into that a little further. When should a business owner start to consider the timing of an exit strategy?

 

Rickie (37:34):

When they start the business really from the beginning, that dictates what they want to do. If you want to leave it to your kids, that's a whole different thing. If you just want a lifestyle business that you're just going to roll up one day when you're done, then that's a different strategy. But if you think that one day you're going to sell that business, which almost like I said earlier, 70% of businesses are sold because somebody wants to retire, then you better be thinking about that from day one because it dictates what products you sell, how you sell 'em, what markets you're in, and a whole variety of things.

 

Keith (38:03):

Yeah. Each quarter, we look at a document that we created last year called Our Business Prospectus, and we have one for each organization.

 

Rickie (38:12):

Amanda will tell you that we've changed it a few

 

Keith (38:13):

Times. Yeah, we've changed it a few times and we're going to change it again this quarter. In fact, we're going to meet about it this week. Each one of those business prospectus documents gives a very high level but detailed view of what the organization has done is doing and will be doing from a financial standpoint. A strategy standpoint, talks about our executive team. It's some history. It talks about key strategic partners. That document has been instrumental in some of those conversations that we've had with people who have come and approached us and said, Hey, we love what you're doing. We would like to invest in you. So that prospectus document is really the key to those conversations. If we can get somebody to help to understand our business quicker, then those conversations are much more fruitful. Talk to me about,

 

Rickie (39:04):

Yeah, that's about that a little bit. One of the reasons we did that is once you start trying to understand the private equity business, investment banker business and all that stuff, you realize quickly is a lot of people want to just charge you money to build that document. So don't tell Amanda what people charge to build that document, but it's like 40 grand. So if you think about it is nobody knows your business better than you do. So build your own document, do your own research, make your own conversations, because you and I've talked to literally, we probably know most of the major private equity people in the country or have been exposed to 'em in some way or another. Doesn't mean we're a fit for 'em, but at least at this point we're having a conversation, and you and I had this conversation with somebody the other day that we've known for a long time and we still don't feel like they understand our business from the comments that they make on the investment banker side.

 

(39:53):

So I think it's important for you to do your own work, have your own conversations with private equity and start that process really from day one. I've been doing that for a long time, and that way when it does come time for you to hire somebody, you make sure you hire the right person that understands your business because there's nothing worse than hiring somebody to help you sell your business that doesn't understand it. It's going to cost you money. You're going to pay a lot of money to these people to do this. It's all for building your, building the document, building the data vault for all your finances and stuff, and then they're going to take a percentage of whatever they sell, just like any seller, right? They're going to take a percentage of that. So if you can do it yourself and go hire a really smart lawyer to help you negotiate, that's one way of doing it.

 

(40:43):

But I recommend everybody go out and do the work themselves first and then go find the investment banker. Don't let the investment banker do it for you. Understand who's interested in your business. Spend time talking to people in your industry and understand what it's like because you're going to get people coming at you left and offering you stuff, and you may, and I guarantee anybody trying to buy your business wants to pay you a lot less than it's worth because they got to turn around and sell it. Especially if you look at private equity, their job is to, usually you're going to be talking to a smaller fund that wants to grow the business or roll it up with other businesses and then sell it to a bigger fund.

 

Keith (41:17):

So now that we painted a picture of how to find the right partners to help go to market for a potential exit strategy, we've talked about the right lawyer, we talked about potentially an investment banker. Sometimes it takes a broker to get there. Oftentimes businesses could be very similar, but they have different goals with how they want to partner with somebody to finally make an exit. It could be private equity, it could be a home office that makes more sense for them. It could be a strategic roll up. It could just be a single investor that just wants to merge two businesses together. For us, we have kind of come to a conclusion that we like one or two paths within that, right? Some don't make sense for us if we want to do something from an investment standpoint when we're looking at trying to grow the business and buying revenue, trying to fund that right partner. It's been a really need exercise for us to try to understand what waters to play in and what waters to stay away from. Tell me a little bit about what your mindset is on finding that right partner and ultimately getting to maybe that second bite of the apple that could potentially be worth more than the first.

 

Rickie (42:29):

Yeah, so I think the strategy you have to think about is do you have a bunch of people you care about? Strategic purchase means that somebody just comes, buys your business because they want to grow their revenue, and you may not necessarily keep everybody around. They may transition everybody. So you have to be careful there. It depends on, we've been in business for 20 years and we have people who've been with us for 20 years. So those considerations are different. And then we have the software As and services business. The AMOP business people look at that differently. So is it family office? Is it private equity? Is it venture capital? We're way past the venture capital point, so that's not a consideration for us, but private equity guys will either, if they don't look at your business as a platform, they just want to find some other people to bolt you together with and grow that.

 

(43:16):

So that may not be a fit for you, but ultimately at the end of the day, they'll want you to stay in, help 'em run the business and get what they call the second buy of the apple. So you have to be careful of is who you're going to business with. So if it's a rollup, for example, how well are the other people doing that are already in the rollup? Do they have a good sales strategy just because they're going to righteous some money and say, Hey, we'll keep 25% and we'll grow this and sell it. Again, you need to make sure that they prove to you now it becomes your responsibility to have them prove to you that they can do what they say they can do.

 

Keith (43:48):

Yeah, you're a dog sled. You're

 

Rickie (43:49):

Hitting

 

Keith (43:50):

Yourself to other

 

Rickie (43:50):

People's, right? You're only as

 

Keith (43:52):

Good as the worst dog on

 

Rickie (43:53):

That dog. Exactly. So you see that a lot and don't, it's really surprising to me because asked that question to some people, it's like, well, tell me how everybody else is doing. I was like, nobody's ever asked that question. It's like, that doesn't make sense. If you're going to go into business with other people, you better know absolutely how good they are at doing that. So that was interesting. If you look at family offices, family offices typically don't look, they don't have to have a $20 million business. They may want to do a 5 million business, 10 million beverages or look at as a software as a services. So you really need to understand what the magic number is. I know years ago, everybody was like, when you get to $10 million, that's the magic number. Right now, the magic number is $20 million, so the bar moved. But when you look at software, if you're in the software business or managed services, they tend to look at that differently.

 

(44:41):

And so I've seen a lot of really small ones get bought, but usually those are strategic purchases. And so you get really around $20 million. You're never going to have private equity. You're really strategic or you maybe be part of a rollup or something like that. So it really is complicated and complex, and if you want to stay in and get a bigger bite, because a lot of people will find that they'll sell their business and then later on they'll get, they'll actually, the second check they get will even be bigger, but you got to make sure that you're going into business with the right people.

 

Keith (45:15):

Yeah, it's a choose your own adventure model as well. I mean, you mentioned it off the rip, do you have a platform and do you want that platform to survive after you exit? If the answer is yes, and you want to maintain the employee base and then maintain the identity and the branding of the business, and then hopefully, potentially whoever you bring in as a strategic investment partner sees you as that platform, then they could bolt on other things to you that grows the equity value tremendously. And then that gets you to the second buy the Apple if it's a home office and they want to do buy and hold,

 

Rickie (45:46):

And that goes back to our earlier conversation about making sure that people understand your business, right? Making it transparent and telling your own story by doing your own prospectus. That's the thing that really is the key is you've got to own that story, and you've got to manage that story and tell that story. Don't let somebody come in and look at your business and try to tell you what it is. Make sure that you're already talking about that from day one. It's like, this is who we think we are. This is where our value is, and own that conversation. Otherwise, you're going to get drug along and you're not going to get as much money.

 

Keith (46:16):

And if you're entertaining those conversations with potential investors, understanding what their model is right off the bat really helps to cut down on needless conversations or time spent on due diligence, and you get the legal and you're like, wait a second, this isn't the structure

 

Rickie (46:33):

That I want to do.

 

Keith (46:33):

That's not what I want. It really saves a lot of time if you understand those partners that you're entertaining or potential partners that you're entertaining. I mean, I weed through those quite a bit. You used to have to weed through all of them,

 

Rickie (46:44):

And then I a sucker to do that for me

 

Keith (46:46):

Right now. But

 

Rickie (46:47):

Really, if you think about it, it's the biggest sell you'll ever make, right? Yeah. So why wouldn't you spend as much time as you would selling just a regular customer? Most people, a lot of people, I really get the impression. They don't really spend as much time thinking about. The largest deal they'll ever make is the one where they sell their business. So you need to make sure that you're an expert on all the things associated with selling a business. Don't rely on other people. I mean, eventually you'll have to hire some advisors and stuff, but if you're not well versed in that, you're going to get taken advantage of and then you may never even know that it happened.

 

Keith (47:18):

Yeah, there's a lot of homework that needs to be done, a lot of time and consideration that needs to be done in order for you to have those right conversations and to get in front of the right people. One of my favorite parts about doing what I do here is helping other businesses grow their equity value. The catapult side of our business is one of the fastest growing segments of our business. That story is all about let us help you build. Let us help you. We will teach you. We will consult with you on how to get where we've gotten so that when you're ready, you're able to have a nice, clean, ready package and then you can go and choose whatever strategic investor you want or whatever exit strategies you want to get. Do you want to roll up? Yeah. Is that fine with you?

 

(48:05):

Yeah. I got two or three employees. Let's go and roll this up. Or I've got 50 employees and we're a platform Bolt some other things onto me. Or is it something more of like a merger, two like businesses come together and really grow that value? It's really choose your own adventure, and that's what's really cool, but it is my favorite thing to do, which is to talk to new resellers or folks that want to get into that game and have us help them build those strategies. What's fun about that is some of those people buy a bunch of our products and solutions, other ones don't, and that's fine and we can grow with them in different ways. But I love that teaching and building side, and we've positioned ourselves in industry to be able to do that, and it's really based on the story that we've already lived, which is a tremendous value to us because we tell that story and they're like, Hey, I want to be like you.

 

Rickie (48:53):

Yeah, well, we're teaching people to do what we did. Right. That's exactly right. When we did it, it was very, very expensive and much harder to do. Now it's easier unless expensive, but we spend our time teaching people how to sell mobility or teaching 'em how to sell white label voice or teaching 'em how to do billing and compliance correctly, or back offices as a service where we've got one right now we're working on, we're helping 'em fix their P & L to make their P & L transparent. I mean, it's not really that we're accountants, but we are people that understand the positive impact and that can have on your business. So we're helping people do that. That's the gap we're filling,

 

Keith (49:24):

Right? Yeah. The barrier to entry to become a carrier now is much lower with these solutions than it was when we became a carrier 15, 20 years ago. It cost a ton of money and a ton of time, and you had to redo your whole business with things like Catapult in our back Office of service solution, helping them build that and then give them the time to focus on growing their business through sales and allowing us to help them do the other things that we've been successful in and know that it's going to be done right, because gotten here is a lot of fun, and those conversations, having those strategic conversations with those customers, those resellers, and teaching them what it means to grow, that it's helping us grow our business, and it's been a huge value add to them, but also to us. So I've really enjoyed this conversation.

 

Rickie (50:16):

Yeah, it's been great fun. We should do this again sometime. Not in an airplane.

 

Keith (50:19):

I should invite you again on the podcast, so thank you so much for your time, Rickie. It's been fun to be a part of this and watch us grow. I can't wait to take the next steps that we're doing as an organization, but also it's really fun to help other organizations take these next steps. Hopefully we've shared something today that'll help somebody on their journey as well. Thanks. Thank you.