Tim Fargo, CEO, Social Jukebox
Tim Fargo: If at First You Don’t Succeed, Come out Swinging
The story of Tweet Jukebox’s Tim Fargo, from bankruptcy to social media success.
You don’t spend 30 years in business without getting into a few scrapes. But as anyone who has seen themselves through hard times will tell you, it’s the way you bounce back that can prove the difference between your ultimate success or failure.
Tim Fargo knows a little about this brand of courage. Bankrupt in 1993 after running his up-and-coming event marketing company aground, Fargo might have been forgiven for retiring his entrepreneurial aspirations and bunkering down in a safe desk job.
Instead, he dusted himself off, and within three years had launched his second company, Omega Insurance Services. It sold for $20 million in 2003. Since then, Fargo has gone on to add author, keynote speaker, and angel investor to his resume, as well as founder of popular social media tool Tweet Jukebox.
So how did this business chameleon take a poor early hand and turn it into a winner? By taking the game on with a wizened, more calculated approach, plus plenty of grunt work.
Don’t be a Hero
The thing that strikes you, hearing Fargo talk, is how candid he is about the event that almost derailed his business career. While hindsight offers the benefit of 20/20 vision, there is a humility in the way Fargo recalls the experience that shows he picked up a lot of character from the experience.
Put bluntly, Fargo attributes the failure of his first business to a mixture of immaturity and ego, describing himself as a “young guy chasing girls, landing deals and spending the money before it hit the bank.”
Today, having learned the lesson that dollars shouldn’t be counted until they are in hand, Fargo is much more fiscally prudent. But back then, he recalls being quick to drink his own champagne – literally and figuratively.
“I was trying to be a big shot. I would think ‘Hey we scored a big deal, let’s party,’” Fargo admits. “The business was profitable, but I thought way more of myself than my income was indicating. The math didn’t add up and it caught up to me.”
It is undoubtedly a familiar narrative for some entrepreneurs—getting punch drunk on the promise of zeroes in the bank, and not showing the kind of patience required to build a sustainable business.
When you’re trying to get a company off the ground, Fargo says it’s easy to feel each high and low intensely, because you’re often riding pretty close to the line, pushing yourself and your resources to the limit. But in his experience, a level-headed approach is necessary to keep things on an even keel, and to create the kind of steady momentum that fuels long-term growth.
“Try not to overshoot what you feel like is going on with your business, either downward or upward. You’re going to have highs but they’re not guaranteed going to last, you have to work for it. Or just because you’ve had a bit of bad luck, it doesn’t meant that’s going to last either. Take the feedback loop from your bad luck and use it for something, but don’t grind yourself into dust over it.”
At least for Fargo, after a period of soul searching, during which he entertained the idea of becoming an academic, the solution was to translate this early failure into lessons he could take with him on the journey.
“It was pretty gut-wrenching at the time, but you can do two things with moments like that. You can look at it like it’s your identity or you can see it as an event that marks a turning point. I chose the latter. A lot of what I learned by going broke really helped me out, in terms of managing cash flow and keeping a closer eye on things.”
Getting Back on the Horse
Moving on from the bankruptcy, Fargo landed a senior management role with an insurance fraud investigative company before branching out on his own with Omega. It wasn’t so much that Fargo had been particularly taken by the industry, but his commercial acumen told him that there was a significant gap in the market—one he was only too happy to fill.
With the industry by and large made up of what Fargo describes as mom-and-pop operations, it was clear to him that a better resourced, more serious player could thrive. They had but one major competitor, whose professional reputation was patchy. Fargo knew that if he could put teams of quality investigators in the field, the insurance companies would sit up and take notice, and they did.
Fargo had also earmarked Omega as a saleable business very early on. This allowed Omega to operate with a deliberate and very aggressive growth mindset, which naturally brought with several operational challenges.
“Growth is a great aphrodisiac for a business, because people are interested in it. It shows that things are advancing and there are opportunities. If you want to have an exit, the management of your business can also be somewhat different. High growth is great, but it’s like driving fast, everything happens really quickly and you’ve got to be able to react.”
Omega went through aggressive growth cycles, typically increasing sales, accounts, and headcount by 50% each time, before slowing growth for short periods to allow the business to catch its breath.
“There were times when we had so many new people in the field, who didn’t really know what was going on, that we just had to pull the throttle back.”
In a people-based business like Omega, the other big challenge was finding enough bodies to do the work that was pouring in. Together with the ever-present challenge to maintain cash flow, Fargo and his team had their work cut out to continuously deliver at the high standards they had set for themselves, and to grow the kind of value into the business that would be needed to sell it.
To Market, to Market
After six years in operation, Fargo saw that Omega was in a strong, stable enough position to attract a serious buyer. Rather than wait for the phone to ring, he took the company to market.
The hardest part of selling his business? Keeping the sale a secret from 300 staff who were professionally trained to dig secrets up.
“It was actually pretty funny, trying to keep information from a group of people who are inherently curious! We set up a war room on a separate floor and there was a lot of slinking downstairs. But we did manage to keep it a secret until we closed. Ultimately, we had a window where there weren’t a heap of sophisticated operators around, and I knew somebody else was going to stumble into the market soon.”
Timing was everything, according to Fargo, who strongly advises against advertising your business if it’s struggling in any way. If you do go to market while there are clear difficulties, be prepared to be “skinned and filleted,” Fargo warns.
Finding the right representation, in terms of an investment bank, is also key. Aim too high, and they’re unlikely to be interested in you. Too low, and you risk being misrepresented.
“People think they want to go with Goldman Sachs, but those guys don’t get out of bed for $20 million! So go smaller, but not too much smaller. Go with somebody who has the ability to extract the proper value of your business.”
Rockin’ the Jukebox
Unsurprisingly, Fargo wasn’t content to sit on the sidelines after the sale of Omega. After penning two books, Alphabet Success and Claimants, Lies and Videotape, Fargo turned to Twitter to spread his message and drum up sales. Unsatisfied with the available options for content management, Fargo asked a friend to whip him up a little app to his own liking.
The entrepreneurial brain was still ticking, and it quickly became apparent that Fargo had a marketable product on his hands. In the 11 months since Tweet Jukebox launched, the site has attracted 26,000 users, with Fargo recently rolling out a series of paid plans while developing similar capabilities for other social media sites. A rebrand to Social Jukebox is not too far on the horizon.
The tool works just as the name suggests. Users preload content into a series of repositories called jukeboxes, separating them based on their content type or theme. The user then sets a frequency for each jukebox, and it spins out the content like tracks.
“The thing I’m very fond of saying, from a follower standpoint on Twitter, is nobody cares how the content got there. They don’t care if it was delivered on a white horse by a guy who has written it on a clay tablet. They only care if it’s relevant to them, interesting, or they’d like to share it. To me, that’s the ultimate reason to get this stuff automated.”
In some ways, Fargo finds the Twitterverse amusing, particularly the emphasis some experts place on theory. Trying to pinpoint the best time to tweet is especially flawed, according to Fargo, as it presupposes that your followers are sitting around, patiently waiting for you to say something. Rather, he suggests the best time to reach out is when anybody who cares about what you do is paying attention.
“You’re not buying a Super Bowl ad. There’s no transaction cost. So put your content out more frequently so people will find it. The beauty of Tweet Jukebox is you can use the extra time to make better content, either through creation or curation, and then get the best bang for your social buck by actually engaging the people who reach out to you.”
Wise words from someone who has done his fair share of laps around the block.
Tim Fargo’s Top 3 Business Must-Dos
- Inject some Zen into your business thinking. You will have some highs and lows when it comes to business, but it’s best not to focus on either. Keep your eyes on the prize. Highs and lows are not guaranteed to last—use each as a feedback loop to keep you growing.
- Beware of very fast growth. Fast growth is something that every business strives for, but doesn’t prepare for. The faster the growth, the faster you’ll need to react and adapt. Real challenges can come with fast growth, so be prepared for some stress in tackling them.
- Be patient when it comes to selling your business. Before you start advertising that your business is for sale, make sure it is not struggling in any way. If you jump into the market too soon, prepare to be “skinned and filleted,” as Fargo warns.
- What it’s like to file for bankruptcy and how to recover from it
- The do’s and dont’s of cash flow management
- How to keep yourself in check and on the right track when starting a business
- The key steps to growing your business rapidly
- What you can learn from going broke
Full Transcript of Podcast with Tim Fargo
Nathan: What up founders, startup entrepreneurs and business owners. My name is Nathan Chan, and I’m your host coming to you live from Melbourne Australia. This is the “Foundr Podcast.” I had to break up that intro because it didn’t feel right, but I had to say it this way because I’m batching all of these intros to every single podcast interview because I’m just about to go overseas soon to the Philippines which is really, really exciting. I’m gonna take a little bit of a holiday, some much needed R&R. I’ve been working so ridiculously hard. And I’m gonna do a talk here as well. And I’m really really excited.
Anyways, about today’s guest. His name is Tim Fargo, and he’s the founder of Tweet Jukebox. And in this interview, he shares with us how he sold his last company for over $20 million, the process that he went through to sell that company, why he sold it, how companies are valued. And we really go in-depth around a lot of things that I’ve never spoke about on any episodes before. And it’s an amazing conversation with Tim. He was very very open. He even talks about how one of his first businesses actually collapsed and how he went bankrupt and the things you need to avoid as a young and early stage startup founder to make sure that you don’t fall into the same traps as he did.
I know you guys are gonna get a lot of value from this episode. So, look, that’s it for me. I hope you have a great day. Thank you so much for taking the time to listen to this interview, and I will speak to you soon. Now let’s jump to the show.
Thank you so much for taking the time to speak with me today. We’ve had this one scheduled for some time now. So welcome.
Tim: Nathan, thanks so much for having me on. I really really appreciate it. I’m a fan of your work so it’s great to be here.
Nathan: Well, thank you so much. The honor is all mine. And I guess the first question I’d like to ask you the way I ask everyone that comes on is, how did you get your job?
Tim: Well, the job I have now is it’s a complete accident. Tweet Jukebox, which is my tweetjukebox.com which is my business, it started out I had a book I was trying to sell starting in July 2013. I came out with an Amazon ebook and I learned what a lot of people learn when they come out with a book: nobody cares because there’s just so much. There’s so much stuff out there, right? So I was trying to find a way to give myself some visibility and my preferred channel after poking around a bit was Twitter. And what I quickly found was that I could get attention and I could draw people to what I was doing. The problem was there was a lot of work involved and even if you scheduled stuff in advance, it was still an upload. It was still managing content in a series of spreadsheets. And from my perspective, that was kind of a waste of time.
So anyhow, fast forward, I contacted a friend of mine. I’m like, “This is ridiculous. There’s gotta be a better way.” And because I had a business previously and I have a little bit of money to do something like this, I said, “Look, I really need an app to help me out because I can’t be wasting my time worrying about this kind of clerical stuff. And it’s, you know, it seems ripe for automation.” So we automated it for me. And then people started asking me about it. And after roughly a year of using it…and it’ll be actually a year next month that we rolled it out and let people start signing up for it.
And then in November, we actually started the paid model. So I didn’t even really know like what would happen with it. When we pushed it out, you know, there’s part of you that thinks, “Wow, this could be really great.” And another part is like, “Nobody’s gonna care. Nobody’s gonna be interested.” But we’ve signed up 26,000 active users now. So it’s been, you know, it’s been a, you know, a great 11 months. You know, I don’t…I’m not really big on like saying, “Hey, we’re gonna crush it.” You know, I’m happy every time we get a new person and every time we try to help solve somebody’s problem and, you know, I have my own particular aspirations for this particular business. So…but that’s how I got the job I got now.
Nathan: Awesome. And I know that you exited on…I don’t know if it was your first business but can you tell us about other businesses that you’ve launched and stuffs you’ve done?
Tim: Well, you know, I kind of bounced around when I was younger and then I’d had a business that was doing okay. But the problem was, this is when I was 29, and my ego was a lot bigger than the quality of my business. So I managed to go personally bankrupt running an event marketing business in Florida. And I actually filed for bankruptcy in California. I kind of moved. I guess I was licking my wounds or something. And it was a great cautionary tale for me. Like I say, because, you know, the business was profitable. It was making money but I just thought way more of myself than my income would have been indicating. And, you know, the math didn’t add up and it caught up to me.
So, you know, if you fast forward a few years from then, I sort of took the lessons from that and I ended up in the insurance investigation business which I started in ’96. And that was a business…it’s interesting because, you know, there’s always this big argument about, you know, do you follow your passion or do you follow something where there’s good economics? And you don’t have necessarily a passion for investigations, but it was certainly a business that was well-positioned to have a business person come in because it was a very…it’s kind of a…there was a lot of mom and pop kind of operations in the private investigative business and for insurance companies.
So I started the business in ’96 in an extra bedroom and then I sold it not quite seven years later for $20 million to a public company in the same city I was in actually. And that…I mean it was a great kind of alchemy of…I mean a lot of what I learned by going broke really helped me out because, you know, just managing the cash for the business and keeping a real close eye on everything which previously I probably wouldn’t have done. So that was…I mean that was kind of…that was… Well, I mean I would have kept an eye on it but not in the way…I guess having a bit of a sales background or upbringing or whatever you wanna call it, you know. It was always just kind of like, “Oh, I’ll land another deal. You know, we’ll grow our way out of it.” And I’m much more fiscally prudent now than I was back then and certainly was during the course of renting Omega which was the business I sold.
Nathan: Okay. I see and, you know, you talked about…you said something like key lessons when you had to go bankrupt. Like can you take me back? Because I’m really curious, like you said that you guys were profitable but, you know, you…and I don’t mean to be rude, but you said you had a really big ego and maybe like, you know, be blindsided because of your ego. You know, what exactly happened? Like if you were profitable, like how did you fall into all this debt and you had to file for bankruptcy?
Tim: Young guy, chasing girls, landed decent deals, spending the money before it hit the bank. And I think that’s, you know…like you get a nice client, right? So you go out and you land, you know, you land a book of business. So let’s say it’s a $25,000 deal or whatever. So I’d land something like that and it’s like my mindset today would be when you’ve collected the money then you know you got it. Until then, it’s all speculation. My mentality back then was, “Hey, man, I just scored a great deal. Let’s party.” And, you know, that…I mean you do that enough times and I kept thinking that I’d manage to weave my way out of it. And, you know, I was trying to be…I mean I was really trying to be a big shot, you know. And if I had just been a bit more reserved, I probably would have weathered the storm. But I was a little busy kinda believing my own press releases.
Nathan: Okay. I see, I see. And like that is like something that happens to a lot of young people. And sometimes, you know, you have to I guess keep yourself in check. What advice would you have to people to keep themselves in check once you get, you know, these wins and you start building this momentum and everyone starts to tell you’re so good? And you’re landing these big deals, but then at the same time you’ve got big overheads or you’re spending just as much? Because that does sound like a familiar kind of narrative.
Tim: Well, you know, I actually I was just…I was on Angel List, angel.co or whatever it is, kind of that Angel funding site, and I was looking around at some different companies. And I was reading a founder’s bio and he said, “Failure is my bitch.” And I thought, “Dude, you are so setting yourself up for exactly what I did,” because…and I really…I mean that probably…I mean I can identify with that remark because I think that’s a little bit what I thought. And, you know, probably I would say something that I have kind of adopted as a little bit of a mindset is that things are never probably as bad as you think. And equally, things are probably never as great. Like when, you know, when you kind of go through these up and down cycles, like when you’re euphoric it’s probably not as like remarkably awesome as you imagine it.
You landed a deal and that’s great. But there’s a lot of work to do. I mean, you know, in the event marketing business getting a sale, like signing a deal basically just means somebody’s contracted you to do a lot of work for them. It’s not, you know, it’s not a software business where it’s like, “Hey, well, we’ve already written all that so, you know, now there’s nothing to do.” I mean that’s the beginning of a process.
So getting excited about it was kind of dumb. And equally, you know, I’d say you can kind of, you know, air the other way when people have a little bit of failure and like, “Oh, this will never work.” But, you know, it’s usually neither the high nor the low or as, you know, you can’t spend a lot of time extrapolating downward or upward of a particular peak. It’s like try to keep it…if we’re talking about the advice, I’d say try not to overshoot a downward or upward what you feel like’s going on with your business because you’re gonna have highs but they’re not guaranteed to last. You still gotta work for it, right? And just because you’ve had a little bit of bad luck doesn’t mean that’s gonna last either. You need to take the feedback loop off your bad luck or whatever you wanna call it and use that for something.
But, you know, you don’t need to like grind yourself into dust over it and say, “Oh, I’ll never be able to make this work,” because that’s…I think that’s the other place people kind of like a loop out is they get a little bit of too many times negative feedback and then they also, they kind of implode in a different way.
Nathan: No I agree. And you’ve come out the other end of it and you’ve really, you know, grown from that adversity. I have to touch on this a little more because I’m just really curious. I don’t think I’ve ever spoken to someone that’s had to file for bankruptcy, so I find this whole concept fascinating just around the fact that I guess, you know, your debts get waived. But I’d imagine they’d be a great deal of…and I hope you don’t mind. Are you open to talking about this a little more?
Tim: Yeah, sure, man. Go for it. No problem.
Nathan: You know, just in society that is…I think, you know, people listening to this as entrepreneurs I think that is fall for anyone. That is like we’re all scared of, you know, having no money left and having to file for bankruptcy. That is almost to the point where people could call that the ultimate failure. You know, how were you feeling at the time? Did that cause a lot of shame and…because I know in America this is something culturally that’s quite accepted and stuff. So I’m really curious. Like what were you feeling at the time and take us back to that moment where you had to actually file.
Tim: You know, I think being in the courthouse when you have to kind of present the judge with your list of assets and your list of debts, because that’s what makes it real… Up until then, it’s kind of conceptual. I mean of course you’re embarrassed, but it’s not like you have to wear…you know, you don’t have to wear a sign or be like in the stockade in the town square or anything. So it’s not necessarily apparent to everyone what’s happening to you. But when you go into this courtroom and, you know, I’ve described it as being…and I don’t know if you have these kind of talk shows in Australia. But, you know, like this kind of Star Wars café kind of situation where there’s a lot of people in there you’re going. You know, you might have thought it was really cute. But look at your colleagues or your kind of equals today, you know. These are the people that you’re kind of equivalent to right now.
So I mean there’s this sort of shame of doing it and then you kinda add on to that. I mean in the states it’s great. You get your debts waived but you also have…I mean you’ve got a pretty big road to hoe, a pretty big process to go through to rebuild your credit. You know, telling banks that you filed bankruptcy is like, you know, not necessarily a great way to get a date with your banker. “By the way, I don’t pay people back. That’s a good one.” So I mean it was, you know, it felt pretty awful. It’s a long time ago now. I mean you know it was ’91 so it’s a fair bit in the past, but it was pretty gut-wrenching at the time.
But, you know, you can do two things with moments like that. I mean you can look at it and decide that this is your identity or you can look at it as an event that can mark a turning point. And I chose the latter.
Nathan: What about friends and family? Did you keep it to yourself or just…
Tim: No, I was open about it. I’ve never been…I guess I just don’t operate in that kind of wavelength of…I mean I didn’t…you know, it wasn’t like I boasted about it obviously, but I didn’t hide it either.
Nathan: So what happened next? You know, because you said you immediately started your next company or what happened next? Did you have to get a job? Like tell me what happened next.
Tim: Well, what I thought was gonna happen is that I was gonna become an academic. And so I kind of put things in place for I thought, “Okay, that was a mistake. But now I’ll find something that’s a little more stable.” I had pretty good grades in university so I was like, “Okay, I got a Ph.D. And then…in Consumer Psychology and then, you know, I’ll use that to be an academic and live a nice kind of stable life.”
But after a fairly brief period of time working as a Ph.D. student, the workload is insane. And honestly, I mean I say this as an entrepreneur, I went to my doctoral advisor after six months and I said, “Chris, if I work this hard in the private sector I won’t need to worry about being tenured. I’ll be rich. I’ll be, you know…” I mean, and I was wrong by like six months. And it was honestly…going and starting a business and all the other things that…I mean for me and maybe only for me, but for me, it was easier than this process of just getting buried in paperwork and reading assignments.
And anyhow, I thought I was gonna be an academic but that didn’t happen. So I left and I ended up going into business with a couple other guys that I knew in the investigation business, and this kind of led to my business obviously. And when I started with them it was a six-person business and I was like, “Okay, I was gonna be in their systems and finance guy.” So, you know, I’d left this doctoral program to do that. So I go to work there. And like I say, I mean I’ve kind of got a little bit of an IT background, mostly finance, and not very good at it though apparently because I filed bankruptcy. But, anyway…
So we start growing really fast. And in fairly short order, the org chart starts to change. So I went from being IT and finance to IT, finance and operations and then IT, finance, operations and sales. And so, you know, after about a year there wasn’t a lot of the org chart that wasn’t under me. And that was fine with me, but I wanted to be camped for it, you know, both in terms of shares which I had some but not a lot. And my pay was not particularly great. So, you know, we danced around with this for a bit, and then I finally just said, “You know, this is ridiculous. I mean I’m doing the work.” I mean I would have been fine with making an arrangement with them, but they wouldn’t budge at all.
So I ended up leaving and starting Omega which is the company I ended up selling. So that’s…I mean that’s kind of the transition. I filed bankruptcy. I tried to be a doctoral student. I worked for some friends, now not friends. But it happened. I mean I tried to make it, you know, amicable by, you know, like just negotiating, but they just didn’t wanna hear about it so…
Nathan: Okay, interesting. And, you know, you said you started working on Omega. Like what caused that rapid growth? What, you know, to sell your business for 20 million? Were you looking to sell or this public company approached you? How did that all come about?
Tim: Well, the growth I mean was pretty deliberate. Actually, you know, barring a little bit from an interview of yours I just listened to with Darrell that you used to work with at Intrepid, he was talking about, you know, growth. Growth is a great aphrodisiac for a business because people are, you know, interested in that. I mean nobody wants to go work at Hanks Plumbing that’s had seven people working there for the last 20 years. It’s like, you know, where you sit and have to wait for somebody to finally decide they wanna do something else if you wanna get promoted. You know, growth is great because it shows people that there’s something happening and that there’s possibilities for advancement. So that was part of it.
And over time, I also thought, you know, if we can have really like high level growth, then we have an opportunity to, you know…I mean people will pay for that. If you wanna have an exit, you know, I’d say the management of the business could be somewhat different than if you just want a steady status because high growth is great. And we definitely got comped for it. But there’s a whole host of issues that pop up when you’re trying to go really fast in any business because it’s like driving fast. Everything happens really quickly, and you’ve gotta be able to react. If you’re going slower, things are a little bit more easy.
But part of the reason we were able to grow so quickly is, you know, it was. It was mostly mom and pop kind of, you know, 10-person, 15-person investigative firms and we were seeking from the onset to build a nationwide footprint which was fairly unique. And we had one really big competitor, but they weren’t really known as being particularly adept as an investigative firm which also helped us because we were very kind of operationally focused on delivering good work product from an investigative standpoint.
So if I’m honest, the expression, “In the land of the blind, the one eyed man is king,” would pretty much describe me. I mean I wouldn’t say that was my amazing business acumen. It was just a lot of the people that were in the same business just weren’t that kind of sophisticated in operating. So it helped me.
Nathan: You said issues with growth. I’m curious, you know, what issues did you have with your business growing so fast?
Tim: Well, because that business, you know, unlike let’s say like a technology business or a business where, you know, or publishing which is kind of your business, where there’s a lot of leveraging of an existing platform across a broader audience. In, you know, for Omega Insurance Services which was my business, I mean to generate revenue required people. You know, you needed…to bill time you needed more investigators. So I mean probably the biggest bottleneck was getting enough investigators quickly enough and training them, you know, because it’s not only a matter of just putting people in a slot. It’s a matter of putting someone in a position that can deliver a quality work product for your client.
So I mean we went into psychometric testing. We did all kinds of pretty brutal interviewing techniques like you do a ride along on an investigation. And we would deliberately leave the air conditioning off when it was 35 degrees out, Celsius, just to see if people really wanted the job because what you don’t want is you didn’t want someone…a lot of people think they wanna be an investigator, right? They think, “Oh my god, it would be so cool.”
Nathan: It could be so much fun.
Tim: And there’s parts of it that are remarkably fun. But there’s a lot of it that’s just sitting around waiting in a really uncomfortable car. So it’s getting people in tune with that. So I mean that’s probably the biggest bottleneck was that. And then you add to that because we never took any funding. So cash flow management was also pretty huge because we grew receivables really fast, right? But, you know, receivables are awesome once you’ve collected them.
Nathan: Let’s talk about banks. Let’s talk about, you know, books.
Tim: Exactly. So I mean so that was another thing was keeping that because your work in process is always people who were getting paid every couple of weeks, right? So you needed to keep the cash flow moving to be able to accommodate that. So that was probably the other like really sticky piece of the business is really staying on top of collections because towards the…I mean when I was selling, we had over $2 million in receivables. And it’s just a lot of stuff to collect and insurance companies aren’t necessarily known for being hyper fast payers. But a lot of little things like that. And I guess to me building a business like that that’s growing really quick and has a lot of moving parts is like trying to like race around a track and, you know, like, you know, like changing the windshield washers where you’re going 200 miles an hour or something. It’s like it’s crazy some of this stuff.
And I mean what we typically did was we’d grow like say by 50%, and we’d have like…we’d get a lot of new sales. We’d get a lot of new accounts. And, you know, let’s say we’ve gone from a million or two million to say a run rate of three. We’d kind of slow down just a little bit to kind of get our feet under us again because at least for me, there’d be times where we had so many new people in the field doing investigations, you know, just new workers in the company that it just felt like we just had a lot of people that had no idea what was going on.
So every now and then we had to kind of pull the throttle back. But we still grew. I mean we went from nothing…we sold for a one time multiple revenue. So we were at a 20 million run rate when we sold out. Anyhow, I mean people base business…I mean the biggest constraint is just getting bodies in the door and making sure that they’re good at what they do, you know, in a particular case of that business.
Nathan: Okay I see. So it sounds like, you know, a lot of people. How many staff do you have?
Tim: I wanna say that when we sold we were probably like 310 to 320, 310 to 320 people. A lot of people. We started using name tags because I couldn’t remember who everybody was.
Nathan: Wow. That’s crazy. And, you know, you said something that struck me. You said that when you’re running a business to sell it as opposed to running it not to sell is a totally different kind of strategy. Like did you initially know that you were gonna run that business to sell it?
Tim: I had a pretty strong feeling because I saw it as an opportunity that, you know…I mean like when you have a window where there aren’t a lot of sophisticated operations, I mean eventually somebody is gonna stumble…somebody else is gonna stumble into the market too, right? So you don’t really wanna wait for them to show up. And then also I mean I really…you know, I love doing it. I work with some awesome people. It was great. But I couldn’t tell you like I got up every day and went, “Oh man, I can’t wait to see what we investigate today.” It was just a business. It was just a business that needed like there were certain metrics that need to be met, certain things that need to be done. So pretty much from the beginning I wanted to get rid of it.
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All right, guys. Now let’s jump back into the show. When it comes to I guess operating the business, do you run it from…I guess when, you know, you own a high growth trajectory, do you run it from just a breakeven, like you’d look…like if you’re breaking even that’s good, and then you just keep hiring more people and try and, you know, just trying grow as fast as possible in terms of a cash flow perspective? Do you run it like look to run at breakeven or, you know, from a financial, I’m just curious, you know, what’s the thinking there?
Tim: Well, we were profitable. But I mean we were probably cash flow neutral. I mean we hired people honestly because we were pretty selective in who we put in the street as investigators. We pretty much hired people as fast as we could find them. My attitude was if you find somebody you think’s gonna be good, hire them and we’ll figure out the rest later because the percent of people that you hire relative the number of people we interviewed was really low. And it’s a fairly high turnover business even when you put a lot of barriers like the interviewing process. So if we found somebody, we brought him in. So we kind of grew as fast as a cash flow would allow us to.
And we had levers that we would use where…I mean my controller used to laugh at me because it was like we’d get the bill from our like our cell bill, you know, which would say is 20,000 bucks or something, right? And then I would put it on an American Express card on the last day before it was due, right? And then giving us another 30 days. And we did that almost with everything. We would try to find every single way we could to stretch terms, not with our interior people. Of course, they always got paid on time. But anything we could do which wouldn’t impact a relationship with a vendor, we would stretch anything we could cash flow wise.
Nathan: So you could grow faster.
Tim: Right. Well, it’s free financing. So, you know, which is nice to find.
Tim: No interest rate and no equity partners.
Nathan: Okay. Awesome. Look, one last question on that business because I find this stuff really really interesting. And I’ve never really talked to anybody in-depth about this stuff is when it came the time to sell, were you actively looking for buyers or they came to you or are you just… You kind of touched on this but you said like you guys were like the number two and you kind of people…you had people knocking on your door in and you were just waiting for the right offer?
Tim: No, we went to market. I hired a good friend of mine who was David Burns, who’s a great investment banker. And he had just left with another guy, Tom Carty. And they’d started kind of a boutique investment bank which they’ve both gone on to other things now. But we hired them and then it was actually pretty funny because we’re trying to keep information from a group of people who are inherently curious, right, because it’s an investigative firm. But we set up like a war room on a floor of the building where we didn’t have any offices because we had offices on the top floor and the seventh floor. We had offices in…on the first floor.
So on the second floor, we took a series of executive suites and we put all the due diligence documents and we used the conference room there to meet with potential buyers and stuff. But there was a lot of slinking down stairways and everything to meet with people. It was pretty cloak and dagger. But we did keep it a secret up until we closed, so it was good.
Nathan: Okay. And how long did that process take?
Tim: Probably about six months that felt about like six years.
Nathan: I can imagine.
Tim: Well, there’s so many things like, you know…I mean first you’re meeting…I mean you meet with…you know, we met with some people that were, you know, more private equity kind of people and, you know, the multiples there weren’t great. You know, so we were getting a fair bit of interest in that way. And then finally we had somebody that came in that was interested as a strategic buyer who made…who’s the one who bought us that made a really nice offer. We were actually kind of blown away. And then you just worried like that you’re gonna scuttle the deal somehow, right?
You’ve kind of agreed on terms. It’s a pretty good deal. And you’re nervous that people are gonna find out. I mean there’s a million things like at least for me, there’s a lot of the like what could go wrong. So from the time that due diligence started by the actual buyer, there was just a lot of worrying and wondering and, you know…and then our lawyer, something I would tell anybody who’s listening, that if you get into a situation where you’re selling, be very explicit with your lawyer not to fight with the other party. It sounds like the most commonsensical thing of all, but these guys got in a fight over like a semi-colon or something.
And I’m just like, “Dude, this is like the rest of my life and my family and my kids and like, you know, the future of this business. Can you like kind of take your head out of it and, you know, just like let’s keep moving the boat forward?”
But anyhow, so I mean we obviously made it through but it was definitely interesting. And I think the other thing that I would tell people because we looked at like a level down. Like we looked at kind of business brokers and, you know, sorry to offend anyone but, you know, we found those people to be kind of like failed real estate agents or something. No really. I mean we met with people and I’m talking to them and I’m talking about the business and it’s clear to me, I mean not that I’m, you know, sort of Jack Welch or GE or something. But I mean these people just didn’t understand business at all and they’re talking about, Oh yeah, we’re gonna go on and we’re gonna sell it, yeah.” And I thought, “No, you’re not, man. You’re not…”
I mean finding the right representation in terms of an investment bank if you’re, you know, if you’re big enough. Even to find somebody who’s like a smaller boutique where the field be interesting enough to get a senior person to work on it, that’s really important. Like a lot of people, “Oh, we’ll get Goldman Sachs. I got news for you. Unless you got a pretty massive deal like Zuckerberg, you know, those guys…if you got…like for my deal for $20 million, I mean these guys don’t get out of bed for that money to be honest.”
So you’re so much better off going with someone smaller. But don’t go with that like lowest level of people who are just like selling…you know, they’re selling vending machine routes and stuff like that, you know, and they… But it’s easy to think that that’s your option. It’s not like…the big names that you read about in the paper, like the big investment banks I mean they’re probably too big unless you have a really like large transaction. But if you go too low you’re gonna be misrepresented. You’re not gonna get the multiple you should. So you really wanna find somebody who’s got the ability to extract the proper value of your business and understands what multiple you really should get for your company.
Nathan: When it comes to multiples, do you usually…is a decision made of just what’s happened with previous businesses that are sold within industry or it just really depends what both parties think it’s worth and a combination of things?
Tim: I think there’s…I mean, a certain amount of it relates to the business itself, right, because…I mean a people-based business…I mean you’ve got SAS businesses like the one I’m running now that routinely sell for 15 times annual run rate.
Nathan: They sell 15X.
Tim: Yep. Crazy.
Nathan: Wow. And recurring too.
Tim: I mean if you look at buffer’s multiple, I mean they raised…their most recent capital raise which was like at the end of last year, I think they raised it like a 65, 60 or 65 million valuation which was roughly 15 times their annual run rate. I mean but that’s a SAS business in a kind of particular area. So it’s pretty driven off the industry, but there is also, you know, at a certain level you get into what the buyer wants. You know, if it’s an ego purchase, you know, if the CEO of the acquiring company really wants it, the multiple can get a little crazy. And then conversely, and this is, you know, for any founders, if you’re having difficulty with your business don’t let that be the reason you sell it because I can tell you, you will be skinned and filleted. You know…
Nathan: These guys are sharks, eh?
Tim: You’re not gonna sell…I mean nobody wants to buy your set of problems. I mean…and if they do they’re gonna discount it heavily. You know, if you’ve got issues you need to sort those out. I mean it might sound also common sense but you wanna sort out your issues before you go to market because it’s the wrong reason to sell. I mean you need to work through that or find somebody who’s gonna be kind of an operating partner or whatever that will help you through it. But if you go to market with a business that’s struggling, I mean that’s just…it’s a recipe for disaster in my opinion anyhow.
Nathan: Man, we’ll, look, you shared a ton of gold on this stuff. We’ll leave it there. But I wanna switch gears and let’s talk about Tweet Jukebox like before we worked towards wrapping up. This is your latest business, you know. Let’s fast forward right to now. You’ve got this big SAS business, 25,000 active uses. You’ve just gone into paid. You’ve got the paid plans. Tell us a little more about how the service works. You’ve talked about Twitter automation. What exactly are we automating? Why are people loving it? Like tell me, man.
Tim: Basically, it’s a place to keep your content. And the way the system works is you have…each Jukebox, because you can have many, is sort of a repository of your content, right? So let’s say for instance for you, you could put all your episodes, all your podcast episodes, could be one Jukebox, some kind of a tweet highlighting each issue. A Foundr could be another Jukebox. Let’s say that you really like a particular group of quotes, that could be another Jukebox and then you would set a particular frequency for each of these kinds of content. Each Jukebox should really be slightly different kind of content. You know, you shouldn’t probably mix them up because otherwise once you set the frequency, you know, maybe you’d get too much repetition of a particular kind.
But people put their content in and then it just runs automatically. You know, the thing I’m very fond of saying is, you know, from a follower standpoint on Twitter or any other social platform for that matter, nobody cares how the content got there, nobody. Nobody cares if it was delivered on a white stallion with a pillow and a guy had written it on a plate, on a granite tablet and then, you know, copied that into Twitter. Nobody cares how it got there. They only care if it’s relevant to them. There’s information that’s interesting or that they’d like to share.
So to me that’s the ultimate reason to put this stuff into automation as well as, and I get a big kick out of, you know…there’s a lot of talk about the best time to tweet which I actually think is hilarious. It sort of presupposes that Twitter is a little bit like if you’ve seen these like circus films or, you know, or actually been to a circus where there’s a person who does the high dive, they like climb this really tall ladder or whatever and then they dive into a really small thing of water, people act like that’s how Twitter is. Like everyone’s waiting for you to leave the platform and see what’s gonna happen, right? And it’s not like that. You know, and I mean the best time to tweet generally just has a relationship to where the majority of your audience is geographically. So frankly, I mean the way the algorithm…those most of those reports run off of…only thing it tells you is what time zone most of your followers are in. Doesn’t it tell you anything else?
So, you know, presupposing that because most of them are online, I think that’s meaningless. I mean the best time to reach out is when anybody who cares about what you do is paying attention anytime. You’re not buying a Super Bowl ad. You know, there’s no transaction cost. So, you know, put your content out more frequently when people would find it and actually someone who you interviewed fairly recently, Guy Kawasaki, is another adherent to the same principle. You know, there’s no reason to like in a tweet three times a day thinking a very egocentric thought which is that like everyone’s gonna, you know, rush to your Twitter feed and see what you’re doing.
So the tool automates that so that you can spend time. I mean the real beauty of the tool is to take that time to develop better content either through creation or curation. And then, you know, get the best bang for your social buck by actually engaging with people that reach out to you. And the next iteration for Tweet Jukebox is gonna be we’re in the process of becoming Social Jukebox where we’ll start posting to LinkedIn, Facebook, Google Plus and probably some platforms like Instagram which I know is near and dear to your heart and Pinterest and some stuff like that.
Nathan: Wow, awesome. That’s crazy. And I’m curious also, you know, when it comes to finding your customers for Tweet Jukebox, what has been the most effective way to go? Obviously, has it been Twitter?
Tim: Yeah, I mean I think the best place to find people is usually, you know, in the same ecosystem they’re gonna be in if they’re gonna use the tool. I mean people that are gonna be really like strong users of Social Jukebox for Facebook are probably gonna be best found on Facebook. The people that will be most interested in LinkedIn are probably gonna be people that spend a lot of time on LinkedIn. I’m guessing because that’s certainly been our experience with Tweet Jukebox that by doing some stuff like when people follow me, you know, we have an automated message like shares a link about Tweet Jukebox, we do some Thank you tweets for our users that help make the app somewhat viral. And anyhow we’ve tried to have a number of ways in which the content about the system gets shared and the most success as you rightly pointed out is it’s been on Twitter.
Nathan: Interesting. And, you know, once you roll out, you know, I guess will you rebrand from Tweet Jukebox to Social Jukebox?
Tim: Yeah, that’s correct. You know, we’re actually kind of straddling that now. We’re starting to develop the program which, you know, we’re hoping to have out in the second quarter of this year. And so, yes, we’re gonna switch brands because I mean we see the same need. To me, social media is an awesome awesome thing. The problem is that like delivering content to all these platforms it’s really really time consuming.
Nathan: Oh, yeah. It’s a shit ton of work.
Tim: Well, my idea is like for Social Jukebox, ultimately what I wanna do is create something that’s a little bit like pocket, pocket for like for social content. So you’re walking around and something comes through, you see a tweet, you see an update on Facebook and you think, “Man, that’s awesome.” And you can just put it into Social Jukebox and it’ll go out to whatever channels, you know, you’re set up to share with. So you don’t have to go to each one individually or anything.
Nathan: Wow. It sounds amazing.
Tim: Here’s hoping.
Nathan: Awesome. Well, look, we have to work towards wrapping up, Tim. It’s been an absolute blast chatting with you. Where’s the best place people can find you if they wanna find out more and more about Tweet Jukebox?
Tim: Well, the best place would be tweetjukebox.com where you can sign up. There’s a free version of the service. And if you have questions people can always reach me at [email protected] I’m always happy…and it doesn’t have to be a question about the platform. It could be a question about something we talked about like selling or running something or whatever. I’m happy to answer. And Twitter which is probably where I spend most of my time on social, my handle is @alphabetsuccess which is the book that I was trying to sell when I started the whole thing.
Nathan: Awesome, awesome. Well, look, thank you so much for your time, Tim. Absolute pleasure speaking with you. Hope you have a great day.
Tim: Thank you, Nathan. You too, man. Thanks.