[00:00:00 - 00:04:01]

Will Smith: Today's guest observes that many great entrepreneurs are risk mitigators more than they are risk takers. Risk mitigation was his own approach and it worked out very well for Jake Bittner. Jake had devoted the first 10 years of his career to enterprise software sales. Selling, he calculated, was the best skill to cultivate for a successful entrepreneurial future. He also built deep expertise in a network throughout his niche of government focused data analytics.

Finally, he built up a nest egg during that decade. So by the time he had the opportunity to buy a business in his industry, he was extremely well positioned. He understood the business deeply, he knew the clients, he could hold his breath and not take salary for a while and this recipe was enough to get the business, which was actually an unprofitable.

Carve, out on firm footing.

But it wasn't until a few years later that Jake and his partner scrutinized their business model and made a pivot.

That is when things really took off, culminating in a life changing exit for the duo. Listen for Jake's enthusiasm for Govtech, which is not a category we hear about much in eta. After this story gets out there, maybe that will change. Here he is, Jake Buettner, former CEO and co owner of Clarion and an LP at Mines Capital. You know that getting a business under LOI is a key milestone, but also a starting gun.

Getting your deal from LOI to a closed SBA funded acquisition is a race, and most business buyers don't realize how many hurdles are ahead until they hit one. This Thursday, leading SBA loan broker Heather Endresen will host a webinar, walking you through the acquisition process like a coach preparing you for a race. You'll learn how to increase your speed, avoid painful delays, outmaneuver other buyers, and anticipate obstacles before they appear. The webinar is how to Run the SBA Deal Race. It is this Thursday, December 4th, noon Eastern.

Link to register for the webinar is right at the top of this episode's show Notes or on the Acquiring Minds homepage.

Acquiringminds.co.

Welcome to Acquiring Minds, a podcast about buying businesses.

My name is Will Smith.

Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this.

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To know August and the team at Oberle.

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Check out oberly-risk.com that's o b e r l e-risk.com link in the notes.

Jake Bittner welcome to Acquiring Minds.

[00:04:01 - 00:04:02]

Jake Bittner: Thanks for having me.

[00:04:02 - 00:04:30]

Will Smith: Will Jake, you bought a business back.

In 2011 in the GovTech stock space.

The business wasn't profitable. It was a carve out. Over the next decade you grew and transformed the business from that humble foundation. And in 2021, just about 10 years later, you exited for a life changing sum. We're going to hear the story today and how you did that.

Start us off Shake with a little background on you please.

[00:04:31 - 00:06:52]

Jake Bittner: Sure. And again, thanks for having me here. This is great to be here. I'm a longtime listener, so excited to be, to be here.

But, but my background so I grew up in St. Louis, Missouri. I actually went to Yale University in New Haven, Connecticut. Graduated in engineering and decided that I you know, I wanted to kind of focus on the technology space really in, in software software world. And so I, I kind of ended up focusing my early career in the data analytics world, went to work for one of the sort of at that time mid sized software companies in the, in the Washington D.C. area. We call it MicroStrategy and you know really focused on, on, on selling data analytics solutions to government agencies which is not what I originally thought I'd, I'd be working with more with commercial organizations.

But you know as, as, as a young kid out of college you get assigned to a certain division and mine was federal and I thought okay, well you know it's here in Washington D.C. i like it. I'll be, in fact I've been, I was six months from leaving Washington D.C. for the good, you know the first five years of my career. I've never left but, but, but yeah. So I, my, my focus was in, in data analytics. I was originally an engineer.

I eventually moved into sales which you know to some extent kind of correlates with my, my, the beginning of my interest in an entrepreneurial journey. You know of my own. I, I had you know, some family background in that area. My dad was an entrepreneur, eventually kind of use a lawyer by trade then eventually became an entrepreneur and I, you Know, I wasn't sure it was gonna be my path, but when I had the opportunity to work, to move into sales, which, you know, to me was one of the key skills of being an entrepreneur. Like, you know, the ability to actually take a customer requirement and turn it into, you know, some cash in your account.

You know, that whole entire end to end process. If you could, you could master that. I figured, well, you know, I can actually potentially, you know, run a business, figure out how to, you know, from, from, from scoping to contracting to convincing somebody to, to work with you, to objection. Handling, to beating your competitors, to, you know, actually delivering the, the value the customer expects. If I could do that, I could, I could build a business.

And so I thought, well, I'm going to dive into sales and, and really start to, to understand that. And so that was, you know, the, the first, you know, 10, 12 years of my career, I worked for.

[00:06:53 - 00:07:35]

Will Smith: Jake, let me, let me pause you. Just a couple quick follow ups there. So not a typical path for somebody who graduates with an engineering degree to get into sales.

Yeah, although I guess in technology there's probably more kind of engineering types who end up as salespeople because it's inherently technical product.

But.

So you were drawn to sales because you thought it was the best skill to develop in yourself for a potential future as an entrepreneur. And you had said that, your, you said to me offline that your dad was an entrepreneur. Yeah, but, but not, not a successful entrepreneur and that, that also informed some of the decisions around this time in your life.

Can you share that with us?

[00:07:35 - 00:09:50]

Jake Bittner: Yeah, yeah, yeah, definitely. So you're, you're right. My, so my dad was aware by trade and then became an entrepreneur and you know, chased after some, some, some big dreams, some interesting, you know, they're very interesting, you know, paths that he was choosing to go down, but he was ultimately unsuccessful, you know, heading down those paths. And I think, I think, you know, from my observations, you know, I, I, you know, experienced more what it cost him, you know, financially it was a huge cost custom, you know, ended up costing two marriages.

You know, luckily he was a great father through all that. Uh, and so it didn't, you know, none of it. There's been no relationships that were, that were damaged. But, but you know, financially it was, it was extremely difficult for him to, to really, to really get ahead. And so I think, you know, and ultimately, Frank, it cost him more than that.

It cost him his life really. My dad died at age 50, I'm 49 of a massive heart attack. He didn't take care of himself. He was, you know, stressed out. You know, it was, it was incredibly difficult, you know, for, for him.

And, and he ended up, you know, dying from it. So for me, it was a, it was a really risky concept. And, you know, I knew I had, I felt like I had a, an idea in me that I wanted to go down an entrepreneurial path, but there was a lot of risk there. I knew the, the potential impact, not just, you know, on a balance sheet sort of thing, but in a real, you know, lifetime impact. This is the thing that someone said to me one time I, I felt, you know, probably not during this time frame, but afterwards, it kind of rang true to me is that, you know, people look at entrepreneurs as risk takers, but in reality, you know, entrepreneurs hate risk.

Right? They actually are just better mitigating risk than anybody else because risk is relative, right. What's risky for you is not risky for me. And so if you can develop the skills, and in my case, also felt like building the nest egg to be able to go ahead and take that leap, then it's not as risky. Right.

And, and, and, and you give yourself a certain pathway to hopefully be successful. And I certainly saw what was not successful, and so I decided to do it differently.

[00:09:51 - 00:10:08]

Will Smith: And, you know, seeing your father's career frustrations might have led you to just want to steer clear of entrepreneurship altogether. So what was it, do you think about entrepreneurship that actually did entice you? I guess it's probably the same thing that entices us all.

[00:10:09 - 00:11:31]

Jake Bittner: Well, you know, I, I don't know. I mean, I, I do think a lot, you know, a lot of people that certainly there's a, There's a factor of, you know, financial factor, right? I mean, the potential for larger returns than, Than as an employee. That's certainly a, A potential thing. But I think for me, it was.

The real drive for me was really to be my own boss, to, to call the shots, to do what I think is best rather than doing, you know, I worked and oftentimes you do stupid things and, you know, you. Why are we doing this? Well, because that's what we do, you know. Well, it's stupid. Everyone, everyone agrees is stupid.

But we're gonna do it anyway. You know, let's do things in a. There was a better way to do things. I felt, and about. And, and, and.

And in a way that we could deliver more value. I became passionate about the customer base, too, about the, about the, The. The government customer base and delivering value for them. And I felt there's a better way to do it. Um, so, you know, there, there, there was the potential for higher financial returns.

That was not probably the main motivator. But obviously, you know, that if, if you're able to, you know, succeed, it's a, it's a, it is a great path to, to, to wealth. I mean there are, people know that, but that wasn't really my main. Well, I mean it certainly was in there, but it's not, that's not the main focus, I think. You don't know.

I mean, who knows what we're going to end up doing, you know, with, with the business, you know, where it's going to end up. So it really can't, can't be your only motivator.

[00:11:31 - 00:11:45]

Will Smith: Yeah, Y. Well, we're going to return to the, you know, reflecting back now on having some wealth and, and how, and how that changes perspective or not. But also you mentioned building up a nest egg.

[00:11:45 - 00:11:46]

Jake Bittner: Yes.

[00:11:46 - 00:11:59]

Will Smith: In, in passing just now that you were, that you were cultivating the skill of sales, but also building up a nest egg. You were on a, in a career enterprise software sales that people could do very well in.

[00:11:59 - 00:12:00]

Jake Bittner: Yes, very, very well.

[00:12:00 - 00:12:09]

Will Smith: It's, you know, you can easily, you know, well into six figures, even seven figures, I've, I've heard is not uncommon.

[00:12:09 - 00:12:09]

Jake Bittner: Yep.

[00:12:09 - 00:12:24]

Will Smith: So. So you also were on a path where if you did well, you could, you could make a seven figure salary and, and just not take much more risk. But the point is you, you set out to build a nest egg to have some financial cushion before you really took the entrepreneurial leap as well.

[00:12:24 - 00:12:24]

Jake Bittner: Correct.

[00:12:24 - 00:12:26]

Will Smith: Take it. Yeah. Pick us back up on the story.

[00:12:26 - 00:13:48]

Jake Bittner: Yeah, Yeah. I felt that was a huge risk mitigator, basically.

Right. Because I had seen my dad's two marriages fall apart for financial reasons. You know, my, my, my mom, my stepmom still very much cared for my dad, you know, personally, but financially it was a disaster. And so I knew that, you know, and I, and I was married, I got married in 24,004. So I knew.

And I had a daughter in 2006. And so I knew that I couldn't take the same, I just wouldn't take the same type of financial risk. Right. So I knew that there, there was a certain amount, to be honest, wasn't a certain amount. It was just, I knew that you wanted to have a, a good solid, you know, six high six, you know, mid, mid, mid high sixes, pushing to seven, trying to think like figures, you know, in the bank to where and and then also I think, you know, another thing that's, that's common among people who go down the entrepreneur path is a great partner and my wife, right, who had a very successful career in her, in her, in her own right, she made probably, she made a good, you know, good amount of money.

She could handle the, you know, a lot of the, the financial burden for us for, for a period. And you know, if it didn't work out, I can go back, always go back to the enterprise sales, you know, world. I had, I had built enough credibility there that I can go back to that, that path. So you know, I felt like financially I, you know, that helped me mitigate the risk. Great.

[00:13:50 - 00:14:11]

Will Smith: And just last point, you mentioned MicroStrategy, which of course today is famous for Michael Saylor basically betting the company on bitcoin. So it's a colorful company today. It was a colorful company back then. This was in the kind of.comish or immediately post.com heyday. And it was also, and it was kind of a high flyer in that era as well.

[00:14:12 - 00:14:43]

Jake Bittner: We had a huge run up, you know, we're all millionaires on paper and you know, we had cruises in the Caribbean where the whole company would go on the cruise. I remember the, you know, a day the whole, whole entire company, everyone, everyone, the janitors, everybody was in, that was in a boat in the middle of the Caribbean and they come on the. We didn't do a single bit of work that day. We all were on excursions and things and you know, we're back in the hot tubs after the night and they come on the loudspeaker, hey, the stock's up 10 yay. You know, everyone's like, not just.

I was probably 23. I was like, that's how it goes.

[00:14:43 - 00:14:45]

Will Smith: You know, you just, you just, oh man.

[00:14:46 - 00:15:38]

Jake Bittner: But you know, yeah, no, it's it, it point by 2000, middle 2000 things they crashed back down and we were, you know, they had, you know, layoffs and everything out that the, the dot com crash was, was beginning and we were, we were, we were experiencing that in our own way. And but I, I will say this.

It, it was a place where they, where we, where a lot of relationships were built, were forged. That a bunch of folks down that, in that, in that time frame went down entrepreneurial paths either afterwards or later. A lot of really, you know, sizable companies came out of that. A lot of really sort of mid sized and small companies came out of that. And it's almost, I'd almost feel like There was a period there for a good, you know, 10, 15 years.

You couldn't go anywhere and see, not see somebody from, from the microtrady days. Like, you know, so it was a good, it, it built a, you know, a, a forge a bond of relationships among people that, that still, you know, stand to this day. Which is kind of neat.

[00:15:38 - 00:16:06]

Will Smith: Yeah, yeah, yeah. No, it's a, it's a classic sort of company that, you know, kind of leaves a mafia in its wake.

All these graduates that come out of a company or kind of an eco, builds an ecosystem around itself or around the alum, the alumni of the company. Very interesting. Especially since it's right here. It's just, it's in Northern Virginia where I am and you are. Yep.

Okay, great. So you, you're there. You also work for SAP. You work for Business Objects, right?

[00:16:06 - 00:16:07]

Jake Bittner: Yep, yep.

[00:16:07 - 00:16:11]

Will Smith: I was all the way. All the while becoming more successful as an enterprise sales guy.

[00:16:11 - 00:16:12]

Jake Bittner: Yeah.

[00:16:12 - 00:16:12]

Will Smith: Professional.

[00:16:12 - 00:17:50]

Jake Bittner: Yeah, yeah.

And then that's the, that's kind of the path there. I was Business Objects. We were, it was a, you know, good mid sized software company at the time. And we were acquired, I think it was 2007 by SAP, 2008, something like that, by SAP. And very quickly I, you know, began to realize that, that, you know, you know, there's mid sized software companies.

I can kind of make it, I could kind of make it on my own and felt pretty good about, you know, the people and how we were able to kind of, you know, run our own kind of thing entrepreneurially a bit. In a lot of ways we did that because in the, in the government space, these, these companies are primarily built around selling to large enterprises. Right. Large commercial companies, the government, they're like, yeah, you guys just figured out yourself. So we were very entrepreneurial in that world.

Once we had the SAP, that got a little bit stamped out. You know, it's a German company, huge massive company. There was, you know, ways of doing things and ways of not doing things and it was really just way too big of a situation for me. They left us alone for a little while and then eventually they started, you know, moving us around and I actually got, even got assigned over to be part of the retail organization. And you know, it was, it was awful.

We'd fly, you'd fly across country for a, you know, 20 minute meeting. They'd say, oh yeah, thanks for coming by. And I was like, that was great. Just up into my Life for a 20 minute meeting in Minnesota. But so it wasn't for me and I said, you know, this is it, this is the time.

This is, I've got to go, I've got to go pull the trigger and do this now. And if that's now or never, right? Because my alternative was probably go back to another enterprise software company, midsize. You know, I got an offer from Oracle, could go there. I mean, you know, and it was like a inflection point here.

I've either got to do this now or it's not going to happen.

[00:17:52 - 00:18:58]

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Why was buying a business the ultimate path?

[00:18:58 - 00:19:07]

Jake Bittner: Well, it's interesting because when I first left, I mean my, I assumed that building from scratch would be the, would be the path.

[00:19:07 - 00:19:09]

Will Smith: And that's as, as everyone does.

[00:19:09 - 00:20:32]

Jake Bittner: Yeah. And that's kind of where the, the direction I was, I was heading down.

And then I was approached by a friend, actually a former MicroStrategy colleague who had built a business called Cadence Quest and was in the process, this is about 2010ish. Sell the business to Accenture. They had built a, a product based on micro strategy and they built another a product product for the retail space and they were selling it to, to Accenture. They happened to have a handful of government contracts from being kind of in the Washington D.C. area. And it was a little bit confusing to the deal and, and the group you selling to at Accenture, they weren't interested in having those contracts that kind of cloudy, you know, muddied the waters a little bit.

So they kind of said, hey, what if we could package this up as a separate company? You can come in as a CEO and you know, be an equity partner and run this. You'd work for us, you'd run it on, you know, and I thought, well that you know, What. Maybe that's better than starting on my own. You know, coming in and getting this business, you know, it's already existing.

It would be, you know, extremely small. Kind of smart starting over from their perspective. But, you know, at least I have some things, some people, some things to start from a little bit of a brand name. Although we ended up having to change a brand name but to seem like a good alternative at the time. And so that's what I did.

[00:20:34 - 00:20:41]

Will Smith: You take the CEO role, you get in there and you find that it doesn't work the way you thought it would.

[00:20:41 - 00:22:31]

Jake Bittner: Yeah, I mean the situation was a little different than maybe what we thought. Kind of going in the, you know, is we finally got a clean sheet of a kind of. Kind of clean P L, you know, of the separate to a Carvel business because it was a little confusing when it was going through the, through the transaction with Accenture. It turned out that the business we were running wasn't making any money, it was losing money.

At the same time, you know, Accenture had put some restrictions on those owner, on the owners that they were not allowed to put in more money into the business.

And just because they didn't, they kind of would prefer they divest it, but they allowed them to keep it and they said okay with the restriction. One restriction is you can't put any more money into the business. And, and it became clear quickly that, that there wasn't enough money in the business to really pay us and build this business. And so, you know, there was something was going to have to happen. They're gonna have to sell it in some capacity either to a different, different ownership group or to, to me.

And, and my, and, and one thing I should say here, this is for the good time. I mentioned that I had, I had a, through the whole experience, an excellent business partner that was at the company already when I joined. He was kind of managing all those contracts and he had been, you know, that's his, his. I was really more on the delivery of, of analytics solutions, you know, an excellent consultant back consulting background. His name's Adam.

Adam Roy. And Adam and I, you know, were the leaders of this new business and we sort of used the coo CEO, what I was. And we, we just realized, hey, we're, we're not going to, we're either going to have to buy this business ourselves or we're going to have to walk away and start something new because there's just not enough here. There's no, there's no money here for us to be Able to do what we need to do.

[00:22:32 - 00:22:40]

Will Smith: It was, it was basically losing money.

And it was still part of Accenture. It had been acquired as part of this larger acquisition.

[00:22:41 - 00:23:01]

Jake Bittner: It was, it was kept separate. It was a separate entity, so was not part of Accenture at all. They, they bought the, I'd say 80% of the business as an asset sale.

Actually the way it was structured was an asset sale Accenture about the assets. We kept the original entity, which now only had a few, you know, a few, a few people and a few contracts underneath it.

[00:23:02 - 00:23:13]

Will Smith: A few people, a few contracts, money losing. But whoever might have been the one to control the decision to reinvest in the business was saying no, no reinvestment in that business.

[00:23:14 - 00:23:30]

Jake Bittner: You know, Accenture's interest was, was in, that was in them focusing on the, the owners of the previous business focusing on the, on the Accenture business they just bought.

They would really prefer that they divested it, which is, which is what ended up happening. You know, they divested to us. But that was kind of, that was, you know, part of this kind of pushing them in that direction.

[00:23:31 - 00:23:45]

Will Smith: Great. Okay, so how did you guys, when you decided that it, that you could be the ones to own this business and that that would be how to give it new life and you know, realize your own entrepreneurial aspirations, how did you approach it?

[00:23:46 - 00:25:30]

Jake Bittner: Well, we were lucky enough to have kind of a few, a few helpful advisors that we had kind of, you know, hadn't been involved with us during this time to help us kind of build this bit, build the business up. One was a micro for MicroStrategy guy named Sid Banerjee. Sid. Sid was great and very helpful during this time frame. But then it ended up leaving as an advisor and focusing on his own entrepreneurial journey.

And then we had another gentleman, Den De Young, who was a very experienced CEO in an area well known name who was kind of, you know, with us, helping us and advising us. And then, and then just after we transacted the business dent, he stuck with us as an advisor for probably eight years or so. But, but it was really all of us kind of putting our heads together and figuring out what a, what a deal can look like. What's a business worth that's losing money. Right.

We're to, to valuing things based on, you know, an EBITDA multiple. Well, that would have been negative in this case. Obviously it wasn't appropriate way to, but it's worth something. And so what, what we did, which is a great idea and I think it was Dendy's idea was we hired, you know, evaluation firms to come in and valuation firms come in and value the business. And I say firms because the really good idea here was, you know, we had a very, we had a big disagreement of what the business was worth.

They had just sold their business for, you know, tens of millions of dollars to Accenture. They of course thought this was worth many millions. We're sitting there going, guys, this business is losing money. It's not worth very much. We had a big, big, wide range.

The suggestion we did was bring in two companies. So we had two valuations done. And the reason we did that was because one valuation, you know, they're going to say it's wrong. Right. If one valuation comes in.

Yeah, well, they, they just, they, that's not right. Doesn't matter. They're, they screwed up there. They don't know what they're doing to valuations. The answer is probably somewhere in the middle, right?

[00:25:30 - 00:25:30]

Will Smith: Yeah.

[00:25:30 - 00:25:55]

Jake Bittner: And so that's, that's kind of how we, when we, how we approached it. And so the value, we did, two valuations, they probably cost us like 10 to 12 ish thousand dollars back then each. And this is 2010, so I'm sure valuation's a little bit more now. But they were, they were very sophisticated.

You know, they met with both sides. They, they did, you know, all sorts of comparables, they did all sorts of discounted cash flow analysis and this and that and came back with a, with a range.

[00:25:55 - 00:26:19]

Will Smith: Well, Jake, the question is how do you value a business that's losing money? So I, you know, it sounds like there was a lot of expertise on the part of these two valuation firms to come up with numbers but like bullet pointed for us, when a business is literally losing money, where is the value there? And you guys even said even before you talked to the valuation companies, it's worth something in what.

[00:26:20 - 00:27:45]

Jake Bittner: So from our perspective, you know, sort of a build versus buy. Like this thing about where we're, what would we, why would we pay for this? Well, number one, you have, we were buying this, this historical entity that had been around for, for 10 years and had a lot of experience, a lot of customer references and past performance you could point to. We needed that to win future business. Right.

That sort of thing helps us win future business with government contractors. But we've been in business for 10 plus years. We have, you know, these customers we've worked with, they've all, they all would, you know, fill out these forms or check these boxes and say we did a great job. That's very important. Other things are contract vehicles.

So in this case, the company already had what's called a GSA schedule, which is in some way, which is essentially a blanket, a contract with the government that the government can buy off of much quicker. Right. So that allows us to, to circumvent the RFP process often, not always, but, but it gives customers an option to circumvent the process if they want to, really is the best way to think about it. It allows us to, to sign deals much, much, much faster. Well, it's hard to get that from scratch.

They not only, you know, they already had it. And so there was some value to us in that. They also had some people and we needed, you know, we needed to sound strange, but we needed people in order to get more people. Right. We needed to have to be a place where good technical people came in order for other good technical people to want to join us.

[00:27:45 - 00:27:45]

Will Smith: Sure.

[00:27:45 - 00:28:17]

Jake Bittner: They had a bunch of processes already in place in finance and hr. So there was a lot there. And the other thing is, one of the reasons we were losing money was because they were paying us. Right.

And as if we're now the owners. Well, we can make a few other decisions. We can make some cost cutting decisions that they didn't want to make and we can also cut our own salaries and kind of get ourselves back to break even and then build up from there. So, you know, there was a, there was a reason to buy that, to buy the business, but, but it also had to be a fair number for us and a fair, in fair terms.

[00:28:18 - 00:28:43]

Will Smith: Well, many of the things that you just said there, Jake, are actually the same reasons that many people buy businesses.

You know, the, the institutional knowledge, the reputation, the customer references. That G schedule piece is, is particular to govtech. That's not going to be relatable. But so in some ways, you know, that's a very familiar story to this audience. So what was the final number, if you can recall, that you bought it for?

[00:28:43 - 00:29:04]

Jake Bittner: We were, I, you know, I called Adam recently. And what was that? We, best of our knowledge, it was in the 600K range. This has, you know, been 15 years, we're trying to remember. I said 600, 700, something in that, that range.

I think, I think we had one valuation, 600, one valuation, 700. So maybe it came in 660, something like that. That, that sounds familiar to me, but okay, but that's where it ended up being.

[00:29:05 - 00:29:09]

Will Smith: And, and you and Adam were going to buy it in cash. Did you buy it in Cash.

[00:29:10 - 00:30:03]

Jake Bittner: No, we did, we didn't, we, we got them to agree to 100% seller financing. Oh part of that was because you know they, we gave them a pretty, pretty substantial interest rate at that point. This is 2010, I mean interest rates I think were rather low. We were probably paying 10, 11, 12% I think something like that interest. They were happy with that.

They had just had a large windfall from cash wise from selling the other business. They didn't really, didn't really need the cash. And so for them, you know we, we sort of made that clear that was part of facilitate, that would facilitate this transaction for us. And so it wasn't a, it wasn't a big give on their part because they didn't really, you know, need the money. Plus there was actually three owners.

So three owners divided by three, you know 600k divided by three is not that, not that impactful when they've already had a multi, you know, tens of millions of dollar sale. So they, it wasn't a big, a big give on their part but it made a big, big difference for us to be able to have.

[00:30:03 - 00:30:26]

Will Smith: But Jake, despite, I follow the logic but at the same time it sounds like before they had been stiffer on the valuation, they had said that's why you went and got those two valuations. It sounds like they were despite the fact that it was going to be, you know, not that much money given the exit that they just had the liquidity event that they just had that they words just willing to, you know, give away the company for nothing.

[00:30:27 - 00:30:33]

Jake Bittner: So price seem to be more important to them than terms in that case.

In that case they were, they were working about the price than they were about the terms.

[00:30:33 - 00:30:38]

Will Smith: Okay, we've heard you say data analytics say more about what the business really did.

[00:30:38 - 00:33:11]

Jake Bittner: We, I mean at a high level we build large scale data analytics systems for government agencies which basically means, you know, we work with commercial software. So many of the companies I work for, you know, other notable ones you'd know would be Microsoft, Oracle, you know that, that sort of technology. In those days it was MicroStrategy Business Objects.

Now today it's Tableau which is owned by, you know, Salesforce. Qlik is another very popular one today we had to work with these commercial software, enterprise software technologies which would, you know, cost hundreds of thousands on low end and millions on the high end for the organizations to acquire and they would hire us to come in and configure and build solutions on top of those, those, those, those enterprise packages. We would Work with the, the business people, non technical business people to understand and analyze the requirements. What exactly type of data do they need to enhance their business. And then we'd go, you know, and acquire the data, we'd clean it up, we'd model it, we'd put it into a, a data format.

We'd build out, you know, analytics and dashboards and everything that they, they need. And then, you know, and then, you know, run and manage those things. And we're talking about, you know, pretty substantial user bases. You know, you're typically looking at, you know, minimally a few hundred on the higher side, you know, thousands of users that you'd want to, you know, get information into the hands of in order for it to be worth it to invest in the technology and our services. You know.

But typically you're dealing with multimillion dollar problems, right? These are multi million dollar organizations and they have multimillion dollar problems. They have smaller problems too. And so it's important that you identify, you know, what are you dealing with here. You deal with somebody who can spend, you know, spend millions of dollars or just spend a few.

But, but that's sort of, the, the real goal was to put data in the hands of non technical decision, business decision makers so they could improve operations in some way. It could be, you know, financial management, you know, managing the hundreds of millions or billions of dollars of a program, of a government program. Or it could be, you know, actually helping to determine what should that, you know, what type of decision should that individual, that should somebody who's interfacing with an actual citizen or resident, you know, on a particular program, what type of service should they receive and how could they receive it. So it's really all about improving in efficiency, using data to make government more efficient.

[00:33:12 - 00:33:40]

Will Smith: Great, that was helpful, thank you.

And would it be over simplifying to say you were systems integrators in the data analytics space? So the business model was that of systems integrators, which is you guys specialized in a few key products, large complex products and would implement. So systems integrators, systems implementers, you'd implement the solution of this third party enterprise software tool into your client.

[00:33:40 - 00:33:42]

Jake Bittner: That's right. That's right, yeah.

[00:33:42 - 00:34:00]

Will Smith: Anything more to say Jake, about the fact that this was a carve out? Like was, did that introduce, you know, kind of liability issues or other complications that people can learn from or maybe not so much?

[00:34:00 - 00:34:01]

Jake Bittner: No, I guess.

[00:34:01 - 00:34:06]

Will Smith: And was it a carve out because.

Accenture hadn't bought it?

Accenture had bought the assets of the entity.

[00:34:07 - 00:35:46]

Jake Bittner: The technical way would be they bought the carve out. We were the original business. Yeah, that's the technical way to think about it. So.

Right. So, you know, it had its challenges. We, we'd get, you know, we, we'd get calls from the IRS for something and we're like, what the hell is this? You know, and, and, or California wanted money from some time they did before. So we, we had our, our, definitely had our, our moments of kind of trying to work through.

You know, they were supposed to take care of all those things as part of the deal. That was part of the arrangement. But of course, some of those dragged on, so that was a, a bit of a mess. Probably the biggest thing we had to do was rebrand, and we came with the name. You know, they were Cadence Quest, and Accenture wanted that name.

And so we came up with a new name, which was Clarion, with a Q, Q, L, A, R, I, O, N. We used the Q as a kind of callback to the original Cadence Quest name. It's also a very brandable letter. I wanted something was, you know, really kind of brandable. And so a lot of our, A lot of our content, a lot of our stuff had a queue in it. And in fact, we had a designer come up with a logo which had a.

Which turned the cue into a magnifying glass, which was a great, you know, concept for us. Right. It kind of, kind of got the point across. So. But I guess the thing I learned also on that is I, I, you know, just like, you know, you hear about, I mean, we would have been, we might have been.

It certainly there were a few times we would have been better off with a name that started with an A or a B or a C, maybe even a D rather than the Q when we show up to the conference and we get put in the back because we're in the queues. But, but, you know, there is something to being ABC Corp. But, but that's probably the only thing that, you know, from the branding perspective, we felt like it was a good name and we had to get people behind it. So. And, and it, it turned out to be a good name, so.

Worked out well.

[00:35:47 - 00:35:55]

Will Smith: Man, Jake, I didn't realize that, you know, there was still a reason to call yourself, you know, AAA towing, like in the Yellow Pages.

[00:35:55 - 00:36:11]

Jake Bittner: Right. I think you're showing up to, you know, I mean, like, anything we get, oh, great. We're going to be, you know, sponsors at such and such event.

Well, how are we going to put list of Sponsors. Let's list them alphabetically. Great idea. You know. Right, right, right.

They never, they never go with reverse alphabetical. We're going to start that trend.

[00:36:13 - 00:36:23]

Will Smith: All right, Jay, great. So you buy the business for. You can't remember exactly how much. 6, 700. Call it 100% seller.

Finance.

[00:36:23 - 00:36:24]

Jake Bittner: Yeah.

[00:36:24 - 00:36:26]

Will Smith: The business is how many employees.

[00:36:26 - 00:36:36]

Jake Bittner: At that point we bought it. We, I think we had two people in administration, Adam and myself.

And then maybe five, four, three, four, five, five. Maybe actual employees. I think actual delivery.

[00:36:36 - 00:36:39]

Will Smith: So these five, these five people are the ones who are going to deliver the service.

[00:36:40 - 00:36:40]

Jake Bittner: That's right.

[00:36:40 - 00:36:47]

Will Smith: And you and Adam are going to be probably doing sales and probably some program management as well, correct, Adam?

[00:36:47 - 00:36:52]

Jake Bittner: Adam was definitely highly billable at that time as well. Just because we needed it, we need the money. Okay.

[00:36:52 - 00:37:04]

Will Smith: Okay, great.

Well, so to continue on in the, in the story, this is a 10 year journey, so we don't have time to go year by year. But give us kind of chapter one when you get in there and what do you.

[00:37:04 - 00:37:53]

Jake Bittner: Yeah, we, we, we. At that point we knew we had it. You know, we obviously the first thing we needed to do was to flip the script and get things profitable again.

We did that by cutting some costs, cutting, you know, our own salaries, cutting some, some, some other costs and kind of getting ourselves back to, to break even. At that point we, you know, we decided to become, you know, we, we're, you know, we, we had to get ourselves above water and, and start generating money. And we were, you know, kind of servicing this debt that there's 100%, you know, financing. So it was substantial. So we are, you know, become very scrappy, Right?

Very scrappy. Anything that moves, we're chasing it. You know, at that point we would love to have thought of ourselves as this high value data analytics, you know, consultancy, but the reality is we were putting butts in seats around analytics products and solutions. You know, anybody who, what does that.

[00:37:53 - 00:37:55]

Will Smith: What does butts and seats mean?

[00:37:55 - 00:38:17]

Jake Bittner: Meaning anybody like we, you know, somebody would say, I need a micro strategy person, right? We would say, oh, we got somebody. And we are. And, or we go find somebody. We're, we're basically selling resumes, staffing, you know, oh, we need an informatica person on this job.

Oh, we can go find somebody, make a match. You know, we list the job, we go make a match. We interview them, we hire, you know, then we hire them. We make the difference between what we bail them out at, you know, and we're basically.

[00:38:17 - 00:38:24]

Will Smith: And why didn't you like that business model, despite the fact that it's not what you thought the business was.

Why did you, once you discovered that, did you also dislike it?

[00:38:25 - 00:40:30]

Jake Bittner: Well, we, we knew that was what. That was a lot of what the business was. And that's common at the beginning of these businesses and common, you know, in some of these, in some of these, you know, as you're getting started, what's. What, what's difficult about that is you have.

You're not really in the value chain other than, you know, the person who made the match. Right? The. You're just sort of taking a, a cut out of somebody else's, you know, because you sort of made a match with somebody and, and stuck them in a, in a roll. There's not a lot of loyalty from the employee side.

There's not, not a lot of loyalty from the client side. They can find somebody who can do it a few bucks cheaper, they're going to switch to them. And, you know, you're. You're kind of holding on in the middle and, you know, every once in a while you get a phone call, yeah, hey, the, the. We're going to go ahead and cut this guy, and boom, he's gone.

It could could be. Could be nothing. Could be the person that had nothing to do with that person because they could have done a great job. They might have finished their job. They might have.

The money might have gone away. They might have had to shift to something else. But you have no control over your future at all. And you're constantly trying to fill the, the bucket with somebody leaving. And do we put them on the bench and do we.

Or do we let them go or do we, you know, staff. Can we find somewhere else to staff them? Can we train them on this real quick and put them here? It's just a lot of plugging holes and feel like you're kind of sticking your finger in the dam every day and never really getting ahead. You're doing things, you're meeting people, you're building relationships, you're getting contracts, but, you know, you're not really building business in a way that's.

That's, that's. That's high value. And so that was really, you know, the early, early days. And then we end up with a lot of, you know, crazy employee stories, which I don't have to, you know, we can go into or not, but, you know, just crazy. Yeah.

I mean, people. We had one guy who got, you know, lost his clearance because he picked up a prostitute and got thrown out of the Got thrown out of the, the, the pro, the, the project. We had two people who turned out they were cheating on their spouses and you know, with each other and so they quit. We had people take, you know, signing bonuses and leave the country for a week. I'll be back next week, never come back.

We had a guy take a sign.

[00:40:30 - 00:40:33]

Will Smith: And these are all people that you were staffing into your client organizations.

[00:40:33 - 00:41:15]

Jake Bittner: Guy, ticket, signing bonus. And then they declared bankruptcy on us. I mean this is on and on, right?

We had, we had one person who would, who would show up for the interview and, and someone else showed up for the job. We're like, wait a minute, that's not the same guy. What's going on? What's going on here? You know, and so it was just all, it just all sorts of mess and problems and things and we just, we just, you know, there was a lot of, after doing that for several years, which we kind of thought we could get, we just sort of, you know, for several years you feel like, hey, if we just do this a little bit harder, we can get ahead and then we'll really have time to work on the business, you know, rather than just in the business every day.

But we never did, we never got it. We never really got too far ahead. Every day was like I said, sticking your finger in the holes of a dam and trying to keep things together.

[00:41:17 - 00:42:45]

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Recall you'd said to me that there was some metric that looked good, like was it sales or just the number of placements? So, so something was like going the.

[00:42:45 - 00:42:46]

Jake Bittner: Right direction but you, we would win.

[00:42:46 - 00:42:49]

Will Smith: A lot of new business but you weren't actually Growing as a business.

[00:42:49 - 00:42:50]

Jake Bittner: We were winning.

[00:42:50 - 00:42:52]

Will Smith: So, so say more about that, that, that insight.

[00:42:52 - 00:45:05]

Jake Bittner: Yeah, I think we felt like, you know, we chased everything that move.

We won a lot of new business. But then you get the end of the year and you, or even, you know, halfway through the year or wherever the, you look at the numbers, you go, whoa, how come we're not growing like we're winning all this new business? But the problem was things were also ending, right? And so our, we, as we started to, to, you know, just fast as we were winning things, we were also, you know, customer engagements were also ending and closing. We were like, gosh, we've got to have customer engagements that we can, you know, we can string together here that could, that, that, that go multiple, you know, quarters, multiple years that allow us to, to grow.

We're, we're just filling, we're just constantly sort of filling, filling the hole. And I think, you know, we, we did end one, one, one great thing is that we did end up talking to a lot of people. We ended up, you know, we did end up sort of signing a bunch of new contracts and building a bunch of new relationships. And you know, we all, we, we, we begin to sort of have a vision of what we wanted, how we wanted things to, to go. But we weren't quite sure, you know, how to get there.

And until we kind of, we kind of looked at a few, look said let's, let's take a step back and look at our current customers, right? Look at our current customers. Who do we think are our best customers and why. Right. And, and unilaterally we had, you know, one customer of the city of Boston that we all felt was, you know, our best customer.

And they had actually been with us for a number of years and we began to realize that that was because, you know, they had a vision. They were allowing us to help participate in driving that vision. We were sort of co ownership of that vision, if you will. Of what that. And we were really helping them build an analytics program.

It wasn't so much about one particular project. It was about transforming the way the whole organization thought about and used analytics and incorporated multiple projects across multiple work streams. And we were sort of viewed as their right hand go to group for any and all, you know, future analytics solutions. And we were like, that's what we want. Like that's the model.

[00:45:05 - 00:45:29]

Will Smith: And, and, and so, and so why.

Jake, is this a question of just did that appeal to you because it was bigger is better or the, the revenue was higher quality because it was a multi year project as opposed to staffing, which is, could just be multi month. Because staffing does have a recurring component to it. I mean.

Right.

I mean you can play somebody and then, and then you earn some of whatever they're earning or is it just a fee based.

[00:45:29 - 00:48:52]

Jake Bittner: Okay, okay. No, no, it definitely. You want some of their own. It can.

It's just that, you know, it was a very cyclical, you know, people would, you had no control over really the vision of what the customer was trying to accomplish. You were just simply trying to stick somebody in there who knew a certain skill set and they needed something else that day, then that person was out. No, I think for us, all of those things are a factor in it. Well, but we started to look at when do we do our best work? When does our team, when does our team, what kind of work is our team?

The people we want to hire, the people we want on our team, the people we consider a players. When do they get really passionate and excited, Excited about the work. Right. And when do they do their, their best work? Where do we, where you know, what drives our economic engine?

Right. In what scenarios can we actually make more money? So those staffing things we're making sometimes, you know, 20%, sometimes you'd make 30% gross margin on a really, really great thing. But on the, you know, like with the city of Boston, they, I don't mind telling you now because it's been 10 years, but they may not appreciate me putting it out there, but, but, but we'd make like 60%, you know, margins and that's a huge difference. Right.

And we had much more control and visibility into our staffing of people. Like if someone was going to go off of that project, we knew three months in advance, you know, and we could put them somewhere else, not to put them on the bench. We could help, you know, find what they needed at the time with somebody else. So they were, we were really a partner with them. So I think it really comes down to, you know, what is our team passionate about?

What are we really, really good at, right? Where can we actually really shine and then what drives our economic engine. And you know, there's a number of frameworks out there that sort of look at something similar to that as really what, you know, kind of what's called kind of your core customer focus, you know, but, you know, there's good to great, you know, for Jim Collins concept, they call the Hedgehog concept. There's other ones that I know in other management management, but, but it's really, you know, they all sort of share that, that same three things, you know, where do we do our best work? What are our people really passionate?

You know, what are we really, really good at? What are we better than anybody else at? And, and we were really, really good at staying focused on delivering these analytics programs. What is our team really passionate about? And where do we make the most money?

And we kind of just, you know, put our heads together and said, why would we do anything else? Well, one answer is we need to get the lights on, right? We need to keep, keep money coming in and stay profitable. And that was one, that was a good reason why we needed to do other stuff. But how could we transition to where, to a future where we only did these, these, these programs.

And that's exactly what we were looking for. And that's where our marketing dollars went towards finding people who were going to go down that path of building a, an actual program. Because those programs last three, four, five, seven years. We, I mean, we have some clients now. I just saw they just renewed another five year client.

We've had them for. This will be a, this will, this, you know, five years will take us to 15 years with NIH, one of the programs there. I mean, these programs last a very, very long time. We have a lot more flexibility on our, on our ability to, to staff them and we have a lot more impact for our customer. And so we're, you know, considered a higher value player in that world.

[00:48:53 - 00:49:04]

Will Smith: Is, does it not introduce some customer concentration or is it concentration that's worth it? I mean, when you had Boston, for example, I imagine that was a significant chunk of your revenue. Or, or am I wrong?

[00:49:04 - 00:49:40]

Jake Bittner: Yeah, I mean, not necessarily. They're all, they're all relatively similar size.

And so the, you know, you know, each, you know, you know, typical, like, basically when we started kind of scoping out what, what we want these to look like, you know, our, our feeling was if you could, you know, at least 5, 500,000 a year. That's when we first started. We. At least 500. If we can't grow this thing to at least 500,000 a year, then, you know, reasonable time frame, it's probably not worth it.

And so most of our customers ended up, you know, sort of being in that 500 to a million range.

And you know, so we never had a real customer concentration problem.

[00:49:40 - 00:49:41]

Will Smith: Okay. Okay.

[00:49:41 - 00:49:41]

Jake Bittner: Yeah.

[00:49:42 - 00:49:46]

Will Smith: Okay.

And so this kind of pivoting of the strategy of the business.

[00:49:46 - 00:49:47]

Jake Bittner: Yeah.

[00:49:48 - 00:49:49]

Will Smith: What did it do for the business?

[00:49:50 - 00:54:19]

Jake Bittner: It was pretty impactful for us. I mean, we had to, you know, obviously figure out a way to make the transition from doing, you know, staffing and we had started to do, to do, you know, some project level work.

But we had to think about how do we explain to a customer how do we, and how do we sort of tell, tell them this is, you know, we don't do staffing, we don't do, you know, we try to, we'll start with a project if we have to, but we're really trying to help you create this, this program. So it, for us what we did was we created a much larger vision that we, you know, were able to come to a new, new customer and say, look, this is what we do, this is what we don't do. And we can't became very clear about that one. I, I think that's one of the really important things. Once you declare kind of what you do and what you don't do, it makes a lot of other decisions within the organizations, within the organization very clear and you can push down decision making much easier.

So not as, not as much, you know, is required of the executives, which really helps the scale. So I think once you can push that clarity down to the organization, that allowed us not to have to work so much in the business and be the ones making so many of the frontline decisions. But, but ultimately we, we created a, A, a, a sort of a, a path for a customer to really achieve significant levels of value through analytics. And we positioned ourselves as your guide on that journey. And you know, is that what you're looking for?

Are you looking to go on this journey? And if they weren't, we, we passed on the opportunity. If no, no, we just need a guy to make a strategy guy. We don't do that. You know, call these folks over here, right?

They can help you out. We focus completely on trying to build these large scale analytics programs. And as we did that, we started to adopt some metrics from, I thought they were pretty good metrics from the SaaS world. Some of the things like customer retention and dollar retention. And we realized in our old model our customer retention was kind of what I was getting to before was 54%.

So we were constantly filling the bucket with new customers and we set a target for, you know, 90%. And I remember, you know, the team being, you know, thinking that was very difficult to achieve. But once we started to focus on these programs and started to win some with our new, you know, model and message, you know, pretty soon customers were with us, you know, again and again. And again, and we started to kind of put some planks in there, you know, customer contracts, I think about them as kind of as planks. And we, you know, they were, they, when we wouldn't be able to renew them year over year over year, all of a sudden the growth started to take off.

Because every new, every new, you know, program we won was additive, right. And we weren't filling a hole anymore. And so that's kind of, you know, from a dynamic of the business, that sort of thing started to happen. But we, it allowed, what ended up happening was it allowed Adam and I to spend more time working on the business rather than in the business. We were able to really start to, you know, start to help focus on scaling.

And I think probably the biggest thing it did for us is it eliminated problems. So, you know, when you're scrappy, you're chasing everything that moves, you know, you, you, you, you go after something regardless, right? Of what that's going to, how that's going to. Tomorrow's problems are tomorrow's problems. That's today I don't have.

We'll deal with that tomorrow. Right? But when you have, when you can take a step back and pick your customers, you can avoid, you can make sure that you're staying, you know, sort of targeted on a core customer that is a, avoids problems for you six months down the road or 12 months down the road, you stay very focused on a set of customers you can deliver for, you know, you can do a great job for. If you can't do that work, you say you can say no, right? And that way you don't get six months down the road and have a pissed off customer.

So I, I, I started, it got to a point where I spent hardly any of my time on customer problems at all. All of my time was spent on bit on growth, on working on in the business, on growing our team, you know, expanding our, our organization and, and Adam, the same way we started to really have more time to, to focus on building the business at the same. And so that really, you know, the concept is sort of the flywheel, right? The flywheel starts good things, you know, lead to other good things and things start, you know, sort of taking off within the business.

[00:54:19 - 00:54:59]

Will Smith: Well, there's so many patterns in there that I think are going to be familiar to the audience.

But it, I think in your case, the magic of it was how they all played together. But the two big ones are not to beat it to death, but the recurring revenue quality, the fact that you weren't Constantly have the recurring revenue, the revenue quality fact that you weren't constantly having refill the, you know, refill the pipeline, ability to be able to work on the business, not in the business because I guess you were delivering higher value work, your customers were happier. There just weren't the same amount of fires to put out. There just weren't the fires to put out that the staffing problem, the staffing business, when you were more of a staffing business, it had. So that freed you to spend your time strategically.

[00:54:59 - 00:56:21]

Jake Bittner: And one of the things that happens, and I know it happened to us and it happens to other entrepreneurs, you know, I've seen certainly is that once you start to have some success, which we did, I mean, we reached a point in the staffing approach, we were going concerned, right. We weren't going to go out of business. But the question was how successful would we be? Right? Like kind of moderately or softly, sort of a little successful, but not really.

And once you reach that point, you can drown an opportunity. Things start coming at you. Opportunities go after this. Can you guys do this? Can you do this?

Can you chase this? Can you, you know, you start to see all these skin, you want to acquire this, you want to do this, you want to, you see all of these distract, you know. And I think that people who, you know, entrepreneurs have a tendency to want to go after all those things. No stone unturned, let's chase everything. But in reality, you're far more successful staying focused on what you do.

And study after study has proved that. Prove that out. I mean, you could read, I mean, I met Reference earlier good to great and great book by, by Jim Collins where they, you know, study these sort of things. And the organizations that know sort of chase after every new idea don't do nearly as well as the ones that just stay focused on what they do really, really well. And that's a common thing.

And we, we felt we, we fell victim to that too early on. We just start, you know, you know, well, can you guys do this? Can you guys do that? Can you guys use this project in Canada? Yeah, sure, we'll be there tomorrow, you know.

Sure. And so I think staying focused.

[00:56:21 - 00:57:06]

Will Smith: Yeah.

One is you're in your stage, you know, your early chapters are about survival and then middle and later chapters are about, you know, strategic, you know, more strategy. Yeah, but, but to your point, I mean, I do think it is a, it's a luxury of a more mature, more established business to be able to start picking and choosing that, that going after everything that Moves is probably, is probably just a necessary evil in the early days in a, in a business like this.

It can be the, the other thing about kind of being more pure play or more, you know, narrow in your client base and what you offer is I, I would assume it makes you more attractive as an acquisition target because when a correct player goes out into the market looking, they're looking for something specific. And if you're just a hodgepodge, you are not something specific.

[00:57:06 - 00:59:16]

Jake Bittner: That's correct. What, what it did, what the other thing it really did for us was it gave us some incredible customer case studies, some really powerful impactful customer case studies. You know, I mentioned some of the clients earlier, but you know, one of the things we also did was we, you know, we stayed focused on.

We decided we're going to have three strategic areas. One was, you know, federal government, healthcare. One was Commonwealth of Massachusetts where I mentioned City of Boston and you know, Commonwealth of Massachusetts as well as a client. And then, and then Commonwealth of Virginia. The Commonwealth is just, you know, that, that just by chance we didn't, you didn't only pick Commonwealth, but, but within Virginia we established quite a substantial beachhead really from zero to being the go to organization for analytics for the Commonwealth of Virginia.

We built, when we continue to do so, to have built a number of solutions for them. Everything from Department of Treasury, Department of Education to the Department of Behavioral Health activities down there, including probably our biggest, most well known one was the opioid data sharing platform for Virginia which won numerous awards across the industry for innovation. The idea being how can we bring together the data from the healthcare side and the public safety side in a safe, secure manner, get that information into the hands of people who make decisions on the front lines in treating the opioid crisis, both law enforcement officials and medical professionals. And that was a wildly successful program for us and as I mentioned, won a number of awards. We started winning other awards for other solutions and those customer case studies and the impact that those solutions were having is, was.

And, and us and our decision to, and our decision, I would say with our marketing firm to push those stories out into the marketplace is what drew acquirers.

[00:59:18 - 00:59:41]

Will Smith: Yeah, well, let's turn to that now, Jay, because I, because I want to get to the end of the story because there are a bunch of lessons I think in your story that I want to have time for you to speak on. Rewinding back to the beginning, I don't think I got the revenue number those. When you bought the business, it had just a small Handful of contracts. What.

How much revenue was the business generating?

[00:59:42 - 00:59:55]

Jake Bittner: I'm gonna say it was in the 3 to 4 million dollar range. Maybe, maybe it's less than that. Maybe it was two and a half, something like that. It was two and a half.

Two. It's really was a long time ago. I should look that back up.

[00:59:55 - 00:59:57]

Will Smith: But no, no, no.

[00:59:57 - 01:00:00]

Jake Bittner: By the end we were, we were over 20 and.

[01:00:00 - 01:00:02]

Will Smith: And great. So let's call it from three to 20.

[01:00:02 - 01:00:06]

Jake Bittner: Yeah. Or three. Ish.

Yeah.

[01:00:06 - 01:00:19]

Will Smith: Yeah. Great. So you're at 20 million going into covet now. So round out.

You just, you kind of just teased it, but round out how now how acquirers approach you and what the story of exiting the business look like.

[01:00:19 - 01:03:45]

Jake Bittner: Yeah. So if you recall back during the COVID time frame, one of the things that happened was state and local organizations took the lead on responding to a lot of COVID activity. And so what that meant was in a very short time from, they had to reach out to the partners and people they trusted and had relationships with to help run the data analytics for Covid. Virginia reached out to us.

So our team was critical in building analytics solutions during, during the COVID time frame for Virginia. That, that, all that, you know, that I think that, that sol. Those solutions as well as the opioid solution began to draw the attention of, of organizations that, that wanted to, you know, acquire us. We always knew that someday the way I think the way, the best way to think about it is this. We always knew that someday we would, we would sell a business.

We didn't have necessarily an exact time frame. You know, Adam had said to me, hey, I've got a few more years in me grinding this out. I don't know how much longer, but I got a few more years. I said fine. We.

So there was, you know, some, some transition was coming. We also knew that to make to the next level of growth, we really need to make an investment on our own. And you know, that was questionable. Do we want to do that or do we want to sort of, you know, is it the time to consider an acquisition?

And you know, we had experienced a significant amount of growth during the last few, the previous few years and during COVID I think, you know, one of the reasons that we experienced a good growth during COVID was because as I mentioned during that time frame, customers had to lean on the people they trusted, the government customers, that is. And we were, we had, we had built a reputation by deliberate, by, you know, deliberately over the previous few years that we were one of those firms and so, you know, things continued to take off for us and, you know, we began to, to, to, to draw interest. And I think the key really for us was we always knew that someday someone would acquire us probably as their analytics department, right? Analytics division, some company that didn't have analytics, another systems integrator that wanted to get jumping in the analytics world. So we were building a company to make sure we, we could be that.

But we also built, we also were building the company to make sure we all, we had our, we could keep going ourselves. There was no need to have to sell it, if you will. And I think, you know, from my perspective, that was the best strategic option, right. Rather than running a process and bidding against other people, bidding people against each other, I, I, My opinion is you come up with a better outcome if you have the ability to walk away, right? If we have a very reasonable option which says, yeah, you know, appreciate it, we're going to go keep, we're going to keep.

Right? We're going to keep doing what we do. We're going to keep growing on our own. And that was our strategic position. And I think probably one of the keys that got us because it took, it took the, the company we ended up agreeing with by, from the first meeting, it took over a year to do a deal.

Probably three or four offers in there, you know, increasingly larger offers that we kept, you know, kind of saying no to. We didn't really go, we didn't engage or we didn't really negotiate. We kind of. No, no, we're good, thanks. You know, kept having to.

Finally they did come up with a number that they're like, well, maybe we should think about this for a minute. And I know we can kind of tell the story of how that came together, but, but yeah, that's kind of, that's kind of how thing, you know, we drew a lot of attention and, and there was a firm that made an offer that we, we felt we couldn't really turn down.

[01:03:46 - 01:04:13]

Will Smith: But Jake, why, if you, it sounded like Adam was saying, you know, if not now, in a few years I am going to want to exit. And it sounded like if now is going to be a time to exit or kind of take the company to the next level, it had kind of plateaued, not plateaued, but it had reached a point where it was a natural selling point. If not, then you're gonna have to sign up for another few years.

So why were you not more eager when you had this company knocking on your door to buy?

[01:04:13 - 01:05:54]

Jake Bittner: Well, because we, we just you know, we weren't necessarily planning to sell it. We weren't necessarily setting up to sell it. I mean, we didn't have, like. I didn't have a plan B.

Like, we didn't really have a real. Like, for myself, I mean, you know what I mean? Like, like, I didn't, like, have a real. We just weren't. We really were enjoying what we're doing.

I mean, it was fun, you know, working, you know, being called into the governor's office and, and asked to work on xyz, you know, project. And I mean, I received a. We had a House bill, I think it was 560 or House Resolution 560 in Virginia that was passed that was acknowledging Clarion's role in the, in the COVID crisis. I mean, it was pretty cool, right? So we got on the House of Representative, our House of Delegates, and enrichment, and receive a parchment paper and, you know, so we were doing a lot of fun stuff.

So it was like. Yeah. And making money. We were, you know, we had, we were. Our.

Our profitability at the time was just north of $3 million. So, you know, we paid out the loan long ago and from the acquisition and we were, you know, distributing a good amount of change. So there was really not a. We weren't all that eager to, to do it. You know, I think things changed for us as the numbers started to get a little higher.

And, you know, we had some. We talked to some people who I consider to be sort of really, you know, great advisors on these sort of things. And, you know, they pointed out, hey, you're not going to see these valuation, you know, interest rates are going to go up. This, this is a time with a very, very low interest rates. Right.

Almost zero. And, you know, valuations are going to come down, interest rates are going to go up. You could work for the next, you know, five, 10 years and not get the same offer again. And I think that's. I think that's not to be true, to be honest.

But what.

[01:05:54 - 01:05:55]

Will Smith: What was the acquisition offer?

[01:05:55 - 01:06:06]

Jake Bittner: So we were 3.1 million and we were offered, you know, 35. So about 11 times earnings. A little.

11 times earnings. And. And that's why I ended up accepting. Yeah.

[01:06:07 - 01:06:12]

Will Smith: And Jake, so 11x for a business doing 3 million in earnings.

[01:06:12 - 01:06:12]

Jake Bittner: Yeah.

[01:06:12 - 01:06:15]

Will Smith: Is a, is an incredibly high multiple.

[01:06:15 - 01:06:16]

Jake Bittner: Did what.

[01:06:17 - 01:06:19]

Will Smith: What do you think the reason for that was?

[01:06:20 - 01:07:26]

Jake Bittner: Well, I mean, you alluded to earlier.

I think a lot of it in that case comes down. Well, there's two things. I think there's. There's Quality of revenue. Right.

And quality of future earnings. And you know, for us there's a number of factors there, there's factors of whether you're prime or you're a sub. How can, how, you know, how, how, what types of capabilities are you delivering? Are there high value capabilities that are, that are highly sought after that you know, that people are going to want in the future? What types of margins are you generating?

You know, and I think, you know, oftentimes the idea is that a strategic can, can, you know, bring in your business and kind of, and can sell, take what you do and sell it to 3, 4, 5, you know, 7, 8 of their, of their, of their clients. And so, you know, for them there's a lot more impact that they, that they can see. The other one I think for us is the growth rate. You know, we were on a significant growth rate. So there's kind of that idea of the rule of 40 which maybe I've seen people talking about rule 50 now maybe.

But it's basically, you know, the idea of your EBITDA percentage and your growth percentage. If they're, you know, 40 or better, you're a high, softer target. I'm not, you know, I don't, that's sort of a rule of thumb I.

[01:07:26 - 01:07:32]

Will Smith: Guess, but in SaaS land. But you're applying.

We were recurring, your recurring nature.

[01:07:32 - 01:07:57]

Jake Bittner: Yeah, we were in that, in that space and I think we were looked at as a, we were looked at and we did this intentionally positioned ourselves as a tech enabled service. Right. So we tried to be a little bit more of a technology type of. You know, we were services but we were tech enabled services.

And so that's, there's a little bit of a middle ground between technology and services, pure services, where they look at tech enabled services as a little bit, you know, stronger.

[01:07:58 - 01:08:05]

Will Smith: You know, purely just a label that you took for yourselves, Jake, or was there a substance to that? No, no, no, no, no.

[01:08:05 - 01:08:44]

Jake Bittner: That's the industry standard one. And in fact the, the investment bank we used, I think they, they primarily focus on, on that sort of, that sort of area.

So you know, all of those factors plus the low interest rates, plus the you know, ability to walk away and do our own thing and, and I think the other thing, there's a lot of synergies between us and the, and the acquirer. You know, we had a, they had some, some strong relationships in, in certain states where we didn't and, and we had relationships in states where they didn't and they were a state and local focused Company. And so just all of that added up to where we kind of got to.

[01:08:45 - 01:09:00]

Will Smith: Yeah. Well, we were talking, Jacob, about, you know, why sell?

Why not hold and compound and holding. Indefinite hold and compounding forever and ever is very appealing. It's something that I generally celebrate and am drawn to.

[01:09:00 - 01:09:01]

Jake Bittner: Yeah.

[01:09:01 - 01:09:15]

Will Smith: But when you have.

When the offer is so full and you. And you, like your. One of your advisors said to you at 11x with these multiples almost certainly, almost certain to come down as interest rates go up.

[01:09:15 - 01:09:16]

Jake Bittner: Yeah.

[01:09:16 - 01:09:40]

Will Smith: It doesn't make any sense to stay in the business for another five or 10 years and sell then when you might sell for the same or less.

The whole magic of compounding and appeal of compounding is that, is that your asset is going to be worth a lot more in 10 years. But if somebody offers you something that is so rich now that may actually supersede where it's going to be in five or 10 years, then it's only logical that you sell now.

[01:09:40 - 01:10:23]

Jake Bittner: Yeah. And I think, you know, if you remember, you know, we did this in 2011, mid. Mid 2011, and really entered into the, you know, the serious negotiations in, you know, early 2021 that, you know, Covid was still going on.

It was unsure what things are going to be like coming out of it in terms of the economy, what our client base, you know, so there was some uncertainty there. So there, you know, another factor as well. This was a lot of certainty, which was great for our families and our future and everything like that. This was, you know, there's just a lot of. I think also, you know, maybe most markets kind of continue sort of, you know, predictably up, up, up, up, up, you know, five, ten a year.

But this is not that kind of business. And this business can go up, down, up, down. As you can see, you know, we're in the middle of a government shutdown. A lot of them are down right now.

[01:10:25 - 01:10:27]

Will Smith: So which business, Jake, specifically?

[01:10:27 - 01:10:43]

Jake Bittner: Government. Technology Business. Government. Yeah. It can go up and down.

So, you know, things can happen next year where we. Where we were, you know, all of a sudden shrinking. Right. And now we're, you know, in a. Having a hard time, you know, because we.

Because we had grown so much, we had to make. We had to maintain that level, you know.

[01:10:44 - 01:10:44]

Will Smith: Yeah.

[01:10:44 - 01:11:02]

Jake Bittner: And so there's just a lot of. I don't.

In a vacuum. Yeah. The owning and compounding and all that sort of thing make a lot of sense. But we also had to be the ones that, you know, showed up. I mean, in theory, you could hire Somebody else to do the job, you know, an operator.

But that's very difficult in the setup of business. It really needed to be us.

[01:11:03 - 01:11:15]

Will Smith: Well, I've heard use the word grind, Jake, and I don't know if you, if you meant that like that. That's actually how it felt. Yeah, but, but there was probably some fatigue too on the part of you and definitely.

[01:11:15 - 01:11:24]

Jake Bittner: And Adam definitely fatigue and certain this, provide this provided some certainty and you know, an end in sight. Right. If you will.

[01:11:25 - 01:11:29]

Will Smith: Yeah, yeah. And that 35 million, was that pretty clean?

[01:11:29 - 01:11:30]

Jake Bittner: What, what.

[01:11:32 - 01:11:34]

Will Smith: All cash or what?

[01:11:34 - 01:12:05]

Jake Bittner: We can talk about that now? No, so we had, we had a significant portion of cash. I think it was like 17, 18 ish in cash, 5 million equity rollover and maybe 12 ish in earnout. Yes, I think that's, that's, I think that's what, that, that's what, 18 upfront, 12 earn out and, and 5 in rollover equity.

And so. Yeah, so, so I guess we can get into that a little bit now. So I, you know, we, we joined the business.

[01:12:05 - 01:12:07]

Will Smith: Yeah, let's have the post script here.

[01:12:07 - 01:14:23]

Jake Bittner: Yeah, we, we know we had gotten to a point where we, where we, you know, we've had some epiphanies in our business.

We really ran things very efficiently, very effectively. We had great internal processes. We ran okrs, if anybody's ever, you know, heard of those. It's, you know, really a way to help improve and grow the business objectives and key results. Very disciplined the way we approach things, long term thinking.

And we came, you know, we were kind of, you know, of course you're wooed by a business. You don't quite know what's going on behind the scenes and, and you expect it to be some, somewhat different when you get there. But it was dramatically different when we got over to the new business than what we, we were expecting. It was quite dysfunctional among, you know, it clearly at the top. And that began to, that, that, that filtered down quite a ways.

And you know, my experience, I took over as the head of sales, the sick chief growth officer of the new company because that was going to my background and became immediately aware that the CFO and COO did not get along and everyone else was kind of lining up behind one side or the other. The CEO is trying to, you know, ride in the middle and they're looking at me and like, what side are you on? And I'm like, yeah, I just want to sell stuff. You know what I mean? What are we doing here?

And so it was a lot More political organization than I was prepared for. I was prepared to get the work on, you know, on the business and start to kind of get everybody sort of rolling in the same direction. I'm used to that, you know, processes that, that made sense and you know, here we are back to large company, you know, bureaucracy processes that, you know, made no sense, but we did them anyway. And so, you know, that begin to, you know, I spent a year there dealing with, with you know, a lot of fallout from that, trying to, trying to fix things. And then you know, after six months it became clear to me I was not going to be able to stick around here much, much longer.

And, and I wanted to stick for a year to make sure we got our earn out. And then, and then, then I kind of planned to go ahead and leave and then, but that's kind of that your point was when things took it even an even more significant term, I.

[01:14:23 - 01:14:26]

Will Smith: Guess you'd say because of that earn out, did you get it?

[01:14:26 - 01:14:46]

Jake Bittner: Well, we achieved the numbers we were supposed to achieve to, to, to, to reach, to receive the earn out. Everyone acknowledged that.

But we ran into the problem of them not being able to pay the earn out when, when, when things kind of came to it.

[01:14:48 - 01:14:50]

Will Smith: And this is a 12 million dollar value.

[01:14:51 - 01:17:27]

Jake Bittner: There were three different chunks of it at that point. It was probably, I think it was the first, the first chunk which was 8, 8 something or 9 something and there was a couple more due in the future. But, but, but yeah, they weren't able to come up with it.

You know, there's, you know, obviously that was, that's frustrating, upsetting.

You know, there's different opinions I think on both sides according to kind of where, where things, things were. They, they sort of view it as, and I, and I get it, you know, I think it's the right thing. They, you know, they were doing the right thing for the company and you know, if they would have paid us, they'd be out of line with the covenant on their loan and their, you know, and, and so that would, you know, of course bring other problems for them. And so from their perspective it made more sense to kind of know, delay and defer us. Obviously that wasn't real, real, you know, real good for us.

And you know there's, I think we had disagreements over the legal terminologies and you know, we, we viewed it as, that they needed to pay us. They viewed it as some of the terminology in the contract allowing them some, some time if a situation like this, you know, occurred and you know, we Ended up working something out essentially in the middle because, you know, it's a, it's interesting. I mean, we were in a tough spot. We had rollover equity. You know, their point was, look, hey, you could sue us and you could win.

We don't think you will, but, but you could win. If you do win, you'll probably get pennies in the dollar, right? Or 80, 70, 80 cents on the dollar, and your equity will be wiped out. So, you know, is that really the best direction to go? And they, they thought they'd win this lawsuit in the first place, but, you know, even if they lost, that was kind of their point.

And it was a good point. I mean, we really didn't want to, you know, what's the point of being right if you're going to end up losing a bunch of money over it? The question becomes, did we think they would, you know, pay us eventually? And, and yeah, we did. They were.

They, they never, you know, you know, obviously it's, it's not a good situation. I think they know they could have handled it probably a little bit, a little bit better in terms of, you know, when and how they told us. But, you know, I would say this. They never, they never lied to us about things.

Very, very honest and upfront about things and transparent. So that, you know, that was, that was good. But, but of course, for me personally, the, the sort of dysfunctional nature of the, of the business, as well as needing to go kind of be external to fight this fight and make sure we eventually did get paid, you know, required that I, that I no longer kind of work there at the business. So I did end up leaving it in, in 2022.

[01:17:29 - 01:17:32]

Will Smith: Well, I'm glad you got your earn out.

That we did get significant.

[01:17:32 - 01:18:14]

Jake Bittner: We did, we got, it took, you know, if, I think if we would have known it was going to take a year and a half when we, when that first happened, we probably would have reacted a little bit differently. But, you know, they said, hey, just need a few weeks. We just need, you know, then a few weeks would come by. We just needed four months.

So we're going to try this, we're going to try this again. Like I said, they were very upfront with us. They were very frank. They were very, you know, they, they worked diligently to find a solution and, and they eventually found one. So I can't, I don't fault them for it.

You know, from the perspective of sort of the, the money side of it, the private equity side of it, they, they were, you Know, it was what it was. Right. The business was struggling and they had to do the right thing for their LPs and for their investors. And of course that meant us too as far as, you know, equity owners.

[01:18:14 - 01:18:19]

Will Smith: And Jake, what's the, the learning for people listening.

[01:18:19 - 01:19:10]

Jake Bittner: So we sold the company to a, to a strategic company. Strategic that was backed by an independent sponsor and it's a very, you know, significant sponsor that was, that, that did, has done a lot of platforms. You know, we sold to a platform company of theirs. It's probably their seventh or eighth platform. You know, very successful, good reputation.

And I think they do generally, you know, a good, good folks and do a good job. In this particular case things, you know, the business wasn't going well and I suppose, I suppose a rate of 7 out of 8 is pretty, pretty good, you know, independent sponsor world. But you know, one thing I think we didn't think about, we didn't fully appreciate maybe when we did the deal was that if something were to go wrong like this, an independent sponsor doesn't have a bucket of money to reach back into to help solve problems. You know, in, in a business like this. Right.

So when we tell people the story.

[01:19:10 - 01:19:11]

Will Smith: Say more about that.

[01:19:11 - 01:19:50]

Jake Bittner: Well, when we tell people the story, people are always surprised because you know, most people assume private equity has a fund and you know, if their company gets in trouble, one of their portfolio companies gets in trouble or owes money or something, they can, you know, reach back into the fund and make sure that, that it kind of gets taken care of. But you know, a, a independent sponsor is raising money on a deal by deal basis. You know, they would have to go out and raise new money to, to pay us and dilute their equity and it would dilute their equity and cause all other sorts of other problems and, and headaches for them.

And so it's not really a really realistic option for them. And I think we didn't, we didn't really realize that. Yeah.

[01:19:51 - 01:20:27]

Will Smith: Because this, this is, yes, it's an independent sponsor. I, I know who it is.

You'll leave the name out. But this is a big independent sponsor, a mature, well known name. Yeah. So for the uninitiated, you might just look at this acquirer and think that they've, you know, they've got all kinds of resources but because they're structured as an independent sponsor, each of their platforms is really segregated from the other and they keep the, you know, they keep the, you know, the balance sheets separate across those and if one, if one interest distress, the others aren't coming to save it.

[01:20:27 - 01:20:27]

Jake Bittner: That's right.

[01:20:27 - 01:20:30]

Will Smith: There's no, there's no corporate, there's no real corporate entity there.

[01:20:30 - 01:21:30]

Jake Bittner: That's right. That's right. And so, yeah, I mean, you know, we probably could have, you know, maybe could have structured. I mean, it's hard because like during the, during the, the deal time, you know, there's, there's so many things going on that are all.

Well, in theory, if this happens and that happens and you know, you're, you're dealing with, with what all sorts of what if scenarios. And this was one we, we considered, but we didn't, we didn't consider it very likely. And so we didn't spend a lot of time, you know, you know, negotiating very hard on this sort of thing. We, we sort of, you know, and that's why some of the language was, ended up being vague around it. So, you know, it's, it's hard to say, well, we should have gone back and spent more time there because at the same time it, it still was a very remote odds when we were going through the deal.

And there's so many other things you're trying to negotiate, you know, in that time frame. Do you, did, you know, I, I, the odds of any of those things happening is, you know, any of those sort of remote things happening could have happened. And, and you know, this one did end up happening. But, but.

[01:21:32 - 01:21:36]

Will Smith: Did you negotiate for, for more of the earn out to be actually in the cash up front?

[01:21:36 - 01:21:50]

Jake Bittner: That would be, you could try. Of course that, that's, you know, part of the earn out is to bridge evaluation gap. And you know, that was, that was the approach was really to use that to bridge evaluation that we, we felt we needed to get to in order to sell the business. So I don't know, I thought they.

[01:21:50 - 01:21:53]

Will Smith: Were coming to you with increasing valuations without you guys even trying to.

[01:21:53 - 01:22:08]

Jake Bittner: No, yeah, we, we were, we were more than willing to take in and out because we knew we had a high, a high belief in our business. So for us was not really a, a problem. And for them, it allowed them to, to pay a price that we ultimately, you know, we felt good about and they felt good about.

[01:22:08 - 01:22:16]

Will Smith: And for a multiple like that that we discussed in 11X, the richer the multiple, the more likely there's going to be, you know, performance hurdles attached to it.

[01:22:16 - 01:22:24]

Jake Bittner: That's correct.

And so we, and that's another important reason why we got an 11x was, was the structure of the deal and we felt very confident in our abilities to deliver on that.

[01:22:24 - 01:22:34]

Will Smith: So well, it ends on a frustrating note but it's really the, the full circle story here is a huge success and a big, a big victory.

[01:22:35 - 01:23:26]

Jake Bittner: Right? Yeah, I think that's true. And, and of course that's the disappointing, I mean, I mean it ends in a, you know.

Well, there is a frustrating note in there but you know, I, I, it's taken me a while to get here but I do believe that all, all, all's well, it ends well. They did you know we did end up getting paid in full with including you know, some penalties and things that we had negotiated and, and like I said, they were very upfront with us about things work things out in a way that was ultimately mutually acceptable. It's unfortunate we had to go through it but, but you know, I don't, there's no ill will at this point or, or that sort of thing, you know, because we're also on the other side of it too. So which is, which is helpful but so, so you know, I, being on the other side of it and of course we, they haven't sold yet. The, the business, the platform we sold to is not sold yet and so we do have a equity position there but other than that we've got it, we've received everything in all of our, all of our cash.

[01:23:26 - 01:23:30]

Will Smith: So, and so how has life been since then? How old were you when you sold?

[01:23:30 - 01:23:43]

Jake Bittner: Let's see, it was 20, 21. So I was, I was actually we sold and I think we sold on my 45th, two days after my 45th birthday. So yeah, so I don't know if that's old or young but anyway, somewhere.

[01:23:43 - 01:23:45]

Will Smith: In the middle I'd say, I'd say it's young.

[01:23:45 - 01:23:46]

Jake Bittner: I mean somewhere in the middle.

[01:23:46 - 01:24:26]

Will Smith: No, I, I, I'd say it's young to make life changing money like that into, you know, we, of course we see, you know, tech headlines so we always think that people exit when they're 25 but the reality is not that. I'd say exiting at 45 is, is great. Congratulations Jake.

It's great, it's a great story. Now let, let, let's, we're bumping up on time so let's turn to just a couple of themes. So for the searchers listening, people who want to buy a business, you had said that you're enthusiastic about gov tech. Yeah, it's where you come from and so obviously you've had success there. But why do you think broadly it's a space that searchers might look in.

[01:24:26 - 01:24:40]

Jake Bittner: I've been investing in Search businesses, you know, in self funded search businesses and independent sponsored businesses, but really more self funded search businesses in the government space. So aerospace, defense, government services. And so there are people out, out there doing that and for, for good reason.

[01:24:41 - 01:24:44]

Will Smith: What's the name of your investment firm or vehicle?

[01:24:44 - 01:24:46]

Jake Bittner: We operate through Mission Support Partners.

[01:24:47 - 01:24:53]

Will Smith: Yeah, Michael, Michael and I. Yeah, Michael Dorcas. I know Michael. In fact, that's how we met through Michael, also local here.

[01:24:53 - 01:28:10]

Jake Bittner: So Michael and I, Michael and I, you know, kind of operate through Ms. Mission Support partners. But I just, you know, my technical dollars flow through a different entity.

But, but, but, yeah. So through Mission Support Partners we've invested in several search search businesses and some search funds and you know, variety of ETA activities in the government space. The reason why I like it, you know, here's, here's. So it's a very, it's a, the growth can be very significant. So contracts are larger, right?

You're not dealing with small individual contracts, you're dealing with much larger contracts. Then the dynamic is sort of once you win a, you know, a small contract, say $200,000 contract, you're not, you now really are qualified to go after $400,000 contracts. Once you win a $400,000 contract, you can go after a $600,000 contract and then 8 and then 10 or a million and then, and then 1.5 and then 2 and then 3. And so the growth jumps can happen much quicker. And in fact it's not uncommon.

Not saying everybody does this, but it's not uncommon for businesses to grow 50% a year, year over year for several years. In this space. The growth is, the opportunities for growth are significant. You're also dealing with. And one of the things I really like about it is that you're dealing with multi billion dollar organizations with multi million dollar problems, meaning people who have complexities and problems and challenges.

But most organizations like that, that are commercial organizations prefer to work with large businesses.

Target I'm sure gets their, you know, their data analytics services performed by Deloitte and Accenture, not by Clarion. Right. But government organizations not there. Not only there are set asides, right? There are those sort of things.

They have their own hang ups. But because there are set asides there, what happens is governments become very, organizations become very used to working with small businesses. So even if a particular contract is not a small, is not a small business set aside, they're used to working with small businesses on things. And so none of our business actually was ever set aside at all. But you know, they're used to working with smaller, more innovative firms than just the big guys.

Yes. Obviously a $10 million a year contract, we're not, you know, it's going to go to some, some bigger organization, but for something that's in the range I was talking about 500 to a million dollars, they're going to look to small. The small business is going to have every chance to compete on those as a large business would. And that's, you know, very compelling. Contracts are also very long term when you, if you design, you know, design things.

Right. Like I was talking, like I talked about earlier, you know, our contracts towards the end ended up being, you know, anywhere from three years to five years, which allows us to have, you know, allows you to plan around those contracts and be more profitable. And, and then I think the other thing is just the mission impact. Right. You can really have a big impact by bringing, you know, intelligence and smart, you know, smart approaches to, innovative approaches to the government space and have a real impact on the mission.

And that's very meaningful to employees. It really, you know, it tends to lead to long term employee loyalty and long term retention of employees because they're having a meaningful impact on something that, that they can, they can see.

[01:28:10 - 01:28:24]

Will Smith: And what do you mean there, Jake? The, the mission, like when you're helping fix government or improve some program in the government, it's more gratifying than helping a business do something better because you're basically, it's a public, you're helping public service, essentially is.

[01:28:24 - 01:28:54]

Jake Bittner: Yeah, I mean, I mean, yeah, I think so.

I mean, I think, you know, you know, I don't get all, like I've, like I mentioned, I keep throwing Target on the bus here. My. But that's one of the ones I went to when I was with SAP and you know, I really wasn't very passionate about helping, you know, target, you know, deliver more packages, more accurately. I mean, who cares really, if somebody gets there, you know, it doesn't make any difference. You know, I guess it's not a lot of satisfaction that for me, it's a lot more satisfaction in helping get somebody into the right opioid response program.

And maybe.

[01:28:54 - 01:28:58]

Will Smith: No, absolutely. Just, it was just clarifying. That's what, that's, that's what it was. Yeah.

[01:28:58 - 01:28:59]

Jake Bittner: Yeah.

[01:28:59 - 01:29:05]

Will Smith: Okay. In terms of government services, obviously it's an enormous category.

[01:29:05 - 01:29:05]

Jake Bittner: Yeah.

[01:29:05 - 01:29:11]

Will Smith: So do you think a good entry point is the type of business that you bought?

So some sort of systems integrator?

[01:29:11 - 01:30:26]

Jake Bittner: Certainly any type of, you know, information worker, type of information work. Right. Type of service is a good way to get in. Whether that's, you know, trying to help outsource a certain process and, and improve it.

Whether it's trying to help them, you know, improve the way they manage, you know, financials or you know, financial planning and analysis could be more intelligent way of managing inventory or outreaching or buying, buying parts for something, you know, because certainly there's a lot of logistics that happens, particularly in the military, but there's a lot, I think, you know, if you can help them, if you're involved in something that helps, you know, helps them operate more efficiently, that's really, you know, the way I think about it is either outsourcing something where they're coming with new data and information or something that helps them really operate more efficiently would be, it would be the best way to think about it. That's, to me, that's, you know, if you're selling a Lima commodity. Okay, I mean it's, it's okay. It can be, it can be okay businesses and we've, we've seen a few of those. But, but I think it's, you know, you're, you're in a stronger position if you're really helping them rethink something or outsource a process that, that today cost them X and you can, you know, do it for 10% less or what have you.

[01:30:27 - 01:30:27]

Will Smith: Okay.

[01:30:27 - 01:30:28]

Jake Bittner: Yeah. Okay.

[01:30:28 - 01:30:59]

Will Smith: Well, let's now take the same question, but outside of the government context. So just systems integration type businesses, broadly, whether or not they serve government or commercial, that's obviously just a vast category.

I mean there's just, just an enormous ecosystem of systems integrators. It's very, we don't see these businesses as targets very often. In, in search land you might argue that MSPS are a version of systems integrated, I think.

[01:30:59 - 01:31:02]

Jake Bittner: So you're dealing with technology, IT services in some capacity.

[01:31:03 - 01:31:17]

Will Smith: Sure.

Except the difference I think might be that MSPs are kind of more recurring support and it's really an indefinite contract where systems integrators is usually kind of.

More project based like your business or.

Am I splitting hairs?

[01:31:17 - 01:31:57]

Jake Bittner: I think it can be and it often is. But I think the really the, the key is how do you turn it into, you know, we used to think about a project versus a program.

How do you, how do you really turn something into a pro? You know, project having a start and an end. You know, we, we would, we would try to work with customers on, on any, you know, get them to have a vision of a program which was something that was A multi year engagement. So you do see a lot of systems integration firms on multi year programs that, that will span multiple contracts, five years and five years again, then five years again because they're really supporting all aspects of a system, you know, you know, operations and maintenance after you build something as well. Which is another, you know.

[01:31:58 - 01:31:58]

Will Smith: Yeah.

[01:31:58 - 01:32:32]

Jake Bittner: Another kind of angle angle of it so that you know, it's really all in that space. And I think the, the, you know, you have to understand what you're doing. That's the thing is it is a little more, it's more complicated, okay. Than, than maybe some of the businesses that you know, that we, that are typically looked at in the searcher world.

It is, but that's because you're also solving more complicated problems and more complicated problems are higher value problems. Right. And you can charge more essentially. Right. For the, for those sort of, sort of solutions.

Right. I mean when you come, when you're solving multimillion dollar problems, your, your price tag is, you know, multi millions. Right. To solve those problems.

[01:32:32 - 01:32:51]

Will Smith: And so Jake, do you think that you could, somebody who didn't know the space is as well as you did after 10 years of selling these enterprise sales, these enterprise solutions could have bought this business and been successful or this was, this was really a case of tight business buyer fit.

You could get in there on day one. Like you knew who to call.

[01:32:52 - 01:33:48]

Jake Bittner: Yeah, I mean look, that's another thing. I think that, you know, for me, I'm not, I'm not a huge fan of, of people kind of jumping industries and this thing. I think that's another risk point to come.

Bring it back to risk and risk being relative. And you know, to me, you know, getting into a business that, you know and spending time having someone else pay you to get to know that business is, it's a huge risk mitigation, you know, approach. And so I had spent 10 years in that business and was able to, you know, to jump into that seat. And I think that, you know, that to me whenever I hear people talking about, you know, buying a business and something else other that they don't know, I, I just see risk all over that sort of thing. And so, you know, I, I, I think, you know, if you're a salesforce implementer today, I think you can jump out and run a Salesforce, you know, implementation Firm or, or ServiceNow or Appian or any of these, you know, platforms or whatever it might be.

I mean so, but, but if you, if you're coming, you know, raw from something completely different, I Think it'd be a bit, I think it'd be a challenge.

[01:33:50 - 01:33:58]

Will Smith: Yeah. Great Jake. Well, thank you for sharing this remarkable story with us before I let you go tell people what you are working on today.

[01:33:58 - 01:35:07]

Jake Bittner: So after leaving I, you know, took some time off and, and, and I, for me I realized that you know my passion really you know, rather than working for large businesses is really in entrepreneurship.

That did lead me to working with, with Michael on admission support partners and, and we continue to invest in, in you know, ETA type businesses whether they're self funded search or independent sponsors in the government space. But for me, you know, and I, I'm going to continue to do that but, but I also wanted to get, you know, really felt like I wanted some more engagement with entrepreneurs rather than just being an investor. Sometimes it's a little passive and so you know what I found looking as I sort of look into what how can I really get more engaged with, with entrepreneurs and sort of give back and help people who really you know, need some guidance and help along the, along these lines. And I found business coaching and so you know that's where I've, I've dived into now and have you know decided I'm going to take on a you know, a handful of clients in that space. I've got two now.

I'm probably looking to go up to, to six within the next, you know, period here. So I got some, some openings if anybody's interested and so Jake, are you're.

[01:35:07 - 01:35:12]

Will Smith: Are you looking to work with searchers specifically or any entrepreneur, business owner?

[01:35:12 - 01:35:19]

Jake Bittner: Yeah, probably my, my ideal client is, is somebody who I, a searcher that I'm invested in as well. So you know, any.

[01:35:19 - 01:35:20]

Will Smith: Invested in.

[01:35:20 - 01:35:51]

Jake Bittner: Correct. So any searcher that I'm, that is, you know, raising money and open to business coaching at the same time to want to have somebody on, on board would be my ideal scenario where I'm, I'm, I'm invested in you and your success in the long run and, and, and also sort of an engaged advisor and business coach in the more you know, near term that that's my ideal scenario. So anybody who's out raising, who's raising money now would also would love to have somebody you know who's been there and done that and sat in that seat with them. I, I'd love to connect.

[01:35:51 - 01:36:00]

Will Smith: Well I, I recall too from our pre call I'd asked you about buying small. You bought a business that was doing 2,3 million in revenue. No EBITDA as we discussed.

[01:36:00 - 01:36:01]

Jake Bittner: Yeah.

[01:36:02 - 01:36:18]

Will Smith: And I think one of Your answers was, well, we did ultimately figure it out, but with either having bought a larger business with its business model more dialed in and, or having somebody who could have kind of pointed out the error of our ways.

[01:36:18 - 01:36:18]

Jake Bittner: Yeah.

[01:36:19 - 01:36:31]

Will Smith: Would have accelerated things even even though, you know, you know, to make 35 million bucks in 10 years is still faster than most people make it, which is never. But, but you feel like he could have even been tighter.

[01:36:32 - 01:36:32]

Jake Bittner: I think so.

[01:36:33 - 01:36:33]

Will Smith: Success.

[01:36:34 - 01:39:27]

Jake Bittner: Yeah. And that's, that's kind of what I. Yeah, that's true. I think that's one of the, one of the value adds that, that someone like a business coach can help to. Or somebody's been there. I'll just, let's just say somebody's been there and done that, like myself has sat in that seat, you know, can see things and can challenge and push and, and help to help to really accelerate.

It's not that people aren't going to get there eventually or might figure it out in their own right eventually. It's how quickly do you want to figure some of those things out and get on, get on to working on, you know, on growth, right. How quickly do you want to get to where you, where your goals are? And I think accelerating through that is really one of the big values of having somebody who's, who's, who's been there and done that before, you know, as a, as a coach, as a, as a, as an advisor to you as you move through this. I mean, the other one is, and I hear this from some of the folks talk to all the time is, you know, just how lonely you're not, you know, but, but let's just say, you know, this lonely.

The top people often say, right. I mean, the CEO role, it's really what it is. It's hard to appreciate the difficulty of the job of someone who hasn't sat in that seat. And I think. And there can be some decisions that are hard to make, right?

Your job is to make a small number of really big impactful decisions and making some of those big impactful decisions can be, can be difficult without having somebody, you know, outside to, to bounce things off of. You know, a lot of times it has to do with hiring decisions, particularly around the executive team. People are very reluctant to, to, you know, to challenge some of those, some of those, some of the thinking they're thinking around that and to really make a move. And you know, you do have to consider is, is the person capable of the job? Do they want to do the job?

Are they given, you know, do they understand what's, what's needed to do the job. And you know, an objective analysis of that can be very helpful because one of the most impactful things is really getting your team right around you, right as an entrepreneur. And that's a hard thing to do just on your own. So I think having somebody who's sat in that seat to help you give you some perspective and you know, really ask you some of those challenging questions. I mean you can look around at your executive team and, and one of the biggest questions I would ask is do you know if you're kind of struggling with people who are on your executive team and you're not sure if someone should stay or go?

I mean would you enthusiastically rehire that person today if that job was open and that person came in for an interview, would you jump and hire them? And if the answer is no, you got to consider a change. So those sort of considerations, challenges, you know, holding people account, helping to hold the CEO accountable. Because in a business where you're the sole owner, you know, and you own the majority of the business, there's no, I mean, yeah, you're accountable to your investors but you know, there's really nobody holding you accountable on a day to day basis. And that's, I think people need that.

[01:39:28 - 01:39:36]

Will Smith: Great, Jake. Well, we'll include a link to your LinkedIn in the show notes so that anybody who might be interested in, in talking to you about coaching can reach out.

[01:39:36 - 01:39:51]

Jake Bittner: And then my, my, my coaching firm is, is a Bitner Performance Group. So Bitner last name B N R performance group.com if you want to, you know, learn more about, about the coaching activities and, and, and reach out and schedule time to talk.

[01:39:51 - 01:40:05]

Will Smith: Okay, great, perfect.

We'll include a link to that as well. Jake Bitner, thank you very much. Congratulations. I know it's been a few years now that you've, that you've exited but what a great, great run and congratulations on it. So thanks very much for coming on sharing with us.

[01:40:05 - 01:40:07]

Jake Bittner: Thanks Bill, really appreciate you have you having me here.

[01:40:07 - 01:40:55]

Will Smith: Hope you enjoyed that interview.

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