Sean Tepper’s Exit Lessons Learned: Structuring Your Business for Maximum Value

Welcome to the podcast that’s dedicated to helping business owners to prepare for exit so you can maximise your valuation and then exit on your terms. This is the Exit Insights podcast presented by Succession Plus, I’m your host, Darryl Bates-Brownsword. And today I’m talking to Sean Tepper. Sean’s got a great story that he wants to share with us, and it’s that one that we all love. It’s all about someone who’s been there, done that. He’s exited his business. He’s earned the stripes and survived it. Come out the other side and he’s going again. Thanks for joining me today, Sean.

Darryl, thanks for the invite. Appreciate it.

Yeah, that’s great stuff, Sean. So, Sean, why don’t you give us, I guess, a high level resume, a little bit about your background, and we’ll talk about your previous business. And then what I’d love to do is just go what did you learn about the process? I’m going to say crazy enough to go again, because as entrepreneurs, we don’t learn, or we do learn and we apply our learnings in the new business. Then I want to check out and discuss what you’re doing differently from what you learned, and then we’ll talk a little bit about what your new product is and how it all connects up. So let’s start with a little bit about your background and the business you were previously running, if you don’t mind.

Yeah. So my background is about 20 years in business, primarily tech. My first company was an agency model in the was built between 2006 and 2010, and we went through a merger. I learned a lot of things there. We could dive into that and then we could, of course, as you mentioned, we could dive into the new business. Completely different model that I’m working on today.

Great, so you’re an agency. Did you say tax?

It was actually like a marketing firm/agency. We did a lot of websites and software for small and mid-sized businesses. We did a little video as well, but I was looking at ad agencies everywhere and where they make their money. I found out in about 2005 and 2006. I’m like those business models, sure, they can make money on video. They can make money on like you could do. At the time, it was more popular, but like magazine advertising, newspaper advertising, social media wasn’t so popular. But I found that software engineering was like a key revenue driver.

So I’m like, I worked for an agency for one year and then I wanted to create my own. Built it up to about five employees, but it was not a profitable entity I learned that as you scale revenue, in other words, bring on more customers, you have to scale your liabilities, you have to increase your payroll. So it was not a profitable venture, especially at the same time we had the recession, 2008 2009. It was very difficult.

Yeah, tough times. Did you say you had one year’s experience of being out there working in agencies before you went on your own?

Correct? Yeah. I graduated college in 2006 and worked for an agency for a year, and I started bootstrapping my own agency on the side, but worked for the agency. And I understood, like, because I was always fascinated about business, just to take a step back. I worked in the hotel industry through college, hotel security, and I worked for a hotel called a Fister hotel. Anybody visits that, a celebrity, you’re an athlete, you’re a business executive from another city or country, whatever, you go to the like, it’s the hotel. So it was a great experience. But I got to understand, how does a company like that make money? Obviously, food, beverage, rooms, everything in between.

So I’ve always been interested in business. So I did the same blueprint for an agency. I worked one year, and I figured out, okay, so what are all the revenue streams? How do they make money? How do they sell? How do they negotiate contracts? And just. I’m a curious person, so I casually ask questions, but I did that through a year and just took a bunch of notes, and I’m like, this is not that hard of a business, because you really just need an internet connection and a laptop, and you’re off and running. And I’m like, okay. So, yeah, I did it one year, then started the business.

But the mistakes, I can kind of dive into those, if you don’t mind, which were the business was project based, which is a mistake for any business. It’s like you sell a project for a customer, which is usually 50% down, 50% on completion. You could also do 33, 33, 33 over the duration. But the problem is, after the project is done, the revenue stops, which means you have to go hunt for more projects. And it was this constant hustle of trying to get new projects in the door, get them done, get paid, and then move on to the next. And I’m like, this was exhausting. And that was one big mistake, is the structuring of the model. And I found out that people who started agencies at the same time as me, they were able to sustain operations and grow their businesses after mine, because they structured it like a SaaS business (software as a service). How do I get our customers onto monthly plans? You get five customers paying 1000 or 2000 or 3000, you dial that up. That’s a scalable service business. And I thought I should have done that. However, it was 2010 and this worked out beautifully. A much larger agency approached us. They started seeing working with some bigger brands and they said, would you be interested in merging with us?

And I was without hesitation, like, yeah, I need to get out of this thing now. Because the business was, nobody wants to buy a company that you have to be working in it and hunting for business. That’s ridiculous. So there was no buyout. It was essentially the debts and liabilities in the company were wiped clean.

And to me, that was enough of a win because I needed a fresh start. I needed to take a step back and move on. So it wasn’t like a million dollar check. Here you go. None of that.

So major lessons learned. Learned a lot. But the payout wasn’t what I was really looking for.

Yeah, so you got out, you survived, but you learned a lot of lessons along the way, by the sounds of it. And the first one is that what I really like, Sean, is that from the very beginning, and maybe I’m just identifying myself as a little behind the eight ball here, but from the very beginning, you were looking at business and understanding and assessing the business model.

How does this business make money? Where does the revenue come from? How does it win its customers? What’s its route to market? And you didn’t say this, but it’s what I heard is, what problem am I solving?

What am I selling to my customers and what problem am I solving? So from what I’ve learned over the years, which you are already on top of, is that if you’ve got a solution or you’ve got a problem that needs solving, you’ve identified a problem that needs solving. Let’s call that a product in old language. And you’ve got access to a marketplace, or you can get that product to the market. A product and a route to market. There’s a business opportunity. They’re the only two things you need to have a business opportunity. Then you’ve got to start looking about how do I price and package it? How do I reach that market, how do I train my employees to do it consistently? Do I need to protect that product?And you can just go on and eliminate risks from there on. And the very first one that we always need to look at is revenue. And you’ve gone, this business is really famine or feast because I’m charging as projects, I complete the project, then I’ve got to go find another one. And in that small business of two or three people, it’s probably all hands on deck while we’re solving this problem and they’re ignoring finding the next client. And then we go, great, we’ve done that.

The client loves us. Aren’t we fantastic? The client’s given us pats on the back and high fives everywhere. And then we’re going, right, where’s the next client? They’re not queued up now.

We got to go out and find it. And that often takes from weeks to months and depending on how long you’ve been neglecting your list for. So it’s a common old problem. It is. Did you get to the point where you were exploring, how do I repackage my product, my offering, my service, whatever we want to call it, how do I repackage that?

Did you explore how you could price it differently to get that subscription or membership approach, or. It was just too hard.

It was actually hard because I started talking with clients a little bit, and the question was immediately, what ongoing service could you provide for us? Right? So we weren’t really able to pack shit. However, the big win over those four years or so was it was the pitching and analysing of businesses, because we served everybody from restaurants to automotive detailing shops to manufacturing companies to even a few SaaS businesses, a few ecommerce. And I was thinking about, like, if I were to do this over, I would want, as I phrase, at top of the food chain, I want to go SaaS. I love the SaaS model. So it was more of that, like, thinking about my next venture. But at the same time, I’m like, how do I change this on my business?

And what I saw really was 2010. That’s when social media, after the merger, social media started becoming more popular, and then Facebook Ads, Google Ads and whatnot. So you could see these agencies kind of shifting from project based to, hey, how do we manage ads every month and then kind of throw in a new website or a software feature or a video? It’s kind of in the package deal. You call it the icing on the cake.

The real revenue reoccurring is the managing of the, again, social media ads or something like that. So the market was able to shift in that direction, which allowed agencies to thrive. I’d say a little better, but I was so burnt out, I had to. Get out of it.

I understand that. And I guess I asked the question out of curiosity because I know it’s on top of every business owner’s mind, how do I eliminate that flow or uneven flow of product or revenue coming in. The word on the street is that, well, we need recurring revenue. Can I contract it? Can I do whatever? Can I spread my costs?

How do I reduce the risk associated with revenue and what the trend is? You just see so many businesses going down the route of that SaaS product, and whether it fits or not, they change their pricing to a SaaS, but they don’t change their proposition or their delivery to a SaaS, which sounds like your clients are right on top of gumbo. What are you going to do? If you’re going to charge me monthly and have, we’ll consider that, but what are you going to do? Where’s the value for us?

And the hard lesson is that it’s always the clients that determine value, not the seller, which is hard work for business owners, isn’t it? Why can’t they just do as we ask and play nice? It’d be so much easier if it weren’t for the clients we often hear.

Okay, so, Sean, that’s fantastic. You’ve gone, hey, look, I’ve learned my lessons. It’s been a great life lesson. You got out, you kept your shirt, so to speak, but you weren’t able to retire.

No.

So what happened then? And what sort of time period are we talking from beginning to end with this business venture?

Yeah. So it’s really 2006 through 2010. Bootstrapped it. 2006. It was really 2007. 8,9, 0 were the four years. And, yeah, I went through the merger. I stayed with that firm for about nine months, kind of research. What’s my next move? And I stepped into more of a marketing leadership role. My team was in great position. They had salaries, benefits. I was like, oh, thank God. Because one thing that was a problem for me is, let’s say it was 2008 or nine, in the middle of the recession. I was like, I want to shut this thing down, but what is my team going to do? I’d let them down. They would have trouble finding work. I’d feel like a jerk, to be honest with you. I’m like, well, let’s keep this thing moving. So they’re in a good spot. But at the same time, I didn’t have a huge resume anyway, so it’s not like I could go apply for a publicly traded position at a GE or Google or whatever. They wouldn’t hire me just like a year or two out of college. So I kept the business.

But anyway, after the merger, I stayed with it. Nine months was 2011, and I decided, let’s get into contracting, just me running lean. And I started working with a few larger companies. And then it was like a year or two later, I got my first big contract for GE. They were great. And then that opened the door to work with other publicly traded companies. But my plan was to go two years working for large companies.

That turned into twelve. Because when I left that firm, I knew the model I was going to create. I wasn’t going to settle for anything less, which is SaaS. The issue was I didn’t have any great ideas. I was looking at Salesforce, I was looking at Mailchimp, I was looking at constant contact. I was even looking at Netflix. I’m like, those are great ideas, but there’s a lot of competitors. I’m like, how do I find something that’s scalable but doesn’t have a huge market? There’s some opportunity there. You can get in and you can move with some momentum and not have a lot of competitors in the same space.

So I didn’t have that answer. So I just path at least resistance went to work for large companies. But then things got interesting around 2015 or 16, and I’ve always been into investing, and thankfully, that first company, it gave me kind of the groundwork on how to analyse businesses. Like, how do they make? Because every customer we would work for and pitch, I’d have to know, how do they make money? What are their problems? How do you help scale? How does software help solve problems? So, looking at stocks, I was like, this is actually pretty easy because you can also see publicly traded information, such as the financial statements, and you can see a lot. I’m like, okay, this is cool.

And then I started, thanks to a little help from Warren Buffett, another guy by the name of Phil Town created an excel sheet to help me create, like, a green light, red light decision making process on buying stocks. Like, I want to remove the clutter, the noise, and all that out of the equation. So I know what’s a good stock and what’s bad. So I use this Excel sheet between 2015 and 19, and my returns ranged between 15 and 50% per year consistently. And I know Warren Buffett says he can make 50% per year if he was managing $10 million or less.

Okay, so we know he’s not using emotions or feelings, which means he’s probably starting with math. So that’s essentially what the success sheet was, is use math, use logic. And it was 2019 when I started sharing this with a few people, retail investors, just regular guys like you and I, and then some institutions and everybody was like, you should consider turning this into a software. And that was the moment. Almost ten years later, I’m like, all right, I’ve got a SaaS idea to execute on and that’s how Tykr my company is spelled Tykr was created.

Okay, so let’s just unpack what just happened because you’ve almost time traveled with us. It’s a really interesting story and I love what you’re doing, and maybe that’s just because it resonates with my passion for business. So you escaped your first business entity and the major lesson was, hey, I need some sort of recurring revenue to make this business model work and scale. When you first started exploring that, you’ve gone, yeah, this is a way to scale the business up. But my product, I can’t figure out how to easily convert my product from a project into an ongoing service proposition that clients will value.

00:16:27
So you’ve pulled the pin, you’ve gone, okay, so lesson learned there, let me get out of this while I still can and I’ll save the shirt on my back. Then you went out and said, okay, perhaps I’ve still got a bit more to learn. I want to go again, but this time I need to make sure that I’ve got a product that I can deliver via a SaaS model and I need to have something different in the marketplace. You went out contracting to, I guess, continue learning and figure out what that next and kept an open mind around what that next product would be. What you thought might take two years, took twelve.

But you were forever unpacking business ideas and opportunities the whole time analysing, analysing, analysing and understanding. And then you’ve gone, okay, so there’s something here where I can help. Now, I think you called it Tkyr where you’re at. And you’ve gone, how do I remove the emotion out of picking investments on the stock market?

Correct.

Captured that correctly.

Correct

And then you figured out if I’ve got a process to help people, when to buy, when to sell, from a purely fiscal, unemotional perspective, following, I guess, the patterns of Warren Buffett, who’s been, should we say, reasonably successful and not a bad benchmark to follow. Using his methodologies, you’ve effectively digitised what you understand his methodology is, and therefore you’ve got an ongoing process to take all of the pain and all of the hard work out of it, and you’ve turned that into a SaaS product, which we now know a few years later as Tykr.

Yeah, correct. You’re my new pitch man.

Well, let’s talk commissions later. So we’ve got Tykr up and running. How long has Tkyr been going? How long has Tykr been transformed from an idea, a concept into a business?

Yeah, we went live in 2020. I’ll keep this really short here. Went live in 2020. Took about six months to get the first paying customer. But I knew that because the idea is to get customers in for free but get feedback really fast. What do you want? What can we do better? But then fast forward. Today we’re live about three and a half years and we have a little over eight, little over 8000 customers and about 50 countries.

Okay, so it’s international.

Correct.

So there’s the first rule, isn’t it? Get your product as attractive to as many people as possible?

Yes.

Okay. Did you take funding on board? Did you go down the route of SaaS companies and get funding? Or is this all bootstrapped again?

Bootstrapped this one. But I kept my day job with one of the corporations I was working for. Yeah. In parallel for about three years. I actually just went full time in 23. It was actually may of 23. Okay, so there’s another lesson.

What about the development side? I don’t recall you saying you’re a developer. So how did you create, do the development side? You started on excel.

Yes. So my background is project management. You’re right. I don’t code attempted that once and I’m like, nah, this is not my jam. Let’s project, manage and sell. But I invested about 30 grand of my own money to create the MVP, which was enough to get it live, get feedback, and then iterate from there.

And then kind of like whatever revenue we could generate, I would just put it right back into the business. Just kept my day job. So it was kind of slower process bootstrapping. But I kind of knew working the small agency learned a lot, but also working for public companies, it was really good to get inside and be in those boardrooms and understand how are leadership or how are leaders making decisions related to marketing, sales and operations? How are we scaling projects.

And those twelve years were really helpful. So I knew kind of like the blueprint, if you will, to how to execute a SaaS because kind of doing that for other companies, I did a ton of projects that were successful and I’m like, let’s just use a blueprint, but take me out of the equation and just keep my.

Yep, okay. And where did you get the learning from the IP, shall we say, behind your product? Like, we’ve talked about Buffett’s methodology, but what else do you do that makes it different to other competitive products? Without getting details, just what were you doing differently to capture?

Yeah. So, like, looking at a lot of people in the stock market, especially people on Wall Street, I see people making decisions with very little rigor. Like, they’ll look at like p to e ratio and market cap and say, hey, that’s a good stock. And in software engineering, for context there, especially in big business, we have a lot of rigor.

It’s like, the keyword is like when you do testing of a product, it’s not one or two or three data points. It can be a thousand. And then you know you’ve got something that is ready. So I went down the YouTube rabbit hole, read a lot of books, and there’s a lot of fluff with stock investing, a lot of fluff and bad advice. But a guy by the name of Phil Town wrote a few books and he provided some of the calculations within.

And it was enough for me to realise or look at and be like, that makes sense because he’s looking@revenue.net. Income, debt free cash flow equity more than anything I’ve seen. I’m like, and then he’s putting it together. I’m like, okay, this makes more sense at a high level. So I started testing that, added my own flavor, like a point system.

It changed a few little things, but I was like, this works. And I wanted to test my own money for not one year. That’s why I tested it for four years, to prove, like, this system works. And we are. So, you know, Darryl, we’re open source.

It elevates our trust. So when people join us, we tell people, you can go read our calculations here and if you like, you can go create your own version of Tykr. However, we hope you still stay with us. And just by doing that, you won’t believe the amount of people are, yeah, we’ll, we’ll use Tykr because we trust it.

So from a business perspective, you’re offering a guarantee effectively?

Yeah.

It’s somewhat similar to a, to Sean, what have you done now? So let’s take this from a business perspective. You’ve learned from the old school. Look, I need a revenue model.

I need to crank up the business valuation. I want the business to work without me having to be on the tool, so to speak, every day. So we know a SaaS product is that in terms of running and building the business now, what are you consciously doing different based on your twelve years contracting and your years in running a business before that, what are the active steps that you’re making sure you include in this new business.

Yeah. So I was looking at, you probably read good to great, and it’s really big on the flywheel concept. How do you get that moving? And I could not visualise that within the agency, no matter what I did or how well I got people trained. I’m like, if I got ten people in today or 20 people or 50 new clients in one day, would I be able to service them efficiently? And the answer is no. I just could not see a clear path. But with SaaS, I was like, you really need a tool that solves all the problems. But I like a SaaS because there’s b to c and there’s b to b. We’re mostly b to c, low touch, which means I could get 1000 people right now at this instant and I don’t have to sell them on the tool, nor do I have to support them. I love the Netflix model, so I was gearing towards that. So today, where I spend the majority of my time, which was a lot of fun, I get to work on the business.

I get to lead my team. I’ve got a media team and engineering team. So we’re building cool stuff and we’re creating a lot of YouTube content and it’s mostly marketing. And fortunately I’ve been able to, and I learned this in big business. If you got problems in the business with your product, you need to engineer the problems out of the equation, which means that people keep asking the same question about this button should do this or this feature should do this, make it better so you reduce the customer service burden with that feature.

So I check emails, so, you know, about half hour a day customer service emails, and we’ve got 8000 customers. I’m like, okay, this is manageable. Some businesses, they could have 800 customers and they’ll be busy 8 hours a day. You got to engineer problems out of the equation. So to back up a second, answer your question, it’s mostly marketing, some operations, some customer service.

Okay, so you’re consciously doing all the things that are working on the business, keeping the flywheel moving and driving it forward. So, Sean, what’s the vision for the business? Do you have an exit plan?

Yeah. So in this case, it’s like, number one, making sure the financials are airtight.

So keeping those really organised right now, at some points, I’ll hire an external firm. I’ve talked to a few already that’ll help manage the books. That way they’re in a nice, clean location right now. It’s just bank and then excel sheet. I want to get that moved over to QuickBooks. It won’t be too hard of a migration. Talking to some people I’m interested in now, but really getting that airtight. And then where are we going? My goal is to get to a million subscribers. I know we can get there.I know our competitors. I give rave reviews of companies like seeking Alpha and simply Wall Street. They’re two great competitors, but they have much bigger numbers than that, than a million. It’s like, we can get there. I know how to get there.

The way to do it is I have a lot of experience, thanks to big business working with channel partners. What is a large financial institution that has a lot of retail investors that need help? Guess what? We can help you with those individuals. That’s how we get from 8000 to 80,000 in no time.

Get to 500,000, get to a million. That’s the play. It will get there gradually with YouTube and social media and do some Facebook ads. But the big businesses, as you know, it’s the channel partner plays that.

So channel partners is that. And I think you’ve just touched on another important factor there, Sean, is that as the business gets to different size, the scaling questions or the scaling answers change. The scale question remains the same. How do I get some businesses talk in revenue, some talk in customers, but it’s what do I have to do to get my business to a mill, then what do I have to do to get my business to three? And then what do I have to do to get my business in ten to 50 type of thing. The scaling questions and the scaling solutions change depending on the size of your business. And you’ve gone, hey, I’ve done my Facebook ads, I’ve done that got me to 8000. Now I need channel partners that are really exponentially expanding my reach to the market and people I get to touch. Brilliant. So you’ve touched on a few things, Sean. Look, just conscious of time, there’s one question or there’s a number of things that I’d still love to ask and maybe we can follow up.

But what’s the one key thing if listeners to go, Sean’s had an amasing journey. He could have easily bailed after that first experience where he managed to get out without too much harm done. But he’s gone on and he’s building something and he’s learned his lessons. But what’s the one key message from your perspective that you want to share with business owners who have still in that planning stage or still in the business that they’re growing and building and going at some point. I do want to get out of it and I do want to make sure I get out with more than the shirt on my back. I need to exit this business and I want this business exit to fund for my life after work.

I would say do whatever you can to structure your revenue model like a SaaS or as close to, because if you can do that, then you’re not going to have the issue that I had, which is selling for nothing. Sure I did as you said, I kept the shirt on my back. I got rid of debts and liabilities. But I am seeing agencies that can sell for one x, two x, maybe three x at most.

If it’s not revenue, it would be EBITDA because they structured their service business like a SaaS. If you can give customers some kind of monthly reoccurring, figuring out what that is, you have to talk with your customers and kind of see what that is. But that’s the most important thing. I should have figured something out way back in the day. But fortunately with a SaaS, it’s like that’s the essence of the SaaS model. So that’s already in place. So that’s one key takeaway,

I think. You reminded me of a book. I think the author is Robbie Kelman and it’s all about, I think she calls it the membership economy or something like that. So how do we move our service type business offering?

And she learned, and she did her first work with Netflix and she’s gone. How do I create my service offering and evolve it from delivering of a service? But if I’m going to create that client engagement and have them behaving as members rather than just clients, how do I need to change my proposition? How do I need to change my pricing? How do I need to change everything so that it feels like a membership proposition rather than a service proposition, bundled up as a recurring revenue for all.

The benefit for the business, not the customer. Thanks for that reminder, Sean Tepper, appreciate you sharing your exit insights. We’ll include all of the details around how they can learn more and get in touch with you in the show notes so they can link through to your LinkedIn and to your website and what have you. But hey, thanks for sharing your story with us today.

Darryl, thank you so much for your time. Appreciate it.

Thank you.

About Sean Tepper

Sean Tepper is the Founder and CEO of Tykr, a software that helps people manage their won investments with confidence. He originally created Tykr as an Excel sheet in 2016 to save time with investing. After four years, he made consistent returns ranging between 15% and 50% per year. In 2019 he started sharing this Excel sheet with other investors and everyone asked “When are you going to turn this into a software to share with others?” Tykr took about one year to build and officially went live in 2020. Today, Tykr as over 8000 customers in over 50 countries.

If you would like to learn more about how to start preparing your business, then you can get more information here: It All Begins with Insights.