Arvid Kahl: Welcome to The Bootstrapped Founder. Today, I'm
talking to Kevin McArdle. Now, he was very instrumental in my
founder life. He acquired my SaaS business. So we're going to
have a conversation about acquisitions, preparing for your
exit, building a bootstrap business that other people
actually wanna buy and how to get to that point, how to go
through the process and what to think about during building your
business, not just when it's time to sell but long before
that. Here's my conversation with Kevin.
Thanks so much for being on the show today. I have one thing to
say to you: you changed my life. I just wanted to tell you.
Kevin McArdle: That is the nicest thing that anybody said
to me in a very long time.
Arvid Kahl: It really is, like, we built Feedback Panda, the
SaaS business that we sold to the company you worked at and
the company you led and the company that acquired us. And it
was the most life changing thing that ever happened to me. I
think after meeting Danielle, my co founder
Kevin McArdle: Yeah
Arvid Kahl: You know, the person that I spend my life with,
Kevin McArdle: Good to clarify that
Arvid Kahl: If there was another person that had a massive impact
on the trajectory of my life, let's just say that, it would be
you. So a big thank you from me for this. And it's really nice
that you found the time to talk to me today. You have a lot to
share about private equity and acquiring businesses, building
and operating SaaS businesses. And I'm excited to hear what
you're currently working on and what the future has in store. So
thanks for being on the show. And it's really nice to talk to
you again.
Kevin McArdle: Oh, it's always a pleasure to talk to you, Arvid
and pleasure to be on the podcast and talking publicly, I
think for the maybe for the first time. And it's very nice
of you to say that. But you know, I played a role in the
success that you and Danielle had, but I was lucky to be the
one to acquire Feedback Panda. And if it wasn't me, it would
have been somebody else that, you know, gave you the exit that
you were looking for. But I'm just so excited for you and
Danielle and all the success you've had.
Arvid Kahl: Oh, thanks so much. Well, you wrote the nicest email
and we had the most wonderful conversations with you. So it
was really easy to pick you, let's just say that. Like you
had such a nice friendly and uncomplicated way of interacting
with us that made all of this, it made it very easy to trust
you and the team. I think that's one of the things that you did
so well in this whole you know pre due diligence but already
kind of due diligence phase, right? When you're selling a
business and you're acquiring a business, both parties kind of
poke at each other to see if it's legit because there are a
lot of people who are not legit in the field, unfortunately. So
you allowing us into you know, the business and all the people
that work for you and having chats with them. That's why I'm
with Tyler. Tyler Tringas, whom I have another podcast with,
right? He was the first person
Kevin McArdle: Of, course. Arvid and Tyler Catch Up. I'm a fan,
you know that.
Arvid Kahl: Thank you so much. Oh, great as fan. I'm super
happy. But first of all, thanks for listening to that show.
Because that's good to know that anybody's listening. But really
like Tyler was the first person we called in our kind of seller
side due diligence that we did with you, right? Because we
needed to make sure all the people that sold, were they okay
or you know, like that they run into any issues? And we had such
a cool chat with him. And he was so energetic. And so he talks so
kindly about the business and particularly about you that it
came very easy to chat with you and then go through the process
of getting acquired. So that was really cool.
Kevin McArdle: I have a huge smile on my face as viewers can
see because it just brings back such great memories of I
remember specifically sending that email to Danielle. And I've
told this story publicly because it makes me smile. And her
response was just a very kind and polite, "No, thank you, not
interested." I was like alright, well that's fine. I have a new
friend on the internet. And that's a good thing for the day.
And then in the background, I find out later she told me
called Tyler, I think spoke to another person who had sold us a
business and then she came back like emailed back I think a
couple of weeks later. It was like, actually, Kevin, we're
considering it. Let's have a chat. And so yeah, that whole
process, it was easy on our side too. Because you know you two
built such a great business. You're such a great team. You
had your, you know, things in order and you know, we're ready
to sell and had done the right things to prepare. And so yeah,
it was win-win all the way around.
Arvid Kahl: The whole process was fun for me like everything
in between, like even me recording this eight hour video
for the software engineer that was supposed to take over my
work just going through the codebase. Like no sane person
does this. But in that moment, it felt like just a joyful
activity knowing how well it would be received, right? Like
the whole process was just kind of a give and take obviously
because we needed to spend a lot of energy both on running the
business and on preparing everything for the acquisition,
but it never felt forced. It never felt like the pressure,
that was never on. And I think that is one of the things that I
admire the most about you in this process, how you were
guiding it without like pushing it. That was such a sensitive
way of dealing with people who are already like I was mid
burnout at that point, right? I was super stressed. And people
don't want to lose their baby. They want to lose the business
and all that. So you handled that with such care. You know,
I'm a fan, but I just want to do it publicly just admit, I'm a
big Kevin McArdle fan.
Kevin McArdle: Likewise, this is just, you know, Arvid Kevin fan
club meeting
Arvid Kahl: I guess. Let's just compliment each other for
another hour. Why not?
Kevin McArdle: Yeah, Arvid we're already losing listeners. So why
not just continue. But, you know, it's funny, like some of
the things you said, like, you know, because selling a business
is a stressful process. I've been on the other side of that
and the fact that you said it was fun. And I'm sure there was
some stress in the background too. But like that, you know,
the compliment you paid me earlier, it's sort of funny and
funny or weird to me in a way is like, it's just kind of how I
act and who I am because, you know, I'm a human being. And I
know, you know, we just do business with other human
beings. And I don't like dealing with a-hole. So why, but like,
it's shocking how much people say the way I do things is
different. And the experience is different. And you know, it just
blows my mind that other people don't have the same approach of
just being a human being. Don't think that you're smarter than
everybody else in the world. And don't be a jerk, don't put
pressure on people because people don't mostly don't
respond better in pressure situations. They usually perform
best when they're comfortable and happy. And, you know, I like
how you phrase it with like, guiding without pushing, I think
is what you said, but I may steal that.
Arvid Kahl: Please do. Feel free to steal whatever you like, you
gave me so much already. I'm gonna keep doing this. This
reminds me of something, reminds me of, I think like Paul Graham
wrote this book, like Hackers & Painters. And in that, he has an
essay on how schools, the system that we are kind of socialized
in really pretty much reflect prisons in terms of the
dynamics, the social dynamics that happen within them. And I'm
getting somewhere with this, right? The idea is that you are
put into this kind of confined system that you're not allowed
to leave, which is like the premises of the school. You have
these weird internal social dynamics, you have like the
nerds and the jocks. And you have like gangs in prisons, that
kind of are equivalents of bad like you're part of one of those
groups, but not both. And the people that are there the
biggest stars in prison, like the strongest and most violent,
like most fear inducing people turn out once they're released,
to have no standing in society whatsoever. And it's pretty
similar in schools too, right? Where the bullies then don't
find jobs because they're way too aggressive. And they don't
value actual human relationships. And that reminds
me of many people who have been conditioned in a system like
this, that you have to kind of elbow your way through society
and then they end up at a spot. I think the Peter Principle
applies here where people get kind of promoted to the point
where they just at the limit of their capacity, right? And I
think Peter Principle says something else about it. I'm
just trying to keep it friendly and loose here. But the idea is
that people who have this kind of behavior, they get to a
certain point, but not further.
Kevin McArdle: Yeah, they hit the ceiling.
Arvid Kahl: They hit the ceiling because people at some point,
they don't take it anymore. Like either they are also pretty
aggressive, which you know, kind of creates more conflict or they
are at the point where they are enlightened enough to understand
that you get way further with kindness and with being
passionate about something and opening up to people than
closing off and trying to grab, grab, grab and this is mine,
mine, mine and you better stay down, right? That kind of
behavior just doesn't fly in most groups of people
particularly not, I guess, the founder community where people
really need each other because it's such a strong community.
Kevin McArdle: That's interesting. People really need
each other. And at the same time, people have independence.
Arvid Kahl: Yes
Kevin McArdle: Do you know what I mean? I think people need each
other by choice versus like a corporate environment where you
have to sort of play the games to advance in your career. If
you're the controller of your own destiny, you're a founder.
You don't need to build community with other people in
your situation. It's beneficial to do so. Yeah, I haven't read
that essay. I'll maybe go back and look at it. But I think and
I hope society's evolving a little bit because I see and
it's you know, as we're recording, it's the time of the
year where kids are graduating and moving from you know, I've
got a couple of moving from one school to the next and I see the
way kids interact with each other today and it's sort really
not perfect. But I think it's less clicky than when perhaps we
were in school and Paul Graham, you know, it's an interesting
comparison schools to prisons because like, you just can't
leave. And there's a person in charge of making sure you do
what you're supposed to do. But I think the educational system
is certainly still has its flaws, but I think it's evolving
in a lot of good ways in terms of like, more belonging, you
know, kids treating each other as like, we're all one big group
versus I'm a jock. And I can only be defined by that, but
it's so situational, right? Like and the Peter Principle, you
know, there's one human being that I can remember who is the
epitome of the Peter Principle just being promoted past his
competence level. And I always picture that person when I hear
the Peter Principle. And there's also people we know that like,
just bullied people through their whole lives and are
incredibly you know like successful by what you know,
like a business or economic way by doing that. And
unfortunately, people look at them and say, well, that's the
way that you succeed in business. So
Arvid Kahl: That's the thing like the media attention on
those people either attention that they created for themselves
because they are sociopathic enough to allow for this, right?
They don't hold back or because they stand out so much. And use
agencies or you know, the tech crunches of the world, they take
a look at them. And they just think it's so clickbait
generating, I will have a headline that works. That is
really unfortunate. I'm glad that you say this about the
evolution of the educational system. And I have this feeling
that I guess the digital transparency, the fact that we
are interconnected and everything that happens happens
everywhere immediately, right? When you hear something happen
or something happens, you hear about it within 30 seconds if
it's important. That didn't used to be the case in the 60's, 70's
and 80s, where you would have the full day before the kids
could report back to the parents and if at all, right? You would
have a delay in stuff. And that changes the immediacy of how
behavior is rewarded or punished in these situations. So I guess
that helps. And by shining a light just on the system and
make it fairer, make it more equitable and that stuff. And I
have a feeling that's it's almost the same in the
entrepreneurial community and particularly with people sharing
their stories like building in public or just being more
approachable and being more allowing more insight into their
businesses, that creates more equitable, more fair and more
accessible businesses in the space that I'm in. And let's
just call it the indie hackers SaaS founder community, as
specific as it gets. When I see people build in public and I'm
just realizing this now. So you're part of the thought
emergence here.
Kevin McArdle: Yeah
Arvid Kahl: The fact that they have feedback cycles with the
whole community, often surfaces, accessibility issues was so much
earlier than when the founder would have thought of them,
right? So yeah, I've had that with my own content, like people
told me your blog is great. But I have dyslexia, I can't read
this, like, what do I do? So I had the option of either
starting a podcast, which I ended up doing or having at
least a little snippet of a WordPress plugin that
automatically generates like an audio version of the article
that I would write and that happened like three or four blog
posts into my actual blog existing because people like
myself from the beginning, I was already sharing everything I
did. So they quickly could give me the feedback on, this is not
accessible. This is kind of excluding people who have this
issue.
Kevin McArdle: I understand you may not have come to that
conclusion not as quickly or ever, right? Yeah
Arvid Kahl: I would have had more readers like that's the
thing that default is people can read and write and hear and see,
right? That's kind of the societal default. But obviously,
not everybody is included in this group. But the group is big
enough to kind of allow for these people to fall off the
site and still turn it into something big, right? Which is
why accessibility is so important.
Kevin McArdle: Yeah, that story, like I can read, I can see, I
read very slowly. So I'm more of a podcast fan, but like, just
knowing that you had that feedback took the step to say,
well, let me try to make this more accessible for other people
draws the "normal groups" of society to you more because
like, well, at least Arvid gives a shit about like somebody who
has trouble reading. I don't look so it's interesting that
we're talking about this and it's no surprise because like, I
love how your content is like founded in or like grounded,
maybe it's a better term in just kindness. You know, I like you
talk about building an audience onTwitter and like conventional
wisdom is like, hot takes that are extreme is what gets you
clicks and follows and engagement and like, that's kind
of true. And I think that's part of what is like, makes normal
media and social media hard to consume a lot of times because
everybody feels like they have to be polarizing. And then you
step into the world and you're like, well, what if I'm just a
nice person and if I like, give people compliments and I just
try not to be a jerk all the time. And I think part of what
we get along is like, that's my attitude too like, but it's not
from I don't know how to say this. It's not from like a
business strategy perspective. It's not like, oh, well, I think
more founders will be attracted to me if I act like a human
being and don't have the sharp elbows. It's just like, I don't
have the time or patience to live any other way. Like, this
is just kind of who I am. And so long ago, I figured out like,
just be who I am. And the right people will hopefully be
attracted to that. And almost more importantly, the wrong
people will be repelled by that.
Arvid Kahl: That's right!
Kevin McArdle: And there are several examples of where I can
think of somebody either not wanting to work with me or for
me or choosing to sell to somebody else. And you know, on
and on down the list or like choosing not to invest in my
company. And there's like, good, well, okay, check, process is
working because we had somebody self select out of my orbit, so
I'm going to keep doing what I'm doing.
Arvid Kahl: That's so great. That is one of the things that I
love about having like a public persona. You allow people to
self select out. And it is not conventional wisdom to get rid
of people from your potential audience, right? Because
everybody wants numbers, numbers, numbers, bigger,
bigger, bigger, but having the wrong people in your audience is
gonna cause more damage than them actually self selecting out
of it. And that is true for anybody, right? Audiences,
customers, partners, collaborators, all of this, like
if you have a group of the right people, no matter how small it
is, your impact is gonna outsize the impact you have with a mixed
bag of everybody who may or may not be vibing with you. Let's
talk about that business. Let's talk about what you're currently
building because I was just going to throw in another
compliment. Like, the reason that I can be this on Twitter
that I can just be kind and friendly and empowering and
motivating is because I've worked with and found people in
the higher echelons of the entrepreneurial world, like
yourself who are like this. Like I've seen in you and the people
that you work with and the people that I got to meet
through you, that it's possible to do this at a super high level
and be effective and successful and friendly and kind and all
these things at the same time. So it is like motivation by
example, that allows me to do this and now be this for other
people myself.
Kevin McArdle: Yeah, that's a cool thing is like you, I think
you are now voted, you know, not to, I mean, I know how big your
audience is, Arvid because I'm not the type of person who
clicks a profile, how many followers do you have? So it's
like, I don't know how many followers most people have. I'm
sure your audience is gigantic. And that's exciting to think
about you being that example to other people because there are
still so few example then like my platform of choice is
Twitter. There's still so few examples of just like kindness
and positivity on that platform. And you know and people seeing
all the success you've had in building an audience and
building a huge podcast following and all that. But the
other kind of, sort of, like I was saying, like, you would suck
at it if you tried to do it the other way, you know, because
you're just not that person, right? If you were trying to
like, you know, troll people and you know, insult people all the
time, like, it would be inauthentic. You wouldn't be
good at it because that's just not who you are.
Arvid Kahl: It would be so weird. It would be hard. I
honestly
Kevin McArdle: I dare you to do that for a day and do it like
next April 1st
Arvid Kahl: That would be fun.
Kevin McArdle: People would pick it out right away. But like just
to spend the day just being a jerk online and see what
happens.
Arvid Kahl: See, the thing is with anything online, like
there's barely any context, right? Twitter doesn't have
context because it's text exclusively. It's just the line
of text. It doesn't have your smile, doesn't have like the
subtle kind of tone of your voice when you like just insult
somebody, but there's a smile under it, right? It doesn't come
through if you just say "fuck you, everybody" on Twitter,
like, it would be funny, but you know, like somebody would
probably and that's the thing. That's why my thinking is in
those moments, somebody probably just had a really shitty
experience an hour ago. And now they're on Twitter scrolling
through and trying to find something positive. They see me
telling them to fuck off. They don't want to be that, right?
Arvid Kahl: You never know where somebody else is. And that is
Kevin McArdle: Their bad experience
for good or for bad, right? You never know like how high they're
flying or how low they're currently crouched on the floor,
just like rolled up in the bundle because they're going
through something. So the default for me is trying to
shift it towards the positive but it would be very interesting
to just be like evil Arvid like Star Trek style just grow like a
goatee like Spock and just you know be like from the evil
universe for a day or two. Man, you're right. I think there are
too few people. Let me just make the world's best segue at this
point. It kinda sounds like it's just like a little group of
maybe chamber musicians like two or three. But wouldn't life be
better if they were in a much bigger band? What are you
currently working on?
Kevin McArdle: I see what you did there. Well done. I didn't
know where you're going with that. But yeah, so I think
you're asking about the new company. Yeah, Big Band Software
is the new project. We just launched in March of 2023. Well,
the company was founded December 1st of 22, but launched early
23. And yeah, the vision is to build a holding company of great
software businesses. So we're buying software companies, 1 to
10 million in revenue with no obligation to ever sell them,
which is strange in our world. Usually transactions, you know,
weirdly, the bigger the transaction, sometimes the
shorter the cycle because investors want to put money into
a business, grow it and then get that money out as quickly as
possible. We just have a different approach. And partly
because we've got like minded. I have two partners in this
business, Chris Reedy and Jason Heath, both of whom I've known
for five plus years. Chris, I've worked with before. And we had a
similar vision. We've got some great investors who have given
us the luxury of lots of capital to go spend over the next few
years and they've got the same vision likes, let's build a
holding company. If we own great software businesses, why would
we want to sell those? You know, let it compound over years and
dare I say decades. And so yeah, on the surface, we are buying
smallish software companies. But beyond that, we're trying to do
things quite differently than almost anybody that's out there.
Arvid Kahl: So that's what's novel to me, like the difference
between, like private equity as I know it and holding company.
Can you kind of tell me what exactly you think is different
Kevin McArdle: Yeah, so a typical private equity firm or
between them?
fund would raise a bunch of money, tell investors, okay,
we're going to buy some stuff, we're going to try to grow it,
and then we're going to sell everything in order to give you
all of your money back. And that timeline would typically be
somewhere between 7 and 10 years. So Arvid, please give me
your money. And in 7 to 10 years, I'm gonna give you all of
your money back, hopefully times three. And that's the model. So
that means let's say, it's a 10 year fund, which would be sort
of at the long end of the range. But that, so I'm being generous.
So now I've kind of got, you know, three or four years to
spend all of the money that I've raised. And then I've got two or
three years to try to grow those companies. And then I've got
three or four years at the end to sell all of those companies.
And to me, you know, there's a couple of challenges that I've
always seen with that. And the first is like, if you've got a
great asset and it's growing, why would you sell it? Like,
that's the dream for everybody. And I'll come back to, there are
a lot of reasons I love to say, there are 100 reasons why people
sell a business and only one of them is money, right? So you've
talked publicly about how you and Danielle, the business was
great, but it was putting pressure on your marriage
because all of the stress of the business. And that's a great
reason to sell a business that has nothing to do with money,
like almost nothing to do with money, right? So I want to be
clear, like there's no problem with selling a great business.
But being forced to sell that great business just because of
the timing of your fund, I always had a problem with
because what if you raise the fund, let's say 10 years ago and
you're now obligated to sell all of those businesses during
today's economy? You know, would you choose to sell that business
now? Or are you doing so just because you told your investors
you were going to give their money back? So I don't like the
idea of being forced to celebrate assets if it's not the
right time. And I don't like the idea of this like short term
thinking, you know, I mentioned like, we want this thing to
compound over decades plural. If you buy a business and you have
two or three years to run it and then you have to start thinking
about selling, the tendency is to make very short term
decisions. So are we going to invest in research and
development or do we hire another three salespeople? Well
that trade off and this sort of a silly simple example but like,
if I'm going to sell this business in three years, well,
the default we will go higher to salespeople. Who cares about
working down technical debt or you know, adding some feature
what you're improving a customer experience? So, you know, like
just growth at all costs, trim expenses. These are the knocks
against private equity is that it's short term thinking. It's
very transactional for founders, which is a huge part of your
audience, I know. You know, a lot of times your company gets
absorbed by a bigger version of whatever you're doing and the
brand disappears and your team might get fired and your
customers may or may not have a great experience. That's another
reason why I never really liked the typical private equity
model. And so, you know, mid last year, I literally took out
a blank sheet of paper and just started scribbling like, okay,
if I want to, if I have the opportunity to build my dream
company, what would it look like? Who would be involved?
What would our strategy be? You know, what are the beginning,
middle, end points? What is my job look and feel like? Who do I
get to work with and talk to on a day to day basis? And I mean,
like, knock on wood, it came together in many of the ways
that I sort of dreamed about back when I was scribbling on
that page. And that's what Big Band Software is now today.
Arvid Kahl: That's awesome. I like, the image of a big band,
like the idea of a group of people each playing their own
instrument, virtuously, right? But in harmony with each other.
And just making fun music, like big band music, like I come from
Dresden in Germany, that's my birth town. That's where I'm
from. And we have a Dixieland festival there. Out of all
places, in Germany, there's a yearly Dixieland Festival and I
grew up going to this as a kid. Like, we would be there and
there would be these wagons full of bands, big bands too like,
sometimes 20 people, just, you know, with trumpets and
trombones and all that kind of stuff. So I have a very vivid,
like, visual representation of just how enjoyable the ensemble
of a big band can be. So seeing you picking that name and idea
for something that I also see as something very joyful, something
very positive, a business that doesn't just take, grow, and
then throw away businesses but actually embraces them. You
should have called this like, it's kind of embracing, it's not
a holding company. You don't hold them, you embrace them.
It's an embracing.
Kevin McArdle: Yeah
Arvid Kahl: That's how it feels to me.
Kevin McArdle: Let me go trademark embracing. No, that's
cool because part of in yield, like naming a business sort of
evolves, right? And both of my partners are musicians. And we
had lots of sort of, we kept circling around musical names,
but I love Big Band for all the reasons. And our tagline on the
website is business in harmony. And for a lot of the reasons you
said like individuals who are excellent at what they do, but
coming together to create something that's bigger than any
one of them could do. And the other thing that I love is like
when like, just about everybody loves music, right? And it
doesn't matter what kind or type. Almost everybody loves, I
have never met a person who doesn't like music.
Arvid Kahl: Yeah
Kevin McArdle: And you jumping to the Dixieland festival in
Dresden reminds me of like, right after we launched somebody
else that I don't know well but we're sort of mutual followers
on Twitter. He's like, I love it. It reminds me of the second
row. And I knew what he was talking about. He grew up in New
Orleans and no, not the second row, the second line and it's
like in New Orleans, there's always like, you know, marching
bands, not in the traditional, like school band sense. But
like, New Orleans is full of music. I don't know how to
explain this to people, hopefully, they know. But like,
parties, there's always a band marching through the street. And
it's sort of organized, sort of group and then the second line
is just anybody who else is in the crowd has an instrument or
an umbrella. They just want to dance like and so the name Big
Band just made him think of that thing, which you could tell was
a joyful thing for him just like the Dixie festival is a joyful
thing for you. And also, just like, you know, another mutual
friend, I was just emailing with Murich Dowsinger with you know,
when we were talking about this, he's just like, it feels human.
Like, thank you. And like, of course, why do most people not
name businesses and things that like? They're all just
collections of humans with a common vision and mission but
like, we come up with these names that like are like feel
more like robots than humans. So I'm glad it clicks with you and
it seems to click with a lot of people and at the end of the
day, it's just a name and we gotta go, you know, do good
things, but
Arvid Kahl: That's right. Yeah, you have to kind of the name is
goal, right? You want to accomplish this and it's gonna
be an interesting goal to accomplish. I want to ask you
more from the perspective of a software business owner now
because it's kind of you're building this company that is
willing to acquire businesses, while then what do businesses
need to look like to become part of a big band? It's kind of what
I want to know because many people, you know, they are
trying to build a software business to, obviously, turn it
into a lifestyle, you know, have revenue come in and live your
life under your own control, without any external forces
shifting around. But like we said, for many reasons, they
might want to sell at some point. So what makes the
business interesting for you in this context of the big band?
Kevin McArdle: Yeah, I love that question. Like simple things to
point out, we're looking for businesses that are 1 to 10
million in revenue, profitable and growing. They don't have to
be growing at 200% a year. They don't have to be hugely
profitable. But that's sort of the niche that we're looking
for. That said, you know, there are a lot of different ways to
create a wonderful business and it is a lot dependent on the
founder and what their vision is. And so, you know, like, if
selling to Big Band is an endpoint for somebody awesome,
like, let's chat. But I don't think people should build their
business to somebody else's specifications. Does that make
sense?
Kevin McArdle: So I think we're doing things differently than a
Arvid Kahl: Oh, absolutely.
lot of people. But if you build a great business, loosely
defined, right? Like, there's a lot of different ways to define
a great business. And as a founder, you should be building,
I believe you should be building the greatness that is in your
head. Like whatever the people listening to this, however, they
define great, go build that and somebody will want to buy it,
whether it's big band or somebody else. And so, you know,
we look at a lot of things that many people do, like, you know,
in a SaaS world, low churn is hugely important. And you don't
want a lot of customer concentration and these sorts of
things. But it's also like, it's also the same advice of like, if
you're building a great business, what does a great
business look and feel like? So let's go aspire for that. And
sort of like the sale takes care of itself is one way to look at
it. And I sort of annoy myself because I'll make two sides of
the same argument immediately and contradict myself.
Arvid Kahl: Sure
Kevin McArdle: So the one side of the argument is build a great
business and things will take care of itself. If you have a
great business, loosely defined, however you define it
personally. Someone will want to buy it when you are ready to
sell it. The second side of the argument, I've started telling
people for a long time, I've said it's never too early to
start thinking about an exit. I'm now like evolved that. I
think exit planning should be an annual exercise, just like
strategic planning. And I'm going to publish something about
this. It's sort of like half written. So I'll make sure you
see it early. And I can put it in the show notes, whether it
comes out before or after the podcast. But just like we do
like annual planning or strategic planning once a year,
not we like not everybody does this. But that's sort of
conventional wisdom that one should do that. I believe one
should do exit planning once a year as well, even if you don't
think you're going to be selling for another 5 years or even 10
years because the exercise of exit planning makes you think
about things that you don't think about, you know, the other
51 weeks of the year. And so I think it's a very healthy
exercise for founders to think about that like, okay, at some
point when I'm ready to sell, what are people like Kevin and
others like him interested in? What do they care about? Am I
checking off those things? And it's not about Kevin. If I check
off those things that will make my business healthier, it will
make it better and easier for me to run. A great business to sell
is also a great business to own. We know this. And so I'm going
to, you know, continue to encourage people to make this an
annual exercise. Because the other part is like, you might go
into this annual exit planning exercise thinking, well, I don't
want to sell for five years but I'm gonna do this planning
because Kevin told me I should and, you know, I'm gonna just
follow his advice. 12 months from now, you might be in a
different position or 6 months from now you might be in a
different position. And if you haven't thought about selling,
if you haven't thought about these things of like, what's
important and how do I get ready to sell my business, you're not
ready to sell your business. And so that's again, one of the
reasons why I believe there's should be an annual exercise for
founders because you don't always get to choose when the
right time to sell is and that could be a very positive thing.
Somebody approaches you and says, I want to buy your
business and you need to react to respond. Or it could be a
negative thing. And unfortunately, I've had several
situations where founder gets sick, founder's spouse gets
sick, co founder gets sick. You know, child, God forbid, gets
sick. And like, all of a sudden focus needs to be on those
things versus the business. And just being ready and having at
least thought about the process and what to do, I think is super
helpful and healthy.
Arvid Kahl: What would somebody ask themselves, like, during
such an exit planning session? What would be the like, the most
important things that you would do every single year? And maybe
track them over time, obviously, because they change. But you
know, I may be getting ahead of you here. But what will be the
Kevin McArdle: So at the top of the list is if you have a co
most important stuff?
founder, are we on the same page, right? So like, and the
Arvid Kahl: Drama
same page might be, I just talked to a couple of guys, they
happen to be guys that have been best friends. And then they
start a business and the business is going well. And it's
one of those like dream scenarios, right? Where you get
Kevin McArdle: And then problem turns into conflict and drama.
to be in business with your best friend. And it's, you know, good
things happen. But one of them is like, well, I might want to
do this for another two years. And the other one is like, I
could do this forever. And they're in their 30s. So it's
not huge conflict. But they're not quite on the same page. So
let's talk about that, right? And another same page issue is,
you know, somebody, you know, if you've got two co founders and
one says, man, if I could sell this business and my share is
And unfortunately, co founder drama kills a lot of companies.
$10 million, that would be amazing, life changing amount of
money. I'd be totally happy with that. And the other co founder
might say, I'm not selling unless I take home $50 million.
Well, that's a problem. And if you're doing this on an annual
basis and you do it early, it's a discussion. If you wait five
years and don't uncover it or you don't address it, it becomes
a problem.
And so that's one of the things just like a check in and it
doesn't have to be only once a year, but making sure if there's
co founders or other owner, meaningful owners of a business.
So like, if you have an angel investor who owns 1% of your
business, you are not obligated to have this conversation with
that person. But just understanding like, are we on
the same page with timeline economic output? Life, like
commitment to this? Like, are we working 100 hours a week, every
week until we die? Or do we want to have, you know, a more
easygoing, like, healthy, sustainable lifestyle? And, you
know, those are the co founder dynamics is at the top of the
list. Now, if you're solo founder, obviously, that's less
important. However, might be good to have that conversation
with a partner or a spouse if you have one. Because they are
certainly a stakeholder in you and your commitment to the
business. The other things that are important in like an annual
exit planning exercise that may not be addressed in like a
strategic planning exercise is, you know, how much am I involved
in the business as a founder? And early stage, you're involved
in everything. You do everything. As your business
grows and you start thinking about exiting, you want to be
doing less than less. And I think that's one of the things
that you and Danielle did very well is sort of identify how do
we delegate these things to team? How do I document what I'm
doing so that somebody else can pick it up and do it? So those
sorts of things are part of a annual exit planning exercise.
And I love how you jumped to like tracking it over time. I
was just talking to a woman who, we were having these
discussions. Off the record, I won't share who. But you know,
she's of the mindset where she's like, I could do this forever.
I'm like, awesome. Do it forever, if you're happy. And if
you start tracking this, like today, your answer is I want to
do this forever. And next year at this time, your answer might
be do it forever. And then two years, three years time do it.
But then your four if you say, you know, maybe I can see the
end of the runway and I should start thinking about this and
then your five it's like, I'm getting a little tired. If you
do this just one point in time and let's say it's year four and
the answer of your annual exit planning exercise is I can kind
of see the end of the runway and I want to start thinking about
this. You don't have that. It's not a trend. It's just a this is
how I feel right now. And so that's a you're a smart guy and
you jumped right on. I think having the you can go back and
like trend over time. How am I feeling about this and that's
doesn't mean, if your trend starts to dip towards or go up
towards, like, maybe it's time to think about selling that
doesn't obligate you to think about selling seriously. But
it's a good data point and a good exercise to have with
oneself or with one's you know, co founders to, you know. It's
really important to set aside the time to have that thought
and discussion separate from like, annual planning.
Arvid Kahl: I love this. And you know, what I love most about
this is that almost every single point you just mentioned in your
business exit planning strategy has almost nothing to do with
the technical parts of the business, like the operational
part of the business at all.
Kevin McArdle: No
Arvid Kahl: It's all persons, all human
Kevin McArdle: Which is why it's different. And the other point
I'm making and like, annual planning people, you know, if
you're super on the ball, you might be doing it in October,
November in preparation for the next year. If you're less on the
ball and you might be doing in January, February or like what
do we hope happens this year, even though we're a little bit
into it, obviously, depends on seasonality and cyclicality of
your business. It could be nothing but turning the page of
a calendar is typically when people think about strategic
planning for the business. I believe exit planning should be
opposite. I'm going to recommend to people like late spring,
summer, like most business cycles tend to slow down a
little bit in the summertime. And because it's a very
different conversation with oneself or with one's co
founder, it should not be the same week of the year. Don't do
your business planning or exit planning. Because, yeah, you're
right. It's all about sort of like how are you feeling up
here. And in here, your head and your heart to say like, do I
still want to do this? You know and like being honest with
yourself? Do I still want to do this is different than how do I
grow the business? And how's the tech stack doing? Where's the
product roadmap? And how are my customers doing? I'm telling
people set that all aside, this is a selfish, how do I feel? How
do I feel with my co founder? How's my spouse feeling about
this business and is now the time to start thinking more
seriously about selling?
Arvid Kahl: Yeah, that's really cool. I really appreciate that.
I think I've written about this a couple years ago. It was a
consequence of me, like dealing with the sale itself and the
process of building the business. I also had or
redeveloped. Danielle and I developed this kind of check in
with each other every couple of months. And I think we call this
the founder business fit. Like if the founder is still good for
the business because the business can operate if you
build it in a sellable way. And that's what you just said a good
business is a sellable business. A sellable business is a good
business, right? So if you can remove yourself from that
business, that itself could be run by somebody else. And that
doesn't have to be you, right? It could be run by somebody and
it is not kind of bound to the founder and checking in with
yourself for this founder business fit. You're right. The
honesty part is probably the hardest in there like, among all
the different things you can talk about, right? You can talk
about like your vision and how much you would like a certain
thing. But we all have these narratives in our mind about how
life should be, right? Where we are supposed to end up because
our parents told us that that is the dream that we are supposed
to live or we ourselves have found that in our communities
and now we want to live somebody else's dream. So being honest
enough to say, well, I need less than this or I need more than
this to feel secure. That's the hardest part. And I think for
that, I love that you make this about the time of year too. I
just had a thought because like when you do these sessions, when
you do these kind of I don't know if it's called the summit
or something but you take yourself away. You have your
little conversation. You lock yourself in the room with
somebody or just by yourself for a day or two and you just talk
about this one specific topic, time of year and location, how
much do you think that actually impacts what comes out of these
conversations? Comparing like being at the beach having that
conversation versus like being somewhere in the mountains in
the winter in a little cozy little board cabin? You think
that actually impacts what comes out of these things? I'm
curious, what do you think?
Kevin McArdle: I do think there's something to time and
place and space and it's all individual, right? Like so like
on the beach, I would say don't do it during your family
vacation that is not like this is a business meeting or
conversation even if you're meeting with yourself and so
don't take family vacation time to do this because I don't think
that's the right frame of mind to do it. And like for me, a
small cabin in northern Minnesota where I live in the
Twin Cities but going a little bit away into the wilderness
would be a great setting for this. Other people it might have
to be on a beach. Other people it might be like in a cozy cabin
with snow outside like it's all individual but I do think
there's something to not being in your normal workplace. It
just lets sort of like your normal workplace, there's always
like distractions and things that you think you should be
doing. But I think there's a reason that people do like and
it's sort of gotten a little cheesy, but they like offsites
is sort of like, oh, we're gonna leave the office and we're gonna
go somewhere else and think about different things. It can
be a little bit contrived. But I do think there is something like
getting out of your normal setting to help you think a
little bit differently than your day to day. And then beyond
that, it's all personal. Like, I jump to spring and summer
because I'm a sort of anal annual planning happens in
November so that January one, we know the plan and we're
executing the plan. And to me, I want it as far removed from that
as possible. But you know, other people might have different
ideas. And I don't really care if you know, it won't hurt me or
bother me at all if nobody ever does this. But if somebody wants
to do it, I would just encourage like it, make it an annual
exercise, make it different than your typical business day.
Arvid Kahl: That's a great idea. Yeah. And it will be unique to
every, like every person really like when their best time is to
have this conversation. It's just an interesting idea to
think, like if there are times or places that would like
inhibit a good conversation or amplify it, right? The outcomes
of it, that would be kind of cool. Thanks for sharing this,
like I love the way that this is a thing, right? Like the exit
planning strategy session, whatever you call it, that is a
thing that can be well defined.
Kevin McArdle: Yeah, and that's why I'm trying to define the
thing and one of my friends and investors is Dan Martell and he
always will, like come up with a bumper sticker phrase and then
add TM to the end. So I'm trademarking annual exit
planning, owned by Kevin McArdle because people ask me all the
time, like, how should people think about like, going about a
sale? And like, what is the right time and like, you know, I
may even, you know, inspired by you, like, create a course about
this. Not about like, making money or like gating the
specifics, but just create some structure and help people think
because, you know, like you and Danielle, I've been fortunate to
buy businesses from 45 people over a period of time, actually
closer to 50 if I think back further in my career. My
partners have, you know, between all of us, we've probably
acquired 60 businesses. We've also sold businesses and so
like, we have a little bit of expertise in this. And so I want
people to be successful, especially bootstrapped
entrepreneurs who have, you know, fought their way to create
a great business. And so making it like you said, a thing and
not just, you know, read a blog or listen to a podcast and like
that's going to be what I go try to do. I think if it can be a
structured thing that becomes like strategic planning. If you
want to go find a strategic planning template, they're easy
to find. Annual exit planning is not as easy to find, yet, but it
will, you know, I think making it a thing can be helpful to
people. And so that's why I'm putting the time in to sort of
think and write and, you know, eventually will publish and
maybe even turn it into a course or workshop type of thing.
Arvid Kahl: It's really about the coining the term, right? And
that makes it more accessible because people refer to it and
they know what it is. And I think that's what Dan is great
at. And that is what you could definitely use.
Kevin McArdle: Dan is great about, yeah, like coined the
term, create a framework, give people something that they can
just pull off the shelf and, you know, take action. And the other
thing and then we can move on from this point. But making it
an annual exercise means that it's something that you should
just be doing anyway because I think there's especially this is
one of those weird nuances of like bootstrap indie hacker
community. There's sort of this, I think, unfair expectation that
like people will and this may have come out of like, there are
some very famous bootstrapped, you know, indie people based in
Chicago who have said publicly, we will never sell a business. I
think you know who I'm talking about, which is just unhealthy
to use the word never or always in most cases. But you know,
they were the leaders of this community for a long time and
still people look up to them. And so there's unfair
expectation, like you're going to do this forever, which that's
not how business works. Like every business transacts. It
could be when somebody dies, but eventually businesses transact,
you know and in the software world that we live in, people
don't hand businesses down to their children like
manufacturing plants or you know, some of these older, you
know, like a farm. Like that's not how our business works. And
so it is normal and healthy to think about the exit. And
because of this weird dynamic that's in the, you know,
bootstrap indie thing, like, a lot of times people come up to
me in real life if I see them at a conference. And they'll open a
conversation with, you know, Kevin, I don't want to sell my
business right now. But how would it work? Or what is it
happens to my team? What happens to customers? What would I do?
How would it be involved? Like? So they have these questions,
which are normal, healthy questions, but they feel like
they have to preface it with I don't want to sell my business.
And I don't know if that's just like, don't get too excited,
Kevin. We're just having a conversation or but do you see,
do you know what I mean? Am I making this up? Like, there's
this expectation of we're going to do this forever. That's not
normal. Like, we don't have to think like that.
Arvid Kahl: You're not only not making this up. Like a couple of
weeks ago at the point of when this is actually being
published, I will have released an article that is titled, like,
short live businesses versus forever businesses because it's
exactly this topic. Like people think that what they need to
build immediately when they start building a business is
their forever business. And it's a bizarre idea because if you
look at home ownership, right? People have a starter home and
then they have slightly bigger home and then they move into
forever home. But forever home is never the starter home,
right?
Kevin McArdle: It's not actually a forever home, rarely forever
home is a forever home.
Arvid Kahl: Exactly! Forever homes don't even work.. Exactly!
Kevin McArdle: Yeah
Arvid Kahl: If homes are something that even if it's many
years or decades, it's still temporary. Why do we not
consider businesses to have the same lifespan, particularly in a
digital internet enabled society where a long living product is
like five years maybe, right? It's bizarre. I looked at and
researching that article, I looked into the world's oldest
company. And apparently that's a Japanese construction business
that has been around since like 570 AD, like they've been around
for 1500 years and they still construct buildings today as
they were doing it back then. You can do this in the
construction industry. But you cannot do this in the SaaS
entrepreneurship industry, like even next week is probably going
to be a different technology du jour that you have to use to,
you know, build the coolest and latest in tech. So we have much
different timeframes now that also should impact how we think
about businesses, right? And my whole thought in this was, well,
why don't we actually consider our businesses to be something
temporary as well, at least when we start out, right? And that's
the whole Rob Walling stair stepping approach too like, you
built some things here, you see how they work if they were cool.
And if not, well you try something else and then you step
into well, now I have some kind of time freedom. I can now spend
more energy on maybe solving bigger problems and then you
exit that and then you get to your SaaS and you run this for
however long you want, forever, whatever that means. I mean, the
whole topic of like lifetime deals and stuff, I don't even
want to touch that, right? Lifetime of what? But if your
business has a lifetime of like five years, that is still a
successful business, particularly if you get to sell
it to somebody who turns it into something else or winds it down,
but transfers customers over to an equally interesting business.
There are many ways. And it's kind of like the cycle of energy
in nature. Like we have fungi for a reason, right? Like
they're not just delicious when you cook them. They empower a
whole system of cycling through material and I feel businesses
should be considered something similar. Which means together to
an end in this monologue of many things, that it is perfectly
fine not to have to build a forever business. But to
actually build a temporary business that you want to get
from A to B through, that's the idea. And for me, Feedback Panda
was kind of that, right? Now I get to do this.
Kevin McArdle: Well, even if you were building, like the Japanese
construction company, I'm interested to read your blog and
learn more about that. But like, even if the business continues
on, you may not be running it and operating it certainly even
if it's the same family that Japanese company has changed
hands hundreds of times at this point. And so why wouldn't we
assume that whatever we are building as business owners, of
course it's going to change hands, right? Whether it's you
know, like the timing that I think right now today or you
know, the timing that might change. Here's another like
thing that I'm going to release a secret into the wild. It's
okay to change your mind on what you think is going to happen,
right? Like we might start and have a successful company that
you say to yourself, I want to do this for the next 20 years.
And in 12 months, your mind might change like we've already
talked about. And so just understanding that businesses
change hands and that's certainly an important point in
that business and in one's life, right? Because if there's a
monetary reward for that, like, why wouldn't you be thinking
about that annually? You don't want to think about it every day
or every week and obsess over it because then it becomes a
distraction. But that's why I want to make it a thing. This is
we annual Exit Planning is a thing that smart business owners
do. And there's a structure and a framework and Kevin will
publish his thoughts on what it should look like or could look
like and other people smarter than me, will say, cool idea,
I'm gonna make it better. And hopefully, it becomes a thing,
just like, strategic planning is a thing.
Arvid Kahl: I am very much looking forward to you
publishing this for you to change the world of
entrepreneurship. But honestly, I think, honestly, that is a
change. You're not disrupting it. But I think and that's great
because it doesn't need more disruption. But you're giving it
the tool, we're giving people the tools that they need to do
something that they already want to do in a better way. So I
think I love the idea that you're turning this into a very,
you should write about this maybe more extensively. Like, as
I'm writing my third book, why I want to do the same thing but
with building in public. Like I want to put this out there as a
concept, as a framework, not just for for indie founders, but
for anybody who wants to go from A to B, right? You can always
kind of empower your community to help you and help them in the
same way. So why not turn this phrase into something that
people can actually use? And as I'm doing this, got a suggestion
to you. Do more writing, I think the world needs these thoughts
as a book.
Kevin McArdle: Well, I think, I need to do more writing. I've
seen how successful you have been with it. I think you're
also I don't consider myself a great writer. But I also know
like, when I write something down, it helps me to think about
it more clearly. So I have some clarity about this concept
because I've been writing about it and haven't published but
yeah, as soon as we're done recording, I will go tweet:
annual exit planning is now a thing.
Arvid Kahl: Yes
Kevin McArdle: And then go around it from there.
Arvid Kahl: I love that. Well, since you're already mentioned
that, like where do people go to find out where are you sharing
this kind of information? Where do you want people to find and
follow you?
Kevin McArdle: Yeah, two great places, if you go to
bigbandsoftware.com, we have a newsletter that I'm really proud
of that we share our ideas. We also share links to, you know,
smart people that we know in the world and what they're
publishing, talk about our team, talk about like hiring needs,
those sorts of things. So yeah, just bigbandsoftware.com and
you'll get a pop up for the newsletter. And me on Twitter is
the best way to find me Kevin_McArdle and McArdle has
one. Sorry, one C, people always get that confused. And there's
more than one Kevin McArdle on Twitter, unfortunately. But
yeah, I'm easy to find. And I love engaging with people on
that platform as long as they're, you know, kind and good
spirited like you. So yeah and I love helping entrepreneurs. So
whether somebody might someday sell to big band or not is
immaterial. I just know that entrepreneurship can be very
hard and it can be very lonely. And if I can make it even, you
know, 1% easier or less lonely for somebody who's out there
working hard, then I'm happy to do that.
Arvid Kahl: You've certainly helped me and I know many people
who you have helped in the past. And I know you are going to help
hundreds, if not 1000s or millions of people, depending on
how well your writing gets received by the community.
Kevin McArdle: Oh, that's nice!
Arvid Kahl: But honestly, I'm super happy that you also just
appeared on my show here today and shared what you're doing,
how you're doing it and the kind way in which you're doing it. So
hey, man, thanks so much for being on. That was an awesome
conversation. I'm so glad.
Kevin McArdle: It has truly been my pleasure, Arvid. I'm so
grateful that you had me on. It's so fun to talk to you as
usual.
Arvid Kahl: Thanks so much. Have a good one.
Kevin McArdle: You too.
Arvid Kahl: And that's it for today. Thank you for listening
to The Bootstrapped Founder. You can find me on Twitter
@arvidkahl. You'll find my books and my Twitter course as well.
If you want to support me and the show, please subscribe to my
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(http://ratethispodcast.com/founder). Any of this, will truly help the
show. Thank you so much for listening and have a wonderful
day. Bye bye.