← Making It with Jon Davids
Making It with Jon Davids
179 - "I Built The First Fintech Company Ever. Here's How." | Brian Hamilton
00:49:47
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- [00:00]
John Davids
What's up guys? JD here. And on today's show I am talking to Brian Hamilton, entrepreneur extraordinaire. Brian is the chairman of Liveswitch and he was the founder of the very first fintech company in America, financial technology business called Sageworks. And I gotta tell you, this conversation went in all kinds of directions. This is the kind of thing that I love. We started talking about the business and how Brian started Sageworks. We get very tactical. So if you wanna understand how businesses are built, you're gonna love the first half of this conversation. And then we just started talking mindset and we started talking about the real grit of entrepreneurship. And if you just want some truths, you know, no holds barred, this is some serious conversation. So if you wanna get the mindset, the tactical, the inspiration, we got it all in this episode. If you're a fan of the podcast, make sure to leave a rating review wherever you're listening to this, Apple, Spotify, YouTube and please go to JohnDavids.com to get my best stuff to your inbox. Now my conversation with Brian Hamilton. You're listening to Making it with John Davids. So Brian, you started out as a consultant and I think you were even a teacher at one point. And then something happened and you create the first fintech company in America. So can you kind of just take me back and tell me how that happened?
- [01:29]
Brian Hamilton
Yeah, I'll tell you the story. It's a long one, so I hope you're prepared.
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John Davids
I'm tucked in, I'm ready to go.
- [01:35]
Brian Hamilton
Yeah, that's good, that's good. Nice to be here John, by the way. It's really, really great pleasure to have you. So first of all, I have to disclaimer we, we always claim we were the first fintech in, in, in, in the world actually. And there was a specific definition that I had put on that, which was we developed an expert system to convert financial numbers into words. And because of the volume of data, John, there's a lot of data, you know, we couldn't just do floppy disks in the day, right? This is 1998 and so we, I'm pretty sure we were the first company to execute a financial program over the Internet. It was us and this little company called salesforce.com so I think it's a pretty decent claim. But you know, what is a fintech and what is AI and all that, who knows? But anyway I, I met a buddy of mine in 1992 and her name is Sarah Torville and I was teaching one of these part time courses at Duke University and understanding your financial statements. I'll never forget this actually. And it was just like, you know, how to understand financials and this type of stuff as a business person and all this. And I was writing all this stuff on a chalkboard in those days. There were chalkboards, I remember. Yeah, yeah, yeah, there were. I, I, I'm gonna buy a chalkboard. I really like chalkboards. I still like them. I'm literally gonna do that. But anyway, you know, and I was writing the formulas up on the board, that type of thing, and this little lady came up to me and said, because I, I had turned to the board and I said, you know, I'm, I'm surprised someone hasn't developed an expert, some type of technology to help people understand financial data because it's, you know, not rocket science or whatever. And anyway, this little lady comes up to me during the break. Sarah Torville, who became a friend and she was a database developer for Unisys. And she said, she said, if you can architect that system, I can program it. And that was the beginning of our great romance because Sarah and I became buddies and we just, just friends, you know, really. And we, we had talked all the time about life and technology and all these things, but I was doing something totally different. And then about 19, you know, there's just like light bulb moments, they happen and then it's like, oh, wow. Or you can call it a eureka moment or whatever. But I was working as a part time CFO for a really bright guy who was running a pharmaceutical CRO company. Really good dude, art cam. And he came into my office and he, with all bunch within balance sheets, income statements, whatever. And he said, you know, hey, I want you to explain to me what these numbers are. Right? And I said, all right, that's cool. And that was the light bulb moment. Like, wow, this guy's really smart. He's a PhD, he's a really world leading research guy, whatever. And, and even he has the whole issue of really understanding financial data. And that became sageworks. That's how we got started. Literally. It was, it was the, I think fall of 1997. And I wrote out a mission statement and Word perfect.
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John Davids
Yeah.
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Brian Hamilton
Which I don't know if word perfect is still out there. I've always liked it better than word.
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John Davids
It's, it's just word now. But, and, and the initial was the initial. If you could put it to me in one sentence. What was the product? Was it just, we're going to help.
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Brian Hamilton
You financial numbers now? It's a Good question. It's a good question. Keep me down to earth here. It's, it is a financial expert system. It truly was early AI, it really was, that converted financial statement numbers into plain language. So if you have a business and you're getting income statements and balance statements and statements of cash flow, this expert system would convert all those funky numbers into, into very plain language that anyone could understand. That's what it was.
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John Davids
So, for example, if it said I had a million dollars in the revenue line and then 500,000 in the expense line, it would tell me you have a profit of $500,000. Is that sort of what it did?
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Brian Hamilton
It would. It did, yeah. And by the way, that's. That's very good, actually. It did. But, but of course, the magic. And I hate the word algorithm because it sounds so fancy, but it was really based upon a lot of algorithms. So it was not just one formula at a time. It was combining all these formulas together. So I could say John's in Toronto and John's six foot one. And John, you know, you look like a pretty fit person. And, and maybe you're Protestant or Catholic or whatever you are, or maybe that, you know, you're, you're left wing, you're right wing. Each of those individual pieces of data are, you know, they're interesting. Right. But unless you combine it all together, we don't know much about John. And that was the basis of the patent in the company. And it works. It's used all over the world, they tell me now, I mean, that system called Profit Sense is still out there.
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John Davids
That's interesting. So let me just dig in a little too, because I didn't realize it did all that. So then you could paint a picture of a company that had, let's say, very high revenues but a very low net margin, or your cogs are too high, or, hey, you're spending a whole lot of money on these fixed costs. Why don't you. Can you take any of these out? So it would give you that kind of analysis?
- [06:37]
Brian Hamilton
Oh, yeah, yeah. The word proud is a bad word, but I'm proud of it. It's still used in that original algorithm, has never changed it. It was unassailable. Yes. We looked at all these numbers together in combinations, but I think, I think it was, like, able to generate like, like literally like 164 trillion different reports. Because as the. It's not only just the static numbers, John, it's how do they change? Because you can't tell the guy every time he reads his report. Go make more money. Because that's not. There's no insight there. Right?
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John Davids
Yeah.
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Brian Hamilton
You got to say, what changed since last time? What might you work on? And we would give people recommendations. Here are things you can do to improve your profit and liquidity based on industry. So it was a pretty funky system. It took me two years to write that darn thing.
- [07:30]
John Davids
And it was a lot of work in 1998. Yeah. We're not talking modern technology as we know it today. If you're spending more than $50,000 a year marketing, I've got something for you. It's a playbook I wrote called how to build a Social Media Selling Machine. You can grab it now for free at johndavids.com playbook. This is the nine step formula we use for our clients at Influicity to turn their social media channels into reliable revenue engines. Grab it right now@johndavids.com playbook. So you're. But your background, I mean, from what I understand, it's teacher, consultant, and then you have a tech company. So what was your actual training? Were you a finance guy, an accountant by training?
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Brian Hamilton
I was for a while. I was in the bank until they, they were going to fire me. But I was in a bank there for about a year after college and I had studied finance and all that stuff. But. But, you know, more importantly, I was a practitioner, I was an entrepreneur. So I knew what was important, or I think I knew what was important to running a company. And that, that was really kind of the magic there.
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John Davids
And so what was your. You said your co founder obviously was the technical person. What were you doing? Were you literally writing out the formulas that would go into the algorithm?
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Brian Hamilton
Yeah, I have a little picture on my wall here. I can't show it to you, but I wrote out the formulas. And again, the magic was in not just the formulas, but how those formulas would change based upon different criteria. It's kind of boring.
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John Davids
A whole bunch of if and then statements. Yeah, absolutely. I got you.
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Brian Hamilton
Yeah, that's. Hey, good job. Yeah. And for each of those scenarios on those algorithms, you needed a separate paragraph.
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John Davids
Right.
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Brian Hamilton
And then the idea is the report comes together based upon the financial criteria into a one sheet or one sheet. You're running a company. It could be a pharmaceutical company, it could be a landscaping company. You get a one page thing. How are you doing? Are you doing well? You're not doing so well. What do you improve? And it works. I mean, it really works. It was really truly early AI and I know more about that than Most people, and I don't know as much as I should, but yeah, it was early, very early.
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John Davids
So that's 1998. What was the growth like of the company? How long until your first client did you raise money? What did that first, let's say decade look like?
- [09:49]
Brian Hamilton
All right, so in 1998, I had to write like 10,000 pages of single spaced text. It was two years. It was a lot of work. Oh my goodness. Then, then you, you know, if they say if you build it, they'll come. And I'm like, yeah, that might be true in Hollywood, but it's probably not true. So I, I built the expert system. And then, you know, you're just sitting there like, wow, this is great. We got it done, but now you got to go sell it. And I didn't know where we would sell. We would sell to franchise companies, would sell accountants. Would we sell it to bankers? Could we sell directly to small businesses? And I tried all the above and, and my friend, who's a friend now, Richard Sebolt, it's the craziest thing. It was based on a Yahoo search. Yahoo. Yeah. I don't even know they had search. But like, all kidding aside, Richard Sable OD is coming out of Citibank, the big building in, you know, New York City, was looking for an expert system like this. And he contacted me and you know, we, we became buddies afterward. But, but Citibank licensed from us and because we had some smaller customers before then, but it was a really, it's, it's just those moments you live for because you're like, oh my God, you know, my work is actually worth something.
- [11:03]
John Davids
You know, Citibank comes in and their use case probably is we have a whole lot of clients, we have a whole lot of staff. Like, we could use this across the organization.
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Brian Hamilton
Yeah, that's correct. Yeah, that's exactly. Yep.
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John Davids
Do you remember that first contract? How, what was that?
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Brian Hamilton
Oh, God, yeah. Yeah.
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John Davids
A lot of zeros.
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Brian Hamilton
I want you. I should send this to Rich because, you know, I was calling him in those days. It was like I'd call him from like a pay phone and you know, he was, wasn't at his desk or whatever. But it was a big deal for us when, when we got that. It's a really an incredible memory. I, you know, I don't, I think I know a little bit about the demographics of your listener, you know, but these are the things that you live for because you work hard, and if you work hard enough, you'll get these moments where you get Like a big deal and you feel validated. It was huge, you know, it was a big deal. And then I licensed to Intuit and then a bunch of other companies was.
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John Davids
The business model licensing to big orgs at that point it was the Citibanks and the Intuits of the world.
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Brian Hamilton
Yes, that's exactly right. Oh, by the way, a little footnote. It didn't work.
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John Davids
Okay, tell me.
- [12:13]
Brian Hamilton
Yeah, yeah, very important footnote. Right, so we licensed to Intuit, we licensed to Citibank, we licensed to Wells Fargo and a bunch of other like, you know, not a bunch but, but maybe five, whatever big companies. But what we found, and I think it's very true and it's a nice takeaway for maybe some of the people listening. What we found is that, you know, Citibank is a bank and they loan money and Intuit is a, they do accounting and they do accounting software. And Wells Fargo is another bank, they do banking. Their core business, no matter what they say, is not doing financial analysis. And so, and boy, it's hard to describe this. It, it's very difficult to start a business and not know whether you know you're going to make any money. Right? That, that's tough. But what's harder is when you get the deals and then they don't turn out to be what you think they are. Because that, you see what I mean, that's really demoralizing, right?
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John Davids
Yeah, I've been there. One of my first, not my first, but when I raised money and sort of did my first venture backed business, we built a piece of software, brought it to clients and realized after two, three years of painstaking coding labor building, they didn't even want a self serve tool, they wanted a full serve tool. So we had built this thing out to function in one way and we realized, oh crap, guys, remember that last three years we've been working, it's a whole different thing now. So let's, let's start from square one. So it sounds like you kind of had that same, that same moment.
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Brian Hamilton
Yeah, you know, boy, that's really interesting, John. I like that. I haven't thought about this in years. You know, people say that the entrepreneurs are crazy and I think it's usually true. Certainly in my case it is. But it's not a matter of being crazy usually it really isn't. It's a matter of you've got to be taking data in all the time, all the time, integrating that data and pivoting. And if you cannot do that quickly, like what you did if you can't do that, you can't usually survive as an entrepreneur. Now, maybe the Chick Fil a person, or the In N Out Burger person, or the Canadian Great Cheeseburger person, whoever that is, maybe they came out with Mom's recipe and they came out and they, they served it and it sold like hotcakes. That would be an aberration. That would be very rare.
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John Davids
Very rare.
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Brian Hamilton
Most times, as you know, John, you get it out there, you listen to the customer and you pivot. And that takes time.
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John Davids
When you have entrepreneurs, and I'm sure you talk to many entrepreneurs, the first idea is almost never what ends up in market successful. So you're, you're really, and especially at the early stage, you're betting on the people and you're betting on their ability not to be stubborn and do exactly what they wanted to do a year ago, but to pivot and learn and adjust, because that's how you succeed. So just going back here because then.
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Brian Hamilton
By the way. Sorry, sorry.
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John Davids
Yeah, keep going.
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Brian Hamilton
Hey, but you invited me. So anyway, just keep your thought. But I'll tell you the Live Switch story, which is another mind blower, because I'm living it again.
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John Davids
Can we. One second. I want to just put a pin in that because we're going to get to Live Switch, but I want to get into the weeds here for one second because this actually is interesting to me and all the listeners. So what was the actual pivot? You said you sold this contract to Citibank, Wells Fargo, which I have to imagine these are seven figure, maybe even bigger contracts, and then it's not going well. So, like, what was the fix? What was the pivot? Because you obviously did well with this company. You must have figured something out.
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Brian Hamilton
Yeah, I don't want to be solicitous, but I've never been asked that question, and that is a very, very good question. Wow.
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John Davids
It's the question that matters because how did you get it to work?
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Brian Hamilton
I got it. I know, I know why you're asking. That's a great question. I've never been asked. And there's an answer. There's always a voice inside of you. I hope there's always a voice inside of you. You know, whether it's working, you kind of, hey, man, I'm on to something. Hey, man, I'm not onto something. And even though the Citibank people are all excited and there's 50 people in a room and we're going to bring this through the whole world and it's going to be Lovely. And there's going to be strawberries and ice cream and oh my goodness, you know, we're going to convert our bankers into consultants. There's that voice. Listen to the voice. Listen. Remember in high school or a girl, a guy, whatever it is. And you. Yeah. They're kind of not into me. You know what I mean? You have to have that voice. So what? I know.
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John Davids
Self awareness.
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Brian Hamilton
Self awareness. Yeah. And honesty. Real honesty. Like it takes so many important characteristics to build a company. Right. But honesty's one of them. And so, so inside of me I'm like, ah, I don't know, man. I'm not feeling it. So what I did is I did a side move and I had a little tiny team of two people, Drew White and Person X. And I said, hey, guys, go out and sell to small accountant firms. Let's try it out, man. Just, hey. It's a way of minimizing your risk. Like portfolio management. Yeah. And. And it worked. And it worked. So those guys were all getting these $5,000 deals, $1,000 deals, and I'm doing the big important deals. But that became the core business. Isn't it fascinating?
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John Davids
Wow. Wow. So that, that little side project became the main driver. It was in the end, the small accounting firms that actually needed this. And the Citibanks didn't need this.
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Brian Hamilton
That's right. Exactly. Yeah. And it was always like, I mean, I'm, I hope we want to get in trouble with her. She's such a lovely person. But Debbie Lenz, in college, like, you know, I asked her out, we go after a meal. Very nice person, but down deep on my ass, she doesn't like me that much, you know, and, and, and I wasn't that likable. So the point is, the point is you're getting to something super important. Do you really, are you really being honest? Are you looking at the data? Are you self examining? And through self examination we become better. But as you know, a lot of people don't do that too much. So they just go off and you know.
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John Davids
Yeah. I think the advice you're giving now is actually so important because there's a whole lot of tactics you can do and there's a whole lot of books, business books you can read. But when it comes to mindset, it can get very fluffy. But to bring it to a place where it's more practical for the listener, right now it's really just about, like you said, being honest with yourself. You have a tingling. Yeah. They're saying they like this, but I know how the software works. And I know this person and they don't know it today, but in two weeks they're going to hate this software even though they're paying. They're writing a check to me today. And I can tell you, because I, back in 2015, 16, that was the exact feeling I had. And that's why I pivoted my business at the time. And it sounds like you had the same thing. I bet there are people listening right now that maybe the revenues are there, maybe they're getting a lot of accolades, they're getting written up in TechCrunch, but they know that they're not quite a fit yet. And it's that level of self awareness. You just got to have it.
- [19:18]
Brian Hamilton
Yeah, well, you know, the other thing? Let's get. If you want to get a little weird today, it's snowing in Raleigh, Durham, North Carolina, which is weird. So I'll get weird with you. It's. You got to be the other person. You got. You got to get out of you. You know what you think and you know, who cares what you think? Go to the other person. If I were running the company, very important. If I were running the company, what's the value of the technology, really? And we persuade ourselves all the time that the things that we create are wonderful and. But be the other person. I can't tell you how important that is. You got to be the other guy, right? You know, like, by the way, for all the husbands out there who, you know, it's. We already know what you think. Be your wife, right? Be the other person. What's important to them? What's the value? And then when you're the other person, you'll get there a lot faster. But again, as human beings, we tend to fool ourselves.
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John Davids
It's so true. I'll end this on one personal note, because I have been on both sides of what you're describing. And so I gave the example a minute ago about how I had this business. And very similar to you. I knew it wasn't working. And just this morning I was on a call, a sales call, with a new client of ours. We sold them on a package, probably about a $50,000 package, at a marketing agency that I run. And I know, I can tell you. Cause I've been doing this for 10 years. I know that this package they're paying 50 grand for, they're going to make 250,000 in the next three months. I know it. I've seen it a hundred times. When you are in that position, it just feels great to be working every day. There's no mystery. I'm not pulling the wool over anyone's head. And so that's kind of where you want to get in a business where you can say the accounting firms, like you said, hey, guys, pay $1,000 a month for this. I promise you it's going to make your life way better. You're going to be thanking me. That's how you want to be in your business.
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Brian Hamilton
Authenticity. By the way, you're hitting on a really sore subject. I can't tell you how often I've hired marketing companies. And we're going to do this or we're going to do that, and we're going to do word optimization for word search and this, or, you know, keyword search, whatever. What are all this stuff? Yeah, and I'm like, you know, here's what's really going to happen. I'm going to pay you money, and I'm not going to make any money. Let's be honest here. I can't tell you how often that's happened. So, yeah, if you're running a company like that, because this is what I said to one of the marketing guys last year. I'm like, dude, you know our product, you know the market marketing, I don't know the marketing. You should be able to tell me whether it's going to work. And. And again, that takes a level of honesty. But here's the good news. If you do it, people will beat a path to your door because it's so rare.
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John Davids
You're. You are totally right. And there's a whole bunch of swindlers out there. And I'm glad my industry is full of swindlers, frankly, because it makes my job easy because we actually get shit done. But. But that. That's a. That's a whole different topic. So let's. Let's just. Just to cap off this story before we get to live. Switch. What was the kind of arc. What was the growth? What was the revenue? What was the exit? What. Whatever you can share about.
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Brian Hamilton
Yeah, our growth was. It was very high. But of course, in the law of small numbers, in the beginning, but. But we were growing a lot. There wasn't a year we didn't grow 100%. I mean, we just. 100. 100. Except for one thing, one last thing, and very important. We did find, once we got to about 10 million in revenue in the CPA market, the accounting market, we were losing customers as fast as we were getting them. Hmm. And it was like that was another eureka, Mom. Like, holy crow. The accountants. There's a sticky element there. But we can't go out and get 2 million of them. So the big move at sageworks was about 2008 or 9. We pivoted into banking, but a different product, a financial analysis product. And that changed everything. That we grew a lot. And then, of course, in 2018, we were taken out by AKKR. It was a very, very, very good liquidity event for everybo. But I do. I want to say this to everybody. I really. I'm very passionate about entrepreneurship because I know how hard it is. It's not bs. I don't. I don't want to sell anybody anything. I hope I can help people. It's really true, John. 99% of our value, 20 year company. 20 year company. 99% of the value of that company was accrued in the last five years.
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John Davids
Wow.
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Brian Hamilton
Keep that in mind.
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John Davids
Yeah, yeah. So you. You put in 10, 15 years to get to the point where you can really have value.
- [24:00]
Brian Hamilton
Yes, that's correct. That's a. That's really true.
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John Davids
Yeah, it's so true. You mentioned. I think I got the number right. When you hit 10 million ARR. You noticed that you were kind of hitting a roof. You were churning as fast as you were gaining customers.
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Brian Hamilton
Yes.
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John Davids
And that happens actually with a lot of software. I mean, 10 million is a number where you do sort of hit a limit. And so you sort of got out of that blockage by going after a new market, a new product. What was it?
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Brian Hamilton
New market and a new product. That's right.
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John Davids
Interesting. And. And so then the exit, and then you were free and clear, or did you hang on for a few more years?
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Brian Hamilton
No, no, they got rid of. No, they're so smart. Those guys are good at what they do. They got rid of me immediately. But I knew at that point, like, on a serious note, I knew at that point that we had developed such a great culture and such a great infrastructure that the company would do fine without me. And they did. And I even told them when they came and I went to business school with all these guys, these types of people, I said, I know you got to look in the car engine and you worry there's something wrong with the transmission. The truth is, man, I'm done. I'm ready to get out. And you guys are, you're going to get a good car. And they did.
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John Davids
That's great. And so you eventually went to live switch. Did you take a break in there? Did you try retirement?
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Brian Hamilton
I just tried that for about six minutes. Well, actually I, I started an organization 32 years ago with, with a, a guy, Reverend Robert Harris, called Inmates to Entrepreneurs. And you know, I'm really happy with what we've done. We've brought like a million people through our program in 32 years. And I, I thought I'd be the nonprofit person and dispensing, you know, wisdom and all this stuff. But after two years, John, I kind of missed the game. I. There's something about being in a for profit thing where it's more real or something. So yeah, I got a lot of the guys back from the old band, they had gone to other companies and I said, hey, let's go do it again. Let's do it bigger and faster. And about 2021. Yeah, 2021 I made an investment in a company in Vancouver called Frozen Mountain. And now, of course, now we're live switching, as you see from the, I.
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John Davids
Can see it on the step and repeat board. And what is the one liner for live switch?
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Brian Hamilton
Well, I guess video and platform communication. So we like this. You're using software here. These guys are super sharp guys. They develop the stack, the media streaming stack underneath this application that you and I are using. I really love it because I can do a lot of things on the product side to build new products from video. So that's, that's sort of licensed.
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John Davids
And what took you, you know, you spent 20 years in fintech, numbers accounting, entrepreneurship with inmates to entrepreneurs. What then took you to video?
- [26:53]
Brian Hamilton
Well, wow, that's a great question. I, how do I say this nicely? I don't know if I can. What, what, what happened? And I'll keep it short, but I need to say this. When I started sageworks from that, with that expert system, my ideas, let's go out and help every small business person in the world. Literally, it was right in our mission statement. We, we want to get them better information, they can make their businesses more successful. And I'm super passionate about helping entrepreneurships as you entrepreneurs. As you know, the rate of ownership is going down and down and down through the decades, both in Canada and the US So very passionate about that. When I pivoted to the bank market after about five years, I'm like, oh my God, we're selling to banks. And it's like kind of boring, you know, don't tell him I said that, by the way, but it's sort of boring, like. So I just, I lost my mojo on mission, you know, and I just not that kind of guy. So what I love about video and what I love about Live Switch, John, is I think even despite this advancement, what we're doing right now in technology and video and all that, I think that the potential to bring people together through the whole world through video technology is so great. There's so many things we can do. The canvas is so much bigger. And that's why I got involved in video, because I think we're at the very infant stages.
- [28:17]
John Davids
It sounds like the through line there is, you want to help at the beginning, business owners and entrepreneurs understand their numbers because they can do a whole lot more and better if they understand that. And now you want to bring people together more. You know, I guess emotionally, not physically, but, but virtually. I mean, it really is. And then even your work with inmates to entrepreneurs, which I want to touch on in a second also. I mean, I don't know, are you sort of at the end of the day, just an altruistic guy who wants to help the world?
- [28:44]
Brian Hamilton
My kids would say, no, no, no, I want to make money and I want to. But I will tell you, and I won't give you the whole history, but when I got out of grad school, I ran a chain of, just for five years in my 20s, I, I ran a chain of Coin Laundromats. I mean, the, the Coin Laundromat experience in North America is awful. They're called shotgun laundries. They're very unsafe and they're not clean and they're not attended. And the inner city experience for people who go to old laundromats, they don't have a lot. You, you know, that's why they're at a laundromat is pretty bad. And so even then I, I thought, well, let's do this and let's make the laundromat experience better. And I guess what I'm trying to say is, yeah, sure, I'm here for money, but my goal was never to be like worth a hundred billion dollars. My goal was to, has always been let's provide a service that's needed and improve things. I, I, that's what I always say to the entrepreneurs, John. I say, you know, we're like ants, man. We're like, you ever the sidewalks, you, you know, you got the answer. And there's like five ants and they're carrying that piece of bread and it's not one and it's, but so the dynamic difference between the impact of Google and Goggle or Google and a guy running a landscaping business in the scope of history is I Believe is very small. I really do. It's very small. But if we all work together and we're all starting companies and we're all service minded, we, through this beautiful thing called being an entrepreneur, we can make people's lives fundamentally better. And so it definitely drives me. I mean there's no doubt about it.
- [30:21]
John Davids
So I, and I don't often talk about this. I talk about it with entrepreneurs, but when you talk about it with non entrepreneurs, it sounds a little bit, you know, maybe high minded. But you know, I truly believe entrepreneurs, you know, improve the world and in many cases save the world. I mean entrepreneurship is responsible for everything from housing to cities to cars to plane. Everything is entrepreneurship. And in your case with, you know, you helped, I think, from what I understand, help people who are in prison improve their lives through entrepreneurship. So how did that even start?
- [30:53]
Brian Hamilton
There's a guy named Reverend Robert J. Harris, comes out of Oxford, North Carolina. I'm Brian Hamilton, Irish Catholic guy out of Connecticut. He's a Baptist minister. And I love being around Reverend Harris. He's just like, he walks into the room and that you don't need electricity, the lights turn on. Just a beautiful human being. And I loved hanging out with him. And he would do prison ministry, so he'd go to prisons. And I don't say Bible thumping, but that's kind of what it was. You know, he's out there helping people in the prisons. And I just like being around Rev. I mean he and I are friends now. I love being around him. So I went to a place called Orange correctional facility in 1992 with him and he's doing the Bible stuff and the God stuff. And during a break a guy comes up to me, orange jumpsuit, I'm making small talk and I go, hey, what are you going to do when you get out of prison? Minimum security? He goes, I'm going to get a job. And I remember thinking to myself, I didn't want to discourage the person obviously, but, but I'm like, wow, that might be hard with a record. Might be hard to get a job with a record. And that was the light bulb moment for inmates to entrepreneurs. I'm like, instead of getting a job, let's help these people start small service based businesses for under 500 bucks. And that was the beginning of that beautiful thing called inmates to entrepreneurs. And now it's, we're in every state, we're in Canada, we're in every state in the United States and we're I guess in like six or seven countries now. So it's, it's been a beautiful journey.
- [32:20]
John Davids
But, but, and are there success stories? Like, so just as an example, like a person becomes a plumber, a landscaper, like what. What are they doing?
- [32:28]
Brian Hamilton
Yeah, that's what they do. They'll go out and, you know, paint, they'll do painting. They do do a plumbing business. Electrician, carpenters. We got some tech entrepreneurs, but largely service businesses. You know that you can start with less than 300 bucks and we teach them how to do that. We've got about 50 mentors. You gotta. You don't have to be in prison to be a mentor, but you have had this, have started a company from scratch. So our volunteers are all entrepreneurs, seasons tough people who help these people learn how to start a business. And it's been one of the more rewarding things of my life, actually. I, I think I don't know your situation, John, but you might be remembered for this or that or whatever, but I to e will be. I mean, it's going to outlast me. And it's, it's, it's been great, actually.
- [33:19]
John Davids
Quick break. So I can tell you about Influicity. That's the little marketing agency I started in my apartment about 10 years ago. Well, fast forward. It is not so little anymore. Influicity works with some of the biggest brands in the world, building customer communities that drive revenue. We do this through influencers, podcasts, paid media, social media, content, AI and so much more. You can learn more@influicity.com and hey, while you're there, check out our case studies. We have a lot of them. That's influence fluidity dot com. Yeah, and. And I'd imagine it's not just the livelihoods, but it's also the fact that when somebody becomes an entrepreneur, runs a small business, it's actually all consuming. So not only does it give them a paycheck, but it keeps them in line, keeps them out of crime, keeps them hanging around the right people. I mean, it really changes your entire life.
- [34:08]
Brian Hamilton
Yeah, it really does. You know, my dad used to say that something like this idle time is the devil's playground. And I was like, what? What are you talking about? I have no idea. What does that mean? But it's true. You get people out of prison if they can't find meaningful employment, if they don't have something to do. Especially guys. Not to be sexist, but guys need to start doing something. We all need to be doing something. But if people are not actively doing something and building something, they gravitate back to where they were and in our society. And I think Canada's in there too, man. I mean, seriously, you know.
- [34:41]
John Davids
Yeah.
- [34:41]
Brian Hamilton
I love Canada, by the way, just for the record. But, but my point is it's true in Canada that we're not giving people a legitimate second chance. And that's terrible. I mean, and I don't. You might not know this, I don't know what the laws are in Canada, but you might not know this if you and I started a business, John, in North Carolina and it failed and we went bankrupt in 10 years in the U.S. it's expunged.
- [35:07]
John Davids
There's.
- [35:08]
Brian Hamilton
You can't get a record of it.
- [35:09]
John Davids
Right. Yeah.
- [35:10]
Brian Hamilton
If you have a dui, driving under the influence or whatever that is, or a failure to appear like, you know, you just missed the court date or whatever, that last in perpetuity today in this little small company called Google, I don't know if you know that it lasts forever. So if you're looking for a job, let's be honest, the employer will Google your name or whatever, and that mug shot comes up. So we, so certainly in the US people are being habitually locked out of an employment economy. Very bad for them and very bad for society. So, you know, it's, it's a big deal.
- [35:45]
John Davids
There, there is definitely something to be said for the, you know, and the cultures are. I mean, I do business primarily in the us, the uk, all over Europe, and so I sort of see these different markets. There's definitely a bias towards entrepreneurship and business ownership and real estate and people who take risks in general in societies that prosperity versus people that cause harm to the society. I mean, in other words, if you cause harm, if you're, you know, if you're getting, if you're driving drunk or you're stealing things or whatever. Yes. That's really going to stain you for life. If you are an entrepreneur and you try to build something but you end up losing, you go bankrupt or whatever it is.
- [36:24]
Brian Hamilton
Right.
- [36:24]
John Davids
You were much faster to forgive as a, as a society and as a government. And I think that's really because we want to encourage entrepreneurship. I mean, that, that's sort of what it's all about.
- [36:34]
Brian Hamilton
Yeah, that's true. I mean, but as, as you probably already know, I mean, and this is stuff I studied, you know, I'm boring. I study this stuff. But, you know, I don't know if it's true in Canada probably, but 100 years ago, you got about 50% of the people in the United States who run businesses. 50. Non farming, by the way. Non farming. A lot of farmers back then, but 50, about 50 years ago, that dropped to about 35%. 30% 30 years ago, maybe, you know, 25% or whatever. Today only 9% of people have an interest in a business. And so what does this do to competition? What does this do to prices? What does this do to employment? Most importantly, what does it do to innovation? It is very difficult to start small businesses right now. You've got big box retailers putting. What's the chance you and I could do a, you know, an office supply store in a small town in Canada? I mean, you know, we have to compete with these big, huge, big box retailers. You got big tech. So it's, it's, it's a, it's a, an existential threat to capitalism and to our society, our free society, to not have people starting businesses. So, you know, we, we got to help them and that's why you're here.
- [37:50]
John Davids
Do you think that the opportunities exist? So a lot of entrepreneurs and business owners listening in here. Do you think opportunities exist more so, because I can make the reverse argument say, yes, I wouldn't go and start a Walmart today, but I could grab a shopify store and have a $5 million E commerce business I've been running in a couple years. Like, isn't, isn't that the bright side of it?
- [38:11]
Brian Hamilton
Yeah, yeah, maybe I haven't thought about it a lot, but I, but I still think it would be hard, you know, if you're competing with a huge company that can buy in bulk. Let's put it this way, I'm older than you. Back in 1972, you go buy a T shirt. And I remember this very well. I don't know why. It's about 12 bucks in 1972. About $12, right. I go buy a T shirt today for about $12. So what I'm trying to say, it.
- [38:40]
John Davids
Costs more than that.
- [38:42]
Brian Hamilton
Yeah. No, so, so what's happened? Right. A lot of things have been shipped overseas and it's very difficult for small businesses to compete with these big box retailers. So, so we've got, we got some issues. I mean, we really do certainly in the West. We've got to really get our arms around this.
- [39:01]
John Davids
I, I think, I think you're bang on. I think it's a, it's a big conversation that we're gonna be talking about for a long time as, as a culture. I mean, there's definitely a lot of changes have to have to happen. What's, what is the next, you know, you had your 15, 20 year experience with Sageworks, what is the timeline 5, 10 year outlook for. For Life Switch?
- [39:21]
Brian Hamilton
Well, yeah, so Life Switch, with a lot of pivots, we got into the video SDK business originally that's where we were. Now we use our platform to build video specific applications by the way, for small businesses. So we're trying to tech enable small businesses so that they can use video to maybe not have to drive out and give estimates or to document their work. And so at liveswitch, my personal goal is to get our platform to every small business in the world in order to help them compete. And you do that by making easy to use applications. As to where we'll go, I'll probably never sell the entire company again. You know, I talked to the guys from sageworks and it hurts me sometimes because I feel like I sold my family a little bit. Right. You know, to the black guard, no less. But my point is a serious one. We will go public where we sell part of the company. And so I'm very optimistic about the company. I love what we're doing at Live Switch, but again, very mission oriented around helping small businesses to, to be able to be more efficient and make more money.
- [40:25]
John Davids
And, and the path here you said is an IPO versus an acquisition.
- [40:30]
Brian Hamilton
Correct?
- [40:30]
John Davids
Did you. So I'm guessing in the previous company you raised capital at some point like pre exit?
- [40:35]
Brian Hamilton
We did, yeah. We, we raised capital a little bit, but it was, yeah, it's a multi billion dollar company. We, I mean honestly it was capitalized with 20,000 bucks. So I've always been.
- [40:46]
John Davids
You raised 20,000 bucks for something?
- [40:48]
Brian Hamilton
Well, originally. Okay, originally. But, but, but even still, I think at our, at our apex it was only two and a half, two and a half million dollars in capital ever raised. Wow. So the one thing I'd say, by the way, I need to sneak this in is we live in a world. I don't know if it's Shark Tank or maybe the PE guys and the VC guys are good at advertising or whatever. I do want to make a call out to your listeners that you do not need venture capital. And frankly nor should you get venture capital in the majority of cases. In order to build a big company, you just got to be wily, street smart and gritty and those are the best entrepreneurs. You'd be very careful about the way you raise money.
- [41:29]
John Davids
You know Brian, you're preaching to the choir because I talk about this stuff all the time. The one criticism I have for most companies actually even the ones that do well is, why did you guys raise money? Like, what, you raised a million bucks when you didn't need it. Now you got this great business. You would have built it even if you hadn't raised a million bucks. And you got these guys on your cap table that own 30%. And now they're just, you know, they're like little cockroaches on. On your cap table. And that's. And oftentimes, you know, when I talk to entrepreneurs who. Who are maybe a little more green, it's like, hey, what do you guys want to do? And they. They tell me their plan, and then I say, great. What's the first step? We got to raise capital. For what? You don't need capital for anything. You just told me.
- [42:06]
Brian Hamilton
Well, you want to go. Can we go further? They actually celebrate when they raise money. Like, we did our A, we did our B. We did our. Well, where did A and the BC come from? Ten years ago, you just raised money when you need it. Now it's like, I got her A, I did her series B, I did her series C. And Mike, do you know you have to pay that money back. Equity is debt. Equity is debt. Stop thinking of equity as a free lunch. It is not. Yeah, anyway, I'll let you. I'll let you finish this point, man.
- [42:38]
John Davids
You're. You're saying these are the lines I. Equity is debt. There's a big. You know, you're a numbers guy, so you know this. Just because it's on the equity side of your balance sheet, it's a liability. You got to pay every penny back before you see a dollar. You know, if there's a liquidity event. The other thing is whoever threw a party because they got a mortgage on their house.
- [42:56]
Brian Hamilton
That's right.
- [42:57]
John Davids
What are you guys celebrating? I'll tell you how this happened. This happened because the tech crunches of the world needed. Needed a story to tell. So they made fundraising celebratory. It never should have been celebratory.
- [43:09]
Brian Hamilton
Isn't it amazing? It's amazing. And by the way, we, as entrepreneurs, we're supposed to be the creative people thinking out of the box. Stop buying into other people's bullshit. Like, I'm not going to be directed by tech crunch or about. No, I got this number of employees. I got them. Frankly, I want to be Craigslist. Who is this guy? Is he in Canada, by the way?
- [43:32]
John Davids
Craigslist? No, I think. I think he's in California.
- [43:35]
Brian Hamilton
No, no, I mean, do you guys use them?
- [43:37]
John Davids
Oh, of course. Oh, yeah, yeah, yeah.
- [43:38]
Brian Hamilton
Craigslist letter, Gothic type, written back in probably 1975. There's no UI. And there's. There's probably Craig and his family. I bet you Craig didn't raise venture capital.
- [43:49]
John Davids
No.
- [43:50]
Brian Hamilton
Meaning? Meaning get out of other people's bs. By the way, I can be nasty sometimes, but I need to say this. I went to business school. John, I don't know your background. You seem like a pretty real smart dude. Frankly, I don't want to be in business with a venture capitalist. They're kind of creepy most times. Meaning, maybe they're not bad people or whatever, but they're very different in personality, temperament, and operationally how they run business than entrepreneurs. I don't want to be in business with them. So, you know, like, remember, when you're raising money, it seems great, but when you raise a round from an institutional investor, you have sold your company. Don't ever forget that. I mean. Yeah. Anyway, we could talk about that.
- [44:34]
John Davids
Yeah. And by the way, I know a lot of great VCs and PEs. But what I will say is to cap off what you were saying, the reason they can seem nasty is because if you're a venture capitalist, the entrepreneur is the product. You as the entrepreneur are their product. They need to mold you and make sure that you do what they need you to do. Just like you need to make sure your product and your business is working.
- [44:57]
Brian Hamilton
I want one thing, though. Okay. I have no beef with that at all. Except for. I'm just going to say this. I'm a little older than you and I've been. I've seen all this stuff. Is a lot of them don't. Small detail, don't know how to run a business. So. Yeah. So just, you know, that's all. Not. Not all. I'm sure there's some great ones out there, but they.
- [45:18]
John Davids
Yeah, they know how to run a spreadsheet. I think if you are doing something, and this is how I catch. Categorize it. If you are doing something where the capital expenditure, initial capital expenditure, is so large and you need to do that, for example, you're building rocket ships or you're building some kind of city that is, you know, for humanity's survival, whatever it is. But when you tell me you're building software, you're having a service business, you want to start this like, you don't need venture capital for any of that. And believe me, you're going to feel a lot better writing a dividend check than you will ever feel getting a check.
- [45:51]
Brian Hamilton
Very Smart. Very smart, John. It's very smart. And just one last thing we got. My goodness, we gotta say it. Okay. I've seen so many entrepreneurs get diluted to kingdom come, and when there is a liquidity event, they're not getting crap for all the work they put in. I'm really glad you're out there talking about this.
- [46:08]
John Davids
I appreciate every day we're cooking here, Brian. We're cooking. So let's. I think, I mean, I love the direction we've gone and we're talking about mindset here. Can we just cap off with what are the numbers? I want to go back to your core competency back when you were on the chalkboard in that classroom in 1992.
- [46:25]
Brian Hamilton
Sure.
- [46:25]
John Davids
What are the maybe two or three numbers that entrepreneurs and business owners need to know if they're going to be, you know, making a profit at the end of the year?
- [46:34]
Brian Hamilton
Yeah, there's three and a half or four. Are the sales going up? Are the. Is the net profit margin healthy? Which is we sold $100 and we made a dollar profit. That's a 1% net margin. @ least it's positive. But sales going up, a good net margin. A good gross margin, which is the difference, as you know, the difference between your sales and your direct costs. Okay, a good gross margin, a good net margin. And by the way, this little small thing called cash. It's always good to have cash in the bank. So to always be forecasting out, what are your capital requirements? I always say, if you can forecast well, what your sales and your expenses are going to be. Cash sales, cash expenses, your need for capital will be de minimis and you're going to be much more successful. But there's other metrics. But boy, if you've got sales going up and your net margins good, your gross margin is good, and you got cash in your bank, you're in good shape.
- [47:34]
John Davids
How many months of cash do you recommend for a normal business to have? Like, based on the. Let's say If I'm spending $20,000 a month on all my fixed costs, how many months of cash should I have?
- [47:47]
Brian Hamilton
I. That's. I know. I never get off that one either. That is an excellent question. I don't know the answer to it, but in thinking about it, I think it depends upon how long it takes you to raise money. Right. And the risk. And of course, the amount of money too. You know what I mean? But at Sageworks, man, if we didn't sell what our expenses were every month, we were out of business. So I, you know, I, I really am a big proponent of keeping capital constrained because it makes you smarter as an entrepreneur. But I need to think about that one. That's a good question.
- [48:17]
John Davids
Interesting. So. So maybe I'll. I'll give you my. I'll give you my answer for what it's worth. So depending on your, just to use a technical term, the cash conversion cycle. So how quickly can I get cash in the bank? If I do, if I sell something today, do I have cash in the bank tomorrow? Does it take 30 days?
- [48:31]
Brian Hamilton
Right.
- [48:31]
John Davids
And then generally speaking, four to six months of cash in the bank is a good.
- [48:36]
Brian Hamilton
Is a good way to go, I would say, for most people. And, and again, like, you know this. But how quickly is the business progressing? And I will. One last thing. I need to mention it because it is related, we all think, and it's the media or maybe the Wall Street Journal. I don't know who it is. Oh, yeah, they started a business and it took off. It has been my overwhelming experience that there's a percolation period that's necessary for you to grow your business. And so it's also a function of that. Hey, is our model down? Do we understand things? And the more you understand your business and the more you get your model down, the less need for capital. So there's, there's a lot of factors that go into that.
- [49:14]
John Davids
Yeah, Brian, I think a lot of people are going to be energized after this and inspired and hopefully going to go out and do something great.
- [49:20]
Brian Hamilton
Okay, that's great, John. Yeah, good stuff, man.
- [49:23]
John Davids
Thanks so much.
- [49:24]
Brian Hamilton
Keep your weather up there.
- [49:27]
John Davids
You got. Got it, man. Okay. Thanks so much, Brian. Thanks for listening. Hope you enjoyed this episode. If you did leave a rating or review on Apple or Spotify, wherever you listen to podcasts, it helps other people find the show and it lets us know that we're doing something right. We'll talk to you guys next time.