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Making It with Jon Davids
217 - "We Had The Biggest Clients... and Here's Why We Lost Them" | Brian Hamilton, Sageworks
00:12:57
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- [00:00]
A
This clip of Making it with Jon David features John talking to Brian Hamilton, chairman of Live Switch and founder of sageworks. So you. 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?
- [00:21]
B
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 stu. 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.
- [00:43]
A
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?
- [00:52]
B
Yeah, I have a little picture on my wall here. I can't show it to you, but. 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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A
A whole bunch of if and then statements. Yeah, absolutely.
- [01:11]
B
I gotcha. 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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A
Right.
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B
And then the idea is the report comes together based upon the financial criteria into a one sheeter, 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.
- [01:48]
A
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?
- [01:57]
B
All right, so in 1998, I had to write like 10,000 pages of single space 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 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 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 Sabol odd 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 after. But. But Citibank licensed from us. And of course, 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.
- [03:11]
A
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.
- [03:19]
B
Yeah, that's correct. Yeah, that's exactly. Yep.
- [03:21]
A
Do you remember that first contract?
- [03:23]
B
What was that? Oh, God, yeah. Yeah.
- [03:26]
A
A lot of zeros.
- [03:27]
B
Oh, well, 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, 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, then I licensed to Intuit and then a bunch of other companies.
- [04:08]
A
Was the business model licensing to big orgs at that point. It was the Citibanks and Intuits of the world.
- [04:15]
B
Yes, that's exactly right. Oh, by the way, a little footnote. It didn't work.
- [04:19]
A
Okay, tell me.
- [04:21]
B
Yeah, yeah, very important footnote. Right? So we licensed into it, 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.
- [04:45]
A
You.
- [04:45]
B
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?
- [05:27]
A
Yeah, I've been there. I, one of my first, not my first, but when I, 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 start from square one. So it sounds like you kind of had that same moment.
- [05:59]
B
Yeah, you know, boy, that's really interesting, John. I like that. I haven't thought about this in years.
- [06:06]
A
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- [06:44]
B
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.
- [07:27]
A
Very rare.
- [07:28]
B
Most times, as you know, John, you get it out there, you listen to the customer and you pivot. And that takes time.
- [07:34]
A
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 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, by the way.
- [07:58]
B
Sorry, sorry.
- [07:59]
A
Yeah, keep going.
- [08:00]
B
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.
- [08:08]
A
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.
- [08:32]
B
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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A
It's the question that matters because how did you get it to work?
- [08:46]
B
I got it. 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 onto 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?
- [09:33]
A
I know. Self awareness.
- [09:35]
B
Self awareness. Yeah. And. And honesty, real honesty. Like it takes so many important characteristics to build a company. Right. But honesty is one of them. And so, so inside of me I'm like, ah, I don't know, man. I'm not feeling. 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?
- [10:23]
A
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.
- [10:33]
B
That's right. Exactly. Yeah. And it's always like, I mean, I'm, I want to get in trouble with her. She's such a lovely person. But Debbie Lens, in college, like, you know, I asked her out, we offer this meal, very nice person, but down deep on my ass, she doesn't like me that much, you know, and, and about. 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? Yeah, 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.
- [11:13]
A
Yeah, I think, 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.
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B
And.
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A
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.
- [12:05]
B
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 gotta get out of view. 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 gotta be the other guy.
- [12:48]
A
Thanks for listening. Get my best stuff to your inbox@johndavid.com we'll talk to you next time.