← Making It with Jon Davids
Making It with Jon Davids
223 - "Here's Why You Should Never Sell Your Business" | Jason Fried, 37signals
00:07:18
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A
This clip of Making it with John Davids features John talking to Jason fried, founder of 37signals.
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B
The dirty little secret in all these hold cos whether it's Tiny or Berkshire Hathaway or Constellation Software or, you know, you name it on and on and on, is that 70, 80% of the revenue and profits usually come from one or two or three companies. Like they have a big portfolio but they got, they certainly got rich off one and then maybe they have two or three now that are. That are bringing in most of the money and the rest are really just bets. They're not. It's not like you're making the exact same amount of money from all these things.
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C
Yeah, you can even see this in like huge luxury conglomerates, there's like, you know, one or two brands that really bring in everything and then the other ones sort of are part of the constellation of the brands because it just, it gives the holding company more power because they have more companies and more control over the market and the whole thing. So, yeah, it's the same thing is true in the VC model, right? In a fund, you've got one or two winners, big winners, and they kind of take care of all the ones that didn't pan out. It's pretty common just in all groups of anything. It's the same thing in music. You buy an album, there's like two, three good songs out of 12, but you buy the album. That's why albums are packaged that way. Now, of course, there's singles, which are a more direct way of saying just buy the hits. Right. And everything's changed, of course, with streaming and the whole thing, but historically albums had a couple good hits and those are the ones that got on the radio and those are the ones that sold the record. And then the other ones were like, you know, other songs. So that's true, that's true. Been true for us. We just want to keep placing more bets, but in our own way, in our own method, under our own umbrella, with the same team, versus, I think making it more complicated to have entire groups that aren't working out and have to figure out how to support those. I just, it's not. It wouldn't make my day.
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B
Let's just say you have your hit songs and then you have songs where, when they play them in the concert, that's when you go to the bathroom because you don't song.
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C
Right. It's basically hits business. And so is, so is like the NBA, you know, like you got a few awesome teams and a few incredible I mean, more than a few great players, but, like, there's some teams that just aren't very good, you know, and they're never going to be. You're never going to have a league full of incredible teams. You're in any collection of things. Some things are going to float to the top and some things aren't. It's just how it is.
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B
It's a bell curve. You're always going to have a bell curve.
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C
And this is why, in my opinion, if somehow you've struck gold or lightning is struck, or whatever metaphor you want to use, like, ride that man. Because, you know, we've been riding basecamp for 20 years. The current version of Basecamp is the best version of Basecamp it's ever been. I believe it's the best product in the market in its category. Of course, I'm biased, but I truly believe that we're going to ride this huge hit. This is a. This does not strike twice. So we've had other hits, but nothing like this. So the idea that someone creates a successful company and then they want to sell it to start the next one, like, to me, I. I get. People want to do that. They're serial entrepreneurs. I understand that. I've met so many people at this point in my career now who've had big hits, sold those businesses and wish they hadn't. Even though they're wealthy and the whole thing, they're like, they can never quite get back to the way the thing they had before. Once you let that go, it's very, very hard to do it twice. You almost never see someone really do it twice in a big way. Occasionally it happens just like the bell curve. There's a few people who can pull that off. But if you have a hit, stick with it, in my opinion, and ride it for as long as you can and keep nurturing it, improving it and supporting it. But don't think that, like, that was easy and your next one's gonna happen too. It's probably most likely not going to happen.
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B
How often do you get calls from acquirers, PE firms, strategics, that just want to buy your company?
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C
We get a lot. I get probably two emails a week still from. Two emails a week from UPCS. Yes, VCs in private equity. And oftentimes it's sort of the same ones that check in frequently.
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A
And these are legit people.
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B
These aren't just like random, like, they actually know who you are and what your company is?
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C
Yes. Yeah, they're legit. What's interesting, though, is we've been around for so long now, 25 years, that I'll. I'll hear from the same VC firm that wrote us four years ago. But it's a new person there because the old associate's gone and they don't know that someone else contacted. So there's some of that going on, some cyclical nature that we've just been around for a long time. So we've been hit up by the same pe, you know, PE and VC firms. And then there's new ones that come in and there's like family offices that, that write and whatnot. But it's just, it doesn't. It. As of this point, it's not been an interesting option for us. We're. We did sell a little piece of the company to Jeff bezos back in 2007. Or six. Six or seven. I can't remember now. That's the only money that we've ever taken in. Although it didn't go into the company, it went to me and David as sold some of our founder shares. The company's always been self funded, but after that point, just no interest in taking money. No.
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B
Has Beethoven ever come back for more, potentially more shares or he's happy with.
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C
I wouldn't sell him more. I'd like to buy his shares back, frankly. But we've tried and he's not interested. He knows he's got a good, good deal here.
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B
Have you ever sat down and had a serious conversation about selling?
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C
Yeah, I mean, that's kind of where I was going to go with this, which is no, but you know, we've been doing this for 25 years, like naturally, like, it's unlikely that we would do this for 25 more. I mean, you know, I just turned 50, so I'm not going to be 75 running this company.
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B
Clearly you don't have like a single gray hair. You're 50.
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C
Oh, I have gray hairs, dude.
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B
Okay, there you go.
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C
I've got them. My beard is gray. I just kind of. Anyway, there's. I've got plenty of gray hair. So at some point you just like the company is not going to. And companies either, like get bought, get sold, they die. They don't last forever. I mean, some last a long, long, long, long time. But in the software world especially, you know, to have a company that's been around for 35, 45, 55 years, super rare. So there will come a point where David and I decide that we don't want to do this anymore. You know, as. As is natural. And at that point. I mean, we're not just going to shut the thing down. So at that point we'd either sell, merge or I mean, I don't really we're not going to go ipo. You know, that's not kind of a path we want to take. So eventually the company would be sold, I'm assuming. But right now we're fired up and excited to do what we've been doing for 25 years.
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A
Thanks for listening. Get my best stuff to your inbox@johndavids.com I'll talk to you next time. This episode is brought to you by my Playbook website selling machine, available right now@johndavids.com Playbook Most companies want websites that look nice, but a lot of nice looking websites don't sell. What you really want is a website that grabs attention, builds trust and turns visitors into buyers while you sleep. That's what this Playbook gives you. Based on 10 years of work we've done at Influicity, optimizing websites for 7, 8 and 9 figure brands. Download the Playbook now at johndavids.com playbook that's johndavids.com Playbook.