Secrets to Successful Exits: Lessons from a Seven-Time Founder Anthony Franco

And now I’m trying to help other founders do the same.

Freddy D
00:02:10.122 – 00:02:16.028
So tell us a little bit story of one of the companies that you started and how did you grow it and how did you exit it?

Anthony Franco
00:02:16.114 – 00:03:18.948
I’ll start with a company called Effective. So I became a consultant after my previous exit. I was just a consultant doing some work for a couple of friends of mine in Some new technologies.

And the new technology that I was working in, it was called Flash. Nobody knows what that is, but it used to be a web technology. What Flash was really good at is building a user interface.

So I got really good at building user interfaces that were easy to use and brought on a partner.

Then we brought on two more people and three more people and we just started scaling the business and doing services all the time thinking that I would build some products that we were going to sell. And the joke was on us.

We just got really busy because we were good at building user interfaces and landed a few Fortune 100 clients and then more and then eventually exited to a firm called wpp, which is a holding firm of advertising agencies.

And this is going to sound really like simple, but we just listened to what our customers wanted and made sure that when we sold, we were selling to what we heard the pain was and just responded to the pain.

Freddy D
00:03:19.044 – 00:03:43.936
Yeah, no, I mean, I can appreciate that because I started in the SaaS space when the SaaS space began like 45 years ago. Initially I used to be an engineer and doing drafting and got into the computer aided design and computer aided manufacturing world.

So I completely understand where you’re coming from, especially with the interface and software and technology. And back in those days it wasn’t that user friendly.

Anthony Franco
00:03:44.048 – 00:03:45.840
Most software sucks still.

Freddy D
00:03:45.960 – 00:03:46.448
Yes.

Anthony Franco
00:03:46.544 – 00:03:47.008
Yeah.

Freddy D
00:03:47.104 – 00:03:58.016
Unfortunately, a lot of it is done by engineers and so they do it for what’s easy for them, not necessarily what’s easier for the user. They don’t put themselves into the user’s perspective.

Anthony Franco
00:03:58.048 – 00:03:58.736
Exactly. Right.

Freddy D
00:03:58.808 – 00:04:10.132
Yeah. I mean, I used to have battles with the developers because of the fact that says I’ve got to do 12 clicks to accomplish this.

And I’m going like, yeah, but it’s taken me three days to get there.

Anthony Franco
00:04:10.236 – 00:04:12.660
More features does not mean better software.

Freddy D
00:04:12.820 – 00:04:22.692
So that’s interesting. And yes, I do remember Flash. I did some work in Flash in my day and that was the big to do at the time.

I don’t see any websites anymore with any Flash.

Anthony Franco
00:04:22.756 – 00:04:40.512
No. I mean, when Steve Jobs announced the iPad, there was no Flash on the iPad and it virtually killed this wonderfully made runtime.

But it was Adobe, Adobe own Flash. They did not do a good job anticipating the market and build technology that worked on the iPad.

Steve Jobs actually tried to get him to do it and they didn’t.

Freddy D
00:04:40.576 – 00:04:58.560
So let’s go back into what was the secret sauce that you guys did to scale the company because you’re interacting with teams, customers and suppliers and distributors and all that aspect how did you build all that to enable the company to scale to the point where you exited?

Anthony Franco
00:04:58.640 – 00:05:46.686
It’s a really interesting question.

I probably would have answered it differently a year ago, but as I reflect back now, and I run my own podcast, which we talk about tactics and it’s almost a hundred episodes in, and everything that a founder cares about really comes back down to the basics. And I think what we did well is we did the basics well. The basics are manage cash like it’s the most important thing, because it is.

Sell like you’re going out of business next week, treat your people really well, listen to your customers like they’re giving you gold every time they tell you something, even if you think it’s stupid, and have a clear vision of where you want the company to be. Those basics come back time and time again, no matter what topic we’re talking about or any entrepreneur that I interact with.

If you have the right combination of those things, you grow, period.

Freddy D
00:05:46.838 – 00:06:09.134
Because you have to have the vision, then you have to have the team on the vision. And that’s the important part.

Sometimes you’ll see leaders that will have an idea, a lofty idea in their head, but it’s in their head and nobody knows what the vision of the company is. So you can’t get everybody into the racing rowboat online and rowing at the same time. In synchronism.

Anthony Franco
00:06:09.262 – 00:06:10.174
In the same direction?

Freddy D
00:06:10.222 – 00:06:53.832
Yes, in the same direction. Going fast so you can win the race. Because if everybody’s out of sync, you’re not going too far too fast. So what you just laid out there, those.

The interaction with the team and that team, how they interact with prospective customers as well, existing customers. And then I’ll go further and say, look at the secret sauce is turning your team into what you said, but I’ll coin it as super fan.

So your team is super fans of the company that they work at. So they’re really super excited about what they’re doing and who they’re working for.

That transcends in their tonality and the engagement with prospective customers that become customers. And that just helps scale it from that perspective.

Anthony Franco
00:06:53.976 – 00:06:54.776
Exactly right.

Freddy D
00:06:54.848 – 00:07:08.424
Because if you’ve got unhappy team, it’s going to transcend across prospective customers and you’re going to go, geez, Sumps just doesn’t feel right. We get that energy feeling and they’re going to say, something doesn’t feel right with these guys.

Anthony Franco
00:07:08.552 – 00:07:11.400
Your team fundamentally has to believe in what you’re doing.

Freddy D
00:07:11.520 – 00:07:12.088
Correct.

Anthony Franco
00:07:12.184 – 00:07:14.984
And if they don’t either, you have the wrong vision or you have the.

Freddy D
00:07:14.992 – 00:07:49.868
Wrong team or a combination of both. But once you get that mechanism going to where everybody’s going into the same direction, they know the same vision, then it becomes fun.

Because then, you know, it’s like you look at this past weekend super bowl team, okay, the Eagles, you could tell they were having fun on the field. And once you get to that point where you’re having fun, you’re relaxed. And when you relax, you kick butt.

And you could see the other guys, the Chiefs, you could see the stress on their faces and the frustration, and they just kept making more and more mistakes.

Anthony Franco
00:07:49.964 – 00:08:51.856
That’s true. It’s funny, we do often use sports analogies to describe building a business, but there’s also certain circumstances where it can break down.

And we just talked about it this morning. We talked about this this morning.

And what’s really kind of a distinct difference between running a business and running a sports team is there’s always a W or an L in a game, and there’s always an opponent. And with business, it’s not always the case.

Like, if you’re not focused enough on your competition, when you run a sports team, if you’re not watching game film, you’re likely going to lose. And the flip to that is when you’re running a business, if you’re hyper focused on the competition, you’re going to lose the customer.

What’s missing from the sports analogy is the central theme of business, which is focusing on your customer. So developing superfans is essentially developing customers that will evangelize.

They’re using your product that you’ve delivered something so exceptional that they’re willing to tell other people about it.

Freddy D
00:08:51.928 – 00:10:49.944
And it goes all over. It’s the whole equation, because it starts off with the team.

So if the team isn’t energized about the company, then you’re never going to do a great job with the customer. So if the team’s energized, that’s going to transcend to the customer.

The customer is going to become a brand advocate or a business super fan, could be telling other customers. And inevitably, you’re going to scale.

You brought up an important thing, and that is the fact that when I was my first year in sales, even though I got a plaque being the number one guy, my first few sales, I did some face plants. And what I did was I focused too much on my competition. And so it was an existing customer.

And all I had to do with that existing customer was to renew an agreement. That’s it. They were on A monthly subscription. But back then we had contracts and all that kind of stuff. They were looking at some other competitors.

And so I kept telling them about how horrible all these competitors are.

And I get a phone call from my manager and he called me to come into his office and said he got a phone call from them that they decided to go someplace else. Didn’t even call me. Called him. He was so pissed that he made me go pick up all the hardware and the software and everything else.

The walk of shame didn’t send the field engineers. It was me that had to go do it. But I was at least smart enough to ask them why they didn’t go with us. Why, why did I lose?

And they basically told me that the reasoning was the competition said, yes, these guys are a great product, but here’s how we’re better. And that was a monster teaching moment for me because I never badmouth the company ever again. And I always focused on why we were better.

And just like you talked before, I stopped focusing on the competition.

Anthony Franco
00:10:50.072 – 00:11:28.756
Yeah, it’s a critical component in selling. It’s that. And before you start talking about yourself, when I’m on a sales call, I’m always trying to qualify myself out.

And what I mean by that is I’m asking the customer, I’m asking the client what’s important to you and am I a good fit? And maybe I’m not. And that kind of interaction, really that servant first attitude of what do you want to get done?

And then let me figure out if I can help. It helps you as a business owner not engage in frustrating engagements where you’re not able to help.

And also if you’re really trying to help them, by default starts to engineer trust between the two of you.

Freddy D
00:11:28.828 – 00:12:23.736
That became my selling style. I would walk in and turn around and says, okay, Anthony, we’re looking at this technology.

I was selling cad, CAM software, computer aided design, computer manufacturing. The other products do the job as well because otherwise you wouldn’t be in business. So let’s get that out of the way. What’s your objective?

What’s your two year plan? What’s your four year plan? What’s your growth plan?

And I got out of the technology conversation and into the business conversation and what was the pain points, what was the issues? And manufacturing shop one of their biggest issues was scrapping metal.

You got $20,000, $30,000 piece of steel and you got the milling machine that just scraps it up and cuts it all wrong. Well, you can’t use that steel for anything. Anymore. So it’s wasted money. So how many of those per year do you do? Well, we do four or six.

If our technology can save you two to three pieces, is it worth continuing the conversation? And that’s where we would go.

Anthony Franco
00:12:23.848 – 00:12:24.696
Solve the pain.

Freddy D
00:12:24.808 – 00:12:48.840
Solve the pain. And that company went from 40 people to it scaled to about 140 people. Bought the two buildings on both sides. They were my super fan.

They would basically refer me business to where people would just call me up and says, Jack says that was the guy’s real name. He says, jack says, I need to get this. What’s it cost me? How fast can you get it here? That was a sale.

Anthony Franco
00:12:48.920 – 00:12:52.414
Customers like that are gold. They’re truly gold. Because you really helped them.

Freddy D
00:12:52.502 – 00:13:10.638
Correct. Last time they wouldn’t let me in. They held the door closed. What’s up guys?

And go, man, you walk in here, you cost us 100 grand every time you walk in. But the reality was, you know, it was all unjust. But yeah. Share a story of how you grew one of the companies and then position it to be acquired.

Anthony Franco
00:13:10.734 – 00:14:42.962
First of all, you have to grow channels. You have to figure out where your customers are. Always look for new ways of attracting those customers.

For us, it was partnerships, but then we went to trade shows and then we started doing referrals and then we went to Gartner events. So it was jumping around to all kinds of different places and looking for customers in new and unique places. So that’s one way to scale.

Always looking into rocks for customers.

You kind of have to make a decision about, I don’t want to say walking away, but maybe there’s no better term of walking away from deals that you used to love to do and looking for deals or looking for customers that are looking to grow with you. I’ll give you an example. We used to take any project where somebody had a checkbook, it didn’t matter the size of the project.

And then we started saying no to $5000 projects. And then we started saying no to $50,000 projects. And then we started saying NO to $100,000 projects.

So it’s not just seeking clients, but also the kinds of clients and saying no to the things that keep you from growing. The same is with the team. Like this team that got you here may not be the team that’s going to get you there.

So not just up leveling your sales and marketing your services offering, but also up leveling your team.

And that doesn’t need to mean replace your team, but it does mean letting Everybody know there’s an expectation for them to grow along with the business. And if they want to achieve certain milestones in your company, they need to get in certain places. So that’s. That comes down to coaching.

Again, going back to the basics, right? This is proper care and feeding of the people that work with you.

Freddy D
00:14:43.066 – 00:14:47.634
No team, no business. I mean, you can’t do that kind of those level projects.

Anthony Franco
00:14:47.762 – 00:14:52.642
It’s also setting an expectation that they need to grow with you.

Freddy D
00:14:52.746 – 00:14:53.202
Right?

Anthony Franco
00:14:53.306 – 00:16:36.410
Some folks just all they want to do is code. That’s great. Now you know how to make them successful at your company.

But some people want to get into management and get into sales or get into marketing.

And it’s like, all right, well, first of all, you need to know all of the people that are working for you so you can understand how to track their career path with or sometimes without you. You also asked about how to get your company ready for sale. There’s a lot of things to do to get your company ready for sale.

The first thing to do is run your company as though you’re not going to sell it. The number one thing that you can do to make your company ready for sale is to make your company work without you.

So try to build systems and processes that operate independently of your leadership. Now, it doesn’t mean that you’re not valuable. It means that the systems are in place so it can operate like it does right now, forever.

And you’re responsible for just taking it to the next level. The most important thing is systematize and delegate. Then it’s again, blocking and tackling stuff.

Make sure your books are really well organized in order that you’re not doing anything weird with buying your truck with company funds. There’s tax purposes for it now, all owners do that.

But it can inhibit your ability to sell the business, especially if you’re selling to somebody that’s looking to get a bank loan to buy your business. Another thing that you can do to get yourself ready for sale is to make sure that your revenue is diverse.

And what I mean is, don’t have a majority of your revenue with one customer or through one very specific channel that you can lose or that can be risky for when a new owner takes on revenue. Diversity is extremely important. And then also making sure that the key employees are called out to buyers.

Like making sure that you have key employees that are incented to stay. All of those things add into making your business more sellable.

Freddy D
00:16:36.490 – 00:17:44.540
Yeah, absolutely correct. Because I just went through that recently with a company that I stepped in for a little bit as a general manager.

And first we had to get the books cleaned up. We had to get some of the cultural stuff in the office cleaned up.

They had the company car on the books bought by the business and had to get rid of that. And then there was another loan for some other stuff that had to be cleaned off and the books had to get fixed because they were not proper.

Things weren’t cataloged correctly. Just like you said, you got to make sure your financial stuff is thing.

And we made sure that we had diversity in customers because it was a husband and wife business and a couple solid customers.

But at the same time, some of those were changing because you’re providing interpreting services and some of the health insurances were not paying for that anymore. They were pushing it down to the provider.

So that changes the scope of the equation because the provider’s going, wait a minute, I’m only getting $45 for this visit and you want me to pay $100 for an interpreter? Not going to happen. And likewise, you also mentioned is sometimes you got to get rid of customers.

Anthony Franco
00:17:44.700 – 00:17:45.132
Yes.

Freddy D
00:17:45.196 – 00:17:58.078
Because of the fact that you bring on a customer and all of a sudden you find out that that customer is draining you and you can never satisfy them and it’s costing you more money. You got to get rid of those because they’re boat anchors.

Anthony Franco
00:17:58.174 – 00:18:31.488
Some of my best customers are the ones that I fired and they came back and said, wait, what do you mean when you’re firing us? And I explained to them why they weren’t good customers and they’ve. They changed into great customers.

And when I say fired, that sounds very Donald Trumpish. That’s not the way I meant to make it sound.

But it’s like you can tell a customer, hey, this relationship is not working out for us and things are going to need to change if we’re going to continue. That’s perfectly fine. To tell a customer actually can be very freeing and also is educating for them.

Maybe they walk away from you, but they’re not going to treat the next vendor the same way.

Freddy D
00:18:31.544 – 00:18:36.224
Well, it could be, but also could be that they’ve got a team member. That’s the bottleneck.

Anthony Franco
00:18:36.352 – 00:18:36.800
Yes.

Freddy D
00:18:36.880 – 00:18:56.310
And until you have that conversation with whoever needs to be they may perceive everything is going well because that particular employee is telling them that all these guys are blah, blah, blah, blah, blah. And it really is the opposite because as you know, those that do the accusing is the one that’s usually not doing so well.

Anthony Franco
00:18:56.430 – 00:18:57.494
Yeah. Yeah.

Freddy D
00:18:57.622 – 00:19:06.918
So, Anthony, let’s go into what you’re doing now to help businesses scale and basically exit.

Anthony Franco
00:19:07.014 – 00:20:04.130
Yeah, so I’m doing a couple things. I’m not currently operating in my own business. I just haven’t landed on anything that I’m super passionate about.

So I’m helping other founders scale their business, either scale to new products or new channels, essentially launch into something new. And I’m running my own podcast. Me and Chris Franks are running a podcast called how to Founders, but my passion is entrepreneurship.

Like, I love entrepreneurs and have a heart for them because I am one, and entrepreneurship can be lonely. So we decided to start this podcast to help entrepreneurship be a lot less lonely.

And also, entrepreneurs get stuck all the time because they’re hitting something for the first time every day. Right. Every day. Something new is coming up that you have an experience. So my podcast is called how to Founder.

We just dive deep on a single topic that founders and entrepreneurs care about and give a mental model and some tactics on how to navigate that specific issue and then hopefully walk away a little smarter and a little less in the dark.

Freddy D
00:20:04.210 – 00:20:30.012
Yeah, what you guys are doing is really great because it really kind of also tags off of what I’m doing because I’m teaching business owners how to transform all their stakeholders into super fans that in turn promote their business. And it costs them very little money to do that. And it’s similar.

You’re dealing with the founder, and I’m dealing with basically how people can interact with people.

Anthony Franco
00:20:30.116 – 00:20:52.216
We deal everything from starting a business to sales, marketing, operations, hr. It like, we get really in the weeds, like what to do when an employee steals from you or how to make your first hire or how do you make cold calls.

So real tactical in the weeds, get your hands dirty kind of stuff is what we talk. We. And we pick one topic, and we dive deep every episode.

Freddy D
00:20:52.328 – 00:20:54.264
Now, do you guys got to bring on guests or.

Anthony Franco
00:20:54.352 – 00:21:18.644
We absolutely do. So Chris and I will sometimes run it on our own, and then we’ll bring in experts.

We just recently we had on Matthew Lesko, who was the question mark guy. He helps companies find government grants and government money. Spoke a whole episode about just uncovering grants.

On Thursday, we have an expert in prioritization to talk about the Einstein Matrix, and we’ll talk about prioritization as a leader. So we have experts on all the time.

Freddy D
00:21:18.732 – 00:21:25.668
I might have a guest for you because I got a guy that’s ex captain Navy who’s a government contracts expert.

Anthony Franco
00:21:25.764 – 00:21:27.156
Oh, great. Amazing.

Freddy D
00:21:27.268 – 00:21:35.664
As we kind of get closer to the end here, let’s Go back and let’s kind of recap those points that you brought up for our listeners.

Anthony Franco
00:21:35.792 – 00:22:21.496
Look, scaling a company is about growing profitable revenue. That’s it.

The way to grow profitable revenue is have a great team, care very deeply about your customers, make sure that you’re solving a problem worth opening your wallet for, managing cash flow to give you the Runway in order to solve problems for your customers. One of the hardest things for startups, especially early stage companies, is customer acquisition at a reasonable rate.

So acquiring a customer for less than what they bring in to the bottom line for you, and that is all about experimentation and having a clear message and having a clear vision, which is also one of those basics, is just knowing who you are, knowing who you’re targeting, being very clear and repetitive with your message.

Freddy D
00:22:21.608 – 00:22:27.172
Right. It’s really developing your avatar and then creating a message for that particular avatar.

Anthony Franco
00:22:27.256 – 00:22:27.564
Yeah.

Freddy D
00:22:27.612 – 00:22:36.828
And tracking what your cost of sales are and then making sure that you keep that as low as possible so that your return on investment is going to be as high as possible.

Anthony Franco
00:22:36.964 – 00:22:37.372
Yeah.

Freddy D
00:22:37.436 – 00:22:40.204
And more importantly, collapse the sales cycle.

Anthony Franco
00:22:40.332 – 00:22:41.420
Say more about that.

Freddy D
00:22:41.540 – 00:23:02.072
Well, one of the things that I’ve always done when I’ve sold technology was I looked at the sale backwards. So I would turn around and work the sale backwards.

And then basically we turn around and says, Anthony, based upon this implementation plan, everything that we’re looking at and when you want to be making money. Well, I want to make money yesterday is the typical answer.

Anthony Franco
00:23:02.136 – 00:23:03.832
Well, so you got to get started now.

Freddy D
00:23:03.936 – 00:23:28.678
So basically the O needs to be issued now.

And I close more sales that way because we laid out the whole implementation process on the marker board and it says you got to take it into consideration. You can’t shut off the existing technology and turn on the new one.

You got to run both concurrently and you got to slow this one down as everybody ramps up and it’s going to take time. And you got to set up new process because it’s a whole new system.

Anthony Franco
00:23:28.824 – 00:23:41.706
It’s a great tactic. I’ve never heard it called collapsing. I always called that reverse engineering the timeline. So when does this thing need to be live? All right, let’s.

By this date. All right, let’s back it up and figure out. Let’s figure out how we get there. We got to get started right away.

Freddy D
00:23:41.778 – 00:23:54.550
I would always go into not live. I’d go profitable because then I would add additional time to the equation, which even made it more because it says, okay, before you’re profitable.

That means you got to incorporate paying for the Technology.

Anthony Franco
00:23:54.850 – 00:23:55.274
Yeah.

Freddy D
00:23:55.322 – 00:24:23.130
I would lay out the pitfalls and everything else.

And what would happen is the people to be using stuff became my super fans because I took the spotlight off their head because I bought them time to learn the stuff. And so they’d say, oh, man, Freddy D. Is a cool dude.

Because I don’t have to worry about getting this thing, learning this thing, because I still got to do it on the old system and learn a new system at the same time. So he bought us some road.

Anthony Franco
00:24:23.250 – 00:24:23.882
That’s awesome.

Freddy D
00:24:23.946 – 00:25:08.708
So, yeah, that got me a few more plaques. I looked at it as a game because I was kind of knowing what I was doing, where I was leading everybody.

But the other thing that I’m going to leave with is I made sure I thanked everybody that participated into the meetings to discuss new technologies and everything else. Even the guys who were in the shop floor, I would always send them a thank you for their time, their input, and everything else.

And I found out after the sale, consensus always was that we felt after the sale, you guys would provide the best support. And that was really because of sending out the thank yous and everything else.

That John, the guy that runs the milling machine or the lathe or whatever it is, nobody ever acknowledged him.

Anthony Franco
00:25:08.764 – 00:25:08.980
Right.

Freddy D
00:25:09.020 – 00:25:09.444
Think about it.

Anthony Franco
00:25:09.452 – 00:25:10.084
Exactly right.

Freddy D
00:25:10.172 – 00:25:21.338
So he felt like a rock star. Holy cow, I got a letter. And then when they would have a committee meeting, they’d say, well, what do you guys think? Oh, man, we love these guys.

Yeah. You and I could probably discuss this stuff for hours.

Anthony Franco
00:25:21.474 – 00:25:22.970
Yeah, it sounds like it. Yeah.

Freddy D
00:25:23.050 – 00:25:25.738
So it’s fun. So, Anthony, how can people find you?

Anthony Franco
00:25:25.794 – 00:25:39.226
Real simple. Just go to howtofounder.com and you’ll find my LinkedIn links there. So you can connect with me on LinkedIn or our podcast.

All of our podcast links are there as well. So just reach out to me on LinkedIn. Say hello, connect if I can help. Happy to help.

Freddy D
00:25:39.298 – 00:25:47.674
Well, Anthony, it’s been great having you on the Business Superfam podcast. Great insights for our listeners, and we look forward to having you on the show down the road.

Anthony Franco
00:25:47.762 – 00:25:48.610
Yeah, thanks for having me.