Finding Your Subscription Model

August 16, 2019 |  

About this episode


John MacInnes pulled his business out of a rut by evolving into a subscription-based model. Here’s how he did it.

To read a transcript of this episode, click here.

MacInnes ran Print Audit, a printer and photocopier management software, for 20 years.

In 2012, the company suffered a rude awakening when its biggest client – who made up more than two thirds of their revenue – dropped their monthly spend by 90%.

MacInnes had to pivot… quickly. He evolved Print Audit to a subscription-based model, focusing on a diverse client base with 80% of expenses ear marked for customer retention.  That one move helped MacInnes sell Print Audit for a healthy multiple in 2019.

In this episode, you’ll learn:

  • The importance of customer diversification
  • Why a subscription revenue with just $1 of profit will keep your company running infinitely
  • MacInnes’s 80-20 rule for maintaining revenue
  • How Print Audit’s strategic value attracted a buyer
  • What it was like to deliver checks to McInnes’ initial investors after he’d sold the company

Print Audit would have been in trouble if MacInnes hadn’t switched to a subscription service. A recurring revenue stream is one of the key drivers a strategic acquirer will look for when purchasing your business – it’s also something that can be added to any type of company. Find your subscription model by completing module 5 of The Value Builder System™. Get started for free right now by completing Module 1.

About Our Guest

A native Calgarian, John MacInnes studied Economics at Bishop’s University, Lennoxville, Quebec. Upon his return to Calgary, MacInnes worked in commercial real estate before he was found by Manvest Inc., where he traversed North America assessing the suitability of a wide variety of businesses for equity investment and recommended accordingly. In 1999, MacInnes founded Print Audit, a developer of remote printer monitoring and print management software. In 2018 Print Audit was acquired by ECi Software Solutions Inc.


John Warrillow:                Next you’ll hear from a John MacInnes from Calgary, Alberta, Canada, who sold a company called Print Audit. Three things that I want you to focus in on in this interview. Number one, his shift from having a high dependency on one customer, to having much more customer diversification. Two, his shift in recurring, his towards recurring revenue. Number three, his 80-20 rule. Again, I’ll let me explain that. Most people think of 80-20 as 80% of your revenue from 20% of your customers. That’s not what it means. He’s really talking about focusing the company on retention.

John Warrillow:                Again, John will explain the 80-20 rule. I’d love for you to listen to that. He talks about the strategic value in his company, what the acquirers were buying. How he told his employees, and some of his regrets around that, and the feeling, what it was like to deliver the checks to the original investors that funded his company in the first place. Here to tell you the entire story is John MacInnes. John MacInnes, welcome to Built to Sell Radio.

John MacInnes:                Thank you, John.

John Warrillow:                Good to have you.

John MacInnes:                Glad to be here.

John Warrillow:                Tell me about this company, Print Audit. You started this business like 20 years ago. What did you guys do in the beginning?

John MacInnes:                When we started the company, the original idea was we were, we knew that companies were tracking photocopies but not prints, and so law firms that were charging back for photocopies weren’t charging back for prints, and I-

John Warrillow:                Sorry. What’s the difference between a print and a photocopy?

John MacInnes:                Oh, sorry. Photocopy is laying paper on glass, and it coming out the other side. Whereas as printing is actually pressing “print” on your workstation, and the paper coming out of your printer. Yeah, and so we started out thinking about that, and built a program around that. I was running another company at the time that was a pure service technology business built around lawyers’ notes, and it was more getting paid by the hour. I was really looking for a product that would, essentially, sell while I was sleeping.

John Warrillow:                Okay, so you’re, I thought, at one point, you were actually selling photocopiers and printers.

John MacInnes:                No.

John Warrillow:                Is that … No, okay. I got that.

John MacInnes:                They were our, the people that sell them are our customers or were our customers.

John Warrillow:                Okay, and so what did you sell them in the beginning?

John MacInnes:                Well, what we would do is we would sell through office equipment dealers to their law firm, architect, engineer, school clients, anybody that wanted to charge their customers or users for printing. There was a fairly large base for that. There weren’t a lot of people out there …

John Warrillow:                What did you sell them? What physically-

John MacInnes:                Oh, sorry. We sold them software that would sit on the workstation and watch for every time somebody clicked on “print.” Then it would collect all of the information around that, and in many cases, it would ask them for more information about who the client was, or who the student was, or it would use access cards and those sorts of things.

John Warrillow:                Oh, so cool. If I’m a law firm and I get paid for every time I hit “print,” it’ll prompt me and say, “Hey, is this for a client, and which client?” Then that goes onto the docket for that client, and the client gets the bill for like six photocopies at 12 cents or whatever.

John MacInnes:                Exactly.

John Warrillow:                That’s awesome. That’s crazy that there’s a business model …

John MacInnes:                That was it. It was a fairly large business just there. It sort of died down over the years, a little bit, and we started … What really did make the company interesting and valuable is we started remotely monitoring printers through a software product that would sit at a customer site. The office equipment dealers would pay us to get into a portal to see their printers online.

John MacInnes:                Where they used to get a call from their customers that say, “Hey, we’re out of toner” or “The copier’s broken,” the software that we built would monitor those printers, and we did it world-wide. It would just get that information to them through a portal, and so it saved them an enormous amount of time and money, of phone calls, people having in to send in the number of pages that they had done. That’s what really was the value of the software at the end.

John Warrillow:                If I’m a Ricoh dealer or a Xerox dealer or an HP dealer, I sell photocopiers, right?

John MacInnes:                Correct.

John Warrillow:                I want to know when my law firm’s having a problem with their photocopier, before they call me.

John MacInnes:                Correct.

John Warrillow:                Because, and that helps them build value into their relationship. Got it.

John MacInnes:                Right.

John Warrillow:                Your software would help them do that.

John MacInnes:                Yeah. It also, so for the most part, the photocopier dealers out in the world, they make money off of the toner and off of the pages going through the machine, and so this would be a proactive way for that to get right into their accounting systems, and we’d tell them when it needed service. We started, of course, as the software got more robust, it would send out service calls, and send out toner automatically, and a whole bunch of things like that.

John Warrillow:                Your customer was the photocopier dealer.

John MacInnes:                Yeah.

John Warrillow:                I know they don’t like calling themselves photocopier dealers, but for intents and purposes, for people-

John MacInnes:                I think they do. I think they’re okay with that.

John Warrillow:                Okay, okay. The Ricoh dealer or the …

John MacInnes:                Yeah.

John Warrillow:                Et cetera. Got it, okay. This business is something that grows. Tell me, was there something that triggered you to want to sell it?

John MacInnes:                A couple of things. One was, I had … I think a lot of people think this way. I was 20 years in, or getting close to 20 years in. I have another company that was growing out of the, it was in the Print Audit space. I actually had a few other companies running at different times, but this one was growing pretty quickly.

John MacInnes:                It was interesting to me, but also there, I felt that for my team that had been with me for a long time, there weren’t a lot of opportunities for growth in there, and that there were people … The industry was very much changing. A lot of the copier dealers were getting bought out by other copier dealers, and it was time for a change. Yeah, it was a time for a change for me but also for the company, to be able to thrive and survive.

John Warrillow:                How many employees did you have at that time?

John MacInnes:                When we sold, we were 43 people in North America.

John Warrillow:                You had-

John MacInnes:                In North America. Now, we had distributors that were exclusive to us around the world, so there were another probably 30 people in the distributorships around the world that we oversaw.

John Warrillow:                Got it. When you thought about reaching that 20-year point where you’re like, “A lot of my people are limited in terms of their opportunities.” It was this kind of group of, core group of 40 or so that you felt weren’t growing as much as you’d hoped.

John MacInnes:                Yeah. There was some limitation for those people. That fact that I had been doing it for 20 years, and it was the longest that I had ever done. I just felt that it was time for … I felt that it was time because we were doing really well at the time as well, and so when you’re, when everything’s going your way, that’s not a bad time to start looking.

John Warrillow:                Yeah, yeah. What metrics would you point to, to determine doing really well? What does that mean?

John MacInnes:                Yeah, so for us, we had a pretty large group of KPIs. Me, personally, the KPIs that were interesting were the sheer amount of office equipment dealers that were paying a subscription, the amount of printers that were on the system. We were close to two million printers around the world. There were, and that was it. I think almost 150,000 end-user customers sites. We were starting to see that the data that we were getting and the richness of the information, there was some value there that we didn’t really know how to unlock either, and that was frustrating to us. It was growing, we were growing the devices by 24 or 25% a year, in some cases even more, and customer base about the same. It just was really feeling like it was taking off.

John Warrillow:                How did you finance the business? What was the … Did you have investors? Or …

John MacInnes:                Yeah. I’m a bootstrap guy. I think my parents and a bunch of my friends chipped in about $75,000 all together, and so I think that’s what we raised. Every company I’ve had since then, and there’s been a few in-between that have done all right, I’ve never really raised money. I think it’s more my fear and not understanding of it than being a true bootstrapper, but I’m not sure.

John Warrillow:                As the business grew, and you started to make money and so forth, did you pay off or buy those people out, or did they hold that equity all the way through to the end?

John MacInnes:                They held it, all the way through to the end. We paid dividends every month for all the months we were around, other than ’18, so it was a good investment for everybody, even though the average investment was 1,500 bucks, but still.

John Warrillow:                Yeah, yeah, yeah, yeah. For sure. You got to the point 20 years in when you thought, and things were going well, that this would be the ideal time. This is an interesting thing, because for a lot of business owners, that would be very, very counterintuitive, right?

John MacInnes:                Yeah.

John Warrillow:                Like this thing’s like you got a tiger between the … What is that expression? Tiger between the tail. The thing is growing. How did you have the discipline to decide to sell it at that point? Where does that come from?

John MacInnes:                Well, it was in my mind, which was nice, but I’d done, so I mentioned to you before we spoke that I’m in two business groups. One of them called EO, and another one called YPO. EO was offering, or YPO was offering a course called My Deal. Essentially, it was a year-long course learning about buying and selling companies. Now, we had acquired a company the year before and done pretty well off of the acquisition. It was an interesting acquisition.

John MacInnes:                Really, this course was about learning how to buy better, but also how to sell better. A lot of the things that we learned about valuation and investment banks and those sorts of things were, “You’re better off to sell when it’s hot.” I was already thinking that. Maybe I went into the course more thinking I would be acquiring more companies but by the end of it, it was pretty clear to me that it was time for us to find a buyer.

John Warrillow:                Got it, got it. You mentioned that, again, before we hit “record” here, that you did some things to get the business ready to sell. Maybe you can touch on some of those.

John MacInnes:                Yeah. The first thing we did, and it was born out of, more born out of desperation, which is interesting. We, as we were growing over the years, we had one big customer and that one big customer was one of the photocopier manufacturers. We were doing really well with them, until we weren’t. They bought another company that was sizeable for them in North America, and it really did send them into … They didn’t stop buying from us, but we became not important in the grand scheme of things. What happened was-

John Warrillow:                Why? Why was the technology no longer interesting to them or as valuable to them?

John MacInnes:                Yeah, it wasn’t really that. It was more that they were, that they became unfocused on us, because we still were very, very small for them and the acquisition that they made was a very tough one. A lot of the technical people from the acquisition moved into taking care of us, and just didn’t know us as well, and so our sales dropped dramatically in about 2010. They dropped-

John Warrillow:                What’s dramatically?

John MacInnes:                With Ricoh, we were doing $600,000 a month, and we went down to $60,000 a month in less than 10 months, and so it was danger. We weren’t sure, and so this is one of these rising, Phoenix rising stories. We weren’t sure how we were going to survive, and but what was interesting about, and maybe this is where I like the pressure of change and things like that, and I think a lot of entrepreneurs do. We really did decide that as we were going to rebuild this, that we wanted to have a recurring revenue model and we didn’t want to have one big customer, we wanted to have several subscription.

John Warrillow:                How much of your revenue did Ricoh represent at the time they were 600,000 a month?

John MacInnes:                That was 70%.

John Warrillow:                70% of your revenue.

John MacInnes:                Yeah.

John Warrillow:                One customer, and this isn’t the Ricoh dealers. This is Ricoh head office that’s driving that?

John MacInnes:                Yeah, so Ricoh head office paid us, but it was through the dealers and their-

John Warrillow:                I see.

John MacInnes:                … and their network, but it was more their direct, it was more of their direct clients. While that happened, and again, as much as it hurt us, Ricoh was a really good customer of ours and they just lost focus, but it gave us this drive to rebuild as a fully recurring revenue company and fully subscription company. That’s where we came up with the idea to charge office equipment dealers subscriptions. Office equipment dealers are very much entrepreneurs too, and so they were like us. They were much more understandable and relatable, and we knew we could offer them something with value, so in January 2012, we actually …

John MacInnes:                Sorry, March 2012, we actually started to build this subscription system, where the dealers would pay us a subscription for this service that they could use to monitor printers. It did grow, it actually grew fairly quickly, so it was good timing, as usual, things are. It also, getting back to the question, it was very much our desire back then, we never thought that we would keep Print Audit forever, so it was very much our desire to build a company where, potentially, our revenue is the multiple that we would get when we sold, instead of our EBITDA. That was a big part of our goal when we restructured. I learned that at a scaling up summit about how revenue’s treated in a recurring revenue company.

John Warrillow:                Great, great. You focused on recurring revenue. Were you able to replace the 600 grand with the small, little guys, or did you ever get back to 600 grand in recurring revenue?

John MacInnes:                Yeah, so we never did with Ricoh. Ricoh ended up being about 4% of our revenue overall, and so, but during the time while we were building, they were still a significant piece of our revenue, so we were able to trade-off. It was some really, really tough years but we could see that it was working. Actually, when you’re doing your yearly strategic planning, when we do that every year, our big hairy, audacious goal was to get to one dollar of profitability, and that for us was, profitability was our recurring revenue, so the money coming in every month, guaranteed, was one dollar more than our expenses.

John MacInnes:                We had also, I’m pretty good, I’m a big cash saver, so we had a fair amount of cash. We did have to, we ended up letting go, in December 2011, we ended up letting go half of our staff, which was probably the toughest thing that I’ve done, but I got to give kudos again to this EO community. At that time, I lived in Calgary, Canada. EO was, everybody in Calgary was doing great, and we managed to get everybody, I sent out everybody’s resumes, got them all jobs, and everybody got jobs within five or six months, and so that was a big testament to the community that I had.

John Warrillow:                Let me make sure I get the arc of the story right.

John MacInnes:                Yeah, sorry.

John Warrillow:                You’re gangbusters, Ricoh’s this huge juggernaut, 70% of your revenues, 600 grand a month in revenue, and all of a sudden, things go pear-shaped. They drop dramatically down to 60 grand. You have a, sort of an epiphany that you don’t want to be holding any one customer anymore, you want diversity among your customers and you want to go to subscription model. Part of that though is a huge change to the company and you’ve got let some staff go. You come up with the goal as a team, that this big, hairy, audacious goal is to get to a point where your recurring revenue, at least matches the costs associated with running the company day-to-day.

John MacInnes:                Correct, yeah.

John Warrillow:                Have I got that arc about right?

John MacInnes:                You’ve got that arc perfectly.

John Warrillow:                Okay.

John MacInnes:                It was a lot of work, but it was, it did work out.

John Warrillow:                Some listening will say, “Why does this guy want like just one dollar of profitability? Why would that be the goal and not 20% profit margins or something like that?” What was so meaningful about the one dollar profitability and why not a loftier goal, I guess?

John MacInnes:                Yeah, so the loftier goal did come after we got that, but really, the one dollar … It’s funny because, we throughout the whole company, we used to call it “infinity,” so once we’re … We called it, “The infinite company,” so once we got that one dollar more than our expenses, then the company just goes on. We don’t really need cash. We don’t need anything, the company can continue that way. In fact, when we, our last group of products, we called them “Print Audit Infinite.” When you think about a theme and moving forward and getting everybody focused on it, that is what we would think about was, “infinity.” Even though, maybe a dollar isn’t lofty, but infinity is.

John Warrillow:                Yeah, for sure. Got it, okay. The first thing you did is remake the business model into this recurring revenue juggernaut. Next, there was something else you did which was, I think, more internal. Maybe talk a little bit about that.

John MacInnes:                Yeah, so we really analyzed the … Because we were trying build a company, that was going to be very valuable, so we analyzed the value drivers. Especially for purchasers and acquirers of recurring revenue companies. One of the things that was obvious, and it was obvious to us as well, but we found that, we thought that retention was going to be way more important than sales, and so we actually had, we 80-20’d, we aligned the entire company, 80% of the company and the people and the resources were built towards retention.

John MacInnes:                Once we, that hard battle of getting a customer on, because nobody had ever paid for a subscription like this before, we wanted to make sure that we kept them. There were, we also put some interesting hooks into how we kept them, and just thinking about what the product did for them and their customers. Yeah, it was 80-20 towards retention, and so we-

John Warrillow:                What does that mean, 80-20? Give me an example of how you would spend money, 80% towards retention, 20% towards acquisition, I’m assuming. Or what was the other 20%?

John MacInnes:                Yeah, so mostly, it was around sales and marketing, and actual development. Our development was driven by the features of our current customers, and with 20% new stuff, and it was very well-measured. 20% new stuff from customers that said they’d come on with them if we did this or did that. The, out of the 40 people, 80% of them were actually under our Retention Director, and so one person in the company was in charge of 80% of the company.

John Warrillow:                Wow.

John MacInnes:                Our sales team was actually very small. Just before we sold, our claim was because we had retention down to a science, we were actually going to flip that in 2019 and 2020 to start becoming a sales engine, if we couldn’t sell the company. We were going to move it around because we really figured out retention. We had somewhere around a 99.5% retention rate of the customers that came on, and so but that really drives, that drives value, is your retention rates and how long the lifetime value of customers.

John MacInnes:                It’s interesting, when you look at lifetime value, most people try and put a number on it, but if they’ve been with you from the beginning to end, so let’s say six, seven years, then that’s your lifetime value, and every day, it gets longer. I don’t think every private equity firm in the world would agree with me, but nonetheless, that’s, it is true.

John Warrillow:                Yeah, for sure. What was the, you mentioned the third thing was this sort of personal odyssey of education to learn about what-

John MacInnes:                Right.

John Warrillow:                Yeah. Tell me more about that. I mean, it was a year-long course, but was there one highlight that stood out for you that was a bit of an epiphany? I mean, you’re obviously a pretty … Very knowledgeable guy. You’ve been around the block, you’ve got lots of businesses, so I’m assuming your level to be impressed with information in relatively high. What sort of was an “aha” for you?

John MacInnes:                We did some pretty serious exercises around valuing our own companies through this. The “aha” for me was the value of this company today is enough to set me up for life, and a lot of my employees and executives for life. I guess, and that sounds kind of greedy because it starts with money and it doesn’t always end with money, but I was surprised at where the value could have been for the company and where it was at the company. I really didn’t think it was that high, and it turned out that it was. So …

John Warrillow:                What was the valuation methodology that you were learning about?

John MacInnes:                Well, so we would look at, and again, I mentioned the data piece. Remember, I mentioned the data piece earlier?

John Warrillow:                Mm-hmm (affirmative).

John MacInnes:                There was a lot of … There’s a lot of companies in the world, and it’s still happening right now, where data from massive amounts of data, like we were getting four million pieces of information from printers around the world every hour into our system. Massive pieces of data were actually valued much higher, sometimes, than IP, and so that was a real value booster for us. Also, when we looked at, they had an interesting competitive matrix.

John MacInnes:                Again, I don’t know how much of this is proprietary, but I think they had an interesting competitive matrix where we could relatively put our value against the value of competitors that might be buying us, larger competitors or, and that’s what did happen. A larger competitor did come and buy us. Strategic values were pretty high for us as well. I can’t remember the exact mechanics, John, but it did come out to, when we were looking at it, and this was run by investment bankers saying, “This is how we’ll present you, or how you would be presented to potential buyers when we go out into the world.”

John MacInnes:                It was just much higher than a multiple of EBITDA that I was even thinking. Even though I was trying to get a multiple of revenue, I never really believed it. It was just much higher than what I thought, and so, and I couldn’t see in the future, because when I think about my industry, I couldn’t see it in the future because I do believe that people are printing less, and it seemed to me that we might be getting to a peak in the industry for us as well. That might be back to your counterintuitive, is there was an intuition that we might be hitting a peak in the industry, and that somebody bigger needs to come in and diversify.

John Warrillow:                Right. Because if you just pull back the layers and go back to 30,000 feet, I mean, people aren’t printing as much as they used to. Even though we have law firms and so forth, like that’s just the reality, right?

John MacInnes:                That’s where all of our money came from. We didn’t have a diversification at that point, so …

John Warrillow:                Interesting. What did you, going through this course, what did you come to learn companies like yours were valued at as a multiple of revenue? I’m assuming it is a multiple of revenue. What was the range you were starting to start to come to realize?

John MacInnes:                It was kind of all over the place, because we were in a pretty niche industry, and so we were seeing multiples of revenue of three to five times, pretty-

John Warrillow:                Wow.

John MacInnes:                Pretty long-standing companies, and ones that had … Or really big multiples of EBITDA as well, so you’re looking at 12 to 20 times EBITDA, and so the numbers were big. That’s another piece of this, of going back to the non-intuitive, is the investment bankers who were running this course, they were saying, “Hey, this is also, probably, the frothiest time in our history for valuations that we’ve ever seen, for valuations and businesses being sold.” That’s another tick in the, “Should we be getting out now?” column, is that, “Maybe we’ll put another five years in and grow like crazy, but we won’t … But the multiple will end up being the same because the market’s gone down.”

John Warrillow:                Well, the multiple actually might go down, the overall value may stay the same, but-

John MacInnes:                The multiple might go down and the value would stay the same. That’s exactly-

John Warrillow:                Yeah, so you could put in five years of work and not get a dollar more for your company.

John MacInnes:                Right. It’d be a much more successful company but still, it’s not, it was what it was worth at the end, because we always did plan to sell. This wasn’t going to be a lifestyle company.

John Warrillow:                You’re seeing numbers, like huge numbers, like three times revenue, four or five times revenue, and starting to think, “Okay. This is worth a truckload.” What was your next step? Did you start selling it on your own? Did you hire some representation? You mentioned there was an investment banker involvement. Maybe talk about that.

John MacInnes:                Yeah, so out of the class, and I don’t know about the other fellows and ladies in the class, but I got to, I got along very well with the guy that was running it. He has an investment bank down in Cincinnati, and it’s called ArkMalibu. We were on a, actually on a little bit of the small side for him, so he introduced me to a guy in Canada, Basil Peters from Exits. Between Basil and Peter down in Cincinnati, we started to build …

John MacInnes:                I woke up June 16th, 2018, which happens to be my birthday and said, “Okay. I’m going to do this.” That was it, so we talked to the executive team at Print Audit and they were really the only ones that knew at the time. Then I went to Basil and Peter and said, “Let’s put this together,” and they agreed to help me through it, which was great. I hired them and we were in the process of creating what’s called a, going through, building our data room and doing the due diligence and all the things that are …

John MacInnes:                One thing about this course that I thought, and just as every entrepreneur, is the due diligence piece and getting yourself ready and having the i’s dotted and t’s crossed is incredibly difficult, and it’s a full-time job for the CEO. The company has to be kind of able to run beneath you. If the company’s running beneath you, that adds value as well, believe it or not, that you’re not the key person and that-

John Warrillow:                For sure, yeah.

John MacInnes:                By the time I left, or by the time we sold, I didn’t know most of our customers. I wasn’t responsible for a dime of sales, and our retention. I was really the strategy and execution person with … That did work out well for me, and I was out going where I could sell. Not everybody in our group was at that point, but I had, because of, and the learnings that I’d had, I’d quickly, I’d been moving myself into that position anyway because I had another company.

John MacInnes:                Anyway, so we, the due diligence and the getting the data room ready and all those of sorts of things happened. We just happened to get a call from the eventual buyer for us as we were building this. I think from that point, this is where I say, “The rest is history,” because the actual mechanics are under NDA.

John Warrillow:                Yeah, I think your voice dropped a little bit there. You said, “The actual mechanics of it are under NDA.”

John MacInnes:                Are under NDA. Yeah, yeah.

John Warrillow:                Did you, so you had an inbound offer. I think people would be curious to know, were you, did you continue to use the investment banking firm? Because, in essence, you got the deal at that point. Or did you separate from those guys? Or how did you kind of work that?

John MacInnes:                Yeah, great question. Personal relationship. We kept on moving, and I’ve got to say that, so I didn’t get to see their negotiating prowess, and though we did negotiate, obviously, the offer upfront. They were very much involved in that, and that was great. Where I got to say, I got the most value on the deal, and I think it was worth everything that we paid them, was the help that we had during the due diligence.

John MacInnes:                The company that bought us was pretty massive. They acquire companies, that’s what they do, it’s one of their main thrusts. We were presented with a due diligence list of 2,000-plus items or somewhere around there. That’s when the investment banks both jumped in with both feet and helped us to organize. They organized my people. They got everybody, they were very, they were great with the confidentiality, but they were sort of the pipeline and the management for getting the due diligence items. I’ve got to say, I think because of them, we were much faster in getting the data and being able to go through it with the buyer, than probably that I’ve seen before, and we were probably smaller than some of the guys they’d bought before.

John Warrillow:                What was the strategic value? Why did they want to buy you guys?

John MacInnes:                Well, we were, so they had the, they had bought the number one and the number three companies in this device management, so that product that I was talking about, and we had these other product sets that they were very interested in. There was a pretty big strategic value for them, but and so it was product, IP, that dataset, of course, is very valuable.

John MacInnes:                Essentially, once they bought us, at least in North America, they owned the market and they got access to all these other markets around the world that we were being really successful in, so they were able to, I suspect, their plan is to sell other, their stuff to our other customers around the world.

John Warrillow:                Kind of, in fact, lots of kind of strategic reasons to buy you guys. The product, the customers and so forth.

John MacInnes:                Yeah, and that’s, I mean, if you’re looking for a sale, a strategic sale is always the best. We were quite happy. These were the right guys to buy us, most definitely, and they were fantastic all the way through the process.

John Warrillow:                Okay. Again, this may be getting into stuff you can’t talk about due to the NDA, but I think listeners would want to know, how did their offer compare with what your expectations were? Did you, were you pleasantly surprised, underwhelmed? Did you feel fair value was being exchanged? Any kind of qualitative description?

John MacInnes:                Yeah, it’s interesting. Let me, maybe the way to do it is our banker in the U.S. thought it was too low, and our banker in Canada thought it was too high. I think at the end of the day, that’s, it came out pretty fair.

John Warrillow:                Okay, got it. It was kind of in the range, presumably-

John MacInnes:                Exactly, yeah.

John Warrillow:                … Between those two guys. Yeah.

John MacInnes:                Yeah.

John Warrillow:                Yeah. Got it, got it. Excellent. How did you decide to tell your employees that you were selling the company?

John MacInnes:                That’s a great one. Hmm. Because of the nature of who was buying us, and the industry and everybody knows everybody, we had agreed with the buyer that it needed to be very confidential, and so we could only read-in a few people, and there were very few. It’s an interesting one. I think that was the right thing to do, but I do think that when it was, when we finally told the staff when the deal was done, and we told the majority of the staff when the deal was done, so the buyer came up and it was a big celebration.

John MacInnes:                I think a lot of people, because of how close the company was and how transparent we had been before, I think there was probably some hurt feelings on that, or just surprise. It was done in conjunction with the buyer, and it was a big piece that we spent a lot of time with. The buyer had a very large PR, marketing arm that was very interested in making sure that we went along their lines of doing this, and it turns out it was lines, and I think that the way they do that, probably, is somewhat proprietary, so I can’t talk about that really. We told the majority of the staff when the deal was done, and they were able to announce with us, so maybe about a week after the deal was done all together.

John Warrillow:                What was, for the rank and file staff member, the junior employee, did they benefit in any way? Or what was their … How did you pitch it to them as a good thing?

John MacInnes:                Yeah. Well, I think all of them knew who these people were, and so we pitched it as opportunity. Certainly, opportunity that Print Audit couldn’t have given them, so you’re talking about going from 40 to 50 employees to 2 to 3,000 employees, and so, and a lot of, we’re very good at hiring at Print Audit. These were really, and are really smart people that were going to impress a larger organization, just had an opportunity to grow.

John MacInnes:                The other side of it was, because the people were so great at Print Audit, I never really felt like they were at-risk. Because people knew how well we hired and that they had built … We spent a lot of time and effort on education and just growing the person, and so I always felt good about the people. It might be tough, it’s change, but I also felt that if they didn’t like the change, they had so many opportunities in front of them and as it’s turned out, it’s true.

John Warrillow:                Would you do anything, if you had a mulligan, and you could do it over again, would you do anything differently in the way you handled your employees in the process?

John MacInnes:                I probably would, but I got to tell you that I think that’s probably under NDA.

John Warrillow:                Okay.

John MacInnes:                I can’t go into details. There is maybe one thing that I would have done differently, but it’s not significant enough that it would blow your listeners away. So …

John Warrillow:                Yeah, yeah, yeah. Got it. Tell me about what it was like to circle back to those early investors with the proceeds of their investment.

John MacInnes:                Yeah, it was great. Most of them had been aware for, even some of them before the staff, which was maybe that’s a little bit of more my … Again, the staff not knowing was always tough for me, because I did have a group of my friends that were investors that knew about it even before some of the staff, so that was very much against my transparency. It was the right thing to do, because customers would have panicked, The industry would have had … They just needed to be given it in a package in the proper way.

John MacInnes:                Getting back to the question, it was great. Most of them came by my house to get their checks, and because we did hand out old fashioned checks, and it was a long ride, but everybody was pretty happy. One guy bought a house, which was nice. Another guy went on a great vacation with his family and I’ve heard really good stories about-

John Warrillow:                If I’d invested $1,500 in Print Audit, what would my check have been?

John MacInnes:                Lots. Lots more than 1,500 bucks.

John Warrillow:                Five zeros, six zeros, seven zeros.

John MacInnes:                I can’t even come out with it, but it was lots more than 1,500.

John Warrillow:                It was a good deal.

John MacInnes:                It was a good deal, yeah.

John Warrillow:                Congratulations.

John MacInnes:                It was nice to do that, and these really are my friends. Unfortunately, my parents had both invested. They were both gone before it was done.

John Warrillow:                Aw. That’s a shame. They would have enjoyed.

John MacInnes:                My sisters got the check.

John Warrillow:                There you go.

John MacInnes:                Yeah.

John Warrillow:                Well, that’s good. Tell me what life has been like for you now that you are exited from Print Audit.

John MacInnes:                Well, I mentioned that I’ve got another company, so it is a question being an EO’er and a lot of EO’ers, this is the thing that they want to do is, “What are you doing now?” Or, “How come you’re working?” Those sorts of things. I don’t think the drive was never really for me to not work. I had another company that I’ve been building for quite a while. I’ve got a fantastic operator, which is great. A guy named Scott, who is the President of the company. It’s called Payroll Rewards, and so I’m very much involved in that now. What it is, is we take entrepreneurs, founders, owners, we take their payroll, run it through AMEX, American Express is our exclusive partner in the U.S. for this, and we get the membership rewards for their payroll.

John Warrillow:                Wow, that’s a great deal.

John MacInnes:                It’s a great deal, and it’s been a lot of fun. It’s growing like crazy, and-

John Warrillow:                Sorry. What’s the name of the company?

John MacInnes:                Payroll Rewards.

John Warrillow:                Payroll Rewards. We’ll have to check that out.

John MacInnes:                Yeah.

John Warrillow:      , I’m guessing?

John MacInnes:                Yeah, that’s exactly right.

John Warrillow:                Awesome.

John MacInnes:                As you can tell, I name my companies what they do. It’s easy to keep them focused.

John Warrillow:                Yeah, exactly, exactly. Print Audit and Payroll Rewards. Well, listen John, it’s been a tremendous pleasure to get to know you. Thank you for sharing your story with our guys, our listeners. I guess, for people to learn more, it’s probably best to send them to Payroll Rewards.

John MacInnes:                Yeah.

John Warrillow:                Is there anywhere else that you’d send them to or should we just point them to that website?

John MacInnes:                Yeah, so is a great one and I’m … I think you’re going to put my contact information up, right?

John Warrillow:                Happy to if you’ll allow us to, yeah.

John MacInnes:                Yeah.

John Warrillow:                You’re probably on LinkedIn, I’m guessing, as well.

John MacInnes:                I am on LinkedIn.

John Warrillow:                Awesome.

John MacInnes:                I’m not sure, my profile is kind of, I don’t know, embarrasses me.

John Warrillow:                Good deal. Well, we’ll put all that in the show notes. It was great to meet you, John. Thank you again.

John MacInnes:                Thanks, John.


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