How do you build a successful web app from absolutely nothing?

This week on the Boagworld Show we are joined by Kyle Racki the founder of Proposify to talk about his life as a successful entrepreneur.

This week’s show is sponsored by The Digital Project Manager School and Pactly.

Transcript

Paul Boag: This week on the Boagworld Show, we're joined by Kyle Racki, the founder of Proposify to talk about his life as a successful entrepreneur. This week's show is sponsored by Pactly and The Digital Project Manager School.

Hello, and welcome to the Boagworld Show, the podcast about all aspects of digital design, development, and strategy. My name is Paul Boag with me obviously is Marcus Lillington. But, we're also being joined by Kyle Racki.

Hello, Kyle, good to have you on the show.

Kyle Racki: Well, it's an incredible honor to be on the show. I have listened to this podcast I think 10 years ago I was an avid listener, and it's just surreal getting to talk to the celebrities themselves.

Paul Boag: Yeah, not so much. But, we've talked via email a few times, haven't we? Because, you've been a sponsor on the show in the past, and, also, I was a user when you were an early beta I think.

Kyle Racki: Yes, and then you left us for Qwilr I think-

Marcus Lillington: Ooh.

Kyle Racki: … it was.

Marcus Lillington: Hey.

Paul Boag: I wasn't going to mention their name. You're obviously-

Kyle Racki: You-

Paul Boag: … very bitter-

Marcus Lillington: I would-

Paul Boag: … about-

Marcus Lillington: … be.

Paul Boag: … it.

Marcus Lillington: Given-

Kyle Racki: You've also been on my podcast twice.

Paul Boag: Yes, of course, I forgot that, very true. Well, it's about time I returned the favor-

Marcus Lillington: Oh, dear.

Paul Boag: … isn't it, really?

Marcus Lillington: This is-

Kyle Racki: Absolutely. Well, the real celebrity I was talking about was Marcus.

Marcus Lillington: Yeah.

Paul Boag: Ah-

Marcus Lillington: This is true.

Paul Boag: Yeah. Well, if that's-

Marcus Lillington: Absolutely, true.

Paul Boag: But, yeah.

Marcus Lillington: It still freaks me out. It occasionally happens. If I go to a conference, yeah, a webby conference, people will come up to me and say, "Are you Marcus?" It's because they've heard my voice over the years. It freaks me out every single time.

I'm not famous at all. I once was maybe. But, no, Paul's the star, aren't you, Paul? But, yeah, I'm enjoying watching you squirm.

Paul Boag: Oh, yes.

Marcus Lillington: It's great.

Paul Boag: The one that freaked me out the most was on a tube in London. I was on a tube train, and I was with Andy Clark and John Hicks, I think, and we were just chatting away. This voice behind me said, "Excuse me?" You know what it's like on the Tube, you think-

Marcus Lillington: Here we go.

Paul Boag: … "Oh, it's going to be someone begging or some weirdo," so I ignored them.

Then, they said, "Paul," and I thought, "Where have they read that on me? What's on me that says my name?" It was somebody that heard us on the podcast and recognized my voice. Yes, that was very freaky.

Kyle Racki: You told them to go away-

Paul Boag: Because, it wasn't even-

Kyle Racki: … of course.

Marcus Lillington: … Yeah.

Paul Boag: Oh, obviously.

Marcus Lillington: He turned his back. He didn't say anything.

Paul Boag: No, actually, I enjoyed every-

Marcus Lillington: Turned around-

Paul Boag: I enjoyed every minute of it, because Andy Clark and John Hicks who are incredibly well known in their fields thought it was, they were obviously deeply envious that I got recognized, and they didn't, so, yeah, there you go.

Kyle, the reason that we've got you on the show is because you, my man, have lived the dream. That you were an agency person, and, now, you're this entrepreneur conquering the world. Tell us a little bit about yourself and a little bit about Proposify as well.

Kyle Racki: Sure, yeah, it was a dream for a long time. I'm a designer by trade. That's what I went to school for, and I worked in agencies for most of my career in the early days. Then, around 2009, I went out on my own and launched my own web design agency which, as I'm sure you know and everybody knows, is a very difficult business, especially if you don't know what you're doing, which I didn't know.

Marcus Lillington: I still don't.

Kyle Racki: But, I was always interested in SaaS, and I was an early user of Basecamp. I remember when I was working at an agency I always had this idea for, "Wouldn't it be cool, if there was a Basecamp for proposal writing?" Because, I sensed there was a lot of pain there in agencies I worked at and running my own business, and it was an idea I wireframed drunk in my basement one night, sat on it for a number of years.

Then, as we were running the agency and experiencing a lot of the struggles with cashflow and clients and collecting on invoices, we, Kevin is my business partner, we just really wanted to start experimenting with some product ideas to try to build a SaaS company. A lot of them, all of them failed except for the proposal idea, which users tended to really gravitate towards. We just kept focusing on it and eventually sold the agency business and went out and worked full-time on Proposify.

Marcus Lillington: That's cool.

Paul Boag: To give people a bit more of an idea of the kind of thing that Proposify does, obviously, it produces proposals. But, why, so this bit's going to sound like an ad, but, explain to people why you would want that over doing it, I don't know, in Word or InDesign or whatever.

Kyle Racki: Sure, so there's two things there. One is the act of creating proposals is typically time-consuming and painful for a lot of people. Proposify helps just streamline the creation of proposals using templates, using a content library, using variables that auto replace or auto switch out stuff like the client name, so you don't have to do find and replace. Obviously, the collaboration aspect makes that easier.

What we try to do as a company is take the time it takes to write proposals down. Obviously, if you're spending less time on a proposal, you can put that time into client work or closing deals. Then, from the client standpoint, it's just a more impressive way to receive a proposal. Instead of getting a PDF in your inbox, clients get this nice, interactive link that they can interact with prices, watch videos, and sign online.

We just take the creation to close and make that shorter and more beautiful.

Paul Boag: Now, there's some really interesting stuff in it. The one that is a particular one for me that, it actually, Qwilr, that is the app that I use doesn't support which is frigging variables. That is by far one of the most useful things. How many times have you sent out a proposal, and you got the wrong frigging client name in it. It's so annoying, isn't it? It's so embarrassing. Yeah, that's a very good one.

I was looking at your website in preparation for this. Your product has matured quite a lot, hasn't it? You're continually investing obviously in its development.

Kyle Racki: Yeah.

Paul Boag: There seems to be a reasonable team of you now. How many of you are there?

Kyle Racki: Yeah, we're at almost 65-

Marcus Lillington: Wow.

Kyle Racki: … full-time employees.

Paul Boag: Wow.

Kyle Racki: We've grown a lot in the last few years. We also raised a large round of funding last year which, putting a lot of that investment dollars into growing the team.

Paul Boag: Yeah, absolutely. Now, that's really exciting. A very different world from the world of being a developer and designer then?

Kyle Racki: Oh, yeah. Though it's kind of funny, because it goes full circle sometimes. I wanted to get out of the service business for so long and get into SaaS. Now that it's been rolling for a few years, we're moving more upmarket and selling to larger sales teams that use our product, and a lot of them want services. They want us to write their proposals and offer consulting. Now, we're getting roped back into that world a little bit.

Marcus Lillington: That's interesting.

Paul Boag: Isn't it funny how these things work?

Kyle Racki: Yeah.

Paul Boag: Was that a conscious decision to start targeting the higher-end market?

Kyle Racki: Well, this is a very common problem for SaaS companies, which is that if you target … It's perfectly all right to target very small customers paying you a small amount. We all know Basecamp has been very dedicated to never taking on enterprise customers. But, there is inherent challenges that go along with serving small customers, which is namely churn, customers canceling their subscriptions. That becomes more of a problem as your recurring revenue grows, it gets eaten away by all of this churn that starts to develop.

A common strategy that works for a lot of SaaS companies, and it makes sense for our business, is to start going upmarket, targeting larger companies. Usually, if you sell a higher-priced product, there's more involved in the sales process. It takes longer to close those deals. But, your churn is relatively nothing, because once a company invests in the software, they're not going to leave.

Marcus Lillington: Do you offer a customized version for the bigger clients? Whatever they might particularly want the proposal software to do, your developers create that for them?

Kyle Racki: Yeah, right. It's the same product, but we have different feature sets that we move on to different tiers. Typically, as you move upmarket into larger sales teams, they're looking for things like advanced permissions, the ability to lock down templates and content. What Paul was talking about, variables, we offer the ability to actually create your own custom fields and variables, so you can have your sales rep fill in a form and then populate the proposal with content. Those types of features, advanced reporting, dashboards, those things, we sell on the higher plans.

Marcus Lillington: I imagine there's many different types. But, is there a particular type of industry that you work in, or is it vastly different?

Kyle Racki: Yeah, when we started I made the conscious decision to focus on agencies, because that was the market that I knew really well. I had been in the agency business for a long time, and I didn't want to try to sell to an industry like construction that I just know nothing about. All of our marketing and our product was very dedicated to mostly digital agencies. They still make up a large percentage of our customers.

But, we've found that as we've moved upmarket, it tends to be more of IT consulting, finance, sometimes, HR payroll, I don't know why, they seem to gravitate to our software. We're finding there's a lot of industries that use our software, and it becomes less agency as you move upmarket.

Marcus Lillington: I was expecting you to say, I don't know, IT hardware or something like that. The opposite of agencies, because, obviously, I write lots of proposals, and I think they're all different. But, obviously, they're not.

Kyle Racki: Yeah.

Marcus Lillington: I just go and reinvent the wheel a lot, and maybe I should look at your software.

Kyle Racki: That's what we try to, yeah, we try to-

Paul Boag: I've told, I've been telling-

Kyle Racki: … crosstalk 00:11:08

Paul Boag: … you that for years, Marcus. Don't suddenly come round to that now Kyle's on the show.

Marcus Lillington: Yeah, well, you know.

Kyle Racki: Actually, Marcus, you commented on the software. I remember a couple of years ago, Paul was talking about Proposify on the show. We all got really excited, and Marcus said something like he hated that you had to actually draw your signature-

Marcus Lillington: Yeah, I don't like that.

Kyle Racki: … with the mouse.

Paul Boag: Yeah, that's gone.

Kyle Racki: We changed that-

Paul Boag: That's long gone.

Kyle Racki: … for you.

Marcus Lillington: For me?

Kyle Racki: We added the ability to type your signature.

Paul Boag: Yes, and I came back to you on the show and said that, because Kyle emailed me back over it. I actually said it to you, and you still all these years later on, yeah-

Marcus Lillington: crosstalk 00:11:46

Paul Boag: I've got to say, you've added loads. I'm just looking through your site now. It's a funny thing, isn't it, that people will get into SaaS from the agency side, because they think, "Oh, it's reoccurring, passive income." Bollocks, it's passive. I look now … When I switched across to Qwilr, and, obviously-

Marcus Lillington: The third time he's mentioned-

Paul Boag: … now, I'm looking-

Marcus Lillington: … that-

Paul Boag: … back at it-

Marcus Lillington: … I have to say.

Paul Boag: … because … Yeah, but, no, but what I'm about to say goes the other way. When I switched across to Qwilr, it's because Qwilr was better suited to me at the time.

Now, if I look at it today, it's actually I'm going, "Oh, perhaps, I need to move back to Proposify," because you've evolved and developed. Going back to what you were saying about churn, that's exactly what is happening, isn't it? You can never stand still. There's no such thing as passive income.

Kyle Racki: Oh, no, no. Competition eats away at that as well, not as much as you would think. But, yeah, certainly, you're an example of smaller customers move around a lot more than larger companies. They tend to stay with what they've got. When we sell to bigger companies, usually they're not using anything. They're just using Word or PowerPoint or something like that.

Really the status quo is mostly what we compete against. But, certainly, features become important, although we try not to just compete on features. Proposal software's been exploding over the last few years, more have been entering the market. It's been getting super competitive.

Marcus Lillington: Cool.

Paul Boag: That's always quite a scary thing I imagine. When suddenly a new competitor comes along, and you think, "Ooh, that's quite good."

Kyle Racki: But, it also really justifies that there's a need in the market. That more people are searching for a solution. I think competition is a good thing. I know that sounds kind of clichéd to say that. But, even bigger competitors than us like PandaDoc, who have raised a lot more money, I think they raised $30 or $40 million. In a way, they've been helping carve out that there even is a market. In a sense, we're kind of grateful for our competitors.

Paul Boag: It feels like a no-brainer to me. For the sake of, what, a few dollars per month, and I know there's a lot of for the sake of a few dollars a month, and as a small business owner, you do reach the point of going, "Flipping A, how many more of these things am I going to be paying for?" But, what I will say about software like this is the one area that I will invest in, in terms of software is in sales and marketing. That's where I think you get a good bang for your buck.

I use Pipedrive as my CRM. That means that I'm organized and on top of my sales. Proposify is another great example, because it has that good at first impression. It has that impact.

It also streamlines a load of stuff, because, suddenly, you don't have to produce a statement of work afterwards, so that your proposal becomes your contract and all of those kind of things. Anything that automates the bits of my work I don't really like, like writing proposals, like remembering to follow up on clients, all of that kind of stuff, then, yeah, I'm happy to pay a bit of money for that. It seems like a no-brainer to me.

Kyle Racki: Yeah, it's always nice when your product, you can attach it to sales, because then it really justifies the cost. I think what we fight against sometimes is people saying, "Well, would I really have closed that deal using your software, or I still may have closed it if I used a Word document." Everything we're doing is trying to actually not just make creating the proposal easier but, actually, influencing the buyer and trying to enhance the likelihood that they'll accept your proposal. Because, then, we're really saying we helped you close a deal.

Paul Boag: Yeah, yeah, which is a huge part of it.

Okay, let's take, I feel somewhat hypocritical, because I'm very conscious that so far what we've been talking about sounds like a massive, big advert from Proposify. Let me-

Kyle Racki: I don't mind-

Paul Boag: … be clear-

Kyle Racki: … at all, Paul.

Paul Boag: No, I'm sure you don't. Proposify are not paying to be on this podcast. Now, I've got to talk about a sponsor who is paying, and that is really unfair. But, there you go, such is life.

This is the advantage, ladies and gentlemen, learn the lesson, this is the advantage of networking and keeping in contact. Because, me and Kyle have been talking for a long time, and he's kept contact with me. Now, he gets sponsorship for free.

Kyle Racki: Long game, play the long game.

Marcus Lillington: So true.

Paul Boag: Play the long game, smart move, yeah.

Let me talk about Digital Project Manager School. This is an online digital project management course that you can do. It covers the whole project lifecycle from initiation through to closing a project. You've won the project using Proposify. Competition is available. Then, what? You've got to deliver on the thing.

You want to do a course like this one which is mastering digital project management. It's an interactive course. It mixes video, round table discussions, slack debates, assignments, peer grading/marking, everything you could expect, and one-to-one coaching, of course.

There's lots of project management training out there that doesn't really cater for the not-so-ideal scenarios. It makes it, and we're in danger of doing that. I've done that on the show before, "Oh, yes, you should do all this usability testing." Yeah, but, we live in the real world. It doesn't always work out like that.

But, this particular course looks at things like tiny budgets, vague briefs, crazy clients, stupid deadlines. That's a proper training course that teaches you that kind of stuff as well. It's very practical and very much beyond just the theory.

It's got an excellent guy behind it. A guy called Ben Aston who is a really friendly chap. Another guy that I suspect I will be in contact with over the long term, because I love talking to him. But, he's also supported by the Digital Project Managers as well.

You can find out more about this. There's an upcoming course, I think starting on the 1st of April. If you get a shifty on, you can find out more about that by going to thedigitalprojectmanager.com/boagworld.

Marcus Lillington: I wonder-

Paul Boag: Right, Kyle.

Marcus Lillington: Sorry, I was-

Paul Boag: Sorry-

Marcus Lillington: I was just-

Paul Boag: … go on.

Marcus Lillington: … this shifty, is that something that translates around the world, "You've got to get a shifty-

Paul Boag: No.

Marcus Lillington: … on?"

Paul Boag: Shifty on. Does that even translate in English?

Marcus Lillington: I think it does.

Paul Boag: I'm not sure it does.

Marcus Lillington: It's southern England maybe.

Paul Boag: Yeah.

Marcus Lillington: Anyway.

Paul Boag: Shifty on. Kyle, have you any idea what we're talking about?

Kyle Racki: Is this some sort of dirty English slang or something?

Marcus Lillington: No.

Paul Boag: No. I don't know where it comes from actually. It means get a move on, hurry up.

Kyle Racki: Oh.

Paul Boag: But-

Kyle Racki: Okay.

Paul Boag: But, I don't know where it comes from. That's really interesting.

Marcus Lillington: Right. Okay, you guys talk, I'll go now.

Paul Boag: Go. Yeah, find out the source of it.

Right, Kyle, so, we've already touched on this a little bit, but I want to delve into it a little bit more. There will be countless people listening to this now who work in an agency or are freelancers, who've all toyed with the idea of creating a SaaS product. We tried to do it at Headscape, and we crashed and burned horribly.

Now, it sounds like you crashed and burned a few times and didn't give up. I'm really interested in that process, everything related to that process. How did you fund that initial prototyping? How did you find time alongside your agency work? How did you make it happen?

We tried to do Get Sign Off which was our tool, and it was two years of faffing basically and trying to do it alongside business. How did you make this happen, Kyle?

Kyle Racki: Well, I remember when you were working on Get Sign Off, and I'd even signed up for the early beta, and I followed that whole story. I actually used your example, and I think the post-mortem-

Paul Boag: Did the opposite?

Kyle Racki: Yeah, well, hey, I learned some things from the lessons that you shared on your blog. In a way, I benefited from your experience with Get Sign Off. I'm sure that doesn't offer any comfort to you.

Paul Boag: No-

Marcus Lillington: Along-

Paul Boag: … alongside the 10% of all sales of Proposify, that's fine, yeah, that's good.

Kyle Racki: Sure thing. We'll get our lawyers on that.

Marcus Lillington: Distant past, Kyle-

Paul Boag: Oh, yeah.

Marcus Lillington: … don't worry about it.

Kyle Racki: Yeah.

Marcus Lillington: A different life.

Kyle Racki: No, but, Paul, you had some something in that post around how you really need to get a dedicated developer working on it. You can't just make it a project within your agency, because it just always will go to the back burner, and client demands will always override your internal product. That was really what we had experienced trying to work on multiple products. We were maniacs trying to work on three or four different products at a time.

But, when we really focused on Proposify, we had to actually … We're lucky we live in Canada where there are government programs, grant programs, where if you're working on a technology product, you can apply for these, and they can even help fund and cover some of your developer's salary. That stuff generally doesn't exist in the US, but it may in Britain, because I think we're a little bit more-

Marcus Lillington: Yeah, it does.

Kyle Racki: … a little bit more English-

Paul Boag: Yeah.

Kyle Racki: We took advantage of that. Of course, we had to reinvest money from the agency to work on the product. But, really, it's just a matter of focusing for a very long time and not giving up. Because, when we had launched our product initially, we had this fantasy in our head that oh, we'll get 10 customers, and then the next month we'll get 50, and then it will just grow, grow, grow. Then, eventually, we'll be able to turn down client work. It's not really-

Paul Boag: We drew a graph like that, that never happened.

Kyle Racki: Yeah, yeah, everybody's drawn that graph before. I think, because we've all looked at the Jason Fried-DHH Basecamp model that it sounds like that's what worked for them. But, in our experience, we realized we had to shit or get off the pot for lack of a better term and focus on the product. If we believed in it and wanted to do it, we had to get rid of our agency.

It took 10 months, and it was horrible. But, we actually sold our agency, didn't make a cent off the sale, but we were freed up just to work on the product.

Paul Boag: You took, because that was one of the things I was going to ask is about the decision to drop client work. You went cold turkey from the sounds of it before Proposify was profitable, was this?

Kyle Racki: Yeah, we were also lucky in the sense that we didn't have a very profitable agency. It wasn't-

Marcus Lillington: Easier decision.

Kyle Racki: … like we had this … Oh, yeah, it wasn't like we had this lucrative agency that was just lining our pockets, and we had to make the hard decision to turn that down. We were struggling at the agency. We were always one payroll away from missing it, you know what I mean?

We were always chasing after clients and trying to sell a crap business like that was difficult, because the buyers, they were looking at our finances and our balance sheet, and they knew that we had good bones I guess as a business. We did some nice work. We had a good team. We had clients. But, we weren't that turnkey business that they could just buy. They were going to have to do a lot of work to it. We were more or less looking for them to just pay off some of our debts and take it over.

Paul Boag: Yeah.

Marcus Lillington: That was different to us.

Paul Boag: That makes sense.

Marcus Lillington: At the time, that was probably when we were at our, we were turning over the most we ever turned over. I'm not sure it was the profitable we've ever been. I don't think it was, because we were growing more than we wanted to be, more than we realized. But, we were turning over a lot, and there was a lot of work on.

Clients were demanding, and there were political things internally as well. But, just I think that was the problem that we faced. We were just never going to turn away from this thing that was good. That was it really.

Paul Boag: How many of you was there when you started up Proposify? It was you and Kevin, who is your co-founder. Kevin's not a technical person, is that correct? He's more of a business, market-y kind of person.

Kyle Racki: Yeah, yeah, that's sort of the divide between us. Kevin, if you will, is the Marcus of the partnership, and I'm the Paul, I guess. I'm the design, product person. I also do a lot of marketing and SEO kind of stuff, those are the things that I've done historically. Kevin's much more operations, finance, legal, basically, everything else that's not product and market, sales. Yeah, that's a pretty good divide for our partnership.

Paul Boag: When you started Proposify, was it just the two of you when you-

Kyle Racki: Yeah.

Paul Boag: … first went, or there was more?

Kyle Racki: Well, I can't code very well. We had a really good developer named Jonathan who built the product from day one, and he's our CTO now. It was really the three, we were trio leaving that agency, which Jonathan was never really a part of. He always just worked on the product.

The three of us left, and we raised a small seed round of funding that basically kept our rent paid for 10 months while we were trying to still find some product market fit and grow. Thankfully, we went from 10 customers to 11 the next month to eight the next month and really struggling, even after we left the agency.

But, finally, by about October 2014, we noticed we had doubled our customers. Then, the month after that we doubled, and it started to really quickly grow. We became a bootstrapped, profitable company within a year from then.

Marcus Lillington: Fantastic.

Paul Boag: Wow. That is excellent. With the seed funding that you took, I'm quite curious about all of this, because I lived through the dot-com, and so it's made me pathologically paranoid and negative towards anybody that takes any kind of funding at all. Which I know is fundamentally wrong, but it's amazing how the past can scar you bitterly.

How did that come about? How did you find somebody for that kind of thing? Where do you look?

Kyle Racki: Yeah. Yeah, definitely, I've always been a little wary of funding myself because of those same reasons, especially, venture capital which is a very different kind of investor where they're looking for that just put fuel in the gas tank and just grow, grow, grow, don't worry about profitability. Then, hope for the next round of funding to come along when your burn rate's incredibly high. That's always what we've been afraid of and, also, losing control of the business, because investors typically take-

Paul Boag: That's the other crosstalk 00:27:16

Kyle Racki: … board seats.

Yeah, I think we're kind of halfway in agreement there. Big difference for us was our first round of funding was a government-based, venture capital firm.

Paul Boag: Ah.

Kyle Racki: They had a bit more of an economic development incentive to put money into the company. They're not like the sharks down in Silicon Valley that are looking to build the next Dropbox or Uber. That was nice.

They also, they took board seats, but they were very much hands off and just let us run the business. That was good. That was our first round of funding.

Then, we avoided funding for a very long time. When we started to grow fast, people were pushing us, "Go out and raise. It may not be there if you wait, or if your growth starts to die down." We were stubbornly resisting that for a long time.

Paul Boag: You obviously changed your mind at some point.

Kyle Racki: Yeah.

Paul Boag: You have got additional funding. What changed, and how have you approached it?

Kyle Racki: Well, we knew that the company was profitable. We have good culture here. We're happy. It begs the question of our people, especially investors look for that eventual acquisition or that big payoff down the line.

I think what changed for Kevin and I was we read that article, I know I've brought these guys up a ton already, but-

Paul Boag: That's fine.

Kyle Racki: … Jason Fried and DHH wrote this article about why they took Jeff Bezos' investment. The big thing for them was they wanted to take secondary capital, meaning instead of the investor putting the capital into the business, they were actually selling their shares and cashing out in a sense, if you will, even though they were retaining ownership in the business.

When Kevin and I read that, we thought, "Hey, I wonder if anybody would be open to that style of investment?" Where they put cash into the business, but Kevin and I are also able to sell some of our shares. That way we have a mini-payoff now. We can buy houses or build houses and have some money to invest and save long term. It frees us up of not feeling like we're tied to, we need to get this business acquired.

Paul Boag: Yeah, so that's an interesting one, the whole thing about your exit strategy. We have, at Headscape, we have a non-executive director of the company who was always encouraging us to have an exit-

Marcus Lillington: He still is.

Paul Boag: … strategy. Which we-

Marcus Lillington: Oh, yeah.

Paul Boag: Is he? Bless him. Which we mock him tirelessly for, because we've always wanted to build a lifestyle business.

What was your ambitions, and what are your ambitions now in that regards? Do you see yourself working on Proposify in 20 years? Do you want it to be acquired at some point, and has that changed?

Marcus Lillington: For a huge amount of money.

Kyle Racki: Yeah. Yeah, it would have to be-

Marcus Lillington: Obviously.

Kyle Racki: … right?

I think that when you take on investors, you're obligated to grow the business, so that it can be sold one day. If we were to tell our investors, "You know what? We just want to run this for the next 20 years. We don't want to go public or get acquired." They'd be pretty upset with us, because that's why they invest in the company is to make a return on it.

They know it will be probably a 10-year investment, but there has to be an exit strategy. It's a lot easier with SaaS, because you can get ridiculous multiples on revenue. If you're trying to sell an agency business, you can maybe hope for 1-2X on revenue, assuming your books are in very good shape, and you've got great systems that are repeatable. But, a SaaS business, you can get 10X multiples, 5X multiples. GitHub sold for 32X their revenue to Microsoft. It was just ridiculous.

Yeah, you always have to I think kind of think about getting acquired one day. But, if we build a good business, and I actually kind of avoid the term lifestyle business, because I think that we can still have a growing business and live a great lifestyle and not be overworked and have freedom-

Marcus Lillington: Of course.

Kyle Racki: … to travel and do what we want.

But, yeah, I don't know what the future holds. We just know we want to grow the business. We want to create a great business and a great lifestyle for our employees and ourselves. I think we can have it both ways.

Marcus Lillington: I think it's possible-

Paul Boag: Well, fair enough.

Marcus Lillington: … too. I think Paul started off by saying, you're living the dream. It sounds like you actually are which is great.

Kyle Racki: It is nice. To Paul's point earlier, of course, you have to still work on product. You never build a product once and then sell it for the next 10 years. You're constantly working on it. People inaudible 00:32:03 me that, "Why do you have a big development team. Isn't the product done?" It's like no, it's the backlog of bugs, the backlog of feature requests. It's a huge, huge thing.

But, I think the nice thing, and why it's living the dream is we're never at the whims of one client. If the customer base as a whole says, "We want this," then we build it. But, we're never at the mercy of one client who says, "Change all the buttons to red, because that's our brand color," and we have to do it. That's the freedom that we enjoy.

Paul Boag: Yeah. The flip side of that, man, is that you are constantly having to market and promote and push the application all of the time. I'm interested, it sounds like you do a lot of that kind of work now. What's your marketing strategy?

Kyle Racki: Yeah, well, we have a great team of marketers. We have about 10 people on our marketing team who do everything from creating content to managing paid media spends to just even bridging, data becomes a big job. Somebody to run your analytics and make sure customer data is getting pushed through all the right pipelines and into Salesforce and all that stuff. There's a lot to be done from a marketing standpoint.

A thing that I didn't really expect getting into this is that we would build a sales team and have people doing outbound cold calling and running demos and making that a big part of our growth plan. Didn't anticipate that from the beginning, but that becomes so important as you move upmarket and sell to bigger clients. That's something, it's kind of overwhelming to be honest.

Paul Boag: I'm quite interested in that in terms of things that you didn't expect going into this. Because, obviously, we're all of us, those of us that come from an agency background when you first start doing a SaaS type project, we're quite naïve, aren't we? I'm interested to hear where you think you were naïve going in looking back at it?

Kyle Racki: Well, we were just trying to survive another day. We didn't really have this grand vision. I'm pretty scrappy and a bit of a hustler, so I was tinkering with code and designing screens and doing customer support and doing marketing and blogging and trying to do it all for a very long time from that standpoint, of course, working with Jonathan and Kevin.

But, I think the surprising thing is that as the company grows, and as you start to see some success, your job as the founder or the CEO becomes a lot more about managing people, hiring the right people, and making sure they're working at capacity. Communication with the team, even just, how do we do an all-hands meeting with 65 people? What do we communicate to them?

Everybody I've talked to especially in the SaaS world who run even larger SaaS businesses, and I'm sure it's the same with an agency, is that people and communication become your number one challenge and your number one job. It's a lot less the hands-on working on product, working on marketing. It's all about this team isn't, they missed this important piece of information that wasn't communicated. How do we solve that communication challenge the next time?

Paul Boag: How does that feel, man, from … Someone who's come from a design background, do you miss the hands-on design, and the fact that now you're having to deal with maternity leave and sick leave, and people-

Marcus Lillington: People-

Paul Boag: … arguing-

Marcus Lillington: … just-

Paul Boag: … with one-

Marcus Lillington: … full stop.

Paul Boag: … another about the next … Yeah, people, people, I've got a problem with people. Yeah, but do you miss that? This is why I work by myself now. Do you miss that kind of design side of things, or has moving into a managerial role felt very natural to you?

Kyle Racki: Great question. As far as the HR stuff, we do have HR people who manage a lot of that stuff, so I don't think I would be very good at that. I'm not great at the touchy-feely stuff. Kevin is really good. People, he's like a bartender. Everybody just trusts Kevin-

Paul Boag: Oh, okay.

Kyle Racki: … and tells him all their worries and whatnot.

But, yeah, no, I think the thing that surprised me about, how do you run a larger company, is that you don't actually manage 65 people. You manage about five people, who in turn have their direct reports. As long as you hire good leaders for departments and have your one-on-ones and make sure you give them clear goals and expectations, that kind of stuff works itself out. There's not a lot of managing people.

But, I guess to the question about design, I still love design. I don't enjoy the actual pushing of pixels anymore. I realized about myself that I'm very lazy.

I like to come up with the general idea and direction and do some whiteboarding and brainstorm, but when it comes to actually implementing it, I'm like, "Okay, there's more talented people over here who will do a better job." I'll come in at the end and say, "Oh, yeah, that's great."

Marcus Lillington: That's interesting, because we spoke to Jeremy Keith on Tuesday. He's, even though he was saying that he doesn't really do any kind of serious project code work all the time, he still dips his hand in from time to time. But, he said with Andy, his partner, the day that Clearleft started, he flipped from, he never coded any CSS ever again. This was the guy that wrote CSS Mastery, wasn't it? He just, "I'm going to be a businessman now."

I think it's just different people for different things, isn't it? Some people can take on a new role, or it might have been the thing they were always wanting to do. Whereas others like Jeremy, he's a tinkerer, isn't he? He's a futurist almost.

Paul Boag: Yeah.

Marcus Lillington: He was never going to stop doing that. He was just doing the same thing, and then he carried on doing it in Clearleft, so, yeah, interesting.

Kyle Racki: Yeah. That's been a hard transition I think for our CTO, Jonathan, because he's just such a skilled programmer, and he loves to do it. As the development team has grown, he's been pushed a lot more by me to be more of a manager and come up, set the vision, set the direction, but don't try to do all the work. Don't take all those monkeys and put them on your back. By monkeys, I mean problems, challenges, not people.

Paul Boag: Not staff.

Kyle Racki: But, that's so common, and it's a big challenge for people who are doers and executors to move into that management position, because they're so used to, "Oh, I can do that. I can solve that." It's like, "No, you have to learn how to delegate and trust your team to deliver."

Paul Boag: The slight confusion that I'm having here is you've listed quite a lot of things that you don't do anymore. You've got a marketing team. You've got an HR team. You only manage about five people. You don't do any design work. Kyle, what do you do? On a daily basis, what actually does a CEO of a startup do?

Kyle Racki: Yeah, so I appear on podcasts like this. I actually had two other scheduled for today, but that is not a common day. It just worked out that way.

A lot of meetings, between one-on-ones with your reports, we have a weekly leadership meeting where we run through metrics and the monthly all-hands meeting, so it's a lot of meeting stuff, which is good I guess. I think the thing that I've really enjoyed is the fact that I don't have to be here 9 to 5. I have to do my meetings. I have to do my calls. But, it's nice to be freed up and take the morning out and spend it with my family or go to the gym, or whatever I want to do.

Definitely, I'm much more free to, and it's because I have the HR team and the development team and the marketing team. If anything, I would probably slow the business down if I got into the marketing team and said, "Okay, let's do this, let's do that." They're quite happy to have me out of that.

But, I do what I can, whether it's sitting on podcasts, creating videos and content for the marketing team to promote. I try to stick in my lane and do what I'm best at.

Paul Boag: Yeah, okay, that's kind of interesting. If you do your job right, you shouldn't be doing a huge amount, really. You should be thinking I guess about the future a lot, and where Proposify is going to go and those kinds of things.

Kyle Racki: Yeah, there's a great quote by Quentin Tarantino that I like to use on that, because there's a fascinating … I don't know, I find him a very interesting guy, and I've heard him on an interview talking about how when he met Terry Gilliam, the director, in the early days before he had directed anything. He asked, "How do you get all your films to look a certain way? They all have a consistent style." What Terry Gilliam told Quentin Tarantino was, "It's not your job to execute or create a film. It's your job to have a vision and then hire smart, talented people to execute your vision."

That's what Quentin Tarantino did. He didn't know anything about film stock or cameras or lighting. But, he knew what he wanted from his films, and he knew how to hire the people who could do the job.

I view being an entrepreneur and founder the exact same way. It's not my job to execute the business. It's simply to have a vision, set a clear direction, measure it, and get the right people in the right seats.

Marcus Lillington: Fantastic.

Paul Boag: How do you do that? Because, it's easy to say, isn't it? But, how are you forming your vision for Proposify going forward? What is your vision for Proposify going forward?

Then, secondly, recruiting is not an easy process. Do you approach that in a particular way? Where do you find people? Are you a remote company? Wow, there's about half a dozen questions.

Marcus Lillington: Stop talking, stop talking, Paul.

Paul Boag: Pick something and answer it, yeah.

Kyle Racki: I'll pick a couple of those questions. We've always been a not remote company. We're based in Halifax, Nova Scotia, which is in eastern Canada. But, we've actually started to experiment a little bit with some remote roles just out of necessity. We had a great engineer who had to move across the county to Vancouver. We have a salesperson down in New York just to do some higher touch sales down there. We're even looking at opening an Australian office just to cover time zones, so we're getting into the remote space a bit.

As far as coming up with a vision is the hard thing, and that where when people say, "What do you do every day?" It's like, well, I could be walking in the woods, or I could be at the gym or somewhere, and it's probably a better environment for me to noodle things and think about the market, read things, and try to learn. The company would benefit more from me doing that than sitting here in the office writing a blog post or writing some code.

I think that you have to as a business owner, you have to free yourself up and not chain yourself to your desk, so that you have that space to go away and think about things. Then, you can come back with some clarity and say, "Okay, here's where I think we're going as a company."

Paul Boag: That's a tricky thing to do, man, isn't it? Especially after, you've obviously … In those early years, as you were growing very rapidly, and you don't have that team around you, you are the HR department, you are the marketing department, you are all of these things. You're constantly having to hustle. You said that yourself earlier that you're very much a scrapper, a hustler. Now, you're not doing that kind of thing. You're having to step back.

It's interesting to look back again at Jeremy Keith who we were interviewing on Tuesday. He said he feels a constant sense of guilt, because he doesn't feel like he's doing a proper job. Do you have a sense of that in a way?

Kyle Racki: I used to. I have less and less as time goes on. Because, the thing is, who am I guilty to? My board and my investors are happy if the business is growing. They don't care when I show up. The team, as long as they can get time with me to meet and talk about things, they don't care if I'm in at nine, or if I'm gone at three in the afternoon. It really doesn't … You have to think, who do I feel guilty towards, myself?

If you are like me, I think having some side hustles and some passion projects is important. I wrote a book last year and just doing little things like that, that keep you on the ground. But, yeah, no, I think taking some space away and having the business not require you just means that you can sell it one day, and the business doesn't rely on you.

Marcus Lillington: One thing I'm interested to say, you say you've got maybe there's five people that report to you. One of those is I assume Jonathan, the CTO?

Kyle Racki: Yup.

Marcus Lillington: Those other people are absolutely, they're so important to your business. Did they grow with you, or did you just hire them from a recruiter? I'm interested where that … Because, we've always had a, back in the day, when we were thinking about growing, we're not thinking that way at all now, it was always a case of, well, we need to get more help with sales and da-da-da. We always felt that we couldn't, we didn't feel that we could fully trust people in those kind of roles. I'm just interested to find out where, how you found those people. Because, they're basically running your business for you from what you've said.

Kyle Racki: Yeah. Yeah, so the people that report to me are our CMO, our CCO, which is our chief communication officer, our chief of product, Ricky, and Jonathan, and also our VP of customer success. Those five people report to me and then a few others report to Kevin, VP of sales, head of HR, that kind of thing.

Yeah, to find those people, most of the people that report to me are actually people who were with us from maybe year one. They were our first five hires. They're people that have had to level up over time.

That I think is one of the biggest challenges of getting people who are scrappy and doers like yourself and then putting them in managerial roles, they really have to evolve into that. The same way I struggle, and you struggle as founders to delegate and trust people to lead, your people, your people who report to you have to do that too. You have to be coaching them to say, "Look, Ricky or Jonathan, stop writing that code. Trust your team." Coaching them to success to become leaders is an important job for you as the founder.

If you can't find those people, or they just don't exist, then you have to go and hire them. We've done that with our VP of sales, our VP of customer success. That's actually a lot easier to just go out and hire somebody who's done it before. You pay a lot more for them.

The downside of it is I guess they're not, you have to make sure they're a good cultural fit. It's easy when you're leveling up your people who have been with you, because they're part of the culture. They helped form that culture. Bringing in somebody from outside, there's always the worry that, are they going to contribute to the culture, or are they too different? There's a challenge on both sides.

Marcus Lillington: What I think I can take from all of this, which I hadn't thought of before this call, is if the business is successful, and it's moving along nicely, and everyone enjoys their role, then people can adapt, and they can grow with the business as the business grows. That's a new thought for me today, so that's great.

Kyle Racki: Or, they don't, and you have to let them go. That's the hard thing too, right?

Marcus Lillington: Yeah.

Paul Boag: Yeah, absolutely. Very interesting conversation, Kyle, I could keep going on that one, but we're kind of out of time. Really nice to talk to someone that has done that transition, that transition from an agency to a SaaS product, and that journey is really interesting to hear.

I do want to mention our second sponsor which actually dovetails nicely with Proposify, because you've got Proposify that wins you the work, then immediately after winning your work, you've got to sort out contracts, which are always the horrible bit. If you're a freelancer or a small business owner, lawyers to look at contracts, it doesn't happen does it? I couldn't justify going out to a lawyer every time I had a contract I had to sign. We make educated guesses, don't we, as to whether that looks okay.

Pactly is about helping users understand their contracts, so that it's not this kind of big, scary thing that you've just signed and hope for the best. We shouldn't be treating our business contracts like we do our iTunes terms and conditions.

Marcus Lillington: Accept.

Paul Boag: Sorry, Marcus, you were going to say?

Marcus Lillington: Automatically, accepted.

Paul Boag: Yeah, just accept.

Marcus Lillington: Whatever.

Paul Boag: Yeah, yeah. There must be a better way of doing it, and that's what Pactly basically does.

You can submit a contract, say, like an NDA or some form of contract to the system, and it will flag anything that looks a bit dodgy or a little unconventional about it. Then, you can go back, and you can discuss that with your potential client.

You can get a couple of reviews per month absolutely free, so you can give it a go. It just works very quickly, because they've got an algorithm that knows how to look at these things in seconds rather than … Even just reading them can take hours, can't it, because of all the legalese, so really great way of doing it.

They're offering us a code. If you do sign up for one of their paid plans, if you use the code boagworld, you get 30% off the lifetime of using them, which I always like. I don't like it when they give you a discount that only applies for a few months, and then, suddenly, they hike the price up on you.

But, you could always try it on the free plan first. You can find out more by going to https://pac.sg/boagworld, and good luck to them, because I think that is a flipping useful thing to have, so yes.

Right, well, Kyle, because you have listened to this show for so long, you know the horror that is Marcus' joke that's coming next.

Kyle Racki: Aw, it's the best part.

Marcus Lillington: There you go. Hey, well, I'm going to-

Paul Boag: Suck up.

Marcus Lillington: … I'm going to continue on the Tim Vine theme, so it's going to be poor, because I'm delivering it. But, it's very short, so here we go. I was getting into my car-

Paul Boag: Okay.

Marcus Lillington: … and this bloke says to me, "Can you give me a lift?" And, I said, "Sure, you look great. The world's your oyster, go for it." Oh, dear.

Paul Boag: I think I've heard that one-

Marcus Lillington: Oh, no-

Paul Boag: … before actually.

Marcus Lillington: … have I started repeating myself? I probably have.

Paul Boag: I don't know why. There are other sources of jokes in my life-

Marcus Lillington: It might have actually-

Paul Boag: … beyond just you-

Marcus Lillington: … been-

Paul Boag: … Marcus. I know-

Marcus Lillington: … Tim Vine himself.

Paul Boag: … that's hard-

Marcus Lillington: It could have been-

Paul Boag: It could have been.

Marcus Lillington: … the great man.

Paul Boag: It could have been. Going forwards, first of all, Kyle, thank you-

Marcus Lillington: Great to meet you-

Paul Boag: … so much.

Marcus Lillington: … Kyle. Really good-

Paul Boag: Thank you so much for coming on the show.

Kyle Racki: Likewise. Quite an honor, thanks for having me.

Paul Boag: Also, thank you for all your support over the years. I know that when you sponsored the show, it's been as much out of love for the show as it has been for the sponsorship, because I know you won't have made a lot of money out of my motley crew of listeners.

Marcus Lillington: We were the difference, Paul, come on. We were the thing that kicked it over the tipping point.

Paul Boag: Yeah, uh-huh.

Kyle Racki: Well, Shopify, I remember when Shopify sponsored this, and that was back when I was listening to it a lot, I think 10 years ago. Look how Shopify turned out, so I thought, I need to follow in their footsteps.

Marcus Lillington: That's cool.

Paul Boag: Yeah, it's the place to start. Let's put it like that. Then, you quickly abandon us when you get too big, because let's be realistic there's better ways of spending your money. "Success starts here," Paul has just said in the chat room. Bullshit to that is what I'm calling.

Thank you, Kyle, for joining us on the show. Next week, we're being joined by Brooke Baldwin, who is a user researcher from Facebook, and she is the reason that we're doing this season of the show. Because, I heard her give a talk where I thought, "Bloody hell, I didn't know that job existed," and that made me want to start talking to people more about their jobs. I knew user researchers existed, but you wait until you hear her on the show, and you'll see quite why I'm so fascinated by her job. It will be a great show, so join us then. But, for now, thank you for listening and goodbye.

Stock Photos from Aleksandr_a/Shutterstock

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