09 Feb February 12, 2020 – ZibTek Ian Reynolds and Hang-o-Matic Karina Rabin
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Folks who go into a situation thinking they can solve
everything themselves are not living in reality.
Ian Reynolds is a Partner at Zibtek, a software development company with more than 200 engineers in the Philippines, India, and the US. Ian serves clients by providing software development, process and performance improvement and more. Zibtek is a software development consultancy focused on helping businesses build custom software. They help growth companies, enterprises, and visionary firms solve their core business objectives with agile software development. Ian has spent the better part of his career in consulting and has served in diverse industries as Finance, Oil and Gas, Retail Power, Field Services, Midstream Energy, Healthcare, Pharmaceuticals, Transactional Finance, Mergers and Acquisitions, Restructuring, e-commerce, Retail, and software development. Before Zibtek, Ian worked as a consultant in the energy industry executing over $15 billion in transactions.
He had gotten so many NOs that he put it in a closet and was
discouraged. And he forgot about it. Eight years later he
remembered the product!
Karina Rabin has been in sales since she was a 10-year-old girl when she immigrated from Latvia. Despite speaking no English, she was determined to pursue a better life. She placed herself beside the register of a local grocer and became the store’s self-appointed, unofficial bagger, working for tips. The Hang-O-Matic was developed by Jared and Karina Rabin. As Karina was decorating her new home office, installing a shelf proved to be difficult. Jared remembered a picture hanging tool he had invented in college. He dusted off the first prototype of the Hang-O-Matic and hung the shelf perfectly level in one try.
Highlights from Ian’s Interview
I played the salaryman game, did that for a number of years. I have got two kiddos, and another one, hopefully soon. And the wife appears well. There is definitely some heartburn until you get in the groove of things and you kind of shore up your capital store, hold on a little more cash because you don’t know what’s going to happen. Getting adjusted to that was definitely a mind shift. To save money, we went to petty cash.
I started my career in startups. I have launched eight or nine different products to market in various startups, basically living under my desk. Got kind of sick of that, and having an inconsistent paycheck. I did the traditional MBA route, then went into consulting, and was a salaryman for many years. I had the opportunity to see enterprise software, work at a Fortune 500, travel all over the country, travel all over the world, and then recognize, “Well, I’m helping other people make more money, I’m helping other people grow their businesses and grow something that’s going to be with them for the rest of their lives and potentially the future generations. Why shouldn’t I do that for myself?” In the last year before making the leap, I was just doing a ton of reading. I was reading everything I could about entrepreneurship, about business, about investing. And I really came to the conclusion that I wanted to kind of minimize life regret, and so I’ve just got to go do this.
I formed an LLC, pieced its capital to run around and look at businesses to acquire, look at a business to invest in. I did some small investments in lower-middle market businesses before I actually took a leap. I helped to kind of provide advice to these businesses, connect with other people, see if I could help improve them with a little bit of opinion and logic. And then I recognized, now I just got to go full board into this thing and give it a go; find something to buy. I acquired 50% of Zibtek, and we have been growing very rapidly: 20-30% a year, since I’ve arrived, and it’s grown pretty conservatively before that. That’s our core business. And then, we’ve also acquired and built up our sales automation software: OnCourse Sales Automation.
The transition for me was really like, I can’t live with the lost opportunity cost of not working for myself, not creating a greater opportunity in the future for myself. And it’s worked out very well, and I’m very happy. Definitely, first year was a little bit rough because you’re kind of transitioning to, what’s the right amount of capital for business, the capital for me; these sorts of things. But it’s been a tremendous opportunity and it’s been really wonderful.
With those initial startups that I had joined sort of right in the college, two of them did quite well. I saved that money very aggressively. I lived in with six roommates. After college, I was basically in what would be an equivalent of a dorm but we had six guys. So rent was nothing and I lived very very cheaply. Even through getting married, we bought a house that needed work. I did all the work myself. We flipped that. And then we have another one that was producing rental income. And then, I saved hyper-aggressively when I was a salary person. I mean, I lived off maybe 15% of my income that basically covered my expenses. And working in consulting, I was definitely making higher than national average in terms of salary and these sorts of things. So I really just stashed every penny away since college, and that gave me enough capital where I could go get loans and make these sort of investments. And then of course, with the market being weak, falling from the financial crisis, it gave me an opportunity to acquire something of value for a fair price.
I’ve looked at a number of companies and I’ve built a pipeline of consistently looking at new companies. And the thing about Zibtek is, it has things that I had worked in previously. So, I was in consulting, it’s a consulting business; healthy margins, stable, growing. I was really kind of doing the work on a much broader scale obviously as an organization than I was doing as an individual. The business model was inherently changeable. It was something I understood very very well because I had lived it. And the company was growing, and the company presented prospects for growth for the client side. I interviewed all the clients of the business, I had talked to all the employees, did all the diligence myself, and everything made sense. It was a one-foot hurdle I could step over, and I was able to structure the transaction appropriately. And I really just felt like, “Yeah, this is something get I can understand. I can add value for additional clients, I can bring in additional clients into the space, and I understand it”. And I really think software is going to continue to be a really important component of the business world going forward. Everything is moving on them. I mean, everybody’s got a cell phone in their hand, and increasingly if a smartphone, and you can order stuff off Amazon. I mean, it’s just one thing after another.
We’re primarily focused on the custom software problem; we can’t help you with your website. We’re probably focused on the custom software problem with our engineers. There’s lots of business problems and unique businesses out there that they don’t have a skill or expertise to solve that in-house: it would be cost-prohibitive for them to go acquire the talent, make sure that talent really has a breadth of experience about what would be the best fit solution for them, and then apply that solution. So, we take them all the way through that design and architecture phase where we’re designing the solution; clickable prototypes, visual elements you can see, touch, and interact with. We’re looking at the architecture that is sort of the technical landscape of, what is the best solution for this situation, and what’s going to give you the most bang for your buck in terms of mileage.
We’re kind of thinking like Toyota model, where somebody can take Toyota to anybody down the street and get an oil change, as opposed to a Maserati where you’ve got to take it to the dealership just for the oil change. And we’re also going to then pair you with senior competent engineers who have particular experience in that technology, and have led multiple projects, and then carried through, and then typically worked themselves out of a job. There’s an incredible number of business problems out there that can’t be solved in-house like that. So that’s our structure. That’s our business in a nutshell.
We serve three client sets. We have startups, probably 20-30% of our businesses are typically folks who are VC backed. We serve midsize businesses that are anywhere from 50 employees to a couple hundred. And we do have enterprise clients. Google and Adobe are clients of ours. We’ve built and maintained large enterprise services for them. And we have other enterprise clients as well.
So certainly, not a custom CRM is within the range of $15,000-20,000. Definitely, not that level of solution. But there are definitely applications that can solve core business problems that can be accomplished for that price. We basically don’t have minimums because there are some solutions that need to be built or simply integrated and that can be couple hundreds of dollars. And it will take that work. Obviously, it goes into a queue if it’s shorter term work, it’s a different priority. But there are some solutions where businesses have software needs that require core engineering that can’t be solved with mega-budgets. They are really just things that need to be done, and it’s a couple hours, or a couple days, a couple weeks, and it isn’t practical for the business to hire someone full-time. Or maybe they need someone for 6-10 months, and they just need someone for that period of time. So, we also facilitate that as well. Because really, it’s structurally not practical for some of these small businesses to, A: go out and directly hire, and then B: to have somebody on sort of perpetual retainer.
You have to recognize that everything is moving online; people are purchasing online, they’re making their decisions based on purchases online, and future generations are going to be even more tied into that online ecosystem for gathering information. If you’re not marketing your business online, if you’re not presenting yourself well online, there is basically limitless competition and you are going to fall behind. So the business you’re going to go acquire, or the business you’re looking to integrate with, or both, pay attention to their online presence and how the business is marketing itself, and how it is planning to deal with the reality that I have to be front and center with my customers online; present myself in a very consumable, findable way. And if you’re not doing that, then you’re going to have a tectonic shift in the business that you need to fill [Unclear]. But maybe that presents an opportunity. Maybe that’s a great opportunity for you to transition that business online and capture revenue that you’re otherwise not already seeing.
We started innovating. We specifically said, a percent of our budget for marketing and sales and for operations has to be tied to R&D expenses for things that would operationally improve the business. There’s also R&D tax credits that apply to that. We’re not yet taking advantage of those because you have a five-year run rate for those, to wait until things are a little bit more favorable, and they kind of ebb and flow too. We’re specifically saying, “Hey, this is a research department. Here are 50 problems that have been identified in the business by management. Go just take a stick to smart person you have, stick them on that and say, you’ve got to solve these problems”. And that, as an exercise, can be applied to operations, can be applied in engineering. It produces fruit, and it’s a really, really, really important exercise I think, for businesses moving in the 21st century. These are not necessarily technology businesses but they’re technology-enabled, and there’s incredible value to that. And it’s turned out really really well for our business, so we’re continuing to do.
I think the biggest entrepreneurial pet peeve is, folks who go into a situation and they think that they can solve everything themselves. That’s just not reality. New business of model size and continued growth can really continue to operate without: interacting with other businesses, hiring other businesses, hiring other people with skill sets you don’t have. So, the biggest pet peeve would be folks who don’t recognize, “I don’t have this skill set, I need to go find somebody who has that expertise and hire them as opposed to trying to solve this myself”. And when you have that, you can have a more frank discussion about what is really needed and these sorts of things, as opposed to, “I’ll take care of it myself”, because it’ll never get done.
So if you want to reach out to us, “www.zibtek. com” is our core website. And you can reach out to me directly, just say hello at zibtek.com, and I’m on that email address and that goes to product distribution, and I’ll see that. That’s the best way to get a hold of us.