Built to Sell: Interview with Wayne Schepens

Elizabeth Shea sits down with Wayne Schepens, founder of LaunchTech Communications, to share the story of building a cybersecurity PR firm with the goal to sell. Wayne discusses how he created an agile business and honed a disciplined approach to growth, focusing on recurring revenue, strong margins, a client-centric approach, and a niche market strategy. He walks through how he prepared for an exit over several years, from working with an M&A advisor to building a unique team structure that reduced founder dependency. Wayne also offers candid insight into the sale process, choosing the right buyer, and the realities of post-acquisition integration. This episode is for founders who want to understand what it truly means to build a company designed for exit.

Transcript

SPEAKER_00 0:00

Hello, and welcome to Branching Out, a Tree Fork Strategies podcast. I'm Elizabeth Che, the founder and CEO, and I created this show to help business owners navigate the ins and outs of an exit event. So each episode, I sit down with seasoned founders and CEOs who have successfully sold their companies through a strategic or financial transaction. Together we discuss what went into their decision to sell, what worked, what they would do differently, and the valuable lessons that they would like to pass along to founders with a sale on the horizon. Our goal is simple to provide a playbook that you can use as you approach your own sale with confidence and clarity, knowing that you're not alone in the process. This is Branching Out. Thank you for joining me. Hello, everybody, and welcome to Branching Out. How are you doing today, Wayne? We're so excited to have Wayne Sheppins in the office today to talk to us about his story of selling his business and uh and exiting. So hello, Wayne.

SPEAKER_01 0:56

Hi, how are you? I'm excited to be here.

SPEAKER_00 0:58

Yes, we're excited to have you. I've I've known you a long time, and so we're we're very excited to hear the story of Wayne, who basically built a PR firm specializing in the cybersecurity industry, Launch Deck has acted it and is still with the company today. Let's start from the beginning. Tell me a little bit about your story, how you got started. I know you started with a software company and then pivoted. So, where did this all begin?

SPEAKER_01 1:19

Yeah, thank you so much. And I'll have to start by saying that I wouldn't be here if it weren't for you and the great advice that you gave me along the way. So uh, and I think it's a really I think it's a really good story. So I think I'm really happy to share it. So I'm a different type of PR person uh than typical. I'm actually an electrical engineer by background. I worked for the government for quite some time. I worked at NSA. I ended up leaving and starting a cybersecurity threat intelligence software company in 2005. And I went to work for a PR agency because I did I didn't have another idea for a software company. And I really liked working in the startup space. And along the way, I had, you know, established some pretty good relationships with reporters and analysts. So I worked with them for about five years and helped them build their security practice. And then we decided as we were getting bigger, uh, there's only so much, so many different clients that you can accept because of uh professional conflicts and those sorts of things. I spun off and started Launch Tech in 2014. I had the benefit of seeing all the good things that I learned from the prior agency, but then also thought about a little bit of a twist and uh things that I could do a little bit differently and better. And my main main focus, which is probably rare for most people in this industry, because of my experience in startups with the software company, I really established launch tech to be built to sell. So, you know, I focus really heavily on recurring revenue, retainer-based model, working towards gradual organic growth. And so it kind of brought me where I am today.

SPEAKER_00 2:58

Well, that's amazing. So that's not typical. Usually it's a lifestyle business when companies start out with a particular agency model in mind. So why was that different, other than you just saw that that was what you wanted to do and you knew the possibilities of an exit with the software company? You know, why was it different this way?

SPEAKER_01 3:15

Yeah, I just I felt like, you know what, we spent a lot of time at my prior agency focusing on delivering hours, you know, like managing hours, tracking hours. And what I learned throughout my time there was clients don't care about hours. They care about outcomes. So I built a small and agile business that was very low overhead. Because I, again, I'm thinking exit. Like what would a buyer want to see? They want to see constant, continuous growth. They want to see high margins, they want to see low overhead, and they want to make sure and know that our clients are served well. And so taking that mindset, it's funny because over eight years, I never had a client, and I've worked, man, probably hundreds of clients. I never had a client ask, show me your hours. How many hours did you work? It was all about building metrics towards accomplishments, milestones, deliverables, more along the lines of, you know, how many placements did I get? How many new new relationships with reporters have you established? All those types of things, how many, you know, things that you can tangibly measure for ROI versus hours and time. So though that was one thing that I, and and when you do that, you strip away a lot of overhead. When you're not tracking hours, you're not managing to hours, it gives you time. And my whole focus was to make sure that all the possible work that was going on for my team was put towards the client. It wasn't helping us run the business. You know, I had support to do that myself. I had a HR and COO helping me run the business. And then I had a business partner that worked with me to kind of make sure that everything was delivered appropriately, Kate Davis Shapiro. And, you know, thanks to her and the amazing team that we built, we were able to kind of grow organically and have a lot of recurring clients. You know, we would help someone start, walk them through exit, and then they would come back in a new shape and form. And it was, it worked out really well.

SPEAKER_00 5:25

No, that's that's that's a great story. So at what point did you start to think we're doing all the right things? I mean, it took you, you know, maybe nine, 10 years before you actually exited. When did you determine what was it that made you say this might be the right time now?

SPEAKER_01 5:39

It's interesting you asked that because it was a handful of things. One, it was always keeping a temperature of the market, like where things were going in terms of how the industry looked and how it shaped and how it felt. Um, I really liked what we were doing, but I had done it for about, I'd say probably after about five years, I was starting to think, okay, are we getting big enough that we might be in the radar to be acquired? Um, you know, I wasn't sure what the time frame would be. I was guessing between five and 10 years, something along those lines. And so I actually reached out to you when I saw that you got acquired and was like, oh my gosh, that's amazing. How did that work? Who did you work with? You know, those sorts of things. So fortunately, you introduced me to Tobin Leff, which is a MA firm out of uh Pittsburgh that really worked specifically with agencies. And that's what you really want. You want someone that knows the business. And, you know, you can't just go to anybody. So I went to them and I had an original assessment. And at the time, I want to say we were probably about half the size of where we were when we ended up finally getting acquired in terms of revenue and personnel. And so it was cool though, because he basically, they basically laid out a roadmap for me to say, all right, this is where you need to be in order to be attractive. And so I followed that roadmap. And, you know, it wasn't inconsistent with what we were already doing. It's just that we were too low in revenue to have a large enough EBITDA to make it worthwhile for an acquirer. And so I went back to work and we just kept, you know, slowly growing. And that's how it was. It was probably like, you know, when we first started out, it was two people and two clients. You know, when I tested the waters, we were probably doing one and a half million in revenue and um, you know, close to 50% margins, but there was only a handful of people in the company. So by the time, you know, it kept chugging through, uh, we hit COVID. And then COVID obviously shifted things, right? And no one really knew what was gonna happen with that. It actually didn't hurt us. We pretty much stayed flat that year. It was probably our first flat year, but we were happy. We took that as a win because you just never know what was gonna happen there. Um, and then the following three years, we had about 13% growth each year. And so I thought, all right, well, we're getting close to not quite, but we're getting close to the numbers that the MA firm suggested that we might be attractive. And so I reached back to them and I said, look, we've had three steady years of growth. I think that's what you need.

SPEAKER_00 8:28

Right.

SPEAKER_01 8:29

We've got really good margins. Uh, let's let's put a plan together.

SPEAKER_00 8:34

So I have to ask you, were those margins? I remember talking to you back when after I had exited and saying enviable margins. I mean, hats off to you. That was um very notable. So were you ever tempted to say, hey, this could this could actually continue to be a nice business because I'm making a lot of money. I mean, was that everyone's temptation or was it we've laser focused on exiting at some point?

SPEAKER_01 8:56

Well, I'll tell you what, the business spoke to me and I listened. And part of the reason for that is you can't like our whole message was we want to be the best in cybersecurity, not the biggest. So we focused solely on our niche market. We grew to, you know, a decent size. I think it was 12 people with 3 million revenue. And we got to a point where, okay, well, now's the time for me to consider two things. One was in order to grow further, I felt like I either needed to build a marketing arm andor business development function, or I need to partner with somebody that had that. And so that kind of led me to the conclusion that, you know, if I'm gonna sell, I've got to continue this upward growth. I can't be flat for 10, 15 years. So what am I gonna do? And that's really what was the genesis for me saying now's the time to go out on the market to see what we've got out there. And I will say that normally businesses that get acquired need to be about 5 million in revenue, but that's because the margins are typically not as strong as ours. And so with the numbers that we had for margins, we became attractive. Well, at least the MA firm wanted to wanted to put us out there and see if we would be attractive.

SPEAKER_00 10:19

Right. I mean, the number is really the e bat off. It's not so much the revenue, you know, they start revenue for sanity and profit is for sanity and and then cash is king. So that all that is.

SPEAKER_01 10:29

That's right.

SPEAKER_00 10:30

So out of curiosity, what else did you do to prepare? Because, you know, you you knew that you sound like you knew that you needed recurring revenue, you knew you needed like operational efficiency, things like that. Owner dependency is important. How much, how much of those things did you prepare for and what other sources did you rely upon to help you get there?

SPEAKER_01 10:49

So the other thing I did was Kate started with me, right? And, you know, for eight years before we got acquired, we worked hand in hand. And our whole objective was to build from within. We never had luck hiring folks from outside because quite honestly, they had bad habits from other agencies or they didn't do things or see things the way that we saw them. And so we grew people from internships to account directors, you know, to VPs. And now, you know, the one intern that we took out of Loyola, she now is senior vice president, like today.

SPEAKER_02 11:24

Wow.

SPEAKER_01 11:25

And we had really good loyalty, and we always I always, again, I'm big into sports. So I played, you know, baseball through college. I played independent leagues for quite some time, and I always felt like athletes were great. So we our first hires were lacrosse player, swimmer, ice hockey player, you name it. Like we we might I have two daughters that played field hockey in college, son that played baseball in college. So I like, I know that mentality. I know that they can take the grind, they can take a licking and keep on ticking, which you really need in this industry.

SPEAKER_02 11:59

Right.

SPEAKER_01 11:59

We started to think of having a minor league. We're building a minor league so that they'll be ready to become part of the MLB. And my whole goal was to train um Kate to be able to take over for me and train Taylor to be able to take over for Kate, and train Cole to be able to take over for Taylor and all the way down the line. So we always were thinking in that philosophy. That was one thing that we did to try to set ourselves up so that I wasn't completely necessary. That was the goal was to work myself out of a job so that someone would say, okay, this is a business, not just somebody's name. Because that's where you get in trouble, where it's just relying upon the owners. So that was really good. The other thing that we did was, and again, this was through the help and guidance of the MA firm. I felt like we had a pretty good handle on, you know, invoicing collections, all that good stuff. But our back end, I'm not an accountant. I had an accountant work for us, and we had a CPA along the way to kind of put things together. But the guys at Tobin Left, they like built the book. Like they made sure, they went through all the numbers. I gave them all the financials and they aligned everything and then validated our numbers. They validated our margins because it's not just about what you think your EVITA is, it's what it actually is when you after you take into account all the tax laws and everything else that's out there. And then finally, I'll say one more thing. I knew that we were going to be in great shape with our client portfolio because we had so many returning clients, we had an average of over three years retention, which is pretty insane considering a lot of the companies we worked with were early stage startups. So you would typically lose a client by them running out of money, them getting acquired, or a new CMO coming in, which you know they only last about 18 months or so, and they bring their own pet agency in. So, like we really had a strong retention rate. We had really good customers. And I will say, during the acquisition process, the buyer of our company came back to us and said, we've never had such rave reviews and referrals get back to us so quickly during the due diligence process.

SPEAKER_00 14:17

So that begs the question. Then, did you share the information or the fact that you were looking to find a partner to exit to with your clients and your and your team? Did they all, were they all aware of the process?

SPEAKER_01 14:29

I would say the team knew our destiny.

SPEAKER_02 14:36

Okay.

SPEAKER_01 14:37

But I didn't get into details with them until we were really far down the road just because number one, they had to be involved in the due diligence. But number two, um, you know, these things could go away quickly. They could show up and go away very quickly. So I didn't want to like worry anybody, give anybody any undue worry, but, you know, they knew what the destiny was and what the plan was from the beginning. And they knew that I also was looking for a partner that would take care of them going forward as well. So it wasn't going to be one of those buy and strip. So as far as a team goes, that's where I stood. When it came to the clients, we got to a point where during due diligence, I didn't bring it up until during due diligence, but I needed a lot of folks to be a part of that process. And so I would call them separately and kind of let them know what was going on and that we were looking for a strategic partner and someone had expressed heavy interest, and we were kind of walking down that path. And it's funny because everyone was so super supportive and excited for us, which is a really cool thing.

SPEAKER_00 15:48

That's a very cool thing, particularly because you looked for a strategic acquirer. Were you intentional about looking for a strategic versus a private equity?

SPEAKER_01 15:56

So that's an interesting question. We got a lot of interest from like bigger agencies at first. And I had a couple discussions with them, but I'll be quite honest with you, the bigger agencies, they were mostly looking for a deal. They're looking for somebody that's struggling and dying so they can get a good deal and kind of take advantage of their customer base. And that wasn't us. So I had a couple meetings, actually, had a couple visits with some agencies. And when I say bigger agencies, I don't mean PR firms. I mean like more comprehensive agencies, like marketing agencies that did website development and all that sort of stuff. So then finally, I was like, eh, this isn't super interesting. Um, I don't think they get it. I really like the focus on the cyber stuff, and I don't everybody else wants to spread us out. I don't think that's our strength. So it wasn't worth me looking or considering those options. So they opened it up to PEs. And it's interesting when they started to do that, we got a lot of interest because PEs care a lot about cyber. So I talked to a bunch of them, and you know, it was interesting because some of them that I spoke with, the companies that they previously acquired, I spoke with them, and they actually had dips in their revenue after they got acquired. So that concerned me. But then I was fortunate because out of the blue came this company called Cyber Risk Alliance. And I was like, I I know those guys, I've heard of them. I don't know them personally, but I know of their events, I know of their activity, and so they expressed interest. And, you know, Tobin Left said, would you like me to share the book with them? And I said, sure, let's go for it.

SPEAKER_00 17:42

Yeah, I mean, I saw that announcement. I was like, whoo, nice job. I mean, just really nice alignment there. And so, you know, a wonderful reputation that the Cyber Risk Alliance has. And so you you got married, you know, you told your clients, you told your team, you're still there, right?

SPEAKER_01 17:58

Yep, I am, yeah. So I I'm here um at least through June. Um, that's when my earnout ends. So we closed the end of June in 2023. Um, but we have plans for, you know, growing launch tech still. Um, and so we're trying to implement new plans there where we're um expanding and growing. So that's exciting. And I will see where that ends up. And then I'm also advising a handful of other cyber startup companies and really enjoying the time that I have right now.

SPEAKER_00 18:29

That's amazing. So, you know, there's always a talk about multiples in the industry and you know, what's the multiple today? Multiples change, you know, multiples change over time. You sold in 2023. That was a really good time to get a nice multiple, from what I have understood about the marketplace today. So, do you think that the pieces that you put together helped enable that successful multiple? I mean, I was very, very impressed and and I'm proud.

SPEAKER_01 18:54

Yeah, yeah, thank you. Like, I really appreciate your support and help along the way. And it was good to have somebody to to bang ideas against as we were going through it because doing it on your own without an example is really difficult. So it's helpful to have, you know, other colleagues out there that have been through it and know how to advise and those sorts of things. Um it's interesting because when we first went through the models, we were looking at these models, and it looked like, and I won't I won't get super specific, but I'll I'll I'll share some insight. Yeah. We looked at the models, and you know, there's different ways that you can go through an acquisition. And I think Tobin Left did a really good job of playing it very conservative for us. So my expectations weren't crazy. So we were looking at like four to four and a half to maybe a best case scenario, 5x on Ebita. And we were looking at, okay, maybe you get a third up front, and then you, you know, earn out the rest of it. Um, and so I was good with that. Like I had worked through the numbers, I thought it made sense. And I'll be honest, when I went out there, I did get a couple offers early from strategics, other agencies, and they weren't even as good as that. And I was like a little bit like, wow, that's crazy. And that's why I mentioned I think they were just looking for somebody that was looking for a way out, or they were struggling. When we got into the discussions with the PE firms that know cyber, the numbers seemed much more in line with what we were thinking about. And, you know, I think because there was such great alignment with Cyber Risk Alliance, we had really good margins that kind of, you know, matched the direction that they're looking for. I was fortunate to be able to way outperform that five and six number with my total package and get, you know, the majority of it up front. So it really worked out well for me and for the team, I think. So um, you know, everybody's been taken care of. There are challenges, and we'll we'll talk a little bit about that with the integration.

SPEAKER_00 21:07

Yeah, yeah. I mean, but that you know, hats off to you again. Then they say that it's but it's the price that the buyer is willing to pay, not necessarily what you want to get, right? So so you are obviously attractive to find the client. It's a nice alignment. So they bring you in. So let's fast forward then to the deal is done, you're popping the champagne, and you are trying to integrate the the organizations. Uh, what was that experience like?

SPEAKER_01 21:28

So it's interesting. You think about the popping the champagne, but like, man, it was like fast forward because you've got this huge integration plan that you've got to work towards um over the next 30, 60, 90 days. So we couldn't really take a breath. And you know, at that point, right when you right when you close, you've got a lot of explaining to do.

SPEAKER_00 21:49

Oh, yeah. Oh, I remember it all too well.

SPEAKER_01 21:52

Whether that's to your employees, like what's it gonna be like, whether that's to your clients, what's it gonna be like? Whether that's to the industry, what's it going to be like? You know, are you are you being absorbed? Because there is a there is a stigma out there that when a bigger company acquires a smaller one, the agility goes away, the company gets buried. And so there is a there's a presumption of that perception. And if you don't counter that perception, perception's reality, right? So we worked real hard to kind of keep our brand because we felt like we built a really strong brand with Launch Tech. And we felt like if it just got merged in and disappeared, there's so many other things going on at CRA. How are they even going to know to reach us? So we worked really hard. We kept our emails, you know, for a while. But then the challenge, when I say challenges, here's what I mean by challenges. I worked independently for eight years on this business. I did all the extras and it was easy. I spent like a half hour doing invoices once a month. Now I got to plug everything into Salesforce. I got to work with a finance company or a finance organization to make sure that they know how to invoice and collect the way that we do. You know, they do things differently because they have different processes and procedures and tools. So we have to learn all those things, and it's a heavy burden. And then on top of that, I never really projected my earnings. I just worked hard, enjoyed the journey, coddled our customers, and things worked out. But now I had to learn how to project and predict, and not something I learned that I'm not good at that. You know, it's not something that I inherited from my previous roles. So I had to completely learn a whole new skill set, which has been a challenge, no doubt. So you go from no overhead to lots of overhead, and it can be frustrating as an owner. So that's that's one piece of advice that I would give is you hear from everybody the integration's going to be tough. You hear from everybody, make sure you're happy with the first part of the deal because you never know what's coming after. And as we talked earlier, you mentioned that not many people stay the full term of the earnout, you know, and and I've been fortunate enough to do that and plan to continue if possible. But I will say that, you know, part of that is because there's just so many extra things. Like we had in our company someone that ran HR. Again, my objective was keep our employees out of doing all that stuff, have them working completely with the client. Now, you know, we have an HR group, and typically if there's a problem with something, they give you a phone number to call to go figure it out versus, which is normal in most businesses now. And I totally get it because there's a hundred and some employees, you know, you can't handle each situation on your own. So it totally makes sense. It's just completely different than what we're used to.

SPEAKER_00 25:06

So what would you tell yourself, you know, 10 years ago? What would you tell your former self that you might want to look out for or prepare for that would be important to you?

SPEAKER_01 25:16

I mean, I'll be honest with you. Like, I am, I could not have done it differently. I could not have done it, I don't think I could have done it better. And it's not because of me. I just, you know, there's a lot of things. My wife and I always talk about this. When people say they made out well, a lot of people say, well, they work hard. And I'm like, you know what? A lot of people work hard. Like a lot of people work hard, make a very modest salary, and it's not that. It's luck, it's timing, it's working hard, it's taking advantage of opportunities, it's working with the right people, it's knowing the right people. There's so many aspects to it. And I was just very fortunate to have like a really good group. I had a really strong technical background that kind of set me apart. So I'd say the biggest advice is how do you set yourself apart from everybody else that's out there? And for us, it was our philosophy. It was, look, I'm a technical guy. I know the space really well. It's very competitive, lots of overlap. You got to know the space really well to do well at it. And I'm hiring people that can learn and can take a beat and can come back and come back smiling and do whatever you need for them. We'll work with you like we're a startup, because we we adapted to their environment. Things like that, where you can't just always do what you think industry does. This is a little different. And and we work things a little different. Because most people would say you don't want to focus on one industry. You want to branch out and cover healthcare, media, what finance, whatever it may be. But we just went strong at cyber, um, cybersecurity and it worked for us.

SPEAKER_00 27:03

Yeah, there is the you know, the adage that, you know, the the closer the niche and you can be the best at that, the better you can potentially uh that potentially you can potentially do and receive a much higher multiple because of that. Um it looks like you had a really nice marriage. You really take took the time to find the right suitor and to go down that path. It seems like you did a whole lot of things right. So congratulations to you. I do know that there was a stat I read recently that about 10% of business owners actually stay around after a year. So you're one of the exception. You're one of that 10%. And it seems like, you know, you're you're approaching your end of your earnout. So hats off. Is there anything next for you? Have you thought about what's next down the road?

SPEAKER_01 27:42

Yeah, um, it's hard to say. You know, I really like the team. I want to make sure the team is set up well. I want to make sure, like, I'm a competitive guy, so I want to make sure that what we built is sustainable before I do anything different. So, again, we have some really cool ideas and plans for implementation over the next year to grow. I'm working with some other companies on the side as well. And then finally, like, I love coaching high school baseball. It's awesome for me. It's so much fun. And I my wife and I spent the winter working remote out in Utah, and I skied 25 days this year, and I love that too. So there's there's so many things to do and enjoy, and there's so many opportunities. You know, it's hard to say.

SPEAKER_00 28:25

And you're still young, so there's plenty of life ahead of you, right?

SPEAKER_01 28:28

That's right. That's right. We're enjoying it while we can for sure.

SPEAKER_00 28:32

Yes, exactly. Exactly. All right. Well, thank you, Wayne. You've been just an amazing guest, and I appreciate your your hat tip. Um, how can people reach you if they wanted to potentially ask you for their own counsel? LinkedIn? Do you ever listen to LinkedIn?

SPEAKER_01 28:46

Yeah, LinkedIn, LinkedIn is certainly the easiest way, no doubt. Yeah, just message me on LinkedIn, that'd be great.

SPEAKER_00 28:52

All right, terrific.

SPEAKER_01 28:53

That's the one thing. Again, as you mentioned, or as I mentioned, I'm a coach. I love to advise, I love to help people get jobs. So along the way, man, I've had the opportunity to get people internships and jobs and lining people up with their next employment opportunity is super exciting for me. You know, if anyone's looking for any career advice at all, especially in this industry, I'm really happy to help.

SPEAKER_00 29:16

Good for you. That's really cool. Well, I'm certain you'll have some people blowing up your inbox.

SPEAKER_01 29:22

Sounds good. All right.

SPEAKER_00 29:23

Well, what a great story, Wayne. Okay, thank you so much.

SPEAKER_02 29:26

We'll see ya. Bye-bye.