JD Graffam - Baremetrics

This week, I chat with JD Graffam, founder of SimpleFocus and serial buyer of small SaaS companies. In this episode we talk about building an agency and transitioning in to buying up smaller SaaS products and turning them in to money making machines!

Josh: Thanks for taking the time to chat. Jumping right in, you may be the most diversified founder that I know. It seems every week you’re acquiring a new company. In fact, I think you just acquired one last week, or at least announced it.

JD: Yeah.

Josh: How about a starting frame of reference here? Can you give me … or are you even able to list all of the companies and products that you have your hand in?

JD: I had a similar thing happen when I started growing the agency, Simple Focus, in 2009. I had two people, and then by 2010, it was five, and then it was seven. When you go through about six or seven things, you stop being able to eyeball the room and see if everybody’s there, and you have to start counting heads. I’m not there quite yet with the apps.

Josh: You don’t remember all of them by name?

JD: No. I still do, barely. No. In all seriousness, it’s quite accidentally been about every six months.

Josh: That you’ve been buying up another app?

JD: Yeah, that something comes together, and it’s not on purpose or anything. It’s just happened to accidentally been around every six months. The first app was Pulse app, which was a cash flow management app, and that was a personal relationship with some local designer/developer combo. Then, for some reason, I saw a tweet from Andrew Wilkinson about Ballpark a year after he had put it on the market. I didn’t even know it was for sale, but I recognized it because it was something I had come across in my research with Pulse, because on the marketing site for Ballpark, there’s a section dedicated to one of its features, which is cash flow, which is what Pulse does.

I reached out and sent him a nice note, and I said, “Hey. I’m a pro, man. I’ve done this before.” Anyway, that deal went really well, and then shortly thereafter, because Andrew and MetaLab are really well-known in the industry and there was his blog post and the blog post we wrote was really good and got a lot of eyeballs on it, people started taking notice. I believe that’s the point at which I was introduced to you, because I asked Andrew for his financials on the business, and he said … Well, he didn’t say anything, actually. I just got an invitation from Baremetrics. Josh, I’m going to tell you the truth. I didn’t know what it was. I had been running a SaaS app, Pulse, for about a year at that point, or over a year, and I didn’t know what SaaS metrics were, frankly.

Josh: Sure. Sure.

JD: And then shortly after that, got introduced to, I guess, you and then David Hauser.

Josh: At that point, Baremetrics would have already started, but I think I had already parted ways with the PopSurvey and Temper-

JD: You had. Yeah.

Josh: … stuff.

JD: Yeah. I guess not everybody knew that, though. It was probably Allan Branch who has a concealed carry permit now. Did you see that?

Josh: Yeah. But he got that and, what, a fishing license?

JD: Yeah, and a fishing license, on the same day-

Josh: On the same day.

JD: … which is great. Yeah. Yeah. All American down there in Florida.

Josh: Straight up.

JD: Allen’s always said, “JD, you need to know Josh because … “ and I’m not making this up, Josh. Allen says, “Because I think ya’ll would be best friends.” I think he knows both of us pretty well, and we know each other passingly through these kinds of conversations, but I think he might be right.

Josh: Yep.

JD: In any case, I talked to you, and then you said, “Hey. David Hauser is the guy you need to talk to because PopSurvey and Temper are small, little apps that might fit what you’re doing.” So I talked to him, and he had just sold Grasshopper, so he didn’t want the distraction of these things. He just wanted to get rid of them and didn’t want them to wind down to nothing, wanted to make sure they were in good hands. I said I’d do my best and ended up … I didn’t pay him for them. We worked out a deal where the Kansas City Startup Village …

Josh: For tax purposes, he was able to do a little thing.

JD: I can’t comment on that. I had nothing to do with his tax purposes. All I know is he had a big year, and he was looking for ways to eliminate some of his tax liability, tax avoidance, which is totally legit and fine.

Josh: Oh, sure. Sure.

JD: I got a good deal, and the apps wound up in good hands, and the Kansas City Startup Foundation got a good deal. Everything was done above board with lawyers involved and all of that. I didn’t want to give the wrong impression with my joke about no comment. In any case, that happened. That was like a twofer, right?

Josh: Yep.

JD: I got PopSurvey and Temper, and then Carl Smith, who runs Owner Camp … because I spent a lot of time around the agency world, the digital agency world, because I came up in that, as opposed to the bootstrapping, indie SaaS world, right?

Josh: Right. Right.

JD: I got a foot in both of those communities. Anyway, Carl Smith, who runs Owner Camp, sent me a tweet one day and said, “Hey. You still buying apps?”

Josh: You still jogging, man? You still lifting weights?

JD: Yeah, exactly.

Josh: You still buying apps?

JD: Yeah. Yeah. I’m still jogging, lifting weights, and buying apps.

Josh: It’s my hobbies.

JD: Yep. He said, “Look. My friend Garrett has been trying to sell an app and recently just had a bad experience with a potential buyer that kind of went south at the last minute. I think you should talk.” He was just trying to hook up two good people that he liked. Man, that turned out to be a great deal. Then, at this point, having acquired five apps, I’m a buyer of apps now. It turns out there’s not a lot of people that do that, especially not a lot of people who aren’t loaded who do that.

To round out this, just to wrap it up, I real quickly, very recently, as you know, sold PopSurvey.

Josh: Yep.

JD: But it was more because the app was … Well, you know this. It was, what, one of the first ones you did?

Josh: Oh, yeah.

JD: Yeah. It was one of the older ones, and it was just going to be too much work to rebuild.

Josh: Sure. Really, it probably needed it.

JD: It did, but what was always interesting to me about PopSurvey was that it would have a been a great, little app to have experimented with pricing models for the survey industry, because I think that that’s a real opportunity for somebody. Along came Emmanuel Bellity, a Frenchman, nice fella. He runs his own survey app, and he said, “Hey. I tried to buy that from Josh or David or whoever years ago, and now I kind of want to see if you want to sell it,” and I was like, “I just bought it.”

Josh: Is this maybe four to six months after you purchased it, or was it even not that much?

JD: It was probably a year. Yeah.

Josh: Oh, it was about a year. Okay.

JD: It was ten months, I think. Anyway, he buys it from me for a very fair price, basically what I had in it. I made a modest little return. That’s exactly what he’s going to do, is experiment with pricing models, because he has a survey app already. He’s just playing around with that, so good on him. Also, I think he’s giving it some more TLC because he’s right there in the survey world with his other app. And then just last week, we announced that we had bought ClientFlow.io. I like that it rhymes.

Josh: You can turn it into a rap pretty easily.

JD: Yeah. ClientFlow is the latest acquisition, and it is an app that manages workflows and … well, really, approvals and client communication for agencies, and that’s it. Let’s see if I can do this. Pulse, Ballpark, PopSurvey and Temper, Sifter, ClientFlow, sold PopSurvey.

Josh: The math would tell us that’s five that you’re left with.

JD: Yeah. That’s five that I’ve done that are acquisitions, and we also run one that wasn’t an acquisition called Project List.

Josh: Ah, okay.

JD: Project List is just one that we built, the proverbial, “Hey. We want to be a product agency. Let’s build our own product.”

Josh: Let’s make a thing.

JD: Yeah. So we made a thing and have had a hard time getting any significant number of customers on it, but that’s partly because I built it for me and not for anybody else. We still use it internally, and I haven’t really done any marketing on it because I’ve been too busy concerning myself with the other apps.

Josh: Sure. Sure.

JD: That’s the arch. Yeah.

Josh: Okay. Okay. There’s our base there. You mentioned agencies. You started there. Correct? Doing anything on your own, as far as being an entrepreneur, begins on the agency level. Correct?

JD: Yes, as an entrepreneur. The truth is I’ve always been a hustler, right?

Josh: Sure.

JD: I never took a break after school or anything like that, and I always had a second job. There was a point in college where I had like six jobs.

Josh: Oh, my.

JD: And I was going to college and getting good grades and volunteering. I guess in college, though, was the first time I started freelancing, instead of a part-time job or a bunch of part-time jobs or selling Cutco knives or repossessing cars or working at Abercrombie, which were all things that I did. Which one of those did you least expect, Josh?

Josh: The Cutco.

JD: The Cutco?

Josh: Yeah.

JD: You’re like, “That guy, I can totally see him working at Abercrombie and totally see him-”

Josh: I can see him wearing his Abercrombie while repossessing cars, but-

JD: This is true, though.

Josh: … the knives caught me off.

JD: No. It’s true. I got in trouble for wearing my Abercrombie while repossessing cars, because you’re supposed to wear khakis, and I was wearing jeans, and they were Abercrombie jeans, because I got them at 30% off.

Josh: Sure.

JD: Yeah.

Josh: I bet you’ve got some stories from repossessing cars.

JD: I’ve got a couple of good ones. One involves a-

Josh: Did you ever get a gun pulled on you?

JD: Yes. That was the second story. The first story is I stole a Corvette … I mean repossessed a Corvette, and the other one is that I had a gun pulled on me. Yeah. I’ll tell you the gun story in a minute, but first, to close the loop on what we were just talking about … What were we just talking about?

Josh: Starting off in the agency, and you were freelancing.

JD: Oh, yeah. My first real freelancing gig was 10 bucks an hour, doing QuarkXPress, as graphic design for road signs, like white letters-

Josh: Like state road signs?

JD: White letters, green backgrounds, Futura. Yes, with the green signs that go on highways and streets.

Josh: Wait. Were you employed by a state agency or something?

JD: No. I was the intern in the college communications department at Millsaps.

Josh: Oh. Wait. Did I know that you went to school in-?

JD: I went to Millsaps, man. Yeah. We talked about this. You’re from Jackson.

Josh: Let’s talk about this because … Yeah. Yeah. I went to Mississippi College.

JD: Yeah. Jackson, Mississippi.

Josh: That’s right. That’s right.

JD: Yeah. You’re a Choctaw.

Josh: Yeah, man.

JD: I mean, that’s the mascot. You’re probably not actually a Choctaw.

Josh: A Choctaw. Maybe it’s somewhere in my lineage. I don’t know.

JD: In Mississippi, probably, because after college I went and worked for the Choctaw Indians.

Josh: Oh.

JD: Yeah. I was the-

Josh: Okay. Hold up. We’re getting sidetracked here.

JD: That’s the point.

Josh: Road signs. I’m fascinated by the road signs, though. Who are you making road signs for?

JD : My boss in the communications department at Millsaps was a freelancer on the side, and they were paying him 40 bucks an hour to do road signs because he-

Josh : They being who?

JD : Oh, a sign manufacturing company in … What’s that town just south of Jackson, like if you’re going to go to Hattiesburg?

Josh : Vicksburg?

JD : No. No. That’s the other direction.

Josh : That’s the way.

JD : You’re going to go to The Stack in Jackson, and you head south.

Josh : South.

JD : Down 98.

Josh : Clinton?

JD : Clinton. In Clinton, there’s a sign manufacturing company on that little road.

Josh : Okay.

JD : They hired my boss as a freelance graphic designer to do the typesetting for all their signs and paid like 40 bucks an hour. He turned around and paid me 10 bucks an hour to do it.

Josh : The state outsources the signmaking to a small company who outsources it to you?

JD : No. The state outsources it to a sign manufacturing company who has a big contract. Then they find a freelance graphic designer who then took advantage of a college kid.

Josh : Finds you.

JD : Yes.

Josh : I will now think that every time I see a sign.

JD : Somebody had to typeset that, probably in Quark, 25 years ago.

Josh : And they’re still using Quark today.

JD : Oh, I’m sure, the old version of Quark, which only had one undo.

Josh : Man, that’s-

JD : That was their thing. Yeah.

Josh : It’s intense, man.

JD : Yeah. Indesign came out and were like, “We’ll give you up to 32 edit undos.”

Josh : That’s the future.

JD : And Quark’s like, “We’re going to stick with one.”

Josh : You’ve got to own it, man.

JD : You’ve got to be better. Yeah. Only the best graphic designers use Quark because they don’t make mistakes, or they don’t make more than one mistake.

Josh : Right. Right. You just get one. Oh, geez. Okay. At some point, you go from doing all these odd jobs to freelancing, and then-

JD : Yeah, and then I was moonlighting at Hilton. It was my first corporate job, real job.

Josh : Yep.

JD : Then I quit that, went into the agency world. The rest is history.

Josh : What’s the transition from calling yourself a freelancer to saying, “I have an agency”?

JD : I was very self-conscious of that, actually. As a freelancer, I was always really good at making a website that made me look big and awesome and better than I was, which is a good sign that I could do that for clients. The name of the agency was Torque Design Shop.

Josh : Twerk?

JD : Torque, not twerk.

Josh : Torque.

JD : Twerk. Torque. Torque. Yeah. It’s a bad name because that happens, but torque, like a torque wrench or torque like horsepower.

Josh : Yep. Yep.

JD : My dream was always to one day own an agency that was in one of those corner pumping stations, with eight or 10 employees. On pretty days, you’d open the garage doors, and you’d be in a filling station, but it would be at an ad agency or whatever.

Josh : Right. Yeah.

JD : What really happened was Torque in Memphis, which is where I’m from, became synonymous with JD. People would just call JD, and I became self-conscious of that because I wanted to start a business. I didn’t want to freelance for the rest of my life, even if it was good money and all that. I wanted to create jobs for other people out of thin air, the economic engine that powers America and such.

Right before I quit at Hilton, I decided that I needed to rebrand, and so I came up with a new name. As that was going on, I also got a letter in the mail from an actual agency in Chicago named Torque, a good old cease and desist. I just ignored it because I was changing my name anyway, and that’s what my lawyer friend said, was just don’t respond. They didn’t send it certified or anything, and they were probably sending it out to the two or three dozen other Torques in America, right?

Josh : Right. Right.

JD : Because it wasn’t that unique of a name, and I wanted a really unique name, and so I named the agency Click Boom, which is a fun name for a web design agency. There was only one other Click Boom that I knew of, and they had the dot com, but they were in Florida, and they did 3D animation or something.

Josh : Wait. That didn’t scare you off, that there was another agency also called that?

JD : Well, it wasn’t a real agency. These guys are class A losers. I’m trying to get it to where you don’t have to bleep me out.

Josh : Okay. Thank you.

JD : This fella, down there in Florida, in Miami, made something like a port of some video game back in the day. The closest thing they did was 3D animation and renderings for architects or something. I thought, “Oh, this pretty safe,” but the Methodist Hospital here in Memphis was sending out RFPs and sent one to him instead of me.

Josh : Because they got confused with the name?

JD : Yeah, because of the domain name, because I had Click dash boom, and they had Click Boom dot com. This guy writes a response to the proposal and submits it, and they get back to me and they say, “Hey. Thanks for the proposal, but wrong Click Boom. My bad. Have a nice day.” 72 hours later, I get a certified letter in the mail that says this guy wants to kick my dog and steal my family and shut my business down and take all my money. He was very angry about this and very formal with the lawyer and all.

Josh : Formal in his anger.

JD : Yes. I was not going to win because, a year prior, I had opted to save the $5,000 that it would have cost to apply for a trademark, and he had been using Click Boom longer than me. I didn’t have a trademarked application, and so I lost my shot. I rebranded to Simple Focus. Boy, let me tell you, I went to the ends of the earth to make sure that nobody else was using Simple Focus. I registered that trademark. If anybody touches it with a 10-foot pole, I’m not changing my name again.

Josh : I’m not doing it anymore.

JD : I’m not changing my name. I’ve gotten two cease and desists, and I don’t want any more.

Josh : Yep.

JD : Yeah. That happened in about 2009, 2010.

Josh : Got you. Okay. You’re building this agency, and you guys are just doing purely client work, right?

JD : Purely client work. Yes.

Josh : How do you go from the agency side of things to product?

JD : The short answer is that we bought Pulse.

Josh : Why buy Pulse?

JD : That’s an interesting story, I guess. Let me back up a little bit to when I was still at Hilton, and I met some really rad guys that I looked up to a lot named Steven and Aaron, here in Memphis. They had a little digital shop that they called Clear Function. Clear Function was kind of like me as a freelancer. All the ad agencies in town would call them to code up their websites. They were good, and I was good. That was about all that there was in Memphis, maybe one or two other people. They got sick of doing that and decided that they really wanted to get into product. That’s what they wanted to be known for. One was a coder. One was a developer.

They got to the point where they had saved up enough money in their little piggy bank and said, “We’re going to shut down our agency for a month, and we’re going to blog about our experience building our own app, and we’re going to call it the One Month App.” They got OneMonthApp.com and didn’t take client work for 30 days and conceptualized, branded, named, put a business strategy around, and built a product in a month, just to show that they could, so that they could get on the front page of [Deg 00:25:13] and whatnot and get some notoriety. The hope was that then they would get that attention and it would lead to people calling them to do product work, as opposed to coding brochure websites for storage container companies or CPAs or whatever, right?

Josh : Yep.

JD : It worked, to a degree. A couple of things happened. One is they got Pulse off the ground as a free product. There was no pay plans. In 30 days, they got it off, and they got a lot of attention from the blog, and Jason Freed was talking about it. It was on the front page of Deg, and a lot of attention. A lot of creative agency types signed up for it and fell in love with it. It was a good product. They also did get a little bit of product work out of it.

Then fast forward several years later, I’ve started my company, and these guys are ready to wind their agency down because they’re going in different directions. It’s the two of them. One of them wants to do the startup thing and work for startups, well-funded startups out west. The other one is going into the ministry full time. They decided that they’re going to shut down the agency but keep running Pulse. I said, “Well, I want to buy Pulse,” and then about every six months I’d hit them up and say, “I want to buy Pulse. I want to buy Pulse. I want to buy Pulse.” They said they were entertaining options to sell it, but never really could close a deal with anybody. They made it sound like it was making real money, and I didn’t know how much, but I was always like, “Tell me. Tell me. Tell me.”

They played it close to the vest and would never tell me, until I had been pestering them for two or three years, and they had been trying to sell it for two or three years. They finally decided to take me seriously, because I had gone from freelancing in the evenings to starting my own company, hiring my first employee, and now I had like 10 employees. They were like, “Maybe this guy can afford it. Let’s tell him.” They finally told me. It was affordable, and then I debated it for six months with my wife, whether or not we would spend the money to buy Pulse. Ultimately, we decided that we were comfortable with it.

The night that we decided, Katy rolls over to me in bed and says, “Hey. You know what’s funny? We stressed about this purchase, and in five years, you’re going to come home from work one day, and you’re going to be like, ‘Oh, hey, babe. By the way, I bought an app today, and it was like 10 times more than Pulse,’” that I was just going to give her an FYI at the end of the day. It took less than two years for that to actually happen. That’s how I got into it. The interesting thing is, like I told you earlier when we were talking, I didn’t know what SaaS metrics were, Josh.

Josh : Right. Right.

JD : I just looked at the numbers, and here’s what mattered to me. This thing had been on autopilot for three years. No marketing spent at all. No advertising, and every month it was getting 10 customers and losing 10 customers like clockwork. I was like, “Okay. I can’t do worse than that.”

Josh : Right.

JD : It would be hard for me to do worse than that.

Josh : For you to mess that up.

JD : Yeah. I’d have to be an idiot, right?

Josh : Right. Right.

JD : Because this thing, it’s a good product. It turns out, I was able to almost triple the size of the business just by being more polite on customer support, fixing some crashes. The app would go down for eight or 12 hours at a time every other month. Customers would put up with it, and it was slow. We fixed the slowness, and we fixed the errors, and we got really nice on customer support. I’ve made very small product enhancements, and it’s almost tripled. You’ll have to cut that. That’s disgusting.

Josh : No, man. I like keeping it raw.

JD : You know what? Leave it in.

Josh : Okay. You’re getting into products at this point. What are the pros and cons of building an agency versus a product? I think people who’ve never built anything before, or you talk about people who are fresh out of college, and you’ve been freelancing and doing random things, but they’ve never built anything before, and they just default, nowadays, to wanting to just, “Hey. I’m going to make an app.” But I think an agency can be pretty profitable on its own, right?

JD : Agencies can be insanely profitable.

Josh : You think of revenue per employee, right?

JD : Mm-hmm, yes.

Josh : With an agency, it’s much higher than it was before.

JD : Yeah, per producing employee.

Josh : Right. Sure.

JD : Somebody asked me the other day, “If you had to do it all over again, would you start your own company?” And I said, “Could I do it 10 years ago? Then yes,” but if I had to choose tomorrow, “Would I start a company now?” the answer would be no because, Josh, it’s so hard.

Josh : Oh, sure.

JD : I started an agency almost eight years ago, and it was so hard, and it’s been hard, but it’s going now, and it’s easier. That’s an agency where you’re investment is a laptop and a handshake with somebody that needs a website. All of a sudden, you’ve got one handshake, you close one deal, and you’re by yourself, and you’ve got enough money to live for 60 days, right?

Josh : Right. Yep.

JD : That’s how you think of it, and that’s how I thought of it, until I had enough money to live for 90 days, and then 120 days, and then 180 days. The next thing I knew, I was like, “I’ve got so much money I need to hire somebody so that I don’t go insane, and I can actually rest a little bit,” right?

Josh : Right. Right. Right.

JD : And that’s how I built up the agency, but it hit the ground running. The difference is, if you go to start a product, there’s so much work and foundation that has to be laid before you have enough money to live for two months. You get your first customer trying to build an agency, and you’ve got 60 days of runway. You get your first customer building a product, and you’ve got like 32 seconds [crosstalk 00:32:19]. You’ve got 24 bucks, right?

Josh : Right. Right.

JD : You’ll get that 24 bucks next month, but it’s a big difference. That highlights the reason that I’ve gone the acquisition route, is because there’s so much unknown upfront, in addition to just the amount of foundation that has to be laid to build a product business. You have got to literally build a product business over a long period of time, but then you don’t know if it’s going to work. You don’t know if there’s going to be a market fit. You just don’t know what the size of this thing could be. At least when you’re doing freelancing, you could knock off 30, 60, 90 days of living expenses pretty quick.

The success of the agency is what got me to a point where I could afford to buy an app, and when I bought an app, or when you get an app to a certain size, that’s where the magic happens, Josh. You know this, and that’s why everybody wants to do SaaS, is because you cannot screw it up. I mean, you can screw it up, but when you look at the risks with an agency … Let’s say you go six months without making a good deal because you’re just on a bad luck streak. Your cash flow, man, it goes up and down and up and down and up and down and up and down and up and down. You have flush months, and you have dry months, and you’ve got to really manage it. It takes a lot of self-control and restraint to take all that cash you made in March and April and have enough of that left in October and November, because you can’t just count on it being steady.

But with SaaS, if you’ve got a good product and you know how to make a good product and you find a market fit, it’s really hard to get that off the tracks. When you get 200, 300, 500 customers, you know what your next two or three years looks like, in a worst case, and how you can live off of that. That’s the difference in an agency. Even now that we’re rocking and rolling, I can’t see more than six months out, but with my products, I can see like three years out. That’s the big difference. There’s a trade-off. It’s like one’s easy to get started. One’s hard to get started. One’s easy to screw up, even if it’s 10 years old, and one’s really hard to screw up if it’s 10 years old.

Josh : Right. Right. Right. What’s the motivation, though? You started buying apps, and you’ve got that feeling of, “Hey. This is really stable, and I would have to work really hard to screw this up.” What’s the motivation for continuing to spread yourself across more apps versus focusing in on, say, the two or three that you had to begin with and making them even more stable and more profitable? Right now, you’ve spread yourself really thin … or maybe not thin, but why not just make two or three of those work really, really well?

JD : Well, two or three of them are working really, really well.

Josh : Yep.

JD : Also, I don’t feel spread thin. I hear a lot of pushback when I share about my model. It’s not necessarily pushback, but some people challenge me and they say, “You know, if you just focused on one or two things, they’d get, like, way bigger and you’d make more money,” or whatever. “Besides, you must be going crazy with all these different pulling priorities and whatnot.” My response is like, “Well, first of all, I’d go crazy if I only got to work on one thing all the time.” That’s just not how my mind is wired. I’m just different than a lot of people in that way. A lot of people connect with that, but I think more people don’t. There’s that aspect.

The other aspect is what I call the hashtag business philosophy. I am running a hashtag business, which means that you do things that you do in business, not that you do when you’re trying to figure out business. In business, you grow through acquisitions, because that helps you de-risk your position. When you, for example, look at what does McDonald’s do when they run out of places to put McDonald’s, they buy into Chipotle, right?

Josh : Yep.

JD : Not to use them as a shining example, because there’s a bunch of free-thinking hippies out there that they will say, “Ew. A McDonald’s, that’s gross. That’s a bad example.” But seriously, it’s just a business. When a big business stops being able to grow itself organically and spending money to grow becomes less profitable than spending money to buy something that’s growing faster, then you choose to spend that money by growing things that are growing faster. You invest enough in the core business to make sure that you’re holding ground and maybe gaining a little bit, but investing in a growth strategy for McDonald’s right now is probably not the best use of their resources, right?

Josh : Yep.

JD : I have found apps that their growth is cheap or free or completely organic because of the miracle of the internet and search engine optimization and the fact that they’re a good product. What I’ve done is I’ve bought apps that are easy to maintain. They’re basically on autopilot. They’re not expensive to run and operate, and they’re growing. Rather than pouring fire on the marketing flames, I’m choosing to grow through acquisitions, and there’s a couple of reasons. One is because I’m okay delegating. I delegate a lot of responsibility to the team to run the agency and to manage our relationships and to deliver the work. Likewise, I delegate a lot of responsibility to different members of the team to run the products. I’m not personally spread thin.

The other is I’m not a marketing person. If I was going to invest in these apps, it would be in marketing more than the product because the products, they serve their niche well. If I’m going to expand the product and try and grow its base of potential users, I’m going to have to reach those users. That means I’m going to have to do marketing. Historically, I haven’t run a marketing agency. I’ve been a UI designer, personally, and a writer, but I’m not a marketer. Phase two of all of this that we’re talking about is that I’m going to … Well, we’re starting to think about marketing and to learn it and to really get ready to invest in it, but I’m a “slow and steady wins the race” kind of guy. When I’m ready to do marketing, you’ll know. But right now, I’m getting my feet under me and trying to figure out the marketing aspect before I go blowing a bunch of money trying to do marketing. When I do it, I’ll do a bunch of marketing on one of the apps to de-risk it, right?

Josh : Yep.

JD : Once I figure out how to do it with one of them, I’ll take that and drag and duplicate over to the others, but it’ll be through delegation and processes and stuff like that. I will invest more in the individual products, but it’s going to be in the form of marketing, and it’s going to be in the future. It’s not right now.

Josh : Yep.

JD : The trick to making this work is that I’m not buying a bunch of apps that need tons of time spent on them. They’re already mature apps. They’re developed apps. They’re stable apps. They have growth already, organically. I’m capitalizing on that while I figure out how to do marketing, and then one day I’m just going to get the lighter fluid out.

Josh : Yep. Yep. Yep. For you, the apps, it’s about creating new income streams and not really about, say, flipping the app to-

JD : No. No. I know I sold PopSurvey after less than a year, but I am squarely in the buy and hold category.

Josh : Okay.

JD : This is a long-term play for me. Yeah.

Josh : Okay. How many people are spread across all this stuff that you guys are doing?

JD : There’s two agencies, believe it or not. There’s Simple Focus, which has about 20 people, and Clear Function, which has about 10.

Josh : Okay.

JD : Simple Focus is the digital product design company, and then Clear Function is a product development house, for clients obviously, so software development, application development, real engineering. When it’s got a scale, this is the crew you call. Simple Focus is the UI/UX user onboarding, all that. The clients range from, heck, even a little smaller than Baremetrics to massive, not-making-profit, venture-backed organizations with 60 IOS developers on staff, right?

Josh : Sure. Sure.

JD : Yeah. There’s 30 people, and then there’s no employees for the apps.

Josh : Practically, are those all under a single business entity?

JD : Every single product is its own LLC.

Josh : Got you.

JD : Every single product pays the agencies for the work they do on it.

Josh : Got you. Yeah.

JD : It’s a very discounted rate right now, but in 2017, I’m going to be cleaning that up for the books, just so that I can run these things more like businesses. What I mean is I’m not a seller, but in case I do want to sell, you want to maximize the value and have it clean and easy and more modular.

Josh : That’s what makes a ton of sense to have them as separate entities, for that purpose as well.

JD : Yeah, and I did that last year. The year before that, they were all under Simple Focus. Now, what happens is an entity called Simple Focus Software buys the app, and then there’s a conveyance from Simple Focus Software LLC to Temper LLC or whatever. Then Temper LLC pays its taxes and operates by itself and has its own books and all of that, and it’ll pay Simple Focus for our time, or Clear Function for their time, or freelancers for their time. In 2017, what’s going to happen is Simple Focus Software is going to hire one or a couple of employees, and those employees will be responsible for just the apps. Right now, Simple Focus is treating all the apps like customers.

Josh : Clients, yep.

JD : Yeah, like clients. And then Simple Focus Software will eventually be the company that runs the apps and has its own payroll, and if it needs to outsource to Simple Focus or a freelancer or whoever, that’s the entity that will do it. It’ll be a lot cleaner that way.

Josh : Got you. Okay. Finally, electric versus charcoal smokers. Go.

JD : I went with electric because …

Josh : Because it makes sense?

JD : Well, it’s just easier.

Josh : Yeah.

JD : Right?

Josh : Yeah.

JD : So much easier. You still get a little bit of the experience of smoking, but if you really want to get into it and be artisanal with it, I think you’ve got to go charcoal one day, but if you’re just getting started in the smoking world, with your barbecue, there’s no reason to feel obligated to go the charcoal route. Don’t feel that pressure from your friends. Just go the smoker route. It’s so much easier.

Josh : So much easier.

JD : So much easier.

Josh : You just set the number. You press a button, man.

JD : Yeah. Don’t we have the same smoker?

Josh : I think we do.

JD : Yeah.

Josh : It’s that stand up thing with a little digital display on the top, and you just set the …

JD : It looks like a dorm room fridge.

Josh : It does look like a dorm room fridge.

JD : Hey, did you ever figure out how to make it stop having mold?

Josh : I’ve never had a mold problem.

JD : Really? Do you clean it every time you’re done?

Josh : I scrub with water.

JD : Yeah?

Josh : Just to get all the junk out, but that’s the extent of it.

JD : Where do you store it?

Josh : It’s sitting on my deck.

JD : It just stays outside?

Josh : It stays outside. I mean, I have a cover for it.

JD : Yeah. You have a cover?

Josh : I do have a cover.

JD : Do you close it close it and latch it, seal it?

Josh : Yeah. Seal it.

JD : Every time I sealed it, I got mold. What I did to get rid of the mold was I just left a little air in there. I left a crack in it.

Josh : So it could circulate.

JD : Yeah, so that it circulates, and then I don’t get mold anymore.

Josh : I have not had the mold problem.

JD : Maybe you leave the vent open on top, and that’s enough.

Josh : I might do that. I probably do leave that little vent open on the top.

JD : That’s probably the difference. You’ve got to have the air circulating through there.

Josh : Yeah. Yeah. Yeah.

JD : If anybody out there is listening and having a problem with mold in your electric smoker, try not closing it all the way.

Josh : We need some circulation. This podcast has turned from a business podcast into smoking tips.

JD : I was most excited about talking about this today, when I got on the show.

Josh : And we’ve arrived, now that we’ve also finished that part as well. How can people get in touch and follow along with your weekly purchasing of new companies?

JD : I’m on Twitter, @JDGraffam. That’s the easiest way to say hi. I like that. My DMs are wide open, so anybody can send me a hello over the DM. You can email me. My name is JD, and I work at a company whose website is SimpleFocus.com. You can figure out the rest.

Josh : Okay. Cool. Well, that’s all I’ve got, man. Thanks for hopping on and giving me the rundown of all that you’ve got your hands in, man. It’s interesting stuff. I appreciate it.

JD : Thanks for having me, Josh. It’s always good to get to catch up with you.

Josh : Yeah, for sure, for sure. All right. Have a good one, JD.

JD : Bye-bye.

Josh : Later.