Episode 611 | Bootstrapping ProfitWell to a $200M Exit (with Patrick Campbell)
Jul 12, 2022
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Join Patrick Campbell, cofounder of ProfitWell, who bootstrapped the company to a staggering $200 million exit. He shares unique insights about using consulting to fund growth, the cash-to-stock split during the acquisition, and the significant revenue breakdown of consulting versus SaaS. Patrick reflects on the emotional journey of selling a business, the importance of securing employee well-being during the transition, and why he opted to relocate to Puerto Rico for tax benefits.
ProfitWell successfully transitioned from a consulting agency to a SaaS company by reinvesting profits and maintaining a dual revenue stream.
Patrick Campbell reflected on the emotional journey of suddenly acquiring wealth, realizing it amplifies inherent personal qualities without changing one’s core identity.
The acquisition deal for ProfitWell included a strategic mix of cash and stock, promoting long-term alignment of interests between the companies involved.
Deep dives
The Journey of ProfitWell
ProfitWell started as a consulting agency named Price Intelligently before transitioning into a SaaS company. This evolution was supported by a stair-stepping approach, where profits from consulting were reinvested into building software products. By maintaining a dual focus on services and software, ProfitWell was able to develop a profitable business model while ensuring a robust financial foundation. The company's strategy of combining consulting revenue with SaaS enabled them to sustain growth and drive their eventual success.
Achieving the $200 Million Exit
Patrick Campbell discussed the feelings and implications of receiving a significant financial windfall from the sale of ProfitWell for over $200 million. He described the experience of coming to terms with instant wealth, similar to winning the lottery, but also recognized that money does not fundamentally change who a person is. His reflections included the realization that having wealth amplifies personal strengths and weaknesses, emphasizing the necessity of taking time to come to terms with newfound financial freedom. By choosing to take a cautious approach, he plans to sit on the capital for the rest of the year to formulate a strategic financial thesis.
Transaction Insights and Structure
The deal for ProfitWell included a split between cash and stock, which represented a quintessential merging scenario rather than a pure acquisition. Campbell shared that the structure of the acquisition was carefully considered, with intentions to remain with the new company for several years post-deal, as he holds a significant stake in the newly merged entity. He highlighted that such arrangements provide incentives for both parties to align their long-term vision and goals. Given this setup, ProfitWell transitioned successfully into a company with a unified mission and operational synergy.
Revenue Breakdown: Services vs. SaaS
At the time of the acquisition, ProfitWell's revenue breakdown was approximately 50% from consulting services and 50% from SaaS revenue. Campbell explained that their SaaS segment experienced robust growth, which was vital for achieving overall profitability. The services revenue not only provided immediate cash flow but also acted as a cushion while the software side was being developed and refined. This strategic dual focus allowed them to enhance their service margins while ensuring rapid expansion of their subscription business.
Company Culture and Employee Outcomes
Under Campbell's leadership, ProfitWell's commitment to sharing success with its employees was evident, as the acquisition resulted in financial benefits for a significant number of staff. He revealed that 13 employees became millionaires, and many others received substantial payouts from equity stakes. This approach to equity distribution reflects a culture that prioritizes transparency and team alignment, ensuring that every contributor was rewarded for their role in the company's success. Furthermore, this philosophy helped bridge the transition after the acquisition, enhancing cohesion between the two companies as they merged.
In episode 611, join Rob Walling as he chats with Patrick Campbell, the cofounder of ProfitWell, on how he and his co-founders bootstrapped ProfitWell to a $200 million exit.
Profitwell was acquired by Paddle earlier this year. We dive into a bunch of topics you have not heard elsewhere, including details about the actual transaction, what was the stock vs. cash split, the revenue breakdown of consulting versus SaaS when they sold as well as talking through his thought process as they were deciding whether to sell.
Topics we cover:
[3:53] Using their consulting business to fund and grow Profitwell in the early days
[8:23] The split between cash and stock in Profitwell’s acquisition
[9:49] The percentage of Profitwell’s revenue from consulting vs. SaaS
[13:39] The conversations that Patrick and his cofounders had from the get-go about their end goals and how much to reinvest in the business
[15:02] The ownership split between all of the cofounders
[17:08] How he made sure his employees were taken care of in the acquisition
[19:05] Did Patrick ever consider taking funding?
[26:14] How long it took to sell the business from the first contact with Paddle
[31:55] Why should SaaS founders take money off the table once they hit certain milestones?
[36:01] Patrick’s feelings about competing with Stripe
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
