EFP 169: Growing TaxJar To 9K Customers

You’re in for a TREAT with this interview today.

I know, I know…talking about taxes on a podcast sounds like a real yawn-fest.

Before you skip this one though, let me tell you that’s NOT what this episode is about. (primarily)

Instead, we look at how a non-developer, non-accountant named Mark Faggiano took his company, TaxJar, from 50 customers and a dream to more than 9,000 recurring customers.

Along the way he raised $600K (with only 50 customers!), built an amazing distributed team, and has consistently replaced himself in the business as he scaled up.

His journey has been really impressive and he’s not shy about sharing some of the successes (and failures) he’s had along the way.

We go into some depth as a dissect what worked (and what didn’t) along the way.

Enjoy!

Check Out This Week’s Episode:

Direct Download – Right Click, Save As

Topics Discussed This Week:

• Background on Mark’s entrepreneurial career
• Getting your first SaaS customers to prove the model
• Spending money wisely as you scale the company
• How TaxJar helps eCommerce entrepreneurs

Mentions:

• Mark Faggiano @ Tax Jar
• Listing # 41032 SumoJerky.com an eCommerce Site In The Culinary Niche
• Web Equity Show Podcast
• Reddit AMA
• Webinar at Dropship Lifestyle
• Foundr Mag

Spread the Love:

I’m stoked Mark was willing to go into so much detail with us here. Did you dig this episode? Let us know in the comments!

 

Justin:
Welcome to the Empire podcast, episode 169. Joe and I have an affinity towards bootstrap companies, but sometimes you absolutely need the cash to build the profit market needs. That’s something we’re gonna look at today as we sit down with Mark Faggiano from TaxJar to talk about how his SAAS company went from idea stage to over 9000 recurring customers in less than four years. We’ll look at how he raised 600000 with only 50 customers, how he scaled to more than 20 employees on a distributed team, and the unique problem he’s solving regarding eCommerce entrepreneurs’ state sales tax. So, stick with us. You’ll find the show notes for this episode at EmpireFlippers.com/TaxJar. All right, let’s do this.

Speaker 2:
Sick of listening to entrepreneurial advice from guys with day jobs? Want to hear about the real successes and failures that come with building an online empire? You are not online. From San Diego to Tokyo, New York to Bangkok, join thousands of entrepreneurs and investors who are prioritizing wealth and personal freedom over the oppression of an office cubicle. Check out the Empire podcast. And now your hosts, Justin and Joe.

Justin:
All right Joe, when Greg, our content manager, brought me this story my first thought was, “Ah, I don’t know, man, some tax guy wants to talk about sales tax? It sounds like a pretty boring podcast episode,” and I wasn’t that interested, but after getting on the phone with the guy, it was an amazing episode. We went probably pretty close to a good full hour, and I got a ton out of this interview, man.

Joe:
Well, boring or not, 9000 recurring customers, that’s good money. That’s something-

Justin:
It’s legit. It’s legit.

Joe:
Yeah.

Justin:
It passes the hot money test, apparently.

Joe:
Definitely passes the hot money test, because I’m a little envious of that, for sure.

Justin:
Well, the cool thing is, the guy, he’s built quite a business and he has real business chops. It was interesting, Joe. As we talked through things, I asked him questions, and some of the things he said were either things that we’ve gone through previously and I was nodding my head, or things we’re struggling with now and I’m like, “Ooh, yeah. That’s something we’re dealing with right now actually.”

Justin:
For that reason, I think this is a bit more of an advanced episode. We talk a little bit about how he got started in the company and what he was thinking, but we talk a lot more about how he grew it, scaling his team, really building out the business.

Joe:
Yeah. That’s interesting stuff, because as people develop their businesses more and more, they’re running into these complex sort of situations, and how they handle it is unique from time to time. I was talking to somebody about this today. A lot of times there’s no right answer. In fact, there might be multiple right answers, and seeing how other people did it is useful.

Justin:
Yeah. It’s interesting. Kind of along those notes, Joe, sometimes people ask you, “Well, you built a successful business. You guys are on a good trajectory. I have a question about my business. Should I do this or that?” A lot of times, we just don’t have the answer. We know how we built our business in the timeframe we did it and the decisions we made, but I don’t know that those decisions or those answers are necessarily right for that person, right?

Justin:
It can be tough to answer. We go by our gut quite a bit so we can give you our gut opinion on what we think we would do in your situation, but there’s no right or wrong here, right? You can look back and say whether it was right or wrong, but it’s hard to say heading into it.

Joe:
Yeah. I just think it’s only gonna get more complex as time goes on and we’re gonna see this more and more often.

Justin:
Yeah. Some interesting stuff about this guy in particular, Mark. He built a tech platform as a non-developer, so a SAAS business as a non-developer. He’s not even a tax guy or an accountant. So, he’s dealing in finance developing a platform and doesn’t have any development chops in particular. So for guys like us who struggle with development, I was particularly interested in digging into him there and finding out what he’s done. I think the answers will be interesting.

Justin:
Another thing I love about his business is that it’s this kind of third party company that’s related to Amazon, and you and I both know, we are friends and we’ve sold businesses that are six, seven, even eight figure businesses with some people we know in this space, in this supportive companies to Amazon, Amazon sellers and Amazon businesses [inaudible 00:04:12] over the last couple years.

Joe:
Yeah. Well, it’s the old adage of don’t go dig for the gold yourself. Sell the pitchforks and shovels and all the tools that you need to go dig the gold, right? Those are the people that usually made the money in the Gold Rush were not the actual gold diggers, right? But yeah, I think that there is a lot of money in this kind of third party app development, as well as a lot of money in Amazon to be made as well.

Justin:
Yeah. Amazon’s such a large company. It makes sense that they are gonna be gaps that Amazon leaves in its wake, right? The [inaudible 00:04:49] are not big enough or not large enough or life-changing enough to really take a stab at, but it could be a $50 million company there. They’re like, “Eh, you know what? We’re not gonna … Too small for us. We want the whole enchilada. We’re going for the big pie and not the pieces we’re leaving behind.”

Joe:
But very interesting that he’s not a developer and not a tax guy, but he opened a software business helping people collect sales tax. I’m really looking forward to this interview to hear how he did it and the struggles he went through, ’cause I can only imagine they were probably pretty great, especially in the beginning.

Justin:
Yeah, absolutely. We’re gonna get into all that. Before we do that, buddy, let’s talk about your featured listing of the week. What’s up, buddy?

Joe:
Tonight we’re talking about listing 41032. We’re actually revealing the URL here. It’s SumoJerky.com. This is an eCommerce. This was created back in September of 2013 [inaudible 00:05:43]. It does obviously beef jerky. It’s a subscription-based membership-based site that does crates of craft-based beef jerky to its subscribers. It’s based on the Sumo brand, the app Sumo and Sumo meat brand that Noah Kagan started. This was his experiment that he did with one of his students. It’s making right now over $7300 a month net profit and we have it listed just above $257000.

Justin:
What I like about this, in 2013, I remember Noah doing this. So it was one of those, “Can I get this business off the ground in 30 days?” He was hammering his Facebook buddies and trying to get them to sign up. “Would you sign up for this? I’d sign up for this. Would you sign up for this?” And got a whole bunch of people to sign up that way just to show people, and he did it all publicly, just to show people that you can set up a business quickly and get it up and running. He got a ton of traction. I’m sure he did some Facebook ads, too. It was shared quite a bit, so I remember seeing that when it happened, so it’s interesting to see this business come full circle. He ended up selling it to one of his students and his student is now, after having run it for a couple years, is selling it through us.

Justin:
So, really interesting business. I like these box companies. I think they’re interesting because obviously the recurring revenue helps, but I like the fact that it’s a physical product. I like the fact that it’s recurring revenue, and they’re cool. I bought these as gifts for friends and families, these types of boxes, like a box wine for my mom and things like that. So I’m a fan of the box companies both as a consumer and as an Empire Flippers partner. So, they’re really cool.

Joe:
Yeah, and the net profit has been very steady since May of last year. I’d say that over $7000 a month, that easily replaces most people’s income. Like you said, it’s a fun type of business to own, something that you could brag about at parties for sure, and that monthly recurring, the more subscriptions you get, the more it’s just kind of snowballing itself.

Justin:
What kind of lame ass parties do you go to where you’re bragging about your jerky business, dude? Seriously. What kind of party is this? What kind of parties you hanging out at? “Dude, you gotta try this jerky. It’s the bomb.” I don’t know.

Joe:
Well, it’s better than the hairbrush business, right? I would rather talk about my jerky business than the hairbrush business.

Justin:
My lawnmowers are the best. You should see my … Yeah.

Joe:
Yeah. It’s tough to brag about those to the neighbors.

Justin:
It’s my ceiling fans. That’s not quite as [inaudible 00:08:14]. All right, buddy. Enough about that. Let’s get into the heart of this week’s episode.

Speaker 2:
Now for the heart of this week’s episode.

Justin:
After exiting his first two companies, Mark Faggiano created his latest company, TaxJar, in 2013. He successfully scored his first round of funding at $600000 with only 50 clients and has since built TaxJar up to a recurring revenue powerhouse with over 9000 active customers. TaxJar helps eCommerce and FBA business owners with automating their state sales tax, calculations, reporting, and filing throughout the US.

Justin:
Mark and I had an interesting call last week to regard scaling his business, running a location-independent team and managing growth, and I knew I had to get him on the podcast. Welcome to the show, Mark.

Mark:
Thanks, Justin. Great to be here.

Justin:
Awesome, man. Well, let’s do a bit of background about your entrepreneurial career and what you’ve done previously. Now, you’ve built and sold two companies prior to building TaxJar. Can you tell me a little bit about your experience there, experience selling them, that kind of thing?

Mark:
Sure, yeah. I’m happy to. So, those two are amongst a total of more than five that I’ve started before TaxJar. So, there have been a couple of wins and a couple of losses in there. I in my DNA consider myself to be very entrepreneurial. I guess that’s probably obvious at this point. Never been someone who really felt good about working for someone else or working in a corporate environment or anything like that, I guess, which is the alternative.

Mark:
I did spend some time in corporate life and really just hated it and knew that I didn’t belong there. So, most of my life I knew that I would start my own business. It was just a question of what would that look like and what would I start it in. So, it’s really evolved over the years. I’m not a tax geek by any stretch of the imagination. I’m an English major, pretty boring actually, and just had this entrepreneurial drive.

Mark:
So, started my first company about 15 years ago and was basically just a website mercenary at that point. So, how do I get people to pay me to do website-related tasks, right? So they needed a website built, they needed help marketing, they needed SEO, they needed a mobile app, anything and everything I said yes to and figured out a way to get it done even if I didn’t know how to do that.

Justin:
There were a lot of those companies back then. Those companies were just starting up, but there were plenty of people that needed those services. Today those companies are a dime a dozen. They’ve been replaced with the easy website setup. It’s so much easier to get a website off the ground and get an online business started today than it was 2002, 2003.

Mark:
Oh man, so much easier. You’re absolutely right. I guess that was the perfect timing to have that type of business. Today I would go to a Shopify or something like that to set up an eCommerce site or Magenta. There’s tons of great options.

Mark:
But yeah, what I got out of that necessarily wasn’t a ton of money, but lots and lots and lots of learning, which I’m happy to dive into, but from there developed a real passion around small businesses, a real appreciation around the fight, right, what it takes to be an entrepreneur and all of the things that go into that and real passion around, how do I help those fellow entrepreneurs? How can I make their lives easier?

Justin:
So you guys started working with these small businesses and supporting them. You said you built five businesses. I know you exited two of them. Did the other three just fall away? Did they just go out of business and then the two that worked, you ended up selling?

Mark:
Yeah. Yep. So two of them specifically, I couldn’t make them work for one reason or another. The third one was this consultancy web business that we’ve been talking about that kind of funded me for the last, I’d say up until TaxJar, and then the other two we did a good enough job where there were exits, so that’s the track record there.

Justin:
Yeah. That’s not uncommon for people to have either a job or a consulting practice where they do some individual consulting that funds their bigger entrepreneurial vision. I think a lot of people are in that space. A lot of our listeners are in that space where they have a job and maybe they’ve bought a business that makes some money on the side. They’re looking for that business or future purchases to get them out of that so they can make the leap.

Justin:
When you exit these other companies, we talked about this before last week, whenever, it wasn’t like F you money. It was like next level money, right? Let you think a little bit bigger and take that bigger stab with TaxJar. What were you doing right before you started TaxJar? Were you still consulting? Did you sell a company? Did you take a few months off? What were you up to?

Mark:
I was back to doing the consulting, so just paying the bills with the consulting business. There was a couple of years stretch in between the last exit and when I started TaxJar. Life got in the way, right, got married, wanted to spend a ton of time with my wife, and also spent a lot of time trying to figure out what the next opportunity was.

Justin:
Yeah. You said you like working with small businesses and medium-sized businesses. So, I see it makes a little bit of sense there, but how does an English major get into building a software company around taxes? That seems weird.

Mark:
Definitely weird, yeah. So a couple of things happened. I’m a big believer that everything that we work on, everything that we do leads somewhere. There’s value in every experience that we have, so whether it’s the things that we do or the relationships that we have and those both came into play here.

Mark:
So, developing software, I can’t write a line of code probably if you put a gun to my head at this point. I did learn a little bit, but I’m not a technical founder by any means, but developed a lot of good relationships with software developers through the consulting business and really got attracted to building products that solve problems, and then taxes entered into that just through relationships.

Mark:
So, had a really good buddy who I played softball with, Ryan Thompson, who has worked for a number of tax and financial companies. We learned a lot together around taxes. At the end of the day, it’s just a pain in the ass. Everybody has to deal with it and there are so many SMBs that struggle with this. How can we combine the two? How can we build something, build a subscription business which were just kind of coming into play at that point in time, and solve tax problems? We spent a lot of time talking to people and figuring out what their pain points were.

Mark:
When it came time to start another business, which ended up being TaxJar, we had heard from a number of people from previous businesses and just through talking to other business owners that sales tax was this behemoth. It was just a total pain. Everybody absolutely hated it and there was no easy way to deal with it. We took note of that.

Mark:
When it came time to starting something else, we said, “You know, everybody’s talking about this. Let’s go see if it’s actually as bad as everybody says,” and it didn’t take that long to realize that there was a significant pain point there that we felt we had a really good opportunity to go solve.

Justin:
Let’s talk about this. Today you have over 9000 customers. You scaled a real legit business with a nice team and everything, but it wasn’t always that way. You launched TaxJar in the summer of 2013. I know you had a couple of years between the previous exit and launching, but you spent what, about a year or so preparing for TaxJar? This was the time where you’re talking to small business owners about their problems, about their struggles. I have a confession to make. I hear TaxJar, and just the word tax in your name gives me shivers. Just thinking about taxes is not something I’m stoked about.

Mark:
Sure.

Justin:
When you were getting this started, when you started to realize the pain points, let’s say we’re sometime in 2012 and you’re planning the launch the next year, what did you do to test the market? Did you hire a co-founder, a technical co-founder? Did you work with developers? What was the launch plan?

Mark:
Sure. So, didn’t write a line of code. Didn’t hire any developers. Was sort of investigating who a technical partner could be, but really the focus of my time, and it was about a year. I took that while ’cause I had my full-time gig consulting, but we spent as much time as we could talking to potential customers. So, folks that we already knew. I remember distinctly we emailed pretty much any contact that we had that might have some connection to eCommerce sellers and we just said, “Look, we need a favor here. We want to take 20 minutes to talk to some potential customers to find out, okay, what exactly should we build?”

Mark:
At that point it was all theoretical. We had an idea of what we should build and how to solve the problem, but we wanted to make sure that before we wrote that first line of code, we were convinced of exactly what we needed to go out and build. So, we probably talked to, I don’t know, somewhere between 30 and 50 people. I don’t even remember at this point. Fortunately for us, it was totally clear on what we should build. There was no gray area whatsoever. We heard the same story over and over and over again, so we would’ve been complete idiots if we didn’t listen to what we had been told and go built something else.

Justin:
Tell me about those conversations, ’cause I know that a lot of potential founders, potential entrepreneurs, what they do is they have an idea already in their mind and they call people up and say, “Hey, does this sound like something you’d be interested?” A lot of times people are just nice and they’re just like, “Yeah, that sounds great. Yeah, I’d probably pay for something like that.” They go through all this work and hassle setting it up and they don’t. Were you a little more open-ended in your questions? Was there really a discovery process or was it like a pre-sales pitch?

Mark:
We treated it much more like a discovery process. So, no doubt we had in our minds we were clouded by what we thought we should go build, but we realized after a couple of calls. It was totally obvious that we were not even close. So, we were lucky because in those first couple conversations, we had that magical moment when people say something to the effect of, “Yeah, this is great, but you know what I really need?” And that’s what you want to hear. That’s when you should be recording or writing down exactly what they say. Luckily for us, honestly every time somebody said that, they said the exact same thing. It wasn’t like we had 10 different things to choose from. It was like, we are being hit over the head repeatedly with the same thing. We’ve gotta go build this.

Justin:
It’s funny you mention that, Mark, because Joe and I have been that way in business, too. By the way, there’s a lot parallels in some of the stuff we’ve done and some of the things you’ve said both now and previously when we talked, but getting hit over the head by potential customers on what you need to build, it’s that obvious, right? Joe and I are pretty dense when it came to these things, and then they’d literally have to beat us over the head before we built it. We weren’t asking for that feedback. They were forcing it down our throats. You were a little better in that you were actually asking them for the feedback.

Justin:
Tell me a little bit about … You didn’t have this huge network and all this content marketing and all these people dying to hear what you were gonna build for them next. You didn’t have that. You had some contacts. You had your connections.

Mark:
Not at all.

Justin:
But when you were planning to launch in June 2013, how did you get your initial customers? Was it a launch or was it kind of like, “Okay, we’re live. Now let’s figure out how to get a few people on this”?

Mark:
Yeah, it was more the latter for sure. So there was a launch. We basically got the product out there. We had a couple of paying customers that had joined us super early and their 30 day trial had expired, but I remember distinctly we went to eBay Radio, which is an event for eBay sellers in June of 2013 and at that point, you could actually go to TaxJar.com. You could sign up for an account, start a free trial and become a customer if you chose to do so. So that night, the first night that we were networking at that event, we pretty much said, “Okay, we are live as of now. We can tell people we’re out there. We can encourage them to go sign up, and we have a level of confidence that whoever we talk to today and tomorrow, they’re not gonna go blow up the site.”

Justin:
It’s exciting, but it’s nerve-racking too, right, because you’re like, okay, everything else is just like, “I think people are gonna be interested. I hope they like what we’re doing. I hope it’s helpful for them,” but once you’re launched, all that’s gone, right? Now it’s out there in the wild, and do people-

Mark:
Totally.

Justin:
Does it really help people or did I spend my time building crap that no one wants?

Mark:
100%. So the 30 days in between that launch night so to speak and when the first significant amount of trials, and it wasn’t that many, it was probably a couple of dozen, I don’t remember exactly how many, when those expired, that was torture because even though we had really good feedback, we had worked really hard on customer development, and we had done it by the book, at the end of the day, they say they’re gonna pay for it but will they actually type their credit card into our system and become a recurring customer? That was the moment of truth. That was like, “Man, I hope this works.” Everything says it’s going to work, but until you see those credit card receipts coming in, you truly don’t know.

Justin:
It’s funny. Your ROI on your time on those first few customers is so poor because you’re bending over backwards to get them to stick and pay, right, ’cause you know eventually your product and your offering and your onboarding and your customer service, everything is gonna be way better, but when you launch, you’re just trying to get it out and you’re crossing your fingers hoping they stick.

Justin:
Now, you got up to about 50 customers by August 2013, so a few months later, you’re up to 50. Did you consider it a success at that point, or were you like, “Eh, it could go either way”?

Mark:
We were pretty excited at that point because it wasn’t like we had 1000 trials and only 50 customers. We were converting better than 40% out of the gate and we knew that that was pretty ridiculous when it comes to a SAAS business, especially anything having to do with accounting or tax.

Justin:
Yeah.

Mark:
A lot of that’s just based on previous experience and talking to other business owners.

Justin:
Why do you think it was 40%? Was it your followup? Did you have really good emails? What were you doing to get that 40% do you think?

Mark:
It wasn’t followup. It wasn’t really good emails. I’m sure they were absolutely terrible at that point. A lot of it was just first iteration sort of communication. I think we were just talking to the right people at that point.

Justin:
Did you get on the phone with them, that kind of thing, like really-

Mark:
We did whatever it took.

Justin:
Yeah.

Mark:
Literally, when we begged for favors to get people to talk to the customer development, we had to do a whole other level of creativity and begging to get that next couple of hundred trials. I remember the conversation that we had, Ryan and I. We’re like, “We’re calling in a lifetime worth of favors right now.” Anybody that potentially, not that they owed us anything, but we could rely on them to help us out, we’re not gonna be bashful. We’re gonna call them and say, “Look, can you give me 10 names of somebody I can call or email and tell them about this product?”

Justin:
Oh god, man. That’s like the cousin that just got into Amway and they’re like, “I got this cleaning product you’re gonna love. Why don’t you come over?”

Mark:
Yeah. So a couple things. One is we started writing content and we knew that there was a tremendous content opportunity for us, but we knew that it also was gonna take time, right? So it wasn’t like we launched a blog post and then all of a sudden we’re gonna have 50 customers next week. So we knew we were playing the long game there.

Mark:
The other thing that we knew-

Justin:
It was a good gamble, by the way. Yeah, good gamble.

Mark:
Yeah. So that’s something we took from previous businesses. That had worked extremely well to drive traffic and to drive leads. So we were like, “Look, we’re just gonna keep the same formula. We’re not gonna try to outthink ourselves here.”

Justin:
Were you doing paid traffic early on, too? Were you getting a positive ROI on Facebook or AdWords or something like that or no?

Mark:
We weren’t doing Facebook. I don’t even think we had enough money for AdWords.

Justin:
Yeah.

Mark:
Just the sort of guiding light that we had was we knew if we could get to 150 paying customers, no matter how we did it, we could get to 1000.

Justin:
It’s gonna work. That was your Mendoza line. I get to 150 and we’re good. Well, this is surprising to me. You got to 50 customers by August, and that same August, you raised $600000 to continue growing out the business. You’d had a couple of exits in the past. You had had some success, but as a non-technical, non-tax guy founder with only 50 customers, that seems like a real gamble for those investors. What was your pitch? Did you know how to raise that money? Was it quick? How long did it take? Tell me a little bit about that.

Mark:
Sure. So, yeah. When you describe it like that, right, people probably-

Justin:
That wasn’t your pitch. That wasn’t your pitch, like, “Oh, we got 50 customers”-

Mark:
Who is this joker?

Justin:
“And I’m not a tech guy and I want to build this tech company. Give me money.” No, a little bit better than that.

Mark:
Right, right. So, the fact that we had had some success previously meant a lot, right? This was not just some complete joker off the street who had never done anything before, right? Like you said before, the previous exits weren’t F you money, but they were exits. So, there was a track record that you could bank on.

Mark:
Now, remember, we’re just raising an angel round, so the understanding with most angel rounds are you’re not gonna have millions of dollars in revenue at that point, right? There is a lot of risk at that stage of the game. So, what we could do is show a track record. We had a very small team at that point that had collectively an even better track record, and we also had very early metrics that said, “Look, these are fantastic metrics. What we want to do is prove that we can do this until we get to 1000 customers.”

Justin:
Yeah. You knew how many trials you were converting at that point, at least on the initial push. You could show them that, which was promising. Tell me about your team. How many people were there at the time? It was you and who else?

Mark:
So there was four people total. Well, I was the only full-time person at that point, none of us getting paid. One guy was giving us a bunch of hours on a consultancy basis and then the other two guys had full-time jobs and basically had committed to say, “Look, the second we start getting enough traction where we can pay all of us, then we will quit our jobs.”

Justin:
So was this in the moment when you raised the money, were you planning on spending that so you guys could go full-time or did you have other plans for that money?

Mark:
The other plans were to try to get more developers on the payroll. So, coincidentally as we were raising money, we got a really good lead on a developer who’s a rockstar who had worked for one of the guys previously in a previous startup, and he became available. He was in between jobs, so we had extra motivation. We knew he was gonna be available only for a very limited time and we said, “The second we get the first check in the bank, we’re gonna hire this guy,” assuming that he wants to, which he did. So, we had all made a commitment that none of us would get paid until we felt like we had enough other folks working for the team.

Justin:
That was 1000 customers was kind of the goal?

Mark:
Yeah. I don’t remember attaching necessarily a goal to it, but I think we went … Let’s see this was ’13, ’14. I think we went all of ’13 and all of ’14, we worked for free and then started getting paid in 2015.

Justin:
Wow, that’s tough, man. That’s tough. What scared you starting out? Did you have any near miss disasters? I guess one of them would be not getting paid and still wondering if this is gonna work.

Mark:
That’s the biggest one. That’s the biggest one by far.

Justin:
Was there any point where you thought it was gonna fail? You’re basically going along not getting paid. If it failed, that’s not good ’cause you’re devoting a lot of time and effort to it throughout 2013 and 2014.

Mark:
Yeah. Really, it’d been three years, so ’12, ’13, and ’14, ’12 doing all the customer development. The failure was by far the biggest motivator. There wasn’t really ever a moment quite honestly where we ever had a conversation around, “Ugh, we built the wrong thing,” or, “Nobody wants this.” Again, we in retrospect had done a lot of things right to make sure that we built exactly what people wanted, so there were no big surprises. Did we get everything perfectly right? No way. We did make mistakes. There was a lot of stuff that we missed, but at its core, the problem that we were solving and the way that we were solving it was right.

Justin:
Yeah.

Mark:
So there were enough people that were interested and were signing up and that were paying to keep us going. That being said, we knew we had a ton of work to cast a wider net. So yeah, the biggest fear is … We had our first child right around then as well, so it was like-

Justin:
Oh God.

Mark:
We see the opportunity. We’re super excited about all of this. This has to work, or else we’ve totally flubbed what we think can be a really big business.

Justin:
That’s a lot going on, man. So you got married a couple years before that, then you have your first baby and then you’ve just got all this stuff going on. You got a new company where you’re not even getting paid at. I can understand that’s probably a stressful but exciting time for you in your life.

Justin:
By the way, I had a conversation with someone recently. I was doing another podcast interview. We talked about, I’ve been involved in other businesses where it just didn’t really take off, but with Empire Flippers, particularly brokering businesses, it just kind of took off. It was clear that we were solving a market need. It’s clear the customers liked and trusted us. Did you feel that way too, or was it like sometimes you felt that way, sometimes you didn’t?

Mark:
No, we had the exact same experience. So, we saw enough positive signs, and there were really overwhelmingly positive signs. There was plenty of opportunity in front of us and we just needed to figure out a way to scale the business.

Justin:
I’ve been on both sides of that. It sounds like you have too, where you’re building a business and you just don’t have that traction. It’s not clicking, and trying to climb that mountain may not be the best move for you. When you do have a successful business or something that’s starting to take off, you’ll know it. It’s obvious.

Mark:
For sure.

Justin:
At what point did you realize that, that you knew this was gonna work? Was it 150 customers, 500 customers? What timeframe was this to?

Mark:
So it was really early on. It was within the first … Let’s see, June … So within the first six or seven months, two things happened. One was we got a call from a longtime customer of a company that basically was a competitor, is a competitor, kind of kicking the tires and saying, “Hey, who are you guys? You’re kind of the new face. Tell us more about what you’re doing, ’cause we’re actually really unhappy with the provider that we have now.”

Mark:
We went, “Oh, that’s interesting.” We had very wrongfully assumed that the existing players in the space were doing a really good job and we were just gonna kind of disrupt on the customer base that we knew the best, and they could have their customers. We’ll take the ones that they’re ignoring, and the opportunity’s plenty big enough. But this customer was actually saying, “Look, we’re way bigger than what you guys are used to. We don’t want to pay them anymore. We are interested in paying somebody else.”

Justin:
Yeah.

Mark:
So that happened, and then it kept happening over and over again and we went, “Wait a second. Are you telling us that we can actually take their customers and get the customers that we’re already getting?” That was like the oh shit moment where we were like, “Wait a second. This is actually a way bigger opportunity than we ever, ever allowed ourselves to imagine.”

Justin:
And these were competitors that had real customers, were making real money, so not only were you getting your own new blue ocean clients. You said, “Wow, not only am I gonna grow my own pie, I’m gonna start taking pieces of theirs, too.”

Mark:
That’s exactly it. These are companies doing over $100 million, almost $200 million in revenue, thousands of employees. These are 10-year-old real businesses that their customers are starting to come to us, so that was a huge moment that we said, to your point, “We’re actually onto something.”

Mark:
The other one was, and I wrote about this on our blog, we actually had an acquisition offer within eight months. A lot of stuff happened in that acquisition offer, but the biggest takeaway that happened for us was, okay, we actually are not only onto something, but we must be doing something right because now other players in the space are … I wouldn’t say they’re threatened, right, but they’re interested in making us go away.

Justin:
Yeah.

Mark:
So that was another moment that we said, “Okay, we’re just gonna double down and keep doing what we’re doing.”

Justin:
Well, you ended up raising money from a VC company in late 2014 or early 2015. In talking to you before, I remember you were mostly a bootstrapper before, so you weren’t using raised money to grow your business, and you went a different route this time. Was it that you saw the opportunity and realized you couldn’t get the tech and get everything needed without quick growth? What were you thinking? Why’d you take the money and what was that process like having never done it before?

Mark:
It was a tremendous learning experience. So, I was very intimidated by it to be quite honest, having really never done it. The only money I had raised before was friends and family, which is a totally different animal and something I do not recommend, by the way. But yeah, you’re right on in terms of why we did it. We felt like we had a certain window of opportunity to get out and really make a statement and dig a significant moat around us.

Justin:
Yeah.

Mark:
We felt like we were onto an idea that we didn’t want other people to come along who had more money in their bank account-

Justin:
Did you have other competitors close to you that were starting out a little before, a little after you, or was it kind of a hot space?

Mark:
Not at all.

Justin:
Okay.

Mark:
Traditionally, this is a not very populated space, but a lot of it is because it’s very boring and unsexy and the other one is it’s crazy complicated. I think a lot of people look at this space and go, “I don’t want to build that. That’s gonna take a long time.”

Justin:
Yeah.

Mark:
We also knew that we were disrupting, so those existing players in the space, it was only a matter of time before they came down market and tried to compete with us, which eventually they did. So, we had a very serious conversation, the first few folks on the team that said, “Look, we can just play this out and bootstrap it, or we can get fully committed. We can pay ourselves, and we can actually scale the team so that we can try to make as big a dent as possible in this,” and like I said, dig a moat so that other entrepreneurs, if they look at this space will think, “Well, we don’t want to go compete with TaxJar.”

Justin:
It’s just challenging. Yeah. Well, let’s get into this. So, I want to cut into … We’ve talked about starting cash. Now let’s talk about managing growth. From 50 customers in 2013 when you’re just starting off to over 9000 customers, that’s an amazing amount of growth in only four years. Today you have more than 20 employees and a distributed team. Talk to me a little bit about what your team looks like now. Do you have a co-founder? Do you have VPs? Do you have managers? How does it work and who works for whom?

Mark:
Sure. So we’ve got the core team that’s been with us since the beginning, these four guys who I don’t think technically they get counted as founders but they’ve been there since day one in one way, shape, or form, and all of those guys each manage one part of the business.

Mark:
So, we have a CTO managing a team of developers that’s divided up into smaller squads. We have a product guy who manages a growing product team, and then we have a chief revenue officer who manages our marketing sales, and then I work with all of those guys and I also manage the customer success.

Mark:
In terms of org chart and the way we do things, that’s still evolving. We’re probably gonna add a bunch more people within the next six to eight months, so it’s not like we’ve been focused and locked into this certain org chart. We’ve tried to keep things relatively flat, but we’re starting to add enough people where we have to pay attention to, okay, how are things supposed to work, what are the right processes, who talks to who, how do we become the most efficient in terms of trying to stay on this really high level of execution.

Justin:
With all these hires with adding new staff members, with changes to the org chart, we’ve just done a bunch of that. We just broke up our operational team to smaller departments and put different people in charge of them and we’re changing structures pretty regularly. It’s easy for the team to get confused about roles and responsibilities. How do you manage that? How do you make sure that everyone’s on the same path and onboard with what’s going on?

Mark:
Yeah. That’s an ongoing battle. I think you have to constantly take that one on. So, one of the ways is I try to keep things as simple as possible. So that comes down to simple goals, right? We don’t have a thousand goals every year. We really only have one or two. We try to be really strict in terms of everything that we work on should be pointing to that goal, right?

Justin:
Yeah, yeah.

Mark:
So, if we’re working on something and somebody asks themselves a question like, “Why am I doing this?” then we’re probably not working on the right thing, right? It should be a very clear cut, straight line to, “Okay, this is gonna help us get to where we need to get to.”

Justin:
Do you have meetings where you review what that goal is or do those goals change over time, and who sets the goals? Is it a team effort or is it just you? How does that work?

Mark:
So traditionally it’s fallen to me to set the highest level goals, and then it’s up to the team leaders or managers, whatever you wanna call them, to figure out what the right KPIs are to track and goals to lead up to that larger goal. It’s also up to me to constantly remind the team of why we are doing things and how we are tracking compared to those goals.

Mark:
For example, if I just say in February or January, “Okay, here are the goals for 2017,” and I don’t refer to those at all or talk about them at all until December, what’s the point, right?

Justin:
Yeah, yeah.

Mark:
So it’s on me, and I’m not perfect at this by any means. It’s on me to constantly show how our production compares to where we should be at that stage of the game and also ultimately how it’s comparing to what our goal is for the year.

Justin:
Does your team know all this?

Mark:
Do they know what our goals are?

Justin:
Yeah. Does the entire team know the goals and what they’re shooting for and the KPIs in their department?

Mark:
Yeah. So we’re completely transparent around what our goals are. Every month on the 1st or 2nd of the month, I post about … I don’t know, there’s probably 50 KPIs from the previous month, and that’s everything from number of trials, number of conversions, revenue, how much money we have in the bank, all that kind of stuff. So everybody on the team knows exactly where we stand at any given moment.

Justin:
God, Mark, I gotta tell you. So, this is super interesting to me, right, ’cause we’re in a similar situation of worrying about this and this ever-changing environment. You do this transparently internally. I’ll tell you, that is content that would be amazing to see, if you were transparent publicly about what those numbers are, how you come to those decisions. I know I’m putting you on the spot here, but I’m telling you, that’s the kind of stuff that I think would really resonate with people. Yeah.

Mark:
So we’ve thought about it. We’ve thought about it. We see other companies doing it, like Buckford does it. There’s a lot of other companies that do it. I totally agree with you. I think it’s awesome.

Justin:
It’s scary, though.

Mark:
It’s scary and we made, rightly or wrongly, we made the decision … This is probably mostly me … Made the decision that we want to keep things buttoned up externally because we got that message eight months into the business when somebody tried to buy us that people are interested. I get called every week from either investors or folks that are connected to other people in the space. They’re doing a lot of snooping. We’ve found that strategically it’s been much more advantageous for us to keep them guessing. Look, we’ve got a lot of work to do. We’re just gonna keep our heads down and keep executing, and we’re not gonna spend a lot of time going out bragging about ourselves and blasting what our metrics are. It just works better for us. Maybe that changes somewhere down the road, but [crosstalk 00:41:42].

Justin:
It’s tough ’cause you’ll never know, right? We would go the other route. We’re very open about even externally what’s going on. I think we’re gonna even push even more for that in terms of the number of deals we’ve done, but we’ll never know what it would’ve been like to not do that, so I can’t say 100% for sure that it was better. It feels better to me. I like it and I know the benefits we’ve gotten, but I see your point that there are some benefits from not doing it, too. I guess you don’t know-

Mark:
I think it’s all preference.

Justin:
Yeah.

Mark:
Yeah. I think it’s all preference. If that fits your business better, I think that’s great. I give you a lot of credit for doing that, but again, we’ve made the decision that this just works better for us for now. Maybe it changes in the future, but you gotta do what you think is best for the business. That’s what it all comes down to.

Justin:
Let’s switch topics a little bit and talk about your hiring process. When we hiring early on, we hired for people that were a little more well-rounded because we knew we’d need them to wear a gazillion hats and we had no idea where they’d ultimately end up in our business, and so we wanted generalists that could figure things out. As we’ve grown, we’re hiring more for specialists, actual roles that are already pre-defined. What’s your hiring process look like then and now and how has that changed and what do you do in your hiring process?

Mark:
So we’ve learned a lot here. We’ve tried to throw out the things that don’t work and focus and keep the things that do work, and this has certainly evolved over the last four years for us. We have not been perfect here. I’d say from the beginning, we’ve always been looking for specialists. We need a person that can do this, and it’s usually been something pretty specific.

Mark:
So, we look at a couple of things, and hopefully I’m answering your question the right way ’cause I love talking about this part of the business. We look for a couple things. One is can they execute from a skillset perspective, and also, how well do they fit with the environment that we’ve now created? Like you mentioned, we have 20 people now, so we feel like it takes a certain type of person to come in and thrive in this environment.

Justin:
Yeah.

Mark:
We have a pretty good idea of the boxes that we’re trying to check. So, we do a couple of things to try to evaluate. One is we try to challenge folks when they’re sending in their resumes with questions that are probably a little bit more complicated and require a little bit more thought than I think what most companies ask for. We have a series of interviews. It’s usually between one and three with the hiring manager and also myself. I talk to every potential candidate that makes it through that first interview, and I’m assessing from a cultural fit, right, so I don’t focus at the job at all. I focus on, is this person gonna be able to come in and do really well with the team, ’cause I don’t want to mess up a really productive team, the team we have now.

Mark:
And then we have what’s called a mutual assessment, or a mutual trial. So we require that anybody that wants to get hired and makes it through those first two interviews go through a trial with us. We pay them for their time. We pay them an hourly rate, and we basically throw them right into the fire. We give them stuff to do on the first day. They’re expected to report on that on the daily standup the following day, and from our perspective, we’re saying, “We really like this person on paper. We think they have the skills. They seem to be the right fit. Now let’s see, can they actually be productive and do the work in this environment?” More importantly from the candidate’s perspective, it’s, “Do I like the problem that TaxJar’s trying to solve?”

Justin:
Yeah. Do they like your culture [crosstalk 00:45:27]. Yeah, do they fit in. [crosstalk 00:45:29] Yeah. So we do a similar thing where we’re judging resumes and setting up interviews based on skillset, but in the end, the last kind of bit is are they a good fit for our team.

Justin:
With growth, managing that growth, we went through a period recently where we had to hire a bunch of people. One of the real concerns was we’re hiring all these people. When you add people to the team, it slightly alters and changes the company culture, and we were like, will it alter it in a good way or are we bringing on too many people to where it’s an unknown what’s gonna happen, and that would be scary ’cause we’ve got a really good thing going. Those are probably thoughts that go through your head when you’re hiring too, right?

Mark:
For sure. I’m curious, what’s that number? What number are you at and what number did you start seeing changes?

Justin:
So we just hired four people in the last … Well, it’s like three or four months ago now, four or five months ago now, but we added four people at a time. I think we had seven or eight at the time. So we’re adding 50% to our management team, right, which is scary, right? Those are a lot of individuals coming into a team that’s already built well and working together.

Mark:
For sure.

Justin:
So we worked hard to make sure … Well, the benefit is they came onboard right when we were having our meetup. So three times a year, we get together for a month. We bring everyone together and work together for a month, so they were coming in right in the middle of that, so they got to see us all together. That helped I think cohesion, so that made it a little smoother. I don’t think we’ll have that problem in the future ’cause we won’t be adding 50% staff again in one pop so I think that was one thing we were a little scared about but we desperately needed them onboard. We do a period of time, we call it an apprenticeship with us, where we bring them on as apprentices for six months and that’s us testing them and them testing us. The goal is to make them a full-time team member, but it’s a six month test period for both parties. So yeah, there’s a lot of similarities here.

Justin:
Just to switch gears a little bit, in scaling your company up, I’m sure you look back and you go, “Oh, there were some missed opportunities.” Where do you see some missed opportunities that you think our listeners may get some value?

Mark:
So, one places we may not have hired fast enough, and this was all pretty much driven by me, I was a little bit more conservative, I focused more on being efficient with capital. So we had made up our mind after we raised our second round of funds to not forever be beholden to the fundraising process, right? We don’t want to be that company that have to raise 10, 20, 30, 40 million every year, go spend that money and then ask for more money.

Justin:
Yeah.

Mark:
Not to say that we won’t ever raise money again. That’s not what I’m saying, but we wanted to control our trajectory. One of the ways to do that I think is to put more money in the bank than you’re spending. To me, that’s a real business, right? That’s a company that’s profitable.

Justin:
Yeah.

Mark:
I made the decision that that was more important than necessarily adding 10 people at a time. Part of that was the same fear that you were talking about earlier, adding 4 people.

Justin:
But do you think it’s a real missed opportunity? It might have been a different company or it might not have worked if you’d had done that. It’s one of those who knows kind of things, right?

Mark:
Yeah. I’m comfortable with it at the end of the day, but I do tend to think sometimes about, well, where would we be if we had added this person six months earlier or something. But look, the founder perpetually second guesses and thinks about what could I have done differently, which I try not to do too much.

Mark:
Yeah. Look, we have had the benefit of making a lot of mistakes in previous businesses. So one of the reasons why this has worked is because we hit the ground running and didn’t make the typical rookie errors that we made starting our other companies. That probably allowed us to be as fast as we were with those first couple of years, right?

Justin:
Yeah.

Mark:
We weren’t spinning our wheels like, “What is this all about? Why isn’t AdWords working?” Or just focusing on the wrong things. So, we stayed very focused on what we were trying to do. We continue to try to do that today. I think that’s extremely important and I think that’s helped us.

Justin:
Mark, your role in the company over the last three or four years has changed significantly, right? As you scale, as you start to manage growth, your position in the company changes, your responsibilities day-to-day and week-to-week change. Is there anything about having a smaller upstart hustle kind of company you had that you miss? Do you, not pine for it, but do you miss some of those early days when there was more hustle and a little more uncertainty? What do you miss about it and what do you prefer now?

Mark:
Certainly really happy with where we are now. It was an unbelievable amount of hard work to get to where we are today. So I get the question. I think all of us as founders love that scrappy stage, right, where it’s like, “Come on, let’s try 10 things today that we’ve never done before and see what works and double down on what does and get rid of what doesn’t.”

Justin:
Yeah.

Mark:
I think it’s important to hang onto that and remember that is in your DNA and try to keep that alive as long as possible. We try to do that as well. Every once in a while I have to remind ourselves, “Look, we don’t have to be so formal. We can test stuff out and not try to be perfect.” None of that has to change. But like I said, I think right now if you gave me the opportunity to go back to that level, what it was like in the first year or two, I don’t think I would take it because it’s been a long, long road to get here and I’m more jazzed than ever about this business. I’m really looking forward to what the next few years are gonna bring and what that stage is gonna be like.

Justin:
Yeah. It’s easy to look back and go, “Yeah, I remember when we were hustling up and there was a few of us and we had to do all this work,” and then you realize you wouldn’t have the money to put in the projects that you have today. You wouldn’t have the team to put on projects and new initiatives, and yeah, you wouldn’t have a lot of the things you have today and you’re like, “Oh yeah, I like that.”

Justin:
Let’s talk a little bit about what TaxJar actually offers. We have quite a few people in our audience that are building and running eCommerce businesses, FBA businesses. Tell me a little bit about what TaxJar actually offers and what you could do for them potentially.

Mark:
Yeah. So the one liner is we’re a sales tax compliance for eCommerce. So really what that means is our ideal customer comes into TaxJar, starts a free trial, connects wherever they’re selling to TaxJar. We do the rest from that point. Our best customers don’t spend a lot of time on TaxJar. Some of them don’t even come back to TaxJar because we’ve done our job and we handle sales tax compliance for them.

Mark:
So we do three things. We help folks calculate how much tax to collect from their customers at the point of sale. That doesn’t apply necessarily to FBA customers. We aggregate data, so we pull down your sales and tax data, aggregate it and compile it into a format that is then fileable, so the customer then has the option to file that return to give it to their CPA to return, which saves a ton of time. That’s often the most painful point for a business owner is to compile that data. And then we have an automated filing service called auto-file, which for those that don’t even want to touch this at all, they just say, “Look, I’ll pay extra to have you file those returns automatically and on time for me.” That’s what that service does. So those are our three core components. That’s what we will always do, those three things, and our goal is to just do them better and for more people.

Justin:
So for a use case, I’ll just you give an example. I’m let’s say a California S-corp and I’ve got a warehouse in Ohio, and I’m selling nationwide. Anyone I sell my products to, my eCommerce products to in California, I’ve got to pay a state sales tax. Anyone I sell to in Ohio, I have to pay a state sales tax because I have nexus in those states. If I’m not paying sales tax, I’m supposed to be, right?

Mark:
Yeah. So the nexus is the million dollar word, so to speak. So you’re supposed to be collecting sales tax in states where you have nexus and not collecting in states where you don’t have nexus. You’re acting basically as an agent on behalf of the state. You’re not paying the tax yourself. You are collecting the tax from your customers in those states and then remitting it onto the states.

Justin:
It’s the state’s thing, but they make you the primary person to collect. You’re the tax man for the state-

Mark:
Exactly right.

Justin:
… in that state that you have nexus. Got it.

Mark:
Yep. That’s exactly right.

Justin:
All right. So most of the clients that come to you, they’re familiar with this. Are they already paying state tax or have they not been paying and then come to you and ask you about it?

Mark:
Oh gosh, it’s all over the board. So there’s the seller that has zero exposure to this other than somebody has told them it’s terrible and come see TaxJar and they can help you, to the person that has tried to comply and absolutely hates it and just wants to find a way to make it easier, to established businesses and brands doing hundreds of millions of dollars in sales per year and they’re just looking for more efficient ways, more affordable ways to be compliant. So it’s all across the board. That’s who we’re dealing with every day.

Justin:
One of the criticisms I hear from smaller businesses, they’re like, “Look, I’m not selling that much money. I’ve got a small FBA business. I don’t need to worry about state taxes. TaxJar’s being crazy with me about this. I don’t need to deal with this until I’m a big company. When I’m a big company, then I’ll have the money. I’ll go to TaxJar and figure it out.” What’s wrong with that?

Mark:
There’s nothing wrong with that. So, look, according to the laws, everybody is supposed to be complying. Is that what’s happening? Absolutely not. We take a realistic approach. If somebody told us, “Look, I’m doing,” I don’t know what the dollar amount is, but, “I’m a small seller,” it’s up to the seller ultimately. You can’t argue with what the law says, but what’s happened is it’s up to the seller to make that decision to comply. We’re not gonna make you do it. That’s not our strategy. We’re not gonna try to scare you into it.

Mark:
Our goal is to give you the education and the tools you need to make those decisions. So if you feel like you’re under the radar, then we’re not gonna tell you differently. Go for it. That’s what’s best for you. Again, we’re just trying to build a brand and a business that’s there to help those that want to comply and know that they need to comply and we’re gonna help you do it better so that you don’t have to worry about it.

Justin:
I think that’s a good question for your accountant, too. If you’re talking to them and they’re like, “Oh, I’m doing millions of dollars in sales and I’m doing a lot of those sales in a particular state,” the more money that the state’s not getting, the more interest they would have in getting that money, right?

Mark:
For sure, yeah. The more money that’s at stake, the higher the risk. You cannot argue with that.

Justin:
And the state. California is a little aggressive.

Mark:
Yep, the state’s another variable. So, yeah. Look, if the state is debating whether or not to audit two businesses, one doing 10 million in sales and one doing 10000 in sales, you know which one they’re gonna go after.

Justin:
Yeah, for sure. They don’t care. If they’re caring about someone who’s doing 10000 in sales, then they’ve really got too much time on their hands. They really moved to the smallest businesses I’ve ever heard of. But is there a level at which they should be concerned? If you had to give me an average of your customers or the bulk of your customers, how much business are they doing? Where are they at?

Mark:
Yeah. This is a tough question. So I can’t give you the magic formula of when it’s time to comply. Like I said, we’ve got the whole spectrum covered. We’ve got the seller who has got a full-time job and is selling out of his garage just trying to make a little bit of extra cash to real brands doing, like I said before, hundreds of millions. So the law applies to all of them. It doesn’t matter what size you are. The only state that spells out a level of compliance is Tennessee, which has a threshold for revenue, which is not that high.

Justin:
That’s really a smarter move for them to do, right, ’cause you have these small guys that are doing a little bit of business. Just leave them alone. Until they get to a point that really matters, why would they care anyway? It would make sense for all of them all around. I know they’re probably not gonna do that, but yeah.

Mark:
You’d be shocked at how hard states make it for businesses that just want to comply to give them their money. At the end of the day, most of the people that we talk to, we talk to a lot of people every day, they just want to do the right thing. They understand what the law says, but there are 1000 roadblocks that get in the way, right? The states, if they just looked at it and they said, “If we’re gonna simplify things, we could actually make more money here. We don’t necessarily have to radically change our laws. Just make the forms easier.”

Justin:
Yeah. They should just 80/20 that for sure, right? We need to go and help them, Mark. We need to step in-

Mark:
Yeah. Well, we’re trying.

Justin:
… help the states. So I’ve heard about this thing called the Amazon tax amnesty, which is interesting, and I’m guessing this is probably helpful for you with getting some people to do some business. But basically, it’s running from right now August 2017 through October 2017 where a bunch of states agreed to say, “We don’t care what happened before. We’re gonna waive any old taxes that weren’t paid as long as you get on the system and start paying now.” Is that right?

Mark:
Yeah, that’s right. That’s the way to look at it. So this actually came out of an Amazon seller conference called Prosper. One of the speakers at that Prosper show is a member of the group that is heading up this amnesty program and he basically went back to the stage and said, “Look, there are all these sellers that want to comply but they’re intimidated because of potential back taxes.”

Justin:
You’d put them out of business. Yeah, yeah. I get it.

Mark:
Right. So the state said, “Fine, let’s give them amnesty and let’s get them compliant.” So this is extremely rare. This is the first time in the five years that I’ve been involved in this space, first time this has ever happened. Yeah. Basically this is a get out of jail free card for those 14 states and it’s an opportunity for folks who want to comply to do so without any repercussions whatsoever about what their history is in those states.

Justin:
That’s gotta be great for your business. Have you seen an uptick since that came out of people signing up?

Mark:
I can say that there’s some additional interest there. So, people want to know about this. This is something that they’ve been looking for, and I wish a lot more states … I’m not saying from a business perspective, but from the seller perspective, I wish more states were involved ’cause this could just clear the path for a lot of people that again, they just want to comply but haven’t been able to wrap their heads around it or are nervous that they’re gonna get in trouble. So this has been a really hot topic as we’re discussing it right now and should be really interesting to see what happens over the next couple of months.

Justin:
That’s awesome, Mark. It’s been really interesting hearing about your business and covering how TaxJar got started, some of the things you’ve done to manage growth and hire people and train people and obviously with what you’re offering to eCommerce and FBA business owners. Is there anything else I missed that I should have asked you about or you were kind of expecting?

Mark:
No. This has been great. Hopefully folks maybe learned a thing or two or there’s some takeaway to this. I’m really passionate about entrepreneurs and give a lot of credit to folks that start their own business. I know it’s a grind. There are no easy days. It’s fun for me to [inaudible 01:01:40] whatever their journey is.

Justin:
Well, you’ve been incredibly helpful with your time and giving with your time. You’ve bene very transparent. I’m sure our listeners are gonna appreciate that. If anyone wants to check out your site, they can go over to TaxJar.com. Are you on social? Are you on Twitter or anything like that?

Mark:
Yeah, I’m TaxJarMark on Twitter, but I am not the poster child for social media. So I listen more than I actually say anything, but you can follow us. TaxJar has much more interesting things to say, so that’s probably a better follow if you’re wanting to know more sales tax knowledge.

Justin:
Awesome, Mark. Thank you so much, man.

Mark:
Thanks Justin. Appreciate it.

Speaker 2:
You’ve been listening to the Empire podcast. Now some news and updates.

Justin:
All right, Joe. Time for some news and updates. First up, we just finished our monthly team meetup in Phuket, as some of our listeners may be aware. Every three to four months, we get our team together and we normally do it for about a month. Our last meetup was in Phuket, Thailand, and we had a nice villa that we were all able to stay in, actually three different apartments basically on the same floor, and so we just rented that out for the month. We got to hang out together and work together and it was busy, man. July was really busy for us. By the end, it was a little stressful.

Joe:
It was a little stressful. It was a good month together. I was glad to meet up with everybody, but I have to say, I’m happy to be home in my little cubby cave.

Justin:
Normally I’d beat you up about that personally. We talk about like, “Dude, you gotta go home. You miss your home,” or whatever, but I was missing home and when I got back here to Saigon, I felt comfortable. I was in my cave and had all my stuff and it was nice to be back.

Justin:
As a part of that monthly team meet up, we also did our customer mastermind. So this is our third customer mastermind. We did two last year and we did one this year, and we had just a little over a dozen people show up. A little over half of them were customers we worked with before and others were trying to get to know us and trying to figure out the industry a bit, and just had a blast with them. We rented a couple of villas for them and had everything taken care of, had some really good masterminds with them, full day masterminds and had some fun in the sun. It was really kind of a nice cap to the end of the month where all of us are working our butts off and we got to hang out with customers and get together with them, so that was fun stuff.

Joe:
Yeah. I love that. I thought it was great. I’m looking forward to doing the next one. When are we gonna do that? 2018?

Justin:
Probably, man. Probably 2018. I was thinking about trying to do something in [inaudible 01:04:04] but I don’t know. I’m looking at Joe. He’s nodding his head. He’s like, “Nope, we’re not doing that.”

Joe:
Nope.

Justin:
2018 sounds a lot better. It’s a lot of work.

Joe:
Yeah.

Justin:
Not so much for you and I. We just kind of show up, but some of our team is really busy with it. Yeah. Next thing, we are again on the Inc 500, buddy, for 2017. We made number 174 on the list. We actually did better. Our growth was higher than the year before, but we’re lower on the list. I think that’s just due to some of the competition, some of the other people on the list that crushed it this last year.

Joe:
Yeah. Maybe us promoting the list, more people are getting out there and signing up for it, which is why we dropped 13 places.

Justin:
I don’t know about that. I don’t know if they’re relying on Empire Flippers to promote Inc 5000.

Joe:
Yeah, I don’t think so.

Justin:
I appreciate the thought. But anyway, really glad we were able to make it. It’s awesome. One of the things that we do every year when we’re on the list, we take a look at some of the companies around us, and it’s really just amazing the diversity of types of businesses that are out there making money and growing. It’s really, really fascinating.

Justin:
The types of businesses we sell and we help people buy at Empire Flippers are just a sliver of that. There’s just a ton of offline businesses. A lot of them are tech, but a lot of them are just non-tech and they’re really interesting or not interesting niches. That’s really diverse. It’s amazing.

Justin:
Next point, Buddy. We had our best quarter ever in Q2 2017 by far. So we actually were able to close a total of 58 deals for Q2 for nearly $6.6 million for the brokers, so we absolutely crushed it for Q2. Definitely puts us well on our way toward our 20 million goal for 2017. I’d say Q3 is off to a slower start, but we had a bit of the July dull drums, so July is generally a slower month for us. Everyone’s on vacation or whatever. August started to pick back up. We’ll need to pick it up in September if we want to stay on track.

Joe:
Yeah. I agree. We killed it, crushed in Q2. Congratulations to the team. Great job there by everyone and thank you to all the customers who were part of that. But yeah, I expect Q3 to start off a little bit slow. Hopefully they’ll get hot here by the end of August and September. We’re putting the pedal to the metal and making it happen.

Justin:
All right man, so we tooted our horn. We’ve blown a little smoke. Things aren’t all cheery and rosy. One thing that’s not going very well is our investor program. One of the things we want to do this year is start a portfolio of FBA businesses. That was kind of the goal and we were looking to put a raise together. We had an operator that was initially gonna operate the businesses as we put the fund together, but problems in our beta test and our content sites basically is forcing us to just reconsider, actually just cancel the investor program with the FBA businesses.

Justin:
It’s really disappointing, and it’s disappointing that we’ve had some failure there in terms of setting up and running a fund, but it’s more disappointing ’cause I see the potential, I know some other people that are doing it and have had some success, and I see that being a really interesting future, a really interesting part of the future of our industry.

Joe:
Yeah. I’m disappointed as well, but honestly I think that it’s better for us for our focus. It was a bit of a distraction. Its absolute goal was kind of undetermined. It could have been very, very successful but it might not have been and based on our beta testing, looks like it was kind of middling anyway. So, it’s just not our expertise and we should focus on what we’re good at, which is the marketplace and the brokerage.

Justin:
Yeah. Ultimately what we’re good at and what we’re having a ton of success in growing in is sourcing deals, right? We’re able to get the message out to bring interesting deals in, to vet those deals and then to find the buyers to purchase them. So that’s something we’re good at and that’s something that we’ll be focused on in 2017 through 2018 for sure.

Justin:
One last bit of news. We are working on a video series for people looking to build and grow websites and online businesses and we think you’re really gonna like that. So if you’re more the video, you like to see what’s going on, I think this will be helpful. There’ll also be a podcast series and we should have that starting sometime in the next 30, 40 days or so, so we’ll give you a heads up when that launches. We’ll be sending an email out and sharing that. So if you’re interested, you’ll be able to take a look and check out our YouTube channel, which we do have by the way, a ton of seller interviews up. We’ve got testimonials and we’ve got some stories there as well, so it’s worth checking out.

Justin:
All right buddy, time for the listener shout section, also known as the indulgent ego-boosting social proof segment. First up we’ve got a five star iTunes review from Steve. Steve says, “Joe and Justin do a great job providing information regarding buying and selling online businesses. If you’re looking at either option, this podcast is a must listen. I’m happy I came across this. It’ll save me lots of money and make me more money down the road. Thanks guys. A suggestion for possible future episodes. We do a walk through, a case study or an example of more deals that went well or bad, I.E. the Russian scam episodes. That was a while ago.”

Justin:
Thanks Steve, first of all, for the five star iTunes review. Really appreciate it. If you’re listening to this and you dig the show, I would appreciate a review from you as well.

Justin:
Second, in terms of doing more podcast episodes overall, we do plan on doing that, particularly with case studies. In fact I have a case study planned I think you’re gonna dig. I’ll look for some that didn’t go as well ’cause I think those are interesting. There’s a lot to learn from people that bought or sold businesses or were building businesses and had run into issues or struggles they went through. Those are always things I like to listen to as a podcast listener, so those are the things I’ll look to add to our pipeline down the road now that we’re back in the saddle with the podcast.

Joe:
Yeah, Steve, thanks so much for the review. I agree. Case studies are cool. They’re actually a really fun podcast for Justin and I to do as well. The content is quite interesting, so I’m looking forward to doing that.

Justin:
I just hope we don’t have to get scammed over and over to keep doing those kind of episodes or really bad stuff happening to Empire Flippers. Those are kind of rare, hopefully. Let’s keep that rare, right? Let’s keep it more rare so it’s not that common, but when those major things do happen, we’re happy to talk about them and we’d love to get more people on the show that are open and willing to talk about their lessons there.

Joe:
Yeah. They make for very expensive episodes. That’s for sure.

Justin:
It costs us a bit. Got a couple mentions on Twitter from Unreal. It says, “Empire Flippers, guys, how accurate is your valuation tool?” He asks.

Justin:
Well, our valuation tool, it gives you a rough idea as to valuation. We have to enter certain information obviously, how much it’s earning, what monetization type it is, how old it is, that kind of thing. What it does is it’ll give you a range. So let’s say your range is 220000 to 260000. That’s a $40000 difference, but it is pretty accurate. The reason I say that is because we use our valuation tool to price and to ultimately list the businesses that get submitted with us. So we’ll run it through the tool, get that range, and then we’ll look at the specifics in the business to determine where on that range it is. Is it 220? Is it 230? Is it 260? Where in the range is it? So it’s a rough but accurate representation.

Joe:
Yeah, and the range is key. I remember quite some time ago, there was someone saying that no way could a calculator replace a human being with a lot of experience who’s been pricing businesses their whole life. That’s true, but at least-

Justin:
I don’t know. You know what? That just doesn’t sound right to me at all. What do you mean, it’s true? I don’t think it’s true. No, no, you take one guy with a bunch of experience versus another guy with a bunch of experience and they’re gonna give you varying valuations. So no, I’m not sure that that’s so true. I don’t know.

Joe:
Wait where I’m getting to, where I’m getting to. What a human being is doing is looking at some objective measures, then looking at this data in the market and then saying, “Yeah, the range is gonna be within here. I know that people are typically paying this much for these types of businesses, and that’s where I feel that it will fall.”

Joe:
That’s simply what our calculator is doing. What’s done during the vetting process is we hone in on that range based on where we feel that the market is going and based on some other information we collect from you about your business. So, yes, our valuation tool is very accurate because we’ve made it very accurate over the time by tweaking the knobs and making sure that the numbers that you input have a good basis.

Justin:
Yeah. It’s built on experience, right? So we tweaked it over time to adjust to varying market conditions and what we’re seeing in the actual market of what people are actually paying. So yeah, I think that’s interesting. I think they can actually get a lot better. I’m not gonna mention them yet ’cause I’m still looking into them, but there are a couple companies that are doing some really interesting stuff in terms of valuations that are valuation calculators on crack, not the crappy ones you’ve seen before. I think ours beats those hands down, but I think there are some that are surpassing ours and becoming really interesting, but I haven’t really dug into them yet, so I’ll mention them on a future episode. But yeah, there’s some really interesting stuff going on in that space.

Justin:
The next one is from James. Says, “Hi Justin. Does Empire Flippers have an affiliate program, please? Thanks.”

Justin:
James, I appreciate the question. No, we don’t have an affiliate program, and that’s kind of by design. One of the things we didn’t want was we want to control the message, right? So when you have affiliates, you have an affiliate sales team effectively. You have people out there in the market talking about stuff that you offer and trying to get people to go purchase.

Justin:
So, because it’s a non-related or I’m not a close sales team, your message can get distorted. So they can be inaccurate with what it is that you offer, not share the risks, just not be fair about what’s going on, overpromise and under-deliver, so it kind of sets us up badly. They’re doing that because they just want to get people in the door and they’re not really close to us.

Justin:
So that’s kind of a long-winded answer on why we don’t want an affiliate program. We do have a couple close co-broker relationships but those are pretty rare and with people we’ve done regular business with.

Joe:
Yeah. Even our co-broker relationships, we’re looking for people who are gonna bring in quality buyers or sellers, most of the time buyers.

Justin:
No, who do it, who do it now, people who do it now with us and we’re working with them regularly [inaudible 01:14:24].

Joe:
Right, and that’s why we have these deals with them ’cause we know that the business they bring in is quality all the time, and so we don’t have to worry about the message that they’re sending out or what they’re selling and that kind of thing.

Justin:
Aaron asks on Twitter, “Any new apps coming, man? Miss you at Hot Money’s Dulcet Tones.”

Justin:
Thanks Aaron. Really appreciate it. I don’t know about the dulcet tones, but I appreciate the message. So yes, we’ve got some new episodes, this one obviously and we’ve got more coming up, more in the works. I’ve been doing a couple of interviews and then Joe and I are gonna do a couple of shows with just us, so we’ve got some good stuff coming out for the podcast. I think you’re gonna appreciate it.

Justin:
If you’re missing me and Ace at least, you can go over and check out Web Equity Show. We just finished up season three, which is for sellers. So it walks you step-by-step from beginning to end on how to sell a website or online business. Go over to WebEquityShow.com and check out season three, or you can check us out at Empire Flippers for the podcast.

Justin:
We’ve got a ton of stuff mentioned online recently. We did a very popular Ask Me Anything or an AMA on Reddit. It made it to the first page of Reddit, the bottom of the first page, but the first page of Reddit for maybe half a day or so. I’ll put a link to that in the show notes.

Justin:
We also did some Facebook webinars with our buddy Anton over at JavaScript Lifestyle you might want to check out, and there’s a great write up about our process and our business over at Founder Mag. I’ll link to that in the show notes as well.

Justin:
That’s it for episode 169 of the Empire podcast. Thanks for sticking with us. We’ll be back soon with another show. You can find the show notes for this episode and more at EmpireFlippers.com/TaxJar and make sure to follow us on Twitter @EmpireFlippers. See you next time.

Joe:
Bye bye, everybody.

Speaker 2:
Hope you enjoyed this episode of the Empire podcast with Justin and Joe. Hit up EmpireFlippers.com for more. That’s EmpireFlippers.com. Thanks for listening.