Elizabeth Shea (00:44)

Hello everybody and welcome to Branching Out. How are you doing today Wayne? We're so excited to have Wayne Shepens in the office today to talk to us about his story of selling his business and exiting. So hello Wayne.

Wayne Schepens (00:56)

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

Elizabeth Shea (00:58)

Yes, we're excited to have you. I've known you a long time. And so we're, we're very excited to hear the story of Wayne, who basically built a PR firm specializing in the cybersecurity industry, Launch Deck has exited it and is still with the company today. So, um, we've known each other a long time. So I'm really excited to hear your story from a personal level and not just over a lunch or a couple of beers. so Wayne, let's, let's start from the beginning. Tell me a little bit about your story, how you got started. I you started with a software company and then pivoted. So, where did this all begin?

Wayne Schepens (01:28)

Yeah, thank you so much. And I'll have to start by saying that I wouldn't be here if it weren't for you and the great advice that you gave me along the way. and I think it's a really, I think it's a really good story. So I think I'm really happy to share it. So I'm a different type of PR person than typical. I'm actually an electrical engineer by background. I worked for the government for quite some time. I worked at NSA, ended up leaving and starting a

Elizabeth Shea (01:38)

There you go!

Wayne Schepens (01:55)

cybersecurity threat intelligence software company in 2005. And then I sold the majority of my share and stake in 2009. And I went to work for a PR agency because I didn't have another idea for a software company. And I really liked working in the startup space. And along the way, I established some pretty good relationships with reporters and analysts. So I worked with them for about five years and helped them build their security practice. And then

we decided as were getting bigger, there's only so many different clients that you can accept because of professional conflicts and those sorts of things, I spun off and started LaunchTech in 2014. I had the benefit of seeing all the good things that I learned from the prior agency, but then also thought about a little bit of a twist and things that I could do a little bit differently and better. And my main focus was ⁓

which is probably rare for most people in this industry, because of my experience in startups with a software company, I really established LaunchTech to be built to sell. So, you know, I focused really heavily on recurring revenue, retainer-based model, working towards gradual organic growth, you know, and so it kind of brought me where I am today.

Elizabeth Shea (03:03)

Mm-hmm.

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

Wayne Schepens (03:29)

Yeah,

I just, I felt like, you know what, we spent a lot of time at my prior agency focusing on delivering hours, you know, like managing hours, tracking hours. And what I learned throughout my time there was clients don't care about hours. They care about outcomes. So I built a small and agile business that was very low overhead.

I again I'm thinking exit like what would a buyer want to see they want to see constant continuous growth They want to see high margins. They want to see low overhead And they want to make sure and know that our clients are served well and so taking that mindset It's funny because over eight years I never had a client and I've worked man probably hundreds of clients or 60 clients or so I never had a client ask

show me your hours. How many hours did you work? It was all about building metrics towards, you know, accomplishments, milestones, deliverables, more along the lines of, you know, how many placements did I get? How many new relationships with reporters have you established? You know, all those types of things. How many, you know, things that you can tangibly measure for ROI versus hours and time. So,

That was one thing that I, and when you do that, you strip away a lot of overhead. When you're not tracking hours, you're not managing to hours, it gives you time. And my whole focus was make sure that all the possible work that was going on for my team was put towards the client. It wasn't helping us run the business. You I had support to do that myself. I had a HR and COO helping me run the business.

And then I had a business partner that worked with me to kind of make sure that everything was delivered appropriately, Kate Davis Shapiro. And thanks to her and the amazing team that we built, we were able to kind of grow organically and have a lot of recurring clients. We would help someone start, walk them through exit, and then they would come back in a new shape and form. And it worked out really well.

Elizabeth Shea (05:41)

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

Wayne Schepens (05:52)

Yeah.

It's interesting you asked that because there was a handful of things. One, it was always keeping a temperature of the market, like where things were going in terms of how the industry looked and how it shaped and how it felt. I really liked what we were doing, but I had done it for about, I'd say probably after about five years, I was starting to think, okay, are we getting big enough that we might be in the radar to be acquired?

I wasn't sure what the timeframe would be. I was guessing between five and 10 years, something along those lines. And so I actually reached out to you when I saw that you got acquired and was like, my gosh, that's amazing. How did that work? Who did you work with? You know, those sorts of things. So fortunately you introduced me to Tobin Leff, which is a &A firm out of Pittsburgh that really worked

specifically with agencies. And that's what you really want. You want someone that knows the business and you you can't just go to anybody. So I went to them and I had an original assessment. And at the time, I want to say we were probably about half the size of where we were when we ended up finally getting acquired in terms of revenue and personnel. And so it was cool though, because he basically, they basically laid out a roadmap for me.

Elizabeth Shea (06:57)

Right.

Wayne Schepens (07:16)

to say, all right, this is where you need to be in order to be attractive. And so I followed that roadmap. And it wasn't inconsistent with what we were already doing. It's just that we were too low in revenue to have a large enough EBITDA to make it worthwhile for an acquirer. And so I went back to work and we just kept slowly growing. And that's how it was. It was probably like...

Elizabeth Shea (07:22)

Mm-hmm.

Wayne Schepens (07:42)

When we first started out, was two people and two clients. When I tested the Waters, we were probably doing one and a half million in revenue and close to 50 % margins, but there was only a handful of people in the company. So by the time we kept chugging through, we hit COVID. And then COVID obviously shifted things, right? And so no one really knew what was gonna happen with that.

Elizabeth Shea (08:04)

Thank you.

Wayne Schepens (08:10)

It actually didn't hurt us. We pretty much stayed flat that year. It was probably our first flat year, but we were happy. We took that as a win, because you just never know what was going to happen there. And then the following three years, we had about 13 % growth each year. And so I thought, all right, well, we're getting close to not quite, but we're getting close to the numbers that the &A firm suggested, we might be attractive. And so I reached back to them.

And I said, look, we've had three steady years of growth. I think that's what you need. ⁓ We've got really good margins. Let's put a plan together.

Elizabeth Shea (08:44)

Right.

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

Wayne Schepens (09:10)

Well, I'll tell you what, the business spoke to me, right? So it basically was like, and I listened. And part of the reason for that is you can't, like our whole message was we want to be the best in cybersecurity, not the biggest. So we focused solely on our niche market. We grew to a decent size. I it was 12 people with 3 million revenue.

And we got to a point where, okay, well, now's the time for me to consider two things. One was, in order to grow further, I felt like I either needed to build a marketing arm and or business development function, or I need to partner with somebody that had that. And so that kind of led me to the conclusion that, you know, if I'm going to sell, I've got to continue this upward growth. I can't be flat for 10, 15 years. So

What am I going to do? And that's really what was the genesis for me saying, now's the time to go out on the market to see what we've got out there. And I will say that normally, businesses that get acquired need to be about five million in revenue, but that's because the margins are typically not as strong as ours. And so with the numbers that we had for margins, we became attractive. Well,

Elizabeth Shea (10:24)

Right.

Wayne Schepens (10:30)

At least the &A firm wanted to put us out there and see if we would be attractive.

Elizabeth Shea (10:35)

Right. I mean, the number is really the EBITDA. It's not so much the revenue. You know, they say revenue is for vanity and profit is for sanity and then cash is king. So that'll hold that edge. So out of curiosity, what else did you do to prepare? Because, you knew that you sound like you knew that you needed a recurring revenue. You knew you needed like operational efficiency, things like that. know, owner dependency is important. How much, how much of those things did you

Wayne Schepens (10:39)

Totally.

That's right.

Elizabeth Shea (11:00)

prepare for and what other sources did you rely upon to help you get there?

Wayne Schepens (11:04)

Yeah.

So the other thing I did was, so Kate started with me, right? And you know, for eight years before we got acquired, we worked hand in hand. And our whole objective was to build from within. We never had luck hiring folks from outside because quite honestly, they had bad habits from other agencies or they didn't do things or see things the way that we saw them. And so we grew people from internships,

to account directors, to VPs. And now the one intern that we took out of Loyola, she now is senior vice president, like today. And we had really good loyalty. we always, again, I'm big into sports, so I played baseball through college, I played independent leagues for quite some time. And I always felt like athletes were great. our first hires were...

Elizabeth Shea (11:40)

Wow.

Wayne Schepens (11:56)

lacrosse players, swimmer, ice hockey player, you name it. I have two daughters that played field hockey in college, son that played baseball in college. I know that mentality. I know that they can take the grind. can take a lickin' and keep on tickin', which you really need in this industry. ⁓ So we started to think of having a minor league. We're building a minor league so that they'll be ready to become...

Elizabeth Shea (12:15)

Right.

Wayne Schepens (12:21)

part of the MLB and my whole goal was to train Kate to be able to take over for me and train Taylor to be able to take over for Kate and train Cole to be able to take over for Taylor and all the way down the line. So we always were thinking in that philosophy. That was one thing that we did to try to set ourselves up so that I wasn't completely necessary. That was the goal was to work myself out of a job so that someone would say, okay, this is a business, not just somebody's name.

because that's where you get in trouble, where it's just relying upon the owners. So that was really good. The other thing that we did was, and again, this was through the help and guidance of the &A firm, I felt like we had a pretty good handle on, you know, invoicing, collections, all that good stuff. But our back end, I'm not an accountant.

I had an accountant work for us and we had a CPA along the way to kind of put things together. But the guys that Tobin left, they like built the book. Like they made sure they went through all the numbers. I gave them all the financials and they aligned everything and then validated our numbers. They validated our margins because it's not just about what you think your EBITDA is. It's what it actually is when after you take into account all the tax laws and everything else that's out there. And then finally, I'll say one more thing.

Elizabeth Shea (13:42)

you

Wayne Schepens (13:44)

I knew that we were going to be in great shape with our client portfolio because we had so many returning clients. We had an average of over three years retention, which is pretty insane considering a lot of the companies we worked with were early stage startups. So you would typically lose a client by them running out of money, them getting acquired or a new CMO coming in, which you know, they only last about 18 months or so, and they bring their own pet agency in.

Elizabeth Shea (14:10)

Thanks.

Wayne Schepens (14:12)

So we really had a strong retention rate. We had really good customers. And I will say during the acquisition process, the buyer of our company came back to us and said, we've never had such rave reviews and referrals get back to us so quickly during the due diligence process.

Elizabeth Shea (14:34)

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

Wayne Schepens (14:45)

I would say the

team knew our destiny,

but I didn't get into details with them until we were really far down the road just because, number one, they had to be involved in the due diligence, but number two, these things could go away quickly. They could show up and go away very quickly. I didn't want to worry anybody, give anybody any undue worry, but they knew

Elizabeth Shea (14:52)

Okay, yeah.

Wayne Schepens (15:15)

what the destiny was and what the plan was from the beginning. And they knew that I also was looking for a partner that would take care of them going forward as well. So it wasn't going to be one of those buy and strip. as far as the team goes, that's where I stood. When it came to the clients, we got to a point where during due diligence, I didn't bring it up until during due diligence, but I needed a lot of folks to, you know,

be a part of that process. And so I would call them separately and kind of let them know what was going on and that we were looking for a strategic partner and someone had, expressed heavy interest and we were kind of walking down that path. And it's funny because everyone was so super supportive and excited for us, which is a really cool thing.

Elizabeth Shea (16:04)

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

Wayne Schepens (16:12)

so that's an interesting question. we got a lot of interest from like bigger agencies at first. And I had a couple discussions with them, but I'll be quite honest with you, the bigger agencies, they were mostly looking for a deal. They're looking for somebody that's struggling and dying so they can get a good deal.

Elizabeth Shea (16:31)

Mm-hmm.

Wayne Schepens (16:33)

and kind of take advantage of their customer base. And that wasn't us. So I had a couple meetings, actually had a couple visits with some agencies. And when I say bigger agencies, I don't mean PR firms. I mean like more comprehensive agencies, like marketing agencies that did website development and all that sort of stuff. So then finally, I was like, isn't super interesting. I don't think they get it.

I really like the focus on the cyber stuff and I don't everybody else wants to spread us out. I don't think that's our strength. So it wasn't worth me looking at or considering those options. So they opened it up to PEs and it's interesting when they started to do that we got a lot of interest because PEs care a lot about cyber, right? So I talked to a bunch of them and

Elizabeth Shea (17:18)

Right.

Wayne Schepens (17:24)

You know, it's interesting because some of them that I spoke with, the companies that they previously acquired, I spoke with them and they actually had dips in their revenue after they got acquired. So that concerned me. ⁓ But then I was fortunate because out of the blue came this company called Cyber Risk Alliance and I was like, I know those guys, I've heard of them, I don't know them personally, but I know of their events, I know of their activity.

Elizabeth Shea (17:36)

Mm-hmm.

Mm-hmm.

Wayne Schepens (17:51)

And so they expressed interest and Tovan Leff said, would you like me to share the book with them? And I said, sure, let's go for it.

Elizabeth Shea (18:00)

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

Wayne Schepens (18:06)

Yeah.

Yep, I am. Yeah, so I'm

here at least through June. That's when my earn out ends. So we closed the end of June in 2023. But we have plans for, you know, growing LaunchTech still. And so we're trying to implement new plans there where we're expanding and growing. So that's exciting. And I will see where that ends up. And then I'm also advising a handful of other cyber startup companies and really enjoying

you know, the time that I have right now.

Elizabeth Shea (18:47)

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

Wayne Schepens (18:50)

I

Yeah.

Yeah, thank

you. And like I said, I really appreciate your support and help along the way. It was good to have somebody to bang ideas against as we were going through it because doing it on your own without an example is really difficult. So it's helpful to have other colleagues out there that have been through it and know how to advise and those sorts of things.

it's interesting

When we first went through the models, we were looking at these models and it looked like, and I won't get super specific, but I'll share some insight. We looked at the models and you know there's different ways that you can go through an acquisition. And I think Tobin Left did a really good job of playing it very conservative for us. So my expectations weren't crazy. So we were looking at like, four,

Elizabeth Shea (19:49)

Yeah.

Wayne Schepens (20:06)

to four and a half to maybe a best case scenario, five X on EBITDA. And we were looking at, okay, maybe you get a third upfront and then you, you know, earn out the rest of it. And so I was good with that. Like I had worked through the numbers. I thought it made sense. And I'll be honest, when I went out there, I did get a couple offers.

Elizabeth Shea (20:19)

Mm-hmm.

Wayne Schepens (20:30)

early from strategics other agencies and they weren't even as good as that. And I was like a little bit like, wow, that's crazy. And that's why I mentioned, I think they were just looking for somebody that was looking for a way out or they were struggling. When we got into the discussions with the PE firms that know cyber, know, the numbers seemed much, more in line with what we were thinking about. And, you know,

I think because there was such great alignment with Cyber Risk Alliance, we had really good margins that kind of matched the direction that they're looking for. I was fortunate to be able to way outperform that five and six number with my total package and get the majority of it up front. So it really worked out well for me and for the team, think. So everybody's been taken care of.

Elizabeth Shea (21:09)

you

Nose.

Wayne Schepens (21:21)

there are challenges and we'll talk a little bit about that with the integration.

Elizabeth Shea (21:26)

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

Wayne Schepens (21:35)

That's true.

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

Elizabeth Shea (22:11)

yeah, I heard all too well.

Wayne Schepens (22:16)

like what's it going to be like? whether that's to your clients, what's it going to be like? Whether that's to the industry, what's it going to be like? You know, are you being absorbed? Because there is a stigma out there that when a bigger company acquires a smaller one, the agility goes away. The company gets buried. and so there is a presumption of that. There's perception.

And if you don't counter that perception, perception's reality, right? So we worked real hard to kind of keep our brand because we felt like we built a really strong brand with LaunchTech and we felt like if it just got merged in and disappeared, there's so many other things going on at CRA, how are they even going to know to reach us? So we worked really hard. We kept our emails, you know, for a while,

But then, the challenge, when I say challenges, here's what I mean by challenges. I worked independently for eight years on this business. I did all the extras, and it was easy. I spent like a half hour doing invoices once a month. Now I got to plug everything in the sales force. I got to work with a finance company or a finance organization to make sure that they know how to invoice and collect the way that we do.

You know, they do things differently because they have different processes and procedures and tools. So we have to learn all those things and it's a heavy burden. And then on top of that, I never really projected my earnings. I just worked hard, enjoyed the journey, coddled our customers and things worked out. But now I had to learn how to project and predict and not something I learned that I'm not good at that.

Elizabeth Shea (23:52)

Right.

Wayne Schepens (24:00)

That's not something that I inherited from my previous roles. So I had to completely learn a whole new skill set, which has been a challenge, no doubt. So you go from no overhead to lots of overhead, and it can be frustrating as an owner. So that's one piece of advice that I would give is you hear from everybody the integration is going to be tough. You hear from everybody, make sure you're happy with the

first part of the deal because you never know what's coming after. And as we talked earlier, you mentioned that not many people stay the full term of the year now. And I've been fortunate enough to do that and plan to continue if possible. But I will say that part of that is because there's just so many extra things. We had in our company someone that ran HR. Again, my objective was

keep our employees out of doing all that stuff, have them working completely with the client. Now, we have an HR group and typically if there's a problem with something, they give you a phone number to call to go figure it out, which is normal in most businesses now and I totally get it because there's a hundred and some employees, you can't handle each situation on your own.

So it totally makes sense. It's just completely different than what we're used to.

Elizabeth Shea (25:27)

So what would you tell yourself, you know, 10 years ago? What would you tell your former self that you might want to look out for or prepare for that would be important to you? Because I totally agree with everything you're saying.

Wayne Schepens (25:37)

Yeah, I mean, I'll be honest

with you. Like I am. I could not have done it differently. I could not have done it. I don't think I could have done it better. And it's not because of me. I just, there's a lot of things. My wife and I always talk about this when people say they made out well. A lot of people say, well, they work hard. And I'm like, you know what? lot of people work hard, like a lot of people work hard, make a very modest salary. And it's not that it's luck.

It's timing, it's working hard, it's taking advantage of opportunities, it's working with the right people, it's knowing the right people. There's so many aspects to it. And I was just very fortunate to have like a really good group. I had a really strong technical background that kind of set me apart. So I'd say the biggest advice is how do you set yourself apart from everybody else that's out there?

and for us, it was our philosophy. was, look, I'm a technical guy. I know the space really well. It's very competitive, lots of overlap. You got to know the space really well to do well at it. I'm hiring people that can learn and can take a beating and can come back and come back smiling and do whatever you need for them. We'll work with you like we're a startup because we adapted to their environment.

things like that where you can't just always do what you think industry does. This is a little different and we work things a little different because most people would say you don't want to focus on one industry. You want to branch out and cover healthcare, media, whatever it may be, finance, whatever it may be. But we just went strong at cybersecurity and it worked for us.

Elizabeth Shea (27:19)

Right.

Yeah, there is the, you know, the adage that, you know, the closer the niche and you can be the best at that, the better you can potentially, potentially do and receive a much higher multiple potentially because of that. So it looks like you had a really nice marriage. You really took the time to find the right suitor and to go down that path. It seems like you did a whole lot of things right. So congratulations to you. I do know that there was a stat I read recently that about 10 % of business owners actually stay around after a year. So.

Wayne Schepens (27:39)

Yeah.

Mm-hmm.

Elizabeth Shea (27:56)

You're one of the exception, you're one of that 10%. And it seems like you're approaching the end of your earn out, so hats off. Is there anything next for you? Have you thought about what's next down the road?

Wayne Schepens (28:06)

Yeah, it's hard to say. I really like the team. I want to make sure the team is set up well. I want to make sure, like I'm competitive guy, so I want to make sure that what we built is sustainable before I do anything different. So again, we have some really cool ideas and plans for implementation over the next year to grow. I'm working with some other companies on the side as well. And then finally, like...

I love coaching high school baseball. It's awesome for me. It's so much fun. my wife and I spent the winter working remote out in Utah and I skied 25 days this year and I love that too. So there's so many things to do and enjoy and there's so many opportunities. You know, it's hard to say.

Elizabeth Shea (28:35)

⁓

And you're still young, so there's plenty of life ahead of you, ⁓ what a great story. Yes, exactly. Exactly. All right. Well, thank you, Wayne. You've been just an amazing guest, and I appreciate your hat tip. How can people reach you if they wanted to potentially ask you for their own counsel? LinkedIn? Do you ever listen to LinkedIn?

Wayne Schepens (28:52)

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

well, yeah,

LinkedIn is certainly the easiest way, no doubt. Yeah, just message me on LinkedIn, that'd be great. That's the one thing, again, as you mentioned, or as I mentioned, I'm a coach. I love to advise, I love to help people get jobs. So along the way, man, I've had the opportunity to get people internships and jobs and, know, lining people up with their next employment opportunity is super exciting for me.

Elizabeth Shea (29:11)

Okay, terrific. right. All right, terrific.

Wayne Schepens (29:35)

If anyone's looking for any career advice at all, especially in this industry, I'm really happy to help.

Elizabeth Shea (29:37)

That is cool.

Good for you. That's really cool. I'm certain you'll have some people blowing up your inbox. Appreciate it. what a great story, Wayne. Okay. Thank you so much.

Wayne Schepens (29:45)

Sounds good. Alright, take care.

We'll see you. Bye bye.