Jon: Getting liquidity out of a business is not easy. Going through that process and actually getting liquidity at the other side and being through that was huge. It was just awesome to be able to experience that at least once in my lifetime.
Is there a right time to sell your business? This is a question that many founders wrestle with. Like most things in life, the answer is complicated, because there are so many factors to consider. As you’re about to hear in today’s story, there’s so much more to this decision than how much cash will end up in your pocket.
I’m Lexi Grant and you’re listening to They Got Acquired. A show about life-changing business acquisitions, and founders, who don’t follow the Silicon Valley narrative.
Today, you’ll hear from Jon Hainstock, the co-founder of a scheduling software company called ZoomShift. You’ll learn about his journey to achieving what he thought would be the American Dream — and the 7-figure exit that gave him a brand-new beginning.
Lexi: In the end, the buyer gave you several deal options, but eventually you decided to go with a seven-figure offer that allowed you to exit right away and keep a minority stake in ZoomShift. Was this what you had originally wanted and how did you make that choice?
Jon: We wanted a slightly bigger stake of the upside moving forward. There was another deal, another offer that they had kind of put together that was closer to 50-50. But the actual cash part of the deal was not there. It just wasn’t going to be good enough.
We didn’t actually have a specific deal in mind that would be perfect for us, but it was just trying to work out the details of the equity stake moving forward, and the cash. Those we the main two variables we were concerned about.
This was the first acquisition experience for Jon Hainstock, and his co-founder, Ben Bartling. As all firsts go, there was a lot to figure out…
Jon: We didn’t have any support. That was something that in hindsight was a bummer.
For nearly a decade, they’d been heads down building their company, ZoomShift. As the sole employees for most of this time, Jon and Ben spent tens of thousands of hours together strategizing, experimenting, and then building and re-building the software. All so that ZoomShift would become the go-to scheduling tool for small businesses with hourly employees.
Lexi: Were you in Ben on the same page about what you wanted?
Jon: Yeah. For the most part. Yeah. We definitely got there. The hardest part was figuring out if we wanted to sell or not. That was the hardest decision.
Any founder would understand why this was a tough decision. Because even if you want to exit a company, you need to make sure the timing is right. In the case of Jon and Ben, ZoomShift was also a dream come true — something they had talked about and imagined together since their mid-20’s.
Jon: There was this big open space that we would actually throw the football around. It was huge and it was just the two of us there.
Jon was the Director of Marketing for an accelerator program called 94 Labs when he met a software developer named Ben Bartling. Ben’s project, ZoomShift, had just received a small seed investment and he had planned to take it through 94 Labs. That is, until he got the news that the accelerator was closing.
Jon: The investor there had lost all of his money and he shut the whole thing down. I was the last person at 94 labs and Ben was just kind of hanging on trying to figure out what he wanted to do next too, because he wasn’t going to have investment moving forward.
Jon and Ben spent hours talking about what they wanted for their careers and realized that they had a lot in common. They had their eyes on eventually running a software company, but as a starting point, they launched a marketing agency called Tailwind Creative.
Jon: We knew that we worked well together. We knew that we aligned well together in terms of values and kind of what we wanted out of business. So we just kinda went in head first and decided we’ll try to make something happen. We didn’t even put a time frame on it, we just wanted to try and figure something out and have some fun.
So Ben and I ended up, creating a new business to do some SEO. Then, we started taking on web development and design projects. Most of those were like WordPress things—minor, simple web stuff.
I would do some of the coding in there and just struggle through and try to learn it. But those skills didn’t really come until later. We built this SEO grading tool and a couple of other little things like that. I got a chance to learn a ton from him on how to put these applications together.
Lexi: Am I right in thinking that you were using some of the funds that you’re making through the agency to fund your time spent on ZoomShift?
Jon: Yeah, 100%. We were just using the agency as a means to kickstart our next software. We didn’t want to be an agency forever, trading hours for dollars. We eventually transitioned, but it took a long time.
For the next two years, Jon and Ben worked side by side, splitting their attention between the marketing agency and building ZoomShift. They had some momentum already, thanks to a five-figure seed fund from a 94 Labs investor.
But they still weren’t making enough to fuel both endeavors and pay themselves a decent salary that would take care of things like health insurance, PTO, and daily living expenses. This was tough, especially since Jon was the sole financial provider for his wife and brand-new baby, a daughter.
Jon: My wife and I burned through a bunch of savings at that time. Previously, we had saved up some money from doing photography wedding shoots and things like that, and just being frugal. But we had burned through a majority of that over the next couple of years, as we tried to stay afloat. It’s not like we were crushing it on the agency side at all.
In addition to the financial piece, Jon and Ben were essentially building two businesses at the same time. They played to their strengths though, with Jon taking over all the agency work, so Ben could use his web development expertise to work on ZoomShift. This was supposed to be a short-term arrangement, but of course — it took longer than either of them expected.
Jon: Both of us were just trying our best to keep both things running. Just a couple of spinning plates all the time. I think that for us the biggest challenge was the focus—not being able to focus full-time on one thing and do it really well. That would kind of eat at you a little bit because you wanted to do it well and pour your energy into it.
Lexi: I’m wondering what appealed to you about working with someone else versus growing something on your own.
Jon: I wasn’t thinking super strategically about the partnership, in terms of making more if I went solo or making better decisions on my own.
I always saw Ben as somebody I really enjoy working with. We connect really well. And I think we make better decisions together if we’re able to work through stuff together. It really did pay off over time because just having a sounding board there count constantly somebody in your corner, somebody who you’re kind of wrestling through all this stuff with, was huge for me.
Early on in their business, Jon and Ben bought back the ZoomShift shares from the original investor so they could be 100% owners. Not only did this make their 50/50 partnership official, but they also agreed they would self-fund from here on out.
And the first step? Growing the company’s reach through SEO, or search engine optimization.
Jon: ZoomShift just was one of those things that grew organically because of search. So we did a lot of optimization around the on-page side of things.
We were able to get pretty far just there, probably because of the age of the site being around for a while and the competition wasn’t quite there yet. And we had a handful of links that would come through organically. People would just kind of find out about us and we eventually redid the site a couple of times to optimize for other keywords. But, we had always done pretty well organically, just naturally, which was great.
Lexi: Did that fuel your growth? I know it’s slow growth, but did it feel your growth in the early days?
Jon: Yeah, 100%. It was our primary channel. Still remains to be to this day. We had tried advertising with Google Ads and eventually doing some Facebook stuff, but the one that doing the best for us was always organic.
Lexi: As the years went on, there were probably a lot of competitors in that space. How did that change? How did you approach it?
Jon: Yeah. So there were more competitors. We didn’t change too much of our strategy there. But what we noticed is that a lot of our competitors were offering a free plan. I think that was probably the biggest shift for us as more competitors entered the market was trying to figure out how do we position against folks who are free. We felt almost obligated to do the same.
So Jon and Ben tried offering a free tier. But it didn’t provide the kind of conversion rates that they had hoped for, so they put that strategy to bed. They switched marketing tools, got software review sites to feature ZoomShift, and tried attracting users with a free companion mobile app.
These experiments were all aimed at achieving growth. They even tried bringing on a marketer, only to realize that they weren’t really prepared to make that hire.
Jon: We just wanted somebody to fix our marketing problems. That’s not a great place to try to hire somebody. So, we hired somebody too fast and we had to let them go. That was sad.
Even with all of these initiatives, the company’s biggest driver for customer growth continued to be search. So Jon and Ben turned their attention to making ZoomShift the best scheduling software it could be. They went through cycle after cycle of rebuilding the product. As a two-person team, this was grueling work.
Jon: The building period is so exhausting because it’s all-encompassing. It’s all you’re thinking about. It’s all you’re dreaming about, in a way. You’re just trying to get through to that next phase. It’s really difficult to draw a line in the sand and say, “This is where it stops.”
You go into them thinking that they might take a few weeks and they ended up taking months, and that kills morale. It just sucks the life out of you when you’re stuck in this mode. Building versus getting it out in the world and iterating and seeing how people are using it, and being able to tackle new problems. We did it multiple times and it was such a grind.
Lexi: What were the most fun parts about the building period?
J: The most fun parts are that technology changes when you find some of these paradigms—the pieces line up and things are actually working in tandem. That’s a great feeling.
Redesigning is fun, too. For me, pushing around the pixels and getting to an experience that feels good. Product design is fun, it’s just really hard. We gravitated towards that as product people—both of us kind of being designers, developers, or whatever. It was something that was a fun thing to be in when you didn’t feel like you were in it forever. So, it’s imaginative. That building process is addictive. It can just wear you out if you’re in it for too long.
But sometimes knowing what’s “too long” is only clear in retrospect.
[music starts to signify a transition]
And not just when it comes to building code.
Jon: I just kind of have a restless personality, which I feel like has benefited me in some ways. And then in other ways it, it doesn’t.
Lexi: Yeah. I feel that.
After the break, you’ll learn about the moment that Jon and Ben knew it was time to move on from ZoomShift, the offer that they didn’t take, and the 7-figure deal that almost fell through.
AD BREAK
Hey, I’m Bobby Burch. I’m a reporter with They Got Acquired, and I’ve been covering startups and entrepreneurship for the last decade.
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Jon and Ben knew they would eventually exit ZoomShift. The tricky part was figuring out the right moment.
Lexi: In 2018, a private equity firm called Ramp Ventures contacted you about buying Zoomshift, but you decided not to sell. Can you tell us why you pass on that offer?
Jon: Yeah, so that was during one of the build periods and we wanted to see the build through and to see if we were able to get some more growth before we exit it, which was wise in hindsight. The real reason around it was that we knew we weren’t going to get the number that we were happy with.
Even though they ultimately passed on that initial offer, Jon and Ben were intrigued. They knew that one of the co-founders of the PE firm was a former growth marketer for a ZoomShift competitor. He’d been incredibly successful at it, and Jon and Ben wondered whether they might be able to broker some kind of strategic partnership.
Lexi: Was it a year later when they approached you again and you took them a little more seriously?
Jon: Yeah, it was about a year later.
Lexi: What was different about that time?
Jon: We were done with the build, and we were reevaluating what we wanted to do. The build had taken its toll on us.
We were also really curious about what the potential of working with this partner Ramp would look like. Maybe we could partner with them or find a way to structure deals so that there’s tons of upside if it goes well.
It just got into a lot more serious of a conversation because we were like at a good point. From the build standpoint, we weren’t really heads down into product.
If they were going to make a deal with Ramp Ventures, the firm wanted to move quickly. But Jon and Ben weren’t sure. Was it really the right time to sell? How would they make this decision? The two founders had different ideas about how to move forward.
Jon: It was stressful. Like it was probably one of the first times where my business partner and I were kind of on edge with each other a little more. You could tell there was more tension. There was a lot of back and forth between multiple parties, and it was stressful.
I remember sitting outside of Stone Fire pizza, which is this place where you go hang out with your kids it’s got all of this fun stuff that they can do. I remember sitting outside like on calls with my business partner or people at Ramp all day long while I’m supposed to be hanging out with my family at this thing.
I don’t want to relive that. It was definitely really difficult. There were so many emotions, too, of just trying to figure out if we want to sell or not. But we felt like we had to figure it out. We had to make a decision.
They had hoped to exit with high equity and a good chunk of cash. But the PE firm didn’t offer the amount of equity that they wanted. There was a lot to consider.
Should they fight for more equity and lose out on cash? Or take the offer with a stronger cash option?
Jon: We were kind of at an inflection point to decide if we really wanted to invest another two, three years to start hiring some folks, or try to grow this thing and then exit and another three or four years. Or do we want to take some money off the table now?
It’s a hard call to decide when is the right time. There’s no good answer to that. You have to figure out for yourself where you’re at psychologically, how you’re feeling about the business, where the business is at—all those kinds of things weigh into that decision.
In the end, Jon and Ben decided to take the higher cash option. It was for seven figures, with a percentage paying out 18 months after their exit — and they still got a minority stake in the company.
It wasn’t exactly the deal they’d had in mind initially, but it was still a strong offer — and they were ready to move on. The last few years had taken a toll. Even with the addition of a customer service specialist to their two-man team — Jon was just plain burned out.
Lexi: I found something you wrote that was interesting. You wrote: “Despite having a great salary, flexibility to live the four-hour work week, I decided to exit the company that I’d worked on for nearly a decade. From external appearances, I was living the American Dream, but inside I was struggling.” Can you explain that? How were you feeling?
Jon: I was having a lot of these existential thoughts and conversations where I didn’t really want my identity to be wrapped up so much in what I was doing.
I’d always tied my identity to owning a software company and getting to that next financial milestone, even if it was just like an MRR thing or ARR.
I realized that after kind of achieving a certain level of those quote unquote successes, it just lost its luster for me. It just didn’t have the same level of satisfaction as it did in the early days when we were throwing football around upstairs and having beers and trying to enjoy the journey. I couldn’t muster the excitement to work on it very much longer. That’s kind of when I realized that an exit is necessary.
Jon and his family, they had been through a LOT while building this company.
He and his wife struggled with infertility after the birth of their first daughter, and then right before they finally got pregnant with twins, Jon’s dad passed away.
Jon: A number of major milestones and things that kind of happened over the course of those years, like doing ZoomShift and Tailwind. Then the twins came, and that was just like insane insanity. It was just crazy. It was hard on us.
Lexi: I’m curious in a family like that where most of the earning responsibility is on you. I think there’s pros and cons to having two parents who work versus one parent who works in one who takes care of the kids and all the family stuff. I’m wondering how that affected your ability to take risks as an entrepreneur.
Jon: Yeah, it’s interesting. It’s not something that weighs me down a ton. It’s something that I feel good if I can do that. If it’s more of an opportunity, less like an obligation.
Even if we were both working, I would have wanted to do everything I possibly could to set our family up well financially. It just felt more innate. It felt more like something that I had grown up with.
My wife is just always been interested in that. That was very clear from the first time that we talked about having kids that she wanted to stay at home with them. She wanted to focus on that. I didn’t know if that was going to change when we had them and she’d realize that kids are crazy—they’re all up in your face and, you have no time to yourself, but she handled it really well.
I think it was good timing with the exit because there was just a ton going on and I, and we needed a win. We needed something. I feel like as a family to put up a bookend to the past 10 years.
So Jon and Ben signed the Letter of Intent, and the lawyers got to work on the deal. But just when they thought this whole ordeal was finally behind them, the deal hit a snag. A big one. One that could mean losing hundreds of thousands of dollars.
Lexi: A problem popped up around the qualified small business stock, which is QSBS can you explain that? What happened?
Jon: Yeah. So, QSBS is a really great thing that is set up for entrepreneurs and investors, where if they have the original, issued stock, and you hold it for a period of five years, and your business has to be incorporated like structure wise has to be a C Corp.
We figured that we’d be able to sell, ZoomShift as a stock deal. Traditionally, assets of our size, like businesses of our size are sold as assets. So, you can be sold as an asset or sold as stock where the other purchase, the other purchaser buys the stock in the company. And so it just threw a wrinkle into the deal.
But Ramp Ventures wasn’t as familiar with QSBS. They’d done mainly asset purchases in the past because stock deals aren’t as common for companies as small as ZoomShift. The deal had already taken longer than they wanted. And Jon and Ben knew they were in hot water.
Jon: We were thinking we were going to get a stock deal where we would qualify for QSBS which would allow us to not have to pay capital gains tax on the sale. And they were under the impression they were going to buy it as an asset, where they get the tax benefit.
Lexi: So there were some days when you didn’t know if the deal was going to go through. What was that like?
Jon: It was terrible. The hardest part is kind of feeling like helpless during the situation. There’s not a lot you can do to control it; you’re at the mercy of two groups of lawyers trying to protect each other’s interests. It was just a terrible feeling like, “Man, this thing we’ve put in a couple of months into that process.” We felt like maybe this thing wouldn’t happen.
It was really difficult to navigate that emotionally. The biggest hiccup was getting the lawyers on the same page. There’s not a lot you can do, except try to instruct your lawyers to just go along with things, even though they might not think it’s the wisest counsel.
It’s like a weird thing where you’re trying to advocate for the deal to get done and they’re trying to protect you, and you have to try to take their advice cause you don’t want to get screwed, but you also want to make the deal go through. So it’s a really weird situation.
Eventually, the lawyers worked things out, and Ben and Jon were able to close and take advantage of QSBS, as they’d hoped.
Lexi: You did sell though in January of 2020, how did that feel? When the wire finally hit your bank account?
Jon: Yeah. That part was pretty cool. That it actually happened, everything went through and what seemed like an eternity actually ended up having some sort of a closure.
But the pandemic was there, so it wasn’t like we were gonna do a bunch of different things. I remember we just went on a walk with my family and kind of talked about it and stuff. There wasn’t a big celebration in hindsight. I wish we would’ve spent some time together.
Ben and myself spent some time together before things got shut down and all that stuff and kind of reflected on the good times and been able to celebrate. We didn’t really have a lot of that.
When Jon and I spoke for this interview, it had been nearly a year since the deal closed. And since it had been such an allusive question for him, I was curious. Did he think they sold at the right time?
Jon: Yeah, it was good. It felt really great to to exit and then prepare for the transition, which was very straightforward.
That was something that was great working with these buyers—the transition, in terms of expectations, was very good. There wasn’t a lot required from us versus transferring over some logins and some credentials. That’s the beauty of selling a digital asset.
Lexi: What are you most proud of?
Jon: Probably just the persistence. Like the patience that we had to stick it out. There were multiple times along the way that we considered shutting the whole thing down or autopiloting it. So, I’m just thankful that we had the patience and the persistence to actually see it through. That was the biggest thing for me.
Now, Jon works in a role he probably would never have imagined when he was going through his acquisition: he’s an advisor at a brokerage firm called Quiet Light. He helps founders figure out when or if they should sell. It’s rewarding work, because Jon gets to be the guide and the sounding board that he wishes he had when selling ZoomShift.
Lexi: What kind of questions do you ask founders to figure out if they’re ready?
Jon: Why sell now? Why not wait? What’s what’s really on your mind when you think about what’s keeping you up in terms of this business? Why not automate this? Why not hire somebody here and there. Is it driven by FOMO?
I.e., when their friends got an exit for a 4 or 5x, and they just don’t have time for it. There are so many reasons why people might want to exit. So it’s looking not only at the financials and the operations of it, but then also understanding what’s their main motivation here.
In addition to helping founders think through their own motivations for selling, Jon also offers tactical advice. For example, how do you know when it’s the right time to sell? While the answer of course varies depending on you and your business, here are some of the factors to consider: First, does your business show steady signs of continuing growth?
Jon: The main things that buyers are looking for are the risk that they would be taking by purchasing your business, if they’re able to make their investment work out in their model, and the growth of your business. So, the ideal time to sell is when you’re seeing some sort of year-over-year growth or month-over-month.
You can mitigate some of the risk factors by staying in business, by simply being around longer, or you can mitigate some of the risk factors by having good standard operating procedures and things in place there.
Second, are your business operations set up for a clean exit?
Jon: It’s also just tidying everything up from an operational standpoint, making sure your books are in line is probably one of the best things you can do, paying a good accountant to get your books cleaned up well so that when you get in those conversations and you go through due diligence, you don’t get stuck there.
And finally, can you get multiple offers on the table?
Jon: Similar to buying a house or something like that, you can kind of lever an offer against another one. Without that leverage, you’re in a weaker position. Before accepting any sort of LOI, make sure that you are having those conversations with interested buyers or folks who you’ve had kind of in your network, reach out to you in the past—cause competition drives price.
Selling your business — especially if it’s your first time — can be daunting.
But my hope, is that by hearing stories like Jon’s on this podcast, you’ll know more about what to expect from the process.
And best-case scenario?
At some point, when both you and your business are ready, you’ll go through your own life-changing acquisition, and walk away with confidence for a brand-new beginning.
Thanks for listening to They Got Acquired. I’m Lexi Grant, and if you want to learn about more business acquisitions like Jon’s, go to TheyGotAcquired.com and sign up for our email newsletter. We’re building all kinds of resources for founders, investors, and anyone who’s interested in building and selling online businesses.
And before we wrap up, I want to thank Jon Hainstock for coming on the show and being so open about his experience with selling ZoomShift. You can look for ways to connect with him in the show notes.
This episode was produced, written and sound designed by Laura Boach. If you liked this story, please share it with a friend, and leave us a review on Spotify or Apple podcasts. With a podcast as new as ours, every single share and review truly matters.
Thanks again, and we’ll see you next time.
