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The Founder of MaxCDN Explains Why He Sold a Rapidly Growing Business
David Henzel is the founder of MaxCDN a content delivery network that is behind many WordPress sites. The business was doing really well and things were moving along and growing when David found out that his wife had cancer. This was an earth shattering moment for David and forced him to take a step back and reevaluate his priorities. He knew it was time to sell the business.
David is a serial entrepreneur who has built and sold businesses. He is also extremely proud of how he has achieved work life balance and promotes family time. He is also the host of the Managing Happiness Podcast. Today, one of the things we’re going to talk about is reasons why people sell their businesses. Sometimes people don’t even know why they are selling, but they know it’s the right thing to do. For David, the reasons were pretty obvious. We discuss reasons to sell, the selling process, and what to do when life gets turned on its head.
Episode Highlights:
- Planning and having everything in order with your business relieves a lot of pressure if and when you need to sell.
- MaxCDN had over 15,000 customers and was integrated on over 6 million websites.
- David knew he wanted to create a larger impact on the world and decided to sell the company.
- Motivations for selling businesses usually tend to be quite personal.
- David had received other offers to buy his business, but when his wife’s illness was diagnosed he knew it was time to do something more in line with his life’s calling.
- The selling process was quite involved and distracted him from the day-to-day business.
- It’s a lot of work to sell a business.
- David wanted to find something where he could offer more value to the world.
- He created a course to apply business principles to family life.
- He also has an outsourcing business and he mentors other business people.
- David is an entrepreneur and is still drawn to business and business principles.
- Because of the resources and knowledge that David had it was easy to start a new business.
- Entrepreneurs see opportunity everywhere.
- How the needs of a buyer are often different than the needs of the business owner.
- When you start a business make sure you spend money on a lawyer. It’s so much easier to have a custom tailored operating agreement for your business.
- David spends time making sure that processes are in place, so he can work on the business and not in the business.
Transcription
Joe: Hey Mark how are you doing today?
Mark: I’m doing really well, how are you Joe?
Joe: I’m good, I’m good. I understand that someone that referred [inaudible] to us, OptinMonster, is a guest on our Podcast today, is that right?
Mark: He is and I had him on the Podcast because I was actually a guest on his podcast a few months ago and it was one of the most fascinating interviews I’ve ever been allowed to give just because we focused on topics that were really not traditional. And it rose up out of his own personal back story. David Henzel is the founder of MaxCDN. Most likely you’ve used that service even if you don’t know it. MaxCDN powers a content delivery network that a large percentage of WordPress sites use. So they are really large company in terms of the reach that they have and the number of websites that they’re installed on. But David started up MaxCDN and it was growing, it was doing really well, they’re making lots of progress, and then his wife got cancer, and it completely turned his life upside down obviously. He had lost both of his parents in cancer, so hearing that his wife had cancer was kind of an earth shattering moment for him. It caused him to take a step back and it didn’t take much time for him to realize “I want to sell my interest in MaxCDN”. So in my Podcast I did with David where he had me on his show, we talked a lot about some of these bigger life issues. I wanted to pull back a little bit on that in this interview and talk more about why do people sell their business. And the reason that this is so important, we hear this from buyers all the time, and I’ve told buyers this as well. Don’t ask people why they’re selling their business or if you do, don’t worry too much about their response. Pick up on the little cues because there’s usually a whole mix of reasons why somebody sells their business, it’s usually not just one reason and often times the seller doesn’t know even why they’re selling their business, they just know it’s right. And with David, for him, the reasons are pretty obvious and so we talked a little bit about that process of selling MaxCDN, of what your life is like when it’s turn upside down on his head, and how do you continue after that sale, what is he doing now and starting to put another business after that.
Joe: That’s excellent. Mark, let me ask you a question and put you on the spot here. What’s the fifth pillar of maximum value?
Mark: Well there is no fifth pillar but I would say if there’s probably a 1a or 1b here, it would be preparation. The reason I say it’s not a pillar is because it’s not an element of a business itself. That said, it is a crucial element. What I would say is this, if we have four pillars that’s making a house, preparation is the foundation of that house because you can’t build a business and excel without preparation. How does that sound? You want to make it a foundation?
Joe: You know what I think? I think in the house that I built for my ECF presentation, it is the foundation, it’s the planning. You might be right; maybe there is no fifth pillar. I need to stop pushing this fifth pillar. But my point is that, look, life turns very quickly. Something happens and you may say “Okay I’m done” and when you have everything in order it’s easier to exit and sort of knowing the process, knowing the evaluation process, knowing approximately why your business is worth, having your documents in good order, are all really really critical for when that moment might happen when life gets in the way and you say “Okay I’m done, I need to move on”. So that’s what my point is and David’s situation really highlights that. So let’s get into and let’s see what he has to say and it’ll help a lot of folks.
Mark: Yeah we will get into it and I want the listeners to try and listen to the moment when I try to demonstrate in this interview that I am truly a jackass for being completely insensitive about something so you listen to that and email me when you find that moment and I’ll give you a big ol’ congratulations.
Joe: For those who haven’t figured it out yet, we recorded a bunch of these pre-recordings at the same time on the same day, dressed in the same clothes and we’ve used jackass five or six times now. We need to end that today.
Mark: Alright let’s get to the interview. David, thank you so much for joining me.
David: Thank you for having me in the show Mark.
Mark: So for those of you that mostly don’t know, but we probably said that in the intro already, I was on David’s Podcast, I don’t know, probably four or five months ago and it was by far one of the most fascinating Podcast I ever did. I didn’t tell you this yet David, I actually had an appointment with somebody who wanted to find out a little bit more about me and he actually found that Podcast and he told me “I feel like I know you already through this”. That was probably the deepest Podcast I’ve ever done before, where we talked about just some topics that you don’t hear in business very often so I really appreciated that it really stood out to me.
David: Thank you very much and thank you for being on it. It was awesome.
Mark: Yeah that was good. So what we do here, and our listeners know this already, we usually let our guest introduce themselves, it’s better than me trying to stumble through something that we exchange over email before. If you could just introduce yourself to our listeners a little bit, tell us what your background is and what you’re currently doing right now, that’ll really be helpful.
David: Alright I’ll start at the very beginning but I’ll speak very fast so it won’t take that long. I’ve always been an entrepreneur pretty much my entire life. I never had a “job”. I’m originally from Germany but my big dream was always to have a business in America, but I started to have a few businesses in Germany because it’s not that easy to get a visa, going to America. At some point I sold my e-commerce business in Germany which gave me enough money to get my investor visa to move to the United States and 2008 or 2009 I moved over and we started the company called MaxCDN which is a content delivery network that we sold a year and a half ago, and my wife and I made sure the reason for selling the business, maybe we talked about this a little more in detail, most said my wife was diagnosed with breast cancer, and this was a really big wake up call for me. I lost both of my parents with cancer, so this was like an extra big wake up call for me, to realize that life ends and it’s pretty abruptly, and this made me re-evaluate things. I kind of thought about me laying on my death bed and thinking about my life and if I already did the things that I want to do and if I die with regrets on. My business back then, MaxCDN was so growing, was a lot of fun, and was having a great impact in our employees’ lives but I felt not in the big picture. From a very early age I had this thing, I want to have a big positive impact in the world, as simply as it sounds, and that’s the truth. It makes me the happiest and so I decided above this point just to sell the business and to focus on something else that has more impact.
Mark: So let me just interrupt real quick, for people that don’t know what a CDN is, our listeners range from extremely technically savvy to people who are literally just managers of businesses, but a CDN is a Content Delivery Network where you would host assets for a site and helps speed it up right? That’s the general concept of it. Do you know where you guys ranked as far as the different CDNs out there? How large were you before you sold the company?
David: We had 15,000 customers and were integrated in over 6 million websites, so quite large amount of websites was using our CDN, partly because we had a few open source projects where we gave the CDN in a way to certain open source projects that we liked. In terms of overall revenue, we’re a smaller player; I think there are publics straighted like 9 billion dollars or something like this. That’s the [inaudible 00:08:36] the game. We were the first CDN that made CDN accessible to everybody. Before, CDN is just an enterprise thing, you need to sign a new contract and pay hundreds, if not, thousands of dollars a month and most small businesses and bloggers could never afford this and so we just made it accessible and it was also the reason for our success because we felt availability was just not there.
Mark: I think most people who have had a WordPress site in the past at least, probably used MaxCDN at some point just because so many plugins and so many themes ended up utilizing your service.
David: Yes we were very big in the WordPress. I love people when they have holes in their WordPress site and use WPN engine or [inaudible 00:09:20] and so on. Maybe you have been using us without knowing it.
Mark: Right, and we use WPN engine at Quiet Light Brokerage and the other businesses I own also use WPN engine so, I definitely have been using that.
David: Using us..
Mark: Absolutely. How long did you own MaxCDN before you decided to sell it?
David: Seven years.
Mark: Seven years, and how was the business trending at that time? The last time we talked, we talked a little bit about growing an enterprise and having to, not having to, but putting together mission statements and core values and things to be able to manage a larger organization. How was the business trending when you got to that point when you’ve learned that awful news about your wife having cancer?
David: Is it trending in terms of revenue and how much you mean?
Mark: Revenue, customers and everything else and also the intangibles, i guess, of the business.
David: Yeah, with revenue, we’re not supposed to disclose it.
Mark: That’s fine.
David: Due to acquisition, etc. We had a hundred employees and 15,000 or 17,000 customers and fix more websites, we had an office in LA which was the headquarters, we have one in Vegas and a pretty big office in [inaudible 00:10:41] which worked out really really well for our Bootstrap business, and we always want to provide great customer service and 24/7 support which is something you have to do or if you have a CDN or hosting with us and we couldn’t find good affordable people that want to work night shifts in the United States, so we went to [inaudible 0:11:03] and this was like really amazing. The talent that we found and this allowed us to provide a really good customer experience and it is also something we have to note for in the industry.
Mark: Yeah, the thing I hear so often from buyers, who are looking at somebody who is selling their business is that, they can’t believe that somebody would want to sell a business, at all, right? People didn’t understand a little bit, like we got a great deal, or something comes up. A Google, or back in the day, Yahoo when they were best or acquisition hungry, who comes in and makes an offer and as a business hunter they’re just thinking, this life changing money, I can’t really pass that up. But what I explain to buyers often is the motivation just tends to be a lot more personal when people sell their business. Now it’s, definitely in the case with you right? I mean as mentioned, with your wife [inaudible 00:11:54] cancer.
David: Yeah absolutely, that’s just very personal, that is.
Mark: How long was it between, when you learned about your wife and making that decision to sell the business?
David: So, we’ve always been, you know, we Bootstrap the business which is pretty rare for a CDN. Because this is a very capital and intense business and somehow we managed to do it. We’ve always been thinking about, do we raise money and make it really big or do we keep costing and leave it the way it is, or do we sell it? My business partners and I were always kind of thinking about this and we always get people knocking at our door or giving us offers on a regular basis. And when the thing with my wife happened, I was kind of lenient towards selling because I want to do something that’s more in line with all about that makes me happy with my calling, as if you were called to… and at the same time a really good buyer came in, that was a good fit. We knew the fine team and was just a very good fit so we thought that this is a good move and [inaudible 00:13:05]
Mark: That’s great, how long did it take you to sell your business?
David: That was quite a process, from the due diligence piece and also like, let’s say an untrained muscle FOSS that we did ourselves. We didn’t have a broker and law office so it was quite a headache and also very much distracting us from our day to day business, [inaudible 00:13:35] so everybody who wants to sell the business and retrospect out definitely gets more involved too with the assistance and helps with [inaudible 00:13:47] make life a lot easier for us.
Mark: I talked to a previous client the other day, he sold their business through us before, and he’s got another business he’s looking to sell, and he actually stopped and said, “You know, one of my hesitations is that I know how much work it is to sell a business. Is there any way to make it easier?” and I said, “I’m sorry, if I could figure that out”. It’s always a lot of work. You recently, I hope you’re okay with me saying this, if not, we can edit it out. You, are you in the process..
David: I’m in the process of buying one. To complete the story, it just happened that I want to find something where I could provide more value into the world. Created an online course where me and my wife figured out that if you apply business principles to your family life then everything becomes much easier because being in marriage and entrepreneur is not the easiest thing, at least when I listen to my wife, just what she says, and we found out that when you apply business principles to our family life everything becomes much much easier. So I put together an online course under managinghappiness.com which is also the Podcast where I interviewed you. And after doing this for a while but somehow I got sucked back into the business world. I start to mentor a few companies and I started an outsourcing business because with our team in [inaudible 00:15:15] such a great success and it was just such a lifesaving, it was kind of our secret sauce of MaxCDN. So I want to give this experience to other entrepreneurs, to other bootstrap entrepreneurs, if you feel that it just makes more sense too, if you want to have 24/7 support, if you hire people somewhere else in the world that are good, driven, know proper English and for someone who used to work nights. So I started doing this and my old business partner is in here, he started an outsourcing business as well but for lead generation. He has a big team in India, and we’ve been chatting and helping a little bit on the marketing and he asked when I came in, I prefer to play with the stock market, I don’t know if you want to do this anymore, don’t you want to take it, and so we’re in the process of buying this out in the next few weeks. When this Podcast [inaudible 00:16:10] we have it already done. The business is called Task Drive, taskdrive.com, what he does is he’d be coming to him and say hey, that’s my perfect client and the research has five more of these clients [inaudible 00:16:23] combined these businesses and I also started mentoring a few other businesses which resulted me investing into 2 other businesses. An ecommerce business and a SaaS platform business and somehow I got sucked into business really really quick because I felt that this is where I can provide more value and it is more fun. I’m not really a family therapist; it’s just somehow more fun I guess.
Mark: You’re an entrepreneur and so I’m not surprised that you find your way back into business, that’s pretty common. I’m going to jump ahead a little bit, I was planning to talk about this in a bit, but let’s talk about that process of going through in selling a business and taking time off. I did this by the way, with myself when I sold my first business I took a year off before I started Quiet Light Brokerage. Now those I know my story, but it wasn’t the cleanest of transitions and I actually had troubles starting my next business. What are your opinions on that? You know, for somebody that is looking to sell a business, what do you think they should have prepared or what do you think is a good tip for somebody who maybe they’ve been putting on that blood, sweat, and cheers for seven years as you did building MaxCDN or on their own business? What would you recommend they do after they sell a business? Do you think someone should jump right in? Do you think they should take some time off? How do you attack the business world and business opportunity?
David: I don’t really know. I felt that when we sell It’s like do Managing Happiness [inaudible 00:17:59] keeping both feeling happy and just spending more time with my daughter. I just thought that back into the business world, so I think there’s like no real formula for what is the right thing for you. [inaudible]I just, I found out that [inaudible 00:18:17] “Oh I’ll early retire” but that doesn’t really work like you get terribly bored and yet you have to drive to do something else. Starting something else, is so easy because of the natural [inaudible 00:18:32] and the resources that I have, it was just very very easy to start another business. All the knowledge that I acquired, I learn so much when I think back when we started MaxCDN, we didn’t know anything. We kind of learned everything. I can’t give the exact formula but I would not be scared to not being able to create any business because if you’re an entrepreneur you’d see on opportunity left and right and it’s just like in one or two, [inaudible 00:19:07]
Mark: Sure, that’s great. So you started Max, you started managing happiness. How long after you sold MaxCDN did you tried starting managing happiness? Where did you start up with that?
David: We sold a year and a half ago, February 2016, and I was the Chief Marketing Officer of the company that bought us for a while and I already started writing down the formula or the operating system that my wife and I were using and I want to publish it in a book. It has been an on-going process and then once I left StackPath, the company, and moved back to Europe, then I focused hard on Managing Happiness and cranked it out and the online course in maybe to a month or so. This could be turned to a business but for me it’s just like more of a passion project that I just have.
Mark: So now you have Managing Happiness, you’re in the process of buying taskdrive.com, is that right? And then you’re going to combine those two companies together and you’re also involved in…
David: No, I have LTV PLUS from Lifetime value, [inaudible 00:20:26] who increase the lifetime values of businesses. That’s ltvplus.com and we’ll buy TaskDrive and we’ll probably merge the two brands together. To have just one. I have MaxCDN at some point we’ve met [inaudible 00:20:41]which on parent company with MaxCDN [inaudible 00:20:43] and we have [inaudible 00:20:45], it’s like very hard to manage all these different assets, so I learned my lesson and I will just combine it into one. A friend of mine who has an ecommerce business in Poland, I’ve been mentoring him and he needed a new software. He couldn’t find something that was the right fit for him, for his ecommerce business and another friend of mine, he’s an amazing developer and we just got together and now we’re building him a software for his business system and we’re going to sell this to others as well, so this works as well. The other thing that we started is with two developers from [inaudible 00:21:22] that I’ve met, they’re actually very early customers of MaxCDN and we met through a freak accident. It was kind of funny story, and we came up with a cool idea on how we can build a framework for SaaS businesses because when you build a SaaS business you have to build everyhting over and over. You have to build the [inaudible 00:21:42] user management, the billing upgrades, downgrade billing, all these things that are the same in each SaaS business, and we are going to turn this into an app basically, or a platform that you can use and you have 50% if you have SaaS as well when you build, and you can just call me I build you a business logic and all the other stuff around you is already built.
Mark: That’s pretty cool.
David: I think it’s going to be a lot of fun and it’s my [inaudible 00:22:09] to focus on a few things but I think the way on how to do this is to work on the business, not in the business. Just put the right people a place and not actually be really really kept into it and to take charge of the business. [inaudible 00:22:29]
Mark: We interview a lot of people on this Podcast. Now a lot of people have had successes and that’s such a recurring theme over and over again. Making sure that you’re working on the business, not in the business. Difficult to do, something I’ve been trying myself to do quite a bit. I want to back up a little bit to the due diligence process you’ve said was, when you sold MaxCDN. You’ve been on both sides of the table now, or you’re working throught the other side of the table as a buyer as well. If you’re going back again, looking back when you sold the business, what was going through due diligence. Why do you think that was such a difficult process at that time? What was it that made that process difficult? Did you question a buyer at all in why they were asking for so much information? Or did it all make sense to you during that time?
David: No we didn’t really question but we kind of, we knew them, we knew they had good intentions so we didn’t really question them. I guess the biggest takeaway was that whenever you take one setback. Our buyer is most likely, the former CEO of SoftLayer who’s sold to IBM, billion dollar plus deal, and he wants to do the same thing again that just top of the amounts that there are extra millions in revenue and now they bought a few companies together within two years. The way they’re building this business is everything has to be squeaky clean because the buyer is going to be a very big buyer and so there can’t be any shadiness or any conflicts or whatever. Everything has to be squeaky clean. And also seeing how they setup the business, when they bought us, we were the first company they bought, how they setup that platform for everything to be super process driven and just really squeaky clean. Just everything was really amazing. Amazing to see and as it was like one of the big struggles that having all the cost and the contracts in your own place, having just like everything nice and clean in a neat package. This was definitely a headache. And also, just a sheer amount of information they want, you put together a presentation, you give the presentation, and you come back with ten things that they would like to see. Pay the law firms, being involved also asking a load of questions. Also another thing why it’s stressful was that, we issued shares to our employees and we had to get every employee to sign a bunch of papers to make sure that this goes through and also our employees that were not with us anymore and just like chasing down all that stuff so next time we definitely have to set this up in a better way. It’s quite a headache.
Mark: Now I think the good thing about what you’re saying though and you definitely get this, it is that the needs of a buyer are often different than the needs of a business owner. Alright, as a buyer going into the transaction, you need to have those books squeaky clean and you need to look at data that a business owner doesn’t need to look at on a daily basis because you already know how to run the business pretty well on your own. But as a buyer, there’s a whole other set of challenges and that’s where I think so much work can come into the equation. From that process, did you learn much as you’re going through your own acquisition now? And are you taking any lessons right from that process of signing a business? Or obviously it’s with a friend so maybe it’s a little bit easier.
David: Yeah it’s with a friend so it’s much easier. The only headache is that he has another investment which I will not fall into. He has a business partner in the business who left the business and they’re not agreeing. So this was also quite a headache. This has been on-going for quite a while and lots of lawyer fees and lots that led us back and forth with this thing. So whenever you sell the business [inaudible 00:26:34] a million times on [inaudible 00:26:36] make sure you spend the money on the lawyer, don’t be cheap, [inaudible 00:26:41], just do it. Trust me, the two grand that you spend on this, it’s well worth it that you have a custom tailored [inaudible 00:26:54] agreement for your business will make your life so much easier.
Mark: Yeah we actually, at Quiet Light, we recently moved over to a partnership format so Joe Valley is now an equity partner and we spent money on a good partnership agreement. Anyone who knows Joe can ask him how long the process took. It took a long time and there was a large [inaudible 00:27:14] I’m like, can we just sign this thing and get this over with? The number of times we also deal with clients who are selling because the partnership is dissolving and they’re not talking to the partner and it’s just messy. It can get really really bad after [inaudible 00:27:27] So how did you get into investing in sites separately then and are you taking the ownership [inaudible 00:27:33] that you’re investing in?
David: Yes and we’re starting that from scratch and so we don’t put money in, we just like fund them out of our pockets as we go. We just like hire a bunch of developers and then pay them basically. So yes, I’m taking ownerships in these companies.
Mark: Awesome, and how is Managing Happiness coming along? You’re still working on that?
David: I got so busy with the acquisition; I already took over the operation of the other business. I want to make sure that I don’t have to work in the business, I can work on the business so I spend a lot of time to put lots of process in place and automate stuff and just make sure that everything just works on auto pilot so I just have to do the marketing piece or bring more people in and focus on just that the machine is working. This took quite some time, so I didn’t really have time to focus on Managing Happiness and I hope that as soon as everything is automated and everything is more on smooth sailing now I’ll focus on our passion project but I’ve put it on pause.
Mark: Good luck with that for sure and I appreciate coming on, in talking about the acquisition that happened last year. We didn’t visit this, but your wife is doing okay, I know this from our last conversation [inaudible 00:28:58] and so the story does have a happy ending and we probably should’ve addressed that earlier.
David: Usually I always say it but since we talked about it before.
Mark: I just realized that people or some, really not that insensitive, just sort of being sensitive. But I’m very very glad. I’m really glad that you were able to come on the show, and for those listening, go to Management Happiness even though you’re not working on it right now, there are old Podcasts there. And again, by far the most interesting Podcast I’ve ever been on and I’ve been on dozens of Podcasts through the years. Let’s stay in touch..
David: The Podcast on davidhenzel.com, managinghappiness.com is just where the online course lives.
Mark: Alright, davidhenzel.com and there should be a link to all these sites that we mentioned in the show notes which will be on our website so people can go ahead and go over there to find any of these resources, and maybe in the future [inaudible 00:29:59] back on, we’ll talk about how setting up those processes worked and what you did to setup those processes because I think for any business owners, especially in the acquire setting up processes [inaudible 00:30:10] but it’s the process and itself. I’m trying to figure out how to do that.
David: Which was super helpful and we try, unfortunately, only discovered maybe a year ago. You know the Entrepreneurial Operating System (EOS)?
Mark: I’ve heard of it.
David: And the book Traction, it’s really amazing. I can highly recommend this to any entrepreneur whose listening to this. Either the business you’ll acquire or the business the business you currently run implement this process into your business and your life will be so much easier.
Mark: That’s the second time somebody has recommended Traction to me, in the past couple of weeks here so will going to add that to my list.
David: That’s really awesome.
Mark: Alright so that’s the preview of maybe few months from now. We’ll talk again the said processes. David, thank you so much for joining me.
David: Thank you Quiet Light.
