556: From Broke to $100M+ in SaaS – Dan Martell (Best of Foundr) [VIDEO]

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. So I got a crazy story. Group home, foster home, crisis center, high speed chases, prison. I ended up in rehab. At the end of that program, I was cleaning out one of the cabins. In one of the rooms was an old computer and a yellow book on Java programming. Within 20 minutes, I got the computer to say, hello world. He's a serial entrepreneur, angel investor, and SaaS growth expert. He's built and sold multiple tech companies, raised millions in funding, and now coaches SaaS founders on scaling fast.

1:14His book, Buy Back Your Time, teaches entrepreneurs how to reclaim their time and scale smarter. Dan Martell. Once I started to get a taste of success, I was so scared of losing it that I just allowed my work to absorb me. I felt like there was an elephant on my chest. I I had to go see a therapist because I was having anxiety attacks. People don't understand that the game they're playing is not the business model, it's themselves. Richard Branson had a rocket ship blow up. His$50 ,000,$100 ,000 problems don't even register on his radar because he's become the person who can deal with a higher quality problem.

1:49Hear the stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

2:03All right. So the first question that I ask everyone that comes on is, how did you get your job? Okay. How'd you find yourself doing the work you're doing today? So I got a crazy story. I'll give you the short version because, you know, I want to get into the meat of our convo. But so what I do today is kind of software. So I run the largest coaching organization for software CEOs. but I've been coding since I was 17. But the way I got into software development is I actually got in a lot of trouble as a kid, like, like sons of anarchy type style, like, like legit, you know, group home, foster home, crisis center, high speed chases, prison, and I ended up in rehab and it saved my life at 16, 17.

2:48I went through a, a program for 11 months that literally, allowed me to build my self-worth and rebuild the trust with my parents that I'd lost. And at the end of that program, I was helping Rick, this maintenance guy, clean out one of the cabins. It was built on an old church camp that they donated to this place. And in one of the rooms in this cabin was an old 486 computer and a yellow book on Java programming. And I opened the book and something spoke to me. I don't know why, but I just like followed chapter one, booted up the computer and within 20 minutes I got the computer to say hello world and I thought so whatever reason I thought it was like a computer genius but um that's literally how I started you know growing up with uh entrepreneurial air quote tendencies and then becoming obsessed and addicted honestly to writing code and software and um I haven't looked back did you you said what happened next like what was your first business well this is always a fun question right it's uh I always ask people like how many projects or domains did they buy versus their business?

3:51Cause like, those are two different things. So the first thing I ever made money on was actually this app I built. This is 97. So I come out and every habit, I discover this little thing called the internet, which obviously turned out to be kind of a big thing, perfect timing. And I built a CD burning tool that my friends would pay me 20 bucks. Cause the problem with that if you had a cd burner back in the day some people are like what's a cd burner um is that they would sit on my computer to build their playlist because you could put like 150 200 songs on a cd so i built this tool they would download it would synchronize with my file drive on my computer from all my mp3s i've downloaded off napster and in limewire and kazam and all these different tools and then they could build their playlist and then they give me 20 bucks.

4:40And then I would burn them a CD. And that was like the first like thing I built on my computer that I actually got paid to do. But my first company was probably at 18, 19, like not too long after I built a vacation rental website for my dad. Initially, I kind of lied to my dad. My dad was like, Hey, I need this webpage for, cause he kept getting calls. He had a cottage he would rent out. And he asked me, he goes like, can you build me a webpage? and then I went online and I wanted to learn this new programming language called cold fusion so I told him that to build a web page it was going to cost 600 bucks and he's like why is it going to cost 600 bucks to host a web page of my cottage and I was like it's just what it costs the truth was is I wanted to rent a server on the cycle one and one one and one.com and I needed that specific one that would run the cold fusion software.

5:37And so I took my dad's money and his project and built this vacation rental site, no different than VRBO, almost identical in concept, uh, in 1998, 99. And, um, and that was the first business that I actually launched. We called it a maritime vacation.ca. And the way I got customers was kind of nutty story is and I didn't know anything about marketing or honestly making money on the internet at all. I was just a software guy. Um, and I told my buddy Dave about this idea I built, you know, the software that lets you create like a listings page for your, your cottage, your bed and breakfast in our area that we grew up in, in Canada.

6:19And he goes, Hey, there's this magazine that the government prints. It's like the tourism magazine. And on the back of the magazine is a listing of like all the bed and breakfasts and cottages for rent in the province. So I bet those people would want to pay you for one of your pages you could build with that thing you built. And I literally sat there and like, ah, immediately ran to my computer, got this magazine, put, paid my little brother. He was like four years younger than me to add all of the contact information, the addresses into a Microsoft Access database. And I paid them like three bucks an hour and then created a form letter in Microsoft Word and literally sent out to people a blanket like sales.

7:06You would probably call it direct mail, but it was just like this page that said like, we're a maritime vacation. If you're looking to build a website for your bed and breakfast, fill out this application, which had all the details, send us$30 and three photos of your listing that we'll scan in and put on your page. And if you want the photos back at an extra$5 and we'll, we'll ship them back after. And, uh, I sent out like hundreds of these. And I remember like maybe seven days after my dad came home and he like checked the mail and there was like a stack of envelopes and he just looks at me.

7:41Cause you know, obviously I grew up in a pretty, I was a little mischievous and he just, he just literally asked me like, what did you do? And I was like, holy moly. And we started opening up these letters because, you know, this is 99, 98 people, people had no problem sending 30 bucks in the mail in cash, but they were full of cash. And that was the first time I kind of made internet on the money from somebody that didn't know me. And I kind of joked that was the day that I went pro. Like, you know, there's like the day that you finally like quote unquote, make it for me. I, that was 18 with maritime vacation, even though it completely failed because a competitor called atthecottage.com kind of came in and absolutely crushed me.

8:23It was an incredible experience. I learned a lot about entrepreneurship and just building a thing that was valuable to other people and marketing it. And that was a fun experience. You have been typically known as kind of like the SaaS guy. So I'd love to know, you know, you have a really large SaaS academy and, you know, some of my friends have joined it and like, you know, spoke very, very highly of it. I'm curious, what was your first SaaS business and how did you fall into SaaS? Yeah. You know, SaaS was one of those things I think growing up in a world with a lot of chaos that the predictability of it just spoke to me.

9:01So back when I started, we just called it like ASP, like application service provider. Like we would host the application. There were hosted services. We didn't even call it that. I mean, it's gone through this evolution of like, I would say hosted solutions to web-based products, to subscription, to cloud, to now SaaS is kind of the thing we call the category. The first, I mean, I built a bunch of SaaS tools with my company Spheric, which was like the next company that, well, actually, no, I did a hosting company that failed. I failed for seven years. Okay. Enthusiastically, this is what's what people I think don't know is like, I didn't side hustle these things.

9:47I was all in, like I would sit there and code 12, 14 hours a day. I would, you know, whatever I had to do. And so like I did the hosting company and that, and that failed because we had a bank as a customer, I almost got sued. So I got way over my skis on that one. And then my third company was a company called Spheric Technologies and we built enterprise portal portlets, they were called. So this is back when intranets, I'm dating myself. Some people were like, what is that? Well, it was big companies started customizing the homepage experience for their employees, right? You open up the browser and the default page would be their intranet, but then intranets got smart and those were called portals, I built SaaS products for Fortune 500 companies to integrate with their ERP systems.

10:38We're talking Siebel, Oracle, SAP, you know, BEA, WebLot, like all these different enterprise solutions. We built these subscription software tools that people would install inside their companies, but pay us for them in 2004. So that company... Are you hesitating to take the next step in your e-commerce journey? Founder Plus has you covered. With proven frameworks tailored to your business needs for fast results, a supportive community of over 30 ,000 like-minded entrepreneurs, and weekly live mentorship sessions, Founder Plus is your key to success. Try Founder Plus today for just$1 for seven days and start building your dream business with confidence.

11:19You can visit founder.com forward slash start dollar trial or click the link in the description to claim your trial. I mean, when I started, I hired a business coach. He was an E-Myth certified coach named Bob. And yeah, he was the reason why I finally had success in business. And that company, Spheric, we almost did a million in our first year, just shy. And then we literally grew about 150 % every year for four years. And I just, I went with it. And eventually we got acquired in early 2008. And that was my first kind of successful entrepreneurship experience. And it laid the foundation for a lot of things afterwards.

12:07So I have to ask the question. You started many other companies since Clarity.fm, Flowtown. And then, yeah, you started your SaaS Academy. And you kind of gone full circle now and you really give back. How come you haven't started another SaaS business? Like, because, you know, some say, and I'd like to hear your take, that like, in terms of wealth creation, building a SaaS company is one of the best tools out there. Yeah. So, I mean, in, well, yeah. So, what's interesting is in the book, I actually talk about what I call the three levels of trades. Level one is employee, right? where you trade your time for money, which you can make a lot of money.

12:55The highest paid employee in the world makes over a hundred million a year and that's Tim Cook of Apple. So it's not even like, there's no good or bad. It just is. People trade their time essentially for money. And then when you go to level two, which is entrepreneurship, that's when you start to learn how to trade money for time, right? You hire an employee to buy back your time to then reinvest it in things that make you more money. And then level three is money for money. And that's where you learn the skill to invest in opportunities that have your money working for you. And I just got lucky that when I was 27, I read Rich Dad, Poor Dad.

13:34And I kind of started to understand the quadrant he talks about and kind of the investor element. And I just started investing my money. So what people don't realize is I have a portfolio, a pretty substantial portfolio of SaaS companies I've invested in. And that's kind of what I do day to day. So I have SaaS Academy, which is the largest coaching organization for SaaS CEOs in the world. We have, I mean, over a thousand active clients. We've coached, I think, 4 ,000 people at this point. And then I have High Speed Ventures. And High Speed Ventures is my kind of personal family office where we'll evaluate buying companies.

14:13We invest in companies. Now we're considering putting together a fund to actually invest in some of our earlier stage companies that we coach. So yeah, I kind of a while ago decided to ask myself, and it's why I wrote this book, is what would my perfect week look like? What kind of work would I be doing? What's important to me at this stage of my career? What do I want my life to stand for? And I just like, to me, I'd rather support CEOs of SaaS companies and either through coaching or investing. And then, you know, just work, you know, because I have two young kids, like have a little bit more.

14:56I wouldn't say worthwhile, like, like work-life integration. That's kind of what I'm optimizing for. So I think that especially doing a venture-backed company is completely different. A lot of my clients I coach are bootstrapped. So I think that, but again, I now hire CEOs to run companies. So I'm not, I don't need, again, it's the whole buying back your time. At some point you go, look, I love being a CEO, but I don't want to be the CEO of this company. I can just hire somebody to run it. Yeah, no, you mentioned work-life integration. I like that term a lot. You know, the way I do it is I think there's three things you need to kind of like integrate work and your life into like a rhythm.

15:34First thing you need is a vision. and you know and i actually cover this in the book because i realize when people are trying to understand the value of their time and buying it back and then what do i do with the newfound time without a clear vision it makes it really hard to make decisions today so i always you know coach my clients to like look out at least 25 years and in the book i call it the 10 10x vision map so once you understand on like these four dimensions i share what our life looks like then you work backwards to, you know, what would be the next 12 months directionally accurate decisions, both the quality of life, how you want to show up as a parent, how you want to show up as a leader, how you, the empire you want to build, um, over the next 12 months.

16:19And then you then come to the, the week cadence. Cause I think that's like, if somebody says something's important to me, I just ask them to see their calendar because usually they will, whether they like it or not, where they allocate their time is a clear indication to what's important to somebody. So to me, I always start with the rhythm in my calendar that's aligned with the 12 month goals, personal and professional that's aligned with the, the 10 X vision map so that I can be super intentional about today. So when it comes to work-life integration, because I have that long-term view and short-term view, I can, I make decisions on a weekly, monthly basis.

17:05When you know what's important to you and you actually add to your calendar, you like insert it as block time. You know, again, I teach this in the perfect week framework. You realize there's a whole lot of extra time to do other stuff. And then you don't get to a place where you're having to fix things. See, the reason why I got so intentional is because there was a point in my career where I was, I was moving forward really fast, but then I'd have to slow down to fix what I call emotional shrapnel, right? You have to apologize to somebody for missing something, or you gotta, you know, you gotta go to the gym because you put on 15 pounds because you were traveling too much or whatever it is.

17:40So like what I've decided is if I can be more intentional today, aligned with my goals, I can actually get more time long-term back because I'm not spending time fixing those things that I'm creating emotional shrapnel around because I'm kind of measuring twice and cutting once, if that makes sense. In the book, you talk about how to scale your business fast. You help entrepreneurs build, like scale a business fast without avoiding burnout. I'm curious, have you experienced burnout? Is that, you know, and I'd love to hear how you've worked through it and some of the things that perhaps you help, like, you know, guide your founders to experience like not experience burnout because i think it's it's it's easy to to get it fall into that i really appreciate the question question nathan because that was my reality 24 to 28 when i was building my company spheric technologies i only had one gear and it was all in i didn't know any different and because i'd failed prior i was so scared to do it again that once i started to get a taste of success or momentum i was so scared of losing it that i just allowed my work to absorb me, to become me, my identity, everything, my relationships, what I valued.

18:52And, you know, I was engaged to a woman that for the most part put up with it. I mean, it was kind of, when I look at how I showed up in that relationship, it's absolutely embarrassing. And what happened was, is, you know, towards the, you know, two and a half years, I was into this relationship with this woman. We got engaged. I was, you know, we ended up buying a house together. And, you know, one Sunday, cause I worked every day, Saturdays, Sundays, but Sundays I was usually home by noon. And she told me, you got to be home by 1130. We've got to go. My friend's having a birthday party. And I went to the office and, you know, I look up and I was in the zone.

19:30I was getting stuff done and it's one 30 and I'm like, Oh no. So I like jump in my car this old volkswagen jetta and rush home pull into her driveway and i run in the house and i found her in tears in the kitchen and she's just beside herself and can't even breathe she's just you know and she just looks at me and she goes i can't do this anymore and she takes her ring off and she drops it on the counter and walks past me and goes and lives with her parents and that was That was the last day, seven weeks before our wedding. And it was so, such a shot to my self-worth and my identity. Cause like, you know, as entrepreneurs, we say we're doing it for our families, right?

20:12We're doing it for our future. And, you know, it's a sacrifice today for that future. And I just totally had it backwards. So when you talk about like anxiety, I mean, I got to a place where I felt like there was a elephant on my chest. I had to go see a therapist because I was having anxiety attacks. And he made me walk around with a rock in my pocket and would squeeze it. I mean, it's just, you know, and, and what, what I love about the work I get to do today, that was the moment that I realized I had to find a different way to build company. I think like if I didn't go through that, I would never have written the book.

20:44I would have never, um, uh, found the tools to build the kind of companies I have in the way I have. And this is where I find a lot of entrepreneurs, right? When they eventually come into my world, you know, people that have adrenal fatigue, they They have their body literally says, I don't want to do this anymore. And you don't seem like you're going to slow down. So boom, and they just drop it. So the short answer of how I help them is this framework called the buyback loop. And the buyback loops based on a principle called the buyback principle, which states you don't hire people to grow your business.

21:19You hire people to buy back your time. So it's a calendar over capacity problem. And to do that, you need to figure out what your buyback rate is. How much can I afford to pay other people to do things so that I could, and this is where the loop comes in. The buyback loop is audit transfer fill. When I hit the pain line, I need to immediately go to an audit, what I call a time and energy audit. And we walk through their calendar and we figure out all the things that take energy from them, all the things that give them energy, all the things that are low cost to pay somebody else to do. And then all the things that would cost a lot.

21:53So I use a$4 sign symbols. $1 sign is low cost. $4 is high. Then we take all the stuff that's red and$1 sign task, and we put it into a bucket. And that is the person we're going to hire next. So first is audit, then transfer. And we, and I have a system that I teach people on how to get things off your plate in a way that you still feel in control, but that you no longer own those outcomes. And then the third step is to fill. And if you don't fill properly, then you actually don't create the momentum in the loop to go to the next stage, right? Most people don't get this right. Filling is one of three things.

22:29Filling is a decision to invest in either doing the thing that you do best that makes you money. So if you have, if you buy back 10 hours a week and you're a designer and you're getting paid a hundred dollars an hour and your buyback rates only like$12, yeah, go do more design work, right? But if that's maximized, then you got to go look at, you know, where's the biggest leveraged opportunity. And I usually look at it through skills. You know, these are things like strategy or know-how or acquiring knowledge, right? The other one is beliefs. A lot of entrepreneurs are stuck where they're at because they have a belief about the world that just simply isn't true.

23:04So they need to do some mindset work. And that's my favorite part that I help founders with. And then the other one is character traits, right? You could be incredibly skilled, have a great view on the world, but are not consistent character trait, and you'll never create momentum, right? So that's the fill part. If you do that, then you get to go up the buyback loop to the next opportunity or pain line. Because the whole point is, I want to teach people how to build a company they don't grow to hate. So you said that a lot of the SaaS founders you coach often bootstrapped. What about the ones that have raised money or significant money?

23:44Is it possible to operate with the kind of frequency that you speak of if you've got pressures from VCs and you've raised a truck ton of money and there's a lot of hanging on your shoulder? Yeah. So here's the only thing that changes. So 70 % of my clients are bootstrapped, 30 % are venture backed. When you figure out what your buyback rate is, let's say it's$12 and 50 cents. the only thing that changes for a venture-backed company is I tell them to add a zero to it. And the reason why you add a zero is because what an investor is giving you capital to do today is they're buying a future outcome.

24:27So there's this bet they're making and it's high risk. So that's why you add a zero and it sounds crazy. You're saying like my buyback rate is now$125. $25. Yep. But the reason why is because you're able to be a little bit wasteful today with the anticipation that those decisions are the right decisions for the future, but nothing changes in regards to, and this is actually where I learned this strategy was moving to Silicon Valley after I sold my first company that was successful and meeting these early 20 year old entrepreneurs that were building, you know, 50,$100 million companies, people like Naval Ravikant, right?

25:06So Naval taught me the idea of leverage. Everybody has the same amount of time. It's a constant. And certain people have a higher ability to create an output, okay? Elon Musk's output is on another level, but his time is the same. So what's the difference? Well, the difference is the multiplier of leverage. And there's only four ways to create leverage. They're called the four Cs. The first one is content. What we're doing now. 100 million people could watch this and it wouldn't take any extra time for them to do that from us so huge leveraging content playbooks is another example creating a repeatable documented system the second c is code software automation ai right huge leverage it's why sas businesses in general have such high multiples is because they help companies get more productivity out of their teams, do more with less people, et cetera.

26:03Like there's a reason why they're, they're valuable assets to build. So that's, that's code. Third is capital, which we all know, right? Like we raise capital and this is why the buyback rate goes up. If you have capital, it's because I'm looking for leverage, right? But in regards to the decision structure and the sequencing and the filtering and what you should do with the free time, everything stays the same. You just get to move faster because you have that capital. The fourth C is collaboration. And it's literally the premise of my book. It's regardless of what business you're in, when you start to grow, you're deploying dollars to acquire employees' time or contractors.

26:46And that's the collaboration see. And most people just do it in the wrong order. So, so instead of like buying back time out of their calendar by hiring people to grab those buckets of thing that drain their energy, that's very little cost to get off their plate. They sometimes make the mistake of hiring like COOs and chief product officers and VPs of sales when they're a small team of seven. And it's like, as a CEO, how about you start with not doing your laundry and not cleaning your apartment and not managing your inbox and, you know, not spending all day long, you know, doing customer support.

27:25Now, I don't disagree that there's value in some of these things, like customer support has a ton of product innovation. But what I coach my clients on is pay somebody to process the emails to find the customer innovation and you can collaborate with them. And that's way more leverage than you literally spending four hours a day doing customer support emails. So really the main premise of your book is kind of like how to how to find leverage and optimize your time. It's funny because people you know people go oh buy back your time it's about productivity. Well it is but it's more than that. People go oh it's about scaling a business.