With an estimated turnover of about £25, and a five-year sentence for drug smuggling, Duane Jackson’s entrepreneurial journey did not have auspicious beginnings. But a decade later, the Workspace customer is a millionaire: in 2013 his accounting software product business KashFlow was acquired in a deal thought to be worth in the tens of millions.
Jackson was one of the early pioneers of software as a service, at a time when QuickBooks and Sage were still the only options – they ran on your desktop and were ‘clunky and difficult to use’ at that.
After accidentally raising the same invoice for two jobs, and chasing the wrong client, Jackson put a web app together to make his life easier. ‘I was a one-man web developer, a programmer for hire,’ he told the audience at the recent Workspace Business Insights Breakfast, held at One Sixty Fleet Street. It must have been of the few options for a young man who’d taught himself how to programme in the children’s home he grew up in and who, like all ex-cons, knew getting employed after prison would be difficult.
He started his web development business at Mare Street Studios; Workspace was working with the London Youth Support Trust (LYST), a charity that helps young people from disadvantaged backgrounds start a business. The scheme provided discounted office space for young businesses, which couldn’t afford to go straight from working at home to paying commercial rents. ‘LYST, with the support from Workspace Group, provided a stepping stone,’ Jackson says. ‘I then went on to paying full commercial rent at another Workspace property, The Leathermarket.’
It was at an event, a bit like this one, Jackson says–gesturing at the audience who’ve arrived at 8.30am in Workspace Fleet Street to hear his story–that he had a minor epiphany.
It would be nice to make money in your sleep and sell a product rather than your time by the hour.
Duane Jackson, founder, KashFlow
In 2006, he started KashFlow with money from the Prince’s Trust. The software as a service (SaaS) model was ‘accidental’ rather than planned, Jackson explains. ‘The phrase wasn't around when we started but because I was a web developer the natural place for me to develop the app was on the web rather than on desktop.’ SaaS is a software distribution model in which a third-party provider hosts applications (through cloud computing) and customers can access them over the Internet.
He thought an upfront fee was exorbitant for many small businesses, so decided on a monthly subscription to help with hosting costs and everything else. ‘It's great for me as I get a recurring revenue,’ he says, ‘and it's good for the customer as we have to provide really good service to retain their interest.’
His thinking is echoed in current trends. The technology research company Gartner, estimated in 2015 that cloud computing has a year-on-year growth rate of 16.5%. SaaS is ‘forecast to comprise 18.5% of this (£37.7bn), representing 20.3% year-on-year growth.’ Salesforce is one of the biggest cloud computing companies, and is worth over US$55 billion.
Selling KashFlow wasn’t a motivating factor for Jackson until he got an offer out of the blue in the late noughties. He laughs when he remembers: ‘I said no and he immediately doubled it.’
Through his work for LYST, Jackson had met Lord Young, former enterprise advisor to David Cameron. Young, who became his chairman, persuaded Jackson not to sell straightaway. He lent him 1000K interest free–to pay off 'some debts and double-glazing' –interest free. 'It worked out well for him as he got more in the long term,' says Jackson.
In 2010, Jackson thought about selling again. Software as a service was no longer an alien concept for small business owners, and Jackson remembers getting fewer and fewer enquiries about online security as the decade wore on. He put the business up for sale, hired an M&A firm, and started talking to lots of potential acquirers. But although he did have interested parties, and one deal almost went through, in hindsight he knows it wasn’t right.
‘I was sinking the business. I was caught up in a lot of day-to-day stuff and not feeling I had the time or space to push the business forward,’ he admits honestly. His lack of a senior management team meant ‘as well as being CEO, I was also being CTO, CMO and C-everything. When you’re responsible for everything, that scares an acquirer or an investor away.‘
The three years that followed proved crucial. He gathered a senior management team, which meant he wasn’t as hands on, relying on intensive planning meetings every couple of months instead. He was also able to concentrate on becoming a thought leader in the industry, which turned out to have multiple benefits:
The PR we were doing wasn’t just about positioning ourselves in front of our customers, it was positioning ourselves within the industry with other companies that might on one day want to acquire us.
Duane Jackson, founder, KashFlow
When he eventually sold in 2013 to IRIS, a UK company that provides bookkeeping, payroll and HR software solutions, Jackson was far more confident. The business was still growing so he wasn’t too eager a seller and when it came to due diligence, he was far more confident about what the seller needed to know and what was irrelevant.
His advice for businesses trying to work out how much they’re worth is quite simple and refreshingly honest: ‘It’s not as complicated as the professionals make it sound,’ he explains. ‘What normally happens–expecially in trade sales–you have a seller and a buyer. You work out a number you’re both willing to accept, then the guys in suits go out and reverse engineer it.’
Sounds simple, maybe, but one thing you couldn’t reverse engineer is Duane Jackson’s entrepreneurial journey.