Guest: Will Hankinson
Episode Transcript (Click to expand)
Ramesh: Hello everyone. Welcome to another episode of the agile entrepreneur podcast. This is your host, Ramesh Dontha. Again, this is both a podcast as well as a video cast. That's what we are trying in 2020. So let's give it a try. And then today I'm very, very excited to introduce you to founder or owner of a company. So his name is Will Hankinson. So Will Hankinson is the owner of www.introcave.com. He is a YouTube intro maker he purchased in 2018. And the Will has a very interesting and diverse background. He's been building websites and video games since 2007. That's 13 years. His expedience ranges from 2% startups to running large Facebook games to working at a digital agency. He has participated in game jams, hackathons, shipped multiple flash and mobiles games, built websites. And believe it or not, he taught as an adjunct professor at Savannah college of arts and design. It's a very popular, a famous college in Georgia and of course in the country as well. And also, he has some investment stake in real estate as well. So as you can see, a very diverse background that it's going to be very interested in conversation. And so Will welcome.
Will: Thank you. Thank you, Ramesh.
Ramesh: So you're a big-time gamer.
Will: Yeah. I mean you can tell from giant gaming headset; apex legends is my current mega league vice.
Ramesh: Will what's your pop current game.
Will: Apex legends. It's a competitive Fortnite which you've probably heard of.
Ramesh: Yeah, yeah, yeah. So fantastic. So that's good. All right, so I have a gamer friend. I keep [01:50 inaudible] him like, man, what are doing? Just killing people in the game. So what fun you get out of it. But anyway, I don't know much about it, so I will not get into it. So let's talk about Intro Cave So you are the owner of www.introcave.com, so Will, why don't you introduce yourself in your own words and then about the business that you're running.
Will: Sure. So I sort of bounced back and forth my whole career from video games and web development. That's kind of where I got started. At the time I was in 2018 when I bought it. I was working at a mobile game studio here in Atlanta and I would sort of work on video games all day and then come home and keep working on either the same game or different games, smaller games. I felt like I needed a little bit more variety. I'm a big reader of like hacker news, in any hackers’ places like that. I'd read a couple of stories of people buying businesses. And that actually kind of just struck a nerve with me. And so I started Effie international is the one that I sort of basically just analyzing deals. So probably for like a, let's say like six months or a year. I was on their newsletter sort of just analyzing deals that came through.
Ramesh: Sorry for interrupting. So what you're saying is, it's not that you were thinking about starting a business for quite some time. I mean you're taking this course or that course, but you suddenly happened to see this newsletter called hacker news and then that lit a bulb, is that how it started?
Will: I mean I’ve always had side hustles even since I first started my career in 2007, back then it was me, back then I was working on the web and making flash games on the side. So now it's kind of a reversal of that where I was working in games and figured I should maybe work on the web on the side. So I’ve always had side hustles. I'd say that since I have a five-year-old and an eight-year-old, so since having kids, I'd say my time for working on side hustles as has gone down dramatically. So having read about some guys on a blog part post somewhere that they had bought their business, that just seemed like a good way. Like, you know, I don't have but maybe 10 or 20 hours a week to work on the side business. So starting from scratch just seemed a little too daunting. And I had a couple of false starts and you know, I’ve launched a couple things, but nothing really ever got traction. So the idea of just buying something that I could optimize and grow, there was already sort of proof that Hey, this is a business that can make money. Just sort of fit what I was looking for.
Ramesh: Okay. So www.introcave.com is what you bought. So what is www.introcave.com? I know it said YouTube intro maker. So for somebody who doesn't know much about it, I mean, what is it about.
Will: Yeah, so I mean YouTube is huge and it's continuing to grow. Everybody, you know, I think they've done surveys with high school students and the number one job that everybody wants right now, it's no longer like astronaut. It's like, you know, pro gamer, streamer or youtuber. So there's constantly new people coming onto the platform. You know, if, if you want to brand yourself or brand your business on YouTube you may have a logo or a tag or some sort of like, follow me, subscribe. And if you don't know aftereffects or Apple motion or, I mean there's a couple of software packages that do this and you want to have some sort of like cool particle logo reveal or announcement like title card animation. There's not really like an easy way to do that. The tools are very expensive and there are quite a bit of knowledge to put something like that together. So what intro cave does is, it's got a library of about a hundred templates. Some of them just have a logo, some have like a logo and a subtitle, some just have texts only. And you can go and pick which template you like, upload your logo, change some colors, change some text, and it'll actually fire it off to a render server on a separate, so I have a web server and a render server. It'll fire it off to the render server, render a sort of crappy small preview, 480 by 270. Send that back to you. If you like it, you can pay five bucks for seven, 720P or 10 bucks for 1080P and it'll take about an hour to render it in HD.
Ramesh: Okay, so how long is this intro video?
Will: Up to, I have some, even up to like 30 seconds that are really more like a micro ad spot, but I'd say the sweet spot is probably in the four to ten second range.
Will: Oh, I see. So 4 to 10 seconds range. And it's, I say, so essentially you guys are doing a sell up of the video and that's how you're making money.
Will: Correct and it's not liked a perpetual license either. It's like a pay per render. So it's not like, you know, some of my competitors are more like a subscription fee and you pay you know, 10, 20 bucks a month and then you can render as many videos as you want. Mine is just a single transaction Elkhart pay per render. And I think that works pretty well for intro videos because you, you know, once you have a logo reveal, you don't end up needing like, you know, two of them a month. I do about maybe 30% of my business is repeat customers. But for the most part, once you have your intro video, you know, once you're sort of just getting started, one is really all you need.
Ramesh: Okay. So that's a very good overview of the business. It's basically YouTube intro videos with, and then your sell up option to do that. And then you also contrast it from a business perspective. How you're differentiating is you're not doing a subscription kind of service. You're doing one at a time. That's how you're differentiating. And then let me ask you a question. How did you come up with a $5 for 720P and $10 for the, you know, HD 1080P, of that kind of pricing?
Will: I mean, really, I just inherited it. So when I purchased the business in 2018, it was $4.99 and $9.99. I've since rounded to even flat numbers just because the, you know, it's easier to put on the video or on the marketing site and things like that. I've tested a few more prices. I tried going to 12. I didn't see enough conversions. I actually, like I saw a dip at $12. So I’ve moved it back to $10. Last summer I tried just getting rid of the $5 option entirely. Figuring some, my average purchase price is about, I want to say like in $7.50 to $8 range, so it's pretty evenly split, may maybe slightly skewed towards the $10 videos. So I thought, well, maybe I’ll just get rid of the $5 option entirely and it'll go all the way to $10. Conversion dropped like 40, 50%. And so the increase in revenue was only about, it'd be like a net 25% decrease in revenue. There's probably some sort of like price anchoring going on there where, you know, when people see the $5 and the $10, they're like, Oh, well I’ll take the 10, but when they only see $10, they think, well maybe I don't need a $10 video.
Ramesh: Okay. Actually that is very, very, good point. I think in terms of price anchoring that you talked about and having the different prices, how psychology works. So let's take it one step at a time. So Will so you bought the intro Cave and then you agreed on some kind of uprising by looking at the valuation of how much money they're making and all that stuff in 2018 and how was the journey and then what, how much time were you spending after you bought it? And then if you could talk about, let's talk about 2018, I don't know how much time you had in 2018 let's talk about that first.
Will: Sure. So I got pretty good at doing sort of financial modeling of these deal prospectuses that were coming through the newsletter I signed up for. So I basically run you know, a 10-year model of like, okay, if I can increase traffic by 1% a year or increase conversion rate by 2%, here's what the business might look like in three to five years. And I was looking for something that was sort of in my technical wheelhouse as well. So my background is in games. So I’ve done a lot of scripting and Photoshop. I've done a lot of similar scripting. So the backend servers are running aftereffects, which has the same scripting language as what you would use to script Photoshop. So this one just ended up being something that was right in my technical wheelhouse. As well as I, you know, doing games and digital media my whole career. You know, I studied animation in college. So this sort of felt like a, Hey, this is like this thing I used to do in the dorm and maybe I’ll pick it back up again and start creating some of these intro videos myself. So sort of like scratch all those numbers. I sort of looked at it as, you know, depending on some of the businesses I was looking at, like if it was a sass and it'd been around for five years, maybe the multiple goes up a couple, I sort of assumed the base starts at around 30 times EBITDA, like monthly EBITDA. So like if it's making, you know, $1,000 a month that you know, sells for roughly $30,000, that kind of thing. So sort of my, in my head where I value things was sort of at somewhere in the 30 to 36 range. And then I would sort of tune that number up or down based on, you know, how long has it been around, how volatile is the traffic. Do they have sort of repeatable acquisition channels? So this one was actually a fairly young site. It had only sort of been earning at that level for about eight to 10 months. Something like that. But so I actually sort of put a little bit lower ish then than what I ultimately paid for. But there were multiple bidders. And so what we ended up doing, the seller actually got enough interest that he was thinking about just holding it for another year and continuing to grow it and then selling it, you know, for double, you know, a year later. Yeah so, we ended up working out a kind of an earnout schedule where, you know, the base price was something I was comfortable with. And then if the earnings grew a ton in the first year I would pay, not quite, you know, double, but you know, pay more for it. So I think my final price multiple ended up being somewhere in the like 30 to 36 X EBITDA range.
Ramesh: Okay. So you bought that and then you said you wanted to optimize the business, increase the traffic and increase the conversions and that kind of stuff. So how, did it pan out or were there any ups and downs in your thinking when you bought it and then as you're working on the business?
Will: Yeah, for sure. So I bought it in, the deal closed in May. I didn't take it over until June. I was traveling until June. So once I took over the business in June, I was making around, I want to say like $2,500 profit a month. So I had pretty much the whole month of June to work on it and sort of do the onboarding, takeover of the business. And then my day job, I'm currently on a digital agency. I only work four days a week, so I have every Friday off. So I'd probably put in about 16 to 20 hours a week on the business after June. So at first everything went great. So, you know, I took over the business at about $2,500 a month or so. And then I grew that steadily through the end of the year. Just optimizing SEO. I started a newsletter. There wasn't a newsletter before. I revamped a lot of the design and the blog, got rid of some of the really poorly performing templates and grew from $2,500 up to about $5,000 profit in January. So in the first seven months I doubled it. Which is great for me. Not as great for the earnout. So basically, I hit all a hundred percent of the first three quarters of earn-out. And then around March, so February is another big month. January is a big month. So January is sort of cyclical for this business because a lot of people you know, you're a podcast of yourself, I'm sure, so a lot of people, you know, when new year’s hits, they're like, this is the year I'm going to start my podcast. I'm going to start my YouTube channel. So January is a huge spike of like, you know, $5,000 profit or something like that. And then that dropped back down to like $4,000 or so in February, which seemed like a more sort of normal run rate. And then about halfway through March, there was a big Google SEO algorithm update. And basically my main keyword that I rank for just disappeared entirely. So my traffic went from about 2000 people a day to like, you know, 400 or 500 people a day.
Ramesh: Okay. So I think we all go through the Google algorithm gods wishes and all that stuff, okay fine. So how did you recover from that?
Will: So my plan had actually been since taking over the business is this thing is held together with duct tape and chewing gum. I'm going to rebuild the render servers, make it super stable. It turns out when three quarters of your traffic goes away, it doesn't need to be that performance or stable anymore. So suddenly I had plenty of computing power and, and so the thing that I was working on kind of didn't make sense to work on anymore. So I sort of just completely re shifted my efforts into SEO. Really just learning everything I could about Outreach, SEO. I joined HARO, help a reporter out. So helping a reporter out is like a daily three times a day newsletter where people are just looking for sources. And so I just tried to respond to three to five of those a week. That's how I got onto this podcast even and just sort of start building a word of mouth that way. I started investing in Twitter. So I wrote a couple of bots for Twitter to basically just a scrape the timeline for mentions of subscribe to my channel, new video out, that kind of thing. And then run a little bit of very simple grading of like, okay, this keyword is worth five points, this keyword is worth 10 points. And sort of split that into a couple of lists of sort of prospects of low value, high value prospects, and then I can go and interact with those people and try to drive a little bit of traffic that way. I'd say that's been mostly a miss. And then right around the same time also my, you know, I get about, and this kind of blows people's minds, you know, a thousand to 2000, sometimes 2,500 people on my newsletter every month just signing up for intro cave accounts. So when I took over the business, the newsletter was about 20,000 people, I want to say and starting around, you know, February, March, kind of the same time the traffic blew up, my list was up to about 40,000 - 50,000 people. And me having never really sent a newsletter before. My, you know, strategy for that is like, you know, load 50,000 names in a mail gun and press send. It turns out that once you get above like 10,000 to 15,000, that doesn't work anymore. So I thought about migrating over to MailChimp or something like that, that'll sort of automatically warm up the servers and send them out and you know, get good deliverability. But you know, at my list size, it was, you know, $400 or $500 a month on one of the sort of pro, you know, email platforms. So to me it just didn't, you know, at the time I was only making like a thousand dollars a month in profit. So blowing half of that on a newsletter that drives, you know, maybe $200 of sales a month didn't seem worth it.
Ramesh: Hey Will I have a question [16:15 inaudible] heard about in that aspect that there are some services where you could ascend straight from your WordPress or whatever website without having to go to the email marketing solutions like a MailChimp to the world. You get unlimited sense. So did you say that, that did not work out for you because of the deliverability of the emails? Is that what you said?
Will: Yeah. So when you, so most of the email service providers, so Gmail, Yahoo, I mean Gmail is the big one. Gmail is like 90% of my emails when they detect a ton of traffic from one IP, that's really, really bursty. So, you know, I send maybe at the time I was sending about 40, 50 emails a day, just sort of normal transactional, thank you for signing up. Here's your password, that kind of emails. So when your traffic goes like 50, 50, 50, 50, 50, 50,000, 50, 50, 50, 50, that kind of spike just doesn't make it through. So you've got to kind of warm it up. So as part of that, I implemented a bunch of transactional emails. So now my daily volume is closer to 400 to 500 emails a day. And then when I send a newsletter, I ramp it up. So instead of going like, you know, 400, 400, 400, 50,000, I’ll do like 400, 1000, 2000, 3000, 10,000, 20,000.
Ramesh: Okay. So you're still doing that thing as opposed to relying purely on the email marketing solutions, like a MailChimp for the world?
Will: Yeah, yeah. I basically built my own newsletter service at this point. That's pretty much the big engineering effort of this year 2019 last year, I guess now.
Ramesh: Okay. Fantastic. So that's good. So you have built it up and then you build up the mail service. That's awesome. And then did it go back to the original at least $2,500 or when, what's happening.
Will: It's improving. So I'd say you know, March through September, August, September, it was pretty flat around making it about a thousand profit a month and that sort of like profit from an analytics side I would say that like an EBITDA side. So, you know, I financed the business when I bought it, so I'm still paying, you know, $400 or $500 a month in debt service. So, not a whole lot of profits starting around like September, that outreach started to seem like it would work a little bit. And so the numbers started ticking up. This most recent month there's another algorithm update a couple of days ago. There was one in December. Those have all benefited me, so I'm starting to see traffic for my top keywords again. And so it's looking like this month will probably be closer to 1500 or 2000, and its sort of on an upward trajectory again.
Ramesh: Fantastic. Okay. So it's a fascinating story, right? So you bought a business instead of building it and then you went through, the reasons why like you didn't want to spend, you know, enough number of hours just building it. And then you went to the pricing discussion. You went through the ups and downs of building the website to that. So now you started the whole thing as a side hustle, as a side business. Okay. So let's talk about what are your thoughts now, now that you have a business that is at least minimum of $1,000 on the side that's getting you on, you have a full-time job. So are you feeling comfortable that at some point you will quit your job and then focus on your business?
Will: I'd say yes but not because of intro cave necessarily. So the plan for it was really you know, we also do, my wife and I do real estate investing, so, you know, we're sort of on the fire financially independent retire early plan. So, you know, we're basically building up a rental portfolio. Then when that's paid off, we'll replace our salary, sort of W2 income. She's on board with that plan. She's not on board with the will wants to start an indie game company and hire artists plan. So if I want to, you know, have some sort of slush fund to like to hire out contractors and artists and grow beyond just what I would work on myself, I need more revenue to support that plan. So my plan with intro cave is actually, to for one, all it's doing now, every dime that comes in from it just goes into paying down the debt of buying it off. So theoretically it's going to pay for itself in you know, with the debt service drag like four to five years unless I grow it significantly. But then after that, every cent that comes into it, it's sort of like Will's fund money that I can just use on whatever I want. So I do have plans for what would it look like if I went full time on it. You know, it's nice, like I didn't sort of waste two years you know, working on a business that could never get big. Like, I sort of hit a high watermark now where I know that in January of last year, I made $5,000 profit in one month and that was at, you know, an average of let's say fourth and fifth in the search rankings on my top keyword. Which for me is intro maker. So when the algorithm change happened, I lost all my traffic for intro maker. But I was still ranking for a lot of other sort of peripheral keywords. So that's where most of the traffic was coming from at that point. When I was analyzing the business and doing due diligence before that, I saw that almost all the traffic was coming in on that one search term. So I sort of hedge my bet against that. So at the same time I was negotiating to purchase intro cave. The domain www.intromaker.com was available. It was, I mean, just a parked domain. It wasn't like freely register. So I reached out to the owner of that and spent like two or three months negotiating to buy that domain. Bought it for, you know, hefty sum. I was going to say it's like nine grand, something like that. Right now it's just parked. It's just not doing anything. It's just says, Hey, maybe someday there'll be something cool here.
Ramesh: Probably forwarding it to your, this business anyway.
Will: Yeah. Oh, well it's just a landing page right now that says, Hey, go here if you want something, maybe I’ll build something cool here eventually. So I have kind of like two directions I could see going. One is having a background in games. I'm super interested in Realtime rendering, which is that's been used recently in like rogue one. It's been used in the Mandalorian that's basically something that takes aftereffects two hours to render you could do in a Realtime engine in unity or unreal in like, you know, two minutes. So I want to start investing in building a pipeline to build intro videos in unity or unreal that then can render much, much, much faster than aftereffects can render. And my thinking was that it'd be pretty easy to build a sort of like a front-end editor for like sort of like a more of a Wiziwig. So instead of having like prebuilt pre-packaged templates, more of like a true editor and putting that up on inter maker.com that's like sort of the grand huge vision. You know, working on it 16 to 20 hours a week. It's moving pretty slowly. I don't see myself getting there anytime soon, so I may just rebrand intro cave as intro maker and start moving it over to there, that'd be the shorter-term play for that.
Ramesh: Okay. So exactly. So now you've started talking about the time management aspect of running a business, which is that you have two kids and then pretty young kids and then so the most you can afford to put on the business at 16 to 20 hours without really compromising the work life quality and all that good stuff. Is that right?
Will: Yup. Yup. I'm kind of lucky actually that everyone in my family goes to bed by nine o'clock and I go to bed at two o'clock, so then I can sort of get like five hours every night where I can do whatever I want. Lately that's been apex legends and video games. But you know, sometimes I'm more highly motivated too jam on intro cave in the evenings.
Ramesh: Okay. So fantastic. So we covered a lot of ground here. We'll then, if I'm an aspiring entrepreneur, based on your story, what can you tell me?
Will: I mean get started young before you have kids is a great piece of advice.
Ramesh: I didn't do that, so then what is the next best?
Will: I, I'd say like one mistake I’ve made, this is looping around to your question is, I'm currently on a sort of huge gaming laptop and I have three monitors set up and I’ve gotten very comfy in my old age where, you know, I have to be at work in my setup. Probably in the next six months or so, I'm going to buy a new like a razor blade or some sort of like windows equivalent of like a MacBook pro or something like that that actually has a decent battery life. When I was much younger in my career and when I was just dating my wife, my now wife we spent a lot more time together while I was working on my businesses. So, you know, I used to make flash games and websites, but I would do it from a small laptop and so we would sit on the couch together and she'd be watching a show or there'd be a show on and she'd be, you know, browsing reddit or whatever and I could be working on it, you know, while still with her. I feel like right now, I go to my office and I sort of shut out the family. So I mean, I'd say if you can figure out ways to work on your business, at least in proximity of the people around you.
Ramesh: Well fantastic. That is what I do as well, where I was sitting in the living room. You know, that way what happens is though, getting the family support is extremely important and then how you get it, I think you gave a very practical tip, not many people talk about it. That's very good. So Will just to wrap up this discussion, just let me summarize. You know, your way of getting into the business is buying it, not building it and for many reasons of course the number of hours that you can put on the business and then the business you went through the valuation X number of times kind of calculation. That's good. And of course went through the natural ups and downs of the business. And I think to, if I could summarize where you came from, you're a techie guy, right? And you bought a business that you could work on if something goes wrong as opposed to a purely entrepreneurial person who just bought this business when the algorithm went down or when the rendering issues that you talked about are not working out, that person could not have worked on the business. Is that the right way to say it?
Will: Yeah, I'd say the Intro cave is very tech dependent. So you know, even I keep in contact a little bit with the previous owner. I had a huge outage maybe three months afterwards and he's like, Oh, I'm so glad I sold to an engineer and not like product manager type. Cause they would've just had no idea how to fix it.
Ramesh: Exactly. And then you have to spend money on somebody else doing it and then that eats into the profits and all that good stuff. Right. So that's other part of the business because I'm all talking about the different aspects. It's like, you know somebody buys houses for real estate investment, if they depend handyman to do it, it eats into the profits. But as if you can do the work yourself, then of course it's more for you.
Will: Yeah, it's funny. The week that I closed on intro cave, so I took last June off. I actually, we also had a tenant move out on one of our rental properties and so I completely redid the floors, the drywall, painted the whole house while I did that during the day, and then was working on intro cave with the seller in the evening. So I was doing both of those at one time.
Ramesh: That's fantastic. Okay, so Will this be a fantastic interview. So how can people know more about you and where should they go? And just a wrap up the video cast, podcast with that information please.
Will: Yeah. I mean, I can give you my email. Learn your ABCs, which sounded cool in seventh grade when I made it. At the time it was Hotmail, now it's g-mail. So firstname.lastname@example.org. I'm Simian logic on all the, you know, Twitter, everything, Xbox live. If you want to play and text with me. I'm at intro cave as well, and Twitter, www.introcave.com is the website. Happy to answer any questions or email me.
Ramesh: Fantastic. Hey, will thank you very much. And we'll stay in touch. Again, folks, I mean, it's an entirely different way of building a business. You don't have to build a business from scratch. You can buy the business and work on it. Of course you have to pay for it, and then you have to take other factors into consideration. But I think Will walked us through in a different way of being an entrepreneur. Thank you very much Will.
Will: Thank you Ramesh.