On today’s episode, find out how one entrepreneur was able to overcome the roller coaster events in his life. Kevin Hourigan sits down with Jon and shares his company’s struggles, victories, recline, and regrowth. He is the President and CEO of Bayshore Solutions, a leading Digital Advertising Agency. Tune in as Kevin discuss how he handles these transitions and adjusts accordingly when the waves end.
“When you're losing so much, getting to profitability seemed like a huge victory.”
01:17 - How Kevin started his company, the Bayshore Solutions, at the time when websites are not yet known or seen as needed.
04:04 - Their struggles at the beginning and how they grew so fast in 3-4 year mark as companies realize the importance of websites (dot-com bubble boom)
06:19 - The downfall of his company after the dot-com bubble burst, how they bounce back, who among their clients managed to survived the downfall current and why
10:48 - What Kevin thought happened at the dot-com bubble and how he and his employees reacted and handled the changes in the industry
16:30 - Why denial phase could be a silent killer and why it's important to accept what's happening and adjust
18:55 - Why Kevin rebrand his company and hired co-worker and customers that are willing to let go of the past and how they became successful
20:46 - Two lessons that Kevin learned from all the events that happened and where it leads him and his company today
24:10 - The vision, expertise, and values of Bayshore Solutions that will enable them to be ready for any shift or unexpected things to come and help their clients grow their businesses
27:36 - How to be innovative not at the client's expense and why Kevin's company doesn't work with vertical markets
Connect with Kevin:
Intro: Welcome to Agile Living, The Entrepreneur's Journey. A show dedicated to discovering how entrepreneurs and digital leaders are doing more with less. I'm Jon Voigt, your host and CEO of Agility. And we're on a journey across the country to learn from top digital entrepreneurs on how to live a more agile, adaptable, and fulfilling life. Thank you for joining me today. And let's dive in.
Jon Voigt: Today we have Kevin Hourigan on the show. Kevin is the President and CEO of Bayshore Solutions. Kevin has been at the helm for 23 years and has seen lots of changes in his business and the industry. We were talking about some of these big changes that happened over the years and it's amazing any business stayed around for so long even with all the major changes across all industries. On this podcast, I wanted to have Kevin on the show to talk about these transformations and speak about his business being able to redefine itself to keep providing top solutions through all the ups and downs. Kevin, it's great to have you on the show.
Kevin Hourigan: Well thank you. It's a pleasure to be on the show.
Jon Voigt: I'd love for you to start all the way at the beginning. You know talk about some of the big swings the business went through and then maybe lead into where you're taking it now to kind of stay relevant as things continue to change.
Kevin Hourigan: Well that's great Jonathan. My company started, Bayshore Solutions, we started twenty-three years ago as a web design and web development company. And in taking you back twenty-three years ago to January 1996 America Online or AOL as you may remember it was on Version 1. And at the time I had a company that was what you might call a network integrator. We went into local businesses in the Tampa Bay market where I lived and we would help them manage their workstations and their servers and make sure their employees could use those computers every day. And we had an idea that we would start to offer these people their first website ever. And January 1996 as we went to our existing customer base and offered them their first website ever which was going to be a three-page website for five hundred dollars, we immediately were faced with two common questions. The first question was, what is a website? And the second one was less of a question, it was more of a statement it was, we'll never need one of those. And that's when we got started at Bayshore Solutions.
Jon Voigt: Wow it's so crazy to flip back to that time where the Internet was questioned.
Kevin Hourigan: Very much so. Very much so. The tides shifted for years later and those companies who said what is one or we'll never need one, where banging down our door changing their mind. But that's when we got started and kind of consider ourselves, for lack of a better phrase, kind of a grandfather oak tree in the Internet space. As we continued to grow and then move in this industry, one of the things we later learned is 98 percent of the companies that were in the Internet services space before the year 2000 are no longer in business today. So, we feel very fortunate to be one of the two percent who survived the crazy times of getting started when no one had belief, and on the crazy times when the dot-com bubble later pre-did and the adoption of the Internet to greater than what it actually could provide results back to. And then the implosion of the dot-com bubble so to speak, and the fallout of that is part of our journey that certainly has given us a lot of experience. And that experience has given us a lot of ingredients to still be here twenty-three years later in an industry that still is the wild wild west from trying to determine what your five-year vision is in this industry. Still at twenty-three years deep it is difficult just because of the rapid change that the marketplace has.
Jon Voigt: Yeah definitely it's hard to plan out in five years when in two years that direction can pivot completely.
Kevin Hourigan: Absolutely.
Jon Voigt: I know, you were talking about the dot-com bubble and some you know big huge climb of the company and then a shrink of the company. And you know a change of all these things, what kind of happened around that time for you guys?
Kevin Hourigan: Sure. So, when we started the company in January 1996, we had an existing business. I was just sharing about we were a network integrator for lack of a better definition. And so, we took three of the employees from that company and started this Web design company. And so, we finally got our first customer, it was a $500 website. We probably spent five thousand dollars ($5,000) trying to learn how to build it. And then because we're in the I.T. infrastructure space, we built two servers and set up our own data center inside our office space and started hosting that first website for nine dollars and ninety-five cents ($9.95) a month. And you know we struggle. We didn't know how to develop a 500-dollar website but we couldn't find anybody willing to pay more than that. And you know a year into the business the general business population was starting to become more aware that a website is probably be something that they need. And as they determined they needed one of those, the value of what they were willing to pay went up too. And so, by the time we started our third year our average project went from five hundred dollars ($500) to seventy-five hundred ($7,500). And we weren't trying to convince people that they needed a website. They were starting to bang down our door. At that three-year mark, when we saw that growth of what our average website cost was, we went from three employees to 30. But 18 months later we were at 225 employees and our average project size was two hundred and sixteen thousand five hundred dollars ($216,500).
Jon Voigt: Wow.
Kevin Hourigan: And so, in a very short period of time, we went from three employees to 30 at the three-year mark. And then at a four-and-a-half-year mark we're at 225 employees. We had six offices, five in the US, one outside the US and our average project size went from seventy-five hundred dollars ($7,500) to two hundred and sixteen thousand five hundred ($216,500). And at that time, we thought we were just the most absolutely brilliant people in the world in that we struck gold and all these different things. We didn't really have that past business experience to understand what cycles end. And certainly, I don't think you know in the last 50 years there's been too many as big of a boom and bust cycles as maybe the dot-com one. Certainly, the real estate, maybe the auto markets have experienced it but you know I don't think in my career I'll ever experience again what we experienced in the dot-com.
Kevin Hourigan: The boom and then as you mentioned just a moment ago Jonathan, when we went from 3 to 30 to 225, we went back to about 25 employees in about 13 months thereafter after the dot-com bubble burst. And we lost over 80 percent of our client-base because they were venture capital-backed and they lost their investors. And we eventually did draw a line in the sand that if you couldn't get current on your receivables and prove you're able to stay current after you got current, we were going to have to separate for lack of being able to pay for the projects. And we lost over 80 percent of our clients and we sent a 30-day notice and only about 15 percent of our clients were able to stay current or were current and prove that they could stay current. And we lost 80 plus percent of our client base and probably you know similar to the number of employees, the workforce, at the same time.
Jon Voigt: Unbelievable. Oh my God. What a shock to the system.
Kevin Hourigan: Yes, it was.
Jon Voigt: But you bounce.
Kevin Hourigan: We did. We did. And you know really you know the industry was at a standstill. I don't think anybody knew what to do. And so, you know when we were going through that downsizing and finally getting to stability points you know what we found is the customers who were paying us a couple of years prior to the seventy-five hundred dollars ($7,500), they were the ones that survived. The ones that were paying us two hundred sixteen thousand dollars ($216,000), they were the ones using someone else's capital with some quote unquote brilliant idea that they weren't the ones had funding behind them any longer. But the original, established organizations who thought a website would be something that they could help grow their businesses. Those were the clients who stayed. And so, you know part of the dot-com bubble burst is I think that everyone thought, first to market first to succeed. But I think what we quickly realized is, those that were first to markets were really paving the ground in an unpaved jungle, and were making lots and lots of mistakes and burning lots and lots of capital. And any of those who did make it through, probably had invested too much and made too many mistakes that that there wasn't a viable business at the end of the road. And those that didn't make it there, investors lost confidence watching those who did make it there and everyone pulled out of the market as a result of really the investments of hope really didn't turn out to investments of reality.
Jon Voigt: Right. So really what you're saying is kind of this big you know, boom and bust was a cycle of businesses that weren't really viable long-term kind of businesses to begin with in some ways. You know they were kind of getting fed by investment and you were able to kind of jump on that wave and grow really quickly and get all those benefits. But when the you know, the sledgehammer hit down all the pressure came on these businesses and they all kind of folded.
Kevin Hourigan: Yeah, I think that's a really good really good way of explaining it Jonathan. I think that the bricks and mortar companies that were in business before and paying us seventy-five hundred dollars ($7,500), they all survived.
Jon Voigt: Yeah.
Kevin Hourigan: The companies or businesses that were being funded with this quote unquote great dot-com idea, that was someone's idea, someone else's money, someone else chasing after the dot-com dream. I would say only 10 percent of those businesses ever survived and they were all investing in in what they thought would be something that would work out. But you know the market was inflated. I remember at the time our company was, our company almost went public.
Kevin Hourigan: I remember at that time our valuation wasn't based on revenue. It wasn't based on EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization). It was based on the number of billable employees we had times a multiple of what revenue would be in a future year. And I don't think that valuation will ever come back in my business career. But it wasn't revenue, it wasn't earnings, it wasn't EBITDA, it was how much revenue could our staff produce in the following year. And so, we're taking the company public. Part of our valuation was to hire a lot of people and we raised 14 million dollars. And part of the process of trying to take the company public. But one of the things we had is we had a training department of probably 40 people in it. Those 40 people really weren't working on any active projects at the time, but each one of them were probably worth three hundred thousand dollars ($300,000) to our company's valuation.
Jon Voigt: Wow.
Kevin Hourigan: Do I think that's going to happen sometime in the future? I don't think so. But that's what people were investing in at that time.
Jon Voigt: Right.
Kevin Hourigan: And you know I think about you know some real estate decisions that people were making. And while relative comparable properties in that region may be worth that at current transactional values at one time, when the market shakes out no one would ever pay that price again for a long period to go. And I think that's what happened to the dot-com bubble, is there were some earlier signs of some companies who were able to create some incredibly impressive valuations and others had ideas that they thought they could equal that valuation and a lot of speculation took place. And when some of that speculation didn't have good outcomes it created concern. Eventually that concern created investor withdrawal and then you know most of these investors from the Nasdaq crashed in March of 2000. I think mostly investors realize their bid money might be not going into a good result and just kept their pocket books closed and then all these dot-comers with great ideas that were my clients had no longer funding, and we no longer provide services without any funding.
Jon Voigt: Right. Wow. So that was a big shift for you guys to kind of get hit by. I don't see the mistakes but the you know the over inflation of all these other customers of yours. And you know coming back when they went down, you guys were down to 25 people, how is that culturally? How is that for you as a leader? How did you handle that change? It's a big shift both ways, right? You said you hit the gold the other way and it was kind of you're on this mind bubble of how do we grow so fast, but then going the other way is the same effect?
Kevin Hourigan: Well on the way up, of course it's a great journey. Everyone's having a good time. The employees all have stock options. You know the way the Wall Street Journal delivered to the office or the offices. You can turn on your TV and MSNBC or any other news TV show is you know, publishing a story or two a day of companies that were just like us. They had 30 employees, a year later they have two hundred twenty-five. All the employees had stock options. They went public and everyone's worth a bizarre amount of money on paper. And so, we all believed we're the next one. We all believed we were next. And we truly believed it. And you know the investment bank that we engaged believed it. And we had investors who had 14 million dollars with the belief into it.
Jon Voigt: Right.
Kevin Hourigan: And now when the Nasdaq crashed that was a first dose of reality and at first, the story was it's just a market correction. It'll come back. Just well wait a week and a week turned into two weeks, turned into a month, turned into two months, six months later our investment group said, you know we're not going to continue to fund this until the market has come back. And it never did. And so that was the first dose reality. That's where we had to go to our existing client base and say we can't continue to take some equity of your company as a form of payment and keep your dream alive. And that's where the big dose reality and for our team, it's hard. I think the hardest part, the hardest to accept is people who had the dream and they don't want to believe that the dream has come to a nightmare. And so, you know, I think you know from myself to everybody who worked for the company we're first in denial of reality thinking that it would come back. And six months later the investors whose capital is being spent, they're the ones who have the biggest dose of reality because they're the ones that are funding a burn rate and the employees are just waiting for the phone to start ringing again and the two hundred sixteen thousand ($216,000) projects to get refunded. And once reality hit, you know it's tough. It was really tough. You know a couple of anecdotal things happen. You know one night you know my really smart you know the smartest best talent I had, they realized it quickly and they knew they needed to go find a new job. And they did that on their own. Others you know didn't necessarily have that foresight. And unfortunately, we went through three rounds of layoffs and had to go through that experience. I went to the hospital on Christmas Day one year during the whole course of this and woke up the next morning and the doctor shared, I don't know if you know this or not but during the course of your emergency procedure last night, we found four ulcers in your stomach.
Jon Voigt: Woah.
Kevin Hourigan: I didn't know it but I wasn't surprised. And so, you know at the end of all that, we had a different name at the time, and as we were starting to turn the corner from going down to start enough to flatten out, I chose to rebrand the company. Because the company that we were before was this darling dot-com company that everybody loved to talk about. That was on the way up. Then all of sudden we weren’t this darling company anymore. It was the company who had rounds of layoffs. It was the company that potentially was going to have to file bankruptcy and nobody wanted to do business with us. I couldn't find any customers that wanted to take that risk and I couldn't find any new co-workers that wanted to take that risk. And we weren't that company anymore. But that's all people perceived us to be.
Jon Voigt: Yeah.
Kevin Hourigan: Yeah that's what the perception was. So, I had to rebrand the company and kind of start over and find a core group of twenty-five people who believed that we could survive with the original core clients that we have. The bricks and mortar people who had been helping with and we can rebuild. Once the marketplace shook out, we can rebuild the company as to what the industry will be and hence the name Bayshore Solutions came out of that. Bayshore Solutions intentionally doesn't stand for much because when we rebranded the company it could have been Bayshore Web Design. It could have been Bayshore Web Development. It could have been Bayshore SEO. But we had no idea what parts of the industry would survive or what parts would fail. So, we wanted to name it Bayshore Solutions knowing there would be some type of solution but not pigeonhole ourselves into some type of brand that determined some type of service offering that potentially wouldn't survive the dot-com bubble burst.
Jon Voigt: Right. Well congrats on flattening it out and bring it around. I think there was one thing you said there that resonated with me, was that you know you guys were kind of in that denial phase. And you know a big part of this topic is how you been able to adapt and adjust and things like that. But I think that denial phase can almost be a silent killer as well because people hang on to something, they deny it. They say oh it's going to come back and come back and they take it so far, that they can't bring it back. And you know there was something that turned for you guys to say, you know we have to start accepting that this is happening and adjust. And I'm assuming if you kept on denying it, you really would have run the company right down.
Kevin Hourigan: Absolutely. Like I said it's not my statistic it's what I've read. But you know 98 percent of the companies in the space didn't survive the dot-com bubble burst. I think we are fortunate enough and realized that it had gone away and I had to find 25 people who understood there was still an opportunity here. It just wasn't the one that we had all hoped and dreamed of.
Jon Voigt: Right.
Kevin Hourigan: But there was still an opportunity here and I had to find the people who weren't still expecting it or weren't so disappointed or you know I hate to use the word holding the baggage so to speak of what didn't happen. But we're focused on looking through that to the telescope forward as opposed to the rear-view mirror backward. And so, when you found that core group of customers and this core group of co-workers who were all willing to use a telescope going forward and only learn from the experiences of what happened in the rear-view mirror, we started to flatten out and then eventually rebound. And you know as we were growing on profitably for those years trying to take the company and intentionally unprofitable way because it helped fund the valuation of how we're being valued at that time. But from that point once we turn the corner and refocused, we were profitable the first year and just continued to grow in profitability and revenues and quality and all of those things. But you couldn't do that unless you had believers who were willing to let go of the past, learn from it, let it go, and look forward. And that was customers and co-workers and that's what we were committed to do and we ended up on the positive side of the outcome of the shakedown of the dot-com.
Jon Voigt: And so, from there, what happened from there? Where did you go? Was it a slow climb, was it a more gradual you know a more stable climb? Was it not? What happened there while it was changing?
Kevin Hourigan: Yeah, I'd say it was a slow climb. You know I think the year 2002, 2003 it was a slow climb for us. You know we were a company who intentionally was running a negative profitability because we are funding this training department and we are funding large media campaigns to get some brand notoriety for the public offering. So intentionally we are being subsidized, running unprofitably knowing that the return would come back in a public offering. When we knew that was going away, you know we had to turn the company around and we had to become a quote unquote for-profit business. You know at that point when you're losing so much at that point, getting to profitability seemed like a huge victory.
Jon Voigt: Right.
Kevin Hourigan: And so, I think the first year we had a net income of like one hundred and ten thousand dollars. And from where we had come from to where we got to that seemed like such a homerun. And that was the foundation to be able to build the future going forward and then a couple of years after that in the Tampa market where our core office remained for the whole time, we started having some significant growth. We ended up competing in some business contests in the Tampa Bay community and one of them was held by the Tampa Bay Business Journal and the first year we competed we were the second fastest growing company in Tampa Bay. And I think the next year we were the 16th fastest. In the year there after we were the 48th fastest growing company. And so, you were able to take that platform, get stable, build some slow growth, and then be able to really get more aggressive on our opportunities to go out there and take some market share and we're very successful at doing so.
Jon Voigt: Right. So, what do you think has changed in your mindset from you know that whole experience to bring forward as a leader? Was there something that open your eyes up? You know one big learning thing that really hits you. Now you apply it or is it just a, always being a bit more cautious? You know what I mean after going through something like that. What do you think?
Kevin Hourigan: Sure. Sure, I think at the beginning I think you have some knee jerk reactions, right? Some of these things come to you very rational and some of our knee jerk reactions, have you been stung so bad, you just don't ever get yourself in that situation. So, I think as we reacted to change you know a few of those things is I didn't want any outside investors anymore. We want to run a for profit business that we could manage the company ourselves without any outside investors.
Jon Voigt: Right.
Kevin Hourigan: I think secondly you know one of the things that I started to have doubt that this all was really going to take place when you're trying to take the company public is, we were on a Lear jet flying to go to a road show somewhere. And myself and one of my partners were on the plane with our investment bankers and they leaned over to us is it, hey guys either of you need any capital or anything like that because we can probably leverage some pre-IPO (Initial Public Offering) stock and give you some spending money if you needed five to seven million or something like that. And I remember just sitting on this airplane like we haven't worked that hard to be able to have this conversation and then it's the next conversation is had we the same plane ride. The next question was, have you considered a research. You know what country you're going to register your yacht in. I remember my business partner saying, sure I'll take a seven-million-dollar advance loan and gets my IPO stock and I remember telling myself, this doesn't feel right. We have not worked that hard. We're not that smart to be sitting on this airplane right now being asked if we want seven million dollars advanced offer our pre-IPO stock and what country we're going to register our yacht in. And sure, enough it was forty-five days later that the Nasdaq crashed and we never run a roadshow or that Lear jet, those road show ever again.
Jon Voigt: So, you got your money? So, you got your money?
Kevin Hourigan: Yeah. Got to tell you about it. Neither one of us did. But that's where I started to not feel right. So, I think you know there's the old saying of you know, I'd love to manage with data but certainly you have some gut feelings too. And so, I think you know, most of my decision, in our leadership decision making here at Bayshore Solutions is, there's an old saying data tells, story sells. And so, you know what is the data telling and then what story can we all agreed to as a result of the data that we analyze. And so, emotions don't have much data behind them but data doesn't necessarily tell the only story. And so, we've been able to look at a lot of market conditions and be able to understand where our positioning is and how we're approaching our existing customer base, our new customer base, how we're recruiting talent, looking at the market, and where our company can position itself best as a fit. And training and teaching our co-workers on the technologies and platforms that will be beneficial to the target market that we're serving. And you had a very data rich approach in and same with our geographic expansion. As we've expanded into two other markets, South Florida and to Denver, Colorado. You know very much specifically looking at the market opportunity. What communities we can provide some expansion into and where we'd be a good fit and those have worked out really well for us.
Jon Voigt: Nice. Congrats on that. So where do you plan to take it from here then? You know you've kind of learned f