Why a Downturn Is the Right Time to Start a Business

What We Need to Grow, Episode 050: There Is No Right Time. A Founder Talk conversation with Matt Remuzzi, founder of CapForge. Cleaned for readability; the words are the speakers' own.

Caleb Pedosiuk: Matt, good to see you. Let's do this. Dot-com boom, you started this company coming right out of it, the boom and bust around 2000 from what I understand, and you stepped out on your own and have been crushing it ever since. We'd love to hear a little bit about that journey. I love the fact that it was birthed out of a time of disruption, innovation disruption. There's lots of people talking about AI right now. Is it a bubble? What's going on? A lot of people get this super hype and then they're super uncertain. Certainly a time of disruption. So please, how has it been, the last 26 years of building?

Matt Remuzzi: It's been good. I hear a lot of people go, well, I've got to wait for the right time to start a business. There is no right time, right? People started businesses in 2009, right? The height of the financial crisis. I started in 2000 when the stock market took a giant dump and everything was doom and gloom and all this internet stuff, nothing's working. It turns out eyeballs weren't really the answer. So the reality is Business 101 never changes, right? If you provide value, you provide a service that somebody needs, or product that somebody needs at a good price, there are going to be customers.

What happens in downtimes is the people who were coasting, the people who weren't really providing value, the people who were on the edge, sort of scammy, sort of just playing along, they were pretending to be business people. That's who gets washed out. But at the end of the day, there's always going to be people who need good service, good products at the right price. And if you're there to provide that, you're always going to have customers. You're never going to be in a position of scarcity or fear.

And I always wanted to be an entrepreneur. I just didn't know what I wanted to do. Getting laid off was kind of a blessing in disguise because I realized I had this skill set. There were people who still needed what I could do, and even though I didn't have somebody who was finding those people for me and then giving me a W-2, I could just sort of cut out the middleman, as it were, and go directly to those people and offer my services. And voilà, I was in business.

Between then and now, there's been about 45 zigzags. Some have worked, some haven't. Some have gone better than others. It's been a lifelong lesson of learning different things as I've been travelling this path, but it's all been good, right? I try to live no regrets. It's not a huge mistake if you learn from it and you do it better the next time. It's just part of life. So that's been the journey, a lot of different twists and turns, but it ended up in a great place.

Caleb: That was one of my questions. 26 years, was it a linear path? How close was your hypothesis of who you were serving and what you were helping them with then, versus where you're sitting now?

Matt: So what I learned is that I could do a lot of things. But I did much better when it was doing something that I enjoyed and felt good about.

The very first thing I did was working with small business owners or startups that were looking to raise money, right? And what they would come to me for was, we need help writing the business plan, we need help doing financial projections, and ultimately we'd like introductions to investors. Which I could do, all three. The challenge was sometimes people would come and say, here's my idea, I want you to write a business plan, I want you to do the financial projections, and then I want you to introduce me to people you know and trust who could put money into this. But the problem was their plan was terrible, right? I couldn't in good conscience introduce their plan to people who I knew as sophisticated investors who would look at this for about a minute and a half and decide there's no way this is going to work.

So I was sort of torn between, do I take the money for the consulting gig, knowing that it's probably not going to go anywhere, or do I give them the bad news up front knowing that then I'm going to lose out on a good-paying job? I didn't like being put in that position. I wouldn't sleep well at night taking money for something I knew wasn't ultimately going to be successful. But obviously, I had to still pay the rent and buy the groceries.

So I pivoted from that pretty quickly into building software that would let people effectively write their business plan and do their financial projections themselves, right? It was a DIY tool. You didn't have to know anything about accounting or bookkeeping or anything. You could build good three-year financial projections, and it gave you the whole template and exactly how to write a business plan. And I sold that software at volume to people. And then whatever plan they chose to write with it, whatever financial projections they wanted to put together, that was up to them. That was between them and whoever they showed it to, and I was just providing the tools. That felt much better to me than being in the position of doing directly the writing of it.

And then along the way I bought a restaurant. Along the way I got involved in some lead gen businesses and some other things, got involved in some partnership efforts to do various business startups, and I got into business brokering. And again, working with small business owners, looking at their financials to see if I could help them sell their businesses. And that really was what triggered the accounting journey, because what I discovered was so many small businesses had poor books or no books, poor accounting. Didn't like their relationship with their accounting person, didn't feel like they were getting the service they wanted, didn't get the education they needed to understand what they were even buying.

So I thought, here's an opportunity to do something I enjoy in a way that I can feel good about and really provide a lot of value to these customers. And that was in 2012, and I've been doing that one thing ever since. Started with me in the spare bedroom. Now there's 80 of us serving clients across the country. It's been a great ride, but it really is because I really enjoy and feel good about what I do. Whereas what I learned in the first 12 years is there's a lot of things I can do, a lot of things that make money, but I don't like them all. I don't enjoy them all. And I don't feel necessarily good about all of them. And those were hard stops for me on, I'm not going down this path. No matter how well I could do or how much money it could make, it needs to feel good on multiple levels.

Caleb: What was your background in 2000? You've done so many different things. You're building software, you're evaluating businesses, you're making intros to VCs.

Matt: Yeah, I covered a lot of ground. Prior to going to college, in college, and after college, all during that time, I worked in the restaurant industry. First basically behind the counter, just a regular employee trying to make some money while I was in college. And then after college, because I got a degree in psychology, which wasn't really where I wanted to go with my life, I just stayed on in the restaurant world but moved up to manager. And then I moved to the point where they would send me to underperforming stores to kind of do the turnaround. So I learned a ton about managing a profit centre, managing employees, and identifying and fixing small business problems. So that was my foundational on-the-ground learning, but I didn't want to do restaurants for the rest of my life. It wasn't really where my passion was either.

So there was an MBA program in San Diego, here where I am, that had an entrepreneurship track. So I thought, I'll go back to school, but I'll focus on the entrepreneurship track with the idea of getting out of school and then finally starting my own thing, which is what I'd wanted to do since I was 10 years old. So I went through that MBA program. I learned a ton. I met a lot of great people, including a lot of the VCs and investors that were affiliated with the school and kind of in that dot-com craze looking for the next great, the next Amazon, the next eBay idea to come out of there. So I made a lot of connections there. I didn't figure out what I wanted to do, but I got an opportunity to work at this consulting startup where I was doing business plan writing and financial projections and working with VCs and working with startups. And that's how, when I got laid off, I basically just kept doing the same thing I had been doing, but on my own.

Caleb: So I understand the relationship building. You're in class, you're with profs, you're in that hub. There's a natural inclination, an openness for people wanting to connect. You also went into lead gen. So I'm curious to know, you're at 80 employees now, I don't know what the client count is, but how does a lot of that demand come to you? Obviously there's word of mouth, that's a portion of it. But did you take that engine, the ability to build an engine for demand, and then apply that to what you're doing now?

Matt: Yeah, I definitely used a lot of what I had learned about SEO and optimizing websites and building funnels. And then also a lot of what I learned in general about business, which was if you provide really great service, great customer service, and a good product, the word-of-mouth referrals and the business that you build from that, that's one of the best marketing things you can do. Just have a great product, have a great business, and your customers will talk about it to other people. You'll get referrals, you will have business coming into you from that, right?

It's much harder to build a great business on a, if the business itself is kind of iffy, then your marketing has to be even better, your sales have to be even better, because you're overcoming this, yeah, but the product's not that great, or the service isn't that great. So I quickly learned in the early days that having a great product, a great service, a great business was the first step in being able to do anything else, because otherwise you've made your job 10 times harder trying to attract customers to something that isn't really good underneath, and they pretty quickly figure that out. Right? You can trick them into starting out, but if they're going out the back door as fast as they're coming in the front door, all that effort is kind of wasted. So build a great business and then spread the word through good marketing, good partnerships, all the lead gen tactics that I learned in earlier iterations.

Caleb: I've got a couple of things going through my mind at the same time. The one that's interesting to me is the restaurant background, and I kind of wonder, having that background and having that as a touchpoint, how that was overlaid in your worldview of serving, how you package things, how you serve customers. Certainly if you have a restaurant, I know it can be a point of stress, but it also can be a breath of fresh air outside of a lot of the way business is structured in a B2B, software-like environment. Having a real tactical food, drink, sitting with people, breaking bread, that sort of thing as well.

Matt: Yeah, I've had a long-time love-hate relationship with restaurants, right? Because they were very stressful. It was a high-stress, high-demand kind of situation. You're basically a food manufacturing business, but also a retail sales environment, together at the same time. So there's a lot of moving parts, which is why when somebody comes and says, oh, I've been in insurance my whole life, I'd love to open a restaurant one day, I'm like, good luck, right? There's a lot going on.

If you've done everything else well, then yes, you can go and circulate among the customers and share stories and enjoy that camaraderie that comes with it, and there is absolutely a great feel about having your hands on stuff, right? What I do now, working with spreadsheets, being on Zoom calls, you lose a lot of that sort of feeling at the end of the day of, man, we got through a busy, busy day, but the team won and everybody kind of went away happy and you had that great, real communal experience. But it comes with a lot of stress.

The best thing that I learned from being in that environment, and in particular being in that management role where I was doing turnarounds, okay, why isn't this store functioning? What I learned was it comes from the top. Right? Very often, a store that was underperforming, that was getting bad reviews, that had a lot of turnover, had low-quality food scores and whatever, it started at the top. Whoever was there never came out of the office, had a handful of favourites, favourite employees. They got the best shifts, they got away with murder, and then everyone else just got ridden rough right into the ground and yelled at and blamed for everything. And of course, in a toxic environment like this, who's going to try and work hard? The good people leave, and you end up with the people who have no other choice but to work here because they need to work somewhere, but they're completely demotivated. As soon as the manager turns their back, if not not doing what they're supposed to, sometimes they're actively undermining what should be.

So it was a great lesson and a great sort of laboratory environment for me to understand how to build a team, build a culture, build an environment where people were motivated to do a good job even if you weren't watching them, right? And even if you couldn't. One of the handicaps I had was I couldn't incentivize people with bonuses or raises or pay for performance or whatever. I was locked in. I could only pay what I could pay. The store determined that, I didn't. So I had to motivate people who are generally working at some of the lowest wages, some of the people with the least opportunities in the job market, and somehow get them to want to do a good job even though I can't pay them more.

So it was a great environment for me to learn how to really be a good manager with a very limited toolset, and how important it was to be a good leader, to have a team that respected you and wanted to work hard, versus all the other ways I saw that people just do a terrible job at that and beat people up. Not literally, but emotionally, and the way they were treated. And I always said to myself back then, right, I have my own business, I'm going to have the kind of business where I would be willing to work. I'd be happy to work there. That's how I'm going to run it, not like some of these. So it was a great experience.

Caleb: Are you seeing an opening up of an opportunity, moving into a trend where maybe, corresponding with the baby boomers aging, the silver tsunami, that more of these businesses are at a point where they're looking at what are my options? Either legacy, or is a turnaround needed? Are wrap-ups an option? Are you seeing, with how CapForge is positioned, that you're serving clients but then also being like, hey, actually this needs some work to get it to a point of acquisition or transition? Is there something that you're seeing open up based on that trend?

Matt: Yeah, I think it's a real thing. We've talked to a lot of business owners who are looking to retire in the near term, and they've kind of always run their business the way they run it. Sort of like they stopped. Like the last time something new was put in place was 1996. That's the last time. And so there's a lot of legacy processes and just ways of doing things, even ways of thinking about things, that haven't really been updated.

And I think there is a big opportunity for people to come in with new, fresh ideas, a new take on how to do things. And it's the same core service maybe, but just with a whole different take on how to run it, how to manage it, how to market it, how to price it. All those things. And I think there are very savvy people out there right now taking advantage of some of those opportunities. And yeah, it's an exciting time to be an entrepreneur for sure.

Caleb: You mentioned saying yes to more things early on, then deciding you wanted to be true to actually doing stuff that you could stand behind. And now, to this point, I only want to build stuff where I would be willing to be on that team in that environment. But going back to that point where you decided you wanted to do stuff you could stand behind, that's a niche, a way to categorize things. Things I would stand behind, things I don't. So you've got a smaller subset. But would you say that you found real traction in niching down outside of the Valley? So let's say you're in the Valley, you're on the West Coast, typically early adopters in general, you've got a lot of advanced ideas coming out, they're at the forefront of things. Did you find that you had more success when you looked outside of that and picked a niche, like serving restaurant owners or serving a really specific aspect of business, rather than having that groupthink, staying in the Valley trying to serve people that are trying to get the next business plan funded in that same ecosystem?

Matt: Yeah, it definitely was. During my whole MBA time and for a couple of years after that, it was very much an insular sort of world, and you sort of feel like, oh, everybody's raising capital, everybody's launching a business, everybody's shooting for a unicorn valuation. And then you kind of realize there's a whole other world, and actually it's like 99% of the world that's not doing that.

I was around a lot of people who had big ideas and were doing these moonshots, but at the same time sleeping on a friend's couch eating ramen. And there was definitely a certain amount of cockiness around this. Well, I wouldn't want a lifestyle business. That guy just has this auto repair business or this HVAC business. Yeah, but that guy makes $800,000 a year running that business and you make $22,000 a year, and there's like a 1 in 100 chance that your business even gets a first round of funding, never mind some huge liquidity event. So maybe tone down the cockiness and find a little humility.

And so yes, as I got out of that venture-backed startup world and into the broader world of small business, I realized that lifestyle business wasn't actually a bad word. It was actually a pretty attractive opportunity. You can have a very nice business serving a great number of customers and do very well financially without ever taking venture capital money or without ever contemplating going public as a business or anything else. And it definitely was an eye-opening experience for me, because I had come up in that very insulated world of, if you're not raising capital or going for an IPO, why are you bothering? So it was refreshing. And really, that's where I've spent 24 of the last 26 years, and very happily.

Caleb: Right now, today, where would you say, if you had to put your finger on one aspect of growth? And I love asking this question, because some people are raising money, some are looking for operators, looking to franchise, some need key talent in certain seats. What would you say is the one thing you need most to grow right now?

Matt: That's a good question. I think we're pretty well situated as we stand. We are currently growing. What's the challenge that we're working on right now is really, how do we incorporate all this new technology into what, up till now, accounting even today is fairly manual still. There are software suites and processes that do some of the work, but we're really sort of at an inflection point where all of a sudden, within the last year, 12 months, 6 months even, there is much more powerful software and AI available to take a big chunk of what was otherwise manual and required human input, and it can now do that as well or better than the people can.

So our growth challenge is figuring out how we incorporate that in, to free up more people time to serve clients differently than we're kind of used to. I think there's a path forward. I think there's a way that actually it benefits us. But it's a little tricky to navigate exactly how this rolls in and what it means for people's day-to-day and their specific job duties, how we incorporate all this. And it's also a constantly moving target. It's not like, okay, here's all the new software, now you've got 3 years to figure it out. It's, here's the new stuff, but 2 weeks from now there's gonna be even newer stuff that's gonna do even more, and keep that in mind too.

Caleb: I've been specifically on the numbers side of it. I've been thinking of it a little bit like algebra. With AI, as we use it across all these different systems, how do we put brackets around this whole part? So let's say, how are the numbers, the expenses, the spend being ingested, being captured? Let's bracket this. So whether your team's using Ramp or something, can you standardize all of this? And you would see it where, some instances with QuickBooks, let's make sure that we're using some standardized form of whatever. Put brackets around it so that if we need to look and say, hey, there's a new tool that solves this part of it, we could swap out that part. But when it comes to file management, integration, LLM processing of things, training on SOPs, you can compartmentalize it a little bit. And then the founder or the leader who's orchestrating is now looking at how these pieces of the equation play out together, rather than, oh my goodness, the whole thing is one ecosystem with all the roots intertwined.

Matt: Makes sense.

Caleb: Well, Matt, thank you so much for sharing. If people are curious to be able to get in touch or have you take a look at what they're doing or see if it might be a fit to work with you, what's the best way for them to do that?

Matt: Yeah, I think the best way to find out more about us is just visit the website, capforge.com. It's got information about me and our services and our firm and the kinds of things we work on. And if anybody wants to get in touch, it's got all our contact info. Feel free to reach out. I'm always happy to chat with anybody, whether you specifically are looking for our services or just want to connect with another entrepreneur. Whatever the case, happy to connect and see if we can be of service.

Caleb: Awesome. Well, thanks so much, Matt. Appreciate it.

Matt: Thank you for having me.