Bootstrapping to $45 Million from Chicago: RKON CEO Jeff Mullarkey (Part 6)

Sramana Mitra: Would it be fair to say that you were able to expand your margin substantially through this process? What kind of numbers are we talking? In the kind of strategic shift that you described, what does that do to the business in terms of margin?

Jeff Mullarkey: After that, we delivered a much higher margin. Managed service companies tend to deliver 10% to15% to the bottom line. Professional service companies, if they do it right, may deliver 5% to 10%. We’ve a mix and we still do. We probably tripled our net profit and doubled our margin along the way on the same efforts. That was a significant change. It also gave us positive cash flow. In fact, a lot of these contracts end up being pre-date contracts. Sometimes, we have more cash than we have profits. You end up having cash and essentially you don’t take it as profit until that month passes. At the end of the year, we have more cash than we have profit, which is a great problem to have.

Sramana Mitra: Absolutely. Cash is king. You have a lot more options when you have cash.

Jeff Mullarkey: That’s right. That whole mechanism led to us being debt-free through our entire existence.

Sramana Mitra: What do you want to do with the company? What are you aspirations for the long term? Do you want to keep running it the way you’re running it, or do you want to sell the company at some point?

Jeff Mullarkey: I probably get 5 to 10 private equity companies calling me a month. I have to be honest with you. Economically, it will be good to cash out, but we have this belief that we’re destined to build something great here. I will sell if the growth of this company flattens out and I feel like I am no longer the right guy to run this. Unless that happens, we want to develop this into a $500 million service company. The gap in the market is gigantic. There are all these cloud players right now with so little value. There are so many unhappy clients.

I saw a report written by Forester that said 50% to 60% of customers who go to the cloud feel that they have not achieved any significant portion of their original objectives. We have 100% satisfied clients. We know that we’ve got a competitive advantage. Our only challenge is in getting the word out fast enough. We built the right thing and we think that it’s a giant expanding market, and it’s being underserved. We think the opportunity to get this to $500 million or a billion is just about getting the word out and getting us involved with more opportunities at a faster pace. We have no intention to sell. We want to fulfill our destiny.

Sramana Mitra: Excellent. Great story. Congratulations on where you are today and wish you all the very best for the next leg of the journey.

This segment is part 6 in the series : Bootstrapping to $45 Million from Chicago: RKON CEO Jeff Mullarkey
1 2 3 4 5 6