Michael McCafferty is the creator of the software product TeleMagic and known as the “Father of CRM”. He’s been building and selling businesses over 55 years and now is out to change the world… Again!
Entrepreneur Helping Entrepreneurs Around The World with Michael McCafferty
I am interviewing one of my dear friends, an amazing individual, his name is Michael McCafferty. Michael and I met in a very strange circumstance. The way we met is both of our companies were bought by Sage plc. At that time, Michael’s company was bought first and then my company, Timeslips, was bought second. I didn’t know Michael but I sure knew his product. When we joined forces finally after we were both bought by Sage, then I was able to experience Michael’s amazing abilities and see the amazing power of the of the product that he had built over the years. Michael, welcome to the show and I want you to elaborate a little bit more on your background and tell me if you will, what your memories are of the time when we first met.
Let me just say thanks for the opportunity to be of service and it’s always great talking with you, Mitch. I think we met in ’95 or ’96 or something like that.
I sold my company in ’94, you must have sold in ’92, right?
Yeah, ’92, October 2nd. I remember it well.
I don’t remember the exact date but I think it was in October as well. The thing about it is the product that you had built, TeleMagic, was really in many ways the beginning of a revolution. It was the start of the CRM industry. I want to let you tell that story, but at the same time I want to acknowledge that back then, TeleMagic was the hottest product on the market. Everybody who did anything with people and selling and staying in touch with others had to use TeleMagic.
I was an independent computer consultant. I just went around and helped people with their computers, regardless of what kind of a machine it was, whether it was an apple or Cromemco or an IBM mainframe or a PC. Eventually, over a couple of years of doing this, I noticed that there was a real need in the marketplace for software that would help sales people and entrepreneurs grow their business, and it didn’t exist. I just sat down and wrote it myself. I had one customer that I did some custom programming for and I told him, “You really need this kind of software.”
I described it to him and I told him it was going to cost him $5,000 for me to write it for him. The hook was, that I was going to own it, not him. The tradeoff was that I would continue to sell it to other people and improve it and he would get all the improvements for free. He said, “Such a deal.” Down the road we went and a couple months later, I had the first Beta version of it and he loved it and started growing his business and everything just kept going from there. I handed it out to a couple of friends of mine who were in their own business and their businesses were transformed by it. I thought I had a good thing.
There are a lot of good things that happen in life that don’t turn out that spectacularly. We’re only human. We can do the most innocent things to screw up a good thing. Somehow, I survived. It was the first CRM software product. I wrote it but of course there was no such thing as CRM back then. That’s only a name they gave it later. I actually wrote it for telemarketing and that’s where the Tele part of the TeleMagic came in. People in the telemarketing business just went bananas as I was selling it for $95 a copy and the next most inexpensive product that they could buy for telemarketing was something like $200,000. It got their attention. I quickly pivoted from telemarketing over into sales because most people use the phone back in those days. We just grew like a weed after that.
I want to dig into the details a little bit because a lot of the people who are attracted to a podcasts like this, I believe are entrepreneurs who are really struggling maybe to get to their first thousand clients. I think in most cases, people have already started a business. They’re already doing something that is making them some money but not quite to where they want to be at. I think the problem is, is that it’s so easy to look back and say, “It just took off,” but I know that you were probably working really, really hard to make that happen. You probably tried a lot of things that worked and probably a lot more that didn’t work. That’s what I would like to find out about. What did you try that really worked for you back then and maybe some of the ones that didn’t work as well?
The first thing I did was amazingly coincidentally there was a company right in town, in this tiny little town of Del Mar, California, a couple blocks away from where I lived at the time and it was a magazine called TeleProfessional, I think it was or whatever. They were in the business. I showed them my software and they loved it. I said, “If you run a couple of ads for me I’ll do this software for free. They did and I got some orders from the ads and they loved the software. Then it came to the point where I had to pay for ads and I thought, “I got no money.” I’m selling the software, they’re cheap and I’m just trying to get some users.
When I started the company, I was basically bankrupt. I had no loans. I had no partners. I had no VC capital. I had no credit cards. I was busted. I had to find a way to make money without money. Buying ads in magazines, that was just out of the question. What I did was I hired a sales person on straight commission and this was a guy who worked as a waiter at a local restaurant. He was off the lunch shift at about 2:00 in the afternoon and I said, “Come on by. Try your hand calling some people and see how it goes.” What I learned was that trying to sell individual copies of the software over the phone was a hard slog. I pivoted into not selling individual copies, I sold to dealers who would then resell the software. It was like a leveraged approach.
You made this decision to move from selling individual copies to selling to dealers, now were those people that were in the business of like computer stores or were they more like VARs? How do you describe them?
VARs, computer stores, basically. In those days ,ComputerLand, remember those stores and Egghead Software. These were the days when software was sold in little shrink wrap baggies. Once we sold a dealer on this kind of software, they would use it themselves in their own sales process. They got to believe this so strongly that they would demonstrate this software and would sell the hardware. People would buy the hardware just because of the software. The first salesman, he started making commissions very rapidly because we would bill it on credit cards before we ever shipped the software. We get our money before anything ever left the store. We got to 1,000 customers, 1,000 paying users very quickly because we only sold maybe 100 dealers. It was really easy to get to a 1,000 customers.
Something happened there. You talked about slugging it out on the phone trying to sell individual copies and then you pivoted. You made this decision to go find the sales person. Were you a sales person before this? What gave you the idea and what gave you the inspiration to hire somebody who wasn’t a salesperson and then aim them in the particular direction that you did?
I’ve got a lot of background in sales. The only reason I was programming this software to begin with was because I couldn’t afford a program. I had to learn how to use the programming language at that time called dBase II, dBase III. I did it all myself but I have a very good background. I started out with IBM as a salesperson right out of college in 1964. Anybody who’s doing the math, 1964, that’s a long time ago. I’m 75 years old and I’ve been selling and starting businesses for over 55 years. At the time, I had a really good background in sales and as well as starting businesses. I really had a feeling for what problems entrepreneurs had and I wrote the software with them in mind. Most programmers write software to show how smart they are.
Since I wasn’t really a true programmer, I wrote the software to show the user how smart they are. It was very easy to use and it wasn’t an ego trip. Now, the point was that I couldn’t afford to hire a salesperson and pay him a salary. That’s why I tried to get this guy to just try for a couple of hours. I wrote the script, I gave me the hot button points and down the road he goes. He started clicking and making sales. He had a good attitude. He was a friendly guy you with a little bit of the blarney going for him, if you know what I mean. He did well and I hired another guy and he did well and pretty soon I had four salespeople on the phone working two different shifts. I think in the first year I had twelve people working out of a 500-square-foot apartment. It’s strange.
I want to just unpack a little bit of what you just said because it’s really important. The idea of bringing a sales person on board and paying them on commission only, you might say to yourself, “How is that even possible?” For example, let’s say you sell something for $1,000 and I said to you, “If you sold it for $1,000, could you afford to pay $100 or $200 to a salesperson if he brought you sales all day long? Clearly, you’d say yes to that, right?
Realistically, if somebody were to sell say five of them a day, that’s $1,000 a day. Do you think you could find a good sales person these days for $1,000 a day?
Yeah, I would think so. That wouldn’t be too much of a problem.
Even the smallest company can add a salesperson just like you did with almost no effort whatsoever. Isn’t that amazing?
It is. The key here is that you’ve got to sell the salesperson. You’ve got to sell the dream. You’ve got to show them the magnificent road ahead. You and you got to train them and you got to continue to motivate them.
Here’s another cool thing about what you just said, you were the visionary. You were able to sell the salesman and again, this is so important. If you can’t sell the salesman, how could you expect the salesman to sell the prospect, right?
Exactly. They say that salespeople are the easiest people to sell. They love a good pitch.
The thing is though, is that they do, they love a good pitch but they can’t stand the bad pitch. For myself, I totally get that, and I am sure you’re the same way as well. When you start bringing a salesperson into your company, you’re getting something that most people don’t do. You’re getting leverage. Look at what Michael just did when he talked just a minute ago when he talked about bringing these people in and getting them started on commission only, what a great idea. Once you started selling and once you’ve got these twelve salespeople in a room of 500-square-foot room and that was the company basically, tell me about some of the growth stuff that you went through to get the company past say even the first few hundred thousand dollars?
One of the very first things that I did was I hired a customer service guy. I couldn’t stand, I couldn’t bear hearing customers have problems with my software. It was like telling me that I had an ugly baby. The very first thing I did was I hired a customer support guy whose job was to answer the phone and help people use the software. When I told them, I said look your job is not so much to help people with figuring out how to use the software. Your job is to write a book. I want you to say when you answer the phone, somebody says, “I got a problem doing this or that or something else,” I want you to say, “I’m sorry. I haven’t heard of that particular problem before. Let me check that out and I’ll get back to you.”Then what want you to do is sit down and write the question in a book. I know you’ve got an empty book, went to page one, write the question in a book and then figure out the answer, right the answer and then call the person back and recite the answer that you just wrote.
I foresaw the day when we’d have a whole bunch of customer support people and I wanted that book to be able to train them easily. I also want that book to be able to help our dealers support their customers. Now, the first thing that happens was this guy, he is a techie guy and he started helping people. After a week, I said, “Show me the book.” He says, “I don’t really have a book.”I said, “Let me repeat let me repeat your job one more time.”The same thing happened the second week, he didn’t have the book. I let him go and I hired another guy who started writing the book. Customer support, extremely important. What I’m trying to get across here is that most entrepreneurs, they start out and they’re the answer guy. They know everything and they get stuck doing that. The essential road to success is to delegate. You’ve got to get yourself out of being the bottleneck. If people can’t do that for you, you got to replace them with people who can.
Did you have that delegate instinct or was that something that you found yourself stuck? Did you have entrepreneurs’ disease basically? Did you feel as if you had to do everything yourself or it wasn’t going to get done right?
No. It’s basically self-preservation. By this time, I had gone through a couple of startups that were in varying degrees of success. It was already baked into my psyche at that point time that I couldn’t possibly do everything myself. I had to delegate. The number one thing that I had to delegate was customer support that was right after I delegated sales.
That’s very insightful, Michael, because not a lot of people start out with a business with the idea that they’re going to delegate. I think people started business with the idea that I’m the guy. I can do it all and I can do it better than everybody else so I’m just going to do it myself. For some of us, it requires some real mindset training to get out of that place where you feel that you can’t delegate. You started with that so you started one step ahead than I think a lot of us which is great to hear.
I had the arrows in my back from your previous experiences. It was pure self-reservation. A lot of people in business, entrepreneurs, startup guys, what they do is that they’re really good at being the answer guy up to about a million or $2 million worth of sales and then they hit the wall. There’s just no way they can grow anymore because they’re stuck in the bottleneck. It’s essential that you do that. Otherwise, you’re just not going to keep on growing.
Let’s talk a little bit about mindset. I’d like you to expound upon the mindset that you started with and then what had to change inside of you as the business began to grow?
The thing that worked best for me was not having any money at all. I was basically bankrupt when we started. I had no credit cards, no loans, no venture capital, no partners, no nothing. Everybody I brought into the business had to start generating immediately a profit. I remember people asking me, “What’s your burn rate?” I would look at them and I’m like, “They’re crazy. I don’t have a burn rate. I have to make a profit every freaking day or I don’t exist.” I looked at everybody I brought into the business as a profit center. This is something that has always struck me that entrepreneurs now, they get to a certain level and they’ve got a cash crunch and they say I can’t afford to hire the people I need.
You can’t afford not to hire the people you need because those people are not a cost center, they are profit center. I would look at a new employee and I think, I need another person customer support and I think to myself, “That person is going to cost me $3,000 a month.” I would look at $3,000 a month as let’s see, “That’s ten copies of TeleMagic. I got to sell ten more copies of TeleMagic in order to afford this person,” but I only have to afford it for the first month. If they’re not doing a good enough job by the end of their first month, I’d let them go and get somebody else. People are a profit center, not a cost center.
If you’re in business and you’re thinking about bringing people on board, take Michael’s approach. Think about how can they make me money right away? How long will I have to support them until they do? I love that Michael. That is so smart. It’s so clever. If people could just focus in and get simple about it like, “How do I make money today?”It would make life so much easier for so many entrepreneurs.
This whole startup’s mania where you come up with a good idea and then you go looking for capital, I think that’s totally wrong. Getting somebody else’s money and giving up stock to prove out an idea is the stupidest thing you can do. You’re giving up the most valuable thing that you have which is your own equity in your business for cash that you don’t really need because you haven’t been proven that you’ve got an idea that people will like.
I call that dollar-one investing. First of all, I would never let an entrepreneur approach me about their business for an investment unless they’re already making money. That would be the only way I’d look at the business.
It sure worked for me. I kept the 100% of the business right through to the day it was acceded.
I’d like to thank you. I think you shared some amazing stuff for us. What I want to know is what are you excited about? Where is your passion?
I retired 25 years ago. I’ve been living a good life for a long, long time and I like it. I’ve had plenty of opportunities to go back and start another business but I’m enjoying living by the ocean, just eating good, sleeping good, no stress. I’ve entered a new phase in my life and that is I’m giving back. For the last fifteen, sixteen years, I’ve been an advisor to entrepreneurs. I’m helping the young CEOs, CFOs. I serve on boards of advisors, boards of directors, etc. I’m just sharing what I’ve learned over the last 55 plus years as an entrepreneur and a businessman and people find me. I don’t advertise. I don’t need the money, but they find me somehow and I help them out. I very rarely turn anybody away. That’s my life.
I actually know that you have something very special that you’ve been working on and maybe you’re being modest about it but I’d love for you to share it.
For the last year, I’ve been working on an app, an iPhone app. Basically, what I’ve done is I’ve taken the experiences that I’ve had and the knowledge that I’ve accumulated over the last decades. I’ve added in a lot of the wisdom of some of the smartest people on the planet, going all the way back to Socrates and all the way forward to Elon Musk and Steve Jobs and Zuckerberg and Warren Buffett and a bunch of other smart people. I put it all together in an app for the iPhone and it’s free. It’s another way of giving back. I created this app. It’s available now. By the way, it’s called ToBeWise. It’s available in the App Store. There’s a free version. There’s a pro version. Pro version is $2.99. Nobody’s getting rich off of this app. This is just another way of giving back.
I love the app. I receive a message from it almost I think about hourly. Every time it comes up, it seems to be something brilliant and simple. I was focusing in on a quote from Rumi, “Yesterday, I was clever so I wanted to change the world. Today, I am wise so I’m changing myself.” This is so beautiful and I got that now from your app on my iPhone. If people want to download that app and give it a try, they could just go to the App Store basically and look for To Be Wise, right?
Right. They can do that or they can use the URL, ToBeWiseApp.com. That will take them to the website and you can learn a little bit more about it and then you can click on the download and away you go.
Thanks for sharing that. I really appreciate it.
We have a couple of last questions here for you. I’d love for you to tell us what you think about this. What in your experience do you think holds us back from really being all we can?
They say there’s two motivators in the world, fear and greed. The big one is fear. It’s fear, fear, fear. Fear, uncertainty and doubt. That’s the thing that holds everybody back. It’s this basic insecurity that we have. It applied to me when I was starting the TeleMagic adventure. Here I am, I’m in the software business and I’m in the software business against people like Bill Gates. What am I doing competing with Bill Gates? I expected any day now he’s going to rewrite what I’ve done and rule the world. You just have to get up every morning and be fearless or you have to act as if you were fearless. You can’t have your people, your employees, your customers know that you’re shaking in your boots. You just got to keep moving forward. It’s fear that holds us back. It’s a basic insecurity. The way you get over it, I think is that you find yourself a mentor. Almost everybody will tell you that the most successful people have a mentor early on in their life, but nobody knows how to get one. It’s really simple. I’ll share you the secret. You just at you just ask. Again, it’s that fear. That guy is great in business. I want to ask him to be my mentor, but why would he? Then the fear and the doubt comes in. I’m not worthy type of stuff. You would be surprised how many people are out there that would just love to help an up and coming entrepreneur. Just ask.
Did you have a mentor when you were younger?
That’s one of the reasons why I’m so positive about having a mentor is because I never had one. I had to mess it up myself. I had to learn from my own mistakes, my own bad experiences. Basically, wisdom is learning from mistakes, but true wisdom is learning from other people’s mistakes. That what’s in this app. It’s other people’s wisdom.
If you had the chance, who, in all of space and time, would you like to have just one hour to enjoy a walk in the park or a quick lunch or an intense conversation with?
I guess I’m partial to Warren Buffett. If it wasn’t Warren Buffett, it might be Elon Musk. These guys have a natural, easy personable manner. They’re not super egotists like some people and they’ve got huge experience and awesome success going forward. I don’t even know what questions I’d ask him. I’ll just wait to see what came out of their mouth. I just have a lot of respect for both of them.
Just being in their presence would be reward enough, but it’s so true. To spend an hour with Warren Buffett or Elon Musk, some people would think it’s like dying and going to heaven. It would be their life dream to be able to do that. It’s a great answer. I’m in sync with you on that one as well. Michael, we’re at the point now where I have what I call the grand finale. This is a single question that may or may not be a big thing, it might be a little thing. I think I can figure out the answer with you, but let me hear it from your words. This is the change the world question. What is it that you were doing or would like to do that has the potential to change the world?
I think that I’m doing it in my own quiet little way, in my own quiet little corner of Del Mar, California and that is just giving back, helping others. Not being so self-centered as maybe as I was in my early years. There are a lot of people out there that need help, and to be compassionate and give freely of yourself. I’ve seen it happen so many times. There is this law of karma. What goes around comes around and the more you get the more you get.
That is so true and such a beautiful way to end our time together. You’ve been an amazing giver. I want to thank you for the chance to have spoken with you. I want you to, if you wouldn’t mind let people know how they could find out more about you or reach out to you.
Michael, thank you for your time. It was wonderful as usual to catch up with you. I hope we get to speak again soon.
Thank you for the opportunity to be of service. I really appreciate it. Take care.
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