Latest / Beyond Fulfillment Podcast / Action over Fear: Surviving Setbacks & Scaling Fast with Jim McNamara

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Action over Fear: Surviving Setbacks & Scaling Fast with Jim McNamara · Beyond Fulfillment Podcast

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  It doesn't even matter if you're small or medium or large.
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  Your customers don't care.
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  They just want what they want.
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  Today we sit down with Jim McNamara, the founder and CEO of 8 Penny Labs, a custom software development company dedicated to helping small and medium sized businesses stay ahead in the ever evolving world of technology.
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  With a career in tech dating back to the 90s, and Jim has mastered the art of building offshore developer teams, and he created a unique business model that gives smaller companies access to the same competitive resources as tech
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  giants.
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  In today's conversation, Jim shares his inspiring entrepreneurial journey, the challenges of transitioning from executive to owner, and how a bias for action and trust first partnerships fueled his company's impressive 55% annual growth.
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  He also delves into actionable insights on scaling client delivery and the rapid impact of AI and mobile technologies on business.
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  Whether you're a business leader, tech innovator, or aspiring founder, this episode is packed with wisdom you won't want to miss.
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  As always, if you found value from this content, please like and subscribe.
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  All right, Jim McNamara, welcome to Beyond Fulfillment.
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  Well, thanks for having me, Dave.
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  Yes, we appreciate you being here.
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  So, Jim, you are the founder and the CEO of 8 Penny Labs, which is a custom software development company serving small, medium sized businesses.
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  That's correct.
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  Yep.
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  Okay.
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  All right.
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  And we're talking off air.
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  You've been in the technology field since the 90s, so you certainly have a strong acumen there.
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  And the Eight Penny Labs was founded in 2019.
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  Sure.
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  So.
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  So just, just take us back to that time.
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  Was there a single, single, like, aha moment where you realized, I've got to start this company?
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  Sure.
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  So I wouldn't say there was one single moment.
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  But I've been working for large and small companies in the technology field for decades.
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  And one of the things that I learned to do in that, you know, history was build software using offshore developers.
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  And really, as I was looking at the market, I was actually running a software company at the time.
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  I was looking at the market and I was thinking about us.
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  We were a small company.
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  We were using offshore resources.
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  And I was thinking, you know, the pace of change in terms of what's going on in technology and what the market is expecting is so fast.
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  And it doesn't even matter if you're small or medium or large, your customers don't care.
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  They just want what they want.
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  And I thought one of the reasons why small and medium sized businesses aren't in, you know, digital transformation efforts and keeping up with the new Technologies is because they can't afford to.
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  So you know, hiring a developer here in the United States is very expensive.
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  They're hard to get.
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  Using an offshore resource is difficult to do.
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  Nobody, not very many people know how to do it.
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  I do.
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  And so I thought it would be a good way to help the, really the strength of the US Economy is the small and medium sized businesses.
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  But they need to be competitive against, you know, Microsoft, Google, Apple, etc.
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  Amazon.
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  And so our, our mission is to help them and bring to them the competitive resources that those big companies have been using for decades.
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  That's where I learned how to do it and really helped them create a path of it for innovation to grow their business.
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  Okay, so you're running a software company and you're skilled at using offshore developers for that company and just in general and you realize that that's a unique skill where not a lot of people at large know how to
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  do that.
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  That's right.
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  You're seeing this change, right?
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  You're seeing this change which is evident in a lot of areas of life where everything is just becoming, we want it now.
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  Customers want what they want.
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  There's more options than ever before.
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  So you see this opportunity and you have this vision to build the company.
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  So how did you go about doing that?
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  Well, I've been working with an offshore developer in India since I think 2006 or 7.
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  Right.
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  So I had a, I had a network of help if you will, to execute on the development work.
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  So I didn't have to hire developers myself.
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  I've got a company that I partner with that hires, finds them, hires them, trains them, keeps them happy, pay, you know, pays them and they just bill me and I, I pay them which is a huge, that would
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  be a huge barrier to entry to do this right to if I'm, if you're not a developer, even if you are a developer, one person only scales so far.
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  So capital requirements that alone dropped the capital requirements for me to start the business and long term history with this company.
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  They are a great company.
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  We are able.
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  Their strategy for how and why they founded their company makes it easy to address some of the challenges that in, you know, when you're selling that businesses are concerned with like rapid turnover of a development team, losing institutional
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  knowledge through that IP theft, all that, all those sorts of things.
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  I have a track record with them and they have a track record, you know, beyond working with me that has them be a trustworthy partner and a reliable partner.
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  And so yeah, that's, that's that's how that all got started was I had a network I could use in this business and they were very willing obviously to have me help, have me help them grow their business too.
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  Okay, so you have this partnership with a long time company you've been utilizing.
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  Seems like a true win win.
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  So once you went to market, what was the process like of building and scaling and getting customers?
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  Yeah, so I've been in business for a long time.
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  I've studied business, graduate school, all that stuff, but I've never owned a business.
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  So it was a new experience.
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  Like it's a different thing.
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  I was a COO of a software company.
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  I felt like I was an owner, but I wasn't.
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  I knew what the owners were concerned with, but I had none of the risk.
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  And so starting the company was like a big, a big deal, right?
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  Where all of a sudden there's nobody paying your health insurance, there's nobody guaranteeing they'll pay you, right?
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  It's, you don't have customers, you have to go source your own customers.
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  And that was the challenge.
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  I mean, I didn't, I didn't cut right over.
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  I was able to run the software company I was running and build this business in the background at the same time.
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  The software company, the CEO of the software company knew what I was doing.
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  He was fine with it.
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  So it wasn't like a cut and dry, okay, jump off the cliff, here you go.
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  But still there was, okay, so I have this offer to make.
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  I think I can be helpful.
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  Well, who do I talk to?
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  So started with, you know, designing what the marketing would be to take it to market.
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  Like, why would anybody care?
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  Like, I had this sense of why people would care, but I wasn't really sure.
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  So I started talking to people I knew that owned businesses in the right, you know, size range and see what they said, got their feedback.
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  And really I wasn't selling them.
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  I was, I was really looking for help.
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  Is this, is this something that they thought would appeal to the, to the target audience that I had and they all thought it would.
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  And anybody that everybody that I talked to in that time became a customer.
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  Not right away.
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  They, they knew I was making the offer and when something came up, they brought me in.
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  So it was, I was really fortunate.
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  I just picked the right people to talk to that I knew, you know, and it's been word of mouth since then.
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  Okay, so you have this idea, you're going to market.
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  You realize that entrepreneurship is a totally different ball game and you're able to start this on the side while you still have your full time income and grow it slowly.
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  But what was the adjustment like in terms of, you know, like you said, right.
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  There's the risk element.
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  There's all the differences from being an employee.
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  Like, how did you deal with that in.
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  Yeah, so first thing, I have a very patient and trusting wife.
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  So the first year we actually lost money, right?
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  So we were writing checks, we had a contract we were filling on.
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  There were some things we didn't know.
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  So we paid for that education and so we were writing checks, right.
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  So that was, that was a tough thing.
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  And I kept saying, you know, hey, this is, I think this idea can really work.
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  I just, you know how we're going about, it's not quite right.
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  But we had, I felt like we had to honor the commitment that we had even that we had made even though we were losing money.
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  And then, so when that contract came to an end, we ended it or when it was coming for renewal and changed the way we changed our focus.
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  And that's actually when some of those other customers I had talked to a year before or prospects I talked to a year before came on as customers.
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  So the timing was perfect.
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  Since that point, you know, we grew on average 55% per year.
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  So it's a combination of bringing on new customers and growing inside of existing customers as we've displaced incumbent developers come in for a small project, they work with us and you know, they like us better.
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  So they, they petition their bosses to get rid of the other people and give us that work.
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  So, you know, the biggest adjustment was the risk.
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  Like, okay, I did this to make money and now I'm spending money to do it.
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  I'm not spending, I'm losing money doing it.
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  But I still had, we still had faith that we could make it work.
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  So we had, we, so we stuck with it.
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  Okay, was there any times like during this whole process where, you know, self doubt crept in and you felt like giving up?
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  Every month I had to write the check.
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  It was like, okay, is this right?
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  Is there something, something.
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  I kept, I kept re examining it and, and saying, you know, is there something flawed here that I won't be able to overcome?
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  And you know, how long will I be able to do this?
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  Because I didn't, we were, we were spending savings.
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  I didn't want to go into, you know, retirement accounts.
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  I didn't want to go into debt.
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  I mean, I may have gone into debt, but that wasn't something I was considering.
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  So it was really Every month it was like, man, what's going on here?
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  How can I turn this thing around?
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  And it really produced an urgency to, to get it right.
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  And I, and I think we have it mostly right.
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  But you know, small business, you're constantly changing how you go to, how you go to market, what you bring to market, that sort of thing.
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  Okay, and I want to go back.
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  To another point you brought up too, to when you started this.
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  I mean, clearly, right, you're able to do it while you still had your full time job.
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  But even, you know, we see so many examples where people have an idea or they have a business or something they want to do and there's, they just have this barrier to taking action, to where mind gets in
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  the way, fear creeps in, distractions, whatever, you know, procrastination.
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  It seems like you had a bias for just taking action even if you didn't know what, what you're doing necessarily, or even if it didn't work out.
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  And then, you know, clearly, like you said you lost money the first year.
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  Like how, how did you develop that bias for action?
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  And is that, is, is, is that fair to say, like that's what you did?
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  It's fair to say I've always had that, but I didn't have it to the extent that I think I needed it to start the business, but because I was running another business.
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  So that was, that was more than a full time job and I was on the road a lot, so I was doing the work for a penny, you know, on the weekends, at night, on the road, in between.
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  And things were, and because I was the COO and the business owner, CEO knew what I was doing.
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  As long as I didn't drop any commitments for him, he was fine.
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  He was like, yeah, great, go do that.
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  So that was a huge advantage to have.
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  And what I learned, I remember sharing this with another business owner.
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  I said, you know, hey, I just, it was stupid, right?
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  It was, I, I didn't re up my business license, I didn't pay, I forget what it is.
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  It was 50 bucks a year, right?
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  And I just, I just missed it, right?
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  So it's $50.
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  But then the government says, oh, you didn't do pay that on time.
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  It's 500 now.
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  I was like, okay, thanks.
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  And I remember being in one way so angry at myself, but it was an immaterial.
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  I mean, no one wants to pay 500 when you could have paid 50 if you just did it on time.
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  But it was like an immaterial amount in the scheme of things.
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  And I remember having sharing with the, the business owner I just mentioned, I don't have time to worry about this.
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  Like I'm going to make mistakes.
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  And I, it's kind of like if you're a professional athlete in this middle of a game, you make a mistake, you've got to let it go and get on to the next play.
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  And that's kind of the way it was.
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  It was like, I don't have time to get hung up on how stupid it was of me not to do this on time.
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  Clearly I need to put some, a practice in place to make sure that doesn't happen again.
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  But so I pay it and move on.
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  And that became the pace I was, I had to operate to do.
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  Both of those businesses became the lesson of okay, just get moving, just get moving, just get moving.
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  And that's kind of the way it's been.
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  Ah, okay.
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  All right.
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  And then as you said, you know, you, you grew on average past five years or so, about 55% per year.
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  I mean, what, what's been the, the, the lessons learned from not only, you know, turning it profitably, but continuing to grow and scale.
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  I mean, what's been the biggest lesson you've learned through all that?
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  Delivery, Right?
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  So, so I think the way that we go to, the way that we, we, we perform is a major differentiator, right?
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  So remember I was on the IT side of things since the 90s.
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  I've bought and now I sell these exact services, right?
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  So now my IT background is on the infrastructure side, security side and software side.
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  So I have a, a wide and fairly deep background.
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  So when I go into a business, I, I understand a lot of concerns that they have and can tailor my message to them.
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  But the, the, the, the point of that is they're, they're able to trust me because of how I message that, right?
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  So I know what they're concerned with.
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  And so when I am in a sales conversation or when we're in fulfillment, I talk to them about here's what's going to happen, here's how it's going to go, here's what.
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  And when this happens, we need to do these things.
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  And I won't get it exactly right, like I won't know the specific, but fundamentally these challenges happen through any, any project.
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  And at the very outset my, the way we deliver is everything is in their control.
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  They're like the software code is in a repository that they control.
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  All the documentation is a repository that they control.
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  Everything is in their Control, so they can just tell me to get lost and I can't hold them hostage.
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  And I say that up front too, because that's what happens when some, some other businesses like mine get into a dispute.
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  They just withhold things.
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  And to me, I sign away all the IP right away at the beginning, and it's like, look, you're in control.
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  If you don't want me as your development partner, then I don't want to be here.
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  I'm not going to fight with you.
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  And that produces, with the right customer, produces a lot of trust.
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  Okay.
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  I mean, would you say that's a key differentiator and like, not the norm of how people do business within that industry?
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  I, I mean, I think so.
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  I, I, I think, I mean, you could find people who do it both ways.
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  I don't know that they're explicit about the languaging on trust.
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  Like, you can kick me out anytime you want.
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  Nobody has kicked me out because I think they feel that I'm very upfront.
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  But also I meet with the customers or somebody on my team meets with the customers every day.
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  Like, we're very transparent.
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  Here's where we are, here's the problems, here's what we need.
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  And that keeps them up to date on how their, their investment is going in whatever it is that we're building.
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  I was surprised.
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  I don't, I don't know why, but I was surprised at how some companies like mine meet with a customer once a month.
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  Like, that's a disaster waiting to happen.
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  I mean, part of the problem or part of the challenge with being a software development company when you're developing software is you're as when you have a conversation about what other requirements.
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  It's a human being speaking to you or writing to you, and you make an interpretation about what they mean.
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  It won't ever be 100.
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  Right.
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  Because it's two human beings making interpretations.
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  Right.
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  So every day being on a call, and it doesn't have to be a long call, but to say, hey, here's what we're doing, here's what it looks like, here are the questions we have.
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  Helps to stay closer to what their intentions were at the beginning and helps us move faster because there's less rework to do.
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  Okay.
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  Also, let's talk about the name Eight Penny Labs.
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  Yeah.
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  So I understand that's based on the eight Penny Nail.
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  Yeah, it's, it's so I have a.
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  When I first got out of college, I didn't know what I wanted to do, and I worked in construction a little bit.
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  I've always been handy.
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  And the eight penny nail is kind of, is a utility type nail.
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  Right.
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  It's, you don't use it for big structural things, but it's, it moves pretty quickly.
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  You can use it in a lot of different places on a job site.
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  And so what I was thinking about in terms of the company is we're builders and we're that utility player.
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  Like, we're not going to be, we're not, we're not Amazon and we're not, you know, a guy in a closet or in his garage coding either.
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  But we can do a wide range of things for the customers that we work for.
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  Because I partner with the development company I was talking about, they have 1500 engineers across a wide range of web technologies.
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  So that anything that we come up with, even if it's obsolete software that needs to be rebuilt and we do that, we can find resources to staff it.
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  It's not about, hey, we just do Microsoft or hey, we just do open source, we can do all of it.
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  And so we are really are.
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  That utility player can get plugged in anywhere quickly and do a good job for you at a reasonable cost.
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  Okay.
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  All right.
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  And another question specifically within your, I guess, the business market at large, how have you seen things change in the market since the, the rise of AI over the last couple of years?
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  Yeah.
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  So let's take a step back before that.
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  Let's say mobile.
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  Right.
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  So AI is an enabling technology.
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  Mobile was an enabling, is an enabling technology.
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  And you know, the web was Internet was a enabling technology and they were all adopted at certain rates.
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  What has happened is human beings, us, and if you look at the demographics, it doesn't really matter how old you are anymore.
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  We all want to make something easier for ourselves.
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  And so that's often like, you know, let's go on the web and find out, do some research, check the menu of the restaurant, order something, whatever.
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  And more and more, it's mobile.
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  Right.
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  Certainly the kids are using their mobile phone all the time.
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  Just walk around, you see them scrolling, they're sitting at a dinner table.
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  Scroll.
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  You know, it's not always healthy, but it's there.
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  It's, it's the, it's a fact that they're looking for ways to schedule appointments and get information on their mobile device.
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  And that really shapes what you, any of our customers is trying to do as well.
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  And when there's market research out there where, if you're, if, if that shows that if you're dissatisfied with the customer experience that you're provided.
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  Half the time you'll, you'll leave, you'll change vendors, you'll find it somewhere else.
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  And 64% of that half, 50% won't even tell you they're gone.
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  They won't even tell you they're dissatisfied.
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  So there's a huge pull away from the status quo and, and what.
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  You.
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  Know, inconvenient or traditional ways of transacting.
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  So the easiest example is you're walking around your house and you realize, oh man, I need something.
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  And you go on, you have your phone, you go on your phone, you go on Amazon, you say, oh, that's what I need.
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  And it'll, they can deliver it today in some, some instances, right?
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  It's like, okay, that just changed your expectations for how you want to transact everywhere.
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  Whether you know it or not, the more you do that, the more you're training yourselves to do it.
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  AI is the next one of those, right?
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  So the, the big AI companies that are pouring money into more and more research, more, more and more infrastructure, energy, development, they're, they didn't ask you, they didn't ask your permission if you wanted an AI summary in your
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  email or an AI summary at the top of your search results or any place else that any vendor is putting in AI enabled something in their product.
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  They just did it.
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  What that means is it's flooding the market, the customer experience of everybody who's using these tools.
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  That means it's going to become the norm.
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  And you could say it already has become the norm.
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  Right.
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  So the adoption rate, I looked at certain numbers for the adoption rate for mobile phones, first four years of mobile phone and the first four years of generation, you know, the GPTs, ChatGPT and that sort of thing, and
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  the growth for mobile year mobile phones from year zero to year one or zero, year one to the year two is like 70%.
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  That's pretty good growth.
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  It's almost 900% for the adoption of the ChatGPT type stuff, the generative AI stuff that tells you that everybody's adopting and they're adopting more rapidly.
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  There's lots of reasons why you could get hung up and.
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  Well, mobile phones are.
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  Sure they are, absolutely.
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  And 900% faster adoption of AI.
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  That means people are going to be looking for the AI interfaces in their interactions with the people they do business with because it's easier.
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  Yeah.
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  Okay.
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  All right.
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  And then you're certainly incorporating that with your own development, with your customer base also.
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  Okay, all right.
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  And Jim, if people want to find out more about the custom software options you have and how you help small and medium sized businesses or they want to get in touch for any other reason.
• 25:12
  What's the best way that people can reach out to you?
• 25:14
  Well, there's LinkedIn, there's X.
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  There's our website at888pl.com or 8pennylabs.com you know, you can find me on LinkedIn.
• 25:26
  I post, I've got a blog on my website.
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  Those are the best ways to see what we're up to on other podcasts too.
• 25:34
  So we'll be posting those on social media.
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  All right.
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  And we'll link all that in the show notes for everyone.
• 25:42
  All right.
• 25:42
  Well, Jim, thank you so much for taking the time to be here and sharing all this valuable wisdom from your journey with our audience.
• 25:47
  We greatly appreciate it.
• 25:48
  Well, Dave, I appreciate you having me.
• 25:50
  It was a lot of fun.