Pay Per Callers Show - Sean McCormick and Zack Bloom, Covalent Media Group

Ringba

Administrator
Staff member
#1

What it was like to get acquired with Sean McCormick and Zack Bloom, co-founders of Covalent Media Group. Learn how these guys created a lead gen and Pay Per Call powerhouse.

Watch on Facebook | Listen to the Audio Version


Show Notes
  • Sean McCormick and Zack Bloom, Founders of Covalent Media Group.
  • Acquired by Subdirect Digital Media Group in February 2019.
  • Client relationship grew over several years while working on the lead gen side.
  • There was a strategic fit that made sense for long-term growth.
  • Being acquired frees up time to move away from the day-to-day startup hustle and focus on new growth opportunities.
  • The acquisition process started in August 2018 and ended in February 2019 and from offer letter to closing, approximately four and a half months.
  • Listen more than you talk. Don’t let your ego get involved!
  • Have a good accountant and bookkeeper. Stay on top of your finances!
  • Surround yourself with mentors and advisors that have your best interest at heart.
  • Be open, willing to listen to people and ask lots of questions.
  • Known each other since 8th grade and went to the University of Rhode Island together.
  • Covalent is the second company Sean and Zack have founded together.
  • Surround yourself with knowledgeable advisors and someone to be the tie-breaker.
  • It’s important to know your business partner and how they operate under pressure.
  • Covalent was founded in Sean’s dining room.
  • Spent early days hustling and taking half hour walks every day to discuss the business.
  • Get out of the office with your business partner!
  • Bought a call center in Texas and didn’t plan enough post-acquisition cash flow.
  • Outsourcing development for lead gen portal to an offshore firm and nearly had to shut down their highest grossing revenue channel.
  • Strong relationships and communication skills are the difference between success and failure.
  • Pay Per Call has grown tremendously over the past 6 months and will be a focus for Covalent in the coming years.
  • Having more cash flow allows you to explore new opportunities.
  • Click-to-Call on desktop and Voice Search (Amazon Alexa, Google Home) are the future of Pay Per Call.

About Covalent Media Group
Covalent Media Group is a full-service marketing firm, specializing in helping brands grow their consumer base.

Website: http://www.covalentmg.com/
Email: info@covalentmg.com
LinkedIn: https://www.linkedin.com/company/covalent-media-group/

Sean’s Email: sean@covalentgmg.com
Sean’s LinkedIn: https://www.linkedin.com/in/onlineleadgeneration/

Zack’s Email: zack@covalentmg.com
Zack’s LinkedIn: https://www.linkedin.com/in/zack-bloom-b933b232/


Episode Transcript

Adam Young:
Welcome to the Pay Per Callers. My name is Adam Young, the founder of Rainbow. Today I have some very special guests, clients and friends of mine, Sean McCormick and Zack Bloom. They're the co-founders of Covalent Media Group and Covalent Media Group is a full service marketing firm. They specialize in helping brands grow their customer base and I'm very excited to have them on the show today. Thank you so much for joining me guys.

Sean McCormick:
Absolute pleasure.

Zack Bloom:
Thank you for having us.

Sean McCormick:
I just want to have a given side note to my partner here. The camera's up there, when we're talking.

Zack Bloom:
Good to know.

Sean McCormick:
Yep.

Zack Bloom:
Yeah, it took us what? Five minutes to get this thing up and running to begin with.

Adam Young:
It's okay if you want to look at this screen, you be weird about it, whatever. The most exciting thing that's happened to you guys, I think in a while, correct me if I'm wrong, is the fact that your company was acquired around the beginning of the year, right?

Sean McCormick:
That's correct. If my wife watched this, I have to say the most exciting thing to happen has been, we had a fourth child back in the eight May of last year. That was probably the most exciting thing in the past year. But secondarily, the most exciting thing in business has been the acquisition of Covalent Media Group.

Adam Young:
That's awesome. First and foremost, congratulations guys. One of the biggest reasons I wanted to have you on the show is, for our audience in Pay Per Callers and the affiliate marketing industry, it's rare to see a company get acquired at your scale. I really want to talk to you about that. If you wouldn't mind, can you just walk us through what that process was like and what it felt like from beginning to end?

Sean McCormick:
Yeah. Do you want to go?

Zack Bloom:
Sure, yeah, I'll give you a little story about how it came about and then Sean can walk you through some of the pinpoints. But basically, the company Subdirect acquired us back in February. But going back about two years ago, we started working with them on lead gen side, so we were generating leads for Subdirect for one of their digital properties. We met with them in the city around the holidays of 2016 and meeting went really well. I guess they liked some of our ideas and Kelly, CEO of the company about five or six months later, called Sean out of the blue. Just wants to get to know us a little more, find out a little more about us. Calling, well, one thing led to another and we were meeting in the city a few months after that, and that sped things up this past fall for what led to the acquisition.

Sean McCormick:
Yeah, it was an exciting process. Everyone has their different story of how things went down. Ours was, we started working with a company, they liked our service, they liked what we had to provide and they said, "No, we probably should own this company." When Kelly called me and asked if we had any interest in selling the company, I was a little hesitant. When Zack and I founded the company, our goal was to take off our years of learning, to turn it into a large company, and how it will be more of a lifestyle business. When we started this thing, we had no intention of ever selling it. We're what? We just passed our three year anniversary.

Zack Bloom:
Yeah, right around now.

Sean McCormick:
Not together, but our company. Yeah, it's definitely exciting and humbling and we were very grateful as well for that opportunity.

Zack Bloom:
Yeah. It wasn't on the roadmap, but here we are and so far so good. We're pretty excited about it.

Adam Young:
Yeah, that's super cool. I remember meeting Kelly at one of the most recent Rainbow parties and she was awesome and their team seemed awesome. I think you guys obviously found an amazing fit. I want to highlight something there, that I think is pretty normal at your stage. Someone calls and says, "Hey, we might be interested in acquiring your business." It wasn't planned, it wasn't designed, but clearly they saw that you guys were great partners and a really good fit with their business, and so I can see how they would pick up the phone and call. Also, it's right in your growth path. You're only a couple of years in. You're obviously growing on a monthly or quarterly basis and that's one of the best times to sell is on the upswing, not if you start heading down, right? No doubt about it.

Sean McCormick:
It's tough as founders and partners too, because you believe so much in your secret sauce and you're drinking your own Kool Aid and you don't know when you're going to hit the peak of the upside. You really need to have a gut check and the heart to heart with your business partner or colleagues, or accountants, or whatnot. Because there's no way to predict what the apex of the hockey stick up into the right's going to be. We strongly believe that that's not we didn't sell at the top, we're still probably somewhere in the middle, but at the same time we're going to get to where we want you to go faster having Subdirect behind us. Not only with a bunch of cash, but they've been around a long time.

Kelly and Brian, the two individuals that really run the day to day, have tremendous knowledge about, not only our industry, but several different industries that we want to go in. Pay Per Callers being a growth engine that we really want to get more immersed in over the last couple years, it just made sense from a strategic standpoint as well.

Zack Bloom:
Yeah, and I think to echo on that a little bit, just overall it's going to give us many more opportunities to do things that we otherwise may not have been able to do right away, just because of operating a start up and having to manage every in and out of startup mode. While there's so many great things about that, and it's exciting, and exhilarating as the ups and downs are, is also something to be said about having a little more structure on finance side and some cash in the bank account to be able to do more opportunities and grow faster.

Adam Young:
Now, when you guys founded Covalent, did you bootstrap the company?

Sean McCormick:
Yeah.

Zack Bloom:
We did.

Sean McCormick:
We did, yeah.

Adam Young:
That's amazing. Now that you have all the additional capital and resources, you guys are basically going to find out what you're actually capable of without all those restrictions?

Sean McCormick:
Yes. Essentially, I think Zack and I have done a decent job over the years, building up the war chest. When we were talking about selling this thing, there's two things that really went into it, is you have just the physical element, like the blood, sweat and tears that went into building it. Then you have the emotional element like, "Hey, we put our hard earned dollars into this and is it worth more than what we're currently offered?"

At the end of the day, we just said, "You know what? This is a fantastic offer. It's a fantastic company, let's move forward.” Where we stand today with what they offer ... We put our money where our mouth is, do you really believe in the Kool Aid that we've been selling everyone else's. Now there's no other excuses why the company's not growing, other than we're not doing the job.

Adam Young:
I like that a lot. How long did the acquisition process from that initial phone call with Kelly actually take?

Sean McCormick:
Kelly called me probably in August of 2018. We met in the city in October, had lunch, or maybe September or October. Then from there we exchanged what we believed to be ... They did some high level due diligence on us, nothing formal, just financials, customer records and things of that nature. Then we entered into an LOI phase probably sometime in November. From November, December, January, closed late February. From the offer letter to closing, probably about four and a half months.

Adam Young:
Very cool. I think that's pretty normal for an acquisition at your stage. I've seen a few of them and that timeline for an affiliate is like three lifetimes, right?

Sean McCormick:
Yeah.

Adam Young:
Six months to do a single deal, how did that feel?

Sean McCormick:
Stressful. The good news is we had partners on the other end that we trusted. A lot of that, kicking the tires and that stiff test wasn't as excruciating as we thought it would be on both sides. But it was stressful at times, because there's always a point in the deal where you think things might be going south, or sour and you really have to have a gut check on how important the deal is to you, and how badly you want to get it done.

Zack Bloom:
I think those four and a half months at times, felt my four and a half years. Sean and I were, I think pretty much hold up in this conference room, for what seemed like six weeks right around the busy season two, because Q4 is always a pretty jam packed day for lead gen because there's always a lot of brands that they're exhausting their marketing budget. Yeah, just a lot of phone calls, a lot of back and forth and Sean signed a lot of gut checks, because you got to feel those emotional highs and lows of what you want, and how you want it all to play out and get it to the point where everybody gets something. As you said Adam too, the affiliate space, that's a long turnaround time for a deal. Yeah, a lot of long days, a lot of whiskey on the couch at night to blow off some steam afterwards, but it all came together in the end.

Adam Young:
What do you think the biggest lesson is that you learned throughout this process is and what do you think you should have done differently now that we can look back and have that 2020 vision?

Zack Bloom:
I think one important thing from my standpoint during the whole process was that, I'm very fortunate and you we bust each other's balls a lot and get on each other. But I'm really fortunate that I have a business partner who I'm always on the same page with, and trust 100%. Even if we disagree, we'll battle it out. We'll always have the same front when it's time to make a decision. Having that person by one side during this process, I think makes all the difference in the world, because you really are in there together with someone that you're wanting to do great things with, and have that support system.

Also, I think a lot of these times, when you are in this situation and there are maybe one or two or three voices on the executive level, I think there's something to be said about not always talking and listening a lot. I think we try to avoid letting ego get involved sometimes and just have one person run the show at times and someone else jump in when needs to be, but not trying to I guess overdo it in the courting stage.

Sean McCormick:
Yeah, I think if I was giving a piece of advice to anyone that is looking to sell their business or, well, actually two pieces of advice to anyone who's looking to sell their business or it might be in the process now. One, make sure you have a good accountant and bookkeeper. Early on we were bootstrapping it. I did a lot of the bookkeeping and I probably didn't do the best job at midnight, 1:00 AM in the morning. Getting a really good bookkeeper, CFO to keep those records for you is important.

Then just another thing, a piece of advice, is like Zack mentioned, make sure that you have mentors or people around you that could give you unbiased advice, individuals that don't have a stake in the end result here. But the only thing that they're after is your best interest. If you have those two things, I think you'll be fine.

Adam Young:
I really appreciate that advice and I'm willing to be humble with you there. A couple of years ago, maybe three before we brought on our CFO for our parent company, we did a lot of the same thing you just described. I have to admit, having a financial team behind you to do all those numbers, prepare monthly and weekly statements and stay on top of every single penny is worth so much stress, and so much money too, your CFO and financial infrastructure should actually make you money. I just want to reiterate that advice. I think it's something that a lot of us, will call us scrappy entrepreneurs from the affiliate space, maybe don't want to spend our time doing, but there's an extreme amount of value in it. Thank you for sharing that, I really appreciate it.

Sean McCormick:
Well, yeah, getting humble is important and telling the truth. That's a process that we were shoring up as we were going through the acquisition and it's not the right time to do it. We learned a valuable lesson there, but then the day it worked out.

Adam Young:
Besides the financial statements, because I've seen a lot of deals and I'm involved in a lot with Tech Coast Angels here in California. I would say that most entrepreneurs at that stage don't have perfect books and financials. But outside of the financials, how do you think you could have been better prepared for that random phone call of, "Hey, we want to buy your company?"

Sean McCormick:
Yeah, I think that just comes down to how you are as a person and how open and willing you are to listen to people. I think Jack mentioned it earlier, is that the most important ingredient to any of this is listening. Ask more questions and then responding is important, but don't actually listen but hear what people are saying. We have two ears and one mouth and that's for a reason.

Adam Young:
I love that. Let's talk about you guys for a minute, because I have a great relationship with my business partner, shout out to Harrison, it's his birthday today now that we're recording this.

Sean McCormick:
Happy birthday.

Zack Bloom:
Happy birthday Harrison.

Adam Young:
I'm super lucky to have this person in my life, because similar to you guys I trust him implicitly. We've known each other for a decade. I can rely on this person. We don't fight, but we definitely discuss things in a way that's adversarial so we can hash out a rough spots, and try and make the best decisions. Take me through your relationship a little bit. How did you guys meet and what was that moment where you decided to found Covalent Media?

Zack Bloom:
Are you going to charge the therapy bill for that?

Adam Young:
Oh, no.

Zack Bloom:
Well, we met, believe it or not in eighth grade. I don't think we were friendly that much at first, we were more acquaintances. People were talking about Sean, I didn't get caught in that. No, but we became very close in high school, we had a really close high school class, but even within that we were in our inner circle of friends. Went to high school together. We ended up going to a wonderful school in Rhode Island called the University of Rhode Island.

Sean McCormick:
It's really the Brown of southern Rhode Island, but-

Zack Bloom:
A little long for a shirt but that's how we-

Sean McCormick:
That's how we ended up.

Adam Young:
Almost half your graduating class right here.

Sean McCormick:
That’s right, there you go.

Zack Bloom:
Hear that, yeah, spawned some good people in the industry. We went to URI together, though we didn't spend too much time together in college, we ran in our own circles, but as soon as class was over, on breaks we were always hanging out. After that, Sean was an entrepreneur right away, and jumped right into the lead gen space, whereas I was a career bartender for quite a while. But Sean and I have always talked about working together, and once he had started his second company, the opportunity came up and kind of, "You know what? Let's try it. Let's give it a shot." I've worked for Sean for a while, learn the space, got to hear him on the phone and learn a bunch of things and meet some people and make my own relationships.

Then we started several companies after, Covalent being the second, and yeah, it's been a long time. A long relationship, a lot of highs, a few lows, but we've always been in this together and the common question we get is, if we're also married, we're just not to each other. However, we stopped correcting people at this point because what's the point?

Sean McCormick:
Yeah, I would say in regard to our relationship and how we work together, we're both pretty sarcastic. I think a lot of the times some people might get frustrated with that, but it's how we work together, is that we joke about it in a snarky, sarcastic way, but at least we understand where each other is coming from. We always, no matter what happens, I don't think we've ever left work angry at each other. Very similar to don't go to bed angry, don't leave work angry at your business partner. Again, we've always had a tie breaker, no matter what side of the business is, Zack's dad, I consider a second father to me. He consults and he's been a consultant for us, and then when it comes to tech, we have another friend who went to URI that also is a tiebreaker.

If you have a business partner and you're 50/50, there's going to be times that you both want to go a separate direction on what you want to do, always have a tie breaker. Someone that you guys trust, you value their opinion and that person is the one that helps break the tie. Otherwise, it's just you're going to end up angry at each other.

Zack Bloom:
For the record, my dad is the tiebreaker like Sean a lot more than me, so it's harsh a little way. But as Sean said yes, it's definitely good to have a little inner circle of people that you can go for counsel.

Adam Young:
I see that a lot with co-founders, business partners, whatever you want to call it. It's either almost one of two camps. It's people who met on a Tuesday and we're like, "Hell yeah, let's start a business." Or it's people who have known each other for a very long time, have learned how each other operate under pressure, which I think is hugely important and have been through some life experience with each other. I think the latter is the recipe for the most successful partnership. I don't think people should hop into business with people they don't know.

I think they really need to get to know people and spend a lot of time together like you guys did, like Harrison and I did, before a financial transaction ever gets in the middle of it. Because if you don't know how each other operate under pressure, that could just end up in disaster. I think that's probably why a lot of startups fail. I appreciate that.-

Zack Bloom:
If you want to see is how reacts them to pressure, go play blackjack with them at a table of five or go play craps with them, you'll figure out real quick what they're made of.

Adam Young:
I like that. What were the early days of Covalent Media like?

Sean McCormick:
Well, in full disclosure, we started from my dining room, until we were able to afford an office space. We were fortunate to get this office space probably about six months after starting the company. But every day, Zack and our program, or our CTO, JJ would come to my house. We'd worked at my dining room table and set up shop. My wife stopped trying to have dinner at the dining room, because our computers were there, it was our office. But believe it or not, Zack and I would take walks every day, probably about a half hour at a time. It was the summer months and we discussed the business and I'd say there was probably never a walk where something good didn't can come of it. Get out of the office with your business partner, do some stuff that you normally wouldn't do and just talk about the business outside of your comfort zone.

Zack Bloom:
Yeah, I agree with that. I think usually once or twice a year, Sean and I will try to get out of town for a night, just to go somewhere and not necessarily talk about work to start, but just talk about what's going on and visions and all of a sudden one thing leads to another and you're just having a great time and you're not getting that office environment. You think your 10 great ideas and sooner or later, two or three of them start to come to fruition and then just balls from there. I think those trips are really important, and just-

Adam Young:
Let's highlight on that for a minute, because underneath what you just said was an admission of, sometimes we make mistakes and fail. I'd really like to talk about that for a minute, because it's so important to business, especially in marketing. I like to say that marketing is perpetual failure, until we fall into a pile of money. Tell me about some of those failures that you had in the early days of your business?

Sean McCormick:
Zack, would you mind if I went first?

Zack Bloom:
Sure.

Sean McCormick:
Yeah, so Zack and I acquired a call center in Fort Worth, Texas back in early 2017. If you want to talk about failures, we got the business for what we felt was a very fair and generous multiple, on EBITDA (earnings before interest, tax, depreciation and amortization) or revenue, how you want to look at it. But the one thing we didn't plan on, and didn't do a good job on, and it comes back to the financial component, is leaving plenty of cash to operate the business. We bought this business in Fort Worth and it's a completely different business model from a cash flow standpoint. You're paying your customer service reps weekly and cash flows is coming in, net 30, net 45, net 60. I'd say, if I had to point the finger at myself, we didn't plan or I didn't plan well enough, post acquisition cash flow. That definitely hurt us. When we were running the business and scaling Covalent as well. I'd say that was definitely a failure there.

We learned some very valuable cash management lessons from that. That's probably one of the biggest failures we've had. Besides for that, I'll let Zack talk about this one a little bit. Technology, when we started the company, even though we have a CTO today, we did try to outsource the tech bill to a firm in Bangladesh. I'd say that was probably a big mistake on our part as well, and I'll let Zack talk about, maybe that or any other failures.

Zack Bloom:
Yeah.

Sean McCormick:
We have a list of failures.

Zack Bloom:
Yeah. We could go for hours on this, but now the outsourcing of in tech platform. Could've gone really well but it didn't. It was an unmitigated disaster when we needed ad serving to work one way and offers to literally generate leads for clients, so we couldn't do it just because the architecture wasn't there. Almost had to completely shut down our highest grossing revenue channel, which is our lead gen portal for probably two or three months. Which is not an easy thing to do, especially when you're a smaller start up and getting some momentum in the market space. We did it, we came out on the other side a little more knowledgeable and with a much better product, so it did work out in the end, but that was a lot of sleepless nights there.

Then also we've built properties, and we drive traffic to try to monetize our users on the lead gen side. We've made mistakes when it comes down to traffic. Sometimes traffic's really strong and you're getting good users and other times it doesn't work out. You're trying to do a good media strategy for one of your bigger clients, and you think it's going to work out great. It's all awesome on paper. But then as soon as the results start coming in, it's a mess and you can lose the business and you have to go back to the drawing board. It's not-

Sean McCormick:
Did you say that happened a couple times?

Zack Bloom:
Yeah, once or twice. The beauty of lead gen, it's performance based, but not a lot of them retain their business. When you lose a few big ones and they always seem to happen at the same time, it sounds like you can just call one and two right back in there. It takes some time to regrow that.

Sean McCormick:
I'll tell you what that means to Zack's credit and why he's such a great business partner, is he who builds really strong relationships. There was no relationship or account that we lost that we couldn't get back. It always came back to us, feeling confident enough that we're going to deliver better results.

Adam Young:
I think that's really important, in the affiliate marketing space where there's a lot of cowboys, there's something to be said for creating really strong relationships with people. That can be the difference between success and failure. I really appreciate what you guys said about technology. I've been through a lot of those lessons myself as a technologist, and I literally felt what happened to you in the pit of my stomach. I think people don't realize how complicated it actually is, to build this sustainable technology platform regardless of what it's for. It requires a lot of effort and if you don't get it right, it can be devastating to your business. I really respect that you went through that process, but also that you made it through safely on the other side, because I know a lot of companies don't.

Zack Bloom:
A learning experience.

Sean McCormick:
Yeah, we were always confident, but it's like getting hit by a torpedo, that somehow you manage to keep the ship afloat. I don't know how it happened, but it worked.

Adam Young:
Very cool. Let's talk about your call business a little bit. This is the Pay Per Callers show after all, what are you guys doing in calls? Has anything changed since your acquisition and what do you think the future of your business in relation to calls is going to look like?

Sean McCormick:
Sure, all good questions.

Zack Bloom:
Okay. Yeah, so I think one thing that our Pay Per Callers' helped during this acquisition process was, there's a lot of highballs on our revenue, and our profit numbers from, now the acquiring company, always getting reports and updates. The fourth quarter of last year, we really started to hit our stride in the Pay Per Callers space. That really helped, not really artificially inflate numbers, but it was a good time to get high. We ended the year on a high, and a large part of that was for our Pay Per Call side. Pay Per Call in the past has always been a channel, we had dabbled in, but there wasn't really .... It was the third channel of the lead gen space, and it's become number 1 or 1a in the last six months.

Not to give you guys a plug, it's your show, but Ringba's definitely helped us roadmap that division a lot more strongly, given us a lot of tools to be able to grow it, which is always a hurdle when you're a small company. Yeah, it's become a real focus of our day to day and with the acquisition, one exciting thing for us is, with some added cash flow and with some deeper pockets, through some more opportunities that we can now jump into, especially on that side where the media is more expensive and then start to continue to grow that business.

Sean McCormick:
Yeah, in regards to the future, there's a lot of stuff going on, so things that were ready to do in the next three to six months and then probably a year plus out. The stuff in the next three to six months, obviously we are a lead generation company. We own a lot of registration pages, form signup pages. What we do is, if we get users to fill out their contact information, one thing we're going to be experimenting with in the next three months is click to call on desktop. We're excited about that and having Ringba be our back-end for tracking monetization.

Besides for that, when it comes to Pay Per Call, I think individuals, and I'm sure many workout now, but the individuals that really understand Alexa and Google home, and how to get rankings and listings on voice command, are going to be those that are going to be the most successful probably in the next two or three years. It's things that we're going to actively work on, but I really believe that that's the future of Pay Per Call is, essentially screenless research.

Adam Young:
Very cool. Well, thank you guys so much for your time. I appreciate having you both on our show.

Zack Bloom:
Pleasure, man. We should do it again next week.

Sean McCormick:
Thanks for having us, Adam.

Adam Young:
If our viewers want to do business with Covalent Media Group, how do they get ahold of you guys?

Zack Bloom:
Just write us a check. No, you go to our home page. I think our number's on there. You could just email either zack@covalentmg.com or sean@covalentmg.com.

Adam Young:
Cool. Thank you guys so much.

Sean McCormick:
Thank you, Adam. We appreciate it.



----

Thanks for checking out the Pay Per Callers Show! Let us know what you think by joining the conversation and leaving us comment. If you liked this episode, leave us a like and be sure to subscribe to make sure you never miss an episode!

This episode of The Pay Per Callers Show is brought to you by Ringba Call Tracking and Analytics. See how Ringba is inventing the future of calls at Ringba.com.
 
Last edited:
Top