Cael Weston. Copyright © 2017, FPP, LLC. All rights reserved.

Acme Computer: The Pinnacle of Success

NOTE: The following is primarily transcribed narrative from Cael Weston, owner of Acme Computer, LLC, captured during a recent visit to Cael’s Medford office. Some minor changes—a word or phrase here and there—were made to translate conversational to narrative format, or to clarify a concept. Enjoy!

Cael began his career as a newspaper reporter. After traveling and moving around the country—and the Western Hemisphere—covering major news events, he returned to his state of birth in time to participate in the California Real Estate Boom of the 90’s. His talent for refurbishing Victorian houses in San Francisco helped him expand his real estate holdings to the point where his primary activity was managing his portfolio—and collecting the dividends from his investments. Comfortable in their financial situation, he and his wife joyfully decided to expand their family. But their fifth pregnancy, unlike the previous four, brought medical complications that redirected his focus from macro economics of the real estate market to the micro economics of his family’s well-being.

2007 … The Big Short … Financial Meltdown. … Real Estate Crisis … He lost everything … He was devastated … and … He blamed himself.

Instead of taking the self-serving pity path, he teamed-up with one of his tenants and forged a new career—in technology. He took stock of available resources (his innate aptitudes and acquired skill set; especially his perseverance and willingness to learn new skills), considered possible options that meshed with these resources and his environment, and climbed back on the Ladder to Success.

Cael Weston proceeded to gradually grow one of the most successful MSP businesses in
Southern Oregon and Northern California.

Cael was born and raised in Los Angeles. His dad, who was in the programming industry, retired at the age of 40 and moved his family to Costa Rica where he bought a dairy farm in 1979, when Cael was 15. Later, the family returned to the U.S. and lived in Redding, CA, where Cael finished high school and junior college.

While attending junior college, Cael became interested in newspapers; this was a mere ten years after Watergate and everybody wanted to be a Newspaper Reporter. Newspapers were in their heyday at that time—and were extremely profitable. Cael was the Editor of the school paper. He transferred to Fresno State and started his professional career in the newspaper business. Around that time, computers were being introduced to the newspaper industry, making some of the mandatory—and really tedious—tasks of newspaper reporting much easier.

Cael was working for the Fresno Bee at the time, and their computers had a feature called UDK (User Defined Key) that was very rudimentary programming: Launch an editor to capture a series of keystrokes (known as a macro; stored key commands), save the macro, and then launch the macro to kick-off the action. The process was very limited; about 16 keystrokes—but you could create a series of sequential macros to produce more complex processes.

At one point, Cael had an incredibly tedious regular assignment that involved populating a computer screen with high and low temperatures from around the world. [Remember when newspapers used to publish worldwide temperatures?] The Fresno Bee had their own list of about 150 places, and published 77 in their paper. Cael’s task was to manually look up each location and then store the temperatures for that location. Cael soon realized that both locations were always precisely the same. Cael figured out how to string together all the location names by setting up a series of UDKs. He spent a couple of hours each day on this task. (He revealed that he wasn’t very good at detail, so this was a painful assignment for him; he was a Copy Boy before he became a Writer.) Management gave him the assignment and then came by to view the results. Cael was ready. He went over to the computer, hit a couple of keys and, boom! all the temperatures appeared! His audience was completely blown away!

This happened to be during the infancy of public access to the Internet (mid-80s), and Cael could use the Internet to do research in the newspaper’s library, which was stuffed with newspaper clippings. He would get an assignment to write an obituary about somebody famous, and go to the library and read 10-20 individual clips to get background information. The paper had a big library staff—and had something called Lexis-Nexis, which allowed users to type in a person’s name and have the computer system search databases of the NY Times, NY Post and other key newspapers. Cael discovered that he could track all his favorite columnists and writers. He would spend as much time as he could on Lexis Nexis (he had lots of time; he worked the graveyard shift), and he reveled in the experience! He recalled one time the Managing Editor stormed into the bullpen, waving a $2,000 (~ $4,500 in 2017 Dollars) Lexis-Nexis bill around and yelling, “Who the heck was using Lexis-Nexis and reading the NY Times at 2:00 in the morning?” Cael didn’t know there were any costs associated with using Lexis-Nexis.

He continued in his life as a newspaper reporter and landed on the East Coast; in Allentown, PA. Subsequently, he moved to Central America, and wrote about the war and the elections in Nicaragua.

During his travels he met and married his wife, and they got pregnant with their first son. They thought they would stay in Costa Rica, where they had been living with friends; stay and have their child—and he would continue to write. But his wife got incredibly sick during Semana Santa (Easter Holy Week), and the tradition in Costa Rica during Holy Week, is that everybody cooks calamari on wood stoves, and that particular smell turned her stomach inside out. So, they went for walks to get some fresh air … but the place has a very homogeneous population, and everybody was cooking the same food. They made a decision to leave Costa Rica.

They returned to the United States and searched for a city in which to settle. They had fallen in love with New York City but both of their families lived on the West Coast: San Francisco. They traveled to California—to San Diego—and Cael applied at both local papers (at the time, the San Diego Union and San Diego Tribune), and he also applied at the papers near their families’ homes (San Francisco Chronicle and San Francisco Examiner.) In those days, there were no cell phones … that changed things. Cael happened to be staying at his brother’s place in San Diego, and he had given the editors the wrong phone number for his brother’s house. After not hearing back from any of the local newspapers, he left San Diego and went to San Francisco. A bit later, the San Diego papers tracked him down and notified him that they had extended an offer to him but by that time, he already had a job in San Francisco. This twist of fate changed his life.

He landed in San Francisco, and the San Francisco Examiner invited him to interview. The paper said they’d hire him but, first, he had to go out into the suburbs, work for six months, and then come back. At that time, the top salaries in the suburbs were $13,000 per year …this was in 1990 and, compared with San Francisco housing prices, a salary at that level was inadequate to support his growing family. He was told the top reporter there makes $45,000 per year. So he took additional jobs, and ended up working at night as a Legal Secretary and Word Processor.

This was at a time when law offices had DOS-based applications, and Windows was beginning to replace DOS. He discovered that, every time Microsoft made a change in an application, the new version would munge all the old documents. The law firm he worked for maintained complex 140-page agreements with tables of authority, tables of contents, and graphics, and the only way to view those elements was to print them because there was no screen view in DOS. The process was incredibly complicated; involving constantly looking at markup language (formatting codes employed by word processors), trying to make everything look exactly right—and then printing your efforts to giant copiers so you could see what the result looked like. This process didn’t work very well in a law firm where attorneys were prone to clone existing agreements, make modifications, and then bill as if they had created the document from scratch. The process had to be fixed.

Cael started creating macros … he recalled his background … his earlier macro days … and started writing macros to clean up the base documents. He started seeing the patterns and the similarities and began to string all the elements together. When he completed the task, he could open up a document and run a macro to execute a search & replace function. He became—for that large law firm—the Guru who cleaned-up these documents and automated the customization processes: a valued employee.

Soon, a training position came up … while he was still working as a Newspaper Reporter during the day and writing for magazines at night. He was also working as a Stringer for ABC News and the San Francisco Examiner, and at a variety of freelance contracts that weren’t paying very well.

At this time, he was having more and more kids, and moonlighting, and he finally realized that, when he socialized and people asked him what he did for a living, he would reply, “I’m a Writer.” In fact, Cael didn’t feel that he was really a Writer; he was a Legal Secretary and a Legal Word Processor who was writing. He finally said, “You know what? I’m just going to do this full-time and make this my work.” So the training position came up and he went in and they patted him on the head and sent him back to the Word Processing Department, and told him, “We’re going to hire a real trainer.”

But he had committed to being a Writer, so he pressed on.

Around this time, Silicon Valley was going crazy. Cael looked through the want ads and found a help wanted ad for a Trainer at another company; he applied for the position. The company was a large Intellectual Property (IP) Law Firm based in Palo Alto. Actually, they were an old Maritime Law Firm based in San Francisco that had transitioned to IP Law, and had a Palo Alto office that was quite active. They hired Cael as a Trainer and within six months he was the number two guy in the IT Department for the whole firm. Wow! [So much for becoming a Writer … a career in IT was beckoning!]

This law firm’s business spanned the United States and Europe, and the IT Department started doing massive rollouts; implementing a ten-million-dollar hardware upgrade, hiring programmers, and working closely with the programmers to develop applications that would produce documents that made work easier for the lawyers. A lot of the apps were third-party software that relied on Microsoft Word and had incredibly-advanced features that interfaced with VB and VBA.

Cael hired programmers and worked with them to produce a specification, and then he tested the application, rolled out the system, and provided training and support; he was what they called the soft side of IT. The downside was: he was on the road constantly … and he and his wife were having more and more kids … and he was commuting to L.A. every day for six weeks; flying back and forth. Every week, he would fly to New York, Seattle, Chicago, Sacramento; this was a crazy time for their family.

Eventually, he rose up to the top of the law firm’s IT Department. He was not a technician but he knew how to manage projects. Attorneys would give him a project, a timeline and a budget, and he would complete the project. But he was never a technician. He understood the theory at the higher end. He could discern patterns.

He liked the work a lot and, obviously, this work paid a lot more than newspaper reporting, so he and his wife bought a house in San Francisco’s Mission District. Then the law firm started breaking-up.

Searching for a new path, he contacted one of the many vendors he had previously hired to do the technical work at the law firm, and asked if he could use them as a reference because he was looking for work. The vendor explained that she wanted to meet with him because she was starting a software company. They sat down to talk, and she asked if he wanted to go to work for her company as a Project Manager. He decided to take the offer—and ended up working with her for about seven years as an independent consultant, under the umbrella of his own firm. He worked with several companies, but primarily for her company.

Cael was not only doing project management for her company but also doing business development, re-doing all her pricing—and significantly building-up her business. He learned a lot about the business side of IT, but he came to the realization that this was not enough to satisfy him. He kept hitting the ceiling because he wanted to sell to other people who would then resell her company’s products. But she wanted to keep all the sales in-house, so he presented his idea of a different business model to her. She looked at his idea for a long time and eventually said, “The problem here is that the people who are reselling our products are going to make more than we are.” He replied, “Yes, but we’re going to make way more than we are now. We want our partners to make money … we want them to make a lot of money so that they continue to sell our product; we can’t hold on to all that. But we’re going to be making about ten times as much as we are now. We’re going to continue to grow.” But she couldn’t see that.

An ancillary benefit to the business was the group of really bright programmers she had aggregated and, of course, there are a million really bright programmers, but what she had done is: put them together and given them enough structure so that she could introduce an idea at one end and a product would come out at the other end. Cael recalled thinking that simply putting those guys together and putting your name on that business … you could have sold that for a million dollars with no product, no application, no nothing. He couldn’t really convince her that the value of her business was not the application that she had sold—that’s turning over all the time, constantly. But the fact that she had this group of very good programmers, and they had a process and a system where they could pass an idea through the development process, and a useful piece of code came out the other end of the system. “That was very valuable in those days.” In retrospect, Cael thought she was great, and they worked together for a long time.

Comfortable in his business, Cael began investing in property in San Francisco; refurbishing Victorian houses. He got very much into that and loved the work. Then his wife said, “Hey, if we move out of San Francisco to a smaller town, we could have another child.” (This would be their fifth.) So he said, “OK. That sounds like a good deal.” They looked for a university town with old houses so you could walk to a business district that hadn’t been destroyed by a WalMart and strip malls. They looked all over and traveled all over, and they found Mt. Shasta. The town didn’t have a university, but the place had everything else, and was incredibly beautiful. They were camping there one day, and 3:00 rolled around and all the kids got on their bikes with their fishing poles, heading out to the lake, and he said, “this is how I want my kids to grow up.” They bought a place in Mt. Shasta. He sold everything he had in San Francisco and bought a bunch of commercial and multi-family residential properties in Mt. Shasta and, from his house, he could walk to everything he owned. He started focusing on managing his real estate portfolio. He continued to buy properties in San Francisco and flip the properties but in fact, his primary interests were in Mt. Shasta. He had a canoe on his truck, and he was 40 years old, pretty much retired, and could do what he wanted.

Their fifth child came along and he and his wife were both of good peasant stock, and had produced the first four children without much problem. But now, he was 40 and she was 38 and the fifth pregnancy didn’t go so well. They didn’t have maternity insurance because they had thought they were done having children and, therefore, didn’t feel they needed that coverage. They had cash flow and everything was good. Cael went to the hospital and explained that they were going to have a baby and they didn’t have maternity insurance but he wanted to start making payments and then work out a payment plan. His wife had placenta praevia; there’s a lot of danger for both the baby and the mother, so the mother must be confined to bed during the last three months of the pregnancy. Cael’s wife did that, and the medical bills became more and more expensive. His daughter, Ella Maria, was born via Caesarian and without any complications. She was fine and everything about the birth was great; however, he was wracked with medical bills that kept getting higher and higher.

He began borrowing on his properties—the year was 2005—and he was thinking, “I can’t pay what’s due in cash, and they won’t take payments until I default on the original stuff, and I can’t default on anything because my commercial real estate business relies on maintaining good credit.” He borrowed on his real assets and was paying down what he owed—and the properties were profitable. Everything was fine.

And then, the big economic crisis hit. What changed for Cael is: when you buy commercial property, you amortize the loan for 30 years but that loan is renegotiated every five years. Suddenly, all the loans were coming due and, because the economy had changed—not his properties, because they were all profitable—but the banks didn’t want to lend against properties with only 25% equity; they wanted properties with 50% equity. His credit card balances were high, his credit score was coming down, and the banks responded by raising their terms on his loans. Everything was profitable, everything was fine, but the credit was being yanked out from under him. And the situation was really his fault because he really, truly, simply overextended himself because he didn’t know what was coming, and he took a risk that did not pay off. He literally lost everything. He’d jumped into a big, giant hole at age 45 with no real marketable skills—in tiny Mt. Shasta. What he should have done at that point
was pack up and head back to San Francisco and start from scratch. But the kids loved Mt. Shasta …

He happened to have a tenant named Rose and he also had a daughter named Rose, so he had bonded with this tenant. She was super-smart and she couldn’t pay her rent. He said, “Come over and let’s sit down and figure this out.” We’re both smart people, we’ve both been in business before, and we have to figure a way out of this. Rose found a little advertisement in a newspaper for installing wireless high speed Internet (“WISP”) on roofs out in Weed and Lake Shastina, California. The ad was placed by a local company called Cal-Ore Telephone, based in Dorris, CA. Rose said, “Why don’t you do this?”

He had spent most of his life in Burberry suits sitting in conference rooms yelling at technicians. He thought, “What the hell do I know about this?” But he went out and met with the owner of Cal-Ore. Cael offered, “I’ll do the installations, but I want to start a business to do the work. This is not going to be an individual contract.” And he said, “The job only consists of one or two installations and the pay is $100 for each installation; one or two installations a week. There’s not much money in the job for you. We’ve already sold 200-300 in that area and we don’t expect the market to grow much; there may be some maintenance stuff.”

They outlined some terms. They estimated that he “should be able to do one or two a day, by yourself.” Cael knew, doing the math, that he couldn’t live on one or two installations a day. He’d need a minimum of five a day and really had to kick the amount up to $800 a day if he wanted to make a living at this; plus, there was a lot of driving involved. So he went out and learned how to do the installations; how to string and crimp cable. He got a drill gun. He found himself, at the age of 45 crawling under trailers in the middle of nowhere installing WISP. The process was very cathartic for Cael. But back at home, his poor wife was having to put up with the collectors calling and cars getting towed and actions that were as bad as could be. But the family stayed together; they loved each other, and that was the main thing.

Cael was out doing WISP installations, beating himself up trying to get things turned around and, as he went into these homes, he got better and better. At first, he realized that a truck didn’t make any sense; he needed a van, so he bought a used van on Craigslist and hoped it would last a couple of years. He started outfitting the van so his tools and equipment would be arranged as efficiently as possible so that when he rolled up to a site, his tools were ready, his test equipment was ready, the cable was ready. Then he began to create a procedure; he started by counting the times he’d go on the roof.

He recognized the similarity between this task and writing code, where you keep going back to the library and writing the same piece of code 95 times. He figured his average install took about 2:45 and during that time, he went on the roof 22 times and he went in the house 10 times to do the install. He started becoming more efficient and got the process distilled down to where he could do an install in 45 minutes, go on the roof twice and go in the house once.

Eventually, customers needed a NIC card—and they didn’t have a router. The company he was working with—the contract he had with them—stated the company wasn’t allowed to sell routers, only he could. Customers also didn’t have any surge protectors—this is in an area where the power goes down frequently. Customers also wanted to cable the kid’s room so they could plug in a TV set. All these requests were coming in and he felt a bit overwhelmed —but recognized the opportunity.

One smart thing he did was to commission a design from an artist in San Francisco who had created a logo for his former company. Cael’s company had given this artist a considerable amount of money for a logo and the artist provided iteration after iteration until the customer was satisfied.

Cael called that artist, John Musgrove, and told him he had no money, and was starting a business absolutely from scratch. He said that he really liked the artist’s work but could not afford to pay the going rate. He explained that he had $500 and he would give the artist a company name and $500, and the artist could simply send him one logo and he would either use what he sent—or not; he wouldn’t go back-and-forth, he wouldn’t pollute the whole process by telling the artist what he wanted. The artist replied, “You have to give me something … what’s the name of the company?” Cael replied, “Acme Computer.” And the reason he said that was because all these other companies with one-man shops have “big high-fallutin’ names that make them look impressive.” Cael wanted to be silly and whimsical and sort of poke fun at that concept. So he decided upon Acme Computer and the artist asked Cael to give him an Idea. So he said, “OK. 1950’s Dry Cleaner.” The artist said, “OK.” And he came up with Acme’s current logo.

Acme Logo.
Acme Logo. Copyright © 2017, FPP, LLC. All rights reserved.

Cael decided to buy an old Ford van off Craigslist and give up his beloved Toyota Tundra truck. He put giant logos on the van, got business cards and made brochures. He would show up and people always thought he was the representative of a much larger corporation; people started asking for more work.

At that time, there were only two computer stores in the area; one in the south and one in the north. He went to both and asked them to give him their cards so he could hand them out to his clients because they were inundating him with requests for cleanups and he didn’t have the time; he had a super-tight WISP installation schedule he had to complete during his workday. Both local computer store owners laughed at him and said, “we own the whole county; everybody knows who we are, and we don’t need any help.” With that, Cael did a little due diligence and figured out how much he’d have to charge someone to cleanup a computer and make a profit. The local guys were charging $50-60 per customer for their service. At that time, Best Buy was just getting started with Geek Squad; they were charging $149, and he thought they probably spent a couple of million dollars coming up with that number … why would he go with $50-60?

Cael put together a brochure listing all the different services for the same price and with the same description as his competitors—the big ones who weren’t in the county; they were outside the county—and he thought, people can get the same services for one-third the money, why would they go with me? To his delight, he was flooded with business, because people saw a van with a logo, a guy in a uniform who had a business card and returned phone calls, and all the things that the other guys didn’t do. He hired a kid to work at night for him; he would work at night, cleaning-up the computers and Cael would return the computers the next day. And then work started coming in: people wanted additional cabling, people wanted routers, and—most importantly—people trusted him.

Cael happened to know a guy who owned two business supply stores, one in the north of the county, one on the south side. He told the owner he wanted to rent a small corner in one of his shops to use for his base of operations. At first, the guy was really suspicious. Cael explained that 1) the “office” would only be a little kiosk but he couldn’t be there all the time and he want to keep the doors open, and 2) he wanted the guy’s customers; the business customers who are coming in to his store for business supplies. So the guy finally rented him one corner and Cael eventually ended up taking over his space—and the whole building.

Cael started getting business customers. One business in particular called while he was on vacation and said they had a really bad problem, and that Cael’s main rival had told them “you’re too small for me.” So Cael rushed back from vacation and he fixed their problem; sold them a server, fixed their cabling, the whole bit. That manager now works for Cael; he’s an employee of his—he’s a great guy! And the margins on the business are so much bigger, the jobs are bigger, so much greater, now that he’s focusing on business customers. There was one other company that provided the same services as Cael did at the time, and they were pretty stagnant and pretty arrogant—and did not have a professional demeanor at all. That company then had competition from a business that returned phone calls and staff who showed up when they said they would.

He started his current business around 2007. Cael had one really good tech—and he quit. [Recall: Cael is not a techie.] Some friends of his were part owners in that other company and they kept saying, “come into the business with us; this guy has been stagnant for a long time.” But Cael didn’t want to do that. Instead, he decided to meet with the owner, and they sat and drank beer for five hours and orally worked out an agreement, and Cael started at the new company the next day. At that point, the guy’s business was better-known than Cael’s was so Cael traded his name and his client list—and Cael—for 50% of the guy’s company, which was a five-year-old California S-Corp. at that time.

Cael moved in and, at that time, the business was doing about $340,000 a year—the best they’d ever done in a year—and they were losing money. The owner had five people working for him, and there was literally no organization. Someone would call in and the receptionist would notify all the techs; there was no accountability, no ticketing system, no follow-up. And, again, if customers didn’t like that, too bad; there was no one else in the county who did that work. So Cael started taking standard business protocols and applying them to this business: when a call came in, a ticket was created which was sent to a dispatcher who assigned the call to a tech. The tech went out, made notes, and then we followed-up and asked, “How did we do?” … and … “Is there anything else we can do for you?”

The business took that $340,000 per year and increased their revenue to $590,000 the next year. The following year, revenue was $960,000, and $1.2 million the year after that, and grew to $1.5 million the next year.

Not everybody wants to grow; not everybody wants more work. In this business, there are a lot of cowboys who want to come out and be the hero. Cael’s philosophy—and what he used to tell his guys—is: “Look, you can be a cowboy or you can be an accountant. The cowboy is the guy who spends his time in the server room; the accountant is the one who spends his time with his family on the beach because he anticipated the problem, fixed the issue in advance, and then the customer’s system keeps on going.”

Those were the “Break-Fix” Days; somebody had a problem, they called Cael and, as long as they didn’t have a contract with another entity, Cael would help them. Cael then started noticing that the business wasn’t doing so well with that model. At that point, he pivoted to the Managed Service Provider (MSP) Model.

The MSP Model consisted of doing a site survey and giving the customer a quote for a monthly maintenance fee. Customers would say, “fine.” But then the problem becomes why would they ever buy a new piece of equipment if they’ve got us for an unlimited amount of time each month, at a flat rate? Using that model, their costs for providing service keep going up the longer they have the client.

The turning point came when Cael decided to do a five-year budget for these businesses. He created a process that began with doing a complete inventory of all their IT equipment and connections, looking up the purchase date, locating the service number or tag on the Internet to confirm the date of manufacture, and using that information to produce a budget that included a replacement equipment schedule, and a stipulation that Cael would not touch any piece of equipment that’s over 48 months old and was no longer covered under a manufacturer’s warranty. With that agreement in place, not only was the cost of supplying the service going down because they were servicing newer equipment, but they were generating a lot more money selling servers and workstations.

Another benefit of this type of agreement is: the ability to overcome the customer’s objection to being sold new equipment. When the time comes to replace equipment, Cael has a fallback position and can state that he’s revisiting the customer’s Equipment Replacement Schedule instead of having to “sell” the customer on the benefits of newer equipment.

For example, he can explain that, this year, the customer needs to replace 13 workstations and a server and a switch. If the customer says they can’t afford to do that, Cael can make a decision to wait a bit longer; however, when the equipment eventually fails, the customer must decide whether to repair or replace the equipment. At that point, Cael can remind the customer that Acme previously recommended replacement. The big national MSPs would simply say, “once the equipment goes outside warranty, we are not covering that device anymore; the work is all time and materials.” And that was enough pain. In Siskiyou County, Cael’s company was the only company that did business that way … until they got really stretched. They did all the municipalities and all the schools.

Around that time, the company was moving their business north to Oregon, to where demand for their services was growing. They got an Oregon contractor’s license because their service involved pulling cable and fiber. At the same time, Cael got a call from the manager of the local cable company, and he told Cael about a company representative that came up to Oregon from Los Angeles, and needed a wireless system at an affordable housing project. Cael went to meet them and started talking to them, and he instantly liked the guy a lot—he was more of a manager, like Cael was, so they sat down and talked. The California Company Representative explained that they have numerous affordable housing projects in development all over the West Coast, and part of the development contract is that HUD and USDA requires high speed Internet at all these locations. As a result of those requirements, their sub-contractors (kitchen, roofing, landscaping, etc.) will follow them all over the place; however, they could not find a good technology services company, and, instead hired local, one-man shops and electricians to do the work.

Cael explained that, in his experience, most tech companies last about six months; they just keep turning over and going out of business because techs are not very good at running businesses. But they don’t like working for anybody else. So there’s a constant turnover. And then they buy all the equipment for their customers but they don’t really know how to do the support part of the business.

Cael did one contract with the California Company, and his company knocked the ball out of the park; they did a great job. Then Cael asked, “What other work do you have?” The California Company Rep said, “Well, the next job is too far away for you guys—the business is located in Anderson, CA—and, that first job is only worth $13,000.” Cael replied, “Anderson is right down the road (south of Redding) … let’s go and take a look at the project.”

Cael ended up following the California Company all over California, and then following them to Texas, and not only doing high speed Internet but doing video surveillance and phones and cabling—all with one call; all the company had to do was pick up the phone and call Cael and give him the address, the site map, and the name of the onsite manager.

John, Cael, Glenn.
John, Cael, Glenn. Copyright © 2017, FPP, LLC. All rights reserved.

Acme started building a reputation. Cael’s company also built a good reputation among the manufacturers of all the equipment they were using, so then, the manufacturers would call the distributors and say, “This big company bought all our gear but the techs who set things up have either disbanded or they can’t fix the equipment they installed. Who do you have who’s good?” The distributors were sending those customers to Acme. That’s how Acme Computers got the contract for providing video surveillance and internet streaming of a huge art display under the Bay Bridge in San Francisco.

The Bay Bridge Display consisted of 25,000 LED lights; the biggest light art project in the world. Acme had done some work for the project, but another vendor couldn’t complete their contract requirements, so that left Acme with 60 hours [on the failed vendor’s contract] to complete this huge project that had many moving parts, including getting Internet into a building in downtown San Francisco, getting cameras set up, and getting multi-streams set up on the Internet.

Cael was standing in his kitchen in Ashland at this point, on a conference call with all the other vendors, and a woman who was overseeing the project started yelling, trying to find out who had done what and who to blame, and the vendors began finger-pointing. Cael simply interrupted her and said, “Look, we can spend a lot of time trying to figure out who dropped the ball, or we can figure out how to fix this.” Cael told her that he could fix the problem and make the display work as expected. He threw some number at her—told her what the job would cost—and then stated that he had to start working right then! And she stopped and said, “OK. Go.”

Cael was on the phone for the next 60 hours, and they were having meetings in the middle of the night, and finally met their deadline. They had 253,000 people around the world who wanted to stream the opening of this giant art project, and they made the whole thing happen. Acme got tons of newspaper coverage and all the local TV stations came and made a big deal because this was a huge project. That kind of success kept building Acme’s notoriety.

Getting back to the MSP side, Cael described what Acme’s competitors do: They go out to a customer site, they provide a fixed rate, and then the equipment guys replace the equipment. Cael started looking at this and said to himself, “I’m so sick of calling people and telling them they have to purchase new servers.” Acme had a really big client with about 100 users in three different locations, and his Account Manager went to Cael and explained that they had lost the account. This account was one of Acme’s biggest and the Account Manager had worked really hard to bring them along. Cael asked what happened and the Account Manager explained that Acme had bid on a big job and the customer had decided to go with someone else for phones and cabling. Further, the customer put cabling in the big new location and Acme would probably lose all their IT work, too.

Cael took charge and called the client and said, “Come meet me and let’s talk.” They sat down in a conference room with a white board and Cael said, “If I can do all of the work you need … if I can do the IT … if I can do all the workstations … if I can do everything and you never have to spend another dime, except for the monthly check you write to us … if I take over your fiber … everything … if I can do that for $12,000 a month, is that something you’d be interested in?” She said, “Yes.” So they pounded away and pounded away, and mapped out a whole strategy for using a data center to tie in the three locations.

John. Copyright © 2017, FPP, LLC. All rights reserved.

The idea worked well, but the implementation was complicated and difficult, and forced Cael to rethink the type of technicians he had hired. He sat down and explained the project, and his techs said, “No, that project can’t be done.” … His response was to kick them out and get the next tech in line. That was about a year-and-a-half ago, around December of 2015. And now, the vast majority of Acme’s good clients are operating under this model—and they recently acquired another major local client. Here’s how the process works:

Clients have servers, switches, routers, wireless access points, fiber, and phones. But all this equipment is provided by different vendors, and the customer owns some of the equipment and other people own some of the equipment; the collection is a big hodge-podge. The customer has somebody on their staff who spends all of their time managing the whole IT Department, and trying to save wherever they can which, typically, slows things down and makes things more difficult. In this type of situation, Acme can go out and show the customer what they are spending on phones, circuits, and IT, and then show them what they should be spending on replacing all that equipment.

Cael takes all that information and produces one number, divides that number by 12, and produces a number that the client can take back to their operations expenditures and capital expenditures budgets, assign a percentage to them, and Acme will charge that amount every month—and everything’s always going to work.

Furthermore, we’re going to take your servers and throw them in the trash. We’re going to take all your hardware and throw that away; replace the switches with our own data center-grade switches onsite, including battery backup. If there’s more cabling that needs to be done, we’re going to do the cabling. We’re going to do everything. Because, what Cael discovered with these clients is that he could go out there and do the best job on the planet but if their cabling isn’t good, the information flow is always going to be bad. Acme simply re-cables—in conduit or innerduct. After the job is finished, instead of building all these little silos all over the place with all their own idiosyncrasies and their own different mix of hardware and software, the customer has an enterprise-grade network and stack of servers, and Acme has one with a local Internet Exchange, and they have another one here in town, and eventually, they will have another one in Yreka and one down in Sacramento. Now, what Acme can do is use any fiber provider to pull a Layer 2 Circuit that’s not going to the Internet; the connection directly connects two sites, and customers don’t need routers and servers on-site. There’s a big fat gig pipe between them that’s faster than their internal cabling. Acme can stack-up all the resources and virtualize everything and now, by virtue of those economies of scale, Acme can significantly reduce the amount of time and labor required to support that client. And the client’s uptime goes through the roof, Cael’s labor costs go down—because Acme is hiring different kinds of techs now; the techs are much higher-end and their salaries are higher, however, the number of techs is going down while the number of end users is going up. Genius!

Now, when a company comes to Acme, and they hate their current vendors, and their season starts now, and there isn’t time to buy new servers, switches or equipment, Acme has a big stack of switches all ready to go. They have battery backups ready-to-go. They have Wireless Access Points (WAPs), bridges, whatever they need to do the job. All the customer has to do is sign the contract and Acme can send a crew over there and start replacing their current equipment with Acme’s equipment.

One example: A client had purchased a 100/100MB circuit from another company and, even with this big pipe, had never seen anything better than a 25/5 (Mbps; Internet speed); they were dying because speed is really about capacity. With Acme’s managed service and the connections they provide, the experience is almost like having an in-house server.

Acme has clients in Redding who have offices in Mt. Shasta; that’s AT&T’s territory but AT&T is incredibly expensive, and AT&T is not in Medford. That issue is resolved by using multiple carriers to carry traffic whether that traffic is Internet or phone, because they have enterprise-grade equipment at every hop with big fat battery backups; individual companies cannot afford to do that. But Acme can afford to do that through economies of scale if they aggregate everybody together; almost like a co-op. This could be likened to a big co-op network, and everybody who joins benefits from those efficiencies but also from the extra speed. And those companies spend the same on IT; the difference is they never have to drop $25,000 in one chunk for a server, they never have to drop another $15,000 in one chunk for a router.

Cael says: you can either spend $50,000 up-front and $2,500 a month … or … you can
simply spend $4,200 a month with nothing down. We are—in a sense—financing the equipment, but our ROI is about 12-18 months out. Cash financing is extremely difficult in the early stages of a new contract; building up those IT Assets takes time. We have about $200,000 worth of equipment in data centers right now and then another $500,000 -$600,000 in numerous locations. But that investment is working for us, and the costs are all built-in to the client’s monthly payment; we take a certain amount each month and dedicate that back towards replacing our own equipment, like the clients would have to do. Simply through economies of scale, we get to amortize these costs over a larger base. The beauty of this plan is: Acme can take a customer in Los Angeles and a server sitting in Medford, and Acme can include clients based in San Francisco and L.A. Now Acme is working with other MSPs who are reselling their service.

Let’s say you’ve got a fiber provider; they pull fiber all over the place and they’ve done a really good job with fiber. Then you’ve got a CLEC (Competitive Local Exchange Carrier) which means they can resell other peoples’ services. What’s so radically changed in IT is: Internet Protocol. So, even ten years ago, if you bought a security system, if you bought a printer, a computer, speakers, any of that equipment, each device would have a dedicated cable, each one would have dedicated software, a separate company to install the software, a separate technician to install the equipment—because each one was different.

Now we have the Internet Protocol which means if you want to communicate over the Internet or over a particular cable, you have to conform to the Internet Protocol standard. Suddenly, Acme has Ethernet cable coming out of the wall, and the customer can connect a speaker, can connect a phone, can connect a computer, can connect a video surveillance camera; any type of equipment that needs access to the Internet. Everything is standardized now and the only thing that’s different is that piece of hardware sitting here and some intelligence, whether the intelligence is on your server or on the Internet or somewhere else.

So many technicians get into IT … you know why? Because they’re cheapskates. They see a computer they want to own, and the cost is too high. They say, “Wow! I could buy those parts and put them together myself, and put the components together for $800 and sell the package for $2,000!” So you have these little one-man shops out there who are making $40,000 a year and running from the IRS. There’s lots of free software out there; the software works together, and a community forms. All the free stuff! And techs think, “Great! I didn’t have to pay Microsoft any money!” But go load that software setup on a business machine and try to run an application that needs an upgrade somewhere and that application not compatible with existing applications. The big cost in IT is not hardware or software; the big cost is labor: time. And, if you can’t keep your customer up 99.99% of the time, guess what? Get the hell out!

Acme buys industry-standard products from known vendors; this equipment is never the cheapest because Cael wants to be able to return non-working equipment and be able to call a manufacturer and to hold their feet to the fire and tell them, “Make this thing work!” And he wants all the other software applications to be compatible with any updates that come out.

The problem with competing with independents—all the smaller businesses that are so busy trying to save people money—is: In the long run, they cost clients money; everything’s overly-complex, nothing is standard, and the individual techie is the only person who can now work on the system. What happens when that techie has an emergency and can’t come out to help? And, you can never charge enough. Then the client is mad, the company lost money on his account, he’s calling you at 10:00 at night. How likely is the individual techie to answer the phone? Not likely.

A smaller company—or an Internet Exchange Company—does almost the same thing that Acme does but they provide free stuff; all the pre-wire, etc. They may tell customers that Microsoft is this big, evil thing. Look at all this cool free stuff; all this free stuff, and the independent company charges almost as much as Microsoft would. Cael pays the extra amount to buy upscale equipment and he gets the customer to pay the extra amount, and then he sets up the system exactly according to best practices. Having a plan, a formula, and sticking to that plan is cheaper in the long run.

Cael decided he wanted to build a template for something much larger. He can’t join 1,000 Rotary Clubs or 1,000 Chambers of Commerce. He needs to build something that’s scalable and can go way outside the scope of local and is not dependent on geography. Fiber companies are dependent upon geography and reselling something over which they have no control. And, in the middle, you have all the MSPs, and they typically don’t resell those other services; they just do their own thing. But the MSPs are the ones who are closest to the customer. So Acme comes in and takes over all those processes; this makes Acme the customer of record for fiber and for everything else—one phone call. One throat to choke.

Now Acme can get really good. They have a dispatch service. They can track every single thing that’s ever happened, and the client regularly receives a copy of their service calls. And when a service call is complete, someone calls the customer and informs them of the ticket number and explains all the work that was done, what was resolved. They confirm that the work was done to the customer’s satisfaction. And they save all that stuff by ticket number and by tech. Techs get graded on that feedback and to get a raise, techs have to have a 98% percentile on all their tickets. Acme asks, “Was the work done to your satisfaction? Yes/No. Was the technician polite and professional?” The Acme Techs all wear uniforms, have no visible tattoos, have business cards, and they arrive at the customer site in a commercial vehicle emblazoned with the Acme Logo. Finally, Acme asks, “Is there anything else we can do for you?” Cael says, “You’d be amazed at how much additional work we get from that.” If your company is interested in using Acme’s services, you may contact them via their website.

Cael is currently recruiting … he’s about to make an offer to a young man who is getting out of the service. Great! Disciplined. Yes! There’s that component in IT that requires discipline—and being able to document everything you did. Showing up on time. Getting along with other people. Ancillary skills that are so essential; our guys have to present themselves to clients. Also: we work in a lot of schools; you have to pass a background check. Interested? Contact Acme!

Cael, like most entrepreneurs, has visited both ends of the Ladder of Success. He has succeeded because he has explored new ideas, taken responsibility for his errors and misjudgments, has educated himself, has created new goals, and persisted until he reached those goals—sometimes, with help from his personal and professional networks—and prevailed!

Author: Karen
Vetted By: Cael
Written: 6/11/17
Published: 9/21/17
Copyright © 2017, FPP, LLC. All rights reserved.