CEO and Founder, Bob Eisiminger
Bob Eisiminger is one of my favorite entrepreneurs, not only because he is a smart, humble, and sociable man, but also because his trajectory is a great illustration of the business plan from money maker to moonshot. (In fact, I’ve written about Bob here before — twice!) Bob’s path to success doesn’t follow the well-known tale of the Silicon Valley maverick who squandered millions in venture capital funds to realize the disruptive idea they came up with in their garage . Sure, those stories exist — see Amazon, Uber, and Facebook, among other dominant house brands — but what you hear less about are the hundreds or thousands of failed startups that tried to follow the same path. Plus, not all of us have access to these sources of funding or – let’s face it – those groundbreaking ideas.
I’m here to tell you you don’t need them. And Bob is proof of that.
Do not get me wrong. Bob – the newest entrepreneur in our video series-began in 2005 with many valuable assets: a West Point education, stints in the military and corporate America to build his leadership skills and nose for talent, and the intelligence and drive to get things done. But he didn’t have crazy amounts of seed money, and his product—a doohickey that turned electrical wiring into a computer network—wasn’t even his own. Instead, Knight Point Systems established itself as a value-added retailer (VAR), essentially a sales operation that packaged service along with its products. VARs are common in the B2B technology market as they help their customers adopt unfamiliar technologies quickly and easily. They require little more than a wholesale relationship with a manufacturer, some technical expertise and a network of prospects, so the barrier to entry and risk are relatively low.
“I’m not that creative and innovative, but I knew there was a segment in the federal government that I could take advantage of,” Bob says with typical humility.
Bob’s military career gave him insight into and contacts within the U.S. military, so he chose to market his products with the Department of Defense (DoD). “I’m not that creative and innovative, but I knew there was a segment in the federal government that I could take advantage of,” he says with typical humility. The problem? While VARs are low risk, they also have low profit margins, and those margins don’t get much better as they get bigger. Nevertheless, Knight Point Systems could build a stable of satisfied customers while building a positive reputation in the relatively tight defense contractor community. Soon customers were asking for much more complex assignments, particularly around the growing need to move or replicate data centers – those giant server farms that are the backbone of business technology.
The applications running in these centers are mission-critical and any downtime could put millions of dollars at risk, or in the case of the DoD, national security. This required building multiple redundancies into each system so that if one center was damaged, the system could immediately switch to another center. The problem? Many of these fail-safe centers were built too close together for a natural disaster such as a hurricane or earthquake to knock them both down at once.
Bob saw an opportunity and invested in software that would streamline the process from months to days. The company began to focus more or less exclusively on this service and differentiated itself from competitors with its own technology. In other words, the service side of Knight Point’s value proposition became much more important than the product side, and the company was able to take on larger and more profitable projects.
A later update to the software not only made it easier to move a data center, but also to continuously manage its capacity – a critical capability. With this development, Knight Point has completely transformed its business model. It was now a managed services provider and customer engagement lasted for years instead of weeks or months. In 2018, Bob was awarded the largest contract in company history — a $902 million, eight-year contract with the DoD — and other major contracts followed.
As a VAR, Knight Point systems would be worth no more than a low multiple of earnings, but as a managed services provider with a backlog of $1.2 billion on the books, it was a very attractive target for acquisition. During his second Birthing of Giants Fellowship Week in 2018, Bob once again seized the moment and decided that his goal for a year would be to find the right buyer for the company – one that would give his team the same vision and drive that got them going loved. since 2005. A year later, almost to this day, he achieved that goal by selling the company for $250 million and walking away with a check for $132 million.
Are you hesitant to take your business to the next level because you don’t have the piles of cash you think you need? Take a page from Bob’s book and scale back – not your aspirations, but the size of the steps you take to achieve them. Smaller steps reduce risk and open up opportunities that you may not have even seen at the beginning of the journey. What are the problems your customers face? What solutions can you offer them? And how can you position those solutions to deliver steady, profitable growth and greater value to your business? Let me know in the comments. I like to hear from you.
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