James Benham

This transcript has been edited for better readability: Henry Harrison Podcast — Entrepreneurs, Business & Finance Guest: James Benham Founder & CEO, JBKnowledge Henry Harrison Today we have James Benham, the CEO and founder of JBKnowledge, and we’re going to hear that incredible story. Thank you for coming on Entrepreneurs, Business and Finance, James. James Benham It’s so nice to meet you, and thanks for having me on the show. I really appreciate it. Henry Harrison Right now, you are the founder and CEO of JBKnowledge, which is a multinational technology and consulting company that you’ve been building and bootstrapping for about 20 years. I interpret that to mean you’re not owned by outside investors, you don’t have a bunch of people to answer to, and this is very much the company you built and still lead. That alone is phenomenal. And beyond that, you’ve also created two disruptive InsurTech products, so for people interested in insurance, we’ll talk about that too. You just finished a board meeting where you’re volunteering as a regent for Texas Southern University, so you’re also clearly a give-back kind of guy and involved in the community. You’ve got your own podcast, The InsurTech Geek Podcast, and a lot of other things going on. But why don’t we start at the beginning? You’re in a dorm room at Texas A&M, and you decide to start a company. Was there some precipitating event? Was it a passion? Were you entrepreneurial as a child? Let’s go all the way back. James Benham I always like going all the way back to the beginning. I was born in Baton Rouge, Louisiana, and my dad was a lifelong entrepreneur. He didn’t really have a role model for that. His father was a very poor farmer in southern Mississippi. My dad joined the Navy when he turned 18, honestly just so he could eat regularly. He served for a few years, then went to LSU, and after that he started a business out of his garage. Over time, he built and sold four companies. That was the example I had growing up. He taught me everything he knew throughout my childhood. Then I went to Texas A&M, was in the Corps of Cadets, and studied accounting. I did a couple of internships as an auditor with PricewaterhouseCoopers. Nice people, good firm, but I really did not enjoy the lifestyle. I didn’t enjoy traveling five days a week, sitting in a cubicle with a couple of other guys, and reviewing audit findings. That just didn’t feel like my future. So I went back to my dorm room after my first internship and called my dad and said, “I want to start a business.” Now, my dad refused to employ me. He would never let me work for him. He always said I had to do it on my own. So he gave me a few thousand dollars in seed capital as a loan and investment, which made him my partner. Then I went to one of my best friends from high school, Sebastian Costa, who is still my right-hand man today. The three of us got JBKnowledge off the ground — me from my dorm room, Sebastian from his bedroom, and my dad as our adviser and financial backer. In total, the outside capital we ever consumed was about $68,000, and we paid that off in the first two years. So when we say we were bootstrapped, we really mean it. We started out building enterprise-grade software for small and midsize businesses. By 2004, we found insurance as a sector we really wanted to work in. Then in 2006, a friend of my father’s told us we should look at construction bidding, and while we were still doing custom software work for insurance, we built a construction bidding product called SmartBid. That ended up being a runaway success. We sold SmartBid in 2018, kept the people, and pivoted into building insurance products. Today we have around 280 people. About 155 work in our professional services group, and the balance work in our product division, which builds Terrene, a claims and policy compliance platform for insurance carriers, TPAs, and self-insured groups. So it has been a really interesting ride. But if you go back to the beginning, I had a great childhood example in entrepreneurship, I got a strong technical foundation, I had a great university experience, and I got started by calling on Aggies who were willing to give me a chance. That’s how we got here. Henry Harrison You’re also a bestselling author, and one of your books is Be Your Own VC: 10 Bootstrapping Principles to Generate Cash and Keep Control. That’s really interesting because you’ve lived that. You’ve done it, and now you’re teaching it. A lot of people would love to do that, because they may not have the friends-and-family network, or they may not want the obligations and hooks that come with outside money. And frankly, a lot of people don’t want to go ask friends and family for money anyway. James Benham That’s exactly right. And if you go the venture capital route, raising money becomes almost a full-time job as CEO — or at least a very significant part of it. I have a lot of friends on that train, and I’m also on the other side of that world because I’m a limited partner in a few VC funds. But it’s tough. You have to make investors happy, you have to raise the next round, and then the next round after that. Those funds have expiration dates. Often you end up selling before you really want to. It’s for some people. It just wasn’t for me. And raising money from friends and family is nerve-wracking too, because people often put a significant portion of their personal wealth into your company, and if you don’t pay it back, you have all the family fallout that goes with it. That’s one reason I thought it was important to write about bootstrapping. Business schools generally do not teach bootstrapping very well. They’ll teach corporate structures, fundraising, pitch decks, and the mechanics of raising capital, but they usually don’t spend much time on how to actually build a company yourself and keep control. So I felt like that was an important topic. Henry Harrison Would you like to share some of those principles? James Benham Sure. There are ten, but I can summarize some of the most important ones. First, cash is king. You have to manage cash flow constantly. EBITDA can be useful in some contexts, but if you don’t understand cash generation, you’re in trouble. Second, get out of debt and stay out of debt. I’m a big Dave Ramsey guy personally, and I believe the same thing in business. Debt is what kills companies in recessions, downturns, and crises. The companies that got hit hardest in 2008 were loaded with debt. The same was true during COVID. Right now, a lot of commercial real estate companies are going under because they’re overleveraged and can’t adapt fast enough. Third, build what you have to so you can build what you want to. That’s really the core mantra of bootstrapping. Sometimes the thing that generates cash is not the dream itself, but it funds the dream. You build a cash-generating machine first, then use that to build the thing you really want. Fourth, survive. My dad always said, “Only the paranoids survive.” You have to think about whether your business can survive recessions, pandemics, natural disasters, client departures, and everything else. Fifth, choose your partners carefully. Sixth, get out and sell. I say the CEO should stand for Chief Evangelizing Officer. You have to be the chief spokesperson for your company. Even now, after more than two decades in business, I’m still doing sales calls, presentations, demos, and trade show booths. Seventh, rewrite your rules when necessary, but not your values. Your values stay constant, but you may have to adjust your operating rules as circumstances change. Eighth, make innovation a habit and a process. Ninth, you always get paid last. If you’re the entrepreneur, you’re last in line. Your people and your business have to survive first. And tenth, establish your personal minimums. You need to know your limits — emotionally, financially, and strategically — in building, operating, funding, and eventually selling a business. Those are really the ten core ideas. Henry Harrison Let’s talk a little more about the beginning. You were clearly talented, hardworking, and technically inclined. But when you first started, how did you actually get your first clients and your first revenue? James Benham I got in my 1995 Ford Mustang and I drove around Texas meeting Aggies. That’s literally how it started. I had met former Cadets and Aggies through my time at A&M, and I started calling on them. I went to their offices and homes in places like Dallas, Richardson, Carrollton, and Uvalde. My first client was the Texas Aggie Corps of Cadets Association. I built their website and member database. Then came a lumber company, then a plastics company, then a membership nonprofit, and so on. My first eight clients were all Aggies. They saw that ring on my hand, they listened, and they gave me a chance. That’s how it got off the ground. Henry Harrison And today you still do custom software work, but now it’s concentrated in insurance rather than across multiple industries. James Benham That’s right. In the early days, we worked in maybe a dozen verticals. Now we work in one: insurance. But insurance is enormous. It’s a multi-trillion-dollar global industry, so it’s not exactly a small niche. Today we work for carriers, brokers, third-party administrators, pharmacy benefit managers, and others throughout the insurance value chain. We do a lot of bespoke custom solutions for them. We also take over maintenance for core applications and build new software as needed. Then on the product side, we have Terrene, which is our recurring-revenue software platform. The reason you build products is because products can generate recurring revenue that isn’t tied directly to hours. They also build equity value in a way services businesses often don’t. We learned that with SmartBid, and now we’re back in the early growth phase again with Terrene. That beginning stage of a product company is often the most fun, because you’re finding the niche, finding the right solution, and figuring things out. Henry Harrison I know you said it was a friend of your father’s who pointed you toward construction, but could you talk a little more about why you focused so heavily on insurance after that? It’s a massive industry, but obviously there were some crucial choices there. James Benham A friend of mine from the Corps at Texas A&M first pointed me toward insurance. Then a friend of my father’s told us about the construction opportunity. Once we got our first insurance client and started building software for them, I saw the industry and the opportunity and just knew it was too good to pass up. Insurance needs an enormous amount of technology help. It’s an industry filled with old processes, legacy systems, and huge operational complexity. So that became the space we wanted to own. Henry Harrison Let’s talk a little bit about being on the venture capital side too, because there’s often a love-hate relationship between entrepreneurs and VCs. Entrepreneurs want the help, they want the money, and they want the connections. But VCs want discipline, accountability, and returns. You’re an entrepreneur, so I know you sympathize with founders, but you’ve also seen how VCs can genuinely help. James Benham Absolutely, they can help. But there is tension there, because VCs want their money back, and they want the return they promised their investors. So they can be pretty merciless about that. Cash is king. If you take someone else’s money, you owe them. That’s one reason I’ve never liked seeing companies celebrate the act of raising a round. I think it’s very premature. Celebrate your first sale. Celebrate becoming profitable. Celebrate your second and third major customer. Those are achievements. But raising money? That’s an obligation. You just took on a big responsibility, not a victory. Henry Harrison What do you see for yourself going forward? You’re still a young man. Some people might say, “Okay, I’ve done enough, I’m going to retire.” But I don’t see that in your DNA at all. You’re still expanding — your show, your books, your speaking, your products, your company. What’s next? James Benham I’ve got a lot of runway left. Sebastian, my Chief Operating Officer and longtime business partner, and I are still having a lot of fun building things together. My leadership team is outstanding. My senior people have been with me 20-plus years in many cases, and the next layer down 15-plus years. That’s a huge blessing and a huge responsibility. When we sold SmartBid, it mattered a lot to me that we could keep the people, because I wanted to build again. I’m 44. I’ve got a lot of runway left in life. I’m also a pilot, so I think in terms of runway. If you’ve got runway left, use it. Build more speed and take off. There’s only so much golf you can play. I think building things is part of what people are made to do. If you look at someone like Warren Buffett, even in his 90s he’s still doing what he does because he loves the game of it. It’s the building, the solving, the mission. I think recreation is a poor substitute for a real mission. A purely recreational lifestyle can feel pretty empty. That’s one reason I engage in public service too — being a city councilman before this, serving as a regent now. Those are unpaid roles, but I think it matters to give back. I’m made to work. That’s why I’m here. Henry Harrison My dad used to tell us to find something we loved to do, because we were going to spend a large part of our lives doing it. And once your needs are met, the work becomes about more than money. It becomes about mission and purpose. How do you keep your employees for that long? That’s a manager’s dream. They’re obviously talented and they have other options, but they want to stay. How do you do that? James Benham First, people don’t really work for companies — they work for other people. So if you want people to stay, you need great leaders around them. I have that in Sebastian, who is incredibly internally focused. I’m much more externally facing — I set the direction, land the clients, do the speaking, do the selling. Sebastian is deep in the operations. Then we’ve got a brilliant chief administrative officer in Mauricio, incredible division leads, outstanding creative and account leaders — people who care about their clients and their teams and are focused on building leaders underneath them. So one big answer is: you need great people leading your people. Second, you have to actually care. You have to care about your people, their goals, what they want, and where they’re trying to go. Third, you have to challenge them. You have to show them a future worth building, and sell them on why it matters. Fourth, you have to be available. If they message you, email you, or text you, get back to them. Be present. And fifth, you have to coach them. For example, I still go with my account managers when they present their quarterly stewardship reports to clients. I sit there, I listen, and afterward I coach them: here’s what you did right, here’s what you did wrong, here’s what you can improve. You have to keep doing that. And then, yes, good HR matters too. We have a really strong HR organization. That helps enormously. Henry Harrison How did it come about that you expanded internationally? That’s a very big step for a company. James Benham We did that early, in 2002. Sebastian is from Argentina, and we were competing against firms from India, Ukraine, and other international software markets. We needed an answer to that competition. So we followed our people. We expanded into Argentina because of Sebastian. Then we got into South Africa through another key team member, Marie, who moved back there and helped us establish a presence. So that expansion wasn’t abstract strategy. It followed the talent, and it solved real operational problems for us. Henry Harrison To wrap up, you’ve already mentioned some of them, but maybe say a little about what else you want more of in life — more flying, more business, more products, more family time, more public service. James Benham Definitely more flying. I’m a pilot, and I love it. My dad was a pilot, my mom was a pilot, my mom’s father was a pilot. Flying is a real family passion, and for me it’s one of the most joyful things I do. I also really enjoy public service. I loved being an elected city councilman. I enjoy being a governor-appointed regent. I think those are meaningful ways to give back. Then there’s my kids. My oldest is about a year from college. She wants to be a Broadway star, so we’re doing all kinds of coaching and planning around that. She’s at Interlochen Arts Academy, a boarding school for the performing arts, and she’ll be a senior next year. My younger daughter is incredibly bright. She wants to live in Hawaii, surf, and be a marine biologist. We just got back from a four-day trip there to visit the University of Hawaii, and we went scuba diving together. We discovered a new shared passion in scuba diving. So my girls mean the world to me. I also think it’s important to have creative things in your life outside of work. I’m in a dance troupe. I do ballroom dancing, salsa, tango, bachata. I play piano and guitar. I sing. I always tell my employees: yes, work hard here, but go find something to geek out on outside of work. Don’t just go home and watch television for hours or scroll endlessly through short videos. That’s such a waste of a brain and a life. Instead of watching people do things, go do things. For me, that means flying, family, music, dance, public service, business — all of it. There’s just too much to enjoy, and too little time not to do it. Henry Harrison That’s all-around good advice from where I sit. Thank you for sharing so openly and candidly. James Benham, JBKnowledge, on Entrepreneurs, Business and Finance. James Benham Thanks, Henry. And if anybody wants more information, they can go to jamesbenham.com. You can subscribe to the podcast, get my newsletter, check out the book, and connect with the companies there. And if there’s one social media platform where I spend time, it’s definitely LinkedIn, so feel free to reach out to me there too. Henry Harrison Fantastic. Thank you.