Accucode Keeps 4 Cents on the Dollar and Uses It to Build Software Companies
A hardware reseller keeping four per cent of $100 million sounds like a bad business. Kevin Price has spent 24 years turning that four per cent into software exits.
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Kevin Price has been asked about his margins twice on this show, and both times the conversation stalled on the same thing: a hundred million dollars of revenue that keeps about four cents on the dollar sounds like a bad business, right up until you understand what he uses it for.
Accucode is a value-added reseller. It buys networking gear from Cisco, Extreme Networks, Aruba and Nokia, deploys it, and services it — tens of thousands of commercial networks, with Lumen’s entire mid-market B2B network deployment work among them. Price does not oversell what that earns.
The hardware business has always been — I refer to it as a self-funding business development activity. The margins are not great, but it’s always profitable.
Kevin Price, founder and CEO, Accucode
The argument about points
In 2019 the two of them spent a genuinely long stretch of the interview failing to agree on what a margin figure meant, and the misunderstanding is instructive.
Price kept saying his net was “about four” on a hundred million. Latka kept trying to express that as a share of gross margin: if you take $10 million of gross profit and $4 million reaches the bottom line, that is 40 per cent of gross margin, which is the flattering way to say it. Price wanted the plainer version. “My net profits are around four per cent.”
Both were right, about different denominators. Four per cent of revenue and forty per cent of gross margin are the same $4 million. The second framing is the one that makes a reseller look like a software company, which is precisely why Price would not use it.
What that cash does is the actual story. It has funded, at various points, three software startups built inside the company, a 3D printing division, and an AI research project in Ireland.
Eight lines of business, each its own LLC
Accucode is structured so that pieces of it can be sold without disturbing the rest. Price described eight separate lines of business in 2019, each a separate legal entity with audited financials from day one.
They’re all set up with the intention of being able to take on investment, of ultimately building up and exiting — and they’re run from the beginning with audited financials and all of the things that are necessary in order to be ready to go sell a business when the right buyer shows up.
The mechanical benefit is about who transfers in a sale. “It actually makes it easier to exit,” he said, “because they only have to take the operational staff tied to that particular product. They don’t have to take my marketing and my sales and my accounting — because typically in an acquisition situation they would have to, and they would lay all those people off anyway.”
He is equally clear about the cost of the model. Shared resources mean nothing gets the founder’s undivided attention: “I think there’s also a cost to that, because it’s not the sole focus, and because a lot of the resources are shared it takes longer to scale it that way.”
The exit that funded the rest
The clearest proof the structure works is Velocity Mail, a software-as-a-service business grown inside Accucode and sold to Descartes Systems, the Canadian public company. Price gave the price as $26 million in 2019 and $25 million when he told it again in 2022; the revenue underneath it was about $5.5 million, with roughly $3.5 million of that reaching EBITDA.
About $5 million came out for the team and management. The rest stayed on the balance sheet and became the next set of bets: the acquisition of a 3D printing business, new equipment and facilities in Dallas and Denver, and six and a half acres in Colorado Springs.
The 3D acquisition is characteristic of how he thinks about markets. He was not buying a printing shop; he was buying a position in what he calls a distributed device population — the same thing his hardware business is, in a different industry.
“There is a complete lack of a thoughtful, organised approach for how you’re going to acquire, deploy, service, support and operate that kind of technology,” he said of additive manufacturing, “and there’s not nearly enough qualified mechanical engineers on the planet to do the install, the operation, the service and support if you’re going to scale this.” His verdict on printer manufacturers is sharper still: they can usually print a thing successfully once, when it takes two or three attempts to get one right. “That’s cute that you can do that, but it’s not very valuable.”
The founder of the business he bought, an IP attorney by training, had been running it as a service bureau out of a hangar at a local private airport. She stayed on to run the division.
Software that shipped under someone else’s name
Every software product Accucode has built started as a customer asking for something.
- Rapid Inventory — a cloud warehouse-management system for QuickBooks users at $60 a month per concurrent user, running uninterrupted since 2007. It launched as Intuit Warehouse Management, branded and taken to market by Intuit for its first three years.
- Jellyfish — a unified order-management platform launched in January 2019, built on what the company learned from a free app that let bars order beer, wine and spirits from their distributors and do their inventory in one place.
- ForWork — Accucode’s own internal workflow and project-automation platform, used to run the business for years before being launched as a product.
ForWork is the one that matters most, because it is what makes the hardware business defensible. It runs the field-service operation, including the Lumen deployments, with real-time project visibility shared back to the customer. By 2022 it carried about $300,000 a year in subscription revenue — against a hardware business of roughly $70 million.
That gap between what a product earns and what it enables is the recurring theme of both interviews. “Usually I have a customer before I build it,” Price said of the software line, which is the opposite of how the ventures that raise money do it.
Twenty-two profitable years out of twenty-four
Accucode was bootstrapped from 1995 on $1,500 of credit-card debt, and has never raised outside capital; its GetLatka profile records total funding of zero. Price borrowed from banks instead and paid it all back. “I’m always cash-flow positive. I got two years out of 24 that I was not profitable.”
The revenue line has been lumpy in a way that reflects what it sells. Inc. reported $63.3 million for 2017, and 2018 came in flat at about $63 million — which Price blamed squarely on tariffs freezing enterprise capital purchasing. Latka pushed the opposite hypothesis, that uncertainty should have produced a pre-buying spike. “I’m sure there was some of that,” Price said. “We didn’t see that.”
- Jul 2019 · Revenue $52M, half-way through a year he expected to be the first at $100M.
- Dec 2020 · Revenue $93M, with 117 people.
- Jul 2022 · Revenue $100M, with 150 people and several hundred field contractors.
The profile carries nothing after July 2022. On the 2022 telling, roughly 70 per cent of that hundred million was hardware and 30 per cent services and software — the latter mostly other people’s software resold, such as warehouse management and manufacturing automation, rather than the products Accucode wrote itself.
Asked what he wished he had known at twenty, the man who spent 24 years compounding four per cent margins into software exits gave the answer his own record makes obvious — patience — and then declined to take credit for it: “I acquired it along the path. I started out pretty angry.”
Sources — Kevin Price interviewed by Nathan Latka twice, recorded 10 July 2019 and 7 July 2022. Revenue, headcount and customer figures from the Accucode profile on GetLatka, with dates as recorded; the 2017 revenue figure is as reported by Inc. and cited by Price.
