How do you buy back the company you sold?

would you buy back your business after selling it then sell it again well that's what David riski did former founder and CEO 3Q digital he scaled his business profitably got an offer for over $60 million could not refuse it sold the company only to find out later that the buyer couldn't make the final payment leading him to buy back the company at a steep discount and having the opportunity to sell it Again David is a deal making genius as dedicated his career to help similar Founders navigate their exits well this is what we talk about on episode 52 of funraising demesy the show where I interview Founders and investors that are actively raising or deploying capital in today's markets I'm your host Jason Kirby I've built and sold multiple companies across multiple Industries as a Founder operator investor and this show is meant to uncover what's actually happening in the private Capital markets and help Founders and investors make better capital decisions this show is published weekly and to get notified of new episodes and get access to a free freebies like our guide on how to negotiate term sheets or get a hyper relevant list of investors specific to your business be sure to subscribe at join. thunder. BC just go ahead and go to join. thunder. BC now on to the show welcome back to fundraising demystified to today we have David rodski with us former CEO and founder of 3Q digital welcome to the show Jason thanks for having me no DAV I'm I'm really excited to have you you have a really unique background and story of how you built a company you sold that company saw an opportunity to buy back that company and then later sold that company and so you kind of have this unique transaction history you managed a ton of money it was a marketing agency you managed billions of dollars in ad spend uh done hundreds of millions of dollars in transactions I think you're going to have a fascinating story to share but I'll stop talking and let you kind of just speak to you know what what is your story and and kind of how did you end up to where you are today I started out um I was I graduated from law school back in 1999 from University of Iowa from Iowa originally um moved to the Bay Area San Francisco Bay Area because I didn't want to be a lawyer and I didn't want to be somewhere without mountains um and I haveen best friend who was living in the Bay Area so came out to the Bay Area uh it was 1999 it was the first.com boom um they were people companies were hiring Warm Bodies and there was a company called rentals.com that hired me to be manager of strategy which meant absolutely nothing and uh I just kind of did a lot of market research for them you know competitive strategy and at some point about six months into the gig the director of marketing quit and there was no one to do marketing and the company had a $25,000 month retainer with a brand agency and a $25,000 month retainer with a PR agency uh and I said oh I can do this I had no idea what I was doing but I took over and I I got pretty frustrated with both agencies because I didn't see any real Roi from what they were doing uh and then I discovered a little company in Pasadena California called go to.net which was the first company to do pay-per-click advertising when you only get you only get charged just someone Clicks in your ad uh and I basically took all that budget from the $50,000 a month from the agencies and threw it into this go- to.net and I went from getting no measurable traffic to getting hundreds of thousands of clicks for like three or four cents a click and I just was hooked I was like this is really going to be the future of marketing so I the next seven or eight years I just doubled down on learning everything I could about this world of go of paperclick marketing also known as search engine marketing obviously Google then came along Google adopted this as their standard for how they bought people bought ads on Google and um 2008 I had been working for client side seven years and I was just um kind of tired of of having to be involved in politics and working with other people's um you know businesses as a as an employee um and I was traveling to India once a quarter for this one company and my wife was pregnant it's not good idea to be in India when your wife's pregnant I guess unless you live in India and um and so I just quit and I didn't know what I wanted to do but I knew I didn't want to work for another company and um I started an agency basically um initially it was a consulting firm but people kept asking me for help and I realized I could hire some some folks and um started out as a Google advertising agency and then gradually expanded it um into uh much larger agency than that as I realized that I was getting clients who are saying you know we want one throw to choke we want we want multiple services with one company not just being really good at Google advertising um I can I can keep going away there or we can pause what what's the what's the best way to uh to continue Jason well no so we we kind of hear the story of you know the concept of you know building a 3Q but when did it start to really take off and and to what scale did it reach and when did you decide I think you sold it in 2015 you know walk us through that Journey getting to that point of selling it and kind of what the decision process was at that time yeah I mean it took a while to scale um you know 2008 the first year I was not in business I probably did $100,000 of Revenue it was really just me in a coffee shop you know 2009 we probably did $500,000 of Revenue and I think I had one or two employees and I moved from a coffee shop to like a wework and then 2010 you know we're up to about a million dollars of Revenue and uh I got a 600 foot office and a lot of remote workers so it was it was growing very sort of organically I guess but not super fast um at at some point around 2011 2012 um I started to see some sort of breakthrough velocity um started to get much bigger clients um we had a lot of success actually with Venture Capital firms starting to send us business we got started to build a good reputation in in Silicon Valley uh and so we had three or four Venture firms who basically almost as a matter of course when they took on a client in a certain vertical that they immediately sent them to us uh and we started to really see um a lot of traction there uh we started to double down on our Marketing in the bay area so um one of my adages that I really love in marketing is if you can't be number one in a category create a category you can be number one in and so for me I realized I'm not going to be the number one agency in the world but maybe I can be the number one something and I what I decided was I think I can be the number one um performance marketing agency serving Venture back clients in the Bay Area and so we we really sort of started to build that reputation we had we attended every conference we could and marketing in the bay we spoke on it we did Billboards on how 101 which is the through through Fair of uh Silicon Valley we did ads on NPR's Marketplace uh we held a client conference at the Giants stadium and invited potential clients and basically got to the point where we we really started became the deao choice for for companies that were particularly in s SMB SAS um director consumer and then companies that were doing anything on social media we were we were getting all that business and so in 2014 um we we acquired a smaller competitor which I can talk about it was a full an all Equity transaction but we there was a local um agency that was similar to us but a little bit smaller that we brought it under the fold for for all for all equity and then in 2015 we started getting a lot of interest from potential acquirers at that point we were probably about um 15 million Top Line and maybe not a lot of bottom line we were really optimizing for growth so we're probably doing about $2 million at bottom line at that point um and um you know we had um just people calling us all the time saying hey we we're looking to fill this need for performance agency uh we weren't really serious about selling I guess but we we're serious enough that we hired an investment banker and we basically said let's just you know you you take all these calls I shouldn't be spending my time you know talking to company is you know you take the calls and um he took all the calls and at some point he said look there's enough people who are calling that I think you should at least hear them out and so uh we decided to run what I describe as a mini process so rather than running a full process where you send out you know a 60 or 70 inquiries to people who have maybe not even reached out to you but you just think are good fits we really only just reached out to the six or seven companies that were already banging on our door um and one of my adages is great companies are bought and not sold so I felt like we had some leverage by saying to all these companies look we're not for sale but if you really want to buy us give us an offer that we can't refuse um and so we did the mini process in 2015 um who ended up buying you in that and like what was that process like so you kind of see you got some your flatter you got some midb interest get the you on the i i Banker involved and at this point you know did you start seeing like tons of offers was it difficult to actually get Lois on the table or term sheets on the table what was that kind of uh that interim process before you actually ended up selling yeah so we we reached out to the seven folks that had expressed interest and we ended up getting three IIs or Lois I mean I guess you'd say they were IIs really maybe it's a way to describe them um and um they were they're pretty different offers there was like one that was I think a a um publicly traded um a agency there was one that was a privately held agency and there was a third that was a strategic that was publicly traded and um I guess one of the things that was sort of very interesting about this transaction was that you know i' I've always like thought about like the world of real estate where you know if you put your company up for if you put your house up for sale um and it's raining out and there's six other houses for sale on your block that that week you might get a very bad offer but if it happens to be super sunny and there's no other houses for sale in 20 miles you might get an outsized deal and so I think that often happens with with transactions in in m&a and in our case we got really lucky because one of the companies that was bidding for us publicly traded company and they had they had announced to the street they were going to make an acquisition I think in Q4 of 2014 uh in the performance agency space and Q4 of 2014 came and went and they they had a prospect I think they were trying to close didn't close so now they're now they're a quarter behind what they had promised the street and they're starting to feel pressure from investors so we were their next Target and they basically came in and they bid really aggressively to win the business um you know it's publicly traded publicly available information so I'll share that like you know we were at about again we were like maybe $2 million to evida and um you know with with adjusted iida maybe we got up to like $3 million or something like that but these guys ended up bidding um 65 million for the business and and and I would say that the standard for like a $3 million adjusted ebit of business at that time was would probably have been in the 35 to 40 million range and and in fact the other bids pretty much came into that range but but it just so happened you know it's better to be lucky than good sometimes that we we had someone who just needed to make a deal for a variety of strategic and and um Market Market reasons and it was kind of a no-brainer for us to accept that the terms of that deal now there were some aspects of that deal that turned out to be a little bit precarious for us which I can talk about but um from a Topline number it was hard to say no to a deal that was literally 50% greater than any other bit that we had yeah that's that's tough to say no to for sure and you know obviously exciting moment when you kind of get that opportunity but you when it comes down to negotiating you know just for our audience just to have that kind of insight of like what does it look like when all right sure you get that $65 offer and everyone usually kind of wow dazzled by the Top Line number but as you kind of alluded to it sounded like there might have been some strings attached so you walk us through kind of what that was like and what were some of those strings that were attached yeah so the the biggest string that was attached really was that um about 55% of the value was an in an earnout and that earnout was a three-year lumpsum earnout so um so we had to you know work really hard for three years and then try to get to the end of that and and get the full amount um you know in the negotiation period we had a lot of like you know as you always do a lot of contentious back and forths and we were lucky I think to have a CEO on the other side um who was really really wanted to get the deal done and was a really fair-minded person um that said um and I really I really connected with their CEO uh that said there were a couple times in the in the in the deal where he was like look David I'm I'm on your side um trust me I will I will get this I will make sure that you're treated well on the other side of the transaction and I said to him sort of a as a joke I said you know as my as my Rabbi has Al often told me trust in Allah but watch your camels um which I think is s of A good rule of transactions which is you know I look and I said to him said look I trust you but you might be gone in six months and the new person's going to come in and say well I don't know what conversation you had with with the old guy and in fact that's actually what happened um you know he was under a lot of pressure turn this business around and um about three months after they closed the deal with us he got fired and a new person came in so my my biggest lesson from you know from a from a negotiation perspective is what I what I what I already said which is like you know don't don't leave anything to trust everything if it's not if it's not in the in the document the old document don't do it um but the other issue you know the big the big sticking point in that negotiation was this this earnout that was based on um three years of performance on our part and um uh you know that was a that turned out to be a very M consequential term because we got towards the end of the three-year term for the for the deal and we got approached by the management team of the of the of the company that bought us that said listen you know we would love to renegotiate this this earnout um because we were at 100% of the earnout we hit we hit 100% we we essentially had to double the business in three years which we did um oh I should also say one of the other points that I made what to the to the acquir where was I said look if if we're going to have a three-year lump sum earnout um and that's the majority of our of our compensation on this deal we need to have full control until you pay a earn out so I said we're not merging our accounting teams we're not merging sales we're going to keep our name we're going to keep our offices we have hiring and firing rights for our people we can we can we can choose it to you know negotiate whatever contractual deals we want with our clients the moment that you pass that threee earn you can do whatever you want you can change your name you can fire me Etc so we got to to the end of the earnout and the chirer said listen let's can we renegotiate this can we have like a one-year extension to pay you what we owe you and I wasn't super happy about that but I was like you know we negotiated a good interest rate on it and I said sure you know we'll help you guys out and then about six months after that they said hey can we have another one-year extension and at that point I said you know I I think I think we'd rather just have our money and move on and so we started to get into some more challenging conversations where they were really putting some pressure on us to to consider changing the earnout and um at the end of the day um we couldn't come to an agreement um I said no I'm not giving you another extension and they said if you don't give it another extension it could have significantly negative Financial consequences for the business which could hurt you because we were essentially unsecured creditors which is another topic we could talk about about being being a secured versus unsecured and whether it even matters because sometimes you could call yourself a secured creditor but but like a bankruptcy court would declare you an unsecured creditor so anyways we ended up the only way we ended up solving this was deciding to say listen you have to put us up for sale you know then if we put us up for sale we'll get the proceeds of that will go to pay our earnout and you can be absolved of your um of your obligations so um so that's what that's what we did that's some Fair Deal making you know kind of given the fact that like good there's something going on you know maybe the they're not able to get the money to pay you guys what needs to happen you guys start feeling that out so it sounds like you handled that negotiation and granted you're probably glazing over the immense amount of intensity of those negotiations of the back and forth of the lawyers and all that you know the true chaos that happens at some of these deals um but you know manage the outcome put up for sale and then actually is is it true that you were the one that ends up buying you back is that uh how that worked out yeah that was not my intention I actually flew around the country to my biggest competitors and I presented them and I said listen this is a deal great deal you buy I know exactly how much you have to buy us for and the value of the company would be worth 2x in less than a year because we're we're turning the turning the ship around in terms of iida and and things are looking really strong and I couldn't get anyone to offer what I thought was a very very good deal for the acquirer to buy the company so at the end of the day I went back to the parent company and I said listen we will make an offer to do a management buyout so we we went we raised uh $10 million from a local bank and um we sort of pledged our own debt that they owed us as as part of the purchase price and we were able to buy the company back wasn't wasn't my intention initially but but that was the best alternative to a lot of bad Alternatives and and we we did had to buy the company back for about 65 cents in the dollar for what we sold it for three years later so we already knew we had a good deal and and the business had doubled from a Topline bit perspective and then by the time um we were done buying the company back the EA had probably doubled as well so you master class and and deal making I'll be maybe not the underlining original strategy going into the you know the boardroom but you know still a good outcome and net positive for you you know their mistake for maybe doing a deal is bigger than they could you know take a bite out of uh or chew and then you know you guys get to kind of resis the company and from there you know so that's a several year Journey over the midst of this you built this great business but you know kind of how are you feeling towards post acquisition because you had another transaction where you you brought in some other investors uh and then eventually you sold it again so yeah kind of give us the the cliff notes of that yeah I mean we were when we took the company back we really were excited to be independent again and we actually made t-shirts up for all the staff that said 3Q an independent agency very excited that we're running the company again we had a lot of success um immediately um juicing the eitaa and winning some big clients and then the same thing happened to us as before which was we got all this inbound inquiries from companies that you know oh you're back on the market and you're two times as big we'd like to talk to you and so we ran a a midi process we didn't really include companies that were just uh we didn't send out 60 Sims we sent you know seven or eight the people who had talked to us already had had an investment banker and um we ended up getting a a really good offer from a combination of two uh family offices in Chicago that you know wanted to wanted to buy the business and also wanted to you know sort of add some capital and and expertise that they thought could help scale the business and so we were only private again for about a year and then we accepted this the terms to be become part of a you call a private Equity or a family office um but business um and then at that Point um about about 6 months into that Journey um the company was already at about you know 500 people um you know doing um High eight figures eight figures of Revenue um if I get my figures right and uh in the tens of millions of dollars of Revenue and I started getting a little bit um tired um I've been doing it for I guess uh 11 years and I also really honestly felt that the business was getting a little too big for me I I felt like I was more of a um early stage or mid-stage founder as opposed to an Enterprise founder so I found a guy to become a c Co and then very quickly promoted him to CEO and then I became a board member and uh strategic advisor to the CEO until 2022 when um and that guy did a fantastic job uh he he literally I think tripled the iida in probably two and a half years and we sold it to um private Equity back holding company called deppt in uh in Holland and at that point as soon as we sold it to deppt I became sort of sort of an adviser but basically not and uh subsequently I've I've left entirely so I have an equity stake in the company but I'm no longer involved in any s in the daily e so I know that was you know quite the story and journey that you shared with us but I I think it's so unique and just kind of Testament of just the deal making Journey as a Founder uh you want to build a business but do you have these kind of core major Milestones of you know selling reselling you know buying back selling uh and as a experiences I find to be particularly fascinating but I want to kind of you know change gears here because you know you're an expert in the marketing world you build a very sizable company in this space you when it comes to like a marketing agency you you wrote a book on how to sell how to sell marketing agency why to sell marketing agency guess kind of what makes a business in this case selling like what what makes it attractive and if a Founder is running a business in this case maybe a bootstrapped you know agency of some kind what makes it uh attractive to to be potentially bought yeah I mean I think there's hard factors and soft factors the hard factors are things like iida iida last 12 months of iida is a number factor people look at when determining uh the value of a business um there's also your compound anual growth rate both of iita and revenue um there there's things like Revenue concentration which can be can gen generally is not good but um you know um you know that sort of thing recurring Revenue versus project Revenue recurring is is preferred um the strength of the management team um the strength of clients um the degree to which um you're a leader in the industries that you're you're targeting uh at the end of the day it all comes down to um you know does the acquirer feel like this is a business that's going to continue to scale and has the has the opportunity to scale even faster than scaling now and and drive significant profit and um you know a lot of times there are agencies that get excited by like oh I have this big client Apple's my client like okay that's nice nice but if your IA is $200,000 a year and Apple's your client you're not going to get a100 million exit you're going to get an e exit on IA um you know and so and the same thing is true for agencies some say oh I built proprietary technology so I want to be valued like a software company and not an agency and I always say to these agencies like look uh if people are buying you for your services doesn't matter what your technology is you're going to be valued as Services Agency so you know there are a lot there's there's some there's some qu qu qualitative things about like oh do they believe in the management team you know do they do you have um a diverse stream of clients but at the end of the day it's how much profit do you have and how fast is that profit growing that really drives the the multiple agency and what do you typically see as far as a range of multiples because you're currently advising and helping agency owners and business owners sell their businesses so what kind of multiples are you seeing as far as a range in this market I mean it varies sub substantially I think one of the biggest factors in determining um the multiples is how how big the hcre is so at AG that's doing let's say a million dollars a year of IA probably is going to get a valuation of something in the range of two to four years of last 12 months iida so $2 to4 million an agency doing $10 million of IA because it's it has more Enterprise scale already uh could easily do call it eight to 12 times eida so you could be looking at $12 million transaction on a $10 million business versus a $2 million transaction on a $1 million business and then if you get to the point where you're at15 $20 million Eid you could get into the sort of 15 to 20 times Eid range it's it's uh it's about sort of predictability and the bigger you are the more likely it is that you have figured some out things out to drive scale and and you don't have the founder hit by a bus problem that you know the founder leaves and the business completely disappears there's the the found the agency is bigger than the founder so so it really does depend but um you know growing your EA is quickly is the number one gate way to get the highest multiple H it's you know it's easier said than done but a clear Target that you know fter should be focused on and when it when it comes to saying like all right I'm a Founder I'm ready to sell whether I'm in the 1 million eida or the 10 million eida yeah how are these deals getting structured you know you kind of mentioned your nna you got the way bigger Topline number but you had the nout which created a lot of complexity and ultimately cause what C uh what happened but you know what do you typically see in in structures and how do you typically advise Founders to you know what what structures do you typically recommend they pursue I mean the two most common structures in the in the agency space are either um Cash Plus an earnout or Cash Plus a rollover and so um in the case of a rollover you know when you're reinvesting your stock back into the the business I would say typically you're looking at anywhere from call it 25% to 40% of your of the de deal value being rolled back into the business in stock and the rest given out in cash at closing um in the case of an ER out it's um there's usually no equity component you're given cash up front and you're giving it you're giving an incentive over some period of years the hit Financial metrics which usually are eay growth um and then you get paid the earn out um I would say that um people sort of genely genely say that um er outs have a higher chance of of litigation um for iety of reasons I mean we talked about my situation where the acquirer literally couldn't pay the earnout so that's that's that's an opportunity for litigation but probably the bigger one is that it's kind of the the Hollywood points deal you know how like a movie gets made and they tell some producer you're going to get 2% of the profits but then they never make any profits because they're throwing they're they're doing a shell game when they're moving money from one movie to the next movie and that can happen in an earnout too where they say oh yeah we're going to give you uh if you double your ebba deal we'll give you $100 million but then as soon as you close the deal the bigger agency says all right well I need you to work on this account for free because we really need to win it well I can't do that I need to hit my e well sorry you know we're the E we're we're not making ebit on this deal it's a strategic deal so um so that really can happen quite frequently I mean the what what an what an acquirer will say is they often like the rollover because it incentivizes the the team that you're buying to be aligned with what the acquirer wants to do um you know again from the perspective of the person being acquired if you are if you have a rollover and someone else is a majority owner you know they may have different objectives than you and so if you have a huge percentage of your net worth now in equity in a company that you don't control that can be very nerve-wracking so there's pros and cons to both I have done both so um you know I I probably I probably prefer the rollover just because I think of all all the sort of Hollywood points issues with earn outs and the fact that was burned once but it's it there's no one right answer yeah that's some really really good advise for for Founders as they think about what might come on the table because again so many people can C up on just the Top Line number but the intricacies is of how the majority of it actually and get ends up getting paid out it's is super common because as an acquirer you don't really know what you're truly buy you know at the end of the day like the business could shut down you know like anything can happen so they want to drisk it as much as possible so it's kind of a give and take uh you unless you just have an absolute Killer Business and it's bought for all cash you know these deals can get usually uh you know messy at some point and I'm I'm very much it like Top Line I think is an easy thing to kind of agree to on a on an earnout but like EV profitability there's just so many ways that the parent company can throw things onto your like oh well we need to share all the accounting expenses oh we need to share all the legal you're like I'm not using those that's not associated to us uh and they can just eat away and trevit like oh you missed it sorry no many and you're like what have I been doing for the last three years y exactly right yeah and so your experience in particular is marketing agencies but marketing agencies you know a target audience a certain type of service but it's a very similar business model to a lot of other you know types of businesses do you see kind of the lessons that you learn and teach in the marketing space or the marketing agency space kind of overlap into like staffing agencies law firms or any other type of kind of agency service based business absolutely absolutely I mean I think any almost any Professional Services business is going to be um treated the same way as a a marketing agency businesses I mean at the end of the day when you're buying a Professional Services business you're buying human capital and so your success in growing that Capital depends on keeping those people there and um you know I think the biggest fear that people have for any Professional Services firm is having a founder or a set of Founders who are in intricately um involved in in the business particularly when it comes to client satisfaction in sales um because the you know the the biggest fear is that you buy a company and then the founder says you know what I'm not really interested in doing this anymore thanks for the cash I'm going to go sit on the beach and all of a sudden all the the sales that you were expecting that founder to to bring in through his or her networking and all the client relationships that that this client this founder has built up for the last decade are now at risk so that is the case for any Professional Services business um for sure um you know and that's also the other thing is that Professional Services businesses are uh valued on a multiples of IA as opposed to multiples of Revenue because there's no escape velocity generally speaking for Professional Services firms you know you don't you don't just apply a slightly better marketing campaign and go from you know 70% net gross margins to 90% gross margins but you do see that in in the software world you a software World once you've built the product once you've got the funnel going that every new customer is pure profit that's not the case case in a Professional Services firm the the one thing I will say about Professional Services which sort of St the obvious is that some Professional Services firms do have this unique layer of regulatory uh requirement so like in the case of a law firm a law firm can't be owned by a um non- lawyer um I think the same is true for for a physician's practice so there are ways around that but um that adds an additional level of complexity not the case in marketing there's no requirement that a marketing firm needs to be owned by a marketing person we GL share that and then you what you kind of mentioned how you financed the repurchase of your deal so you basically said I'll you know wipe out that I you the debt they owed you plus you rais a little bit of debt yourself and when you see these deals getting done the market now like how do you typically see these acquirers financing these deals and financing the initial purchase and then potentially financing the the uh the earnout well a lot of the deals that are being done in the marketing world today are private Equity back so the priv Equity company at a at a at a baseline has raised money from limited partners and has the money to just put out and um and invest in these companies but the private Equity companies are also very often uh working with a bank to use a leverage on the Ia that they're acquiring to to to make the transaction so depending on how aggressive the private Equity Firm is they would look at anywhere from maybe just a one times leverage you B that all the way up to a three or four times leverage um and you know if you if you do the math as long as your your your debt payments don't spiral out of control um it can be a lot more profitable to um take out a loan and pay the interest on that than it is to you know give give up 20 or 30% of the company that you think is going to increase in value by 5x so um typically that's what what we have been seeing a lot of um you know um at the end of the day it it's then the when you have good e in a business it opens up a lot of opportunities it opens opportunities for financing for um for investing in the business for Building Technology Etc um and and that's what the best companies do yeah that's fair and typically what I see is about that one to 4X you know evida in terms of financing and you know finding those Banks and lenders is you know always something that's important to have those Partnerships lined up before an acquisition and also you know kind of leads me to to my next question like what have you seen below deals like what what when a deal looks like it's moving in the right direction and then you know abruptly blows up or yeah is has ended for a reason I mean the two experiences I've had one is um if there's a hiccup in the business um so if uh if you if the company has sort of signed an Loi with someone and they're in due diligence and some bad stuff starts happening to the business you know that the um they lose a big client they miss to ourg something like that I mean you know acquirers can get spooked uh very quickly uh and so anything that's a that's that's out of the ordinary um I think another thing people have said too is if the finances aren't well um organized I mean if someone starts going into the financial documents and says well wait a minute why is this here and why didn't you tell us this earlier I mean that kind of stuff can spook an acquirer um I'd say uh another thing that I think can of spook the acquir uh is um learning things about the acquirer that that they don't like um so like for example in my case I was about to sell to a large holding company um that had a good reputation as a as a leader in the space and I did due diligence outside of just asking their references for U their opinion I went to some people who had sold their business to that particular holding company that I knew personally and one of the guys said you know these guys only care about revenue and anything that's not Reven producing they don't support so for example they don't think that training of Staff training is important because it doesn't drive Revenue that was a pretty crazy thing to hear and I just sort of could imagine my team you know being integrated in this company and getting frustrated very quickly and H and us having huge attrition of our top talent so I was on this sort of half yard line with that company and I pulled back and I said we're not doing the deal because that's that's just not going to work for us being a a company that's our reputation is based on having this smartest you know most you know most aggressive marketers in the space so those are some of the things that I think can can can cause problems well it's just commendable for you to to go and put that extra mile into doing that research and doing that reference check and caring about your the outcome of your Bo you know is that you're handing over you know that it's out of their control of who they get sold to and you know having your eye out for them and looking out on their best interest yeah hopefully they appreciate it uh you know it's always you know hard to tell sometimes but at least you're on their mind I've dealt with that and the uh the acquisition so I always told the Walmart I was just like we had some key players we just cared so much about and Walmart was like nah we don't need them I was like we won't do the deal if you don't take them and it's one of those things where it's like we would still do the deal but we really really don't want to without them and uh yeah we just pushed hard enough to where we were able to kind of push the line just over the H where we got to everyone and um that was so helpful just because morale would be destroyed if we lost those people then you they're expecting us to ramp up like crazy um and so I such an important thing to kind of as Founders think about more than just money you know sure you can get a big number but it's a it's it's a it's a breathing organism essentially with all these different moving pieces and you got to make sure it's all take care of to that to that point Jason um you know timing is everything in the negotiations and and in your example of the employees that you think are important to keep you know prior to signing an Loi when you're when you've got six different contenders you have a lot of Leverage as a seller and so you can say to them look I'm going to put this in the LOI these six people stay with the company um after the selling of after the signing of thei and before the deal is signed you still have some leverage now you're only dealing with one company so they know that like if this deal falls apart it's going to look bad because it looks like you chose someone it didn't work out but still they want to get the deal done and you you're still negotiating the terms so that's even that's still a good time to sort of use some leverage but after you close the deal the deal signed your Leverage is whatever the contract says and so if they if you didn't protect those employees and they say oh yeah we own the business now we're firing these six people it's gone so um I I recommend that people frequently like especially in the LOI stage make the LOI as comprehensive as possible any sort of Hiccup any concern that you have put it in the LOI make the LOI five pages 10 pages long a lot of people sort of have these Loi that are like a page and a half that are just kind of fluffy like we're going to give you this much money and you're going to have a three-year earnout and that's it but that's that's when you have the most leverage because you have other alternatives to that deal and because once you kind of sign that you go exclusive you know you can't just bring someone else back to the table ands bad if you go exclusive and it doesn't H deal doesn't happen yeah then then it sends a signal that you're like all those people that would have buy were like whoa what do they did they pull out did you pull out you know exactly are you going to pull out if we go in yeah so it creates a lot of uh ambiguity in the deal making and just you know there's a lot of deals on the table and you're no longer the hot you know deal that people want to to pay attention to because you might that's right some baggage some G greater buys which you know kind of leads me to to my next question um what advice beyond what we shared today would you give to Founders who are maybe thinking about selling or have the big dream one day that they'll sell when they get to whatever you know milestone what would be your advice to them I think the biggest advice that I probably give people is are you sure that you want to sell and I think that when you are building a business and someone t uh dangles a seven or eight figure offer in front of you um the first thing that you think about as a Founder is you know the beach house in Jamaica or something and and having to never worry about finances again and and this being being sort of a life affirming moment for you and that all of that can happen it can be very positive but the more I've been on the post Founders side post exit Founders side if you will um The more I've run into Founders who have dealt dealt with a lot of anxiety and depression after selling the business and the way that I would sort of describe the root cause of this is that when you sell your business sometimes you're selling your purpose and identity for cash and so if you think about it that way if you think about like I've spent the last 15 years building this business I've I've got a great reputation in space I love what I'm doing I feel like I'm this is a mission driven organization that I'm trying to you know shape the world or shape my industry and suddenly you give all that up and someone gives you a pilot cash and says okay we got it we don't we don't need you anymore that can be very challenging it was challenging for me um and it's and I've talked to talk to Founders who have have made transactions uh in the billions of dollars um who have had the same challenge so I'm not saying that this means you should never sell but I think it does mean that you should really do a sort of a pros and cons analysis of of what's important to you and what do you want to get out of the transaction um before you just take cash because it's a lot of cash I think that's incredible feedback and as you know we're both part of the post founder group and there's a lot of dialogue of this of now what you maybe you go on the sabatical you you take the break and but then you're like like me I was like Idle Hands like I can't can't sit and do nothing I gotta like create you know build add value um and it's a it's a great question to ask yourself of you know one is now the right time and two should you sell and what happens after you sell it having that reflection because you have a lot of people maybe pushing you to sell because their incentive is to get a big check uh and they'll constantly be like oh yeah damn it great idea definitely take the deal and you but they don't really care what happens after and because they're going to get their check and uh I think it's so important to have those conversations and just have the the you the thought process just go through the exercise of what happens next and is it something that you envision is a net positive for you because you still have control you still have the choice yeah that's the best time to to leverage that well David it's been a phenomenal conversation with you but I do want to call out the fact that you do have a book can you tell the audience a little bit about the book and they can expect uh if they were to to read it yeah thank you uh the book is called selling your marketing agency it's a pretty straightforward title and um Sy yeah the idea really is uh you know I feel like I I learned a lot on my own dive during the three transactions that I I sold the two transactions where I was part of buying it a company and um I do feel like one of the crazy things about being an acquirer a seller of a business is that for you this is the most important financial transaction of your life uh and it's your first and only time doing it and for the other side uh it's usually something that they've done many times and that they're this is their full-time profession to buy companies and so you're at a really significant disadvantage um for that reason so I tried to write a book that would level the playing field and basically make it so that if you own a marketing agency and really a Professional Services business you can read this book and when you go in and you talk to the investment banker and the lawyers and the accountants and the Corp Dev people at these acquiring companies you are a little bit more of a Level Playing Field and the chances are that you're not going to make these same mistakes and you're going to come out with a good outcome so it was a uh it was a labor of love and uh I think it's pretty valuable for anyone in a Professional Services business to to check out and it's obviously available on Amazon sounds like a good read and uh I'll be adding that to my my list and then you know you are helping know it's beyond just the book but you're also helping ERS navigate this as it's kind of like now you're post exited you you're kind out of the business now uh this is something that you do day in day out helping Founders navigate this correct yeah so I started a little consultancy um I just changed the name to David ritz.com because at the end of the day it's never going to be a big agency I don't want to have 20 people working for me it's just me and uh yeah at the end of the day my my objective is either to help companies agencies uh scale their business so how do you sort of break break through some of these some of these challenges to really become a big agency most something like 90 94% of agencies have less than 50 people working for them so getting to that 50 100 200 range is challenging and so I've I've done it so I can help with that and then when a when a Founder is ready to sell the business I can provide Consulting that sort of keeps the investment bankers honest and you know have my law degree even though I can't say I practice law but I can look at contracts and I can share my experiences as to which contractual terms are the ones that that need to be massaged the most so that's something that I'm I'm always happy to do if there's an agency founder that wants to figure out scale or sale I can I can be helpful no I imagine you would be an amazing asset to have you at the table and those discussions and with this experience that you've been kind of back and forth on so David it's been an absolute pleasure having you on the show uh what is the best way for someone to to learn more you mentioned your website B there you know LinkedIn Twitter or X I should say uh that people can follow you or learn more yeah I mean LinkedIn is the only real Network that I'm active at and I think uh so that's that's a good way and then the website if you can figure out how to spell my name which it's r o d nit TZ KY not s so David rinsky decom uh there's a contact us form there I'm happy to talk to anyone who wants to to uh talk about um how they can sell or scale their business or just have some general questions I'm happy to go back for an email fantastic well we make sure to put those in the show notes and uh thank you for being on the show thank you for sharing your story and thank you for sharing such valuable insights that I know our Founders will greatly appreciate thanks Jason and thanks for doing this I think this is a real valuable resource for the community I appreciate it thank you for joining us thanks for listening to the show today we hope you learned something valuable and if you did be sure to let us know in the comments or by hitting that like button and if you're a Founder looking to raise Capital then join us at Thunder . 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