About the Host
Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs called Growth and Exit Planning that helps in exit planning, value building and financial management.
About the Guest
Mike Rynchek considers himself a natural born entrepreneur. He began his company Spyder Trap in college at St. Cloud State University. In 2017, he sold the company to Bright Health, a former client. After staying on for a year with Bright Health, he moved onto other endeavors. Mike now works as a consultant for numerous technology companies and Fortune 500 companies.
If you listen, you will learn:
- Mike’s entrepreneurial background.
- How Mike got involved in consulting.
- The services Spyder Trap offered their clients.
- The milestones that marked Spyder Trap’s growth.
- Why Mike chose hustle over strategy.
- The benefits of using a service model.
- The benefits of maintaining good client relationships.
- How Mike created recurring revenue in his business.
- The 3 Rs Mike follows in his businesses.
- Mike’s goals for the business.
- The opportunities that lead to Spyder Trap’s sale.
- Why Mike chose to sell to Bright Health.
- The emotional side of letting go of clients.
- The questions you need ask before you consider selling.
- Finding integration in your work and family life.
- Mike’s advice to the audience.
Full Transcript
Announcer: Welcome to Life After Business, the podcast where your host Ryan Tansom brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: Welcome back to the Life After Business podcast. This is episode 105. Today's guest's name is Mike Rynchek. I really enjoyed having you on the show because he told us the story about how he started his company in and around college and grew his digital marketing ecommerce business up to about 50 employees to eventually sell to a venture-backed high-growth company called Bright Health and Mike was on the show today to describe how he grew it, some of the different things that he was doing to pivot his business while he was growing it, and then he was able to share with us how he went through the thought process of what should I do with my company? Should I bring on a huge capital investment and then continue scaling? Am I going to have to redo my business model? Is the services industry something I want to be in and who could be a potential acquirer that will check a lot of the boxes that will make sense for him and his company? So he describes the whole acquisition process with Bright Health, but then he explained what it was like emotionally for him to say, okay, well I'm selling my baby everything that I've grinded away for for years to grow and to build and to sell it to someone. And what's that like when your company's name, Spyder Trap, in his case, is no longer there? And it's a new company and you're integrated into there and where do you fit inside that new business and the new growth strategy? Mike is now on his new next stage of his life, trying to figure out where he's going and wine. He's able to give us a really interesting perspective from his side of the world of what it's like to have built and sold a company and trying to determine what's on the forefront and some of the things that he wished he would have thought of, besides just the money, when he was going through the acquisition, there's other data points, there's other variables that you need to understand that will have an impact on your outcome and a life afterwards. So I really hope you enjoy the episode with Mike. He's got a ton of wisdom and a lot of gold nuggets that are available to you throughout the episode. So without further ado, here's Mike Rynchek.
Announcer: This episode of Life After Business is sponsored by GEXP Collaborative. Their proven process gives you clarity on all of your exit options and how those options impact your financial success, timing and future happiness. Sell your company on your timeframe to the buyer of your choice at the price you want.
Ryan Tansom: Morning, Mike, how you doing?
Mike Rynchek: Good, Ryan. How are you?
Ryan Tansom: Good. Good. I'm excited. You and I've gotten to know each other over the last couple of months and, um, we had a mutual friend, Rob Gails – nice little shoutout to him – that introduced us and said, uh, you do have to meet. And he, he was reading the cameras. The first phone call. I was really excited because you and I have a lot of parallel parts of our journey and our story is that our age with the companies that we've been involved in, but for the listeners that have not gotten that exposure to you so far, let's kind of go back and let's give them a little bit of a backdrop of, you know, where were you when you decided to jump in? Was it accidental or did you decide to become an entrepreneur and then what was the business that you were in?
Mike Rynchek: Yeah, I've always been very entrepreneurial at heart. Um, even growing up growing up in the mid-west growing up in Minnesota specifically, you know, people tend to go more towards the corporate side and a more traditional or typical path would be come out of college doing an internship with a fortune company, bigger company, and then work your way up. For some reason that just didn't click with me. And so I was always very entrepreneurial. Um, and so going through college I was trying to, it was a marketing major. I was trying to build up additional skill sets, but also pay my way through school and find additional revenue streams. So I taught myself engineering at the time and then eventually taught myself more digital marketing aspects and one of the revenue streams that I created was, was consulting. Um, so that was kind of my initial entrepreneurial path while I was working several other jobs to pay my way through school. Spend some time in the analytics room as well. And so if you take kind of the marketing, the technology, the analytics and you put it together, merging out of college, I founded a company called Spider Trap, which was definitely more geared towards the marketing at the time, um, but then really started to morph as we grew into more of a technology company, really focused on the digital marketing aspects, but also larger-scale engineering projects as well. Design and engineering closely a lot of bigger clients as we grew. We developed into the healthcare space a bootstrapped it initially and then grew it over time, uh, in the Twin Cities and then eventually sold it to a company called Bright Health may of 2017.
Ryan Tansom: So, so interesting because I've interviewed and I know a lot of people that kind of started in the marketing and online space and why, why did you start consulting versus like cranking out a bunch of websites. I know a lot of people that guys– because a lot of those industries converge and we can probably get into that, but you know, a lot of people are cranking out websites and making a bunch of money versus consulting first and they had to get, you know, there's kind of a conversions that happened between the two of, you know, how did, how did that stuff jump in front of you?
Mike Rynchek: Yeah, that's a good question. Why it didn't go that direction because a lot of my consulting was building out websites and then making them better for clients. At the time, this was back when I was in college and so I actually did have a little dotcom that I played with, you know, really when facebook was, was taking off, right? And really blowing up that really focused on all the things going on in college campuses, but then externally as well, you're not actually in our time together. We haven't really talked about that. So that's a new thing within my journey. So I did actually that for a little bit, but I really had a passion for working with multiple clients at the time, seeing different business models, meeting so many different people, but then also building really kind worldclass as I'd like to say products at the same time for those organizations.
Ryan Tansom: So what do you mean by products? It was it because you know, the, the digital marketing these days is even different than the 10, 15 years ago when you started, you know, is it, was it actual software stuff for their website, ecommerce, it, you know, like actual client conversions and SEO stuff?
Mike Rynchek: So it was both. So we really started on the digital marketing side of things. So SEO, sponsored search, email, crm type work, but then that grew very quickly, especially with some of our larger-scale clients into developing new applications, extensions of their website, ecom, um, you know, and then eventually of course grew into more and more mobile work as well.
Ryan Tansom: So I mean that huge spectrum of stuff must have been tough to manage is like how, you know, what was some of the major milestones as you're growing the company and the business model change and you know, were you intending to go any direction because I know you and I have talked about some how your business model had had evolved, but you know, where were, what were some of the reasons that you guys started to evolve and pivot or in like how are you handling all those different services?
Mike Rynchek: Yeah. What's, what's interesting is when you looked at the agency, the quote unquote agency landscape in the Twin Cities, what we actually did was, was pretty tight. It was really two pillars. It was the design and engineering and then it was really the digital marketing arm. That was it. So we didn't do branding. We weren't going to be your PR firm, right? So we were actually very true to our DNA and who we were. And believe it or not, that was actually a big point of differentiation. The model was actually kind of interesting. So I started it in 2008, which everybody tells me is a horrible time to start a business. What's your point around kind of the service model versus going, you know, building my own websites or, or having my own ecom websites, things like that is. It was actually interesting because because of the economy, you've got a couple of different factors going on. We had, you know, these bigger corporations trying to find more nimble, cost effective, but yet high-quality partners at the same time, unfortunately there's so many layoffs and exoduses that we had a large pool of talent as well. No, we really prided ourselves on, no, not all sourcing really much work at all over the course of 10 years, but we always had, especially early on when we were bootstrapping things and getting things going — and for the record we bootstrapped it all the way through, we didn't actually take investment — but early on when capital is really tight, we did have resources that we could, we could pull together to form a team really, really quickly. So that's, that's another aspect of our model change from distributed outsource model to really in sourcing everything very quickly. And then growing from there, taking advantage of a lot of headwinds traditionally people would see as headwinds, uh, from an economy standpoint.
Ryan Tansom: And how difficult, what were some of the pain points that you had of bringing in new projects, bringing in staff, it's always the chicken or the egg and then being able to cash flow those projects in a way that you didn't have to have any kind of capital to, to level that off? And then how did that impact where you're going?
Mike Rynchek: What's interesting is I was young at the time, I was just out of college working with a lot of fortune companies in advisory/consultant roles. So very quickly on how to try to build the reputation of the organization, of course in myself as well. Um, because in this space, reputation is absolutely everything and there's very little room to recover from any kind of major issue, if you will. So that was a big hurdle that I had to come overcome quickly. The nice thing about building a service model is there some cash necessary. It's not easily scalable, but it's pretty low barrier to entry. So I didn't need to go out and raise 50 million dollars. I was able to partner with other firms in the twin cities and utilize their space and then scale to the point where know we had our own office because it's, you know, we're getting additional clients, our own clients. But a big thing for me was, you know, building relationships and I know that that's always a challenge for a lot of organizations. So naturally I just developed the ability, I guess kind of a strength to be able to go and meet a lot of different folks, identify all their business problems or their, their miscues and come up with a strategy to solve them. So yeah, there was just a lot, especially in hindsight when you look back, there was a lot of just pure hustle, kind of brute force versus pure strategy and then as we grew the strategy and the model had to take shape.
Ryan Tansom: So it's interesting you hit on a couple of things where you know, low barriers to entry because you're doing project-based work and it's the reputation an it's service delivery, but you know how as you're bringing those clients on and you're managing building the team and building the reputation and cash flowing it, did you, how did that, how did you use those funds to build because you ended up building out reccurring revenue, didn't you? Because you and I have talked about that and how did that, how did you decide what route you're going to go and how you were going to do that? And, and the second part of that question, Mike, is, did you do that for enterprise value reasons or did you do that because it was too much of a pain in the ass to manage the projects and the cash flow?
Mike Rynchek: So we developed that model pretty quickly. You know, when I was going through college, I worked on the client side for awhile and just uh, the retainer-based recurring revenue side, just being a beautiful thing. It was also great for me as a client because I knew what I was paying and then we had a planned schedule for KPIs that we're trying to hit, you know, we plan the work accordingly. And so kind of bridging the gap. That was a really quick aspect of our model and the model actually works really nice because tying some of your questions altogether, we had a lot of groups that would want us to build a website or a product and like I said, they got larger and larger scale builds as we went along. But then also too it was great because we could do the marketing aspects again, all within the realm of, of our digital efforts. And so it did help us from a valuation standpoint. We could predict revenue. You're absolutely correct on that as well. But it became a natural progression of our project base and allowed us, you know, a big part of what we did was actually build long-term relationships with our clients. So we had retainers that lasted six, seven, eight years out of the 10 years that we're around. And so in an industry especially that's hard to scale, building out recurring revenue was an aspect that we could actually scale. We could plan the work, forecast the work and then staff against it. Whereas project work as you know, is a little bit more complicated to manage resources, again, against a hit profitability, you have to be very tight in your process, how you build the team, how you structure relationships, right?
Ryan Tansom: How you bill and collect money?
Mike Rynchek: Exactly, and then getting paid at the same time. You're absolutely right. Yeah. It's just not as easy as most would think.
Ryan Tansom: Was there any like… So you said you were on the client's side at one point we were, where did you get the idea and how did you come up with the pricing? Because I'm just keeping so many people so that they can build up recurring revenue in your own industry is huge. I mean there's a lot of people that still just do project-based and they never ended up doing it. So you know, how did you get to that point, you know, and where did you get the ideas and then how did you price it?
Mike Rynchek: Yeah, so when I was in college and I was studying both partners that we were working with and then just looking at the general landscape, I really saw an opportunity to be more nimble, to do things slightly different and you know, I had good relationships. So check that box. Managing value, which will lead to the second part of your question, was always something that I, you know, I struggled with seeing and I know a lot of people on the client side will struggle with seeing value at times with their partners that they work with, not just in kind of the technology or the service industry. And so building a company that was really based off of relationships, responsiveness and results. That was kind of the three Rs that I, that I tried to program the organization around was really, I think, key to our success and what's what's interesting. Sadly there's so many people out there doing this type of work and a lot of people have honestly a lot of bad experiences as well, so if you stay true to those three Rs, you can really start to define where I'm going next, which is the value of what you bring to the table and hopefully you can put a price tag on that. The hard part is like any organization, you probably faced this too one – and maybe it's our mid-western values, right? But it's hard to put a price tag on what you actually do. And ask for money, right? It's hard to do that. So I think, you know, there was obviously times almost a decade where I'm sure people didn't feel like we brought enough value. There was other times where, you know, we're working a lot on the coasts, on both coasts. We were told many times, no, you guys are three times cheaper than what we would traditionally paid. Do you know that? And I'm like, well, that's a great relationship, right? Going back to the that we completely understand, let's just add it to the value of what we're doing. Right, right. So I think for us what was nice was, um, I had a great cfo as well that was able to, to track profitability. So we actually developed some of our own in house tools using an intuit product product and we had some great team members actually built that out, turn it into some IP for us, um, or we were able to track profitability on every single project, track profitability on employees. Forecast to your point earlier in your question earlier forecasts, incoming work, where are we at capacity-wise, where we at financially? Tie all of those things together so that we could see a, our pricing is perfectly aligned, but we also of course did kind of the third party research as well.
Ryan Tansom: That's super interesting. So that kind of goes in as we're going down the storyline here. So, um, what are some of the milestones that you're able to share from, you know, the revenues or employee count or whatever it might be that kind of give you the, give us the, the, the peer into kind of what the size of your organization was and then you know, with the IP, with the staff that you had, what were, I mean, did you intend to create IP out of value creation or was it more of just because it was easier to run the company? So kind of a two part question.
Mike Rynchek: So let me start with the second question. First, you know, building this IP was really meant to more efficiently and effectively run the company or the direction that you're heading. And there's a lot of things to sort of unpack in that from keeping people sane — we tried to which help reduce hopefully turnover as well because it was always hard to find talent. Technology generally just not waiting on the street for you to pick up the phone and call them. But it also helped make us run a really smart business financially. And I guess the last point that I would say is all that came together hopefully to produce value for the client, so you know, we use off-the-shelf tools in the past kind of project management software if you both things that, but then ultimately ends up ended up building our own custom solution that really met the needs of what we were trying to do, which is always an interesting project to turn your focus inward versus a lot of the work that we do is externally of course with the milestones that we hit, you know, as an entrepreneur.
Mike Rynchek: I know it's interesting. We used to do a thing that I love kind of starting and, and pushing along throughout the years. That's why your trap was we used to do champagne pops throughout the year. Did I ever tell you about that?
Ryan Tansom: No, I want to hear!
Mike Rynchek: So we would gather around. One of the cool milestones for us was we moved into some really cool space in the Twin Cities right in the heart of the downtown area. Big sign, can't miss it. Really cool open space, rooftop patio, all that fun stuff. So really great location, you know, going from sharing and then growing office space that then transitioning to this beautiful, plush office space, but still holding true to who we were was really cool. But we had a beautiful staircase and anytime that we hit a milestone, whether it's through the year or you know, our first client in this space, what I would do is bring the team together, have the individuals that lead that initiative that created that milestone, give a quick talk. We'd popped some champagne and then we would have a glass, have some apple cider or whatever, and then we'd go back. Usually it's in the late afternoon, [Ryan interjects: Or at 10:00 in the morning and you're having champagne.] Then we'd go about our day and it was. And it was beautiful. We really focused a lot on culture and, and we and myself as an entrepreneur if so focused on the grind and the next milestone that I, I rarely celebrate. I think it was a little bit superstitious, right? I think growing up play hockey or whatever, I was always really superstitious and moving onto the next thing. But, you know, for us, hitting first employee was a big deal, right? I'm bootstrapping this thing. Um, you know, it was getting our first big client; getting our first big retainer. It's like, oh my gosh, this thing is actually becoming real. I mentioned moving into the office space, um, you know, what was, what was really fun is, you know, we started winning a lot of awards for our culture and I think we won six or seven Minnesota best places to work awards and that comes straight from our people. It doesn't come from me or you know, I didn't pay anybody off to have it kind of thing. Right. I think a very genuine thing. And we were fortunate in that sense. My model was always. And I think in the agency world, this was also a differentiator is, you know, we don't do what we do to win awards, but we always appreciate it when people recognize us for our great work, for our great people or our great clients.
Ryan Tansom: So how many people did you have at the top?
Mike Rynchek: We're just pushing 50.
Ryan Tansom: Oh, yeah, hover right underneath that 50, the 50 mile mark, right?
Mike Rynchek: Which is a whole different milestone.
Ryan Tansom: For a lot of technical reasons, right? You know, Mike, as you're grown this, what was the, what was your, you know, when you said you were focused on the goal in your mind, what was the goal and how did you know if you were going to be there and how did this triggering event come into play that… when did you plan it and how did that whole thing come in, in, in near future plan of what you were trying to build?
Mike Rynchek: So I think it was smart enough, humbly speaking in the beginning to… I really wanted to build something that was first of all scalable and I think that was also another milestone is we host a lot of big events and when you know, people would reach out to us, that was always a milestone or kind of a humbling experience, if you will. So I knew that I wouldn't necessarily retire with Spyder Trap, right? They don't want to create necessarily just a lifestyle business. I think there is opportunities to create culture around that, but I knew at some point there would be, if I was lucky enough, some kind of exit along the way. So that's where know I called it Spyder Trap, but not Mike Co. Our great people could not be, you know, have a shadow cast on him if I walked into my room for a meeting, that we could scale the values. So if Mike's not in the room is this going to be a good meeting? So we really tried to scale as we hired a great account service team and really made the focus of the company the people versus a person.
Ryan Tansom: Did you… So I'm curious because I think scaling and growing is fun as heck and first of all there's a lot of good reasons to do it, especially if you're like an inefficiency not which I think you are as well as like it just is fun to build a well-oiled machine and can you continue growing and did and knowing it's. I think a lot of people, I've heard Mike were like, I'm going to grow a great company that's scalable and someone will want to buy it someday, and that's kind of the way they approach it versus a very intentional situation. Did this, where did this triggering event of you selling come around? Was it, did you run into capital needs or service issues or did someone approach you and did that fit in line with where you had intended to go?
Mike Rynchek: Yeah, we had, I would say not initially, we had and watching the marketplace and a lot of our competitors are getting acquired. Um, you know, there's always an insourcing versus outsourcing push on the client side. We're seeing more of an insourcing. Um, we're fortunate enough to have, you know, organizations approach us throughout the year. A lot of it was me looking at those kind of environmental factors along with myself. I mean, doing anything for, for 10 years especially nowadays is long time. Right? Um, and then I also looked at the opportunities, so, you know, I was excited about the prospect. I had been advised by a lot of M&A groups. Um, but it wasn't a strategic initiative and so probably I would say two or three years prior to selling, you know, once you hit that seven mark, seven year Mark Yourself as an entrepreneur, that's a long time. That's a lot of sleepless nights. That's a lot of stress at the time to pass the baton. You start looking at different options and opportunities and then you've built a machine and then you start looking every single year going… Do I– do we have another year left in me and I think it was a very pragmatic approach saying we had another year of growth we had best of year again, looked at the marketplace, looked at potential suitors, started going through sort of our own process and then had the opportunity with Bright to really, you know, take hopefully a lot of the strengths of the organization, roll them into Bright, you know, create additional value, do great work and, and a very challenging and demanding field. Being the health insurance space, disrupt the market and be a part of a great, great team there. So the opportunities and kind of the stars really just aligned along with sort of the strategic vision that I had earlier on when I first started.
Ryan Tansom: What I find is interesting though is that you started two to three years at least thinking about it, right? I mean I know so many people and even whether there's clients I'm working with are the stories that I've heard where, I mean it's just a random out of the blue offer and then it just recalibrates what they're doing and they go down this route. They just don't. They didn't know that the stars align or they did. It was one star and two in a line versus a bunch. So I think you're seeing an opportunity as a result of being aware and kind of keeping your temp- your pulse on the marketplace, you know, was it resources or people that you were looking at and they kinda had you looking at that? Or was it just the nature of kind of who you were?
Mike Rynchek: I think it was the nature of who I was. I think we were… We were also fortunate to have a good internal team that had a good beat on the marketplace. That's the thing, this is a very small, tight team, especially in the twin cities area, but then you start really listening to people listening to some M&A advisors minds from friends and mentors talking valuations. We gotten through a couple of exercises just seeing what the business would be worth, what it could be worth. You know, we started exploring potential pivots and things like that, which ultimately didn't make sense because the machine had gotten so big.
Ryan Tansom: What were some of the- Sorry to interrupt- what were some of the… the "Ahas" that you might've had with evaluations, like was it how companies are valued in how things like the IP that was built for original, like you know, efficiencies is now potentially worrisome. So how did, what was some of the reconciliations you had in your mind of what value meant?
Mike Rynchek: I think it, it wasn't actually from a valuation standpoint. I think it was good, but I think there was just a realization that as, as I had explored different models, we weren't a SaaS business, we had some IP, we had some recurring revenue. We had a great book of really great clients. Um, we have a really great team, good process, but the business itself, you know, service businesses… a lot of hard to make margin on, which again is a lot of the things that we just talked about. Oh, we were really smart about that, but they don't tend to be high-valued organization. Some are, but not, not a lot of them. And that was a harsh realization for me, which is again, one of the things I think that excited me about bright was really hypergrowth great organization, highly scalable organization. There was a lot of the key learnings that and a lot of the things I've struggled with over the years trying to scale and build Spyder Trap the inherently had within the product, within their marketplace. I would say that there was, you know, there was a lot of other learnings too about myself as an entrepreneur. I had to take a hard look in the mirror and say, you know, the value of this company and our people if I keep pushing myself or if we make too drastic of a pivot that is also going to create other challenges and for our clients as well. Um, go ahead. Were you gonna say something?
Ryan Tansom: I think it's interesting because it's how hard do you pivot and should you continue being in this business or should you continue in some other? Because I see a lot of people were my old industry, I mean, and they, they're like, you're told to be in this other part of the industry. And so you then you start redoing your business model and you should've just maybe stayed in your own lane and then had a different kind of perception perception of where that seemed to take you.
Mike Rynchek: Well, think about this. I mean we tried building quote unquote series of products. We tried, you know, sort of strategic partnerships and those things actually all detracted from the focus of our organization. Even when we were trying to build our own products. We ran into cultural issues internally because you know, a certain group was really working on cool, sexier things, right? Why am I stuck doing this? Or very much a distraction to us. But to your point about when we were really humming along, we really staying true. Just like I said, we really done a good job at despite trying different things along the way, which I actually don't think is, is wrong, but we tried other things and we tried to be strategic about it knowing that we would have backstops or knowing that, you know, whatever we did wouldn't kill us as an organization, but it definitely would hurt us. Right. So take a step back. So that was a key learning for us is you know, if we're going to actually scale, Ryan, like we got to go raise some capital, you know, because for us we built out a sales team but you would really have to ratchet that up. You would have to start looking across the country deeper and we were. But even deeper, looking internationally, right? Looking at bigger size, more complicated deals. And that would've take a lot of horsepower to pull off.
Ryan Tansom: So how did you know when all the stars aligned for Bright, how did you come across them? And I think you had mentioned in a previous conversation that typically a lot of people will roll into another agency which affects how you get your money, what the upside is, why you want to do it versus a very interesting purchaser like Bright, you know, how, what were the things that you saw that made that situation appealing to you?
Mike Rynchek: Yeah. So I knew one of their co-founders well throughout the year, years leading up to that really respected the work that he had done, building large-scale organizations, his leadership style and the teams that he's been able to put together. And so we, we had been friends, we had been colleagues in the past and Bright actually was a client of Spyder Trap initially through that relationship. Really working with them as they're standing up the business basically from scratch. So when we first got engaged with them, they had essentially a brand and had, um, were working on just closing their series A, which is a huge monumental series A. So obviously off to a great start doing a lot of really great things. All the things I just spoke to, I think it started to manifest and so there was a lot of excitement for me. You're doing a lot of great work with them. We were actually already looking at, hey, how do we, you know, how do we expand this relationship beyond just what we're doing here? So it was a delicate yet I think natural conversation, if you will, where it's like, hey, how do we expand our relationship? Oh, by the way, we also have this other process that we're looking at potentially exiting. It's, it was kind of a delicate conversation.
Ryan Tansom: When do you bring it up, right?
Mike Rynchek: And how do you bring it up, you know, because you could lose. There were a great client of ours, um, you know, risk losing them, but at the same time, I wasn't- I had been doing the service model, the agency world for a long time. I wanted to learn more selfishly about, you know, that management structure, scaling of business, the work that they were doing. I also had a big passion for healthcare as well. A lot of the work, as I mentioned earlier, was in the healthcare space, so it was really, oh, a great fit, great organization.
Ryan Tansom: And so it made a lot of sense. So I'm curious then as you, you know, as, as things kind of come together and you talk about the process of actually going through the, you know, the, the courting and then the actual closing is, you know, you've repeated many times over the course of this interview, you know, we wanted to stay true to who we were. You were really huge on culture and you know, you had very specific services that you were doing to your wide range of clients. What did that look like when you're selling to one specific client with one specific deliver and their, their, their intentions of their marketplace and their service deliverables are different. So how did that, how did that structure, I mean, what was that like internally and how did that actually unfold?
Mike Rynchek: Yeah, so I was excited about it, but we knew going into it that some people would be less excited just because it's, it's when you're going through a process like this, as you know, it's not something you can speak openly about, which is, which is a hard thing to do. But that was, that was hard and I know it's hard for a lot of entrepreneurs out there has to be able to be open when it's a very closed conversation. So we tried to, you know, if we went to a different agency, there was a huge amount of risk of the unknown, right? Likely wouldn't know, but you wouldn't know the work and the style of work. Whereas this was near the organization, knew a lot of the people, the work that was being done. But we also thought it might be a challenge because you're now working on one you know one essential company, right? You're within one company and you know, we were looking at fast-growing companies. So, you know, they're developing, they're developing culture. Um, they're developing the team, so there's variables that we didn't necessarily have, you know, in hindsight at Spyder Trap because we had been around for so long and we had developed a culture.
Ryan Tansom: How did that, how did that impact the value of the business? In like, because there's a lot of different situation. Here's some context of my question is that I hear a lot of the stories of a client buying the service provider because it makes sense because they can scale and they can use the talent and the services or the IP or whatever it might be on their account and it just financially makes sense because they can make a return on the investment over the course of three to six years because of the nature of them and having to spend that money anymore. How did that impact the value of the company of how you structured that and how did they look at the value differently and then as in like do they, what do they do with your clients? Right. So like, I'm just making it like if you have 100 clients and now you're just down to one, you know that cash flow… What did they do with that? Did they keep it, did you guys keep it? How did the whole thing… Does that make my question make sense?
Mike Rynchek: I think it does. I think the value for Bright, from my perspective was a couple of things. One, a lot of what they're doing and you can read about is about speed to market and so when you're building an organization that quickly, I mean standing up a health plan as quickly as they did is simply unbelievable. Right? And the work that they're doing around scaling takes a lot of horsepower. So for them, it made a lot of sense to bring those resources internally. And there was other things that went on in that course, you know, it was a, there was a rebranding that happened when two additional markets. A lot of which I'm incredibly proud of the team on is, you know, we really helped, I think, provide horsepower to be able to accomplish the rebrand, finding additional markets, standing up another product, going through for the first time, a full planned year, going through open enrollment, having for the first time re-enrollment numbers, which ultimately comes down to engagement, value, things like that for Bright. So I, I think that there is a lot of upside to be able to accomplish the scalability aspects that they're looking to do, but at the same time, you know, long-standing clients that we had, that was sort of a hard conversation because we had worked with a lot of these groups for so long.
Mike Rynchek: I think most that I talked with specifically got It. They understood it. They were excited about the opportunity. Uh, we tried our best. The team really I think focused really hard, you know, they did a lot of wind down work, making sure that the projects that we have completed, making sure as much as we could that, you know, our clients found a new home. But that was something that was, I didn't think about maybe as much would be challenges of transitioning clients. And I think final thought was kind of a key learning for me is thinking about how hard it is to start a business, right? Like guys like you and I, we know what it takes to start a business. This is a ton of work. Who would have thought that, you know, winding down in business as it's being rolled up would be so much work at the same time. And it absolutely is.
Ryan Tansom: So. So you did actually then wind down all your other clients besides Bright?
Mike Rynchek: Yeah.
Ryan Tansom: Wow. So yeah, I mean in maybe you can speak a little bit like, and the emotional aspects of it because winding down is one thing, right? It's the technical ways of winding down which could very robotically explaining how to do that. But you know, when you think about all the work that you went into building the business and keeping those clients your reputation, what was that like going through that?
Mike Rynchek: Yeah, it's a roller coaster of emotions because you're so excited because as an entrepreneur you crossed the finish line, right? And you cross it into a great organization. It's a great deal. At the same time though, you're, your brand really doesn't exist. It doesn't live on, which was something I did give some thought to, but maybe not enough of is how would I feel if company that I had just lived, you know, for the last 10 years no longer existed because right. Your identity is very much wrapped in the work that you do in this company that you built. Everywhere you go, people will ask you how's work going, how's Spyder Trap? And you know what I mean? It was really tied to who you are. So I'll say, you know, especially now I'm no longer being at Bright, that's been something during this time off that I really have given a lot, a lot of thought to and it's been challenging. And that was the emotional aspect that, I don't know, maybe you, you read it in textbooks and in business school I didn't.
Ryan Tansom: Yeah, they don't have any of that stuff out there is like, you know, it, it, it's so bizarre. I mean they turned my old building into a church so like there's like stained glass windows on it and then they've got to have a lot of prayers to get rid of the cursing and that kind of thing. [Mike interjects: Yeah, right?] But it was like that alone when they take down the sign and stuff like that in the building where it's like, it's a bizarre feeling. But you know, the one thing that I did have that was slightly different is all of my clients stayed because that was why the art, that was why our purchaser bought us was for our clients. So I couldn't get… I mean, were you involved? I mean I wouldn't be even harder having to essentially talk to your clients about through that. I mean, what was, how did you go through that?
Mike Rynchek: The first step was we always, we were very transparent and open and honest with our clients, which everybody should be, right? But it's not always the case. And so I think it, again, I think they were, they were excited for us. There was a lot of questions around what does this mean? We tried to work through that, tried to give them good options. So I think what we had spent a good amount of time on was trying to come up with a true game plan for managing to the best possible outcomes given the transition that we're facing and you know, overall I think that that went really well. We stayed true to true to everything that we felt like was promised and contractually contractually obligated to complete as well.
Ryan Tansom: How did the, how did your culture change then as I just think about, you know, like with a service-based business too, right? So I mean you have tons and tons of customers with dynamic. It's your employees because they experience different things all day long, you know, as I can only imagine the challenge that, you know internally what that had with certain employees where they're just talking about one thing all day long now? I mean, did. How did that change the dynamics of the culture fit?
Mike Rynchek: Well, I think… post-acquisition? [Ryan interjects: Yeah, yeah.] Yeah. I think for us, you know, key takeaway was because of the wind down work and the amount of work necessary. I think as we reflected it would have been ideal to, I think accelerate some of that and I think that that would be key physical and emotional takeaway just because you know, you got one company that's going very quickly in scaling. Meanwhile you're trying to be very diligent, diligent and thoughtful and again, pragmatic about how you're managing another book of business as it eventually winds down. Um, so that just created a lot of dynamics and additional challenges that in hindsight, you just had to had to spend way more time on.
Ryan Tansom: I can only imagine for a lot of you and your employees. I mean you're essentially grieving and you know, you've got this process that you have to go to, like put something to bed while you're trying to like I'm assuming all these other people are scaling, just raised millions of dollars in a series A like those two dynamics alone just got to be tough.
Mike Rynchek: Yeah. And there was a lot of excitement, right? New team we were working with, the other part of the team was in Austin, Texas. So you know, people were spending time down there. It's just a lot and so I think, you know, I definitely think that there was a lot of growth that happened with a lot of individuals. I think myself included a lot of learnings along the way, but I think that that's what, or individuals that have gone through the sales process is so invaluable because you see pros and cons of deal structure, right? You get this better than anybody. You see the emotional side, you know what to think about before it gets there. Right? It's like anything else. So that experience for me was absolutely invaluable as I look to kind of gear up towards the next thing.
Ryan Tansom: Yeah. And what, what, uh, what are some of the things that you on the other side that you would think about? You know, and you and I have talked about this as in like, you know, there's a specific reason that people buy companies, right? A purchaser will buy a company for a lot of reasons and then there's just two sides of an equation and they're all good people, but the, everybody's just have different intentions and different KPIs and reasons to grow and deploy their capital and but you don't realize until after the fact what all those different things are and you don't realize how those different deal structures are different things would impact, you know, you. Is there. Is there a certain variables or key points that you realized now are important to explore that you wouldn't have or you had no idea before?
Mike Rynchek: You know, I think that there's, when I was running Spyder Trap trying to isolate variables so you know, things like earn outs, trying to understand potential ups and downs and implications, what you can control can't control, you know, what you, where do you, what is your legacy going to be? Do you still want to drive by you're saying or your building, do you want to stay involved in the organization and for how long? Are you, are you going to retire? With that organization? You know, there's a lot of thought that goes on to the people and the culture and trying to get that as good of a match as possible or have other off-setting variables. Right? So if there is a difference in culture or the work or whatever, having off-setting variables.
Ryan Tansom: Just define what you mean by off-setting variables because I think I've got an idea, but like what do you, what do you mean specifically?
Mike Rynchek: Well, for us, I kind of spoke to it earlier is we understood the grind of the agency world and you know, the pressure of the client world as well and that clients would have and so we really try to offset with as many things as possible that still made financial and you know, just general sense. So everything from the space to bonus structures, things like that. So I think we understood the good and the bad and the ugly of our organization and then offset things are higher against that or have a recruiting slash hiring structured up to really offset what we saw as challenges. I think for any organization, especially just generally speaking with any acquisition, you know, thinking through if, if retention or anything is, is a key initiative, you know, how do you hedge to the downside? And I think just generally speaking, even with the technology play or you know, taking something to a new market, right? You always need a hedge for that downside potential and you know, I think thinking through that and advances is key.
Ryan Tansom: Yeah. And I think it's interesting how you put that too. And it's also about being able to understand what variables are correlated so that way — we got a lawn mower here, that's awesome — So it's about…
Mike Rynchek: Are you cutting the grass while we're having this conversation?
Ryan Tansom: Yeah, I'm multi-tasking! So it's about understanding what variables are correlated. Right? So you, you know, potentially selling to a managed service provider, another one, would, you would keep in the grind, you would keep in the same situation, but there would have been more of an earnout or like how legacy impact when you get your money. It's just like understanding what variables and data points are related is difficult until after the fact.
Mike Rynchek: Well, let me, can I add on one thing?
Ryan Tansom: Yeah, no, absolutely.
Mike Rynchek: I would say correlated and what actually matters. [Ryan interjects: Yup.] On both sides. On both sides, right?
Ryan Tansom: Well and… what are some of the things that you realize we're view you realize but mattered and then that were correlated that you might not have known?
Mike Rynchek: Well, I think, I think we talked a little bit about some of the correlation. I think I'm still thinking about, you know, reflecting on what matters because I think, you know, for us, um, you know, what mattered was so ingrained for such a long time that myself personally, I, I should've spent more time on just generally what mattered. And I don't think that that's necessarily a bad thing. I think, you know, when deal structures come together, there's a lot of variables. I just think as a leader, you know, in hindsight I really had to learn or I would have learned and now have learned what, what variables actually mattered. But I think what's interesting is for us, we had a lot of research. We had a lot of, you know, basically documentation and reporting of what mattered and experience. And I think that just that key learning of missing, not seeing or not understanding the correlation I think was, uh, was something to think more about.
Ryan Tansom: It's tough. A lot of people don't know that until after the fact, when they come out the other side and they realize actually what the, the lens on the other side looks… and it's difficult because they all are intertwined and that's why I think having more options to and more time to process it is important because you won't know until after the fact.
Mike Rynchek: Yup, that's exactly right. And that I think is, is a challenge in of itself is that you really don't know all the variables and sometimes you don't know what matters until you actually get there. So I think that's where, you know, trying to do as much planning upfront is key to minimizing that.
Ryan Tansom: So as you've been into the second part of this, what is, what have you realized and how have you gone through identifying what matters to you now? Now that you're looking at, you know, you've taken some time off and you know, what's been some of the big takeaways as, as you've reflected and looking forward?
Mike Rynchek: Well, I think to me what matters, you know, building a company, being an entrepreneur and then going into hypergrowth, I expanded my personal life, my family as well, and so I think having this time off to reengage with my young family and really enjoy that time I think has been priority number one for me, and that's been a key learning as I go forward is to you have a better sense of, you know, I was always taught — a great mentor of mine — taught me it's not about balance, it's about integration. And you know, I think that that's a key learning. I think just reflecting on my passions, my skill sets because that was doing something for so long when I was running Spyder Trap. Really. I'm enjoying this time to be able to reengage with folks, to meet with folks, meet people like yourself, spend time having these types of conversations, which I think are a lot of fun. I often get asked, "I thought you were taking time off?" I'm like, "this is too much fun."
Ryan Tansom: What does integration mean for you?
Mike Rynchek: I don't know. I'm figuring that out right now. I don't, I, you know, people ask me what are my hobbies? I'm like, well, I recently dusted off my golf clubs, like literally dust off my golf clubs. But what it's supposed to mean, what I'm aiming towards is that throughout your life, I truly believe that the percentages can and should change whether it's family, work, travel, hobbies, religion, whatever the spectrum of your life encompasses, but you fill those buckets. You take time, you set aside, you preplan vacations, right? You, you shut off your phone, you have a career that's very engaging. That's very fulfilling, right? That's ultimately what we're all striving for. Again, easier said than done, but I think a big learning for me honestly, Ryan, was that it's not balanced. It's not one or the other. You need to find a way to encompass these other things in your life.
Ryan Tansom: Well, I think that's huge too and I think the ability to find that correct integration afterwards is tough and also also rewarding. And did you. Did you find it… Did you know that ahead of time? Because I think, you know, what I've found from a lot of people I interview or even myself is I had it completely integrated and it was a shitload of fun and then I didn't realize that it was completely integrated and my whole world got thrown out of whack and then — and then I didn't know my new integration and the way it should be.
Mike Rynchek: Yeah, that's really honest. And I had a lot of that, you know, when I was first getting going, it was easier in some aspects because life believe it or not was simpler rate coming out of college then it likely will ever be. It seems complicated at the time. Right. Great time to start a company because you could be so selfish, right? You could be so selfish and just use, you know, strategy and group forced to build it. As life goes on and there's other other variables or other things that go on that you need to spend time with him, think about. And I think the stress, by the time you get married and children and all these other things happen, um, you know, there's- the machine is so large that it's, it's, you know, if you're fortunate enough to have scaled that maybe have somebody take it over or read a different strategy, it can be less stressful. But I think for a lot of small companies like we were became more stressful because the burn rate's larger, right. You seeing that you just built becomes more complex in itself. So it's more time consuming and a lot of different ways, even if it's just mentally. So for me it was challenged because even if I was there physically, I would still be, yeah, mentally maybe not in my personal life or other areas as well. So I think I went through probably a progression similar to you where I thought I was being as superhero and doing all these things when really it was a harsh realization that okay, realize great work is going well, but other things are suffering because of it.
Ryan Tansom: I think that's one very well said, but it's also, you know, what I struggled with was like, you know, all the people that you work with and you're like, I had the correct amount of leadership in my life. I had the correct amount of decision making and strategic planning and execution and all of those perfect amounts of all those different things that I really enjoyed disappeared after I sold the business or we sold the business and it was just that environment disappeared.
Mike Rynchek: Yeah. But I, I think I get that. I think I went through different stages of that one. I was growing the business and then when you sold, when you sell, you see different sides of people and yourself and other things that happen and then you know, when you're in kind of this period like I am where you're just kind of taking some time, you know, understanding who's there. A lot of fortunate supporters, things like that. But I think the key learning for me for that aspect was trying to create business Karma over time. Trying to, trying to do right for people do right for the community, things like that. But again, some of that is easier said than done because you're moving so fast, you're so focused on running the business, but I do think that definitely, you know, challenges good or bad, right, or opportunities good or bad lead to really seeing who's in your corner, you know, I definitely think that's something I think a lot of entrepreneurs don't think about as they're going through a process as well.
Ryan Tansom: Yeah, no, I agree with that. And just, you know, for the listeners, what did you intend to stay with Bright and did you, you know, now that you're not there, you know, what, what is, what is the next step for you? What is the life after look like for you?
Mike Rynchek: Well, that's a good question. So we have been planning or my exit for a little little time, where's he in the last year and then rolling into this year, started those conversations, really looking at the milestones that bright was trying to hit and then, you know, what I was trying to hit as well. So scaling the business, really proving the model, um, helping, helping build out kind of the final aspects. So that now they can go become a much bigger organization was really something that I was passionate about and so I think we were really excited about accomplishing those things. At the same time, you know, myself personally had a growing family and just actually looking in the mirror and being realistic. And so the other components of integration that we just spoke to, it was just a good time to, to pass the baton and move on. But still, you know, big fan of, of that team, the group, uh, you know, I still check in with them from time-to-time. They're still doing great things and for me, you know, that's a great question. I'm, I'm excited about the conversations I've been having. Uh, I'm excited, you know, most people I think that I'm just going to start something and let's say that's probably pretty low right now. Just given all the things that are going on in my life and the opportunities that are out there. So, you know, I'm, I'm probably excited about joining another growth company. Helping them scale, helping them move towards maturity. Um, and those are the conversations I'm having right now.
Ryan Tansom: So if you were to take all the different things that we talked about, that kind of your whole journey and maybe, I don't know if there's something you want to highlight or there's something we haven't touched on that you want to make sure you leave our listeners with, what do you think it'd be?
Mike Rynchek: I think I think a lot of… if I could tie a bow around this conversation, a lot of entrepreneurs think… Pride themselves in being strategic, but I don't think, and this is where you and I think hit it off so well, I don't think that they really think through exits other than seeing dollar signs. Right? So really being as diligent as you have been to run the business and build the business, really thinking about the emotional side or you're looking to go. But then one last learning for me is, yeah, to your question just now is what's next? I think a lot of entrepreneurs don't think about what are you going to do afterwards? Great. Are you going to actually enjoy being retired?
Ryan Tansom: What does retired mean?
Mike Rynchek: What does that mean, right? Are you going to go join boards? Do you have those lined up? Have you already thought about those things? Right, so giving some thoughts to kind of what's next or where were you going to go after the acquisition or after earn outs or done or whatever it ends up looking like I think is probably something, I'm sure, this is kind of what the whole podcast is about you, I mean you could spend years talking about those things.
Ryan Tansom: There's a lot of data points and variables that matter that are outside of the dollar amount and they're all correlated till to understanding what that means after the fact.
Mike Rynchek: For sure. For sure. Absolutely.
Ryan Tansom: Mike, what's the best way for our listeners to get in touch with you?
Mike Rynchek: So obviously you can hit me up at LinkedIn, Mike Rynchek. Twitter as well and then also feel free to reach out an email. It's M rynchek r y n c h e k at gmail dot com.
Ryan Tansom: Cool man. Thank you so much for coming on the show. I had a blast.
Mike Rynchek: Thanks man. Thanks for having me.
Takeaways
Ryan Tansom: Thanks for sticking in there and listen to the entire episode with Mike. I hope you enjoy his story as much as I did, so here's my main takeaway is that Mike and his ability to say and articulate the difference between balance and integration and I think the thing that I recommend for all owners is understand what your balance and integration is. Obviously I– according to Mike balance is unhealthy because you don't want to necessarily give and take, but you want integration with all the different buckets that are available in your life. So if you determine what buckets are important, like family, work, leadership, charity, fun, activities, travel, whatever those things are, what's important to you right now while you own the company, and then how are those different integration points going to be different after you sell, whether it's the third third party or the internal transition, whatever that transition or acquisition process looks like, how are you going to be able to accomplish those different integration points after the fact? How is your leadership bucket going to change? How is your charitable donations going to be able to change? How are you and your travel opportunities or schedules going to be able to change and the financial needs that you need? Really understanding how different your world's going to be after you sell the business is extremely important, so start talking to owners that have been through the transition that can give you things to think about, which is, if this were the situation, how would you handle that and would you be happy? So really, really dive in and do some soul-searching and reflecting before you start going into all the technical things that are going to need to be done. So I hope you thought that episode was enjoyable and Mike's story was awesome. If you really enjoyed it, going to itunes, give me a rating. Otherwise I will see you next week.