Podcast: Building a Profitable Culture-Focused Business, an Interview with Jill Nelson

By Ryan Tansom
Published: March 21, 2019 | Last updated: April 1, 2024
Key Takeaways

The customer experience is a vital part of the success of your business, so figuring out how to engage your employees to work the business like you would is important.



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

A driven entrepreneur passionate about building a one-of-kind company, Jill Nelson has grown Ruby Receptionists into a nationally recognized organization for its inclusive, people-powered company culture and its record-breaking position as one of Oregon’s fastest growing companies for the past 11 years. Since founding the company in 2003, Jill has led Ruby to double-digit revenue growth every year, and in 2015 sold the majority share of Ruby for $38.8 million to Updata Partners.


In addition to her own entrepreneurial endeavors, Jill has been recognized by her peers, receiving the Pacific NW 2017 Ernst & Young Entrepreneur of the Year Award and named the 2017 Oregon Technology Executive of the Year—the first woman to receive this recognition.

A fervent supporter of local business, Jill has served on the board of Entrepreneurs Organization in a variety of roles including President of the Portland chapter and acted as a mentor in its Accelerator program, successfully helping business owners reach the $1,000,000 revenue mark.

If you listen, you will learn:

  • Jill’s decision to study business.
  • How she built Ruby Receptionist.
  • The struggle to get Ruby off the ground.
  • Why metrics are so important.
  • The things Jill believes contributed to her success.
  • Jill’s motto: easy to hire, hard to empower.
  • How she built a unique and valuable business culture.
  • How Jill dealt with the sales process and due diligence.
  • How to create organic growth by empowering.
  • Why an investment broker was a key part of Jill’s deal.
  • How finding alignment with buyers is a lot like dating.
  • What life is like as Ruby’s CEO.
  • Jill’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: Hey everybody and welcome back to the Life After Business podcast, this is episode 137. If you want to hear a story about how you can accomplish a lot of the things that you want to from hitting the vision that you want with your business. Checking all the boxes from the financial perspective, for sure. Finding a strategic buyer that understands your culture, your people, values them and wants you to continue to infuse the business with your personality, your morals and your vision, and is able to give you a checkbook and additional resources to continue to grow it. Then you have to listen to this episode. Jill Nelson, who started Ruby Receptionists, is that on the show today. She describes her whole journey from starting the company, bootstrapping it all the way until when she hits her million dollar mark and then puts her be Hag in to say we want to if $10 million in 10 years.


Ryan Tansom: But not only does she hit the $10 million mark, but when she gets to the $11 million mark, she starts talking to buyers and she ends up doing a private equity recapitalization for $38 million. And the big question you should be asking is why does a service based business that does phone answering services get a multiple that is that extraordinary? Well, Jill had a very, very specific intention to build a platform using technology and then also huge amounts of value placed in the culture and the people that she has in her business to increase the value of her company because culture, technology plus the need that she was solving, she just literally kills it. And when you listen to how happy she was, I just think it's a model that everybody needs to really pay attention to because even though it was a third party sale, she had walkaway ability, she did all the right things from the value-building perspective.

Ryan Tansom: She had a great culture and she was able to find the right buyer that valued her, her culture and her vision, and it was able to continue on after the whole sale. She's still working there years later and they are absolutely killing it. Go into the show notes or on our website and take the off 25 multiple choice questionnaire that actually will rate you in the five growth and exit planning principles and spit out a bunch of resources that you can start diving into to make sure that you are ready to maximize the value of your company and set yourself up to have the most amount of exit options to specifically get what you want, which is exactly what Jill did. I really hope you enjoy this episode with Jill. She does an amazing job explaining how she did it all. So without further ado, here's Jill Nelson.

Announcer: This episode of Life After Business is sponsored by the 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: Jill, how are Ya?

Jill Nelson: Well Ryan, thanks for having me on your podcast.

Ryan Tansom: I'm super excited. Like you and I were just chatting. So you were on John Warrillow's podcast and that's how I came across your story there. And I think actually I saw your name on the small giants community too. So Bo Burlingham has been on my show and so a Paul speak and I love that community. And actually then we had some, I don't know if you would've known Dan Golden from be found online from Chicago. So lots of good, lots of good community people in the end. So you get a pretty cool story and, you know, I think what I'd like to do is, let's go back, you know, for the listeners… how did you become an entrepreneur? And the questions I sent over, I wrote accidentally in parentheses, because I'd say 90% of the interviews, I'm like, why? I never really intended to be an entrepreneur. Give us a little bit of backdrop and how you jumped in and what the business was.

Jill Nelson: Yeah. I actually don't think I'm an entrepreneur. I think I always wanted to be and entrepreneur and my dad, it was a civil engineer and he did not want me to study business because he felt like business people just move paper around and to be an engineer or computer scientist was building something of value. And my mom didn't what me to be a business major because she thought I was too creative and she wanted me to use my creative talents. And if for some reason I just was just sure that I wanted to be a business major. And I feel like majoring in accounting, I always say it was an act of childhood rebellion. Um, but I think I, that's what kind of it out. It ended up. But as I, and I actually didn't start Ruby Receptionist 37, but I was always curating and, and now today I look at it, that's what being an entrepreneur is. It's about using your creativity to create something of value with a little business thrown in. And, um, I worked as a receptionist for a business broker and as the receptionist for the business broker, I got to see, see like hundreds of small businesses' tax returns. I got to say, see what businesses sold then what brokers got excited about selling. And I unfortunately I also got to see businesses fail and people who had invested their life retirement into something they were passionate about, find out that there was no market for it. So there's a, you know, and the whole time I was sort of paying attention and going when I a business, it's going to be this and this and this.

Jill Nelson: So the original idea, I wanted to do an executive suite. The modern, the modern day equivalent is coworking space, the we works of the world. And I wanted to do it in the Pearl district in Portland, Oregon, um, with up-and-coming at the time. And, but I had no money and I had no experience, so I couldn't find a landlord willing to build out office base. So, what I wanted to do was executive suites and um, rent out small offices to small businesses and provide shared receptionists and shared secretarial at the time. But I had no money and I had no business experience, so I couldn't find a landlord willing to fill the office, uh, at their expense kind of. So I said, well, what can I do with the resources I had, which was I think it was $17,000 a four one k's that I had saved up and I got it. Aye took out the real estate and went, okay, well I want to help small businesses. If I want to really be their receptionist, how can I get the calls to them during the middle of the day, even if they're not sitting right next me and just kept noodling on that and until I found a telephone company and a software vendor that would kind of help me hodgepodge a solution together and got an SBA loan and we are off and running.

Ryan Tansom: Super Cool. It's funny because when I do my keynotes, and I just did one a couple weeks ago and it was the first thing that any of us as entrepreneurs should do. So go to a business broker's website and look at everything crazy, interesting exposure to light. What actually value is where a lot of people go 30 years and they're like, oh crap, this is not worth much. So, so when you, how did, how did that, how did that insight impact what business you saw, that need. How did that, the value creation where this is all tied in?

Jill Nelson: Yeah. I mean it was ironic because back then this was working for the business broker. Big popular businesses that everyone got excited about was manufacturing and they felt like service businesses had no, no value because your talent walks out the door every day. Your service walks out the door every day. And I kept like, I just was like, ya but service revenue is recurring. And she, you know, like manufacturing cars is capital expenditures and all these legacy business brokers. I was just like, nope, nope, nope. If I ever start a business, yeah, I want a recurring revenue stream. Yeah. And, and then I ended up becoming a business broker for a short period of time. Yeah. Right around then it was like, and it was ISS. Yeah. Dial up. I'm dating myself, but there's dial up ISPs, there's all these local providers. And there was a lot of roll up going alongside represented sales to those small ISPs. Yeah. Huge insights there because I then I got to see that recurring revenue piece, those ISP, we're trading on multiples of revenue. And then traditional business brokers are very modest. Two to three x EBITDA or income. And then the other big lesson I learned, yeah. Being a business broker and doing the roll up ISPs is that I saw, I sold two on the surface equivalent businesses, they had a similar level of revenue. They had similar number of subscribers and they had a similar price point and one was wildly profitable and one was going out of business. And I, I would ask the person who was wildly profitable and he just had every single solitary metric levered and measured and visible. And he knew every last one of them. And I mean, it was really the difference on execution about running a profitable business versus you know, every day, every month being sort of month-to-month.

Ryan Tansom: How did you find your first customer? What was your first year like? How did you take that 17 grand and what was the SBA loan for?

Jill Nelson: Yes, my view was I needed a phone system and software and employees, even before we had customer number one, I had to get everything because if we were going to be a receptionist service, we had to be open from 5:00 AM which is where are, you know, east coast customers would come from all the way into the evening. And so I like all of it was pretty much out the door. Personal guarantees on the space and the and the SBA loan and the phone contract. Yeah. Um, I signed my life away before we even had customer number one and we did not get customer one until I think we launched June 3rd to be live and to advertisement. We did not get that first customer and tell the end of June. And I remember him asking, actually remember him asking, how many customers do you have? And I remember saying, like we're working towards 20 because I didn't want to lie, but and I think he's still with us. He's a software engineer in New York City. And we finally told him that he was our first customer. Yes. Yeah, that was, it was a lot of a gut wrenching times. Because again, we were paying people to ensure that we were there to answer phones from morning to night and when we only had a customer, 20 customers, and you know each of them maybe got 10 phone calls a day. It was, it took a long time.

Ryan Tansom: 15 year overnight success, that's right. Some of the milestones. I'm curious, you know, even as you go into that, the difference, I think even what you said and the insights and experience that you had versus a lot of entrepreneurs is you had this whole end did you have an end in mind? Was it like an opportunity that you were just trying to capitalize on or like what was the foresight and then what were the kind of the pivots along the way?

Jill Nelson: I do think that I'm like an entrepreneur because I love the puzzle and I love the idea of proving it. And so literally I was just looking for something to do. Yep. To get up in the morning and I just had this idea and actually people go, oh, did you ever imagined you would be successful or oh, did you ever imagine you would fail or you know, were you afraid? And I don't think either one of those things happened, you know, until we almost failed. I just had this idea and I was just excited to see all businesses wanted it. If it was going to be valuable. I just wanted to puzzle through it and get it out there, see what happens. So no, I did not have an exit in mind and oh, and you know, that is, that's it. That's an interesting thing because on the one hand I think it's important to know like, well how, what is your, what is your exit strategy? But on the other hand, I think it was just urgently required that to get that business up and running, I had to have that passion for the business itself and if I just skipped over all that hard work and only thought about, you know, the exit, I would have never made it to this our side here.

Ryan Tansom: Agreed because you have to enjoy it when you're getting socked in the face every day. Yeah. Give us some of the milestones over the years where you know some of the crucial ones where you basked in the sun and was like, okay, I'm doing it. But it was it… For the revenue employees and the model that you were, you were working with and actually with the customers?

Jill Nelson: We are a metrics-driven business. We are this… competing forces because we are about personal connections. Winning our small business customers new business by creating this really wonderful experience, but you don't answer 50,000 phone calls a day and not major everything. There's also the, the least hidden secret around is I'm a pretty competitive person and so we, we are Oregon's record holder for consecutive years on Oregon's fastest growing companies private 100 list. And the first milestone was making what they call lighthouse award, which is making it for five consecutive years. Yeah. And that was a really big deal. Um, but around year five in business, um, I had been introduced to Rockefeller Habits, Verne Harnish, I don't know if any fans of that out there. We created a strategic yeah. Or scaling up. That's great. Um, so we made this plan that at year five we were a $1 million revenue company and we were really excited to have that $1 million a year.

Jill Nelson: And, but we did this exercise would happen. We, you know, what would it be like 10 million of revenue? And we were, we did this vision exercise that I think is a Cameron Herold painted picture exercise. And we like how many employees, what would our office like? And we did a vision on all out. And then we said, well know what would that take to get there? And we work backwards of we'd need this many customers and we'll what were, you know, and then we're like, well, what do we have to do this year in order to be on track? And we were like, Alex, doable. So we sat at your five, we set this flag in the sand of this 10 at 10. In year 10 of business, we're going to do $10 million of revenue. And we literally said it five years, you know, at year five when we were a $1 million company, just plugged. And by the way that can you, 10 year, 2013 so this was during the 2008, 2009, you know, economy going the other direction. And I'm excited to report that 2013 was our 10 at 10 Year and we did something like 11 million in revenue. So that was huge. Huge, huge milestone. Right? And then, so of course we of course then we were like, okay, so it became 50 at 15. We're like, Gosh, if we can do 10x in five this easy, it's five x. It proved to be a little bit more challenging. We did cross and that was last year and we actually crossed it with a $50 million run rate. Just shy of annual revenues.

Ryan Tansom: Good for you guys!

Jill Nelson: those are big, like having those big milestones. Okay. And you know, I'm huge fan of breaking it into little tiny pieces that seem manageable. And you know, recalibrating.

Ryan Tansom: What do you think some of your keys to success were out of that? You know, when you really hit the throttle, was it people, capital, innovations? What were some of the big things?

Jill Nelson: I do. I do think having an eye on… we were completely levered and we are uh, even at a very young age and the company when we were ball we use, you know, excel spreadsheets and Microsoft sharepoint to crate KPI dashboards and… Having measurable goals and knowing what success looked like, trying to not like that, that fine line between what, what's doable and achievable and a real win and not killing ourselves in the process and having fun. That would be really early, early on success. Um, but really all the way through year 10 almost… we had paper Click, a modest amount of pay per click and then it was referral customer, so it was really just executing and delivering a service that had real measurable ROI for our customers. I mean that absolutely at the foundation I'm on top of that. We are, we are literally, it is like customers selling customer service.

Jill Nelson: So it's about like every single employee in the companies. It's empowered absolutely. To do whatever they what two or I feel like they should do for our customers, from the receptionist or customer happiness team. Just understanding that our customers are our success. I think that's a huge, huge, huge, huge, huge focus and core belief of our, you know, we're, our mission is about the personal connection, but that core belief that people want to do business with people and just living and breathing that every day we've went over a number of great, yeah. Place awards along the way with our fastest growing. So you know, those, those values and the mission that define our service also what create a culture of, you know, what is now 600 employees all rowing the same direction. Yeah. Okay. Wow. All W2, all full time. Yeah.

Ryan Tansom: There's a couple of things I want to peel apart. You mentioned in John's podcast and I listened to about your culture. It's a huge deal and I've got a couple of customers and people that are great friends who kind of… I can tell by being part of the small giants that obviously makes a big difference, right?

Jill Nelson: Yeah.

Ryan Tansom: How that impacts your ability to hire, how that, how you maintain that and then how that was valued. You know, we can get that, uh, down when we talk about the exit. But how did you scale with hiring the people like that and then… that had to been crazy difficult.

Jill Nelson: Yeah. Yeah. And even today, we're hiring a ton and we have 13 applicants for every receptionist opening. Even in this economy we have, we do eight interviews, three face-to-face interviews for everyone. It's actually opening. So we, that is not a bottleneck for us, but we really recognized very early on, well you know, actually like as a founder business owner, yes. One of the great privileges is you get to run the business according to your own values. And you know, I, I love it people and you know, people connections and I certainly want to come to work every day. People who want to be there who, who like are inspired to do the work. But you know, you learn those lessons crazy. Yeah. But we also recognize on the, like on the turnover side and we actually led the city of Portland back in 2015 with a 15 dollar an hour starting wage, which was a 2 dollar bump.

Jill Nelson: Thank you. It was a $2 bump for our receptionist. But what ended up happening is that okay, cost provide service for a minute service only went up 2 cents and it reduce our turnover by about 60%. And the thing about being a fast-growing business is that when you are needing to hire for growth, if you're also hiring for turnover out the door, it's a bottleneck. You actually, it inhibits your growth. We have, you know, you end up and we've had moments where we actually have a KPI, uh, back in the day when we were growing so fast, the receptionist, 40% of our receptionists were in there first 90 days and it just created chaos. Our service levels drop. And we realized like, we actually can't exceed 20% of our employees in their first 90 days. So anytime we exceeded that actually couldn't, we would have to and throttle are, uh, marketing. And so being able to, you know, have really low turnover was a key strategy. But more than that, like we're selling the personal connection. So we have a set of values, we live at to our customers. We live at to our people.

Ryan Tansom: Finding 600 people that are happy and enjoy life like you must be crazy difficult.

Jill Nelson: Here's my, here's my, my sort of challenge to people. I actually hiring nice people really are excited to be able to be nice to other people. Aye. Easy. I think we turn employees into when create the rules that make people nervous about doing the wrong thing or air, they're going to do the wrong job or not feel empowered, we actually turn them into end nice. People that just literally are fear-based in their work. So one of my controversial topics is it's easy to hire. It's hard. Two uh, spy to make people feel safe, let them make them feel happy, empowered really.

Ryan Tansom: I think you're spot-on with that, actually. As I went through the turnaround in our business and having a higher that may people, it was like, hey, eliminate the ego is like hey, you know, you just, it is easier to it because people want that. They don't want to be, I mean they're everybody's adults. Right. They don't want to be micromanaged. As long as you put in a plan and hold to it. On the, on the inner structure of the business too is what were the, what was the engagement like, cause I know this is going to tie into kind of your valuation and the exit is like, it is how, what was the contracts like with the business, with your clients? And then you ended up building out a system too, right? So it wasn't as a service based business. You had some proprietary technology and some other things inside of that. Correct?

Jill Nelson: That is correct. We are a live virtual receptionist and today it actually includes the Telepany and the mobile APP that's connected to our receptionist. So we're literally connected with our customers all day long. We're integrated into their contacts. We're integrated into their practices management software if they are attorneys. Um, but when we, one of the tenants of our business, because where the is for small business, we answer every single solitary call live. And we, you know, now we have 10,000 small businesses and 400 and some receptionists. And now we have also online chat as well. And so we couldn't do that. We had to get onto our own software. So the proprietary software and that's where the differentiator between service, where all of the talent is in people's head and if they walk out the door, you've lost your business versus the technology that basically we can onboard a receptionist in a couple of days and we can onboard a customer without any training like we can onboard a customer now in 15 minutes and whether it's the first sort of the 100 call, that business is going to get the same friendly experience with the know-how and the knowledge that is going to make us sound like we're right in the office. So the technology piece, poor part of why we were valued as a tech-enabled service company on multiples of revenue rather than a traditional service business.

Ryan Tansom: Multiple of revenue for a tech business is a little bit different from how law firms are valued, right? What was the triggering event? Grown that much and you're hitting your BHaggs to take the Rockefeller term, right? What is it that led you to explore other options?

Jill Nelson: It raised a point too, in the business, where I was actually able… It was beautiful, healthy business, great leadership team. I was actually taking a lot of time outside of the office enjoying that as a lifestyle business. And then this investment banker came along and tried to, I have this traditional business progress you recall. And we sold businesses at like literally like as low as one and a half times EBITDA to, you know, maybe five or six. And this guy comes along and tries to tell me, you know, that my business is worth multiples of revenue and I, you know, I was like, well I don't believe you, but if it's true, I'm interested because I had already taken it. Okay. And you know, it's like, you know, here I am still in this seat. I actually, you know, what ended up happening and, and that was the genesis. And then, whereas really paranoid it's my baby and these are my people. And I certainly didn't need to do anything. So it was really, it was, yes. You know, it's like, I'll do the exercise, I'll see what happens. But it was, it was one of those like I'm not just selling anybody.

Ryan Tansom: So let's walk through that. This is a very interesting topic for my listeners. I'd say the small giants kind of listeners that are the baby, they're really, they really care about the people. So it's not just, I mean, that's why, you know what, my whole situation was tough when you had to fire a bunch of employees. If it's, it all depends on what the buyer wants from the business. Right? So. How did you, you know, aligning, getting the value for the business and aligning the values with the fire and all that stuff is complicated. And then optimizing the tax, blah, blah, blah, all this stuff. Right. Walk us through the, like the, the, the journey, Jill. Yeah. What does the exercise that you did with an investment banker and then did you go through the normal process and like what, what was it like from inception? From like Oh, hey, maybe to okay, this is a real situation?

Jill Nelson: Absolutely. You know, I'll start with the outcome. Yeah. Especially if you have a vision that you have a vision for the future of the company and the best valuation is the partner that looks at that and goes, yeah, I believe in that vision. And what we have today is just scratching surface. And I believe in the leadership team. And it's a really core component of getting the highest value because it de-risked when an investor looks at your team and goes, yeah, team can take it to the next level. And, and also on the culture piece, and this is why I kinda knew that these guys weren't just talking. And they really were going to walk the talk is they said, hey yeah, invested almost exclusively in software companies and they're like, we don't know your business. You've built something special, we can help you continue to develop the technology vision that you have that is, that is basically all you need to do to run your business as ruby and a cell phone. You know, that we're sort of like, even though we have w two employees, it's very similar to like, you know like you might think of an instacart today where you're getting a personalized service exactly when and how you want it that's completely controlled your mobile app.

Jill Nelson: But then now at that time that was, that was a vision and they were like, we can help you there. Just don't let us screw up your culture. Because that's literally what gives you the differentiator edge. And they felt like our culture wasn't just something that, yeah, they were talking to, they felt like it was our competitive moat and that's why nobody else could just come in and repeat what it is we're doing.

Ryan Tansom: Yeah. The fact that you were taking time off, because I know not only was my old situation, but a lot of people I know… they might not be the technical, so like let's say they've decouple themselves from the technical knowhow in the business, but there's still Paul Spiegelman I think, he was the chief culture officer. Happiness officers who in your executive team was also able to do that. Did you have other people that were able to take what you've got in your DNA and actually ripple it throughout the business?

Jill Nelson: This is possibly a bad strategy, but when we moved from two locations to three locations. We've actually done an acquisition ourselves now it's like I can speak to and it's always been what's going to happen, happen to the culture cause that's what, correct. Okay, thanks. And we have what we call people-powered culture. So it is nobody on our executive team, frontline people. And then we have our reset. Our receptionist centers are literally, they're separate from our headquarters. And from the supervisor, the, we call them cultivators, but the entry level supervisors all the way up to the site director, all former receptionist. So having receptionists and literally every rank… Legacy receptionists. That's another thing we're turnover is he, because when you have these legacy 10-year boys, when 10 years ago you only have you're 70 employees and they're empowered to keep alive the culture and art, we just, we constantly call it a people-powered culture and it's not a top down thing and it's okay. Only way that no matter if you're one center or 10 centers, cultural lives on. And so I actually have, not necessarily to everybody's approval or desire, but I've actually removed myself from the day-to-day so that eventually no matter what happens or whether you know, whether we opened a center on the east coast and I'm never there, it's not about me at all. And I think probably yes, six years ago it long having anything to do with me and it's this really cool organic thing.

Ryan Tansom: Was it a couple of key employees? In our business, we call it the two 12 program. It was like, the one degree and it helps it boil it cause I mean I don't know if there's that's specifically that you did to like maintain that, that DNA of the culture?

Jill Nelson: The empowerment thing is key. Incent, inspire, empower. Those are the three things. And one of the early lessons was we had our set of values, we said, these things are important. Okay. And yet when we were giving raises and incenting people, we were giving raises based on how productive you were and perhaps you know what your attendance was, which has nothing to do with our core values. And that got pointed out to us. So one of the first things, everything that you see that we measure is aligned right back to the core values. We actually measure peer-to-peer recognition. We met actually measure note cards and little one minute videos that we send out is um, one of those things is aligning our values to what we are actually measuring.

Jill Nelson: And that just one of the things that people, Oh God, Oh that's what this company cares about. Oh okay. I'll do that. And that that was on. And then, okay, from a cultural standpoint, when we talk about empowerment, one of the things like we have a wow station and it is stocked with all kinds of things that come up, phone conversations like oh it's so cold out. Or we send them, a little cocoa and a mug or oh my gosh, you know, I need another cup of coffee, we'll send them also a Portland coffee. But behind that is also Amazon prepaid account. Everybody has, yes did that they can buy anything for any customer for any reason, they just have to share the story. And so all these programs that are really about helping employees understand from day one that they are, they are empowered to make the culture. We, we have our beautiful spaces, they're open 24 seven to all employees, a start running teams and knitting clubs and literature clubs and it Will blow your mind all the different things our employees on their own start. And then like one final thing that I love passing along to other businesses is that we have culture funds. So everybody also has a little bit of money too, whatever that might be. It's $100 per year per employee and they might have an idea and it's obviously going to be more than a hundred dollars. And I'm like, I have this idea, it's like a Kickstarter fund, like crowd sourcing. I need people to donate their culture funds. And then the really great popular things that people actually want to participate in get funded. And the dumb ideas that me sitting up here in the, you know, in the corner office, I haven't, you know, I think that people like don't get funded.

Jill Nelson: But just like people powered culture, like we say it is, but there's a lot we've put into place so that it just live, it's on and then, and then, and then hiring, talking to the core values, retaining, we all know that also, you know, letting people go that just don't alight with the culture is, is both a gift to them as well as, you know, a way to protect what we have.

Ryan Tansom: So how did you… because I think all that is very tangible for the listeners. So going back to the investment banker, multiple of revenue, there's lots of, walk us through. So that's the outcome. That's difficult to find someone that values it, that allows you to keep that, that's not just financially financially gets what you're doing. So walk us through the process. Like how did you go about finding these people and what was that experience like?

Jill Nelson: Just so you know, I'm not a business madger. I've seen the financials of businesses don't necessarily have these programs there similar in what they do and our margins are wildly more positive. So at the end of the day, our income statement just looks good. And I am an advocate for the most profitable businesses are the ones where you don't have to hire and train all over again. So back to the investors. So we ended up hiring a different investment banker who knew there are so there's like private equity, there's different funds for different stages, different interests and they, I will tell you the due diligence of what I experienced as a business broker and what I went on this went through with this process, not even in this same ballpark, like not even close. But they ended up…

Ryan Tansom: What do you mean?

Jill Nelson: Oh my gosh, it was, it was like 1,000 times more intense. Our customer database back to the beginning of customer. Like every invoice we ever out had to be validated, you know. It goes on and on and on. But our financial statements and customer records were validated thoroughly.

Ryan Tansom: I think it's an interesting note. It's the worst thing any owner wants to deal with it. When, why wouldn't you want to go and talk about your wild fund instead versus these libraries kind of cleaned up.

Jill Nelson: That's right. Yeah. One of the things out there in order to close locate my escort filing, like some random piece of paper 13 years ago that was like pretty touch and go, I like one example, but you know, at the end of the day, like it is about risk, right. So everything you have, everything you have buttoned up, that's just a little bit less risk, which means willing to pay a little bit more and okay. And so we ran a process. The process was, there was a little flyer teaser that went out to the most likely suspects. Some strategics, strategics move much…. They were just all too slow essentially at the time. Yeah. NDAs got signed. Books got sent out. I did 20 something, a one hour video call like you did and got 20 some letters of interest. Picked the top eight had face-to-face meetings all day meetings with the team, picked the top people out of it. And that's, I mean that's, and then we picked our favorite and the investment banker is really, really, really helpful. Keeping on schedule. And you know, as a business broker, one of the things that happened is once this seller except an offer, it kind of lost their upper hand. Yeah. And they were kind of on the buyer's timeline and kind of at their mercy and, and it can, it can create up killing deals. And the investment banker was really, really helpful keeping the process going.

Ryan Tansom: So what I think is interesting is… one of the things, based on my story, is that many options… Because so many, how many times do you, have you heard someone was at a trade show and my strategic competitor was like I should buy you, or like a vendor or a customer you just like, Oh sure. Great number, huge number. Like let's do this versus what you experience is 20 different offers or different, depending on, explain how all of those were different from terms and conditions, pricing and how those buyers had different plans for your business.

Jill Nelson: Yeah, yeah and some just saw it as a straight service business and they valued as such. And so the, it was a really, really, really wide range letters of interest where they were a range and, and then you know, and then there's this phase two and then you have your final bid, uh, which was again different than the, the way the business brockerage works. Everyone saw a little bit. Different and the parties that were the most competitive or the ones really bought into the vision for the future because they saw it and they saw that, you know, and that's where multiples of revenue comes in. Um, that the tech and the tech platform at that time immature. And so there were some parties that were like, yeah, your tech pot platform's immature. So or devaluing that versus some parties looked at that and goes, Gosh, we can help with that. That's the easy part, we know how to help you. Your vision created position yourself in the marketplace and the reputation you've had and the growth you've experienced and how you get customers.

Jill Nelson: Yeah. We can add capital there and help you accelerate that way. And went there. There was a number of things that, yup. It was really more about what is the business going to look like in the future that the most competitive parties saw and bought into and the, you know, again looking at risks, it was, it's those portfolio co those portfolios that have things in common with your business. So for example, one of the things about our business is we serve very small businesses, which means the churn on a customer, a small business customer is higher than the enterprise, like a big business with annual contracts. It's a smaller revenue. So there's a fear that at some point, even though there's tens of millions of small businesses, that it will be really hard to get customers efficiently. But there's other businesses, other portfolio companies where if they have another example of success like, oh, we know how to do that, we can help you here. We're not afraid of small business. We actually love small business it's got this huge market, and know some of that.

Ryan Tansom: Just a couple of major points where if you look hard enough you can find all the right character. It's kind of like dating. Is there anybody in that process that had a really appealing number but you were like, no way the comments are making what they would do with it?

Jill Nelson: Yes, yes. Easy. You know, I, you know, at the end of the day, most of the people that made it to the finish line, there was alignment there. You know, you're not gonna have the most competitive number if you don't actually buy what it is the leader is saying about the business. So. It wasn't, you know, wasn't the, there was definitely some that were like no no. There is some that I, there was one in particular, no names I really, really, really liked. Um, a lot their methodology in a way that they couldn't get there with the number. I like updata is the best.

Ryan Tansom: Yeah. We're going to be short on time here. I'm curious the deal structure. Because when you're comfortable sharing numbers, I think that I've seen some of those out there is, you know, that you're talking big numbers. So was there any creative things or that you wish you did or didn't do on the tax or the estate plan to structure it? So you make the most of it? You don't have to go into IRS stuff.

Jill Nelson: We did pretty well. We worked with an accountant. We we from a tax perspective we were able to do that, but there's a lot more than just the number. You know how if you're rolling any, how much debt, if any, is anyone going to use put in the business? I, I was, I was really, really concerned. Yeah. My concern was the future of Ruby and its employees and, and that was so much more important than any sort of structure, any sort of like tax piece. And that was my most, mm. You know, obviously there's a financial benefit, but at the end of the day I, you know, this is again my baby and the people who shed blood, sweat and tears to make it what it is. There was a future for them that, and where I got was it felt like ruby was in better hands with this partner than if we were to continue to go it alone and then that made the decision easy. But from a minutia. I know now that there's a lot of things I could have negotiated like tax structures and one thing I like, could I have, you know, I just rolled a little bit, but I stayed on a CEO. Could I have gotten more shares just by staying in this the EOC, could I have it? Could I have negotiated more board seats? It's like things that I knew nothing about that I didn't think were big deals. That and my partnership with Updata has been yes. Phenomenal. You know, when I learn other people's stories and, and hear the things that were important to them.

Ryan Tansom: Did you do an asset or a stock sale?

Jill Nelson: it was a stock sale. We actually had to convert from a s corp to a c Corp in the same day and, and there was a, it was a pretty complicated transaction.

Ryan Tansom: But ordinary income versus or?

Jill Nelson: We were able to, we were able to do it in a way that it was capital gains, but the, but the hard part was I didn't want to the part that would have been really challenging. Yeah. If any of it would have been personally, yeah. Ordinary income, that would have been like, like a completely different equation.

Ryan Tansom: Most people don't even know that, though! Lots of, lots of, lots of Zeros.

Jill Nelson: Yeah, for sure. For sure. When I was a small time business broker the sort of asset allocation piece that was like, if anything was going to like a blow a deal up, it was going to be the asset allocation or you know, whether it's a stock or assets sale and, okay. But you know, let's see, oh, I know preferred what I rolled, I rolled common and the new owners preferred stock. So that was a surprise to me and taking the time to understand that what I was signing up and basically the idea was a, hey, as long as the business grows it 8% in value every year, we have nothing talk about. And I felt really confident that that would continue to happen. So, um, but those are, that are surprises that you got to like and that, and that's another reason why the investment banker can be super helpful because they can really help you and compare offers apples to apples.

Ryan Tansom: Was there anybody else on the team? And did you have an M&A CP attorney or any of these people that were helping on the side too that you saw that were, had some really good piece of advice that you'd want to share? The point of the question is that so many people don't have these people talking together and it's like your outcome that they're actually solve for in versus having silos. And the reality is like one situation ripples into all the other designations. And I just find it so many times. It's difficult. A lot of people though, they don't have a team that's actually talking behind the scenes.

Jill Nelson: Yeah. We had a really big team. That whole process, it was so expensive. It was a big shock. So we had to engage, we had to engage our accountants, enable their accounts to do due diligence. We had to have a IT consulting firm, validate the security of our technology. You know, you don't get into those big numbers without insuring someone knows exactly what, what they're getting and you, at the end of the day, you just have to engage professionals to be able to do that. I mean, who wants to write a seven-figure check without knowing what they're getting.

Ryan Tansom: If you're comfortable sharing the numbers? The whole point is that these numbers pay for themselves. Right? Like from the rest from the buyer. And then also for you it wasn't as wrong, 30 plus million bucks or 30 it was, I don't remember exactly what the numbers were for your, for your value of the company, that part of the company is sold.

Jill Nelson: That's the value of the part of the company we sold. It was like a 38 Million Dollar transaction for the majority of Ruby. And then myself. And there was one other tiny shareholder that we rolled some.

Ryan Tansom: So what does it and you have a check like that when it hits the bank. Being the employee of someone else, you got the ability to walk out, but you're also still here three, four or five… how long has it been?

Jill Nelson: I think that's the biggest surprise. I will say my attorney said, Jill, I just want you to know I have never, when we go back around the second time, I've never seen that CEO in the same seat, you know, like three years later. So I just want you to be warned. And I really like, I guess that's the piece of advice and I was like, I, I'm totally okay with that obviously. Cause I was, it was really about how Ruby was left. It was, and you know whether or not if I was as I was like, as long as I can be helpful, as long as I'm the right person for the job. Great. And what ended up happening was, oh my gosh, I could fill up a whole nother hour about all the things I learned after doing the deal with them and just a million things in it. And I think the job has changed every single year. It's a new company and I think that's what kept me here, you know, now I will say, you know, it's 600 people and to the job, crappy burner or things get done like that is like, it's a little bit like it's my natural inclinations.

Ryan Tansom: I don't want to put words in your mouth when you say your baby and so many people talk about that, right. Bo's book finish big talks a lot about that and it's like, do you think there's, there's a level of how you've been treated with these people and having them appreciates what you built versus just looking at it and just, you know, I don't know. There's, there's a level of appreciation and you know, being valued that I think is huge and a lot of people…

Jill Nelson: It is. I'm not really driven by money, I'm not, it's more like creativity and getting an idea and a place and being able to build something other people really find valuable and, you know what I will add another surprising thing, especially with private equity is really meaning when they say we invest in teams and they didn't keep me on as CEO, as a founder CEO so that they could just tell me what to do if they wanted to just how somebody would do, they would hire a hired gun CEO. They totally depend on the CEO to set the strategy, defined the vision and to guide and provide hello, we're needed it really. And I did. And I think actually, and I don't think every firm is that way. I think some have a clear statement like, nope, this is where we would take your company. This is how we see it. And that's, that's another way to go to. But a lot of private equity firms are like we got to buy into the leader and where they're going.

Ryan Tansom: You've gone through so much. If there's something you want to bring to the surface. Or if there's something that we haven't covered that you're just like, you know, here's the listeners. This is a huge takeaway. I don't know if there's something you want to leave it at?

Jill Nelson: Metrics and having precision and knowing your business and knowing your numbers creates a successful business, but also creates enterprise value because it, the risks from an investor standpoint where they feel like they know what they're getting, it's really a huge deal. I think that's number one. And the other thing is like when you are going to tell your baby it's not just about money, it's just not. And thinking about what would it take for you to get a transaction and solve for that when you know what you're trying to get, then I think it's easier to go seek and find it.

Ryan Tansom: Did it take you the process to figure out what you wanted from that, or did you have a way to articulate it before that?

Jill Nelson: I would say when I started going into the process, I was dramatically more removed from the day to day business fell back in love with the business. As I started talking about it and paint it, you know, what could it be in five years? And so kind of rediscovered this whole new business plan and idea and then like had the help and backing to go do it. Out of everything, that was probably the biggest surprise is I just became right back at the starting point. Excited to go.

Ryan Tansom: So if the listeners want to follow you, reach out to you, what's the best way to get in touch with you?

Jill Nelson: Our website, I have a, I think Jill Nelson PBX Twitter post very often, but I can reach out to me on linkedin. Jill Nelson, founder and CEO of Ruby Receptionist.

Ryan Tansom: Thank you so much for coming on the show.

Jill Nelson: Well, thank you so much for having me. It was a blast.


Ryan Tansom: planning principles because I think that Jill just did all of it right. One, for the first principle of vision. She knew what she wanted, she knew what was important to her and she knew why. Absolutely important thing. She said, you have to understand that so that way you can go get it. She knew that her employees were important to, her vision was important to her. She just really had all of that locked and loaded so that when she could calibrate all the different things that were coming at her under the lens of what she wanted and what was going to make her happy. The second principle of the financial targets, well because she built a valuable business and she was making a lot of money for a lot of people, she was able to, no matter what crush it, and because she was not unbelievably greedy and not super, super only focused on the money, she was able then to layer in all the different potential buyers in the lens of okay, she's in a give a degree here and there, but it's way more important to figure out the fit, which leads us to the third principle of the exit options. She chose a private equity recapitalization, but you could tell that she did the research of finding the investment banker that was doing the due diligence to find a variety of strategic buyers and private equity financial buyers. And because she knew what she wanted and why, she was able to select these people from why they wanted Ruby Receptionists instead of just, okay, I'm going to get the money. So her exit option was layered on top of the last two principles. The fourth principle, she was able to build out any technology, platform and systems and processes inside of a service business that was able to get her $38 million on a recap on $11 million in revenue. So Jill looked at her industry completely different than everybody else and she wanted to build a platform into the systems.

Ryan Tansom: So that was she can make something repeatable. And the fact that she was able to say that amazing, bubbly, selfless customer facing amazing culture that she built, wasn't reliant on her is absolutely extraordinary. What she did is nothing short of amazing. The fifth principle, she was able to do the due diligence on the investment banker who she didn't even hire, and she ended up finding the right people that we're finding the ways to accomplish it. All of the things that you wanted in order to do maximization she even said that she spent a lot of money on advisors, but she got what she wanted and she was able to maximize the plan because she was driving the plan because she knew what she wanted. I really hope you enjoy this episode. If you want to know where you stand in those five different principals, go onto the show notes, go onto the website, take the growth and exit planning quiz, the survey, figure out where you're at and all these, it's just a multiple choice, no financials, just to give you an idea of where you sit and to start racking your brain. And then we'll shoot you a bunch of resources to keep diving into where you think you need to go into. So that being said, I will see you next week.

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Written by Ryan Tansom

Ryan Tansom

Ryan runs industry-specific podcasts on his website which pertain to mergers and acquisitions, and all the life lessons he wish he had known then. He strives to bring this knowledge to his listeners in a way that is effective and engaging by providing new material each week from industry experts.

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