Podcast: How a Startup Managed the Sales Process to GoDaddy, an Interview with Alex McClafferty
You are capable of positioning your business for a big sale if you take these lessons to heart about paying attention to the details in your negotations and making a valuable niche for yourself.
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
Alex McClafferty coaches founders of SaaS & productized service companies. In 2013, he joined WP Curve when the company was doing $478 in monthly revenue. By 2015, the company had built a remote team around the world and grown revenue to $1M ARR.
In December 2016, GoDaddy acquired WP Curve.
With the help of a rockstar team at GoDaddy, the WP Curve team, rebuilt and then relaunched the product as WP Premium Support. Alex left GoDaddy in 2018 to pursue business coaching full-time.
If you listen, you will learn:
- Alex’s early career and move to the U.S.
- How Dan and Alex built WP Curve.
- When to dissolve a partnership.
- Alex’s advice for people having partner issues.
- How Alex prepared for his meetings with GoDaddy.
- The importance of building a great M&A team.
- How Alex worked with GoDaddy to make the deal go smoother.
- The ups and downs of M&A.
- Why Alex exited GoDaddy before his earn-out was completed.
- The 2 questions you should ask yourself before changing jobs.
- Alex’s final thoughts.
AlexMcClafferty: Trying to understand what's in the deal for the other party, so ultimately life that business, it was just a matter of Go Daddy could go and build what we built if they wanted to. If they can figure out how to do it, but what they're basically painful it was time and reducing their risk so they didn't need to spin up a team to go and do it. They didn't need to figure out all of the plumbing that didn't need to do any of that. They could just buy it off the shelf and kind of bolted on.
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 everybody. This is episode 126 of the Life After Business podcast. I hope you enjoyed your holidays and we are off to 2019 and I'm excited to launch it off with this episode with Alex McClafferty because Alex has an awesome story about how he founded WP Curve, which was the first wordpress customer support company and grew that from 2013 and to eventually sell it to Go Daddy in 2016. And Alex during our conversations, shares all of the ups and downs of what it was like in his partnership, what it was like scaling the business and then how he had to take a crash course in mergers and acquisitions. Because Go Daddy knocked on the door and he sat across the table from Go Daddy of all people who are in the business of doing acquisitions and he did it himself with a couple other trusted advisors and Alex shares all the things that he wishes he would've done a little bit differently at the negotiation, what it was like running the business and also selling the company at the same time. But he also gave a bunch of color of what it was like working as an employee for someone else and how he left a bunch of money on the table to be true to himself so he could get back into entrepreneurship and do one-on-one coaching and consulting for software as a service companies. It was absolutely a blast talking to Alex and we'd go back and forth about all the different things that we both wish we would have done differently in our actual exits and totally worth your time because you're hearing it from Alex who's gone through it. All the things that you need to be thinking about today and what you're going to eventually deal with when you sell your company. And one last little note. If you're interested in working on a one-on-one basis and you want some one-on-one coaching and consulting and how to grow an exit your company, reach out to me at [email protected] or shoot me a linkedin message and we can have a conversation about where you're at. What are the things that you're trying to figure out and if there's a way that I could potentially help, I'm only taking five people and this is new because not everybody's ready for a full blown growth and exit plan, but they are willing to invest some time and some energy in order to sift through all the information and to make sure they're going in the right direction. Other than that. Without further ado, here's my episode with Alex.
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: Alex, how you doing?
AlexMcClafferty: Good, how about you?
Ryan Tansom: I'm doing good. I'm excited to hear your story because you and I are fellow community members of the Rhodium weekend community online and Mr Gates is a good friend of both of ours, kind of the ringleader of a bunch of really cool people. And you, uh, didn't end up coming in and doing your presentation. I'm looking forward to kind of hearing your story and when we can get your voice and your story out to all the people that would have heard you. So I'm excited to dive in and you get a pretty interesting background, you know, for the listeners. Maybe let's just start off, Alex, how, you know, what's some of the background that you had and what led up to you joining and starting a business?
AlexMcClafferty: It's a long story. But I'll try and keep it concise. In my early career, I guess I was focused on making as much money as I possibly could. So I guess I started, um, slinging insurance as I, uh, I phone rep. So I was selling, you know those guys that call you up and they're like, Hey, do you want to buy some life insurance while you're in the middle of the dinner? One of those guys, I threw myself into that field because I couldn't get any other work. And then ended up, I'm kind of rolling through as a team leader in call centers, which is a great way to learn management if you want to ever learned how to manage people, having grown men cry at you when you talk about that performance metrics is a good way to get to get to really know people and after that really started to... I went into business analysis and project management and was making in a good money as a contract consultant, uh, companies in Australia. So banks and tellcos and even some government work. Um, and then in 2013 I moved out to the US and I had that.... I'd read practically every book on entrepreneurship. And of course the Four Hour Workweek was the total of that list, um, and know and I heavily heavily into mixergy and all of that good stuff.
AlexMcClafferty: And um, I'd been following this guy called Dan Norris and then had like a really interesting story. So he'd worked on a Web Design Agency, had a web design agency for seven years. I'm taking the capital from that. Tried to build out a SaaS company. Um, and I think for 11 he worked on that for 11 months and around the 12 month he'd basically burned through the capital and they then needed to figure out an idea or go back and get a job. So, um, he came up with this idea for doing 24/7 support and the stars so aligned that I'd been reading some of his stuff as, you know, hungry fellow who's chasing the entrepreneurial dream and, you know, was really inspired by his story and there was a blog post that he put it out that I actually responded to in the comments. There's talking about the concept of startup validation being nonsense. And uh, yeah. So I said to him, Hey, you know, are you looking for a, looking to partner up amongst. And I get this thing off the ground because I felt the pain of dealing with wordpress, wordpress themes and issues and everything else.
AlexMcClafferty: I always told the story that I had a blog. Um, I trid to edit the header. Four hours later looked worse than when I started, um, so I figured if there were more than a thousand people like me out there who was literate, you know, there was a business opportunity there, so we jumped straight into it and uh, big changes happening around that time for me, but ultimately we jumped headfirst into this opportunity and the market timing was phenomenal because wordpress is a complex ever-growing platform and ended up getting some good traction with it. And ultimately I think about the... A couple of years into the business that had godaddy come and knock on our door and say, hey, we like what you guys are doing. We're thinking of doing something ourselves. Do you want to talk about joining the team? So the, in between, of all of that is where the real main is, but ultimately like the, all of these kinds of stars aligned to have me land in Go Daddy at the end of December 2016. So no, about three and a half years of effort and building a team. A remote team of folks all around the world, Philippines, Africa, Costra Rica, to and then taking that business. Okay. Trying to build it at a, at a scale which could support the guy that he base, which is a significant, a couple of orders of magnitude bigger than what we were dealing with.
Ryan Tansom: There's a lot to unpack there. By the way. I just got to comment on that four hour header thing. I mean like I've been down there myself, so it's like, oh my gosh. So you guys were pretty early on into this too because I mean like it's very interesting when, especially when you mentioned the four hour work week, I can kind of see how some of those dots connected to kind of lead you to that. So like when you know, going from that comment thread to actually having the conversation about hey there's a business, like how did you structure it and what was, what were the conversations you guys were having? Like what is this business? What do you want it to be? How did you buy it? What did you buy in? Like what? Like how, what was the kind of the inception of the business there between you two?
AlexMcClafferty: It was completely sweat equity and completely may taking the risk off the table. So when I landed I had a 90 day window, which is the, I guess it's like, for a motivated person basically put you on the bench. So 90 days where I couldn't actually get a job in the US. So it was kind of forcing my hand to keep me busy. And it so happened thhat I didn't. I wouldn't know it was after I'd go to the U. S and I was in conversations with them and said, look, um, you know, I, I'm not asking for any equity. I'm not even asking for any salary or any anything else because it's such an early stage of the business. Let me like, let me work with you and we'll see how we go. And then if we get some traction, you know, post window of time and you know, we can get back into the equity split and all that good stuff because basically like in the early days 50 percent of nothing is nothing.
AlexMcClafferty: So it didn't really matter. And I had something to prove anyway, I was really willing to put in the hours. Yeah. But yeah, as far as like what the opportunity was and all that good stuff. Yeah. I had to pull, like, pull back and look at the overall market and just work on the assumption that keeping it really simple that they were like normal people just like me who had been through that pain. Okay. Um, and in hindsight and retrospect, the model that we went through, which is this productized service model, like if you can, if you get on a forum and you find people screaming about a program like wordpress or you know, a bunch of other different platforms or even, you know, transcription, podcast editing and stuff that can be spun off into a service business that can make you a bunch of money that you can run a team on that can have a nice, you know, exit at the end of it. It's not easy to get to, but that model practically practically any service that has an ongoing aid. So yeah, just a little.
Ryan Tansom: We should put a pin in that and come back to it because I just interviewed Walker who just wrote the book buy then build and I think one of his biggest things is that it's very difficult to find the product fit and the pricing fit in the marketplace and what you're talking about circumventing that whole painful process because you're just having people tell you what they want.
AlexMcClafferty: As an example, with wordpress, wordpress is the platform that we chose. Um, but when we have new prospective investor, why aren't you doing this for all of the online platforms? Why aren't you doing this to squarespace and wix and weebly and everyone else would be interested. And I'm like, well, it gets like significantly more complex to do that. The opportunity, the opportunities are right there so anyone can pick it up and go and run with it. It's something that's painful that that people are swearing at their computer about.
Ryan Tansom: So let's take some chunks along. The journey is like kind of working your butt off and you're proving yourself know what was the conversations you were both having was an exit in mind from the beginning or was it in?
AlexMcClafferty: Not at all. I think in the early stages, we both had something to prove. So dan had had years and years of challenge and struggle and really done the hard yards, um, as far as these webdesign agency went. He was on the 3M phone calls and all that stuff. So He'd had a really hard time and then had another year of pretty much failure off to that with the software company. So the shortsightedness was actually I think a benefit in some sense because we were only thinking hit the next month growth target versus this highfalutin multiple, multiple what, what happened and what I see happen with people that I work in the catching capacity is I realized that actually owns a, something that building like real equity in real value. Um, and then along the same, in the same vein, I've found the motivation's changed so Dan and I had different motivations. We have well going in different directions and that was probably obvious about 18 months into the business. So we had to start looking and thinking about thinking about that, what are our options? So, in 2016, I basically like I was convinced that one way or another there was going to be like an exit, like an exit scenario, whether it was me selling to the Dan or Dan selling to me or a company like putting it on the market but maybe a coming along. Yeah. Um, and we were just lucky that the timing kind of landed this guy that he was Godaddy was looking to solve a problem that they had internally and I was ready to put in the work to drive the acquisition process.
Ryan Tansom: So what was, what were the different needs and wants from you and Dan, like what and what were the conversations that kind of led up to the point where you guys realized that there is diverging interests?
AlexMcClafferty: Dan is a starter. He is the guy that starts stuff. If you went back to the Internet, Internet machine or whatever it is, the way back machine, you'd say that, like throughout a wp curve days, we started a bunch of different stuff while we were already sitting on a really viable business. So we started a community for content and a paid plugin that was similar to lead pages but focused very heavily on wordpress. And so he is, he had this insatiable need to go out and start stuff and do stuff and build stuff and create, um, where I was a little bit slower and all was going, we in focus in on what this opportunity is and try and push it forward. But because where we are at individually stages of our lives and everything else, we just would really high on different things. And I think again to share with some listeners how you start to identify this stuff, it's not good, i's not bad. It just is. Um, you'll notice it within communication. So for us, yeah, communication started to and I kind of drift away. Um, I was a big proponent of that. I started to really pull back rather than. Yeah, you know, what was going through my head, how I was feeling, where I was, and then I just started to put my energy into other things and started to do software consulting, uh, in, in San Francisco where I was. So like, you see this and I say this all the time, there's an opportunity, there's something that kind of a consistent and push on that and focus on that, you can go ahead and build something really sustainable and substantial, but... it's not necessarily even like a shiny object syndrome or anything else. It's just your motivation changes or the novelty kind of wears off or things come up in your life.
AlexMcClafferty: What was a huge priority is not so big a priority anymore. Letting that fester like letting that fester and dressing and point blank. Um, if I could go back and change some things, which there's a laundry list of things that I would do, one of those would be basic go back and have these conversations up front and say, Hey, I know we're going in different directions. Let's be, let's be structured nad smart about how we do this. When I to talk to people who are thinking about getting into partnerships, I remind them that it is just as big of a commitment as a marriage. You're going to be spending so much time talking to them, working with this person and there's... you're going to have a lot of your financial eggs in this basket. You know, how you show up in that is hugely important. It takes a lot of I guess maturity and a lot of the times you only learn that after the fact, but huge learning curve.
Ryan Tansom: I can't tell you how awesome it was that you articulated it like that because there's so many. Like I mean honestly I've been there, done that and seen it in different companies I've been involved in and you know, there's a, there's actually this personality test called the colby where there's like a bunch of. And I can't remember all the different ways of like how you show up and how you present, how you handled decisions in the world. And one of them's quick start. This sounds like, you know, Dan was a little bit, which it's Kinda like, you know, you get into it and you're doing these things and you can just being self aware of it is difficult in the moment. And like when you talk about like you pulling back from a relationship, you know, because it's just the easier thing to do because it's like okay I have to so much stuff that deal with like how do you value the business, what are the different things and you start to like go into this winding so it's just easier to do other things. But then they're like you had said there's this financial assets that if you communicate correctly you can both figure out a way to handle it together. So how did you guys start coming, you know, like where did the relationship go and how did, how was the, the day to day, you know, handling there and then how did you guys start having those conversations of what you both want to do?
AlexMcClafferty: The distance we had and the time zones we were kind of working in allowed us to kind of do our own thing and work on our end. Dan was in Australia, I was in San Francisco and um, just to get back onto that point of like fading out, which is something that I had done a couple of times as the acquisition process. I had to go back from um, the consulting work that I was doing, but I also didn't really communicate that as clearly as a needed to my consulting partner. which ended up like I ended up having to very fractured or like very fractured business relationships on top of the mounting pressure pushing the deal through and everything else kind of lose sight of you lose sight of these things and just put your head down. But I think I'm getting back to the original question like thinking about valuation and what we each want, um, because because of the nature of our business that wasn't, it wasn't necessarily comps.
AlexMcClafferty: So you can go and look at a service business that you can look at, like for example, a recruitment business or like a typical internet business. And at that point in time, which is 2016, you know, I talked to a few different business brokers and they throw a bunch of different valuation models at me, but it was very heavily weighted towards a SDE, which is seller discretionary earnings, I think. Like as far as I was concerned, we'd built, I felt like we built something that was worth more than what I was getting as far as valuation. And it wasn't, maybe it was partly pride, the amount of energy and effort that you, according to something, um, it becomes your baby, it becomes a part of you and you don't want to go and like sell it for, you know, a tiny multiple. So as I guess as the conversation started to take over with Godaddy to dig into like, what would this look like as far as the multiple? You know, I had, I had a multiple in mind where I'd be like, yeah, that's absolutely I got to sell and walk away kind of price. But where it goes, where it gets sticky and this is another thing that gets sticky for founders. Okay. That the concept of, okay, I'll sell it and walk away, um, if you're integrating into a larger company, a larger companies, at least one person to stay back and integrate Atlanta team and land on the productive processes and everything else. And that was, that became a contingency of the deal. Like I kinda needed to be there to steer the thing into port and uh, I was probably ready to let it go at that point. I didn't want to the belt and everything else. But again, the, I guess the internal conflict that arises out of all of that is you're hanging on, wanting to do the right thing. But then, uh, you're doing this dance where you can't let go, but you need to. But you know what I'm talking about.
Ryan Tansom: I like that you called it the internal conflict and internal horrible torture. It is because we're used to kind of just doing what we want. So then suddenly you're like almost trapped. Just like, how do I get out of this? Yeah, right.
AlexMcClafferty: I made a mistake initially. Again, a mistake and the mistake I made is like cool. Like I'll put the pain on my back, I'll figure out how to get this done. I'll go and make this all happen. And again, the pride gets in the way of some of this stuff and I got big enough shoulders to carry all of this stuff. Know after pushing the deal through and landing and having a bunch of personal stuff happen, you quickly figure out that you a human and she, he will go eventually, like all of this stuff will catch up and maybe but you out of action for a little while, which is what happened to me. So um, you know, a lot of waste there and especially when those peoples livelihood on the line, because it's not just you looking at these cells, but I'm looking out for 30 people that we brought over. So yeah. Pressure.
Ryan Tansom: So let's go back to the finances and I want to kind of walk through the actual process because you're saying you did it yourself, which I know I also can relate to is extremely stressful. And you know, what is a, when you're looking at the numbers, did you have a number? Like, did you do any like net proceeds or tax planning or something like that going, okay, here's how much Alex and Dan are going to walk away with and here's going to be what's contingent? Or was it just like top line, like let's, this is appealing enough and I hope, I hope I have a pretty good understanding of what I get. Like what was your clarity in that?
AlexMcClafferty: I like backwards modeled it from all of the different kind of tax standpoint depending on the side as a, I guess a bit of a story when I knew that we were really in play, I read a, what was it, like a 200 or 300 word, a 300 page book that was about M&A um, over a weekend and basically did that ET thing where he picks up a book on, like goes through the whole thing. I gave myself a crash course and understanding the difference between a you know asset sale, stock sale, different tax implications and all that sort of stuff. So I had it modeled very clearly as to what my net would be depending on different, uh, the different kind of a structures the deal would go through. So I knew her from like, when I say pushed it through, I had a great accountant. Um, his name's Avery Dorland. He was, he was very, very responsive, which is what you need in a time like that. I also had an attorney. Um, and they work, I think they're out of Colorado and they work with small. Oh, small to mid businesses going through acquisitions. They were super, super responsive, which was incredibly important. Um, you know, if you're not getting, you're not hearing from the other side of the table as far as the buyer goes, you at least want to have your ducks in a row to be able to handle the questions.
Ryan Tansom: My CPA went on a hunting trip in the middle of our deal.
AlexMcClafferty: Oh yeah, yeah. Oh yeah. Well you can go and work with an attorney that I just had it. He was like, you know, you are a tiny, tiny part of their book of business and they'll get to you in 24 hours or 48 hours and you've got your livelihood on the line. So yeah, that's, it's already stressful enough. You want to get a, you want to rally a team around you that's going to be available to help.
Ryan Tansom: So it was super interesting because you got your team that sounds like it was pretty bad ass. Why did you decide to do it yourself? I mean like how did like in where in the line up of you and Dan and kind of figuring out like this is kind of where we want to go. Like how long was it before go daddy knocked on the door and like what was your like internal or personal journey of getting to the point where it was go daddy? Like how long did that take and why did you not decide to use an intermediary?
AlexMcClafferty: Yeah, I definitely shopped it. I definitely looked around and talks to San Francisco and to talk to different kinds of prospective buyers and try and get a taste of like whether there was any, like whether we had, you know, whether the multiple that I was holding in my head was something that I spent time looking at that as far as the timing went. Like I think what had happened is Dan had other things going on so he'd had worked on the seven day startup, which is a, a book that he wrote about how to start something really, really fast, which is great for anyone who's just getting off the ground. Um, but he'd also kicked off a brewery so he's like right into beer brewing and that was a real passion project for him. So I think at the same time that we went into the meeting with Godaddy, he's brewery was like opening or just starting on the Gold Coast, so really didn't have the bandwidth or probably the, I guess the energy to, Oh, maybe he did, but he had to look on you on the home front and I was all in and committed to making this thing happen because I wanted to see it through.
AlexMcClafferty: So I said to him, look, I'm going to like, I go 110 percent on this thing and I'll obviously keep you updated and I walk you through the challenges and the questions and stuff that we have, but I kind of want to go this one alone. And it was supportive of that. So it Kinda gave me space to, to figure it out and work through it and do that crash course in acquisition, which is, I think it's amazing how much you can learn and how quickly you can pick things up if the pressure is on.
Ryan Tansom: Do you recommend doing it when the heat is on, or maybe a little at a time when the heat is on?
AlexMcClafferty: Yeah, it feels like a bit of a blur. looking back and probably. Yeah, I would say if you can find people that know what they're talking about and know what they're doing, save yourself the energy because it is a process. It is something that there are experts available in Chris the work that he does for the radium weekend stuff, he's great resource for figuring that out. So rely on the experts. There's a reason that they've got around this. Mine was more, was more necessity where I was like, okay, I need to push this through. I need to figure this out. Yeah.
Ryan Tansom: Well it's interesting. When I started this podcast, Alex, there was nothing out there like built to sell barely even snort, you know, there was just like so few resources and you're like even like half the m and a books have come out probably since we sold our company and no, I found it difficult. We didn't have the resources that you guys that you had found and I didn't even know how to hire them. I didn't even know what questions to ask. Like I dunno, you got a spreadsheet, you probably know what you're talking about. What was it like, you know, with the Godaddy process, did you even before like we could maybe go into that, but how did you like when you said that the multiple goes back to the valuation question before we go into the processes? No, you probably because you strategically knew your value to someone else. Is there things that you knew that you're going to have to like write a narrative on or whether it was the employees that are going to be coming with? Had you kind of like structured or thought about how this was going to fit into someone else and so there's like strategic value that you were kind of working on and what were the things that go daddy aligned with the. The extra value in the strategic value. Does that make sense? The question?
AlexMcClafferty: Yeah, and I think the advice I would give other people is try to understand what's in the deal for other people. So ultimately it was just a matter of go daddy could go and build what we built is I wanted to. They can figure out how to do it, but what our basically painful was time and reducing the risk. They didn't need to spin up a team or a project to go and do it. They didn't need to figure out all of the plumbing. They didn't need to do any of that. They could just buy it off the shelf and kind of bolt it on. And I think understanding also the company's history of acquisitions. So I think at the time when we were acquired, we were probably like the 17th or 18th acquisitions. They knew what they were doing. They had a process that a team, they've... had all of that in place and understanding that and understanding, okay, like if certain things like to go over, if you get certain places in the process then you have like a little bit more certainty. No, not as much as you'd hoped - past the time for this or past that.
AlexMcClafferty: Yeah. I guess as far as like understanding understanding we were where we were at. I'm like, what value we hold to get out. He, I was trying to be really pragmatic and they'll be like, you know, this is going to be as significant as a hundreds of millions of dollars acquisition that is going to be front page news and there's going to be able to stuff going on and it's like yes, one of the, one of the strategic pillars that they're building the strategy around and I want to make sure that they can do well and I'm going to go into this one. The assumption that, and I think it might blow up and then the assumption that I need to build really good relationships with the people that are going to help me steward this thing through because in companies like that things change. Um, and things were changing, uh, as we were, as we were progressing with the deal. So those are, I guess a couple of things that people should remember. Like if you have, for example, a business sponsor, whether it's a director, a VP or even the CEO, get it at some time, get some face time with them so they understand who you are and what you're about. I went to, I went to drinks at Godaddy office in San Francisco on my birthday night in 2016. I had to then go and meet like I didn't have to but I chose to commit and go and meet the SVP and just spends, you know, 15 minutes chatting with them and saying what was going on because there was, it was going to be something there. So that's kind of like getting back to the people that push the deal through. So undrestanding that and building those relationships is important.
Ryan Tansom: Sorry to interrupt. In terms of, I was just curious the doing all the pr, which makes a ton of sense. Did you like, had you known enough through the conversations about what this would've actually cost for them to build it in the lost revenue and opportunity? Like, so you. Did you get, did you stray away from like the EBITDA play and just say hey this is what it's worth to you guys. And like Kinda how, how are you positioning the acquisition in light of what they are with their own needs and wants?
AlexMcClafferty: It was a bit of a dance. Ultimately I don't think they knew we were looking to exit, um, when we might big enough for it to be, you know, like it wasn't something that, how are we going to spend a whole lot of time on? So that was like an opportunity. Um, they looked, did a bunch of research in the market looked at all the competitors, so it's a bunch of competitors due diligence on that side. And part of it I think was just like pushing, like basically pushing, like I was pushing really hard to keep up, keep the process moving with whatever I could do on my end to make sure that I was like spot on with diligence and everything else. But as far as the, I guess the multiple and EBITDA and all that kind of stuff, they were generous and like there's always a negotiation, you know, we'll start at this and we'll go to that and everything else.
AlexMcClafferty: But I think what often happens in those negotiations is that you both kind of know where you're going to land, um, as far as the multiple guys. Um, and you start with these pulls apart and then you made it in the middle. And that wasn't really as far as the deal went. That wasn't really the biggest, the biggest hurtle or sticking point. It was more about figuring out how to actually integrate the business, I guess. And again, she had this listeners is if you have a multiple in mind that you can say, Hey, I'm happy to sell at that price. And like that's good. Like it of takes that off the table and once you've got to that and I could focus on the next thing. Um, if you go into it and you start to feel short change, Oh, you're worried about missing periods, you're worried about these other things that you know, you feel like you might not have get your hands on than that can sour Um, can definitely sour things for you and also take your attention off what needs to happen next, which is figuring out, okay, how do we, I get from this system to that system will, how do we like launch a product? So how do we do this in multiple, multiple different languages or actually get getting into the work that needs to happen. So once theyarrived at the number that I felt was fair, that was it, I could just kind of got on with it.
Ryan Tansom: Interesting. The strategic synergies and how you'd actually like, how they were going to harvest the value of the acquisition almost, it seems like.
AlexMcClafferty: Yeah. Emotionally, and this is another kind of element, but emotionally I wanted to make sure I could make it successful. So again, I had something to prove I want, I didn't want to just make some money from it and then just kind of bow out and leave the team hanging. I wanted to make sure that it landed and that and I see it and that was like again, kind of following through on the commitment and making sure that it actually happened and people were taken care of as well. My son is important. I was like making this all happen because if I just walk away, I walked away and blow it up, then I wouldn't be able to sleep. That's, that's an element too.
Ryan Tansom: Pride, which is nice. Have self-worth, which there's a lot of people that might not take that approach and want you to puts buyers up on the defense which have I think while the relationship building you did with a super important. Because actually they believed it. What was it like Alex doing all of this by yourself while also trying to run a company and I don't know how much of your time was devoted to the company day to day before you actually started this and then not only doing it by yourself and running a company, but going up against a team of people that do this for a living. I mean, that's a, that's a lot to tak on.
AlexMcClafferty: I was really fortunate in the sense that I built a really great time, so as far as the business went, like day to day operations of the business, I had great team leaders in place that were running the team of developers. Well the wordpress developer really great as well. So they all got on with it. Um, so that allowed me to really step back and, you know, focus on what needed to be know as far as going up against the team, have, uh, folks that know what they're doing. It's funny because there is this kind of combative nature and we talked about this before the recording started, which was united, that I guess you've got, you've got different interests in different things that you're striving for. A buyer wants to get value, seller wants to get value, where do you meet in the middle. I was, I was, I'll be honest though, I was hot. Um, it was really, really hard. No, that these guys on this team knows exactly what they're doing has figured all of this stuff out in advance and sometimes you feel like you're only like getting snippets of information or like different pieces, not the full picture. Um, I just want answers and you know that like once you're past signing the term sheet and you go into a period of exclusivity or whatever else and become like the leveraged. Definitely changes. Um, and do you feel that you feel that pressure. You feel that pinch
Ryan Tansom: Yeah. That's a good way to put it.
AlexMcClafferty: Yeah. It really started.... Like the pressure just to compound and I'm seeing this, I've seen there's a fight that I've worked with who have gone through the same process, like a vice that kind of tightens around you and you are trying to do as much as we can to influence and see it, but you don't have, you don't necessarily have any influence, you don't have any force. So you know, you've just got to. say this and I hate when people say it to me now, but it's true. It was like trusting the process. Like if it's meant to come off, it's going to come off, you do your level best if it doesn't get across the line, well are you're going to learn how an acquisition process works and that sucks. That's true. And I kept telling myself that.
Ryan Tansom: I was going to say, you know, there's so much psychology going on there because it's the sunk cost fallacy, right? Like so it's cost and it's just pure time and emotion and I was.... It's like, you know like in, in it, and I don't know about your guys the season in Australia, but like that's plenty of time. Like it, it may, it's in May when schools about to be out and he was like, I'm done. You know what I mean? Like mentally and then like to have that hold the thing. Like, wait, no, you're not done. That alone I think makes people make sacrifices in, in that diligence process that they never wished they would have done.
AlexMcClafferty: And the problem with that is if you go in and then, unless there's something that happened in the deal that is like put a bad taste in your mouth. Well I actually like if they know what they're doing, they don't really want that because I don't want a deal to land and the a bunch of work in and then handed over to the business unit and then you go like a pistol founder or someone that's really sad. So, and the odd. Now I know that like the smaller companies that happens quite a bit where there'll be some chiseling that happens in the deal process or you know, the buyer will get too aggressive with something and then this, the seller will land and just be really upset about things. It is still a relationship, right? So, um, I, again, I take the pluses in the Montessori. I was fortunate in the fact that the team, the acquiring team and the acquiring business unit understood some of this stuff.
AlexMcClafferty: They like were respectful and I knew that I was going to be stressed out and I needed that. This will be a big change and I wrap the tape around that to support it. But still, you go into a big company with an entrepreneurial of mindset and then it's like, okay, it's me versus everyone and this is another thing that happens all the time. You forget that you'll no longer running the show and you, uh, like in my case I became a director of product management and a founder is a generalist title, but a director of product management is even more ambiguous and it's like, okay, I have to figure out how to create an environment where I can be successful, but I'm working in someone else's environment now. And that's another thing that just like absolutely rattled me. So yeah. So I'm on so much good stuff there.
Ryan Tansom: I got a friend, he's got a couple offers on the table right now and uh, I'm just like, dude, you have no idea what it's like to sit in a conference room was like 10 other people and you think five of them are idiots and you can't fire anybody or make any decisions like you're not used to that. And just know that is going to be a scenario that could happen and it's going to be unbelievably frustrating.
AlexMcClafferty: Look, it's a real patience test. And I can't speak poorly of GoDaddy. What they do is amazing and brilliant business api, but the challenge is like as an entrepreneur, like you put your heart and soul into the work that you do every day you show up and you kind of leave it all out on the field, like folks that work in big companies, but that can just be a part of their left. I can just put it in the day. You don't have income so they can pay their mortgage and spend time with the family and it's just a completely different mindset. You know when you're in those 10 people, 10 person meetings where five people are like completely checked out and the other just like saying whatever was said in the last meeting and no one's taking any action from it like that. That is, that can be torturous to be prepared for it if you kind of be acquired by a big company because that is what happens. And I love. So I was going to say I love saying it and I don't love saying it, but I know and it's a guaranteed thing. Everything kind of stops and you're in one of those meetings and you're just like, wow, okay, this happened. Like I'm here, I need to figure it out. You know what I can do. But yeah it's part of it man. And absolutely part of it.
Ryan Tansom: So I'm sure you wouldn't. You just said that you're thinking like I've got the specific meeting in my head that I was. What were your two questions on that, Alex. Were you like, what, what, what was your thought like? Was it a okay I'm going to be okay for a period of time and like how did you devise a plan and because you're not there anymore. So what kind of led you up to and from that one moment that you had and then did you have a significant chunk tied to any earnout or milestones that was, that forced you to stay longer than you would have after you had that epiphany?
AlexMcClafferty: I can't go into the deal terms, but as far as the, like I left a shitload of money on the table with GoDaddy. And I think for me that was like a personal decision, because I don't think I was super happy. Like I just wasn't really happy doing what I was doing. Um, and as far as like I guess the meeting and you know, those moments, like I have a few of them, but I guess one that was funny was when I like, we would have a quarterly business reviews, which is, that's typical kind of big company thing, where you go around and retrospectively look back on the quarter and I like, I really enjoyed them because that's based on the senior leadership, but for whatever reason on that day I just decided to dress down and you know, not every one is in suits or anything like that. I'm sitting in this, I'm sitting in this quarterly business review and I've got the CEO sitting across from me.
AlexMcClafferty: I'm the chief product officer and the chief, like a hedgehog. And I'm sitting there and like in shorts and a tee shirt looking like I just showed up from the beach and I'm thinking. And I'm thinking from that perspective, they're like, who is this big goose? It just doesn't know how to dress himself. It's just like rocked up. He looks like he's just wondering from the beach. But like that was, that was kind of where I was at because I was in some, in some way, like checked out a little bit. No, it really was because I was like trying to, trying to figure things out, you know, leading up to the departure. I think what had happened to me in 2015, I'd actually started. I started coaching a founder because he was doing a product service. I did it with him for three months because I just wanted to get some of this stuff out of my head. Um, and then in 2016 I had another guy reach out, his name's Jake, and then he was doing, I'm getting mixed up. But anyway, so he reached out and was like, dude, I'm, I really liked to work with you in a coaching capacity. I'm like, oh, okay. Like he pushed me for a little while. Um, and then I had more and more people start to, to come to me and like doing these coaching calls at five and six in the morning before going on to the GoDaddy stuff. So like I think people were knocking on my door saying, hey, you know, you have some value to offer here, or walk, we appreciate it, you know, how you think about this from what you've done there. Um, and it came to me and it was like literally like slapping me in the face for a lot of the time, you know, well you want to see things through. So I had that conflict again where I'm like, okay, like a lot of money to leave on the table, a lot of money to kind of walk away from, but interpersonal circumstances change and things that might've changed. Sometimes the universe has a way of just like making that very obvious to you ... almost doesn't feel like a choice in some sense.
Ryan Tansom: That's very insightful. And I think a lot of people that are listening could probably relate to those different circumstances, whether there's a fork in the road but that it doesn't really seem like, like an equal decision because it's so obvious. And I think honestly with the listeners on like that they've been to an end for the last few years. Like, you know, if you can get to the point where you make it at least enough money upfront that you're, that you're not unbelievably trapped so that way you can make at least a little bit of, you know, horizontal moves without totally like blowing up your whole life. You know, I just, I, I find that way too many times. I don't know if you, if you see the same thing.
AlexMcClafferty: When you say horizontal moves, you're talking about having some optionality or being able to go into something?
Ryan Tansom: Yeah, I have to sit in those meetings anymore or like, you know, work for that boss where like it's like, so against your nature and you have internal conflict and you know, I think so many people get, they're like, well I need the money and the sale is all and earnout or employment agreement or something like that and it's too much money where they don't have these other options. And I just, it's one of the things, I just, I, it tears my heart away when you see that happening.
AlexMcClafferty: Well, I like the money thing is fascinating to me because I've had friends that have made like eight figures in exits and significant significant money, but the problem is like he can really never have enough money. Once you hit a particular milestone that you're striving for, it's just goes to the next level, like you'll want 10 x and that's for whatever reason, that's the way the worldwide and it's hard to show a cuddle second event. You didn't necessarily turn off. But the money. I tried this, I but the money just like will not make you happy. Like it doesn't matter how much money you got in your bank, can't have big houses, know how fancy your car is. Any of that kind of stuff. Like if you go day to day is not aligned with like I get out of bed in the morning at 3:30 on a Wednesday to take a coaching call with the client in Denmark. I would not do that to go into a 10 person meeting conference to just bounce around ideas that may or may not get for sure. Unlucky. That's a good litmus test. If you're willing to jump out of bed at 3:30 in the morning to do what you do. Then maybe the money will come and you know, that sounds a bit kep coming from a guy that sold this company to a big internet drive, but some of the stuff that starts to bubble up after you have that time to reflect right?
Ryan Tansom: After so many interviews of these people that have made so much money. You said it very well. It's like I've kind of boiled it down to if you can answer two questions everyday when you wake up as what really sweet problems do I want to solve and who do I want to solve those with? Everything kind of recalibrates around that because there's not A. I dunno, there's not really much else besides it.
AlexMcClafferty: The work that I'm doing right now, you can get hung up on lock Rod. This is my rate or engagement or equity or whatever else it is, but if you're in a position and you have the ability to go out and be helpful to people and not expect anything in return straight away and like you can truly like... have a really good social conversation, be honest and help them and somehow or some way, you know, this stuff will come back and again like karma and all that good stuff like obviously like being out here in the bush and feeling quite connected and everything else. Some of this is true, right? Like that. Hmm. Window of coaching that I did with the guy in 2015, I loved it. I freaking love jumping on those goals with him. Like I was right in front of me that whole time and I did it for nothing. Like I was like I didn't ask or anything and I got a lot out of it. So sometimes that's a good litmus test as well, which is like, what would I do for free?
Ryan Tansom: That's a great question to ask actually because then like, then maybe that's, that's awesome. So, you know, shared a ton and where there's probably hours and hours of stuff that we had didn't even skim the surface on if there's, maybe it was something that you wanted to highlight that we've talked about or something that we didn't touch on that, you know, especially because you're coaching, Alex, so you've got kind of an idea of what people are are looking for and they want the crash courses, you know, what would you leave, would you leave people with?
AlexMcClafferty: I think the point I would make is everyone's journey is going to be completely different, right? If you're looking for education or you're looking for a how to or whatever else, that's something that's prescriptive and was going to tell you what to do. Like whatever else. All of this stuff is really a contact sport, right? But can you don't actually get to learn any of these things until you get in and get in the mix. And I think Renee Brown talks about it like getting in the and you know, putting, putting your neck on the line kind of thing. So whenever I work with anyone in a coaching capacity, I'm always very clear on saying that every person is different. Everyone's got different needs and there's no absolutely like one size fits all to get your problem solved and if you're like a respectful of that and honor that, then it takes a lot of pressure off because you don't feel like you have to do something in a certain way.
AlexMcClafferty: So no, I think that's the message that I would share with people. I work with clients that are super organized and have 50 google box, everything kind of mapped out and then I'll work with guys, no people rather than. But people that, you know, fly into the call, whatever's on the top of mind I want to talk about. And that's okay too, like everyone has a different style, but as soon as you try and force yourself down a particular path, um, are there an acquisition and you're working for a big company. It's really not your jam or something else, like one way or another that stuff will bubble up. So I think I keep getting this advice from friends and family around me, which is be kind to yourself. So I'll share that back to the listneers, it can be helpful to them.
Ryan Tansom: If you're out of balance with yourself, it's gonna eventually ripple into everything else. Like it's gonna show. It's gonna show up and manifest itself. Probably in not very healthy ways. Oh yeah, we're good. Yeah. I think you and I probably got more of that with the listeners. If they want to tell us a little bit more about your coaching and then how to people get in touch with you.
AlexMcClafferty: Yeah. Coach founders now. Um, and it's kind of like me solving a problem that I had, which I kind of wish I had an advisor through some of the stuff that I went through. I do right now. I don't even know if I have spots available because I've got a handful of sites that I'm talking to you group coaching and individual coaching. If people have questions and I want to reach out to me. My email is Alex at prodcutize dot Co. Okay. Um, and the website is productized.co. Okay. So talk to people aboUt the positioning of that and are you really clear on what it is that you do and how you help founders and everything else? I think productize is as ambiguous as I can get when it's memorable to running with that sites individually and taking calls with sanders and seeing how I can help and kind of taking it from there. So yeah, if people listen to this and going through an acquisition on me to handle, I just want to chat, like in. Feel free to get me up and jump on a call and show show what I can share.
Ryan Tansom: Absolutely had a blast and I appreciate you coming on the show Alex.
AlexMcClafferty: Right on. Thanks for having me, man.
Ryan Tansom: I hope you enjoyed the interview with alex. I really, really had a blast talking to him. He gave a great insight. I think if there's a couple of big takeaways is one, is that what alex did and doing it himself, is crazy risky. It's a ton of work and I really, really suggest that if you're thinking about this at all, make sure that you're doing the work ahead of time so that way when you do get a random offer, you've got all your stuff prepped, ready to go. You know what kind of deal structure you want, you know, the terms conditions. You got your team. It's worth doing the work now before something randomly comes, but also you can engineer the actual exit that you want and I think you know, the other big takeaway is I don't know exactly how much money Alex left on the table in a potential earnout or the note that he left by leaving go daddy, but I really suggest that if you're going to have money on the table that is contingent of you working there, really wrap your head around what you think it's going to be like working for another individual, another company, and being an employee and how much of your payout do you want to tie to you working there versus how much money you need upfront so you've got the freedom and flexibility to leave and walk away knowing that it's more the faq kind of money or that I don't need this and if it is challenging or you hate it or you don't like it, you don't feel trapped. That you need that money. So you have to work there. As far as the last takeaway, if you're interested in doing one on one coaching with myself because you want to understand where you're at and where you need to go as far as growing and selling your company, reach out to me at riot gxp collaborative. Shoot me a linkedin message. I'm only doing five one on ones this year, so if you're interested, reach out. We're going to be wrapping that up by the end of january, so let's get on the calendar and have a conversation. Otherwise, I will see you next week.
Written by 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.