Podcast: Why the Long Road Pays Out Better, an Interview with Ryan Moran
This podcast takes you through Ryan Moran's successful closing of an eight-figure deal and what he did to make it happen.
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
Ryan Daniel Moran is one of the most sought after and well-respected leaders on Entrepreneurship in today’s market. As a serial entrepreneur, author, and investor, Ryan’s main focus is on creating lifestyle freedom — helping people create lasting businesses and investing the profits wisely while enjoying a higher quality of life, and working less.
If you listen, you will learn:
- Ryan’s background in business.
- What working for Dunkin’ Donuts taught him.
- The skills he picked up along the way.
- How to create value for your customers.
- The importance of optimizing your channels for your business.
- The businesses before the big sale.
- How the sale of Sheer Strength began.
- Understanding your leverage in a business negotiation.
- What Ryan would have done differently in hindsight.
- Why entrepreneurs are attracted to e-commerce.
- How Ryan built a relationship with his private equity firm.
- The benefits the PE firm brought to the business.
- How they structured their deal.
- Life after the sale.
- The lessons Ryan learned from the process.
- The “who” is more impactful than the “how” in business.
- Successful entrepreneurs play the long game.
Announcer: Welcome to Life After Business, the podcast where your host, Ryan Tansom, brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: Welcome back to the Life After Business podcast. This is episode 97. Today's guest is a powerhouse. Ryan Moran is the podcast host of Freedom Fast Lane. He is the owner of capitalism.com, and within the last couple of years, Ryan had an eight-figure exit where he actually netted eight figures after the sale of his company. And on today's show, Ryan and I talk about how he grew his company into a machine that was able to run without him, how he ended up scaling up to $10,000,000 in revenue and three to $4 million in EBITDA. And then with that kind of size and him making a difference, someone ended up knocking on the door and wanted to acquire him. And the deal momentum got going and Ryan was able to share how he just thought that this was going to be some random exercise, but lo and behold, the next thing you know, he's got a signed LOI. And he had some amazing advice about once you sign that LOI and once that deal train gets going and you start handing over information, you lose all leverage.
Ryan Tansom: So it kind of- the theme of today is that you hold the prize. As the entrepreneur, you have the cashflow that everybody else in the marketplace as business buyers, that's what they want. So you sit there as the entrepreneur thinking, well, they've got the check. I have to give them all this stuff so I can get the prize. When in reality you hold the power and you hold the cashflow. So you should be able to dictate the terms and conditions. Ryan was able to share us the ups and downs and the things that he learned. And we had a great conversation and great dialogue about the things that he's been through. I really hope you enjoy this interview with Ryan. So without further ado, here's Ryan Moran.
Announcer: This episode of Life After Business is brought to you by Solidity Financial's growth and exit planning. 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 right buyer at the price you want.
Ryan Tansom: Ryan, how you doing today?
Ryan Moran: Hey Ryan. Thanks for having me on, dude.
Ryan Tansom: I'm really looking forward to the show and having you on. I, uh, talked to a mutual friend will give Paul Miller a shout out who was on your show and has a very interesting story himself. Um, but uh, I got hooked up onto your podcast, started listening to a bunch of episodes and I was sitting there listening going, oh my gosh, I think our audiences are extremely similar and you've got one heck of a message and a following that you've built over the years since you became an entrepreneur. But for some of our listeners that might not be familiar with your story, Ryan, can you take us back to how you became an entrepreneur and why? Because I think it's, it's extremely important and every entrepreneur has their own reasoning that they got into it and I think yours coming from the personal situation you went through is a good one.
Ryan Moran: When I was a kid, I say that my first business was that I drew hand-drawn pictures on computer paper and took them door-to-door knocking, asking for a penny each in order to, to transact with my hand drawn pictures of my dad was my first customer. He bought two of them that night and he provided all the computer paper. So hundred percent profit. He was my 80 / 20 customer, if you will. And I think sometimes you're just born with it and I'm one of those that just came out of the womb an entrepreneur. But when my parents split, I was uh, somewhere between 11 and 13 years old. And the thing that I learned from that was that I, for better or worse, believed that I was on my own. And I... all I learned how to do during that time was carry something on my back and run with it. And it made me a very good entrepreneur later in life were that.
Ryan Moran: The other side of that was it made it difficult for me to rely on others, which is something that I, I, I still am learning as now somebody who's building bigger companies. But in that period I kind of learned, all right, I guess I'm on my own. And when I was 14 or 15, I was working summer jobs and started, got my first part-time job at a Dunkin Donuts, which was within walking distance of my house. And one night I came home and I was about to fall asleep and my mom woke me up in a panic and I could hear her voice quivering and this and that, that panics sense of, you know, somebody is about to cry. And she said with like a hint of anger and yet mostly just like hurt, "Ryan, you broke the washing machine." And what had happened was I had forgotten I'd even know you were supposed to do this.
Ryan Moran: We were, we were so poor. We had like, you know, this like loose tube on the back of the washing machine and apparently you're supposed to, like, we were supposed to, every time we use the washing machine, we tightened the screw because it would come loose and what had happened was it had come loose and the washing machine did its thing and, and it had overflowed and overheated or something, uh, and I, and it was like a $50 repair. I wasn't quite sure what was so upsetting to my mom. And in retrospect I realize now that she wasn't upset about a $50 repair. She was upset about the frustration and we had another setback. Another thing in which... that would, that was that she had to think about, she was already working so hard and a $50 repair was going to be just another thing.
Ryan Moran: And I, I just had this sense of I'm going to have a different life than this. I'm not gonna... I'm not gonna fall asleep every night thinking about broken washing machines and worried about how I'm going to fix random things that break. I'm going to, I'm going to have- whatever it takes. I'm just going to learn what, what, what that requires and do that. And right around that time one of my customers at Dunkin Donuts me a copy of the book Rich Dad, Poor Dad. I noticed that he had owned a- His name was Eric and he had this cake shop in town and so I would ask them about business, about being a business owner, and he gave me a copy of Rich Dad, Poor Dad, where I learned that 10 percent of the world's wealthy own 90 percent of the wealth. And you know, it's funny that today if you say that publicly to people are like "down with capitalism" which of course, which is nonsense, of course I can say that as the owner of capitalism.com. But I, I- no part of me had this sense of like that's unjust. Everything I heard was like alright, I guess I got to find it out with those 10 percent of people do. I'm going to find out. And everything pointed to being an entrepreneur or which meant creating something and then doing something different. What was interesting is during that time, all my friends and even family members were encouraging me not to, not to learn about business because I needed to maximize my federal aid before I went to college. I needed to be as poor as possible so that I could maximize my financial aid. [Ryan interjects: What is the logic in that, right?] Like what, what are we doing? This? Are we being serious right now? Don't contribute and don't make money so that we can take as much from the government as possible? Like, what? And this made no sense to me. So what I did learn, Ryan and since you're somebody who focuses on tax planning, is I realized that if I opened up a corporation and I kept profits in there and it was a C Corp and I didn't take distributions myself, it could be seen as separate and I can still maximize my, uh, my uh, distributions or my financial aid from, from, uh, from the government, so.
Ryan Tansom: So what were you doing at that time, Ryan, where you actually had the profits? So I mean obviously like the, the dramatic, you know, experience... I can just feel the, the probably the stomach ache you had as you went through that with your mom. Like what- the next day, when you woke up, what was the mission? What like was there. Was it, I'm going to sell bubble gum, like Warren Buffett door-to-door? Was it the drawings. Did you double down on that? Like what was the first... I mean, I'm sure you've pivoted a gazillion times, but what were some of the first things that led you to the profits that you would actually have to actually have to put in that C Corp?
Ryan Moran: Yeah, well thank God I didn't double-down on drawings on hand-drawn pictures on computer paper. I would not be on this podcast with you today, Ryan. [Ryan interjects: Who knows, maybe!]. So at the time it was like, all right, I'm going to make as many tips as possible at Dunkin Donuts. I got my tip cup. I walk home with an extra six bucks every night. Now I'm going to make as many as possible. And Ryan, what I discovered is people tip you a lot more when you smiled, people tip you a lot more when you gave them an experience, people to tip you a lot more when you remembered their name and you remember their favorite order. And so now we're talking about like customer experience and customer service. And to this day I will tell you that I think we all have the fear of losing it all. What if it all goes away? And for me that nightmare scenario is what if I lose everything and I have to end up working at Dunkin Donuts again and part of me it's like, you know, what will happen is I will be the best damn doughnut salesmen God ever created.
Ryan Moran: That's what will happen. I'll... I will know every customer by name. I'll be upselling them on coffee. I'll be, I'll be the best damn salesman on donuts ever. So I, and I learned in that time little bit about customer service and customer experience and then it was I read Rich Dad, Poor Dad and started thinking like an investor. And so to me it was "okay, I now I now I want to buy some assets, acquire as many assets as possible throughout my life" and that it was kind of the turning point in my life and career. Where I ultimately started making real dollars was I had a computer teacher who taught me how to do html. One thing my parents really encouraged for me was they saw that I had taken a liking to computers. They fostered that interest and they bought me a typing tutor when I was in like middle school.
Ryan Moran: So seventh and eighth grade, I'm typing 100 words a minute. So my computer teacher fostered that, was like, "you don't need to be doing typing tests, you need to learn html" - which isn't even used all that much anymore. But at the time I'm hand-coding websites on Dreamweaver and my dial-up computer in my living room. Right. And so I... and, and that led me to learn about a search engine optimization and taught me to learn about affiliate marketing. And then eventually physical products and ecommerce, which is where I invest now. So it's one of those things where you're Steve Jobs says you can only connect the dots backwards and uh, to be honest with you, I don't recount this much in my brain and I'm rather enjoying connecting all these dots, these dots.
Ryan Tansom: It's interesting when you look backwards like that, how many different things could have gone a different direction had that one teacher not been there, right? I mean, it's so interesting how everything unfolds. So like, you know, as you're learning how to do this, Ryan, and you're starting to generate money and first of all, a couple of questions along that journey. One is a lot of, a lot of people that read Rich Dad, Poor Dad immediately try and go buy an apartment complex or like a duplex or something like that. So how did you determine and was it the html background that you said, okay, like I can actually make money on that because I think your approach towards business and streams of profit is very similar to the Rich Dad, Poor Dad. However, it's with businesses, not real estate. I mean, how did you connect those dots, now that you're looking backwards?
Ryan Moran: Yeah, that's a great question. So Rich Dad does a good job of talking about making your money in a, in a business or at your job and then investing the profits into other places that you don't have to operate. It's that shift into the investor mindset. And where I think a lot of people go wrong is they try to make investing in their business or their business investing rather than trying to keep them separate. So even for me now, you know, I went through an exit, uh, about a year ago, biggest payday in my life, very proud, and my thought at first was okay, now I can go buy up as a bunch of single family real estate, which, which to me, you know, to me, I, I, I had too much respect for real estate investors to try and think that me as a part-time investor can get the same type of deals and know as much about the markets as people who are doing it full-time.
Ryan Moran: So I don't even try to do that anymore. I just give my money to the people who that is their business and participate in the profits passively. So I go all-in on my strengths. Where do I produce,? Where do I, where do I create value? At 18, you know, that's like whatever people will pay you for that you're excited about. Um, you know, and at 19 when I'm selling affiliate products on the website that I'm coding in my college dorm room, it's just follow where wherever money is showing up. When you're starting out, you're in yes mode. It's yes to everything possible. And then you hit a certain point which is you need to be in no mode and you need to be in... sometimes you're in buy mode, sometimes you're in sell mode. Right now I'm in sell mode on a lot of assets. So at that point, at 18, 19, it was, it was you're following where, where money is and falling, where we're, wherever there's momentum and I think so many people go out and in pursuit of passive income. So they're buying real estate rather than doubling down on a skill set and creating something which is either, you know, that's a hustle or it's a business, whatever you want to call it, taking those profits and putting them into whatever investment vehicle that you want. I think they're different. And I think for most people, step one is invest everything in your business and then you use those profits to go be the investor.
Ryan Tansom: Well, and this is what I want to impact a lot of that because you touched on a lot of interesting and extremely important, uh, points there because um and one of them - and because when I hear more about the exit that you did and how you built that business and how you kind of went through that transition, but also Ryan like you and I briefly talked about it prior to jumping on the call, is that a lot of entrepreneurs in a lot of people jump in and they have this business that is an investment and they don't necessarily realize that it is that it might be a lifestyle business that is generating tons of cash flow, certain things, a great lifestyle, but they don't realize that they're going to somehow have to exit out of that and it should be an investment. But then also there's this whole separation of doubling down on your skill set and then work because you have to hustle like you said, right?
Ryan Tansom: You have to- you you go from working the job and doing the services to building it to a valuable company and valuable profit and cashflow streams so you can sell it and so you have to like merge from being an entrepreneur to being an investor and that's what creates the most valuable companies. And how do you... kind of walk us through that journey because as you were doubling down in your skill set, what was the actual deliverables of the company and how did you work yourself to a point that it was a, a sustainable cash flow for someone else?
Ryan Moran: Well, that's a really interesting question because there was a big pivot for me because my skill set was myself for a long time and I am not sellable, thank goodness. And where I kind of got my freedom was for probably about 10 years from, you know, the college dorm room or from my parents dial-up computer to my dorm room to the first few years after college, I had learned how to make money. I had learned how to sell things. I had learned about leads, customers and sales, but I was not a business person and I had a mentor call me out on this. The mentor is like, "you know how to make money, but you don't have a business." And, and I was considering myself an entrepreneur, but I was not an entrepreneur. I knew how to make money on the Internet, maybe, but there was nothing sellable. And I was learning a few skill sets along the way because I was, Ryan, I was buying and selling websites as an asset class, which is still a very, very interesting play if anybody wants to Google that up, but that's kind of what I was doing as, as one of my, one of my gigs, if you will, and so I had achieved that sense of the laptop lifestyle, if you will, but there was no business behind it and that puts you on a lot of soul searching of like, I know how to make money, but I don't really I don't know what I'm building. And a mentor of mine, same mentor who kind of called me out on my lack of a business. I was like, well, you know, what would you do if you were. If you were me? And he said, you know, what I do is I would sell stuff. Like the it's so hot right now to be in tech. It's so hot to be in information or blogging and some of that's really interesting and we're on a podcast right now so we do some of that, but what was, what, but he's like, people are always going to buy stuff and that really stood out to me and it stuck with me and I've always made my money looking at channels and how to optimize channels. So when I made websites, I learned about Google search engine optimization because that's where all the traffic is. Gett in front of it.
Ryan Moran: When I sold information products, there's a channel called Clickbank. You know, if you got your products to rank on there, you made a bunch of money and the channel for physical products on the Internet was kind of still in its infancy. And that was Amazon.com, which I, uh, I like to say I was an early adopter to because I had a Prime membership in 2007. And so at that point in my career I was kind of looking for change. And so I became kind of fascinated with ecommerce brands specifically on Amazon.com because I saw that as the emerging platform and I saw some opportunities there. Sso it, it was never that I was able to build my skill set into a business, but I applied my skill set to new businesses that could be systemized and could be cashflow for somebody else. And thankfully I got in at a time when the trend was on the upswing. It still is and there's a lot of private equity groups and a lot of investors who are fascinated by that sector because it's obviously interesting and obviously doubling every five years or so. So the, the idea of being, there was some timing, there were some opportunistic chips played and then that was the- those were the businesses that I've sold. I've now gone through two exits on ecommerce brands that were mostly based on Amazon.com.
Ryan Tansom: So let's, let's kind of unpack that a little bit because I think, you know, with the videos that I've seen of you and the presentations you give, you're very open about it, which is a fun because, uh, you know, there's a lot, a lot of personal stuff that people end up having to talk about on this show. But you know, around what were some of the major milestones from a revenue and cash flow and you know, did you build it to sell it to someone specifically or did someone knock you uh knock on the door? Because I think there's this like chicken or the egg. Do you build it to sell it or someone all of a sudden says, "hey, you're now bugging everybody and you're now like out there. What if we just buy you?" Was there was a strategy to it and what were some of the major financial milestones along the way?
Ryan Moran: Sure. So I've built a handful of physical products brands at this point, one of which was a yoga brand called Zen Active Sports. And that was sold within about a year of starting it. And that was somebody who bought it uh, they approached me and, and to be perfectly honest, frank, it was a small deal and they approached me because they wanted me and they wanted my intellectual property and they were kind of courting me as a, you know, a relationship. So it was a great learning experience to sell that business, but I wish I hadn't done it. I wish I had held onto that, grown the business and gone through a, a more strategic exit later. Later I had a business that was a health and fitness company, preworkouts, creatine and post workouts, um, some supplements and that was a company called Sheer Strength.
Ryan Moran: I'm still a minority owner in that business. That was pacing about $10,000,000 a year with about 75 to 80 percent of that coming from Amazon.com. We also owned about a thousand retail stores nationwide. Still are. And Sheer Strength profitability was at, well it depends on who you ask. Our EBITDA was between three and $4,000,000 and then you go through your, your valuation period looking at add-backs and where they are discounting things. And we ended, we ended up selling at about a $15,000,000 valuation. Um, and I sold a majority stake and I still own a, a certain percentage of that. And, and so that's, that's where it was. I was mostly systemized out of the company at that point. And my business partner stayed on, um, and is still there at least part-time.
Ryan Tansom: And how long did you have that business? Because I, you know, what's interesting and the context of why I'm asking is because I see in the ecommerce world so frequently where people go from zero to crazy numbers super fast. And like in the traditional business world, it's like, Hey, let me see, you're like, you know, three years, last three years' financials and tax returns and all that where it's so different because it's such an explosive growth in this side. You know, how long did you have it around and then who... were you planning on selling it?
Ryan Moran: W we had every desire to when we started it. So I, I didn't want to get into a new business unless it had sellable potential. If nothing else, I wanted to learn that process. If nothing else, I wanted to see what that was like. And we took our first sale in June of 2013. Uh, we sold in June 2017. So we had it almost exactly four years. And we sold, we sold it to a private equity group and the idea for me- so my, my dream, my goal is to own the Cleveland Indians. Uh, that's, uh, that's my first love and buying the Cleveland Indians is going to require me to do more than build a 10 million dollar a year business. So for me, a lot of people ask why did you sell a company that was profitable and growing so quickly and for me at my options where I could either continue to grow the business which was already at 10 million and I had never grown $100,000,000 company. I wasn't sure I was capable of growing 100 million dollar company or I could partner with a group that did have an experience doubling, tripling, quadrupling companies and watch what happened and learn from the sidelines, which seemed like a better long-term investment for me than trying to do it myself so that I could apply that to other companies and also build up a better network faster. And that has been the case. So I was evaluating it more than just on the dollars that I was going to receive, which certainly factored in, but I was also factoring in the capital of my time that would be freed up and the relationships that I could create by going through the exit and the learning capital that I would have mass as a result of going through this process and watching how that company has grown. And I'd say that has been just as valuable as the dollars that I took off the table.
Ryan Tansom: Well, and I think it's interesting because there's a, there's a theme over the last handful of my podcast because there's a lot of been a lot of private equity recaps that have been talking through. I want to explore your side because of the ecommerce where there's a lot of PE firms, whether it's distribution or manufacturing or you know, like a lot of the typical up-and-down the street companies. But you know, the, the, the ecommerce and the digital marketing space. There's been a lot of these PE firms or people like to call themselves that where they might not actually be that. Um, you know, so I think there's a lot of cautionary tales out there for people on who is uh who are they actually sitting in front of. Did you seek these people out and did you have like a controlled auction with an investment banker or did you have someone at a trade show or someone call you up? I mean, what was the actual courting process?
Ryan Moran: The courting process came through a broker, so we were approached by a broker that made some pretty bold claims and so we entered a relationship with that broker because there was no downside for us or do you find us a buyer you're saying you can, go for it. But we weren't ready to go to market. It was more like, yeah, do your thing. Which was a blessing and a curse, Ryan, because ultimately they did bring us a deal that we were happy with. Um, and it was a deal that, that we completed. The downside was we weren't ready ahead of time. It was, it was more like if you want, if you want to bring those kinds of numbers to us, you go ahead and bring those numbers to us dudes. And uh, so we did not, we did not do the, the upfront work that we should have done, which is something that I'll now preach to my people like you, you would have known this ahead of time. I didn't know this, so we didn't prep, we didn't operate our business really any differently while they were doing their thing and until there was an LOI on the table, that's when we're like, oh, this might happen. It's time to figure this out, which I'm, I'm sure I'm not the first person to tell you this, Ryan. [Ryan interjects: That's why I have the podcast.] Yeah right, right. So, so I wish I could have gone back three months and done some proper preparation before we went to market. But we were a little bit surprised at what happened. Also very thankful. I learn by mistakes anyway and so I did a lot of learning during that time.
Ryan Tansom: Well, let's, let's shine the lead and some of the things that you learned. I mean, so you, you have an LOI, you probably went through due diligence, you went through this whole cavity search, which is usually what happens, right? [Ryan M interjects: I'm still limping, buddy.] It's like, yeah, here's this 28 page document with all this stuff I need. But you know, other than like the due diligence stuff, maybe Ryan, like what would you have done differently in how you're operating your business and how you would have taken it to market, you know, is there, you know...
Ryan Moran: Oh, Ryan, I just, I'm just going to give you the, give you the goat on this one. The biggest thing, the biggest thing, you are the one, you are the one with the cashflow and you are the prize. And so often as entrepreneurs who got into this game because they wanted a better life, they want quote passive income. Somebody shows up with a check and now they're the price that becomes the prize. And so we do this song and dance for our future buyer hoping not to poke the bear and we get beat up and we say "yes, Mr. so-and-so..." because they're the one with the check, right? But they're trying to buy you, you're not trying to buy them and so there's this awkward dance that you play when you give up all of your power. My biggest mistake was not showing up and saying, these are our terms. We waited for the, for the company to say, "here's what we offer." In retrospect, I should have shown up and been like, "no, these, these are our terms. Do you want to meet them?"
Ryan Tansom: Well it isn't Ryan, you, I wish I want to shout that on the rooftops because we did the exact same thing where my business partner puts it in the most elegant way where, you know, a lot of entrepreneurs they're at a trade association or something, you know, someone - there's because there's a trillion dollars of dry powder sitting on the sidelines right now with investment bankers trying to make their feet and the PE firms trying to deploy their capital, we are the people that are the desired ones. Right? And so what happens is they're out fishing, they're trying to do all this stuff and you're at this trade association. You get this phone call like, oh my God, someone's actually willing to buy my company and you had this anxiety because you never really knew whether someone would or wouldn't ,when the reality is you don't realize how desirable you are to almost everybody. So you should be able to dictate those terms and conditions.
Ryan Moran: Yeah like this... It's a simple play of economics here. I mean, let's go back to the multifamily real estate. I live in Austin, Texas. People are all over themselves for four percent cap rate.
Ryan Tansom: Right?
Ryan Moran: And it's like, woah four percent cap rate in Austin, Texas. Amazing! Where you can buy a business with 20 percent ROI for paying five X. Cash, right? So, like, you have the most valuable asset in the world right now: cash flow. And people want it. And, and we forget that because of the context in which we're operating. And, and uh, and to echo your, to quote a good friend of mine, Ron Burgundy, I wanted to shout it from the mountain tops. I didn't have a mountain top. I had a podcast and a laptop. And here I'm telling you, you are the prize. Not the buyer.
Ryan Tansom: Well and to extrapolate that a little bit too, Ryan, is I, you know, when people say "what do you mean by terms and conditions?" and I'm curious in what you potentially, you know, if you would have done anything differently or going forward, it's how long you stay, how much you give up. I mean it's like everything, right? I mean it shouldn't be a prepackaged deal. Is there a certain things that you're doing now differently or what you would have done differently as far as the terms and conditions?
Ryan Moran: Well, I, I would have shown the growth plan for the company upfront, like I would've come up with a, a well-done document saying this is what we're doing and this is where we're going and this is why it matters, and then I would have followed up with here's the number that we're looking for. Here are our here's our EBITDA, here's what our terms are from each of our involvement, my partner in, and here's the type of group that we're looking to work with. If you meet this criteria, please move forward with your offer. That's very different than: so you want to make an offer? Which is basically what we did with the brokers. Why the brokers didn't bring this idea to the table, I'll never know, but in retrospect just doing that one week of work probably would've been. I would've walked away with maybe twice as much money.
Ryan Tansom: We left almost a million-and-a-half to 2 million bucks net on the table through the lack of creativity and the deal structure and just like all these different things that you could have potentially known and it's also the different kinds of buyers because if you, if you have that, then it's just like any other real estate asset. I mean it's like, Hey, we want the best person to come here and offer us what we want. Right. It's so different and you know, going back to what you were saying, roundabout the cash flow, right? You have the prize, you know, is there things that your community - the Freedom Fast Lane or the Back Room or the people that you interact with that are... I think your world in the ecommerce tends to gravitate towards the scaling out of the business a lot better than some of the traditional businesses up and down the street or the baby boomers, you know, that free- It's the free cash flow is decoupling yourself from the operations. There's certain things that you did or would have done differently or that you're seeing that people are doing successfully in order to get that more free cash flow?
Ryan Moran: You used a lot of big words there, Ryan, so it was a lot of big words for my stupid brain. But in reality, Internet companies are sexy right now to the baby boom generation because you're seeing things like Amazon have year-over-year growth, acquiring Whole Foods, moving into all kinds of different markets. And basically any physical products that isn't involved with Amazon is, is pretty much irrelevant at this point. So I think, I think the reason why you're seeing so much interest in that sector is because it's changing so quickly and people are willing to overpay to have some participation in that upside. So, uh, and, and, and the thing about Internet companies is that they tend to be very customizable. I can never say that word.
Ryan Tansom: I know what you meant! Now you're trying to use the big words, right?
Ryan Moran: I'm trying to sound like I'm smart, Ryan. I just know how to click buttons on the Internet, but. But that, that they're there, they can be fairly automated and they can be fairly duplicated, which is a double-edged sword because if later you don't add in some real marketing and branding, you're going to be... You're going to get hosed, which is, which is where I think the role of more professionalized equity groups and bigger businesses can come in and provide their own strategic value. If you have a group that has background in advertising and marketing and branding, they can come in and professionalize that type of a business and create a real portfolio out of it. Whereas most of my peers are scrappy entrepreneurs who know how to sell things like I used to be, but don't really know how to apply good old fashioned business principles to that business to take it beyond $10,000,000. And so I think that's, that's why you're kind of seeing in my world a lot of businesses kind of peak at about 10 million and more old money come in and buy them up, put together a portfolio and you're seeing rollups and consolidations start to be popular.
Ryan Tansom: Well, and I think you definitely hit on some really important things there because I think it's more of the beware, right? Because you know the analogy, and I can't even believe that I was using some big words because I always think of myself as the scrappy entrepreneur too you know, because I, the analogy Ryan that I give is that a lot of us entrepreneurs are playing checkers, you know, so it's launch the next product, build out the next location, you know, whatever it might be - hire the next employee - and the professional equity markets are playing 3D chess. You know, they're playing three boards, seven moves in advance. And so what happens is you, you're not even playing the same game and you don't even know what questions to ask. So you might have a, you know, an equity group that promises you that check or that prize and don't realize all the baggage that comes with it.
Ryan Tansom: So it sounds like you had a good partnership that you landed with, but there's a lot of crazy things to be aware of out there. So you know, can, can you explain the relationship that you have with your equity group and then... because I mean that's a fancy term from new partners. Right. And they bring new people, new skill sets. So how did you end up, you know, maybe explain how you invest in side by side and how they maybe restructured it and what services do they bring to the table that allowed you to kind of step back and reinvest your time and other things?
Ryan Moran: Yeah, the, I mean the, the, one of the first things that they ever said to us was that this is a marriage without the makeup sex and it's harder to get out of. And we're like, "Great. A pleasure to work with you guys." And the, the relationship was very honest and upfront from the beginning of what we wanted out of it, what they wanted out of it. And I, I, because of the stories that you're bringing up, I, I was very uncomfortable with the situation until... I live in Austin. They were in Dallas, so we took a trip up to Dallas and met face-to-face and went over what the plan would be if we went through. And by the end of the meeting, that's when we signed the LOI. So we had received an LOI and I was super uncomfortable with it. I did not like the approach of being locked up under LOI and then having everything kind of all of our books combed through all of our processes looked at, um, you know, going through open heart surgery before when there was just an LOI on the table. I don't like that process. So. And that's, and that's, that is the process that most acquisitions that my peers go through looks like is they just, they get an LOI, they sign it, and then they get ripped apart. So they were pushing the LOI on this for a bit and we took the trip to Dallas, met face-to-face for four, five hours and that's when we signed the contract and decided to move forward so that that kind of was a nice way to begin the relationship and they're a smaller PE group that is nimble and can just. And so it has always just been an open conversation about assault, meeting our goals together.
Ryan Tansom: Is there, what skill sets were they bringing to the table? Was it just more of like taking over your guys' or was there a strategic partnerships or relationships or talent that they were going to, you know, insert to help continue the growth path?
Ryan Moran: Yeah, their biggest asset, I would say is talent. And the talent being that they have gone and built infrastructure many times in the past. So, so what's interesting is in a lot of cases you're selling to a strategic acquirer who's in the same space as you or you're selling to somebody who has similar or related businesses that can end up being part of a portfolio or a roll up. That wasn't the case with this one. With this one, their expertise was in building infrastructure and it was going out and building and going out and getting executives and what was interesting to me, it was watching how their first thought that they had was not like what strategy do we apply here, but what people do we go get. And that really left an impression on me of as soon as you buy a company, you're going, okay, what- who do we need?
Ryan Tansom: Yeah, it's interesting because you know, everybody that you know and people is one of the most challenging things that's out there for sure. And so do they have like a pool of people and then, you know, actually I think the better, the better question that I've got... So you switching gears and maybe a little bit, Ryan has that, you know, you talked about reinvesting side-by-side with them, which is kind of like refinancing your company for simple terms. Right? So you left the stake of money in there and you allow them to take their talent and their strategies to apply it where you're more of a board member seat and you took a chunk of money off the table, correct?
Ryan Moran: That's correct.
Ryan Tansom: And so when we're talking about divesting into these other businesses and such like that, so you know, how much did you, how did you negotiate, how much you wanted to leave in there? Was it something that they demanded that you will leave some in there, which is typically the case? Or did you want to, or how did you guys come to, um, how much was going to be at stake?
Ryan Moran: Yeah, they, they had their model and their model was how much of a business that they're, that they tend to buy and then they go out and they raise, you know, they, they, they do their side on the equity piece of the equity side of it. And so that was all done in the Loi and to be honest with that was that was mostly their model and then a little bit of negotiation. Um, but, but at the end of the day they had kind of the number that they're used to buying and that was just a starting point.
Ryan Tansom: So that allowed you to freed up to, do you know, what was the first time... actually, what, what did you do when you sign the purchase agreement and you were done and you had that money wired in that I've seen on your video where you circled it. So was it just like, well, who or did you already have the next thing plan? I mean, how did you, how did you mentally handle that?
Ryan Moran: That's a funny question. I thought you were going, "what did we do when we signed the LOI?" and that was, you know, get back to work and then the closing process got delayed, as it always does. You know, got delayed one week. Um, you know, it's going to be tomorrow, it'll be the next day, it'll be next Tuesday, it'll be next Friday. And it kept getting delayed and finally we had like a deadline and we were like, alright, this is what we're going to do. If, if we don't hit this deadline, maybe we need to think about going back to market. And we said that we're like, "look, you know, we're not saying we're out, but we're saying that we're going to think about going back to market if we don't hit this deadline" and that deadline passed. So we, uh, we're like, well, okay, we got to talk about, we're going to do here, let's take the day and think about it. And about an hour later my partner calls and he goes, check the bank account and the money had showed up and it went through and there was this sense of uh, well, I guess this is real, I guess we really did the deal. I'll talk to you on Monday.
Ryan Tansom: And then what'd you do? I mean, did you go celebrate or was it like, were you so fatigued from the deal process that it was almost surreal?
Ryan Moran: Ryan, I'm still fatigued from the sale process. So, so this is what happened. Um, and I, I would love to tell you that I went out and partied and celebrated. The reality is I woke up Monday morning and I went back to work and to be fully honest, uh, at the same time I was going through a separation and I was going through like recovering from a lot of burnout from being a workaholic and so most of my life moving forward was picking up the pieces of how I had basically burned everything to the ground. So I never celebrated, to be honest with you. I never had my time. I never had my party. I went back to work and part of that work was working on myself. Part of that was working on my next business. Part of that was planting seeds for the next things .Some of it was, you know, I have a following and an audience. It was serving those people and discovering how I was going to show up for them. Now that my life was a little bit different, actually quite a bit different. So I didn't have that. I was like, um, there's an old commercial with Emmitt Smith when he won the super bowl where he was in the middle of the bench press and he is like, I won a Super Bowl, I guess it's going to rest now. And he took a breath and he said, okay, rest is over. And he went back to the bench press and I kind of felt like that, I mean, part of me needed my body needed a recovery, but I did not have the big celebration. I, uh, I, I said this is a great next step of me owning the Cleveland Indians and it's a big, big step for me owning and Cleveland Indians, but I to this day feel like I'm just getting started. Like I have learned a lot of very valuable lessons in my 12 years as an entrepreneur and they've set the stage for me to build something that I think is great, but that I've just begun the process of building.
Ryan Tansom: So as you're going through that, Ryan, and you're picking up the pieces like you said, and you're recalibrating because I mean you've, you've naturally done some recalibration with some of the hard things that are going through. Is there a certain principles that you decided to pick up going forward that we're going to be important to not recreate that burnout or burning everything to the ground?
Ryan Moran: Yeah. Well I can tell you that there are more intellectual things that I've picked up because I'm still practicing these. Um, so to act like I have beautiful work-life balance would be just a complete lie, but the things that I decided to pick up were number one, I get more done when I work less and by work less. I don't necessarily mean work fewer hours. I do mean focus on fewer things at one time and giving myself the space to be creative when I, when I am... like this past weekend I went out for a hike, got a bunch of son, jumped in a lake and when I came out I like I couldn't wait to come back to it, right? And, and I, I know that I need that creativity, I need that type of being recharged in order to be creative enough to be productive. I know that in order for me to be at my best, I need sadly eight hours of sleep or else I'm grumpy-pants Ryan. And I wish I didn't [Ryan interjects: I can relate]. I wish I could survive on five-and-a-half to six-and-a-half hours of sleep, but I can't. I make poorer decisions. There's literally an ROI to that extra two hours of sleep. Um, and, and, and, and that ROI is creativity and production when I'm awake. The other thing is being willing, and this is probably the hardest lesson for me, being willing to go back into the trenches and the grind and be like, get my hands dirty again. Because the first thing I wanted to do when I started another company was not do that. Like I wanted to avoid the hard work and I wanted to like hire out a big team and have... and then it just crumbled. Right? Um, uh, I assume you're laughing because I'm not the first person who has said that.
Ryan Tansom: Well, I'm just thinking about myself. I went from having 80 to 100 employees that like- you're like puppet master to huh, it's just me and a laptop, no cash flow anymore to hire out and it's a totally different deal.
Ryan Moran: Right. And for me, I thought once I was at that level, I needed to stay at that level and so I hired a lot of people with the expectation that would make me grow faster and I found out that that was, uh, that that was not- that was maybe a faulty assumption and that I would be just as profitable, I'd be more profitable and more, um, more productive with a smaller team. And then not trying to build the whole thing at once. I am just not at the level of skill yet to be able to have a 25-person team out of the gate. I've just, I've never done that before. It's not my skillset. And it breaks when I tried to do that.
Ryan Tansom: Well, ideally you'd have the revenue or profit coming into afford it too.
Ryan Moran: Exactly, right? And you think you're on cloud nine when you've got, you know, an, an eight figure check in your, in your, uh, in your history. But that doesn't mean you're a good entrepreneur. It means that you had a good go. And so I had to be humbled and get humble enough to go back to the grind and to build something bigger and better. I had to start in the dirt, get my hands dirty and plant some long-term seeds. And, and even now, I mean, I go back and when I'm - my company is capitalism.com. You know, I, I, I invest in entrepreneurs. I invest in physical products brands now. And I'm documenting the journey as the CEO of capitalism.com. Um, because I'm very concerned about how my generation views capitalism insight. I'm out to spread a message that's a little bit different when I'm in the comments on my videos, it's me responding to people, you know, it is me interacting with people. I had to be humble enough to go back to engage with my customers. Whereas before it was like, I'm going to remove myself from that process. And I think that's when things broke, so I had to get humble enough again to go back to the beginnings in order to be great again.
Ryan Tansom: Well, and you're using all these other companies and in and uh, investments to grow your wealth as well as in... And then you're able to focus your skillset, like you said, doubling-down on a skill set and the thing that you're doing right now. Is there certain things that you're doing in that kind of combo that you see really working for you? Or is there things that you've got advice for entrepreneurs that have maybe had a transition or going not going to do that to kind of diversify your situation like you had between investing and also where you're spending your time as a business?
Ryan Moran: Yeah. Great question. For me, the asset that has the greatest ROI in the world is an audience. Whether that audience is for your business or whether it is you as an entrepreneur, I think that no matter where you put your energy moving forward, an audience with happy customers or people that you have created value for is something you take wherever you go. And you could probably simplify that even more to just be relationships. And every time I've gone through a hard time or every time I have gone through a reset or a restart, the thing that I'll do first is make a list of the people that I want to have relationships with and to deposit checks into that relationship account as much as possible call people that I want to spend more time with people that I want to shore relationships with. Because I think relationships are the highest form of capital.
Ryan Tansom: Well, and it's interesting too, um, and I don't know if you, if you've seen this after your liquidity event, but you know, and there's like this catch 22. Those relationships that you value the most don't actually potentially take capital because it's... And now that you're all of a sudden not financially strained, you have time to invest in those relationships that you only want to and not have to deal with all the other people.
Ryan Moran: Yeah, a hundred percent and those relationships, one relationship ends up leading you to the opportunity that is your next big adventure. And I, I've always, I've always found that who is more impactful than how. And so when I, when I go through a hard time or I go through a transition or I'm not sure what to do next, it's often the question of who do I want to do business with or who do I want to connect with or who is going to help me? Who do I want to spend time with that ultimately leads to that end goal? Not how or when or what, but usually who.
Ryan Tansom: Well, I- very wise words as we're wrapping up here and I know for the time here, you know Ryan, if there's one thing, because we talked about a lot and you got an awesome journey that you were willing to share with us. Is there one thing that we maybe didn't touch on that you want to leave our listeners with or if there's something that we talked about through the last hour that you want to highlight, what would it be?
Ryan Moran: Yeah. The. The, the lesson that has always treated me well is if you play the game for the long-term, you end up winning and you end up beating the people who are playing this game short-term, short-term win. And for me that has often resulted in missing short-term opportunities for long-term equity or long-term wealth. Much to the chagrin of people around me. But I find that when you walk in the investment in people in processes in habits that compound over a long period of time, you get to where you want to go a whole lot faster. And that's the case with investing. The things that you buy in you're investing and all these people who are buying Bitcoin, I think are going to have a horrible wakeup call soon. Um, and at the same time, the people who are buying long-term dividend-paying boring stock, um, are, are if they're willing to wait long enough are going to out-win and outrun all the people are going for short-term gains. The same is true with health. The same is true with relationships. I think playing the long game more often than not, winds in both the short-term and the long-term, but most people are not willing to reverse-engineer what habit they're gonna practice over a long enough time in order to achieve that. And that has been the lesson that has probably served me the best.
Ryan Tansom: And I think that's an amazing note because I mean that is some very valuable stuff that a lot of people do not adhere to and I, and I've watched it and I can't highlight or echo it enough. If our listeners want to get more of that kind of wisdom, what's the best way to reach you?
Ryan Moran: Yeah, so my website's capitalism.com. I have a podcast that is called Freedom Fast Lane, iTunes, Stitcher, Spotify, and you can hit me up on Instagram - probably the best way to contact me. My Instagram is my full name, Ryan Daniel Moran.
Ryan Tansom: Thank you so much for coming on the show, Ryan. I had a blast.
Ryan Moran: Alright, Ryan. Thanks for having me.
Ryan Tansom: I hope you enjoyed that interview with Ryan. If there's a couple of things that you should have taken away from that, it's one you hold the prize. Your cashflow, if you built your company correctly, is valuable to you, but it's also extremely valuable to every single business buyer out there, whether it's a strategic sale and a strategic buyer or if it's a financial buyer, you hold the thing that everybody else wants, so make sure that you know what you want going into it. And be comfortable being in the driver's seat and dictating the terms conditions and what you want from a potential buyer and asking for because they didn't create it and they're looking for you to hand something off that is extremely valuable, so make them pay for it. And also know what you want to do with your cash flow, whether it's investing side-by-side of someone else that's taking over part of the business or if you want to completely walk away knowing what you want will get you to a point where you can ask for it.
And the more you show the growth potential based on the historical trends that you've got, the more you will get that future growth as a value today. When you end up selling it.
If you enjoyed, go to itunes, give me a rating. Otherwise, stay tuned. We will be actually launching on the GEXP collaborative website a bunch of deep-dive guides about how to do all this stuff to keep your eye out. 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.