The Wise Exit

RYAN LANDAU - Episode 44 of the Cashing Out M&A Podcast

00;00;00;17 - 00;00;11;17
Ryan Landau
It's always a balance. It's always the economics of the business. When is the right time to sell it? Because as you raise more money, you don't have more and more options. You actually have less and less option.

00;00;11;19 - 00;00;32;02
Todd Sullivan
Welcome to the Cashing Out podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve. Today we have a special guest, great friend and Iron Man athlete Ryan Landau.

00;00;32;04 - 00;00;54;07
Todd Sullivan
Ryan, along with his brother Andrew, built Chalkfly, a company that helped transform how school and office supplies are purchased online. Launched in 2012, Chalkfly was among the fastest growing early stage e-commerce companies out there. It was quickly acquired by Global Office Solutions in under three years. Ryan's one of the most introspective and corporate culture conscious founders that I know.

00;00;54;10 - 00;01;21;10
Todd Sullivan
It's not easy to make the decision to sell your business so quickly. But Ryan has some great stories and great advice for all of us who may be thinking about selling our business in the early innings. I hope you enjoy my conversation with Ryan Landau. So, Ryan, thank you for being here. This is so great that you're willing to share your experiences as an entrepreneur and the exit that you had with Chalkfly and maybe hear a little bit about the exciting new business that you have.

00;01;21;10 - 00;01;41;28
Todd Sullivan
But as you know, the exit is generally a black box for a lot of founders. And so when somebody gets to go through it and share those stories, I think those are incredibly valuable. And that's what our podcast Cashing Out is about. And by the way, like I was just fired up when you said you wanted this time slot and you would come in here.

00;01;41;28 - 00;01;49;24
Todd Sullivan
And I had, like, no qualms about bumping Mark Cuban from the spot. So thank you for being here.

00;01;49;27 - 00;01;51;07
Ryan Landau
You're welcome.

00;01;51;10 - 00;02;14;22
Todd Sullivan
So before we get in to your business, is your background chalk by the exit? You and I think have a lot in common, right? I like to kind of start with how we met. And I don't know if I remember the exact moment. Right. But we both were starting companies around the same time in like 2012, 2013, 14.

00;02;14;22 - 00;02;40;19
Todd Sullivan
That range? Yep. Okay. And we're both funded by Detroit venture partners as one of our venture firms. So we were working in their kind of co-working space. Right. So you had started a company funded by Detroit Ventures, as had I. I had also started a company with my brother. Right. And you started Chalkfly with your brother? I'd say, like we both have young families who got a baby on the way.

00;02;40;19 - 00;02;55;14
Todd Sullivan
One and a half. I've got a baby about one. And then I would also say that you are an Iron Man triathlete. Right? And I love watching sports on TV. So we have way more in common than most people.

00;02;55;14 - 00;02;56;00
Ryan Landau
Similar.

00;02;56;00 - 00;03;21;05
Todd Sullivan
Yeah. Yes. So I am going to want to hear about how you can actually do three sports for that long is pretty remarkable. I get tired watching Sport one Sportello. So why don't we jump in? Yeah. Tell me about the kind of origins of Chalkfly, how you kind of got it off the ground. And then we like quickly move into the decision to sell the business.

00;03;21;08 - 00;03;48;24
Ryan Landau
Yep. So I think even to take a step farther back, it's originally from Michigan. When I graduated college, there was like, no opportunities in Detroit or I don't even say opportunities. There's just nothing on the radar. And so immediately, like moved to DC and then maybe this is in 2010, 2011, maybe right before we met, heard about everything that like Dan Gilbert, Josh Linkner was doing with Detroit Venture Partners (“DVP”) in this like revitalization of Detroit.

00;03;48;24 - 00;04;06;17
Ryan Landau
And so very long story short, and I think about 2010, 2011 was like, I have no idea what I want to do, but I'm going to quit my job. So ended up quitting my job leaving IBM as a Federal Consultant, which sounded fun and exciting but was very hard and ended up moving back to Detroit to be in the Madison building.

00;04;06;17 - 00;04;25;01
Ryan Landau
And so initially when we were in this building, which is an incubator downtown in downtown Detroit, I honestly had no idea what I wanted to do, but I knew I wanted to surround myself with people like you. Todd, the folks at DVP and stuff like that. And so we sat there or eyes out there actually as a way of trying to figure out watching these other businesses.

00;04;25;01 - 00;04;47;26
Ryan Landau
And then one of the things that I noticed is as all of these buildings were going up in the city of Detroit and all these people were busy building businesses, they needed all this like business supplies. And you think about office supplies, huge total addressable market, but super unsexy, right? Staples, Office Depot, all of these like unsexy vendors in the space.

00;04;47;26 - 00;05;07;28
Ryan Landau
And I was like, wait, hold on, we need to start a business here and we also need to bring my brother back. He was in Chicago working for Google. And so we were like, How do we start this like Zappos for office supply, bringing a modern approach to a really unsexy industry. And so that's what we started. And I think that's when we met, maybe it was 2011, 2012 to our time for.

00;05;08;00 - 00;05;23;16
Todd Sullivan
Yeah. Because we were both doing e-commerce, right. Yeah. But Chalkfly really, I mean you had a really nice start at the beginning there, right? You're one of the faster growing e-commerce companies at the beginning. Right. And it was office and also school?

00;05;23;18 - 00;05;31;17
Ryan Landau
Office and schools. Okay Yeah. So one in the same with there was a B2C, you know customer group and then there was a B2B segment that we were focusing on.

00;05;31;23 - 00;05;51;07
Todd Sullivan
Yeah. So yeah, being in that environment, getting to kind of trade stories back and forth with all of us right in. I think that's a great way to start a startup, right? To start a company to have that kind of camaraderie and support along the way, not just from your investors but from your fellow founders. So that was a yeah, that was a great time.

00;05;51;10 - 00;06;10;25
Todd Sullivan
So, you know, you have some early success, you got funding, you've got product market fit, the unit economics get set, and then it's not two years when you guys sell the business. So can you talk to me about that's fast. So what drove the exit, the decision process.

00;06;10;27 - 00;06;28;08
Ryan Landau
Yeah. So I think if you think about the core of like office and school supplies, very low margin business. And so when we started the business, there's really only two, I guess three trajectories, right? Continue to raise more money, exit, or just go out of business. And so we knew one of those path was going to happen.

00;06;28;08 - 00;06;54;07
Ryan Landau
When you start a business as excited as you are and in you're so pumped, you're like, this is going to be big. Honestly, you still have like no idea what's going to happen. And so we continued to grow the business. We can continue to raise money again. Office and school supplies extremely low margin business. And then again, I think it was probably two, three years into the business, there was a more regional player, Midwest player that approached us and said, Hey, we would love to buy the brand, we would love to buy your book of business.

00;06;54;09 - 00;07;12;14
Ryan Landau
And we decided instead of raising more money, let's take this exit M&A opportunity. And so that was, I believe, probably maybe three ish years after starting the business. But it was yeah, it was exciting. It's, you know, all different businesses have lots of different opportunities. That was one that we decided to take probably three years into it.

00;07;12;15 - 00;07;38;12
Todd Sullivan
That's great because I think as founders, we have so much invested in the business and if you're going to say, I'm going to go raise more money, give up or dilute myself or give up shares to somebody else, you're just creating a higher hurdle, right? And you really need to take stock of where you are. Yeah. And I know you really introspective guy probably had a way to evaluate this and said this is the right time for this business.

00;07;38;18 - 00;08;00;12
Ryan Landau
Yeah. And I think you, Todd just mentioned a really important thing for a second. I think people thinking about raising more money. When you raise more money, there's more options. I actually think it's the inverse. As you raise more money, there's less options because you have to have a bigger exit. So if you raise $1,000,000 or how about if you raise $0 and you sell for a million, you just made $1,000,000.

00;08;00;12 - 00;08;19;09
Ryan Landau
If you raised $1,000,000 and you sell for a million, then you're not even and if you sell your business for 5 million and you've only raised a million, you just made four. And so I think there is a misconception that like, oh, you just raised $70 million. Now there's only a subset of buyers that could potentially purchase your business.

00;08;19;09 - 00;08;31;14
Ryan Landau
So I think, like you said, it's always a balance. It's always the economics of the business. When is the right time to sell it? Because as you raise more money, you don't have more and more options. You actually have less and less options.

00;08;31;14 - 00;08;51;24
Todd Sullivan
Okay. So there's an economic way to look at it, right? And so, look, maybe the ROI (“return on investment”) drives the decision in a lot of cases, but were there other decisions or other criteria that were helping make that decision? And the reason I ask is we've had a few founders talk about the idea of getting a win under your belt, right?

00;08;51;24 - 00;09;11;08
Todd Sullivan
Starting a company, funding a company, having an exit and wanting to go do the next thing. I've had businesses where, you know, you build and you have a trajectory in mind and it's a trajectory that you've sold everybody on that total addressable market that you mentioned at the beginning. And then you're looking in, it's not there, it's not what you expected.

00;09;11;10 - 00;09;31;03
Todd Sullivan
And so you can bang your head against the wall over and over and over, but you know what the outcome is going to be. So why not create the right outcome as quickly as possible and move to the next thing? Like I've been in that position? Was there anything else in Chalkfly besides just trying to drive the appropriate economic outcome that made you say it's time?

00;09;31;05 - 00;09;53;26
Ryan Landau
Yeah, I think it was the balance. As I was saying before, as you raise more money, you have to have a bigger and bigger outcome. And for us, when we looked at it, it was like, do we want to raise more money or do we want to like step away now? And for us it was like we want to be responsible with the money that we're taking from investors and specifically Detroit Venture Partners, all of them like we wanted to be fiduciaries of their money.

00;09;53;26 - 00;10;09;04
Ryan Landau
We didn't just want to like take their money and say good luck, because I think at the end of the day, when you take a step back and you think about entrepreneurship, businesses will come and go. But relationships are what like the most important. And so maybe my brother and I wanted to stay in the business. Maybe we wanted to be done with the business.

00;10;09;04 - 00;10;23;24
Ryan Landau
But you really have to think about what all the stakeholders around the business wants. It's not just about you anymore as you take someone else's money. And for us it was at the point where we were like, Hey, this could be good for everyone. But at the same time, and maybe the most important besides the economics was about the relationships.

00;10;23;24 - 00;10;28;05
Ryan Landau
We were like, Hey, this is what everyone wants, so we should move forward with this.

00;10;28;05 - 00;10;46;10
Todd Sullivan
So that's great. And I know you as a founder, there's a lot of visibility even in that environment that we were both in. We're giving a lot of visibility into our companies. So we're not the only ones suggesting which way you should go, right? Yeah, And we both know that. Right. We were pushed particularly hard to go in a certain direction.

00;10;46;10 - 00;10;58;21
Todd Sullivan
Right? There's a lot of experience that we're listening to and then ultimately we're making the decisions, right, as CEOs. So maybe you take a little bit of a turn. How did you come to that decision with your brother, Andrew?

00;10;58;24 - 00;11;14;21
Ryan Landau
Two things. One, conversation with my co-founder, also known as my brother. But then, like you mentioned too, we're not the only people that are the decision makers there. When you raise money and you raise millions of dollars early stage in a company, not only are you selling part of your company, right, there's control and then there's the economics.

00;11;14;21 - 00;11;31;07
Ryan Landau
So we economically gave away part of our company, but from a control standpoint, we had a board and so we were a voice at the table, but we weren't the only voice. And so for us, we did have options to go one way or another. But again, I don't want to simplify it, but from a relationship standpoint, my brother and I, I don't think we're short sighted.

00;11;31;07 - 00;11;51;25
Ryan Landau
We know that we're going to be in this community for a while. And so we had some recommendations, Hey, this might be the best path. And so for us, it was kind of like, make sense for us, make sense for investors, let's go down this path. And so again, we're on to both on two different businesses now. But like for us DVP are I think actually probably one of the biggest customers that we have in the new business.

00;11;51;25 - 00;11;56;28
Ryan Landau
And so for us is again back to relationships. I think that's a big part of it. In addition obviously to the economics.

00;11;56;28 - 00;12;20;27
Todd Sullivan
I think that's just fantastic advice, right? You're not just kind of walking off into the either right there. There are people, zero person relationship ups involved and you want to preserve and enhance those, Right. Because this is a career path for for many of us. So how did you create this exit? Did you bring in investment bankers? Did you have an M& attorney is like, what did your team look like and how did you find the buyer?

00;12;21;02 - 00;12;39;01
Ryan Landau
Yeah, I wish I had like a beautiful story to tell you here. This was more of like an organic just opportunity that was inbound that approached us and someone was like, Hey, what do you think about this? We weren't actively trying to sell the business or anything. We were just like, Hey, again, back to what we were saying before, maybe this is the best path forward.

00;12;39;01 - 00;12;55;23
Ryan Landau
And so I think for us, what we were trying to do is always just keep options on the table and make sure from we could pick A, B or C and we were never forced into one direction. This opportunity approached us and we were like, Hey, at this time this option makes the most sense. And so we decided to pursue it.

00;12;55;23 - 00;13;14;23
Todd Sullivan
So with co-founders, right, I'm wondering, does one take the lead on saying, okay, look, this is a viable option that we need to consider as fiduciaries of this business. One takes that path and the other one says, okay, I'm going to keep running the business. Did you trade efforts or did you both do everything together?

00;13;14;28 - 00;13;45;09
Ryan Landau
Yeah. Again, I wish it was like a more beautiful, like split of responsibilities. But both of us, I think at the time when we were building the business and today even though we're building independent businesses of each other, we had a core focus of like, let's just do whatever we can do to help move the business forward. And so, yes, I think we both had a set of like, Hey, Ryan, you're focusing on this bullet points and other co-founders focusing on other bullet points, but sometimes it gets a little muddy and it's like, again, whatever we can do at that moment to move the business forward.

00;13;45;09 - 00;13;47;27
Ryan Landau
So to answer your question directly, it is a combination of both.

00;13;47;28 - 00;14;06;22
Todd Sullivan
Got it. Okay. So I'm looking for lessons, right, that we can share and and, you know, you have inbound interest. You manage that you're managing not only the potential buyer, but all the stakeholders. And you ultimately made the right decision for the business. I think you agree in hindsight, was it the right decision?

00;14;06;22 - 00;14;29;17
Ryan Landau
Yeah, I think one the right decision. And I would say if we were to put it in like a lessons learned category, I would articulate it as like businesses come and go. Relationships are like number one. Two is from like options try which is not easy it to make sure that you always have options as a business meaning like you can continue to run you have to sell or exit.

00;14;29;17 - 00;14;50;13
Ryan Landau
So then it's never I have to make this decision because of X, Y and Z. So options I know it's on simple but are important to have. And then it's also just seeing like where you are in the market and like where is the industry going and from that standpoint. So for us I would say it was like relationships, options and market and kind of all of those led us to believe like this was the right time for this decision.

00;14;50;14 - 00;15;12;08
Todd Sullivan
That's gold, right? That's really great insight, particularly the options. I think it's very hard to develop options. A lot of people think about getting to profitability, right? And then, okay, now I don't necessarily have to take money. I can grow a little bit slower, keep profitability if the economy changes and in the wrong direction for us, we have the options right?

00;15;12;08 - 00;15;13;26
Todd Sullivan
We don't have to go out and sell.

00;15;14;01 - 00;15;42;14
Ryan Landau
Yeah, 100%. And then, you know, when we exited that business and kind of going on to what I'm doing now, for me, we’ve taken any much different approach, as in we decided not to actually raise any money because we wanted to keep the most amount of options open. And so for us, you know, I've taken that path of raising, you know, a couple million dollars and then this path that I've decided to take and I don't think it's right or wrong, is essentially raise like zero money and be funded by our customers rather than being funded from like VCs.

00;15;42;14 - 00;16;04;22
Todd Sullivan
Yeah, I think the allure of venture capital right can capture a lot. I've certainly raised from a lot of venture firms and and today we are not funded by any external investors. And just like you said, we're funded by our customers. And I think there's no right or wrong answer. You just got to make the decision with with as much information in front of you as possible.

00;16;04;25 - 00;16;38;06
Ryan Landau
100%, definitely. I know I hear some people, you know, saying, hey, you got to just bootstrap, you've got to raise money. I actually am a believer there's like some more in between because it's nice to have cash, but also at the same time, it's nice to have options. And at the current state of the business that we're in, I actually think like because we didn't raise money, it forced us to find product market fit a lot earlier because again, not to simplify it, but like we had to make money and we had to bring in customers that were like, Hey, for the value that you're providing, we're going to provide you a certain dollar

00;16;38;06 - 00;16;52;02
Ryan Landau
amount a.k.a also known as a price for your product and service. And so I actually am a believer that like constraints are a beautiful thing and it actually makes you to focus on the things that matter rather than like all the shiny objects that are out there.

00;16;52;02 - 00;17;19;17
Todd Sullivan
Yeah, I mean, that's the operational expertise that you've developed and honed over time. No small feat, right? To be able to recognize that. One thing I tell a lot of founders and it goes back to creating options or having options the second you do take on external investment, right? And maybe this is beyond friends and family. As soon as you do that, you are on somebody else's timetable right they’re making an investment.

00;17;19;17 - 00;17;35;23
Todd Sullivan
They're expecting a return on that investment within a given time frame. And by potentially, I don't know, I don't want necessarily call it slow rolling. What we're doing now, both of us are building businesses pretty methodically to have full control of our timelines.

00;17;35;24 - 00;17;54;12
Ryan Landau
You have full control of your timeline and I also think the outcomes could be potentially a lot different, meaning when an investor gives you money, they're not looking for an 8% return because they could take that money that investor put it into the market. They are giving it to a startup when a company raises money to have a big outcome.

00;17;54;12 - 00;18;17;28
Ryan Landau
So sometimes this is like funny to say, but like if you are raising money from VCs and you create a good business or you hit a single or a double, sometimes that's actually not good enough. You can have $1,000,000 business that's very profitable in the VC world, and that's just okay, because in the VC world, again, these limited partners are giving monies to VCs so they can hit Grand Slams and be the next billion dollar business.

00;18;17;28 - 00;18;35;28
Ryan Landau
And so you have to understand, when you take $1,000,000 of, you know, VC money, there's intent behind it. And the intent is not for you to build $1,000,000 business. The intent is for you to build a $500 million business, $1,000,000,000 business. And then as even as sexy as those numbers sound like, the odds of that happening are so slim.

00;18;35;28 - 00;18;52;15
Ryan Landau
And so I think whenever you take money, you have to know what type of money you're taking and meaning like what is the intent behind the money. And from a VC, it's to hit a big home run. It's not to return 8% because an investor will take that money and just put it into the market instead.

00;18;52;17 - 00;19;11;17
Todd Sullivan
It's such a important point because I know we're not talking about the exit. Yeah, exactly. But we essentially are. We're talking about how the hurdle goes so much higher once you take on money from that asset class. Right. That is truly looking for Grand Slams, right? Not singles and doubles.

00;19;11;25 - 00;19;29;12
Ryan Landau
Exactly. I think you said if you if you were to say like the exit, there could probably be. And I know that this is what we're talking about right now. There's probably also different like subsets out of that. There's like the billion dollar exit that get the most amount of news and get like the most amount of like TechCrunch, you know, press and stuff like that.

00;19;29;12 - 00;19;48;05
Ryan Landau
But I also think and maybe there's another type of the M&A exit that you start to where it's like bootstraps exit, where it's, Hey, I started this company from nothing and I sold for $10 million. And by the way, that cap table, there was no one else on it. That is a pretty good win for an individual to build a business from 0 to $10 million and take that home.

00;19;48;06 - 00;20;07;26
Todd Sullivan
Yeah. Incredible. Back and again economically and just the decision process is not being driven by external factors or people that have totally different interests in mind. Right. Which change over time. Right. The pressure that an investor can put on in year one is very different than what they'll put on in year seven.

00;20;07;29 - 00;20;20;21
Ryan Landau
Yeah, I mean, there's so much news that goes around is this company sold for $500 million But if you do a little bit more research, you can see they raised $700 million. So everyone is taking a loss on it.

00;20;20;24 - 00;20;49;25
Todd Sullivan
And there's preference. Right? So that was the last investor that came in with a huge valuation was protected in that sale. Right. So the trickle down is even worse for for founders. Yeah. So I guess that's kind of a different discussion, but it really leads to the outcomes, right? And that's what we're trying to do is educate founders around M&A, around the exit advice from people that have been through that, whether there are big exits or small exits, it doesn't matter.

00;20;49;25 - 00;21;08;22
Todd Sullivan
All the learnings I think are transferable and it really helpful. So like I said at the beginning, you're one of the most introspective founders that I've come across. We're very good friends, so I know you well. I'd love to hear what you're doing now because I think it brings a lot of you into the business, who you are.

00;21;08;22 - 00;21;22;13
Todd Sullivan
It feels very mission driven and really circles back to how you why you wanted to come back to Detroit, Right? It was like, I want to be part of this. I want to be in the Madison building. I will figure it out when I get there. Can you tell us a little bit about what you're doing today?

00;21;22;20 - 00;21;42;21
Ryan Landau
Yeah, and it's funny that you said it feels very me, this business. And because before we get into the idea, literally how I thought of this business is I had a legal piece of paper which people don't use a pen and paper that much anymore these days. And I was writing down literally, what does Ryan enjoy doing and made a list of like bullet points.

00;21;42;21 - 00;22;02;08
Ryan Landau
Like I knew like I love building a business. I knew I don't love reporting to investors and stuff like that. And so today, you know, so I run a company called Purpose Jobs. We're the largest startup in tech community in the Midwest, but we have roots in Detroit, meaning I live in Detroit, and we were starting to build the startup and tech community in Detroit.

00;22;02;08 - 00;22;26;10
Ryan Landau
But what we saw what was happening is this resurgence of the city of Detroit is honestly the same story that's happening in Columbus, Indianapolis and other emerging markets around the country. And so for us, we maybe a common theme. We were focused on the unsexy meaning. We weren't focused on San Francisco, we weren't focused on New York. And really like how can we build startup and tech ecosystems in the middle of the country?

00;22;26;10 - 00;22;39;17
Ryan Landau
And economically, how we make money is we run a recruiting marketplace. So that just means free for job seekers. Employers pay us a yearly subscription to get their brand out to the talent community and obviously make good hires. And so that's what we're doing today.

00;22;39;22 - 00;23;03;03
Todd Sullivan
That's great, right? We at Exitwise love that category really, And a tech enabled staffing, job awards, that recruiting element. And we have several investment bankers that specialize in that area. We had a great staffing exit last year. I think that was actually our deal of the year. So I love hearing that. And then you're impacting so many people, right?

00;23;03;07 - 00;23;16;23
Todd Sullivan
Companies are paying, they're getting access and visibility into the talent pool that you're bringing together, not just for getting jobs but for community. Conceptually, I love the business. Where do you see it going?

00;23;16;25 - 00;23;33;19
Ryan Landau
Yeah, And so back to what we were talking earlier is like from a cap table perspective, from an exit perspective, what I'm focused on is just keeping the options open. And what I mean by that is like we started the business day one with zero investment and have been focused on this like crazy thing called like making money.

00;23;33;22 - 00;23;52;17
Ryan Landau
And so we are focused on profitability, we are focused on top line and things like that. And for me we are going to continue to try to build this business as big as we can, but also being thoughtful and not also growing at all costs. And so we are, you know, thinking about our unit of economics. So we can be in control of our own destiny.

00;23;52;17 - 00;24;09;23
Ryan Landau
And for us, you know, what I tell to our team every single day is like, let's continue to build and be really thoughtful so we can be in control. But then if an opportunity came along that made one plus one equal 19, of course we would have that conversation. And so I don't know where the destination is today.

00;24;09;23 - 00;24;26;05
Ryan Landau
Sitting here right now, but I know for the journey we are trying to build a big business, which I think you can really do bootstrapping your way and also being thoughtful in a way. Also, I guess to give some context, the way that we're able to do this is right. We're in a high margin business and so that's what we're building today.

00;24;26;07 - 00;24;50;16
Todd Sullivan
That's great. And I can't really say between us, but it's very obvious, right? You're on the map. You're getting interest from bigger companies, companies that could acquire you, and you're going to be in that. You're going to be the you only have that decision to make probably multiple times as you continue to grow the business. Now that you have the options, you have the control.

00;24;50;23 - 00;25;12;13
Todd Sullivan
How do you think you think about that topic, the topic of exit? Do you really just say, Hey, I'm going to build this business and I don't care who, I'm going to let it all be noise and we're just going to hit delete on those inbound interest emails. Or are you saying, Hey, I'm going to kind of keep track of this all along the way, measure what an ROI would look like if we were to sell today.

00;25;12;14 - 00;25;17;07
Todd Sullivan
Like, I don't want put words in your mouth, but yeah, how are you thinking about that? Because you're clearly getting attention.

00;25;17;12 - 00;25;44;05
Ryan Landau
Yeah. So I think there's two things that we're thinking about is, one, continuing to run a business and run it super successfully, making sure our unit of economics are great and just running a successful business. So that is one thing we are very focused on. The other thing that I would say is probably spend 10% of the year or less focus on is are there big partnerships, M&A opportunities, other partnerships that could potentially make us go one plus one equals 19?

00;25;44;05 - 00;26;06;11
Ryan Landau
And so I do sometimes have those kind of quote unquote M&A exit conversations, but we are trying to keep our options open. And I would say, Todd, one of the things that has definitely evolved since we met in 2010 to today, my checklist of what would need to be there to exit is very different. I would say, one, if we were to go through the checklist like one is definitely like money.

00;26;06;13 - 00;26;21;00
Ryan Landau
Like, does this make sense for the team and for myself? But also maybe this is a sign of getting older. I'm not sure is also like my family. And so I think about that now. Now, you know, ten years ago I didn't have a kid and now we have a baby and we have another one on the way.

00;26;21;00 - 00;26;45;13
Ryan Landau
And so I'm also thinking about like the value of my time. And so starting a company is like freaking hard. And so sometimes I am like, Whoa, this is crazy. Is this what I want to be doing now? Because you only have so many hours in the day building a business or building your family. And so I think before it was a lot of just like economic conversations that were running through my head.

00;26;45;17 - 00;27;05;09
Ryan Landau
Now I'm having a lot of like economic family value of times, prioritization, work life balance, all so many other things that are just like coming in. So I think quote unquote, the exit is a different conversation that I'm having with myself honestly today than I did, you know, let's call it five years ago.

00;27;05;12 - 00;27;27;15
Todd Sullivan
That's awesome, because we're in the same boat. So when I was out in Silicon Valley and, you know, investors are all talking about who they're investing in and they're just investing in really young people that can give all their time, right. And spend no money and don't have families. And I used to kind of resent, like, why are all these young kids getting their money?

00;27;27;18 - 00;27;49;24
Todd Sullivan
And now I kind of recognize as having a family and how important. Right. Spending time with your family is. And maybe we get more efficient. I'd like to think we get more efficient with our time and building our businesses effectively. But I think you bring up a important point with thinking about the economics of an exit. And we go through this with a lot of our founders.

00;27;49;26 - 00;28;11;21
Todd Sullivan
Somebody comes to me and says, Hey, I'm thinking about selling the business, or there's a company that wants to acquire us. They called us, What should I do? We bring in a high level of expertise from a private wealth management standpoint, meaning we go through an assessment, we bring in external people to go through an assessment with you to say, Well, what is your number?

00;28;11;24 - 00;28;29;27
Todd Sullivan
Because if we could sell you for $30 million today, what percentage is going to go in your pocket post-tax? And can you achieve the things that you want to in the next stages of your life? Have you gone through that process and have kind of a number in your head given where you are today?

00;28;30;01 - 00;28;54;25
Ryan Landau
Yeah, it's a good question. I do have a general number in my head, but also at the same time it's balancing like a lot of other things. So it's not just economics on the scorecard, right? Of course. Like where am I going next? I'm not interested at the current moment. And by the way, this could change in a couple of years, but I'm not interested in going somewhere so I can leave and then go start something else up right now, like I am very happy, like growing my business and like growing my family and being that with them.

00;28;54;25 - 00;29;12;07
Ryan Landau
And so the there is a number in my head, but also at the same time, there's other things that are on like that priority list. But I think you bring up a really important point because people just look at the number and say, That's it. You got to think about like from a waterfall perspective, like what money is actually going to be in your pocket.

00;29;12;07 - 00;29;24;12
Ryan Landau
There's taxes, there's other people on the cap table, there's team members and stuff like that. So I think at the end of the day, right, you got to think about what your number is. But there's a big difference between what the number is and like what's your take home is.

00;29;24;12 - 00;29;51;20
Todd Sullivan
Yeah, if I were to give some advice around this for founders is what is your number? How did you come to that? And it's not that you have to sell, it's know what that number is all along the way. So when the opportunity comes, you know, whether it fits your game plan or not. And I really love going through that process and getting people their number because your number is very different in different stages of life.

00;29;51;20 - 00;30;09;05
Todd Sullivan
Do you want to start another company? Do I want to be highly philanthropic? Do you want to be an investor? Do you want do you have to put your kids through college? Are you retiring? Right. All these different things that happen in life, knowing what your number is, it's really important. And it'll drive the way potentially the way you drive your business.

00;30;09;07 - 00;30;26;25
Todd Sullivan
We have a client right now where we could give the advice we have given the advice that if you spend the next 18 months doing these three things, we can double your outcome. And for that particular client, oh, I have to invest. I have to raise a little bit more money to do these things. I have to go off in a couple different directions.

00;30;26;27 - 00;30;45;24
Todd Sullivan
Not my strength today. If you meet this number we’re a go, right? Okay. How did you come to that number? And we go through that assessment and it's so revealing to an entrepreneur like what are you building for an economic outcome, but also your time so you can spend it with family and do other things that you love.

00;30;46;01 - 00;31;02;11
Ryan Landau
100%. And then I think you mentioned something important, too. It's also like the stage of life that you're into because I think a dollar let's just use a simple number, right? A dollar that I make today is very different than a dollar than I make in 20 years from now, because right my work and career still could be another 20 plus years.

00;31;02;13 - 00;31;21;09
Ryan Landau
And so my horizon, hopefully I'm around for a while. So a dollar in the market is going to grow over the next 20 years versus if I make a dollar in 20 years from now. Right. My horizon in life is also much different and expenses are much different. Right now. We're we're just starting expenses with daycare, colleges, all, all of those things.

00;31;21;09 - 00;31;36;18
Ryan Landau
So I think it's the number of there needs to be like context around it. And the numbers look very different for everyone. There's not again, I think people think there's a right and a wrong answer. There is no right and wrong answer here. It's it's very much an art versus like a science.

00;31;36;18 - 00;32;02;04
Todd Sullivan
Yeah, it's self-evaluation and it evolves over time. That's good stuff. Is there anything that, you know, you've gone through the exit, which most entrepreneurs have not done right? Like one in ten of these businesses even work or get off the ground, never mind end up in the hands of somebody else to grow. So you've been through it. If you had two or three pieces of advice, I know you've given them quite a lot along the way.

00;32;02;04 - 00;32;06;22
Todd Sullivan
I'm excited to kind of highlight a few of those things. What would it be?

00;32;06;24 - 00;32;25;05
Ryan Landau
Oh yeah, I think there's a lot and to give some context, right, there's, you know, exits that go well, there's exits that go bad and things like that. So I would put in a couple things I would say, again, not to go back to relationships because we're we're in such a tiny world that like, relationships are so important.

00;32;25;05 - 00;32;45;14
Ryan Landau
And I've been maybe even sometimes more focused on that than the financial outcome. So I think, you know, cultivating like the relationship is so important because once you exit with that investor group or that business, my hunch and I could be pretty sure about this is you'll probably run into those people again or end up doing business with those people again.

00;32;45;14 - 00;33;11;00
Ryan Landau
So I think you want to be hyper focused on that. I also think you want to be hyper focused about like where you are in your life, right? Are you just beginning your career? Are you ending your career? And then I also think it's just about being like intentional, like as you bring on money. So, right, the exit is more of a destination, but like the start of the journey, like understand why you are bringing on that money who're those investors and what is their intent?

00;33;11;06 - 00;33;18;25
Ryan Landau
Because maybe their intent with their money is different than your intent. And so make sure intent and money are all aligned to awesome.

00;33;18;25 - 00;33;37;01
Todd Sullivan
I think, boy, the alignment right of the start to how you think about the end, it's really important. And like you said, you discussed options, really creating more options, having not reducing your options. Yeah. This is gold. Thank you. Anything else that you would want to.

00;33;37;08 - 00;34;07;04
Ryan Landau
Yeah. No, it's a it's a fun ride. It's a fun journey. And again, I think there's not one path. That's right. I think sometimes raising money, if you want to go big, is what is right. And I think sometimes maybe the last untold story is this like bootstrapped option where you're building a business. And so I know many entrepreneurs and many business owners that have had massive exits doing the traditional, the unsexy I don't even want to call it slower, but just like back to the basics, kind of building a business.

00;34;07;04 - 00;34;08;20
Todd Sullivan
Methodical and making money.

00;34;08;20 - 00;34;15;19
Ryan Landau
Yeah, making money. I know it's crazy these days in 2022, but yeah, lots of options and ways to build businesses.

00;34;15;20 - 00;34;21;08
Todd Sullivan
Ryan. Thanks for, for doing this. I really appreciate it. I think people are going to learn a lot from this conversation. So thank you.

00;34;21;09 - 00;34;23;24
Ryan Landau
Thanks for having me, my friend.

00;34;23;26 - 00;34;46;00
Todd Sullivan
Thanks again for listening to the Cashing Out podcast. For more founder exit stories, please subscribe to the Cashing Out podcast on Apple, iTunes, Spotify, or wherever you listen to your favorite podcasts. And please remember to exit Ys dot com and the Cashing Out podcast are for entertainment purposes only. This should not be relied upon as the basis for investment decisions.