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Living The Red Life
How I Sold a Company for $16M and Bought It Back for Pennies on the Dollar w/Ryan Moran
00:23:15
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- [00:00]
Ryan Moran
Our business at its peak, we sold it for $16 million, Rudy. We were doing $10 million a year in sales. When we sold it, it was doing a few hundred thousand dollars in revenue. That's how much that it had degraded. So we bought it back, put on the same exact playbook, hadn't changed. Same product, same people, same strategies. And guess what? The company is growing again. Here's the takeaway that was so profound for me.
- [00:29]
Rudy Moore
My name's Rudy Moore, host of Living the Red Life podcast, and I'm here to change the way you see your life in your earpiece every single week. If you're ready to start living the red life, ditch the blue pill. Take the red pill. Join me in wonderland and change your life.
- [00:44]
Unknown Host
What's up, guys? Welcome back to another episode of Living the Red Life. We have a special episode today with one of my longest Internet marketing entrepreneur friends and a really cool story how he sold his supplement companies for 60 million and then rebought it for pennies on the dollar. And a very close friend for many years, Ryan, welcome to the show.
- [01:04]
Ryan Moran
Thanks for having me, Rudy. I mean, we knew each other when I was just scraping this little company together on the climb up, even before I sold it and then bought it back. So you've seen the entire journey. Thank you.
- [01:16]
Unknown Host
Yeah, yeah, a long time, literally. I moved to America, joined a couple of masterminds. Met you at, like, one of the first. I was just, like, finishing grad school and starting my fitness business. And I think I shared this with you, like, one of the first marketing events I ever went to in my life, especially in America. Was your event sat at. Yeah, yeah, I sat at the back of the room and, like, taking notes. And it was right before we went to Ben Greenfield's house. And I think you were there too. This was like, what, eight years ago? And then, you know, a few years later, we became close friends and I spoke on that stage. And then, you know, we've been friends ever since. So cool. Full circle story, but let's. Let's dive in. Tell us about you and the supplements to kick us off.
- [02:03]
Ryan Moran
I cut my teeth as your traditional Internet marketer, like many of us do, learning affiliate marketing or a skill set like SEO or pay per click marketing or whatever the hack is at the time. But about eight, nine years into my career, I realized that if you do this stuff for a real business, a real business meaning something that you can scale and sell, then it works a lot better. So I applied my skill set into a physical products brand. This was early days in the dawn of Amazon FBA and when that was kind of a new platform. And I put all of my marketing efforts into customer acquisition and follow up sequences and search engine optimization and content marketing into what I would call a real business, which allowed me to launch products quickly. And I ran the math when I was, you know, 25 years old, seeing that if I could just get four products at 25 sales a day, that would be a hundred sales a day. And at a 30 price point that would be a million dollar business. Which to me at 25, I never had a million dollar business before. So that was the end goal. But then you realize as you get to a certain point that oh my goodness, there's something called enterprise value in business. We forget about this as cash flow entrepreneurs. We think about cash in, cash out. Wait a minute, there's this whole other side of it called enterprise value. That's the value of your business when it is sold. And of course there's a variety of different ways that you can calculate how much a business is worth. Poor man's math just is a multiple of profit. And our business at its peak was doing about $4 million. I think maybe, maybe now I forget, it's been so long. We sold it for $16 million. That was the valuation. But here's the kicker, here's the asterisk. I didn't get all that money upfront. I got most of it, split it with my partner, 50, 50, but we didn't get all that upfront. We carried some to ride with the private equity group because they wanted to take it to $50 million, $100 million and me at 29 going, you guys are the big guys with these, with these deep pockets. You've done this before, you know how to build businesses to 50 and $100 million. Well, they don't know Internet marketing. They don't know the skills that you and I have. And everybody listening to this is so good at it gets corporatized and bureaucracized. And so a few years in, after selling the company, the company went bankrupt. They got away from the playbook that made it successful. They got away from the entrepreneurial spirit. And I bought it back for a few pennies on the dollar. I've now been rebuilding that business. It's now pacing seven figures again. When we brought bought it back, it was doing a few hundred thousand dollars in revenue. Rudy. We were doing $10 million a year in sales. When we sold it $10 million, it was doing a few hundred thousand dollars in Revenue, that's how much that it had degraded. So we bought it back, put on the same exact playbook, hadn't changed. Same product, same people, same strategies. And guess what? The company is growing again. And we're still fairly early in that climb up process, but now we're pacing seven figures again. We're still relaunching the product line and the intent is to bring it back to its old glory days and then we'll see what happens. We could sell it again or we could just build a really great business that we're excited to have. That's the full story.
- [05:44]
Unknown Host
Yeah, it's, it's a great story. And I always love like I've heard a few of the stories where entrepreneur sells it, P tanks it, entrepreneur buys it back. I think it's like the David and Goliath. That's one of the best stories. And you know, I've worked with some PE firms and I think they even admit like their success rate is like 2 out of 10, but the 2 sell is like they get, get it to 9 figures or whatever. So it still makes sense for them, you know, but it's just funny.
- [06:14]
Ryan Moran
Here's the takeaway that was so profound for me. This is how valuable our skillset is as entrepreneurs or marketers or founders. Sometimes we forget because most of us grew up just wanting to make money. We just wanted to have a different life. And so we learn a skill set and we learn to monetize it. But when you apply it to a real business and you think about the enterprise value that it can create, oh my goodness, we have such a skill set. And we often as entrepreneurs sell ourselves short because we see all the problems in our businesses. But when you see that really deep pocketed investors and private equity groups buy companies, get away from the thing that made it special and tank it. You realize, wait, maybe we're good at this. And maybe if we can combine those different frameworks, we can take some lessons from the finance world, we can take some lessons from the PE world and we combine it with our entrepreneurial spirit and our marketing know how maybe we can build some really exciting special enterprises. Yeah.
- [07:17]
Unknown Host
And I think it's interesting because like, you know, I've obviously had a mastermind and coached hundreds of people now and I've seen like there's a certain percent, probably a small percent that actually can take companies, entrepreneurs that can take their company to 10 million and beyond because they're able to merge the entrepreneurial side and the corporate side. Sadly, I don't think Most entrepreneurs can, which is why most never get past a couple of mil. And you know, I'm always emphasizing, I say people buy my masterminds and stuff for ads, funnels, marketing, branding, social. But half of what we're teaching is the boring stuff, right? How to make a hire a VA, how to delegate, how to track KPIs. And you know, you can learn a lot of that great stuff from corporate, but I would love to just talk about the 16 million in sales so we don't. Or exit so we don't graze past it. If someone's listening that, you know, doing a couple of mil a year or scaling their business, what were some key lessons to actually building it to that level and then the exit path?
- [08:20]
Ryan Moran
Well, the first is thinking about enterprise value as separate from cash flow. So I like to say there's three types of money. There's cash flow, there's wealth, and there's enterprise value. Cash flow. Obvious you're not listening to this podcast if you don't know what that is. Wealth is the total amount of your net worth, what you could sell everything for from your investments in your real estate and all that. Enterprise value is what you can sell your company for. Now most entrepreneurs, if they're smart, they take cash flow from their business and they invest for wealth. That's better than most. You have your cash flow business, you invest it into long term index funds or real estate or whatever you invest in. That's better than most people do. But if you flip the whole thing and you focus on enterprise value, you can build a company that is worth and can be sold for millions of dollars within a handful of years. And then you can invest and never have to worry about cash flow again. So we can flip the whole order. Of course you can do both. But by prioritizing enterprise value, we think about the business differently. When you are thinking about how I'm going to maximize and increase my cash flow six months from now, the approach is going to be different than how do I build enterprise value over the next four, five, six years? Very different paths. Both are fine. But if you want to build something you sell, you think about enterprise value, you think about the person who's going to be buying the company. You think about where there is value different than the other businesses in your sector. When you start looking at that, then the guiding principles start to be a little bit different.
- [10:00]
Unknown Host
Well, I'll give you a real life example, like me growing this company, you know, to sort of 30 million or so in sales. I probably made Less profit than like pretty much every other Internet marketer. But I grew my team to a hundred employees, big offices, TV shows, big celebrity projects. So you know, I had the option to like, hey, do I want to have really high margins, take it out and put it in real estate and stuff? Like a lot of the IM space do or do I want to like put it back into the business and expand all these projects? And I don't think there's a right or wrong. Any time will tell. But like, I'm always like, no, I want to build this $100 million company and then you know it. So it's kind of like if you draw through it on a graph, like, you know, I'm behind, behind, behind, but then I peak. Right. Whereas other people are more slow and steady. And again, no right or wrong. It's like personal preference. Do you want to go low carb or high carb? Right.
- [10:57]
Ryan Moran
As a great analogy.
- [10:59]
Unknown Host
Yeah, yeah. Because everyone wants to say, oh well, you shouldn't be doing this and that. It's like time will tell. Right. And I think you need to be true to yourself too. A lot of people don't ever want to run 100 person company and probably never should. And they love having 10 employees and making 4 million a year net and having Lamborghinis and putting it all in real estate. Right. Whereas that doesn't even fulfill me. But fulfilling fulfillment for me is big projects, big teams, big offices. Like, I genuinely enjoy that. So I also think to your point, like grow the company you want to grow. Right.
- [11:36]
Ryan Moran
And to, to, to, to that point, Rudy, I don't know that I could have focused on building enterprise value until I had satisfied the cash flow part of my life. And I did that by having clients on the side. I did that by leveraging the skillset that I built previously. I did that as an affiliate marketer. Today I have two businesses. One is capitalism.com that is more of a cash flow business. And that gives me the space to be able to roll everything profit wise back into the companies that I invest in and the brands that I hope to exit and sell or borrow against tax free someday. And I having that separation allows me to just let that ride, allows me to just keep compounding that. So I don't know that I could have done that had I not had my cash flow satisfied in a different way. So in some cases it's okay to just say, this is my cash flow business. I don't need to scale this to 100 million, let it pay for my life. Now let me put my attention into the thing that can compound over the next four or five years. And if we let all that ride, the enterprise value compounds very, very quickly.
- [12:50]
Unknown Host
Well, I hit it exact same as, you know, I had an agency and I kind of said actually I want to keep this a couple of mil a year making 33% profit margins, right? That makes me 600k profit and I can just use all that money to pay my own stuff, my own investments, blah, blah, blah, and then more capital. This red company, I didn't take any money out of it for the first two years. I just put every penny back. So I think that is a really neglected thing for entrepreneurs listening. Like if you want to build a business, sell. Having that nest egg and stuff is really important because in the other side of business world, you know, if you go to Silicon Valley, they don't have that, but they just keep raising, right? And raising and raising and raising good data and liquidating as entrepreneurs do it in some ways a better way where you know, we try and scale but also, you know, we're not going and li you know, diluting our own shares and stock. So, so Ryan, quick question. Building to sell, like you talked about the three types of wealth, I think it's important but you know, I've been part of obviously a lot of M and A stuff in recent years and there's so much that goes into like building to sell versus building a normal marketing based entrepreneur company. I would love for you to talk a few things you learned during that process on how to maximize valuation and stuff too.
- [14:11]
Ryan Moran
Well, one of the things I learned, but I learned this the hard way, is that as the controller of a very profitable company, I have the asset that everybody wants. So at 29, when I'm selling the company and people are dangling eight figure checks in front of me, I'm sitting here going, oh, oh, these people. There's this big checks. Yes. What, what do you want me to do? Mr. So and so I felt like I had none of the control, none of the leverage. I learned that I had all of the leverage. And if I had done one thing differently or if I could go back and change one thing, I would have shown up to every one of those discussions with a potential buyer with my term sheet saying, these are the terms we will accept. These are the things that we will and will not accept. This is what we'd like to do. Let me know if you would like to proceed. We didn't do that. And so we were, we were the insecure Guy trying to approach a cute girl in public.
- [15:14]
Unknown Host
That's use that analogy. That it's our human nature that once, the first few times we don't have the confidence and then, you know, if we've dated a bunch of pretty girls or handsome guys, eventually we're like, well, this is what I want in a relationship and want to rate and that exact same thing. It's interesting, right?
- [15:34]
Ryan Moran
That's right. So I would have shown up with what I was looking for and who I was going to get into business with. And I didn't feel like I had that leverage because people were dangling big checks in front of me. And so when you realize that you're the hot girl at the dance, you are the thing that everybody wants, you show up with more confidence and then you can find the right partner. And that's the one thing I wish I could do over.
- [16:02]
Unknown Host
Yeah. And especially back then. Right. Like you had a super profitable ecom business, good brand. It wasn't like it was linked to your like big personal fitness brand. I'm sure it was a perfect buy. Um, so at least I think the positive of that is you learn that at 29, not 49.
- [16:20]
Ryan Moran
Right. So that's exactly right where I was exactly right. The last thing that I'll add to maximizing enterprise value is how dramatically things can change with a few relationships. So I'll give you an example. I now invest in E commerce companies and we have a low carb snack brand, a high protein, low carb snack brand. And that brand, if, you know, if we were to just sell it to somebody right now just based on numbers and profit, it might, it might sell for like a million dollars. But we partnered with an influencer who's huge in the space, perfect person for this brand specifically. And we did not pay this person in the form of US Dollars in order to talk about our products. We gave him shares in the business, small minority share, but it was, if you calculate shares to dollar value, it's way more than he would get from a sponsorship deal. And we said as soon as you sign this deal, the value of your shares actually goes up by 200%, maybe 300%. Why? Because the business with this person on the cap table is now a more predictable high growth company. And we could raise capital against that at two to three times what we could do if we were just value it on the revenue or profit or loss. So we can double the enterprise value with one key relationship. That's also true if we start adding advisors or CEOs and we start seeing these relationships at thing as things that don't just make the company create more cash flow. They raise the enterprise value of what someone would be willing to pay for the asset. That, that when I started seeing how all that all played out and how the numbers ran, that was where I realized how the big boys play well. Yeah.
- [18:23]
Unknown Host
And there's also, you know, if you are listening to this, looking to get into selling, there's that and there's a few other tricks as well. You know, like if you can build reoccurring revenue in your business, if you make 200 grand a month, but now it's 200 grand a month of reoccurring that drastically changes it. Or if you have multiple income channels or you get in physical locations and online. So there's a lot of, you know, we don't have time for it all today. But just to that point too, there's a lot of things you learn over time where it's like, well, if I just get YouTube ads working as well as Facebook now I have at least multiple, you know, multiple advertising streams. Right. So there's a lot of nifty ways. And that's why to your point, having board members as well that aren't just big personal brands or influencers, but actually advisors can make such a difference. You might give them 5% or 2%, but they can help you get another, you know, one on your multiple and it's now increase it proportionately.
- [19:20]
Ryan Moran
Yeah. So when you start adding 1x multiple, now we're talking about multi millions of dollars in value. But we as entrepreneurs are trained to just hold on to the whole pie. That might be why you're stalled out in your growth.
- [19:34]
Unknown Host
Yeah, yeah, I think, I think, you know, like I, I used to be like that. And then you just learn and that's why podcasts like this are great. So. So Ryan, last question. As we come to the end of today, talk about the. We'll have to get you back on for a whole another episode on capitalism.com because you built massive business there too. And events and community I'd love to dive into. But just talk about for today, buying it back for pennies on the dollar. I'm sure people are interested. Like, how did that happen? Give me the one minute summary to wrap today.
- [20:05]
Ryan Moran
The company declared bankruptcy and the bank had to choose who they were going to partner with to get the assets. And I made a bid. I didn't get the bid. In fact, a bank went with another private equity group instead. And that private equity group Ran the business even further into the ground. So there were two owners after me that just beat up this dog. And the private equity group that owned it the second time had an acquisition for one of their own other brands. And so there was someone who was in charge of selling off or getting rid of the non performing asset. And that person gave me a call and we started having some discussions. I knew that person from other relationships and they were now working at this private equity group and they called me and said, would you like to have your old company back? And when they told me the number they wanted, I walked away. And we came back to the table and we negotiated and they had another number and I walked away a second time. And then there was a third round of negotiations and we got close to the price that I wanted to pay and I bought it. Four pennies on the dollar. I basically bought it for the cost of inventory that was stored up in the warehouse. And I'm quite honestly that's what it was worth. It may not have even been worth that. The company had been completely destroyed. It was a total do over. I brought this back because I wrote a book about building and selling this company. I didn't want the story to end with a bankruptcy. Let's at least have a good ending to the story.
- [21:40]
Unknown Host
Well, I mean it's a great, great add on to the story and hopefully can create a whole new book on how you regrew it.
- [21:47]
Ryan Moran
That'll be fun.
- [21:48]
Unknown Host
Yeah, that'd be good. Cool. Well let's, you know, just to wrap today, obviously people if they are listening for the first time, as I kind of mentioned in tears, will definitely get you back on and there's a whole nother side of your genius on the capitalism side. So where, where if they do want to learn more about you in the meantime, can they find you?
- [22:10]
Ryan Moran
Thanks for asking. The most affordable and direct way that I could serve somebody is for them to grab my book which is called 12 months to 1 million. That's my formula for building million dollar businesses. They want more advanced stuff. I'm on YouTube. Everything that I know is free and I'm just my name on YouTube. Ryan Moran. If you want to build a brand that you can scale and sell, all my best free resources are available@capitalism.com playbook. That's our free resources for those who want to build a brand that they want to scale and sell.
- [22:39]
Unknown Host
Good stuff. Ryan, pleasure. Great to see you again.
- [22:43]
Ryan Moran
Thank you for having me, Rudy.
- [22:45]
Unknown Host
It's been a pleasure guys. I hope you can all sell a business for at least 16 million. Mar and Ryan, thank you so much.
- [22:54]
Ryan Moran
You can too thank.
- [22:57]
Unknown Host
Keep living the red life. Everyone take care.