today we are playing a drinking game on the podcast and we're playing never will i ever and it's a game where we're talking about all the mistakes that we made when we're selling our company and saying never will we ever make this mistake again and if you ever wanna sell a company or you sold a company if you sold a company you're gonna be able to relate some of these mistakes i'm sure if you wanna someday sell your company it's good to listen to so that you don't have to pay the same price that we did to make these mistakes so go ahead grab a drink we're playing never will i ever and start sipping on the drink while we tell you about hubspot our partner for this steps episode yeah i feel like i could rule where i know i could be what i want to from at all in in like a days off on the rolling they are talking about how to sell a company and in fact we're talking about how that to sell a company these are mistakes that we made selling our company so sam sold the hustle to hubspot and a big deal sold to a public company i've had two exits now under my belt and i've sold one to a big company amazon and one to a small group of private buyers and every time you sell your company you learn a bunch of lessons but we're gonna make this fun so if you played the drinking game never have i ever we have a new drinking game for you m style right this is never will i ever and never will i ever is a game where we say never will i ever do blank again because we've made so many mistakes we made these mistakes so you don't have to we died so you don't have to hear and if you listen to you're gonna be a lot smarter when it comes selling your company sam are you ready to play the game what are you drinking what's your drink i mean i only have three juice left here but i got some greens in the morning i'm i'm looking a little athletic and i got some greens not sponsored but you know send me a free box yeah no save be eighty bucks a month dude i have a i have a ton of it drinking it once in a while it's really hard to stomach for me do you like you could just drink that plane i love it plain and i love that it doesn't taste that great because to me i don't want my healthy shit tasting good right i don't like my hot people to be funny too i don't like when things are not supposed to go together go together alright i think the guy matt rifle comedian no took i'm not watching that special number one in netflix that at all well you're pretty funny what does that make you pretty ugly as the world should be alright what how do we wanna go about this we have a bunch of points here which one you want let's start with the this most straightforward thing okay no so never will i ever you both we both have this one ignore q sbs usps i'll drink to that yes now explain when you say ignore qs what happened here two sbs for those who don't know i didn't know about it until like a year before i sold my friend jack smith told me about it qs bs i'm gonna try and state the law here but it says so it stands for call qualified small business stock qs sbs protects up to ten x of your investment for long term capital gains taxes of ten million dollars or ten x your initial investment what that means and a lot of people only pay attention into the ten million dollar thing so with q usps how long do you have to hold it your stock five years yes so you hold a a small business stock so a private leak held company that's a c corp and you have to hold it for ten or five years and it has to be valued originally or the assets of the company which is the value has to be fifty million or less you hold it for five years and you can save ten million dollars in capital first half ten million when you sell like let's say you sell for ten all ten would be tax free for at a federal level and many states also on our q usps back california but many states also do so you could walk away paying zero in taxes if you sold for ten million dollars which is remarkable or and now here's the your part that a lot of people forget or you can save up to ten times your investment whichever is greater the ten times or the ten million now what that means is let's say that theoretically you start as an llc or you don't have a your company isn't in value but let's start as an llc and you convert to a c corp and when you convert you value your company and it usually has to be done by a third party so has to be reasonable you value your company let's say you're doing fifteen million in revenue let's say you're doing twenty million in revenue and you say great i think we're a forty million dollar company you get a third party that does it so you can save ten times forty million dollars yeah in taxes four hundred million dollar that's a four hundred million dollar tax shield right there yes and i know friends that are doing this now this this this this law a lot of people don't know about it it's maybe besides real some real estate laws tax savings and real estate it's probably the greatest thing there is it will it's better better you think it's better it's better than real estate because in real estate you have let's say depreciation or the ten thirty one exchange these are great but they're deferral whereas this is not a deferral this is simply you just have a you know you have a a exclusion on a hundred percent of your gains up to some number so it is way better than a deferral way better than real house to real estate guy yesterday and i said i have the greatest tax thing that no real estate guy has you what you talking about real estate is the most tax advantage i said yes but you don't have qs usps because real estate is not eligible for qs usps only certain types of businesses can do it but like like sam i'm saying you could stack it so for example what some people do they have qs usps for themselves but it's per tax return so you could do it for yourself you can create trust for your kids and give each of them equity and then each trust gets a ten million dollar exclusion in addition to your own so you can have look you i was joking out with a a q sbs guy and that's he's like yeah if you have three kids i can get you i can get you forty million fifty million in q sbs and i was like i was like oh this kid i have you know this next kid you i'm gonna have this is this is just a walking qs sbs shield here like this is awesome and it used to be that it wasn't does that mean that your kid when they're but were your your kids at the age of eighteen have say in control of your business with their eighteen atm i mean exited by them by them right like but they're gonna have the maybe not but they're gonna have a just a small equity say i can get the majority right you're just giving them enough so that they have a shield they have like you know they have less less tax and you you know while they're minors you control the state you can always you know sure i don't know the i don't think why a lot of people having is like little kids that eighteen years later are like succession hostile taking over like the company as as they band together i don't i don't think that's the that's the thing to worry about and we'll wrap this one up by when there's a big asterisk here which is this i don't like calling it a loophole because that's first of all i hate that word loophole because loopholes are good loopholes are legal like when someone does a loop loophole up like okay but you're trying to spin this negative but like you're just following the line tie a shoe without a loophole yeah yeah it's essential or we'll be able to say shortcuts they're like that's that's shortcut i'm like well i love shortcuts if i can arrive at the same destination just as safe and faster than a long cut let them take the shortcut but so this loop loophole there's an asterisk here because i think two years ago it was it was up to vote if they were gonna exit and the idea was they might make it only fifty percent or so they might reduce it by half i don't know if this is gonna be in play for how much longer this is not like real estate in the last forever right right yeah it's but it's it's been out for a while and it's it's amazing especially in the in the tech industry alright so my turn never will i ever just shut down a company without trying to sell so we'll drink yeah have a drink for that i before i sold before my first exit i had built many companies many products before that and they all had reached some version of like you know an outcome some really had no no momentum some had like some momentum but not breakout and it was either wasn't worth a time or it wasn't able to get funding or whatever i specifically remember one app that we made that was if you remember bit v we had basically made an app that was like way better than bit mo it just like and bit mo was giving you in a like a a personal little character for yourself that would be in and then it it would give you like kinda like these stickers that were in funny like positions or phrases we had made an app that was even better making the world a better place one emoji at a time exactly emojis emoji emojis one of the greatest products ever right self expression there so you we had made an app that created a character of you and then you could and then you could type any word you could just type hashtag whatever book down and they would make your character book down and we had every like whatever you could think of like you could put you could say hashtag single ladies and it would dress your character up like beyonce right away doing the single eighty stance like whatever you could think of we would be had because we would just every day we would rank the top tagged terms and our artist would create like hundreds of these per day so very quickly we had tens of thousands of combinations was really fun because you could just type something and just to see does it do it or not and people did this we got half a million people to download the app in the first month they were just pounding like tons of these little stickers it didn't have great longevity but i had this amazing novelty factor and we were trying to do it as its own messaging app which was too hard like people wanted whatsapp they wanted facing messenger they want all these things and i wrote this blog post called my hundred million dollar mistake because we took that and we said well this is not really sticky as a messenger it's not big enough where you're gonna get all your friends a switch and and start texting you here people love the character they love these stickers we don't wanna build a sticker company so i guess we'll just crumble it all up and just kobe and just throw it away and that was so dumb in retrospect what we should have done is taking that little app to all of the existing messaging companies and be like hey this feature is unbelievable building this is not easy we've already built it we've proven that people really like to do this look how like the average person is doing sixty of these you know just buy this and put this into your keyboard and shortly after bit mod sold for a hundred million dollars to snapchat doing exactly that because they they couldn't make it as a standalone app either and i have no idea why our instinct was just to like just pivot just turn it off and pivot versus like take thirty days and have like five conversations even if it doesn't go through like you owe it to yourself after you know nine months of hard work or a year of hard work and creativity on something so never will i ever just shut it down you said we got a hundred sorry we have five hundred thousand downloads in sixty days and had a brief moment at number one on the charts before falling into mediocrity how much could you have sold this for easily tens of millions easily like you know you think either wasn't gonna sell at all because there's only like eight buyers for this there was like eight mess messaging up they're were major at the time i was like line and kick and you know whatsapp and facebook messenger or snapchat there's all you know those eight players that like could benefit from something like this and either it just wasn't gonna sell at all but like that's actually unlikely there's a price there's a kinda like a price for every buyer the hard part would have been our team wouldn't have wanted to go with the acquisition and so we would have had to like either try to just sell the tech which is really hard or sell the whole company including the team and then dis band for a year then come back together and we just you know we didn't but we but the thing is we didn't even really get to that point like we should've gone and seen what our options weren't right like in in poker if you've already paid the blind we'll just see the flop maybe you maybe something good will come out of it and we didn't do that did you by the way you're if you google a hundred million dollar mistake jean perry there's you have a medium blog you've got a lot of good posts here so if you're listening go check it out did did you not and this might bring me to my my point did you not sell because you're main investor didn't give a shit no it it literally just didn't come it's not like we had a conversation and one get one side said yes one side said no one we debated it and then one side said no i have the voting control hell we didn't even think about it we just moved we literally had lunch and it was just moved on like it was just like it's the worst types of mistakes the worst types of mistakes are the ones where you didn't even really explore the possibilities you didn't even ask yourself what could i do here you just sort of quickly gloss over it didn't didn't even give it the thought to make a decision it was a non decision decision that's like your third or fourth or fifth multi like ten multi tens of millions of dollars mistake the first one being not joining stripe as employee thirty or fifty or something like that and not selling this app and i think i think you might have a dude i'm i'm shoot mc gavin and happy gilmore what he says i eat pieces of shit like you for breakfast and then happy over goes you eat pieces shit for breakfast that's me i've i've made mistakes more expensive than your net worth it's like you've made mistakes like this and it's like yeah multiple multiple alright here i've got one never will i ever act desperate you have on here you will only have one option that is the way that not act desperate that is one way but when i was building my company i wanted to exit so badly like give me an analogy on the spot analogy you wanted to exit as bad as like a twelve like when i was twelve year twelve years old and like a cute girl like you know like complimented my braces it's like i wanna close this so badly i'm emotionally invested if you don't like me no one will like me and i'm a piece of shit i was so desperate i had all of my personal net worth my emotional network worth tied into this exit and i acted like a little bitch and the one of the ways not to do this is to have multiple options that's the easiest most most tactical one is to have lots of options the second one is you just don't you you basically have to act like a hot girl you're like like i don't care right like i'm gonna be fine regardless and i remember there was one point do you track your like your finances somewhere mh i have like a a spreadsheet and i remember one day i just added like ten million dollars like you have like other account so you can link all your accounts and i just had other and i just manually typed in ten million dollars and i would stare at that for like six months and actually helped me believe that i already had it and so i was a little bit less desperate but i remember being desperate and when you are desperate you have zero power and you have zero power that is the worst part to be in when you negotiate and the the best part when you can negotiate is to walk away and the and or to be able to walk away and to be able to walk away you typically just don't give a shit so you're just like passionate about whatever you're doing and you don't need the money or you have other options and i remember being desperate in that just like to that twelve year old girl who was into me aaron you know like they could sense it they could they they could smell the firm the the the hormones on you like eddie like could any hot girl could tell we could be desperate they can tell what a confident man is like and i was not a confident man can you put your retainer back in it's the same thing right yeah the you've nailed it in that last bit which is the rules the rules of a nigga of negotiating when you are when you're trying to sell your company number one the most important rule is you must be okay if no deal happens meaning not just like i'll be alright like you know like a funeral has happened but you might the you know option one should always be we do no deal and we're totally fine i would love to keep going and whether that's true or not there should be no grieving you no grieve convince yourself that that's true that you don't want your options to just be offer number one or offer number two because you guess why offer number one's is gonna have some hair on it offer number two is gonna be a little shaky maybe fall through you're gonna start to feel real desperate when offer two falls through and now it's only offer one on the table you always need the one one option on the table that you can control which is i will keep running my company it will grow and just be bigger and better if i keep going and you have to convince yourself of that if you wanna have a chance in these negotiations the second rule is in any negotiation the side that carries the least wins and so you have to be the one who needs the deal less than the other party and so whether that's true or not it's a mentality you must mentally need it less than the other side you must mentally care less than the other side that this deal goes through exactly as is if you could do that then you're in pretty good shape and you know which deal is the best deal the one that will actually close that's another huge learning not all the deals are the same the one that will close to close a deal it's a really big deal to get an offer and go through diligence that's not nearly as big of a deal you and i have both gone through stuff where the offer was great and the the people buying were either disorganized their were shit heads they changed their opinion right something you wanna do the deal that will close that is the best deal that that is one of mine as well i put never will i ever go with the highest offer sounds confusing like what do you mean maybe you why would you not take the highest offer you wanna take the best offer not the highest offer and the best offer and the highest offer have a lot of differences the one of the differences what you just said likelihood to actually close will they do what they say they do let's say they will do i'll give you a story from the milk road sale we had a high offer and that we had a fair offer and at first we were like oh hell yeah we got the high offer this is great did but they they did a bunch of weird stuff though there were some red flags but hey dude like you know like anything else you know when when something's really attractive at a red flag that starts to look just like a it's like is that maroon actually maybe that's maybe that's orange you know that's so red you you start to overlook and talk yourself out of a bunch of things right so like what was one of those red flags can you say they had a lawyer that would jump on the call that refused to ever turn his camera on had no linkedin sent us a document that was like the term sheet that was like our lawyer was like this no way a lawyer wrote this and we were like okay it's probably not good that their lawyer's not a lawyer but we don't understand also why why they would not have a lawyer like it's this guy's friend they says he's a lawyer it says it's like so strange he's like you know they're not like scammers but it's said like can you just turn your camera on and you know like it was weird yeah this was is like a little bit weird that was like one i think they sent you money then they well did you were sent money we we went down the we took the offer and there was a time to close but the the again one of the stupid things they did they wrote the offer as when we sign the the term sheet which is not the deal not closed when you sign the term sheet they wired to all the money they had to wire all the money on day one which again was like are these guys idiots why are they doing that that's not how this is supposed to go but we were like well i guess we're getting money so like what what do you know and it was during that kind closing period that we started to get a little sketched out and said look i don't think this is the right deal for us maybe we should just go back to options one we'll just keep running our company we don't have to do this deal so we wired back millions of dollars voluntarily because we had made the mistake of going with the highest offer first and the best offer is a combination of it's likely to close i'll tell you a funny story about that the people involved are high quality and they're people you wanna be around because it's not a sort of hit it and quit it you're never gonna see these people again like business even if your deal is kinda like you walk away clear like i don't know the business world is actually kinda small you run into people they now own your company your brand like you don't want it in the wrong hands you'd rather do business with great people who you might do more business with in the future which is what we ended up doing so the best offer is different now let me tell you story about about likelihood to close so we get this high offer and we're comparing the high offer with the fair offer and i call bo and people apology you know it's one of the smartest people on there psychology biology apology what would you do if you were me and he's like well that's a higher offer but let me ask you a question have he of course like intelligent people can get on the heart of the issue right away like he does like a metal detector just new and he goes are you negotiating these on the same timescale scale and i was like i don't know what that means he's like who did you talk to first and how far how long have you been talking to them and how long have even talk to the high offer i said well i talked to the fair offer way earlier we've renegotiate it renegotiate it they've done diligence and the high offer is new oh like he goes okay so this is not the real offer and he's like you need to apply a discount i said well what do you mean he's like well you don't know if this deal is gonna close you don't know if this number's gonna stand you don't know if they're gonna change their mind they says this all fresh and a fresh deal is not the real deal and so he's like you need to just mentally apply some discount factor if this even is gonna be the final offer that gets sent to your bank account and someone i was like okay so like ten percent he's like tell me what you know about this first i told him everything i know he's like fifty percent and so we had the company offer by fifty percent mentally to to to you know compare apples to apples and that was some of the best advice we got was that one piece of advice so now i always in any deal i have to ask myself what's the discount factor here meaning how likely are they to close have they done all their diligence yet have we already had the deal have we already negotiated this to a stalemate where kind of both sides feel like they've gone as far as they're willing to go because that's when you can reduce the discount when we were selling to hubspot i remember the just like i said the the my contact the one i was speaking with she sensed weakness and she sensed she sensed that i was in a tough place emotionally and she in not because i was like constantly asking because we were sobbing alright what else you mean where how do how do we move this forward yeah she could like chicken she's like are you are you laying down when you're talking to me like she could just like sense that i was like laying on the floor and been the difference between what you did and what i did was two things one i sold to up a public company which meant basically the decision maker was not the ceo or the owner of the company it was the person who reported to the person who reported to the person who who reported to the person it was like for you know ladders down probably the decision maker the ceo which how we like they just saw it on their like board meeting every once in a while like you know quarterly and they're like okay cool whatever now can we talk about porn stuff and this woman she was like look we don't care about you well you know she's basically said she's like our company is worth like twenty or thirty billion dollars and this is a rounding there for us our reputation matters more than than this little deal and it would hurt it would hurt our reputation more than the than the cost of this deal in order to dick you around if we say we're gonna do something we're gonna do something now shut up and relax that's basically like what she was saying to me i remember feeling that was like i feel so much better and so i think there's a difference between selling to like like selling a small business to a sole prop provider or to a pe company or to a really large strategic company i think the way that you deal with those sellers is different more buyers are is i'll tie that in i haven't never will i ever never will i ever assumed the person i'm talking to is the person who's buying my company so this is when we sold to twitch which is owned by amazon i'm talking to corp dev it's very easy to think i i'm assuming you're talking about somebody in corp dev yeah in corp dev she that's lady was wonderful she was like my therapist for the three right and corp dev is very helpful they're they're the they're the router or they're the project manager of any acquisition but they are not the decision maker and actually the thing you described i actually think is not that truth meaning i actually do think there is a decision maker they are pretty high up it's either the ceo or it's the the vp or the sv who runs like you know or somebody the c suite who like matters to sign off on a on a transaction of of of you know a multi figure transaction that's not it's actually not it actually the decision actually does ladder it but by design these companies design it so you're never actually gonna get to talk to that person because they need good cut bad they need the person whose job is it to move the transaction along or find out information and then that person can't actually be the one who's negotiating with you they're gonna be like cool i'll go back and find out and that layer those layers of bureaucracy are actually a huge negotiating advantage that a startup typically doesn't have unless you're working with bankers and whatnot where you where you do have an intermediary that's able to do that for you and so one of the most important things you gotta figure out is who's actually buying this company it's not a company that buys a company there is a person in a company who needs something for their job and you have to figure out who is that person and what is the fire under their ass you know what is the thing that you know are they in trouble for their job and they need to do something because the competitor is getting ahead are they super strategic and they had a dinner with somebody and they they had an epiphany and now they're they their steve jobs they're a visionary and they're trying to make that vision come true you need to fit that story like you know you have to figure out who is that person in the company and what is the fire under their ask if you ever if you wanna have a chance of being able to sell a company because you're selling to that person that champion alone not to a multi billion dollar corporation right and and so the buyer really matters and understanding what motivates them a lot of times the people in corp dev they just wanna keep their jobs and they wanna look good and so as the seller you have to sell a company and you have to make them look great you have to make it easy for them to look wonderful you you have such different incentives they are just trying to not fumble the bag you are trying to get your first bag and you are gonna behave totally differently and you're gonna value different things and if ever said to me something like oh this is kind of a rounding error or like you know this is we're huge this is not this is not not a you know this is a small small piece of it i'd be like cool round up the precious just went up ten million then right like you know if if this money don't matter to you it matters a hell every dollar of this matters to me and so maybe we have the price wrong actually then let's get the price right before we we continue alright like that is and and by the way you saw this we just renegotiate our deal with hubspot and like you know without going into the you know the guts everything matter everything mattered and you saw high approach it we me and you have very different approaches to negotiation what did you see or describe or not that so this is like a midwestern value stake which is if if i order a stake and you send me out a pizza i'm just gonna shut up and eat it and i ain't get complain the way that you did steak taste different yeah yeah i love my steak with mozzarella and pasta sauce this is exactly how i like it you handled it differently and i and frankly i i i that was one of that was a an example when i learned from you i think you said something great you said whoever can be most uncomfortable will win and you needle these fucking guys for everything and in my head i was like what why who gives a shit and you're like this word needs to be the hat and i'm like what are you doing and and you're like it all matters it all is really important and frankly you got your way at least for the big important stuff and when you got your way i got my way to to get the negotiation negotiations done both sides have to get their way but you have to figure out what really matters to them and what really matters to us and those two things are not gonna line up and you need like sam alt you he's he's all in the news right now and he said something great about negotiation he goes i am not interested in binary negotiations there's nothing interesting there where it's just a number and you want it to be lower and i want it to be higher that's just tug that's just a tug of war that's like you know that's not interesting that's not a sport it's like slap fighting versus mma right like the slap league is literally just one guy standing there with no defense one guy's gonna slap them as hard as he can it's kinda interesting to see but like it doesn't have the same it's not as satisfying to to to the sophisticated barbarian like us who likes you know you have c instead and so the sophisticated barbarian cares about a a non zero sum negotiation and so it's like how do i give them what say genes kw what is that what is that ari if i say that right there's an art there and so you have to figure out one of the things they really care about that i only kinda care about one of things i really care about that they only kinda care about how do we all get what we want in order for this to work but you're right that i was willing to be more uncomfortable than you or maybe most people just because i don't know this is our baby and this is like one line item for them but this is like our this is like the basis of what we do and and has potential to be like such an awesome part of our lives like you know i have to get this right this is my kid it's like you know my kid versus you know how my teach how when they go to school how a teacher's is gonna teach treat my kid like they care but not the same way i do about my baby right it's different there's levels to that and so yeah you know the the party that's willing to be more uncomfortable generally will win or the way my dad taught me was the more stubborn in person wins in any negotiation can i tell you a a dad negotiation the story yeah so i worked with my dad for about nine months i think in my life and i i'm really happy and your dad does everything right he's like like he does projects he started as an engineer lonely engineer and he has like you know he is like office space or like under mi or something like he's sitting in his cubicle and it he kept getting patents so his wall had like twenty two patents on the wall but his salary stayed the same and he's like how can like you know this like the guy who dresses up nice he works with me for six months i get this patent and he gets promoted i stay here like wait am i in the wrong job so took him ten years to figure that out he's like maybe i should move to the business side he works at a he works at bp for like thirty forty years and he finally like leaves and he does then he started doing more entrepreneurial things one of which was we both worked together in this company in australia and when we were working there i got to see my dad in action and like it's so funny you see your dad at home and dad's at home are just like these like totally different creatures when they're like done with work for the day i had to see him like interacting with other people especially for an immigrant dad it's like it's like oh you have this level of polish why at home do you turn into just like a caveman man and so i got to see him just act actually differently and one of the things that happened was they we were negotiating with this other party the other party was the slick talking australian guy who literally looked like leonardo d cap this guy on like the australian cnbc every week and he's super polished just an amazing talker and i just think oh my god my dad dad's i'm gonna have to get watch my dad get beat up in this negotiation this guy's like mister mister charisma mister smooth everybody already loves him the decision maker loves him and they want one thing we want another my dad's you know this you know this indian jay you can barely you know he forgets to add the connecting words and sentences he's just gonna get walked all over this this thing and then they walk in and this guy got like binder of like you spreadsheets presentation like he's got everything prepared my dad is nothing doesn't even like a pen on him and the guy that guy makes his case first he kinda passes it around he's like here's what i think we should do and i wanna run the project and give me the funding and here's what we're gonna do with it it's gonna be great everybody's like this is super well put together thank you so much blah blah blah and it's my dad's turn and my dad basically kinda like refuses to speak and then he starts to speak and i'm like where's the logical argument he's not like using any logic he's just saying no and i'm not doing that i wanna do this and i'm not doing it for doing it that way and then they're like yep a garage we have like you know this plan it makes sense look i know you're not getting the exact equity you want you're not getting to run it but like this guy will run it but you this makes sense right and my dad's is just like foot on the table he's like i'm just telling you right now it's not happening never not happening and i'm like what are you doing like you're not even backing up your words you just say no and you're just refusing you like such a stubborn idiot and he just acted the full for like an hour and they were like this is going nowhere and they walked out i was like dude you blew it and he's like no that went perfectly and i was like what do you mean and he's like he's like oh i could never compete with that guy he's like you super charismatic and he he has all the fact on his side i was like so what's your your plan is what he's like i'm just gonna the most powerful word any negotiation no he's like i'm just gonna say no i'm not doing it i'm not doing it that way and i'm not gonna i don't need explain why i'm not doing it and actually i'm offended that it's going this way i'm pissed off and actually i might blow this whole thing up and he's like you know i only have one piece of leverage which is that they need me to play along in whatever we're gonna do here like it's gonna be hard for them to replace me in this thing so i'm just gonna say no and i learned so much that day he'd he told me he goes the more stubborn guy did they come back yeah before they come back they came back and in fact the exact opposite happened by the end of the whole thing we negotiated this deal and like you know there's just kinda like okay let's take a break we'll go get the yeah yeah we what were you doing i was there i where's the way support and they leaves the room to take like a break they're printing out the papers or whatever and my dad turns to the middle man guy he goes so how what do you think he goes he goes i think we're playing poker but all the chips here on your side of the table now and actually my dad made a mistake which was that he negotiated it way too hard and took all the value in the end and then they then they realized it and they were like you know what we let the stubborn idiot take the whole thing the whole in like no and they went back to no and we actually ended up more like at a fifty fifty deal but if he had just given a little bit back you always wanna kinda give back at the end where they feel like they have something to lose he took it so far he won the negotiations so badly that they had they had had nothing to lose in the negotiate and closing the deal they're like well what do i have to gain by closing this deal nothing it's just all all the value to him at this point and so he had taken a little too far but i'll never forget that idea that you know the in in any negotiation side that has the better argument or the more or more logic it's whoever has more leverage number one and then within that you're that's like the the the the substance and then you have the style and the style is whoever's is a little more stubborn and a little more crazy little more irrational that is to your advantage in a negotiation we gotta have your mom and dad on the pod i think we've we've heard a lot of stories about them alright i'll do we'll we'll do water two more here's a really easy and simple one never will i ever be disorganized and i'll give you an example of that we changed payroll like three different times it was like gust and then adp and then like zen and then rip because rip can track your computers like when you give out computers or gust pays two days later so i can keep the cash to it it was so stupid and here's why it's so stupid when you selling a company for thirty million and three hundred million it's the same thing basically as in a lot of times when you saw business let's say i don't know what that threshold is it could be ten or fifteen million but when you sell a company for three hundred million and fifteen million they basically give you the six excel sheet and it has five pages and each page has literally fifty bullet points and each bullet point is a big deal for example one bullet point will be under the hr tab and it will say show me the payroll for the last five years or show me every contractor you've ever hired yeah add the contracting agreement that you have with everything student contractor including the confidentiality incident we don't even have that yet like yes yeah and here's why it's a big deal when you switch pay here's a very specific example when you if you just use one payroll that's easy you just click export that's easy but i didn't and so i and then if you know if it's been three years you have to call benefits be like i don't have access to my account anymore do you guys even have these records and i thought this was stupid and i was like i remember telling kip the cmo of hubspot i was kip i used five one time i paid a hundred and fifty dollars out of my paypal account i even paid it personally and he's i was like why is this matter and he's like well you know i can't hire b baller eighty four on fiber because and that goes against fibers terms of service and that would be like i can't like i have to make sure that everything was by the book because every little thing matters and and that made a lot of sense to me but i was a fool and i was disorganized i would use paypal for some stuff every once in while would just v most someone i'd be like here's five hundred bucks thanks for the freelancer or i wouldn't track confidentiality agreements it was a fucking mess i use google drive to store some stuff dropbox of store so it was a mess and i'm telling you when when you're selling a company for what i sold it for i only had forty employees and you can't tell anyone that you're selling company so it's basically me and ed this woman who worked with me and we went through all of these documents to find all of this shit and it literally took three months to find documents that's three months working every day for twelve hours day it is so hard to get all the documents it is so challenging and you don't wanna give them anything that's messy otherwise you'll look not buttoned up and if you look not buttoned up they'll say what else you've missing or like are you lying about something right and you need to present things in a really nice orderly fashion and so start being organized from day one is really really important and not like being a maverick and being like i'll just here i got twenty bucks i'll pay you for this i'll use paypal for this like it's a mess well i gotta drink to that because i made that same mistake no surprise i'm like the most disorganized scott earth and you know i made mistakes like i thought you know hey start up you guys gotta move fast don't at least time incorporating and getting trademarks and doing all that and you know that could be the difference between in long term capital gains or short term gains or having to you know explain why you know the ip over here but it should be over here or you know we made a mistake of did you mail in your eighty three b i one year i did and then for one company i just didn't do it and i was like i was like oh i gotta like go to the post office and i just didn't do it now luckily that company failed and i didn't have to pay the price of that but like you know the eighty three b election basically but if anybody doesn't know is like a you can basically get shares in a company and you could tell the irs hey text me now this year on the gain of these shares because i'm gonna exercise them it's like a dollar i'm gonna exercise these shares now text me you know so it's like the original strike price was one cent and then they're valued at one and a half cents and so you're like text me today on that gain so that i've exercised the shares at this price so that when i sell you i don't have to pay this huge market on the on the exercise of of the and you only have like thirty or sixty days to mail it in and you basically literally have to write a letter is it ninety days you have to write a letter and you wanna like post market and then you wanna like you you write in the letter like send me a receipt of this it's like a really manual process and you're like dear your irs please send me proof that you received this and you have to store that in your records in case y'all ever get audited and i think now there's like i think there's some automation around this but yeah i i was messy about that you know i had this great meeting when i wanted to sell my company i didn't know how and i went and i met with five people who had sold come multiple companies and i was like okay hey i don't know what the fuck i'm doing here can i explain to you what i'm currently doing and then you tell me what i'm doing that which which parts point out the dumb parts okay can you do that yeah because i was like if i just ask you for your advice who knows what you saying but if i draw you a picture of what i'm doing and you could point to the ugly part that'll help me and so so i did i had lunch with this guy flawed and he's the ceo of this company called now he had sold i think he's sold like five companies associate shit like that and he pointed out two mistakes that i was making number one he goes he's like oh wow you got like okay you have an actual offer on the table and i was like yeah dude it's been so hard it's such a long road you know even though it only been like forty days but i was like dude yeah it's just been ups and down but finally we're here and i was talking like i arrived at some destination he goes he's looked at he's like this is not over actually you just reached the starting line now it's time to sprint and i to repeated that advice to so many people of now it's time to sprint because so many times has happened let's say you're fundraising for a company and you spend you know three months trying to fund you finally get money in the bank and you're so happy ses so satisfying your whole body just wants to relax it's like oh you no welcome to the start of the race now that something to run you're ready to run yeah and like the work starts especially true when it comes to closing m and a it's like when you have the lot of people don't realize is it it it it takes from getting the offer to actually getting the money that can take six months that could take exactly for for me it took they emailed me and they emailed me in september or october i got paid in february yeah exactly three months six months is a very common so you yeah that's sometimes for the hardest the second thing he said was he goes she'll me your data room and i was like oh we i have a google drive but like it's kinda messy right now and he goes he goes you're selling your company think for it like a product on amazon how does amazon sell product i'm like looks like a page and a one like a one click buy he goes exactly you need to turn your entire company into a giant buy button and i was like what is he's like you need to like answer all the questions now get it all organized now put it all in place now so that when they look at this stuff they are ready to one click buy if the the more questions they have to ask you the more you have to go dig stuff up the more half or incomplete information you have to give them the more reasons that this deal can fall apart turn your company into a giant buy button that's the other advice i've getting given which is like what are all the the ducks i can line up here so that this just becomes a you know easy to understand easy to consume you know process for them and like it was the one you know thirty day period of my life where i became marie condo i organize organized the shit out of my company i took everything i was like look this thing needs to be pulling bulletproof and i'm so glad that i did because it was it was extremely necessary doing do one last one yeah oh by the way i have one never will i ever run my company like a personal piggy bank so i made this mistake before and i have a story of a friend of ours who made this mistake before so what a lot of people do when they run their company is you start to make some money and then they're like oh i have to pay taxes and then they're like fuck taxes suck and you're like what can do like reduce spend it all i like i think smart people smart people have like tax stuff they do so what i mean do i'm start doing some tax stuff i was like okay what's the tax stuff and they're like oh let me like we talked to a guy recently that was like oh i created my own captive insurance program and then i bought this property that we're using as like a a office and i'm like i what are you doing you're just trying to save like two hundred grand of taxes and what you're doing is actually you're ruining your books so like when i looked at his business the business looked like it had no profit and he's like know so happy that easily has this like shitty margin shooting net profit margin because in that year it saved among taxes but the reality is if you're building a company that you want to sell you need to take some short term pain of having clean simple books that you pay you know legit taxes on in order for you to have a big exit at the end because they're gonna see a track record of multiple years of solid profits that that you're gonna sell at the end right like that is just generally better there's of course exceptions to both cases but like generally that is a better approach we have and if you don't wanna sell there's there there is like a bullshit category on quickbooks that you could put stuff into but that is not ideal if you're trying to sell yeah exactly is if you're trying to sell you wanna you wanna be able to show a track record of of assess and versus is like you know i and a friend who would go to the bank on december t and take out a bunch of cashier checks that they were gonna use to pay vendors and it's like prepaid vendors for the next year and then the next year they're like i wanna quit this vendor but i'm already prepaid them or they'll like take two of the checks that never even paid and then put it back in the bank a month later i hope nobody everybody notices it's like dude just don't do this shit like don't treat your company like a personal piggy bank if you wanna sell this someday because nobody wants to buy your hot mess and i think it's very and you can't undo that you you can't really unwind that these are like it's in the it's in the history box every year that you're doing that you are kind of like making your you're adding a bunch of asterisk to your own books that like you need a buyer who's willing to go and do a bunch of add backs and try to figure this out in order to feel confident that they should buy this business when dave port sold you know he's sold bars sports a couple times but the first time he sold it he was like i was an idiot he's was like i owned a race horse that i bought through bars joel sports and so bars stool sports owed like two race horses a trailer for the race horse they owned like the house i was in like he said all the stuff that the business owned and he's like we got docked so hard thousand was all meters in gym that we acquired like yeah and that's what he said he's like he like cher didn't wanna buy like skip the race horse but the business owned it and we it was really hard know when he first sold that business he sold the first portion of it and at the time bar was a big deal he only sold it at a fifteen million dollar valuation crazy when it was worth way more than that and it's probably because it would he was just sloppy a lot of it was sloppy and he was like i also like made so much profit and i didn't put any of the profit back into the company i just would buy horses and shit like that in gamble he's like gamble like crazy because it was content is that it i got one more never will i ever just just stay at home when there's a deal to be closed so this is the rule of just get on a plane go meet go meet people in person don't resume calls or if you're doing zoom calls add in the in person afterwards the in person meetings are so important you know i'll i'll tell one story which was just a deal we closed recently the you one deal that we didn't close that i got on a plane for and like you know for me i my the running joke on the spot is i i'll leave my house and that's true i really don't leave my house i don't like to do that i got little kids and i don't know it's for our family life it's very disruptive to travel if i go if i leave the house for like five days whatever but i did for this one deal it didn't the deal didn't go through but i could sleep easy at night because i'm like i did everything like i made multiple offers on this deal i got on the plane i met them in person like well we did everything that we could we could do we did what was in our control with a deal that we just recently did the other party was like cool like after the additional conversation of interest they were like cool we'll love to just next chat we'll love to it in person i'm happy to fly out to you wherever you are let me know which day works i'll fly in same day fly out same day and it it'll be easy and i was like i respect this person and i trust doing business with this person because they understand this principle of like you just gotta get on a plane and you gotta go meet somebody and you should be willing to do that when we sold the milk road i had a similar situation where we remember i told you about the high offer and the fare offer we had said no to the fair offer took the high offer that you rented it so we went back to the fair offer for months later and we were like i was like you know what i wanna see what those you guys are up to and see if there's a deal to be done here and i kind of called or emailed and it was sort of like we just had like a quick oh i texted it i think and it was like really wasn't an opening but i was like hey i'm gonna be in the city tomorrow you know for my niece soccer game so i was like gonna go see my soccer game but i'm gonna i'm really doing this to meet too but i it sound to him like i was going to the soccer game and i was like right you know we'd love to catch up he's like yeah great let's do it and so we drive into the city car breaks down on van ness and i'm my car literally just shuts off in the middle of the road your car breaks down car literally the car shuts off down i don't know what happens is car stop stop driving and i like and the momentum to let me just get to the side of the road from there with my don't you have like a brand new escalate this is the bmw before that so this is you i'm with my wife my two kids are in the back and the car seats cars broken down i got this meeting in you know ten minutes and i'm like shit i guess i cancel this meeting you know whatever who like who knows well if this meeting anything would even come of it anyways but like whatever wait for triple and my wife is like no you gotta go you told you've been telling me all morning how this is an important meeting like you think that you have a feeling that you could be able to to get this deal back on like you know go and i was like i'm just not gonna leave my wife and kids on van ness and san from the middle of san francisco in a broke out car and she's like just go we'll be fine i was like okay you know send me twice and so i hop out and i literally none i i run down van ness like you know a mile basically get to the coffee shop meet the guy deal comes back to life by the end of that coffee meeting and we end up selling to them you know and i'm like i i think i'm i'm actually like a hundred percent sure if i hadn't gone to that coffee meeting that deal doesn't happen and because in that meeting we were able to clear up some things that like were not as exact transactional but like you know kind of what his viewers were and what our hesitation were and really kinda su it out and get get comfortable with each other in person so yeah insane insane that that happened and this is like this is like an anti ad for bmw w yeah don't trust them yeah don't trust them and they'll ruin your deals well that's sick hopefully people dig this we did a little q and a for this episode except on one topic i think we're gonna keep doing these every other tuesday right yeah we're gonna trying to come up with great topics that we can kinda shoot the shit on and share maybe you know either our answers or or stories that that we've been through so i think that was good i think people will like this one but let us know let us know the youtube comments what you think alright well one there and that's the pod i feel like i could rule to word i know i could be what i want to from at all in it like a day's off on a road travel never looking back