How to Sell a Struggling Company

November 20, 2020 |  

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If you’re feeling exhausted from running your company, you can take a little solace from Michael G. Dash.

Dash built Parallel HR Solutions, a staffing company, up to around $5 million in revenue with clients like Overstock.com, Goldman Sachs, and Discovery Channel. When the relationship with his partner broke down, he decided to buy her out. The negotiation got ugly and ended up in a six-year lawsuit costing Dash more than 1 million dollars in legal fees. His former partner decided to set up a competing business. All the while, Dash struggled with addictions ranging from gambling to cocaine.

Dash was a mess. He was exhausted and emotionally drained, so when a friend offered to buy Dash’s business for $750,000 (around three times the profit he was pulling out), he jumped at the chance to get out.

Dash’s story is a cautionary one of a founder who emphasized growth at the expense of just about anything else. Dash has turned his life around and now lives in Mexico. He has had time to reflect on his mistakes. In this episode, Dash reveals:

  • How he let his ego and addiction take over his decision making.
  • The importance of recurring revenue over one-off sales.
  • What destroyed his business partnership and what he now advises other partners to be aware of.
  • How he sold a struggling company.
  • Why he would never sell a business to a friend.

Running a business during a global pandemic is exhausting, and, like Dash, you may get to a point where you want out at any cost. When that happens, reach out to a Certified Value Builder™ who can walk you through your options to get out quickly or build back the value you’ve lost.

Our guest

MICHAEL G. DASH is an entrepreneur, best-selling author of Chasing The High, business coach, recovering addict, speaker, and philanthropist. He founded the F.A.T.E. series (From Addict to Entrepreneur) published on Thrive Global & Medium and MD Coaching and Mentoring where he works with entrepreneurs helping them streamline their businesses while increasing profits and helping them find clarity, consistency, and connection allowing them to step into the true leader they were meant to be. He is the co-founder of the Activated.Life, a social movement focused on inspiring a culture of positivity, authenticity, passion, empathy, and resilience while giving back to others. Michael is an avid volunteer, fundraiser, and mentor, and is dedicated to bringing positive change to leaders of all kinds. You can reach Michael via his website at www.michaelgdash.com where you can join his weekly newsletters and get the first two chapters of his best-selling Amazon book Chasing The High free at https://www.michaelgdash.com/book. His audiobook can be found on Audible at: https://shorturl.at/efqt4.

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Transcript

John Warrillow:

Okay. What are the numbers on your company’s dashboard? My guess is you look at your company’s revenue and profitability, which are two great metrics to track, but there are another eight key drivers of the value of your company that go well beyond just revenue and profitability, that are the things that acquirers want to know about.

John Warrillow:

Going and getting your Value Builder Score will help you look at your business through the lens of an acquirer. Takes about 15 minutes to do. Go to valuebuilder.com to get your score.

John Warrillow:

If you’re feeling exhausted these days, I don’t think you’re alone. Running a business in the midst of a global pandemic is incredibly challenging to say the least. And if you’re feeling that way, I think you’re going to like this next episode.

John Warrillow:

If nothing else, it might give you just a smidge of solace that it could be worse, because my next guest, Michael Dash experienced, I think the worst of entrepreneurship. He built his company up to $5 million in annual sales, clients like Goldman Sachs, Overstock.com, when he ran into a challenge with a partner.

John Warrillow:

And the rest, as he will describe was a rollercoaster of emotion mixed with addictions to both gambling, cocaine, Adderall, a whole litany of problems, which Michael will describe for you.

John Warrillow:

There’s still lots of lessons embedded within this episode. I want you to particularly listen to how Michael made the case to an acquirer that although his business was on the downward spiral, it had a future. I think that if nothing else, is worth taking away from this conversation about how to make a struggling company look more attractive to a potential acquirer. Here to tell you the entire story is Michael Dash.

John Warrillow:

Michael Dash, welcome to Built To Sell Radio.

Michael Dash:

Thanks for having me, John. Excited to be here.

John Warrillow:

I love the picture behind you. Describe for folks who aren’t watching on YouTube, what is behind you?

Michael Dash:

What is behind me is me at my highest level of excitement as I finished summiting Mount Kilimanjaro in 2018, and I am pointing up, screaming at the top of my lungs with excitement, at the sign that says, “Congratulations, you have made it. Your five-day journey up is complete.”

John Warrillow:

Awesome. It looks fantastic. That was something that you did after, I think you sold your business, which is what we’re going to get into today. Tell me a little bit about Parallel HR solutions. What did you guys do?

Michael Dash:

It started as a side hustle, like most businesses. I was working in New York City for a staffing company and I was calling on E TRADE Financial, if you’re familiar with that organization.

Michael Dash:

They said to me, “We don’t have any business in New York City.” That’s where I was at the time, in New Jersey. “But if you happen to know somebody in Sandy, Utah, we’re trying to hire 200 financial service reps in the next three and a half weeks.”

Michael Dash:

I always knew I was going to be an entrepreneur and build my own business. My dad was, so it’s kind of from the cloth. And so I happened to know one person outside of the metropolitan area because my company only wanted business in the metropolitan area.

Michael Dash:

I knew one person who I had worked with before joining that company. She was from Utah. So it was almost divine intervention. I called her up and I said, “Look, I got this great opportunity. Do you want to put a bid in with me on this? If not, I’m going to bid it myself and I’ll figure it out.”

Michael Dash:

She was all in. So we put a bid in on the project and I remember we worked all weekend. I submitted it at like 6:00 PM on Sunday night. At 11:00 AM, Monday morning, I got a call from the SVP of HR from E TRADE, and she’s like, “We accept your bid.” And I was just like, “Oh, shit.” Sorry for the language.

Michael Dash:

I went into my current boss, I took two weeks. I told them I needed to take two weeks off, I have an emergency. It was emergency. I didn’t tell him what kind. I just said it was an emergency.

Michael Dash:

I flew out to Utah, we put a team together. She was at another staffing company. So her team fulfilled the business and I managed it all, and I took a 30% cut. And, so I was still running my $4 million book of business in New York. So I was kind of juggling both things.

Michael Dash:

We finished that project on time and under budget. Then we got projects from E TRADE in Alpharetta, Georgia, Jersey City, and Tampa, Florida. In one year we filled 800 full time financial service rep licensed series 763 positions.

Michael Dash:

It was at that time that I knew, “All right. I’m not working for anybody anymore.” Eventually I left, I went out to Utah and started Parallel HR with her, my ex business partner. So that’s how it all started.

John Warrillow:

Got it. Okay. Where does it go there? So when I think of HR solutions and staffing, I think of like a traditional head Hunter where you hire them, they go out and find a key employee and they take a percentage of their first-year salary. Is that the kind of stuff you’re doing?

Michael Dash:

Yeah. That was a majority of it, but we were also doing contracting services. So we focused on technology because I had met her at a tech staffing company four years prior. She had a great tech background.

Michael Dash:

She was very skilled and I was very skilled on the business side. So we had dueling skill sets that fit well together. And so we would focus on software engineers. We focused on positions we were able to staff that we could duplicate easy and that companies hired multiple members of the same skillset.

Michael Dash:

So it was very simple to train our staff. If we could train and have the staff master certain profiles and what to look for and how to screen for them, and head hunt from other companies, then we felt we would have a competitive advantage.

Michael Dash:

So we focused on, and most companies have anywhere from, smaller companies, five to hundreds of software engineers in some of these bigger e-commerce companies. So we knew if we could get in with some of those, have a process we could duplicate that we’d be able to scale it. So that’s what we did.

Michael Dash:

But then we also started getting involved in consultants. So when companies would need just an expert to come in for six months or for a year versus full time. And so we would payroll them, they would be on our payroll. And then we would send them out, consult them out on projects for six months, for a year, or whatever.

Michael Dash:

And then we would take the spread. So we would put a Mark up on it. Usually let’s just say, an engineer was a hundred dollars. We would need to pay them a hundred dollars an hour. We would bill the client, maybe 125, 130, and we would make 25, 30 bucks an hour on each person.

John Warrillow:

Got it. When you went to sell this company, what proportion of it was from recruiting fee? What portion of your revenue was from recruiting fees compared with the sort of margin you took on the contract employees?

Michael Dash:

I would say percentage wise, working and what we focused on, it was like 70-30. 70% full-time, 30% consultants. But revenue was actually flip-flop. We would have about 70% revenue on the consultants, 30% on the full time.

Michael Dash:

There were just more opportunities on the full-time side, so we focused on that. But we made more money on the consulting side because it’s reoccurring revenue, and the other stuff is one and done type of stuff and you have to start over again.

John Warrillow:

Recurring because the employee gets paid every two weeks, and your-

Michael Dash:

Yeah. They would say on month, over month, over month, so you have somebody. Some of these, we focused on high level engineers, so they were good. So when they were companies, as long as companies had the budget for them, they would keep them on because it was nothing with their performance.

Michael Dash:

Most of the time they were better than the employees they had with them. They were just expensive. So it was a matter of budgeting. And also you figure, you place a hundred thousand dollars software engineer, you get 20K, or 25K.

Michael Dash:

But you place a hundred dollars an hour engineer for a year and you make 25 an hour on that, if [inaudible 00:09:42], for instance, then you’ve got about 2000 working hours in a year, multiply that by 25. You’re obviously making a heck of a lot more money doing that.

Michael Dash:

But where I was at the time in Utah, there was just a lot more full-time opportunity, full-time staffing opportunities available. So that’s kind of where we focused.

John Warrillow:

Got it. What was your setup like with your partner? You mentioned you started this business with her. I mean, how did you guys divvy up the equity? Did you kick in money? Was this just a handshake deal? How did you guys structure the original agreement?

Michael Dash:

All this happened, initially because of the business development I was doing in New York and because I brought this huge E TRADE opportunity to her. So that’s kind of what gave her the confidence to leave her company and then start with me when we got together.

Michael Dash:

We wanted it to be a women-owned business because there’s certain advantages in the marketplace for that, diversity and a lot of organizations have programs. She had 51% and I had 49%.

Michael Dash:

I did pitch in some money initially, just from an infrastructure standpoint, it wasn’t significant. I mean, maybe 10, 15 grand, I think. I mean, significant in the big scheme of things. To some people that’s very significant. So I’m not trying to downplay that. But yeah, so it was about 10, 15 grand, and then we were off to the races.

Michael Dash:

In terms of setups, my responsibilities were client sales, business development, all client relationships. I managed all that. Negotiating contracts, negotiating agreements with the client, all of that.

Michael Dash:

She handled the infrastructure within the organization. She handled the recruiting process. She hired and trained recruiters. We eventually opened an office in India. She did all of that.

Michael Dash:

We looked at it, we could hire four people in India for the price of one in the US, and it made sense and I agreed with it. So she set all that up. She would go to India, and I would hold down the Fort in Utah. We had an office in Lewiston, Idaho, and also in New York City when I bought the company from her and I expanded back to New York.

John Warrillow:

What triggered you purchasing the company from her?

Michael Dash:

Oh, you want to go there. Well, eventually we got to a point after about five years, we were basically growing at a million a year. So we were up doing about five million in revenue, five years in.

Michael Dash:

But my goals were to build this company to a $20 million company and get bought out by one of the monsters in the industry, but she was content at where we were. I mean, we were both making good money at the time, especially in Utah. She had two kids and she was telling me she wanted to spend more time with her kids and all this other stuff.

Michael Dash:

But we really had a complete breakdown in communication between each other, and we started resenting each other and it grew towards a very unhealthy relationship. I was not the person I am today. I was driven by ego. I was driven by money. I was driven by build, build, build.

Michael Dash:

She also, I would say resented me, because I was kind of flamboyant and out there and taking the spotlight a lot. I don’t think she really enjoyed that. She didn’t like that. She started working less and less, and I was grinding it out.

Michael Dash:

I mean, my life was this business. I was putting in 10, 12-hour days. I was going to events all night. I was doing all these things. She wasn’t, and we were splitting it 50-50 from how we got paid.

Michael Dash:

And so I started resenting that a lot. I’m working 10, 12-hour days, she’s working six-hour days. So it wasn’t working anymore and one of us had to go. We weren’t even speaking to each other for a while and our offices were right next to each other. It grew into a very poisonous situation.

Michael Dash:

So we had our own lawyers negotiate deal for the two of us, and I ended up leveraging the relationships I had to buy her out.

John Warrillow:

How did you value the company for the purposes of buying her out?

Michael Dash:

Great question. We actually had our accountants and lawyers work it out and we kicked numbers back and forth. We ended at 1.35 million, that I paid her. I owed her a million at the closing date and then 350 over the next two years, so 50K every six months, as long as she abided by the contracts and agreements we signed, which she did not. And that’s a whole other story, which I’m glad to get into if you’d like.

John Warrillow:

I would like. Let’s talk about the valuation before we go there though. You’re around five million in revenue at the time that you guys split up?

Michael Dash:

Yeah. We were growing at a steady pace and we had some clients with some clients that were projecting certain numbers that we worked into the valuation. So it was a lot done on projections and stuff.

John Warrillow:

Yeah. What would you put to the bottom line in a year where you generated five million in revenue, like on a percentage basis? What would you expect you to put on the bottom line?

Michael Dash:

I would say in five million, we were probably, I don’t have percentage-wise answers for you, but I would say we’d probably take it out 750, [inaudible 00:15:58] two of us.

John Warrillow:

And that would be split between the two of you guys?

Michael Dash:

Yeah.

John Warrillow:

Okay. Got it. And so just doing the math a little bit, so you’re kind of pulling out 750 and so you value the company, which she owned half of. Right?

Michael Dash:

Actually 51% to be technical.

John Warrillow:

Yeah. Yeah. So you valued it at around, $2.7 million or about 50% of revenue?

Michael Dash:

Yeah. Approximately. See, the challenge was there was reoccurring revenue, which you can get multiples on, but then there’s the flat revenue, which nobody’s going to pay more than one-to-one for, if that even, because it’s unpredictable.

Michael Dash:

Companies want to be able to predict and forecast, and on the full-time side, it’s really tough to do that. So, if I had to start the business over again, I would just focus completely on contract work because that’s where you get the number. In our industry, like an average multiples, like two and a half times is a good number to shoot for.

John Warrillow:

Yeah. And so to get her to agree to value the company at 50% of revenue was a pretty good deal for you.

Michael Dash:

We were just, at that time, we were heavily on the full-time side of things. So yeah, we negotiated it down. I mean, still at that point in my career, I didn’t have a million dollars to pay her. I had to borrow half of it. I had about half of it saved from the work that I had done and everything, but I had other investments going on.

Michael Dash:

I did like a bunch of houses, and a bar I invested in, and the things we all do when we’re growing a company. We know we’re not busy enough. We’re not focused enough on the company. We have to go complicate our lives and do all these other things that in the big scheme of things end up reducing the value of our life.

Michael Dash:

For my case, my case, at least, they reduce the quality of living for me, because I was not focused on myself personally. I was focused on running these businesses, and I have four houses, on my tenants. I wouldn’t hire somebody to run the houses because I was like, “Why would I pay them? I can do it myself.”

Michael Dash:

It was just this attitude I had back then that I would strongly would not advise, for myself. I’m speaking to myself now. Now I value automation and I value partnership. Even after a tumultuous partnership that I got out of, which the partnership we’re talking about lasted six years in court.

Michael Dash:

We were in court for six years because after I paid her the million dollars, I actually found out she was having an affair with our director in India, who I inherited as my director.

Michael Dash:

Now, she was married with two kids in the US, so it was a shock to me. This guy hated me because she obviously was having an affair with him and poisoning his mind. So it turned out to kind of be a very rocky road, almost disastrous in a sense, after I bought the company, because within the first three months, the India office stopped basically performing for me.

Michael Dash:

I hadn’t met them. I mean, I worked with them every day, but I hadn’t met them in person until I bought the company. So all their loyalty was to her. I had about 15 people there. Six of them were very, I had great relationships with, but the other ones, were all loyal to her.

Michael Dash:

So, about three months, after three, four months after the purchase, I was under a lot of stress because I just borrowed half a million dollars, owed her 350 more, I’m paying, I have to close deals, and she basically started a competing company in India and took nine of my 15 employees with her.

Michael Dash:

They moved directly upstairs in the same building as my remaining people. So that will tell you something about how our relationship was.

John Warrillow:

Did you have a non-compete with her?

Michael Dash:

I had a non-compete, but she contended it wasn’t valid for India.

John Warrillow:

How did the courts take that?

Michael Dash:

It was a US court, so they said it was kind of no, and they didn’t really take it up. They only took up the US portion. When we filed about it, they didn’t really rule on it, which was unfortunate.

Michael Dash:

But, so I basically bought this company for a huge sum of money at the time and had to rebuild an entire office, which now was a million dollar producing office. They were crushing it for us.

Michael Dash:

So yeah, I didn’t have the rosy exit that probably a lot of people you interview have had. I had the tumultuous, I had to go through the fire to see the light.

John Warrillow:

How did it end with your partner? So you paid a million dollars, you had 350, I’m assuming you didn’t pay the 350 when you found out about this affair and all that stuff.

Michael Dash:

Yeah. When I found out about the affair and the office, I didn’t care about the affair. I’m like, “I don’t care. Do whatever you want.” But when it affected my business, then obviously I did. When she’s within like a month of paying her a million dollars, she’s taking this guy to the Maldives for two weeks. He’s supposed to be running my office.

Michael Dash:

I’m seeing pictures being posted from the Maldives. I’m like, “What the heck is going on? My office is tanking. I just paid a million dollars.” I went to see a lawyer. We sent her a letter that we were holding off on the first 50K payment, which was due in six months.

Michael Dash:

Right before it was due, I sent the letter and we were doing an internal investigation and we felt that she violated the agreement. And then she sued me. That’s kind of what started our lawsuit. Then I counter-sued her.

Michael Dash:

To make matters more complicated, her sister and brother-in-law worked for me. Her sister was the best employee I had. So she stayed for another year, the sister. And then the sister started a competing company with her in the US. So they took the India operation and expanded in the US.

Michael Dash:

And then I had agreements with the sister. She violated them. The brother-in-law violated them. So then I sued again. I sued them when they left. So it was a mess. And again, a lot of this could have been avoided if we communicated, but we had stopped communicating and just built resentment towards each other.

Michael Dash:

And again, I was a different person. My ego was out of control, and I really felt wronged. I felt screwed. I was also going to the wrong people for advice, specifically my father.

Michael Dash:

It’s one thing I learned. Don’t go to family members for advice, because they’re going to give you a biased opinion. Yes, it’s going to be loving and caring and all that, but it’s biased. They want to protect their children.

Michael Dash:

My dad’s an entrepreneur. My dad would just fuel my plane. He was just, “Don’t you dare let her screw you over.” And I’m like, “I’m not. There’s no way I will.” And that just that didn’t give me the perspective I needed of like, “Hey, take a deep breath, step away. How does this look for you in a year, in two years, in five years? What’s the goal here and what are you going to achieve?”

Michael Dash:

I never put it in that context or thought about it until I was six years into the thing and just wanted to get out and ended up settling. There’s these lawsuits that I’m speaking of, and these counter-suits back and forth, went over a six-year period until the lawsuit finally ended.

Michael Dash:

I was deposed five different times. We deposed her multiple times. We actually went to court. We had a trial, it lasted six days. I was on the stand four or five different times, and so was she, and so was her… In the interim, she got divorced and she married the director from India and had a couple of kids with him. So he was in the US. So it was just a mess.

Michael Dash:

But we went to court. The jury actually ruled that I owed her the 350K because I signed an agreement as the CEO of the company saying I would pay it, and that document superseded everything, but that she caused 260K in damages. So it was a net 90K basically I owed her. But the judge ruled that she was the prevailing party. So I was responsible for her legal fees.

John Warrillow:

Which were?

Michael Dash:

She wanted over a half million dollars in legal fees. Now, my only legal fees were $1 million over six years. Thank you for feeling my pain. She was threatening. So I was like, “I’m not paying that. I told her, “I’m not paying that. I don’t have it. I mean, I owe my own lawyers a million dollars, and I’m not able to pay.”

Michael Dash:

Anyway, she was also threatening to… because she was upset at the ruling. I was just like, I wanted it over. My mindset had shifted. I had done some personal development work on myself. I went to Bali. I had a big experience in Bali, eat, pray, love, baby. And so my mindset was like, “I just want my life back.” That’s what I wanted. I didn’t care about the money. I didn’t care. I just wanted my life back.

Michael Dash:

She was threatening to appeal it. And if you appeal, that could be another year to two years of my life. And I was like, “Oh hell no, I ain’t doing this again.” And so we ended up negotiating.

Michael Dash:

This is the irony of the whole situation, and the irony of my life, is that we negotiated a settlement of 350, the same amount I owed her six years prior. I just had a million dollars in legal fees to pay off.

Michael Dash:

So it was six years of torturing myself. I did it to myself. I have nobody else, I’ve taken responsibility. I’ve forgiven her. Obviously, she was a major part of why it happened, but I was a major part of why it happened and I own it. I don’t blame anybody. I don’t blame myself either. I’ve forgiven myself, I’ve forgiven her, I’ve moved on with my life.

Michael Dash:

That’s really why when I sold the company, I just wanted to get out of it. I grew to resent the very company I built and a major reason was because that legal matter was hovering over me while I was trying to lead and manage people. I ended up, at the end I reduced a lot of staff.

Michael Dash:

When I sold the company, we were doing three million. We weren’t doing five and a half million anymore. But I was completely unfocused because, well, I was trying to be focused, but my attention was diverted in a million directions and mostly on this legal matter.

Michael Dash:

So I paid her the 350 and signed the agreements, and I settled that lawsuit, and sold the business in the same week. All the proceeds I got from the business, paid her off and paid my lawyers off. Then I left Utah. I moved to California.

John Warrillow:

This is an incredible, incredible journey that you’ve got to through. I’m smiling because you’re smiling. But clearly it was not something to laugh about during it.

Michael Dash:

No, it was painful.

John Warrillow:

You mentioned, your ego and how that was fueling a lot of the decision-making. Have you been able to unearth what was going on for you personally that your ego was in need of that sort of fulfillment or that sort of satisfaction?

Michael Dash:

Well, I wrote a book called Chasing the High, and I mentioned that because, and then that’s my whole through entrepreneurship. I have a past in addiction, and lawsuits. That was a part of it too, explaining and talking about the story.

Michael Dash:

But I mentioned Chasing the High, because that’s what I was doing. I was always chasing a high. For me, I started gambling when I was 11 years old. I had a 20-year gambling addiction and then a drug addiction. In college I was like a bookie and a drug dealer. That’s what I did in college.

Michael Dash:

I mean, I was a student and I also worked. I went door-to-door selling home improvements, but I mentioned all those things because I was chasing the dollar. Amongst all those addictions, I was addicted to money, and I wanted more money.

Michael Dash:

It was money, money, money, accumulating things. I was programmed, amongst a lot of us are programmed as children growing up that money will make you happy. If you have money, you can live the life. You can get the houses, the cars, the suits, the woman, the man, whatever. Everything that you want and being rich is where it’s at.

Michael Dash:

And so I was brainwashed myself. I was brainwashed by TV and the media, and even my dad was an entrepreneur. So my dad just worked his ass off. He was not around for sporting events. He was not around for plays and stuff like that. That was my mom.

Michael Dash:

My dad was working and grinding all the time. His mentality was, you’re the first one in and the last one out. That’s how you become successful. That’s how you beat the competition. That’s what I did because that’s what I learned.

Michael Dash:

Now, I would never do it that way now with all the experiences I have. No, no, no, no. Now it’s about set up a good structure, put a structure in place you can automate and you can grow and that you can scale. Less is more these days. So I have a totally different attitude through my experiences.

Michael Dash:

But back then, this is 20 years ago, the internet wasn’t really, it was just coming into its own. It was just crazy to say that just 20 years ago, the internet was coming. It’s crazy.

John Warrillow:

Yeah. It’s shocking when you think about what’s changed. What kind of car did you dad drive when you were growing up?

Michael Dash:

Nothing fancy. Not at all. He, my dad is the opposite of me in terms of money. He is so frugal. I mean, I call him cheap. I feel like he’s cheap. “No, you’re not leaving enough for the tip.” I got to tell him every time. I always throw an extra 10 bucks on top of the tip.

Michael Dash:

I’m like, “You have all this money. Why aren’t you spending it? What are you saving this money for? I don’t want your money. Live your life.” But he doesn’t want to spend it. He loves the stock bar. By the way, he’s 88, and he trades to the market every single day. Watches Kramer everyday, loves Kramer.

Michael Dash:

He’s grown, and he’s done great in the market since he’s retired. So it keeps his mind going, he’s sharp as a tack. Really, I love that he loves keeping that going and everything. But in terms of money and everything, he has a nice house, but he drives this. I don’t even know what the car is. I don’t even like being seen in it.

Michael Dash:

But I think, you know what, actually? I’m sorry. He had a Lincoln Continental when I was in college because I borrowed it. That’s how I remember now. But otherwise his cars are very modest, Volvos, and stuff like that.

John Warrillow:

But those were sort of emblems for you of this frugalness, this importance of money, keeping it, not spending it. It sounds like on some level you were rebelling against that frugalness, if-

Michael Dash:

I didn’t subscribe to his frugalness. That was a him thing, not a me thing. For me, I was like, “I want to enjoy my life. I’m going to spend money and I’ll just make more. I got to work my… ” If I go out and I drop two grand a night on a steak dinner with 10 of my friends and I decided to pick up the bill, I would pick it up, and I would just be like that weekend I’d be like, “All right. I just spent two grand. I got to work my ass off this weekend.” That’s how my mind worked at the time.

John Warrillow:

What was your drug of choice?

Michael Dash:

What wasn’t my drug of choice?

John Warrillow:

No. What was your drug of choice?

Michael Dash:

Oh, no. I know what you asked me. I was rephrasing the question for you. Again, gambling started my addiction, but then it was cocaine, then it was oxies. I had a couple of surgeries. I had two shoulder surgeries, two back surgeries, I got hooked on oxies very easily.

Michael Dash:

Then it was GHB, if you’re familiar with that drug, and Adderall. Adderall was one of the worst drugs for me and one of the most recent, because when I was building my business, like when I moved to Utah, that’s when I was introduced to Adderall, I hadn’t heard of it before.

Michael Dash:

I got hooked on Adderall real quick, and I was popping like 30 milligrams a day in the office and it really took away. It took my… Basically what Adderall will do for you is it definitely helps you focus. I would get a shit ton of work done. But the flip side of that is it really messes with your emotional state.

Michael Dash:

If you’re having a good day, it’s the best day you’ve ever had in your existence, and if you’re having a bad day, you’re depressed and on the verge of suicide. And those mood swings were prevalent on a daily basis for me. It really, really affected me as a human being, also as a leader. I did not lead from a place of empathy. I led from a place of almost dictatorship.

Michael Dash:

Until I stopped, and like the last two years I was running the business, I wasn’t really on Adderall. My employees noticed a huge difference and we had much stronger, I was mentoring them as a leader should, where the other years I was not. I was just all over the place and just be like, “Let’s get deal, deals, deals.”

John Warrillow:

Let’s get into the actual sale. I mean, I have found the story so fascinating to date, but I’d love to know about the deal. So you’re at five million when you break up with your partner. What precipitated sort of shrinking to three? Why did that happen? Was it the loss of the India office, I’m assuming contributed to that?

Michael Dash:

Yeah. One of the big clients, we had changed their business model, and we lost a significant amount of business. However, which would have been fine if I was focused on the business, I would have been able to replace it. But I was focused on the lawsuit and I was the main salesperson at the company.

Michael Dash:

I brought in, I had all the relationships, I brought in all the business, I made things happen. And then I had a huge team of recruiters who would fulfill it all. I tried to bring some sales people in, but I didn’t mentor them properly, and I didn’t put the time in to continuing to build. I was exhausted.

Michael Dash:

I had expanded into New York and that turned into a nightmare. I had problems with employees I hired there. I overpaid for some very senior level employees because I wanted to bring senior people in, who could run the offices. I was focused on this lawsuit at the same time.

Michael Dash:

So I think I lost a chunk of money in the New York business trying to expand it to New York. So I would say that, that was why I was diverted all over the place.

John Warrillow:

What would you have been doing in terms of top line revenue and bottom line profit when you decided, “Okay, I want to sell this company.”?

Michael Dash:

What was I doing?

John Warrillow:

Yeah.

Michael Dash:

I think we were doing about three million a year and-

John Warrillow:

In revenue?

Michael Dash:

In revenue, and the margins were lower than they had previously been, because I had taken on some clients like Goldman Sachs was a big client of mine and they are penny pinchers, let me tell you.

Michael Dash:

I started doing a bunch of businesses then I’m thinking that I would get some volume, which they told me I would, but it didn’t turn out that way. Yeah, so it was about three million. And then I was pulling about maybe 250 out of that.

John Warrillow:

Got it. Okay.

Michael Dash:

200, 250. But it was really, I wasn’t really pulling it on my stuff. I was paying bills, everything. Legal bills, and yeah, basically legal bills.

John Warrillow:

Got it, got it, got it. And-

Michael Dash:

When I sold the company, I was like, I could have got more than I got, but I just wanted out. I wanted enough money to pay off all my loans and everything, and I had a credit line. On top of all that, I had a credit line with Chase Bank, which was a half million dollar line.

Michael Dash:

I was into it for 280K. And then one of the years, in the whole time I was in business, one year we lost money. And as soon as that year popped up, they shut down my line at 280 and it was a 14% APR, or 14% rate they were charging me.

John Warrillow:

On the 280?

Michael Dash:

Yeah, not APR, but 14%. Now, I signed that year’s prior not even thinking that I would only take the money and I would pay it off, not thinking about some legal or none of that stuff.

Michael Dash:

So I really forgot totally about they always say the devil is in the details. And I always say that also because I learned from experience of not paying attention to the details. And then it bit me in the ass because I didn’t have the 280 to pay it off. So I was paying that.

Michael Dash:

As it lands on you, you’re probably feeling the chaos in it. Because I feel the chaos and in explaining it my head is spinning. So you can imagine living it how distracting it would be and how unfocused I was on the business itself.

John Warrillow:

Gosh. Yeah, no. I can totally feel that. So you’re starting offices in New York, you’re chasing Goldman Sachs as a client, you’ve got the lawsuit that you’re kind of, it sounds like coming at least to some level of agreement, although it hasn’t settled yet.

John Warrillow:

Was there a straw that broke the camel’s back that said, “Okay, enough. I’m out.”? Can you remember the day or the moment that you said, “I’m selling this business.”?

Michael Dash:

With everything I described, I was just being worn down physically, mentally, emotionally. I was just worn down. So it happened over a period of time, and there’s not a specific… I wasn’t even jumping for joy when it happened. I was just like, “Thank God.”

Michael Dash:

I didn’t go out and celebrate it. I didn’t go because I didn’t do any. I was just like, “It’s over. Oh my God, I got six more months to transition then I’m out.” That’s literally, I was so exhausted. I had no emotion left to celebrate anything. I said that I was settling the lawsuit and selling the company. It was more or less just like, “Thank God, this is done.”

John Warrillow:

Well, let’s get into the actual transaction itself because it was a $3 million company putting between two and $300,000 on the bottom line. How did you go about marketing? I mean, did you hire an advisor? Did you market it yourself? How did you find a buyer?

Michael Dash:

Sure. I had a finance guy the whole time, my financial advisor. So I just worked with him to put the numbers together and everything and the valuation and try to get as much as I could. But I also was resigned to the fact that whoever was interested, I was going to present them with a discount if we could close it quick.

Michael Dash:

Because again, I didn’t care that much about the money anymore. My mind had shifted about not getting as much as I could, that wasn’t my goal. My goal was getting what I needed to pay all the bills off so I could start fresh. That was my goal.

John Warrillow:

What did your financial advisor say it was worth?

Michael Dash:

He thought with the trailing numbers and everything in the projections that I should get one and change.

John Warrillow:

Got it.

Michael Dash:

But I took less because I just wanted out, so I ended up taking about 750 all in.

John Warrillow:

Got it. And so he figured it was worth… financial advisor woman or man?

Michael Dash:

Man.

John Warrillow:

Man. So he figured it was worth around a million bucks. So he’s putting sort of, it sounds like maybe a four or five times SDE on it, Seller’s Discretionary Earnings, if you’re pulling out a couple of hundred grand. But you were happy to take less.

John Warrillow:

Where did you find buyers? I mean, again, did you know somebody? What was the process you went through to find people to buy it?

Michael Dash:

Yes. I had an office in India, as I mentioned. So the biggest competitor in where I was in India, which is Nashik, India, I had actually formed a relationship with this guy because originally we were stealing employees from each other, and they were much bigger than we were over there. So they were taking my good employees.

Michael Dash:

I called them and we started talking and I said, “Why don’t we support each other?” Because this is a small place in India, small place in India with two million people, by the way, but that’s small in India. And so we agreed and we became friendly.

Michael Dash:

When I was ready to sell, I called him up and I’m like, “Hey, I’m looking to sell. If you guys are interested, let me know.” They were owned by a much bigger company in the US called [Ampcus 00:44:50], and they were interested.

Michael Dash:

They flew me out to their offices in DC and I met with them. Then I had four probably, competitors, direct competitors in Utah. So I went to them and I was friends with a few of them. I went to them, told them, and then my best friend, lived in New York city, who I had worked with years prior in the staffing business, he had a $20 million nurse staffing agency, nursing and the admin, and he wanted to add IT to the mix.

Michael Dash:

So I told them I was selling also and he was interested. So I started meeting with these people, dwindling it down to who was really serious. I thought some of my competitors were just trying to find out, dig information from me. So I didn’t release really anything to them until I knew they were really serious.

Michael Dash:

Basically, it boiled down to my good friend in New York and this company in India, which is based the parent company in DC, those were the two that were most interested. And then I tried to, I had leveraged some of it, some of them against each other.

Michael Dash:

But I know if I waited and stuck with the bigger company that I would have got more. But with my friend, I mean, we’ve known each other since five years old, so it was kind of easy. I mean, we negotiated back and forth. It wasn’t an easy negotiation per se, but it was easy once all that happened, then transitioning it and everything like that.

John Warrillow:

Got it. At what point do you raise the specter of valuation? I mean, as you’re having these conversations with Ampcus and your friend in New York, I mean, are you letting them place a value on the company, or are you saying, “Look, I want X for the business.”?

Michael Dash:

Yeah. I went in and said, “I want X for the business, and here’s how we came up with those numbers.” And then I just laid out everything. I would have my finance guy actually call in to these meetings, so he could walk them through the numbers.

Michael Dash:

I’ve learned along the way that trying to be the numbers expert on valuations is not my jam. I’m very strong numbers person, but I’m not a valuation mergers and acquisition person. So I kind of let him handle a lot of that, and it was just, we negotiated back and forth.

Michael Dash:

They picked the part a lot. We basically did projections based on the clients and the contracts we had in the years prior, in the years forward, and they picked it apart a lot and told us some of the assumptions we made were invalid based on whatever reasoning they presented in the marketplace, and we just talked things out from there.

John Warrillow:

When you walk into those meetings, did you say, “I want a million bucks.”?

Michael Dash:

I don’t remember. No. I asked for more than that originally. I think I said I wanted 1.35 because that’s what I bought the company for. So I was trying to get back what I bought it for.

Michael Dash:

I think that was the original goal. But I knew I was coming off that number, because you got to remember, this isn’t a typical negotiation. I was going to not push hard. I wanted out, so I was going to negotiate the best I could, play these two against each other to get the most I could, and so I could bounce.

John Warrillow:

Did either of the two organizations, Ampcus or your friend, put together a letter of intent or some sort of formal offer that prior to you agreeing with your friend to proceed, did Ampcus put together an offer at all?

Michael Dash:

They didn’t. We signed NDAs. But then I had an offer from my friend and I went down that alley while I was working with Ampcus to get an offer. They couldn’t move as quickly because they’re a much bigger organization. They had to get sign-offs and all this other stuff, and I was done. John, I was done. I was just like, “Get me the heck out of this.”

Michael Dash:

I went just with, I negotiated with my friend. I told him that, “Look, Ampcus is going to come to the table with a offer. So if we don’t get this done quickly, I’m going to obviously start considering their offer.” So he moved quickly and we put something together and we went back and forth a little bit.

Michael Dash:

There was some back-end opportunity for me to make even more than I did based on revenues numbers coming in, driving some business and things of that nature, so I was comfortable with the 750 basically.

Michael Dash:

Part of it was asset. We divvied it up where like, I think like a hundred of it was for the property and assets and the rest was for the business. So something like that. And then again, there was a tie on, on the back-end for commissions over a year long period, from certain accounts. And if those met and if he sold his company, I would also be tied into 1% of that sale.

John Warrillow:

Got it. What was his first counteroffer? So you go in at a 1.35 million knowing that you’re not going to probably get that, but that was your initial starting point. What did your friend come up with as his starting point?

Michael Dash:

I think it was a half mil.

John Warrillow:

And what was that like? This is a buddy of yours that you’ve known since you were four years old. What was your reaction to half mil?

Michael Dash:

No. I’m like, “I bought this company for 1.35 million.” And he’s like, “Well, it’s not worth it.” And I knew that. But it was more his accountant and evaluation guys saying, “Look, it’s not worth this amount of money. These assumptions he’s making.” They saw a period of going from five million steadily down to three million. So there was alarms there.

Michael Dash:

And so they were focused on those alarms being set off. So then he came up to six and then eventually we landed on 750 with options to earn money on the back-end on commissions for certain clients and the sale, on his eventual sale. But I had to hit those commission numbers first.

John Warrillow:

I guess a lot of people are listening right now, and we’re recording this in the depths of this pandemic wave two, whatever you want to call it, where a lot of small businesses are facing the same thing you faced, the, it was five million last year, now it’s three million this year, and many of them just want out, they’re exhausted. They’re just they’re like you were.

John Warrillow:

How did you make the case that although you’d gone to five to three, there was a future for the business. What did you say to your friend that got him to open up his wallet to the tune of 750? How did you make that case?

Michael Dash:

I set up meetings with my biggest clients and brought him to the meetings. So like Overstock.com, have you heard of them before? You’re familiar with that company? They were my biggest client in Utah. I mean, they basically made the beginning of the company. They were the first client I had. They were a million dollar client, certain almost every year.

Michael Dash:

I brought him in to meet the CEO, and the CEO just told them how amazing we were and how we’re going to be partners forever, and he had big plans for us and, yada, yada, yada. So that gained his confidence.

Michael Dash:

Then I brought him to Goldman Sachs, who is another client of mine. I brought him to Discovery Channel, Discovery Communications, Discovery Channel. And that was the third biggest client of mine. So I built confidence with him through these meetings more than anything.

John Warrillow:

How did you ensure that he wasn’t going to just take those relationships and steal them?

Michael Dash:

Because he’s my best friend. I mean, he’s not going to do that. He didn’t know anything about tech. He was a nursing admin guy. He wasn’t a tech recruiter or a tech. He didn’t know anything about that. So it was a unique situation that I was able to do that because of the relationship I felt completely comfortable.

Michael Dash:

I believe at that time he had signed the letter of intent. So I was comfortable with it. He signed an NDA, and signed all these things. But, look when you know somebody that long you trust them like your brother.

Michael Dash:

I had problems with trust because of the whole lawsuit and everything. But he’s one person that I never had any thoughts about trust.

John Warrillow:

In addition to the value of the company? What else was contentious in the negotiation?

Michael Dash:

Well, afterwards, I would say things didn’t go according to plan. So it was very contentious afterwards. And if I had to do it again, I wouldn’t sell it to my best friend because he’s always reminding me of certain things and I’m just like, “I didn’t force you. You wanted to buy this. I warned you.”

Michael Dash:

I actually did warn him. I warned him. Initially I said, “I don’t want to sell it to you.” He’s like, “Why?” I’m like, “Because if things go wrong, I’m never going to hear the end of it. I don’t want it to affect our friendship. Our friendship means more than anything to me.” But he was adamant. So I was like, “All right.” At the end of the day, I was more miserable with the [inaudible 00:55:15].

Michael Dash:

But afterwards, all the biggest accounts, Discovery Communications, Discovery Channel was a big account at that time and I had some big billers that were bringing in a lot of money. Literally, a month after we closed the deal, they hired a new CEO. And you know when a new CEO comes into a company, they want to change things. They want to make an impact.

Michael Dash:

So the first thing they did is they said no more contractors at the whole company. And we want to wind down all the contractors that are here. I had five people that we were making 30 to 40 bucks an hour on, who were working 2000 hours a year. That’s a lot of scratch just there. And they were ending them all.

Michael Dash:

So he was obviously furious. But we couldn’t predict this. We sat down with Discovery and they told us all these plans they had for us, but you can’t predict. That’s why you just can’t predict. You never know.

Michael Dash:

And so eventually they got all the contractors. It wasn’t just me. It wasn’t just our company. It was all the companies I competed with for that business that were in there too. It was a lot of companies. And the CEO changed the business model there and they hired all those people from us full time. So that really hurts.

Michael Dash:

So for months he was like hemorrhaging money and he was pissed and I would hear it. But there’s nothing I could do about it. And at that point I didn’t get upset because I knew how he felt. I just listened to him and said, “Look, tell me what you want me to do. I’ll do whatever you want.” But there was nothing really we could do at that point. We just tried to build the other companies up. But yeah, it didn’t kind of go according to plan.

John Warrillow:

What’s your relationship like with him now?

Michael Dash:

We’re like brothers. It was a contentious time. But I think he realized that these things were out of control of both our hands and it was just bad, bad timing and bad luck. And sometimes, look, luck is a part of business. It really is. You got to be in the right place at the right time.

Michael Dash:

Obviously you need to work your ass off. You need to do the right things. You need to have a good business and everything. But if people say luck isn’t part of it, it certainly is.

Michael Dash:

Throughout my career there’s been different, I don’t really call it luck anymore because I feel like you manifest these things. You can manifest positive business and manifest positive relationships based on how you’re showing up in the world and how you’re showing up for your employees and how you’re showing up as an organization, and if you’re giving back to the community and all of these things.

Michael Dash:

But at that time I just believed in luck. I hadn’t gotten to the manifestation point in my life yet.

John Warrillow:

So after you sold, it sounds like Discovery Channel changed strategy and they lost some of that business. What about Goldman Sachs and Overstock? Did they continue to use you guys?

Michael Dash:

Goldman Sachs did. But Overstock had a hiring freeze. And so they kept our people on, they were still billing and stuff, but they weren’t hiring anymore. So all of a sudden the two of the three biggest clients, because Overstock was going through some challenges at the time as a business, it had nothing to do with our performance. It just, the business models changed.

Michael Dash:

And so he had to hire a business development person to go focus on getting new business and stuff. So he had to put out more money. It’s not what he was looking to do.

John Warrillow:

It sounds like in retrospect you mentioned, if you had it to do all over again, you might not sell to your best friend. What tactically might you have done differently if you could do it all over again?

Michael Dash:

Not get in a lawsuit.

John Warrillow:

I guess that’s an obvious one. I guess I’m more interested in retrospect, again, hindsights 2020. Was there any way to draw Ampcus into the conversation sooner? Could you have done anything to accelerate their decision-making?

John Warrillow:

Would you have slowed down with your friend to get them to get your timetables on the same wavelength so that Ampcus had a competing offer? Any of those tactics as you look back now?

Michael Dash:

Well, I also had a million dollars in legal fees. So I was paying the legal fees, but I owed probably about 350 more in legal fees that I’d stopped paying because I just didn’t have. I had a whole contentious relationship with my lawyers where they’re completely over-billing me and taking advantage of me.

Michael Dash:

The law firm I ended up with, my lawyer, his other cases were like a $25 million legal case with GM. I’m like, “Why are you have my case?” But I didn’t really know that till I was in it, way too far into it to change. But I ended up having a more contentious relationship with my lawyers than my ex business partner. That’s a whole nother story for a different day. But yeah, that was emotionally draining.

Michael Dash:

So to answer your question, which I believe was originally, would I draw the other bidder in Ampcus, to maybe get more money and get the bids off? Where I was in my life, I didn’t care to create a bidding war because I was so burnt out.

Michael Dash:

But the business side of me is, “Yes, you need to create that bidding war.” And yes, I would have waited and brought Ampcus in, but that wasn’t my focus at the time.

Michael Dash:

When you think about all the things that were surrounding me, legal bills that were mounting, bills with the bank I still needed to pay off, the business itself, running and managing that, the actual lawsuit, and still being in the lawsuit. And then trying to manage my employees and my clients. And then I had these houses and I was an investor in something else.

Michael Dash:

And so it was just so much that I had built this life where I felt like I wasn’t living my life, my life was living me, if that makes sense. I wasn’t running the business, the business was running me. And so at that point, I didn’t care about creating and getting an extra 50K or an extra hundred K I just wanted out.

Michael Dash:

So that’s why I made the decision to run with the offer that I had and try to get the most out of it that I could.

John Warrillow:

Makes a hundred percent sense. Tell me about your life now because you’ve left Utah, and you’ve written a book. I mean, give me a sense of, paint a picture of where you are for folks. We’re recording this in October and the US is fully in the throws of this pandemic and an election, but you’re not anywhere to be found. Just tell people where you are.

Michael Dash:

After I sold the business, I moved to California. I was living in Venice and there’s a very negative vibe in the air and especially in California, and in Venice specifically compared to the rest of the US.

Michael Dash:

I mean, the challenges exist for everybody in the world right now with the pandemic, and in the US with the election and the division over it, and the racial unrest. And then if you add on to all that, in California, you have the fires which are burning out of control. So the air quality is horrible.

Michael Dash:

In Venice itself, the homelessness problem is beyond out of control. The drug problem on the streets is crazy. I mean, I would be walking just for my morning coffee and I’d walk by these embankments, these camps where this tents along the sidewalk of homeless people, and people are shooting up and smoking crack at 9:00 in the morning. And I would walk by this every day.

Michael Dash:

So this is in Venice. Mental health problems, people screaming just at no one in the middle of the streets. And it’s really a sad state of affairs. And then you add onto that the crime that’s being committed there. Four or five times a day, I would hear police cars and fire trucks going by where I live.

Michael Dash:

I really, it was starting to affect my mental health and everything. So I decided to take just a trip to Tulum, Mexico to visit a friend. Three weeks later, I went back to LA, packed up all my stuff, broke my lease, put it in storage, gave my car to my friend and took eight bags and moved to Tulum.

Michael Dash:

So I’m in Tulum, Mexico now. Never thought I would be here, never planned on it. It all happened in flow. I followed my intuition, and people are actually living their lives down here.

Michael Dash:

I’m executive coach right now for various CEOs, and also am an interim COO for one of those companies. Just recently started a business with a woman who lives downstairs from me, a clothing business, women’s dresses and oils, something I know nothing about, which I’m going to bring the business side to it, and she’s bringing the obviously creative side. I’m starting a podcast called Tales from Tulum, as well.

Michael Dash:

So I’ve gotten very involved. I’ve been here a month and got a lot of things cooking, and I’m just loving it and creating a new life for myself. And yes, I did write a book called Chasing the High, and they’re actually having me at the bookstore down here to talk about it. So I’m excited and interested about that. That book is on Amazon and Audible.

Michael Dash:

I actually read it myself, which was a cool experience. It’s really all about my journey through addiction, entrepreneurship, lawsuits, and my journey to the edge, is the subtitle.

John Warrillow:

Sounds like a must listen, or a must read. I really appreciate you taking the time to do this. It’s obviously, I’m happy for you. I’m happy the way it all ended up. But it sounds like a difficult time. I’m happy the way it’s ended up for you.

Michael Dash:

Yeah. I appreciate you having me on. This was a good discussion because I do a lot of podcasts and they’re all usually about addiction, or about writing a book, or entrepreneurship, which is great. I love talking about that stuff. But I’ve never really talked in depth about the sale like I have on this show. So it was fun. I appreciate it.

John Warrillow:

Awesome. Well, we’ll see you again.

Michael Dash:

Thanks a lot, John.

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