Wes Mathews built High Level Marketing, a digital advertising agency, to $6.5 million in annual revenue. The business was thriving, but when COVID hit, Mathews started to question the risk he was shouldering employing 49 people. It was around that time that Mathews received an email that would change his life forever.
In this episode, you’ll discover how to:
Show Notes
(06:33) Wes Mathews: “My business partner and I, Jon Bowerman, he’s the CTO of the company.”
(11:20) Wes Mathews: “I wanted to charge a client set-up fee and a monthly reoccurring fee forever. That was the goal from day one. Looking back hindsight, there’s nothing more valuable than reoccurring revenue.” 8 Key Drivers of Company Value: Recurring Revenue
(12:39) Wes Mathews: “Because what do you have? At the end of the day, if you just have your customers and your customers can go over here, we had stickiness, they were on our own proprietary platform.” Why Sticky Customers Matter
(13:32) Wes Mathews: “I think early on when I started this journey, I was the guy, right? I’m beating the drum, I’m going out there, I’m driving it. But then I finally realized it took me a while I joined EO and just grew as a leader and as an individual to realize I need to build up my team and they were the true real asset of the organization.” 8 Key Drivers of Company Value: Hub & Spoke
(14:28) Wes Mathews: “We use the acronym MYCE, and it stands for Manage Your Content Easily.”
(21:58) Wes Mathews: “I joined EO organization, a global organization in Detroit, it’s like a hundred entrepreneurs that are all going through the same thing.”
(23:27) Wes Mathews: “We set the foundation up in the company saying, we’re going to go all-in and do such a great job early on and really drive the value, because I’m going to retain this customer for life. We sold some customers that we signed 11, 10 years ago that are still customers today. Our retention rate over the course of 11 and a half years, we’re sitting at about 90% now, but I always shot for 1.5% churn, year over year. We’re a digital marketing agency retaining 88% of our revenues. We worked really, really hard to make sure client satisfaction is just at the highest, highest level it could be.” 8 Key Drivers of Company Value: Recurring Revenue
(27:51) John Warrillow: “Michael Gerber’s book and they all know about the work on not in.”
(29:43) Wes Mathews: “EOS changed my life. Honestly, that is the one thing that I think that if I wouldn’t have adopted EOS, we may have blown up as a company and it would have been my fault.”
(33:00) Wes Mathews: “My vision and dream of High Level was always to sell the company for a hundred million dollars, to create a hundred million dollars of valuation. The last couple years I kept telling myself, this isn’t going to happen.” What is My Business Worth?
(34:39) Wes Mathews: “COVID is happening, my team’s freaking out. I’m freaking out, but I got to show up all clean and proper, and I’m the fearless leader. Right? But I’m also like s**t, this is scary, right? I’m in EO, a lot of businesses were affected and revenues, our customers pay us monthly. We lost, we had a small little dip, but nothing crazy. We really worked with our customers, they delayed payments and stuff, but we actually grew out of COVID.” How $1 of Revenue Became Worth $7
(36:28) Wes Mathews: “I go, this guy looks Grant Cardone. Grant Cardone is the author of 10X, this fricking crazy sales guy. I love the guy.”
(36:39) Wes Mathews: “Todd Taskey, Potomac Capital”
(44:49) John Warrillow: “We call it The Freedom Point, which is when the sale of your business would create enough liquid wealth that you could live comfortably for the rest of your life.”
(45:04) John Warrillow: “You get your first rung on Maslow’s Hierarchy of Needs and say, I’m never going to worry about paying the mortgage, kids hockey fees, whatever.”
(1:06:18) Wes Mathews: “The deal did get to a point where I’m like, I started to get irritated and said, this is distracting to me. Right? Are we going to move forward in this deal or I got to just close this chapter?”
(1:10:41) Wes Mathews: “I knew from that phone call, he probably doesn’t know. I don’t think I ever told him, but from that phone call, I was like, yeah, we’re going to grow this thing to a hundred million. I’m like, this is the right partner. Private equity would just freaking pick us apart like vultures and bust the company up. I care too much about the people, I built a great team and I care a lot about the people. I’m an emotional guy.”
Meet Wesley Mathews – Co-founder & former CEO of High Level Marketing. Wesley is now Chief Revenue Officer of High Level Marketing that recently had a merger closing at the end of February. Previous to the merger, Wesley co-founded HLM in 2009 and grew it from an idea to $6.5M in revenue and over 45 employees. HLM thrives on Digital Marketing for Entrepreneurial run Small to Mid-Size Businesses.
Wes is known as a leader in the Digital space, a scrappy Entrepreneur that thrives on relationships and delivering on clear expectations. He is direct and has a clear vision to the future.
Wes has been married for 15 years and has 4 boys ages 12, 8, 8, 6. Outside of breaking up his kids fighting, he’s a very avid Hockey Dad, Golfer, Fisherman, Hunter, etc. He is on the constant seek of improvement, whether it’s personal, business, or family.
Connect with Wes:
John Warrillow:
This episode of Built to Sell Radio is brought to you by MassMutual. MassMutual helps business owners identify and prioritize the protection and financial strategies that are critical to the ongoing success of your business. With understanding the value of your business as the foundation, they can help address the core planning pillars, which includes your family, business, future, and team, so you can help minimize risk and protect what is most likely your largest asset. Every business owner will leave their business at some point in time, either by design or by default. Let MassMutual help you stay focused on the task at hand – running your business – while together in concert with your trusted advisors, help to create a financial roadmap for long-term success and an eventual exit that’s on your terms. Visit MassMutual.com.
Do you remember Sully, the guy who landed the plane on the Hudson River? He had done everything there is to do in an airplane. He was even a trainer of other pilots. Yet, he had never had the opportunity to land an airplane on the Hudson River. He had one shot at greasing that landing, and he nailed it. When it comes to selling your business, you’ve got one shot, one shot to make sure you punch above your weight when you go to sell your company, one shot to make sure you don’t make some of the most common mistakes that entrepreneurs make when they sell their business. That’s why I wrote the book, The Art of Selling Your Business. It’s a field guide for anyone looking to sell their company. You can get it along with some gifts for my listeners at BuiltToSell.com/Selling.
Okay, so, what are you going to do when you get an acquisition offer that does not meet your expectations? First of all, it’s been flattering to be offered, but if it’s not where you want it to be, how do you react? My next guest Wes Mathews did a great job, I think, of somehow threading that needle. Reacting with enough emotional vigor that got the attention of the acquirer, but at the same time, kept them on the line, so much so that he ultimately doubled the value that he got for his business through some savvy negotiation—four or five rounds or turns of the letter of intent. I’ll let him describe that entire process to you. Also, listen for the way Wes got his business ready to sell in the first place, in particular four things that he did to drive up the value of his company. He talks a little bit about pricing and the importance of recurring revenue, how he kept his customer sticky and what financial freedom meant to Wes. Here to tell you the entire story is Wes Mathews.
Wes Mathews. Welcome to Built to Sell Radio.
Wes Mathews:
Thank you. Thank you for having me.
John Warrillow:
Tell me about High Level Marketing; you guys were in the digital marketing space.
Wes Mathews:
Yeah, so High Level Marketing, we are a digital marketing agency focused around small to mid-sized businesses, really entrepreneurial-run businesses. We don’t work with any large Fortune 500 company. The idea is any small business that has an entrepreneurial spirit; we typically can come in and add value by way of website design, redevelopment, organic optimization, SEO, getting found on Google naturally, and pay-per-click advertising. So all the paid areas, and Google, the company is really about driving leads and success to a small business by helping them grow. We were able to establish a quantifiable value of how much a customer is paying us and what we’re delivering on the backend in terms of leads.
I felt at a time when I started the company, there’s a lot of companies out there that do marketing, but they never defined an outcome. And I’m all about the outcomes. We were able to do that. I started the company and grew the company.
John Warrillow:
How did you charge for your services? Were you being paid some sort of success fee based on how many leads you generated, or was it just time and materials? How did you charge for your time?
Wes Mathews:
Yeah, certainly time and materials. Early on we created the A, B or C package, right? The good, the better, the best. I think we called it silver, gold, platinum, to make it easier to understand the customer perspective. As that evolved into today, it’s changed, because if you have a plumber say that has 10 trucks on the road or 100 trucks on the road, they’re going to have different visions and values that they need to establish when it comes to lead generation. We started with the packages early on and then it became how do we take our services and create a custom package to that customer, to understand what outcome they’re looking to have.
For example, if they’re like, hey, we need 100 leads. We have the ingredients for the recipe, we just got to come up with that recipe. That’s how we base our model. But really hours and services that we’re providing for customers. [crosstalk 00:05:32].
John Warrillow:
So if I came to you for 100 leads, or I said, look, I need to get 100 leads a week, you would be able to back end into that, how much they need to spend in the way of search.
Wes Mathews:
Correct.
John Warrillow:
All the different, pay-per-click and so forth.
Wes Mathews:
Over the course of the last 11-and-a-half years, we’ve been really good at doing that. When we first started early on, it was a gamble. We won some times, and we got our ass handed to us sometimes, because we’re doing a lot of work for say, $500 a month and the customer’s getting a hundred leads and getting so much value. It was like the R&D through the first five years of what that was, and then we started to perfect where we’re at today.
John Warrillow:
So you started to find the right balance between, okay, this guy needs X number of leads that corresponds with Y, in terms of hours and time.
Wes Mathews:
Yup.
John Warrillow:
Got it. Who’s the we? You co-founded this business, is there a partner involved?
Wes Mathews:
Yeah, so started company back in 09. My business partner and I, Jon Bowerman, he’s the CTO of the company. We had this great yin-yang relationship. I was the sales end of it, the operation side, the customer side, and he was this technical genius that was this hidden gem. He was lacking a Wes and I was lacking a Jon, because it was very hard to find a reliable software developer or somebody who I could count on for delivery. He was doing really great at that, but he lacked a true sales guy and a true operations guy that wanted to come together. We met up through a different project I put together. We partnered right away and still partners to this day.
John Warrillow:
How’d you guys split the equity stuff? Did you each kick in a little bit of money, split equity, 50, 50? How did you guys structure that?
Wes Mathews:
I had my own company and he also had his own company. So little companies that were both trying to grow and scale doing a couple of hundred grand each in revenue. I was actually sending deals over to him for him to fulfill, and I was giving him a percentage of the contract value. It got to a point with me, I said, look, I think I just had my first child. He had a child, we’re the same age. I said, look, why don’t we just partner? I have a little office here. You have a little office there, let’s go 50/50, I’ll take my client base, we’ll take your clients. He had a developer, let’s just put it together and let’s grow this together. We’re young, we’re 26. Let’s just get after it and do it.
It was my proposal. He’s like, yeah, you know what? Let’s try it. Fortunately, the first month was a little bit like, let’s figure this out, but we were profitable that second month after partnering together. We each put in a dollar.
John Warrillow:
And your respective assets being your client lists and so forth.
Wes Mathews:
Yeah – time, right. We were 100% both all in. He had some affairs, he wrapped up, there was a couple of projects he partnered with some guys, but I think he knew, he had a CMS, a content management platform, very similar to WordPress. He was like, I wanted to really focus and build this thing out. I want it to be the best and the greatest. It was this perfect storm and serendipity for us to come together at that time. And it worked out.
John Warrillow:
That was the 2009. And you in, this year of 2021, is that right?
Wes Mathews:
Yeah, closed the deal at the end of February of this year.
John Warrillow:
Got it. Got it. What did you get your revenues up to, before you sold? To give people a sense, you were a couple of hundred grand when you came together with Jon. How big did you get before you sold?
Wes Mathews:
Yeah, so end of 2020, we did 6.5 million in revenue. As an agency sometimes numbers are a little skewed, but that was all HLM revenue. Any third-party costs, meaning Google spend, third-party advertising, we always put on the vendor direct. We did 6.5 revenue all into HLM.
John Warrillow:
What does HLM stand for?
Wes Mathews:
High Level Marketing.
John Warrillow:
I’m sorry. I didn’t make that connection.
Wes Mathews:
Sorry about that.
John Warrillow:
Got it. Got it. Right. Because some agencies are like, yeah, our revenue is a hundred million bucks and then you actually get underneath the covers. It’s like, yeah, we spent 90 million on advertising [crosstalk 00:09:53] revenue is actually 10 million.
Wes Mathews:
Correct. Exactly.
John Warrillow:
So your six and a half million-
Wes Mathews:
I never want to play that. Yeah. Pure revenue. We did everything in-house. We didn’t send anything overseas and we ended, my first employee I hired when I partnered with Jon, hired her from a Craigslist ad right out of college. She’s still with us today. She’s still in the company. It’s been an interesting ride, but we grew the company to about 49 employees at the time we closed the deal.
John Warrillow:
Got it. Hindsight’s always 2020, as you look back over that journey. Clearly you guys added a lot of value to the business from the early days when you put in a dollar each to when you sold. Are there one or two things that you look back on now as being real value drivers? Like this decision really made a huge difference for us, as you look back and reflect.
Wes Mathews:
Yeah, for sure. A couple of things. The one major thing that stands out, early on I was like, I knew a lot of people back then that lost their businesses or that were struggling because they would have five to 10 major accounts. And when the market shifted in 09, they lose five accounts, company is bankrupt, they’re out of business. When I set out for this quest, I said, I wanted to charge a client set-up fee and a monthly reoccurring fee forever. That was the goal from day one. Looking back hindsight, there’s nothing more valuable than reoccurring revenue. We drove that number over half a million dollars a month in reoccurring revenue. That, number one is the most valuable. Number two, process. I had a lot of people around me that were like, man, you guys are a small company, at 6.5 million, but you have systems and processes, you could be a several hundred million dollar business.
I think it’s just because we had great processes in place. Clear, precise, our production process, our customer intake to life-cycle of customer, how we fulfill and then manage ongoing. The reoccurring revenue, the processes and then our technology. Like I mentioned early on, when I first partnered with Jon, he had this little CMS that he was working on. Over the course of 11 years, the value we built into that piece of technology and the things that it could still potentially do to the future, that was a huge asset. That was the big differentiating factor between us and other web company out there. Because what do you have? At the end of the day, if you just have your customers and your customers can go over here, we had stickiness, they were on our own proprietary platform.
I use the analogy, if we’re dating, you can’t just dump me on a Thursday and we never see each other again, we have to sit down and go through a divorce and we have to talk about this. This push-that and move-that forward where, because we’re at a time where digital marketing, everybody knows what digital marketing is. Customers are getting calls from all over the place, all the time, trying to pull you away from your company. And this was a little protector that helped us build a lot of value, the stickiness of that. I would say those three things. And then people. I built a rock star, all-star leadership team, and I had key people within the business that created a lot of value.
I think early on when I started this journey, I was the guy, right? I’m beating the drum, I’m going out there, I’m driving it. But then I finally realized, it took me a while, I joined EO and just grew as a leader and as an individual to realize I need to build up my team and they were the true real asset of the organization. Those four things are really important.
John Warrillow:
I want to dig into a couple of those, if I can Wes. Talk to me about the technology. You refer to it as a CMS. Is that right?
Wes Mathews:
Yeah. Content Management System. Yup.
John Warrillow:
Okay. You’re effectively white labeling someone’s CMS and making it your own or did you actually build the CMS from scratch?
Wes Mathews:
We actually built it from scratch, because what was available in the marketplace was really clunky, it’s cumbersome, it’s hard to use. We took the idea that what if we created our own and made it really easy to use. We use the acronym MYCE, and it stands for Manage Your Content Easily. We want to create a solution for a small business, to say, look, you don’t need an advanced degree or to understand technology to go in the backend of your website to make edits. That was really the foundation of why we did what we did. And then also the idea around this is our system. So people will adopt our system and get to know our system. They won’t want to go elsewhere.
John Warrillow:
For people who are not familiar with content management systems, like me. If I’ve got a website and I own a plumbing company and I’ve got a website, and I want to run a special offer today. God knows why a plumbing company would want to run a special offer, but bear with me. Even if I wasn’t the technical guy or gal, I could log into your CMS and make a change to my website. Is that-
Wes Mathews:
Absolutely. That is correct.
John Warrillow:
Got it. [crosstalk 00:15:27].
Wes Mathews:
I want to provide the solution to an individual to say, look, if you want to do it yourself, the system will allow you to do it yourself. But we are also behind it as a company. If you want to shoot us a message or call us and say, hey, I need this coupon done for a 50% off a drain cleaning, we’re happy to do that for you. I like options and I wanted to give my customer base those options as well.
John Warrillow:
Was it cheaper for them if they chose to do it themselves, as opposed to having you guys do it?
Wes Mathews:
That’s what everybody thinks, right? Because if we say, hey, it’s $125 an hour, to pay HLM to do this for you. Obviously if they sit down and do it themselves, but that’s taking away from doing more plumbing jobs. I think giving them that option was a great solution. So what we would find, is most customers in the beginning would do that. They’d say, man, there’s so many changes or this is a lot more than I thought it was going to be. Can you guys take care of it? Early when we started on, as long as customers were paying their bill on time and they’re paying us a monthly fee, I would allow a certain amount of hours per month where we would just do it for free for the customer, just to to do a value-add.
So unless somebody was really abusing it and saying, hey, more than an hour or so a month, we would start to charge them. But normally it’s like, hey, you’re within the HLM family. We’re going to take care of it, because that’s just a surprise and delight to say, hey, normally we charge $125 an hour, but John, you’re such a great guy and you’re so busy and we love you. We’re just going to do it for free. It’s like, that’s good. I like that.
John Warrillow:
Yeah. For sure. And so the system, the content management system would allow the user or you, or the owner to manage their website, would it also allow them to manage some of their social media campaigns and assets?
Wes Mathews:
Yeah, for sure. Again, when we launched in 2009, social media, Facebook just launched, social media just became a thing. What we did with this MYCE technology is, till today, we evolved it. Where it stands today, a customer, that plumber can log into the backend and actually have a complete dashboard to see where their investment is going. Where they rank on Google, what is their Google Maps doing? How many leads they received. So really it’s a very intuitive dashboard that the customer knows every little thing about their website, rolled into this dashboard. That’s really where MYCE came from and what it evolved into today [crosstalk 00:17:55].
John Warrillow:
One of the things that’s going through my mind is like, in a way you were competing with the likes of HubSpot and Infusionsoft [now Keap] and these massive unicorn companies that have more money than they could ever possibly throw at a problem. How did you guys, as a small independent business, keep up with the investments they were making to make your CMS competitive?
Wes Mathews:
Number one, I tip my hat to my partner, Jon Bowerman, the guys is unicorn. I’ve been in this industry now for, like we said, we started in 2009. I was doing some things before then until today. I’ve been part of great organizations. I’ve met a lot of talented people. Jon is still extremely high on that list on what his capabilities are. How he was able to bob and weave right into the technology where it needs to get to today. But I also feel HubSpot some of these businesses, we started, I feel with the most important asset of any business, which is the website. HubSpot was never doing websites. They’re a stack on service. And so we really got people at the ground floor to say, look, if you’re going to make investments, I don’t care what you do people are going to go to your website.
Your website’s got to be dialed in. And none of those guys touch websites. That was our foot in the door, is delivering a world class website that quite frankly, nobody was really delivering. And even still to this day, I think we deliver at a whole nother level in terms of the value and the price that we provide for our customers.
John Warrillow:
Wes, I got to ask – you know, at some point along the way, did you ever feel vulnerable to Jon holding his technical prowess over you, and saying, Wes, we got to renegotiate here. I’m adding in a truckload of value to this business. You don’t even know how to turn on the CMS, let alone build it out to compete with HubSpot. Did you ever feel a sense of dread that that conversation was coming?
Wes Mathews:
No, not at all, because I think that you could build the best technology, the best widgets in the world, but it’s the sales aspect, the operational aspect of getting those customers to use it. The technology itself is a great value if you can get people to use it. I almost feel it’s opposite, where it was me driving the business, getting the people in the door. Again, we really had this good relationship to say, I’m driving the value of bringing in the customers and building the company. Here’s this powerful software. We really just came together and had that mutual respect to say, I know what you’re capable of. I know what you’re capable of. Look, was it all roses the last 11 and a half years? No, but I think one of the things that really helped us as business partners was, I was never like, I’m not a greedy guy.
I’m not like I need to have 51% or you’re doing this, or you worked two more hours than me this week. We’ve been fortunate not to get there. I’m sure there’s been feelings on both sides, but I think when you strip all that away, I’m an over-communicator. I’m not scared of tough conversations. I really don’t have a filter. I give myself a lot of credit where if things were bothering me, I’d bring it up to him. I had to chip away at him. I could get a sense of when he was getting irritated with me, and I would just say, hey man, I think you’re getting irritated about this, let’s talk about it. I feel I always wanted to win together with Jon and his business and I never cared more or less. I said, we’re doing this together.
I guess it’s kind of like my marriage. I think I’ve used that analogy with him a couple of times, I’m like, look, outside of your wife, I’m the closest thing to you. Same with my wife. It’s a give and take relationship. And fortunately for me, I’ve grown a lot since I started in this industry and I joined EO organization, a global organization in Detroit, it’s like a hundred entrepreneurs that are all going through the same thing. I’ve been able to really grow and constantly learn. We both had that vision of let’s grow this thing together and not get in the weeds, and nitpick.
John Warrillow:
That’s awesome. I also want to go back to, you mentioned the four things that you did to drive a lot of value, the recurring revenue, the process, the technology, the people. I want to go all the way back to the recurring revenue for a second. You charged a set-up fee. Tell me a little bit more about what went into that decision.
Wes Mathews:
For sure. One of the things that was really important for us is, most of the work we do from a web perspective, the heavy lifting is in the front. We started off selling, we’d always sell the website and then we’d sell a digital marketing package behind the website. Early on, we said, we’re not doing digital marketing for a customer, because we want the stickiness of getting the website on our platform. In order to do that, it’s almost like working with a contractor for a home edition. You pay us half upfront for the materials and the time. You pay the rest when we’re done. And then we were hoping to squeeze a little profit out of that, because our profit really began seven to nine months after we closed in that monthly reoccurring revenue.
We set the foundation up in the company saying, we’re going to go all-in and do such a great job early on and really drive the value, because I’m going to retain this customer for life. We sold some customers that we signed 11, 10 years ago that are still customers today. Our retention rate over the course of 11 and a half years, we’re sitting at about 90% now, but I always shot for 1.5% churn, year over year. We’re a digital marketing agency retaining 88% of our revenues. We worked really, really hard to make sure client satisfaction is just at the highest, highest level it could be.
John Warrillow:
So retention just to be clear, 88%, year over year. So you’re retaining 80% of your revenue that you started with each year.
Wes Mathews:
Correct. Correct.
John Warrillow:
That’s awesome. Good for you. Obviously a valuable service. One of the things that I think a lot about in the way of set-up fee, is that, the bigger the set-up fee or that upfront payment, whatever you’re characterizing it as in a recurring revenue model, the stickier your customers, because they’re going to make a financial investment, and becoming a customer and therefore they’re going to be stickier longterm. Equally, it also makes it harder for your sales guys and gals to get them on the platform, because there’s an upfront payment. Did you settle at 500 bucks? Did you try 1000? Did you try 250? Was there some experimentation there or was 500 the kind of, how did you get to 500?
Wes Mathews:
For sure. When we first started early on, we were selling packages for $75 a month. And what I learned early on, that was such an insignificant amount of money where nobody took it serious. The second I raised those fees, a couple of hundred bucks, we started getting deals. What I learned right away is, because people if they’re going to spend 75 bucks a month, they’re like, this can’t be effective. Why am I going to sign up for this? And I learned that early on. That was probably one of the best learnings I’ve had. So what ended up happening is, we got a little bit more sophisticated and financially and looking at gross profit margin, that’s how we then established the pricing for the packages around how much time we’re committing.
The set-up fee, my big take early on, and even with the sales team, my goal was to, I want to build the monthly reoccurring model, because if you’re charging a set-up fee and the set-up fee was for a website, so it wasn’t like you’re paying a set-up fee just to get into our system. It’s like, you’re getting a world class website. It’s really hard. Let me give you an example. And I explain this to my sales team. If it’s 500 a month and it’s $6,000 for the entire year, it’s much easier to get somebody to spend 500 a month and to then roll them into a new contract, moving forward, than to get them to pay 6,000 today, and then next year I have to go through the cycle of selling you again for $6,000.
I’m essentially going to train you to pay 500 a month, see the value and you’re going to fit that within your budget. And then we’re going to help grow and scale that monthly number. It’s just an easier transition and an easier conversation to have. Because even me or anybody, it’s like 6,000, okay, let’s think about this, let’s talk about it. When you’re paying that 500 a month and it’s business as usual, it’s a completely different mindset.
John Warrillow:
But you also charge the set-up fee. Let me ask you, why not drop the set-up fee and say, look, 500 bucks a month, away to the races?
Wes Mathews:
Because there are hard costs associated with the website itself. I think just our barrier to entry project, let’s look back a couple months or even today, it’s about 60 to 80 hours of work. There’s real costs associated with that. Those costs have to come from somewhere.
John Warrillow:
You’re underwater on the deal to about seven months. And then at month eight, the margin starts to go up, and year two, year three, year four, the relationship – it’s really very profitable.
Wes Mathews:
Yeah. That’s how we started. We’ve obviously since evolved from there and cleaned some things up. But yeah, that’s exactly where we started. Correct.
John Warrillow:
That’s great. I’d love to dig into process a little bit, because I think everybody’s read Michael Gerber’s book and they all know about the work on not in. But I hear a lot from folks who want to build processes. I just don’t have the time, stuff changes in our company too frequently. I got to rewrite the processes all the time. I don’t want to spend my day writing processes, maybe react to that commentary.
Wes Mathews:
I think we ran very chaotic for the first four years of the business. Right? Very entrepreneurial. I’m a visionary guy. I describe myself to people, I have four kids, so I don’t know if you’ve ever watched the movie Wreck-It Ralph.
John Warrillow:
No.
Wes Mathews:
I’m kind of like Wreck-It Ralph. I’ll bust through the door. I’m not trying to disrupt things. I’m not a process guy. Right? Fortunately my partner was a process guy. I think in terms of partners and who you’re hiring, hire smarter people that can be effective in areas you’re not. But I implemented this thing called EOS and I actually learned about EOS through entrepreneurial organization. And what that is, that’s a platform for entrepreneurs to manage a business, because we’re all crazy entrepreneurs. I was causing organizational whiplash. I can have a conversation with somebody in 15 minutes and throw out 15 different ideas.
And they’re like, whoa, whoa, whoa. EOS changed the trajectory of my company, because it does take these entrepreneur journey and put it into a process. With these processes decisions were a lot easier to make in terms of how we run meetings, how we start goals for the organization, how do we improve processes? It really makes you think deep in the business to understand what do we need to work on? What are the top five things that we have to get right that are going to drive everything else. EOS changed my life. Honestly, that is the one thing that I think that if I wouldn’t have adopted EOS, we may have blown up as a company and it would have been my fault. Because I’m a complete disruptor. I’m not super organized. Once one idea is not even solidified, I’m onto the next thing.
I didn’t realize it because, look, I’m the CEO, I’m the entrepreneur. And everybody’s like, yes, yes, yes. But like, nobody would step up to me and say, whoa, whoa, whoa. You got to slow down. And that’s what EOS, EOS made me look in the mirror and realize, damn, you know all these problems we’re having, it’s not everybody else, it’s me. I think it was being vulnerable and looking in the mirror and understanding I’m the cause of all these problems and they’re real. That to me changed my entrepreneurial journey. We were able to identify and go through, okay, from a process standpoint, we use Salesforce, we use some internal custom type analogy we wrote. But as a leader, as a CEO, the entrepreneur, I could say, hey, I think that these are the most important, who’s going to do them? How do I add value?
I only want to be in the strategic side of it. I don’t want to be in the day-to-day. We hired around that. Not perfect, but our systems are pretty tight, from what we’ve invested in.
John Warrillow:
That’s awesome.
Wes Mathews:
It also helps to… Go ahead, sorry.
John Warrillow:
No, no, I was going to take us in a slightly different direction, which was going to be around what triggered you to want to sell? You’re clearly a young guy. If you’re not watching this on video. Wes looks like he’s just run a marathon or something like that. He’s certainly young for having four kids. Why sell? What was the trigger?
Wes Mathews:
It’s not one thing, it’s a combination of a lot of things. I am 39, turning 40 this year. I have four kids, been married for 15 years. If I look back in the entrepreneurial journey with High Level Marketing, I didn’t think it was going to last 10 years. Quite frankly. I didn’t think it was in the last five years. I’d hired a chief operating officer, like things are finally coming together. I remember I came back from a trip in 2020 and my COO, we operate our EOS system. We call them level 10 meetings. So we have this meeting board and I see this little item on this meeting board and it says “virus discussion”. I said, what the hell is this? Whatever. We start talking about this thing and he’s like, there’s this thing and it’s going to be bad.
Pulling the fire alarm. I’m like, you’re out of your mind. So we operate like that. I’m this crazy visionary. He’s the level headed, run the business day-to-day. I didn’t believe it, but I’m like, all right, I hired you to make these decisions. And then the week later we’re shutting down the office and here comes COVID. Being a digital marketing company, we were already flexible with people. I didn’t care if they work from home. As long as you get your s**t done, I could care less where it is. We were already familiar with Zoom. We’re digital company, had a great office in West Bloomfield, Michigan. It gave me a lot of time to sit. I’m in my home office now, I’ve spent a lot of time here.
Quite frankly, there’s a lot of things I felt at High Level Marketing. My vision and dream of High Level was always to sell the company for a hundred million dollars, to create a hundred million dollars of valuation. The last couple years I kept telling myself, this isn’t going to happen. It’s not going to happen, because either A, because of me, and the investments that we would have to make to continue to grow the organization were fierce. I was looking down the barrel of about a $1.5 million investment for people, some new process, and quite frankly COVID, I spend a lot of time to thinking, what do I want? I always tell people, even in business, wave a magic wand and tell me where you want to be in 12 months from a lead perspective, from a marketing perspective.
I turned that same question onto me and I thought about that every day. I never wanted to outright sell, but I use an analogy, actually I used it this morning before this conversation is, I’m a hockey guy. My son plays travel hockey. So I like the analogy around, we’re the Detroit Red Wings, we’re a good solid team. You’ve got the captain, you’ve got the assistant captain. An average hockey player plays 15 minutes in a game, out of 60 minutes. High Level Marketing, everybody’s playing a 60 minute game. Everybody’s exhausted. So even the best players are exhausted. We’re always just pumping deals, getting in new ones, and we’re never able to really take that investment to grow and scale. I sat there one day and my job became protector. Right?
COVID is happening, my team’s freaking out. I’m freaking out, but I got to show up all clean and proper, and I’m the fearless leader. Right? But I’m also like s**t, this is scary, right? I’m in EO, a lot of businesses were affected and revenues, our customers pay us monthly. We lost, we had a small little dip, but nothing crazy. We really worked with our customers, they delayed payments and stuff, but we actually grew out of COVID. But I’m sitting there looking at everybody, I’ve got 50 people, little Zoom heads on my thing. And I’m like, huh, something’s not right. I’m just not feeling it anymore. I think as an entrepreneur, you are your own worst critic. I started questioning my ability as a CEO to take this company to the next level.
At the end of the day, I’m like, what am I good at? What do I actually do for this organization? And for me, I’m like, man, give me the microphone, I’m a relationship guy, but being in the weeds and doing this stuff, I want to bang my head against the wall. That’s not why I created this company. For me, it’s going against the grain. I think I played 70 rounds of golf last year. I had nothing to do. I’m like, I don’t know what I’m doing. A lot of those emotions around it, and I always had this vision in my mind. Continuing on that hockey analogy, with hockey, you have the all star game, right? Where the all star game is, you take two of the best players from every team and then you’re a bad ass team.
I felt High Level Marketing is such this hidden gem in West Bloomfield and we got to get out there. I always get calls all the time. You want to sell your company. You want to sell your company. And I’m like, kick rocks, kick rocks. This one guy emailed me out of the blue and I must have been bored that day. I don’t even know why I responded to this guy. I clicked the link and I saw him on LinkedIn. I go, this guy looks Grant Cardone. Grant Cardone is the author of 10X, this fricking crazy sales guy. I love the guy. And I said, I’m bored. Let me talk to this guy. He calls me, his name’s Todd Taskey, Potomac Capital. He’s bullshitting with me. I’m like, I like this guy. This guy, he’s me. I love this guy.
And I said, kick rocks. I’m not interested in selling. He goes, okay. Because I said, here’s the money I want. If I want to be out of the business, here’s my number, because here’s the number that I will never had to think about work again. I can just do what I want to do. I’m 39. I got a lot of years ahead of me, hopefully. A couple of weeks later, he says, hey, I met this guy in Alabama and you’re going to love this guy or you’re going to hate the guy. I don’t know. He’s like, would you be open to having a conversation? I said, sure. Long story short, me and this guy, we meet on Zoom and he’s got almost the same size agency, but they’re doing more revenue.
We just go, we start talking, we start having conversations. The conversation started with just meeting each other. But I had three things that were really bugging me, how we intake customers. It was a debacle at the time. There’s a lot of scrambling around, and guess what? They identified that two years ago and they fixed it. Everything that was paining me as CEO, entrepreneur, they had a solution for, that they’ve already been through, the last couple of years. I’m looking across to this guy and he’s like, I’m like, this guy’s a real CEO. He’s everything I’m not. He just looks the part and he just really wants to grow and make acquisitions. I’m like, this is one of the first guys I’ve met in a long time that actually impressed me.
So then my mind’s like, how can I work with this guy? Can I support this guy? Because, again, I’ve already mentally built the model in my head that I’m going to be chief revenue officer of my company one day and lead sales and lead the relationships and big strategic thing. I had already predated that model. So then I meet his chief operating officer and I’m like, I freaking love this guy. I have enough experience now in the last 15 years of meeting people with titles and what are they going to do? These guys are everyday grinding in the business. All they care about is growing this company and everything. And so I’m looking at these two executives talking about the business, and guess what they don’t have, they don’t have a Wes who’s crazy, he’s got knockout power, that’s a relationship guy that could really lead the charge in sales.
And they don’t have a technology component in their business. They do not have a CTO. They do not have their own proprietary technology. They have zero technology. They’ve been operating WordPress and all these other things. So I’m like, I started paying this vision of, man, if we’ve got a CEO, a COO, a CRO and a CTO, and then we roll up all of these employees together, going back to my analogy around everybody getting exhausted, the resources are endless. The cultures were very similar. They’re from Alabama, so there’s a little bit difference in terms of, just culture by location. But also the big key thing for me was, if we would have been in an office, this deal probably wouldn’t have happened, because in my mind, everybody’s on Zoom and I’m like, we can probably pull this off, because if Sally, she’s going to log into a new Zoom the next day, there’s not a lot of disruption.
All these things started popping up. I don’t know. I’m a gut guy. I’m a serendipitous guy, weird things happen to me, but everything that was paining me at that moment, these guys had the solution for. I also, look, this is a lonely ass road, as an entrepreneur and a CEO of your own company. Oftentimes I felt I don’t have the support. It’s hard to do it myself. And again, I go early on to when I partnered with Jon. I looked at Jon and said, let’s go all in 50/50, let’s grow this together. I used that same process with these guys and said, man, I see a hundred million dollar valuation coming together, and there’s a real opportunity to do that.
So for me, that was, hey, if I can take chips off the table today, partner with a larger company, and celebrate the success and really dig in and help this company grow by adding what I wanted to do day in, day out, but then also be eliminated from all the personal liability, being the CEO and being responsible for everything, I felt that it was my time and I just acted on it. Everything just happened and fell into place. [crosstalk 00:41:19]. I’m sorry I could talk about this. It just happened, and it just happened organically. Look, I respect entrepreneurs. I love the story. I love experience shares and these guys are just hungry.
John Warrillow:
All right. I got a ton of questions. Let me start. Todd Taskey, the guy who reached out to you. Can you recall what it was in his email that stood apart from all the other emails you’d got? In your own admission, you were getting emails all the time from people. Hey, do you want to sell your business? Do you want to sell your business? Todd said something in that email that tweaked your curiosity, what was it?
Wes Mathews:
I don’t think it was anything of crate, it wasn’t very different. I actually want to go back and search and find it now. But I remember seeing his picture and I think I just clicked on it and I saw his picture and he looked exactly like Grant Cardone. And at the time I just finished reading 10X and I’m like, literally just bored at my desk. I’m just like, I clicked on it. I think I clicked on LinkedIn and I just responded. He was all over it. Take a call with me, take a call with me. I’m like, okay. And then when I met him, I’m like, he’s not this super, like, he’s not a suit. I’ve met a lot of guys from these huge private equity firms, half the time, I can’t understand what they’re saying. And it’s just not authentic.
Todd was just this authentic guy that I was having a conversation with. I think it was his timing. Honestly, I just happened to be sitting at my desk, click the link, we connected. Kudos to him, because I basically told him like, you’re a good dude, but kick rocks, not those terms. Kudos for him for actually following up when he says, I’m going to hook you guys up and see what happens, mastermind.
John Warrillow:
Had he been engaged by Bell Media, your acquirer to find the businesses to sell?
Wes Mathews:
Yeah. What happened is, what I learned after the fact is, they were very close to a deal. Bell Media and this other company, and it fell through at the 11th hour. Todd was working with this organization to find a suitor and that’s how he found me. One thing I failed to mention too, that I think it would be helpful to the listeners and my relationship with my partner. Stressful, COVID was stressful. Right? Just running the business in general is stressful. Jon, my business partner, he’s the mastermind where a lot of people roll to him because he just solves problems. He can do anything. He did come to me and he was waving the white flag. He said something to me that stuck with me.
He goes, man, if I had X amount of dollars, I’d just be done. This was different. I could tell from his body language. When he said that to me, it was in my head of, s**t. That’s when Todd connected and all things started moving forward. I kind of blame him for a little bit of putting it in my head, I’m moving forward. But then I started thinking of myself, like, look, I’m 39. You got to know when to hold them, know when to fold them – right? I want an outcome based on the business I built. I think at some point diversification is key, right to this point.
John Warrillow:
We call it the freedom point, which is when the sale of your business would create enough liquid wealth that you could live comfortably for the rest of your life. You get your first rung on Maslow’s hierarchy of needs and say, I’m never going to worry about paying the mortgage, kids hockey fees, whatever. What was that number for you? If you’re comfortable sharing it, great. If you’re not, maybe helped me understand the math that went into it for you.
Wes Mathews:
Yeah, for sure. My number has always been $10 million, and this got us part of the way there. The reason why I did that, was because I still want motivation and I want the next big win. This was enough to allow me to say, man, I really won, we created a viable business, a huge asset, ring the bell of success, but it’s also going to keep me hungry enough to really get it to the next phase, to hit that chapter of that 10 million. I don’t think personally at 39 I was ready to say, I don’t even want that kind of money yet. I still want that mentality of, I want to grind for the next 10 years. I don’t want to mail it in. It was scary to get that kind of money at the time, and that’s why I structured the deal this way, to be honest with you. It might sound crazy, but that’s what I did.
John Warrillow:
No, it doesn’t at all. How did you structure the deal? For folks to try to understand. Maybe just describe the structure.
Wes Mathews:
Yeah, for sure. Obviously in a deal, right? It’s new to me. Right? I got a lot of advisors, a lot of people around me. The first thing that happened was, a letter of intent came my way, right? Here’s what we’ll pay for your business. Here’s what we think it’s worth. I laughed at him. I said, you are out of your mind. Let me tell you about what I’m worth. It was a lot of back and forth and I had a mental, like I said, I’m always an entrepreneur, I’m a visionary. I build mental models in my mind. I had a number I was very specific on and I wanted to be invested in the new company. I did not want to be CEO. I wanted to be CRO. I wanted to personally let go of any fiduciary responsibility of old HLM.
And I want to maintain a 10% stake in the new company, because I think the opportunity is sell this, again for over a hundred million dollars and I’m okay. Exiting the second time working with right partners and really growing this, that was part of where I manifested the deal to get to.
John Warrillow:
Okay. The LOI comes in, before you even opened the LOI, do you have a multiple of earnings that you think your company’s worth? I know you had a number. What did that equate to as a multiple of say profit?
Wes Mathews:
Well, like entrepreneur, right? I’m like 20, 20X, right? We built so much value and we’re better than everybody, but realistically I was like, look, six to 12, depending on who it is. Right? Because obviously we have some technology and some things, it really mattered to who the buyer is. Right? I was smart enough to understand if I’m selling off to a private equity, they don’t want me as a partner, but to another agency who’s trying to grow and grind just like we are, our technology is valuable, our team. All those things, I mentioned, those four pillars earlier, can drive that multiplier higher.
John Warrillow:
Got it. So you thought it was worth six to 12 times EBITDA?
Wes Mathews:
Absolutely.
John Warrillow:
And what was the LOI as a multiple of EBITDA?
Wes Mathews:
To be honest with you, I don’t want to say it was like an insulting, but it was like, nothing stood out. It just wasn’t anywhere in the realm of what I was thinking. None of it made sense. I’m not trying to be vague, but it was just like, I think they just tried to see where I was at, because the next conversation was, okay, you didn’t like that. Where are you at? It was almost like a tester and I came hard. I was like, I’m not going to walk away from this without, I say six, but I probably, wasn’t going to take less than eight, knowing that we’d settle somewhere-
John Warrillow:
Times EBITDA?
Wes Mathews:
Yeah. I’m going to go for 10, for 12, I’m going to settle on eight. I’m not going to six. I knew that that floor for myself. And again, I think that a lot of entrepreneurs and businesses talk about multiplier EBITDA. I had a number in my mind, that I wanted for myself and my partner and the partnership moving forward. I almost didn’t care what it was. I’m like, we just have to get to this number. We can slice and dice and negotiate any way you want, and tell me, it’s two times EBITDA, 25 times EBITDA. I almost don’t care. Here’s where I’m at. Do you want to figure out how to get there or not? Kind of like how we operate with our customers. Start with the end in mind and then work backwards and see if there’s a conversation to be had.
Unfortunately for us and these guys, they saw the value. It was more value than just what’s on paper. They’re getting my team, they’re getting me, they’re getting Jon.
John Warrillow:
So the original LOI that you got, you had this number in your mind. You’re like, this doesn’t do it. The original LOI. I’m assuming it was below six times EBITDA. Do you remember how much below?
Wes Mathews:
Yeah. I’m trying to think of the EBITDA number, because what happened with the EBITDA number is, everything’s in negotiation. So when you actually look at EBITDA, how you and I would view EBITDA on my company is going to be completely different, right? Because there’s add backs, there’s people, if you’re not carrying forward this cost, is that added back in EBITDA? I want to say the initial offer was half of where we ended up ultimately.
John Warrillow:
Okay. So you got this number in mind that you’re happy with. They come in at roughly less than half of that originally. Where does it go from there? A lot of people would pound their fist on the table and say, you got to be kidding me.
Wes Mathews:
I did. I did.
John Warrillow:
Did you?
Wes Mathews:
I did.
John Warrillow:
[crosstalk 00:51:02]. Go ahead.
Wes Mathews:
That’s where this Todd Taskey guy from Potomac Capital was a genius, because he took the first hit. He took the hits. I kind of describe myself like, I’m that lion that can’t be with other lions in the zoo, because they put me in a little box. I hit him, I let it out with him. He just through his experience and his negotiating, helped me recognize where they’re coming from and then help tee it up. And then he would have the conversation with them. He was the mediator between it all. He probably went back and said, look, you guys have one more shot, because this guy is like, don’t waste his time. Because at this point, what I didn’t realize at the time, when you start to go down this road, I’ve always thought about this since day one, selling the company. The time and the mental stress that this creates, because what it does, what it did for me, it made me question everything and really think at a different level.
I spent a lot of time with Todd about where the bodies are buried and everything. It was this exhilarating experience. It got to the point where I said, if this deal doesn’t go through, even if I would’ve spent a couple hundred to that point, I felt good, because it was a good exercise for me to just take a deep dive with myself to understand where I’m at as an entrepreneur.
John Warrillow:
I asked it earlier, but I don’t know that I got a clear sense. The name of the acquirer is Bell Media, is that correct?
Wes Mathews:
Correct.
John Warrillow:
Okay. Was Todd engaged by Bell Media to find acquisitions? I’m unclear of who was paying his fee effectively?
Wes Mathews:
We ultimately paid his fee.
John Warrillow:
Okay.
Wes Mathews:
We, at the end of the day became the seller. We paid Todd the fee.
John Warrillow:
That’s helpful. They come in with this offer, it’s less than half of what you want. You’re letting it out with Todd. Do you tell Todd your number at that point? Or do you just say this isn’t enough do better?
Wes Mathews:
No. I told him where my threshold was. Because I said, otherwise, you need to know what you’re fighting for. I don’t care how you do it or how you get there, but I felt to be fair for him. I’m a real wear it on your sleeve kind of guy. I just said, here’s where I’m at. Either figure it out or don’t. Whatever you need to do with these guys to get there, because I didn’t want to go back and forth and that’d be like, you guys put all this time into it and I’m going to keep rejecting it. I said, look, dude, here’s the good, better, best. Do your job, do your work.
John Warrillow:
So you gave him the good, better, best? Yeah. [crosstalk 00:53:49].
Wes Mathews:
He’s been through this a lot of times. The guy has got a lot of experience, so he knew how to lion tame me. He was really good at what he did, because it was mental warfare, going back and forth, and going through the negotiation of this. It was a mental game that he was really good at consulting me on.
John Warrillow:
Got it. I realize we can’t get to the actual number, but don’t mind if I nibble at the edges a little bit. The good, better, best, help me understand where that sat. And again, I know that multiple EBITDA, there’s lots of interpretation, add backs, et cetera. Roughly speaking the initial, in your mind it was worth somewhere between six to 12 times EBITDA. You went back to Todd and said, minimum’s got to be this. This would be great. And this would be a home run. What multiples of EBITDA we’re talking about, the good, better, best scenarios?
Wes Mathews:
Six to eight and then 10, and then plus 10. I knew with this deal I wasn’t getting over 10.
John Warrillow:
Got it. Got it.
Wes Mathews:
With this specific deal. Because I think there’s a lot of other things to consider in this deal specifically. One being, I was very hard on negotiating my term, which was, I’m going to stay on the company for three years, with a three year guarantee. Right? Obviously as a company, with HLM, very successful, very healthy salary as an executive and an employee of my own company. So I said, if I’m going to be an employee of this company, I negotiated a three year term that I wasn’t going to budge on. Because, look, I don’t know what the outcome could be. These guys could say tomorrow you’re fired. Thank you for your service up until this point. Outside of the conversations we had, I think they are great guys, but I was also like, this is going to secure me and get me all in, HLM, future growth, not having to worry, because I’m shifting from an entrepreneur of doing whatever I want to do at any given time to, well now things are a little bit different.
Because even though I’m still an owner of this company, everything’s very much ran as, well, now I’m a C-level employee of the organization. That was very different. And so I think a lot of that give and take and the negotiation came into that. Where I gave a little on, maybe it was a multiplier of EBITDA was the, hey, I’ve got this sweetheart backend deal protecting the salary that sustains the lifestyle that I’m choosing to live. Also a big kicker with this is, we have High Level Marketing, right? I built this brand, the baby, right? We are maintaining High Level Marketing as our brand company together. They’re ditching the Bell Media. We are now High Level Marketing. And that was a big thing for me, because I’m like, even though you can’t attach value to that, I’m like, again, this to me is a stepping stone in my journey, because I now feel when we sell this company for over a hundred million dollars at the second time, it’s High Level Marketing, that was really important to me.
I didn’t realize how important it was until I could reflect back. But the fact that we’ve maintained the name, maintained the integrity, it’s a really cool. It became, I don’t want to say it became less about the multiplier, the money, because me personally, and I think again, every entrepreneur is unique. You could say, I got pound on the table and say, God damn, we’re worth 12 EBITDA and we’re not selling. I had a number in my head personally, where, look, I’ve got a home, I’ve got four kids, I’ve got things. I wanted to be 100% debt free. I wanted a set amount of money over here. I wanted to fully fund my five to nine. I wanted a certain thing out of this, that I’m like, if I could do this, I don’t care what EBITDA.
It didn’t matter to me at that point, because I’m like, if I could design this life where I’m 100% debt free, I have a three year guarantee of new company and I’m an equity partner in my own organization that we’re continuing to grow, that we will grow for over hundred million. Man, that was a home run for me.
John Warrillow:
Got it. So talk to me about the structured, because you sold most of your shares, but then you rolled some of that equity into the new HLM. So tell me about that.
Wes Mathews:
We took a big piece off the table terms of cash. When we took the cash and there was a responsibility to put that cash back into the business. How we approached this deal was, let’s take the majority of it in cash, put a little bit back in the business rolling forward. I almost look at it as, if you cash out completely, took this part of it, but then took the rest and invested in a new company, that’s essentially what we did. And as an entrepreneur and as a human, I just looked at it as, if you have a big sum of cash, right? There’s only so much money you need, right? There’s only so much things that you need to live a lifestyle, to support your family, and you’ve got vehicles, you have a house, we got a cottage, there’s only so much money that is going to secure that.
And then you have this excess cash. Well, what are you going to do with the excess cash? My thought was, I want to reinvest back into HLM, bet back on the company that I’m going to be driving essentially and being CRO of. So who’s better to bet on then myself and what my capabilities are. We did take a small portion of that and invested it back in the company.
John Warrillow:
What portion did you invest back in the company on a percentage basis?
Wes Mathews:
It was 75/25.
John Warrillow:
So 75% of the cash you took?
Wes Mathews:
Cash off the table.
John Warrillow:
And then 25% you’ve rolled into this new entity?
Wes Mathews:
Correct.
John Warrillow:
And now you’re a shareholder in the combined entity of High Level Marketing, which is a company [crosstalk 01:00:04].
Wes Mathews:
We were 6.5 million in revenue at the end of 2020, this year combined company will do a little over 18 million in revenue.
John Warrillow:
Got it. And the goal is to sell at a hundred million dollars?
Wes Mathews:
Yeah. And that was one of the driving factors. I can see a clear path to that now. If I would’ve stayed HLM where I was before, we’ve always grown, but I was getting really bored with this. Now I see the hockey stick growth. For me, a big question was, if I own 50% of my company today, but I can negotiate this design structure that I’m all in on, yet own 10% of a larger company moving forward, that’s a freaking home run for me. And that’s exactly what we did.
John Warrillow:
I get it.
Wes Mathews:
And also I would say, going back to my original conversation about Jon, I care about Jon, and I told Jon, I said, I’m going to get you the same deal. So we own 20% of the new company moving forward. I led this initiative. I fed him, look, it was stressful. Right? I fed him the details of which I felt he needed to know. And that was our relationship up until this point. I’m not going to get into the weeds and tell him everything, but I’m going to tell him the shit that I would want to know, somebody leading this discussion and project over here. I said, hey man, we’ve had a great run, this is the negotiations and where we’re at. And we can both secure 10% of new company, moving forward here’s the terms. That number he told me, that one day, I got him more than that number.
John Warrillow:
That’s awesome.
Wes Mathews:
So that one day when he came to me and said, hey, if I had this amount of money, I’m out, I got him more than that. So that was a driver too. I felt it was a win.
John Warrillow:
Wes, how did you ensure that when you got him that money, that he didn’t say great, I’m out. You know what I mean? Was there any part of that, they were like, we’re going to lose our CTO here if we cash them out too much?
Wes Mathews:
You know what, at a personal level, I know him. I think when you spend a decade with somebody, you know a lot of the stress and the challenges like, this pulled that lever for him. He’s a mastermind developer. And what I was able to architect and through conversations is, he’s now in his dream job, which he told me, if I could lead our technology team that just works on product and cool technology, that’s not in the day-to-day, I’m in heaven. And what I was able to do is, now he has a team of five internal developers and they lead our product development team. For me, I was also at that point where if he said, I’m good, I was at peace with that, because we’ve had a great run and look, I want him to be happy. And if he’s literally to that point, I’m like, look, I got it all to this point, make your own decision. Right?
But I think I negotiated a pretty sweet term moving forward that now secures you for the next three years where you can play in this playground and really take our technology to the next level. I felt I was able to achieve the best of both worlds. I was able to close up the old business, but then present this really, really great opportunity by designing exactly what he wants moving forward for the next three years. Obviously three years is like that magic number, but we’re committed to this organization and we really want to be, we’re all living on this organization to grow it.
John Warrillow:
Yeah. To be clear your three year, is it employment guarantee?
Wes Mathews:
Correct. Correct.
John Warrillow:
And your 10% equity retains whether you’re an employee or not.
Wes Mathews:
Because look, let’s face it, in the end of three years, there might be a situation where maybe I’m not the best CRO or maybe I’m just like, look, guys, I don’t want to do this anymore. Right? And that’s okay. I feel right now where we’re at, the next three years, it’s critical for us to be all in to get it to this level. I already, like I said, I build mental models and I build them in my head and I see them and I grow to that. I already see this in three to five years selling again for 75 to 125 million in revenue, to either a larger partner or private equity.
John Warrillow:
Got it. When you went back to Todd and said, this is good, this is better, this is best in terms of the number, what happened next? Did the acquirer come back with a second LOI? What was the next step?
Wes Mathews:
Yeah, it was a lot of filtering through Todd. Todd going back, but then also Todd’s like, he would actually use me as a whiteboard and say, all right, okay. Here’s what I’m going to do. Here’s how I’m going to do it. And I would give him feedback. We had this weird little relationship going, and went back. We probably went back three to four or five different times on the LOI. And sometimes it was obnoxious things, like, look, we want to lock some of this money up in escrow, or we want to make sure this, this and this happens. And I’m like, look, you’re buying it as is. Right? I can’t control a client in six months if they bail, either do it or don’t do it.
John Warrillow:
Those are some of the details which were critical. I’m curious though, the first offer was less than half of what you said was your number, around half or whatever. The next turn of the LOI, the second, if you will, version of it. How much closer did it get to your number?
Wes Mathews:
I would say about 80%.
John Warrillow:
Okay.
Wes Mathews:
Yeah. 80%
John Warrillow:
And then the third turn. When did you get to a point where it was there?
Wes Mathews:
About the fourth or fifth LOI. It dialed in. In the last round about that. We all knew what it was going to be. So when it was delivered to my email, I knew exactly what it was going to say. I think the first couple of times, we didn’t have that deeper conversation. It was like, well, let’s throw this bait in the water and see if he bites it or how they react. Once we got to that final stage, Todd was really good to say, hey, where are you at with this? What’s your final number? Because I want to go back and I want to close this up. The deal did get to a point where I’m like, I started to get irritated and said, this is distracting to me. Right? Are we going to move forward in this deal or I got to just close this chapter? It also came from them too, like, look, is this guy screwing around? Do we have a deal? It’s both sides managed through him, and then we got there.
John Warrillow:
Because I think a lot of people when they get a deal, they’re like, we’re not quite there yet. They worry about pushing the acquirer too hard, too far, so much so that they’re going to walk. Four or five iterations of the LOI, that’s a lot of back and forth. How did you get comfortable with the idea that you weren’t going to push them over the edge, push them away, push them to the point where they’re just like, this guy’s a lunatic?
Wes Mathews:
This might sound weird, but I was trying to do that. I was trying to push them over the edge. There was a part in the negotiations where I completely, my feet turned 100% cold, and I told Todd, I’m like, I don’t think I can do this. I had received feedback from my existing COO, some other people that just got in my head and I completely turned a 180. My emotions took over and I said, what am I doing? This is crazy. I told him, I said, Todd, I said, look, because I felt pressured to make a decision. I blew up and I said, look, this is a big decision. You get a commission check at the end of this. This is my business. I’ve spent a lot of years in this, not in quite those words. I go, you need to back off and give me a couple of weeks.
I’m going on a trip with my family. Maybe I can meditate or something will come to me. But I said, look up until this point in my life, when I want to buy a car for my family or my wife, I’ll buy it same day and it’s delivered. I don’t screw around. My decision making is fast. And I said, for this decision, I’m going to take two weeks, because I don’t want to make the wrong decision, because this isn’t buying a car. This is going to change the trajectory of a lot of people’s lives, including my own. They got pissed. They said, if this guy doesn’t come back by Monday, we’re walking. And I said, after you, do whatever you want, I could care less. Like I said, I’ve already gotten so much value in learning through this. I’m like, now we’ll be better prepared to go to the next one.
Scott, the CEO of that company called me on Tuesday, and this is what changed everything for me. He goes, hey, Wes, I know what you’re going through and I know it’s extremely stressful. We’ve been through this three or four times. Because what really started hitting me hard was like, I’m about to be an employee of an organization I created to a certain degree. I was starting to map that out, but he gave me a call and just his tone and how we communicated. I just knew right then and there, I said, dude, this is a guy that I trust, that I can prop up as CEO. I can build a really successful business with. Just the fact that he understood that, to take a second to say, I don’t want to rush you into any decision, take as much time as you want.
I know that Todd came back and said by Tuesday or Monday, I’m not worried about that. Take as much time as you want. And I was like, you know what, that to me is who I am as a human being and for him to recognize that, it wasn’t about EBITDA. It wasn’t about this. It was like, I can partner with this dude because I know who he is now as a person. That was huge. That was really huge for me. And again, I think the version that I’m coming from is a lot of my stake is rolling forward. If I was selling 100% goodbye, things are different. Negotiations are different, but where I’m at with this deal and everything, how he communicated that with me was extremely important. That was a big differentiating factor there.
John Warrillow:
You’re rolling 25% of the deal in. So this was truly a partnership that you wanted to explore. Well, savvy move on behalf of your acquirer to give you a call directly.
Wes Mathews:
What’s that? I’m sorry.
John Warrillow:
I just said savvy move on behalf of your acquirer to call you directly.
Wes Mathews:
Yeah. Yeah. I think it just showed, I knew from that phone call, he probably doesn’t know. I don’t think I ever told him, but from that phone call, I was like, yeah, we’re going to grow this thing to a hundred million. I’m like, this is the right partner. Private equity would just freaking pick us apart like vultures and bust the company up. I care too much about the people, I built a great team and I care a lot about the people. I’m an emotional guy.
John Warrillow:
What was their reaction when you told them you sold the company?
Wes Mathews:
I waited until the 11th hour because obviously I didn’t want anybody to know. So being on Zoom, what I did is, I told the leaders, we have a leadership group. I let them know. Up until that point we made decisions together, but this was one I’m like, look this is a decision I’m making as owner. Did a lot of the triage and the why. And they all got it. Because they’re all living day-to-day and understand the lack of resources and just what the opportunity is. I jumped into everybody’s Zoom meeting from each department and just kicked it off. I think the benefit I had was, I’m very transparent. I’ve been very honest and direct with my team from day one. I think that that’s one thing that people know and respect about me is, I don’t sugar coat. I don’t tiptoe.
I really just talked about the vision and the future. I think that, I would say 90% of the people, I could watch them nodding their heads and they’re bought in. I had some employees that have been there for eight, nine years, that are like, I get it. We see it. Some people that are like, why are you doing this? This is selfish and this is stupid. Everything’s great. But again, I think the team, little does everybody know a lot of this was, I didn’t feel great about the trajectory of where we were going as a company. I felt that at some point the bottom was going to fall out, because the foundation wasn’t sturdy. And so I think it’s easy for an employee to look out and say, man, things are great. We just went through COVID and navigated through COVID.
I didn’t feel whole about that. I think it’s going to take some employees maybe a year, or they’re going to reflect back at some time, and they’re going to look back and say, damn, this was one of the best decisions we ever made, which I’ve already gotten some of that feedback. We had some turbulence, we lost a couple people, some people just felt this isn’t for me, or now since we’re going to be with new company, now is that opportunity for me to jump ship. It was a conversation I was excited for and I’m glad I had it and I felt very confident. I reached out to somebody that was on the team that I probably haven’t talked to since the merger and her recap yesterday was like, thank you so much for reaching out. It means a lot, but it’s also really great to hear how bullish and how excited you are two months into the integration. It gives me a lot of inspiration because it’s been hard, integration is hard, bringing two companies together, very, very difficult.
John Warrillow:
Yeah. It’s-
Wes Mathews:
100 people. Even though it’s an emotional decision for me, it’s a big, look, you have employees that are used to a certain thing, in a certain way. We’ve been a culture of change, but change isn’t easy for people. I don’t mind it, but [crosstalk 01:14:00].
John Warrillow:
It’s like that book, Who Moved My Cheese.
Wes Mathews:
For some people it’s really hard.
John Warrillow:
Yeah. Yeah. I think-
Wes Mathews:
I was really sensitive to that. I’ve really grown as a leader, as a human being to put myself and be super empathetic and look at it from their perspective. I was very cognizant of eliminating a lot of those questions and fears, because, look, obviously new company, new CEO. You hear merger, right? It’s merger, downsizing. It’s like, no, no, this is for growth. We need everybody on the team to make this a success. It was my promise and commitment, and here we are two months later and we’re heading in the right direction.
John Warrillow:
Love it. Wes, where can people reach you? I know you guys are growing HLM here, so there may be people listening to this that want to learn more about what marketing services you guys provide. What’s the best way to reach out?
Wes Mathews:
Our website is HighLevelMarketing.com. H-i-g-h LevelMarketing.com. You can find me on LinkedIn. I think I just updated my LinkedIn to now Chief Revenue Officer of High Level Marketing. You can always email me at Wes, W-E-S@HighLevelMarketing.com.
John Warrillow:
Awesome.
Wes Mathews:
I love sharing the story, love diving in. I’m part of EO, Entrepreneurs’ Organization. I’m always here to help other entrepreneurs. I think that’s ultimately my goal, is if I can help anybody through a tough situation or give experience, share feedback based on what I’ve been through and can offer any kind of value, that’s really what gets me going. I think we’ve now talked for an hour and 20 minutes and it feels we’ve only been talking for four minutes. For me, this is where I feel I love to share. I love to talk about the journey, because if it can help anybody in any capacity, it’s really what I love to do.
John Warrillow:
Well, you’ve certainly helped a few people today. Thanks Wes.
Wes Mathews:
Awesome. Thank you.
John Warrillow:
Hey. If you liked to today’s episode, you’re going to love my new book, The Art of Selling Your Business. The book was inspired by the cohort of my guests over the years, who’ve been able to negotiate an exit far better than the benchmark in their industry. Sometimes two or three times more than I would have expected. I was curious to understand the tactics and strategies of these entrepreneurs and what they do differently from average performers. The result is a playbook for punching above your weight when it comes to selling your business. To learn more, go to BuiltToSell.com/Selling, where we put together a collection of gifts for listeners who order the book. Just go to BuiltToSell.com/Selling. Built To Sell Radio is produced by Haley Parkhill. Our audio and video engineer is Denis Labattaglia. If you like what you’ve just heard, subscribe to get a new episode delivered to your inbox each week, just go to BuiltToSell.com.
Outro:
Thanks for listening to Built To Sell Radio with John Warrillow. For complete show notes, with links to additional resources, visit BuiltToSell.com/blog. John is the founder of The Value Builder System. To find out how to improve the value of your business by 71%, visit ValueBuilderSystem.com. John is also the author of, Built to Sell: Creating a Business That Can Thrive Without You, and The Automatic Customer: Creating a Subscription Business in Any Industry. Connect with John at facebook.com/BuiltToSell or on Twitter @JohnWarrillow. W-A-R-R-I-L-L-O-W. Thanks for listening.