0:00:01 – (Matt Widdoes): Welcome to another episode of growth at Scale. I’m your host, Matt Widows, founder of Maven.com, and today we’re joined by David Rodnitzky. David is the founder of David Rodnitzky Consulting, a boutique firm helping agency founders navigate complex acquisition, scaling and m and A opportunities. His experience includes founding the annual two plus billion dollar ad spend media management company three Q Digital, now a part of debt, and serving as senior director of marketing at Adteractive and advisor at Improvado and Marin Software.

0:00:31 – (Matt Widdoes): Welcome to the podcast, David.

0:00:32 – (David Rodnitzky): Thanks, Matt. Great to be here.

0:00:34 – (Matt Widdoes): I’m so excited to have you, and there’s so many fun stories to unpack. I think it would be good for our audience to hear maybe in your own words. I’d love to hear kind of your background. Soup to nuts. Where did you grow up? When did you come to the bay? What have you done? Tell us all about it.

0:00:49 – (David Rodnitzky): Yeah, I grew up in Iowa, Iowa City, Iowa, and went away to college in Chicago and then came back to Iowa for law school. And I had planned on being a lawyer, but decided by the end of law school that I didn’t want to be a lawyer. And I also had decided that I just kind of wanted to be near mountains because I’d been in the midwest pretty much my whole life. So I packed up my Volkswagen Jetta with my, all the clothes and possessions that I owned, and I drove to San Francisco primarily because one of my best friends from high school was living here, and he said it was a cool place to be.

0:01:26 – (David Rodnitzky): So I didn’t really have much of a plan other than just to be in a cool place. And so I got here in 1999, which was the middle of the first dot boom. And I kind of got lucky being at the right place, the right time, because at that time, there were so many dot coms that were being birthed that they were really looking for warm bodies to do things there. And in 2000, I got a job@a.com called rentals.com, which was trying to revolutionize the apartment rental space.

0:01:58 – (David Rodnitzky): And they gave me the job of manager of strategy, which really meant nothing. It just meant I did a lot of sort of market research and competitive research and wrote statement papers and whatnot. And I was having the time of my life, even though I didn’t really have much of an impact on the company. Then about six months into working there, the director of marketing quit, and the company had a $25,000 a month retainer with an ad agency and a $25,000 a month retainer with a PR agency.

0:02:29 – (David Rodnitzky): And so I just inherited both of those and I started trying to figure out how to use them. We hadn’t actually launched a product really yet at that point, but we were still spending $50,000 a month on these agencies. And I just kind of came to the conclusion that this was not the best way to spend money. It didn’t make a lot of sense to me. I remember the advertising agency, which was a branding agency, brought a guy interested Superman. And I said, this is rentals, man. This is going to be your guy. That sort of brings you all this publicity and success. And I was like, this seems not a good use of my time. And so at that time I discovered there was a company in Pasadena, California called Goto.net dot. And what Goto did, which was incredibly revolutionary, is they said, look, you can buy advertisements on our website and you only pay when someone clicks on the actual ad.

0:03:18 – (David Rodnitzky): And so this was the origins of pay per click or search engine marketing advertising before even Google did it. And I remember I took that $50,000 budget, I fired both agencies and I just put it all on into this.

0:03:30 – (Matt Widdoes): Pay-per-click advertising, performance driven.

0:03:32 – (David Rodnitzky): And that was at a time when there were very few people who knew what it was. So most of the clicks of like the most expensive clicks were like ten cents a click. Most of the clicks were like a penny or two pennies. So I was getting just tens of thousands of clicks to this company. The company ended up going belly up when the.com bubble burst and they couldn’t raise their next round. And there are many other problems with the company, but actually it was founded, it was funded by sequoia and Softbank, but you don’t see that company name on their website for some reason.

0:03:57 – (David Rodnitzky): So I worked for a bunch of different startups. For the next seven years or so. I worked for add to active as you mentioned, which was a legion company. The end of 2007 I was working for an e comm company and I wasn’t really happy with the way that the company was being run. The company had an f from the Better Business bureau, which is not a good thing to have when you’re an e commerce company. I was traveling to India once a quarter to manage your team there, which is not necessarily in of itself terrible.

0:04:23 – (David Rodnitzky): However, my wife was pregnant and as the due date approached, being in India was not a good marital health strategy. So I quit at that time and I just quit one month before my first son was born, which was, this is 2008, and decided that I needed to do something else. After working client side for seven years and tried a bunch of different things, one thing that will be near to your heart is I did try to play online poker and make a living out of that.

0:04:53 – (David Rodnitzky): I think within a week of quitting my job, I got first place in one online tournament and second place in another, and I was up $3,000. And I was thinking, this is my, my gravy train. Ended up losing all of that in about six months. And going into the red, I tried starting a conference on contextual advertising. I started a website on wrinkle cream, affiliate website. I tried to build a site for newborn new parents on how to shop for products.

0:05:24 – (David Rodnitzky): I was just basically throwing a lot of stuff against the wall. And then while I was doing all this, people just kept calling me and saying, hey, can you help me with my Google advertising? So I said, sure, it’s paying the bills. So I started doing consulting for Google advertising, and eventually that sort of scaled into three Q digital. And I’m happy to sort of tell the story of three Q digital. I know I’ve been talking for a long period of time.

0:05:46 – (David Rodnitzky): I can pause and go whatever direction you think makes sense.

0:05:49 – (Matt Widdoes): That’s great. Do you ever wonder back if you had kept the Superman guy at rentals, if that would have played out any different?

0:05:57 – (David Rodnitzky): It wouldn’t have played out any different, because the truth of the matter was we raised $28 million and we basically never really launched a product.

0:06:07 – (Matt Widdoes): Number one classic.

0:06:08 – (David Rodnitzky): So that was a problem. The second problem was the company was 15 years ahead of its time. So there are some great companies today that do software, SaaS software for apartment rental companies. There’s like, I think Appfolio is one that’s pretty prominent, and they have tons and tons of subscribers. We were at a time in 2000 where we had to explain to property managers why they needed a domain name and a website.

0:06:32 – (David Rodnitzky): And so the idea that they were going to sign up for a SaaS solution to do payments, online maintenance requests, online advertising online, it was just way, way ahead of its time. So it was destined to failure, unfortunately.

0:06:44 – (Matt Widdoes): Well, that was also a period when consumers wouldn’t put their credit cards online.

0:06:48 – (David Rodnitzky): Right.

0:06:49 – (Matt Widdoes): There was like a growing, like, there were pundits saying, like, nobody is ever going to buy anything online like this. So, yeah, far ahead of its time, probably by more than a decade, if I had to guess. And so, okay, so then you start three Q digital. How’d that come about? You’re coming out of consulting and you’re like, hey, I can just make this a thing. Is that accurate or is there more of a pivot?

0:07:13 – (David Rodnitzky): I mean, it was very natural. I mean, I started out in a coffee shop in Pacifica, California, and I just did everything myself. I mean, I really enjoyed it and I think it was, I was one of the earliest people to do this type of marketing, so I had a lot of experience and was pretty decent at it. Over time, I just kept getting more and more calls from friends or friends of friends or venture capital firms saying, hey, I need help with this. I was charging a very low amount.

0:07:39 – (David Rodnitzky): My initial minimum fee was dollar 500 a month to manage people’s services. And I just got this sort of reputation as this guy will work with startups and do a good job. And it got to a point where I was like, I can’t take on any more work. I literally have too many clients, so I can’t remember who I hired first. I think it might have been my sister, but I just sort of went to people I knew who were either sort of in between jobs or bored of their jobs. And I was like, listen, do you want to learn about this new area of marketing called search engine marketing? And they said, sure.

0:08:09 – (David Rodnitzky): And so after one year at the coffee shop, I got a reguse, you know, temporary office, which was later, it would be more of a Wework style business. And I just kept on sort of adding employees as I ran out of time to work with people. I think another sort of pivotal thing that happened was my initial thesis on the business was all I did was search engine marketing, and what I would say to potential clients is an expert at everything is an expert at nothing.

0:08:38 – (David Rodnitzky): And so you need to work with me because I’m a specialist. And that worked out well with, with small clients. But as I started to get to bigger sized clients, I started to hear, that’s great, but I don’t want to manage six agencies, I want one agency. Sort of one throat to choke would be the sort of expression. And so I realized, like, I can’t grow this business if I’m just SEM. So then I started to hire experts. So I think my first hire was someone to do Facebook advertising, and then I brought in an SEO expert, and then analytics and decision sciences or data science expert, and then display and on and on and on. And so I basically just kind of listened to my customers and they were saying, if you want to keep working with us, you need to be a more comprehensive agency. So that was sort of instrumental in sort of helping us scale, I think. Another thing I did that was a good decision, was I had a colleague that I’d worked with who was actually didn’t know anything about marketing. She was in sort of product management, but she was one of these people who just was sort of a bull in a China shop. You could set her on a path and she would just figure out how to do it.

0:09:48 – (David Rodnitzky): And so I hired her to be my first head of marketing. And we set a list of, like 45 things we wanted to accomplish, which range from very basic things like have a website and have a blog, to much more complex things like put a billboard on 101 and make sure the blog posts unique content every day, Monday through Friday, 365 days a year. And she just went about and did this. And we started to sort of scale this thought leadership that was really a combination of quality and quantity. And that was really helpful because we just established ourselves as sort of a voice people wanted to listen to when it came to online marketing. So it was a lot of little things that sort of drove the scale well.

0:10:30 – (Matt Widdoes): And those were earlier days, too, where Google would give a lot of preference for something that with, like, the frequency and relevancy and things like keyword stuffing and stuff like that that were really important to the early SEO before they realized the rat’s nest that that opens for them on, you know, if they incentivize that too much. And so you grow that and then, you know, at what point? Cause you eventually sold that. And so walk us through that.

0:10:57 – (Matt Widdoes): That’s something you spend, we’ll go into in a moment, but something that you spend a lot of time thinking about now is helping other agency owners with a sale or m and a more generally, but. So, yeah, so how did that come about? How long into that run did you end up selling it?

0:11:13 – (David Rodnitzky): Yeah, it was very organic, to use the SEO term, I guess. We started the business in 2008. In 2014, I acquired an agency similar to three Q Digital that was also local in the Bay Area called isearch Media. And they were sort of our biggest competitor, although we were probably about two and a half times bigger than them at the time we acquired them. But we sort of consolidated the market, if you will, in the Bay Area, and became really sort of the dominant player in Silicon Valley for digital marketing. We had about 125 employees at that point, and I started to get inquiries from potential acquirers, and someone gave me the advice.

0:11:56 – (David Rodnitzky): A friend of mine who had sold before said about six to nine months before you end up selling the business, you should probably have an investment banker retained, so that when you start getting these inquiries, you have someone who can spend the time talking to them. So you can keep focus on your business, you can prepare your financials, you can start to put together a marketing deck to make yourself attractive.

0:12:17 – (David Rodnitzky): So I did that. I hired a banker, a guy named David Clark, from a company called Jeggy. He’s now at Bright Tower, and he started putting together a bunch of this stuff, and he just, every time I got an email from someone saying, hey, are you interested in selling? I just forwarded it to him, and he did all the talking. And at some point, we got to the point where we had, like, six or seven serious companies that had reached out that were really interested in talking about m and A with us.

0:12:44 – (David Rodnitzky): So in consultation with the investment banker, I said, let’s just run what I described as a mini process. Because in the m and a world, there’s a concept of a process, which is when oftentimes you send out a very professional marketing packet to 5100, maybe even 200 companies, and you expect to get back, 10% of those people get back to you, and then 10% of those people end up bidding on the company. So you’ll sometimes end up with like ten to 15 bidders in the company.

0:13:12 – (David Rodnitzky): I didn’t want to do that. I didn’t necessarily want to go through that dog and pony show at that scale. So I said, look, anyone who’s reached out to us already, let’s talk to them and let’s see if there’s a fit there. So he sent out what’s called a confidential information memorandum, or a SIM, which is really a deck designed for M and A to, I think, seven suitors. We ended up getting three offers from those seven, and then we ended up choosing one, which was hard. Hanks, which is a publicly traded company out of Texas, as the company we were going to merge with. And it was a fortuitous transaction for us for a couple of reasons.

0:13:51 – (David Rodnitzky): One was hard. Hanks had told the market in the prior quarter that they were going to close on a digital agency in that quarter, which would have been Q four of 2014, and they didn’t close in one. I think they got second place on a deal. So they were under the gun because they had already committed to their shareholders or their investors that they were going to buy something. So they were very motivated to get a deal done with us. And so that meant that we got a multiple on the business that was much higher than we would have probably ordinarily gotten. But we also got a lot of flexibility on the deal terms, and one of the things that was a real sticking point for us is that they wanted to pay us more than 50% of the offer was on a contingent earnout, which meant that in our case, it meant that we had to hit certain performance numbers over a three year period.

0:14:39 – (David Rodnitzky): And at the end of those three years, we got a lump sum payment based on the percentage of that that we hit. And so I said to the CEO of the acquiring company, I said, look, you’re paying us more than 50% based on this earnout. I need to have complete control of my business until that transaction closes. So that means that I retain separate books. I have the right to hire and fire whoever I want as a staff.

0:15:05 – (David Rodnitzky): I have the right to charge what I want to clients, to fire clients or hire clients. Everything is completely separate. We’ll call ourselves three Q digital, a hard Hanks company. But until you pay me that earnout, we’re completely separate. So that was a very crucial deal point that they agreed to, which I can explain in a minute. But we were kind of at the right place at the right time. And again, we were not sort of signaling to the market that we’re going to sell at any cost. We were just signaling to a few key people that, look, if you want us, give us an offer we can’t refuse. Otherwise, we’ll just go back to running our business.

0:15:39 – (David Rodnitzky): We happened to get this deal that we were very happy with at the.

0:15:41 – (Matt Widdoes): Time on that point of retaining control, essentially, until you hit your earn out of. Unpack that a little bit and kind of flesh that out a bit.

0:15:54 – (David Rodnitzky): Yeah. I mean, in a lot of deals, there’s a, you know, there’s a cash payment, and there’s a. Either an earnout, which is a base on performance payment, or a rollover, where you invest your money back into the business and you become a minority owner of your own company. And they insisted on an earn out. That’s what they wanted to do. And my concern was essentially, what happens if more than 50% of our compensation is in an earn out and we get to the end of this period and there’s some sort of dispute, because what I had heard was the number one reason for litigation in m and a is earnouts.

0:16:29 – (David Rodnitzky): And what usually happens is there’s this sort of expression of the Hollywood points deal, where in La someone says, like, hey, I want you to be a producer of this movie, and I’ll give you 5% of all the profit if you invest a million dollars. Great, this sounds great. And then the movie comes out and it makes $10 billion and then zero profit. Zero profit. Well, what happened? Well, we actually had to, there was $100 million for costs over here, and you didn’t see this $200 million.

0:17:00 – (David Rodnitzky): They can basically move the money around so that there’s never a profit made. And so that’s kind of what sometimes happens with earnouts. I think the classic case for agencies is someone says, okay, if you hit $2 million of profit over the next three years, we’ll give you a $5 million bonus. And then they, then the bigger agency that acquired the smaller agency says, okay, I need you to work on this account.

0:17:21 – (David Rodnitzky): You need to spend. You have ten people working on it, and they’re going to pay you $10,000 a month. And my part of the agency is going to have two people working at it. We’re going to paid a million dollars a month, which is another way of sort of just basically messing with the profitability so that the smaller agency, the agent that got acquired, never hits their earn out. In our case, what ended up happening was we hit 100% of our earnout.

0:17:46 – (David Rodnitzky): Essentially what they asked us to do is double the size of the business in three years. And we did that. And so we had 100% due to us. And the parent company came to us and said, look, we would like to find an alternative to paying you the earn out right now. And we have, you know, we have some other commitments that are important to us that we need to fulfill. And so they said, would you be willing to do an extension for one year so that we can get you your money a year later?

0:18:14 – (David Rodnitzky): And I said, yeah, well, we’ll do it. I mean, we set some terms around sort of getting paid some interest rates and whatnot. And at the end, about as that year ended, sort of the same thing came up. And they said, well, can we have another year of extension? And at that point I said, you know, I don’t know what’s happening inside your business, but we’re not going to wait around forever for you to be able to pay us back.

0:18:33 – (David Rodnitzky): So I said, the options are really find a way to pay us back or put us up for sale. And so I’ll just sort of go back to the comment about, we were talking about how we were keeping a separate business. If we weren’t separate, if we had been commingled into the parent company, it would have been really hard for us to sell, for them to sell the.

0:18:52 – (Matt Widdoes): Company, to peel that back out.

0:18:54 – (David Rodnitzky): But because we were completely separate, it was a very clean piece of business. And it was very easy for them to put the market. Now. The problem was their company had been challenged, at least from a stock perspective. So the stock had dropped, like, 70% in the three years that we had been part of the company. And I think that potential acquirers looked at that, and they saw this as like a fire sale.

0:19:17 – (David Rodnitzky): They thought there must be either there’s something wrong with three Q or there’s something wrong with the parent company, so we can get this company at a bargain. And so they, we got a bunch, a bunch of offers for the company. And I actually flew around the country to two of my biggest competitors, and I basically went to each competitor. I said, look, this is how much you need to bid for our company. It’s about a 60. It’s about $0.66 in the dollar from what hard Hanks paid for the company three years previous. And we’re two times as big. So this is a bargain.

0:19:47 – (David Rodnitzky): But I could not get them to commit. They all thought something must be wrong. So we got to the point where we didn’t have any credible offers, and I ended up deciding, well, the only thing I can do is to buy the company back myself. So I went in with my co founders, and we raised a little bit of debt, and we ended up purchasing the company back.

0:20:07 – (Matt Widdoes): Great, so then you have it back. You have now. It’s kind of a false start on them. They get, they’re free and clear from your earn out, essentially. Right. But now you’re holding this and that. And what year is that when you’ve kind of taken it back?

0:20:22 – (David Rodnitzky): 2018 is when we bought the company.

0:20:24 – (Matt Widdoes): Okay, so four years later, essentially, you buy it back, and then what do you guys do?

0:20:28 – (David Rodnitzky): So we broke, we bought it back. And our thought at that point was, we’re independent again. We tried this whole m and a thing. Let’s just stay independent. It was fun. Let’s bring it back. So we had a big party. We gave everyone t shirts that said in the three Q Independence day. And we’re very excited. And over the course of that first year, we had a tremendous growth spurt, and we actually doubled our EBITDA, or profit, and we increased the top line by probably 30 or 40%. Want some really big clients.

0:20:59 – (David Rodnitzky): And so the same thing happened, that happened in 2014, where we suddenly started getting unsolicited inbound requests from acquirers who saw that we were on a rocket ship. And we had it. We hired an investment banker. This time, we hired a guy named Sanjay Chada from Canaccord Genuity and did the same thing. We didn’t do a full process. We just sent out letters to people who are expressing interest in us, and we ended up, again, exact same thing. I think we had three main bidders that ended up looking at, and we chose to work with two family offices that had private equity arms out of Chicago.

0:21:38 – (David Rodnitzky): And we closed that deal in May of 2019. So at that point, I became a minority owner in the business, but was still CEO. But over the next year, I realized that the company had sort of scaled to the point where I think I was not as effective as I was when I was a smaller company. I have this sort of theory that there are stage agnostic founders and stage specific founders, and I really felt that I was a founder who was really good in the sort of 150 to 250 range of employees.

0:22:11 – (David Rodnitzky): But by the time we sold, we were at about 325 employees, and it was just getting a little bit too unwieldy for me. So I found a guy who I originally brought in as president, and then after, like a month, I was like, you know, you what? You’re ready to be CEO. And the investors were in full agreement that it was time for someone other than me to be CEO. So we brought in a professional CEO, and then I stepped aside, other than as a strategic advisor.

0:22:38 – (David Rodnitzky): And then in 2022, as a minority of the company, we sold again. We sold to debt, as you mentioned in the intro, which is a dutch based company that’s backed by the Carlyle Group. And then I became a minority of the minority. So now I just a little tiny speck on the debt universe.

0:23:00 – (Matt Widdoes): So you sold the company three times and bought it once is an accurate portrayal of that, which is funny, because not many people get to say that. You do see occasionally founders buying back their company. Right. That happens. But then to go on and to sell it a few more times is. Is probably much more rare, so. Okay, cool. So you do that. And by the time you sold it, most recently, if I’m not mistaken.

0:23:29 – (Matt Widdoes): Not mistaken. Multiple hundreds a year in AR. Yeah.

0:23:35 – (David Rodnitzky): Yeah. I mean, we were over $2 billion a year of spend and a very.

0:23:42 – (Matt Widdoes): Large revenue, which is a long way from Pacifica running, probably pizza hut. Not Pizza Hut. Local stores.

0:23:53 – (David Rodnitzky): Yeah. My first year in business, I think I did 120,000, so it wasn’t much.

0:23:58 – (Matt Widdoes): Yeah. Yeah. Well, that’s a great background on all things three. Q. I’m curious, like, in the early days or kind of, as we think through for other CEO’s kind of starting companies or mid stage or maybe even about to exit any kind of specific kind of learnings or trouble spots or things that you would do differently, just any kind of takeaways from. From your experience that you say, hey, do this, don’t do this. You know, I spent way too long trying to do this thing, and in the end, it was just this. That is what I needed. Like, any major learnings that are worth talking about.

0:24:33 – (David Rodnitzky): Yeah, it’s probably. I think the two things that come to mind are, and they’re totally unrelated. The first is, I think I would have had more success if I had a really strong finance person in the business. Early on, I really resisted hiring expert finance people. I mean, I always had people who were, like, operators who sort of knew enough to be dangerous in finance, but really weren’t finance experts running the team.

0:24:57 – (David Rodnitzky): And I remember when we sold to the private equity guys in 2019, they said, we need to hire a CFO. My argument to them was, let’s hire a chief product officer first, because we have so much we need to fix on the product side. Let’s do that, and then hire CFO. And they were adamant that we were going to go for the CFO first. And I said, fine. I grudgingly agreed to it. And we hired this CFO, this guy, Shane Kern, who was amazing. And he just got the company into a sound financial place where we can make smart investments, where we were just monetizing clients much more efficiently.

0:25:32 – (David Rodnitzky): Bills were being paid, or I should say we were closing the books very quickly. It was just like a game changer. So I think I probably hired a CFO at around maybe 65 million of revenue. I probably should have hired one at about 20 million in revenue. So that was one big change, big learning. I think the other one was, I always used to joke that PPC, it stands for pay per click, but it also stands for people processing culture.

0:25:56 – (David Rodnitzky): And I was always someone who wanted to have the best culture. And to me, that meant, you know, raving fans on the team, you know, just a place that was like everyone wanted to work for and was proud to work for, you know, that people had some swagger. It’s all. And I still believe in all that. I think where I sort of maybe made a mistake a little bit was sometimes I didn’t make tough decisions about people because I didn’t want to, because I thought it would hurt the culture. And in fact, I think the opposite was true. I think one of the hardest things to do is to fire a nice person who’s not particularly good at their job, firing a jerk is easy because everyone hates them and you want them out of the company, but someone who everyone’s friends with, who’s maybe been really loyal to the company, who maybe was once really valuable, but today is a liability or just not carrying their weight.

0:26:51 – (David Rodnitzky): I was always very scared to make those sort of decisions. And I think that I have learned that, like, having a great culture does mean trying to make people raving fans and radically very happy, but it also means being very quick to move on, people who just aren’t a good fit. And so I would have. I would have done more of that.

0:27:09 – (Matt Widdoes): Well, I’ve seen that as well, where you also have situations where. And I think that the element you flagged is, like, the really nice people, where. How tough that is. But by keeping somebody who’s just an underperformer, you get people. And if your expectation is high performance, you have people looking around and saying, well, why am I working so hard when this guy just seems to coast by and it doesn’t seem to be a challenge? And then you also have the added cultural benefit. One of the team being able to look at that and say, wow, they take that seriously. They fired, you know, nice nick, and, you know, like, they really are holding that same standard.

0:27:44 – (Matt Widdoes): And it also puts some relief where they’re like, okay, sweet. I don’t feel like I’m. Nobody wants to feel like they’re the best person in the room. I think the best people I’ve worked at don’t. Right? Because they’re like, okay, sweet. I’m surrounded by other people that are challenged me, and I’m constantly being, you know, pulled up and driving to, like, do more, and, you know, the fulfillment that comes from that, the outcomes that come from that.

0:28:04 – (David Rodnitzky): Yeah. So that really question that I always ask my team when they were thinking about firing someone, and any. Anyone who works with me at 3Q would. Will have heard this a thousand times, but I always ask them, if this person left today, would you be panicked, ambivalent, or relieved?

0:28:17 – (Matt Widdoes): And panicked, ambivalent or relieved?

0:28:19 – (David Rodnitzky): Yeah. And I was shocked at the number of times that someone would say, to be honest with you, I’d be relieved. And then I would say, why is this person still at the company? You know, if the answer is panicked, which does sometimes happen, you’re like, all right, well, when was the last time they got a raise? When did they last get a promotion? Do they. Are they happy with the amount of work they’re getting? Do they need to take on more responsibility? I mean, whatever the answer was and the hardest one was ambivalent. If someone was ambivalent, I guess the question I would say to someone is, all right, the next question is, in 30 days, could you get to the point where you’d be panicked if they. If they left?

0:28:50 – (David Rodnitzky): Which is kind of another way of saying it, put them on a pip. But you only put someone on a pip if you think there’s a chance they could get to that a level quality. And if not, then we’ve all seen people get put on pips because the manager is just delaying the inevitable or hoping that they leave. So I would have been much more tough on that sort of three part question. We had great people at three. Q. Don’t get me wrong. We had 95% of people there were great.

0:29:20 – (David Rodnitzky): But I think I could have. I think I made the mistake of equating everyone’s happy to. This is a good culture, and that doesn’t necessarily completely correlate.

0:29:28 – (Matt Widdoes): That’s a great point. And I think the other piece is, as you scale, and particularly when you’re in the even after 100, but certainly at the 350 range, it’s like all that gets lost. So that has to be baked into the culture. It has to be baked into how you reward people and let people go, and you have to have some structure there, otherwise it gets lost in the chaos of a growing company.

0:29:51 – (David Rodnitzky): That’s totally true. It is very hard to make. I think quality control is probably one of the number one reasons that companies end up becoming bloated and sort of slowing down as they scale. Because, to your point, when you’re at 100 people, you probably know everyone in the company, if not on a first name basis, at least by sight, and you sort of know what they’re doing. Once you get to that 200, 5300 level, then there’s hires that are being made that you may never even meet. They’re in a different office.

0:30:19 – (David Rodnitzky): And oftentimes you find out that someone’s not a good fit the hard way. When a client calls you up and says, we’re terminating the relationship because you have so and so on this account and they’re terrible, that’s a bad outcome.

0:30:32 – (Matt Widdoes): You mentioned culture being really important to you. I’m curious, from your perspective, what are some of the key ingredients in the cultures that you want to be a part of at the office? What are kind of key elements there?

0:30:44 – (David Rodnitzky): Well, we really tried to define our, you know, we used the EOS entrepreneurs operating system, and they have this concept of core values and core promises. So we really thought very deeply about what those were, and I don’t know if I can remember all of them, but the core values were things like, own it, you know, do the math. Everyone’s a client. Act for the greater good. You know, we really tried to sort of create a culture that we valued these things, and then we did core promises. I mean, the one core promise that I always remember was, we don’t work with jerks.

0:31:16 – (David Rodnitzky): So we had several instances where we fired clients, in some cases, clients that were paying us over a million dollars a year because they were jerks and they were not being nice to our team. So we tried to try to, in the early days of the business, maybe not even early days, maybe the first, like, five or six years, I’d like to always stop people in the hallway and ask them, what are our core values? Do you know them?

0:31:41 – (David Rodnitzky): And then I would ask people, are we living our core values? And if someone said we weren’t, then I would try to rectify it.

0:31:46 – (Matt Widdoes): I’m curious. When you look at, you’ve met with tons of agencies in the work that you’re doing now, you’ve seen tons of competitors over, you know, the last well over a decade. I’m curious, from your perspective, having seen so many agencies, are there any things that fall into the category of things that most agencies are getting wrong or kind of just generally doing wrong or approaching in a way that you don’t agree with?

0:32:11 – (David Rodnitzky): It’s a good question. I think that a lot of agencies are focused on sort of near term profit and are not thinking about lifetime value or sort of a ten year plan for the business. So I think that oftentimes decisions are made that are, you know, let’s, let’s hit our number. Let’s hit our monthly, quarterly, or annual number. And I think if agencies were more thinking about, like, I’m going to hold this business for ten years, what decision am I, should I, should I make today that’s going to pay off in ten years?

0:32:49 – (David Rodnitzky): I think you would see, I mean, the sad truth is that if you, I just saw this survey come out. They do this survey every year where they ask consumers, what’s your opinion of these different professions? And of course, like firefighter and doctor and nurse are always at the top.

0:33:06 – (Matt Widdoes): Yeah.

0:33:07 – (David Rodnitzky): And at the bottom, it’s always advertising agencies and lawyers. Pretty much the two things that I’ve done in my life. And I think that’s because there’s a sense that incentives are not aligned and that in those professions, the company is acting for their own good and not for the good of the client. And so I really, I mean, I think there’s a lot of people who do come from the client side that start agencies like myself. So I’m not unique in this respect, but I definitely had been burned by agencies prior to starting the agency. And so when I started it, I was like, look, I’m going to try to be a different type of agency. I will say one of the things that I always said to my team early on was, if you’re working with a client and you find a way to reduce their spend by 40% while maintaining the performance of the campaign, effectively saving the client 40%, even though that’s going to cut our fee by 25%, you should do it, and we’re going to celebrate it.

0:34:02 – (David Rodnitzky): And unfortunately, there are agencies out there who are like, no, don’t do it. Don’t tell the client we need the revenue. So I think that’s something. That’s a common problem.

0:34:11 – (Matt Widdoes): Yeah, that’s something I’ve observed as well. And it’s been super frustrating on the client side. It’s also frustrating because you also have to kind of accept the fact that coming into conversations with somebody you don’t have a lot of rapport with, that you have to kind of overcome how you’re different. And every agency also starts by saying, like, we’re really different. We’re not like other agencies.

0:34:28 – (Matt Widdoes): And so I think that, thinking long term, to your point, it’s like it. We hired an agency once for a discrete thing that was essentially performance driven. It was, you’re gonna pay this amount, and if it, if it doesn’t work, we’ll keep working on it at no additional cost until it does work. Right. So on the service, you’re like, okay, well, that’s cool. And I understand they need some money to get started.

0:34:56 – (Matt Widdoes): And so I paid them to do the first part, and it was not good. And it was like, okay, well, do this next. Do these things. Still not good. And then it was like, okay, well, what are we doing next? Get a bounce back. Okay, let’s email the more senior person here. Maybe that person got fired. Get a bounce back. Go to their website. No website. And it was like, I got the sense that they, they go around selling a very attractive, no brainer kind of low, fairly low cost starting point to lots of people where they’re like, yeah, we’re really good at this. We do it all the time, and this is how we work.

0:35:33 – (Matt Widdoes): And then every, I don’t know, three months, they just open up a new website. Remarket. You know what they do? Maybe it wasn’t even their real names for all they know. I have no idea. They just disappear off the face of the earth. And that’s like the quintessential. Or you have a thing where the agency is trying to lock you into really long terms without performance, like, without any, just, this is how it’s going to be kind of starting point.

0:36:00 – (Matt Widdoes): And, yeah, a lot of decisions are made to your point that are just purely focused on very short term selfish interests, ignoring all long term kind of value and relationship. And I’ve asked myself, like, well, how can that be? And I think the answer is that when. And some of these are big companies, right? Big agencies, and they’re the case studies. I always feel like even in house, I’m like, and we have cases because people like to see them, but I’m like, they’re pointless because it’s essentially like asking me for a reference and I send you to my mom, like, I’m not going to put references in front of you. Like, nobody, game theory wise is going to give you some terrible reference. So it would be way better to say, like, what companies are not on your website they’ve worked with. That would be a great question to ask. And then say, okay, cool, I’m going to go check on those from those companies because they may have, you know, there’s any reasons why you might not have been able to get a case study, but the challenge is that. So you ask, like, how can this be?

0:36:53 – (Matt Widdoes): And my sense is that, well, so and so calls ex client and say, what do you think of the agency? And they say, they were awful. They were so bad. They did all these terrible things. And they’re like, well, I heard they were good. And they’re like, they weren’t good for us. And then they call the agency and say, well, this person said that you guys weren’t very good. And the agency’s, well, yeah, I mean, that was a very troublesome client. And, you know, it’s like, we have, we have plenty of ones that you can talk to that where we’re very good and that at the end of the day, the client still hires them. And they just shrug and say, yeah, I mean, like, it’s a mixed bag and agencies kind of suck. So we got to pick one of them. And, like, it’s such a terrible place from a buyer’s perspective to be in because you’re just like, this is, we just have to accept this. They’re bottom of the list of trusted professionals and that’s just how it is. And we have to work with them. It’s like lawyers, like we.

0:37:38 – (Matt Widdoes): You still need a lawyer, right? And so, you know, it’s kind of the same.

0:37:42 – (David Rodnitzky): Yeah.

0:37:43 – (Matt Widdoes): The same potential outcome, which is very frustrating, I think, for, I’ll say two.

0:37:46 – (David Rodnitzky): Things to respond to that. One is our focus was on Silicon Valley, so we worked with really sort of series A and beyond startups in Silicon Valley. And what I used to tell the team is, Silicon Valley is a small valley.

0:37:59 – (Matt Widdoes): Yes.

0:38:00 – (David Rodnitzky): If you want to survive as a service provider in Silicon Valley, you can only have so many mess ups because eventually the company that you mess up with is going to tell their vc, the guy who’s the head of marketing there is going to go be the head of marketing somewhere else, and they’re going to both post something on a message board about how you were terrible. So it’s almost like we had to have like six Sigma of quality to survive in Silicon Valley, because a lot of agencies have come to Silicon Valley with a lot of bravado and they over promise and they drive bad results and they’re gone and you never hear from them again.

0:38:34 – (David Rodnitzky): That’s number one. Number two is, and this is more for big agencies. One of the books that I was sort of always amazed by in college was Stanley Milgram’s obedience to authority, which is the study that in the sixties where this guy dressed, volunteers up in lab coats and said, you need to shock this other person.

0:38:53 – (Matt Widdoes): Is this the Stanford experiment?

0:38:54 – (David Rodnitzky): What’s that?

0:38:55 – (Matt Widdoes): Is this the Stanford experiment?

0:38:56 – (David Rodnitzky): Well, the Stanford prison experiment is similar concept that, you know, you can get people to do horrible things. And obedience to authority talked about a couple things that happen in big organizations. One is obedience to authority. Obviously, if someone tells you to do something, you do it. The next is distance from the victim. So if you’re sitting in an ad agency in New York, you’re working with a client in South Carolina, you never see them.

0:39:18 – (David Rodnitzky): You feel less empathy for them than if you were sort of looking them in the face. There’s the slippery slope, which is, well, I kind of overcharged this client by $5, but next month I’ll overcharge them by a $100. There’s peer pressure while everyone else is not, is. Is not putting in good effort on these clients and loving it and making lots of money. So I’m going to do the same. So the same things that sort of drive people in that lab experiment to do bad things to other people are sort of the same tendencies that you see at really large organizations. And this can be in a law firm, law firms in particular, where, you know, well, everyone else is sort of hiding this.

0:39:55 – (David Rodnitzky): They’re not, we’re not, everyone else isn’t sharing the files with the, with the other side. So why do. I shouldn’t do it either. My boss said, don’t tell the other side that we did this. Okay, well, I’m beating authority. So anyways, I think there’s something to be said to that. And large agencies as well, unfortunately.

0:40:12 – (Matt Widdoes): Yeah, no, I think I hadn’t thought about the parallels there. And all of those boxes, I think, are checked. So now you spend a lot of your time helping agencies through their own successful acquisitions. Um, and, you know, you have a lot of experience in that firsthand, and probably, and many lessons from, you know, how to pick a finance person to get you ready. How did you know? Some of the kind of catches of, of a sales process, things like, you know, maybe maintaining your autonomy and, you know, keeping an eye on the earn out.

0:40:45 – (Matt Widdoes): Let’s talk about the, the book a bit. I actually have it here, which is selling your marketing agency by David Radnitsky. It can absolutely be found on Amazon. I think that’s where I got this one. I think I even have a sweet autograph from when we collected it. This one is not for sale. But let’s talk a little bit about the wisdom that’s shared there and kind of a high level for anybody who’s kind of in a camp of selling their agency. And I think, actually, really, this applies probably to anybody trying to sell a business. But what are kind of some of the broad topics that you talk about in that book for anybody who might be listening and interested in some of those learnings?

0:41:22 – (David Rodnitzky): Yeah. The purpose of the book was really a realization on my part that whether you’re an agency founder or you’re the founder of a.com or a SaaS company, whatever, when you go to sell your business, myself being the exception, 99% of people who sell their business, sell their business, sell a business once, it’s the only time they sell it. It’s the single most important financial transaction of their life.

0:41:43 – (David Rodnitzky): And typically speaking, the other side, the side that’s buying your business, has done this dozens of times, and is our seasoned professional. And even the people that you hire to represent you, your law firm, your investment bank, your accounting firm, even those people sometimes have adverse incentives to the founder. So I find it kind of crazy that someone would go into a transaction in the tech world. We could be talking about billions of dollars.

0:42:13 – (David Rodnitzky): In the agency world, it’s usually tens of millions or low hundreds of millions of dollars. You go into a transaction like this and you have literally no learning on it. You’re learning as you go. That’s kind of crazy. I mean, no other part of life would you have such a big decision and not be prepared for it. So that was kind of the raison Dietra of the book, and I kind of break it down into a couple of different sections. I think the first section is really just sort of asking, trying to ask the founder, do you really want to sell?

0:42:41 – (David Rodnitzky): And it may seem strange to imagine someone getting tens of millions or hundreds of millions of dollars from selling a business and then having a lot of depression and anxiety as a result. But that actually happens way more than you think for a variety of reasons. Primarily, it comes down to another way. One way that I describe selling your business is selling your purpose and identity for cash.

0:43:04 – (Matt Widdoes): Yeah.

0:43:04 – (David Rodnitzky): So there’s a huge number of founders that I talk to all the time who have, who have exited their business, who are struggling with this. So the first question I try to address in the book is, should you be selling? If you don’t want to sell, but you want some liquidity, are there alternatives to selling? And then I sort of go through the process of putting yourself up for sale. What are the marketing mechanisms that you use? Who do you hire?

0:43:28 – (David Rodnitzky): How do you choose a good lawyer? How do you choose a good investment banker and get ready for the sale? Then there’s the whole negotiation and contract part, which is where my, I’m not a lawyer and I do not play one on tv, but my background in law has helped me to look at all the different terms that are going to come up when you’re actually looking at a transaction to make sure that you’re negotiating the right terms. There’s some terms that are just absolutely crucial.

0:43:53 – (David Rodnitzky): Like I said, I mean, in my first deal, there were a couple terms. If I hadn’t gotten those terms, I probably wouldn’t be talking to you today in this capacity. And then there’s the whole post exit planning. How do you tell your team? How do you tell your clients? How do you set up success so that you, like, merge with the other company and you’re happy, everyone’s happy. And then sort of the, I sort of end with this concept again of, like, what are you going to do now?

0:44:18 – (David Rodnitzky): You know, a guy I know wrote a book called what to do when you get what you want. And that’s sort of the, that’s sort of the epilogue of the book, like, where do you go from there? How do you, how do you find your next, your second mountain? I guess there’s a book called Second Mountain on this topic. So it’s not just about the sort of the mechanics of selling your business. It’s also about sort of the emotions on both before and after you’re selling your business and making sure that when you do get that sort of check at the end of the transaction, that you’re not just happy because your bank account has an extra zero in it, you’re happy that you made the right decision and, you know, sort of what you want to do next.

0:44:54 – (Matt Widdoes): It’s funny, you talk about terms and some of the conditions and gotchas and particularly companies who’ve been there before. And I don’t know how this was fully missed because these companies would have both had massive legal teams behind it. But I was just reading recently was talking about all the troubles that Boeing is facing and just kind of this seeming collapse of them. And they had essentially acquired, if I’m remembering correctly, they had acquired, I guess it’s called McDonnell Douglas, an old failing aerospace company company, essentially.

0:45:26 – (Matt Widdoes): And part of those terms, and Boeing was the bigger company, part of those terms were that executives would maintain their position from both orgs and that they would blend together. And what McDonnell Douglas did right before the contract went through is they promoted everybody, tons of people, to executive teams and leadership. And then when they merged, they’re like, well, hold on, I’m this and I’m this. And they had this whole other structure where it’s like, okay, well, I guess that rolls into CEO.

0:45:56 – (Matt Widdoes): But like, oh, my gosh, we just expanded the directs to the CEO by 1000%. And then those people started, like, firing off and isolating the Boeing people and essentially did a hostile takeover as the minority coming in because the term said that they could. And so just a minor tweak on something like that that says any executive that has held their role for at least 24 months will maintain their position post merger.

0:46:24 – (Matt Widdoes): Or given that. Let’s just talk about it. What executives do you have on your side? What executives do we have on our side? What would that look like if we did do this? And, okay, that looks good, or that doesn’t look good, right? But like these minor things, and this is, I think, where you have a lot of benefit, having gone to law school. And this is why we have lawyers, is to think of all these edge cases, these crazy things that nobody would ever do, right? Like who would go promote 300 people to executive positions.

0:46:51 – (Matt Widdoes): It’s like, well, sometimes they do it.

0:46:54 – (David Rodnitzky): Yeah, I’ll share two related anecdotes on that. Number one is, in the first transaction that we did, the lawyers for the other side were supposed to calculate our earn out based on a very simple formula that they were calculating, our CAGR compound annual growth rate. And they literally put the wrong calculation in such that we would have hit our earn out, 100% of our earn out, even if we didn’t double the company. If we had just grown by 10% a year, we would have hit the earn out because they did not put the right calculation in. And not only did they not put the right calculation in mathematically, they then wrote it out in English, like, this will be the greater of two times this and that.

0:47:30 – (David Rodnitzky): And so from a court perspective, it’s like you can’t even say it’s a mistake because they did it twice.

0:47:35 – (Matt Widdoes): Right?

0:47:35 – (David Rodnitzky): So, fortunately, I guess you could say we hit their full earn out anyways. But they would have put the company in a position where they would have gotten 10%. We could have gotten 10% of the value promised and got 100% of the earnout. So that’s one example of sort of bad lawyer.

0:47:49 – (Matt Widdoes): Did you guys catch that and say, hey, you forgot to carry the one here.

0:47:52 – (David Rodnitzky): We caught it about six months after the deal closed, and we were in a meeting with the acquirers, and we said, you know, we don’t have to hit double our revenue. And they’re like, what do you mean? It’s like, we’ll read the contract. And their jaws dropped. And they. But they never argued it because there was. They knew. They really.

0:48:08 – (Matt Widdoes): But you hit it anyway. But you didn’t have to hit. You hit the spirit of the contract anyway. But contractually you didn’t.

0:48:16 – (David Rodnitzky): But they got lucky that we did, you know.

0:48:18 – (Matt Widdoes): Wow.

0:48:19 – (David Rodnitzky): The other instance was when we were in that same instance, we were trying to extract ourselves from this company, and we were in some. We were some heated negotiations, and I said, well, we may need to file. I was working by law firm. I said, we need, may need to file a lawsuit against these guys to get them to move. And our lawyer said, well, you’re not going to win the lawsuit. I said, well, let me rephrase this. Do you mean we’re not going to win the lawsuit in the sense that it’s going to be thrown out by the judge immediately, or that if we go to trial, we’ll probably lose a trial? He goes, oh, you’ll probably lose a trial. I said, but this is a publicly traded company. Don’t you think that if one of their parts of their company files a lawsuit, that’s going to be pretty bad for their stock and it’s going to cost a lot of concern?

0:48:59 – (David Rodnitzky): You know, they would probably want to avoid this, right? And they’re like, yeah, yeah, that’s probably true. I said, so that’s, this is a. This is not a legal discussion. This is a strategy discussion. And they didn’t understand that. And this was a large law firm, and so I fired them pretty much on the spot. I went through seven law firms when I was with 3Q and we found a new law firm that went from having 1000 employees to having ten employees. But they knew exactly how to think strategically. And most law, most lawyers that I’ve encountered know the law. They don’t know how to think like a business person.

0:49:27 – (David Rodnitzky): And in fact, they’ll often defer to you and say, well, that’s a business decision. I can’t make that decision. So there’s a huge difference between the type of lawyer that you get and, you know, just as we said about employees, you know, if this person left today, would you be panicked, ambivalent? The same applies to lawyers and law firms.

0:49:43 – (Matt Widdoes): Well, and finance, for that matter. I’ve seen. I’ve come across so many. It’s been hard to find somebody on the finance, tax planning, stuff like that side to really think about strategically. I joke, I’m like, I’ve always heard of all these amazing benefits you get as a business owner. I’ve never seen one of them. So I’m like, outside of like, yeah, if I want to buy a hummer, I can amortize that over, like. But it’s like, I think it’s like $0.75 on the dollar. So you get a 25% discount on a gigantic car. That I don’t want. I’m like, there is more, right? Like, there has to be more. So it’s like finding the right strategic thinkers and thinking about growth in those roles. Thinking about those roles through the perspective of growth and, like, what does this mean strategically? And not everybody’s capable of that. I’m curious on when it comes to people reaching out and say, hey, I’d like to talk to you about buying your company.

0:50:30 – (Matt Widdoes): I think I got on some sort of a list because I feel like I get three a week and how do. Which I ignore all of them. How do you differentiate between that kind of cold spray and pray? I’m assuming cold spraying pray inbound versus a serious suitor. And do you have like, you know, a go to know copy paste question that say, you know, I want you to answer these three things, and then we can have a discussion. How do you, how do you approach this?

0:50:56 – (David Rodnitzky): Yeah, I mean, first of all, that’s one of the things that’s valuable about having an investment banker on retainer. Every- you get any of those letters, you just forward it to the investment banker, and the investment banker usually either sniffs out the company and says, this is legit, or doesn’t recognize, and then has to make a call as to whether to contact them or not. I mean, typically speaking, you can sort of tell when it’s kind of a spray and pray. I mean, the most common one that I got was something like, my name’s Jim.

0:51:25 – (David Rodnitzky): I’m looking to acquire five companies with at least a million dollars of EBITDA, roll them up and go public in the next three years or something like that. And it’s like, okay, this is just the strategy here is clearly, send out 500 letters, ten people write you back. One of them is dumb enough to accept your offer. Typically speaking, it’s easy to research any company that’s looking to acquire you. And if you’ve never heard of them, if they don’t have a track record of making acquisitions, or if they’re not like a large company already, then it’s not worth your time.

0:51:56 – (Matt Widdoes): Yeah, you can look at them on LinkedIn and see how many employees they have. You can go to their website and see who they’ve acquired in the past, etcetera. That’s helpful. I’m curious, any kind of key considerations that, that startups or agency owners should keep in mind when navigating these kind of obstacles in M&A, I think.

0:52:15 – (David Rodnitzky): Well, as I said, number one is knowing if you wanna sell. Number two is, I think you mentioned it about when you’re looking at a buyer, it’s not just a matter of looking at the references that they provide. It’s a matter of doing your own due diligence. Because at the end of the day, after the signing happens and you get your first check or whatever it is that you’re getting paid, you have to work with this company, usually for two to four years.

0:52:42 – (David Rodnitzky): There was an instance when we were selling the second time around when I was on the 1 yd line with a very large agency, and they had said all the right things about how they want to work with us. They had given us a really impressive offer from a top line perspective, and I was ready to close the deal. And I decided I would just call a friend of mine who had sold to them a couple years previously. And I said, hey, what do you think of this company? And he said, well, all they care about is profit.

0:53:10 – (David Rodnitzky): And so as a result, they told us that we couldn’t do any more training of our team because it wasn’t a profit driving activity. And that to me was just a dagger. I was thinking like, wow, this is going to be so countercultural to the way we run the business. It’s going to destroy morale, it’s going to destroy the quality of what we’re doing, probably destroy our ability to actually hit our goals in terms of the earn, outlandish. So I reverse course and I didn’t sign it went with someone else.

0:53:34 – (David Rodnitzky): So I think that not all money is equally green, and it’s not just about the money, it’s about, I used to say to my team, we’re not going to do a deal unless it’s right for clients, for shareholders and for the team. And that means that it’s not just the financials that matter.

0:53:52 – (Matt Widdoes): Yeah, and those are more difficult to check all three than it might appear. As you start getting into deeper terms, discussions and potentially lawyers dragging on for months and months on very minute details to maximize their short term win rate, knowing that you will never sell through them again either.

0:54:11 – (David Rodnitzky): If you’re in a room with six lawyers discussing a topic, then you have to recognize you’re paying 6000 an hour or 6000 hours for that discussion. And you probably need to either find a new law firm or set down some laws.

0:54:21 – (Matt Widdoes): Yeah, makes sense. And any parting advice you’d have for somebody who’s starting a new agency or growing an agency that hopes to sell.

0:54:28 – (David Rodnitzky): Someday, well, I think I go back to what I said before, which is think about lifetime value and not about quarterly earnings. I think that the moment that an agency starts to focus on doing things that they think are going to make an acquirer want to acquire them instead of just building a great business, is when that agency starts going south and make the assumption that you’re never going to sell and that you’re going to build a business that you’re going to hand over to your grandchildren and the profit will take care of itself over time, and then you’ll make yourself even more desirable to acquirers because they’ll see that you’ve built something that’s going to last. And at the end of the day, enterprise value is the thing that drives M and A.

0:55:11 – (David Rodnitzky): And if you can demonstrate that the business is far greater than you and will be far greater than you after you leave. That’s when you get the most value from an m and a perspective.

0:55:20 – (Matt Widdoes): Yeah. It comes back to thinking long term about your clients and your own business. Right. And not making short term decisions that solve short term problems versus thinking.

0:55:32 – (David Rodnitzky): Yeah. I always think of Amazon. You know, Amazon lost money for like the first ten years of their business because they were optimizing for a long, long horizon. And then when they started making money, they made money big time. And they had also built such a defensible business that it’s impossible for anyone to keep up now. But they did that by not looking at quarterly earnings. And Jeff Bezos, you know, basically gave the middle finger to any analyst who was like, why aren’t you profitable yet? He’s like, I don’t care. I’m building.

0:55:58 – (David Rodnitzky): I’m building a hundred year business for a thousand year business.

0:56:00 – (Matt Widdoes): He was super consistent on that. And it seemingly had the vision for what we see today, 20 years ago. Right. And it’s come, come a long way. And they seem to be doing all right, I think. I know they get a lot of, a lot of my money, for sure.

0:56:12 – (David Rodnitzky): I just bought a ping pong table from them. So I never thought I’d buy a ping pong table for Amazon, but I did it, so.

0:56:17 – (Matt Widdoes): Yeah.

0:56:17 – (David Rodnitzky): Combination of Amazon’s Amazon prime and me watching too much olympics.

0:56:20 – (Matt Widdoes): Yeah, exactly. Well, thanks so much for the time today. Maybe we’ll get some chance to play ping pong in the near future. But really appreciate the insights and you being so open with your own experience and look forward to chatting again soon.

0:56:32 – (David Rodnitzky): Thanks, Matt. Really appreciate it.

0:56:34 – (Matt Widdoes): Cool. Thank you so much.