EP 20: Todd Muffley - Lessons From Selling to Key Employees

Todd Muffley  0:31  
Hey, thanks. Thanks for having me. 

Ed Mysogland  2:08  
Well, can you give the audience a snapshot of your journey into out of and then back into business, 

Todd Muffley  2:15  
I can definitely do that. So I started my marketing agency in 1999. And through that journey, build up a list of clientele and actually sold part of it off.

And 2005 to go more into the digital space. And Plan B marketing was born from that. And then through that journey from 2005 to 2017 really focused on

paid online advertising, we did a lot of inbound marketing, social media, we did websites and created strategies for our businesses, mostly in the b2b space, and mostly outside of Indiana. And through that, you know, we've had at one time 28 employees, when I sold the business, we had 20 employees and selling the business. I wish it was as linear as the journey that you know, to start a business and to get rid of it. But it was something where I

wanted to get some employees involved in the business. And so I offered them to buy into it at a small percent it was 10% to start with. And then

a year later, wanted them at 10% they really didn't see too involved in sales, and I sold another 38% I think it was 35%. And

then the next year I sold the whole thing. Were you trying to lock them down? I mean, well, what precipitated the offering of equity? Well, you know, to be candid,

I lost six retainer clients, in the first six months of I believe it was 2014. And, you know, I had been on this marketing ownership journey by myself for so long. And so many times I put all my, you know, from credit cards to bank accounts, you know, I put everything on the line. For my business, you know, it's my risk, but I just, I felt like I wanted somebody else to share that instead of doing it again. So my wife and I, you know, spoke and we actually took that first 10% that they gave us and we put it right back into the company to not only keep it solvent, but to grow it because I just knew we were on the precipice of something really great as far as you know, getting a lot of new business, which we were so that turned out well, it was good gamble. So fast forward, and then all of a sudden, you're like, Okay, now it's it's time to exit the entire business. I mean, we were a client, I mean, and so we we had a pretty intimate

Ed Mysogland  5:00  
relationship on on how you guys worked. And when you told me that you were selling the company, I have to tell you, I was surprised. And, and so, I mean, what made you decide to do that? Well, money. First off, but you guys were doing great. You know, we were for the last two years. And so you know, my p&l really showed in 2015 and 2016. It was very healthy. But if you look at it the previous, you know, umpteen years before that, I created a job. And I created lots of jobs for that, you know, so many employees, but it really, no marketing agencies are difficult to run, you have high turnover clients, high turnover staff. And so while I made a good living, I didn't really have a really good business that gave a steady return on investment until the last two years. And, you know, when having employees having, you know, having the people that I sold to intimately know the clients and intimately know, the brand, and what we sold was very helpful. I think the hard part of it is the looking back, as

Todd Muffley  6:17  
they didn't really understand what I did in the business. And so they thought it would be easy to do it without me. And so, you know, selling, you know, so let's say they're certain that 38% ish of ownership of the business, and business is going great. And I just, you know, I told my wife, I'm working, you know, 60 plus hours a week, and I'm just done, you know, I'm spent, and I had somebody approached me from another company that wanted to buy me, and I went to my, my existing partners, I said, you know, I'm entertaining talking to them. I haven't done anything yet. And they said, Well, we're interested in buying the whole thing.

And so, you know, that's the blind squirrel mentality. I got lucky. 

Ed Mysogland  7:05  
No, no, that I don't think so. I mean, I think the way you have it structured, I mean, did two things. One, it kept your employees from being poached. And the second thing is, it was a segue into a total exit. So not, I don't think it was blind luck by any means. But I guess I'm what did that conversation sound like? Well, they were very receptive to it. They, they wanted to own the business. I think that how it went home were creative.

Todd Muffley  7:36  
They're in their mid 30s. Okay, so so, you know, they, they have a couple of young children. In here, he's got an MBA, and she was the creative director. And, you know, she'd been with me since, like, 2004. You know, so we were, you know, not only I felt like friends, but you know, we have a long standing business relationship. And I really think that they, you know, they wanted to do things a little bit differently and put their mark on the business and do it their way. So, you know, it was it was a very easy conversation, actually, you know, when I told them that I was looking to divest all the business, you know, to get get out from under all of it, they stepped up and they said they wanted to, so then it was just, you know, crossing T's and dotting eyes and you know, spending, you know, three to four months with accountants and lawyers to get it all squared away. Yeah.

Ed Mysogland  8:33  
I mean, are you guys still friends?

Todd Muffley  8:35  
You know, that's the funny thing is, I think as business owners, we tell ourselves lies that our employees are friends. And I don't know why this happens. It probably be an interesting study on small business owners to think this way. But, you know, I thought we were friends. But, you know, they they never call and ask for advice. They never. It's like, No, I would say no, we're not friends now. But then we have to ask yourself, we're really friends before, right? So

Ed Mysogland  9:08  
that's, yeah. No, no. And like I said it, you know, going into it, everybody has, you know, the intent of, we're going to be friends forever. And like you were saying earlier, you, I don't think especially employees fully understand, number one, the risk associated with small business ownership. And then number two, just what it means to be all in with your business. And you I think, Mark can only live that I don't think you can be taught that.

Todd Muffley  9:37  
Yeah, and again, I think people think it's easier than it really is. Right? They see it from the outside. You know, I'm at the office every day at 730 and I don't leave sometimes till 730. And while I'm not actually doing the work, you know, I'm managing the accounts, I'm getting new business, I'm doing HR for the for the comp any, you know, managing the strategies for all these clients? And I think sometimes, you know, people look at that and don't think it's, quote, real work. And especially, you know, especially sometimes when I think that, you know, you have this pre notion that you can do it better than the other person. And so they, they stepped up and they said they wanted to take it. Thank God they did. Yeah.

Ed Mysogland  10:28  
So going back to when you when you first started the agency, was it always one of your plans to grow it? And then eventually sell it? Or was this because I know you've got kids and you got kids in the business? I mean, was this, were you thinking, well, this is a successor type situation,

Todd Muffley  10:45  
you know, my kids didn't want it. And, you know, thank goodness that they didn't take it because they weren't ready for it. They're, you know, my son does digital marketing. And my daughter did business development. And while I think that they could have been the business, I don't think they could have done it on their own. And so, you know, I think it was very wise for them to see that they couldn't do that. So once that conversation, you know, had sailed, you know, then it was just like, well, I didn't have an exit strategy, you know, if we wouldn't have lost those clients as first six months, you know, all in rapid succession, I probably wouldn't even went out and got partners. But then, if I, if I think about it, I didn't have an exit strategy. You know, this exit strategy actually, is sort of like a snowball, rolling down a hill turned into this giant snowball at the end, right. It just was started by the series of misfortune on events and then became a you know, at the end, it was really good. So unfortunately, I'd like to say that I had a strategy to divest the business, but

Ed Mysogland  11:50  
I really didn't. So as you were thinking about the business, I mean, most business owners are heads down and doing the business and they only think about, you know, the trials and tribulations. Like I said, they're, you know, typically around the 15th and 30th, when payrolls do, but the problem, I think, is that life events, like, in your case, you had lost the six clients, and all of a sudden, risk was staring you in the face. And I think business or other business owners, you know, whether it be health or age, or any variety of issues that face, you know, the the ownership mortality? You know, I think it's a it's a different, it's a different animal. And so I guess that's my question is, what made your risk tolerance change?

Todd Muffley  12:47  
Well, I have I had the opportunity through, you know, when you when you have a successful agency, like I think that we did, you know, we're doing over a million dollars in retainer and project work, not counting media buys, right, so not an inflated numbers like 1.2 1.5, somewhere in there. But when you're when you're doing well, that attracts other people to start thinking about it. And so I actually had, before I sold my, my 10%, off to my, my employees, I actually had some people contact me find MBAs and went down the journey in three separate occasions, with one was another agency. And then two, were actually printing companies. And what I found going through those things all at the sort of, you know, sort at the same time after I sold the 10%. And then, you know, the timeline is, you know, not all three happened at one time, but over the next two years talking to people about selling and being courted, if you would, what I found is the agency that wanted to buy me one of the by me for and have my book of business, and then make me an employee. And you know, me, that's not gonna work. For most business owners, it's not gonna work for exactly, and then the printing companies that wanted to buy me knew nothing about marketing. And I would actually, it would be like, it'd be like trying to integrate a square peg into a round hole. And it was it after I saw all the details and went through, I'm like, this would be a freaking nightmare. And so I think having that background along with the employees who were able to purchase the business and then the want to even buy more business, it really was a combination of a lot of things that just came together perfectly. So

Ed Mysogland  14:48  
well. What precipitated me calling you out of your quasi retirement was that I read an article that you had posted on LinkedIn, saying beast Still, and, and the tone of, you know, I've seen you, I've seen your work. And I've seen how you write and the tone of that article was just, it was somber. To be honest with you, I was just like, Wow, maybe this wasn't what it what you thought it was going to be. So Can Can you talk a little bit about what you were feeling when you wrote that?

Todd Muffley  15:24  
Sure. If anybody wants to see if they can go to LinkedIn, and sit in Todd muslin and find it, but

Ed Mysogland  15:32  
I'll have a link to the show in the show notes. Okay.

Todd Muffley  15:36  
The reason I wrote that article, it was a, I was reflecting back on, it was just over two years that I had sold the business. And I think, like I didn't have, I didn't have like a mentor in business. I was sort of just doing it myself. You know, I had an attorney and I had an accountant, but I never had anybody to sit down and look me in the eye and say, You really mess that up, buddy, you know, besides my wife. But on on this one, you know, after you sell your business, it's like one of those things where you're, you're, you're climbing that mountain, and all of a sudden, you get to the top of the mountain and you're like, oh my god, I made it to the top the business has sold. So it's like, well, nobody tells you that, you know, that journey going down the mountain is just a strenuous meaning, okay, you sold your baby, you know, something that you worked and lived in, in just did put everything into, and that reflecting back on it, it was it's just, you know, difficult, too difficult to process that, but really, you know, not trying not to run into something else, you know, trying to, it's almost like mourning, to tell you the truth. It's almost like, you know, you because, you know, my employees that, that I had when I sold the business, they're not all there anymore. You know, they're a lot of them are gone. It's just it was it was a reflective period that I just wanted to note that, you know, sometimes you, you got to not only understand that, you know, you're selling something as a consequence to it, but also that you shouldn't run and do something else right away. You know, it's like when the when they say when you get a divorce, that you you know, you shouldn't make any financial decisions for you know, a year after your divorce or something like that. Well, that's the same thing. I think with selling your business, you sell your business, and you should really, somebody should advise you to go on vacation, to chill out to really reflect on what your next step is. And I didn't have that next step. I just jumped into the I just jumped into more things, which I wish I wouldn't have done.

Ed Mysogland  17:52  
Well, you know, the funny thing is that when we so roughly the statistic is is 75% of the people that sell their business regret selling it. And, and for that for all those same reasons that you've cited, but you know, being in this position and knowing you I mean when I would talk to you I mean you were you were hell bent to go you're going on your boat, it's it seemed all the ducks were in a row. And so that's what took me aback with with that article. I was like, Oh my gosh, what did i What did I miss when

Todd Muffley  18:29  
life changed? That's the problem, right? So I was that, you know, I got a beautiful I got a beautiful 37 foot power catamaran. I have I have my life set. And then we moved to North Carolina and you know, some personal things came up that change that dynamic that I had envisioned in my mind and so you know, life threw me a curveball. But yeah, you're right I did have it laid out what I wanted to do but now that doesn't always happen.

Ed Mysogland  19:01  
Well, a lot of business owners had owned the real estate and you did too and and it seemed like the market was just crazy for for where you guys were located. And and I figured that was that was your retirement that that piece of real estate was going to to carry you through the rest of your life and then all of a sudden I see a for sale sign then all of a sudden I see someone else someone else owning it. So what happened or is that back to back to the life issue?

Todd Muffley  19:32  
No Actually this is a good business one so just everything that you said right so a lot of people have the dreams of routine the land or the property and then lease back and they're like you know saying well you know the new business will pay you and I actually had a five year lease. You know we when we sold the business we they signed a five year lease the lease the property back to me. Which one I can't understand why they didn't want to buy the property as part of the as part of the sale of the company, but they didn't. And so we did some adjustments in the sales totals to actually so I could own it. I actually had a five year lease I was making $1,500 a month off of the lease. The problem is I lived in North Carolina. So now I'm a landlord away from the property. And while it was financially good, you know, things happen, fences need repaired, air conditioners need taken care of, and, you know, that started to Weigh Down On Me. But what, wait, what, on the other side of the scale, the real estate market just exploded, and there was nothing, nothing that people could buy. And so I reached out to a commercial real estate broker that I knew. And I said, Listen, I want to list the property. I think we listed it for like, I can't even remember it was 600,000, or some some obscene number. And we had a bidding war, and we got way more than we thought we would for it. And it was one of those things. It's like, you know, it's the perfect storm. Yeah, really, the money that we got for it was so ludicrous. You'd have to own the property for 10 years with no problems to even be close to making that back again. And so my accountant was like, Todd, you gotta sell this. It's just, it's just financially the right thing to do, especially since you're not even in the city anymore. Yeah.

Ed Mysogland  21:34  
So where did you take the money? And what did you park it into? Since you got a lump sum? What did you end up doing with

Todd Muffley  21:41  
the government loans to two crushers? So I couldn't write that check? My wife had to write that one, actually. But we, I just, I literally took that money and put it on my, my mortgage here in North Carolina again, that way, I wouldn't spend it. Fair enough. So that's probably wasn't the smartest thing to do. But it felt really good when I did it. Oh, no.

Ed Mysogland  22:05  
I mean, I think that's a real good thing to have done. So. So a lot of business owners are just stubborn, and you're you are one of them. But those that are those that have built companies from the ground up, I mean, what I guess what are the lessons that you learned? That you wish you would have known before and after the process? I mean, I know that from the question prior, you know, you have to retire or you have to be going to something and you shouldn't just right, you need to grieve what you've lost. So aside from that, what what other lessons did you learn?

Todd Muffley  22:44  
We know what it's like I said, I had a lawyer, which I thought was good. And I had an accounting, which I thought was good. And they both work that they helped really do that transaction. But I wish I would have had somebody that would have maybe been not a yes, man to me. When I was going through things, they have that, you know, reality check to say, what do you Why are you doing this? Or why are you thinking about this? You know, having having somebody and even if you have to pay somebody to be that person, that's an independent party, somebody to whisper in your ear, I think would have been valuable. And I didn't have that. And luckily, luckily, it turned out good for me, but I can see, that would have been good to have during the process. And you don't think about that during the process, because you had on a lot here, you know, you're paying $250 an hour to your account, and you're paying $200 an hour to you're like, Whoa, why the hell do I need somebody else at this meeting I'm paying money to and that's because that little bit that you pay them could make you a whole lot more in the terms of the agreement, then you really then you can think about because that's what they do for a living.

Ed Mysogland  23:58  
So who is that person? I mean, what does that person look like?

Todd Muffley  24:01  
And it could be another attorney, it could be somebody like you it could be, you know, a mentor or somebody in business. I just, you know, I didn't have that I was by myself. Yeah, but I, I could see that it would have been good to have somebody. Because you know, when you have a lawyer, when you sell a business, the lawyer is even your fiduciary, the businesses, fiduciary are the people across the table from you. And so you got to really make sure you know who your lawyer represents. Same thing with your accountant. So having somebody on your team that you know is on your team and making decisions with your best interest with you I think is valuable. I mean, I have my wife, but having somebody with more experience to the process could have been better.

Ed Mysogland  24:47  
Yeah, well, you know, this, this second half of of my career is kind of, you know, rolling into is is trying to get further ahead in the sale process and the sale prep. World Two, you know, so you know what you're getting into, regardless of whether or not you engage investment banker or business broker or whomever. But you got to understand what it is that you have and what's been sold, and how somebody's going to look at it. And I don't, yep. And and boy, I'll tell you, so many business owners just enter into the deep end of the pool, and they just don't know what they don't know. And that sounds to me that, and I feel horrible that the, you know, that I didn't know that you were going through this struggle, you know, I knew that we had, we had a couple of lunches that we, you know, talk through some of these things, but I didn't realize to the extent that, you know, and like you said, hindsight is 2020. But, hey, had I known? I would have I would have, I would have inserted myself a little bit more deliberately. Did you ever think about the value of the company? Or did you think more of, of how much you were taking from the company? Not? And that sounds bad? Yeah,

Todd Muffley  26:08  
well, the last the last two years, basically, I knew I knew after I sold the first bit that I really had to work on, you know, getting a strong EBITA. And so I, I really took less out of the company and kept more in it. Now. I had to pay more taxes, but it's that small business dilemma, right? You want to try to legitimately hide as much as you can from the IRS. But you don't want to do that for the next, you know, when you're leading up to a sale? Because then, you know, unless Unless somebody can pull out the value of what that is, and I'm sure people can, I just wanted to have it in there. So the p&l was really strong. So yeah, I did think about that the last, you know, 18 months in business.

Ed Mysogland  26:50  
Okay. So yeah, I mean, that's, that's the good news. Is that you that you did, I mean, so many business owners don't don't recognize how the position of the financial statements plays a direct correlation to to value? And yeah, the more you show, or better yet, I shouldn't say the more you show, the more that you can demonstrate to a buyer, the greater the chances are, you're going to get a premium. Yeah, most definitely. Like I said,

Todd Muffley  27:20  
one of the things people can pull out, you know, owner business owner value, but it's a lot easier if it's just sitting in cash in the bank chair.

Ed Mysogland  27:27  
So did you ever regret that you were that you were the business? I mean, it was like the was at the frog and in boiling water kind of thing? You didn't? Because I mean, you you had you had a pretty strong infrastructure, if I remember. Right, so, but but to hear you say, you know, I was I was the business? Did you know, you were the business? Or? I mean, were you? Oh, yeah. Were you trying to figure out how do I get out of the middle of this and empower others? Or did you like, it was more like, look, there's substantial risk, I need to stay in, I need to stay where I'm at to provide air cover for for my investment.

Todd Muffley  28:06  
I definitely knew I was a business. I don't think other people knew or thought that. And so there again, that's how I think I could sell the company do and do well selling it, because other people think that they can do something better than you're doing it. But my wife, you know, she was always playing, you know, in that in that in a bad way. She was just saying that, you know, didn't think that it would be successful without me there. I think it's a nice way of putting it.

Yeah, I got it. What's your next venture? What are you up to? Well, you

know, the funny thing is, when I sold the business, I actually didn't sell the stock of the business. So it was a mass actually, I sold, I just sold the assets of the business. And so I kept the corporation, plan, the marketing, and I kept the, the veteran owned clients that I had, because of course, they couldn't service those because they don't have the veteran credentials to do that. So currently, I have contracts with the state of Indiana, and multiple, various ways. And I have retained those. And so I'm actually still doing marketing, just do it through independent contractors. So I don't have I don't have any quote unquote, you know, employee liability or overhead. And I have five I have clients and actually got a new client the other day, just word of mouth referral. And so I'm sort of a call myself a boutique agency I deal with who I want to deal with.

Ed Mysogland  29:42  
Yes, I saw those invite only invite only. Well, what so So, so are you taking clients? Are you are you just being selective on on who you're working with? And and if so, what? What does that person look like and how do they get in contact with you?

Todd Muffley  29:59  
Well, I'm definitely I taking clients that have the right situation. So right now, with my state clients, those are people who need a veteran on the RFP to actually get points in the bidding process. And so that's a no brainer. And, you know, I accept phone calls for those all the time. On the other side, it's really got to be, you know, just has to be a good fit with strategy. I do more maybe more consulting than execution. And then I did start a venture with a couple of old employees from fat Adam. That's called unboxed marketing. That's unboxed without an E. And it's a sales enablement company. And it's something I really have a passion about not going to be anything big. You know, at least that's not what I'm doing. And I do it, because I just a really, really love helping salespeople close more sales faster using gifting. And that's what unbox does. So

Ed Mysogland  31:02  
using gifting what does that mean?

Todd Muffley  31:06  
So our motto is no one buys less because you care more. And statistically, it's proven that if you can stand out in the sales process by sending creative gifts, I got it to your prospect that, you know, not only will your brand stand out, but showing that you care, and we're not talking about sending swag with your hat on this is actually strategic gifting at crucial times during the sales process.

Ed Mysogland  31:35  
Yep, I know exactly. I mean, we were we were a beneficiary of that. And I and we're Yeah, and it was always something people talked about. And so I totally I totally know, but and I'm certain everybody's asking the same thing, because I'm, I'm, I'm wondering about it, too. What where's your non compete? Or is this not a non compete type scenario, or

Todd Muffley  31:58  
I did, I had to get like, during the sign the non compete, I only signed a nondisclosure that I wouldn't, or excuse me a non solicit so that I wouldn't solicit past clients or past employees without their written permission. So for, for this, I did have to go get their permission to work with the work with these employees. But

like I said, that's, you know, it's something I had to go through that process to do.

So we don't get, we don't call on any of the businesses that, you know, we that we dealt with just out of respect, and, of course, my non solicitation clause, which is up in April.

Ed Mysogland  32:38  
So, I want to be sensitive to your time. So if you had one piece of advice to give our listeners that would have the most immediate or the most impact on their business, what would it be?

Todd Muffley  32:49  
Oh, that's a big one, I'm gonna go with, sit down and have a thought process around what your future the business is. So what I'm saying is, is it mean that, hey, let's have a let's have a strategic process to sell our business, maybe you never want to sell it, right. But I think stepping back at regular intervals, every year, every two years and just say, where are we at? What's our position? Where is our future? And just maybe having like five questions that you ask yourself every year, because if something changes, and you do decide to sell, there are things that you need to start thinking about, not the day you sign, but you know, years before you start to do it. And so I think, you know, just asking yourself those questions regularly, I think would be a good idea.

Ed Mysogland  33:38  
Got it? Oh, that's a that's a great idea. So what's the best way we can connect with you?

Todd Muffley  33:45  
People can go to my website, it's think, hyphen, bing.com. That's th i n k, dash B as in boy.com, where you can find me on LinkedIn, just type in top, roughly, and I pop up all over the place.

Ed Mysogland  33:58  
Got it? Well, I'll make sure to have that. That tied up in the in the show notes. So, Todd, boy, I enjoyed our time together. And I'm so grateful for you being so generous and, and candid. And I want to emphasize candid with with with your advice, and the experiences you've had. So thank you so much for being with me today.

Todd Muffley  34:23  
Well, it was great talking to you. Thanks for thanking me. And if anybody, have any of your listeners do have any questions as it comes to selling your business. I can help out. I'll take those as

Ed Mysogland  34:31  
well. Awesome. All right. Oh, buddy. Well, good, good being with you. And I hope I hope you're quasi retirement and a new business grow pickleball career right, you're broke. Pickleball career goes well. Awesome, buddy. All right. Thanks. Thanks, man. I

Todd Muffley  34:49  
look forward to hearing that soon. And I'll catch