Transcript – When It Makes Sense To Accept Equity Instead Of Cash
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John Warrillow: Matt Darby, welcome to Built to Sell Radio.
Matt Darby: Thank you. Thanks for having me.
John Warrillow: Tell me about this business. You guys had a company called Matched Pattern. What on earth did you do?
Matt Darby: That’s right, ScriptDrop. Let’s see. Well, I was working at Rackspace.com. I was there, I was happy. It was an interesting time. Met a lot of good people. That started to slide a little bit, and so I always had this idea in the back of my head of jumping out and starting a software consultancy. I kind of grew up with them here in Columbus, Ohio. You know, meet a lot of great people, a lot of interesting projects. You know, it’s a great way to network.
Matt Darby: So, with that in the back of my mind I started Matched Pattern. I literally quit my job on a Wednesday around 11:00 a.m. when I had to interview for my fifth boss in six months. I was just like “I’m not really interested in this. Like no harm, I’m sorry, but I’m going to go this direction.”
John Warrillow: So when you say custom software, what do you mean by that?
Matt Darby: Basically any type of software that’s not off-the-shelf, i.e. like Microsoft Word or Google Chrome web browser. Custom software is basically anything technological that human’s typically do and we can automate through computer code.
Matt Darby: Things like sending emails or calculating invoices. All that kind of great stuff, that’s just repetitious and we basically codify it and make it automatic.
John Warrillow: And, so who was the typical client for you guys?
Matt Darby: Typical clients were all over the place. We had some pretty large enterprise customers. I’m still not allowed to name them, unfortunately, because of contracts. We also had one of the world’s largest suppliers of code hosting. So, we did some work for them, and then we also did a whole bunch of start-up work.
Matt Darby: So, start-ups are smaller businesses. They’re just trying to get off the ground. They have an idea, they have a little bit of funding, hopefully, and usually they’re looking for people, developers to help them bring this idea to implement it, to make it work.
Matt Darby: So, I see, there’s a lot of start-ups in Columbus, Ohio and there’s a lot of need. Our developers, we have a lot of great developers here but it’s a finite pool. We’re one town and we are dealing with brain drain out to San Francisco, Chicago, New York, all that kind of stuff. So, we kept it here and we’re trying to line them up, basically, with the right companies to quickly get, at least an MVP. Basically a minimum viable product, as we call it.
Matt Darby: So, it’s not … your application or your program doesn’t have all the bells and whistles, necessarily, but it gives you a nice starting base that you can go then and take to investors and say, “look, this is a proof of concept. This is how I think it’s going to work. We have some of the important bits lined up.”
Matt Darby: Typically, then you’d ask for another round of funding to help implement, if you impress the investors.
John Warrillow: How were your accounts receivable in this business?
Matt Darby: Cash. It was all time and materials, so the hard part with a consultancy is you don’t typically have investors. So, start-ups do because there’s an investment, there’s a growth there. With consultancies, especially in programming, there isn’t a lot of that. You work up front, you wait, 30, 60, 90 days for payment and it’s pretty brutal.
Matt Darby: Again, there’s no investors, there’s no bank account that we’re burning down, essentially. So, all of our ARs were all time, materials, pay us please and that all went into payroll.
John Warrillow: I guess my question was more, did you get stiffed a lot?
Matt Darby: Oh, did I get stiffed a lot? No, there was no stiffing but there was certainly some conversations and a lot of chasing. Typically, when the money went up, the communication when the bill came, went down. So, especially when you’re dealing with larger companies, they move a lot slower and what is a lot of money in your mind, for your company, is nothing to them.
Matt Darby: So, you don’t have their attention, so a lot of times you got to call. You’ve got to send some interesting letters. You know what I mean, try to get stuff paid on time. So, yeah.
John Warrillow: What would a typical project be, in terms of revenue? How much are we talking, thousands, tens of thousands, hundreds of thousands?
Matt Darby: Revenue would probably be, on a typical project, hundreds of thousands.
John Warrillow: Okay, so fairly good size projects. Got it.
Matt Darby: Right, right.
John Warrillow: And, what made you guys unique? Why would people choose you guys over somebody else? I’m sure there are a lot of custom development. Yeah.
Matt Darby: There’s tons. There’s a sea of them. The only way that you’ll get known in consultancy and get jobs is by having a reputation. That’s it. It’s all sales and if you don’t have a network they’re all cold calls. So, part of what we brought, Matched Pattern, in Columbus, I ran a thing called the Columbus Ruby Brigade for about ten years, so we would run monthly user groups free. We would have corporate sponsorships-
John Warrillow: User groups of what?
Matt Darby: User groups that are, basically, just, it’s like a loose band of nerds, there’s the more appropriate word. We get together every month and we give talks and we learn and teach each other about the latest things. You know, network, talk back and forth.
Matt Darby: So, after doing that for ten years, I had a really good network. Lot of good friends, lot of corporate people that I knew and I basically just used that as leverage to kind of get my foot in the door into a lot of these places. So, it gets your foot in the door, having the reputation, but it doesn’t actually sign the contracts.
Matt Darby: So, there’s a lot of negotiation, a lot of proving yourself and answering the right questions.
John Warrillow: You guys had a bit of a specialization in programming on something called Ruby on Rails, is that right?
Matt Darby: Close. We actually went to a language called Elixir.
John Warrillow: Okay.
Matt Darby: Elixir is basically Ruby’s big brother, let’s say it that way. So, Elixir’s quick history, they were … it was created back in the 70s and it was actually a language called Erling and that ran all the telephone switches in Finland and Sweden, I believe.
Matt Darby: So, it could not go down because your national phone network would go down. So, a bunch of programmers that built Ruby and Ruby on Rails … Ruby got a little bit more mature and so they built out a lot of the tools and they were getting bored. So, a lot of these people took the lessons they learned in Ruby and went and wrote Elixir.
Matt Darby: So, the benefit is that Elixir, basically, all of the stuff that you have to worry about, environment wise, let’s say, with Ruby, is reduced probably at least in half with Elixir, and Elixir’s throughput is massive compared to Ruby.
Matt Darby: It is fast, fast, fast. Ruby’s really great. It’s fun to write. It writes like English, it really does. When you write it right, you can almost read it like prose. The trade off with that is it takes longer for the computer, essentially, to run it.
John Warrillow: So, Elixir
Matt Darby: Elixir is not as fast-
John Warrillow: As fast or more stable. And, did your customers know the difference between … like sometimes you hire a plumber and one guy’s using the Stanley 3″ whatever and another guy’s using a DeWalt 3 whatever and you don’t need to know. Just fix my toilet, buddy.
Matt Darby: Right, right, right.
John Warrillow: Were your customers in that camp, where they’re, I don’t care if you use Elixir or cement mixer, just write me some code so I can pitch my-
Matt Darby: Right. If we had Greenfield projects, yes, we would definitely pitch Elixir because it’s-
John Warrillow: But, did they care about Elixir, I guess is my question. Did they-
Matt Darby: They did not.
John Warrillow: Okay.
Matt Darby: No, they absolutely did not care. Almost everybody had existing frameworks, languages in place and we were brought in to adopt, fix and improve, essentially. So, it was a lot of, I don’t want to say rescues, like rescue projects, but a lot of “things are on fire, please come in and help us out.”
John Warrillow: So, how … so this was a time and materials business and I guess a lot of people listening maybe able to identify a little bit, Matt, because while they may not be in software, they might be in a service business, they might be in an advertising agency, graphic design studio, architectural practice where you’re sort of selling time, essentially and materials.
Matt Darby: Absolutely.
John Warrillow: You wrote a blog post which sort of caught our attention here, “All Hunger, no Thirst.” Can you explain that for folks and tell people where they can find it if they’re interested?
Matt Darby: Sure, it’s on Medium. If you just search for Matt Darby on Medium, it should come up top. “All Hunger, no Thirst” is actually a lyric from a band called Doomtree that I reference many, multiple times in that blog post. It was just something that struck me and it’s had different meanings for me over these last 18 months, last two years, basically.
Matt Darby: What it means to me is that a lot of people see the glittery side and they want the title and they want the end result but they don’t necessarily see what it takes to get there and what it takes to maintain that.
Matt Darby: So, thirst, you know what I mean, is like they want it but hunger is that you got to earn it. You have to, essentially, eat that responsibility, process it and then you grow and then you get the title and you understand a bit more.
Matt Darby: It’s an interesting thing, but yeah, that’s what it means to me.
John Warrillow: So, you … when you started Matched Pattern were you hungry or thirsty?
Matt Darby: That’s an excellent question. I was thirsty and then I kind of got to see behind the curtain and then I got the hunger. It was like, “okay, it’s time to do this. I have to do this. I don’t know where it will end up. All I know is that I’m standing on a pier and there’s a big lake in front of me and something is telling me to swim.”
John Warrillow: Were you financially strapped? Were you in a point where you kind of had to make rent or mortgage payments or whatever that you didn’t have forever to kind of sit on the pier. You sort of needed to start earning some money. Is that fair to say?
Matt Darby: We had a little bit of money. You know, I’m a computer programmer over the last 20 years. So, I mean, it pays well, but I certainly wasn’t sitting on millions. Honestly, how it was funded was my home equity loan and just happening with clients, getting something moving.
John Warrillow: And, how big did you get the business before you decided to sell? What was … how big in terms of size, number of employees or whatever proxy you want to use for that?
Matt Darby: Sure. We had nine folks. Nine full time people, eight of which were developers, including myself. My wife, Melissa, as the executive assistant. We ran everything out of our house. We were all remote so we didn’t have a centralized office. Developers are pretty neat in that way. We kind of keep weird hours and paying for an office with one person in it doesn’t make a lot of sense.
John Warrillow: What did that do for your culture as an organization? There’s so much focus these days about inspiring culture and empowering culture and blah, blah, blah. How did you think about culture, all being remotely?
Matt Darby: The actual answer is, is we were in such get it done mode that we didn’t care about culture and that was a known playing with fire kind of thing. There wasn’t a lot of time for niceties. It was more hit the ground running, please go, we got to get this stuff done. Culture is incredibly important but we failed on it. We did. It was just get stuff done, all throughput, not a lot of relaxation, not a lot of camaraderie.
John Warrillow: Why do you say you failed on it because it worked for you?
Matt Darby: It worked. It could have been better. That’s probably the best thing. I didn’t have enough time to grow it and it’s such an important thing, especially, as you grow and culture’s not something you can add on afterwards. At least, not easily, right? Because then you have people that came into a company and they’re thinking one thing and then your corporate culture shifts and then they’re kind of left out in the wind. Especially with developers, they’re a very intelligent bunch and they’re in critical demand, so treating your developers right is absolute key to running any type of tech organization and that’s why I said I failed on it.
Matt Darby: I didn’t lose anybody but if it was better I probably could have grown faster and yeah.
John Warrillow: Okay, that’s helpful. What was the trigger that made you decide to sell Matched Pattern?
Matt Darby: The trigger that made me set out with it?
John Warrillow: No, the trigger that made you think, now is the time to sell?
Matt Darby: Ah, sorry. It was truly a personal decision, for me. It wasn’t really based on numbers. It was based on that I was running the company by myself. I was the salesman, I was the owner, I had no other partners. I had no investors, anything like that and doing sales is really difficult. It takes a lot of time. It takes a lot of effort and when other things are dragging you down.
Matt Darby: You know, trying to do work and accomplish all the things that you set out to your energy level goes down. So, Nick Potts our CEO over here at ScriptDrop, I chased him for some client work for a while.
John Warrillow: Sorry, what does ScriptDrop do?
Matt Darby: Sure, ScriptDrop is the company that purchased Matched Pattern. We do prescription medicine delivery nationwide, America nationwide. So, we’re in all 50 states, we have a whole bunch of strategic partners, couriers and pharmacies, pharmacy grocery chains. So, basically, you go to your doctor, you get a prescription, they ask what pharmacy you would like it to go to, you can say whatever your pharmacy or you have ScriptDrop deliver it to you.
Matt Darby: So, basically we parcel out the needs, based on, do you need it right now, do you need it within an hour, can we schedule it, do you need it next day and we’re also moving in to durable medical goods, too. So, things like hospital beds, wheelchairs. We have an aging community and anything we can do to help them take their medicine regularly and help them. It works and it’s an altruistic mission so that’s partially why I sold to-
John Warrillow: So, you were pitching them for some work, meaning they had custom development projects and you thought, hey, maybe I can-
Matt Darby: Exactly, right. So, we all knew each other from the community and I chased Nick, our CEO over here, and he was concerned about investors, as any start-up would be and a consultancy with developers is not cheap. I mean, it’s pretty expensive, so he was worried about that appearing on his bottom line when he was going to investors.
Matt Darby: Like, I understand that for sure. What we did do was we understood that we had this shared love of Elixir and so based on my history with the Columbus Ruby Brigade, we started up a new user group for Elixir, here in Columbus and we ran that together every month for, I don’t know, eight months-
John Warrillow: Nick doesn’t sound like a software guy, though. He sounds like a more of a business and entrepreneur … he doesn’t sound like a in the weeds software guy but-
Matt Darby: He knows a little bit of software. He says he knows enough to be dangerous and stay away from it. Yeah, he’s definitely more on the business end right now, the wheeling and dealing and all the phone calls. But, yeah, so the networking opportunities with the Elixir group, we ended up working together, just talking a lot and we realized that our goals were shared.
Matt Darby: Like, the big things. Like, what do you want to do if we make it? That kind of stuff and I needed to sell. I had the developers that I needed to sell hours for and he had custom software that he needed to be written.
Matt Darby: So, he just approached me one night and he was like, “can we buy you?” And I went, “yeah, let’s do it.” It was honestly that. It was probably a five minute conversation, a handshake and here we go.
John Warrillow: Fantastic. I want to dig in a little bit more there. So, Nick is the guy who runs ScriptDrop. How big was ScriptDrop where you were both volunteering for the Elixir user group together? Like are we talking hundreds of employees, dozens, what’s the size?
Matt Darby: Right at that point, I believe they had about 12.
John Warrillow: Twelve employees.
Matt Darby: Right around there, 10 to 12, right, yeah. They were in a co-working space here in Columbus. They provided a big conference room and based on our network, we invited a whole bunch of people in and it’s been running every month. So, tried to train people up, give them a safe space to talk about dev stuff, that’s not management.
Matt Darby: No one wants to look stupid. So, with these user groups we can ask all the good questions.
John Warrillow: So, ScriptDrop, in terms of at least head count, was sort of similar in size as you guys. Not totally similar but in a completely different industry. Had you gotten … like when you were starting to feel a little bit heavy and burnt out and like maybe I want to sell, had you gotten a sense of what your company would be worth in terms of either a multiple of revenue or some other sort of proxy for value? What’d you think it was worth?
Matt Darby: I think it would … I thought it was basically worth about a year of our payroll, essentially.
John Warrillow: Okay.
Matt Darby: We never really had profits. That’s the trouble with a young consultancy, any profits goes right back in the payroll. So, we couldn’t really show profits or five year years from now, based on this growth we would be there. With a developer consultancy the more projects you sell, the more people you need to staff and so, as that staffing goes up, your profits are eaten up in order to make profit on the next project.
Matt Darby: But, if that project goes away then you have people on the bench that aren’t billable and still need to be paid. So, things like vacations, PTO, anything like that, it’s actually a double dip to the company. That’s usually not a big thing or at least it’s kind of hidden when it’s a larger company but when it’s just a handful of people it takes a lot of effect. So-
John Warrillow: So, you figured you guys were worth, roughly, one times payroll?
Matt Darby: Right.
John Warrillow: Got it, and so you start this conversation. You’re into the user group with Nick. He says, out of the gate, do you remember what triggered him to say, “can we buy you?” I mean, it seems like kind of an odd thing to just come out with. What were you guys discussing when he came out-
Matt Darby: I was probably lamenting how, lamenting on the issues and the difficulties that I was having as running something. It wasn’t that it was over with or ending or anything like that. It was just, it’s a very difficult road to be an entrepreneur, especially when you’re so low, with no backing.
Matt Darby: I mean, one single phone call can ruin you. It takes a lot. So, I was probably lamenting that to Nick and he was probably doing the same about needing … he found such a great avenue for growth for this business that he really needed a built team to come on in with all the camaraderie and knowing each other and that kind of stuff, just kind of come in, hit the ground running and a lot of our people were pretty senior developers. A lot of years underneath their belts. So, that was part of the attractiveness, as well. They had somewhat more junior people, we would come in, help them, help grow the entire company.
John Warrillow: By the way, if your guys were so senior, why hadn’t they left for New York or San Francisco for kind of greener pastures, so to speak?
Matt Darby: Friendships. I honest to God, have to say friendships. And, again, not to keep hitting this user group thing, but that’s where this all comes from. One of my right hand men at Matched Pattern, who is now our VP of architecture here at ScriptDrop, he was in Chicago running Dev Bootcamp, which was a coding bootcamp, very, very, very popular and he was essentially the lead engineer.
Matt Darby: He ended up coming back home to Columbus because it wasn’t home and he missed people. So, we do have a lot of brain drain but oddly enough there’s like a trickle back. They go out there and they kind of get disenchanted with housing and all that stuff, but, yeah.
John Warrillow: Someone told me that software developers, I mean I’m not a developer so I know nothing about this stuff, but someone told me that software development is a team sport and that developers really crave that interaction with other peers. Is that true?
Matt Darby: Absolutely.
John Warrillow: Yeah, because you kind of have the stereotype of the developer as the kind of like Rain Man, propeller head guy who never talks to anybody. Don’t interrupt Stewie over there, he’s doing some stuff. But, it’s not true, right? There-
Matt Darby: That’s the old stereotype. It was definitely true but, yes, it’s way more of a team sport now. The industry has grown and all the tooling has grown so much that no one can keep even 1/10th of it in their head. So, everyone’s got a piece of the pie and you’ve got to work together. You got to talk and that was part of the issue with Matched Pattern being remote. We didn’t have those little kind of hallway conversations. The water cooler. They’re not all just gossip.
Matt Darby: When devs talk, they tend to talk technical things and they’ll start speaking on a topic and someone else will go, “oh, I need that. Awesome, thank you.” And then they’ll run over there and it opens up whole new avenues for them.
John Warrillow: Okay, so back to the story. You’re lamenting with Nick and saying, “this whole time and materials thing is tough” and he’s like, “well, we got a tiger by the tail here, we need developers” and he says, “can we buy you?” Then what happens?
Matt Darby: We shook a hand, gave a hug.
John Warrillow: You didn’t even talk price yet, how did you guys figure the price for the business?
Matt Darby: We, Nick and I, literally sat down in an empty office, he gave me an offer, I negotiated, changed it up, redlined it once and he went, “okay, cool” and then we got to an entire overview of the company and we honestly, I started ramping down projects right then.
John Warrillow: So, Nick came up with the first offer.
Matt Darby: Right.
John Warrillow: And, what was he basing that on, do you know?
Matt Darby: I think it was just, honestly, I don’t know. I didn’t give him any of our numbers, anything. He just kind of came to me with a price and I went, “yeah, that looks good.” Because I mean I know what I would have to do in order to recoup or to make that money.
John Warrillow: Right, right. And, what were the redlines? Redlines being kind of legal lingo for kind of changes to a contract, what changes did you request?
Matt Darby: We, our biggest thing was handling how the actual acquisition was framed from a legal and financial standpoint. So, it was just between Nick and I, handshake, good, let’s go do it, get it done. But, of course, it’s an acquisition so we have to get the lawyers involved and that went over about two and a half, three months of back and forth, just updating contracts. The actual variables, like the price point never changed but it’s like, how are we lining this up, how is payment going to happen. A whole bunch of legal kind of things.
Matt Darby: That was pretty brutal. So, having a great lawyer in your corner is absolutely … I mean it’s worth every single penny you’ll ever spend on it.
John Warrillow: So, you guys agreed on price. Did you also agree on the payment dates, like when you’d receive your money?
Matt Darby: Yes, exactly. So, I can’t say what the amount was, but basically I got half up front and half six months later. So, out of the first payment I had to take care of a whole bunch of business loans. So, even though it looked like profit and the check felt good, a lot of it went to paying back our company debt. You know, which is nice, paying that off and getting out of the loan thing. But, yeah, yeah.
John Warrillow: And, then the second half is in the future?
Matt Darby: Yes, exactly, yep.
John Warrillow: And, is that contingent on you achieving certain goals or is it just a date or time based or-
Matt Darby: It was a date and there was certain goals mainly around team building. So, that’s my specialty outside of being a dev and a former professor and all this other stuff. I have, I know the devs, I know who’s good, and when you’re hiring developers there’s not only just can you do the job. There’s salary, there’s fit, there’s position, there’s title, there’s timing, all this stuff in there. Yeah.
Matt Darby: So, basically my goal was to build out the team. So, we took it from 12 people, initially, plus our nine which is 21. Now we’re up to 62 all told across the company and I believe 40 of them are developers.
John Warrillow: Really, and is Nick-
Matt Darby: And, that’s in six months.
John Warrillow: Has Nick attracted outside capital for the business? Has he got investors?
Matt Darby: Yes, we have investors. We just closed a really small kind of informal round, basically last week. So, lot of interest, a lot of good things.
John Warrillow: And, did you get a piece of ScriptDrop as part of your deal? Like do you have some shares that so you’re vested too?
Matt Darby: Yes, yes. So, basically the breakdown from the payment, I believe it was basically one to five in terms of cash to equity.
John Warrillow: So, for every dollar of cash you got, you got five “dollars” of equity?
Matt Darby: Right. Right. Exactly.
John Warrillow: And, that was based on ScriptDrop’s most recent valuation or how did you value those five dollars?
Matt Darby: Their most recent valuation, yep. So, even before I started they were getting buy out offers. So, it helps to put a valuation on the company pretty quickly when someone comes to you with a negotiation. Like, “okay, that’s what they think we’re worth. That’s what they think we’re worth. So, let’s split it in the middle, that’s our valuation for right now.”
John Warrillow: And, so this took place, was it seven or eight months ago, now, I’m guessing, ish?
Matt Darby: Yes, it was seven months ago. Yeah we-
John Warrillow: Okay.
Matt Darby: We all moved in together, December 1st.
John Warrillow: Got it. Got it. As time has sort of gone on and you’ve gotten a chance to sort of get into your new environment, what sorts of reflections do you have about your decision today? Do you sort of reflect on it and think that-
Matt Darby: Sure, I don’t regret it in any respect. Entrepreneurships fantastic if you have the stomach and it’s a brutal business. It’s really, people don’t care. There’s not a lot of friendliness. It’s, again, time and materials, and time is money and all that kind of stuff. So, but, reflecting back I’m absolutely happy that I made the decision. It’s been life changing.
Matt Darby: So, again, just going from basically running it all to helping run it all, just by removing the sales aspect from me, that dropped my stress level probably 40%, right there. Because we have investors, we have money and by extension, we have time to make decisions and implement those decisions.
Matt Darby: So, it’s much more relaxed and more sure, basically, right? We know where we’re going. It’s not just keep the client happy.
John Warrillow: Some people might look at your old life being totally independent, master of your own universe, flexible, decide when to work, where to work, with a sense of envy, right? And, to some extent, when you were with Rackspace you did look upon entrepreneurs and think, “oh, I’d love to do that”-
Matt Darby: Yes. Yes, I did. Well, it’s like peeking behind the curtain. I mean, as a developer with a lot of years and a little bit of management, you understand certain things but when you’re the one holding the contract and it’s your name on the line, it’s your house on the line, that’s tough. That is extremely tough and I give kudos to anybody that can do it happily over time. It’s brutal. I did not know and I have a great, a lot more respect, basically, for the people that are out there doing it and doing it right.
John Warrillow: So every employee should have a business under their belt before becoming an employee, is what you’re telling me?
Matt Darby: Oh, boy, I wish. Oh, boy, I wish. You know a lot of developers, they come right out of college or right out of these bootcamp schools and they’re great and they’re wonderful, but, a lot of them don’t necessarily have, I hate to say, real world jobs, places like where you have a time clock. A lot of them don’t have that experience and again, the dev culture is very rich. You’re allowed to do pretty much whatever you want, so you have to facilitate that but with the most minimal amount of money and the least amount of time away.
John Warrillow: How did selling your business impact your relationship with your wife?
Matt Darby: That was good. My wife worked with me. She was the executive administrative assistant and when we were bought out she was part of the deal. So, she’s now the executive assistant here at ScriptDrop. Selling the business absolutely, again, it decreased my stress level and by extension, decreased hers.
Matt Darby: So, selling it … it would be a lie to say that it wasn’t affecting the marriage and the relationship, but, yeah, it’s tough and thank God that we have a very strong relationship, so it didn’t get harmed that much.
Matt Darby: When I first went out in to this endeavor I have a few friends here that are CEOs and have run companies, 20, 25, 30 years. I took one of them out for lunch and I just asked, I’m like, “what am I getting into? Like please tell me where the sandbars are before I run aground” and the only thing he told me, he goes, “watch your marriage.” That’s it, he’s like, “watch your marriage. That will the first thing that you skimp on and that will be the first thing that breaks and then what are you working for?” He was like, “that was it” and I was like, “thank you.”
Matt Darby: When I worked with this fellow he had gotten divorced because of entrepreneurship, working, all that kind of stuff. So, yeah, having advice and a network is absolutely critical. Absolutely critical because you’re out there by yourself and you have no one to turn to, no one to talk to and the people that you do, don’t necessarily have that experience. They don’t have that background. They’re not in it. They can hear it but they don’t feel it.
John Warrillow: That’s why we’re such big believers in these sort of mastermind organizations. Have you ever heard of a mastermind, where you bring … it sounds like you did one, you hosted one?
Matt Darby: Yeah, yeah, yeah.
John Warrillow: But, you know, there’s a few big, EO is one of them and then, of course, there’s TAB and Vistage and Renaissance and there’s a number of different organi … in the UK I think there’s one called the Council for Chief Executives. In any event, there’s a lot of them and they play that role that you created for a lot of your fellow developers.
Matt Darby: Right. The other part that was really hard about consulting was that a lot of people, at least in my case, they wanted to hire me, and that’s a great problem. They didn’t want to hire my company. They respected me. They knew my work but now I was selling my word for someone else’s work.
Matt Darby: That’s a different thing, so it changes the conversation quite a lot. It’s like, “well, it’s not personal. It’s not about you, but” and again, it’s a small town, there’s a lot of relationships. There’s a lot of, you know, developers move companies pretty frequently, probably eight months, a year, on average.
Matt Darby: So, we have a smaller scene here so a lot of people know each other and have histories together.
John Warrillow: It sounds like your negotiation with Nick was almost a kind of dream come true. It sounded, in retrospect, like a really good deal. If you had it to do over again, if you could press rewind on the 8 track tape … I’m dating myself, what might you do differently in that negotiation?
Matt Darby: Probably not anything in the negotiation but I certainly would have gotten lawyers involved sooner. Basically, I figured we’re two business owners, there’s money involved certainly, a handshake, that’s good. It’s my company, I want to sell it. Well, if you’re going through acquisition there’s a whole lot that isn’t just a handshake and good faith. There’s a lot of paperwork, a lot of land mines that you can step on very badly, especially when it comes to taxation.
John Warrillow: So, let’s, yeah, let’s reveal some of those. So, clearly you guys agreed on the price and the rough timing of that payment and the currency, it sounds like. What else did you need the lawyer’s help to sort of structure.
Matt Darby: The lawyers were literally structuring the acquisition, all the paperwork. Basically, what would have happened if I had signed a document right there and then, based on the tax that I would have owed immediately, I would have been homeless. That quick. So, I didn’t sign it-
John Warrillow: Why? What was-
Matt Darby: Because the tax debt that I would be on the hook for would basically be more than the value of my house. Like, the way if we did it as a handshake deal. So, we had to restructure it as like a true acquisition with all the paperwork and everything.
John Warrillow: I see. So, if he had just written you a check for X hundreds of thousands or millions or whatever, it would have been income for you and the government would have wanted a third of that or whatever.
Matt Darby: Yeah, easily, easily. So, contacting the lawyer. We always had him and I said, “well, sounds like we should get him involved” and he saved me. Also, we had a CPA firm that we worked with very closely. So, those two worked together and they saved us a lot of money and over the two months guided us through the process. So, the back and forth really was just small redlines between the two companies. It was nothing really material. Just making sure that we had our t’s crossed and i’s dotted.
John Warrillow: Got it. Got it. It sounds like a great marriage and ending and I’m so happy that you’re liking life at ScriptDrop and that that’s going well. If people wanted to reach out, I know we’re going to have developers wanting to work with you I’m sure, so is it LinkedIn? What’s the best way for folks to sort of say hi and reach out to you.
Matt Darby: Sure, I’m on LinkedIn, just under Matt Darby, of course or my email is email@example.com.
John Warrillow: Dot co., excellent.
Matt Darby: Yeah, yeah.
John Warrillow: And it’s, obviously, ScriptDrop.co if people want to check out the service, itself.
Matt Darby: Absolutely, yeah. Feel free to reach out and I’d love to … I’ve gotten where I’ve gotten by helping people so I’d love to help you and hit me up.
John Warrillow: Well, that’s very generous, Matt, thanks for taking the time. It’s a pleasure to be with you.
Matt Darby: Thank you so much.
John Warrillow: Sure.