Transcript – Why Hitting $10MM In Annual Revenue Matters
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John Warrillow: Hey this episode of Built to Sell Radio’s brought to you buy the Value Builder System. I had the opportunity to interview Stephanie Breedlove the other day. She sold her $9 million payroll company for a cool $54 million dollars. How did she do it? She focused on the eight things that drive company value. Things like what we call the Switzerland structure, monopoly control, recurring revenue, all things you’re going to evaluate in your own business using the Value Builder Score. Takes about 15 minutes to complete the survey, go to valuebuilder.com.
John Warrillow: So Jill Nelson sold a majority interest in her company Ruby Receptionists for a cool $38.8 million. Not bad for an $11 billion company that essentially answers phones, but the company was much more than that. If you listen to this interview, you’re going to hear how Jill invested significan;t in technology as a way to differentiate her service from others and a way to scale up her service much more quickly than competitors. You’re also going to hear how she used debt and an angel investment which she was able to deliver a 250000% return for, not a bad deal for that guy. You’ll hear lots more about the negotiation itself and I want you to listen to Jill’s demeanor as she describes the story. I can tell that she used her good cop persona to her advantage in negotiation. She put her CFO and her investment banker in the line as the bad cop, but she remained positive and I think that was a key to keeping relations going as she negotiated through what inevitably was an amazing exit. To tell you the rest of the story, here is Jill Nelson.
John Warrillow: Jill Nelson, welcome to Built to Sell Radio.
Jill Nelson: Thank you, John. I’m happy to be here today.
John Warrillow: Yeah, you guys are up in Portland, Oregon. Rain Country. Tell me a little bit about Ruby Receptionist, like what does this company do?
Jill Nelson: Well we are the friendly group of real receptionists who help small businesses group by being a first impression to our customers telephone experience. So, we’re a virtual receptionists company and se serve about 6500 small businesses across the country.
John Warrillow: So, who actually wants somebody live to answer their phone these days?
Jill Nelson: Well, at first sometimes small businesses thing, “Hey, the phone call is dead and we’ll get one of those virtual PBX companies to handle our phone calls,” but in fact phone calls are actually on the rise. Something like 29% of phone calls lead to a sale, and if you are not there to answer the phone and provide a wonderful experience, chances are your callers re going onto your competitor. It’s really the rise of using mobile as the main search device is causing phone calls to be on the rise.
John Warrillow: So I own a, whatever, a plumbing company, and I’ve got three guys on the road, three vans, and I want a friendly voice to answer the phone. If I’m on the job, can’t answer the phone, I would hire your company to be that friendly voice?
Jill Nelson: Absolutely. And we would be able to greet your caller, we would have all kinds of information about your business, we would be able to transfer calls, ever to your plumbers who might be on the road. We integrate to your mobile phone so you have your messages and availability at the ready and we’re integrated with your contacts and calendar, so it’s very-
John Warrillow: Were you also getting into the whole VA virtual assistant world where you’re providing broader set of virtual assistant, or did you stick strictly with front end reception?
Jill Nelson: Yeah, so Ruby is a 14 year old company and back in the day when I started it I wanted to do an executive suites’ concept with not just assistant serving, but conference space and offices as well. But I didn’t have any money or business experience, so I couldn’t find a landlord willing to provide that for me. I did provide all things administrative. The receptionist piece took off and the administrative piece was really hard to scale, especially back then. So we, over the years, have gotten more and more focused. Today we’re really focused on that revenue side of equation, helping small businesses win new customers and we partner with some wonderful assistant organizations to help with the back office stuff.
John Warrillow: I love this story, because we’re always talking about the importance of actually [inaudible 00:05:16], getting rid of all the services that are not scalable that you can’t teach employees, and you guys have done that. You’ve gone from where you were offering a wide set of services to just focused on the inbound calls and the sales piece which is great.
Jill Nelson: Yeah, that’s right.
John Warrillow: So, 15 years. Give us the trajectory. Over that time, how big did you get the company? What was the revenue when you went to try to sell?
Jill Nelson: Yeah, so started very small and it was I guess year 11 in business and we just grew steady, steady, steady at about an average growth rate of 40%. So the year prior to the decision to sell the majority of Ruby, we had done $11 million and then the current year, we started the transaction, we started the search for the right investment partner in about, I believe it started in May and it took the entire year. It closed the very end of 2014 and we did about $15 million that year.
John Warrillow: Got it, got it. Excellent. So, that revenue’s coming from what? Annual subscriptions, monthly payments you’re getting from these small business owners? Like just give us a sense of where the $11 million was coming from.
Jill Nelson: Yeah. So, all of our revenue is subscription based and it’s all recurring monthly revenue. What we’ve done over the years is we built our own technology platform so that we could scale our service, we actually ended up having to build it because we wanted to be exceptional at what we did and we realized without the technology to help us be able to make sure we knew if it was morning or afternoon depending on the time zone, we needed our own technology to do it. Ironically, that really redefined us from a services company into a tech-enabled service company which put us in the interest of a whole different set of investors.
John Warrillow: You know, as an aside, I can tell you were trained at one time in your life as a receptionist because I can hear you smiling through the phone. Like I’m literally hear you smile as you talk.
Jill Nelson: Oh, thank you. Thank you.
John Warrillow: Which you must train your guys to deliver, right? I mean it’s infectious for sure.
Jill Nelson: We do. We actually we probably don’t train the friendly, we hire the friendly, but we certainly train the language. So, there’s all kinds of word choice that can help a caller feel heard and feel cared about.
John Warrillow: Give me an example. Give me and example.
Jill Nelson: What’s that?
John Warrillow: Give me an example.
Jill Nelson: So, instead of saying no, we would say, “Let me find out for you.” We never say, “You need to,” or “You have to,” or “You need to call back.” We say, “Oh, what I can do for you is take down your number and I’d be happy to have somebody return your call.” So we always keep it positive and we always guide the caller and we always keep it on what we can do, rather than what we can’t do.
John Warrillow: Love it. Love it. So you get to $11 million in these recurring contracts and subscriptions. By the way, at this point who is the we? I mean do you have multiple shareholders in the business, have you taken in venture capital at any point in the road?
Jill Nelson: Yeah, so very very early on there was a gentleman who was a complete stranger who called me out of the blue who was going to start a competing business and wanted to see what we were doing, and I welcomed him for some strange reason. He ended up saying, “Hey, this isn’t my thing, but you’re really onto something. Do you need any working capital?” So he ended up being a very, very, very early investor for a very small amount and then provided a large loan to the company so that we could actually evolve our technology. That was like year one, when we were something like $17000 a month in sales. So it was really odd. And then-
John Warrillow: And when you say small, do you mean he gave you a small amount of money or he took a small amount of equity?
Jill Nelson: He took a minority investment for a pretty small amount of capital, but you know what it was what we needed to actually keep the doors open because we were taking off but we hadn’t yet reached economies of scale, and I was running out of money. Our phone system that we started on had maxed out. So it really was this sort of odd person coming into my life at a just perfect time. It was a small amount of money, he got out at the transaction that happened in 2014, and got something like a 25000% return on investment. So, it was a very small amount, I’ll just say, that he invested.
John Warrillow: Well that must have worked out quite well for that-
Jill Nelson: It did. You know sometimes you look back and go, “Oh, if I had to do that over again, would I have done it differently?” But on the other hand I couldn’t say that we would be here today without that. So, no regrets.
John Warrillow: Great point though. So, the loan, which is really interesting. He gave you some equity, so some money was in the form of an equity, and the loan. Was that a convertible loan which gave him the rights to buy equity like you do a sort of VC deal or was it strictly a loan with an interest rate?
Jill Nelson: It was strictly a loan and it was a pretty significant interest rate. I mean this was 12 years ago so it was something like prime plus 2% which turn out to be like eight to 10%.
John Warrillow: Right, and that floated with-
Jill Nelson: And he got paid back-
John Warrillow: Sorry, I didn’t mean to interrupt. That floated with prime? So, as interest rates went up and down your percentage changed as well?
Jill Nelson: Correct.
John Warrillow: Interesting, interesting. So relatively, I mean I think some people would look at prime plus two and go, “Well, that’s actually pretty good for a young company that frankly didn’t have a lot of staying power at that time, that’s a pretty inexpensive loan.”
Jill Nelson: Absolutely. And you know I don’t know that I would have qualified for a loan elsewhere. Now, I didn’t go find out, but yeah we were not profitable and, again, our sales were about 17000 a month and there wasn’t a compelling story to tell yet.
John Warrillow: Out of interest, what was his recourse on that loan. If you had defaulted and not paid, what would have happened?
Jill Nelson: Gosh, I would have to think back. Honestly I cannot remember if I had a personal guarantee or not, but certainly it was secured by the assets at the business.
John Warrillow: The business. He would have probably gotten the business or something.
Jill Nelson: Yeah, yeah, yeah.
John Warrillow: So interesting. So, the we in Ruby was you plus this minority share holder who’d invested a little bit of money. Who else was part of the we?
Jill Nelson: It’s funny, when I incorporated, I incorporated online and I filled out a form and I gave myself 80% and I gave my husband 20%. So he also, he’s actually still a shareholder today. He’s no longer my husband, but that’s another story, but we’re on great terms and he still has a piece of the pie. He wasn’t ready to give it up. And yeah, that was us. Today I still retain a very small minority of the company and then Updata Partners out of Washington, D.C. along with StepStone Capital acquired the majority in late 2014.
John Warrillow: Okay, so I want to talk about that. You’re at 11 million in annual sales, you’re growing 40% a year, what was the trigger that made you want to sell?
Jill Nelson: Ruby, we actually just celebrated being on Oregon’s fastest growing companies list 10 consecutive years, only the second company in Oregon to ever do it and so our revenue numbers are published. So once we had that $11 million year, I think $10 million is this mark where you start to get a lot of peoples attention, you start to get the growth equity firms’ attention, you start to get investment bankers attention. So, I was fielding emails daily about people that were really interested and having talks with me, and I ignored most of them and then one was really in the industry and he was, quote unquote, happened to be in town. I met with him and he told me he said, “You know I think you’re business is worth this,” and having come up through old fashion business brokerage I was like, “Well I totally don’t believe you, but if it’s true I’m interested.”
John Warrillow: What did he say he thought the business was worth?
Jill Nelson: A multiple of revenue. Somewhere between three and five x revenue, and I had grown up in the tradition multiples of EBIDA.
John Warrillow: So, he’s saying he thinks your business is worth 30, 40, 50 million dollars and you’re looking at him sideways saying there’s no way.
Jill Nelson: Mm-hmm (affirmative). Exactly.
John Warrillow: Then what?
Jill Nelson: But ended up, and that was really the trigger and ended up with his other partner, he had a connection to a different investment banker who we ended up hiring, we actually did a formal process. And alon with that that, you know, I had been in the business, well let’s see I guess that’s 12 years, and at the time I actually thought, you know, I was starting to become a relatively absentee owner. The business was sort of on autopilot and I thought that perhaps it was time, it was time for me to exit. So, between this high valuation conversation and sort of where I was, that was what ended up we engaged in a formal process with an investment banking company.
John Warrillow: So, just to be clear. The person that you met with originally that put this huge number in your mind, that was a potential acquirer or a potential representative, like an investment banker?
Jill Nelson: Yeah, so the latter-
John Warrillow: The latter, okay.
Jill Nelson: It was a potential investment banker.
John Warrillow: Got it. Did you end up hiring his or her firm or a competing firm?
Jill Nelson: We actually ended up hiring a completing firm. So, we had this person and then we had another firm and we sort of looked at both firms and evaluated them on who best would represent us, and we ended up choosing a different firm.
John Warrillow: How did you evaluate your MNA professional? Like how did you choose?
Jill Nelson: It was really tough, but at the end of the day one investment banking was more specialized in the legal services, which many of our customers are solo and small firm attorneys and one was specialized more in technology and technology enabled services. I think got us more excited about … You know, here I am sitting today, I’m still in the CEO seat two years later. So, I actually didn’t end up leaving the business and what ended up happening through this process and through meeting so many Harvard MBAs looking at the business, I kind of fell back in love with the company and really what the future of it could be and what could be possible. So, that investment banking firm, I just got more excited about what they thought could happen with the future of the company itself.
John Warrillow: A lot of people are going listening to this shaking their heads going, this is crazy, this is an $11 million company in the services category, like answering phones, happy smiley face, but not huge crazy. We’re not landing someone on Mars here, right? We’re answering the phones with a happy voice and making sure they get put … Why did they think it was worth so much money?
Jill Nelson: Well, surprisingly, and maybe not surprising when you think about it. It’s actually very hard to do. I don’t know why, we’ve done it all along, but we built our own technology platform that allows us not just to be friendly on the phone but to really be able to be helpful to small business and have the right information at our finger tips. We’ve developed technology and workflow systems so that we do answer 100% of the calls live throughout the day, and 99% within four rings.
John Warrillow: And was that home grown technology? Or did you license someone else’s?
Jill Nelson: Yeah, so by 2011 we had gotten entirely onto our own platform, and that was a piece of it too, we had the mobile app, but really where I think people say that the company could go and that’s what happened after Updata acquired the company, they really helped us invest in our technology. Today, you think about what we’re used to, we’re used to ordering up personal services and, you know, whether it’s getting your groceries delivered from Instacart or dialing up a Lyft, we’re used to having things exactly the way we want them, exactly when we want them by a person who completely performs the task you expect. So, the world was kind of set up for this, too.
Jill Nelson: The fact that our market is huge, it’s not just local to Portland, it’s 29 million small businesses, the fact that we really kind of stood alone as the market leader. And that delivery of service, I think that was the thing that people looked at and go, it’s hard to do, and we really the only ones who were able to do it at scale. So they felt like we had real competitive edge. We worked many, many years on building a wonderful culture, too. That’s one of the things I would say was so surprising is how much private equity firms actually value a culture that seems robust and set to scale and is able to deliver exceptional customer service, because they recognize how hard that is to do. It was really our competitive edge that essentially Updata looked at and said we were kind of untouchable because of our culture that we had built.
Jill Nelson: So all of those things together and really the opportunity in front of us with the help that … Updata themselves had something like 24 other portfolio companies, almost all of them in the software space, so they were really able to help us do what we had wanted to do. Evolve into something that was much more scalable and relevant to today’s small business.
John Warrillow: Culture’s a really interesting world to use because it means different things to different people. What was it that gave you the sense that Updata valued your culture, beyond just the lip service that, “Yeah, we think you built a great culture, Jill.” I mean that kind of sounds like window dressing. What was it that-
Jill Nelson: Totally. Yes, and we heard it all the time the, “Oh, you’ve built this great culture,” and I had told my investment banker, you know, this company is really the people that work here that’s why I actually stuck to something for 12 years, which is kind of a first for me. The pride and the accomplishment is really about the people here and the community that’s been created.
Jill Nelson: So when I did decide to sell the majority I kept saying, “I’m not just selling to anyone, I’m not just selling to anyone, I don’t need to sell,” and the investment banker finally said, “Jill,” he was from Tennessee, he said, “Jill, like I tell my wife, I heard you the third time.” So it was a point that I drove home that somebody really needed to respect the culture.
Jill Nelson: Everyone did pay lip service to it but Updata was like, “Hey, we can help you build out your executive team, we can help you evolve your technology, but whatever we do just make sure we don’t screw up your culture.” They really made it sound like they didn’t just appreciate it, they made it sound like that’s what they were buying.
Jill Nelson: It’s turned out to be true, and I had some really wonderful early validation points in the first few months of the new relationship that was great. They have turned out to be that. But they were, you know, they’re ex-entrepreneurs themselves and I think they’re in it for, you know, they feel a lot of pride around the companies that they’re invested in. It’s interesting you think of maybe private equity as more transactional but there are firms out there who are doing it because they love helping business grow. They do it-
John Warrillow: Yeah, I’m always crapping all over private equity, so it’s good to hear someone actually had a good experience, which is great!
Jill Nelson: I have, yeah.
John Warrillow: Which is awesome. So, you built this culture, culture was a huge part of was differentiated you, you felt tremendous loyalty to these people. How did you tell them that you were selling?
Jill Nelson: Yeah. So, early on I was encouraged to be public about it and that wasn’t my gut instinct having, again, spent a few years in the late 90s as a business broker, we always advised our sellers, you know, keep it confidential until something’s closed because people will worry and won’t know what their future is. But I think because I had taken that early investor and he was mostly absent, and so to the people here they just viewed, “Oh, Jill’s looking at trading out her investors,” or something. They didn’t really worry too much. At the end of the day the message was, “Well hey Jill, you got us this far. We trust you, we trust what you’re doing.” Which was a wonderful vote of confidence and a lot to worry about. I did not want to mess this up and pick the wrong partner.
Jill Nelson: We closed in late December and we actually waited until January to make the announcement because we wanted everybody to be back from the holidays and be able to present at a company wide staff meeting and we invited them out to the staff meeting, they introduced themselves and did a little thing about who they were. Again, they’re great, they’re great guys. I think only one person really came up and addressed like well what does this mean for me and what does this mean for the company, everybody else kind of rolled with it. The people that work directly for me were heavily involved throughout the entire process. I could not have gotten it to the finish line without them assisting on the due diligence or even in the management information sessions. The private equity firms that were looking at us were only firms that were investing in teams that they felt were winning teams, so it was an important piece.
John Warrillow: Interesting. So, let’s talk about that now. You hire this MNA firm to take you to market. What was that process like? Did you get multiple offers? Was Updata the only ones that came to the table.
Jill Nelson: No it was a long process and something like over 100 NDAs got signed, we ended up get 20 something letters of interest which is something less than a letter of intent. Then we selected from that six companies that we felt were aligned, that were in a valuation range that was compelling, and then went through that process and weeded a few out. Then there was essentially three that we wanted and came through with final letters of intent. Even then, by the time that happened it was really clear, in fact the night before they came in was like you know what, no matter what happens it’s Updata that we want to work with. So, we were able to use all of the interest to really … and that’s where the investment bankers earn their keep. They were able to make sure that Updata was able to match in value what others were willing to value the company at.
John Warrillow: Can you explain what the difference between a letter of interest and a letter of intent? This is a key point.
Jill Nelson: Yeah. Well, and I don’t actually know technically what they mean, but letters of interest really aren’t worth the paper they’re printed on. They’re letters of interest, they generally have a valuation range, and they’re saying I’m interested enough in acquiring your company in this valuation range as we learn more, and not too much else. Generally they’ll be an outline of how a deal might be structured, which was also something really interesting to look at, all the different ways that firms will propose a deal. Then the letters of intent were more like you get one of those, to agreed upon terms and conditions, and you go exclusively with one party with a signed by bot sides. You work that in good faith and go through due diligence and try to get that to close. So, we only signed one letter of intent.
John Warrillow: You had three but you signed one.
Jill Nelson: Correct.
John Warrillow: Got it.
Jill Nelson: And worked that one, and the other two were sort of in the wings.
John Warrillow: And how did you filter down from the 20 letters of interest down to the six, in fact down to the three that you actually got letters of intent from? What was you filtering process like?
Jill Nelson: Yeah, yeah. At first it was very difficult. On paper everybody really seemed the same. So it was, you know, the first 20 something it was really a lot about who valued the company probably the highest was probably the first consideration, and then once we had general ranges it was more like relying on the investment banking company to educate us about who the different parties were. Then from there it was very much we had … So from the six we had all day management meetings with each of the firms, and we would go out to dinner with them, so you really got a sense of who they were. There was very different levels of, you got a sense of hat they would expect of you pos transaction, you got a sense of how involved they would be post transaction. You kind of got a little sense of what life might be like after that.
Jill Nelson: At first I was actually drawn to a different company that they were more operational, they would have stepped in and really evolved the company and it was kind of exciting, but the more I got to know the Updata folks the more I was like … And their message was, “Hey, you run the business, it’s your team, but we can help you achieve your vision by the experience that we have with our other portfolio companies and the success we’ve had.” At first that wasn’t as compelling but by the end it was the right message for us.
John Warrillow: What range, how much of a range was there between the lowest offer of the 20 that you received and the highest offer?
Jill Nelson: Huge range. Huge range.
John Warrillow: Can you quantify?
Jill Nelson: The lowest was probably 30% of the highest.
John Warrillow: Got it. So somewhere like one and a half times to five times kind of idea?
Jill Nelson: Mm-hmm (affirmative). Yeah.
John Warrillow: That sort of range?
Jill Nelson: Yeah, and certain firms depending on their portfolio or how they look at your company or how they invest they might be … valuations, there’re so many different methods. They could be valuing based off of EBIDA, they could be valuing based on what they saw as how they could leverage, you know, what they could do with the company. It’s really what was it just worth to them, and everybody has different criteria.
Jill Nelson: For some we were more in their sweet spot. When a private equity firm has knowledge around your industry or our market, they have more comfort to be able to go, “Hey, we can do something with this. We know what we’re getting ourselves into.” And that eliminates risk, which makes them value the company higher.
John Warrillow: So I get to step into some very, very dangerous waters, I’m probably going to receive some awful emails for this, but I have to ask this question. You sound very much, like when I talk to you, you sound very much like a woman that I interviewed called Stephanie Breedlove who sold a $9 million revenue company for $54 million, just another enormous, crazy valuation. When I spoke with Stephanie I felt like I was talking, it sounds very similar to when we speak, and that is, and I can’t think of a way to say this in a subtle way, but as a woman I think you sound slightly more deferential, slightly less up on your pedestal, you sound like you’re willing to accept peoples points of view. That you’re not trying to sound really smart all the time. You almost sound like you’re like, “Hey, like I’d love to learn more and I’m open.” I wonder if you’re … I know you’re an incredibly intelligent woman. I’m wondering if you’re doing that strategically so that you can sound almost a little less informed than you actually are or is just your demeanor. Do you know what I’m asking? Maybe I’m just butchering it.
Jill Nelson: I will say people have said about me, underestimate me at your own risk.
John Warrillow: Yeah, like I hear that.
Jill Nelson: So perhaps that’s what … but you know, I go about my life, I don’t really separate my business life from my personal life. So, I like to enjoy myself at work, you know the way I would treat somebody outside of work would be the way I would like to treat somebody at work. I just I am me and I have my own set of values and so, I think that’s just what I believe is the right way to act. We’re a very, very friendly company, we even do happiness journals. We have an annual happiness journal campaign.
John Warrillow: I do one every day, so I love that.
Jill Nelson: That’s wonderful. And even the research is in that, not to say anything about myself, but I have seen the smartest people are the ones that are the most curious and open to learning. I think getting more information is the way to go and I think in the long run, I mean there’s all kinds of ways to be successful in business, and I think I just am me and it’s been successful. But I also am very, very, very competitive, and we are successful here and we set high goals and we go get them.
John Warrillow: Does it diminish your ability to play bad cop in a negotiation with the other side? Like you’re into some heated, I’d imagine, negotiations with these three. You’re doing full day management meetings. I mean, does your tenner, your demeanor your disposition, the way you speak, does it change when you’re in a tough negotiation or are you always this sort of glass three-quarters full kind of attitude. Do you know what I mean though? Do you find that basically brings the guard down of the other side?
Jill Nelson: I will say that I actually am uncomfortable in discomfort. So, I have a wonderful CFO who loves negotiating and the investment banking firm that I hired did a great job of negotiating. But when it comes to my core principles, I don’t have to bluff, I don’t have to be unkind, but they’re unwavering. I do think people get that, there are just things that I am not willing to compromise on.
John Warrillow: Like what?
Jill Nelson: Well, for example, the culture piece of it and working with investment bankers and making sure that it was the right company who we got to the finish line and that we wouldn’t get to the finish line if there wasn’t the right thing that appeared. Even with the Updata transaction there were a couple of moments where it looked like, and I wouldn’t put it on themselves but perhaps their attorneys, were looking for ways to perhaps increase a hold back or maybe try to ding a little bit of the value off the top-
John Warrillow: This is during the due diligence process?
Jill Nelson: Yeah. And I was more like we are, you know you make your bets on the firs tee or whatever, I’m not a golfer, but you do what you say you’re going to do. So, when it’s matters of principle you can kind of pick that up in me that I’m not willing to break a promise. So, there are certain things that if I care about it, I think I’m a wonderful negotiator. I am passionate about what I believe in, and I believe I am persuasive, but I don’t like making people uncomfortable.
John Warrillow: So do you go into a negotiation with your CFO proactively saying, “Look, I’m going to be the good cop here, you guys be the bad cop.”
Jill Nelson: Yes, if we’re going to negotiate back and forth and it’s just strictly numbers I would outsource that, absolutely. That is not my best strength for sure.
John Warrillow: Fantastic. So, you get these three offers, they’re outlandish multiples, you agree to Updata, talk to me about that 60 day re-trading attempt. What was it like? When I say re-trading that’s industry lingo which you would know clearly for trying to change the deal terms. Like what kind of deal term were they trying to change?
Jill Nelson: There was just one, oh my gosh, the due diligence process, there was so many things that I, not so many, there was a few things that just caught me flat footed that I just wouldn’t have ever known and at the end of the day I think they were a less of a risk than perhaps the attorneys on the other side were trying to make it. So they wanted to use that to I guess re-trade or increase a holdback, but things like filing your cafeteria plan appropriately back when you founded to make sure that you’re … Just the number of things that are scrutinized, and with good reason, but as a small business owner when you’re starting out, thing you just don’t think about. Couldn’t find our original S corp filing called the IRS to try to get a copy of that and ultimately had to go with a certification from them that we were in fact an S corp, which was fine. We had to convert to a C corp to do the deal. But thing like that they ended up going, “Well that’s the way it is.” You know? You’re welcome to keep doing the transaction or if this hangs you up then I’m sorry.
John Warrillow: So the press clippings talk about the acquisition as Updata making, I think the words were, “$38 million investment to take a majority ownership in Ruby Receptionist,” something like that.
Jill Nelson: Yeah, yeah.
John Warrillow: Can you talk a little bit about the structuring of that? I mean did you just basically get a check for $38 million to put in the bank and go to the beach?
Jill Nelson: Yeah, I meant they did put a couple million into the business to help finance its growth, especially on the technology side. I sold a majority of my shares and the structure of that, you know the tax structuring, was a big piece of the negotiation process trying to get it in the best form for both sides. Then there was a reasonable small holdback for year, which ended up getting released as promised, but yeah other than that it was a big check or a big amount that got wired. It was great. It was very exciting.
John Warrillow: Why are you still there? Don’t give me some bologna about, “Oh, I believe in the vision and mission.” Like why are you still there? That was 2014.
Jill Nelson: Well, originally that was a condition of the deal.
John Warrillow: Right but that’s passed.
Jill Nelson: But I will say I did, I fell back in love with the business. Talking about this vision especially the customer facing technology that we built since then, and just looking at the opportunity. I still have a small piece of the pie. In theory the next transaction it could still be a bigger transaction even for me with my small minority, because the business has continued to thrive. We’ve more than doubled since that time, and again what we now offer including phone numbers and you can actually call out from our app and it publishes your business ID so you don’t have to give away your mobile phone.
John Warrillow: Cool.
Jill Nelson: There’s just all kinds of things that it was like, wow, we really could be thing business hold name. We could be the next QuickBooks. Then they helped me get this amazing executive team and wow, your job just changes so much when you have highly skilled leaders that have done this before that come in an it’s fun.
John Warrillow: Were you wealthy, like did you come from a wealthy family? I mean did you have a lot of money growing up?
Jill Nelson: I did not. I did not. My father was a civil engineer and he worked for the country and the department of public works, and my mom was a stay at home mom and she was an artist. She went through some tough times and I actually financially supported her. So, no. Yes, I’m in a new territory to have this financial security.
John Warrillow: How does that feel?
Jill Nelson: It feels lovely to have that security, I feel incredibly grateful and lucky that the thing that I’m good at actually has financial value associated with it, and then I also of course feel an obligation to, just when I’m done with this I want to help other people be able to launch and run successful businesses because that’s really what got me out, created the opportunity for me. So, you know, anyone could do it. I get it that access to capital is critical, and certainly having those basic business lessons that you have to learn along the way, those two things that’s why I want to go help other people.
John Warrillow: Describe for me the day you told that minority investor that you took on all those years ago that you’d had this liquidity event, like what was that phone call like or did you do it in person?
Jill Nelson: Oh, no he was involved in the get go from the decision. He was incredibly, incredibly happy on the day we closed. Yeah, no it was over the phone and it was one of those, you know, who would have thought. Then he’s like, “What’s next? And can I invest in your next thing?”
John Warrillow: Was there any part of you along the way that, like were you motivated at all along the way to wanting to do well by that investment that you knew that he had taken a risk on you in the early days and that you wanted to prove that was a good risk?
Jill Nelson: So I would say after the first five years that he was in, we actually started, We were S corp so we were making distributions from our net income. Our net income was very healthy, so he had more than made back his investment multiple fold. So, it wasn’t necessarily that, but I am proud that I was a good bet and I am thankful that he saw that early on. What I will say is having investors probably helped me be more fiscally responsible along the way. If it was just left up to me, I probably would have spent all of our profits on the business because that’s where I spend my day and want it to be a nice place. You know, spend it on the things you care about like training or celebrations or business trips, but having that partner actually helps you be more disciplined.
John Warrillow: It’s a great insight for sure. Man this has been an incredible interview, I’m so grateful for you being so transparent.
Jill Nelson: Oh, thank you. Oh, my pleasure.
John Warrillow: It’s great to hear the story. So, where can people learn about you, the company, apparently you’re still there, so even though I’m trying to convince you to go to the beach-
Jill Nelson: I’m still here.
John Warrillow: You’re not leaving.
Jill Nelson: I am actually catching a 5:00 am flight for Costa Rica tomorrow.
John Warrillow: Oh, there you go.
Jill Nelson: So, a little summer break. But callruby.com, you can learn more about Ruby Receptionists, we have resource page filled with articles about how to help small businesses grow mostly focused on how to do it through delivering a great customer experience, but there’s all kinds of tips there, too. So, I encourage you to check us out.
John Warrillow: Callruby.com. Jill Nelson thanks so much for joining us.
Jill Nelson: Oh John, thank you so much for having me. It was a great pleasure.