The Sinkinson Brothers' Combined Net Worth is $48M. Their One Rule: We're a Package Deal in Business

Full Transcript

[00:00:01] Dave: The first day that we stopped working, Chris sent me a PowerPoint deck of a different business he wanted to start. Clearly he had spent a few hours on this. It looked very nice. I emailed him back, just being like, what are you doing? Stop. Like, go lie down on the couch or go in the lake or do something.

[00:00:19] Harry Morton: Post-exit founders often face two big challenges staying grounded and navigating weird family dynamics. Chris and Dave didn't have that problem. Why? Because they brought each other along for the ride. I'm Harry Morton, and this is Moneywise, a podcast not about how to make money, but how your life changes when you do. It's a podcast from Hampton. Hampton is Sam Parr's private, highly vetted community of founders where people like Dave and Chris and me. And you have conversations like this all the time. So if you're interested in learning more, go check it out at Join Hampton. Com. Chris and Dave Sinkinson do everything together pretty much. They founded, scaled and exited their business app, armor. Then they wrote a book together, though apparently that wasn't completely a 50 over 50 split.

[00:01:06] Dave: You'll see it says David Sinkinson first and then Chris Sinkinson. That is by design, because David Sinkinson me wrote 99.9% of this book. Now Chris was there. Chris. Chris unfortunately writes like lines of code.

[00:01:18] Chris: We decided that bullet points from Chris was a much better idea.

[00:01:21] Harry Morton: Now they have a podcast together and a brainstorming what their next big venture will be. But they didn't always do everything side by side. They've actually got a ten year age gap. We'll get to the story of how they ended up working together and what it was like to exit together. But first, the good stuff, how much money they made from it. Can you break down the deal, the details of the acquisition for us? I'd love to know, like total deal size and how much you both got to walk away with.

[00:01:47] Dave: So cap table is easy enough to understand. Two people, Chris and David Singleton. That was it. We had no debt. Nothing. It was as simple as it gets. Our business. By this point, we were turning a profit margin of about 60%. 7 million IRR. You can do the math there pretty quick. Basically, just as the pandemic started was the first time the company that bought us approached us and they said, hey, would you be interested? And they made an offer for us. They came to us and said, you know, we'd be willing to give you $20 million for the business, which I wasn't really happy with. I thought that was a pretty low multiple. And we're in software like, as you know, the multiples are usually better than that. And so I wasn't pumped with that. And I said, you know what, maybe later. Not right now. Chris and I made that decision and then jump ahead after we had this unbelievable pivot during the pandemic. We reach out to that company again. Hey, say, hey, are you still interested? And Chris and I were exhausted by this point, but, you know, are you still interested? They said yeah, maybe. How are you doing? And we said, well, we had the best quarter in our history. And they immediately said, cool, we'll double the offer. $40 million. We are reducing the earnout from a year and a half to three months. Um, you get more direction over sort of how this is coming together.

[00:02:52] Harry Morton: Is that us or Canadian dollars, by the way?

[00:02:54] Dave: That's Canadian.

[00:02:55] Harry Morton: And real quick you guys said mentioned phantom equity. Can you tell me just like briefly what that means and how that impacted what you both got to take away.

[00:03:04] Dave: During the initial sale of the company? For the $40 million? We were working pretty closely with the private equity group. I basically just said to the guy right away, and actually he's in our book, his name is good Guy gal. He's awesome. And I said to gal, like, you guys are planning on spinning this company out and selling it probably within the next 12 months, right? And he's like, yes. And I was like as part of that full package, first thing, do we have to do this now? And we want to participate in that. And he said, yes, you have a two month window. There are some complexities for Canadians, Canadian citizens to have equity in American companies. So instead what they did is they basically gave us, you could call it a promissory note. It was a legal instrument at least, where basically if the company sells, then you will get this percentage of the overall value. It wasn't super lucrative. The main deal was, as we said, 40 million. That was probably, I want to say like what was it like 400 grand each or something?

[00:03:55] Chris: And we had to give half of it to the government because it was treated as earned income. So at our marginal tax rate, which is like 50%. So we saw 200 of the 400.

[00:04:05] Dave: So it's like a little disappointing. I think we could have maybe done rollover equity. But there was there were a lot of scenarios where our accountants were like, this could get really messed up, and it might just be simpler to just take it this way.

[00:04:17] Harry Morton: So I want to know your net worth as it stands today. Um, yeah. What is the net worth today and how do you manage it?

[00:04:23] Dave: So I think I'm around 23 to 24 million in net worth right now. I have a few big assets. So my home, which is probably worth about three and a half. I also have a condo that I own that's sort of like a rental property. That's probably around 1.51.6. Obviously we also own the office space, but I split that with Chris. So that's I'm not sure what the office space is worth, but I would say probably about 2 million. That might be even be aggressive for office space these days. But anyway. And the rest of the money is all managed in investments. And so I manage my own money. Um, Chris and I, as you can expect, work pretty closely on our investment strategy. So we have a lot of similar investments. I'll let Chris dig into that because it's really his brainchild. He is. I'm just happy to benefit from the intelligence of my brother.

[00:05:14] Harry Morton: Is that how it works then, Dave, do you just go? Do you know what, Chris? You've done the homework. I trust you, you tell me where to put it and I'll do it.

[00:05:20] Dave: Well, hang on, like 90%.

[00:05:22] Harry Morton: But by the way, by the way, that is 100% what I would do despite me being the older brother. I would love someone like Chris to just be like, Chris, can you just tell me what to do?

[00:05:30] Dave: Please let me know. Yeah. Look, I'm raising the next generation of humanity, okay? So I'm pretty busy. But Chris here, he's got some free time to look into this. But I will say, I will say, and Chris has been really good. He'll get into it. But one of my biggest wins is and I show you this funny conversation with my wife the other night where I'm up 130% on Shopify right now, Okay. And I put in I think it was like 150 K into it. And my wife was just turns to me. She goes, well, why didn't you put all the money into that? I'm like, well then we would have like, yeah, that would have been great. But we also wouldn't have had this steady stream of income with this other strategy that we've been doing that was much more conservative, but very much still very lucrative. And so, Chris, I don't know if you want to.

[00:06:10] Chris: Yeah. When Dave says he worked with me on the investment strategy, what he means is he copied what I did without spending more than about 10s thinking about it. Uh, one thing I'll put out there, uh, I'm not a big fan of, like, the wealth management industry. You know, the, you know, diversify and don't put all your eggs in one basket. Like, it just seems very cookie cutter. I actually took the Canadian securities course. There's a version of that where you don't actually take the test, so you don't get certified as a securities trader, but you learn all the same material. So I kind of thought, why am I just going to like, have some guy do this for me and I want to check it. I want to go in and I want to be looking at it. I want to be able to make moves, and I don't want to have to justify them to some guy or gal, I suppose, but it was just the way I wanted to do things. So, you know, like I kind of alluded to, nothing too risky, really wanted to make sure that nest egg was locked in.

[00:07:07] Chris: So a big part of the investment is bank stocks that pay a dividend that we sort of use to live off of. We also use it to fund the development of our book, uh, pay for podcast studios, that type of thing. So it's also kind of funding both our families, but our our business ventures here, we're kind of using it to bootstrap the next ventures that we're, we're working on. So that's about 50% of our portfolio is in really boring things. Then about 20% of our portfolio is in more aggressive or slightly more aggressive, like S&P 500 type companies, and then about 30% in more like Nasdaq tech companies, that sort of stuff. And we have some stuff that's also, um, covered call funds because they tend to generate more income. So a bit more aggressive there from an income generation perspective. So across all of those that's sort of where we land. From my perspective, I think my portfolio is about $20 million right now. I've got a condo that's probably worth about 2.5. And then the cottage. So probably at about 25 million is probably my total net worth at this point.

[00:08:15] Harry Morton: One of the craziest feelings when going through an exit is just the surreal feeling of it. So many of our guests have talked about how simultaneously, everything changes, but at the same time, nothing does. It's an incredibly fortunate but incredibly isolating experience. But for Dave and Chris, that was obviously a bit different.

[00:08:35] Dave: I was actually in the pediatrician's office and I was sitting there and my I think my daughter was, you know, just getting a routine checkup or whatever. And, you know, I just feel my pocket buzz. And I look at my banking app and I go, you have an incoming deposit of $20 million. And I was like, whoa. Hey. That's cool. That was a pretty cool feeling. I actually it felt kind of weird, I would say. You know, it wasn't I like, expected it. I knew it was coming. I was excited for it. I was actually a little bit nervous because I wanted, you know, as a salesperson, like, the deals never complete until it's all signed and the money has changed hands. So I was really like, kind of like waiting for it. And so it happened. And, um, I just kind of had this moment, I think as I was looking at my phone, I just got a text message from Chris that said, hey, did you get it? And just like, oh yeah, I sent him a screenshot of of what's on my phone. And, and then I think I realized that it was kind of like the closing act on, like that part of the journey. So I think I was on the one hand, I was like relieved that it had happened, but then also a little bit anxious because all of a sudden I was going to have a first day again, you know, I was going to have a first day at a new company and have bosses and have to go through all that. And I didn't totally know what that was going to look like. So a little serendipitous, I suppose.

[00:09:49] Harry Morton: How about you, Chris?

[00:09:50] Chris: Getting the transfer to my account, getting the same notification, and then, uh, wanting to move it from my, like, checking account to my investment account, which is with the same bank. So literally like, move it from one line to the next in my accounts. And it wouldn't let me transfer the money. And so I pick up the phone and I'm waiting on hold. I'm like, ah, they're like never going to the bank. So hang up. I walk over to the branch and I said, yeah, I just need to move this money from here to here. The branch couldn't even do it. They had to like, escalate it internally to get my money from one line in my accounts to another line in my accounts. So that was a very weird moment, incredibly frustrating. And then I remember, uh, that's how I didn't even know this existed. But then all of a sudden I get a phone call from private banking. And I'm like, what is private banking?

[00:10:42] Harry Morton: Yeah, that's amazing though, Chris, because it seems like you got straight into the practical. You know, when I asked you what was that feeling like, you said, well, I went to the bank and had to transfer it. That's really interesting to me. So how did this amount change your lives? Like, were there any big purchases that happened? We talked about, you know, the things that you like to spend money on and Chris windsurfing that kind of like, did you go out and buy some sweet new rig or. Dave, was there anything that you were kind of out there immediately wanting to purchase like. Yeah.

[00:11:07] Dave: So the answer is probably no. But I'll tell you what I did get. So I think there's a lot of frugality in what we in what we did. So the first thing I want to say though, is that when the transaction happened, one thing that we ended up both buying effectively together right away was the office space. The office space was owned by a holding company that we have between us, and we just had that money flow through and pay off that mortgage. So the first thing that happened actually, technically speaking, is a big chunk of that, not a big chunk. But I want to say it was like a million. Something like that immediately paid off the office. So we own the office space and we actually still rent it rented it to Motorola Solutions. That was the first thing. After that, my next move was I paid off the mortgage for my house. That was probably about 1.5. I have a nice home in Toronto. All the homes are insanely expensive. So I remember calling up the bank that was managing that mortgage and being like, I was like, I want to pay off the remainder of the mortgage. And they were like, it's like $1.5 million.

[00:11:57] Dave: I'm like, yeah. Anyway, so I did that and then I bought a new car because, uh, I just wanted to upgrade from the Nissan Rogue. But I did keep it for a couple of months, actually. And then the big thing for me, I think, is probably I went on a six week vacation with my wife and my daughter, who was a year and a half and would be almost two years old by the end of the trip. So I guess a little bit further into her life. But we went through Europe and, you know, we did a bunch of countries. We went to visit my wife's family in Eastern Europe. We, you know, went through Hungary, we went to Turkey, we went to France, we went we kind of like flew all around. We did a whole bunch of things we wanted to see. And that was in Greece. Oh my gosh. Spent so much time in Greece. I love Greece, both the mainland and the islands. Uh, it was amazing. So that was probably my biggest spend. But after that, you know, it's almost all in the in the market and in investments or in real estate. It's I didn't buy the private jet, you know. So.

[00:12:50] Harry Morton: Sure. How about you, Chris? Did like if there are any big purchases or kind of splurges, I'd love to hear about those. But also, you know, has it impacted your your lifestyle? You know how so.

[00:13:01] Chris: You know, not a ton. I bought I obviously into water sports. I always wanted one of those uh, if you've ever seen them an E foil. So it's like a surfboard with a foil that goes into the water, and you lift it out of the water and you zip around on it with, like, a remote control in your hand. So I bought one of those, uh, I actually, um, throughout the acquisition and actually throughout our business, Dave, obviously, uh, my best friend throughout the business. But one person that was really important to us was our lawyer. We were very fortunate to have a really good lawyer. So I actually bought him one of those surfboards as well, because he actually lives fairly close to where the cottage is, where the where the surfboard is kept. So I go out with him sometimes and, uh, go foiling, uh, near our cottage. But I didn't do the big vacation or anything either. I, I literally needed just like, decompression time. I went to the cottage and I spent a summer and I didn't work, and it was very weird at first. I was just like, fish out of water. Another water reference.

[00:13:57] Dave: But I remember the first day, the first day that we stopped working like we were done at Motorola and Rave and all that jazz. Chris sent me a PowerPoint deck of a different business he wanted to start, and it had. It was all these. It was, I think it was 20, 25 slides. And clearly he had spent a few hours on this. It looked very nice. I emailed him back just being like, what are you doing? Stop. Like go lie down on the couch or go in the lake or do something like, we're not going to start another business like an hour after we're done.

[00:14:30] Chris: Yeah. It's, uh, for me, it was really tough to turn it off. I really, really missed it. I remember even like a week after we had left, I got invited back for the happy hour with our staff and it was really tough. You know, I was really happy to see them. But then afterwards leaving, I'm like, wow, it is so different now. Like I did not anticipate some of those weird feelings that happened. I missed it so much. So for that first summer, um, because we left in April, I just went to the cottage and just decompressed and windsurfed and did silly things. Wasted my time, and I think that was actually really cathartic. Uh, for me, I needed to kind of decompress.

[00:15:06] Harry Morton: Totally understanding man. Like, really common to like to have that process. And do you feel like you've fully gone through that process now? Like, do you feel like you're out the other side, or is there still that part of you that's kind of like itching to kind of do something big and bold? I mean, obviously you guys are working on the content of the book, and there may be other things that I'm not aware of. So apologies if I've.

[00:15:26] Chris: No, you're absolutely right. So, uh, definitely I feel like I'm decompressed and I'm out of it and I'm content with where everything is. I also, though, have the itch for the next startup, the next business idea. I think what's been really good is actually working on the book and a podcast and paying it forward to other entrepreneurs, the people that were where we were ten years ago. So that's been really, really good. But I am getting to that point where I do want to start another business. We've got a few ideas that we're kind of incubating, but.

[00:15:54] Dave: So we're done. The book, the books happened, so that's good. And it's been pretty well received. And that was, I think, honestly, a big part of the decompression. And even in the book, we talk about how, like there's an identity crisis after you sell. And, you know, I've since read a lot about it, but when it happened, I had no idea it was going to happen. And it was it was a freight train in that Europe trip. I had a bit of a freak out in Istanbul where I was just like, what am I doing? Who am I? Why am I here? And that was pretty tough. And just on Chris's point of getting the itch, I think now we're a couple of years out now we have the itch. We actually are working on this product that's And, uh, basically an AI tool for RFP responses to automate the entire process, because that was a big thing I had to do at App Armor. And so, you know, we're excited for that. That's coming out obviously a few months from now, but we're looking forward to getting at that a little bit.

[00:16:42] Harry Morton: Chris and Dave didn't fully grasp what they were feeling at first, but confiding in each other, they processed it enough to distill it into a book, something not all founders get the chance to do. And sure, you're already ahead of the game just by listening to this podcast, but even then, there's nothing quite like having someone who truly gets it going through it with you in real time. No jumping into a new business an hour after selling the last one. No blowing it all on bad investments. Obviously, not everyone is lucky enough to go through a major exit with someone as close to you as their brother. But the real lesson here isn't just about having a co-founder who happens to be family. Success comes from opening up to people you trust, leaning on them and not trying to navigate massive transitions alone. Whether it's a sibling, a spouse, a mentor, or a close friend, Having someone who can offer perspective, keep you grounded and call you out when needed can make all the difference. No matter how much money you make going it alone, the highs feel emptier and the lows hit harder. But back to the brothers. I teased at the top that they have a ten year age gap. So when did they actually become close? Like any classic sibling story, it started with the younger one copying the older one.

[00:17:51] Chris: I graduated from computer science in 2002, so if you think back to that time frame, most people are too young to remember this. But there was the.com bubble. So that was probably the second year I was in university. I remember IBM coming to campus and saying, look, quit computer science. Just move to the big city. We'll get you set up in an apartment and you can start working tomorrow. You don't even need a degree. That was around 2000. And then by 2001, the the whole.com bubble had burst. And, uh, all the layoffs were happening and the market was flooded with people with lots of experience. And here I am, a newly minted computer science graduate who can't find a job because it's a really tough labor market for those types of skills. So what do you do in that situation? You start a business. So started a solopreneurship business. I had written some software products. One of them actually was tied into what our father's company was doing, wrote some software for like paperless office or document management because it worked well with the photocopier equipment that they were selling, and did that for a long time. And I actually did fairly well. I just never was able to really scale any of that. Fast forward about ten years, and that's when Dave sort of comes along. Who is the you know, if I was the nerd, Dave was the sales and marketing person. And that's really when there was a real fork in the road for us, where by combining the two sets of skills together, we were much more effective. It was one of those one plus one equals four rather than a one plus one equals two. Nice like that. Thank you.

[00:19:21] Dave: I want to get as many like business systems as we can into the pot.

[00:19:25] Harry Morton: Let's do it. But, David, I'm interested from your side. Like, when did you get into business? And, like, was that your teaming up with Chris? Was that your sort of first venture into quote unquote business versus like being in the regular job market?

[00:19:37] Dave: So while Chris had this old document management product that worked at our father's photocopier company, as well as many others, by the way, he kind of he sells himself a little bit short. That company did what, like 400 K at its peak. Like it was like pretty meaningful for a solopreneur. Meanwhile, I was at school, I went to the same university as Chris, and I was doing my undergrad, and I was actually in political science and history, which is like just a tremendously useful degree. You know, the job offers were just flying at me. And so I kind of had this weird moment where I was at school and going, man, I, I don't know what I'm going to do with this degree. And one of those things was, I actually got a job, I think it was paid like ten grand a year or something. So very much part-time as the business manager of the on-campus newspaper. And I got to be honest with you, I did not want that job. There was a bunch of other things I applied for and I got rejected, rejected, rejected, rejected, rejected, rejected. And then I got that one. I was like, fine. I turned that newspaper business around from basically having a deficit of like $60,000, which doesn't sound like much, but its operating budget was $330,000 to turning that around to about 100,000, basically net positive financial situation.

[00:20:42] Dave: So all of a sudden, like, I turned this sort of ailing campus newspaper around. Now, the other thing I'll mention here too, that's really important, the thing that was happening with Chris. Chris was doing his MBA at the same school as me, so we were both there at the same time despite the age gap, and we would have lunch together all the time. And so I would go to him and say, hey, I'm having this business challenge with the newspaper, and he'd go, well, we were in class today. We were talking about this thing. Why don't you go try and do that? So then I would turn around and go back to the newspaper and try and do that, and had a lot of success with some of these ideas. And so I realized, hey, I'm actually into this. I actually like this, and I'm actually winning at this. Maybe this is something I should do. And that was really when I started to be like, I actually want to be in business and I want to have my own thing. That was the start of that journey.

[00:21:27] Chris: So I finished my MBA and 2011. Um, Dave then decided he wanted to do his MBA. He also did the exact same program that I did. So still at the same school. Uh, but he did it a year later.

[00:21:41] Dave: His GPA was higher. Chris.

[00:21:43] Chris: Dave brings this up every time.

[00:21:46] Dave: The answer. The answer is me. My GPA was hired by 0.1 and it will be immortalized in this podcast.

[00:21:52] Chris: I've got to go back to the school and dig up these records, because I feel like some.

[00:21:57] Harry Morton: Sort.

[00:21:57] Chris: Of error here.

[00:22:03] Harry Morton: So classic SaaS relationship. Chris was a tech guy. Dave was a sales guy. Together they built their company App armor, which is essentially a virtual version of those blue light security polls you see in college campuses. They saw a need for a modern day upgrade.

[00:22:16] Chris: Apparently 30% of them weren't working properly. Faulty wiring, light bulbs, burnt out, communications issues, things like that.

[00:22:24] Harry Morton: And ran with it.

[00:22:27] Dave: So we actually ended up bootstrapping the business because of all these other side hustles we were doing. At the same time, Chris had his legacy product that we sort of mentioned, the document management piece. We had two other pieces that were doing, I would say probably another 30 grand, you know, 20, 30 grand each. So not huge money there. We're doing 50 grand. And another one that was actually doing pretty well at the time, which I thought maybe was going to be our winning horse. That was actually doing, I think probably I want to say about 100, 150,000 of top line revenue. So like, you know, that wasn't all profit, but that's decent money. So basically what we were doing is we were taking the money from our various side hustles and placing bets on our winning horses, basically. And it kind of narrowed down to app armor and this other sort of book platform at universities and colleges as well. But we ended up deciding focusing on app armor for a few reasons. The biggest one was that our equity position in the e-book platform, uh, was considerably worse. We had about 15% of that business. Whereas with App armor, the cap table was pretty easy to understand. Uh, 50% David Singleton, 50% Chris Singleton. And that's actually how that would continue for the entire genesis of the business.

[00:23:34] Harry Morton: It sounds then like you were bankrolling something from these kind of products that Chris, you'd been building while David, you were still getting your MBA. Again, this is like a relationship question. Chris, I'm wondering how you felt in the early days of just effectively like bankrolling the team. Felt like you were taking a bet on David there. You know, is that a fair assessment? Am I kind of seeing the numbers there?

[00:23:52] Chris: You know, I didn't see it that way at all. I had worked so hard, uh, and I needed some help. And I was thrilled that Dave actually wanted to do this with me, because I know that I'm kind of at this limit of what I can do, and the only way to get beyond that limit would be to bring in somebody. And there's nobody that I trust more in the world than my brother, so it actually worked out fantastic for us.

[00:24:16] Harry Morton: So what were you paying yourselves back then?

[00:24:18] Chris: So the way we in Canada there is similar to like a 401 K in the United States it's called an RRSP plan, registered retirement savings plan. So essentially what you do is our accountants had us max out our salaries to the point where we could maximize the contribution room to our retirement savings plan. I think that wound up being about $120,000 a year back then, and we could contribute, I think, about 18 to $20,000 of it to our RRSP. That was our only compensation was just our salary. So as we continued growing, we were generating more cash flow than was needed. We were very profitable at one point. And I remember Dave was renting, you know, those short term car rentals, because he had just gotten a dog and wanted to take the dog to parks and, you know, going little side trips and things like that. And Dave was spending, I forget what it was, a couple hundred dollars $100 every weekend to rent a car, to take the dog and girlfriend slash soon to be wife on these little excursions. And I said to Dave, I said, wow, you're spending a lot on this. Like thousands of dollars. Like he's like, yeah, I think I'm going to have to buy a car. But, you know, like, I don't know. And I'm like, we're going to just dividend the money to you and you're going to get a car and go pay cash for it. So we actually dividend $45,000 to them. 15 of it went to a separate bank account because we knew we were going to have to pay the tax on that dividend, which ends up being about a third. And he took the $30,000, walked in and paid cash for a nice white SUV that he took home that weekend. So that was a big moment.

[00:25:52] Dave: I think I will say that before that, Chris and I were solidly committed before that to reinvesting any additional. Like we were very profitable pretty early, as you can imagine, bootstrapping the business. So I think by then we're probably doing like 20 or 30% margins. So we're just taking that money and we're just putting that right back into the company basically over and over again. And then, yeah, this, this car gate thing happens and I buy a Nissan Rogue White Nissan Rogue in cash. And I kind of have this moment where I'm like, that was awesome. I like money, and I think that really changed all of a sudden. The psychology of like, okay, we're growing this business for sure for the purposes of like accomplishing its mission, like helping people be safer on campuses and moving that forward and all the great stuff I was doing. But then there was the other side of this equation where, like, it also should be making us richer. Like it should be helping us make us wealthier on a day to day basis. And then all of a sudden I really got bit by the dividend bug. I was like, oh, I want this.

[00:26:49] Harry Morton: Did that then become just like a regular thing? And what was your total comp at that point in those years up to the sale.

[00:26:54] Chris: Car gate 2017, I'd say.

[00:26:56] Dave: Yeah, like a winter time. I think it was like December or November 2017.

[00:27:00] Chris: Yeah. So obviously at this point to the business is really on the upswing. We're adding more clients. We had done product proliferation, We added more products that we were selling to those clients, so the revenues had grown significantly. We'd done a good job at automating things. So from a profit margin perspective, it was it was excellent. And I think by about 2018, we actually had a call from because we had dividend quite a bit, hundreds of thousands of dollars to ourselves by the end of like 2018. And our accountants actually called us and said, hold on a second, because you're now at the point where there's a better way to do this. And I recall talking to our lawyer about it, and he called it the Hocus pocus, because there was some sort of like a holding company and a roll over and all these things that I can't even explain.

[00:27:48] Dave: Promissory note.

[00:27:49] Chris: Yeah, yeah. So we had set up like a shell corporation that was then doing something. I can't even explain it to you, but the net result was we converted a lot of those dividends to capital gains, going from paying about a third of it in tax to only about 25% of it in tax. So I think we paid our accountants something like $30,000, but I think they saved us several hundred thousand dollars. It was like the easiest decision we'd ever done. We did that the following year and it was even better because again, we're still on that really nice growth curve. So I don't know, I feel like we had a year where we made probably about 200,000 additional each in dividends, and then we had a year where we probably did about 400,000 each in additional dividends. And I think we had a year where it was like 900 each. And that was right before we were about to be acquired.

[00:28:42] Harry Morton: Now we keep talking about all the great aspects of going through this process with a sibling, like how you can trust them completely. There's no fear of getting screwed over. But on the other hand, business and personal life can blur together fast, and if you're not careful, it can strain both. So Chris and Dave had to navigate this balance in real time.

[00:29:01] Dave: You really learn a lot about a person when they're your co-founder. I mean, you see that person? I usually say to people that you're like, work, family. You know, you see them more potentially than your regular family. So I think in working with Chris, there's a few things that I had to get used to. And one is that, you know, Chris had a way of doing things, and he's very detail oriented and he's very process specific. And these are fantastic assets. It's really good for scaling a company and frankly, being innovative and moving the company forward. But there are times when that's annoying. And I think that managing that experience with your brother and not making it get personal was a huge deal. I always knew I was going to see Chris later. He's going to come over for dinner or he was going to, you know, see you at Christmas or Thanksgiving or insert your holiday. And for me, I think it was managing that relationship inside the business relationship and the needs of our company and the needs of our staff. And that could be really, really tough sometimes.

[00:29:58] Harry Morton: Chris, anything to add to that in terms of challenges?

[00:30:00] Chris: Yeah, I think it was really tough. You know, like at Christmas or at various times of the year to shut off the business side and just be brothers and just be able to hang out. We have to work at that. Actually, I still find it tough. I see Dave and we start talking about business things, and sometimes we just need to shut that off for a little while and just hang out. So that was one of the big challenges. But I'll say on the flip side of it, the one of the biggest benefits of having your brother as a co-founder is I never had a doubt that he had my back. Whenever there were problems, whenever we were having tough times, systems were down, things weren't working. Customers were upset. I knew that Dave was covering my my six. You know, he was he was there to to look after me. And that was incredibly reassuring. And it's I don't know if you have that with regular founders. I think that's one of maybe the unique things with a sibling.

[00:30:49] Dave: I like to believe, too. If I could really quick here that I like to bring the temperature down a little bit sometimes. So I would occasionally just do stuff to make it funnier, like and like make us enjoy work a little bit more. And I think that's the other thing too, is that Chris had just been used to being very serious all the time, and I think it kind of lightened the mood, actually helped us be a bit more creative and more fun at work, and it made it more fun for everybody else occasionally too. I would just like call Chris and be like, everything is down, you know, just freak him out for a second and then just hang up really quickly and be like, who the hell was that anyway? So, you know, there was good sibling moments, like all the time that I actually think our staff kind of got into it. After a while, they kind of realized that we were pretty goofy with each other. Like at times. It was also very serious at other times, and they could kind of read us. So it would be actually interesting if you ever did a follow up to ask them what they thought of our relationship at work.

[00:31:35] Harry Morton: Yeah, we did try to talk about the downsides more, but these guys kept complimenting each other and apparently they skipped the childhood bickering too.

[00:31:41] Dave: I'd say we both fought more with the middle brother respectively because of the age gap.

[00:31:46] Harry Morton: Okay, so it's a common enemy. That's what you need. Okay. Got it. Yeah.

[00:31:49] Dave: Yeah. It's interesting with three, right? You could two could team up on one at some points. But you know our middle brother is very independent. He's very strong, and I think probably some of it is because he had confrontations with us so regularly. But I would I would say we almost never fought. If anything, I looked up to Chris like, you know, wow. Like, look at look at this guy going to university or playing these sports and doing these amazing things. And we were always, always had a pretty good relationship.

[00:32:14] Harry Morton: Which explains why they're not done doing business together.

[00:32:16] Dave: I do want to start another business and we're kind of a package deal.

[00:32:20] Harry Morton: But things are different now.

[00:32:21] Dave: I do prioritize time with my family over just about everything else. So what does that mean? It means I'm going to pick up my kids every day from school, and I'm going to drop them off at school every day. I'm going to go all to all the things on the weekend. Everything I can and any business we build will have to have that expectation around it. In terms of my time, my commitment, what I'm going to be willing to do, I am going to be there for my kids because those are like days and hours and minutes that you do not get back. I am not going to miss out on that. I'm really insistent. It would seem ridiculous to me to have this, and I'm not sure if this is a PG show or not, but we're sort of at that foo level of freedom. You know, somebody tells you to do something. We've got the money to be like Foo, I'm not doing it. And I think for in this context, I am going to be there for my kids, full stop. After that, I will have a business and I will do other things, and I will be creative and be passionate about that. But it's secondary to my family.

[00:33:14] Harry Morton: Awesome. And fuck away. By the way, you're welcome to use whatever language you like.

[00:33:20] Speaker4: The the the fuck you.

[00:33:21] Dave: Level of freedom, right?

[00:33:23] Speaker4: Who's that from, Chris?

[00:33:24] Chris: Yeah, it was from the movie The Gambler. I remember watching it on a flight to a trade show. It's the Mark Wahlberg John Goodman scene. Yeah. And I remember showing that to you and saying, yeah, we need to get to the f you or fuck you level of freedom. Because that seems to be where. Where life gets nicer. You know, one thing I'll say from my side there, Harry, is, uh. I was the workaholic. I was the one that was working nights, weekends. Just all the time. My dad always used to say to me that I. I did 40 years of work in 20 years, because that was about the amount of time from when I finished school to when, when we were acquired. And, you know, for me, I think the priority now is being healthier. So there's a lot of entrepreneurs that exit and then all of a sudden, all of a sudden become health nuts. I'm kind of in that, that cookie cutter mold. I want to be able to sleep better. I never slept well for a long time. I want to solve all of those types of issues. And then, you know, I went, I don't think I've been on a date in ten years. So, like, once I've got myself to that point where I feel better, I want to get more social. That's kind of the way I see things for myself. And then new business ideas kind of coming after that. So like health, social and then, yeah, let's do another business. But it's not going to take away from those first two items.

[00:34:39] Harry Morton: Yeah. That's awesome. Do you think you would have achieved the same level of success individually? How key do you think your partnership as brothers is?

[00:34:48] Chris: Like, I think I've proven that I couldn't have done it alone. I tried for about a decade and it just wasn't working. So no, I think I can prove the otherwise.

[00:34:58] Dave: I think definitely yes. No no no absolutely not. We've kind of alluded to this a few times, but the importance of being able to trust each other sort of innately is so important in how we operate and how we deliver the business, how we set, how we delighted our customers, how we went to market like it was. Our relationship as brothers was so woven into our business offering that it's difficult to even imagine a circumstance where I'd be working with somebody else in an entrepreneurial venture. Chris brings so much to the table that I lack. And by contrast, I think I bring a lot of the things that Chris needs, and we just work so well together that it's ridiculous to even imagine a time where I could have been even as close to as successful without Chris.

[00:35:40] Chris: Harry, it's funny, we've done with the podcast a lot of engagements with people, and I'll talk to entrepreneurs all the time, and I think it happens maybe 2 or 3 times a week where somebody starts tiptoeing around. Oh, you were the CTO at App Armor. Oh, you know, my startup got this great idea. But, you know, we need some tech help. And, you know, like, maybe we could have a coffee or have a beer and, like, let's talk about it. And I have to, like, just sort of say, look, uh, I'm out of the game. I can't help you with that. I'll have a beer with you or whatever, but I'm not jumping on board to be your CTO or anything like that because, like Dave said, we're a package deal. I'm not doing this with anybody on LinkedIn. I changed my LinkedIn, uh, banner image to say I'm busy coding. Reach out to Dave instead because I'm getting all these, like, weird requests and I'm not interested in doing it with anybody else. Uh, so, yeah, we're a package deal.

[00:36:33] Harry Morton: That's awesome. And so then the flip side of that as well, you still live in the same city. You're still obviously deeply entrenched in each other's lives. Like, how do you avoid that kind of burnout with one another and conflict and things like that? How do you how do you manage that?

[00:36:46] Dave: I think the easiest thing here is we're, like, genuinely friends. Okay. Like, we genuinely enjoy spending time together. I like it when Chris comes over and plays with my kids. He likes spending time with the kids like we like our company. It's not just this and not companies in like a business, but companies in like spending time together. Right. I think that's kind of fundamental to this. I think you could have two co-founders. I've actually seen co-founder setups like this where functionally they are very good together, but they don't really want to hang out outside of work. Like we're the total opposite of that. Like we want to hang out as much as we can. We like doing that. And yeah, the conversation dovetails into business every once in a while. But we know that we're just we're just kind of shooting the shit a little bit. It's not going to be, you know, necessarily. We're not making any big decisions unless we're really focused on the task at hand. But it doesn't. There's no burnout, honestly. There's just good times. Like we just have fun. And also now the temperature so turned down after you have that fuck you level of money that it's just so much easier. Like now I feel like now I have a better relationship with you than than before. We can just hang out. We're not, like, so worried about your phone ringing, Bringing, you know. So yeah.

[00:37:47] Chris: Every setback always felt like existential when we were running the business and before the acquisition. And now setbacks are just annoying, you know, which is which is lovely.

[00:37:57] Dave: That's fine.

[00:37:57] Chris: Yeah.

[00:37:58] Harry Morton: Yeah. Amazing.

[00:38:01] Speaker5: I've been running for, like, I woke up in one the top rock.

[00:38:07] Harry Morton: I want to say the lesson here is to have a brother you like, and that compliments you in business. But obviously, that's not an actual lesson, though it probably would be nice. What you should be taking away is this. It's not just that Chris and Dave built a successful business together, or even that they managed to stay grounded after a big exit. It's that success. Real, sustainable success isn't just about money. It's about keeping strong connections with those you love through it all. We hear it all the time on the show, founders who sell their company and suddenly feel lost or isolated. They spend years grinding toward financial freedom, and then when they have it, they feel completely alone with it. Money is awesome, but it doesn't make your life people do. Cherishing those people, even when you have tens of millions floating around you, that's going to bring you the most happiness. And it's important to remember that. So I mentioned Chris and Dave have a book and a podcast. You can find all that stuff over@startup.com. I'll put a link in the description. But this is a podcast by Hampton. Hampton is a private, highly vetted community of founders and CEOs. People like Chris and Dave and me and Sam Parr were all hanging out in there talking about this kind of stuff in a way that we don't do publicly. So if you're interested in these kinds of conversations, you've got to go check out Join Hampton. And finally, you got to check out Lower Street. That's my company. We produce this podcast. If you are a startup founder or a CEO or a marketer and you want a podcast for your brand, we take care of everything for you. From coming up with a strategy to creating the content to getting it out there, you've got to check us out. See you next week.