Episode Transcript
[00:00:00] Speaker A: Welcome to the Independence by Design podcast where we discuss what it means to be a business owner and ways to get unstuck from the day to day so we can design a business that gives us a life of independence.
Last week I was on a group call with a handful of my clients and I would say that the theme of last week's call was total clarity. And what came with that was this crazy sense of peace. And there was three different people that had this unlock and each person had a different outcome that they were marching towards.
But what it did bring for each of them is this sense of peace and freedom, really, of I know I've got to do hard stuff and I still own the company, but the decision trees that were in front of them became more obvious and apparent. It wasn't going to be easy, but there was going to be hard stuff to do. But the why and the goal became super clear, which made people energized and felt peace because they knew how to move forward. And so I have my friend Nick Bradley on the podcast today. And the reason I brought him back on the podcast, he's got a coaching business very similar to mine. We both are working with owner operators. Nick came from the private equity space where he's done three to five billion dollars worth of deals. He just got done reading, writing his book called Exit for Millions. He's got a podcast called Scaling Up. And Nick and I had just a super fun conversation as we're both trying to learn more about what does it take to actually scale and feel this freedom? Then this piece. And what Nick and I landed on was it you just gotta understand the game and the end game that you're marching towards because everything else will fall into line. And Nick and I had this unlocked towards the end of the call where he loves to help people get ready for the arena of selling to a third party. And I'm continuing to learn more and more about myself.
And I love to help people build value and then figure out how to step back and run the company from the boardroom, keep the business inside of an internal transition, an esab, a family, and it's just wildly different than a third party sale. But what we talk a lot about in this conversation is that the, the value creation plan, call it 80% of it's the same, but your end goal will dictate some of the things that you do and some of the strategies that you implement. So really understanding where whether you're going to do an internal transition or stepping back and just keeping the company or if you're going to the third party sale is paramount and it's going to impact a lot of the things that you do in between now and then. And I know we all want optionality and that optionality is super important, but at some point there will be in the timeline you have to choose and it'll dictate some of the things that you're going to do.
I really hope you enjoy this conversation. Nick and I are, you know, two people trying to help similar people or two people in similar business models trying to help people like you. And we're thinking through stuff and we're bantering back and forth. And the reason I'm saying that is because I was on Apple podcast and I realized I got my first three star review and someone said I hit the eject button because Ryan didn't stop interrupting and it made me feel like shit. And then I was like, you know what, I understand, I go, I get really excited and so I apologize for that. However, what I'm trying to do is I'm trying to learn as well so I can learn on, you know, my client's behalf and your behalf and we can be all, all be on this journey together. So Nick's a friend, I've known him for years and I hope you can enjoy the banter back and forth and yeah, give me a handicap if, if I'm a little too excited about certain things. And if you want to help me out, go to the Apple podcast and give me a five star review if you want to punt that old pod all that review to the bottom of the list. So anyways, everybody, I am seriously grateful for your time att be participating in the journey as we're all learning together. I hope you enjoy this podcast with Nick Bradley. All right, brother, this is going to be fun. I saw your book release.
I couldn't wait to catch back up. I always enjoy our conversation. Look at. There it is.
[00:04:10] Speaker B: There it is, two years in the making and dare I say, a non AI written book. Ryan.
[00:04:16] Speaker A: Oh, what? You don't have the M's? What is it? The M over there are a few.
[00:04:22] Speaker B: Dashes in the book and I was looking at it the other day thinking people are going to think this is AI written. I can assure you this is not. This is. This has taken two lots of editing. I did get some editing help because I just was trying to make it too bloody perfect, which is one of my traits. But yeah, it's fun for you. There's some good fun bits in it.
[00:04:39] Speaker A: I'm so excited. So much to catch up on because you're have moved or about to move you you like after our last podcast I had like many people reach out to me and text me or direct message me saying sounds like Nick convinced you to have a dog walking coaching business and to niche in oh that's so hilarious.
[00:05:00] Speaker B: I remember that. Oh and of course you did it right. You now have a dog.
[00:05:04] Speaker A: Yeah, exactly.
I pivoted man. I pivoted hard to Nisha. No so maybe it would because we were just catching up. What I what I thought I would do Nick is I'll give you a cliff note of like where I've gone and come since our conversation because you and I have similar business models. We we target similar the same kind of profile I think there and as I have been focusing on my program I become more clear of the ideal client profile that I that I am targeting and what I'm trying to solve for and I think it's different from the desires to a certain extent. There's going to be a Venn diagram overlap but I think it'd be fascinating so we can talk about the kind of the coaching and like our clients your book and then I want to, I do want to talk about private equity, the state of private equity, where that's coming, where the money's coming from, valuations. So there's a lot to cover. But just maybe as a cliff note. So like my program, the ownership operating system that I've landed on for the owner operator, that hyphen is really important that so it's not VC, it's not PE back companies. They're all people and I've got 16, 17, one on one clients right now working on a scale in the group program and I've labeled it the ownership operating system that hovers on top of eos to take the ownership's goals of their time, what they want to do with their role. So everybody essentially wants to get extracted out of their W2 income and they want a path to that while then building out a professional company so they can keep it and then look at it as an investment. Then the cash flow so they can get their cash flow from ownership distributions and have a line of sight for that while focusing on the valuation growth tied to their net worth target. So looking at the discounted cash flow, then the multiples and then you know a potential strategic and how the cash at closing the way I've got it nailed down now is with my three lenses of valuations, Nick, the cash at closing should be Minimum after debt and taxes, the discounted cash flow, equity valuation. So that's like their hurdle rate. Like you have to like otherwise keep the business and like really thinking about it as a capital allocator. Companies are between 10 and 50 ish million. I've got some of that are way outside of that, but that is just more of an anomaly. Anyways, what I've learned about my like the clients that I love to help Nick and that are, that are having a lot of fun is like they're really focused on that extracting themselves from the operations and running the company from the boardroom.
I have some that are going through a transaction. But I've realized, Nick, even though like you and I have been talking about deals since the day I met you, I actually don't want to only focus on deals at all because I love the building stage and the freedom stage. Like I got clients that are truly not working anymore and there's, you know, running the company from the boardroom. And what I want to do is the moment because there's still this big gaping hole where like the moment someone like, I got a couple clients, you're like, I actually want to sell to a third party. So not an internal, not an esap, like I want to go to a third party sale.
It just shifts the conversation. Due diligence library, get your team advisors, tax planning, deal structures, investment bankers, like all that stuff. It's just a wildly different track than the build to get out and run the company from the boardroom. It's just this different path. And so that's where I think there could be some overlap.
[00:08:20] Speaker B: Where like there is a little bit. There is a bit. I mean like, I think, I'm not sure if we talked about this last time and I'll jump in, I, I, I talk about those three layers of exit. Right, I know, I know you don't use that word as much as I use that word. In fact, my book's called exit. Familiar.
[00:08:33] Speaker A: I know, I know you went in, you owned it, I love it.
[00:08:35] Speaker B: But no, I talk about the exit the chaos, exit the, then exit the business. And what you're describing there, as far as I'm concerned, is exit the operation, meaning I'm not there running the thing. As you said, I'm at the boardroom.
I personally think if you are going to create freedom and financial independence, I think we align on that. You have to go through the layers.
Whether you choose to jump off at each point a different thing. Some people I know, they like to exit the chaos but they like to still run the company, right. And, and they still want the same things. They want cash flow and they want the ability of choice and options. Sometimes people just don't want to run the company. They realize that they can bring other people in. So there's different things to it. My. I think the thing that probably is slightly different in terms of how we think of it is I love to work with people who want to sell to a third party. So.
[00:09:24] Speaker A: And that's why I think you and I as like our differences are very.
Yeah, it's the same person, but it's like the game.
[00:09:31] Speaker B: Yeah, yeah.
[00:09:31] Speaker A: Which is super cool because like, and I'm still like, I still bet on our future that we will be collaborating at some point because like when I look at the, like I'm helping some people facilitate where like they're hiring the investment bankers to due diligence, the M and A attorney. I'm just like, if I were. Because I love the game too. But I realized that I, I love the other part more, even though I'm really good at this other part. So then I'm like, okay, like I'm doing stuff that's out of where my default passion lies, which is fascinating.
[00:10:01] Speaker B: The, the collab though. I think the collab for us. And this is the bit that I, you and I haven't spoken about maybe enough is I, when I was, when I was in pe, right. You know, I used to be the CEO, but then I was also the operating partner. Right. And I, I love the KKR sort of operating model.
Right. So for people who don't know what this is, right. When you get acquired by a private equity firm and it's usually exclusively a financial buy, it doesn't happen the same way with a strategic. Like, you know, when a company buys you, you get, you get this kind of entity that is there to help you expand the value of your business. So it's profit, it's scalability, overall value to another exit, another capital event in the future.
And that operating playbook and the team that goes in is like Navy Seals type of stuff.
And so I love that, I love the precision. It's like we're here to do a job. It's not fluffy, right. It's military style stuff. And we are here to mechanize this thing and make it more valuable. And the stuff that I learned in that world, which will be very similar to what you do, that's the fun bit. The only difference is the outcome that I'm going for is another sale or another liquidity event.
But the principles will be similar, I'm sure.
[00:11:21] Speaker A: Totally. I mean, because what you and I were talking about before we hit record was, you know, all this stuff that if anybody does what you and I do, as long as you and I have done, you're going to get the first principles right. So like we're all talking about finance, leadership, scale for the marketing, maintaining margins, getting the executive team in place. So like all this stuff becomes the foundations. But then like, what you said is like your, your passion is that to that exit where I like to stop short of that, to scale the scale my program and the exposure of people thinking like an owner. Then there needs to be this graduation that I like. I've got this vision for my coaching program, Nick, down the road where there's this path called the deal room or something like that, where then the moment, the, the moment they go, okay, because like, I get what, what these clients that I'm working with that actually do are going towards a third party sale.
What's fun about this so far is like, every one of them could articulate to you why I want to do this, how it impacts my time, how it, like the deal structure that I want, the type of like, they've, they're so thoughtful of why they're doing that, that I don't have any heartburn from like a fatherly figure or mentor to like, hey, you're doing this for the wrong reasons. You're going to get taken advantage of. Like you're ready to go off like a kid. Like you're ready to go off, get on the bus and do your own thing.
But then like, they need to then have that level of guidance where there's that place that you fit in before the investment banker.
[00:12:52] Speaker B: Right.
[00:12:52] Speaker A: Where it's like, okay, now I need to like do all of this stuff.
[00:12:55] Speaker B: Yeah. I mean, because, because we're not, I mean, we're not talking about selling a company.
Where we're talking about, I mean, the thing I love the most is, is when you get a company built to a certain level where, as I said, it's highly profitable, it's highly scalable, it's highly valuable, and you know, your choice of whether you want to keep it or sell it is up to you. Right. So, so, so sometimes people similar to you go, hey, this is great now like, why do I want to get rid of this now? I, I often say, because, you know, AI is going to disrupt you in two years, so it's probably best to get out now. But you Know, well, let's.
[00:13:28] Speaker A: I want to.
[00:13:29] Speaker B: I want to.
[00:13:29] Speaker A: Let's hold that for. Because yeah, we'll come back to that.
[00:13:31] Speaker B: There are reasons why. I mean, I want people obviously listening to this to understand I'm not just like a junkie when it comes to sort of private equity exits. There are reasons why, I think liquidating your asset when it's at the peak.
[00:13:44] Speaker A: From a capital allocator perspective, yeah, it's a financial decision for the right reasons for the economics of that asset.
[00:13:52] Speaker B: And also there's a detachment to it. So the other reason I lean on that side is not the emotional attachment to the business.
So it's like if you get too emotionally attached to any decision.
Right. Hard sometimes because you need to have some of that. But if you get too lined into that, it can make you make the wrong decisions. So for me it's about being objective as much as you possibly can be. Kind of teaching people what that means.
[00:14:15] Speaker A: I love it so tied into AI. And then I want to hear how you have framed up all these ideas in your book with your models.
So where my mind's at right now, Nick, and this is a loaded comment, but there's probably a lot to unpack that you and I can of the markets and valuations and capital. But like I.
So I have Alan Beaulio from ITR Economics my pockets quite a bit. I've become really good friends with his daughter. You know, They've got their 2030 Great Depression or if we go to Rob Paul talking about, you know, the 20, every. All these things around 2030, whether it's AI or the economic, you know, situation, the dollar, the geopolitical issues, all this shit's kind of converging around 2030 demographics. You know, all this stuff we're like, we have to acknowledge that now. It's kind of where I'm at is like to, to talk about anything and have a decision framework that doesn't talk about the base layer of like the debasement of the dollar, economics, the, the demographics where, where I've kind of got my head wrapped around, Nick is like take your business and if you want to sell it, get that figured out and sell that thing in the next 24 to 36 months or hunker down and build the Noah's Ark of cash flowing machine. So that like when I think about a cash flow machine, my, my definition would be is okay if you run it from the border, make sure that your revenue has got elasticity, pricing elasticity with your clients, you're looking at AI. Disruption and demographic issues and, you know, geopolitical issues.
From it, you're looking at your model and say, okay, I can. I know how to handle my revenue, my payroll, because, you know, payroll is going to have to keep going up with inflation. And so, like, by looking at that, and we can look at the owner's distributions, we can use it as a, you know, as an arc through the waves and the turbulence. But sitting in like no man's land is going to destroy a lot of people. But it is really coming up with a coherent, very specific plan and just making a choice, knowing that you're going to have options if you do whatever you and I are talking about. So the goal is still options.
[00:16:17] Speaker B: But.
And, you know, this, this, this segues a little bit into. In, in the book, I talk about scale to sale, as I've been talking about that. In fact, I trademarked that as a framework years and years ago. But the first pillar of that is reverse engineering anyway, right? So reverse engineering from an outcome. Now, that doesn't necessarily mean, in my mind, that doesn't mean a sale, but it does mean equity value. It does mean, if you are assessing this business, remember that the main things that drive equity value are still the profitability of the business. It's its ability to cash flow, and it's how it's structured, of which there are a number of components, right? And those same components create the same freedom and leverage that you're talking about with your stuff, right? So the point being is you create a business that's fully optimized, right? I call it scalable, predictable, repeatable or everything like that. So there's precision to that. And then if you want to sell it, you can. If you don't want to sell it, you don't have to. And that gives you the ultimate choice. Now, we'll get into private equity a lot today because my view is the private equity are not going to go away.
There is still going to be massive consolidations, valuations are going down.
But the only thing that's really changed is that the way that private equity, and within that I talk about broader private equity, family offices and all that sort of stuff is they're just having to get their capital sources from different places so they're not leveraging debt in the same way they used to. They're still doing it, but they're actually having to rely on other sources of, let's call it global access to funding and capital, of which there is a lot. If you go outside of North America and you go to other places. So that's where I think sometimes the bubble of North America and I work a lot there, as you know, people look at it, oh, look what's happening in this part of the world. Tell you what, in Singapore, Hong Kong, Dubai, where I'm going to, those problems don't exist.
[00:18:05] Speaker A: Let's talk about that.
You want to dive into that first. You want to kind of can put a container on your framework and how you're thinking about it.
[00:18:12] Speaker B: Yeah, let's talk, let's talk about, let's talk about a bit of that. So scale to sale is. I tried to simplify everything I've learned from being in PE for so long into something that's digestible for scale stage founders. So the whole premise behind Exit for Millions is the idea of scaling and selling. Right. It's not, it's not one or the other, it's two sides of a coin. So the outcome is a liquidity event, but it's what you need to do.
So in private equity, and I go back to that operating model, right? So if you're acquired by a company, by a big PE firm like a KKR or Blackstone, and I was a Blackstone for a little while, as you know, you know, these same principles apply. So the first thing is reverse engineering. So we talk about the next exit, certainly the valuation and the goal from the day we do the acquisition. Right. Like it's, it's, it's part of the, it's in the 100 day plan.
Right. Like we talk about that even down to who's going to buy us in some cases, depending on what the thesis is for the investment before you, before.
[00:19:11] Speaker A: You, before you keep going. Typical size companies like you want to just give us like the ideal client profile of who you're like.
[00:19:18] Speaker B: Yeah, so I, I work at a very, at the very, very early stages. You know, people come into my scale programs at seven figures of revenue, but I, I personally work with businesses at seven figures of ebitda.
So I want to get businesses north of, let's say they're at 1 to 2 million of EBITDA. I want to get them north of 5 million, ideally I want to get them north of 10, depending on what their goals are. Because that opens up the mid market of pe.
[00:19:43] Speaker A: Yep, yep, yep.
That tracks. What I've been telling my audience too is like that 800 grand to 2 million in EBITDA is just the no man's land. We want to get to that five and there's that big, huge no man's Land in between. Because you're not attracting the right capital sources. There's not as much. Yeah, no, I'm tracking.
[00:20:03] Speaker B: I mean it's great. And 5 million, you open up where PE will start to play. And that's a whole podcast in itself about how that happens. But it's the thesis that even a small deal is just as difficult to close as a bigger deal. In fact, a bigger deal was easier because normally with a company that's got some scale, it's got more resources and infrastructure. Right. So you know, you can look at the predictability of that model. So that the first pillar is that the second pillar is strength and foundations. And this is one where it's the optimization of what's there.
And again, this is probably where the operating piece that you look at comes into it. So like we're not going to go and do value expansion, like proper value expansion, like where we look at kind of acquisitions and things like that. We're not going to do that unless the foundations of the core of the business are in place quite often.
And this is where you see this happen a lot in pe. This is where the founder might no longer run the company.
So they might put in a scale up CEO, someone who knows how to actually take something and expand it and then that founder might get a board seat.
And quite often that's not a bad thing by the way. That can be. Particularly if you're rolling over equity in that deal and they're going to put someone in who's an expert that's kind of that bigger play.
So that's the second pillar, making sure that everything's in place. The third pillar is, is the, is the scale piece. So it's, you know, scale fast and expand value is what I talk about. And that is really the M and A playbook.
So in pe, you know, it's, and actually in strategics now it's still about creating a bigger entity through consolidation. And I don't think that's going to go away. Actually we can talk more about that fourth pillar is, I call it profit up. It's prepare and profit up. It's not just about taking cost out, but it's making sure that all of the areas of your business, it's a little bit like tightening up the screws right before you're about to go into the storm. Right. You don't want anything falling apart. So it is making sure that, you know, everything that you would have to be assessed with through a due diligence process is a hundred percent locked in and it's like doing, I call it shadow due diligence, but you're really doing a risk mitigation exercise before you go through a sales process. So all of this has happened before.
[00:22:05] Speaker A: Building like a data room and looking at all the different areas, forensic level.
[00:22:09] Speaker B: Stuff, like if you had a key person had to be replaced in the last 12 months.
Well, we need a story around that.
And the other thing that gets created in this part is what I call the transferable vision, which is sometimes called the exit story as well. But it's the idea that if I'm going to create the highest point of the multiple, I want to align that exit vision with either the entity I'm trying to attract or if it's a strategic. Knowing what their strategy is so that I can actually position.
[00:22:42] Speaker A: Yeah, sometimes you just design the entire narrative. Yeah, you just.
[00:22:45] Speaker B: Oh, yeah. Like if I'm selling to pe, I can tell you what the narrative and the positioning is going to be very different than if I'm selling, you know, this big media company to News International.
[00:22:54] Speaker A: Yeah.
[00:22:55] Speaker B: Are you talking.
[00:22:55] Speaker A: Is it pretty much like a sim? So you're doing the due diligence, you're building the SIM deck and you're just.
[00:23:00] Speaker B: Yeah, it's, it's, it's a little bit less. We're not, we're not SIM stage yet because that's going to come up, you know, more when we go into the sales process. And we.
[00:23:07] Speaker A: But it's like an internal sim, almost like.
[00:23:09] Speaker B: Yeah, it's like a pitch deck. I mean, it's quite, it's like, let's be really clear about where the value is. And the thing that you get asked. You ever sell a company to private equity? The first question without fail is always tell me the vision. And what they're really asking is, is this vision scalable? You know, or is it just something that's in your head? Because if you're creating a scalable vision that I can then invest in with my resources as the PE firm, I'm going to, I'm going to bump you up in the multiple. So, so this, so this vision thing, people get it. Oh, this doesn't sound that important.
It could be tens of millions depending on your valuation.
So crazy stuff. And then the Last 1, the fifth pillar is, is the sales process, which, which I say exit for the highest multiple. And that's interesting because I don't always say you have to have an investment banker.
I think it depends on your outcome. Like, if you are going after a strategic sale, you can if you've done everything I'm, I'm talking about, you can go and choose your buyer.
Right.
[00:24:05] Speaker A: It's really interesting that you bring this up. I got a client right now where we are choosing not to hire an investment banker. We're using an M and A attorney, one of my old partners actually, because it's like we have a list of 30 people. Let's build a do. I mean it's. And this is back, back to like why I think there's so much collaboration opportunity because like I'm now doing this stuff over here, kind of guiding this process and I'd, I'd rather be doing.
[00:24:26] Speaker B: Other things we should do. I think we should do like a two day event like where we bring this together and just say it's called this event and do it that way and just kind of get people to come to it. Because I think that'd be, that'd be.
[00:24:36] Speaker A: That'D be a blast in Dubai. Let's get there.
[00:24:38] Speaker B: Oh, that'd be fun. Okay, we'll talk about that offline. Everybody wants Minnesota.
[00:24:41] Speaker A: Dubai. What do you, what do you think.
[00:24:42] Speaker B: Would be better in Dubai? There we are. So there we are. Yeah. So we can, I mean, I think at the end of the day the five, the five sort of pillars of the framework, if you like, are relatively easy to understand. But it's the depth. Like in the book, I go into it in a lot more detail and go through the exact things that you need to be thinking about in each of the stages. But it is designed for people who are wanting to, to one day sell their company, even though there are things in the book that are going to help them. Regardless of that.
[00:25:10] Speaker A: What I like about, I still remember where I was at when we, when we had our first call. I was at some co working places like six, seven years ago. And like we started talking about like you're Ironmans and working out and all this stuff. And what I think about like what you and I continue to focus on, where we, what brings us joy is when you say it's the, you know, it's simple but it's. The precision is all this can be related to health, man. And like all the discipline that you and I have with health, you know, like if you read Peter Atia's book outlive.
[00:25:39] Speaker B: Yeah, yeah, yeah. I, I just started to actually as of this week started trt.
[00:25:44] Speaker A: Have you really.
[00:25:45] Speaker B: Okay, so that's going to be interesting. But that, my, my tea was very low for whatever reason, so. Yeah, so I'm, I'LL let you know.
[00:25:51] Speaker A: How I've never, I've never actually looked at my tea and I.
I'm taking all of Andrew Huberman's recommended supplements from Momentous. I had GPT engineer an entire supplement stack with Momentous based in my blood work.
Anyways, so like I think why this is correlated is it's simple like Peter's book. It's a 500 page book that tells you to sleep eight hours, eat well, go move.
[00:26:17] Speaker B: Like hard to read, but I'm going to be honest with you, I like it but I had to get the Cliff Notes on it. I deliberately didn't want my book to be like that. So. So for everyone who's looking Peter a tears books like this.
[00:26:27] Speaker A: Yeah, exactly.
[00:26:28] Speaker B: And mine's like, mine's like 250 pages.
[00:26:30] Speaker A: Because I'm not going to lie, I'm working on my book and I'm probably going to have in the TIA book because it's like, because I like, I want for you know. But I think more this is all related is like I love working with the high performers and I think you do too because it's like let's not f around, let's get shit done. Let's actually do this, let's actually go. We have to get the goal. Like all of this stuff that you and I talk about is simple.
It's hard to execute because it's discipline.
And where Peter's book comes in, it's like here's the why if you don't believe me. Here's all the proof. And that's what I, I find so much joy in just proving the why even. And that's where it's keeping it simple, stupid, but then also showing the why. But I think you know, I wanted to relay that because even though you are saying it simple, I from knowing you as long as I've known you, you're not cutting short, you're not shortcutting things. And I think that that's the biggest thing that I try to do with my podcast. I think you do too and all your mater.
This is not easy to execute and anybody that tells you otherwise is fucking lying.
[00:27:34] Speaker B: It's really hard.
I think where again if I lean back to my PE stuff, right. This is what we would talk about.
Simple strategy, precise execution.
Right? That's it. Right. So what we don't want. And this is why I deliberately, because I could have gone down the, I mean some of the feedback in the early edits of my book where this is too technical and there Is a bloody glossary in the back, for Christ's sake. Right? Because there's terms there that I had a PE guy look at it over the weekend. He's like, why have you got a definition of a cap table in the back?
I'm like, you'd be surprised that people don't know what a cap table is, right?
[00:28:08] Speaker A: How about cost of capital? Like, heads explode, right?
[00:28:12] Speaker B: I think I've got that in there. I don't know. I need to look. But anyway, there's at least 10 pages at the back, which are like literally the glossary. So it even defines what a private equity firm is. Jesus.
[00:28:20] Speaker A: Awesome.
[00:28:21] Speaker B: A retrade. You know what? A retrace. Yeah, right, but, but at the end of the day, right, like, I want people to understand it to a certain degree what this doesn't do. This is not going to make you a master of execution, right? This is not going to help that. This is going to tell you how the playbook works. But underneath the playbook is, is where the game is really played. And actually it aligns with, with your stuff as much as it does mine. Because the, the one thing about love about pe, right, I love this, is that that level of, of operating discipline and operating excellence is just. It's like, as I said, like Navy SEAL ninja level stuff.
[00:28:57] Speaker A: It's like, right, which on that note, I like. What I'm certain to see with some of my clients is like, as people have been executing now for 18 months that have been working with them, they put in the foundation, the financials, their, Their goals, all this stuff that they've been working on. We get to my, my third phase. So it's plan, build, elevate. And the plan is all the owner's goals and the setting and the owner's rhythm. Then the build is the financials, the predictable revenue and scalable margins. And then the, the last phase is elevate is all about the leadership team. So when people get to this point where you build, it all comes down to the leadership team. And I think, Nick, what's super fascinating and the opportunity, as we get to the private equity discussion, people that are in private equity, you know, because you sit, you have a very graceful way of saying consolidation. Well, private equity as an industry asset class is going to be in for some turbulence. I think that the people listening in that are owner operators are going to be able to benefit from that from multiple angles. One is that these executives who are promised all of this upside and it doesn't come to fruition.
I've I've got a couple clients now. One hired a CFO from 10 years of private equity. Another one's looking at a CRO, just hired a CRO from that.
These executives who also like that discipline and that Navy SEAL stuff, but they are sick of the shenanigans of PE and they're like, hey, an owner operator that has the same level of this discipline can be a really fun place because they understand the compare and contrast, but they don't want to go to somewhere where it's like, I mean, a couple of my clients, like, they wouldn't have been able to hire that executive had they not put all their shit together.
So it's really, I think the way.
[00:30:28] Speaker B: To think of it though is that I think this is important, right? And I, I sort of say this is.
And people have to buy into why this matters, right? But you don't have to sell to a private equity firm to operate like one, right? So what do private equity firms do brilliantly? Well, as you said, they allocate capital, they buy companies, they optimize those companies to make them more profitable and valuable. So if you've got a company, why not do that anyway, right?
[00:30:57] Speaker A: And what's really cool is as I've gotten to that, because I, behind the scenes, I say it's essentially the family office private equity playbook just for you as an owner operator. But what's fun is like when they get to see their cash position and their, and their cash flow from distributions in the future, the benefit is you get to decide what to do with that, not someone else. So if you want to overpay your people or if you're willing to give people more of a chance, like the IRR that we're trying to get is based on their goals. So if you're willing to take a little bit less or you're willing to just. It's literally your choices as a person, you get to then impose your values and your desire of your fingerprints onto the world. And just being aware of like, what's the pros and cons of how that impacts cash flow. Valuation is just up to them, though, but that the way that they get that empowerment is through what you just said, which is do the same thing that everybody else is doing that know how to do.
[00:31:47] Speaker B: I mean, I, I simplify. I like to simplify, right? So my, my view is value, right? I've got a diff, I've got a different definition of value to most people, right? So for me, it's, it's, it's the profitability, as we said beforehand, you know, designated as. As free cash flow, right? What you can. What you can convert into cash, and then it's the scalability of your business model.
Right now, if you think about those two things, that's, that's, that's all a valuable company is, right? The ability to. To create, you know, significant cash flow and the ability to scale to whatever level is required and, and more often, that's it. Simple as that. And if you understand that, you can determine how much cash and you can determine how much scale.
That's it. You know, and, and sometimes people want to build an empire from it. Sometimes people just want to, you know, create something that gives them freedom. That's the scale question, because it's about obviously creating something that is not reliant on any one entity.
[00:32:40] Speaker A: Yep. I love it.
[00:32:41] Speaker B: So that's. That's a. That's. That's all I focus on really is. Is doing those two things, but with, you know, if you want to jump in the arena over here and now play that. You've. You've built this thing. Do you want to play with it, do something with it? And that's obviously the exiting piece and the, and the kind of liquidity event.
[00:32:57] Speaker A: I love it, dude.
[00:32:58] Speaker B: What do you.
[00:33:00] Speaker A: I'm curious on what you're seeing in the M and A marketplace for buyers. What's going on in private equity. Valuations, capital sources of capital. I mean, there's a lot of stuff within that that you and I can riff around and within. We don't have to take it in a certain order. I'm just kind of curious because, like. And the reason I'm curious on what you're doing, your perspective is, Nick, is I. I've had people on the podcast where, like, I wanted to do these quarterly economic and M and A updates. And like, I find even investment bankers, even though there's a bunch that I like, there's always this, like, wrapper around it. Like, I just want to hear the truth. Like, I want to hear how things are actually going. And so I'm curious on, like, what do you.
[00:33:41] Speaker B: Yeah, well, let's. Let's tell that I definitely won't be. I mean, obviously the investment banker side is that there's a bias towards the transactions. You know, that's how they get paid. So they're going to talk about that.
I've just come out of being in a PE firm for a few months, and I wanted to kind of jump back in the water a little bit and see if I liked it and I didn't like it.
[00:34:00] Speaker A: You were the fog before it.
[00:34:01] Speaker B: You were like boiling gold or it was boiling but it wasn't like lukewarm in the Bahamas. It wasn't that water.
But I can talk to what I am seeing in that world.
I mean one thing that's interesting is access to debt.
Certainly from my experience still quite simple to get. Not as tricky as people were making it out to be. Now cost of capital, super high.
But if you look at the ability to be able to buy companies at scale and buy EBITDA even when the cost of capital to do those deals is high, still making a lot of money. I'll give you an example of a deal I was working on just to kind of make this come home. Right. So we're doing a roll up. I won't go into the specifics of it or anything like that, but we were buying three companies each doing around about 2 million of EBITDA. In fact just over. So the, the, the combined was going to be about 7 million of EBITDA buying each of those companies for about, around about three times.
Okay, well first of all how did you.
[00:35:06] Speaker A: Well negotiated. Well that's where, that's where the gap.
[00:35:08] Speaker B: Oh they're rolling over equity as well that we are selling the dream of the second bite. So there's a, there's a piece here but that, that's was a rolled ever.
[00:35:16] Speaker A: Overall equity come after the three multiples.
[00:35:19] Speaker B: It comes back to what you said beforehand that a business that's in that sort of, you know, let's say 500k to 2 million of EBITDA. Yeah, they might be able to sell for 4 times, they might be able to sell FOR 5 times. But if there isn't a marketplace, it's a supply and demand thing. If there's no one up the chain to buy it, you ain't going to sell it.
[00:35:39] Speaker A: Remind me. I've got a couple deals that I'm working on that are around 2 million in normalized EBITDA and I want to talk to you about that but keep going.
[00:35:44] Speaker B: Okay, so in that situation, yeah, you can sell them. It's not to say you can't. It can be quite tricky. Usually people are concerned about what they're buying. So it's really just going to be a bolt on into some sort of other roll up anyway or it's going to be some sort of strategic sale generally speaking. Right.
In this situation though, what we sold to those business owners because it's at a very specific niche in A very specific geography in North America in one.
[00:36:10] Speaker A: Part, like complementary lines of business or.
[00:36:13] Speaker B: Like all same business, exactly the same. So it's horizontal. But you can get such economies of scale. It's in a manufacturing type of thing. So again you can consolidate.
So in that situation, right. So we then said okay, we're at 7 million of EBITDA.
Okay. So all of a sudden and the valuation on that was around about 6 to 7. Okay, could argue a bit more. But that's what we, what we, we basically went out there and started talking to the PE firms about. So, so we then said okay, well how are we going to fund this? And we had to put in around about. So let's, let's play the numbers here a little bit. So we've got seven threes, 21 million, something like that. It was a bit more actually because it was about 25. We had to put in 10%. Anchorage.
Okay. So we had to put 2.5 million in. But then we went out there and spoke to a lot of debt financing businesses specifically to kind of raise that. And we had five offers really quickly off the bat.
So we're talking north of 20 million at an interest rate of around about 15%.
[00:37:10] Speaker A: What was the AM schedule on that?
[00:37:12] Speaker B: I remember of the detail on specific.
[00:37:14] Speaker A: Because I was going to say because that's, this will relate to my story because the deal structure and the cost of capital becomes a challenge. If It's a standalone 2 million, the EBITDA company. That's why I want to come back to. This is super fast.
[00:37:26] Speaker B: Sure. But what we did do when we put it through our models and again we looked at kind of how we would aggregate. So obviously we had the payment schedule on the debt, right. And then we had kind of how it was, I think it was over five years.
I can't remember exactly.
[00:37:43] Speaker A: That's pretty, that's pretty tight then for that cash, cash flow. So that obviously the economies of scale become important to be able to service that. Because like dude, I talked to a Banker recently buying 7 million of EBITDA.
[00:37:54] Speaker B: So, so here's the thing, right? And we're not looking at, you know, even with a good following in, in two or three years we, we saw that close to doubling, right. But, but here's the thing, right. We didn't do this, but the equity value of that roll up because of the marketplace was opened up, as I said, was, was like six to seven times. So we're looking, we're looking at that sort of 35 to probably 45 million on average valuation offer 21 million valuations. So we could have technically probably had.
[00:38:25] Speaker A: To do a little bit arbitrage there.
[00:38:26] Speaker B: Yeah, we could have flipped it a double. Right, right.
[00:38:29] Speaker A: And so just through the effort of combining the twos into the seven, let's.
[00:38:35] Speaker B: Say we have a penalty on the debts because we're paying that off early, even though we didn't have much on that. Right. Even if we had to do that, we're still making 10 to 15 million dollars in probably a six month window.
[00:38:47] Speaker A: Right.
[00:38:48] Speaker B: So I bring that up because people say, oh, private equity, you know, hard to get money, all this sort of thing. Well, maybe in, maybe in the traditional ways that PE operate. The PE is not operating in a traditional way anymore, starting to do different things because the, even the institutional investors are starting to be a bit more flexible around it now.
[00:39:08] Speaker A: So let's, let's put some contrast to the situation that I multiple that I'm dealing with that I think you're highlighting an insanely important topic here, which is also why, why the deal side of things. And it could very well be because of the size of the market I'm working on is just not as interesting as much because the expectation gap is so freaking ridiculous. And like, and how much education I do on valuations and deal structures and net debt, I mean like, dude, there's not more education I could put out there to try and align these expectations.
[00:39:40] Speaker B: That's why, that's why like, let's play with the numbers. Why did I say three times? It was a bit more than that, but it was between 3 and 4. But either way, right.
Those guys aren't going to go and get. It's not worth them selling their business. Even if they could get a little bit more, they're still going to be, they would have to scale that business, their own individual businesses closer to that 5 million EBITDA.
Or they just, it's almost like a federation. Let's all come together, we'll orchestrate it. Right. And this is what a lot of the family offices are doing now. They're going out there and saying, okay.
[00:40:11] Speaker A: Let'S bring you, you, you bolt it all together and then yeah, let's work.
[00:40:14] Speaker B: Out what you need. We'll obviously it gets a bit technical in the legal structures and how that all kind of works. And of course the multiple arbitrage they don't all get. So this is the interesting thing, they don't all get the bump on the arbitrage. So if you could sell your business just for simple maths for three times that in a group format, it's going to sell for seven times. You're not going to get the seven times.
You might get five times.
And the extra two points per business goes up to the SPV or the entity that's managing the whole thing. But if you didn't do that deal, if you had to do the deal yourself, you'd get three times. That's like, oh, I think, right.
[00:40:53] Speaker A: All that makes a ton of sense. And the challenge is that it's the, hey, I'm, you know, on 2 million, I'm worth 5 to 7 times. And like you started off right. And like, this is where I, why I spend so much time, Nick, walking people through the financials, showing them cash flow from operating activities, working capital, debt, taxes. Like this, this is cash. It has like, there is normalized Z, but you could go through all your ad backs and all that stuff. But like to get to the 2 million, it's 2.5. But like a buyer has to fund this whole thing and if it's going to be debt and they're going to put this much debt on it, it doesn't cash flow. So I'm trying to mathematically show people that their expectations are not realistic.
And then what? So here's where I struggle, Nick, and I'm curious what your thoughts are. Is like, where I, where I struggle because I'm like inherently just a ridicul, ridiculously optimistic person. Like, show me all the adversity. I will swallow the reality pill and then just go against it. It is what it is.
But like, I hear myself explaining to people and I'm like the Debbie Downer. And I'm just like, but then that's why I show all my education. Because I'm like, see, it's not me, it's just math. And then it's like, well, you know, all these people say like. And I listen to this podcast and. Or there's this investment bank and then the investment bankers and the brokers and then like the attorneys and the wealth managers and all the people in the Exit Planning Institute who don't know about valuations. Like, everyone's like, you can get seven times. And I'm just like, this is a disaster for expectation setting. And it's just so frustrating to me because I want people the moment we can, I call it the step on the scale moment you step on the scale and it doesn't lie.
Now we can do a plan to work against against it. And then just like, it's just like you Started it at three times. And like in that. That's coming from a buyer who's looking at math. That's like everything you just said just makes sense. And I'm trying to explain that to people.
And it's either self talk, where I think I'm too much of a Debbie Downer, or like it's. I don't think it's just self talk because I'm watching people's reactions and like this disbelief.
[00:43:02] Speaker B: I think what I say to people is this, which is similar to your sort of optimism, is like I say, as I said back to my first pillar of the book, reverse engineer, I say, what's the number?
Right? And let's say they make up a number, right? 20 million. And their business is doing, say 2 million of EBITDA right now.
My response is, well, absolutely, let's do it right.
[00:43:26] Speaker A: Same here.
[00:43:27] Speaker B: Because I'm not.
[00:43:28] Speaker A: Because it's tomorrow, Nick.
[00:43:30] Speaker B: But I'm not brokering the business, right? So. So for me, it's value expansion. So I'm in there saying, do you know what? It could be 100 million if you want it to be. Right. Like, I don't believe.
[00:43:38] Speaker A: How do you lay around the timelines and the expectations? Because, like, I'm tracking you and that's what I do too.
[00:43:43] Speaker B: But then it's not going into. I'm not, I, I specifically don't work with businesses who come to me saying I want to sell my business.
In fact, if someone comes to me and says it like that, and obviously I sort of frame and say, well, what do you mean? They'll go, oh, I want to sell my business next year for 10 million bucks or whatever, using your math, I'll go, that's not what I do.
If you want 10 million bucks, if that's your number, and usually I try and push them up because I do the same thing you do about taxes and everything else. I'll say, because it's a wealth number, right? What sort of money is going to change your life? And I say, let's start with that and then let's look what's realistic. And then I can tell you the timeline, right? I can give you an estimation of what needs to happen.
[00:44:26] Speaker A: You're. You're helping with the timeline.
[00:44:28] Speaker B: Yeah.
I'll sit there and say, listen, if you want to go out there and buy three companies this year and you've got the resources to do that, or we have to go and work out how you can do that, you can probably achieve it certainly within 24 months, like you know, the sales process always takes somewhere between six to 12 months. But like, you know, if you did a year of M and A really hard at it and bought two companies and added an extra one, one and a half of EBIT to your number, you know, you're gonna, you're gonna smash your, your, your exit number. So, so that's what I say to people. And a lot of people just look at me blankly and go like, well, this is, this is the private equity playbook. This, this is everything we're talking about is how P talks. It's not like, you know, no one gets scared by a number. It's like, let's buy lots of companies.
[00:45:13] Speaker A: Yeah, exactly. And yeah, it's back to, if you want to run an ironman, just give me, give me the, we can back into, like, tell me the goal. We can back into the timeline. And then, and then it's understanding what's that journey look like? Does it feel good for you? Because I spend a lot of time talking about the experience of that journey. Like, what do you want to. That's why I've got that time component. Because that time, what kind of level of stress, what kind of lifestyle you want, then we layer on then, okay, well if you do all that, like, that will impact your cash flow and potentially even your equity structure. And so it's no super helpful because like I, I just, and it goes, and it's giving you some context like why that exit conversation has been so frustrating. And like, I just want to, I.
[00:45:57] Speaker B: Can see well, but I do like, you know, we talked about our models before we press record. Like, I, when I work in a partnership way, I always start off with a strategic consult, a paid consult, right? And, and that is, and that's, that's pretty deep. That's four hours, right? It's deep, right? Like, it's not a one hour. Let's talk about your business. That's a four hour boom. We're going deep, right? And there's two, there's two outcomes, Clarity and a roadmap, right? So I'm going to tell you exactly from the information that you're giving me and what we talk about and discuss, right? It's a workshop type thing. We're looking at stuff. I've looked at stuff. This is the issue, right? Based on what you're trying to achieve. This is the challenge, right? This is what we need to fix if you want to get to this.
And then at the end, if, let's say we finish that consult, we say, okay, here are two or three things that need to be fixed. Right. Here's the goal, because we've talked about, what would it look like if you were going to kind of retire one day when someone's paid a lot of money and then I sit there and say, okay, that's going to take about three years.
So do you want to get to work?
[00:46:58] Speaker A: You're giving them actual expectations or was.
[00:47:01] Speaker B: That not really what you wanted to do? Because that's, that's what it's going to take. And sometimes people go, oh, that seems really difficult. Okay, well, maybe now you know what it takes. You know, if you want to run your lifestyle business, then go run your lifestyle business. But that's at least now you understand if. And sometimes people actually, interestingly, they'll do a consult, they'll be like, holy, like, wow. Then they'll go away. And then they come back and go, I've now made the decision. I'm ready. Because they have to, they have to.
[00:47:28] Speaker A: Think about it, absorb it.
[00:47:30] Speaker B: Yeah, yeah, it is, it is a journey. And you said you got to enjoy the journey. And sometimes people have to ask something of themselves and their identity before they're ready to take that. That's cool. I think that's great when people do that because they've really then thought about it. And then when they come back to execute, they're like, I, I've now got my head around this. I'm ready to go.
[00:47:47] Speaker A: And I think how both you and I are doing similar things, that it sounds like I could do a better job at being very well. It's interesting because I'm not on my scale of the group program yet, so it's all the one on ones. And I've known these people for a long time, so we've got good relationships. And I'm acting as the partner in the board, as you're referring it to.
But as I'm going to the next stage, it's helping people see that level of clarity that fast. So that way it's like, okay, because wrapping your head around what is it going to take? Then leads into then the uranized optimism, which is you can do whatever you want. And I think that then goes into, as you're talking about the cost of capital and like the private equity markets, like, all of those things are just like, I, I played soccer. It's like, is it raining or is it, is it sleeting out? We're still playing soccer. This goal is still to win. So the, the conditions have changed, but it's not Changing the sport, which is what you and I have internalized, is the sport. And like, hey, you know, debt's a little bit different. They're going to different, you know, private debt markets versus commercial endings, or it's a combination of both. Or here's where you got to get the equity. It's coming from family offices and now over Dubai instead of, you know, Ohio's teachers pensions fund. It's like, whatever, like, fine, I'm just going to move, you know, the puzzle pieces around. But like the, the equation's still the same, so I think it just mitigate or it mutes the stressors of those different variables changing because the game's still the same.
[00:49:14] Speaker B: It is. What I've tried to do and maybe still, still in development, I think with how I work with people is I've tried not to introduce too much complexity too early. Back to my, my love of simplicity, right? So my, my group program does not talk about exiting, right? We don't, we just talk about scaling, right? We talk about the principles of, of, of, of growth, which we call pipeline. We have process, which is obviously people and systems and operations, and then we have profit, which is really about cash flow. But we don't talk about exiting, right? And then at the very end, so, so that's, that's the kind of group at the other end, at the extreme ends, right, there's this, the middle piece is where the consulting stuff happens. We have the high value exit accelerator, which you have to be wanting to sell your business within 12 to 36 months. It's, it's, it's not, we're not here to talk about anything other than getting you ready to sell right now in that situation, they might still get a rude awakening as to what their valuation is, because we do the valuations and all that, but it's unapologetically about that outcome, right? It's not to scale, it's not to do anything. It's. You want to sell your business for this number within 12 to 36 months, we're going to assess it and do the valuation. We're going to show you exactly what you need to do and we're actually going to run the sales process as well. If you want us to do that or lead that team, the deal team, who's going to do that for you.
[00:50:34] Speaker A: So where do you find more joy and that, that or the first.
[00:50:39] Speaker B: I don't, I don't get a lot of joy in the, in the, in the, in the scaling piece in terms of.
[00:50:43] Speaker A: This is why I Think you and I should collaborate. Like what you just. So you call it the high value accelerator, exit accelerator, whatever you said. And that's the one thing that I was saying that I know I need to have this off ramp for my clients and I love doing the other thing.
[00:50:57] Speaker B: Well, I mean there is, this is how I, I look at the journey, right? And rightly or wrongly, and I think there is this. So, so I think and, and I, it could be wrong. I've been doing this for a while. However, right. I think that when business owners go, let's talk about some figures, I like to talk about scale stage versus startup instead of seven or eight figures, right. So, but, but you know, a lot of people, they get to scale stage which often starts around that seven figures of revenue. Not always, but it usually does. Right. And they still operate like startup founders.
And, and for me, like that's a really painful transition. And I kind of think, well, I'm just going to introduce you to the concept of stuff scaling. Let's talk about what that is. Because they're like, I still want to do this, I still want to do that, whatever. And so, so for me I sort of, it's almost like putting training rules around the business, right. You ain't going to exit it unless you know how to scale it. So let's, let's, let's do that. Right. The bit that I get the most excited about to your question is when someone's kind of through that scale journey and they're now starting, they've started to build like a pretty good foundation. That's why I talk about the 1 million of EBITDA. Like, you know, to get to 1 million of EBITDA, you've got, you've probably got somewhere.
[00:52:04] Speaker A: This is where the, this is where I think you, you, you could be wrong. Quote, it comes into play because I'm working with people in that whole spectrum. I've got clients from 1 million in EBIT to I think my largest is 7.
[00:52:14] Speaker B: Yeah.
[00:52:16] Speaker A: The draining wheels are on all of them.
[00:52:18] Speaker B: I, I, I find, you know what I like about it? This is going to think they got more money to spend.
[00:52:22] Speaker A: So no, no disagreement there because the guy that I can bring more.
[00:52:26] Speaker B: Yeah. And this is the other thing I say like I go because part of my model in the middle, right, the sort of operating partner model is I'm there as your strategic partner, but I'm going to bring in the resources, right. So if you need fractional CFOs or even growth or whatever else, we're Going to invest, baby. Because in private equity again, that's exactly the wrapper.
[00:52:47] Speaker A: You got to go the Jacob Burn, the ebitda.
[00:52:49] Speaker B: Yeah. So I'm like, hey, let's bring in the resources to do this properly. And that's where it's the most fun because that value expansion, that's where you can do really the acquisition stuff is really fun stuff.
[00:52:57] Speaker A: Okay. You and I are okay. Okay.
[00:52:59] Speaker B: That's where. That's what I love. So at the exit. I like the exit. But you know what? The exit sucks if you haven't done the cool value expansion bit in the middle. Right. So that, that's where, that's where the engine room is. Yeah.
[00:53:08] Speaker A: Okay. I'm tracking.
[00:53:09] Speaker B: All right.
[00:53:09] Speaker A: To map what my. My stuff onto that thought process. So because I have a couple clients that are making a lot of that money and like I said to him recently, I'm like, this is so fun because everything that I have suggested in the last 90 days was done immediately.
It was just like. And so my endorphins are going through the frickin roof. It was just like, this is fun. But like.
So yes, I understand why you like that because I also agree with you. Okay, so let me back up to then that first part, I think where my personal mission and like the creative journey that I've been on is I want to help figure out how to introduce the people to the training wheels foundation of the scale part using the talking more type of coaching model that you and I have both been introduced to my kind of like mission and like the, the, the be. It's just a personal behavior of like if I can figure out a way to scale this idea to help a lot of people figure out how to tackle it. The ownership red pill, Nick, it's like, okay, wrap your head around all of this and then start doing this stuff. Because the people in that stage that you and I are talking, we'll call it the 800 to 2 minute normalize. You've got a cash as a constraint because a lot of times the distributions is tapping up against their lifestyle. So they have to have lifestyle choices where it's like the CFO that's 250k along with the strategic plan along with the executives are all going to come out of your pocketbook or you have to grow. So it's usually just you have to grow a little bit longer. And so I like that because of how much help I can give them.
Even though personally, like if I'm going to personally be involved, the people that are like executing because they got the resources is also fun. But what I think could be an interesting way of collaborating is like, okay, because like that bottom part, like I just find so much joy in like helping people that can go almost kind of self execute because they can't afford anything. Like when I say I shouldn't say it like that, it's like there is an absolute constraint where like you can't do A, B, C and D at the same time. There has to be an order. And that's why my, my ownership operating system has this escape velocity swirl that says you're actually taking the constraints of your time, cash flow and equity as a constraint to then prioritize what to work on.
And I've got that rope. So anyways, I just, that was helpful because like I agree with you.
[00:55:34] Speaker B: I think what's interesting is if you think of it as three dimensions, right? So you've got the scaling bit, right? Then I think you've got what I call, I call it the value expansion bit. But that's kind of just my PE language. But it's kind of where you do kind of sexy stuff with profit and value M and A. And then you've got the exit, right?
[00:55:51] Speaker A: Yeah, I like that.
[00:55:52] Speaker B: I like value expansion to exit. Like, I like that. Like you know, you've got, you've got, you're still on the scaling journey, right? Because it's kind of like a bit of a Venn diagram. You're still scaling, however, you're kind of more advanced scaling, right?
[00:56:04] Speaker A: Yeah, yeah, yeah, yeah. This is so helpful.
[00:56:07] Speaker B: And you kind of, you've probably, and this is the, this is the cool. But you've probably exited the operation or you're in the process of building out your leadership team. All that's kind of now there. And you're thinking, I don't have that much to do anymore. What do I do? And I'm like, okay, now we get serious. Now we're gonna, now we're gonna kind of go companies. This is why.
[00:56:25] Speaker A: Okay, so my. Yeah, yeah, yeah. This is why my thesis. I, I think there's. There, that's where the collaboration opportunity comes. Because I like, for the content challenge for me is delivering the content and the operating system for the ownership on that bottom part to.
In the middle of the scaling. And that's where the Venn diagram is like for sure. Yeah. And then hand that off and some.
[00:56:49] Speaker B: People might just hang around. As you said, like in the value expansion doesn't always mean an exit. It just means creating a more valuable Business.
[00:56:55] Speaker A: Well, and if I were to layer.
[00:56:56] Speaker B: Yeah.
[00:56:57] Speaker A: And if I were to layer on, like, my personal passion is. So yours is the scale to the exit where like I really resonate with like Tugboat, Evergreen Companies, like, like lifelong, like, and so like my passion would be, is create that machine and then keep that machine ongoing. Conscious capitalism, Bo Burlingham, Tugboat, like, all of that. Like, that's where I, I've got such a, you know, I lean towards ESOPs and like, you know, internal buyouts and stuff like that. Not, not, not that I have a bias for anybody, but for my passion of where I like to work, it's towards that stuff. So it's almost sort of like if you were to have like this, why it's like the, the foundation is the same, then you have that scale part, but then you're moving towards that third party sale. And then I'm like, hey, let's keep this thing around as a perpetual flywheel.
[00:57:50] Speaker B: Do you know what's interesting though, is when, where in that journey does someone make the choice? You know, at what, at what stage? I don't know the answer to this. I'm just putting it out there, right? At what point do you make the choice? Right? Because there's a bit like sometimes I think, you know that thing about he or she who chases two rabbits, catches none. It's like, oh, do I, do I keep this as a kind of thing that's going to be with me forever? Not forever, you know what I mean? But like, I'm going to keep it versus I'm going to sell it. Oh, I don't know, what am I going to do? I think that can be interesting as well. It becomes there is a point sometimes I find when someone's really clear on their outcome.
[00:58:24] Speaker A: Well, agreed. And I. Okay, so this is why I'm, I think a lot of the thoughts that I've had about you and I and our practices and our expertise and where they all fit are actually more true than I would have actually thought when we started this call. Because I think soon, like, you and I both start our programs with like, what the hell do you want?
And like, because it has to be like that, reverse engineer your first principle. It's like, if it's going to be to keep it forever, we have to like, identify that and then reverse engineer it, which will impact the strategies, how you use capital, what you do with the distributions. Like, it will dictate everything. And I lean more towards, like, let's figure out how to get you out of the operations, but keep the entity around for your community, for your people, for like whatever it is. And then you lean more towards the third party sales. But like all of the in between shit's the same. But like the talk, like where I, where I really bumped up into this epiphany, Nick, is that the talk tracks of like selling to a third party. Even though I've been a part of dozens of transactions and I think I'm fairly good at it, I don't want to necessarily talk about that stuff. I would rather talk about like the phantom stock plans and the esop, or like keeping the business or what are you going to do with like, like the legacy and like, because. And I think a lot of this drives through. I've been doing a lot of reflecting of like, I would still have our family business had I known all this stuff and I would still, I, I would have liked to kept it. I would have liked to have had it still.
[00:59:53] Speaker B: Yeah, but that, but that's an important distinction because I think there are people out there, I certainly, I, I come across them when I'm talking to business owners that some of them don't ever want to sell their companies.
They want to keep them. Now, I have a different view on it as you do, based on our experiences. I'm not saying it's right or wrong, just different. So I'll sit there and say, hey, listen, no judgment if that's your goal. Because I had two guys I spoke to this month and this is interesting, actually. Both of them had inherited their companies. Fourth, fifth generation, like the great, great grandfathers or whatever else started the companies.
And you know what I found? I said this to my team.
I said, I got no way helping these guys.
[01:00:37] Speaker A: Why'd you say that?
[01:00:38] Speaker B: I can't have a conversation with them. So. And you know what it is?
[01:00:41] Speaker A: It's not why, why, why, why, why was that the case?
[01:00:44] Speaker B: Well, I'll tell you why. So I could have get. I could have got into making their operations slicker, increasing profitability, all that sort of stuff. But the vision they have is to hand the business off to their next eldest son or whatever in a better state than what they got from their dad.
[01:01:03] Speaker A: Okay?
[01:01:04] Speaker B: And that's just not saying I couldn't go in there and maybe help with that. But my experience is not that. My experience is I have this view, right? This vision. You're laugh at this. Have you seen Gladiator with Russell Crowe?
[01:01:18] Speaker A: Of course I have.
[01:01:20] Speaker B: This, this thing of like helping, helping, getting, getting someone ready to go into the Arena.
[01:01:25] Speaker A: Yeah.
[01:01:26] Speaker B: To fight, you know, in that, in that, in that, right in the ring, you know, in front of a crowd and trying to win this thing. That, that's, that's what I see. And like, and I'm like, dude, I totally. Have you seen enough? Yeah, it's like that. And I totally, you know, and. Because that's, that's the world I came from. Like, you know, that's what I was doing. Remember, I also work with Rupert Murdoch at News International. Right. So I, you know, even though that was a family owned business, they were aggressive guys. Right.
[01:01:51] Speaker A: Like deals and the movie, the show succession I had to imagine was very similar.
[01:01:55] Speaker B: Yeah, well, I didn't. That came out after I worked there. But either way, so I had this idea that we are going into battle. We're going into. You are about to face a worthy opponent. Do you want to win or not? Right, let's talk about that. Let's get that set up. And so when someone says, hey, I just want to have my business for, you know, you know, 40 years and then give it to my son, and I'm like, okay.
[01:02:16] Speaker A: This is so awesome.
[01:02:17] Speaker B: Because, like, it's probably someone else who's better.
[01:02:22] Speaker A: I'm like drooling for that because, well, there we go.
[01:02:24] Speaker B: I'll send those people to you.
[01:02:26] Speaker A: Well, and honestly. But here's, here's how, like, it's so interesting of how our experiences frame this all up as like how we're mapping our realities together. Because the way I hear that, like when I hear someone say that it's.
And maybe that maybe I would have to ask more questions, but like, it's better. Is growing while creating legacy. Good culture, family harmony. Like, we've cleared distinctions between the board versus operations we're using as a legacy play. Like that right there is the arena. Dude, I like, it's easier to talk to investment bankers and business brokers and attorneys and CPAs and tax mitigation because all that is like, way less messy than all the personal dynamics of a family business, which I love that challenge because me and my dad had a family business and it was like all this stuff. Like, to win that arena is really hard, but it's also possible. And it's also possible to create a bunch of money and impact a bunch of people and watch the fingerprints of the impact of an idea and your values through an organization.
So I, I actually view that as an arena. But it's still fascinating because, like, I also understand what you're saying. Like, it's just you. You're choosing to. What arena do you want to be in which it goes back to your.
[01:03:42] Speaker B: They're different. They're actually different games. I think you could. You could argue that the. Some of the things that you would do in each of those games is the same. Right. I suppose it's like, you know what? There's different types of football, right? Like this. You're kind of still kicking a ball, but there's a very big difference between.
[01:03:59] Speaker A: I can tell where you're from. Yeah, I. I resonate with your football version.
[01:04:02] Speaker B: Well, exactly. But. But either way, it's like, you know, there are. There are things that are similar, but there's a massively different, you know, way of way it works. And I think my takeaway. And these guys I met were great, but both of them said similar things around risk and pace and like, you know, we're not in. You know, they may want to do an acquisition, but their biggest fear, I think, is wrecking the thing that was built.
[01:04:31] Speaker A: Right. And which is a freaking game.
[01:04:34] Speaker B: Yeah, it's a different. It's a different. Mine is. Mine is that. Let's just. Let's just make this thing massive and, like, sell it for, like a billion bucks. Like, I know.
[01:04:44] Speaker A: Well, this is where I know. Which, by the way, I also resonate with because, like, I. The games, like, the deals that I've been a part of, where that was the game.
I have a lot of fun because, like, for, like, when I just. When I think about just how life can be a lot of fun is clarify the game as much as possible so that way we understand the rules so we can execute like a motherfucker and have fun. Because I like to execute. I just want to know what the game is, what the rules, and then I will run through every single wall. And what's fascinating to me, Nick, is like. And that's really where I've. I've continued and this has been a very helpful conversation for me, is because the game I like to play is that one that you don't like to play. And I think it's just even. And it is. And this is where I. Yeah, it's good.
[01:05:24] Speaker B: I mean, it's great because there's definitely people that come into my world. Which you would. You would resonate with. You know how they say people buy people, right? Like you buy the mentor or the coach. That resonates with your ideology, your outcome, whatever those things are.
That's true, I think, because sometimes the stuff we do could be very similar. I'm sure when we look at building org charts and thinking about leadership, all.
[01:05:45] Speaker A: The foundation, the financials.
But what I think is interesting is like, you know, the goal orients all of the rules and the constraints.
[01:05:55] Speaker B: 100.
Everything about that. Yes, I agree. 100. Because it also think it also changes how you. As the strategies. Yeah. And your identity. I think it goes as deep as saying.
[01:06:05] Speaker A: Yeah, yeah.
[01:06:06] Speaker B: What do you identify as? Because those two guys, they identify as the word.
Almost like I was gonna say, you know, when someone's.
They're not.
I can't think of what the word is. It's where they're kind of like trying to guide the business to the next best outcome in a very sort of almost like a passive way. It's like they're the gatekeeper of this thing. That was, that was what I got across. It wasn't like, you know, this is not really mine. I inherited it, so I need to do this with it. And I'm like, okay, right, that's fine.
[01:06:37] Speaker A: I love it.
[01:06:38] Speaker B: You see what I'm getting at?
[01:06:39] Speaker A: Like, yeah, I do, I do, I do. And I got a. I got a bolt in three minutes.
[01:06:44] Speaker B: Okay, let's.
[01:06:44] Speaker A: We're going to have to. We're going to have to do round two because we didn't even get into like, Dubai. And I know.
Yeah.
I'm open for like, it like whenever we want to get this right back on. I want us to continue to, to unpack this, Nick, because to your point about niching down on the last conversation, I haven't. And now I've got two thirds of my clients that are in the. What you would like the different arena. I'm gonna call an arena because you're, you're poo pooing it. And I'm just saying that is really hard.
[01:07:17] Speaker B: I'm just saying that it's not mine.
[01:07:18] Speaker A: We just want to pass it up. You just want enough.
[01:07:22] Speaker B: I just, I just don't think I can help them. That's all it is. I don't think I'm the best person to help them. So that's different. Right.
[01:07:26] Speaker A: And it would. And I would argue that 80 to even potentially 90% of what we're doing with our clients is the same, which is why I've always enjoyed you. It's the same thing in the health and the exercise.
[01:07:38] Speaker B: Yeah.
[01:07:39] Speaker A: But the goal, like, my goal is to like, I, like, I'm never running a race. I have. Have worked out for 20 years, but I've never run a race. So my goal is different than your, like someone that's running a race. And what I think would be fascinating is like I have certain people that are like I said no to like three different clients in the last month that I probably should have just referred to you.
And I was just like, I'm not. What's that?
[01:08:03] Speaker B: Well, there's two definitely. Now that I know that a bit more I could have sent these guys your way, you would have had a very different conversation with these guys. Probably a more valuable one for them to be honest.
[01:08:13] Speaker A: And when. And I wonder if like you know, as we.
[01:08:16] Speaker B: Because.
[01:08:16] Speaker A: Because you challenged me to niche down and like I've got the owner operator, the owner operator system and, and you've got your program. Both of them can apply to anybody. But the goal is actually what dictates whether they should work with you or work with me. But all of that path is the same. And I think that this is just.
[01:08:35] Speaker B: Because I haven't niched down fundamentally either. I, I've not been dog walking, die walking.
I've niched down in what I do.
I'm hyper niched in what I do, but I'm not, you know, and there are certain industries just. I know we're going to go in a second, but there are certain industries where what I do works best, better.
But at the same time, if I. Someone's. If the goal, if the goal is what they, you know, aligns with what I can help them achieve and I feel that I can add value to that outcome. Right. Then that's. That's a yes.
[01:09:09] Speaker A: Yeah, same here. Dude, this is so fun. I love catching up with you always.
Thank you. By the way, I. On a separate note, I am. The reason I'm jumping right now is I am on the cap table of this company.
That hundred percent is a play for your expertise. Like it is a scale and sell this shit. It is a ridiculous opportunity. And I'm. I'm going to be 25 owner of this company and all of the goals are oriented around what you're saying. It's not a, this is not a family business legacy play.
[01:09:45] Speaker B: Like let's elaborate on that.
There's some damage on that.
[01:09:48] Speaker A: Yeah.
Hey brother. So good to see you.
[01:09:51] Speaker B: Always a pleasure. Thank you very much. And I look forward to chatting again.
[01:09:54] Speaker A: And we're gonna put the book link in and everybody's got to check out the book and we're gonna, we're gonna have you back on very soon to keep unpacking this.
[01:10:01] Speaker B: Okay, let's do it. Love it. Thanks ranch. Thank you.
So fun. Dude, you better fly, but, yes, absolutely. Well, that's cool. I. I will have those two guys. I'll send them your way, have a chat with them.
[01:10:11] Speaker A: Yeah. And I. I've got a couple of people I'm. I'm close to having these hard conversations. I'm just like, I'm not your guy because, like, this is going to take extra time. It's got to be like, there's just a lot of precision to this that I know I can help them, but it's just such a. It's a different gear in my head. It's a different game how we just.
[01:10:26] Speaker B: My. My signature program. Because, you know, I told you, I don't like. So I've. I've got Boardroom and Boardroom Elite, which is my scale thing. But my signature program is called the mvp. It's the Maximize Value Partnership.
[01:10:37] Speaker A: Okay.
[01:10:37] Speaker B: And that's specifically about Value Expansion. And then High Value Exit Accelerator is the program after that, which is when someone's really ready to go, so.
[01:10:45] Speaker A: All right, brother, later.
[01:10:48] Speaker B: Pleasure as always, Sam.
