Building, Scaling & Exiting High-Value Businesses with Nick Bradley – EP 189

Justin Donald: What’s up, Nick? Good to have you on the show.

Nick Bradley: Hey, Justin, it is fabulous to be here. Thanks for having me on the show.

Justin Donald: Well, I got to tell you, we’re riffing offline here. And one of the things that we were just chatting about are all the things that alignments, things that we have in common, networks that we have in common, relationships. But I’ve got to tell you, I have been so excited for this episode. You met with Ryan Casey, our COO of Lifestyle Investor, and he couldn’t stop saying wonderful things about you. Same with our mutual friend, Brad Weimert and Tyler Devin and Ryan Levesque, and so many others. And so, I’m just thrilled for this conversation. In fact, I don’t know that I’ve been this excited for a podcast in quite some time, and this one has taken quite some time to materialize.

Nick Bradley: I’m blushing, Justin, now. I don’t take compliments too well. It’s funny. I think, sometimes, I often say, when you get in bigger rooms and you start to associate with people you like and you start to kind of meet the same people who are on a similar path in a similar journey. And some of those names you mentioned have become very good friends of mine over time. So, I’m super excited for this as well. And likewise, it has taken a while to get to this, but I’m sure we’re going to make up for it by having a fabulous conversation today.

Justin Donald: Oh, for sure, without a doubt. I love your background. For those of you listening, you don’t get to see, the cool scale up in the background, it looks like, but…

Nick Bradley: There’s also a Larry Bird picture behind that sign. That was my wedding present from my wife. And that’s my favorite thing.

Justin Donald: Okay. Yeah, that’s nice. That’s really nice. So, you’re a basketball fan appreciating the Celtics in this current state or what?

Nick Bradley: I am. So, I have this kind of bucket list item, which is to see the Celtics win the finals. The last time was 2008. I actually have this thing on my vision board, which is about buying the Celtics at some point before I die, which is going to be quite a big check, as you can imagine. So, I’m hoping that this is the year that I get to fly to Boston and see them actually win a finals game.

Justin Donald: I love it. And now, where do you live? You’re in the UK somewhere?

Nick Bradley: Yeah, I live about two hours north of London. My wife and I both came from big cities. I was in Sydney, Australia for a long time. She used to live in Dubai for 12 years. And when we met and got married, we said we want to live somewhere where there isn’t anything like that around us. So, we literally live in a farm, in a beautiful part of the UK called Rutland’s. But I’m always on a plane doing crazy stuff across the world, particularly in North America. So, when I’m home, I’m home. And when I’m out traveling, I’m out doing my thing.

Justin Donald: Yeah, there’s no doubt. I mean, I can’t see a way or a world that exists where you’re not going to major cities because you work with these huge companies, and in some cases, medium-sized companies, getting them huge, and then you exit. You help them exit to private equity. And so, I definitely want to dig into that, and I want to dig in, we’ve got a community of entrepreneurs. We got a ton of people that have businesses, all different shapes and sizes. And so, I definitely want to get into even the specifics of things that they can do. But I would love to hear, like, what even got you into the space of mergers and acquisitions and helping sell companies? Because at one point in time, you were on the buy side, right?

Nick Bradley: Yeah. I mean, my career, I’ll give you the short version of the story because it kind of starts with me, actually, being a founder of a business. When I tell you the story, you’re going to go, that’s not much of a business, but it’s still a business. And I did sell it. But back in the early 90s, I was a personal trainer in a place called Adelaide, South Australia. Now, if anyone’s ever been to Adelaide, it’s famous for three things. It’s got lots of churches, which is a bit sort of weird and eclectic. It’s famous for wine, it’s got the Barossa Valley and all those sort of things. It’s also famous for serial killers. Probably, there’s been more serial killers in South Australia per head of population than anywhere else, which is weird. So, I often say that story is the reason I had to leave, because it was like, you don’t want to be around that.

But anyway, I started this personal training business. Of course, back in the late 80s, early 90s, people didn’t have personal trainers. It wasn’t as big as it is now. I was studying a business degree at university at the same time. I managed to build that business to three employees. It was a great lifestyle business for me at the time, and I ended up selling that or selling really the customer list for 3,000 AUD. It’s my biggest exit.

I redeem myself a lot later on, which we can get into. But it’s interesting, I tell that story because I had this entrepreneurial streak at an early age, and then I made this decision to repress it. And I went into the world of corporate, and I started working for some of the biggest media companies in the world. I worked for News International under Rupert Murdoch. I then worked for another group in the UK called emap, which was the second biggest publishing group. And as I went through the ranks in those organizations, I got involved in corporate strategy and I was involved in a lot of acquisitions and structuring and things like that. Eventually, that business in the UK, emap, sold to a private equity group and I was involved in that as well. And that was a big exit. That was an exit that was over 2 billion pounds.

Justin Donald: Wow.

Nick Bradley: And after that, I went to Getty Images in New York. And if anyone ever studies scale up, like at the absolute best possible kind of playbook style, then Getty’s growth and what it did over the course of about five or six years is incredible. And it’s what we call buy and build. They effectively grew through acquisition. They sold to private equity, sold to another private equity. I was involved in one of their transactions, which again was another big sort of 10-figure transaction.

And from there, I was kind of very much entrenched in this whole world of buying businesses, selling businesses, and then private equity. And after I left Getty, I started working specifically for the private equity firms. I’ve been the CEO three times of private equity-backed companies, had a couple of exits within that framework. And then I ended up becoming what’s called an operating partner, which is where you’re not the finance guy who does the deals, right? You’re the person who comes from some sort of business experience or business acumen. And your job is to guide the investments and mentor the CEOs, the leadership team, obviously, with the outcome of building value in those companies and then exiting them.

So, over the course of about a decade in that environment, I’ve been involved in over 100 transactions. And I like to say I’ve been involved in a total of 26 exits, including a few that have been my own. But a lot of those have been also now helping founders exit their companies for millions of dollars as well.

Justin Donald: That’s incredible. So, you’ve been able to experience that on each side, on the corporate side. And it’s interesting. Here’s something I always tell people in our community because in the Lifestyle Investor Mastermind, we’ve got around 120 people, all high net worth and most of them being entrepreneurs, probably close to 80% of them being entrepreneurs. The other 20% being highly paid corporate professionals, whether it be C-suite or sales, medical, attorney, that sort of thing.

And one of the things that I love to share is that, if you’re looking at a PE firm, they’ve done this thousands of times. You as the entrepreneur, you have never done this before in most cases. In our community, we’ve got people that have had one or two exits and maybe a couple of outliers at three. But that chasm of experience to no experience is massive. And so, it is so important to have someone on your side that actually knows what’s going on, right?

Nick Bradley: You raise one of the points that I talk about a lot. I actually call it the prize versus the prey. And just to kind of add a little bit of color for everyone listening, so when I was in the thick of private equity, it’s an interesting environment because you learn a lot of stuff. I often say that scaling a company the way private equity does it is like playing in the NBA if you’re kind of in the little leagues. It’s like a different level of how things are done and you’re trained to do that. But what’s interesting about it is I was also trained to buy companies off entrepreneurs for the lowest possible price, knowing that I want to do certain things to them to increase the value, but also kind of exit those companies for often three to five times what we’ve invested in them within three to five-year window.

Now, back to my prize versus prey, because this is interesting, if you came to me to sell your company, the first thing I’m going to do is put you in one of those two buckets. Okay? Now, prey is exactly your point. You might sell a company once in a lifetime, the biggest financial event in your life once. I’m doing it every week. My team is doing it every single week. You can’t compete unless you really kind of do a few things to learn the game is what I say.

So, in that situation, you haven’t prepared your business, you haven’t prepared yourself mentally, you haven’t got great people around you, advising you on what you can do and what you should do. You haven’t built a fantastic story for what the business is going to be in the future, which is important again for the transition. In situations like that, you’re the prey, and I’m going to get your business off you very cleverly. I’m going to schmooze you, wine and dine you. And I’m going to get you absolutely emotionally attached, whereas I will stay detached. That’s the prey.

On the other side, the prize is what I call the formidable opponent. You turn up, you know about M&A. You might not be an expert, but you know enough to be dangerous. You know exactly what your business is worth. You’ve spent time preparing, positioning, increasing its value. You’ve built a team that’s transferable within that so that you don’t have to be reliant on what happens after the transaction. You’ve got a great investment banker, great advisors, whatever it is.

In that situation, I’m still going to think that you are a great acquisition target for me, but I know that I’m going to pay more for you, but I don’t have to do as much work to it. And both are good. But if you’re listening to this and you’re a business owner, you don’t want to be the prey.

Justin Donald: That’s right. Yeah, there’s no doubt about that. It’s interesting, I think, a lot of people get the reps in. Well, let’s just start with the actual raw data. Most companies fail. So, going beyond five years, you got less than 5% that are actually going to succeed. So, most don’t even make it. And then the ones that actually have an exit, you’re talking somewhere in the 1% range. Okay, so you have an exit nine times out of ten, at least my experience in coaching people and working through this with them and my own experience with companies is that terms get traded at the 11th hour. When you think it’s all done and you’re ready to cash the paycheck, they come and they drop the hammer and offer you half what they originally did or 70% what they originally did. And it’s kind of like, oh, deal fatigue has set in. Do you really want to go through this again? I’m curious from your experience how often that is the case, because my experience is that it is incredibly often.

Nick Bradley: I tell you what’s happened more recently. I left private equity in 2019 and started my own consultancy coaching business around this particular topic. What I’ve noticed is that private equity firms have had to clean up their act significantly. For a couple of different reasons, I think business owners are starting to become more aware of this idea of having an exit strategy and what that means and the value of it. I think the other thing is there’s been more private equity firms launch post-COVID, like significant numbers, and there’s a massive competition between them now for good asset. And in that situation, you can’t be out there and be this ruthless tyrant that used to exist a decade ago. You now have to be a much more kind of empathetic and be seen as a partner with what happens. So, there’s that piece.

But to your point, and I did exactly what you did. I don’t mind saying it, even though I think I’ve redeemed myself in the last few years. But we would take a business in and we would get them under LOI. It’s a letter of intent. And then we’d run typically a 90-day due diligence process. Now, if you haven’t prepared your business properly, I’m going to go into that business with a huge amount of detail, right? Fine-tooth comb. And I’m going to look for errors, chinks, whatever it is, so I can do what is called a retrade. Now, retrade is I gave you a price when I gave you the LOI. The retrade is a lower price, quite simply. That’s one thing, right?

The second thing I’m going to do, which is your point exactly, is I’m going to screw you on the terms. And whether it’s the 11th hour or whether it’s just that the business owner doesn’t have the right team around them to really diagnose what’s in the documents, which happens a lot, either way, my ambition is to pay you as little money as I can, but get the asset off you in a clean way and then do what I want with it. That’s what it has been like, typically for years. It still does happen.

And the point I’ll make here is whenever I advise a business owner about that final stage of putting their business on the market, you have to treat it like you are actually choosing the person who’s going to acquire your business. They’re not choosing you. So, you turn the tables on that, and there’s certain things you do to be able to make that happen.

Justin Donald: Yeah, that’s a great point. In fact, one of the things that I share with people in our community is, that you want to kind of give as little awareness or transparency of what you ultimately want because it can be used against you. Now, if you’re partnered with the right group, then this is just not relevant. But if you don’t want an earnout and you let them know that, then that can be used against you. If you are fine with it, that can be used against you. And so, it’s almost like you have to show up. I try and teach people, like you show up and you play it either way. You say, “Hey, I’m good with an earnout. I’m good not having an earnout.” You’re like, here’s all the scenarios. It just really depends on the terms. I’m pretty indifferent. And I have found that through that type of process and showing up that way, we’ve been able to navigate a lot better offers and actually, closes going to completion.

Nick Bradley: Well, I think what you articulated brilliantly there is this idea of being detached. You are not emotionally aligned to any particular thing, which becomes a deal breaker that can be used against you, right? And that’s the key piece here. I often say, when we go through the beginning part of a process which is about getting clarity on the end game, there are certain transactions, certain buyers that will allow you to elegantly leave the business because they don’t need you. They just want the asset that you’ve created.

There are other types of buyers who absolutely need you because you’re going to be a platform for them to scale. And it’s important to understand the options you have there as you go through the process. But when you get into the detail, like you’re talking about, you don’t want to give too much away. And like any rule of negotiation, you want the first offer to come from the buyer, and then you want to be able to play back your terms around that.

Now, what I often say is, if you’ve prepared the business well and it’s still growing, it’s still performing well, remember, the process to actually go through a transaction can be anywhere from 6 months to 12 months, right? It takes a while. If the business is performing better, you’ve got more to go back on to actually retrade it up and say, “Hey, listen, the business is now a lot better six months later, I want a higher price or I want these terms.” And that’s how you start to win that game versus those sophisticated buyers I mentioned.

Justin Donald: Yeah. That’s clever. And by the way, it goes back to your prize versus prey analogy. On the price side, you had talked about how you have a lot more systems. It’s not as owner dependent. And I think when you have that type of business, you often find the acquirer that doesn’t need you, so there is no earnout. And for clarity’s sake, just so everyone is on the same page, an earnout is where you sell your company, but you’re still on the hook for a period of time, typically two to four years, where you have to work in the business. So, you used to run a business, now you are working on behalf of whoever purchased your company.

Nick Bradley: You have a boss, Justin. You have a boss. And actually, some entrepreneurs have never had a boss, right? So, there’s that. And the other thing, again, back to kind of my old life of private equity, I was bonused on making sure that– hopefully, none, but a minimal part of that earnout was ever paid. And this is where it becomes really prickly around the edges of this is once you’ve sold your business to me and we’ve agreed the terms, you don’t own your business. And very rarely am I going to agree that you have some sort of control over strategic decision making.

So, if I decide to cut the cost base or do certain things and your earnout is reliant on those things happening, hey, that’s your problem, not mine. So, to be clear, what do you do about that? Well, firstly, most private equity firms will try and say that we’re going to give you 60% to 70% cash at close. So, when you sell the business, whatever the value is, you get 60% of that. The remaining is the earnout. I often advise that firstly, you want to get the highest percentage, you can cash it close, and whatever your life-changing number is, try and get it at the cash or close.

The other trick, and just to be a little bit technical here, but I’ll explain it is instead of doing an earnout, you can do a rollover. And a rollover, if you sell to a private equity firm, is where you have shares, usually at the same level as the private equity firm in the entity that they’re going to go and create. And in that situation, it’s not about them trying to sort of take that money off you. Of course, there is the risk that your investment doesn’t grow, but you’re competing on the same level as the private equity firm. So, it’s a much safer bet in my opinion.

Justin Donald: Yeah, I like that. And I also think it’s smart if there’s a way, I mean, everything depends, right? It depends on the situation. But I love leaving some chips on the table. If we can find a way to leave around 20%, maybe up to 30% on the table, at least 10% to 20, because a PE firm is buying you because they think they can at least 10x you, right? So, that’s a pretty good bet. I think most of the time, they’re more skilled, more experienced, have more capital, have more professionals. have the resume, have the experience. So, yeah, I think that’s great.

But can you do that without being on the hook? Can you do that without having an earnout that requires your time where you’re actually stuck in the business? And I think that really is the sweet spot. And we’ve had a lot of people that have been able to structure deals that way.

Nick Bradley: Yeah. I mean, to your point, you can. You can. But the thing that’s interesting now, and you made mention of not many businesses ever achieve an exit, and it is a tiny amount. And there are certain thresholds that if you get to them, the odds change dramatically. And the reason for that is you just open up the markets. And so, I like to say to people, if you’ve got a business that’s say doing a million of EBITDA net profit, and you can get that up to at least 3 million, ideally closer to 5 million, you open up what’s called the mid-market of private equity.

Now, if you think of it like a bell curve, the top of the bell curve with the highest volume is in the mid-market, and they’re transaction sizes that are usually 30 to 40 million at the very, very low end, all the way up to about 250, 300 million at the top end. So, it’s quite a big range. Now, most of the business owners that come into my world want to achieve an eight or nine-figure exit. Getting 30 million, 40 million obviously tax, whatever, it’s still a large amount of money. You can end up with an eight-figure sum of money in your bank account. And so, if you can say, “Well, this is enough. I’m at 1 million, I just need to get to 3, 4, or 5.” And everything changes. You go from a 2 in 10 chance, like an 8 in 10 chance of selling your company. That’s where you’ve got to put the focus.

Now, the other thing to your point again is that when you start to build to that level and you create a prize business, you can then pick and choose who buys you and you can put whatever you want in front of them. So, you can sit there and say, “Listen, I know that you would normally want an earnout, but I’m prepared to take a lower price, actually, if I can have a rollover instead of an earnout” or “I have different terms, I only have to stick around for a year.” You can negotiate all of that if you’ve got a business which is competitive in terms of other people want to buy it.

Justin Donald: Yeah. And I see a mistake that a lot of people make where someone reaches out, they want to buy their company and they just go through the process and they sell it. Now, if that’s just the right fit, by all means, do it. But if you actually run a process, the odds are pretty good it’s going to sell for a lot more than what that person came in on. And even if that’s what they were going to pay, if they see that other people are willing to pay more, they’ll often pay more. So, I do think as you do this process and you do want to sell a company, it’s important to get as many people in the room looking at the deal as possible. Would you agree with that, even if they’re strategics?

Nick Bradley: You’ve always got to drive competition. So, I agree, 100%, like going in one lane presents risks. It presents risks in multiple ways, i.e., the deal might not go through, and that’s a problem because then you’re damaged goods and you can’t go to market for a period of time afterwards. The other thing is like, you’re going to get screwed over in the negotiation generally. Not always, but generally.

If you go too wide, though, that can also be a problem. So, there’s different types of auctions. The one that I recommend is called a closed auction. And you have a mixture of strategics. You always want some strategics in there. So, companies sometimes, on the stock exchange list of companies, you want some of those in there because they will tend to pay the highest price for reasons we can get into.

Justin Donald: Often, a strategic may come buy it from the PE firm, right? You might have a middle man PE firm. So, if there’s a way to go straight to the end user, you want to do that.

Nick Bradley: Precisely. And I like to sort of say, sometimes people come to me and go, “Hey, I want to sell my company by listing it on the stock exchange.” But it’s a tiny company, and I’m like, “That’s not even an exit. That’s a capital raise for starters. So, let’s park that over there for a second.” You should try and exhaust the private money before you start to go to the public money for lots of different reasons. And there’s like $4 trillion in private equity at the moment undeployed, some ridiculous number.

Justin Donald: Wow. I knew it’s a lot. I didn’t know it’s that high.

Nick Bradley: Well, you hear different figures and, and I believe that’s kind of global. I think in North America where the bulk is, it’s like 2 to 3 trillion, something like that. That’s what I’ve heard.

Justin Donald: Man, it’s a ton.

Nick Bradley: It’s crazy, right? But back to my kind of closed auction, so a couple of strategics in that, they’re going to boost the price up because they can do something more with the business normally than the financial buyer can, which we can get into. But when you get competition against private equity firms and they have to deploy capital, if they don’t deploy capital, their whole business model is at risk. They can go crazy on multiples. So, the average multiple that I’ve been involved in is anywhere between 8 to about 15 times in that range. The biggest one I’ve ever personally been involved in…

Justin Donald: And that’s an EBITDA, based on EBITDA, right?

Nick Bradley: It’s an EBITDA.

Justin Donald: You got something that will be based on revenue if it’s in tech, SaaS, marketplace, platform, etc.

Nick Bradley: Yeah. Less so these days, and we can get into that. But yes, it does happen, of course. And marketing agencies is another one where they tend to go on revenue multiples because they’re going to get assimilated into a group. But when you get into like the financial buyers competing, I was involved in a deal that was 36 times EBITDA and we lost out on the deal. The private equity firm I was with went up to 20 times. We thought it was worth about 18, but we had to go a bit higher.

And then the firm that bought it, the European firm, paid 36 times EBITDA. And we’re like, “What the hell?” But they’d missed out on a number of deals. They had to deploy capital. It’s risky, but that’s how the game is played. Now, if you’re that business owner, fantastic, right? Like, you didn’t expect to get that. You’ve probably got double the valuation that you were thinking you were going to get. There’s no logic behind it.

Justin Donald: Yeah. We’ve got a guy in our community that just timed it right. And back in 2021, 2022, I told everyone, if you’re ever going to exit, if you thought about it, just exit. Times are going to change. So, in 2022, we had, let’s see, 23 people have exits in our community.

Nick Bradley: Wow. That’s great, mate.

Justin Donald: It’s unbelievable.

Nick Bradley: That’s fantastic.

Justin Donald: One of the guys that had an exit sold two companies, both of which for twice the multiple as industry standard.

Nick Bradley: That’s exceptional.

Justin Donald: So, pretty crazy. And that was an outlier year. It’s not like that every year inside our community. Generally, we have 5 to 10 exits inside our community, maybe up to 15. So, that was big.

Nick Bradley: Let me ask you this, Justin. So, when someone in your community has that, that capital event, what tends to happen in your experience? Because you obviously have a relationship with these people grow over time. Obviously, they invest capital in the stuff that you recommend. But what about them? What do you observe?

Justin Donald: Well, there’s some fascinating observations. So, number one, they’re the wealthiest that they’ve ever been in their entire life, but they don’t feel it. So, number one that I notice is they moved from this where they should be in an abundant mindset, like I have all this money, wow, to oh my goodness, what do I do? I’ve never been in this situation. Every time I spend money, my bank account dwindles. I need to figure this out. And then they get into this urgent manner and almost like their mindset is they’re really poor. It’s fascinating.

Number two, I see a loss of identity. They were who their business was. And that’s it. They were so tied. Now, all of a sudden, they don’t know what to do. They don’t know who they are. It’s like they just are totally not themselves anymore. They’re like a shell of the man or woman that they were.

Nick Bradley: Yeah, 100%.

Justin Donald: That would be one and two right out of the gates. And then number three, I just see people burning money, spending money, throwing it around, investing it like they have spent the last 5, 10, 15, 20 years as an investor, not an entrepreneur. Totally different skill sets. So, a lot of people, whether they were in our community when they exited or whether they joined after they exited, they show up with a story of I lost X number of millions of dollars because I didn’t know what I was doing, but I thought I did.

Nick Bradley: Yeah. So, all of those I’ve seen. Yeah, I mean, it’s great. I mean, it’s exactly the pattern. I mean, there is something interesting that happens when you create a life-changing event like this. And identity, I talk about a lot because one of the things we do in our program is we start with clear end game, which is kind of what is that number? How are you going to get to it? What’s the runway to do that? Sometimes, that’s short depending on what the number is. Sometimes it’s longer, right? But it’s usually between 6 months or 36 months. So, that’s that piece.

But then we focus on what we call your next act. And we do that quite early in the program because crazy statistics come out of the exit planning Institute, things like the number one reason that a business fails to go through a process successfully is because the business owner gets cold feet for the reasons you said. And what we find to be true is that if someone has something that’s pulling them forwards into something that they’re excited about, a lot of it’s impact driven. They’re going to go and do something that they’ve always wanted to do, but money and time was the constraint, right? And I love that part of what we do, because going into make a bigger impact in the world is one of the best things you can do as an entrepreneur.

Justin Donald: You bet.

Nick Bradley: But if people don’t do that, I’ve seen situations where, exactly like you said, they spend all the money, almost like they’ve won the lottery. A lot of them have huge marriage breakups or family disruptions. They have this mistrust of everyone around them because they think that people are looking at them differently, which to some extent is true. In other cases, it’s not. But this massive image issue comes about. And so, the advice I give to people, if they’re getting ready for an exit or that’s a goal, is they have to work on themselves through the process because they are going to change and they have to at least appreciate, acknowledge that early. You can’t acknowledge it once you’ve had the event. It’s hard.

Justin Donald: That’s right. Yeah, it needs to be addressed. And the other thing, so that’s the identity piece and like the belonging piece and self-image. But there’s actually the tactical part of the more money you have made as an entrepreneur, the greater your lifestyle has become, most likely. Lifestyle creep for most people is very real. Now, all of a sudden, the business is gone. You can’t expense your lifestyle through the business. So, one year of expensing your lifestyle through just your assets if you don’t have passive income, it dwindles it down so much, it’s crazy. I mean we’ve had people that their lifestyles are $1 million to $2 million lifestyles. They don’t want to change those lifestyles. You have what most people would say is a life-changing, never-have-to-work-again exit at $20 million, but it’s really not. $20 million, you pay taxes. Maybe you’re at like 12 million. If you have $1 million life, plus you make some bad investments, you’re in a range where you run out of your money in a decade if you’re not wise with that capital.

And so, we love teaching people strategies on how they can get the cash flow, how they can– and by the way, it’s amazing the confidence that that really lifts people with just helping them cover their lifestyle expense. You have a big exit. You don’t know what to do. You’ve spent some money. You had fun with this money. This money you tried to invest, you lost it. Now, you’re desperate. We help you actually create the passive income for the lifestyle you have. So, now, you hit stabilization, which you can really find a lot of peace and clarity on what the next act is. And you need a next act. You need a next chapter. You just do. We weren’t designed to not work. We were designed to have purpose, to have a mission, to have impact, and to work with other people.

Nick Bradley: I had a lady on my podcast recently, Anastasia Koroleva, I believe her last name is. She’s had three nine-figure exits.

Justin Donald: Oh, I know Anastasia. She’s awesome.

Nick Bradley: Yeah, she was great. And she said something really powerful, which is people think that when they sell their business and they reach what is, I suppose, deemed financial freedom, that that’s kind of it. But what they realize is they don’t get freedom at all. It just creates another level. And the next level is about purpose. And if you haven’t got a purpose that’s beyond the money, beyond everything else, that’s when you start to sabotage things like you suggested. So, it’s an interesting point. And some people, when they kind of meet us and kind of want to work with what we do, they think it’s going to be about the private equity financials and spreadsheets. But often, it’s about the person. It’s about the business. It’s about the outcome, of course, but it’s making sure that there’s preparation across all of those levels.

Justin Donald: Yeah, 100%. So, since our audience is highly entrepreneurial, most of these people will, I guess, probably have a desire to have an exit at some point in time. What would you say if someone wants to exit to private equity? What are like three to five things that they can do now to set them up for a better exit?

Nick Bradley: Sure. What I’ll do is I’ll go through a framework very quickly that we use. It comes from my sort of decade in private equity, which has three core components to it. So, I’ll run through that quickly because I think, there’s going to be points in there which some of them, most business owners may have heard of before, there’ll be some that are new, but they can apply things through them. And then at the end, I’ve got a more robust gift, if you like, for the audience, which is 15 things that me as a private equity guy would be assessing your business against to give it the highest valuation, so we can obviously give that to the listeners as well.

Justin Donald: Fun. Love it.

Nick Bradley: Yeah, it is good. And it’s extremely valuable once people kind of understand what I– if you think of me as I was the guy buying your business and you knew exactly what my playbook was at that side of the table, if you know that in advance, you can do things in your business to obviously increase its value and get the best outcome.

Justin Donald: 100%. And I can’t stop thinking about if someone is an entrepreneur, whether you want to have an exit or not, you probably should do these things to make your company more valuable and to optimize your company. But bottom line, everyone needs a Nick Bradley. Everyone needs someone that has the reps that understands the process, that is going to look out for their best interests, and ideally, knows the other side so well that they can compete against, that they know how to tactically maneuver around what a typical entrepreneur or just get squashed with.

Nick Bradley: It’s the funnest part of my job.

Justin Donald: No kidding.

Nick Bradley: Just to say that I was on one side of the table, taking away the value that’s created by the people who create it, to now be able to sit on that side of the table and help them harvest what has been probably decades of work, right? So, I’ll go through. So, we have a framework which is called Scale to Sale. And quite obviously, it’s not just about selling the business. It’s what you do in preparation. And there are three components to that.

And it kind of starts off with a lot of the businesses, when I used to acquire them, they might be structured in a certain way and doing certain things, but there was a degree of what we call organized chaos going on. So, even if it was a seven or eight-figure company, it wasn’t optimized. And so, the first thing that we would do is we’d want to go from that, what I call organized chaos to a well-oiled machine. That’s the shift. And in order to do that, we need to strengthen the foundations of the business.

Now, what’s cool about this is if you strengthen the foundations of a business, it also allows a business owner to achieve what I call the first exit, because really, what they’re doing is creating an entity that allows the business to operate without them. And most entrepreneurs, even if they’ve got decent sized businesses are trapped. So, the keys to that, quite simply, obviously, it’s the right people in the right seats. It’s about having automated systems and processes across the business.

And then the last thing is a real commitment to data, KPI, and metrics, so that if you have people running the business, it’s all run through systems and strategy. You have a way of measuring performance even if you’re not there. Guess what? You’ve just created freedom for yourself.

Justin Donald: That’s right.

Nick Bradley: And what you’ve also created though from my lens is you’ve created a transferable asset because I’m going to have something that’s not reliant on you. So, that first area is what we call Strength and Foundations. And whenever we acquire a business, we want to optimize the foundations before we scale.

The second part is what we call scaling value. And again, a business that we would normally inherit would have inconsistent growth. It might be growing, but it’s choppy, it’s not predictable. And we want to get to what we call profitable scale. That’s where it’s predictable, repeatable, and sustainable. And the key word there is profit, right? Not just growth. Now, within that, there’s another few things that we look for. We look for recurring revenue streams. Quite obviously, if you have to go and hunt for every customer that you need, that’s very inefficient, takes lots of marketing dollars. If you’ve got recurring revenue, you can start to build value off your existing customer base. So, we look for that. Massive driver of value in any transaction. We look at the ability for the business to scale via acquisitions. So, what we call Bolt Ons.

And if you’ve got a seven-figure business out there, at least you should be learning and understanding how you can grow and scale through acquisitions. If you’re not doing that, you’re leaving a huge amount of like pace and predictability of growth on the table. So, you’ve got to learn that.

And then the last thing we do is we look at what I call– I call it profiting up, but it’s really where you’re looking to expand the margin of the business. And that’s getting granular on things like customer profitability, product profitability. It’s not about just getting rid of overhead. It’s looking at the whole way the commercial engine works so that it’s the most, again, streamlined version of the business. So, in those two areas, just to be clear, the strength and foundations and the kind of scale value, if you do that before you sell your company, you’re going to have just a better company, right? You don’t have to be there. It’s making a lot more money. So, a lot of people, when they come to me, they go, “Actually, you know what? I don’t want to exit yet. I want to create the option to exit, but I just want to have a business that allows me the freedom that I started the business for in the first place.”

Justin Donald: Yeah, that’s brilliant.

Nick Bradley: Yeah, it’s cool. But again, I think about it like, this is what I did in private equity. I’ve just taken that method and taken it over to the other side. But I’ll quickly finish with the last part, because the last part is what we call sell smart. So, your brilliant point before about the private equity guys doing hundreds of transactions, the business owner once or twice, maybe three times. So, we say at that point, we want you to go from curious amateur to worthy opponent, like I mentioned previously. You’re not going to ever get to the point of being a master of the game. But if you’re going to walk into the auditorium, we want to know that you can win. And the way you do that, again, is there’s a few things. Firstly, you have what I call a perfect exit plan. You really think through the preparation and positioning of the business. You put around you the best deal team you possibly can. That’s internal and external, but like definitely the best bankers, lawyers, tax planning, all that. You’ve got to do that early.

And then the last part, which I get a lot of fun doing is that growth story or that transition story, because you’re the best person to be able to sell the dream of your business, right? And remember, when you sell a business, I often say it’s not about you exiting, it’s about the baton pass of what someone’s going to do with it. And if you sell to a sophisticated buyer and you show them, there are three acquisitions here that we can make. There’s a global expansion initiative over here. We’ve already done this work on product innovation and we’ve tested the product market fit. If you can articulate that all through the sales process, someone like me on the other side of the table is going to go, “Well, of course I’m going to pay 15, 16, 17 times because I can see the future performance clearly.” And 1 to 2 points on the multiple, if you’re selling the business for, let’s say, 50 million and it’s like a 10x or something, you’re adding tens of millions to a deal just by writing a story. So, there are a few things in there, probably quite a bit, but that’s a bit of a framework, I think, that anyone listening to this can start to think about when they’re looking at their business.

Justin Donald: Well, I love that framework. And I also love that you talk about the importance of having a positive EBITDA or whatever way that you measure profit. Okay? That it’s got to be profitable because we lived in an era over the last decade where many of those years you were rewarded on growing revenue, not profit, even to the detriment of profit growing revenue. And so, it’s a fascinating bubble of a season, but…

Nick Bradley: I call it the season of free money, Justin, where interest rates were so low that people were bullish. But even today, I had a coaching call with a client and we left the call. I said, “You have one objective. Your one objective is to focus on profitability.” I even said, “You’ve got to get a Post-it note and put it on your bloody computer” because it’s all I want, growth, growth, growth, growth. Whoa, whoa, whoa. If you run out of money, and I’ve had this happen with some clients where they’ve been chasing just growth, you ain’t got a business. They’re like, wow. And I can tell you now that, even though our businesses do sell for revenue multiples, they sell for revenue multiples because they going into an entity that’s going to take the costs out and get the value back, but it all comes back to profit at the end of the day.

Justin Donald: That’s right. And by the way, profit is your insurance policy. It’s like your parachute. Should everything go wrong, your company still makes money. It can keep itself afloat as opposed to the other strategy. Now, the beauty of selling to a strategic is that they can buy your business regardless of profitability. And in many instances, they’re buying it, not even for profitability, because they don’t care if it makes money. As an add-on, it makes them globally a lot more money. So, there’s a beauty in that, right?

Nick Bradley: It’s good having this conversation with someone who knows so much about it, Justin.

Justin Donald: Oh, this is fun. I mean, I feel like we could talk about this for hours. I could geek out on this stuff. I mean, what I’ve seen…

Nick Bradley: Well, you’re educated on this stuff, and there’s a lot more to this that we could go into, which I think are just powerful points that business owners need to learn. But if the headline summary is, if you have the ambition to exit your business for millions at some point, you need to know how to play the game, right? And there’s different ways of doing that. But if you don’t know that, like, (a) it may not happen for you, but (b) you’re just leaving such a big opportunity on the table. And that’s the thing that I suppose from a mission perspective, got me to jump on that other side of the table and do what I do now.

Justin Donald: Yeah, that’s so cool. And I love your comment of, “Hey, you might be at 1 million EBITDA right now, but if you really want a nice exit, get up to 5 million EBITDA. You get there and you’re in a whole ‘nother mid-market range and realm, where the multiples get more attractive, and there’s more competition.”

Nick Bradley: And you’re pretty much, I’d go as far as saying that if you get to 5 million EBITDA and obviously, you have to do some things in the business beyond the financials, like some of the stuff I just mentioned, you’re pretty much guaranteeing yourself an eight-figure exit, at least, depending on the market. But like just think of that. And if it’s 5 million, like the averages around that type of EBITDA range from at the absolute lowest, absolute lowest six to seven times, all the way up to 12 to 14 times. So, the average there is about 10. So, think of it. You’ve just created a $50 million asset by doing that.

Justin Donald: That is incredible. I love it. And once you have that exit, my biggest advice, because there are a lot of people listening that will have an exit or already did have an exit. Just be patient. Do not rush to invest this money. Do not rush to spend this money. Reward yourself and do something fun, something nice with friends and family, people that matter the most to you. Really, truly celebrate it. But do not be in a rush to place the money somewhere until you get your investment criteria in place and you start working on your foundation of education in the investment space, until you bring people into your ecosystem that actually do this for a living, because more times than not, I see people blowing through their money what should be enough to last a lifetime, many lifetimes, many of their friends’ and family members’ lifetimes. And it doesn’t, unfortunately.

Nick Bradley: It’s a great point. And that’s why I think there’s good alignment between, obviously, what I do and what you do. And I see lots of gaps between people who aren’t preparing on that investment side, the tech side, and they don’t go into a situation well at the end. And as you mentioned, they either burn the money or they start to act differently around things. And I think, you’ve just got to get everything. I think the headline here is it’s not just about the preparation of the business, it’s the preparation of yourself, right? And if you can get those things lined up all through giving yourself enough runway, then you’re going to have a great outcome, but you’re also going to enjoy the process as well.

Justin Donald: 100%. And just like you’re taking as long as you need months to prep for exit and to prep what your next chapter is going to be, you should spend the same amount of time creating your tax strategy because if done right, it can save you millions of dollars. I can’t tell you how many people come to our group after they’ve had an exit, and they’re like, “Oh, man, I wish I had found your group. You would have saved me millions or tens of millions of dollars,” because there are simple things that you can do prior to an exit that can make a huge difference in what you’re taxed on.

Nick Bradley: Yeah. And that one thing, actually, and we have different specialists who advise on this in our world too, because if you think about it like everyone gets fixated on the enterprise value of their company, they get fixated on the cash at closing the earnout, well, they don’t realize is the big thing is going to be how much tax they have to pay. And you’re right, there are strategies out there if you get ahead of them, which means instead of paying that tax to the government, you can put it into a real estate thing. I won’t get into the detail. I’m sure you know much more about it. But like, you create another asset from what would have been a tax payment.

Justin Donald: That’s right.

Nick Bradley: Crazy.

Justin Donald: Yeah. And even from the standpoint of you just want to be, like, well, let’s say that you’re okay with not having that money, you can still put it to a charitable use instead of to the government, where I just don’t think anyone believes or most people don’t believe that the government is using our money wisely.

Nick Bradley: It’s the same in the UK, by the way. We’re about to go through a transition here to the point where my wife and I are contemplating where we’re going to live because…

Justin Donald: Really?

Nick Bradley: Yeah, I think…

Justin Donald: Come to Austin. Lots of fun people here.

Nick Bradley: I’ve heard Austin is great, but I have to hang out with Brad a lot more and that won’t be good for my liver.

Justin Donald: Yeah. He likes to have a good time. There’s no doubt.

Nick Bradley: He’s a good guy.

Justin Donald: Oh, I love it. Well, this has been so much fun. You are fantastic at what you do. And most of the time, I mean, I feel like I have people that are really good at sharing what they do. I think you’re exceptional at sharing what you do. And you gave so much value today to our audience that is actionable, that is implementable, and I really appreciate that. Where can our audience learn more about you, Nick?

Nick Bradley: Yeah, well, thank you for that. I’m blushing again now. But no, I do like, just to say, just on that point, when I left private equity, I made it my whole thing. And the reason I started my podcast was I wanted to be able to put as much of what I learned out there into the world, to kind of balance this idea of how much I took in private equity to now contributing. So, part of doing shows like this, having conversations with you, and getting into the details so that I can help as many people as possible. So, I appreciate the sentiment as well.

In terms of, yeah, so how people can reach out to me. My website for our company, our company is called High Value Exit, that’s HighValueExit.com. I tend to hang out on LinkedIn more than anywhere else. It’s @realnickbradley. You’ll be able to find me there. Message me. I love people when they get in touch and say, “Hey, I heard you on Justin’s podcast,” and give me some feedback on that.

And I mentioned a gift for people listening today, which I think will also help them. As I said, it’s called the Exit for Millions Blueprint. You can download the blueprint at ExitforMillionsBlueprint.com. And it’s the 15 reasons why someone like me wouldn’t buy your business. And you can actually assess yourself against the 15 things. And what I’ll say is that they might come out a lot of red and amber when you first do this. Your goal is not to get to 100% green. Your goal is to get to about 80% green over whatever runway is required to get to that life-changing exit.

Justin Donald: I love it.

Nick Bradley: I hope it’s useful for everyone listening today.

Justin Donald: That’s so good. Well, I appreciate your time. I can’t wait for our next conversation. I’m looking forward to joining you on your podcast next week. But I love wrapping up every episode I do, asking our audience a question, a simple question, and that is this, what is one step that you can take today to move towards financial freedom and to move towards a life that you truly desire, one that’s on your terms? And unlike what most people live, a life by default, how can you move towards living a life by design? So, again, what’s one thing that you can take from Nick today to really move in that direction of financial freedom and a life by design? Thanks. And we’ll catch you next week.