From Basement Startup to $100M Exit ft. Alexis Sikorsky | Coffeez for Closers with Joe Shalaby

0:00I am sitting here with a legendary entrepreneur based out of the UK, currently residing in Spain. Mr. Alexis Sikorsky has had multiple exits with his last exit north of$100 million. Please welcome Alexis Sikorsky. Alexis, thanks for being on the show today. Thanks for having me. Alexis, I like to start the show off the same way I start with every entrepreneur. And what's your morning routine? I don't have a morning routine anymore because I have two young kids. So my morning routine is changing diapers and bottles. Yeah, I remember that. I have four young kids, so I totally get it. What was it before you had the two young ones?

0:45I was a 3D routine kind of guy. I had more an evening routine. So I get to the office relatively early, but not crazy early, like 8, 9, and then work the day, back at home at 6, feed the kids, put them to bed, and back in the office at 10. That was my daily routine. Nice, nice. When you began your entrepreneurial path, you started at 15 years old. What really drove you at that early of an age to start your entrepreneurial journey? I thought I was very, very smart. That's something all 15 years old have in common, right? I thought I knew everything and I was very, very smart. So I said, why not buy stuff cheap and sell them expensive let's do export import and become a billionaire so you started export import business at 15 yep wow how'd that go not good was it i was 15 so yeah it didn't go i started my first entrepreneur venture but met at 14 as well and yeah definitely a failed venture but a lot of fun.

1:55Yeah. And it's, remember, it's a time like before the dot coms, right? It's, it's the seventies. So like the seventies, early eighties, so eighties in that case. So it's before like the internet it's before, like it's, it's another time. Gotcha. Now growing a new access from your basement in Switzerland, what personal fears or doubts kept you, kept you, kept you up at at night when you started that first company new access firing people really that's the only honestly i was more scared to have to fire people than to lose my money what what is it about firing people that really scared you makes me physically sick every time i have to do it like literally physically sick.

2:45I hate doing that. And like literally my brother, I was working with my brother at some point. He literally went to the hospital when you had to fire a lot of people. Makes us physically sick. So how do you deal with it now?

3:06Same where I dealt with it before as humanly as possible. And when someone has to go, it has to go. And I managed to, at least on an intellectual point of view, justify it by understanding that they were contract. It's a specific contract that actually defined the way you can separate. So like you don't betray people. And also I'm older, so I'm less of the, it's a family. We, Kumbaya, we all love each other. and it's more like, but still, I don't enjoy doing that. I probably will have to do it again soon. And it's also different when you have to fire people because of performance or to fire people for economical reason, right?

3:57If it's for performance, it's their fault. If it's for economical reason, it's your fault. So it's a little bit different. Yeah, you know, firing people, thank God, I'm in a company where I have an HR department that deals with that for the most part. But it always gets under my skin because, you know, I live by a model, coach up or coach out. And you continue to coach them. If you can't coach them up, you have no choice but to coach them out. Yeah. Yeah. And it's basically you have a responsibility, right? You choose them and you made a mistake. So, yeah. So, you've navigated some massive growth through various acquisitions.

4:37and various crises. What was your toughest low before knowing that you were actually on the right path to success?

4:49Okay, let's give you a little of background. Super quick to answer your question. 2000, we started the company, Bespoke Internet Development Company. 2003, we acquired Electronic Document Management Software Company for banks. Grow that from 2003, 2008. 2008, we are a 10, 12 million revenue company, two and a half, three million profit. And I'm the king of the world. I'm so smart. I'm so bright. I'm really convinced. I know everything, every money, every penny we make, we spend, we hire more people. We open more offices. We develop the product more. and then 2008. Done. We are a banking software company.

5:43100 % of our clients are banks. And on a regular Monday morning, the clients are calling me and say, by the way, for the next two, three years, we're not buying anything from you. Revenue dropped 75%. Like literally in a day. And that's when I realized that I was really, really not that smart. And I didn't forget your question. And I had to grind from 2008 to 2014, like literally to the point, like I mortgaged my house. Like every month you said, like, are we throwing good money at bad money? Is it really worth going on? And in 2014, we were just kind of break even. And then the private equity came by 77 % of the company.

6:42And to answer your question is the moment the private equity money reached my bank account, that's where I knew. Not one day before. You took a lot of risk. how did you deal with the 2008 crash? I didn't even think about European companies, how it impacted them. I've been in mortgage for 20 years. So I went through the ups and downs and I had to pivot my mortgage path in the crash. But I didn't think about European software storage companies or I didn't think about all the other. Obviously the whole world was impacted, but you only kind of think within the confines of what companies were impacted here in the United States.

7:25But you, I mean, you were obviously impacted in Europe. I mean, it wiped you out, and you weren't even in the mortgage banking or mortgage brokering world. You were just providing the technology for them. So how did you really navigate that? Firing three quarters of the company, reducing cost as much as possible, begging the client to at least not cancel what they were paying, and try to find smart way to open new lines of profit that are kind of counter-cyclical. Like the crisis brought new challenges for banks. So they were not spending on everything related to growth, but they started spending on stuff that are more crisis-related.

8:13If you think like bank stability, know your customer, all that stuff, compliance in general. And yeah, I try to develop new stuff that the bank were actually buying. That's how we grew back from like, I don't know, we were 12 million in 2007, 3 million in 2008 and back to 12 million in 2014-15. Some big jumps. That's amazing. So you've said you left$50 million on the table because you didn't understand PE, private equity. How did that realization shift how you now define success? Well, 50 million in five years, that's what I said. That's the cost of my mistakes in general. Not only PE, to be honest, the PE who acquired my company have been fantastically honest and have been incredibly lucky because with the knowledge I had, they could have like bled me dry and they decided not to do it.

9:24So I got lucky. Now I know private equity. I actually speak private equity, which is very, very important. There's lots of stuff. Private equity is a very uncomplicated business. It's very similar to real estate. We'll talk to you. It's a leveraged business. That's all it is, right? It's you get a mortgage, you leverage your investment, you buy a building, the building takes 10%, you resell the building, you double your investment, right? Basically, that's real estate. Private equity is the same kind of thing. It's a leverage business. So when you understand that, all the jargon they put around that they used to make you feel stupid and make you think you don't understand, it's actually pretty simple.

10:12And more than that, you have to understand what they want. And that's the absolute key. Now, when I help my clients selling, it's like we talk private equity and it actually helps the client and it also helps the private equity. On that note, Can you give me a one minute explanation or crash course on private equity? Yeah, very simple. Let's say you want to buy a company. You keep a very, very simple number. On average, you pay 10 times a bid, 10 times profit. So you want to buy a company that make 1 million profit, your private equity. So you're going to pay the company 10 million. You put$3 million of your cash, you borrow$7 million from the bank.

11:02You keep the company for seven years, and during these seven years, you just pay back the bank with the million of EBITDA you have. Everything being equal, you didn't generate a penny of growth. You just keep the company exactly the same. You basically didn't do anything. So now your bank loan is paid, you resell the company for the exact same price, which is 10 million, and then your 3 million has tripled. Fair enough, it's a leveraged business. You reimburse the debt with the company, the bidda, and the genius part is the debt is on the company, not on you. So you have zero risk in terms of debt.

11:47The risk is in the company you bought and that's it. So your capital risk is 3 million and your risk is that, your 3 million. And obviously that's not the game. The game is to grow the company. And for example, the total cash my private equity put in the company is around 17, I would say. total cash with the initial buying, the earn out and the subsequent M &A, 17 million. And they sold north of 100. 500 or 100? No, north of 100. Yes. So they made time six and I made a lot of money and everybody's happy. A lot of people don't know PE. I didn't even know that PE works like that. I didn't know it was a total leveraged business myself.

12:46I didn't know that they're just taking bank loans. It's basically like buying a house, but you're buying a business. It's exactly like buying a house, except your leverage is a little lower. You get like 70 % leverage, not 90%. And it's a little higher risk, but it's way, way better rewards. Way better rewards. I mean, the payouts are insane. As long as you're calculated on the risk that you're taking for the company. You know, and you study your leadership, et cetera. Yeah, and that's why at some point, you think 2016, 2017, the valuation, the PE were ready to pay were completely crazy. They were massively overpaying.

13:28And it's calmed down a little bit now.

13:34Now you're building a roadmap, your Apex method. And it came after your own exit experience. When did you realize your story you could actually guide so many other entrepreneurs? It's a process, right? I sold my company 2019, 2020, retired, did nothing for three years, starting to get a little bit bored and start an executive MBA in Oxford University here in London. During my MBA, I started meeting entrepreneurs and they were telling me their story. I'm like, fuck, they're doing the exact same mistakes I've been doing my whole life. So let's see if I can, like, give them a hand, like, just like tell them, no, no, that's stupid.

14:19Don't do that. Like, have a wall chest. Stop confusing what's urgent is, what's important, like basic concept. And then I started actually building that because when you don't take money, people don't listen to you. And started to work pretty well. And after a while, I say, well, you know what? Like, okay, I'm going to be able to help 10 entrepreneurs. But if I want a book, it's going to be more. So that's why I want the book pretty much. So the book is called The Apex Method? It's called Cashing Out. Cashing Out. Okay. Where can we find that? And is it on Audible? Yeah, it's on Audible. It's on Amazon.

14:56It's everywhere you find. I'm lucky enough that I have a complicated name. So if you search everything with my name, we'll either find a helicopter or my book. A helicopter? Don't buy the helicopter.

15:11And what is your Apex method? Listen, it's a method because it's nice to have a method in a book. But basically, it's four concepts, right? First, you analyze your company. Like you talk with entrepreneurs all the time. You are amazed by how little they know about their own company. Like they don't know what they have. And I'm talking like, I do not talk with startups. That's not my business. I do not talk with solo entrepreneurs or with$1 million company. So I talk to like minimum 5 million revenue companies and they don't know anything. They don't know. They don't have the proper numbers. They don't know their clients.

15:53They don't know what makes them unique. They don't have a plan. And especially the most important, they don't know where they're going. lots of them have massive engines and no steering wheel like why you where are you going what are you doing when are you selling the company are you selling the company is it a lifestyle business is it a gross business do you want to leave this company to your kids or do you want to sell it you want to make one million per year to finance your lifestyle in the company or do you make want to make a quarter million and all the rest is growth all this question like very basic they don't know.

16:30The reason they don't know is they're grinding and they spend way more time in the company than they spend on the company. And that's one of the things I bring to these people. So analyze basically two, three months, understand your company. Then from that, you have a plan. So let's say your company is now making 10 million, 2 million in bidda, it's worth 20 in four years max. I don't work plans that are more than four years. In four years, we go to get to a 100 million valuation, which is basically we have to multiply your EBITDA by five. What's the path to do that? Where is the growth? Is it M &A?

17:12Is it organic? Is it new product, et cetera? And how do we organize that? So that's going to take another like six, nine months, depending. After that, I'm going to leave you alone. I'm going to let you execute your plan. We're going to touch base from time to time, like once a month, to be sure that your execution. I usually end up being in the board meeting, so I can follow on a monthly base that we are on the plan. So that's the execute part. And then two years, three years, max four years later, we exit the company.

17:55Wow. And how many of those, using that methodology, how many use cases do you have? At the moment, I have three, but none of them have exited yet. It's a brand new project for me, so it takes two, three years. I have one that's very close. Now, you retired for three years. Someone like yourself, a super high achiever, like what did you do to fill your time? Travel, midlife crisis, new country, new wife, new kids, new hobbies, golf, scuba diving, and making kids, basically.

18:33Nice. So some of your favorite hobbies is golfing, scuba diving? Yeah, and I'm really, really pathetic at golfing. We're all golfing. It's terrible. It's the worst sport in the world. So I've been doing that for 20 years and not get any better. Pick a pickleball, you know, you'll see rapid improvement.

19:00Now, writing cash out meant distilling complex lessons. What personal experience did you wrestle with most when you were writing that book? sorry can you repeat the question don't show understand you what what are the personal experiences that you really had it like that really impacted you the most when you wrote the book cash out um 2008 crisis is a big one okay um having to fire half of my company the same day twice. So Switzerland has a strange law that if you fire more than 10 % of the company, you have to do it in a certain fashion. And the fashion is you have to tell them to tell your whole staff that you're going to fire X employees and you have to give them three weeks and you're not allowed to tell them who you're firing.

20:03So basically you tell them, I'm going to fire half the company in three weeks, but I cannot tell you if you are in the list or not. And then on the actual day, you send people in a conference room and tell them you're out. And I had to do that twice. And that's hard. That sounds hard. Now, you're an advisor, you're a board member. What internal hurdles do you find with founders that you, that what internal hurdles do you find founders usually face that mirrors ones that you overcame? I know you mentioned that you like to teach them. What are some like ones that you could think of off the top of your head that the founders usually deal with?

20:50Okay. In order, first one, no plan. They don't know who they want to be personally, not the company. They don't want if they, they don't know if they want to exit. They don't know if they want to grow the company, they don't know any of that. That's number one. Number two, they tend to confuse what's urgent with what's important. So like that's super, super common. I'm yet to meet a founder who didn't have this problem. You spend your time extinguishing fires instead of doing strategy. It's completely normal. And there is a methodology to get out of that. then war chest you like I'm a war chest Nazi like I the first thing I make with my client is I want nine months of your monthly burn rate in your bank account because 2008 will happen again it's not the question if it's the only question is when so you need to be prepared nine months is enough for war chest for 2008 no Nothing was enough for 2008, but I could have not mortgaged my house if I had nine months of burn rate.

22:01So in nine months, you can fire a lot of people and reduce your cost considerably and not completely exhaust your war chest. So you can shrink down a company pretty efficiently in nine months. I'm not saying like, oh, we're not going to do anything and we're going to live on our war chest. It's just a question of how reactive can you be? So, yeah, you have to scale down. Scaling down is a skill. It's very, very hard. It's way harder than scaling up.

22:33And, yeah, so the world chest is one. And then it's the one I'm helping the most to solve now is needing good people, not being able to afford good people. That's the one that's going to actually, that keeps most companies in the 10 million range. It's a very hard one to overstep. It's a hard one to solve when you really need a proper CFO, but you cannot afford a proper CFO. Yeah. And it's hard to get top talent when they're already pretty happy wherever they are. Yeah. So the way I did it is I have 12 people in my virtual C-suite in my company, which are people that I've been working with for decades that are either retired, which is a very good pool of people, like just retired and still very skillful, or that are in a job that are bored and will be able to work at night.

23:41I have lots of stuff like that. So the reason they do it is because they find it fun. They don't need the money, but they find it fun. It's fun to help a company at that stage. So yes, these people are hard to find. And to my knowledge, nobody does fractional C-level people, except for CFO. Lots of people pretend they do fractional CFO. Lots of them actually do bonafide accountants, but like fractional CFO you find. And what we need at that point, and that's tricky, is we need to send people who actually work together. And that's tricky. That's a skill as well. Now, what belief about yourself or leadership in general did you have to really unlearn or purge from your mind to scale from founder to strategic advisor?

24:39I had to understand I'm not a manager. So that's the one thing nobody teach you is people confuse manager and leaders. And not only they are not the same, but they kind of opposite skills. Very rarely do you meet somebody who's a leader and a manager. And that's one of the main realization I had to have, which I had way after I sold my company. I said, why was that so bad and that stuff? And it's because it's not my skill set. I don't know how to manage. I know how to lead. I'm a terrible manager. Yeah. Whenever anyone, I can't even manage one person. Yeah, but when you know that, then you work on your skill and you hire people who do what you cannot do.

25:27Not only that, but people like me and you, we could probably easily be taken advantage of. just because we can't manage them. So they can just, whatever. All the time. But if you're a good leader, the people who work for you do not want to take advantage of you. Yeah. That's one of like how you know you're a good leader. Yeah, yeah, because you serve. Yeah. Now, how has your definition of freedom changed from your early hustle days to now you're helping others exit on their own terms. Freedom is a number, right, in that universe. Freedom is how much money do you need in your bank account to never have to work a single day in your life if you don't want to.

26:15That's freedom. Freedom is being sure like your kids will have a roof in their head and you'll be able to give them a good education and your wife can have a nice car and you can have two nice houses. That's freedom. I'm not being political. That's like in our universe, that's freedom. It's what's and one of like when I do client prospect interviews, that's one of the four or five questions I always ask. What's your number? What number do you think you need to be free? And that's my target for selling the company. Minimum target. Yeah, but, you know, once you're free, then what? you know, founders always ask themselves, then what?

27:01You had that then what moment? Yeah, boo fucking who? You know what I mean? Like, poor rich boy. Now you have 40 million in your bank account and you're a little bit bored. Get over it. Lots of people don't get that. And most people are struggling. So just leave me alone and go see a shrink you can afford. Yeah, that's right. That's right. Now, a couple last questions. Now, if you were to tell your younger self, your 15-year-old Alexis could hear your story now, what would you be most proud of and what wisdom would you offer that 15-year-old Alexis? What I'd be the most proud of is the work I'm doing now, actually.

27:45Pride comes from helping others, not from your own success. Everybody can be successful. I'm more proud of my book than of my exit. I'm more proud of the work I'm doing with my founder than of my exit. And wisdom, it's just always sound like supermarket wisdom, but like just know what you don't know. Like know what you're good at, know what you're bad at, and have a plan. Try to have a plan.

28:20Now, I have a question about family because you got four kids, I got four kids, and you grew up not very wealthy. You definitely didn't grow up as wealthy as your kids. How are you instilling that same level of grit, mindset, hustle in your children now as a father so that they could kind of emulate you? How are you teaching them that? I'm not. I'm failing miserably on that point. I don't know how to do that. I literally don't know how to do that I don't know how to explain to a kid that's been brought to school in a Bentley with a driver that you need to grind I don't know when you try they laugh at me my only chance is telling them I'm still alive you'll need to deal yourself on the time before I die and so far it seems to be working The older one just finished his master's in Quant at Georgia Tech.

29:29So he's doing good. The young one is in a hospitality school in Switzerland. So it's working. They're doing stuff with their life. But if you tell them life is going to be hard for you, they laugh. They know. They're smart. It's not working. And the little ones are too young. So I'll be very, very old when this problem arises. It's my wife's problem. I mean, it's a struggle, you know, like we grew up not very wealthy, right? We had to really fight for success. And then teaching kids how to be successful when they're brought up in a fluent world is not easy. What I'm trying to do is, I know trying to tell them you're not going to have any money, it's not going to fly.