How To Exit Using Private Equity - Alexis Sikorsky

0:01In the world of entrepreneurship, we dream about the big exit. We talk about mergers, acquisitions, IPOs, etc. But there's one exit strategy that's often whispered about. Selling to private equity. Today, we're pulling back the curtain on this mysterious world with someone who's not only been through it, but has come out the other side of fan. Alexei Sikorsky is the founder of a software development company called New Access. After 20 years of running it, he exited his company by selling it to private equity for£100 million. He's seen the good, the bad and the ugly of private equity deals and he loves it.

0:41Because PE is a game and if you want to make it work for you, you just need to know the rules. From the importance of knowing your numbers to the art of making your business look its best, Alexei is going to walk us through the details of preparing for a private equity exit. He'll share insider tips on how to maximise your company's value, navigate the complex world of deal making and avoid the common pitfalls that can derail even the most promising deals. You probably like me aren't planning on selling a business for nine figures tomorrow, but by knowing what options you have now, you can better position yourself for when you're ready.

1:17Whether you're a founder dreaming of your big payday or you're just curious about how the PE world really works, I think you're going to love this episode. So let's get into it. so very relevantly as i was discussing with the guys i come from a uh so i've got a consumer business as well um private equity is absolutely one of the potential options for us um i haven't heard much good stuff about it um and so i'm taking a you know the reason i'm interested in this interview particularly is i'm i'm genuinely here to learn so the way that this interview hopefully blows is like a normal conversation you are someone smart who knows the space and has researched it well and i actually am a literal perfect person to be asking these questions because this is absolutely the path for me i'm more than research it i actually live yes i know flesh yeah yeah yeah exactly yeah and and i've rarely i've rarely heard good things i haven't heard like you know i'm not saying i've just heard terrible things like we'll discuss it but I've never yet heard someone go private equity is bloody brilliant for your business which is essentially what you're doing and I haven't yet heard that so I'm really excited to discuss that so let's start I'm ready okay a lot of entrepreneurs talk about exits right you know you don't necessarily think about it when you start but it's always on your mind why is selling to private equity the thing?

2:50Like why is that specific topic in its own sphere of interest versus just exiting in general? Let's get back 30 years, okay? 30 years ago, you basically didn't have private equity. So you're an entrepreneur. You have, whether it's a lifestyle business, a growth business, whether it's big or it's small, usually you exit before you retire right that that was your natural exit you retire and believe me being through that you want to retire early because you're tired it's exhausting you know that as well as I do so what are your options basically your option is leaving your company to your kids if you have lucky enough or unlucky enough to have kids who can take over the business the other one two oh and one two and well there is no real reason to think that entrepreneurship quality goes in the blood right so one two are trained for and capable for which is a lot um so your option is basically sell to the market right is sell to a competitor or mainly sell to a competitor.

4:07You call that a strategic sell. The problem with strategic sell, it's very imbalanced negotiation, right? If you are a mid to small entrepreneur, you have tons of competitors, and the big guys have, what, four, five, six of them? How many Googles are there to buy you? So they tend to make you feel like crap. Negotiation is really not in your favor. And yeah, they want to buy you cheap. They want to get rid of you as soon as possible and all of your friends. And it's a difficult, tough situation. Now, come private equity to the scene. So there are guys that have very, very clear goal. They want to buy your company because basically they like what you're doing.

5:01They think you're making a profit. Well, because if you're not making a profit, you're not selling to private equity, mostly. And they think they can help you make more profit. And suddenly you have 500 private equity who can buy you. So suddenly you become a rarity. Like you're an entrepreneur, you know that, right? You receive email or phone call from private equity once a week, right? because they have so much money to deploy and it's not that many. They have a sweet spot in terms of location. They have a sweet spot in terms of investment size, in terms of market, in terms of how the company is run.

5:45So if you go all the criteria from this guy, finally they don't find that many to buy. What is private equity? You say there's so many of them. Let's define it. What does it really mean? What is a typical... How does one start a private equity? and like why are there so many of them? Okay, private equity, well, private equity is more than what I describe as private equity because you have like private equity who will buy an airport and you have very big private equity. But the one we're dealing with is private equity that specialize in LBO, leveraged buyout, which means they're going to use their investors' money plus bank money to acquire a company.

6:27they will take a majority share of the company and usually leave the founders and management team in place with a minority position that's what does that typically look like majority and minority i know it's how long is a piece of string but what are typical my case and actually it's pretty typical my case is they bought 77 and left the management team with 23 percent that's pretty common they leave they will rarely take less than two-thirds and rarely more than 80 percent i would say so now it's pretty typical you you keep between 20 and 25 30 and that's a negotiation right so yeah okay so like what are they as in that that's sort of like how the money is so to speak but like how does how does one set up a private equity what is that kind of organization i know it sounds like a very basic question but you know in the startup world especially the startup world right so you're early on your journey and stuff you you know you start to understand angel investors seis eis venture capital like all these things you start to understand the market a little bit and then on the exit side there's these few things that you sort of broadly understand ipo selling to a company failing and then there's like obviously mna and private equity what is that so we know what VC fund is but what is a private equity well first of all congrats if you understand the angel and VC world because it's going to be the topic of my next book and it's very very complicated actually private equity is pretty simple okay private equity is a company who raise a bunch of money usually mid-size so for for instance the private equity who acquired me had the first fund of 100 million.

8:19I was part of the second fund that had 400 million. And after they sold me or while they were selling my company, there is the first billion euros fund. So mid-size, usually between 100 million to a billion, I would say. Leave alone the KKR and the giants. But usually that's the guy you will deal with. so there is a that money mainly with institutional investors some private but mainly institutional so now they're sitting on that part of money and they will deploy eight to twelve per fund so if you fund this hundred million their sweet spot will be eight to twelve million right and keeping So deploying 8 to 12 million per acquisition.

9:15Yeah, so they would make it to 10. So they'd be looking to invest, call it 10. They'd be looking to invest 10. Yes. To own 60 to 70 % of a company. Yes, but keep in mind that with their 10, they're going to borrow 40. So that means that three spot will be 50 million. Oh, I see. Right? The size of the deal will be 50 million. So that's private equity. private equity is usually usually organized with a few guys four five who are the gps who are the owners of the fund who own each have their specialty and they tend to get involved so that mean when you get acquired by a private equity you have a guy uh in in my case they were called participation director which which means that's the guy who's in charge of the day-to-day of of running your company and you have the the gp who will be in charge of doing the board meeting once a month and gp is general partner yeah right yeah um so yeah that's it so it's very interesting like we'll probably discuss that later but private equity do massive due diligence on you and one of the reason entrepreneurs are scared of pe because they don't do their due diligence on the private equity right at the end of the day you end up working with two individuals the guy you talk to on a weekly basis or sometimes even on a daily basis and general partner who's gonna be basically your boss or and at the least you can do is meet with these people like the first question you ask is who's gonna be my participation director who's gonna be my GP because at the end of the day they're people so the quality of the relationship will depend on the quality of the people and the participation director it's kind of your new boss or not is that a way to think about it no the the gp is your new boss the participation director will act more like your colleague right my my participation director which is still a very close friend and got interviewed in my book and everything we would talk probably once a day and we'll he was in paris i was in geneva it's not one time i'd go to paris and not grab a beer with him or he'll come to geneva hood usually come to geneva like two or three times a month so he's more your colleague the guy who's actually acting like your boss is your is your gp okay let's talk a little bit about due diligence then?

11:56What does good look like? What are the things that you categorically need founders to know that they have to do? What are the absolute core basics? It's actually so easy and I don't understand why people make that complicated. So how would you do your due diligence for anybody you work with, right? So first of all, you meet with the guys, talk to them, talk to them outside of just deals, conversation, know who they are as human being. and by the way they're going to be completely okay with that you actually tell them you said you know in this process if we end up uh signing a deal you're going to do a massive due diligence on my company so i'm going to do do a due diligence on your company they're going to be actually they're going to probably appreciate that by the way i didn't do any of that so it's it's it's uh knowledge i acquired later in life i wish i did i got lucky um so first talk to the people know them and ask them question the one of the good question you ask is how how much freedom will i get as a ceo that's a that's just ask the question uh will you give me um kind of a road book this is where i want you to go and let you work or will you be on on my ass every day for details and they will probably tell you that um you can also ask them um okay now you met with my management team who is going who do you think is not cut for this job that's a very important question um are they always really honest about this stuff no yeah no so a lot of this feels like performative theatrics right no it's a bit more than that They're not always completely honest, but, well, I have a fundamental belief in human nature.

13:44So I think you end up knowing. In my case, it was very, very clear. They'd be super honest. They say, you don't have a CFO, which is absolutely right. So say, you're going to need a CFO. Apart from that, I love your guys. That's why we're buying. And it turned out to be mostly true. But that's, okay, that's the purely conversational time. But then the best thing you know is to talk to people they've done business with. So the way I would do it now, again, I didn't do any of that, but the way I would do it now is ask them for five names of company they acquired, of founders of company they acquired, and say, I want to do a due diligence, can you give me five names?

14:27They will give you five names, no problem. You're obviously not going to call any of these people because it makes no sense. and you find the other five. It's usually pretty easy to find who they acquire. Mainly it's on their website. And then you LinkedIn and call the CEOs and founders of this company and say, how did it happen? So for clarity, what you're saying is you ask them for five names and then you with your skeptical, cynical, slightly aware entrepreneurial mind know that that'll be the best five that they'll probably give you. And therefore you ignore it. But you've essentially told them that you're going to be contacting your people.

15:08And so you're using your initiative ultimately to find better ones. By the way, that's exactly what a good private equity will do when they do your client due diligence. Isn't there an argument to say, so for example, when you're doing interview techniques, and there's a great book called Who that I use to do my interview techniques at heights. and the thing that they ask you to do in references or that they suggest that you do in references in the book is literally tell me someone who is going to give you a great reference someone who you don't think will give you a great reference and someone you're not really that sure about which is really interesting because almost everyone can if they're really honest think about those three answers not on the spot but in general and it provides a lot of introspection and that could be quite an interesting way to do it with them because you actually have to make them name someone who it hasn't been a good relationship with that's a good idea actually but in that case keep in mind like you're not talking to hundreds of good of company rights there so if they do 10 per fund if you get the last 10 you'll have a pretty good vision right so it's 10 phone calls and by the way people will answer people love telling their stories we know that right so So you call and say, hey, I'm getting acquired by PX.

16:25I know they acquired you. Can you spend half an hour? I never heard of somebody saying no to that. They love telling you the story. And also especially if they're pissed with them. Yeah. Yeah. They love telling it even more. So what happens if you do your due diligence on all the available acquirers in PE and they all turn out to be arseholes? There's 500 of them. So it's not happening. Yeah, 500 ourselves is possible. Well, it's... And also, where does this 500 come from? Is that a fact? I don't know. No, it's not a fact. Do you know how many private equities there actually are in Europe, for example, that are in the market available to buy companies?

17:01No, I don't. That's a very good question. You should do some research on that. It's a reputation game, right? It's like saying, I don't know where to eat because all the restaurants are bad. like it's it's um it's mainly a reputation game for these guys and i'll give you an example that's a very very clear example one of the private equity trick which is brilliant it works every time is i'm gonna buy your company and i'm gonna say i'm gonna acquire you for 100 million and after that we go to six months of stuff due diligence legal negotiation I call it six months colonoscopy.

17:47What's happened in your mind during that time? For me, I'm good. I'm happy. I have staff to do that. That's what I do. Yeah, that's your job anyway, right? That's my job. That's what I do. It's not what you do. So what's happened in your brain? It's happened multiple things. First, you want to kill me multiple times. So I'll have to quiet you down. But I'm happy. I'm very good at that. then you're not running your company for six months by the way right because you're dealing with private equity yeah which by the way obviously is the same with fundraising and vc one of the good bull cases for having co-founders is one of you can practice focus on that and the other one can focus on the business but obviously for a lot of people sole founders or whatever is this big ironic situation where you need to do the best performance of your life at the same time you can't be running the business absolute absolute catch 22 yeah 100 percent yeah um and another thing is going to happen in your in your mind is you're going to start spending the money either if you're a very reasonable guy start spending it in your mind and if you're like me your personal money or no the money you're gonna get you're the 100 million that you haven't yet got oh you see on growth on growth yeah on making sure that you're hitting targets and no no no no no that's not money for the company right you're selling that's money for you right so you as a human being as a founder who's been like most founder has been grinding for decades before they get to their point and like suddenly they're gonna have 60 million hit the bank account i dare you not to start at least in your mind spending it or if you're like me spending it in real life like oh i can buy the new car now i'll get 60 million in six months you know what i mean yeah and then you got to end of due diligence your private equity say by the way it's not going to be 100 million it's going to be 80 because x and x and x bullshit reason um a friend of mine call it brilliant they call it fish and chip they fish you with 100 million and then they chip away of the money that's brilliant um So that's a very, very common technique.

19:53It's something you should address with them at the beginning and tell them that's not going to work on me. This is the number. And unless there is a very valid reason, you know there is no valid reason, right? Because you know your company. So unless there is a valid reason, I'm not going to accept 95. So do not spend a million in due diligence if you think you're going to screw me for 10 million at the end because it's not going to work. At least you tell them you're aware. Yeah. So that's the first question you ask when you do your due diligence. Do the fish and chip. Yeah, so what's interesting here is you're making it sound like sometimes this is as simple as having some self-respect, some awareness, and drawing clear lines of boundaries up front in a negotiation that you're not a pushover, which is interesting because, in theory, these things should almost be assumed as an entrepreneur from a buyer, especially from what you've just said, which is, you know, this is a reputation game, you know, they do multiple deals like this, like blah, blah, blah, blah, blah.

20:52Yet, if I was selling my company for 100 and they said 80 on the last day or whatever at some point during the negotiation, it completely screws my love for this deal. Even though it's a great amount of money and all of the things, no one likes to feel taken advantage of. So even if it was 99, to your point, it's like, why do that? You're trying to, it's like a psychological trick right and it's not really about the money it's about the common decency between two people in an authentic negotiation where i need to take you as a partner at face value and what you're saying the same way as we should because it's going to be a business relationship and partnership and now i feel like i can't trust you i i can't understand the psychology of that at all and it sounds to me a little bit like it's almost just for the love of the game do you know what i mean as in that they will try just to see if it's possible so that's a very common mistake it's like i don't know like interacting with your computer and thinking he has human reactions private equity are all about the money that's that you need to understand that and you need to understand that early they don't care they don't care about your feelings they don't care about your staff feelings, they don't care about your client feeling, they don't care about their staff feeling.

22:13It's a money game. If they buy a hundred million company for 90, they make an extra 10%, which is a lot. Because for you it's, well, okay, it's just 10 % less. For them with all the calculation of revenues and everything, it's a lot. because keep in mind they're financing 80 % of it, right? So it's actually very smart to do because you're going to be pissed at them, they don't care. You're not going to trust them, they don't care. You work for them. You need to understand, I love private equity because I love that their goals and targets are really, really clear. They want to make a multiple on their money, on the money they invest for their investors, and nothing else matters.

23:06And that's very, very different. And that's actually a big cultural thing when you deal with these people, right? When you are a founder, especially for mid-sized, when I sold the company, it was maybe 300 employees. These guys are your family, right? You've been through a lot with them. the company was 20 years old. Some of them were literally my family. You know what I mean? They don't give a flying mic. They don't care. There are numbers on an Excel spreadsheet. And they do care about staff morale. That's something they will talk about. But as a tool, like, oh, we want them to be reasonably happy so they don't leave and they work properly.

23:55Apart from that, they don't care. So this negotiation technique, they really, really don't care if you don't like them. What do you think are common misconceptions then? So I've said my side, I haven't necessarily heard good things about private equity. Maybe it is because of the emotional side as well. What do you think most common misconceptions are then from founders? Most common misconception is they're going to acquire your company and fire you. That does happen. but it's the last thing they like to do. What does happen if they do? They put another CEO. Can we, in the context of that question, actually, let's talk about a theoretical deal.

24:37Yeah. Let's say they buy your company for 100 million. It's a round number. Yeah. In this scenario, they invest probably 20 and borrow 80. Is that about right? Yeah. Okay. And so, and they will probably own about 78 % Or whatever, 80%, let's call it, right? And so you as the founders have what? Fully exited... Yeah, actually, let's start there. How does that work financially then for the founders? Let's say the founders between you two, for simple maths again, let's just say that you own 50 % and your investors own 50%. So they will buy 100 % of all your investors. Right. And they're going to buy 30 % of your shares.

25:20Right. So your investor will get 50, you'll get 30. That's how it will work. Got it. they will very they'll be very unlikely to keep a non-active investor on board on an on an management buyout they usually get rid of all the small investors which is by the way very beginning day one of your company you think about first of all having the cleanest cap table as possible so as little investors as possible do not give this half a person deals right oh you're gonna do my website and you get half percent of the company do not do that because they have i've seen big and good deals being canceled because of that why well uh um the last thing they want is to have minority shareholders who are pain in the ass so i own five percent they're buying them out though yeah if they want to oh i see yeah and then everybody said and that's really super common like oh don't worry i have a drag along tag along i have a shareholder yeah sure if they sign so that's i just had this conversation with a client who has like a guy in his cap table who hates him and and they are fighting and i told him i cannot sell your company right now you have to solve so why he has that he has a drag along tag along so i say yeah okay let me describe you the situation The private equity will give a letter of intent.

26:51You're going to go through all the negotiation, the six months colonoscopy, everything. You get to signing the deal and the guy say, I don't sign. What do you do? Well, I have a drag along. Yeah, you have a drag along. So you go to court, right? And that's a two years process before the guy put his signature on the piece of paper. So one of the things the private equity will do, will absolutely have a conversation with every shareholder to be sure everybody is on board. So going back to your example, all the investors will get 50 million, you'll get 30. And then you'll still own 20 % of the shares.

27:26So in what circumstances then, because we're talking about misconceptions, so here's my misconception or my conception, is of that 20 % that I'm still in and I'm running the company, I believe that the private equity is trying to fuck me over every single moment that they possibly can to fire me early to cancel my shares to take my 20 is that true or is that no because firing you will have no impact on your shares right you're still all the shares yeah i don't know that's actually what i'm wondering is this stuff conditional or it's like you are the shareholder no you are the shareholder no no no there's no no the condition you can have is um part of your earn out will be based on performance and part of the earn out will be based on the fact that you're actually staying on board.

28:15So sometimes they do what's called a bad lever close. I mean, if you quit, you won't get your earn out, basically. After that, they have nothing on you. You won't get your earn out, which is part of the... Initial payment. The initial payment, exactly. But you're 20 % that's... Shares, shares, like shares of IBM, right? IBM cannot decide you don't have shares anymore. Got it. Okay, fine. so what you're hoping in a deal like that so again it's all down to what's your number right but what you're hoping in a deal like that is first of all the initial payment is enough to hit your number right so like how much money you basically how much money you need to live without working do you advise people on what you think that number is from i know what that number is what is that number but well it's you can't say you know what it is and then be like well No, I know what it is.

29:09I'm going to say in the UK. Right. In the UK, that number is 40 million. Four zero? Four zero. So never, personally, you need 40 million to never work again. Fuck me, that makes the UK sound expensive. No, I'll tell you why. Basically, universally, pretty much everywhere in the world, you need a million per year to live without working. Right, okay. That's like school for kids, nice house, nice vacation. It's expensive to not work. You'll see. Okay. So basically you need a million per year to not work. You could just drop your ego a bit. A million a year is... I mean, yeah, maybe some ridiculous holidays and stuff.

29:45We'll discuss that. We'll discuss that when you're retired. But like, of course you can live with less. I'm not an asshole. But keep in mind you're an entrepreneur who brought your company to like a hundred million. So you have some kind of habits of expectation. You have staff, you have kids, you have... So basically a million per year. So in the UK, you need to make double that because the taxman will take half. So basically, 40 million at 5 % will give you 2 million revenue per year. And one goes to a taxman, one goes to your life side, and you leave 40 to your kids. Got it. That's the idea.

30:19Okay. So then just to break that down, because what you're referring to here is obviously it's an intelligent investment strategy versus um also just just to explain this a different way you've defined this as 40 million because of the way that you can live off that money and so can you just define that a little bit more because i do actually understand what you're talking about but maybe not everyone does because initially when you said 40 i'm like what's your you have to draw that down every month every year rather but you're not saying that you're saying you're investing it in the market and you're living off the the returns from the market investing of 40 million so that you know you're not going below 40 million at any point basically in any country like western country in the world you can assume that a reasonably safe investment strategy so in the uk for example you do a mix of like very low risk bonds and high dividends paying share so basically you invest your money and five percent it's pretty reasonable yep um yeah so the idea is like the only way when you reach and believe me i'm talking from experience unfortunately and for lots of people i know it's hard not to spend your money it's hard when you get a 40 million check to not want to buy a 20 million house but you can't yeah you can't if you want a 40 million house then you need more than 40 million yeah because the the only way to live quietly especially if you sell like if you sell when you're 90 you probably don't care so much but usually you'll sell when you still have a few years to live and usually you have kids right yeah and you want to leave something to your kids so the idea is to get to a number where you can never ever never again touch that money yeah so you have 40 million in your bank account when you die there's still 40 million in your bank accounts that's that's why it's that number got it okay that makes a lot of sense alexis at some point i'll exit my company i'm not in a rush but you know at some point it's a consumer brand it's called heights and we're just about to do you know we're trying to do 10 million a year and started four years ago so it started in 2020 so nice growth growth rate, nice trajectory, borderline profitable.

32:47I would have been profitable the last seven months. We weren't profitable last month because growth was good. And so we decided to invest more in marketing. Obviously aware that we would need to focus on EBITDA if we want to be serious about an exit. So let's just say that I'm coming to you for advice. I want to do an exit and I'm considering PE. What do I need to know? What are you going to advise me other than wait a couple of years and come back to me when you're serious? First of all, I'm going to ask you two questions to define if I can have a mandate and what's the scope of the mandate. First of all is what's your number?

33:26So is that a personal number or is that a personal number? I don't care about your company. I care about you. Fascinating. What's your number? The reason I'm going to ask you that. Well, I shouldn't have asked you what the fact is before having a number. Most of my clients, I bring them to a number of 100 million actually. but not personal 100 million yeah personal oh personal 100 million yeah the 100 million exit is personal right okay but so does that mean because most of your so i've had investors yes um and the numbers you were talking about in your conversation they felt like they were working towards 100 million exit versus 100 million personal exit okay in your case that's obviously the same when you own 100 of the business but in my case i own more like 25 percent of the business i got one co-founder roughly 50 and investors um the thing that we've got going for us is um control so we've got voting control um so we have a unique setup i would say more unique than others in this situation but anyway um okay but but to get to 100 million that's a conversation for later but i would probably try to clean the cap table before a exit get rid of your investors earlier but how so how would one do that a lot of people listening will will have investors so how do they do that how do you clean a cap table prior to a private well you you buy them back right you buy them back by the profit of the company and depending who they are it might be it's easier if they're angels might be a little bit trickier if they're vc um but anyway actually that's a detail i'm gonna see what's the number for you with your investor so how how how much do i need to grow your company to get you to that number sure that's the first point in your case you i already have the answer but actually that's the second question the second the first question is are you a lifestyle business or are you a growth business and that's a like it's a number one question right and how does one know well what self-awareness It's a decision.

35:26Actually, it's a decision. Like, there are very, very strong hints. I'll tell you about a company I'm advising with, a software company, right? Brilliant. Beautiful company. Making, I think, 10 million revenue, 1 million EBITDA. Like, why is he making 1 million EBITDA? What's wrong? the founder is taking a million salary. All the cars of the kids' cars and the nephews' cars, everything is in the company. And the company is growing, but slowly. And that's pretty much a lifestyle business. The owner, she's very happy with that. She said, well, I'm making a million per year. I have no cost. And my son is going to take over.

36:20Perfectly fine. Just wait until she finds out she needs two million. No, she's okay. She's one million. Half of the spending is in the company, right? Every time they travel, they travel with the company. And, you know, so it's one million, but no cost, basically. Yeah. Sounds amazing, to be honest. Highly tax efficient that way. Yeah, depend on the country, up until you get caught. But, yeah, highly tax efficient. And in her case, the succession is clear. The kids are in the company. So it's a lifestyle business. That's fantastic. Just there's nothing I can do for you. You run that perfectly.

37:02The only skill you need in a lifestyle business is operational efficiency because you need to extract as many profit as you can from the company, whether it's directly to you or in dividends, and tax efficiencies, which it's not my skill set. a growth business, I would like to see the founders taking the absolute minimum livable salary, and I'm going to bitch slap you if you take a penny in dividends, right? Because that's not what you do. You grow. Yeah, then we're that for sure. I know. That's why I didn't ask the question, but that would be to a new client, that would be my first question. So first question is lifestyle versus growth.

37:46Second one is your number. So let's say in your case, we bring the company to 100 million and the next question is how much time do i have uh it's usually gonna be between two or four years i don't do 10-year plans i i like i suck at it it's not what i'm good at well no one no one's good at 10-year plans no one i i i totally believe in that but um if your company cannot grow to a hundred million valuation which is depending on the market but roughly 10 million EBITDA in four years and you're doing something wrong right then maybe you are a lifetime business so you can also can you just define EBITDA so people aren't confused just in case there are listeners being like basically it's your profits before tax depreciation and amortization so it's the difference between your cost actual out-of-pocket cost and your spend your your revenue and so So basically, to go back to your question, how long?

38:46Yeah, I'll bring you to 10 million between two or four years, depending on the market and the value. And then I have a methodology that I apply to my clients. That's my son found the name. I'm really proud of him. It's called Apex. So assess the company. There is a few common points. But do you know your numbers? I ask you the question. Do you know your numbers? Probably so, yeah. Yeah, I bet you don't know your numbers. I probably don't know it to a financial inspection. You don't know your numbers. And that's the first thing. Like so many funders don't know their number. And that's one thing.

39:20That's the one thing. Probably the only thing I was good at before private equity. And that was a big part of the success of the deal is I actually knew my number. Although I suppose as long as one of you does, my business partner is an ex-accountant. Yeah, that's fine. Yeah, yeah, yeah. It's always good to have either a lawyer or an accountant as a business partner. Having that, yeah, up until something goes wrong. But you're the CEO, right? Yeah. So you should know your numbers. Yeah, and I broadly do, but I know that I would fall apart in a proper inspection. If you are my client, I'll nag you with that.

39:51Yeah, yeah, yeah. I nag you too that you have a monthly clear view of your number. But then equally, I suppose, I'm not optimizing for that right now. And so I'm not defending that I shouldn't know my numbers. I should know all of them. But I suppose at different points in your life as a founder and CEO, you need to focus on what the actual goals are for that year or that next 24 months. and exit isn't one of those things right now, if that makes sense. That's a mistake. Do you think so? Okay. Yeah. Like, I'm not saying think exit when you're not profitable or when you're grinding, but now you said with the number you said and you being profitable, now you should really have exit in mind.

40:30So I'm going to assess... Well, I suppose to your point, sorry to interrupt, I suppose to your point of if it's a two to four year process, then it makes perfect sense to start to get everything in mind. Yeah, it's like, keep in mind that from the moment you get the phone call or you start your selling process to the moment the money hits your account, it could be a year, like six, nine months. Mine was fast, but it's not always that fast. So assess your company. What's your unique selling proposal? Do you measure your client satisfaction? Do you measure it properly? do you talk to your client do you actually physically sit and talk with your client all that stuff so that's a that's a process and then we're gonna plan like okay so how do we get from you said one yeah one no you you said break even how do we get to from break even to 10 million a bit down four years what are the steps uh in most cases i'm gonna allow you to do an acquisition interesting i love m &a it's such a fast and and just define m &a what's that mean well merger and acquisition i love love love so that one of the conversation i have with my my founders is really acquire earlier than you think it's a fantastic new access to i'd say 90 percent maybe not 90 but 80 % of our growth was external acquisitions.