Mastering Private Equity: Strategies for Business Growth and Wealth Creation

Adam Coffey is on the show to talk about his new book, "Empire Builder," which serves as a guide for businesses aiming to scale from zero to a billion dollars in revenue. The book emphasizes the importance of understanding and mastering unit-level economics, achieving specific financial metrics (as outlined in the "30-20-10 rule"), and transitioning from a hands-on role to a more strategic, overseeing role as the business grows. 

It also highlights the significance of thinking like an investor, prioritizing cash flow growth, and understanding the role of private equity in business scaling. Throughout, the book stresses the importance of a comprehensive understanding of business growth, strategic planning, people management, and financial literacy for entrepreneurs aiming for significant business success.

THREE BIG IDEAS FROM THE INTERVIEW:

1. The 30-20-10 Rule for Business Growth: Adam introduces a key concept for scaling businesses, the "30-20-10 rule." This emphasizes that businesses should aim for a 30% gross margin, keep SG&A expenses below 20%, and have a minimum net profit of 10%.

2. The Importance of Financial Literacy and Role Evolution: As businesses scale, there's a prevalent gap in financial understanding among entrepreneurs. They need to grasp unit-level economics, understand business valuations based on earnings (not just revenue), and manage finances for long-term value. Additionally, as businesses grow, entrepreneurs need to transition from hands-on roles to overseeing broader operations, akin to moving from playing every instrument to conducting the orchestra.

3. Adopting an Investor Mindset and Understanding Private Equity: Entrepreneurs should think like investors, focusing on cash flow growth and understanding their equity positions and growth strategies. The article also highlights the significance of private equity in scaling businesses, introducing the concept of the "P.E. pyramid," which shows that as companies grow in size, they become more valuable, allowing them to sell at higher multiples and create wealth.

ABOUT ADAM COFFEY:

Empire builder, CEO coach, in-demand speaker, and three-time #1 bestselling author Adam Coffey builds high-performance cultures that drive transformative exponential growth. A CEO for more than two decades, he led three national private equity-backed service companies for nine PE sponsors, completing 58 acquisitions and realizing billions of dollars in successful exits. Coffey is a founding partner of CEO Advisory Guru, serving as management consultant and independent director to PE portfolio companies, family offices, and elite executives. His specialties include growth strategy, mergers and acquisitions, new business development, and exits. A proud US Army veteran, Coffey lives in Texas with his family.

PODCAST INTERVIEW QUOTES:

07:35 - “There's 33 million small businesses in America today. And of those 33 million, only 7% ever get to a million dollars of revenue.” - Adam Coffey

13:00 - “Invest in what you know.” - Adam Coffey

13:46 - “Invest in what people need or build a company around needs. - Adam Coffey

45:33 - “First I'll tell you they have almost no understanding of their own finances.” - Adam Coffey

45:42 - “I consider the income statement. It's a set of stairs and I'm walking down the stairs.” - Adam Coffey

INTENTIONAL GROWTH™ RESOURCES:

• Intentional Growth™ Podcast Archives: Archive of 356+ episodes and counting. Get access to the entire library HERE. We'll be adding a searchable tagging feature later on this year.
• IG Financial Scorecard: Get your Intentional Growth™ Score that grades you on how well you are viewing - and running your business like a financial asset. Get your results and 5 case study videos HERE.
• Intentional Growth™ Academy: 71 Videos, 9.5 hours of content, 20+ exercises. $995 for subscribers [normally $1,495] HERE