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Transforming the Game with Kristina Katsanevas is the podcast for game-changers, risk-takers, and industry shakers. Don’t hate the player—hate the game? Not here. These leaders are rewriting the rules. From high-net-worth entrepreneurs, founders of Australia’s most iconic brands, and those disciplined enough to keep stacking those habits to success. We dive into the minds of pioneers innovating in media, business, fashion, sport and transformation.
Want to know how to break the mold and redefine success in your career, business, and life?
Tune in and start transforming the game.
Kristina Katsanevas (00:43)
Adam Coffey I've been waiting a long time for this one welcome to Transforming the Game.
Adam Coffey (00:49)
Well, it's good to be here, Kristina I'm sorry that it's taken us a while to get here, but we're here now. So hello to all your listeners out there.
Kristina Katsanevas (00:57)
this is going to be exciting, this is going to change the trajectory of their business, but why should they keep staying and listening?
Adam Coffey (01:03)
Well, if I had to just list some numbers real briefly, let's see. I was a CEO for 21 years, three different large companies. I bought 58 companies doing a buy and build. I built them for nine different private equity firms. I had two and a half billion dollars. That's billion with a B ⁓ exits. ⁓ know, so.
I'm I've written four number one bestselling books on building businesses, private equity, working with private equity, selling your company. So I guess people should listen because that's those are my numbers. That's.
Kristina Katsanevas (01:39)
you've got the stats.
You've got the tickets.
It's real. It's real. I have read all of your books, Empire Builder. well, I've read three of them, actually. Let me take that back. The Private Equity Playbook, The Exit Strategy. I will admit the Empire Builder is by far for my favorite in this book.
Adam Coffey (02:00)
It's my favorite. It's my favorite too. But the world
likes the private equity playbook the best. it's been number one and I don't know, 30, 35 countries and it's never left the top 10 here in the United States. My books pretty much have owned the private equity category, you know, on, Amazon. It's just, that's the way that it's been. That's the way that it works. I'm blessed.
Kristina Katsanevas (02:14)
I know.
Congratulations. Well,
they are a really good read. So from anyone who's even just starting a business, even thinking about a business, you've written it in a way that takes the readers on a journey to understand and you're very methodical and you step through, but it's not dry. So tell me what is the key takeaway? if someone picks this book up that you wanted someone to like take away as your legacy of reading it?
Adam Coffey (02:48)
Yeah, so I think first thing when I was doing research for this was actually for a different book for a different a different project that I was working on. I was shocked to find some statistics that weren't very friendly towards entrepreneurs. And, you know, it goes something like this. These were US statistics, not Australian. But but thirty four million small companies in the United States. Only seven percent of those companies ever got to a million dollars in revenue.
Only 4 % of the 7 % ever got to 10 million in revenue. And success was just, it seemed like such an elusive thing for so many people. Only 40 % of those companies were profitable. 50 % of them would be gone within five years. And I thought, why is it so hard for people to be successful? And I really then wanted to dig in, which led to Empire Builder, you know, into helping entrepreneurs
Kristina Katsanevas (03:33)
Yeah.
Adam Coffey (03:44)
beat the odds. Because in my world, I'm building companies that get as large as a billion dollars in revenue. And it's like, I want to help people learn how to succeed. So that was the kind of the catalyst behind writing Empire Builder was help entrepreneurs make the journey from zero to a million focus on the right behaviors. Once I get to a million focus on the right behaviors to get to 10 million to get to 100 million, you know, etc. And most entrepreneurs
didn't understand the basic DNA of success. And I wanted to help change that.
Kristina Katsanevas (04:16)
So what was the biggest thing, the biggest task, the biggest mindset that people were doing wrong? Why couldn't people, why is it so hard for so many to get to a million? But then people like yourself go, I'm to buy up 58 companies. I can sell for hundreds of millions. What is it that tips the scales?
Adam Coffey (04:33)
Yeah, so
I focus a lot on it in Empire Builder, you know, I call it unit level economics. And so it's not understanding the basic building blocks of success and breaking down whatever the product or service of a company is into its fundamental lowest revenue earning unit, and then making sure that the math works small. So many entrepreneurs start a company without any kind of conception around what you know, what will drive success. And they just think I got to get bigger, I got to get bigger.
Kristina Katsanevas (05:02)
Mm-hmm.
Adam Coffey (05:02)
add more revenue
add more revenue. Well, if your company doesn't work small, it's not going to work big, you know, so that's the first, you know, takeaway is we got to make a company work small, it's got to be profitable, small, needs to be healthy, small, if it is, then we're guaranteed that we can scale it to a higher level of success. And so in the book, I use the mythical landscape maintenance company, because globally, everybody kind of gets this this concept, I hire a company, they come out to my yard, they cut the grass.
you know, and they cut it every week, you know, when it's growing season every two weeks when it's when it's not, you know, and they fertilize it and they do all this stuff to my yard. And, you know, what's the basic unit level? Well, I can't have half a crew and half a truck, you know, the basic unit that I have to be successful at is one truck, one truck, a crew of two people, a mower, a blower, a weed whacker, can I generate enough
Kristina Katsanevas (05:50)
Hmm.
Adam Coffey (05:57)
enough revenue with that unit to pay for it and to produce a minimum of 30 % gross profit. I also talk a lot about this thing called the 30 2010 rule. know, anytime I evaluate a business or I'm looking at an income statement, you know, while I want it to be higher, my minimum level of acceptable performance is I need at least 30 % of gross profit.
I want to keep my back office expense or SG &A or indirect expense under 20%. And I need to make at least a dime on the dollar to be profitable and to be, you know, I want 10 cents of profit for every dollar of revenue minimum. These are my minimums. My perfect company is more like 35, 15, 20, making at least 20 cents on a dollar. That would be best in class for a lot of different industries. So, so I look at the basic math.
And I build an expense model. How much does it cost to have two people as my employees? What am I going to pay him in salary benefits, you know, all the stuff that goes with the employees. And then I have a truck. And so what's the truck payment? How much does it cost for gasoline for oil for, you know, repairs and insurance and all of that stuff. And and so and then I got to operate the weed whacker, the mower, the blower, it's like I look at what is the expense model.
And I look at what's the revenue model. How much can we charge to cut someone's lawn? How many laws can we cut in a day? How many laws can we cut in a week, in a month? And I create a revenue model, an expense model. And if my company does not produce at least 30 % gross profit, stop. Don't try to grow it. Try to fix it. Because I'd rather fix it small than
Kristina Katsanevas (07:27)
you
Adam Coffey (07:35)
make it really big and make my problem even bigger than it is. so, and I have to tell you, Kristina, this is not unique to small businesses either. I've had billionaires, you know, reach out to me and say, Adam, my company that has been around for a hundred years.
you know, is failing. And it's like, and I look at it and I peel back the onion, get down to the base unit level of economics. And I'm like, it doesn't work. You know, no wonder it doesn't work. No wonder for CEOs have failed trying to fix it, because they don't understand unit level economics. They're trying to fix 6000 trucks from the top down. I'm just going to go down to one truck and one truck work. And if one truck works, all 6000 will work.
Kristina Katsanevas (08:12)
Yep.
Adam Coffey (08:18)
So it's understanding and in each business, each industry, that basic unit level is different. If I'm a retail environment, I might be looking at revenue per square foot of my store. I might be looking at it based on product lines. I have a client who is doing a roll up in the pharmaceutical industry. They own a bunch of pharmacies, retail pharmacies where people come in. Well, we've got the pharmacy that deals with prescription drugs and
Kristina Katsanevas (08:24)
⁓
Yep.
Adam Coffey (08:45)
That has a certain square footage and a certain amount of revenue being generated and a certain cost structure for the technicians and the pharmacist that works in there. And then I've got the retail section that has products that are also being sold. And I have cost per square foot and I have a cashier that sits up front to check people out. So it's like we can find unit level economics regardless of the business. But the key to finding success large is to first find it small.
And to get it dialed in and make sure that the basic math works. Once I've got that, then scaling becomes really easy. So in my mythical landscape maintenance company, you know, how many trucks do I need to have to hit a million dollars in revenue? And how many, you know, employees would I need to have? How many customers would I need to have? And it's like, and I turn success and scaling into what I call napkin math, you know, and
And I turn it into net, you know what? You don't have to be the smartest person on the planet from a business perspective, you know, to get all this. Once you know, napkin math, then, you know, I have a nephew, my nephew, God bless him. Um, career air force, USA air force really big. And he did special security stuff. And I'm like, if I'm ever in a bar fight, I want him standing behind me. But when it comes to building his landscape maintenance company, he's dumb as a brick, you know, he's just not a business guy. He's a big brick, you know,
Kristina Katsanevas (09:58)
Yeah.
Adam Coffey (10:08)
blank, you know, and he knows how to take care of people and kill people for a living, but he doesn't know how to run a business. And so I helped. can't first I gave him the book Empire Builder and said nephew just so happens I wrote a book that's your Bible for success. And and then you know now now he calls me, you know, Adam, I just got my 76th customer. I just bought a new truck, you know, every 75 customers buy a truck. Every 75 customers, I want you to take, you know, a crew of two people.
Kristina Katsanevas (10:17)
Yes.
Thank you.
Adam Coffey (10:36)
keep the best one, you know, that's in the truck. He's the truck crew chief. Take this person and put them in the new truck. He just became a crew chief. Now we hire, you know, it's like I gave them the whole map for success, you know, and, and most entrepreneurs can understand napkin math. These are the activities that I need to pursue every day that guarantee my success. And if I can figure these out.
Kristina Katsanevas (10:53)
Napkin map.
Adam Coffey (11:00)
then I'm gonna beat the odds. I'm gonna be one of the 7 % that get to a million, one of the 4 % of those that get to 10 million, and then anything is possible from there.
Kristina Katsanevas (11:09)
Yeah,
that's what I love about your books and just how you present. I've been honored to see you live a few times where it's broken down so simply that anyone could get it. because a lot of people are really good at their craft or they double down in that for their business. But like you say, dumb as a postman actually comes to business. And what you've done is dumbed it down to the post.
so that they can understand those basic economics and with any business just go back to it. But what I want to circle back on which you sort of breezed over but I'm actually really big on is you said once you build to he built to his 75 he takes his best person and he move them over you scale them up so what you're talking about there is internal culture you're talking about
of building out their career and really the people management side of things, which I think is really critical. So we've talked numbers, but I want to talk to you about how have you, do you skate?
Adam Coffey (12:05)
Yeah, I lead
off every seminar. talk about it in my book right up front. If we're going to build an empire, you know, we're going to need a lot of people and nobody wants to work in this world anymore. Everybody wants to sit home and be a tick tock millionaire. You know, it's like, I'm to be on mom and dad's couch until I'm 50 years old and order pizza door dash. And I'm going to make sure that
Kristina Katsanevas (12:21)
Mm-hmm. Yep.
Adam Coffey (12:30)
that, you know, it's like, I've got a million followers on social media. It's like, you know, that's how people are wired today. You know, and, and I think in today's world, if you want to attract talent, if you want them to work for you, culture is everything, you know, and because I'm a guy who literally has held every job you can hold on an organizational chart, you know, I was a guy in truck to CEO and boardroom, you know, and so I've held every job you could possibly hold.
Kristina Katsanevas (12:30)
Thank you.
Mm-mm.
Adam Coffey (12:56)
And I recognize that as a line employee, hey, was a I'm no different than I am today. You know, I eat the same breakfast cereal today as a 61 year old man that I ate when I was five years old. You know, it's like my Captain Crunch, you know, it's like, I'm the same guy. Money has not defined me or changed me. And so what I recognized was that people in the trenches that work hard every day, they're my product. You know,
Kristina Katsanevas (13:12)
Yeah.
Adam Coffey (13:23)
in a ⁓ I've always built and run service companies, you can't store service in a box and put it on a shelf. You know, and so if you cannot store your product in a box and put it on a shelf, your products actually people. And so engaged workforce that's motivated, that's well taken care of, they go out there and they kill it, they take care of your customers and clients. And then those clients come back for more and revenue just kind of rains from the sky. And so
Kristina Katsanevas (13:29)
Hmm.
Yes.
Adam Coffey (13:49)
The secret sauce to any successful company or empire is building a strong culture. And that wasn't always the case. know, when I was in my fortune 500 career days, ⁓ working at GE for Jack Welsh, know, number one on the fortune 500 list, the world's most admired CEO, that company was growing so fast. was doubling in size every three years. And, but back then it was my way or the highway bottom 10 % whack.
you know, whack every year, kick them out. It's like, hire them are it's like my way or the highway. And I learned, you know, to fight that. And early in my CEO career, I think I was a little unique, a little different. I think that servant leadership and being a transparent leader and a motivator, I think that's a whole lot more popular in today's culture in today's world. But I'm going to build a big company, I got to have a strong culture, I am going to take care of people. That doesn't mean they get a pass. And they don't have to work hard.
Kristina Katsanevas (14:33)
No.
Adam Coffey (14:41)
You know, I'm to I'm going to have metrics and I'm going to have, you know, I'm to have goals and objectives and they're going to have to hit these things. But by far God, I will bleed for these people if they bleed for me. You know, and so don't lower the bar. I raise the bar. I hold people accountable, but I am going to take care of them. You know, and I call it I want to win at the water cooler when people are going out to have a beer, you know, on Friday night and they're talking smack. I hate my company. I hate my boss. My company sucks.
Kristina Katsanevas (14:54)
Yes.
Adam Coffey (15:10)
I want my employees to say, I love my boss. I love my company. Why don't you come work for me? You know, come work at my company. And, know, I want to win at the water cooler. I want to win at the pub on Friday night, you know, and when I can build that kind of culture, I will never have a problem attracting talent and retaining talent. Take care of people. People take care of my customers. Customers give us more stuff. Revenue rains from the skies.
Kristina Katsanevas (15:32)
Simple as that. And we're done. No, I agree. And I love people. also am a big firm, firm, firm believer that the A players attract the A players and they will weed out the others. So it's not about the free ride there. It's about keeping it high and tracking to the right metrics.
Adam Coffey (15:32)
Amen.
Kristina Katsanevas (15:49)
you've got a bit of a rep of a turnaround guy, but you also talk a lot about don't buy a dog with fleas. So you're kind of unique that you can turn around a company and maybe that's why you're like, don't do it. It's, it's a really hard and a waste of time,
but how do they turn it around? If they've done the unit economics, they're on track there. How do you turn the culture around?
Adam Coffey (16:11)
Yeah. So,
you these are good questions. And so I do talk extensively to people about only buy good companies run by far good people. If you're going to do a roll up, you know, if you're going to buy a company and then step into it and run it, or just as an investment, we don't want to buy fixer uppers says the guy who's a turnaround specialist at GE and every company I ran and built started as a dog with fleas as turnaround.
So private equity would hire me to come into an underperforming company, fix it quickly, and then grow it like it's never grown before and sell it for massive, know, massive multiples and great exits. And so, you know, so why do I counsel against fixing things? It's just simply that I want to stack the deck in your favor. If you're an entrepreneur, hey, I've been a turnaround guy for 35 years, right?
Kristina Katsanevas (17:05)
Yeah.
Adam Coffey (17:05)
I've got experience, I've got rep, you know, reps in that, that taught me how to get in there and do that. And I do talk about these things, you know, in books like Empire Builder. So I use tools like the 30, 20, 10 rule to understand what part of my business isn't working. And, and then quickly to assess the culture and assess the leadership team. And oftentimes when I go into a company, I'd find underperforming
You know, so they aren't generating the dime on the dollar. You know, that's why it's a turnaround. It's like the company's not performing. I'd find a damaged culture and I'd find a lack of leadership. And, you know, it really does not take a great deal of time to turn around a company to turn around a culture. But I always start with, with culture. So understand, you know, like in my case, I might be looking at some key metrics, like talk to me HR person about turnover. You know, I have 1500 employees.
how many of my employees voluntarily terminated in the last 12 months, you know, and the last company I went into, it was 42 % of my employees had turned over in 12 months. I'm like, Bing, Bing, Bing. Well, that tells me that I've got a damaged culture. How can I grow a company and maintain a company when 42 % of my workforce is walking out the door every day? I can go to the to the chart, take a look at the income statement 30 2010.
Kristina Katsanevas (18:22)
at the
Adam Coffey (18:30)
No, more like 2020. Nothing. We're not making any money. You know, and, you know, and so the 30 2010 rule helps me identify where a company is off track. If it's not producing 30 % gross profit margin, we already talked about it. I'm going right back to unit level economics. I got to make more money in the trenches in order to support a back office.
Kristina Katsanevas (18:34)
you
Cool.
Adam Coffey (18:54)
You know, if I'm over 30 % gross profit margin, but I'm making less than a dime on a dollar, I'm focused on back office expense. I'm looking at SG &A indirect expense. We're spending way too, way too many chiefs, not enough Indians. You know, it's like I've got, I've got massive numbers of managers and layers of managers and not enough worker bees. I got more managers than I got worker bees. Something's out of whack. And so I can use the 30-20-10 to quickly troubleshoot the financial income statement.
Kristina Katsanevas (19:04)
Yeah.
Bye.
Adam Coffey (19:23)
to see where the company is failing. It might be failing in the trenches. It might be failing at headquarters. It may be failing in both. But that'll point me at least into where do I attack first? Using my models, revenue model, expense model, capital expenditure model, I can quickly figure out what's wrong, what's broken, what's the plan to fix it surgically and quickly. Then I look at the leadership team. How did this team allow this to get into this state?
Kristina Katsanevas (19:39)
Yeah.
Adam Coffey (19:51)
you know, where potentially, you know what, when I came into a company, I didn't bring a team of people. I assessed the talent I had. I only surgically changed people out where I needed to because they had failed. They weren't, they weren't capable of managing, you know, the business we had at the level we were at. So it's a, there's a combination of activities that takes place and I'm building culture all at the same time. And most turnarounds, just to be honest, when I've done them,
Kristina Katsanevas (19:53)
Yeah.
Adam Coffey (20:18)
I can fix a business within 12 months. can redirect culture and take employee satisfaction levels from garbage to superstar within 12 months. Turnarounds are not difficult when you know how to attack them. And when you're not meeting, you know, passing those basics, the 30, 20, 10, you don't scale. You stop growth. Growth is not my issue. I don't need more revenue. I need to fix what I've got. Once I get the model right,
Kristina Katsanevas (20:37)
it.
Yeah.
Adam Coffey (20:46)
Then entirely my focus goes towards scaling and growth. How do I accelerate growth now that it works? But I generally counsel people not to get into doing turnarounds only because when I'm writing my books or doing my seminars or teaching people or coaching them, I'm trying to stack the deck in their favor so they have a higher probability of success. And so I avoid the turnarounds. Buy good companies, run by far good people, pay fair market value for them, and then take them to the next level.
Kristina Katsanevas (20:53)
Yeah.
Adam Coffey (21:14)
That's where the return is.
Kristina Katsanevas (21:16)
Once you're, like you've got them the basics going and then you're talking about that scaling, I know adding on an acquisitions big in your playbook there, when you start acquiring and bolting on more companies, what do you see most about maintaining the culture and how do you maintain their brands or do you just like merge them in together? Because especially in the service industry,
Everyone usually is doing a lot of the work, and that's how they identify. So coming in, you don't want them to lose that. What's your little secret there?
Adam Coffey (21:50)
So everything starts by far identifying areas of risk. So you talked about branding. So let's talk about branding. If I come in and change the name, what is the probability that I may lose customers? I may lose revenue as a result. know, if I'm Coca-Cola, you know, known universally, you know, around the world, you know, for selling, you know, a soda, a drink, you know, in that red can, you know, it's
Kristina Katsanevas (21:58)
Hmm.
Adam Coffey (22:17)
If I came into Coke and said, we're not going to call it Coke anymore. We're going to call it something else. Nice fruity drink, know, whatever. It's like, you know, I, there is so much brand equity in Coke that as Coke learned when they went to New Coke, for those of us old enough to remember that marketing fiasco.
Kristina Katsanevas (22:34)
No. ⁓
Adam Coffey (22:37)
If you monkey with something in a B2C environment that's got a huge following, you can do real damage. You can do revenue damage. so generally when I'm doing a roll up, I also find too, when I'm buying companies that names, entrepreneurs get very passionate about those names. The name of my company is Sammy. That's the name of my dog. My dog is dead. My dog's in doggy heaven. You're going to buy my company and change the name from Sammy to something else. I'm not selling you my company.
Kristina Katsanevas (22:52)
Okay.
Yeah.
Adam Coffey (23:05)
You know, so I find that founders have the most passion when it comes to the name and it's a literal deal killer. If I walked in there talking about, well, I'm going to change the name. So I typically use what's called an endorser brand strategy. And so what the heck is that? So let's say I buy Sammy's HVAC. Well, my company was named CoolSys. So I would just simply take Sammy's HVAC, a CoolSys company.
Kristina Katsanevas (23:06)
Mm.
Adam Coffey (23:31)
I maintain the brand equity that, that Sammy's built up and I've associated my umbrella brand or my bigger brand CoolSys with it. So now I buy 20 companies and in that case, 23 companies and every one of them becomes a CoolSys company, a CoolSys company. That's the endorser brand. Well, somewhere down the road, I can flip when it's not emotional.
Kristina Katsanevas (23:43)
Yep.
Adam Coffey (23:55)
When I've ensured that the customer base sees my new name with my old name, and they associate these and I've educated them, whether it takes three months, three years or 10 years doesn't matter. At some point, I can then flip and go by far the endorser brand is now the main brand. And then all of those other logos go away. And when you go to my website, you look at the history tab, and I talk about the legacy of all these different companies that made up
cool sis, you know, or made up the company that I'm building. And so that's very common in roll ups to use an endorser brand strategy, I create an umbrella brand, I buy a bunch of disparate companies, I associate the umbrella brand with all of their individual brands, until I'm certain that any brand equity has now been transferred to that new name.
Kristina Katsanevas (24:35)
Mm-hmm.
Adam Coffey (24:43)
And then I can flip and go to the the endorser brand is the main brand. That's probably the most common that I personally use. And so it all goes back to risk, though. What's the risk? I'm going to lose the revenue I'm buying because the money I'm borrowing and the loan I have to pay that stays, whether the revenue does or not so relevant. My debt's going to stay and it has to be serviced. I don't want to lose the revenue. So how do I protect the revenue?
That's also how I decide, by far the way, whether the founder needs to stay or the founder can go is what's the risk I'm going to lose the revenue. So one company I built, I bought 34 companies. I only kept one entrepreneur because I had no risk. I didn't need the entrepreneurs. Another company I bought 23 kept 21 out of 23. Why? Because I had a lot of risk that I was going to lose the revenue that the contracts could be canceled. So I made them become rollover investors.
Kristina Katsanevas (25:16)
⁓
Yep.
Adam Coffey (25:40)
take a portion of their proceeds when I bought their company and buy stock in my mother's ship. Now they had enough skin in the game to where they needed to stay and help me continue to build the company and build these brands. And they had, I protected the revenue stream that I was buying. So I always tell you when we're doing diligence, when we're thinking about brands, when we're thinking about customers and revenue, it's all about risk.
Kristina Katsanevas (26:04)
Mm.
Adam Coffey (26:04)
What is
the risk that I'm going to buy something and then turn around and lose it, you know, through no action of my own? And how do I mitigate that risk?
Kristina Katsanevas (26:13)
You obviously got very natural in your perception of the risk management side of things because you've done so well. I want to circle back. You talked about deal killers just before with three and a half, like trillion. They talk about on the sidelines with all these businesses and a transition of wealth and what that means to people who are going, well, what is that? That there's a lot of businesses out there that are, their owners are getting older. They're getting to retirement age and the kids just don't want to take it on. Now.
What I'm finding when I talk about deal killers is these these entrepreneurs, they've owned it, their babies, they're very passionate about their names. They've owned their business for so long, but selling their business, they think they want to sell it until you come along. So how have you negotiated with a lot of these owners in having them not even self sabotage their own sale? Or what's your what's your work around for like the ultimate negotiation?
Adam Coffey (27:07)
You know, so
I would tell you, you know, is slightly different depending upon how I sourced a deal. When a company is listed by far a broker or represented by far an investment bank or a broker, typically they have already in their mind, made up their mind that they're a seller. And now they're simply focused on price. How do I get the most price? How do I extract the most price? Those aren't typically my best deals. My best deals come from entrepreneurs who don't know that they're a seller when they first meet me.
Kristina Katsanevas (27:13)
Mm-hmm.
⁓
Adam Coffey (27:34)
You know, they're not listed for sale. They're not with a broker. I've done cold outreach, you know, and, you know, and I'm starting to talk to them about the potential of their business and what it could look like for them. You know, at some point, all business owners are thinking, I've got to retire. want to exit, but how do I manage the entrepreneur? You know, that that that is the the art, right? There's an art and a science. Well, the art part is, you know, deals are about people.
Deals are about relationships. Eventually we'll get to numbers. So I don't reach out and I say, I, might be my company, my team, you people are reaching out. Our goal and objective is to start building a relationship with the people. Look, you know, I'm 61, you know, I'm one of those people you mentioned, I'm getting older, you know, and you know what, and people's kids don't want to take over because they all want to be TikTok millionaires, right? So it's like, at some point a transition is coming and
Kristina Katsanevas (28:14)
Yeah.
Adam Coffey (28:29)
They know this, the entrepreneurs know this. So when I'm reaching out, it's, you hey, you know, I'm, I'm building a large national HVAC company or laundry company or whatever I'm building. You know, I'm doing three rollups in the accounting space right now with different people. And it's like, I'm working with nine roofing companies. It's like, there's many different kinds of industries, but I'm building, you know, something special in this industry. I'm looking for great companies to acquire, to put together.
Kristina Katsanevas (28:48)
Thanks.
Adam Coffey (28:58)
You know, and I came across yours, you know, as I'm looking and, you know, I love what I see, you know, and I'm just reaching out, you know, wondering if you've ever thought about doing something special, you know, being a part of a roll up, being part of something special and, you know, educating them about what's in it for them. And, you know, everyone says, well, yeah, Adam, but you've done this for decades and you've got books and
you know, people, you know, so it's easy for you. It wasn't always easy for me. I had to start somewhere, right? And so, you know, and with a lot of the clients that I work with, I help them, you know, with that part with the credibility and the, the, and the getting the interest, the initial interest. mean, that's part of what I do today for all my clients. But, but, but you actually can do this, you know, it's done every day, you know, phones are ringing. You're a business owner out there listening. I bet most of you have been called multiple times by far
Kristina Katsanevas (29:28)
Yeah.
Okay.
That was... perfect.
Yeah.
Adam Coffey (29:51)
potential buyers or potential investors. And so people know that there's an exit at some point and they think about it and you know, the phone rings, they get a piece of outreach, you know, and sometimes they respond and on average, you know, I find that I have to do outreach six to eight times just to get a response. And that response might be Adam, get out of here, quit bugging me, you know, or it might be, know, Hey, you know what? You know, let's talk.
Kristina Katsanevas (29:58)
Hmm.
Yep.
Adam Coffey (30:20)
You know, let's talk about what, what, what the potential is. What is the possibility? know, and, unfortunately too many entrepreneurs wake up and say today's the day I want to my company. No preparation, no forethought, you know, and I call it the accidental arrogance of success. Sometimes entrepreneurs who are really good at building their business.
Kristina Katsanevas (30:23)
which you can do.
Adam Coffey (30:41)
think that that expertise now translates to they're going to be an expert at selling their business when in reality, they're a novice, they've never sold a business. They're probably talking to a PE firm, you know, or a buy side advisor for a PE firm or a strategic backed by far a PE firm. The world's most sophisticated people are on the other side of the table. You think you're an expert and, In about 10 seconds, they know who they're dealing with.
Kristina Katsanevas (30:59)
you
Adam Coffey (31:05)
And as a result of that, you know, you can be taken advantage of, you know, good outcomes are intentional. They're planned. You know, I never even start building a company without knowing what my exit is going to look like and how long it's going to take me to get there. And then I'm breaking down that journey. But most entrepreneurs are just running a business, living life. Then they wake up and say, I need to sell. Today is the day I'm going to sell. And because I'm
God's gift to building my business. I'm God's gift to selling companies. So yeah, come on, P.E. I'm here, I'm ready.
Kristina Katsanevas (31:36)
Yeah, and this is the money
I want because this is what I think it's worth because it's my baby, I think.
Adam Coffey (31:41)
Yeah, because my buddy who I'm drinking a pint
with, you know, told me that his company sold for 20 times. I'm looking for 20 times, you know, and I'm a dog with fleas and I'm worth three times. You know, but I have this inflated vision, you know, of what I'm actually worth until I test the market. And it's because of this lack of intentional behavior that leads up to an exit that I think, you know, that there is another statistics that that's kind of scary.
Kristina Katsanevas (31:48)
Yeah. Yeah.
Mm-hmm.
Adam Coffey (32:09)
80 % of people who start a business or build a business don't ever find a buyer. And at some point, they just turn off the lights, walk out the door, and that's the end of the business. And we have to make sure what we have is an ongoing concern, that if we step out of the business for a month, don't answer emails, don't answer calls. And I come back.
Kristina Katsanevas (32:29)
Yep.
Adam Coffey (32:30)
Business is still there. Revenue is still coming in. Customers are still being delighted. If you can't walk away from your business, you don't have a sellable business. It needs to be an ongoing concern, a business that can run without you. then a buyer is going to focus very heavily on three years worth of financial data. If I wake up today and say, hey, I'm going to sell, I get to live with everything that's happened in the three-year rearview mirror.
Kristina Katsanevas (32:39)
Yes.
Adam Coffey (32:55)
As I get older, I tend to become more conservative too, as as a, you know, as a founder, as a, as a, a person who's running a business. I stop investing in growth. Cause I know there's risk. And so I get defensive. I start paying, playing prevent defense. I don't want to lose, but because of that, I stopped growing. Now, when I go to sell, instead of selling a growth company, I'm selling a flat company and it trades for a lower. Oh, and it doesn't get as much action. So.
Kristina Katsanevas (33:18)
world.
Adam Coffey (33:22)
Selling a business is just as intentional as it was when you started it and you were growing it. And, you know, I generally, you know, I tell people surround yourself with experts. You're not an expert and, you know, and get a team of people to level the playing field so that the people across the table know that there's competent representation going on on the other side of the table. Good advisors, you know, and then let's, you know, let's get to fair market value.
Kristina Katsanevas (33:30)
Good at last.
Okay.
Adam Coffey (33:50)
But too many entrepreneurs leave too much money on the table because they didn't prepare in advance. They took the first phone call that they got, you know, and started down the rabbit hole of selling their business. know, I just literally had ⁓ a friend text me today, you know, Dr. Large Business, you know, 7 million in earnings, who just spent six months going down a rabbit hole with a P firm that
called out of the blue and said, we love you. want to buy you. Okay. Let's go down the rabbit hole. Six months later, they pulled out, didn't even make an offer. him dry for information.
Kristina Katsanevas (34:23)
of an ego thing for a lot of the entrepreneurs,
isn't it? Where they're like, look, someone's like wants me, but then then depending who they're playing with, they could be completely out of their league. ⁓
Adam Coffey (34:35)
Sure happens every day, you know, and, so, you know, again, lot to building a business, you know, culture, getting the unit level economics, right. You know, learning how to scale a business, but there's a lot to preparing it for sale, you know, brand strategy culture. We've talked about a lot of things already.
Kristina Katsanevas (34:37)
⁓
We have, can I go through
But what you touched on earlier, was some of your entrepreneurs and your owners that you buy, you just buy them out and they go. Some of them you keep on and you do some rollover.
equity. So I want to talk about ⁓ what that means for some people and how you can get multiple bites of the cherry as you put it and have done because I think that's a really great way to keep culture and to help grow your business but some people haven't even thought of that. ⁓
Adam Coffey (35:11)
Yeah.
Yeah, most entrepreneurs, you know, the way that
they are programmed to think is I'm going to spend my career building my company and then I'm going to sell it. It's a one and done event. know, a sale and exit is a one and done event. Give me my wheelbarrow full of gold and I'll walk off into the sunset. And, you know, I tell entrepreneurs, there's another way to look at this. You know, that first exit could simply be the first rest stop on your wealth creation highway.
And, know, take me as an example. I had one company that I ran and in 11 years, I sold that company four times. And the total of all four exits was $1.625 billion. The last one being a billion, the one before that being 475 million. And then a couple of small ones in the beginning. You know, if those first small exits would have been one and done,
about a billion and a half worth of value would have never been seen by far that founder that walked out the door. So why sell a great company once when you can sell it twice? My personal record is five paydays in 13 years and four months. But four of those paydays was 1.625 billion in 11 years. That's a lot of transactions. That's a lot of and you can participate in this. So how does that work? Well, let's say a PE firm is buying you
And they're going to make you a platform, which is a company that they're then going to go out and build upon to build something bigger that they eventually sell. you, go from founder to now CEO and minority shareholder in a P act roll up. You know, so I owned a hundred percent of one watermelon. Now I own 7 % of a truck filled with watermelons, you know, and you know, that's what we're going to build.
Kristina Katsanevas (36:57)
Hmm.
Adam Coffey (37:08)
And, you know, and people a lot of entrepreneurs start right with hold it. If I'm not going to be the control shareholder, I don't want to have anything to do with this company. That's that arrogance of success again, you know, limited success because success can have many levels. And so then I always say, well, let's talk about Elon Musk. Let's talk about Jeff Bezos, the two worlds, the richest men in the world, both own less than 13 percent of their respective companies.
Kristina Katsanevas (37:21)
Bye.
Adam Coffey (37:35)
you can be a minority shareholder and still make a lot of money. I don't remember what the final number was, but they were talking about Elon Musk's contract recently and how much money they were going to give the guy. It's massive amounts of money. You can get multiple paydays. So PE firm buys 100 % of your company. Let's say they buy it for 10 million. So they buy it for 10 million. Instead of taking 10 million out and having no stock and walking away,
Kristina Katsanevas (37:48)
Yeah.
Adam Coffey (38:00)
Plus having a five year non-compete so I can't go back into what I know and love and earn a living. I got to figure out something new. You know, I stay and I roll 3 million forward and I take 7 million home instead of 10. And then three, four years later with the PE firm's money and help and guidance, we go buy seven, eight, nine more companies. We sell that thing. This is my math, by far the way. This is my last adventure.
Kristina Katsanevas (38:04)
Okay.
Adam Coffey (38:25)
So I buy a company and then three years later, I sell it after buying eight total companies and putting them together. And investors got what's called a four times multiple of invested capital. So I was buying small companies, small companies are plentiful and they trade for lower multiples. I was paying five times earnings for each of the companies that I was buying.
And then when I sold it three years later, I sold it for 14 times earnings, which means every dollar of revenue I paid five bucks for, I then sold for 14. I use five to pay off the debt, $9 of profit on every dollar of earnings that I bought. You know, this math adds up pretty quickly. So it was a four time multiple of invested capital. So back to our example, I sold for 10. I rolled three forward three years later.
Kristina Katsanevas (39:05)
Good night.
Adam Coffey (39:15)
I'm with Adam, Adam sells, I get four times my money. That 3 million just became 12 million. 12 million is bigger than 10 million. And the second bite of the apple was bigger than the first bite of the apple. And it happened in three years. And if I add them both together, I got infinitely more money than I thought my company was ever remotely worth in a ⁓ bazillion years. so you know, this
happens and it happens, you know, every time I'm doing a roll up, I'm buying companies, I let people in if I have a risk, if I had a risk of losing the revenue, I make them roll over, I want them hitched to my wagon, I want them working to help me to keep keep all the customers together and eliminate that revenue risk. Buy, buy, buy, buy, sell the whole thing. New PE group comes in, all my investors get cashed out, including my former owners. And lo and behold,
Kristina Katsanevas (39:57)
Yeah.
Adam Coffey (40:09)
Second bites are bigger than the first bite. Third bites are bigger than the second in a 10 year period. You can get three paydays on average, one when you sell five years, the typical hold period in PE. So I get ⁓ a bite now five years, the second bite, five years, a third bite, three bites in 10 years. What's better than selling my company once selling it three times in 10 years. That's what's better. You know, and so this is a new way of thinking.
Kristina Katsanevas (40:32)
I... So much better.
Adam Coffey (40:36)
You know, and
Kristina Katsanevas (40:36)
Yeah.
Adam Coffey (40:36)
I, I try to educate people, you know, about that way of thinking, because, you know, selling your company doesn't have to be one and done. Look, I get it. If you're 75 and you want to retire. Okay, fine. But there's people out there who are in their forties who play this game. I started playing this game in my thirties, you know, and, and so, you know, we can also play that. Why would we play that? We're diversifying.
Kristina Katsanevas (40:49)
Yeah.
Adam Coffey (41:00)
against risk and unknown futures. God, I could tell you horror stories all day long about companies I tried to buy right before COVID and then having the value destroyed by far COVID because of an arbitrary act of the government. I have a good friend that was a client in the UK.
Kristina Katsanevas (41:05)
Yeah.
Mm.
Adam Coffey (41:19)
who was doing a roll-up in the machine industry space, five axis CNC milling machines, buying custom metal shops, putting them together, doing a roll-up. Largest client, Russia. Not making armor, not making military stuff. I think it was in agriculture. But when the war between Russia and Ukraine broke out, the UK government said, no exports to Russia.
My client lost his largest client overnight by far an arbitrary act of the government. That war was supposed to last eight minutes. It's still going three and a half years later and he can't export to his largest client. He calls me, I'm going to go bankrupt. Help. Okay. The patient has minutes to live. Let's turn minutes into hours, hours into weeks, weeks into months, months into years, and let's find stable and then let's find growth again.
Kristina Katsanevas (41:52)
Well.
Adam Coffey (42:08)
But he still can't export to Russia. And that again, outside his control. So what's the lesson? Bad things happen to good people. it's sometimes, it's unfortunately, most entrepreneurs discount risk. They think that nothing bad could ever happen to their company. And bad things happen every day. I see it every day. So we need to diversify. So I wrote an article for Forbes in July of 22.
Kristina Katsanevas (42:14)
Bye.
Adam Coffey (42:34)
that you can read today, you can look it up online, you know, and it's it's like I created the rule of 130. And so you know, 30 2010, you know, it's like rule of 130. What's the rule of 130? Take your age. I'm 61. So I write down 61. You're 29. So we write down 29. Right? Yeah. And and, and then we think about our total net worth. What are we worth?
Kristina Katsanevas (42:52)
Thank you.
Adam Coffey (42:58)
And for most entrepreneurs, that illiquid private company that we own is our largest asset. And so what percentage of our total net worth is tied up in this illiquid thing known as our company? That's going to be a two digit number. We write that down. We add the two together. Most entrepreneurs I work with 50s or 60s is their age and they have 80 to 90 % of their net worth tied up in their company. If something bad happened tomorrow, they may not have enough time to recover.
And so I write those two numbers down and I add them together. If it's over 130, then you have too much risk. We need to think about diversification just so that bad things don't happen to us. And we're too old to recover the wealth that was lost, you know, or destroyed or disrupted. And so by far doing what I just described, selling, rolling over, selling again, rolling over, selling again.
Kristina Katsanevas (43:25)
Yes.
Adam Coffey (43:52)
I not only get three paydays, I get three chances to extract value out of my illiquid company, turn it into cash and get it invested elsewhere so that I've got good diversification. And that's how someone who has too much risk can de-risk. know, another way could be, yeah.
Kristina Katsanevas (44:08)
I loved it. It
was easy. It's simple. I find it a really great way for anyone. And it's actually a really good thing to end on here, Adam, I want to do a lightning round with you. Few questions. let's just have some fun here.
So are you ready?
Adam Coffey (44:26)
I'm ready, let's do this.
Kristina Katsanevas (44:27)
Right. What is harder to sell, a book or a company?
Adam Coffey (44:30)
A company for sure. No question.
Kristina Katsanevas (44:33)
I mean
you've got four best sellers here so...
Adam Coffey (44:36)
But my books are cheap, right? So it's like, hey, if I don't like
the book, I've lost five bucks. You buy a company I built, you're paying hundreds of millions or a billion, you know, and that takes, that takes a lot of effort. Yeah.
Kristina Katsanevas (44:44)
This is true. is true. Billion dollar deals.
Biggest red flag in a deal, numbers of people.
Adam Coffey (44:52)
⁓ so both equal, most people discount personality and culture, you know, and so numbers are where deals go south. But even if I have a great company with great numbers, if I find a toxic culture, I walk away. I don't want to mix that toxicity with my culture. And so equally important on that one.
Kristina Katsanevas (44:54)
⁓
All
right, 50-50. If you could only buy companies in one industry for the next 10 years, what would it be?
Adam Coffey (45:20)
It would be a professional services industry. So it could be things like insurance agencies, wealth management, independent wealth management, bookkeeping. These are companies that are needs, not wants. And so it's not discretionary. So in a down economy, I still need my taxes done. I still need my books done. You know, I still need that service. It's recurrent revenue. I sign a contract, I pay a flat month, you know, monthly fee and every month or hitting my credit card and I'm paying a fee.
Kristina Katsanevas (45:46)
⁓
Adam Coffey (45:48)
You know, and so it's not discretionary, it's needs not wants its recurrent revenue. And then it's very low capital expenditure. My knowledge is my product and my knowledge is in my head. I don't have to build a plant. I don't have to have dump trucks. I don't have to have a bunch of expensive stuff to generate revenue. I just need a computer sitting on a desk. I don't even need an office. I may be working that business at home. So very low capital expenditure needs not wants and then recurrent revenue.
And then I also want low capital expenditure. If I can find those three key ingredients, any industry that checks those boxes, you know, I'm going to make money. I'm going to make a lot of money. Yeah. And I have less risk of failing.
Kristina Katsanevas (46:25)
Okay.
Preferred growth move, roll up or green field?
Adam Coffey (46:31)
Roll up by far for Greenfield organic growth is slow. And it can be very time consuming. We don't have time when we're doing a buy and build. I want to quadruple the size of my company in five years. And that means I want to quadruple my earnings. Greenfield I'll do both. You know, I may do both. I'm on the board of one company. Now we're doing both. But if all I did was Greenfield, you know, then organic growth tends to be very slow.
especially in a mature company. We're not talking to start up where you go from $1 revenue to two and call that 100 % growth. I'm talking about companies been around for decades. Organic growth is slow, it takes time, you know, and and buy and build is going to get me where I need to be much, much quicker.
Kristina Katsanevas (47:14)
What's raising capital or leading post-acquisition?
Adam Coffey (47:17)
So for most entrepreneurs, you think it's raising capital, but it's not. As you started this conversation and said, there's trillions of dollars out there looking for stuff to invest in right now, right this second. Money's everywhere. We just have to know where it is. We have to know how to present our opportunity to the money. And if we don't have it, we need to know how to treat money well so that when it has to make a decision who to back, it chooses us.
Kristina Katsanevas (47:41)
Mm.
Adam Coffey (47:45)
And so early on, that might mean I'm giving bigger than they're expecting returns. You're asking for 10 percent, I'll give you 12. You know, I want five percent equity. I'll give you 10. You know, it's like it's like if if all I have is a dream and no money, I'm dead in the water. If I don't have money, if I can find money, present my opportunity well, a well-written thesis, and then I treat them well from a returns perspective, I'm to get my deal funded. So it's not money.
Kristina Katsanevas (48:12)
Beautiful. Favourite book not owned owned by you.
Adam Coffey (48:15)
So outside of my own, I'm old school. So if I, if I want to think about old books that been around for a while, the millionaire next door, that's one, blue ocean strategy, another book that's been out for 20 years, how to make strategic pivots from good to great, you know, Jim Collins, kind of the creating the flywheel effect, which is what I do. I get in a company and I've been the growth curve. You know, I think of books like that, some contemporary books. I actually this year have.
Kristina Katsanevas (48:32)
No.
Adam Coffey (48:43)
have participated in about a half a dozen other books. So there's a book out there that's written by far a good friend of mine that I wrote the forward, it's called The Owner's Manual. Seth Deutsch is the writer, just came out last couple of weeks. There's another classic out there called Mastering Private Equity. And I wrote a piece of that and contributed. There's a second edition that just came out recently this year.
⁓ EOS and traction, I think about, you all businesses need to be focused on continuous improvement, margin improvement. You know, so I think of books like that. You know, those would be some, you know, that are out there. If I went off camera for a second, I could pull over some books, you know, and, but at any rate, you know, that would be a couple. So I like classics because how to build a business never changes. It doesn't change.
Kristina Katsanevas (49:23)
Right there, the ones. Classics. I think that's important.
mean, the world is changing with AI and everything, but the basics, the numbers, if you take it down, you can build great wealth, you can build a great business, you can build a great job, or you can build a great empire and move on. Final question. You're in Australia recently. Obviously, I am in Australia. Favorite memory from being in Australia?
Adam Coffey (49:52)
So, you know, I was in Sydney is where our event was held. Sydney is everything New York should be, but isn't. It's clean. It's the you're walking down, you know, by the by the opera house and it doesn't smell. You know, the water doesn't smell and it's clean and I can walk the streets at night and there's great shopping and great restaurants. I felt safe, you know. And so I think about, you know, Australia.
you know, the diversity, you know, the diversity of the environment, you know, I'm up in the Blue Mountains, you know, it's a different environment from Sydney, but it's like, you know, there's a lot of different parts to Australia. You know, I love the people, you know, people have been very friendly, the, you know, the business climate there, I think is filled with entrepreneurs who are out there, you know, attempting and working to build empire. So, you know, a lot of my books, thank you, Australia, my books.
always hit number one in Australia first because the day begins on release day. And I actually had a time when my last book came out in Australia, where I had the number one, two, three, and four books in the country at the same time. Some of my books were written five years ago, but Australia made all four of them number one, two, three, and four. I have a screen capture of it, you know, and it's like,
Kristina Katsanevas (51:00)
Excellent.
That's brilliant.
Adam Coffey (51:10)
That was that that's rare. You know, you take a Stephen King or some famous fiction writer, they write their book, they sell millions of copies. And then six months later, that book sells for five bucks, you know, on the discount book stand. You know, my books seem to just have a staying power because the need to improve businesses never goes away. The tools never change. You know, how we build a business stays the same. And so like the private equity playbook was written in 2019 when it came out. It's never left the top 10.
Kristina Katsanevas (51:12)
All right.
Adam Coffey (51:37)
You know, it's been there the entire time. And so people continue to read them. What you may not know is I donate 100 % of my royalties to charity. So I don't even profit from my books, but I...
Kristina Katsanevas (51:46)
Well, that's all I think, yeah.
Just giving out the
wealth, paying it forward, that's how you're serving it. I just saw Oprah recently and she was like, how can I serve greater to the greater good and to human? And it seems to be what you're doing with all the entrepreneurs here. So I really do appreciate you and applaud you for that, Adam. I love that you loved Australia. I was going to say your worst part of coming to Australia, I assume it was the flight.
Adam Coffey (52:11)
That was the
17 hours, you know, which, know, good Lord, I go stir crazy on a flight for that long. Cause I usually don't sleep on planes. So it's like 17 hours is a long time. also amazed me at how reliable modern aircraft are to fly over water for about 15 of those 17 hours and work and not have to, you know, have a, you know, it's like you're one, one slip away from being Tom Hanks in the movie Castaway, you know, and.
Kristina Katsanevas (52:33)
There's no
Adam Coffey (52:40)
But by far God, those planes are going back and forth all day, every day, and they perform. It's amazing to me.
Kristina Katsanevas (52:43)
there.
we appreciate that you made the trip and that you've enjoyed it. Maybe you'll be back and come up the Queensland Way where we've got the Great Barrier Reef and the Australia Zoo
Adam Coffey (52:52)
I have clients
there, so you never know.
Kristina Katsanevas (52:55)
Yeah, it is great. thank you so much, Adam. I have really appreciate this. We have done ⁓ an complete life cycle of a business from how to get started, how to acquire, where to go, culture people. have loved it. It is a full masterclass and people are going to be taking away so much. So thank you so much for changing the industry, being a game changer in everything you do and coming on transforming the game.
Adam Coffey (53:19)
Well, thank you for having me. Good luck to everybody out there. Remember, get up in the morning, look in the mirror and tell yourself, yes, you can. You can do this. People do every day. Why not you?
Kristina Katsanevas (53:27)
Yes.