Building Business Value With Nick McLean

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05/13/2024

Show Notes:

🚀 Ever wondered how to increase your business’s value?

✅ Nick McLean reveals the power of entrepreneurship through acquisition on Think Business with Tyler!

✅ Discover Nick’s journey from engineer to private equity maven & the insider strategies of Four Pillars Investors.

✅ Walk away with actionable tips for selling to private equity and unlocking growth potential in your business – only on Think Business with Tyler! 🎙️💼📈

INTRODUCTION

In this episode, we are going to explore the nuanced world of private equity and entrepreneurship through acquisition, a path that Nick navigated after his time in industrial engineering, consulting, and pursuing an MBA. He shares the pivot that led him not only to found Four Pillars Investors, with the goal of acquiring two businesses, but also to transition companies like Southwest Steel Fabrication into an independent sponsor model, all while acquiring multiple businesses between 2016 to 2024.

Nick opens up about the struggles and failures that have sculpted his journey, which, as many of you entrepreneurs know, are as common as they are challenging. We’ll delve into the notion that revenue growth often trumps operational efficiency when improving the bottom line and discuss how intentional changes can unlock growth potential in seasoned companies.

Nick also addresses some common misconceptions about private equity and sheds light on what he looks for in businesses—from EBITDA to customer concentration and the importance of documented processes. If you’re a business owner thinking about selling or transferring ownership, this is your chance to get indispensable advice directly from someone in the trenches of private equity.

Plus, if you stick around till the end, Nick will share how you can get hold of his e-guide on selling your business to private equity and other valuable resources.

So, let’s get ready to Think Business with our insightful guest, Nick McLean.

ABOUT NICK MCLEAN

Nick McLean is an accomplished entrepreneur and private equity investor, renowned for his strategic insight in acquiring and enhancing lower middle market companies. With a background in industrial engineering and an MBA, Nick transitioned his career towards private equity after discovering his passion for entrepreneurship through acquisition (ETA) during graduate school.

He is the founder of Four Pillars Investors, a firm that specializes in acquiring businesses with untapped growth potential. Nick is dedicated to revolutionizing company operations and boosting their market value by implementing innovative growth strategies and maintaining active involvement in their management.

Outside of his professional pursuits, Nick is deeply committed to his family and enjoys sharing his journey and insights in entrepreneurship and private equity through various platforms, including his YouTube channel, Nick Four Pillars.

QUOTES

1. “Entrepreneurship through acquisition is like standing on the shoulders of giants, giving you a head start on the entrepreneurial journey while leveraging systems and teams that are already in place.”

2. “Private equity is not just about the capital; it’s about the opportunity for transformation. We don’t just invest money, we invest in processes, people, and potential.”

3. “Revenue growth is the lifeblood of business value. While operational efficiencies are important, they can’t replace the impact that top-line growth has on your bottom line.”

4. “The true test of a business’s resilience is how well it performs not just in favorable winds but also when sailing through storms. It’s about strong leadership and a company’s ability to pivot and persevere.”

5. “When preparing for a sale, the condition of your books is like the health of your heart. It needs to be strong, reliable, and without question, because that’s where the lifeblood of your company’s story is pumped from.”

FUN FACTS

1. Nick McLean pursued industrial engineering and worked in consulting before realizing his interest in private equity, leading to a significant career pivot.

2. Despite Nick McLean’s successful acquisition of multiple businesses from 2016 to 2024, he candidly admits having had more failures than successes as an entrepreneur.

3. One of McLean’s business acquisitions in Portland revealed untapped growth opportunities that the original owner had not pursued, showcasing the positive impact of fresh ownership on business expansion.

LESSONS LEARNED

1. Title: Navigating Private Equity Terrain

Description: Nick McLean demystifies private equity (PE) for listeners, emphasizing that not all PE firms operate identically. He advocates for nuanced understanding, noting that while some pursue aggressive tactics, others, like Four Pillars Investors, focus on growth and supporting businesses. McLean encourages a deeper look into a PE firm’s strategy and approach to fully grasp their potential impact on acquired companies.

2. Title: Embracing Entrepreneurial Acquisition

Description: Entrepreneurship through acquisition (ETA) is a rising trend where individuals buy and grow existing businesses. Nick McLean highlights how ETA differs from traditional startup routes, offering a path to entrepreneurship backed by a business’s established foundation. He underscores the importance of strategic growth, operational understanding, and potential scaling opportunities when considering a business for acquisition.

3. Title: Preparing for Ownership Transfer

Description: To ready a business for sale, clean financial records and understanding of critical performance drivers are vital. Nick McLean advises owners to ensure their books are orderly and to remain informed about their business’s essential elements. Having a competent team, like a knowledgeable CFO or business coach, can help maintain business attractiveness and ease the transition post-sale.

4. Title: Criteria for Acquisition Consideration

Description: Tyler Martin explores the qualifications for business acquisitions. Nick McLean shares that private equity firms generally look for companies with a minimum EBITDA of $2 million. He advises that business owners seek to minimize customer concentration and maintain well-documented processes. Such measures can significantly enhance the business’s value and appeal to potential investors or buyers.

TAKE ACTION

1. Review and Clean Up Financials: Take time to ensure that your business’s financial books are in order, with clear documentation and accurate records of at least the past three years. This step is vital for understanding the key drivers of your business and preparing for a potential ownership transfer.

2. Develop a Growth Plan: Start creating a detailed growth plan for your business that identifies untapped opportunities, new product lines, or areas for expansion. This plan will not only help reignite your passion for the business but will also be attractive to potential investors or buyers.

3. Seek Professional Guidance: Consider hiring a knowledgeable CFO or business coach who can help evaluate your company’s performance and provide advice on improving processes and profitability. Their expertise will be invaluable, especially if you aim to keep them on board after a sale.

LINKS

Four Pillars

Nick’s YouTube

 

 

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