Securing Success Through Private Equity with Adam Coffey

Private equity is an intricate but also rewarding venture – if you just know how to play your cards right. Adam Coffey has been guiding people in learning and mastering the ropes of private equity so they can grow their wealth and secure profitable opportunities. In this conversation with Norman Kallen and Stuart Brown, he details how he became a blue-collar CEO who utilizes the so-called “napkin math” to help entrepreneurs and organizations achieve financial success. Adam also shares how working under Jack Welch and serving in the military influenced his no-BS approach to leadership and coaching.

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Securing Success Through Private Equity with Adam Coffey

We’d like to welcome Adam Coffey to our show. Adam, it’s nice to have you.

Norman and Stuart, it’s good to see you, guys. It’s good to be here. Hello to all your audience out there.

Servant Leadership in the Military

Thank you very much. Why don’t we jump right in? There’s a lot of good stuff to cover, and we only have a limited amount of time. Let’s begin with some background. As it says in your book and in your bios, you started in the US Army and not in the boardroom. That military experience seemed to have shaped a lot of your leadership style. Toward that end, what core principles have remained constant from your time as a soldier to your years as a CEO and beyond?

It’s very safe to say that I started my career at the bottom rung of the ladder. I was so low on that ladder that I would look up and see bubble gum on the bottom of somebody else’s shoe. I left high school and home. My dad was a Navy Captain, and I’m in the Army. I can’t go to the Navy because that’s what dad did, and I’m seventeen. I just graduated, and I’m a Private E1. I started at the absolute bottom of the rung.

I learned about discipline, teamwork, and leadership. What the military has been cranking out for many years are servant leaders. We didn’t have a title for that. We came up with that title in modern history, but that’s what the military cranks out. Without that foundation, I would never achieve things further in my life. I remember the tagline of their commercials back in the day. This is the early 1980s. Ronald Reagan was the President. It was, “The Army, a great place to start.” For me, that’s what it was. It was a great place to start. I went there seeking an education. I went there to find my adult self, and they shaped they shaped me. Those foundational skills were critical to my future success.

First of all, it wasn’t a job. It was an adventure. We’ve interviewed Colonel Jack Jacobs. I don’t know if you know Jack Jacobs is. He said something very similar about how the Army shaped him in terms of leadership, skill, and the can-do attitude. He talked about the fact that you’re 18 years old or 17 years old and you’re in charge of millions and millions of dollars worth of equipment and people’s lives, and how quickly you grow up.

I went to school at NASA. The Marshall Space Flight Center in Redstone Arsenal is the military side of that. I worked on classified air defense radar systems that were forward area deployed. As I talk about multi-million-dollar equipment in the hands of an eighteen-year-old, that is the way it works.

Influences of GE and Jack Welch

First of all, thank you for your service. We appreciate it. Again, a great discussion on this. In reading your private equity handbook, you give a lot of credit to GE and Jack Welch in shaping your background of leadership and your understanding of how to scale a business. Can you give us a little more detail on that?

After the military, that was version 1.0. Version 2.0 was me as an engineer, a very meticulous planner. When I got to GE version 3.0, I started first as an engineer, then crossed over into leadership. It was the heyday. I called it the Camelot era of GE. Tech didn’t exist as we know it now at that time. GE was number one on the Fortune 500 list. Jack is the world’s most admired CEO. GE is growing so fast. The company is doubling in size every three years, and the stock is splitting.

It was the Camelot era of growth at GE. I am an up-and-coming manager, learning how to run a business under the guidance and auspices of the world’s best CEO of the era. It pains me now to see a lot of the Monday morning quarterback stuff that gets written about Jack and that time frame back then. In that time and in that place, Jack was a God. GE was the coveted company that everybody wanted to emulate. GE is a very demanding place. You’re being promoted about every eighteen months.

I was a turnaround guy, so if I fixed something, they gave me something bigger that was broken, and I would keep on climbing the ladder every eighteen months. I learned how to run a business. I learned how to analyze, troubleshoot, fix, scale, and grow at a pace that would let the world’s largest company double in size every three years, which is a 30%-plus compound annual growth rate in earnings. I learned how to do that at GE.

Jack left in 2001, and so did a bunch of other leaders who didn’t get the nod. I left in 2001 and that launched me off into a 21-year career as a CEO building three large national service companies for nine different private equity firms, but it was the military that gave me the discipline, teamwork, leadership, and servant leader meets engineering meticulous planner, meets the Jack Welch era of GE and how to apply that to growing a business, sets the stage for them along now 25 year run as a CEO building four company. It was a magical time and a perfect time in my life. We’re talking early 30s through mid-30s, where I learned how to run a business.

Understanding the Concept of Blue Collar CEO

You also call yourself or refer to yourself as a blue-collar CEO, oftentimes. I think that label resonates with a lot of people, especially people who are in service-based industries. Toward that end, what does that term mean to you when you use it? How does it help you connect with teams and scale businesses in your travels?

I was not born with a silver spoon in my mouth. I didn’t walk out of Harvard and into executive management. I was a private in the US Army. When I started post-Army, I was a service technician, a guy in a truck, and I held every job on an organizational chart that a person can hold from dude in truck to CEO, and everywhere in between. What I always remembered was that, as an enlisted soldier, I got out as a sergeant, so as a squad leader, you’re taking care of people. A servant leader is like follow me and take the hill kind of thing.

You add to that all these experiences as a blue-collar, call it bottom of bottom-of-the-rung guy or service guy in a truck, working nights in hospitals in Michigan, fixing CAT scanners and MRIs, which shockingly were very similar to military radar systems. Because of those roots and the way I climbed up the ladder, that’s kind of an untraditional path to the executive ranks, so I called myself a blue-collar CEO. I’m a guy from a truck. I can play country club if I need to, but I’m more comfortable with shorts, flip-flops, and a T-shirt, driving a pickup truck. It informed me.

I remember that as the guy I was, the guy in the truck. I was a fairly smart, intelligent person, thoughtful, and cared about the company I worked for. I understood the importance of culture in a business as a result of that. As a CEO, I always build what I call as an informal communication network. I have a staff. The staff tells me sometimes what I want to hear, and I’m impacting a company and driving massive change. In a buying build situation, I may be buying 20-30 companies and putting them together. This company is moving fast, and there are a lot of moving parts, but I’m always connected to the people in the trenches.

It would be common when I started in business. I wasn’t an expert in the business until someone hired me and called me the CEO of a business. That’s when I became an industry expert. I was running companies and industries that I was not necessarily familiar with. I would take an employee census. I’d find out how many people we have and what they do. I have 1,400 service tax. I’d better go spend some time in a truck with a service tech.

We have 400 construction workers. I’d better go spend time on construction sites with those people. I have 67 salesmen. Let’s go meet some customers. Let’s see what the sales experience is like. I didn’t want to see spreadsheets and numbers. I wanted to see people in jobs and activities to understand what these people did for a living, but I never lost touch with those people. I stayed in contact with the people I would ride around with.

My last company was a nationwide HVAC refrigeration service company. We kept grocery stores cold. They would text me and say, “Adam, what’s up? How are you doing?” I fostered a culture of connectivity, and one where it’s like, “I’m going to have a high bar and I expect a lot from you, but I am going to do my best to take care of you to provide excellent benefits and packages. I’m going to lead the industry.”

You also feel like you can talk to these people. They relate to you on how you speak to them because you went into the Army at seventeen. You didn’t go to an Ivy League school at the time, and prep school. Do you think that helps you in connecting with these people?

It does, and the nature of the company. I have run medical service companies with a lot of engineers. I’ve run engineering companies and medical device companies. There have been different industries, but that’s what has given me the ability. I’ve never been the smartest person in any room. I can tell you that. I know how to hire talented people. I know how to articulate a vision, empower them, and then get the heck out of the way. I hold them accountable, use metrics, use numbers, and push decision-making down to the lowest level.

There are a lot of skills and things that I’ve learned that have served me well. My real superpower is the ability to connect with people. I use Barack Obama and Ronald Reagan as examples when I teach about leadership. I spent years lecturing at universities in executive MBA programs. When I talk about leadership, I talk about someone like Barack Obama. What did Barack sell us? He sold us hope. What the hell is hope? You can’t put hope in a box. You can’t put it on a shelf. What he was able to do was articulate a vision of hope, of what we could aspire to be. He sold it and went from senator for eighteen months to the president of the United States.

I think of Ronald Reagan. Mr. Gorbachev tore down this wall. He gave some of the moving speeches. I think of the debate with Walter Mondale, where he defused the biggest issue of the election, which was his age, simply by saying, “I will not make age and my opponent’s youthful inexperience an issue in this election.” The entire world laughed, and Walter Mondale laughed, and you never heard about his age ever again.

These are two people at opposite sides of the political spectrum, but who could articulate a vision and get a generation inspired to action. In my role as chief executive officer, I call myself a chief entertainment officer, which is to connect a culture and foster a vision of what the future could look like, and create a shared aspiration where the line employee understands what’s in it for me. I tell people in the book Empire Builder that a great empire starts with culture. It’s the cornerstone.

Culture is the cornerstone of a great empire.

I want to get into that.

It was of tantamount importance. That’s where my superpower was. It wasn’t that I was God’s gift to strategic planning, financial planning, or engineering. It was strictly an ability to get people who are working in blue-collar jobs to want to achieve something more than what they were doing, and taking a company that was struggling, giving it an identity and giving it a destination, then leading the charge from the trenches, take the hill, and follow me. The same thing as the military. That’s been the key to my success as an executive.

When I looked on Amazon, I read the reviews. The reviews generally said that what they liked about your book is that they were very direct and no BS. Stuart and I both agreed that there’s none of that in the book. It’s great, and that’s the reason why it’s such good reading. Do you think that comes from the fact that you’re able to talk to all these people? You know what people want to hear, and how to convey the message without all this flowery language like a script?

I’m blessed that my books have all been very successful, but that one in particular is a required reading for a lot of executive MBA programs. It’s a required reading for a lot of large PE firms, too.

My kids are going to have it as required reading, by the way.

For me, the magic of the book was, you could go down into a 1,700-page rabbit hole of a textbook if you wanted to. Who was the audience? What was I trying to convey? I spent decades working in this thing called private equity. When I first started private equity, it was a relatively nascent industry. It was measured in hundreds of billions, but it wasn’t measured in trillions.

Defining Private Equity

Adam, let me interrupt you for a second. We have a very diverse audience. Can you spend 30 seconds defining private equity from your perspective?

Everybody understands the concept of a mutual fund. We go on Schwab and we buy a mutual fund. Our money goes, and a fund manager pulls a basket of money and then buys a basket of stocks. It’s publicly traded. I can buy and sell it anytime I want. Private equity is similar to a mutual fund. Only the capital is private. A large minimum investment is usually $5 million. It’s private. There’s no liquidity. The fund lasts for ten years. They have six years to invest the money and call the capital from you. You don’t send it in upfront. They buy companies and build companies to improve them.

By the end of the tenth year, they have to have sold everything they bought and returned the capital to shareholders or investors. Typical investors in private equity are a university endowment or a public pension fund. It’s long-term capital that can be very patient with a ten-year fund vehicle that has no liquidity. That’s the basic difference between a regular old mutual fund that traded in a public environment and this private ten-year thing called a private equity fund.

How To Think Like a Billion-Dollar CEO

Thank you. That was a good description. Let’s move on from there if we could. On a juxtaposition, you were talking about working in the trenches, so to speak, starting from the bottom up, and listening to the people who get their hands dirty and whatever the respect to business would be. In Empire Builder, though, your emphasis shifts from small thinking to billion-dollar thinking. I thought that was a very interesting juxtaposition. Why do you think so many founders of businesses undershoot their potential? What do you think it takes to think like a billion-dollar CEO?

You’ll notice in the book Empire Builder that the section on scaling from $100 million to $1 billion is very short because the majority of the book is focused on getting out of the gates. It was driven by statistics. I do like statistics. In engineering, I’m meticulous. I like to learn and challenge myself. There are 34 million small businesses in the United States now. Of those, only 7% ever get to $1 million in revenue. That struck me when I was doing research and thinking, “Why is it so hard to be successful?”

Of those 7% that get to $1 million, only 4% of those get to $10 million. There are only 3,000 companies on the entire planet that have $1 billion in revenue, and I’m blessed to have built one of them, and now a second one is there. I’m thinking to myself, “Why is it so hard for entrepreneurs to find success, and why do so many fail?” Sixty-five percent of those businesses, those 34 million, will be here in six years. How can I help entrepreneurs beat the odds?

That’s what Empire Builder is all about. I’ve learned in my own world. I’m a simple guy. I always have been. I call it napkin math. I am going to deconstruct success and put it into terms that anyone can understand. In the book Empire Builder, I am building a fictitious, mythical landscape maintenance company. I’m talking about the concept of unit-level economics. What’s the smallest common denominator in a business? That’s the unit level. As an entrepreneur building a small business, we need to focus on finding success at the smallest level that we can.

If we can find success, we can build a billion-dollar company. If it doesn’t work small, it will never work big. I talked about unit-level economics. What’s the revenue? First of all, in the landscape maintenance business, what is the unit level? It’s a pickup truck. It’s a truck with two people, a mower, a blower, and a weedwhacker. That is my unit level. I can’t send half a pickup truck. I can’t send a pickup truck with no people. I need a truck, two people, and some basic equipment. That’s the unit level.

How much revenue can I generate with that unit level? How many lawns can I cut a day? How many lawns can I cut a week? In the winter, if I have to switch over to a snow plow, how many lawns? How many driveways? It’s all this basic math. Now, I have a revenue model, and then I look at the expense model. What is the cost to have those two employees employed? Plus 40% for benefits because I’m going to have great benefits in my company. What’s the cost for fuel, oil, and maintenance on that truck, and the payment if I didn’t pay cash for that truck?

I’ll build an expense model, and then I’ll apply this thing I call the 30/20/10 rule. A basic company to be successful has to produce at least a 30% gross profit. It needs to keep customer acquisition cost or sales in general administrative expense, SG&A, under 20% to be viable. We have to at least make a dime on a dollar to be a scalable company. I’d rather a company be 35/15/20. That would be better than earning $0.10 or earning $0.20. What I do is I then help people understand, “We want to get to $1 million, and only 7% of people get there. Let’s stack the deck. Let’s take our unit-level economics.”

In the book, $198,000 is what this crew can produce in revenue. Their cost is $126,000 or $36,000, or whatever the cost was. There was about a 36% gross profit margin. How many trucks do I need to get to $1 million? I need six. How many clients do I need? It’s 75 clients per truck. It’s 450 clients to get to $1 million in revenue. My nephew, God bless him, is building a landscape maintenance company. I said, “Nephew, you’ve got to read my book Empire Builder because it was built around you building this business.”

He’s a 25-year retired veteran of the Air Force, and he was in special security. You want him in a bar fight, standing behind you, but he’s not the smartest guy on the planet when it comes to business. I laid out the napkin math. “Johnathan, you and your partner are the first crew. You’re the first truck. As soon as you sign 75 customers, buy a second truck. Your partner gets into the second truck. You each hire a helper. When you get 75 more clients, whoever the best helper is, now gets to be crew chief of a third truck.” I gave them napkin math, and he calls me, “Uncle, I got one more client. I’m buying my next truck.”

I created napkin math, where a person who doesn’t understand business only needs to know a certain number of things. “I need six trucks on the road to get to $1 million. I need 51 trucks on the road to be at $10 million. I need to charge so much money per lawn. I need so many customers per truck.” It’s napkin math. His success, his getting to $1 million and beating the odds, and his getting to $10 million are pre-programmed. The company should become more profitable. As it gets bigger, it creates leverage. Buying 51 trucks should be cheaper than buying one. It’s the basic concept is like that, but we need to make success programmatic.

Many entrepreneurs tell me, “Adam, I’ll figure out how to make money once I get more revenue.” It’s not about revenue, people. It’s about unit-level economics. I had a billionaire. After four CEOs had failed, an iconic American company, thousands of trucks on the road. Why can’t anybody fix this? It’s because everyone’s trying to fix it from the top down and trying to figure out, “How do I make money with 6,000 trucks on the road?” I’m like, “Let’s just look at one truck. What is the revenue we’re producing with one truck? What are the expenses to have that crew in that truck?”

We’re not passing the 30/20/10 rule. Our fundamental problem is that it doesn’t work. We need to go back and figure out the model, the unit-level economics. Once I fix it for one truck, I have fixed it for 6,000, then you scale it. I tell entrepreneurs, find your unit level, make sure it works, and passes 30/20/10. If it does, you’re ready to grow and scale. If it doesn’t, don’t focus on growth at all. Focus on improving the fundamentals of the business.

We don’t want a small problem to become a big problem. We want to fix it small. Once we get it dialed in, then we’re ready to scale. If we can’t get it dialed in, fail small, fail fast, and move on. Go to the next opportunity. If it can’t be made to work, don’t force it. Don’t spend twenty years struggling and trying. Make it work small, then it’s ready to scale. The rest of Empire Builder is, how do I grow from zero to $1 million, $1 million to $10 million, $10 million to $100 million, and $100 million to $1 billion? It starts with unit-level economics. Get it dialed in, and it works. Now I can scale.

Thank you. That was excellent. It goes to the basics, which, if you want to think big, start at the bottom.

People tend to overcomplicate success. What I’ve learned is that success is quite simple. My books appear to be simple, yet only 7% of 34 million companies get to $1 million in revenue. I try to present it in simple terms that any entrepreneur of any educational background can understand and grasp. Sometimes, I’ll get the occasional negative review or something on Amazon.

Someone will say, “This is useless dribble. You’re talking to me like I’m three years old.” I put a quote in my book thanking the person for the useless dribble comment. I used his words in my book, but most of the reviews are overwhelmingly positive. At the end of the day, success is not difficult. We just have to know the DNA of what creates it, so I focus on making it simple.

Success is not difficult. We just have to know its DNA and how to make it simpler.

The Good, the Bad and the Ugly of Private Equity

Let me go back to the first time you had a company or corporation, and you sold to private equity. I’d love to hear about your first experience with private equity. You’ve doubled a lot of private equity over the years, but the first time you had to deal with them and you didn’t have the knowledge base like you do now. What was that experience like? What was the good, the bad, the ugly?

I grew up in my informative years as a kid in the late ‘60s through the ‘70s. My dad and everybody on my street were World War II vets, Korean War vets, apple pie, Chevrolet, and the American flag. It’s a very apple-pie kind of world that I grew up in. My dad always measured success. He was a depression era minded guy. The first part of his life was informed by there was nothing. The second part of his life was informed that everything was rationed, World War II and Korea. The first twenty years of his life were like, “There is nothing. It’s control.”

He was very much a part of that cash-and-carry tight mentality, “Son, success is what your title is and how much money you have in the bank. This is how we measure success in life.” In addition to being an Irish-Roman Catholic kid and all the other stuff that goes with that. This is how we play the game of life. I was chasing money and title. I went into the military because I wanted to serve. I went into the military because I wanted my education to come from there.

My dad was all that kind of guy, fairly wealthy family, but he was like, “You want a car when you turn sixteen, how are you going to get one? I got a job. Do you want to go to college? I went to Notre Dame on an ROTC scholarship. What are you going to do?” There were no handouts. It was learn to work. I bought a car at sixteen. I got a job. I saved money and I bought a 1969 Lincoln Continental Mark III. It went from 0 to 30 in 10 minutes, but from 30 to 150 in a blink once you got it rolling. It was a 460 ME. I was styling at an early age.

At any rate, I’m at GE. I’m chasing money and title. I’m playing the game as my dad taught it to me. It’s all about title and money. I was chasing the title. Somebody came to me and said, “Adam, we will make you a President/COO for the first time.” It was President/COO before it was President/CEO. Turn around a broken company. No one has fixed it. It’s a failed public company, taken over by a private equity firm. I didn’t know what the hell private equity was. All I knew was someone wanted to call me President/Chief Operating Officer.

I went to my mentor at GE, who was a former professional football player for the Cleveland Browns. Mike Martin, if you’re out there somewhere, shout out to you. He gave me the best advice I’ve ever gotten in my entire life. I was like, “Mike, should I continue on this path of going to be one of a thousand general managers at GE, a giant company? The way I came up through the ranks is through the blue-collar way. I’m probably not going to be a division president anytime soon. Should I stay in that comfort or should I leave to go to a smaller company to be a president?” He looked at me and said, “Adam, once a president, always a president. You’ll never be thought of as anything other than a president.”

It was interesting, so I embraced that and I left. I figured worst-case scenario. I was a good engineer. If I had to fall back to being an engineer, I could nail that, and so I left. I left because someone was giving me money and a title. I didn’t know what private equity was. I discounted the value of stock, grants, options, rollover, or all the incentives. I was recruited out of GE, like many people were back in that era. As you’re approaching GM, it’s time to get picked off because the world wants GE leaders. I promise you, some janitors there were getting the names of every student from the door of their dorm where they stayed or where they were signed, and then selling them to a recruiter. As soon as you left Crotonville, your phone started ringing, “Adam, we got a job opportunity for you.”

I was recruited out, and I left. Everybody was leaving. Jack was retiring. People who didn’t get his job decided to take off. It was funny because it was true. Once I was a president, a lot of division presidents who now went on to run other companies, now my phone starts ringing, “Adam, I’m building a service division. Why don’t you come run my service division?” He was right, “Once the president, always a president.” I was never anything but a president, then a CEO after that. I knew nothing about private equity. I learned it the hard way. I learned by stepping in every pothole that you could.

I was there to turn around a company, fix it, build it, and sell it, which is what I was doing for GE with all the business units that I was running. It’s no different. I’ve gotten every company I ever ran to grow 30%-plus a year, which is the rate that I needed to keep a job at GE back in the heyday. What I learned there was applied to all these companies. Servant leadership was applied to all of the cultures. All of that led to a very successful run. What happened was that private equity exploded. It exploded. Now, private equity buys 50% of all companies bought and sold on the planet, and money keeps pouring in.

I wrote the first edition of The PE Playbook, and there was $2.83 trillion in assets under management. I remember that number. I did the update, the second edition of The Private Equity Playbook, and at that time, we were in the sixes. I saw a report from McKinsey not too long ago. We’re over $7 trillion already. That’s a ton of money, and it all has to get put to work. It gets put to work by buying companies. Whether it’s acquisitions of a platform they already own or they’re looking for platforms to buy, all of that money, the one cardinal sin of private equity is not investing your capital. If you don’t invest capital, you’ll never raise your next fund.

You must put the money to work. Mediocre return is fine, but you must put the money to work, so $7 trillion needs to get put to work. When people talk about the economy, high interest rates, what is that doing? It slows down M&A a little bit. It changes the calculus. Equity checks have gotten a little bit bigger. At the end of the day, private equity can’t sit on the sidelines and wait for interest rates to come down because the money has to get invested. It can pause for a few months, but it can’t pause for long. Money has to get put to work.

Your first experience must have been a good one because you kept coming back to the well.

I did. I still have a love-hate relationship with private equity. Let me talk for a second. I’m not putting myself in this league, so don’t take it wrong, but I’m going to use an analogy. It’s like Michael Jordan, Kobe Bryant, and Phil Jackson, the best athletes in the world, working hard every day, every practice, wanting to win a championship. Phil, who makes less than them both, somehow found a way to coach the world’s two greatest athletes to a point of ten rings, or how many rings he wound up winning. I liken private equity-run middle-market companies to professional sports.

This is a sport played at the highest level of business. An entrepreneur who isn’t successful or has a bad year has no accountability. There’s no one there to fire him. As long as they’re breaking even, they can survive to fight another day. There is no accountability. I find that as one of the biggest problems that entrepreneurs have. No one is driving their accountability. As a coach and a mentor, you have to adopt the thinking that if I don’t hit my numbers, I’m dead.” How much harder are you going to work when you have that mentality?

One of the biggest problems in entrepreneurship is that no one is driving their accountability.

The love-hate comes from private equity is pushing you to perform at the highest level in a very short period of time, which means a lot of work has to get done in an average five-year hold period, growing at 30% a year. You’re quadrupling the size of a company in five years. Growth does not need an orderly. It’s messy. My last empire, I bought 23 companies and put them together. One before that, 34 companies that I put together. I got chaos.

On a good day, it’s chaos. I made 23 entrepreneurs rich. I gave them all a wheelbarrow full of gold. How do I get them to sing Kumbaya around my fire and all pointed in the same direction? It’s magic. There’s a lot of detail and activity. You are M&A attorneys. Doing one deal is complicated enough. Doing 23 in five years takes it to another level.

I describe it in the book as it’s akin to going from high school hockey to professional hockey. It’s the same size rank, but the players cover the ice in the distance so much faster. You’re learning how to play business as a professional sport at the highest level. Being pushed is a good thing. It can be a stressful thing. “Adam, I don’t care if you’re having a bad day. My numbers suck. Go fix it. I hired you to fix it.”

They email you at 3:00 in the morning.

That’s the other thing. Analysts don’t go to bed. They’re not allowed. They’re working 20 hours a day. Partners are sleeping, but the analysts are firing off questions to you why you’re asleep and looking for an answer before you get up. It is constant pressure to perform. No wonder there’s a high flame-out rate as well for founders who sell who have to make this transition.

For a lot of them, they’re not prepared, which is another reason why I wrote the book. It’s another reason why PE firms hire me to coach and mentor transitioning founders to help guide them through this transition, because they don’t want to replace leaders. They want to back leaders. They want to write a checkbook. When that person gets a wheelbarrow full of gold and checks out, the PE firm has to make a change. If the person doesn’t have a sense of urgency as necessary in a five-year PE hold period, then they may not make the journey either.

Let alone the company is going to grow four times its size in five years. Some people may not have the skillset to go from one size to another. A lot of issues and a lot of challenges. My idea was I’m going to write a series of books to help people on the operational side of private equity, teach them how to succeed, how to think differently, how not to manage minutiae, and become the conductor of an orchestra.

Maintaining a Consistent Workplace Culture

You mentioned all the acquisitions that you did in those two companies. How do you maintain a consistent culture and a sense of purpose while acquiring and integrating dozens of companies? Integration between companies is so difficult, particularly when you have different cultures. You focus on your book, particularly the Private Equity book, about the importance of culture.

It is interesting, but it can be done, so let me explain some basics on how. First of all, when I build a company, I have one goal for employees. I want to build a place where they can spend their entire life in one place, and that’s working for me. That’s my goal. In order to do that, I need to do three simple things. I have to pay a fair wage. If I don’t pay a fair wage, I’m going to lose talent. You can’t nickel-dime talent. It’s hard enough to get people in this world. Everybody wants to be a TikTok millionaire and live on mom and dad’s couch. Nobody wants to work anymore. It’s hard enough to find people. If you’re going to build an empire, you’re going to need people. Pay a fair wage to keep talent.

Have a great benefits package. I always aspire to have the best benefit package of any company in my industry because when I buy a company, and employees are nervous, I want their first experience with me to be positive. “I get better benefits. I have promotional opportunities.” The third thing I need to do is to create opportunities. First of all, I need the guy who’s been in the truck for 30 years. I promise you, some people are driving around Michigan working for GE Healthcare, fixing CAT scanners and MRIs, that were driving around in trucks when I was driving around trucks many years ago. They’re still there. God bless them. They teach the next generation of people how to do that work.

I was a young buck who wanted to get out of the truck, who wanted to aspire for more, chasing titles and money. I’ve never done climbing. I’m always looking for the next opportunity to climb the ladder. In order to create that, if I’m a growth company, I’m creating opportunities for growth. I got 80 branches. I have 80 potential opportunities for someone to be a branch manager. As I’m getting bigger, I’ve got new VPs of this or that, that I didn’t know I would need five years ago. I’m creating C-level positions that didn’t exist.

If I’m preparing my workforce for promotion, I’m doing a lot of hiring from within. I’m satisfying the needs of all, paying a fair wage and great benefits plan. I’m creating promotional opportunities, and a lot of these companies I buy, if you’re the worker bee, they have one service manager. They have one branch. Maybe a couple.

The owner’s name is Smith, and the manager I’m working for is named Smith. I’m 35 and my name is Jonas or something. I’m not going to ever be that manager. I have a dead end, yet when Adam buys my company, all of a sudden, 80 branches are going to need managers. None of those people’s last names is the same as Adam’s, and they are not the owners of the company.

Shockingly, here are the statistics. When I would do surveys of employees, I had higher employee satisfaction with acquired companies than I did with the base company, because the acquired employees saw the positive aspects of what I was building, and they felt it. They felt it in my benefits plan and the career opportunities that were now open to them. We had schools. We would train them and do things that their company could not do on its own.

The reason why the people who had been there for a while rated me less was that they got complacent. Sometimes you’re there for twenty years, and it’s a great company, but you don’t know it’s great until you find out the grass isn’t greener somewhere else. You pick apart a place you’ve been for a long time, but you don’t realize that place is better than any of the other opportunities that are out there. What I found was that it’s important as part of doing diligence in M&A.

Educating and Teaching About Private Equity

Adam, that brings up an interesting question. When you were dealing with private equity and you’re a CEO, did you have to educate private equity on that concept of why culture is so important versus all these financial analysts simply looking at the screen and saying, “You need to cut this expense. We need this. We need that. We need to need to hit this target?” Was there any education involved for private equity?

Private equity, as an industry, encompasses tens of thousands of companies. In any ecosystem that large, there’s good, bad, great, God awful, and everywhere in between. Who an entrepreneur sells to and who they choose to partner with have a lot to do with whether or not they are going to be successful. For a founder who cares about legacy and people, they need to do more diligence. PE diligence is you until you’re dead. Founders do no diligence at all on their buyer or their partner. They’re only focus is who’s paying me a bunch of money. They missed the opportunity to hand-select and pick a good firm in a sale process that would be a good steward to them.

A lot of what I do is I work with 71 founder-led companies and a dozen PE firms. My number is somewhere around $500,000 million in companies I’ve helped transact over the last few years. For me, it’s more about fit. This person, that company, and that culture would be a great fit for this PE firm that loves buying companies in that industry, and they’re very knowledgeable and could be a helpful thought partner. Part of this has to do with picking the right firm.

To answer your specific question, sure. I’ve been at an impasse with PE firms a number of times. Fortunately, though, as I got later into my career, I had a track record. I wasn’t an unknown. People who were going to hire me to come fix their disaster had to buy into the methodology that I use, which starts with culture. It may start with investments, not with cuts.

Adam’s Book Recommendations

Let me ask a couple of final, quick questions for you on a lighter side. Other than your books, which everybody should have and every CEO should have, what’s another book that a CEO should have on their nightstand?

I’m old school, and there are a lot of books that I read that were in print many years ago. When I teach people about fixing a company or scaling a company, I like old classics like Jim Collins and Good to Great and things like that. I like Traction. EOS for small companies is a system of continuous improvement. We all need to be on that journey for continuous improvement, and books like that. I’ll go old school and even say, I still love The Millionaire Next Door. Jim Collins gets a nod. I’d say Blue Ocean Strategy, Traction about EOS, and things like that.

Everyone needs to be on a journey of continuous improvement.

The Great Shift to Remote and Hybrid Work

What would you say is the one thing that’s changed your mind in the last few years from a business perspective?

If there was anything good that came out of COVID, it was the fact that the world was forced remote and forced to adapt. Let’s talk about our world for a minute. Let’s talk about someone who sells a company. Before COVID, buyers had a hard time figuring out how to do due diligence on a virtual company. There was some reticence to want to pay extremely high multiples for companies that were virtual or had no brick-and-mortar. How do I know this thing is going to continue and build?

When it comes to talent and attracting talent, there’s a big move now. A lot of people are saying, “Let’s go back to the office.” I don’t have a problem with that, but I would say that there should be a balance. Take my last company. I’m living in Dallas and I’m the CEO. The company is headquartered in Southern California. My CFO was in Miami, my COO was in Virginia, and my CTO was in Denver. I’m a nationwide company with offices everywhere, so I can harness talent, get the best people for a job when I don’t force it all to move to Southern California, or New York, or someplace in particular.

A lot of people are less willing to relocate and move for a career in this world. There are some positive aspects, so that’s one thing that has changed. If I’m a warehouse manager, I can’t manage my warehouse for my bedroom when I physically need to be there. I can’t be a barista from home when I’m at Starbucks. Some jobs require us to be there, but employers need to be a little bit more flexible and a little bit more focused on we need talent. To attract and retain talent, we need to be a little bit more flexible, perhaps, than we’ve been in history. Having said that, we have a whole generation of people who don’t want to work.

That’s a whole different issue. Do you drink alcohol?

I do. I’m a scotch guy. Old-fashioned. That’s my drink.

Do you have a smoker? Have you ever smoked your Old Fashioned?

Yes, I have smoked my Old Fashioned. I was thinking more meat. I’m in Texas. I love smoked flavor, especially in a wood-fired oven for pizza. I got one of those, too. Yes, Smokey Old Fashioned. I tend not to do it as much anymore. It was a novelty when it first started, but I am an Old Fashioned snob. I gauge a restaurant’s usefulness or making my rotation of regular places to go based on their ability to make a decent Old Fashioned. When I see them mixing it in a compass, it’s like, “Honey, it’s time to go.” Rather than mixing it with small ice and pouring it on a rock. It’s like I’m looking at the technique.

When I’m watching of bartender making an Old Fashioned, I know whether or not I’m going to like it before it ever hits me. I know who’s good and who’s not. Every once in a while, I’ll walk up to a bartender and give him a $50 bill and say, “This is a good Old Fashioned. I watched your technique. You’re ace by me, brother.”

“You didn’t use a maraschino cherry.”

I’m an Irishman. Prop me up in the corner when I’m gone and have a party. I was a soldier, a pilot, an engineer, a CEO, and a best-selling author. I made a ton of money and had a great run. Anytime God wants me, He knows where to find me. Come get me. Prop me up in the corner and have a party because it’s been a good run.

On that, Adam, thank you very much. That was an excellent conversation. We thank you for your time.

Good to be here, guys. I hope everybody out there had fun and got some useful tricks and tips out of this.

Adam, thank you for your time.

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That was Adam Coffey, CEO, author, mentor, and an empire builder. If you’re a business owner and you’re serious about scaling your business, about navigating a private equity partnership, or preparing for an exit, his books are a must-read and need to be on your shelf. You can learn more about Adam at his website, AdamCoffey.com, and be sure to check out Empire Builder, his latest book that’s already making waves among founders and operators alike.

It is a great book.

Remember, building something big starts your thinking bigger. Thank you for tuning in to the show.

Take care, everyone.

Important Links

• Adam Coffey
• Adam Coffey on LinkedIn
• Empire Builder: The Road to a Billion
• The Private Equity Playbook: Management’s Guide to Working with Private Equity
• Good to Great: Why Some Companies Make the Leap…And Others Don’t
• The Millionaire Next Door: The Surprising Secrets of America’s Wealthy
• Traction: Get a Grip on Your Business
• Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

About Adam Coffey

CEO, Board Member, Best-Selling Author, and Acclaimed International Speaker, Adam Coffey is a visionary leader who drives transformative growth and fosters high-performance cultures.

With 21+ years of experience as CEO, Adam built three national service companies for 9 private equity sponsors. During this time, he completed 58 acquisitions, his track record includes notable outcomes measured in the billions.

Adam is a respected mentor to MBA candidates and a sought-after speaker at top business schools. He brings diverse expertise from commercial and industrial service businesses, alongside being a licensed general contractor, pilot, former GE executive, and US Army veteran.

As an author, Adam’s books “The Private Equity Playbook” (2019), “The Exit Strategy Playbook” (2021) and Empire Builder (2023) all became #1 Amazon Best Sellers. Recognized as one of the “Most Influential Leaders” by the Orange County Business Journal four years in a row, he founded the CEO Advisory Guru in 2021, providing consulting services to private equity firms, their portfolio companies and to founders seeking to scale, do M&A and exit.

Adam’s impactful seminars have generated millions in revenue, solidifying his position as one of the world’s top paid speakers. He resides in Westlake, TX, with his family.