Why Founders Should Aim for Private Equity Standards, According to Nick Bradley

In a recent LinkedIn post, Nick Bradley challenges the conventional wisdom surrounding business sales, drawing a powerful analogy to elite athletes to explain why aiming for the highest valuation standards, particularly those set by Private Equity (PE) firms, is crucial for founders. He argues that many entrepreneurs, particularly those with significant EBITDA but below the highest tiers, often settle for less lucrative strategic sales because they misunderstand or avoid the rigorous evaluation process inherent in PE deals.

Bradley opens by posing a rhetorical question to highlight his central thesis: “Nobody asks an Olympic marathoner: ‘Why not just run local races? The prize money’s easier.’ They’d look at you like you’re insane. Because it’s not about the money. It’s about proving you can compete at the absolute highest level.” He then directly applies this to the business world, stating, “Selling your business is the same choice.”

The Brutal Standard of Private Equity Valuation

Bradley elaborates on the fundamental difference between strategic buyers and Private Equity firms. Strategic buyers, he explains, often pay premiums for “synergies,” where acquiring a company offers them significant cost savings or revenue enhancements by integrating it into their existing operations. This can lead to valuations of 6-7 times EBITDA, sometimes more, allowing founders to walk away with substantial sums.

However, Private Equity firms operate under a different, and in Bradley’s view, more demanding, valuation model. He outlines the core question PE firms ask: “If the founder had a heart attack tomorrow, would we lose 20% of value, 50%, or 5%?” This question, Bradley stresses, is not about immediate synergies but about the inherent resilience and transferability of the business’s value. The answer to this question, he notes, is a primary determinant of valuation multiples, distinguishing between a 10x and a 4x EBITDA multiple.

“Most businesses? The honest answer is 40-50%. And that kills the deal before it starts. It’s the gauntlet. And most founders can’t pass it.”

Bradley contends that the reason many founders avoid PE isn’t necessarily due to lower multiples, but because the standard of operational excellence and founder independence required is exceptionally high. He posits that most businesses, especially those with $3 million to $5 million in EBITDA, fail to meet this PE standard because founders are unaware of the requirements or choose not to pursue them.

Obsession with Excellence Over Exit

Bradley identifies a select group of founders, perhaps “1 in 100,” who, upon crossing the $1 million EBITDA threshold, begin to question their ability to compete at the highest level. These founders, according to Bradley, don’t focus on the exit itself but become “obsessed… with EXCELLENCE.” Their motivation stems from a desire to prove their company’s mettle against the most discerning investors.

He further explains that for this elite group, achieving a successful exit is not just about the financial outcome but about the validation of building a world-class business.

“They want to prove they belong in rooms with the smartest investors in the world. And when they win? It’s not just a 9-figure outcome. It’s knowing they played the biggest game possible – and didn’t leave anything on the table.”

Bradley concludes by emphasizing his personal motivation as a journalist covering business leaders. He is driven not by facilitating “decent exits” for good founders, but by highlighting and supporting those “obsessed founders” who strive to prove themselves at an “Olympic-level” of business performance. His work, as presented in this post, is about recognizing and reporting on entrepreneurs who aim for the pinnacle of business achievement, as defined by the most rigorous standards in the market.