In this episode of Owner to Owner, former M&A advisor and PE CFO Jaimee Hart reveals how founder-led business owners can transition from chasing short-term cash flow to building a high-value asset that private equity buyers want. Discover how to leverage normalised earnings, valuation multiples, and strategic bolt-on acquisitions to maximise your capital gain when it's time to sell.
Are you grinding away year after year just pulling income out of your business, or are you actively building a valuable asset that can be sold for maximum capital gain?
In this episode of Owner to Owner, host Michael sits down with Jaimee Hart—former Chartered Accountant, M&A advisor for KPMG and Grant Thornton, experienced CFO for private equity-backed companies, and founder of a global advisory platform.
Jaimee pulls back the curtain on how private equity (PE) firms evaluate, acquire, and scale founder-led businesses. She breaks down the strategic shift from short-term cash yield to long-term asset value, revealing how small-to-midsize business owners can leverage PE playbooks, normalise financial earnings, and execute bolt-on acquisitions to dramatically increase valuation multiples.
Michael (00:00):
The small business hustle, You're an owner grinding away year after year to pull more money out of your business. But is that thinking actually taking you away from a bigger prize, building an asset that you can sell for higher value?
If you know anything about private equity or PE, you'll know that they do that ruthlessly well. My guest today spent years doing M&A deals for PE-backed-businesses. She's also bought businesses, operated businesses. Now she runs a global advisory and educational platform from a pretty cool office, but we'll talk more about that later.But today we're going to really dig into how to step off that treadmill, adjust your thinking and focus on the real price, maximising your capital gain. So welcome to the Owner to Owner podcast, Jamie Hart.
Jaimee Hart (00:48):
Thank you, Michael. Thanks for having me.
Michael (00:50):
What's the two minute Jamie Hart story?
Jaimee Hart (00:53):
Yeah, well I'm originally a chartered accountant and started up in the traditional accounting firms, KPMG, Grant Thornton, and doing a lot of advisory for clients. So clients buy, build and sell businesses. And then I moved into the CFO world, so firstly working on building businesses up and preparing them to get private equity investment. And then also once the private equity joined, then for the last 10 years of working as a CFO with private equity owned businesses, where the main growth strategy is buy lots of businesses, get as big as you possibly can, and sell for a whole lot more money.
Michael (01:30):
Right. It's pretty simple business model.
Jaimee Hart (01:32):
It is
Michael (01:33):
Yeah.
How did you happen upon the PE part of it? Was that just the firm that you're working for were specialist advisors to PE or did you kind...
Jaimee Hart (01:42):
Yeah.
Michael (01:42):
...navigate your way into more of these sexy PE deals?
Jaimee Hart (01:46):
So it more came from I was a CFO of a business and we were building it up to get it ready to get private equity investment. And then we took that business to sale, sorry, to market and had all the various PEs pitching for us. And then one of them then became the shareholder and the majority shareholder. And then from then I've never interviewed for another job since, and his private equity had bought different businesses they've brought me on as their CFO and to help them with that strategy of building up these businesses to be worth a lot more money. So it's more from the perspective of being the CFO for those companies that the private equity own and helping them implement that growth strategy, which a lot of that is M&A.
Michael (02:28):
So there were owners at the heart of these businesses that were wanting to do exactly what we're going to talk about, which is I'm here, I get some PE on board and we'll max out the value in five or seven years or whatever the time frame is.
Jaimee Hart (02:44):
Yeah, all those businesses have privately owned, they're privately owned, a lot of them were founder businesses. And then they're bringing private equity on as an investment and growth partner. So a lot of those founders would still stay on as a shareholder. And then they would go on that journey with private equity, which would bring them significantly more value versus if they just sold out entirely now. So that is a really common way...
Michael (03:07):
Yeah.
Jaimee Hart (03:08):
...to maximize what you can get for your business sale.
Michael (03:11):
Is it more about these owners inviting in PE rather than I talk a lot about, good businesses will get acquired. They get someone knock on the door and say, We like this industry. You're the second or third in so we wanna work with you to take on number one or number two. It sounds like you've had some owners there that knew what PE was about and invited them in, as opposed to waiting.
Jaimee Hart (03:34):
Yeah, exactly. I think it's both and it is helpful if you're in an industry where private equity is heavy and they do, you'll know from your experience, you know, for a while they're big in this industry and then they're over here. So there is an element of certain industries they're more active than at certain times. But yes, there was very much that intention of going out and sourcing private equity and building those relationships. And part of it is building a business that is attractive to private equity. But then part of it's actually just being open to that. I think a lot of business owners don't realize that it is an option. Or they view it as this big as soon as you say private equity, people kind of get a bit scared of what does that mean? And, you know, and it is important to understand what you're getting into.
But it is, there's businesses I've been involved in, they're just everyday. A lot of them husband and wife started the business, they've been doing it for 10 years. They're not any exceptionally grand thing. And they don't even necessarily need to be that big. A lot of what we were doing and our strategy was just buying up lots of smaller ones because you know, the basics of valuation, you have your earnings times a multiple.
But if you can buy, you buy a smaller business for a smaller multiple, you bring it into you and then it's now part of a much larger group. So you can buy a business that I don't know, two and a half, three multiples, bring it into the group and suddenly it's worth six multiples and you make money overnight. So actually sometimes buying those smaller businesses also is also a really attractive opportunity.
Michael (05:02):
Indeed. And that's good to hear. I think the archetypal PE is Blackstone or some of these behemoths that own global industries pretty much, but there is a level or two down where they're looking at rolling up in certain industries. What always strikes me as a good starting place is being the right industry.And that's what I think that top down thinking about PE you're the expert in but is that a part of it like they do look at in equal proportions the industry and its potential as well as the business within it?
Jaimee Hart (05:36):
There's definitely a flurry of activity in my experience in certain industries at a time. But also and there are certain private equities that do focus heavily in one industry. But actually if you look at the portfolio, there's a huge range of software businesses, food manufacturing, agriculture, healthcare, education.
Actually a lot of them do have quite a broad range of investments in their portfolio. I think what they're looking...
Michael (06:03):
Okay.
Jaimee Hart (06:04):
...opportunity is the key thing that they're looking for. It's very simple. Their goal is to buy something here, sell it here. So if they see an opportunity, they're interested.
Michael (06:16):
An opportunity by default means it's a business that they can see themselves owning and running or investing in, but also working with the founder if they're gonna... that's a marriage of convenience that gotta have all the right pre-nups and I would imagine a lot of thinking about who we're actually getting into bed with.
Jaimee Hart (06:36):
Yes, exactly. And they're all different, but a lot of the ones we did would be a yeah, you sell down the percentage of your business and the private equities bring capital and expertise and networking and skills to take your business to the next level. But those founders are staying on board for that journey. And if you can get it right, it can be a win-win because it means all that knowledge and expertise that's got that business to be attractive to begin with stays and helps on that next legislative journey. But then you've got the capital and the network and the experience of private equity to help it grow. And then if you both can work out how to work nicely in that marriage together, because it is a very careful thing that you're going to do, then you can both...
Michael (07:20):
Yeah, yeah.
Jaimee Hart (07:21):
...exit in three to five years, significantly more than if that founder just sold outright. But it does come back to each owner and what they're wanting. That's also not for everybody.
Michael (07:30):
In your experience when we chatted a week or two ago, you're based in New Zealand. You've worked across Asia Pacific. Where have you had your tentacles with the work you've done?
Jaimee Hart (07:43):
So a lot has been based in New Zealand and then obviously Australia because there is a lot of, you know, business that goes between the two. Obviously working in more global accounting firms, you have clients that are global and are around the world. And then with the work I'm doing now of teaching and educating people on this, it's global. Because a lot of the opportunities are the same depending on what country.
It's not related to your country. Yes, your country will have specific laws and regulations and that kind of stuff, but in terms of the opportunity, it's global.
Michael (08:17):
Okay. I introduced you in and talked about PE being primarily focused on buying at X and selling at Y in a time frame. You said less focus on dividend yield and cash flow more focus on capital growth. How do you balance those two? 'Cause you need to be sustainable but can you talk a little bit more about that dance between taking out money from the business. If you're an owner it's great if you've got a business you can take cash out of, but the PE wanna do they just wanna reinvest that? Just can you talk about that a little bit more?
Jaimee Hart (08:55):
Yeah, I think it is in my experience, business owners focus a lot on the profitability of their business, and that's their lifeline. If you're not getting cash in your bank, life's gonna get hard really fast. So that is typically their first and foremost focus and it should be. That is really important. If you're not making money today, then don't even worry about trying to sell your business because you shouldn't. You're not having a good one. But I think the challenge I see with a lot of businesses there's they're just focusing on that. And there's so many that like the idea of selling in the future, but they're just so in... running a business is hard, it's challenging. You're dealing with stuff all the time. And it's very easy just to be in now and in the business today and making it work and view the future sale as a project in the future to be done and it's too hard. But what I'm trying to encourage people to do and teach them is actually to be able to think about both those things. Because yes, cash flow and yield and you want your return on equity and all that kind of stuff is very positive. And that also, you know, a valuable business has that. But what you also want to be thinking about is this is also an asset and I'm not just thinking about the profit today, but I'm also thinking about building the asset.
So a very simple example is say you buy a rental property and all you're doing is focusing on the rental income today and the rental returns and not thinking about, well, hang on a sec, I could also sell this in five, 10 years and make a big capital gain as well. And you get both positives. So just trying to encourage people to think about...
and I also help people with buying businesses. When you're looking at buying businesses, yes, that profit, you want a business that's cash flow positive, has a profit, gives you a good return on investment. But what can you see? What's the opportunity that you can see in this business that could take it from being, say you buy it from a three multiple, what can you do to make it worth a five multiple? And then you're actually building an asset as well as getting that profit from it year on year as you own it.
Michael (11:01):
Yeah, I understand I think there's opportunities that owners have it might actually take away from profit that year, but it's an investment in a new area or a new service, a new product, or it might even be a defensive thing where they upgrade systems or plant or increase stock to keep up or to forge ahead and it's you know decision points I can take two hundred grand out of the business and go buy a boat. Or I can leave it in the business and put in a new ERP or something. So is that the kind of discipline you're gonna get from a shareholder, co-shareholder?
Jaimee Hart (11:42):
Yes, I think it's just having what I really encourage people to do is not just leave it to a project at the end, you know. It's so much harder to okay, now I know sell my business, now I've got to get everything ready versus as you say, as you're running that business thinking, Okay, well this piece of equipment's dying, I could get a bit more out of it for another year and save some pennies.
Versus well, actually, if I invest now, I've got new machinery, which is more efficient, but also it's giving me capacity for growth for the next 10 years. And so then when I do come to sell in a few years' time, that's ticked off. I don't even have to think about it because back here when I was making the decision, I made a decision that was keeping the longer term interest of the business in mind. And even if I don't plan on being the shareholder for that whole benefit period, it means if I come to sell here.
That's a non-issue because I've already thought about it. It's sorted. I don't even have to think about it. Versus coming to sell and being like, okay, all my equipment's old. My team isn't well trained. I have no data or reporting. I have... and suddenly you've got this big mess to deal with. And it's just you're not going to get as much money for your business. It's not going to be as attractive. So you're not going to get people lining up for it. And you're making that process really horrible when it doesn't need to be that horrible.
Michael (13:01):
Yeah. I think that you rightly and tightly summarise value as a multiple of earnings and earnings, as that's the formula for valuing a business. There's a whole derivatives of that, but essentially it's how much money is the business expected to make and how many years of profit am I prepared to pay for. That's my way of trying to explain it every day. But what you're talking about with multiples, you can increase your business value by increasing profits, keep the multiple the same, or you can increase the multiple, or do both. Do owners focus enough on the multiple parts of it? Or are they still driven by the earnings piece and what do you do that might be specifically a multiple driver or multiple improver?
Jaimee Hart (13:50):
Yeah, I think business owners are bred to think about profit and cash flow. But the multiple I hear business owners talk about it a lot less. And I think because it is a bit more ambiguous. It is very subjective. But yeah, there is a lot you can do about improving that multiple. But firstly on the earnings side, one thing I think a lot of people don't realize is that you do it based on normalized earnings. And I don't know how many people would have heard that term normalize, but I'm an accountant, so this is my bread and butter. But basically, what normalization means is that it's not just your last year's profit. It is what that profit would look like in the ordinary course of business. So what it means is you can actually strip out one off costs, you can make it look as good as possible. You want to do it in a very honest way because it is going to get pulled apart in due diligence, they are going to check it. But a perfect example is well there's lots of examples, but like what you were saying before the question of do I invite... have a bit more cost now, but it is for that future of building a better asset, versus having less costs now, but not having that future asset.
But actually when evaluation's done, it's based on normalized earnings. So a lot of that extra cost, we would strip out and actually look at like on a normal, you know, in a normal year, what...
Michael (15:19):
Yeah, yeah.
Jaimee Hart (15:20):
...would it look good? You know, so you might have had, say for example, you need to move premises. So say to get growth for the next 10 years and to have enough space, you might move premises and it might cost you 30 grand in moving cost just to move everything.
I would normalize that out. That's not an ordinary course of business. That's not a normal expense line. So yes, you're spending money today too and you're going to show less profit, but actually for your valuation, I'd be showing that separately and I'd be stripping it out and having your profit increase to reflect it. Plus, you've got the benefit of you're now on a much better premises. It's got capacity to grow and it's going to look much better for people looking to buy your business. So one of the things, I would bet that is really easy to do today. That then makes that a whole lot easier when you come to sell it. Just start having a line in your expenses, just one-off expenses, just show them separately. So when you are spending money on legal fees for a dispute that isn't a normal course of business, you've got to pay an employee to leave because they're a bad egg and you just have to pay them some money to get rid of it. Any of that kind of stuff that's not normal, just code it off to one off.
And then when you come to do evaluation on your business, you've already got it there. You can very quickly work out what a normal profit would look like. You've got the evidence and support. And you know, there's no extra work involved versus suddenly you've got to give three years of accounts to your buyer and you've got to go back to your... you can't remember what the heck happened to years ago, and you're not gonna strip out nearly as much as what you could if you just did it as you went.
And so you'll get a...
Michael (16:52):
Yeah.
Jaimee Hart (16:53):
...a lot more money for it. It makes your business more valuable because your profits are bigger. And if you do it as you go, then it's easy, it's no extra work. So yeah, that's more on...
Michael (17:01):
Yeah, it's...
Jaimee Hart (17:02):
...the earnings side.
Michael (17:03):
Yeah, the term add-backs is probably familiar for some people, or adjustments or normalized earnings and it's my core work day to day is to line up four or five years worth of tax returns and remembering that your financials for small business are fundamentally about reducing tax.
It's like that for just about everybody. But you're right, we go line by line and across the years you do see things that just look really odd and you say, what was that? And yeah, it was a one off thing. It was a discretionary thing. It was driving a two hundred and fifty K Merc when you run a wholesale business it's why you do it. But yeah, you're right. Keeping that perspective on what it looks like for another owner of the business who just ran it for pure profit at the most efficient level of financing and OPEX and CAPEX.
I think a lot of owners just leave their finances behind as soon as the compliance work's done at the end of every quarter or end of every year. Is that your experience? It's like lower my tax, pay my BAS or whatever the, you know, whatever the compliance taxes are and then move on. Is that your experience when you get to spend time with owners?
Jaimee Hart (18:19):
Yeah, of course. And like it's not the most exciting thing. And I'm an accountant and I find it boring, and a lot of it is retrospective. So yeah, a lot of people get their accountants to do their accounts at the end of the year, and as long as they've... most business owners will have a way of knowing if they're profitable, even if they're not getting, you know, monthly management reporting. And again, I'd encourage people like that's not the end of the world.
The number of business owners I've talked to who we've often will shoulder-tap businesses, find businesses that we'd like to buy, and we'll go and shoulder-tap them and have a conversation and they're thinking they're like, I don't have my accounts in order. They've never done a budget before, any of that kind of stuff. And that's normal. That is more often what I would expect to see. So yes, I'm an accountant. You should have your finances in order and up to date. And you definitely want to be paying all your... filing all your tax returns and all that definitely on time.
But if you're not keeping perfect monthly accounts, if you're not doing budgeting forecasting, it's also not the end of the world. And I really just encourage people to think of what is it that drives your business? If somebody is wanting to buy your business, what is it that they are fundamentally really caring about? And it is not that you have perfect monthly accounts. It is likely to be your revenue growth.
How many key customers do you have? What are your key products and services? Are they growing? Are you... do you only have five customers and that's a key risk? Or is your revenue split across 30 key risk customers and those relationships are across multiple people? When I'm looking at buying a business, I care a lot more about that than somebody having their monthly accounts in order, as much as that might surprise...
Michael (19:59):
Yeah. Yeah.
Jaimee Hart (20:00):
...people given that I'm an accountant.But you can't win everything and someone buying a business is looking for a valuable asset that has opportunity and being able to show that opportunity is more important in my perspective.
Michael (20:15):
Yeah, and viewing your business, you're the owner of the business, trying to view it as an investor as opposed to the owner is a bit of a challenge. But it is that... that's the frame with which you can start to see what the business is performing and might actually perform. And it's the contrast I use in a lot of discussions. So would you buy your own business based on doing a rational analysis of it and therefore go back to work and fix it or change it because as much as you might love or hate your business and particularly in PE it's gonna come down to you knowing the normalized earnings and where the business is tracking. Um... what...
Jaimee Hart (20:55):
Yeah, exactly. And you asked that question earlier about multiples. And I think this is one of the areas that really does drive multiple is what opportunity does that business have for growth? And have you proven some of that? So there is a very big difference between... I would be much more prepared to pay a higher multiple for a business. Say they both have a million dollars profit, say whatever, it doesn't matter what the number is, but profit is the same, but this business has shown growth. It's proven it can do it on a smaller scale. It has proven there's opportunity, and I have a... and you know, they've invested in people, they've invested in capacity, platform, equipment, whatever it is, and I can see a practical path to being able to buy that business and continue to grow. I will pay more for that business than I will pay for a business that has the same profits, same earnings, but it's stable or they haven't proven it or they just have a couple of key customers and their revenue isn't diversified, they don't have capacity to grow. So yeah, think about what are those key things that really drive your business and set it up for the next owner's journey. And that's what's going to move your multiple and get your business to be more valuable.
Michael (22:11):
Yeah, indeed. It's a really subtle thing in valuation or appraisal of business value. So you've got to look at the history because you have that, but it's there when you put forecast earnings or maintainable earnings in the valuation, you're really... you're really just saying that history is my best estimate or best judgment is that based on that this is what the business is going to produce for another owner. That's... so the past is a proxy for the future. And it's not the past because of the past. It's just the best indicator of the future. I was keen to understand...
You've probably made calls to businesses and been on the end of a few calls from PE, I was just... how do you... how do you handle those calls? If one of your businesses got a call out of the blue or an email from PE, what's the first couple of things you do to validate it's worth spending any time on?
Jaimee Hart (23:08):
Do not get carried away, keep it super simple. The first... co... conversations are: catch up for lunch, catch up for a beer, catch up with a coffee, and have those very initial conversations. I think one of the most important things is the relationship and you kind of have to build that first and work out if there's any legs.
A really good example was when we were starting to get interest from private equity and investing in us. Some of them outright wanted control. We weren't giving away control. It wasn't like... we were very happy to have a partner, but a lot of private equity takes full control over everything. And there was not a hope in hell that I was ever going to get that across the line with the current shareholders. And I knew that, and that was just a non-negotiable.
So just catching up with somebody for a coffee, what is it that you're after? What are we looking for? Is there some kind of alignment or is it not even gonna get out of the starting gates because that's just not gonna happen? So I think just...
Michael (24:08):
Yeah, so straight... straight away you were clear on what you... already had a sense of what are non-negotiables. So you can have a pleasant conversation, leave it on good terms, but it's not for us. And I think you could assume that the PE firm that made the approach knows enough about your business to know that they're interested. Is that a fair assumption? They do the homework?
Jaimee Hart (24:30):
Yeah. Yep. They'll know enough like obviously your financials and everything are confidential, but they'll obviously know your industry. They've probably heard about you from different people. They're so well networked. You know, the number of times I get calls of, hey, I can see you went to KPMG with this person and they're now the owner of this, what were they like to work with? And the other thing is it's not all just about numbers.
Particularly if they're buying outright, that's different. But often they're investing as a partner. And it's just as important that you can work together and that you can build that positive relationship because that's just so crucial to run the business well going forward. So a lot of it to begin with is just each of you casually sizing each other up. And I just encourage people to not be scared about it, but just be honest, because it is so much better to know...
Or early on, if you think the other person's a douche and you just don't want to work with them, or they're wanting something...
Michael (25:28):
Hmm. Yeah.
Jaimee Hart (25:29):
...or trying to achieve something that you're just not aligned with at all, it's just that that's fine, you know, everybody has their own objectives and you just agree to go your own ways. But the sooner you can find that out, the better.
Michael (25:41):
Yeah, and a coffee, a beer or lunch is a good good way to do that, right? It's just getting to know people. I mean it's really healthy. It's great that you get an approach, kind of give you a bit of a lift sometimes if you're out there and if you're just you know, doing the thing day to day and someone calls and says we're interested, you're right, you just need to get to know them.
And not be under too much pressure to release a whole lot of detailed information too early. That's a huge red flag.
Jaimee Hart (26:12):
Definitely. Yeah. But also if you're open to an approach, like so many people say, How do I find a good business to buy? Or how do I find someone to buy me? And the best deals I've seen are just word of mouth. It's because you both know the same lawyer or accountant and or you know, one of our bankers said, Hey, one of our, you know, their other clients was looking to sell. They're in your industry. I'm like, Perfect, introduce us, let's catch up for coffee. So even just starting to tell, your lawyer, your banker, your accountant, hey, I might be looking to sell out in a few years. I'm open, and you just don't know what will come along. But in my experience, that's where the best deals have come from is just word of mouth.
Michael (26:51):
Yeah. There's a huge movement entrepreneurship through acquisition, ETA, which is alive and well. I'd classify it as a version of private equity, but that's probably technically not right. However, the model is not dissimilar. They're well funded, they're after particular kinds of businesses and they do a lot of knocking on doors to find deals because they're not advertised for sale. You've got to know what you're after and you've got to go find them and hunt them down or at least you know engage in a conversation. I did a lot of work on the acquisition side. I had a rule of thumb out of ten, ten calls that I would make, these are within an industry, they're not just random calls, one would say we're already for sale, one would say we're not interested, we have a plan, and the other eight would engage in a conversation because they didn't have a plan or even a like timeline, but that's so there's it's rich pickings, but boy you can spend a lot of time filtering...
Jaimee Hart (27:47):
Yeah, you can. Yeah, it's interesting. I would have said so for me it's been about 70% of people are open to have a conversation. And then of those, and then I reckon about 50% actually would be happy to sell. And this is not just for owners, it's also owners existing business owners looking to grow their business. You know, one of the great, and again, ways to increase your multiple is size. The bigger you are, the, you know, wider the area you serve, the more sites you have, the bigger team you have, just the bigger earnings you get, the higher the multiple you can often attract. So a great way for businesses to grow is to utilize their strong business that they've already built to be able to get funding to buy another one to bolt on. And again, they can do the same thing. So say your current business might... attract a multiple of three given its size and where you've got it to, you go and buy another one or two businesses similar size at a three, but together now, because you're now much bigger, you might now be able to attract a multiple of, you know, four or five. So straight away, you've just increased your value just by acquiring, not actually, you know, and often that can be a much faster way to creating value than actually just staying with your one existing business and trying to organically grow that one business to be the same size. So bolt on acquisitions...
Michael (29:13):
Yeah.
Jaimee Hart (29:13):
...is a really well and that's what private equity does as well. You know, we bought... they bought one...
Michael (29:18):
It's it's...
Jaimee Hart (29:19):
...and then we keep buying and gobbling them up.
Michael (29:21):
It's the playbook, right? It's buying one but with an eye it's a beachhead or it's the first one and to get to scale by buying three or four or five. As you say, you're seventy percent of eighty, just back of the envelope, but there's a lot of businesses that will engage in a conversation with you. So getting... getting good at acquisitions is such an effective way to grow your business and it's in... i... in most industries there's opportunities everywhere you look and so you go... I... I guess the owner has just got to have fuel in the tank though. It's not... it's not straightforward to... it's a specialist thing to go and run an acquisitions program and... and go one by one and you know...
Jaimee Hart (30:05):
Yeah...
Michael (30:06):
...do the analysis...
Jaimee Hart (30:06):
...it's...
Michael (30:07):
...and keep the dialogue going.
Jaimee Hart (30:08):
That's interesting because I don't think it's as hard as people make it out to be. And you know, they're not having to do a whole lot. You like I've got some students who just might do one every couple of years, you know, or if the opportunity comes along, then they will. But they're not desperate, you know, they're not having to be like private equity just constantly doing it. So yes, there are... there are some specialist elements to it, and particularly when you're getting into the nitty-gritty of the legal documentation and all that kind of stuff, you do need to make sure your risks are covered. But the general concept is actually not that hard. And that's what I'm passionate about and working on is just trying to upskill these business owners. They've managed to build a business where they have to wear all the hats, one day they're marketing, one day they're the receptionist picking up the phone, one day they're dealing with the lawyers. If you can manage that, you can learn to buy a business. It's not that hard. And I think as well if you're looking at doing a bolt onto your existing business, it's quite interesting, even a lot of the acquisitions that I was running.
I would bring the founders in all the time because they know that industry a hell of a lot better than I do. And yes, I might have been doing this a long time and, you know, heavily experienced. But actually the key risks of an industry or the key risks of a specific business, actually I found a lot of the founding shareholders, they rarely could nail down right, this is the key risk, this is what I'm looking for, this is the opportunity or...
No, they're talking rubbish. That's a problem. And I've heard through the Grapevine that they did this. You know, like really you're just looking for an opportunity as an asset where you can see opportunity in it to grow. And if you just keep it as straightforward as that, the lawyers can help you with the lawyers, the accountants can help you work out valuation. You know, like that's the main thing is trying to find that really good opportunity. And actually I find business owners are really... they're naturally good at that, right? Because otherwise they wouldn't have been as successful in building their own...
Michael (32:06):
It...
Jaimee Hart (32:07):
...business.
Michael (32:07):
I agree entirely with that. They do know their industry better than anybody else, most likely, so in terms of finding or buying something in your industry, you're a long way ahead of anybody else. But also yeah, I've come across owners who ri... writing up a... an MOU or a... a non binding indicative offer or... or structuring... agreements, all that stuff you can...
getting a good advisor to help you with but what they... what they have is and what they need to back themselves on is they've used commercial judgment all along the way to build their business and sometimes you just gotta... t... remind them that every day you make decisions to buy stuff, employ people. So you've got good commercial instincts and you need a framework for buying the right thing at the right price. But yeah they're pretty well placed to do that.
Jaimee Hart (32:57):
Yeah, exactly. And a lot of that you can learn and that's what I'm focusing on at the moment as well. Like it is...
Michael (33:03):
Yeah.
Jaimee Hart (33:03):
...a very structured process and there are very clear, defined steps and this is the objective at this step. If you get here, then you move forward. It's very pretty, it is painted by numbers. And even, you talked about your memorandum of understanding or your letter of intent or your offer.
There's not that many different things that can go into it. If someone can explain to you, right, this is the mechanics evaluation at a high level. These are the different typical terms you would see. I know you've had guests talk about burnout. This is the typical way they can be done. And then, you know, there's business owners intelligent. They can say, Yeah, well, that sounds like a good option. I don't like that one. And then it's like, great lawyers, please write it up so that it makes this.
And I think that's really the key thing is actually being able to just think about things sensibly and then you can just explain that to normal language to your lawyers and then they can do all that stuff and make sure you're covered, you know? But just don't be scared by it.
Michael (34:01):
No, and get the right advisors who have got the right experience. Sometimes your most trusted advisor is out of the loop with what's happening on... on... on certain things, tax or even just... you know, don't assume they're gonna be a great commercial partner for you, a negotiator or... I mean so yeah, pick your... pick your the right advisors but also...
I think be really clear about what you want from them. So it's your paying the money and these things can drift, deals drift, negotiations lengthen, cost you money, cost you six minute increments if you're engaging lawyers. So just have to be really clear about what you want. I just want to finish up on this private equity bit. Where's the money coming from for what you term private equity currently?
Jaimee Hart (34:45):
So they'll all have different ways of getting it depending on which ones you are dealing with. But often a mix of private individuals, wealthy, high net worth individuals investing their money with them. In New Zealand we have like ACC, like your Medicare like they invest a lot of funds or superannuation funds are getting invested, Kiwi Saver funds are getting invested.
So there's usually a mix of where they get the money from.
Michael (35:11):
Right. So there's no shortage of it.
Jaimee Hart (35:13):
No. Nope. There's no shortage of the money, just the opportunities really.
Michael (35:17):
Yeah. Alright. So that's a good segue to what you do now. So tell us about that.
Jaimee Hart (35:25):
Yeah, so what I do now is I've worked for years helping people as clients, you know, working as what we've been talking about, as advisors who you pay a whole lot of money for for a short amount of time. And then yeah, doing it for private equity and for businesses as a CFO. And firstly, it's one thing I love about my job.
So I really, really enjoy the process. I love the chase of finding really good deals, of negotiating, thinking of all the opportunities and just really enjoying the whole thing. But the one thing that really excites me is that opportunity that is there to create that wealth for people. And the people I work with who can retire at fifty and have plenty of money so they don't have to worry about it and they can just live the rest of their years travelling and...
Doing what they want to do and the freedom that it can create. And there are a lot of people out there, and that was also me for a long time, working hard, climbing the corporate ladder, getting paid a good salary, sure, but actually you're putting all that time and expertise into building somebody else's asset and not your own. And I think about buying a business.
So you can obviously start your own business or buy one, but by buying one, it's giving you that base to start with, is giving you some, like you're talking about before, the history doesn't necessarily reflect what will happen, but it gives you some confidence of what might happen. So it gives you a really good starting point to have that asset. And actually being able to put your time and your expertise and your skills into building an asset that one day you could sell and get that benefit from...
as well as obviously the profits as you're working in it and getting paid for your time for what you put into it. So I've just seen so many... I've seen people do it really well and they have created, you know, significant financial freedom for themselves. But I've also seen this feeling in the industry that it is a big scary process and not something that a lot of people are capable of doing, or you've got to pay...
a whole lot of money to advisors and you gotta hope and trust that you get good ones and that they get it right for you or trusting brokers and all that kind of stuff. But actually the process, if you're talking to the type of person that is keen to have their own business or that has had their own business as they're keen to grow it via acquisition, that type of person is someone that is very capable of learning new things. They are intelligent. They can think commercially and about more than just their box.
So, actually, it's not that complicated. So what I'm doing now is trying to take that process and actually teach and coach and support people to learn it. And it's not to take over from advisors. You do need your own advisors to help you with the technical parts. But what I'm trying to encourage people to do is to actually understand it themselves. So the more you can understand the different steps, what they're trying to achieve...
In each of the outcomes you're looking for, the better deal you're gonna have and the more control you're gonna have over that process and you will end up with a better deal in the end. Because the number of times and like we were saying before, those business owners often come up with some of the smartest comments I've ever seen round the table when we're looking at, you know, businesses. And a lot of them will say, I'm...
Michael (38:45):
Yeah.
Jaimee Hart (38:45):
...just a...
Michael (38:46):
Yeah.
Jaimee Hart (38:46):
...doctor and I've built this medical practice and it's like, yeah, but because you are, you'll look at that business in a way that I won't. So actually a lot of it just encourages them to have that confidence, to think about it themselves and to learn and ask questions and not just sit back and rely on the advisors that have been doing it for so long, you know.
Michael (39:09):
If you kinda peel that back a bit, it's... it's about some motivation to in the first place to want to crystallise value from your business as opposed to just taking money as you go and you can do whatever you want but back to my business...
This is what I do two or three years out. What's it worth today if you had to sell and that often is a hell of a shock for owners. If you've still got two or three years you've got time then to... to think about what would change the earnings, what would change the multiple, what... what would make it more sellable because...
You've got time but actually starting with and reinforcing the whole theme of this which is think about your business as an asset that you want to improve the value of if you have that in the back of your mind every day when you make decisions. Come the time to sell it. In theory it'll be worth more.
The leap from there is interesting. If a lot of what might be called exit planning or sale readiness planning is about building the business so it's less dependent on you, less reliant on you. And if you get there, don't just automatically sell it because if it is truly working under management, you... could take more time out of the business, do other things, the... the return you've got out of a high quality small business is way better than a bank account or share portfolio when... when they're...
Jaimee Hart (40:29):
Yeah, it...
Michael (40:29):
...when they're the better ones.
Jaimee Hart (40:30):
Yeah, it is, absolutely. And I think, yeah, so it was talking about buying a business, but then once you have a business, what can you do to maximize its value, make it as attractive as possible? So actually when you go and sell, or you might have people coming sh... tapping you on the shoulder before you even really sell, but you want people lining up to buy and then how do you make that as easy as possible? And the owner dependency... that...
The business of the owner is a big thing. And I think I just encourage people to... some people like working in that in their business and that is totally fine. But treat yourself as you would an employee, almost with a job description and a role. So I don't think there's anything wrong with, you know, somebody coming to look and buy on you and then you're involved. That's okay. But you need to write, I fill this role, this is my scope.
Rather than a lot of business owners are in on everything. If anything goes wrong, people are running to you. They've got the history in their head. They've got all the relationships in their head, and they're not just filling one role in the business that somebody could then go and hire somebody and you could teach somebody else to do it just like any other employee if they were to leave. But they've actually got their tentacles everywhere and that's a bigger problem.
But I'd encourage people to also think about who you're gonna sell to? Because also like we've bought lots of businesses where the owners are deep in everything. And that wasn't a bad thing because we kept the owners with the business. So we didn't buy them outright. We kept them with a...
Michael (42:02):
Yeah. Yeah.
Jaimee Hart (42:03):
...shareholder and we wanted them to stay in. And yes, with time, we started moving them out because the plan was, you know, we buy you here and then we all exit together in five years.
So then we'd have that five year period. So that wasn't a negative to us that they were involved. That was actually a positive because we were buying them with the business, if that makes sense. So you just need to think about who...
Michael (42:25):
And they still... you... I can see they still have a runway.
Jaimee Hart (42:28):
Yes, exactly. And it actually de-risks it because if you buy the business and they're retaining shareholding and they're coming with you, then actually the fact then you've secured that knowledge of the business actually. So that de-risks it for you because the key person in it, you've tied in via keeping them having a shareholding. So they're incentivized to do really well. So think about who it is that might buy you...
And therefore what should you be doing. So in that situation, it's actually better that they spend their time proving growth opportunities and making the business look like it has as many opportunities as possible to grow rather than trying to pull themselves out of the business. But again, they're happy to go and they're deciding that that's their next step and they've still got energy to keep pushing for five years and be committed for that final sale. Versus if someone is truly wanting to step out...
then yes, they absolutely need to start getting their business ready to work.
Michael (43:21):
Yeah, you can't... you can't do that in three months. The really important question there is asking who's the natural owner of business because I think a lot of exit planning or... s... or sale readiness is about getting the business ready and then advertising it for most businesses there will be...a pool of natural buyers and you can start to approach them, you can start to think about how to blend with their business. You know it's just a great question. I do wanna finish on a couple of things. For an owner who's sixty or sixty five, you've just explained there...acquirers could buy a business and you could leave tomorrow. There are other businesses that could be acquired and you could stay with the business. So don't lose hope if you feel like you're totally your business, there may still be ways to get an exit plan together and work with a buyer. Is that something that they ought to focus on?
Jaimee Hart (44:14):
Yeah, again, I think it comes back to you personally. So, and it doesn't need to be my example before with private equity, even moving private equity out. If you are wanting to exit outright once you hit sixty five and you're going to the beach, go fishing, you don't want to think about business, then you need to get the business ready so it can run without you. Or at sixty, you need to start having those conversations and find a buyer...
and be open to continuing to work in that business for a period to help them with the transition. So that's really common. We'll often buy businesses and we'll buy them outright, but the owner may agree to stay involved as a contractor back to us for X amount of hours for the first six months and then less for the next six months and we would have this transition plan. So a lot of people are open to that. So therefore, you know, when you're out trying to sell it then...you're letting people know and what that does is from a buyer's perspective it de-risks it. Versus if the owner leaves, go on, you're not gonna call them because they're out fishing. Then to me, I want to be much more certain about buying that business. To me that's a higher risk business. I probably amn't prepared to pay as much, versus knowing they're around to help support you with that transition. That can be really helpful. So just think about what it is that you want.
I've never really heard somebody say they went to market or started having those conversations earlier. Lots of people have them too late, but there's no harm in starting to have them...
Michael (45:42):
Yeah, yeah.
Jaimee Hart (45:43):
...earlier. And also it really helps... it's interesting, I can't remember who it was, but someone I saw on Instagram the other day and saying his strategic growth plan is he would take his business to market and he would hear that, you know, that come in and go, well, I'm prepared to pay this. And he's like, Well...If I wanted this, what would I have to do? And get these parties to basically value them and say, well, hang on, you're not there yet because you haven't done these things. And then that would become his plan for the next year. So there is no harm having these conversations early. And then they can help inform you on what you need to be focusing on and where are people seeing the risks and are there things that you can start doing about it now? Because it is a whole lot easier to get prepared, know early, have time, and work through those things...before being at the point where I actually really want to sell and now you're in a much less powerful position.
Michael (46:33):
That's why you engage. You don't give away everything but you ask good questions like that. Well how do you know what would make it attractive? Also just knowing... i... if you've identified there are potential natural potential buyers, you start to tune into it to not just your business but...their business and the industry and you start to pick up on what's going on in with mergers and acquisitions, you can really build a really deep knowledge of what's going on in your sector if you... if you can just remove yourself from the day-to-day and start to think about I've got to do that, but I've also got to think about my exit and earlier, earlier is better.
Jaimee Hart (47:10):
Yeah.
Michael (47:10):
Just briefly, your advisory... an education business. We can put some links in there on the show notes. What's it called and or what sort of channels can people see it on or hear it on?
Jaimee Hart (47:24):
My name is not exciting because I'm an accountant, so it's just my name. So you can go to my website, which is jaimeeart.com. Um, and I'm on Instagram...
Michael (47:31):
Yeah. Yeah.
Jaimee Hart (47:33):
...and I'm just starting on YouTube, so don't cringe too much, because again I'm an accountant, so this is all learning. But yeah, it's really focusing on helping people learn that process to buy and sell, taking some of that fear out of it, upskilling, learning, so you feel a lot more in control and have a bit more confidence with it. And also when you have an asset, how do you really view it as an asset, build value, maximize that return and make it really attractive and easy to sell? Yeah, so Instagram, my website or YouTube.
Michael (48:04):
All right. So the answer to the question where your office is, come on, tell us.
Jaimee Hart (48:08):
Yes. So I am actually back at our house at the moment. But yeah, we live in a caravan. So we bought a sailing offshore sailing boat and last year we sailed up to Tonga. So thank you to Mr. Elon Musk for Starlink... and you can...
Michael (48:24):
Well thank you for that bit, yeah.
Jaimee Hart (48:26):
Yeah, yeah, for that, but thank you.
Michael (48:28)
Yeah.
Jaimee Hart (48:29)
Yeah, so we've been sailing around the Pacific Islands and just working from the boat. It's pretty good.
Michael (48:34)
Yeah, that's what we should all be striving for, to do something we're interested in from different locations.
All right, final question. I'm not sure you'd have to go through the citizenship thing, but if you were appointed to be head of Australia's federal small business department is the minister in charge...
What's the first thing you would do to make it easier for small businesses to thrive and why?
Jaimee Hart (48:57):
Well, personally, I am actually an Australian citizen. Oh...
Michael (49:02):
There you go, tick. So we're... we're one step closer now.
Jaimee Hart (49:06):
What do you think of Australian politics? Well, the obvious one for me in this conversation is capital gains tax. I think it is so challenging for business owners when, you know, the government's clipping the ticket with VAT on revenue, they're clipping the ticket on your employing staff paying salaries with PAYG healthcare, superannuation, they're clipping the ticket on employment tax, and they're clipping the ticket for you guys on capital gains as well. There are a lot of...
They're hardly incentivizing business owners to build an asset there, making it really challenging. And I actually did some work on a business case for going into Australia, where we were actually looking instead of buying, we were gonna build from scratch a business in Australia. And I was blown away. Like the business model works in a number of other countries we've gone into.
And we and the board, we just all assumed in Australia the numbers would stack out. We kind of thought it would be a no-brainer, like yes, we need to do the business case and to you know, dot our I's cross our T's. And actually I was blown away with the costs of going into Australia, not only from a tax perspective, but the cost of labor was eye-wateringly high, and even the cost of the build. So we were gonna need to do a specific custom build, and it was gonna cost double...
what we had just paid to do it in New Zealand. And it just makes the numbers just don't stack up. And we hadn't even thought the numbers wouldn't stack up because this business model was so profitable in so many other countries, it didn't cross our mind. So and it really came down to we...
Michael (50:36):
Yeah.
Jaimee Hart (50:37):
...would have had to be so certain of the revenue and getting that revenue in quickly to make the business case stack up. So I think...from my experience and what I've seen, I'm... obvious obviously not an Australian having to deal with it as much as you guys do, but it just seems so challenging for those early stage businesses where you don't have that solid revenue yet to build a business when you are clipping the ticket with tax in so many ways. So I'd be looking for ways to try and encourage business owners. And it's... it's like the government can't get their head around the fact that...The better businesses are, the more tax money they're gonna get. If you encourage and support Australian local businesses, they're going to make a whole lot more tax dollars because you making more money means they make more money, but actually it's encouraging people to get services from offshore because it's so hard for Australian businesses to compete with offshore because of their cost base.
Michael (51:33):
Well we had this quite radical proposal to change the whole CGT infrastructure across asset class housing and there's been a few things that have sounded like they're getting wound back a little bit 'cause the government's gone. Wow, we heard from you, we didn't get that right. One of the things the start up area and employee share plans...
maybe there's some green shoots for a change to what was proposed. But in terms of employee own trusts as a succession planning tool for existing businesses, that's still nowhere and it is somewhere in the UK and somewhere in Canada and that's another, that's another battle. But couldn't agree...
Much more with that. Thank you for that contribution. It's been great to chat to you, Jamie. People we'll put in the show notes where people can contact you. But I thank you for your time and for openly sharing all that great experience. PE World's a bit of a mysterious one for some. For many, in fact. But you know, if you've got a good business...
Don't be surprised if someone from a PE backed firm knocks on your door and is a bit better placed to handle that call as a result of our chat today. Thanks, Jamie.
Jaimee Hart (52:43):
No problem. Thank you for your time. It's been a fun chat.
Michael (52:46):
Great. All right. Catch up with you soon, Jamie. Bye.