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When High Leverage Plays Fail

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Hey there entrepreneurs,

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Welcome to the Better Business Brief, where I share takeaways from:

• running businesses I’m building to sell for millions
• My advisory with other business owners building to sell for millions
• tips and tricks you can use to do the same

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Private equity has been on a tear for decades.

In the 80s and 90s, PE firms were pulling 30–40% returns.

These days? Not so consistent.

And now, a lot of people are starting to ask: is the bubble about to burst?

After digging into this on a recent episode of my show Deal Flow Live, here’s what I think business owners and aspiring acquirers should be paying attention to…

So today, in less than 5 minutes, I’ll give you: ​ 💸 The problem with debt-fueled deals 🏗️ Why building long-term beats financial engineering 🗝️ How to protect yourself as a buyer or owner

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Here’s the big picture:

Private equity has gotten addicted to fast flips and high leverage.

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It worked when markets were hot and buyers were paying crazy multiples.

But when that slows down, a lot of firms are left holding companies they never wanted to actually run.

That’s where things start to crack.

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Debt-Loaded PE Plays Aren’t Working the Same

For years, the model was simple:

load a business with debt, squeeze out short-term cash flow, package a few together, and sell them for a premium multiple.

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The problem?

Multiples have cooled.

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Buyers aren’t paying 4–5x multiples on mom-and-pop service companies anymore.

And many firms that depend on those quick flips are stuck holding businesses they never planned to operate long-term.

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In other words, they made these big, leveraged plays that depended fully on the after market of these businesses…

AKA something they didn’t have control over.

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Long-Term Builders Win Anyway

So what actually works?

Maybe there’s a better way.

I’m not saying leveraged buyouts are a bad way to go in the first place…

Just that a lot of firms set out unrealistic expectations.

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So what do you do?

Building a company like you’ll hold it for 10 years, or even pass it on to your kids.

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That way:

• You create real cash flow and optionality.
• You avoid shortcuts that burn reputation.
• You’re negotiating from strength when a buyer does come knocking.

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If you’re not desperate to sell, you hold the leverage.

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How to Protect Yourself

Whether you’re raising money, buying a business, or growing your own:

• Don’t rely on a future sale to hit your numbers.
• Treat an exit as optional, not required.
• Don’t create your whole plan based on the NEED to sell in the future.
• Build systems and operations that make the business turnkey, so it’s attractive to buyers and profitable to hold.

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That’s why it really gets a better outcome if you build it like you’ll leave it to your kids.

At the end of the day, the PE bubble might pop for firms chasing short-term gains.

But for those of us building solid, legacy-quality businesses?

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We’re setting ourselves up for strong cash flow today and outsized exits tomorrow (if and when it makes sense).

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If that resonates with you, and you want to learn how we’re helping owners build businesses that buyers line up for… check out ScaleForSale.com.

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If you like these ideas or found this informative, stick around and subscribe. I do this newsletter every week.

If you did, share it with a friend who may too, as this is the best way for me to grow it and make this better.

They can even sign up here :)
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Happy value-building to you!

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See you next time for Better Business Brief,

-Brody