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Episode Summary
Your business just doubled. You wrote yourself the biggest distribution you’ve ever taken. By December 31st the bank account is empty again because working capital ate it. That’s where Dave was sitting in 2020. Record year on paper, still pulling his car over to have a panic attack about a forgotten banana. Part 2 of my conversation with Dave Darmoni picks up where Part 1 left off: after the fire, after he took over from his dad, after he installed EOS to stop being the bottleneck. We got into the part most exit stories skip. How Dave learned what the business was actually worth. Why his dad told him to sell (“the best years of our lives were 50 to 65”). How COVID doubled the business and almost made him hold out for a bigger number. Why he hired Prairie Capital even though the PE buyer was already at the table. Real numbers ($7M to $17M in two years), real working capital pain, and the honest moment Dave stopped chasing $100M on paper.
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## Top 10 Takeaways- EOS doesn’t find sales. It frees you to find them, because everything stops routing through your desk.
- Gross profit can grow every year while cash at year-end gets worse, and the gap is working capital.
- Your EBITDA isn’t your cash. Profit gets gobbled by inventory, receivables, and equipment before reaching your distribution check.
- The P&L hides the line that’s bleeding. Your real cash position needs an 18-month forecast, not a year-end summary.
- Family equity gets impossible at scale. The bigger the business, the harder to transfer to the next generation fairly.
- You will not make a clean exit decision while you’re still proving you can carry the load.
- The best years of life aren’t behind your business. Your dad will say what your spouse has been saying for a decade.
- Hire the investment banker even when a buyer is already at the table. You don’t need a different offer. You need a different conversation.
- The right buyer survives a hiccup. How they treat you when the deal nearly breaks tells you who you actually sold to.
- Knowing your number means knowing what you don’t need. Worth $100M on paper is not the same as a life you can spend.
Sound Bites
“Success comes from hard work and suffering. That’s what I believed. I mean, that’s how I got everything.” (@00:40:35) — Dave Darmoni
“We as entrepreneurs always believe making a million dollars today is better than getting 10 million in my checking account, because I can do this for 10 years and then still sell it.” (@00:44:50) — Dave Darmoni
“He said the best years of our lives were from 50 to 65. He said those years were worth so much money, Dave. I’d give it all up. Right now.” (@00:43:25) — Dave Darmoni (recalling his dad)
“I don’t need to be worth 100 million on paper. I don’t need to be worth 50 million on paper. I don’t need to be worth anything, because if I get out of this deal where it sits today, my family’s taken care of.” (@00:54:05) — Dave Darmoni
About This Episode
Dave Darmoni is a second-generation owner who took over the family epoxy manufacturing business his father bought in 1992. Part 1 covered the warehouse fire and the rebuild. Part 2 picks up in 2015 with Dave installing EOS to stop being the bottleneck, runs through the working capital squeeze of going from $7M to $17M in revenue in two years, the COVID doubling, the personal coaching work with Chris Yonker, and closes with the December 31, 2020 sale to private equity. This is the operator-to-exit arc most owners want to hear and few tell with this much honesty about the trade-offs.
Resources Mentioned
- Unlocking Private Company Wealth — The book Dave’s banker handed him that reframed how he thought about EBITDA, working capital, and the actual value of his company.
- EOS / Traction — The operating system Dave installed in 2015 with implementer Chris Naylor.
- Chris Yonker — The personal coach Dave engaged in December 2019 after the “banana” moment. Dave credits this as the most valuable part of the entire transition.
- Prairie Capital — The investment banker Dave hired even though the PE buyer was already at the table.
- Intentional Growth Training — Ryan’s workshop Dave attended with his daughter Paige in early 2020 before the sale process started.
Connections
Phase + Module:
- Module 9 — Operator Transition — The exit arc Dave actually lived, from installing the system to handing over the seat
- Module 4 — Sustainable Financials — Where Dave’s working capital and EBITDA education had to land before he could read his own value
Milestones inside the transition:
- Milestone 6 — Transaction Value — The PE sale, the role of the investment banker, and the hiccup two days before close
- Milestone 25 — Operator Transition Plan — Dave’s two-year stay-on as part of the deal
- Milestone 12 — Five-Year Forecast — What Dave didn’t have until his fractional controller built it
- Milestone 18 — Business Operating System — EOS as the structure that finally let Dave hand off work
Concepts referenced:
- Normalized EBITDA — The number Dave didn’t understand until he read the book
- Cash Conversion Cycle — Working capital eating the growth check at year-end
- Business Operating System — EOS as the framework that freed the owner’s seat
- Value Gap — Between paper net worth and a life you can actually spend
- The Owner-Operator Trap™ — What Dave had to climb out of before he could sell
- Free Cash Flow — What the EBITDA conversation was really pointing at