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Episode Summary
If your earnings sit between $500K and $4M, you’re in a no-man’s land. Too small for the private equity money flooding the top of the market. Too big for the family handoff that happens at the very bottom. The buyer who actually closes deals in that range has to be part operator and part financier, because the business can’t yet afford a hired CEO. Pete Seligman has spent a decade in exactly that gap. In 2012 he left a 15-year corporate career in engineering and investment banking in Australia, partnered with a mate, and bought five businesses across mining services and industrial manufacturing. He dropped in as CEO of three, ran them for six months to three years each, and then recruited or promoted his own replacement. By 2020 he had two full exits and three partial sales on the board. I wanted Pete on because he’s done the thing most operators only talk about. We got into the 5-5-5 framework he uses to filter deals, the campfire analogy for getting a business to its self-sustaining tipping point, why he took zero distributions for years to reinvest in capacity ahead of the curve, and the gardener-not-skipper mental model that finally let him delegate his way out of the operator seat.
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## Top 10 Takeaways- Your five-minute deal filter is three questions: right industry, something special about the business, what you’d personally bring to it.
- The five-hour filter is people, not numbers. Spend the time with the vendor and the team before you spend it with the spreadsheet.
- The five-day filter is the boring part. Legals, documentation, confirmatory diligence. By then the deal should already be emotionally done.
- Earnings between $500K and $4M sit in no-man’s-land. Too small for private equity, too big for a quiet family transfer.
- At that size the buyer has to be operational, not just financial. The business can’t yet carry a hired CEO.
- You don’t need industry tailwinds when you own a fraction of a percent of the market. Doubling revenue is a quarter-point of share.
- Reinvest in capacity ahead of the curve. Hire the technicians before you have the work, or the work never comes.
- Your first horizon after the close is the campfire tipping point. Self-sustaining heat. Then you have real options.
- Delegation is about outcomes, not methods. You’re the gardener creating the environment, not the skipper holding the wheel.
- Skip the predetermined exit plan. Make the business good. The offers come when they come and you’ll be ready.
Sound Bites
“We didn’t take dividends for years. Our businesses were in an actual sense kind of only breaking even because of that reinvestment process.” (@TBD) — Pete Seligman
“It’s a bit like lighting a campfire. For the first bit you’re constantly feeding it leaves and sticks and more wood. And then it suddenly gets to this tipping point where it’s got its own kind of core of heat and energy.” (@TBD) — Pete Seligman
“You need to really focus on outcome rather than method, because there is no way that anyone else is going to do that thing the same way that you do it.” (@TBD) — Pete Seligman
“You need to be in a position where you can be proud of what your business becomes even years after you’ve sold it. You should be proud of the fact that you got it to here so they can take it to there.” (@TBD) — Pete Seligman
“I don’t have 100% resolution on what the picture is in front of me right now, but I know enough to make a decision. And I’m gonna move forward with intention.” (@TBD) — Pete Seligman
About This Episode
Pete Seligman is one of Australia’s most experienced search fund and entrepreneurship-through-acquisition (ETA) practitioners. After a 15-year career spanning engineering, project management, investment banking at Macquarie Bank, and corporate general management, Pete co-founded Alfond Group in 2012 to acquire and operate small Australian businesses. Between 2013 and 2017 he and his partner bought five companies. Pete served as CEO of three of them for periods of six months to three years, then successfully recruited or promoted his replacement and stayed on the board as a non-executive director. By 2020 the group had fully exited two businesses and sold partial stakes in the other three. Today he invests, advises, speaks, and hosts a podcast focused on ETA in Australia.
Resources Mentioned
- Pete Seligman’s website — peteseligman.com.au
- Pete Seligman on LinkedIn — Most active channel for reaching Pete
- Alfond Group — Pete’s acquisition vehicle
- Macquarie Bank — Where Pete cut his teeth on infrastructure due diligence as a civil engineer turned investment banker
- Finish Big by Bo Burlingham — Ryan referenced this for the framing that the happiest exiting owners are the ones who are proud of how it all went down
Connections
Phase + Module:
- Module 9 — Operator Transition — Pete’s literal playbook: drop in as CEO, build the team, recruit or promote your replacement, move to the board
- Module 5 — Predictable Revenue — Hiring technicians ahead of the work as the lever to revenue capacity
Milestones:
- Milestone 25 — Operator Transition Plan — Three CEO tours, three successions. The central theme of the conversation
- Milestone 20 — Leadership Roadmap — Pete recruited the Brisbane manager who eventually became his CEO replacement
- Milestone 5 — Market Value — The multiples Pete walks through by earnings band (2.5x to 5x in the $1M-$4M range)
- Milestone 6 — Transaction Value — Deal structure for the $500K-$4M earnings gap that ETA buyers live in
Concepts referenced:
- The Owner-Operator Trap™ — The founder-led ceiling at 10-15 people and why delegation is the only way through
- Capital Allocator — Pete’s whole posture: operator and allocator in one seat, then handed off
- Normalized EBITDA — How earnings drive the multiple band you trade in
- The Multiple & WACC — The step-up in multiples when you cross $4M of earnings and PE shows up
- Free Cash Flow — Why Pete took zero distributions for years to fund the growth