The $50 Million Mistake: Inside the Private Equity Playbook and How to Maximize Your Exit

Alexis Sikorsky went from near-bankruptcy during the 2008 crisis to selling his banking software company for an unheard-of 11x future EBITDA. Here is what he learned about the “grind,” dealing with Private Equity, and the expensive mistakes founders make on the way to an exit.

Every entrepreneur dreams of the perfect exit. The phone rings, a big number is offered, and you ride off into the sunset.

The reality is usually much messier.

Alexis Sikorsky, co-founder of Nightscale, knows this better than most. After building a successful bespoke development company to over $10M in revenue by 2008, he lost 75% of his business overnight when the financial crisis hit.

What followed were years of what he calls “the grind”—fighting bankruptcy monthly, mortgaging his house, and laying off staff just to survive.

Yet, by 2014, he had clawed back to near-breakeven and received a call from a Private Equity (PE) firm. Through a stroke of luck and bravado, he managed to sell his company for 11 times the EBITDA projected in his aggressive two-year business plan.

It sounds like a fairy tale ending. But years later, while earning his executive MBA at Oxford, Alexis calculated the cost of his inexperience.

“If I knew at the beginning what I know now, I would have sold for $50 million more and five years earlier,” Sikorsky says.

Now, Alexis helps other founders avoid that “$50 Million Mistake.” In a recent podcast interview, he shared the brutal truths about getting stuck at the $5M–$10M revenue plateau and the secrets to dealing with Private Equity.

Here is the playbook for preparing your company for a maximum-value exit.

The “Fish and Chip” Trap

When a PE firm approaches you, it’s flattering. But Alexis warns founders that the initial offer is often just bait.

He describes a common PE tactic one of his clients calls the “Fish and Chip.”

1. The Fish: They hook you with a very high valuation in the Letter of Intent (LOI).
2. The Chip: They spend the next six months of due diligence (what Alexis calls the “colonoscopy”) finding reasons to chip away at that price.

“You go through six months of due diligence, you’re exhausted, you don’t work on your company anymore… and if you’re an idiot like me, you start mentally spending the money,” Alexis admits. By the time they lower the offer from $80M to $70M at the closing table, you’re too tired to fight back.

How to Counter It: Do “reverse due diligence.” Before signing an LOI, ask the PE firm for a list of five CEOs whose companies they have acquired.

Don’t call those five people. Instead, research the firm, find the founders they didn’t put on that reference list, and call them. Ask them two questions: Did they “fish and chip” you on price? And did they treat you well post-acquisition?

The Secret Sauce of Valuation: “Nominal EBITDA”

Most founders value their company based on their current EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Private Equity firms do not.

PE firms calculate something internally called a “Nominal EBITDA,” and knowing this concept is crucial to increasing your valuation.

Nominal EBITDA is your earnings “cleaned up.” PE firms look for non-recurring costs they can add back to your bottom line to justify a higher future value.

Examples include:

• Excessive Management Salaries: Are you paying your cousin $200k to be CFO when a market-rate accountant costs $100k? That’s $100k added back to EBITDA.
• One-time Expenses: Did you have a massive legal settlement or a failed product launch last year? Those get removed from ongoing costs.
• Former Employees: If you fired expensive staff in Q1, a PE firm will adjust the trailing 12 months to reflect those savings as if they existed all year.

By “dressing the bride” and cleaning up your financials before you go to market, you can present a much higher Nominal EBITDA to potential buyers.

Stuck at the Plateau: The $5M–$10M Trap

Alexis notes that many founders get stuck between $5 million and $10 million in revenue. They are profitable, but they cannot figure out how to scale past that point.

According to Alexis, founders hit this wall for three reasons:

1. Exhaustion: They have been in “the grind” too long.
2. Working IN the Business: They are still acting as CEO, Head of Sales, and Lead Customer Support. They haven’t “fired themselves” from daily operations.
3. The Talent Gap: They need C-level talent to scale, but they feel they cannot afford full-time C-suite salaries.

The Fix: Preparing for the Exit Now

You don’t prepare to sell when you receive an offer; you prepare years in advance. If you want to avoid leaving millions on the table, you need to shift gears now.

• Fire Yourself: If you go to a deserted island for two weeks and the company tanks, you don’t own a business; you own a job. And jobs aren’t sellable assets. You must build systems that don’t rely on your presence.
• Get Real Numbers: Stop running your business on gut feelings. Implement decent monthly reporting immediately. You need to know your numbers better than the PE firm does.
• Use Fractional C-Suite Talent: To break the $10M plateau, you need experienced leadership. If you can’t afford a full-time CFO or COO, hire fractional executives—like the “Navy SEAL teams” Alexis now builds at Nightscale—to get the expertise without the massive overhead.

The goal, according to Alexis, is to reach a valuation where you never have to work again. For many founders, that “magic number” is around a $40M valuation, which—after taxes and investing conservatively—yields roughly $1 million a year in passive income.

Reaching that number requires moving out of the grind and into strategic preparation. Don’t wait until the buyer calls to get ready.