Cash Flow Beats Exits

Nick Huber shares his perspective on building businesses focused on cash flow rather than exits, highlighting the tension between immediate profits versus building for acquisition. He emphasizes that while exits can provide larger payouts, consistent cash flow businesses can create substantial wealth over time.

Key Points:

• Cash Flow Business Philosophy:

  • Lives modestly (290k house, 12k truck) to support long-term wealth building
  • Focuses on businesses that generate immediate cash rather than "enterprise value"
  • Believes time is an advantage if you can avoid lifestyle inflation

• Multiple Business Strategy:

  • Running 5 companies simultaneously
  • Projected combined profits of ~$6-7M by 2024
  • Examples of cash flow focused businesses:
    • Cost segregation: $2.5M EBITDA (30% margins)
    • Web development agency: $200k/month revenue
    • Recruitment company: $5M revenue, $3M EBITDA
    • Debt brokerage: $5-10M revenue potential

• Challenges with Cash Flow Focus:

  • Lower business valuations (3-4x EBITDA vs 10-15x for high-growth companies)
  • Harder to achieve massive wealth compared to exits
  • Must resist lifestyle inflation and maintain discipline
  • Harder to attract talent who want equity upside

• Personal Wealth Philosophy:

  • Target goal: $1M per month in income
  • Acknowledges goalposts always move ("5 years ago would have been happy with current position")
  • Struggles with wanting more despite having significant wealth
  • Focuses on delayed gratification to stay humble and teach children values

• Counter Argument:

  • Selling companies can create faster wealth
  • High-growth companies can get 10-15x earnings multiples
  • Harder to make significant income through products vs finance/real estate
  • Capital gains often easier path to wealth than income