Co-founder @ Evermore. We buy founder-led businesses and grow them forever.
Joined December 2022
- Tweets2.8K
- Following119
- Followers16.3K
- Likes6K
Pinned Tweet
My developing thesis:
1. $7 trillion of profitable small businesses will change hands in the next 25 years -- 馃憢馃徎 bye Baby Boomers.
2. Virtually no one is focused on buying these sub $15 million businesses. Too big for an individual. Too small for private equity.
3. You can *still* buy these assets for 3-4x their annual profit. That's a ~30% year 1 return with no debt and no growth.
4. Most ambitious peers are trying to build the next billion-dollar company. There's a lack of sophisticated operators in this space.
5. Content is the flywheel. Sharing the journey publicly attracts proprietary deal flow, the right investors, and the best talent.
To be clear:
I am not the first to identify this opportunity.
Folks like @BrentBeshore @awilkinson @SievaKozinsky @XavierHelgesen are way ahead of me.
But hey -
I think we're in the 2nd inning of a 9-inning game.
There will be many winners.
Broker sent me a CIM this week for a content business doing $450k in revenue and $150k in gross profit.
Asking price: $6,500,000
Be careful out there folks...
20
32
9,411
Recent conviction:
I need to ask more/better questions.
As the business owner, my job is not to solve problems.
My job is to find and motivate great people to solve those problems.
Every time I proactively jump in, I toxically undermine their accountability.
5
26
3,028
Raising equity deal-by-deal is a suboptimal approach for anyone trying to buy multiple cash-flowing businesses.
You may lose a deal because you can't raise the money in time.
Your investors are concentrated in a single business, rather than a diversified group of businesses.
You don't have the opportunity to reinvest pre-tax profits into other businesses you own.
A single raise to fund multiple acquisitions is better for everyone, especially when buying volatile small businesses.
Every week I analyze hundreds of small businesses up for sale.
98% of them are garbage.
In time, I've learned to quickly filter out the noise.
Here are 7 simple questions to avoid wasting your time on a bad opportunity:
Focus here when reviewing a new deal:
- Revenue diversification
- Motive for selling
- Cash conversion
- Asking multiple
- Inventory levels
- Transition plan
- Key man risk
- Addbacks
In time, you'll begin to recognize what a great businesses looks like.
2
14
2,662
Thanks for reading. I hope you enjoyed this breakdown.
For anyone new to my writing, I share thoughts on creating wealth through buying (and building) cash-flowing SMBs.
Would love to have you follow along @itsDanny_V
Every week I analyze hundreds of small businesses up for sale.
98% of them are garbage.
In time, I've learned to quickly filter out the noise.
Here are 7 simple questions to avoid wasting your time on a bad opportunity:
3
8
3,583
If you acquire a business for 3x its annual cash flow, use no debt, and keep the business flat, you would generate a 33% year 1 cash-on-cash return.
4x = 25%
5x = 20%
Stop fixating on purchase price.
Instead, focus on your ability to mitigate risks and grow the business.
3
17
4,281
Seems like daily I get asked:
"I'm 23 and have $25k in savings. Should I use that to buy a $1,000,000 business?"
No.
Instead, go find a well-paid job working for someone you admire.
Learn to read a P&L, structure deals, manage people and save cash.
Jog before you run.
Bank debt is the #1 funding source to acquire small businesses (sub $1m EBITDA).
Unfortunately, interest rates keep climbing.
The days of using SBA loans to fund 90% of a deal are over.
You need to get creative.
Here are 5 clever strategies you may not know:
Rising interest rates may seem like a major obstacle.
But let me encourage you:
If you can get a deal to pencil in this environment, it's going to look that much better when interest rates eventually come back down.
Stay the course.
1
2
1,137
Hope you enjoyed that short breakdown on creative deal structuring.
If so:
1. Follow @itsDanny_V for more. I write about building wealth through buying (and building) cash flowing small businesses.
2. Like + Retweet the below to share with your audience:
Bank debt is the #1 funding source to acquire small businesses (sub $1m EBITDA).
Unfortunately, interest rates keep climbing.
The days of using SBA loans to fund 90% of a deal are over.
You need to get creative.
Here are 5 clever strategies you may not know:
1
1,709