Zach
@ShowMeYourCIM
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Lower Middle Market M&A @ Trailhead Partners | founder @haulersoftware | former garbage man | Airplanes, Golf, Fly Fishing, Family (priority order)
The Hill Country, Texas
Joined February 2009
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search funders who can't wait for the joy of small business ownership:
sometimes it's great.
sometimes a service truck catches on fire and you put it out with storm drain water using a gatorade bottle you found in the truck your driver hasn't cleaned in a week.
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It’s so sad to see resumes like this
Sucked into the corporate vortex
It’s not too late for this guy to start a pressure washing business and make over $10k his first month
Take the leap Steve!
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First boys trip in the new ride to go see the grandparents! 7 hour drive turned into a 2 hour flight
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Yes, I've been successfully baited.
No, buying a $500k SDE business does not net you $13k a year using any number of reasonable assumptions.
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Of course that's your contention. You're a spreadsheet jockey. You just finished reading the HBR Guide to Buying a Small Business. Buy over $1M EBITDA and let it cash flow, probably. You're gonna be convinced of that til next month when you get to
@bentigg
and then you're gonna
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Don't be like me. Accounts receivable was $29k when I bought my business and $171k after one year of ownership.
Because we grew? No - I was a pushover.
6 months into ownership and not collecting enough I had $4k in the bank and $60k in short term debt. Don't be like me.
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Buying and growing a business is easy. Here’s what you need to make it a success:
Hard work
Focus on the KPIs that matter
10X SBA leverage and a PG that keeps you awake with crippling anxiety
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"We're different," said every buyer
We have 9 private equity groups in our CRM with "Oak" in the name 😂
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EBITDA (or SDE) multiple doesn't matter in owner operated deals. What really matters: can I comfortably service the debt and consistently pay myself enough to make the risk worth it?
My own acquisition was reasonable at 2.3x, but too small to pay myself enough until we grew.
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We worked with an owner this week who bought his business 6 years ago for $3m with a 7a loan. We think it’s worth around $18m today.
He’s a great operator, but hasn’t reinvented any wheels. Consistent, steady growth and hiring. The SBA SMB dream!
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Anyone looking for a fire and water restoration business for sale? We have a nice set of 3 SERVPRO franchises coming to market in North Texas and Oklahoma.
$5.7m revenue
$1.2m adj EBITDA
DM me your email and I'll get you the rest of the info!
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Got an offer on a small deal today where the buyer sent us three options:
High price, high seller note
Medium price, medium seller note
Low price, all cash
I kind of love this method! And I think the seller will appreciate the options
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A friend 10x'd revenue ($800k to $8M) of his commercial landscaping business in 4 years after buying with an SBA loan!
His dirty secret? Being absolutely and totally addicted to selling.
He would show up at a decision maker's house and beg them to sign the contract. Go to HOA
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I'm looking for an on-demand financial analyst/team.
We don't need someone full time, but we have enough time-sensitive stuff that hiring consultants doesn't always work because they're on other projects
In an ideal world, we would be able to pull from a shared pool of people
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Getting an LOI signed is great because 90% of the work is done, and you only have 90% to go! 🙃🫥💀
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If I were buying a business, the first thing I would do is mute every professional service provider on here telling me to go buy a business
You gotta make that decision on your own and not be influenced by the people making money from your fees
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Here are your options:
- public company CEO
- professional athlete
- highly respected politician
- owner of a privately held co
You make the same amount of money in each.
Which life are you choosing? Why?
I think the answer is obvious.
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Love talking to those people no one has ever heard of, with a single page website, with $1B invested, and majority ownership in 35 companies
35 companies no one has ever heard of
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We need to be productivity minimizing.
Do those time-wasting things that bring joy that efficiency maximizers tell us we should outsource.
Today I’m shoveling 12 yards of dirt with my “helpful” 3 year old.
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Closing announcement! Shoutout to everyone for the helpful feedback:
- "we have other opportunities at a lower multiple...thoughts?" (my thought is you should buy those instead!)
- "this asking price is unrealistic. can you walk me through how you got there?" (no)
- "the
Anyone looking for a fire and water restoration business for sale? We have a nice set of 3 SERVPRO franchises coming to market in North Texas and Oklahoma.
$5.7m revenue
$1.2m adj EBITDA
DM me your email and I'll get you the rest of the info!
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Alright I get why y'all hate on business brokers. We're pitching a client who's firing their broker, and we snooped around and found the BizBuySell listing.
Listing: Rev $13.5m, SDE $2m
Real numbers: Rev $9.5m, SDE $880k
It's like we aren't even reviewing the same business!
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Running a business with a newborn at home (not sleeping) is great because I get a number of opportunities to lay in bed and stare at the ceiling and wonder wtf I’m doing
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Yall wasting money on gym memberships when you could search for FREE ROCKS! on marketplace
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I know I shouldn't be shocked at this point, but I am consistently blown away by the delusions of grandeur, unresponsiveness and lack of awareness of searchers. I'm reminded daily that if these guys were truly great they'd be real entrepreneurs and start a business. Sad truth
I know I shouldn't be shocked at this point, but I am consistently blown away by the laziness, sloppiness and lack of intelligence of small business brokers. I'm reminded daily that if these guys were truly great they'd be middle market investment bankers. Sad truth
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Average searcher response: price unrealistic. margin too low. why would you even send this?
Average $500m PE in Atlanta response: Congrats on the fantastic mandate! Unfortunately, this isn't a fit for us, but keep them coming. Let's get 18 in next time you're in town!
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This BizBuySell listing wording may have been plagiarized from a dictator’s speech, but no matter, I’m in.
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Today is my 35th birthday, so I’m sharing 35 hot tips about small business acquisitions:
1: Try to have fun
2-35: Never trust a lender’s estimated closing date.
Until next year! 👋
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@TracesofTexas
Everything changes, everything stays the same. I’ll be on the Guad this weekend near Sisterdale with a group of 10 guys looking just about identical to this (minus that good looking Chevrolet)
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I came into the blue collar world from software with idealistic views around transparency and was wrong on just about all of them. The *only* things that mattered to employees:
How much is my weekly paycheck?
Is my boss too much of an asshole?
Maybe depends on industry.
Do you think companies should share profitability numbers with employees?
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Today is my 37th birthday, so I’m sharing 37 essential tips about small business acquisitions:
1: Try to have fun
2-37: Never trust a broker’s add-backs
Until next year! 👋
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I don’t think any small businesses have a real, long term moat.
Lots of buyers have a defensible moat on their must-have criteria.
Maybe I’m looking at it wrong? Anyone have good real world examples of businesses that would be really difficult to compete with long term?
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4/10 owners I talk with have a completely unsellable business based only on the intro call
3 out of remaining 6 have a completely unsellable business, based on the brutal financials I receive
2 out of final 3 can sell to a strategic
1 is MAYBE a good deal as defined on SMBtwit
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Get ready for the most insane SMB buying playbook from me, an industry pro!
Want to be your own boss and crush it?
1) Get on BizBuySell and find a business
2) Offer a price that's higher than any other offers
3) Get an SBA loan
4) Profit
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Breakdown on private flying so you can really compare to driving
Preflight/Taxi: 25m
Flight: 2h15m
Taxi/postflight: 15m
Getting this shitty tug to start and not scraping a wingtip on the hangar door while it’s 105* and the tug clutch *almost* works: the rest of my afternoon
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“Cherish these times, because you’ll never get them back 🥰”
Me, to myself when we get a babysitter on vacation so I can spend 4 hours alone
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It's fun to complain about how terrible brokers are when they use weird valuations like "2.8x SDE + FFE + seller's age" but in reality, who cares?
You just need to agree on a number, and arguing about the method is unlikely to get you there.
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Sellers: do not under any circumstances sign an LOI with 90-day exclusivity, a no-shop, and a requirement to forward any new offers to the buyer.
Negotiating power strongly shifts in favor of the buyer after LOI.
My ramblings on exclusivity for sellers:
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The worst thing about not owning a blue collar business anymore is not being able to buy a bunch of Milwaukee tools (Shop Expenses) without my wife knowing.
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How do buyers pay for businesses?
Here’s a breakdown of the last 4 SBA-sized transactions we’ve closed, ranging from $300k to $1.3M TTM SDE:
⁃4.5x, 75% SBA, 6% seller note
⁃3.1x, 85% SBA, no note
⁃3.7x, 90% SBA, no note
⁃3.9x, 88% cash, 12% note, no SBA
None included any
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hey boys been a minute
yeah man
yeah glad we could get out
yeah
for sure man yeah
man perfect day
man yeah
for sure
yeah
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Anyone looked at playground installation and equipment sales?
We have one coming out in the couple of weeks that I’m getting pretty excited about. It’s unique in that it’s large enough for private equity, but also something a well-funded owner-operator or search fund could run
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Founder of a $2.2m EBITDA facilities service business and the former-PE searcher who’s buying it at market value (1.9x) with a forgivable note and non participating rollover after “building a relationship” with the founder (buyer’s church elder) for years
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Have an 11AM meeting today that’s a 4 hour drive away. No convenient airports (GA or Airline), but just far enough that driving sucks up a whole day.
So I’ve hired a driver for the day. 15 minutes in and I think this might be the way to go!
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“That’s never going to pencil” falls flat for me as a purchase price negotiation.
What you’re really saying is “That price doesn’t pencil for my structure”
But not everyone uses 80% or 90% SBA and 10% seller note! We’ll always adjust price if we aren’t getting what we expected
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Private Equity will go small for add-ons, and they're more prevalent than ever. It's not uncommon for the groups we talk to to say "Oh yeah we don't have a minimum and we just closed a $250k EBITDA add-on"
Chart source: Pitchbook
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How much buyer interest do small deals get?
Here's a breakdown of one we closed last year. Small town Texas, small service business, very dependent on the owner. Not an easy sell!
- 99 strategics/home services platforms contacted directly
- 27 NDAs signed from outreach
- 74
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The majority of the replies are telling David he’s just thin skinned and the VC is being direct, not condescending.
I disagreed, but what if I’m the thin skinned one?
So I took a stab at rewriting the VC’s feedback email as directly as possible while removing the snark
Turns
Last year a VC begged to meet with us
When we sent over our numbers, they concluded that our MRR was "almost meaningless"
Then they ended the email by trying to invest at half our valuation
We did not take their money
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That 50% margin local service business your favorite new SMB guy loves to talk about is a mirage. Not sustainable.
If I were starting a service business today I would double check any model with the assumption that net will settle around 15-25% once the business matures
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@scottiebateman
Wow - that's the definition of a perfect canyon turn executed about 10 seconds too late!
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Auto-reply today from a business owner I reached out to:
"I made it! I have retired!"
End of message. 👑
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The perfect searcher outreach email does exist, and I received it today.
- short, 5 lines
- geography, industry, size
- change of control
- "we are serious and can close quickly"
No bio, no picture of family, no mention of legacies and stewarding capital, no ask to pick my
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In the teaser email subject: "union company"
In the teaser email body: "union company"
In the teaser: "union union union union"
"Looks like a great fit for us. NDA signed and attached"
CIM sent
"I don't do union. This is a pass."
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@ClintFiore
Hey would you mind sharing his name and contact info and the name of the business and 36 month P&L? No reason, just interested to know
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“Semi-Absentee” “10 hrs/wk” “part time” business for sale doesn’t always equal bullshit
More often, I find owners who have been doing the same thing everyday for 10 years and kind of have it down.
But they’re available 12 hrs/day 7 days/week, which creates the disconnect
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If I’ve learned anything about SBA lenders on Twitter, it’s that they sure say “congratulations” a lot when a deal doesn’t work.
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@SMB_Attorney
My favorite: Louie’s. Divey and great martinis
Brick oven: cane rosso. NY style: GAP
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Who is buying micro saas deals and where do I find you? Think: $250k-$2m ARR.
We're finding this to be the toughest buyer list to build, but I know there are holding companies out there buy smaller than the typical software-focused PE size.
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Been thinking about this recently. We’re two years into Trailhead (business brokerage) and finally feel like the flywheel is *maybe kind of* spinning.
I wouldn’t call it a moat, but time and the long sales cycle is a barrier to entry in my business
I don’t think any small businesses have a real, long term moat.
Lots of buyers have a defensible moat on their must-have criteria.
Maybe I’m looking at it wrong? Anyone have good real world examples of businesses that would be really difficult to compete with long term?
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Twitter is good because a bunch of nobodies can tell the guy who *actually* runs an accounting firm that he’s a moron for liking this deal.
On the surface this looks like a great accounting firm for sale. I’d rate it a 9/10 based on the listing.
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What are we working on today that isn’t remotely productive?
I’m bringing (more accurately, trying to bring) this 1998 Wrangler back to life
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Millions of people watched two celestial bodies billions of years old and millions of miles apart line up, an event that has astonished and terrified millions (billions?) of people before us.
And I think that’s pretty cool. It’s okay to be excited by things that don’t matter!
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Around 90% of the LOIs we get on sub $3m don’t include a NWC provision. When we push buyers to clarify, the vast majority leave as is. Not saying one way is right, and I would certainly want it as a buyer…
But know you’re swimming against the current if the deal is competitive!
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@moseskagan
@CRELeasingLawTX
@friedmandave
@PinkPoloShorts
@ArtemTepler
This is a terrible tragedy. Awful. Moses, there’s absolutely no reason to be sharing these details online right now.
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In between selling my business and starting my firm, I worked for a lower middle market IB. We lost a deal, that I originated, to some good ol’ boy business brokers.
Found out the deal closed last year. $15M EBITDA. Buyer said the brokers didn’t know what they were doing and he
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Brokers after a full day (Two 20 minute calls) of answering “Yeah that’s really a post-LOI request” to every buyer question.
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@MatznerJon
😂 ridiculous. To believe this, you have to think every person on the list wants to buy a business. Do you know a lot of attorneys looking for a landscaping company? I don’t.
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Business brokers when the conversation turns to real estate agent commissions being too high
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What do you do when you meet someone working in your industry and realize they’re like 10x better at the job than you are?
I thought I was pretty good
This happened to me today and I’m reeling
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I represent sellers. This site is so buyer-centric that I'm finding myself feeling like we're enemies. It's seeping into my brain.
How ridiculous! We all want to close deals. Buyers: the seller is not your enemy, I am not your enemy.
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Are there any examples of successful ESOP setups for smaller businesses? Let’s say $1-2M EBITDA
Assuming the lending is even available, one of my main concerns would be if there’s enough cash to fund repurchase obligations
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@laughridge
PowerBI is really pretty quick to learn and desktop version is included with Office 365
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My most toxic belief is that I think I could putt pretty well at Augusta
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If you’re telling me that I can start presenting “Broker EBITDA” as what I *think* it should be then I’m about to do some wild stuff
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@SullyBusiness
Me! Owned a roll-off business, sold it, now build software for other roll-off cos.
I’m surprised there aren’t more trash people on Twitter. It’s a simple business. Clear growth playbooks. Incredibly capex heavy.
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Sellers: you want to see as much detail as possible in the LOI. It contains meaningful deal points other than just the price, and now is the time to hammer these out, not during purchase agreement drafting.
- Seller note terms? Of course
- Estimate of NWC to be included?
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A friend here in Texas is looking for a VP of Finance working directly with the CEO at a PE-backed home services business. Great guys leading it and an incredible opportunity for someone getting out of big company life and getting into SMB.
DM me if interested! Moving quickly.
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New season looks great
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