Buying Existing Businesses

Seasonal businesses present unique challenges that can derail even the most promising acquisitions. In this discussion, we explore the intricacies of acquiring a seasonal service provider, focusing on a snow removal company with $1.5 million in annual revenue. The operator, new to the industry, faced unexpected hurdles when the previous owner had not accurately represented the seasonal cash flow a...

A service-business acquisition that exposed how labor economics can hide in plain sight: a commercial cleaning company with $3.4 million in annual revenue, purchased for $1.8 million by an operator with no cleaning experience. The business had forty-five employees, mostly immigrant workers, and the previous owner had been paying slightly above minimum wage with minimal benefits. The financial stat...

A business acquisition where the post-close success depended entirely on management execution: a regional printing company with $4.8 million in revenue but declining margins, purchased for $2.1 million by an operator who'd successfully turned around two other businesses. The business had been losing market share to digital competitors, and the previous owner had been coasting on legacy customer re...

An industrial acquisition that exposed the danger of skipping environmental due diligence: a metal-finishing company with $7.1 million in revenue, purchased for $4.2 million by an operator with manufacturing experience but no environmental background. The business had been operating at the same location for forty-five years, and the previous owner had maintained good relationships with local regul...

A cautionary tale about customer concentration risk that materialized in the worst way: a specialty-chemical distributor with $5.4 million in annual revenue, purchased for $3.2 million by an operator with distribution experience. The business had a diversified customer base—or so the financial statements suggested. In reality, the previous owner had been managing the largest customer relationship...

A small SaaS acquisition that violated the cardinal rule of buying unglamorous businesses: a vertical-market software company with $3.2 million in annual recurring revenue, purchased for $8.4 million (2.6x revenue) by a private equity group. The software served dental practices and had strong customer retention (94% annual churn rate), but margins were terrible—the company was spending 65% of reve...

A healthcare acquisition that exposed how much financial complexity hides in payor mix: a dermatology practice with $1.8 million in annual revenue, purchased for $1.1 million by a physician who'd never owned a practice. The practice had three dermatologists, a strong reputation in the community, and what looked like stable revenue. The financing was 70% bank debt (medical-practice lending is a spe...

A franchise acquisition that looked solid on paper but had structural problems in the unit economics: a regional quick-service restaurant franchise with three locations, purchased for $2.3 million by an operator who'd never run food service. The franchisor's disclosure documents showed average unit volumes of $1.8 million per location, but the three being sold were averaging $1.2 million—a red fla...

A mid-market acquisition: a precision sheet-metal fabricator doing $6.2 million in revenue, purchased for $4.8 million by a first-time buyer with manufacturing experience but no acquisition background. The business had been family-owned for thirty years, had strong margins (18% EBITDA), and a customer base split between automotive suppliers (45%) and industrial OEMs (55%). The financing was aggres...

We open with the simplest acquisition type: a regional landscaping firm with $2.1 million in annual revenue, sold for $1.2 million to an operator with no prior experience in the industry. The business had seasonal cash flow problems, a customer base that was 60% dependent on three municipal contracts, and a retiring owner who'd never documented his pricing structure. The episode walks through how...