I have been operating for a couple years and have seen even this site go from its early days to becoming the behemoth that it is today. There are many things I’m not good at but one thing I believe I have a gift for is recognizing blind spots and resisting group think. So hear are some things I believe are generally missed in the aggregate even among this niche community.
1) Operating
The realities of operating a small business are so different from what you picture in your head when you buy a business. Employees have affairs at work. People develop substance abuse habits. People die. They get evicted. Any th big you can name will happen. If you want to buy and run a small business go manage a Taco Bell for a few months and see what you think of that. Add to that operational stress the stress of levering up to buy the thing and it should become very clear to you why you must strategically plan every single detail about your business and every scenario. If you do not the fires you put out will consume your attention and distract you from opportunities to make more money which is the whole point of this.

I have installed dusty curtains, built pricing models, cleaned up literal human shit, worked around the clock, hired people, fired people and I’d do it all again. Be ready for that.

2) Taxes
Taxes are often an afterthought that should always be a forethought. Before you buy you should know your tax implications through and through. You should know section 1202, section 338 h10, section 280g, opportunity zones, all of that! You should plan out your taxes and how to legally minimize them for the next ten years of operating your business. I’m not saying that yourCPA should plan that. I’m saying you should plan that and then consult your CPA to make sure it makes sense.

3) Declining Marginal Utility of Money
When one takes on that level of risk when they’re young, it’s hard not to become more risk averse as you age. By the time I think “I’d like to do this or that with my money” I blink and I’ve made even more that I to figure out what to do with. It’s a great problem to have and a lot of folks on this platform make much more than I do. But I’m saying this to point out that you care less about money the more you have of it. I didn’t understand why my seller sold me the business for such a great multiple but I think I get it now. He had it for 12 years and the longer you hold a business the less its terminal value means anything. I value things like being able to kiss my wife when I walk in the door, hug my son, or randomly go see my parents because I feel like it. If I found a bag with a billion dollars in it tomorrow, I’d be doing exactly the same things I’m doing right now (except I’d buy out all my competitors and make a monopoly). Money is very important up front and become less so over time.

4) Labor
In the USA hiring people sucks! If you look at it in the aggregate, we have a federal government that spends more than it makes and hires people away to do so either through social security or through actual jobs. The point is the same: some large number of people who would otherwise have to work don’t work to feed themselves don’t.

Then you have Amazon (and others like it) who has the best cost of capital I’ve ever heard of! What was it? Like 20 years? people threw their money at them and didn’t care about profits for decades!?!? That takes capital away from productive companies and it gives Amazon an unfair advantage to hire people. For example on the latter point. Economies of scale aside, let’s say you have a warehousing business with five employees each paid $40k a year but they make you $60k each. In a simple world you get $100k difference. But let’s say Amazon hires a similar demographic of worker with similar productivity per worker. If Amazon doesn’t have to make a profit they can pay those workers the full $60k they contribute.

That is happening on a massive scale. And it’s made it very challenging to hire and retain people unless you’re in a business with a lot of margin per employee. You need to think through this point before you buys a business - especially a blue collar one with high labor as a ratio of revenue.

5) Supply and Demand
When I started buying companies there was this silver sunami everyone kept talking about. It was magical! In###-###-#### when I sent my first LOI) you could throw money at pretty much anywhere and hit gold! Rates were low. It was wonderful. But now demand for these businesses has picked up and a lot of people want to buy companies. This is driving up multiples and driving deal quality down. Yall are regularly buying things that people would have passed on five years ago. I’m not saying it’s a bubble because I’m bullish on SMBs. Even at inflated multiples the math is usually that it’s much better than buying stocks in the s and p 500 or the Russell###-###-#### But I am saying that everyone should be careful out here so as not to bankrupt themselves and that those who are searching will have to work a lot harder to find a really good deal.

Hope all this helps. Just wanted to get it off my chest as I hadn’t posted in a while.