Looking For Thoughts on Small Business Roll-ups

searcher profile

December 11, 2024

by a searcher from University of North Carolina at Charlotte in Raleigh, NC, USA

All, I'm thinking about drastically changing my previous search fund plan. I think what I'd like to do is buy much smaller businesses (sub $1M in profitability). Probably ecommerce, given its portability and ease of management. I have seen firms of this type plateau simply because the founder does not know how to put systems in place. The idea (which is not particularly original) is to buy these type of firms, introduce systems and a growth strategy then sell in a higher market. Then wash rinse repeat, same concept as flipping houses, the hold time would be relatively short. Has anyone ever done anything like this? Are there specific investors that have an apatite for this kind of strategy?

2
14
243
Replies
14
commentor profile
Reply by a searcher
from Duke University in Cincinnati, OH, USA
Having just bought two D2C brands as part of a travel roll up - both like $300k EBITDA - I’d say if you’re excited to be involved in the day to day, really get your hands dirty running the business, then that’s great.

If you’re looking for something hands off that will run itself, you’re going to be hard pressed to find that in a sub-$1M EBITDA business.

In terms of investors, I look for founders of successful e commerce brands who have Industry expertise and who could write you small checks. There are not many institutional investors who will look at deals that small in my experience.
commentor profile
Reply by a searcher
from George Mason University in Manassas, VA, USA
My only caution is that there is a certain amount of work, and it’s a lot, that a business will require no matter the size. If it were as easy as systems then a lot more would do it. In my experience those first few months there’s going to be a lot of things that you’re probably only going to want to trust yourself to handle. So that C factor of work is the same for a $5M business or a $20m. In some cases bigger might be larger.

is it possible? Yep. Just realize it won’t be lightning speed and easy. The work to profit ratio is a lot tighter in smaller businesses
commentor profile
+12 more replies.
Join the discussion