Risks - Buying a 1 person business - solo owner/operator

by a searcher from Purdue University

1 year ago

Businesses owned and operated by a single person and the associated risk doesn't get much attention.

I've seen it a few times, mainly with home service based businesses where work can be subbed or contracted out. 

Curious if anyone has experience - good or bad here. 

This presents a whole host of unique challenges. Any specifics you'd recommend looking out for in DD?

Updating: Thanks for the concern. This is a very real situation where I'm looking at a one man GC that subs out work on roofing, siding, gutters, and windows. He's doing half a mil SDE regularly by himself. Scaling this business with more staff and expanding geo is an attractive prospect. But this is definitely the career sales leader in me speaking...

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searcher from University of Pennsylvania - The Wharton School

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2 months ago | like reply | 0 likes

intermediary from Rutgers-The State University of New Jersey-Camden - Rutgers School of Business

I just closed on a similar type transaction a month ago as the broker. To simplify my response, I think there can be good deals found especially since you should be buying at a deeply discounted multiple. It takes a lot of diligence on your part (not so much a team) so pursuing the deal costs almost nothing except for your time to investigate. I want to know how much the seller is key to (1) the revenue generated, (2) operational skillset that leaves after the sale, and (3) any relationships, internal or external, that are sticky to the seller not the company. The other company I sold with a solo operator was a real estate services business that operated like a tech company. All sales came in from the website (all strangers), no customer concentration, staff were 1099 techs, and the owner's skillset was not unique to him. To boot, it was very scalable. It was a fun one to work on. The new owner is running it from out of state. I wouldn't necessarily walk away from it. Qualify the deal as best you can.

11 months ago | like reply | 0 likes

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