What’s in the Stack?

• The Business - 7 Essential Keys to Spotting the Perfect Retirement-Ready Business for Acquisition! (4-min read)

• The Spiritual - Think in Generations - How a God’s Eye View of Life Brings me Peace

  

7 Essential Keys to Spotting the Perfect Retirement-Ready Business for Acquisition!

In this article, we'll explore the top 7 qualities that we are using to pre-qualify SMB legacy acquisitions, specifically when the current owner is retiring.

Baby Boomers are retiring in droves. According to some reports that generation has 65-70% of the wealth in this country. And you guessed it…

70% of the SMBs.

There are thousands of entrepreneurs nearing the age of retirement, many of whom HAVE NO successor for their business. This means many companies will simply stop operating after 20, 30, or even 40 years, when the owner decides to hang it up.

Unless, someone buys them.

Believe me I’m on the hunt. I recently teamed up with Mike Fetterman, a former investment banker, turned advisor. @mike_fett_ on X (forgive him for his lack of followers, he’s new to X).

Mike and I are actively looking for these opportunities and we are calling them:  

SMB Legacy Acquisitions

We recently came up with a list of criteria we are using to identify potential M&A candidates. Recognizing these attributes can be the key to identifying a hidden gem in this niche.

#1: A Legacy Brand 🏆

The value of a legacy brand is immeasurable. Such businesses have stood the test of time, earning long-standing customer loyalty and a stable market presence. This enduring recognition often translates to consistent revenue streams and a reliable customer base.

Consider the contrast between acquiring a well-established brand versus a newcomer in the market. The former likely enjoys ongoing customer patronage and market trust, which can be leveraged to revive or enhance the business's profitability.

This existing brand equity can serve as a robust foundation for new growth initiatives, ensuring a smoother transition and immediate cash flow.

#2: Peaked Revenue in the Past 📉

A business that peaked in revenue years ago and is now maintaining lower revenue levels can be particularly appealing. This scenario often indicates that the business is not struggling because of market conditions but rather due to the reduced involvement of a retiring owner.

Imagine acquiring a business that once flourished but has started to wind down; the groundwork for success is already there, just waiting for renewed energy and focus.

Revitalizing such a business can be less about fixing problems and more about tapping into its underutilized potential, offering a quicker path to scaling up and enhancing profitability. Not to mention a below market valuation.

#3: Little to No Debt 💸

A clean financial slate is highly attractive. Businesses with little to no debt offer a clearer pathway to profitability, as the incoming owner won’t be burdened by significant financial liabilities. This financial health allows for more flexibility and freedom to invest in growth opportunities or operational improvements.

More than likely a buyer will need to bring financing of some type, whether a 7A loan or Private Funding. A debt-free company likely means cash flow to service the buyers debt, allowing you to focus on business development rather than financial firefighting.

#4: Ability to Add Technology 🖥️

In today's digital age, the potential to integrate or enhance technology within a business is a significant plus. This could mean introducing e-commerce capabilities, leveraging social media for marketing, or streamlining operations with modern software.

Businesses ripe for technological enhancement present an opportunity to rapidly scale and modernize. The transformation from a tech-lite to a tech-forward business can significantly increase efficiency, expand market reach, and create new revenue streams, setting the stage for substantial value creation.

#5: Strong, Reliable Cash Flow 💵

A business that generates a consistent and reliable cash flow is particularly appealing for acquisition. This attribute indicates that the business has a solid customer base, effective revenue generation mechanisms, and a degree of financial stability.

Stable cash flow ensures that the business can cover its operational costs, invest in growth opportunities, and provide immediate income for the new owner. It’s a sign of a healthy, resilient business model, especially important when the previous owner is transitioning out, ensuring that the business remains lucrative during and after the transfer of ownership.

#6 SELLER FINANCING AVAILABLE 👴🏼

In most of these situations the seller will happily carry the note too. Knowing that they’d just be forced to shut down the operation in order to retire. Most will prefer to stick around in an advisory capacity while they earn out and pass the torch.

#6 The Key Man Problem 🔑

So many small businesses never reach a point where they no longer rely on the founder to make every decision. In terms of an acquisition criteria, this means they are now in need of a replacement key person. Private Equity and even banks recognize this problem a mile a way.

When you replace the key person in a legacy business you solve this problem making the deal attractive once again to these institutions.

We want to help you with these deals. If you have one you’ve targeted and want to get our input on structuring financing, or if you know of any potential targets, please reach out. We will pay finder’s fees if we do a deal.

In conclusion, recognizing these five key factors can significantly guide you in identifying the right SMB for acquisition, especially during a succession phase. We hope this insight empowers you to make informed, strategic decisions as you move forward on your acquisition journey. Here's to finding a business that not only meets these criteria but also aligns with your vision and goals, paving the way for a successful entrepreneurial future.

Email me at: [email protected].

See if your business is ready to raise capital:

Answer 10 questions and we’ll send you a Personalized Private Funding Report! And Scorecard.

Finally, check out our new landing page for the private equity fund. I will be bringing all kinds of resources here. I made a course too for anyone looking to learn what I learned raising $100mm

https://capraise.org

Think in Generations - How a God’s Eye View of Life Brings me Peace

Many of us spend way too much time thinking about ourselves.

Recently, I've been contemplating what my great-great-great-grandchildren might be like. Considering I don't have children yet, it's quite a hypothetical thought. But one that keeps me from thinking about me.

My musings extend to my great-great-great-grandparents as well, whose lives remain a complete mystery to me. I’ve read books about Poland in the 1800s and Ireland during the potato famine, but that’s as close as I can get to understanding who they were.

Thinking like this, in terms of generations, brings me peace. 

Integrating this long-term perspective into my daily routine imbues my life with profound meaning.

I suspect this generational viewpoint might be how God sees us. Adopting this perspective has enhanced my understanding of my existence.

At its core, the Old Testament recounts a saga of generations. It doesn’t take long for the offspring of Adam and Eve—Cain, Abel, and Seth—to make pivotal decisions that will determine their descendants' fates.

Cain’s murder of Abel not only ends Abel’s lineage but also casts a long shadow over his own descendants. Later, in Genesis, God’s flood eliminates the descendants of Cain, while sparing Noah, a descendant of Seth.

So, why is this perspective significant to someone in 2024?

As an entrepreneur who embraces responsibility, I’m drawn to concepts like Jocko Willink’s Extreme Ownership, which advocates for maximal personal accountability. I’ve always been this way, since I was a kid.

Yet, this mindset has also led to considerable unhappiness in my life, stemming from my belief that I could control more than was realistically possible. Failure, despite my best efforts, often plunged me into deep despair.

My study of the Bible brought a transformation, partly due to the tranquility I found in the following notion:

What if our primary purpose is to pass the light to the next generation? What if that’s genuinely what God desires from us?

Having spent two years in both the Old and New Testaments, this idea resonates deeply with me, imbuing me with a sense of mission. I have yet to find a better answer to the question:

What does God want from us?

This isn’t to imply it’s easy—on the contrary, being an example is a formidable challenge, especially when you get to the new testament and start learning about Jesus Christ. Yet, despite my shortcomings, it’s one I strive to meet daily.

So now, in everything I do, I consider my descendants.

That’s the commitment I’ve made to myself. My primary objective is to emanate God's light to everyone I meet, ensuring I’m a faithful conduit of His message.

In the future, when I have children, I intend to pass this light onto them, so they, in turn, can pass it to their own offspring, and so on.

If anyone out there can come up with a better, more meaningful mission, I would love to hear it.

As for accumulating wealth in this life. I believe I am obligated to pass that too. (Though I will save the biblical basis for this belief for another post)

And not just material wealth but also wisdom. I desire for my descendants to value physical strength, exhibit generosity, and be adequately prepared for whatever life throws their way.

Interestingly, adopting this long-term perspective has granted me serenity. It anchors me in a meaningful endeavor and motivates me to build something valuable that will benefit generations to come.

And so my daily stresses seem trivial when viewed against the backdrop of my overarching goals to lead by example and impart this profound love to future generations.

To all my subscribers I can’t thank you enough for letting me write for y’all. If there is anything I can do for you or any topic you’d like me to cover, please hit me at [email protected], I will do my best to bring it here.