The Only Type of P.O.S. I Want to Buy (Pit of Success)

A formula for business that makes it HARD to lose.

Just because a business is affordable, doesn’t make it the right buy. A Piece of S**t is probably the wrong kind of P.O.S. for a first time business buyer.

You have enough new material to potentially learn:

• New owner transition
• Personnel actions
• The industry and operational challenges

The last thing you need is to struggle through a lack of cash flow, a toxic work culture, or unexpectedly losing contracts because the business changed hands.

So why not start out in a Pit of Success? (Yep, that kind of P.O.S.)

In order to find a business that’s so well put together that it’s hard to fail - you have to look out for some key factors. It helps to start with a business that’s stale, old, “weak”, and simple; but also essential, with strong finances, a growing market, and a large customer base that hasn’t been fully leveraged (yet).

I. Stale Innovation? No Problem.

There's less disruption risk in a business that's gotten "stale" for lack of innovation. The tried and true cash-flow machine has stood the test of time... and became boring doing it so now you've got a few things to look forward to:

• An existing workforce that knows the ins and outs of the business and how to get the job done.
• Established and steady supply chain and vendor relationships.
• Stable, mature industry and customer base (with potential room to grow).
• Opportunity to modernize/optimize beyond the proven operational processes that got them to this point.

II. Old? More Like a Vintage Gem

I'm all in on time-tested business models. Give me a business that's lasted through the real estate collapse, COVID, and a recession - your chances of failure drop with a real live "case study" on how to turn a profit against all odds.

Do they have deep, dependable customer loyalty? A long list of happy customers over the course of 10, 20, 30 years is hard to beat.

Some of these businesses certainly have big shoes to fill - take time to make sure that the owner's long standing relationships in the community won't be disrupted by a change of hands.

III. Weak Competition? Perfect.

With less competition, there is an opportunity to establish a stronger market presence and potentially dominate the niche. With some careful planning you could create significant barrier to entry within your area and further secure your business as a major player in the market.

A few lasting benefits to consider as you dominate the niche:

• Low threat of new entrants
• More stable and predictable business environment
• Reduced the risk of sudden market disruptions caused by aggressive new competitors entering the market

Understanding how to navigate the local market and create more opportunities for acquisitions you may find opportunities to "buy out" competition or their customers, assets, and intellectual properties. Consolidation of local competition can lead to better pricing with suppliers and customers, cost synergies, and streamlined operations under one roof - all of which increases the gap where startups in your industry could attempt to compete.

IV. Simple is Sustainable

A business that is easy to understand and simple to operate. It's that simple.

I love using landscaping as an example because where I live it is simply inevitable. Everything grows year round here - and the simplest landscaping companies show up, cut, trim, and clean up and they keep long-standing customers with reliable recurring revenue. BEAUTIFUL!

A lean business operates with low overhead, collects reliable income, and for the right owners, has bandwidth to expand into new territories or develop new products because they have the bedrock of a simplistic model to stand on.

Like landscaping maintenance these type of businesses focus on their core competencies. No frills. No fluff. Just reliable cash-flow.

If this is your FIRST business - remember the old acronym K.I.S.S. (Keep It Simple, Stupid).

The Beauty of Boring Businesses

I really can't emphasize enough that boring business models make sense. You can still get EXCITED about being a business owner for an HVAC company, a "widget" manufacturer, or a cleaning service because you are still an entrepreneur.

Find the predicable cash flow; get into that recession-resistant industry we just can't live without; enjoy the peace of simple operations; and start to grow a new customer base while keeping the die-hard customers happy for life!

No one said it was going to be glamorous - the legacy, the impact, and the change in your life is still going to be BEAUTIFUL.

Finding Your Pit of Success

Where exactly can we find these businesses?

Every M&A guru will give you the same lines about tapping your network, walking into businesses, and making cold calls... but there are a few awesome opportunities I've found to be really effective:

1. Check for local trade shows with your Chamber of Commerce, Small Business Development Center, and local Small Business Administration offices.
2. Think long and hard about which services are always in demand, the ones you actually use. Get them to do some work for you and when they do a great job, go tell the owner how impressed you were. Then, start asking the owner some intriguing questions...
3. When you search for "on-market" deals, spend some time building relationships with the brokers you talk to. When they really like you, and see your aptitude they may start to send you "pre-market" deals too.
4. Partner with intermediaries like lawyers, CPAs, commercial real-estate agents, and business/property insurance agents - they often have a pulse on who might be looking to sell and certainly know which businesses are healthy.
5. Private clubs are a level above. It is not ameteur-hour. The people and business owners at these clubs will usually have a strong pulse on the local market, their business, and may even be your acquisition competition. Get them to root for you and doors will open.
6. If you love building community and have a helping heart, there are also great clubs such as The Rotary Club - I recently found out they have locations both in and outside of the U.S. (for any of my friends abroad).

My Kind of P.O.S.

When I look at a business in a Pit of Success I want something that has strong cash flow well-beyond the debt service, operator salary, and my target owner compensation - it has to be in my Deal Box but it also has to be a good business in it's own regard.

Price will impact cash-flow, especially under the wrong terms. Strong financials is a qualifier and a business that can manage a 30% downturn and still maintain profits is often worth a higher price. Keep your debt service coverage at a high enough point to weather market changes.

Within these boring businesses is an entrepreneurial journey paved with recurring revenue streams, resilience against economic storms, and the chance to dominate local markets. The renewed energy of a new buyer in these cash-flow machines, can start a chain reaction of success, and build the foundations of a legacy.

Want to learn more? I am taking on only 5 (1-on-1) clients for a personalized coaching program. I'm also starting a waitlist for small group sessions which I'll announce in the coming weeks.

You can book a quick intro call and we'll discover the RIGHT business buying strategy together.

To your lasting success,

Sage Price