What we are looking for
We are primarily interested in acquiring a majority stake (75-100%) of a well established business (in operation for >10 years) with annual profits (not revenue) in the range of $1-5m.
We have purchased two businesses since we started in 2014. In both cases the owners were retiring entrepreneurs who wanted a quick exit, however they remained as consultants for 12 months. Actually, we consider any type of ongoing relationship. If you would like to take some chips off the table but keep working for 2,3,4,5 years that is fine too.
Usually we value businesses anywhere from 3 to 5 times adjusted annual profits, depending on the nature of the industry, reinvestment requirements, and quality of management supporting the business owner. If there is a big difference of opinion in price we can try to bridge the gap by altering the form of payment from all cash on completion to payments over time tied to performance of the business.
Our acquisitions are financed with debt and equity, and we make sure the business has sufficient working capital to handle future growth and not so much debt it can't handle the business cycle.
We have a very broad industry focus, believing there are owners in every industry that are considering an exit. It is our experience that very few investors are willing to roll their own sleeves up and learn each industry, relocating anywhere in the US and wearing multiple hats in the business if necessary. We also believe that many small and medium sized businesses can benefit from an injection of youthful aggression and fresh ideas, particularly in the sales and marketing functions.