No items found.

#15 | Reinforcements have Arrived!

May 7, 2024
#15 | Reinforcements have Arrived!

It is a great start to the week because reinforcements have arrived.  

It has been a long 3 months since one of our key employees at ProjectionHub started maternity leave.  The last 3 months have been our busiest 90 days in the history of the company, and we pulled it off without a star player.  So I am quite overjoyed to have Grace back to help us build on the strong momentum.  


Additionally, I started this search to acquire a small business basically right at the time when I was about to get really busy in the day to day of our business.  I am looking forward to the chance to slow down just a bit in the day to day and focus my attention on long term initiatives including finding a complementary small business to acquire. 

I Need to Save More Cash

One thing that has become obvious to me is that acquiring a small business requires a stockpile of cash.  Sure you can get an SBA loan and negotiate a seller note to finance much of the acquisition of the business, but there are still lots of uses of cash in the acquisition process.  Some that I can think of:

  • Legal fees
  • SBA loan fees (if applicable)
  • Due diligence fees
  • Tax accountant fees
  • Working capital needs for the business
  • Contingency fund in case the acquisition doesn’t go as smoothly as planned
  • Funds to invest in growth and new opportunities in the new business post acquisition

These are all expenses that I need to be prepared to cover out of pocket it seems.  So I think there are a couple of options.  

  1. I save a bunch of cash in preparation for an acquisition
  2. I look for investors

I have a pretty good handle on where you can secure business loans to acquire a business, but I definitely have less experience on the investment side, so I wanted to dig into some data to see where successful acquirers have raised the equity funding they needed to acquire the business.  

Here is what I found from the Search Investment Group study.  78% of searchers used their personal savings to invest into their acquisition.  This is by far the most common source of equity, with friends and family coming in second at 42%.  

So one key goal that I have during this search process is to stockpile as much cash as possible to give us the most flexibility and optionality when we finally find a good deal that works for us! 

Until next week,

Adam

Recent Emails

June 4, 2024

#18 | Buying a Business, then Hiring an Operator Copy

How do you determine the right amount to invest if you are buying a portion of a business or partnering with other owners?

May 28, 2024

#17 | Buying a Business, then Hiring an Operator

Any examples out there from business owners who have been able to replace themselves in the day to day before reaching that level of profitability? 

May 21, 2024

#16 | Buy vs. Build - What Should I do?

I would love your feedback, how do you think I should focus my time?