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#9 | When is a Business Too Small To Acquire?

March 19, 2024
#9 | When is a Business Too Small To Acquire?

Last week, a friend of mine shared a business that is for sale with me that initially really caught my attention.  Here are a few of the details:

  • It was a marketplace business that essentially connected buyers and sellers and took a small fee for the connection
  • It had some decent organic website traffic - roughly 11,000 per month
  • Sales price was only $35,000
  • Annual revenue was only $8,000

So I really like marketplace businesses.  I think they are the hardest type of business to start because you have to market to both buyers and sellers.  Airbnb for example needs both hosts and guests, and they need to balance that supply and demand in order to keep both the hosts and the guests happy.  

That is a really tough business to get started, but once built, it is a durable business that can be really hard for competitors to disrupt.  

So for that reason I was really interested in learning more about this small marketplace business.  

I also liked the baseline of organic website traffic.  It is really hard to build a website from 0 to over 10,000 in monthly organic website visitors.  I would expect it to take much more than $35,000 in order to try to replicate that, plus it would just take a lot of time to try to replicate as well.  SEO takes time. 

A $35,000 sales price was nice and low as well, so I liked that.  

But there were 2 key problems for me:

  1. This particular business was not in my niche.  It wasn’t a business that served small businesses, so it wasn’t complementary to ProjectionHub and the work I am already doing.  Since there wouldn’t be any benefit to ProjectionHub I really needed to look at the business on its own merits which brings me to the second problem. 
  2. It was just too small. 

One of the primary reasons why I want to buy a business is because I have started many businesses in the past, and starting from scratch is really hard.  The idea behind buying an existing and profitable business is that much of that hard work has already been done, and I could just focus on growing the business or making it more profitable or cross-selling with ProjectionHub etc.  

I realized that this business would essentially be like a startup for me.  With only $8,000 in annual revenue right now, I wouldn’t be able to hire anyone to build the business without having to invest more capital into the business.  

The business isn’t proven to be profitable yet either, maybe it won’t even be able to reach profitability.  

This is what I realized, if I was set on starting a business in this particular industry, then buying this business for $35,000 would be a steal of a deal.  It would have saved significant time and money that would end up costing more than $35,000 if I was starting from scratch.  

But… 

Since I am not set on starting a business in this particular niche, and it would not be complementary to ProjectionHub, this acquisition would need to stand on its own, and it just didn’t for me.  

I think it could be a wonderful little acquisition for the right person, but not right for me.  

I don’t have permission to share publicly what this particular business is, but if you think you might be interested in a $35,000 marketplace business that would require a lot of elbow grease from you, but could be a nice business someday, then just respond to this email and I will see if I can connect you with the seller directly to learn more.  

One last thought… 

Since this business was not complementary it was just too small, BUT I realized that if this business was complementary to ProjectionHub then it could have been a perfect little acquisition for me.  If this business sold projection templates or bookkeeping templates or connected small business owners with accountants for example, I would have been all over it.  

So yes this business was too small to acquire because it was outside of my industry, but in the right industry, I think a very small acquisition could still make a ton of sense for me as a strategic buyer.  

I am curious, what is the smallest business that you would be willing to buy?  

Until next week,

Adam

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