What business (industry) would you target to buy for $500k - $2MM?

Typical IB guy wanting to be the client after working in client services for a few years but humor me, please.

I've been working in sell-side M&A for a few years now and getting serious about next steps for me/my career but have always had more of an entrepreneurial bent. I don't work for a name brand IB but truly do like working in the lower middle market due to the extremely lean deal teams and type of clients we work with - usually family owned and often times not terribly sophisticated.  Most deals I work on are in the $20-75MM range (some smaller, some bigger) but a few have involved active, smaller roll-ups as part of the deal so I have some exposure to smaller transactions in the $1MM range.

 

In my next job I am primarily searching for something with a heavier focus on operations, operationally focused PE/micro PE, maybe a start-up, etc. Somewhat flexible. I am in my mid/late 20s now though so would like to pivot to something more entrepreneurial before I turn 30 (just to throw a target out there and working backwards) and during my next job I'd also like to start turning over rocks for a small business to acquire.

 

The $500k - $2MM is full purchase price using financing, not the equity check I'd be writing. Willing to do SBA, personal guarantee is not ideal of course but it doesn't completely terrify me and if not now, when? I am also willing to make a minority investment and help scale a business, might be more realistic with a small check size and limited operating experience.

 

Some main industry buckets I am looking at includes:

 

  • Service businesses. Maybe not ideal for scaling but one of the "easier" businesses to get into from a barrier to entry point of view and for me to learn the ropes as an operator so to speak. HVAC, lawncare, cleaning company, etc. I have limited M&A experience in this (HVAC/plumbing deal that did not close due to seller walking away from offers…but I was a little surprised at the multiples we were getting) but have talked independently with a few entrepreneurs in the space. I was on the "Sweaty Startup" bandwagon before he really blew up on social media.
     
  • Chemical products. Worked on a deal in the space, loved the company, margins great, plenty of end markets to target, etc. I do not have a science background through so having someone with technical chops would be necessary.
     
  • Food products. This would be the "dream" for me – combining my experience (decent amount of my closed deals are F&B) and something I could get passionate about, healthy food moderately priced/trying to fight obesity in America. Pretty competitive space – maybe better for a second venture after I have more entrepreneurial reps but this is an easy space for me to talk with current business owners due my deal experience.
     
  • "Roll-up candidates". Covers a few different industries and I have some deal experience in the space. Something like dental clinics/DSO, auto repair shops, maybe funeral homes. Other industries would work but maybe tough to do with my check size (and rollups are tougher to implement in practice vs. these whiteboard exercises I am doing). Would need to have co-investors, additional capital to properly execute...or generous seller financing. 
     
  • Other industrial. I guess just a catchall for those random, "boring" business that make machined components (as an example) or other manufacturing scattered throughout the midwest. Not an engineer so will need to work around that somewhat.
    This category is my Midwest IB experience screaming through, haha!

 

Those are my high-level buckets I have been thinking about – good business models that would fit my capital constraints and factoring that I am not an engineer/that technical (so not the next Zuck but also not trying to buy a restaurant on Biz Buy Sell dot com for $180k, ha).

 

What industries/business should I also be thinking about? Open to consider almost anything at this early stage of my search before narrowing down…figure WSO might be a good place to brainstorm, even if Wall Street is stereotyped at being terrible at idea generation.

 

Also open to critiques of the above industries and my plan in general. I guess I am essentially trying to start my own search fund or do a "real world MBA" (I think coined by Tim Ferriss?).

 

Thank you!

 

 

 

Comments (21)

 
Jan 30, 2021 - 8:04pm

Maybe a storage facility (or multiple facilities). I've heard its easy returns with them and you don't actually have people living there, which is where the hassle comes. People drop off shit and pick it back up. They pay rent or leave/stuff gets trashed. Pretty simple business model. 

I was staying at a Holiday Inn a couple years ago on the beach in Florida and met this guy at the bar that owned a handful of storage facilities. He said it was a great industry to be in and he never had any big issues or anything. 

Also, once you get some good managers for each facility you can sit back and do nothing except be on the search to open even more locations. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

  • 1
 
Feb 22, 2021 - 2:36pm

Hylan Blvd

Thanks for all your input in the thread!

The guy's name at the Holiday Inn wasn't Nick, was it?
https://www.businessofbusiness.com/articles/silicon-valley-sweaty-start…

He's pretty public about his storage facility acquisitions and would theoretically fit my size range...

Interesting read. I didn't meet Nick. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Jan 30, 2021 - 8:13pm

Another idea is to run a bunch of Airbnbs. I have seen people do this successfully, but it is a lot of work. Shit does go wrong and your business depends on good reviews. Some people can scale successfully in this, but again likely is with the help of good property managers. I follow this guy on TikTok that has 100s of Airbnbs and claims to be a multi-millionaire off of them. Doing the math, given how many he has running, it does seem he is making good money. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Jan 30, 2021 - 8:18pm

Also, baby boomers are getting to be elderly and there doesn't seem to be a 'great' nursing home or a nursing home chain. My parents pay $4,200/mo for their place in a senior living facility for an independent villa, but the food blows (food is included). They claim to be a '5 star resort'. I know everyone in there would pay $5K or $6K per month for upgraded food and services/facilities. They have an executive chef, but had to close the dining room due to Covid. I saw nearly every senior living facility in the area and most of them really suck and are depressing. I think a business could come out as a 'high luxury resort for seniors' that just blows the competition away, but also comes with a price. It would be glitzy to live there and that's what old people fear the most - is to be left alone and abandoned with shitty conditions. A lot of them have deep pockets and if they don't have an expensive health condition, they want to spend it on living/eating well.  

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
  • Intern in HF - Other
Jan 30, 2021 - 11:10pm

Look at the Mirabella apartments at Arizona State. They're kind of implementing this idea to some degree. 

Location is kind of funny as well because it's 100 yards away from Mill Ave (ASU's main bar street). 

 
Jan 30, 2021 - 11:15pm

 

Look at the Mirabella apartments at Arizona State. They're kind of implementing this idea to some degree. 

Location is kind of funny as well because it's 100 yards away from Mill Ave (ASU's main bar street). 

Yeah these look nice. Interesting its a joint op with ASU in a sense. 

 

https://www.retirement.org/mirabella-asu/residences/

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Jan 30, 2021 - 8:44pm

Another thing as the restaurant industry is so fragmented, you have a lot of labor on the streets for people that could run and operate a food truck, except they are broke. If you buy the truck and find one person to be the owner operator and executive chef (they make the menu, find sous chefs) - you might have a new business on your hands and you could expand. I think its $50K - $75K to buy and equip a truck.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Jan 30, 2021 - 9:49pm

Apu Nahasapeemapetilon

Isaiah I love you

-

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

  • 1
 
Jan 30, 2021 - 9:44pm

Food trucks/carts can be fairly lucrative. I think they'll fall well below your target price, but can be scaled, especially if you have 1 or 2 good guys running them. I can't speak too intelligently about the business, but a friend of my dads owns those halal food carts, like 5 or 6 of them. He says he pulls in around 150 a year from them. I don't know much about start up costs or anything, he also has people from the same community he trusts running them for him. So that's something to consider, it's usually all cash and not very sophisticated - can get cheated easily. He also spends hours after he's done cleaning and preparing for the next day after long shifts during the day. He's beginning to focus more on scaling, but the first couple years were rough. Still, for a 27 year old immigrant, who never graduated high school, it's not bad.

My uncle, before he fucked it all up, was a Popeyes franchisee, he owned a handful of locations. Did really well, with minimal effort after the first few years. I don't know if you'd be into becoming a franchisee, could also start your own chain.

 
Jan 30, 2021 - 11:58pm

MaxEbic

Food trucks/carts can be fairly lucrative. So that's something to consider, it's usually all cash and not very sophisticated - can get cheated easily.

Yeah that's why I outlined having an owner/operator. I think if you write in one key person to share in the profits, they will be loyal to the business and the books. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Jan 30, 2021 - 10:14pm

"franchise offering requires an initial investment of $175,900 to $431,100 for our food trucks"

https://www.cousinsmainelobster.com/franchise/

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Jan 31, 2021 - 1:48pm

Equipment rental. Specifically B2B rental. Things like:

  • Construction equipment - renting out traffic barrels, dumpsters, etc. to construction sites
  • Party equipment - renting out chairs, buffets tables, tents, etc. to catering and event planning companies

There are probably many more examples to ones above. From what I've seen, it's a simple and dependable business model. Companies have a strong need for the equipment as jobs/projects can't be done without it. Companies don't like owning the equipment because each job is different and there is a need to scale-up/down depending on the needs. The main issue is dependability/reliability as work can't get done without equipment, so you're main task is just to provide the agreed upon equipment on time and you're pretty much good from there. Lastly it's "off the radar," as long as you do a decent job at reasonable prices your customers will continue to use you....there's not much of a push to find other providers.

The biggest downsides I see are (1) it doesn't seem to do well in bad economies (2) sales, as I heard most business comes through referrals. It may be hard to scale up simply by putting more effort/time in prospecting for new customers. 

 
Feb 1, 2021 - 6:48pm

Yeah parking garages seem good. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

 
Feb 1, 2021 - 11:49am

Most people here are mentioning real estate constantly, but I think the OP means he is looking for an operating business.

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