2023 Year in Review

December 29, 2023 | Issue #95

Big Deal Small Business: 2023 Year in Review

December 29, 2023 | Issue #95

This is a newsletter written by Guesswork Investing about acquiring & operating small businesses. If you are a new reader / new searcher, I recommend starting with the New Searcher Reader Guide. If you are looking for a deal team to support your transaction, I have recommendations for you.

2023 was a blur for me and many in the small business community. This year featured a harder operating environment for many businesses combined with rates on floating rate debt continuing to skyrocket.

Thankfully, my business closes down for the week of Christmas, so the holiday week affords a few moments to pause & reflect on the past year, which yielded plenty of wins worth memorializing.

Newsletter & Community Building Recap

Building the Entrepreneurship Through Acqusition (“ETA”) community both digitally & locally continues to be a focus for me, with this newsletter being the primary vector.

The newsletter this year:

• 18 posts with high 50%/low 60%s open rates.

• This final post of 2023 will go out to 5,836 subscribers. The last post of 2022 went to 2,348 subscribers, and the last post of 2021 went to 962 subscribers — I was confused as to how we more than 2x’d readership last year, but then we did it again this year off a larger base.

• In 2024, my newsletter goals include 1) 10-12 new posts, 2) 5-7 updates to older posts, and 3) creating at least 2 downloadable Excel templates.

• While I’m tempted to set a subscriber goal, my experience has been that focusing on writing good content (when I have something to say) has naturally driven readership. But please do keep sharing posts that resonate with you as that’s how the newsletter grows.

Resources & Community Building:

• I finally launched the Trusted Search Deal Team, which is my recommended deal team for ETA deals. I’d wanted to put this together for ages as it’s the most common question I get from searchers. It’s also the ideal win-win monetization strategy for the newsletter. It allows A+ service vendors to find well-prepared searchers, and keeps the newsletter free-to-access for all searchers. We have generated over 20 referrals so far!

• I launched informal monthly happy hours for the SMB/ETA community in Seattle. This is just a rolling calendar invite to a new brewery/bar each month, rotating around the various subregions of Seattle. We’ve had seven happy hours so far and now consistently have 10-12 people come through each time! If you’re in the Seattle area, just reply to this email and I’ll add you to the January calendar invite.

• I personally invested in two self-funded search deals in 2023. I’m by far the smallest investor on the cap tables, but will hopefully provided outsized support to the searchers in terms of being a thought partner (or unpaid therapist, depending on the week). I can’t invest at most searchers’ min check sizes, but if you’re okay with a smaller check in exchange for an investor you can text random little questions to in an informal way, I’d love to look at your deals! The deal junkie in me deeply misses being in the deal flow of private equity, and eventually I’ll likely start doing these deals with a small syndicate behind me.

In a less formal sense, I’ve been blessed to be surrounded by a truly stellar group of small business operators who have provided consistent support throughout the year.

This really is a lonely job, so having people who see you & understand you as you ride the small business roller coaster makes a material difference in your day-to-day sanity.

So for all of you that were on my team in 2023, a big thank you. It meant a lot.

Business Recap

As I alluded to in the intro, 2023 was a tougher year for me in the business than 2022.

Between weaker organic demand and higher rates, I felt squeezed on every front. That said, we got through the year successfully, and it’s worth mentioning some highlights:

• Seller Transition: The sellers were fully transitioned out of the business in early 2023 — we’ve been on our own for ~10 months now. This was no small feat. And while there were plenty of bumpy moments (and still are), we’re doing okay.

• Digital Proposals: Quoting & invoicing system is fully digitized now, including at the estimator-level, with each estimator equipped with an iPad. This was crucial as our average project size declined in 2023 with clients tightening wallets, so we had to process far more proposals to get to the same revenue level — moving to digital proposals at the estimator-level was a key component of being able to process a higher throughput.

• Overseas Hiring: “Figured out” how to use overseas customer service reps — this will be a key component of scaling up our call coverage and client follow-ups over time. My first overseas CSR hire was a bust, primarily due to my failings as a trainer & manager. I learned from those lessons (post for another time), and the second hire has been incredibly productive and a great fit.

• Kept Making Payments: This is a minimum requirement, but it’s worth nothing that we made 12 more debt payments out of 120 total payments. It’s a big block of debt to chip away at, but chip away we did, even as the monthly payments kept going up with interest rates.

Personal Recap

At its most basic, my professional life serves my personal life through two sometimes-competing, sometimes-complementary initiatives:

1. Increase my personal earnings & net worth.

2. Increase the # of good days in my life versus the # of bad days in my life.

When I worked in private equity, #1 was easy & naturally occurring — I made far more money than I spent, I got large raises each year, and as I entered the carry pool of the fund, the increase in investment value of our deals partially accrued to me.

But I had no line of sight that #2 would ever improve in a way that afforded me the lifestyle I wanted (especially in a future involving children).

The acquisition of the business made #1 a lot trickier. There are some paths that could lead to financial outcomes better than private equity, but there are still plenty of paths that lead to me zero’ing out all my savings and starting over. I’m certainly not in the clear yet.

But initiative #2 is now far more in alignment with initiative #1. The more I build the business to be process-driven & stable, the better my lifestyle looks.

And while there is a short-term financial impact to initiative #2 (due to needing to invest in people & systems), reducing business fragility eventually improves #1 as the value of the business increases.

That said, we are still early days — my working hard, long hours can still make a material difference in the company’s earnings potential in the near-term, which is largely worth the effort, especially in a highly-levered situation.

I also have far less control of which days are good days vs bad days today than I did in PE. Yes, I work less hours overall, but the stress & randomness of bad days wear on me in a different way, especially when I have three weeks of bad days in a row. Those stretches are much worse than three weeks of bad days in PE — even when the PE stretches featured 100 hours of work per week. I’ve been there, done that, and the SMB version is harder.

But, there’s still a long-term vision that sees that ratio between good & bad days moving in my favor, even as the business earnings (and therefore my net worth) gradually tick up. That alignment is meaningful.

Conclusion

I hope 2023 was a fruitful year for you, whether you’re a business owner, investor, searcher, or service provider. I see our ETA space continuing to expand, even as the macro & rate environment look choppier than ever — I’m excited to welcome new cohorts of searchers and business owners in 2024.

One ask — this newsletter has grown entirely through word-of-mouth & Twitter. If you know of anyone in your orbit who is even vaguely search-curious…please share the newsletter with them!

I’m continuing to build the newsletter to be a powerful resource hub for searchers. In 2024, in addition to new posts, I’m planning to create downloadable Excel templates. So please do keep sharing broadly as I slowly turn the flywheel of the newsletter — thank you!

Happy New Year, and looking forward to chatting with everyone in 2024.

For thoughts or feedback, you can always reply to this email or post/DM me on Twitter. And quick reminder — if you need deal team recommendations for your deal, here’s my Trusted Deal Team list.

Thanks, 

Guesswork Investing