Big Deal Small Business: Is the Grass Greener?
May 31, 2022 | Issue #68
Quick newsletter update: We just crossed 1,500 readers! I’m humbled that so many of you find my rambling thoughts about search interesting enough to clutter your inbox. Not only that, but over 70% of you opened the last issue, which is really wild. Thank you for joining me and following along!
Okay, onto this issue’s post:
Now that I’m a few months into the operating phase of an SMB search, several people have asked me if the gig has lived up to the hype.
Said differently, am I enjoying being a small business more than working private equity?
The answer to this depends on context, specifically 1) my expectations and 2) my motivations.
My Expectations
While the search phase can feel long & grueling, I was lucky to connect with a LOT of SMB operators during this period. I also job shadowed a few friends at their small businesses.
This process helped set expectations nice & low – I went into my acquisition expecting a knife fight, day in & day out.
When you spend enough time with SMB operators, you’ll hear them talk about problems in their business in the most casual tones.
“Yeah, we had a water main burst and production shut down for three days.”
“My GM called it quits today out of the blue, one week notice period.”
“I’m pretty sure my bookkeeper isn’t reconciling my books correctly. I’m going to have to go into the accounting myself and figure it out.”
“Yeah, my #1 supplier decided to pull out of my market.”
As an outsider, each of these problems felt potentially earth-shattering. And left unaddressed, they could be business-shattering.
But that’s the job of the SMB owner - take big problems in stride and figure them out as calmly & efficiently as you can manage (which can still mean sleepless nights).
If you’ve built a good business, it’s passive when things are going right. Your team can handle the workflows as long as all steps in the workflow are clicking.
You step in when something goes wrong or something gets bottlenecked.
So – I came into SMB ownership with the expectation that my job was to deal with the worst problems the business faces.
My Motivations
I think a lot of folks think I’ve gotten into SMB ownership to make more money than I would have made in private equity.
Realistically, I would have made much more in PE on a 5-10 year time scale, and with WAY lower personal financial risk.
On a 10+ year scale, the jury is out given the PE industry is maturing rapidly, and SMB equity can have real upside.
So that’s not why I got into search / SMB ownership.
My motivation comes from wanting to control my life and my time.
Don’t get me wrong, I want to make good money and afford my family a pleasant lifestyle. But I’m not looking for absolute dollars earned, I’m looking to optimized for dollars per hour worked, and to have real control of when those hours are worked.
This is a long-term play to build the life I want.
So, is the grass greener?
At the moment, the work is a slog. I’m pretty wiped out by the end of each week. The hours are not worse than PE, but the pressure & stress is worse.
In PE, it felt like I was driving a comfortable luxury sedan with leather seats & great shock absorbers. Now it feels like I’m driving a 15-year-old Camry with holes in the floorboard, just white knuckling the car down a dirt road.
In both cases, it’s a lot of “driving” each week, but now I viscerally feel every bump.
I’m also still learning how to be self-employed. I can’t help but feel a twinge of guilt when I’m not working on the business. I have to remind myself that I’m running a marathon, not a sprint.
That all said, I knew this going in - my expectations for the day-to-day were properly calibrated, and they’re being met.
More importantly, I can see the future I want more clearly now than ever before. I’m only a few months in, but I can envision this business growing into a well-oiled machine (or at least…better oiled), one that affords me the luxury of time.
My motivations for getting into SMB ownership appear wholly intact & achievable. It’s just a tough, multi-year path to get there.
In PE, while I enjoyed the work & my coworkers, the long-term vision was always more of the same.
I’m happy to work hard at this phase of my life, but now I finally feel like I’m building towards an end that’s worth chasing.
Hopefully you get what I’m trying to say – the grass isn’t greener, and there’s a lot more snakes hiding in the grass, but there’s more potential than ever before.
As always, I welcome your thoughts or feedback. Just hit reply to this email or find me on Twitter.
Thanks,
Guesswork Investing