Big Deal Small Business: Search Update (8/2021)
August 26, 2021 | Issue #38
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Today’s post is a monthly ride-along update on my self-funded search. If you’re new to Big Deal Small Business, feel free to check out these posts for more context on my search:
My search approach: Why I picked self-funded vs traditional and quasi-partnered vs solo or fully-partnered
The big news of course is that I quit my job recently, which changes my search approach & time commitment materially. More to come on that, but here’s the explanation if you missed it earlier this week.
Deal Activity
The deal train is chugging along, with 14 new deals added to the CRM since my last update. It does feel like information flow has gotten slower, which is probably due to the end of Summer slowdown I see every year in PE.
That said, I’m mentally prepared for post-Labor Day to be a fresh sprint of new deals coming to market, so I’m very excited to have more headspace & bandwidth for that!
I’ve gotten better at looking at deals in my target range — the last 15 deals I’ve looked at are all over $750K of SDE or EBITDA. In the 15 deals prior to that, only 8 were larger than $750K of SDE or EBITDA.
On the other hand, I’ve been looking at far more deals with project-based revenue. It’s not fair to call them non-recurring as a lot of the business is with the same customers, but each transaction is a standalone project.
Think construction-focused subcontractors — their GC list is pretty consistent year after year, but any given year will have a few large projects making up 50% of revenue. But every year in the company’s history looks like that, and revenue has been pretty consistent.
To be honest, I’m not sure what to do with that kind of revenue quality yet. It feels higher quality than it looks, but it’s lower quality than I want.
I need to reflect further, but damn if it isn’t tempting to just buy a subcontractor with $1.5M of EBITDA for like 3.2x and just do your best to eke out your revenue year after year.
If you’ve got any thoughts on this, let me know — even if it’s you yelling at me to just stay away from project-based work.
Monetization Survey
Now that I’ve quit my job, I’m considering adding a layer of monetization to this newsletter. Not trying to replace my income or extend my search runway meaningfully, but it’d be nice to have some dollars coming in the door.
Many readers have suggested I add a subscription paywall, and a few advertisers have pinged me on putting ad inserts.
I mostly do this newsletter for 1) formalizing my learnings in search, 2) building community in search, and 3) helping others in the community accelerate their learning by reading about mine.
Given that, I’m not going to put a hard paywall on the newsletter. However, I am considering an optional paywall, more of a “pay-what-you-want” subscription. Alternatively, I could just leave it free and add a little advertising.
I’d love to get your take before I make a decision.
Here is a really short (literally 4 questions) survey. Appreciate you guys filling it out for me.
Conclusion
The search continues! Hope everyone gets some time off to end the summer and is ready to hit the ground running post-Labor Day.
As always, I’m all ears to hear your thoughts & feedback. Hit reply to this email or find me on Twitter.
Thanks,
Guesswork Investing
P.S. I’d always appreciate introductions to potential acquisition targets or brokers (primarily targeting $750K-$1.5M+ of SDE or EBITDA, ideally located in the Northeast, West Coast, or Colorado).