• Broker Outreach Yielding Results:

  • My relationship-building activities with brokers in August paid off in September.

  • Notably, three separate brokers called me proactively about opportunities tailored to my profile, even before they listed those businesses publicly.

• Direct Engagements with Business Owners:

  • Following my August goal to focus on getting more direct interactions with sellers, I successfully engaged with two owners in September.

  • Although I didn’t submit an LOI, these interactions were valuable because I got more practice honing my pitch to Sellers about why I’m a good fit to carry on the legacy of their business.

• Enriched Search Community Connections:

  • The Self-Funded Search Conference in Dallas was excellent and helped me expand my network within the search community. More on that later.

• I evaluated a 34-year-old landscaping firm (60% residential, 40% commercial) that felt like a great candidate for a searcher:

  • $1M in EBITDA,

  • all “processes” were done on pen and paper,

  • decent recurring revenue base (38% under contract, 62% from maintenance customers),

  • a seasoned team (average tenure: 10+ years),

  • 100% word-of-mouth,

  • no customer concentration, and

  • very clear growth opportunities (from B2B maintenance to add-on services and M&A prospects).

I decided to pass on this deal because (i) 2023's financials (TTM) showed shrinking margins and much lower EBITDA, revealing vulnerability to the residential installation segment, and (ii) my valuation was ~20% below asking price (which was still 4x TTM EBITDA), but the broker held firm saying he had three "full-price offers.”

I decided to pass on this deal because of (i) the size of the deal / owner dependency, (ii) new construction exposure, (iii) reliance on new installations vs. service, and (iv) my lack of desire to include real estate in this deal (which would have been required to win the deal).

• Current Financials: Get Them Early. 

  • 2023 financials for the landscaping deal I liked revealed issues with sales, gross margins, and EBITDA.

  • Another company's 2023 EBITDA tripled from 2022; a challenge for bank underwriting and a red flag for sustainability (at least for that deal).

  • Key takeaway: In the future, always request updated financials early in the deal evaluation.

• Moving Fast (Early) Sets You Apart.

  • There is a lot of competition for good deals right now.

  • My post-CIM communication is fast, but my progression to get a formal LOI submitted has been slow.

  • Strategy shift: For future deals, I plan to submit an early "indication of interest" (IOI) to set myself apart as a genuine buyer and quickly gauge whether the Seller and I are aligned on valuation. Here is my “template” IOI: Balance Capital IOI Template

• Smaller Deals: A Double-Edged Sword. 

  • $750K to $1M EBITDA deals seem like the most attractive deals I’m reviewing right now.

  • These deals often have lower valuations and potential growth but come with owner dependency and less structure.

  • Challenge: these smaller deals tend to be more “owner dependent” and require a hands-on approach that I think would delay my ability to implement higher-level, strategic improvements to the business. But they are very tempting given the obvious growth opportunities!

• Deal Opportunities Feedback. I’ve highlighted a few opportunities that I reviewed this month. Anything stand out to you? I’d appreciate any feedback.

• Smaller Deals or Bigger Deals? I would love to find a $1 - 2M EBITDA business that is going for under 5x EBITDA that doesn’t have major, obvious red flags. Do those exist right now? I’m struggling to find them.