Reflections on my first in-person visit

Author

Mike McLean
November 29, 2023

I’ve got a big update today.

On November 13, I made a 7-hour drive to meet owners who are ready to sell their business off market.

This is the first business I’ve visited in person that I sourced.

I learned so much and the experience multiplied my conviction for my plan.

I will share my evaluations in this update, but one heads up: I’m realizing just how green I am at evaluating these opportunities.

The veterans in the business buying space can evaluate an opportunity within minutes. I’m two weeks removed and still processing my thoughts! I’m a little all over the place.

So, if you’re following along, just a warning… you’re taking the scenic route.

Today’s update

Recap on the business I visited

What I learned:

-About the business

-About my plan

-About myself

Where I go from here

Business profile

I’m either redacting information or changing names and minor details to keep the business private.

I’ve talked about this business a couple of times in these updates. Remember the owner who asked for two references, a resume, and a LinkedIn before sending me an NDA?

Same folks.

They are an e-commerce store, in business for over 15 years.

Remember, I’m targeting businesses off the beaten path. Deep value as some call it.

And, boy, is there a lot of hidden value here.

What I learned about the business

I’ll give you the pros and cons (from my perspective) in bullet points

🟢 Pros

  • The business has grown, profitably and bootstrapped, every year (a two-year stretch was flat).

  • The owners do not market the business.

  • On the contrary, they’ve inadvertently sabotaged marketing.

    • They’re on vacation and their website has a pop-up letting customers know they’re out of office and orders will be delayed 10 days.

    • Their checkout page says shipping might be over-quoted and to call for an exact quote.

    • They’re literally turning people away.

  • Amazing customer reputation. People who buy this product love it.

  • Very organized ops. They have well-documented processes and spec sheets.

  • Very little competition.

And now the cons…

🚩 Cons

  • Their self-reported EBITDA number is overstated. They’re making less money than they think they are.

  • They handle all order fulfillment internally. It’s not complex, but it’s a lot of moving parts. The person running this business would need to spend a couple of months getting up to speed on their processes.

  • Some light engineering work is required to work effectively with manufacturers. Not my favorite cup of tea.

  • The business requires an employee, but really can’t afford it at current revenue.

What I learned about my plan

This experience was another data point to confirm I have a solid five-year plan.

As we sat at lunch (location: The Hitching Post) and talked about our personal lives, it became clear I’m in a unique and underserved niche: hard-to-find, profitable internet businesses with owners looking for a relationship-based transition (not a top-dollar exit).

Here’s a quote from my lunch to illustrate the point. I asked them, “If it doesn’t work out between us, what’s your plan for the business?”

❝

We’ll run the business for two more years, then close it down.

I could write many more words about this, but I’ll summarize by saying my hunches are confirmed about the opportunity in this space — at least in this case.

So, I’m confident my plan can yield a lot of fruit given enough time and that I stick with it.

I learned more about myself

I spent almost four hours with the owners. I met them at their house. I drank their coffee. I used their toilet. They asked me to drive in the backseat of their car to lunch like I was one of their grandchildren.

I loved every part of it.

I feel pretty strongly that I was made to do something in this arena. The process of finding a hidden gem like this, building a relationship with such down-to-earth people, and potentially working together for a mutually great outcome feels like my sweet spot.

I’m coming to believe that enduring endeavors happen by falling in love with the process, enjoying the act of just getting in the reps.

I am really enjoying the practice.

Where I’ll go from here

I don’t know if I’ll buy this business or not.

I haven’t thought about this opportunity in black-and-white terms (I realize that probably doesn’t make sense to you). My whole strategy is built on a long-term, relational approach. I’m not trying to make a now-or-never, one-way-street decision.

There are some red flags I have with the business. I have a number/terms in mind for what I think would minimize those concerns.

So, my next step is to touch base with the owner. My strategy is to:

  1. Tell them what I love about the business and how much I enjoyed meeting

  2. Reiterate the opportunity I see in the business

  3. Share my concerns with their reported earnings and my potential offer price range

  4. Offer to help them with their marketing should they decide to hold onto it for now

Maybe the conversation goes really well, and they decide they like me so much they’ll work with me on a homerun offer.

Maybe they’ll be bummed I don’t think their business is worth as much as them, decide to hang onto it, but leave feeling like they have someone in their corner if/when their thoughts change.

Maybe they’ll curse me out.

I don’t know…

Either way, I’ll keep you posted.

P.s. Hey, by the way. If you have a brother, cousin, friend interested in this space, I’d love to meet them. (Referral link below.)