The SMB Scoop
Posts
🟠 "how big of a company should I acquire?"

🟠 "how big of a company should I acquire?"

Experienced buyers think there's a sweet spot in size when buying a business

Ben Tiggelaar
August 14, 2023

The SMB Scoop is highlighting an important part of buying a business which is: ‘how big of a company should I acquire?".

Keep in mind, there is no right or wrong size for the size of company, but people will and do have preferences. I for instance, I personally stick to $750K+ minimum EBITDA range (for a standalone SMB platform…add-ons are a different story). Through my personal experience, I’ve found that businesses smaller than this lack the structure, management team depth, processes to standalone (then I’m a General Manager instead of a CEO). Nothing wrong with being a GM…but just not my personal zone of genius.

1. There’s a sweet spot in size when buying a small business:

Working on buying SMB w/ $1.5M EBITDA. As I work through financing, it’s pretty clear that the $1.5-2M of EBITDA range (give or take) is a sweet spot for SMB buyers b/c it’s an “in between” size for usual buyers. Too big for “job buyers” and too small for other folks (PE, SBIC).
— Sam Rosati (@Sam_Rosati)
4:44 PM • Aug 21, 2020

2. Buying a business that is too small presents some unique challenges that you just need to know:

Many self-funded searchers seek to buy a business with $500k in SDE. Big mistake. Here’s why.
— Jordan Carter (@JordanPCarter)
5:17 PM • Jun 25, 2022

3. Common software acquisitions made by traditional search funds (yes, they are an ideal target for a traditional search fund):

I'm often asked - "Can Search Funds Still Actually By Software Companies?" Here's 5 Types of Software Deals commonly seen in Search Funds. A quick 🧵
— Steve Ressler (@steveressler)
2:03 PM • Jan 14, 2022

Check out my SMB Junction Capital Connector: Connecting SMB entrepreneurs with the capital they need to acquire and grow their business

For deal sponsors (entrepreneurs) with a deal under LOI seeking to raise capital from 550+ accredited SMB investors
For accredited investors wanting exposure to passive SMB sponsors and investments

The SMB Scoop

Ben Tiggelaar

As always, reply with what you’re up to or what you want to see more of.