Buying Boring Businesses That Make Money

Loren handles the larger end of the Business Exits range, from roughly seven million up to the mid nine figures, and he opens the conversation with an observation most people find surprising: an enormous number of profitable companies are doing something completely unremarkable. He mentions a bike horn manufacturer clearing north of twenty million a year, and the company behind the little marker balls on the back of delivery trucks. Neither is the kind of business anyone sets out to look for.

If you're buying

Look for something that isn't sexy

Loren's first piece of advice to buyers is to start wider than feels comfortable, both in industry and geography, because the best opportunity is usually something you would never have thought to search for.

His own preference runs to service businesses, and he is unapologetic about HVAC in particular. The appeal is structural rather than sentimental. You get paid right before or right after the work is done, which solves the cash flow problem that strangles so many other business models.

The flip side is the warning about chasing something shinier. Technology and SaaS companies carry a perception of premium value that often has little to do with their actual profitability, and he describes sellers in that world asking forty million for a business that is losing money. Buyers who say they are open to anything tend to lose interest once they see those multiples.

Bring something the business doesn't already have

The second filter is about fit. Loren argues that buyers should look for a company their own skills can measurably improve, and that this is less restrictive than it sounds.

His example is a friend with a marketing and design background who assumed those skills were useless for something like an HVAC company. His response is that an HVAC business is fundamentally a lead generation business, which makes branding and marketing central rather than peripheral. Standing out from the operator who has had the same truck graphics for forty years is most of the opportunity.

The matching caution is not to change too much. These companies are rare precisely because they worked, and a new owner who rips out what was working usually discovers why it was there.

The math that makes smaller deals work

This is the part of the conversation most useful to anyone running the numbers for the first time. A solid service business producing around eight hundred thousand in annual profit on a few million in revenue might sell for somewhere near two to two and a quarter million. With SBA financing at ten percent down, that is roughly two hundred thousand dollars of buyer capital.

Put another way, something close to a house down payment in much of the country buys a company already generating eight hundred thousand a year, with the capital returned after debt service inside a year or two.

He also mentions a detail many buyers miss: if your next acquisition is in the same line of business, SBA financing can allow you to buy it with no money down.

Recalibrating what "dream big" means

Both men push back on how ambition gets framed. Culturally, dreaming big has come to mean becoming Musk or Bezos, which describes a path available to a fraction of a percent of people and carries a kind of pressure most would not want.

A more useful definition is two or three times the size of what you have now, or an eight-figure exit. Loren is direct that he would rather have a ten or twenty million dollar outcome and a good life, able to support his family and be generous while keeping his anonymity, than be a billionaire.

Why nobody loses in a Main Street deal

One of the more compelling arguments in the episode concerns incentives. In a typical lower middle market transaction, every party wants the deal to work. The seller has usually spent decades building the business, often has no successor in the family, and wants to hand it to someone who will look after it. They will stay and help. The employees keep their jobs. Customers and vendors want continuity. The bank earns its interest. The buyer gets a profitable company and a mentor.

Loren contrasts that with the tech world, where he has done larger deals and found the atmosphere adversarial, crowded with people whose job is to extract a little more from the other side.

Start smaller than you think, but not too small

Nearly every first-time searcher arrives wanting one to two million in EBITDA, which Loren notes is the most competitive segment of the market. His argument for looking lower is about headroom rather than price. A business at that level has usually already optimized its marketing, which means growth has to come from lateral expansion. A smaller company doing three or four hundred thousand in profit with eight or nine employees often has obvious room to grow, sometimes with the capacity to triple its workload using the same staff.

The question he suggests asking is not what the business costs but how much visible growth is sitting there untouched, achievable without acquisitions or heroics.

There is a floor, though. Below roughly a hundred thousand a year in profit, he thinks the deals get genuinely difficult, because the business has not yet proved that it works.

Credentials are not the same as operating experience

The cautionary story in this episode is worth the listen on its own. A buyer with a private equity background and an MBA bought a fencing company in Northern California and ran it into the ground within two years. He was convinced he knew better than the operator who had been running it, he was not someone people warmed to, and he tried to outsource everything. Nobody wanted him to build their fence.

Loren's point is that running a real business depends heavily on human connection, and that being smart and well educated does not substitute for having managed people before. Buyers without that experience should start smaller.

If you're selling

The hands-off owner is largely a myth

Ryan raises a question that comes up constantly online: why would anyone sell a business that is working? The answer is usually that the owner is tired rather than that anything is wrong.

Loren adds a dimension that surprises most buyers. He describes owners netting two million a year on ten hours a week who still want out, because the responsibility never actually leaves. Waking up on holiday in another time zone with a knot of anxiety about what might have gone wrong is not something a good management layer fixes. For a certain kind of operator, the weight sits there permanently.

His aside to buyers is that those are precisely the sellers to look for, because the business is usually in good shape and the owner's reason for leaving has nothing to do with its condition.

Why the silver tsunami hasn't arrived

The expected wave of retiring owners selling their businesses has been slower to materialize than predicted, and Loren's explanation is that most of these companies were never built to be sold.

Owners structured their taxes to minimize what they paid, looked after their families, paid their people well, and took time off when they wanted it. None of that is a mistake. It is simply a different objective from maximizing reported profit, and it produces a hard conversation at sale time, because valuation at this level comes down to profit and a multiple of it.

Loren expects this to shift over the next couple of decades as a generation of owners builds with an eventual sale in mind, but it is the reality of the current market.

Sometimes the answer is to wait

He describes only listing businesses he believes he can sell, and being willing to tell an owner directly that now is not the moment. He has a group of companies he is quietly helping get ready, working through tax returns and structure, with no listing in sight.

The advice in those conversations is often to spend eighteen months or two years building a management layer. That makes the company more robust and therefore more valuable, and it may lift enough weight off the owner's shoulders that selling stops feeling necessary. He is comfortable with that outcome, on the view that the referral or the eventual sale at a better price will come around.

Build it to sell, or build something else

His framing for owners is a choice between two paths. Either build the business so that it can be sold when you decide you want to, or accept that it cannot be and invest elsewhere, in real estate or the markets, so there is something to retire on.

The problem is that a large number of owners are doing neither. They take the profit, minimize the tax, and build no outside position, which leaves them with a business that will not sell for what they need and no alternative to fall back on.

He is candid about having watched this up close. His mother, facing the 2008 downturn, could not bring herself to lay off staff she cared about and instead ran up half a million dollars of debt on a line of credit to keep paying them through a period with no work. The employees would have been fine on unemployment and could have come back. Loyalty and good business judgment are not automatically the same thing.

On the diversification side, he estimates that sixty to seventy percent of his sellers hold a real estate portfolio alongside market investments, and many sell precisely because the money will work harder somewhere else. He owns around twenty-two buildings in Upstate New York himself, and makes the point that enough independent income changes your posture. You can decline work you do not want, and you stop waking up worried.

If your valuation falls short of your number

Being disappointed by a valuation is extremely common. Loren's advice when the gap is large is that organic growth is unlikely to close it, since organic growth is what produced the current number.

One route is acquisition. Buying a smaller competitor you can finance and fold in can move the bottom line faster than growing into it, potentially reaching the target in a couple of years. The caution is that integration is genuinely hard. Experienced acquirers tend to keep the companies largely separate and combine only in a few places, because every business has its own culture. Running two companies at once is also more than most owners can manage, so it usually requires a capable operator for the second one.

The other route is empowering the people already there. He describes a cell tower maintenance company in Los Angeles whose key employee wanted to relocate to the Sacramento area for family reasons. Rather than lose him, they backed him to open an office there, and that location now produces thirty to forty percent of the company's revenue.

Ryan's closing challenge on this is a good one. If an idea like that sounds obviously smart, the question worth sitting with is why you have not already done it. The answer usually points at the thing that needs to change.

Don't take your foot off the gas

The final warning is for owners who have mentally checked out before the sale. Multiples reward growth, and a business that has been flat for years will not command the number its owner is hoping for. Loren mentions a California client, away six months of the year, who was growing when he first met them and has since plateaued.

The arithmetic is unforgiving because profit is not linear. A company normally doing four million in revenue that slips to three and a half, while keeping all its staff and expenses, can lose something like forty percent of its profit. A few hundred thousand off the top line moves the sale price far more than most owners expect.

One last note from the episode, aimed at anyone feeling out of their depth: do not be embarrassed about not understanding the M&A process. Loren mentions a deal heading toward a seventy-five million dollar close where the owners had calculated their own EBITDA at five million when the real figure was closer to eight or ten. Not knowing puts you in the majority.