Take Five #014: Why you need to dream bigger and stop going for 500k SDE businesses, and more
Five takeaways we loved at Kumo this week
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Take Five #014: Why you need to dream bigger and stop going for 500k SDE businesses, and more
1. What to do when the asking price is too high: “Admit you're not very smart.”
2. In this economy, one team’s commitment to run against the wind:
How the team at Chenmark feel about uncertain economic times:
As cash-flow-focused small business owners since 2014, our approach has been decidedly unfashionable. We only deal with companies that have a history of profitability. We determine purchase prices based on free cash - the kind that accounts for capital expenditures and working capital. Once a company is one the Chenmark team, we make sure to identify and track unit economics in depth. We expect our teams to know how much it costs us to mow a lawn, produce a baguette, run a boat tour, grow a fruit tree, or sell a gallon of paint. This means we make uncomfortable decisions on the regular. In order to sustain our unit economics, we sometimes have to increase prices, abandon unprofitable customers, limit hiring and investments, and adjust operational processes. We never have enough resources and everything is a trade-off.
[…]
While Chenmark is certainly not immune from the macro environment, shifting markets do not force us to adjust our entire approach to business. Our growth strategy doesn’t rely on external capital. We are very comfortable ruthlessly scrutinizing unit economics, operating with limited resources, and maximizing cash flow. We are used to running against the wind.
From “Running Against the Wind” by Chenmark
3. Why you need to dream bigger and buy a bigger business:
4. “There are plenty ways to find businesses for sale, but only a few that actually work and are worth your time.”
5. Common mistakes searchers make, from a SBA loan broker: “Yes, interest rate is important. What is more important is certainty of closing.”
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