Take Five #154: When to build vs. buy vs. partner during growth planning, and more
Top five must-reads this week in the world of SMB acquisitions and operations
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Take Five #154: When to build vs. buy vs. partner during growth planning, and more
1. When to build vs. buy vs. partner during growth planning
Every private equity-backed executive—whether a CEO, CFO, COO, or Operating Partner—faces the Build vs. Buy vs. Partner decision. It’s one of the most critical levers for driving enterprise value while staying within the risk-adjusted return expectations set by investors.
At its core, this decision is about balancing speed, control, and capital efficiency while working within the guardrails of a defined investment horizon. Arvind Kadaba, CFO at Aidoc, shared a structured approach on Run the Numbers, breaking the decision into three key factors:
"It’s the standard build, buy, partner calculation that every executive goes through. If you want to build it, how much roadmap distraction would it be? Is it already planned, or are you pulling it forward? And what’s the opportunity cost of that decision?"
Read Looking for Leverage’s post here.
2. Service business-specific due diligence figures to review
3. Franchise acquirers weigh in on why they bought, plus provide deal structure details and some benefits to buying into a business model
In a survey of 187 Entrepreneurship through Acquisition (EtA) businesses purchased by Harvard Business School graduates in the past decade, 19 (or 10%) purchased franchise operations—10 immediately upon graduation and 9 mid-career. All were self-funded, paying an average earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple of 4.2x with a range of 2.7x to 5.5x. The median seller note was 20% of the purchase price with 15.5% outside equity and the remainder financed by bank debt. Of these franchises, 55% were single-unit operations, and five ranged between 13 and 23 units. Employee count ranged from 8 to 300. Searchers took a median of 12 months from search launch to close with a range of 6 to 35 months. One additional searcher/CEO decided to “build” rather than “buy” a territory for seven car wash facilities.
Why choose a franchisee to acquire?
Omar Simmons, at Exaltare Capital, who now owns more than 100 Planet Fitness operations, said that “franchises are good businesses at a decent price with solid growth prospects. They have low-valuation multiples, offer ‘buy and build’ opportunities for growth, and we can create and leverage a sophistication with our capital advantage.” Richard Bi, at Paul Davis, found that “Brand awareness and operational support offered by a franchise network make the business more stable. Franchises usually come with some form of exclusivity, most commonly territorial protection, which has real intrinsic value that’s independent of how well or poorly you run your business. I found that debt and raising equity relatively easier. I didn’t start my search looking for a franchise. To the contrary, my initial strategy was actually to avoid franchises with the only exception of day care.”
Read the rest of Jim Stein Sharpe’s post here.
4. Redditor rundown of a dead snack business acquisition (and some good dialogue in the comments)
5. Podcast: “From Survive to Thrive: Scaling Your Home Service Business for Maximum Growth”
Owned and Operated podcast hosts John Wilson and HVAC Jack discuss how to prep service businesses for the busy season with smart, scalable strategies. They break down how to hit big revenue goals, streamline operations, and build a strong team within budget. They also discuss how to leverage AI, overseas support, and staffing services to grow efficiently and stay ahead of demand.
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