Small Business Acquisition

Acquiring an existing small business as a wealth-building strategy — distinct from starting a company and distinct from institutional Search Fund investing. The canonical practitioner’s argument comes from Brandon Laughridge (July 2020, Firmly Believe the Most Certain… (tweet)):

“Firmly believe the most certain path to building a high net worth ($10M plus) is buying a small business at a relatively young age.”

The core model:

• Size constraint: target businesses under ~$7M total capitalization. The SBA Loans $5M limit is load-bearing — at this scale, 70-90% of the purchase is SBA-financed, 5-25% is seller paper, and the buyer contributes only 5-10% equity.
• Deal math: on a $4M acquisition at 5x EBITDA ($800K in earnings before debt service), total debt service runs ~$500K/year (10-year amortization at ~6%). Leaves $250K+ in personal earnings during the paydown period.
• Down payment solved: the 5% equity requirement (~$200K on a $4M deal) can be raised from outside investors while retaining 85%+ ownership. Net out-of-pocket: $0.
• Horizon: after 10 years of SBA paydown, the 85% stake is worth $3.4M at flat earnings, $4.5M at inflation growth, $6.8M if the company doubles. The SBA debt that made entry possible also compresses out over time.

The strategy is closer to Micro PE than to typical entrepreneurship — you’re acquiring a stable, profitable operating business, not building from scratch. The risk is operational (running the business) not existential (finding product-market fit).

Brandon Laughridge notes he and his wife both run companies acquired this way.

Where this appears

• Firmly Believe the Most Certain… (tweet)