$80m cash exit on $189k/mo profit; would you?

^{Can we say your next phase of B2B growth starts right here:}

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What a great personal mantra from a gentleman who 10+ years ago started a PE firm which today manages more than $1.8b in assets:

Make good decisions. Plan the work and work the plan. Deploy capital and generate returns.

That said…

If you AS WELL want to make good decisions. Plan the work and work the plan. Deploy capital and generate returns.

Doing all that you probably know that running a business is hard. You're solving problems daily –often for the first time. Mistakes cost time, money, and momentum.

That’s why Rand Larsen built Scalepath.

A curated peer group for business owners who want to move faster by learning from others who’ve already made the tough calls.

If you’re building a company and don’t want to do it alone.

Schedule a free call with Rand Larson from JoinScalePath.com

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Big lesson for those who do add-on acquisitions:

"Don't buy from people who sell their businesses. All deals we did were off market going after folks in their 40s who've been in the business for 15 years.

Look for someone who's not ready to retire but ready to live a simpler life."

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It seems you don’t need to cold call 100-300 owners to find a deal.

One first time buyer got a $5.5 million deal because he told everyone in his network he wanted to buy one.

6 months later a warm intro from someone who heard him talking about buying a business at dinner.

I guess the lessons is that your next great deal might be one conversation away

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Not a traditional business story, but a SaaS… and a great one!

Base44 ended up making $189K profit in May and today got acquired by Wix for $80m...

I believe it's important to UNDERSTAND that increasing a share value from a SaaS business is FAR faster and makes way more money THAN any other business ever will.

For example, every 100k in recurring revenue in a SaaS business is worth 5-10 million in networth/share/valuation.

It can even be 30 million + if you're in the right industry (AI for example right now).

The multiple actually INCREASES the more the revenue grows.

For example a 1 million MRR (month recurring revenue) will probably only see a 5x multiple.

A 10 million MRR will see 8-10x.

1. Comparing a consulting business vs SaaS (just an example)

There are VERY VERY VERY few ways you can reach an income of 20 million a year.

So in SaaS they know that if they simply increase revenue constantly, the share value will sky rocket.

This is why most silicon valley companies make no profit (Base44 was bootstrapped and a rare example).

2. Hard work

Perhaps THE most important lesson one can learn as an entrepreneur.

The BIG difference between a 7, 8 and 9 and 10 figure builder is RARELY... RARELY the effort.

We can even go as far as to say it's not an effort thing. It's a strategy thing. And SaaS is the smart way to go.

Although also the most difficult.

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No journey is ever the the same but I personally really like the ones where one quits their high paying say $300-400k/year job at a prestigious firm to go and acquire a very traditional niche business with revenue less than $750k with no saving and having a newborn at home.

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Private equity made 80x on this roll-up. They had 40% EBITDA margins, 3-year paybacks, and subscription-like revenue.

A true masterclass in sale leasebacks, dividend recaps... and timing.

Here are 12 key lessons from the car wash PE boom and bust:

1. A simple business that attracted big capital. Car washes looked ideal to investors. They offered recurring revenue, low labor intensity, and scalable real estate footprints. Wall Street couldn’t resist.

2. Private equity jumped in fast. Billions of dollars flowed into car washes starting around 2019. Almost every quality operator was rolled up into a larger platform.

3. The unlimited subscription model took over. PE firms saw unlimited wash memberships as a dream. Predictable, recurring revenue made the model look bulletproof. But it became harder to retain customers as competition increased.

4. Family-owned operations became financial assets. What used to be owner-operator businesses were now part of spreadsheets and pitch decks. Growth targets took priority over steady operations.

5. The race for expansion was relentless. Firms rushed to open hundreds of locations in a few years. The goal was to reach scale quickly, often at the cost of operational discipline.

6. Valuations went off the rails. Some acquisitions closed at 25 times EBITDA. Aggressive financial adjustments made the numbers look better than reality.

7. Debt was the fuel. Low interest rates made leverage attractive. But once rates increased, these highly leveraged companies started facing serious cash flow pressure.

8. Operational complexity reached a breaking point. Managing a dozen sites is manageable. Running hundreds with inconsistent systems, maintenance issues, and employee turnover became a nightmare.

9. Customers didn’t stick around. In theory, everyone washes their car regularly. In practice, loyalty was weak. Many customers canceled or hopped between discounts.

10. Real estate was sometimes the real asset. Some investors realized the land beneath the car wash could be more valuable than the wash itself. Sale-leaseback deals locked in long-term obligations.

11. The roll-up model lost steam. Acquisition multiples started dropping. Some platforms are now worth less than they paid for the assets. Deal flow has slowed.

12. Strong operators focus on the fundamentals. The winners in this cycle are the ones who never overextended. They built high-quality, customer-focused operations without overpaying or overleveraging.

This 25-min video explains it all.

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Forget who said this but have faith in yourself to do harder and riskier things than you currently are. They won't actually be THAT hard and you'll figure it out.

This is exactly what wrote to my great friend 5 years ago for his 32nd birthday. 6 months later he sold his small and boring $350k Ebitda line striping company and raised VC money to build a hardware robotics company.

Two weeks ago they had a demo day at the Tesla factory.

- - - -

How has been the week in the small holding company world?

Traditional companies

Over the past 2.5 years I've looked at thousands of companies, talked to and met with almost half a thousand of them.

When I first started it seemed like buying a business bigger than you expected felt risky, but now I see it as safer.

I was looking for a $400-600k EBITDA business. But now I'm working to close a deal where the company has an EBITDA over $2m in EBITDA. Why?

Because a company with ca $500k EBITDA often means:

• No systems

• Owner still in the business

• Little margin for error

Where the bigger business has the infrastructure, team, and a runway to learn.

All of this means less risk.

That's why I'm working on this $12 million revenue heavy equipment company. More details coming soon!

Consumer loan company

I know we're still in a mickey mouse league compared to many folks here on twitter but we had our best day in financing loans. $55k, followed by 35k, 28k.

"Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts."

— Charlie Munger

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This week’s podcast:

After 100+ podcast appearances by Andrew Wilkinson...

His business partner finally speaks.

My conversation with Chris Sparling, co-founder and President of Tiny.

In his first-ever solo episode, Chris breaks down:

• Tiny’s origin story

• Their first deals

• Buying 30+ businesses

• Lessons from meeting Munger & Ackman

Here are 9 takeaways, lessons and quotes from this podcast:

1.  Buying businesses with proven earnings beats burning millions trying to start one.

2.  Every shiny VP we hired didn’t have it figured out either.

3.  Unlimited capital would make us worse.

4.  Founders sell to Tiny because we’re real, fast, and don’t waste their time.

5.  Avoid barnacle businesses.

6.  You get what you reward. And most people put sugar in the wrong places.

7.  Risk isn’t volatility. Risk is betting the farm on something you can’t control.

8.  If it’s not a hell yes, it’s a no.

9.  Pretend your business is a law firm. Ask what a law firm would do with $10m.

Here are the links to Spotify, Apple Podcasts and YouTube.

That’s all for today.

I really appreciate you taking the time to read and look forward to talking to you again next week.

Take care,

PrivateEquityGuy / Mikk Markus