February 8, 2019

Investing In All Kinds of Weather

It’s human nature to have biases: ice cream vs. popcorn, Netflix vs. cable TV, tennis shoes vs. flip flops. The same applies to business. As we investigate companies to buy, we develop preferences for certain characteristics: “steady eddy” vs. glamorous industry, slow growth vs. fast growth, people intensive vs. capital intensive. And while it sometimes feels like we are looking for a needle in a haystack, our searching has become much more focused and productive because we know what we are looking for. Entrepreneurs are defined by their passion to pursue business success by doing what they love. And while entrepreneurship is glamorized in today’s world, the reality is that owning and operating a business is hard work.
 
   
 
So it’s fair for would-be entrepreneurs to think about the daily duties of operating a business, whether that be a grease-trap cleaning enterprise, or better yet, a trash collection company (both of which we’ve seen during our search!). Both sound pretty mediocre, to be honest. But there is a big difference, for example, in running a trash collection enterprise versus actually picking up trash.  Even in today’s high-tech world, there are thousands of under the radar, old-economy industries where business owners are reaping the rewards of their labor.  We plan on taking such an existing, successful enterprise and installing “new economy” energy, systems and growth. Just as importantly, this is our opportunity to “bet on ourselves”. So whether our future business is in a glamorous industry is far less important than other details.
 

We have passed on absolutely beautiful businesses that, for one reason or another, just weren’t the right fit for us. What are some of those reasons?

 
They can range from geographic location to customer concentration. Some are too big, while others too small. We both maintain a healthy fear of the next economic recession, and we think it’s smart to consider both the best and worst case scenarios. Our ultimate acquisition will be a business that we are absolutely certain will survive the test of time so that we can look back in twenty years and be proud of what we’ve built. Fundrise’s latest investor update conveyed a message that we share about our investment philosophy:
 
How does that message relate to our search to buy a Florida-based, family-owned business? We didn’t necessarily start Pursuant to buy a glamorous business, nor do we need to acquire a business related to our personal passions (e.g. soccer for Joey, golf for Sam). We are looking for something “steady eddy” that can weather all economic storms. Just because a business had a banner year in ‘18 doesn’t necessarily mean it will do as well in ‘19.

As a reminder, here’s what we’re looking for:

   

For us, the most important characteristic of our future business is that it can do well in good times and bad.  We regularly pass on businesses that are doing great now but had a tough time a few years ago. It’s tough work to find that needle in a haystack, but we are confident that we will find it sooner or later.  And with that, the search continues.  

As always, we greatly appreciate connections you are willing to make to business owners, service providers or other area business folks. Whether that’s an introduction to your personal CPA or a neighbor who is a business owner, our best leads come from personal intros. We hope your 2019 is off to a healthy and prosperous start!    

Cheers,

Joey  &  Sam

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