Could this business be replicated with "$100k and a website"? - Searchfunder

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by a searcher from University of Virginia
in Troy, VA 22974, USA

1yr ago

Could this business be replicated with "$100k and a website"?

I was listening to a recent episode of the Acquisitions Anonymous podcast, and one of the hosts questioned whether the business they were analyzing could be replicated with "$100k and a website."

It sounded like he was saying there's a certain type of business that's cheap and relatively easy to start up, and that type of business would be a less desirable acquisition (barring some unique proposition, of course).

Has anyone heard this term before, and what are some businesses that would fit in this category? Thanks.

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reply by an investor 1yr ago
in Asheville, NC, USA

That was actually me saying this on the episode.
Essentially, we only want to invest in deals that we consider a “real” business with a barrier to entry versus just a hustle combined with a marketing hack.

Hustles are *great* to start, but can be easily disrupted and are generally based on the owners' skills.

We don’t want to invest in that, and you don't want to buy that.

When a company can be recreated with some grit, good marketing, and 30x less capital, then it shouldn’t be valued the same, and it’s prone to more skilled competitors and industry disruption.

On average, the harder it is to scale, the stickier it will be over time.

For reference, here is the conversation mentioned (Timestamp 26:15) redacted

^redacted‌ you asked for a specific example, so here are a couple:

1) Imagine a "roofing company" where it's really just an SEO website that brings in leads and delegates to a list of random subcontractors. Maybe in brings in $1mil/yr, but you don't want to pay $3mil for that. You want to invest $100k in good SEO and find good subcontractors.

*Of course* this is easier said than done, I'm generalizing, and not everyone has that skillset. But it's worth looking at a deal from this perspective.

2) The example from the AquaAnon episode. Imagine that, as we hypothesized, this is a "payment processor for yoga studios using ACME scheduling app" type of software.

The app itself is probably relatively simple based on what we saw on the listing teaser. Scrape all the yoga studios with "Powered by ACME" in the footer, offer a better deal or handhold onboarding for them, spend $100k on this instead of the $7million asking price.

Obviously I'm oversimplifying a complicated process, but I'm sure you get the general thesis. Of course, you cannot get any sort of debt funding for such a task, so capital and grit is required, but if it works then you save millions.

reply by an investor 1yr ago
from United States Naval Academy in Ashburn, VA, USA

^redacted‌ This is a really great take that I'm surprised we don't hear more people talking about.

If you can't find deal flow or are priced out, you could create something in that target space and apply your "special sauce" now. If you had your hands on that dream company - what would you be doing day one to make it grow? Can you build that for companies out there now and make money now without acquiring?

In Travis' example - if you helped roofing companies market you could establish a relationship with them. You could even be figuring out who runs the best roofing companies and know what they are really worth. If you know them you may get an opportunity to buy them down the road if that's really what you want. It doesn't have to be buy the whole thing Day 1 or replicate what you see with a Build strategy. You can use your skills to do a lot in between.

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