What are the strategies or frameworks used to choose the path to take?

November 27, 2024

by a searcher from State University of New York College at Cortland in Durham, NC, USA

I know I've learned that buying small is generally not a good idea. I have an Auto Shop nearby (and want to do a rollup, but there are lots of tiny operations not many platform opportunities) but it barely makes money (actually loses money but with seller add-backs it makes $124k). I do see some extreme upside if I get it right (has the lift capacity I like) but worried that if I don't get it right it will require a huge time investment for very little money. I do have an operational expert that has been in the space for 20+ years and could help me but feel there is quite a bit of risk.

I have another Auto Body Shop, more of a platform business but it's 3 hours away. I have a young family and we aren't moving. It does have some upside and I am stepping into some solid cash flow. The hours of operations also allow for me to stay there for 4 days and have the long weekend home with the family if I am not working outside business operations which if I am head down making things happen, I would work those longs days while they are open and hopefully set myself up for having more freedom the days I am back home. I would again have the same industry expert for this opportunity plus other contacts I have made.

Then there is entertaining only opportunities outside of Auto Repair focused on Home Services and staying locally without an expertise partner per se but I could learn the business and then figure out a vertical/horizontal rollup strategy after running a business for some time.

I'm trying to gauge what makes the most sense. What are strategies or frameworks people use to help them make choices that seem like they are all reasonable opportunities?

Thanks in advance.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Interesting dilemma. Is the adjusted EBITDA for the small shop after including potential CAPEX adjustments and a salary for you? There is not much room if something goes wrong with such little EBITDA. In addition, auto repair can be a challenging industry. Repair technicians are in high demand right now in the market and if you do not have experience and you lose them, you could be in some real trouble. I think buying the smaller business is really high risk.

As for buying a business three hours away when you do not plan to move your family, you really have to think about the live work life balance you are looking for. If your children are young, you might be underestimating the strain on your family and you personally.

I know I do not know you, but since you posted here for advice I am going to be honest. I would not recommend buying the business with so little EBITDA in an industry you do not know. You are setting yourself up for a challenge. Secondly, I would not buy the business three hours away with the young family. I would look for something else local that fits your experience so that you can have the work / life balance and have reasonable EBITDA to handle anything that comes up without stressing your family. If you would like to discuss further you can reach me here or directly at redacted

Reply by a searcher
from University of Florida in Miami, FL, USA

^redacted‌ I'm going to echo what others have said; keep looking. I don't know your personal finances, but assuming you're leveraging up with an SBA - at $124k ebitda you're basically just buying yourself a job with the downside potential of someone taking your house if you don't perform.
I would possibly entertain the 3-hour-away one, but be prepared to make unplanned and frequent trips out there, unless you have an operator in place that you trust fully.

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