Has anyone out there purchased a small business to own & operate?
Currently have the liquidity and with SBA leverage could afford a $5m metal-bender type business.
Thoughts and experiences?
As a side hustle, I am considering a number of possibilities, and purchasing a small business is one of them. I'll be curious to see if anyone chimes in. Sorry I can't offer any guidance; I'm looking for the same information as you!
The best small businesses to buy IMO are websites that generate regular revenue already. You can buy these business for 2-3X annual revenue only, or maybe 5X operating profits. Compare that to the S&P 500 trading at a CAPE PE of 33X!
See: https://www.financialsamurai.com/buying-selling-blogs-how-i-built-my-blogging-business/
Look up search funds and "Entrepreneurship Through Acquisition". There are a lot of good resources out there, including studies by Stanford Professors and a book by two HBS professors.
Definitely an interesting path. Certainly higher risk than buying real estate.
A website is a tough one. I personally wouldn't pay anywhere near 5X profits. I'd pay 1X - 2X, MAX. Google changes an algorithm and you could be wiped out. I can think of all sorts of websites that have come and gone. 5+ years to break even at the rapid change of pace that comes with the internet... That's a tough sell!
I would check small business brokerage sites... bizbuysell for example. Look through and just spend a LOT of time looking through.... See what is available, what they are selling for, what their profits are, etc. Business is tough and if you are expecting a turn key operation that will be smooth sailing, you may be in for a huge surprise. Consider that a good portion of businesses for sale are because the owner can't handle it any more, they feel a downturn, too much competition, etc. It's tough.
The most turnkey would be something like a gas station/convenience store. Beyond that, there are so many opportunities to just start something yourself. Start small. Sell, sell, sell.