Searching for a business to acquire?
Or just thinking about it? You've come to the right place.
OUR STORY
Start small & focus on what matters
We started Cub Investments to create a future for small businesses lacking a viable succession plan.
But, we didn’t start by investing. We actually went out and acquired and grew a small company ourselves to prove it was possible.
It’s true. The ‘silver tsunami’ of business owner retirement is upon us. It is creating opportunities not seen in generations. Capitalizing requires rolling up the sleeves to take on tough projects – creating a high performance culture, building high quality processes, and implementing technology.
Done right, we believe it is possible for a small business to compete and win at a scale mom-and-pop players never before could achieve.
WHY ACQUIRE
Building small business for both career success & lifestyle
Career success and lifestyle don’t have to be at odds, if you put the right incentives and support structures in place. We believe small business entrepreneurship can offer the best of both worlds if done right.
We invest with entrepreneurs who share our beliefs that…
It’s better to be great than big
True satisfaction comes from the people you impact
The journey is the reward
Many fear diving in and getting stuck. It's a legitimate fear. Owning a small business can be lonely, difficult, and stressful. The key to avoid feeling stuck is building strong partnerships with people who will help. At Cub Investments, we are that kind of partner.
OUR STRATEGY
Frequently Asked Questions
What makes a good acquisition target?
We focus our energy on small business acquisition opportunities in the “job replacement” market, where the seller’s discretionary earnings (SDE) falls into the $200-500K range. In these businesses, purchase multiples are low (typically 1.5-3.0x SDE), the buyer population is small, and most potential suitors are unsophisticated and under-capitalized. This creates real competitive advantage for first time entrepreneurial acquirers.
We like businesses that are simple to understand, reliably profitable, and have a robust recurring demand profile. We also prefer businesses that are service-oriented, and do not consume a lot of cash to grow. It’s advantageous when the acquired business serves (or has the ability to serve) a customer niche where there is a non-cyclical tailwind propelling growth. In short, we want to position our businesses to benefit from overwhelming economic forces in order to create the greatest probability of success.
We put high value on businesses with a long history, a unique and valuable niche, and a strong motivation to exit fairly quickly. Niche businesses competing in a fragmented industry structure with relatively unsophisticated and under-capitalized competitors are also desirable.
Do I need to invest my own cash?
Typically, yes. As the searcher, you will need to bring enough cash to purchase your equity at a fair price given the acquisition financial structure. Depending on how much debt the acquisition can handle, and whether you bring outside investor money as well, acquisition entrepreneurs will generally need at least $50K to invest.
What if I don't have enough cash?
There are many passive investors who are interested in investing in these types of deals. We keep an active network of such invidividuals, you can find people on Searchfunder, and there are other investor lists and communitites as well.
How do I get started searching?
We generally suggest starting by searching with the large small business listing aggregators including BizBuySell, BizQuest, BizNexus, and DealForce by Generational Equity. While listed businesses tend to be shopped, if you are competing where you have a real advantage, that shouldn’t matter. Moreover, there’s no bigger barrier to acquiring than an owner not wanting to sell. At the prices you should be purchasing at, you are unlikely to compel someone to sell who doesn’t already really want to. Nearly all of these listed deals have overcome that hurdle by engaging a broker.
We recommend starting with the broadest possible searches and searching using limited exclusions. If you aren’t willing to move, use geography to constrain your search. There’s value in searching close to home because you will know the market better and be more credible with sellers.
We recommend inquiring about businesses that look interesting and fit some of your criteria. Evaluating the pros and cons of real listings will teach you about yourself and your process. In addition, the brokers listing those businesses are likely the brokers you’ll come across again and again. It helps when they recognize you and know that you are qualified and hungry.
We've compiled tons of good resources including websites, links, newsletters, podcasts, data, tools, and more in our library.
What do you avoid?
We typically do not consider consumer brands, bricks and mortar retail, or anything food-and-beverage related. We aren’t interested in businesses that are in fundamental terminal decline or face near term existential threats. We typically are not interested in franchise operators due to the growth constraints and risks imposed by franchisors. They do the fun part and cap your success. We are, however, open to businesses competing in heavily franchised segments, as your competitors are effectively paying a tax to a franchisor that you don’t have to pay if you can build and run your own business infrastructure.
How do I know I've found the ONE?
First, recognize that the ONE does not exist. No business is perfect. If it were, no one would want to sell it.
That said, if you have the managerial chops to acquire and successfully operate the business you are considering, you should feel comfortable that whatever comes up, you can likely deal with it. That’s one reason to prefer simple businesses. You may not have the complete comfort you’re hoping for when making your initial offer, but you should be pretty close to that level of confidence by the time you close. Figuring out what the owner does and what you have to replace will be a big part of getting to the finish line. Much of that will take place during due diligence.
Lastly, it’s worth mention that as long as you have a vision and a plan for making the business into what you want it to be, it could be a great deal worth pursuing, even if the current business itself isn’t great. Sometimes acquiring is just your foot in the door that creates the momentum to get started.