LMM Folks: Have you seen an attractive business model where you said "that's so easy that I could start that business today"?
I am an associate in UMM PE. I am not 100% sure that PE is for me long-term.I have had an entrepreneurial itch for a few years now, but don't have a good idea. I was looking at our deal flow for inspiration, but as a function of working in UMM PE, the business models I come across are too complicated, mature, or require some highly specialized expertise.
Has anyone here, who covers the LMM, come across an attractive sub-vertical that doesn't have "insane" barriers to entry? I know the question is a bit parodoxical, but interested to hear people's thoughts.
Get jacked and start an OnlyFans. Hire a couple of fit models for group activity, watch profits soar.
Edit: OP wants a lucrative business with no barriers to entry. And you’re MS’ing me? Idiots.
Isn't this basically what Andrew Tate did? lol.
Most "simple" LMM businesses at auction are the product of a person's life work. Take a "simple" business services platform as an example - e.g. commerical plumbing, HVAC, landscaping. The typical founder profile I see at these companies is someone who started working in trades or manual labor in their late teens, then spent thirty years building a book of thousands of customers and managing hundreds of employees. You're discounting a lot of sweat equity that goes into most of these companies. There isn't a free lunch in this regard.
Rarely, but I have stumbled across some that I spent serious time thinking about jumping into myself.
- Fertility egg storage (massively underserved)
- Used box supplier (procure unwanted once used boxes; re-sell them as a ESG benefit and cheaper alternative to new)
- Used pallet supplier (same idea as above)
- Direct to equipment refueling/recharging
- Solar panel cleaning / snow and debris removal
All of them had some sort of issue, typically personal, as to why I didn’t pursue (e.g., the market I want to live in is already dominated or there isn’t enough demand in that preferred market, would need equity investors which is something I desperately look to avoid, etc.). Currently investigating residential sprinkler care.
Pinging this. Several members of my graduating class went into entrepreneurship, and the three most successful businesses are an egg fertilization and storage company, a long-term solar panel cleaning and maintenance contracting company, and a direct-to-equipment refueling company that targets agriculture, construction, and emergency response clients.
That said, and following another comment, there is no free lunch. Those kids are not the Hollywood tech startup success story, they grind just as many hours as I do for a fraction of the income, although they could end up far wealthier over the long term. If they can expand margins significantly, bring on staff to delegate responsibilities to, and continue to grow, they could end up with strong cash flows and exit potential - but, everything depends on that if.
Good perspective. People don't realize scaling even a non-SV startup takes years and years. It's for those playing the long game.
I have seen the greatest business model ever. The problem is it doesn’t scale and it only works in China.
In China, the government gives regional monopolies (via licenses) to one individual business to store umbilical chord blood. 50%-plus FCF margins and literally no competition for a business that is basically just a bunch of freezers.
Also, doesn't work for the "so easy I could start it" part of the question. You probably have to be a connected princeling to get one of those licenses. Something very very few people can do.
Short is answer is yes but you don’t need to work in LMM IB or PE for the benefit. Just sign up for biz broker blasts on various broker websites and you’ll get teasers/can execute NDAs for books on bizzes that interest you.
can you list a few broker websites
Ever heard of Google?
Porta potty rentals and washer & drier rentals. The leading consolidators in the space run into issues of they buy a tack-on and 2-years later the founders of the original business re-launch and recapture a bunch of share on their old routes once non-competes roll off.
Ask Platinum how their United Site Services investment is going lol
Last I heard that wasn't an industry demand issue and more a losing share / customer retention issue . . . to people who they have bought smaller s***cos (in all sense of the word) from.
Dunning-Kruger in full force.
I'm surprised by how many intelligent finance guys look at something they know very little about and assume it is easy.
You should just assume anything you think is easy is ~10x harder than it is if you have never tried it.
Building some of these blue collar LMM businesses fucking sucks and is a serious grind.
And how would you know? Aren’t you a consumer guy?
I come from a long family line of blue collar entrepreneurs. Plumbing, electrical, welding, auto mechanics. You name it. It’s not easy, but it’s also not as hard as you think. Certainly not “10x” as hard as what some may believe. Generally these folks really aren’t all that impressive.
The fact you dismiss people like that kind of says it all. It is IS hard because it requires so much willingness to work with very stupid people over a sustained period of time, it is super depressing if you are going from an environment like PE where everyone you talk to is making 6 or 7 figures. I've run manufacturing ops that I scaled from nothing to ~200+ people. It sucks in a way you do not understand unless you have had to explain to someone that their paycheck is smaller now because they are paid weekly instead of 2x per month or drag meth addicts out of a bathroom and kick them out.
lol fair enough. Maybe "easy" wasn't the best word to use, I meant more so something that didn't require 20+ years of industry-specific experience to run.
m-1 and the OP are both right here.
Insurance brokerage
Do you think entering that market now would be too late in the game? Have seriously considered it given some personal connections, but a lot of people told me that it's in the "mid-to-late innings" of consolidation given private equity started acquiring platforms many years ago.
It’s not too late. Your goal shouldn’t be to build a large consolidator. You should buy a sub-1m EBITDA firm for 8x, try to grow organically and do very small book purchases, and sell for 12x at 2m EBITDA. Of course easier said than done, but there is still significant arbitrage going from a tiny shop to a relatively small shop
This is very accurate. Multiples go up 50% upon reaching some semblance of scale and the margins (at any size) are very lucrative. The biggest barrier to entry is social network. If you show up brand new at the game into a market; you have some work to do to build up trust and reputation. Earning the business of the accounts that have lots of premium spend is not easy and while there is some element of price sensitivity... it's not as important as service and that requires large fixed cost investment.
If you can get the funds to purchase a LMM business lets say ~7 to 15m EV, I think a specialized contract manufacturer is a thing to consider. ie, someone that does it for nutrition products. You don't need much expertise as you will not be responsible for formulating or developing products, and you will have the people around you needed to continue operations and growth. It's a realativly fragmented market as well. Obviously tough if you want to start from scratch due to capital investments and such.
In the LMM contract manufacturing space don't you run into customer concentration and / or customer health issues? Like at a 10% EBITDA margin / 4-8x multiple you are only doing ~ $20m of revenue so I'd think difficult to be super diversified.
APAE the people miss you
the folks dismissing lower middle market founders should put their money where their mouth is and start one on their own
Ipsum odio earum amet numquam vel numquam quod. Enim necessitatibus sapiente ratione quia. Odio et error sapiente repudiandae velit. Autem sint accusantium mollitia consequatur. Commodi earum qui sit dolore. Amet reiciendis quas excepturi ex.
Est in aut est voluptate perferendis saepe. Illum doloribus odio autem enim illo.
Tempora nam omnis quas sequi. Quia esse sequi et inventore molestiae iure voluptatem. Natus libero aliquid ad eligendi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Corporis quae dolor totam in asperiores aliquam corrupti. Deleniti voluptatem sit et culpa id est voluptatem. Numquam quos tenetur natus fugit. Nihil asperiores ut dolores minus. Sapiente nihil et sapiente dolores dicta. Aut sit molestiae magnam est omnis rerum debitis.
Est excepturi rerum omnis. Impedit tempora ullam recusandae eum corporis. Voluptatem molestiae velit et ipsum aspernatur. Sunt optio et dolores et nulla.
Nam eveniet voluptas provident. Aliquam doloremque dignissimos et est consequatur ipsum praesentium.