I have a friend, Jeff, who does this with standard businesses.
He searches for businesses built by owner/operators: plumbing, health care, massage therapy, etc. These businesses started as an "S", and as they grew, more people were hired and employee base was built very flat. End result is one owner/operator with 35 people reporting to him.
Usually they are languishing on the market because the owner cannot leave without the business falling apart. Only person who can take over the business is someone with the same job skills (plumber, doctor, therapist) but most of those folks do not have the money or ability to get financing.
Jeff comes in, structures a deal where the owner can get out of the business, but has to be involved over the next couple years via an earn-out. Jeff restructures the business, installs an organization hierarchy and removes a lot of the inefficiencies. There tend to be a lot of inefficiencies when a owner/operator is running the show.
Once the business is restructured, it can now operate on it's own without the owner being involved and is much more palatable to a business person looking for an opportunity. He resells it for a profit.
Some things I have noticed while watching him do this:
1. Whole process takes 2-5 years and is very similar to value plays on commercial real estate, except that the upsides (and downsides) tend to be a lot higher.
2. Customer (revenue) are the most important variable in the equation. Whatever you do, make sure you are tending to customers and customer service does not suffer.
3. Hire a good manager. 90% of employee issues are related to management. Find a good manager and keep them happy.
There are tons more, but these are the mental notes I have made while watching him do this stuff over the past five years.
RealOG
He searches for businesses built by owner/operators: plumbing, health care, massage therapy, etc. These businesses started as an "S", and as they grew, more people were hired and employee base was built very flat. End result is one owner/operator with 35 people reporting to him.
Usually they are languishing on the market because the owner cannot leave without the business falling apart. Only person who can take over the business is someone with the same job skills (plumber, doctor, therapist) but most of those folks do not have the money or ability to get financing.
Jeff comes in, structures a deal where the owner can get out of the business, but has to be involved over the next couple years via an earn-out. Jeff restructures the business, installs an organization hierarchy and removes a lot of the inefficiencies. There tend to be a lot of inefficiencies when a owner/operator is running the show.
Once the business is restructured, it can now operate on it's own without the owner being involved and is much more palatable to a business person looking for an opportunity. He resells it for a profit.
Some things I have noticed while watching him do this:
1. Whole process takes 2-5 years and is very similar to value plays on commercial real estate, except that the upsides (and downsides) tend to be a lot higher.
2. Customer (revenue) are the most important variable in the equation. Whatever you do, make sure you are tending to customers and customer service does not suffer.
3. Hire a good manager. 90% of employee issues are related to management. Find a good manager and keep them happy.
There are tons more, but these are the mental notes I have made while watching him do this stuff over the past five years.
RealOG