How to Build a Niche Holdco with $2m in Earnings

hen today's guest set out to buy a business, he identified the education market as a target industry.

Schools fill their classrooms with students year in, year out, so there is reliable demand for products & services to educate those students.

It was a simple premise, and it turned out to be on the nose.

The first business Matt Kopp bought provides organic samples for science classrooms. Think vials of pond water or, yes, frogs for dissection.

It generated about $350k in cash every year on $2.2m in revenue — steadily.

"A good solid little business," as Matt put it.

That was 2019, and we hear how Matt parlayed that into a portfolio of similar businesses, which today generate about $2m in EBITDA and all have managers in place. After 6 years of Matt running hard, today Matt's businesses run themselves.

A few themes to listen for:

• Matt's willingness to let people go if a business he acquires is bloated. This is something we don't talk about a lot. We're often more concerned with retaining people in a target business, not cutting them. So it's valuable to hear how Matt dealt with a situation where he felt there were too many people doing too little work.
• ETA in a less mature market. Matt is in Australia, where the lack of buyers & searchers (and access to debt) means that multiples for small businesses are low. If you can figure out where to get debt and raise equity, multiples for sub-$1m EBITDA businesses should be 2-3x.
• And finally, why the education market is appealing for searchers.

OK, please enjoy this conversation with Matt Kopp, managing partner at Enduring Investment Partners.