Starter Acquisition: Buying a $25k Business

eil was working as a project engineer at a Toyota plant in his home state of Alabama when he learned about search funds. He was very intrigued and promptly “read all the books.”

Fast forward a few months and he acquired Nashville Bubble Ball, a party rental business, shortly before entering Vanderbilt University on a full MBA scholarship. (He was able to use the savings that he’d set aside for tuition.)

For Neil, this starter business served two purposes more important than money. First, he wanted to prove himself as an entrepreneur. Second, by acquiring a business, he wanted to experience the search process firsthand.

Nashville Bubble Ball had a few things going for it: it was well within his price range, he could run it for just a couple of hours a week, and it was already profitable. Neil could expand or just maintain it without a lot of effort.

Even if the acquisition flopped and he had to write it off as a loss and move on, the asking price was so low — 1x annual cash flow — that it wouldn’t hurt too much.

In April 2021, he acquired the business for about $25,000.

His vision for the business is ambitious but realistic. He says it has the potential to grow 4x to become a $90,000 to $100,000 business (though probably never a $250,000 one).

In this episode of Acquiring Minds, Neil explains how acquiring and growing the business has helped improve his confidence as an entrepreneur, which tweaks to the business are making a difference, and how he plans to drive more demand.

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‍✳️ About Neil Granberry

✳️ Top takeaways from the episode

✳️ Episode highlights with timestamps

✳️ Links & mentions

Acquisition Entrepreneur: Neil Granberry

‍💵 What he acquired: Neil found Nashville Bubble Ball on BizBuySell and acquiring the party rental business in April 2021. It was profitable, affordable, and close to Vanderbilt, where Neil is working towards his MBA. By changing the pricing structure and doing more events, he’s already been able to grow revenue.

‍💡 Key quote: “If you’re considering your first small acquisition, find something that can break even on autopilot, so that every bit of effort you put into it beyond that is generating some kind of return.”

‍👋 Where to find him: LinkedIn

Acquisition Tips From the Episode

‍Top takeaways from this conversation

‍🕹️ Consider a starter acquisition.

‍‍Neil wanted to earn his stripes as an entrepreneur, something he’d always identified as but never actually been.

A small, low-overhead business close to the campus of his business school at Vanderbilt fit the bill.

The numbers aren’t big — but neither is the risk. And Neil gets to have the experience of acquiring, operating, and growing a small business, experience that he can parlay into a more ambitious venture after business school or, if nothing else, talk about in job interviews.

“It was a way to show this thing that I've kind of been saying about myself since college, hey, ‘I'm interested in entrepreneurship, I'm interested in doing these things.’ But I had never done it,” explains Neil.

“Let's signal out a little bit that I'm willing to take this risk. I'm serious about doing this, and I am capable of doing it. So let's actually do it. Let's show some track record of success, and then see where that takes me.”

💸 Check the seller’s assumptions.

On the original for-sale listing of Nashville Bubble Ball, the sellers had not deducted any expenses in their calculation of the business’s profits. Not that they were dishonest; they had simply co-mingled the business with another business and hadn’t considered costs like equipment storage (they were using their house).

The business was listed on BizBuySell for $30,000, what the sellers characterized as 1x profits. So when Neil took a careful look at the books with the owners, a new profit number emerged: $22,500.

Sticking with the original valuation multiple of 1x and putting in an additional $2,500, Neil acquired the business for a total cost of roughly $25,000.

🚀 Make sure you can handle growth before turning it on.

Before COVID, a lot of the previous owner’s business came from fall festivals, church events, and field days. Obviously, the pandemic had a major impact and the business took a hit.

As the situation with COVID has changed, Neil saw the opportunity to expand the business with the return of in-person events.

But he made a point of working on operations first, before reactivating old customers. He wanted to be sure that he was ready to handle the rush once he started marketing to them.

Episode Highlights

‍Inflection points from the show

‍[1:49] Bumper people?: To help people better understand his business, Neil Granberry asks them to imagine themselves playing soccer or various other games — while partially enveloped by a giant layer of inflated plastic, and constantly bumping into other competitors.

[2:56] Double duty: Neil acquired Nashville Bubble Ball just before starting his first semester as an MBA student at Vanderbilt University.

[4:40] An awakening: He loved his job, but couldn’t help sensing that it wasn’t what he wanted to do forever. At first, Neil considered a number of popular online platforms for e-commerce side hustles. Then he learned about the search fund model through the Harvard Business Review and books like “Buy Then Build” and dove deep.

[5:48] A clear winner: While evaluating local businesses for sale in Nashville, Neil found that the bubble ball company checked a lot of boxes. It was well within his price range, and he could run it for just a couple of hours a week. It offered existing profitability, and if he wanted to be more ambitious with it, the growth potential was there.

[9:03] The bottom line: What stood out to Neil most when he found Nashville Bubble Ball was that the existing numbers and the asking price indicated the potential for profitability in two years without making major changes and without an exit. It gave him the option of staying put and enjoying a modest profit, or exiting with an even nicer return on his modest investment.

[9:58] The numbers: The previous owners’ asking price on BizBuySell was $30,000 (1X EBITDA). In negotiations, he examined the books with them and a new EBITDA number emerged: $22,500. Neil got them to agree that 1X was still appropriate and put in an additional $2,500, bringing his total cost to acquire the business to $25,000.

[11:34] A different model: The previous owners had been honest with Neil about their expenses and the business’s value, but they operated it on a model that excluded expenses that Neil would have to incur, like storing the equipment. This enabled Neil to negotiate a price that more accurately reflected the business’s value to him.

[13:23] More than money: Of course Neil wants Nashville Bubble Ball to be profitable, but his key motivation in acquiring it was to prove to himself that he was an entrepreneur, something that he told himself since college.

[14:09] Resume builder: If anything, this acquisition is a chance for Neil to establish a track record of success as an entrepreneur. He talked about this and his motivations for acquiring the company in all his interviews.

[16:01] Customers, not stock: Neil estimates that only ~$4,000 of the acquisition price reflected equipment or other supplies. He saw the customer list as the business’s real value. It also has no competition in Nashville.

[17:57] Don’t believe the hype: The media’s coverage of the proverbial next great unicorn startup had at least partially convinced Neil that you had to be Bill Gates or Elon Musk to start a business. Nashville Bubble Ball showed him that wasn’t true.

[20:14] Slowly ramping up:  Neil acquired the business in the wake of COVID, and the previous owners had not done events for ~18 months. The first six months, after Neil took over, were slow.

[21:18] Early figures: So far, the company has grossed about $13,500 and is operating at ~70% net margins. Overhead is $500 per month.

[21:54] COVID relief: As the COVID situation improves, Neil sees a lot of business coming back. The company has traditionally had a re-ocurring business, much of it in the form of field days, big church events, and fall festivals. Some of it is already coming back.

[22:27] Growing revenue: With a concerted marketing effort, Neil expects to surpass his $22,500 basis number. His target going into next year is $35,000 to $40,000.

[23:08] First order of business: Once he acquired the company, the first thing Neil did was build the operating base. He did this rather than reactivating existing customers who had heard the business was closed because he wanted to be sure he could handle the rush once he was ready to market to them.

[23:42] Hard shoes to fill: None of Nashville Bubble Ball’s employees stayed on after the acquisition. Finding replacements was difficult, but once he found the right people, he started digital marketing campaigns and worked on the website.

[28:56] Laying the groundwork: Working one of the company’s events is not a bad gig. It’s fun, even. Yet even on occasions when he is available to work at events, he makes an effort to have his staff do it because he wants the company to be able to operate without him if and when he decides he wants to sell it.

[30:09] Healthy margins: With low overhead, contract employees, and events that cost between $295 and $750, Neil stands to make a nice profit. To grow, he needs to increase the number of events per week.

[34:56] For similar projects: To those considering a similar micro acquisition, Neil recommends finding something that can break even on autopilot, so that every bit of effort you put into it beyond that is generating some kind of return.

Links & Mentions

✅ Nashville Bubble Ball

✅ Vanderbilt University Owen Graduate School of Management