The 7-Year Collapse of an SBA Acquisition

Today's interview covers the painful seven year journey from self funded SBA business acquisition to going to zero and shutting down. Scott Duncan bought a tool and die business that seemed to offer good business buyer fit for his mechanical engineering background. It also seemed to be a good searchy business.

Revenue was highly reoccurring in the service it provided was critical to its customers manufacturing operations. Unhappily, a number of factors conspired to undermine the business and Scott's efforts. Key person departures, poor culture, Covid inflation, Customer concentration was yet another culprit.

Scott knew that 10 to 15% revenue concentration in a single customer was the tolerable limit. But it turned out there was a customer whose revenue was in that range but whose EBITDA contribution was closer to 50%. So when that customer stopped buying, they took half of Scott's earnings with them.

Huge learning there. Watch for concentration not just of revenue, but EBITDA as well. That and much more in Scott's heroic but ultimately doomed efforts to save his company.

We thank Scott for coming on stage like this. If you find his story helpful, please consider shooting him a quick note saying so. You'll find his LinkedIn in the show notes.

And here he is, Scott Duncan, former owner of F&M Tool and Die. Last month Tim Erickson of Shareholder Ventures and Acquisition Lab presented a primer on the financial anatomy of a self funded SBA search deal with investor equity. Lots of definitions in theory was covered including pref rate, step up waterfall and much more.

Well, today, Thursday, December 11th, Tim returns for part two of this popular series to walk through a financial model. Row by row. You'll learn how pref rate, interest rate, step up debt and equity all work together. How to import your own deal into the model, how to create a base case, bear case and bull case, and how to do a sensitivity analysis so you know what happens to your acquisition if…

The webinar is how to model an Investor backed Search acquisition and it's today, Thursday, December 11th noon Eastern. Link to register is right at the top of this episode's show notes or on the Acquiring Minds homepage. Acquiringminds co. Welcome to Acquiring Minds, a podcast about buying businesses.

My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this podcast I talk to the people who do it. What do the following Acquiring Minds guests.

All have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the Acquisition Lab, the accelerator in community for people serious. About buying a business.

But they represent just a sliver of the Lab's success stories. The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business.

The Lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions, and in an active community of serious searchers. Check out acquisition lab.com link in the notes or email the Lab's co founder, Chelsea Wood. Chelsea buy then build.com. Scott Duncan, welcome to Acquiring Minds.