🌟 Growing Daycare Center Making $172k/yr!

Here’s what we have for you today:

Cool Business Idea: Fixing McDonald's Ice Cream Machines 🍦

Confusing Corporate Sayings:

“Submit a ticket for that in our system”

Professional Translation
“We have a process that will help solve your problem in the most efficient way possible.“

Corporate Pivot Translation
“A fool proof way to get your task done 3 weeks late“

Sam’s Perspective (1st Time Buyer)

🆕 Status Update: This week, I spoke with a broker about a potential acquisition. The business numbers looked strong, with a solid 36% profit margin, achieved simply by matching customers with subcontractors. These types of businesses can generate serious income, but I noticed something interesting: the asking price had dropped significantly since I first reviewed the listing. I had to dig deeper—is this a golden opportunity, or is there a hidden red flag?

It turns out that, although the business was listed as absentee-owned, it actually relied heavily on the previous owner’s sales skills and personal relationships with customers. This is a critical factor to uncover before investing time and money—you’d essentially be buying the owner's network and not much else. One creative approach that was suggested: structuring a deal where the current owner remains involved on a royalty basis, rather than paying a high upfront cost. If that’s possible, it could be worthwhile; otherwise, this one might be a pass. Either way, it was a valuable experience!

Tyler’s Perspective (Experienced Buyer)

🚨 Tip of the Week: Like I said before, organic leads are tricky, especially if you are buying a minority share of a business and the owner/seller remains on as the operator. Valuing the company can be tricky. You are about to go into business with this person, so the negotiation is tough. Normally, you don’t have to deal with the seller too much (aside from a transition period), so you’re less sensitive to beating them down during the negotiation. In the instance of a minority investment, you have to treat the negotiation a little more delicately than you otherwise would in order to operate smoothly moving forward. That’s not to say you should intentionally overvalue the business, but you may need to come up with creative solutions to give the owner/seller an option that they feel comfortable with moving forward, and that meets your investment metrics. 

💰 Deals < $500k 💰

Business Name: Growing Daycare Center
Revenue: $481,212
Asking Price: $300,000
Profit: $172,243 (Profit Multiple = 1.74x)
Location: Baker County, FL
Established: 2021

✅ Pros:

• High Demand: Growing waitlist, especially for infant and toddler care, assures consistent future enrollments.

• Turnkey Condition: Facility is in pristine condition, requiring no repairs or upgrades.

⚠️ Cons:

• High Fixed Costs: Monthly lease cost could impact profit margins if enrollment rates drop.

📈 Growth Opportunities:

• Increase Enrollment: Boost occupancy rates by reaching full capacity, especially with a pending Gold Seal rating.

• Expand Programs: Offer additional programs like after-school care to attract more families.

💰💰 Deals $500k - $2m 💰💰

Business Name: Exterior Cleaning Franchise
Revenue: $450,000
Asking Price: $600,000
Profit: $300,000 (Profit Multiple = 2x)
Location: Huntsville, AL
Established: 2002

✅ Pros:

• Established Franchise: Over 38 years of brand credibility with extensive franchise support and training.

• Turnkey Operation: Comes fully equipped with trucks, equipment, and a loyal customer base for easy transition.

⚠️ Cons:

• Seasonal Demand: Potential revenue fluctuations due to demand variations for exterior cleaning services.

📈 Growth Opportunities:

• Expand Service Areas: Further develop exclusive territories in adjacent counties to increase market share.

• Introduce New Services: Add specialized cleaning services like solar panel cleaning to attract a broader clientele.

💰💰💰 Deals $2m-$10m 💰💰💰

Business Name: Trucking Business
Revenue: $1,540,000
Asking Price: $2,100,000
Profit: $580,000 (Profit Multiple = 3.62x)
Location: Upstate South Carolina
Established: 2013

✅ Pros:

• Scalable Model: Established team and infrastructure with potential for immediate revenue boost through backloads.

• Semi-Absentee Ownership: Management structure allows for minimal owner involvement.

⚠️ Cons:

• Asset Negotiation Needed: Vehicles and equipment are sold separately, creating additional initial investment needs.

📈 Growth Opportunities:

• Expand Service Options: Implement backload services to increase revenue without additional trucks.

• Increase Fleet Size: Add more trucks and drivers to meet rising demand in the transportation sector.

**If today is your first day reading, go to Chapter Recaps to get up to speed!

The Lean Startup: Ch. 9 Part 4

Its the spookiest day of the year and you’re here to read more about the Lean Startup! I’m not going to lie… I’m a little sad today. The Dodgers won the World Series, so that means baseball is over for the year… You know what, at least college football is still going. Sorry, not sorry if you’re a Yankees fan. They beat Cleveland, and so honestly, from the bottom of my heart I want to tell you, I’m happy they lost.

Ok, ok its time to talk about The Lean Startup & today we are going to talk about the idea of pulling & not pushing, & the hypothesis of pulling in a clean industry. In traditional mass production, the way to avoid stockouts (not having the product the customer wants) is to keep a large inventory of spares just in case. The more inventory you keep, the greater the likelihood you will have the right product in stock for every customer. The problem with large inventories is that they are expensive to transport, store and track!

Lean production solves the problem of stockout with a technique called pull. Toyota uses this type of lean manufacturing method. If you were to need a bumper replacement and go to a Toyota dealership, they would replace your bumper. That dealership would then move to call their regional center to replace said bumper. That regional center then contacts the next center to build the actual bumper. Each filling the “hole” on their inventory. This is ideal in a lean manufacturing chain. 

When a company switches to this kind of production, their warehouses immediately shrink, as the amount of just-in-case inventory, also called work-in-progress (WIP) inventory, is reduced dramatically. Startups can struggle with this because their work is intangible. In manufacturing, pull is used primarily to make sure production processes are tuned to levels of customer demand. Some people misunderstand the Lean Startup mode as simply applying pull to customer wants. The goal of the Lean Startup is to build products to be able to run experiments that will help to learn how to build a sustainable business. To develop in the Lean Startup method is to respond to pull requests in the form of experiments that need to be run. It’s not the customer but the hypothesis about the customer that pulls work from product development and other functions. 

Now to clean tech. Alphabet, no not Google (for you stock BROS/GALS). They are building a product that can generate electricity from waste heat, using a new kind of material called thermoelectric. While working through its leap-of-faith assumptions, Alphabet figured out early that developing a solution for waste thermoelectricity required building a heat exchanger and a generic device to transfer heat from one medium to another as well as doing project-specific engineering. Alphabet takes advantage of the massive existing infrastructure that produces silicon wafer for computer electronics. The company went about testing their hypothesis in small batches by building small-scale solutions for its customers as a way of learning. Because they weren’t weighed down by large-batch approach, Alphabet was ready to pivot after just three months of investigation. 

“The Lean Startup works only if we are able to build an organization as adaptable and fast as the challenges it faces. This requires tackling the human challenges inherent in this new way of working; that is the subject of the remainder of Part Three.”

As always, if you want to discuss topics of this chapter (or any previous or future chapters) join our Discord channel.

Read more at corppivot.com!