Getting Started With SMB Investing — What Should I Know?

[hinom]

Hello everyone.

I'm exploring SMB investing and want to hear from people with hands-on experience. How do you evaluate small and medium-sized businesses for acquisition or minority investment?

What metrics matter most beyond EBITDA, and how do you assess owner dependence, customer concentration, and recurring revenue quality?

I recently watched a video on SMB investing that sparked these questions, but I’d love real-world input. For those who have invested, what deal structures, financing mixes, and governance rights have worked best? How do you source deals, avoid adverse selection, and manage post-close risk?

What mistakes do beginners commonly make?

 

[hinom]

Hello everyone.

I'm exploring SMB investing and want to hear from people with hands-on experience. How do you evaluate small and medium-sized businesses for acquisition or minority investment?

What metrics matter most beyond EBITDA, and how do you assess owner dependence, customer concentration, and recurring revenue quality?

I recently watched a video on SMB investing that sparked these questions, but I’d love real-world input. For those who have invested, what deal structures, financing mixes, and governance rights have worked best? How do you source deals, avoid adverse selection, and manage post-close risk?

What mistakes do beginners commonly make?

thanks in advance for any help

 

[steven46]

You should obtain their track record for the last 8-10 years. That would cover most of the
intermediate time frame regimes. Within that record, what is the max drawdown and the average
yearly return. As far as the other details, it is not going to make a difference if they cannot produce
a reasonable risk adjusted yearly return. If any of these terms are unfamiliar to you it means you are at a
disadvantage and should not place more than a small amount in their custody until you know what you
are doing. I assume readers of my thread(s) already know that I am a professional. You can obtain more
about my background by looking at my threads (I have started two of them). I don't have anything to "Sell"
or market to you. I do teach a class however based on the questions you asked you would not be a good
fit. So please assume I have no positive or negative intent, except to provide an even handed answer.

Good Luck