Buying Businesses: Diversifying after Your Big Startup Exit

By Trip Holmes

It’s no secret that North Carolina, my home since birth, has become a haven for starting and scaling a business. In the Triangle, where I live, we have lots of tech companies and life sciences concerns launching daily. In Charlotte, fintech is king, while in the Triad, we see a variety of companies ranging from business services to software. Tying together all of these markets, as well as lots of small towns across the state, is a white-hot craft beverage scene. At the time of this writing, you can practically throw a rock from almost anywhere in the state and hit a microbrewery, vineyard or distillery.

With many of these businesses, young founders from their late twenties to early forties are starting companies with big ideas, gaining marketplace validation, and they are able to quickly scale and find a buyer for a bigtime exit. This scenario is of course prevalent in technology, often in just a short number of years, while other sectors, like healthcare, can take a little longer. But we’re even seeing consolidation in areas like craft beer, with giants like Budweiser’s parent company snapping up independent players like Asheville’s Wicked Weed.

Regardless of your industry, if you’re a young founder who finds a successful exit during what’s usually the first half of one’s life, you’re proving that you have good ideas and that you know how to run a stellar business and take on the right partners and relationships to sustain your run to a highly profitable exit. My question for you today is, “What’s next?”

While many of you may simply commercialize your next big idea, many of you are looking for that next thing that simply makes good sense. Being in business myself for more than 30 years, I’ve had the opportunity to put many business owners through their paces and run the measure over their businesses. Having the kind of capital at your disposal after a big exit isn’t an ending, but rather a beginning. And it’s a wonderful opportunity to diversify your business interests. More so, you’ve now bought yourself the luxury of buying businesses that are already profitable and will provide you many years of income (and nice exits thereafter).

Here are a couple of examples of businesses I’m in the process of moving right now, companies that young founders and executives would be smart to consider. First, we are working on a grading and paving business, with an asphalt plant. This type of business makes infrastructure happen, whether it’s paving North Carolina’s portion of an interstate or US Highway, a county road, or even asphalt tennis courts for parks and country clubs. Infrastructure businesses are the closest thing to recession-proof. Think about it: in good times, public coffers are replete with tax dollars, states, counties, and municipalities typically spend on infrastructure, and private sector development booms. And when hard times hit, the government often goes into stimulus mode to create jobs and cash flow in the economy by funding “shovel-ready” projects.

I’m also working on a pair of sales of assisted-living facilities.  These companies are good examples of opportunities created by the “gray tsunami” of the aging, retiring Baby Boomer generation. With nearly 75 million Baby Boomers hitting retirement on the young end and severe aging and health concerns on the older end, businesses like home health, companion care, and assisted-living facilities/nursing homes are poised to rake in huge revenues, from both private and public monies, whether it’s family cash, private health plans, or Medicaid-driven. Again, as with infrastructure businesses, these companies that address issues related to health and aging are diverse in their revenue streams and nearly recession-proof.

Roads have to be built and maintained, and aging folks need care. Yet another beautiful aspect of younger founders investing in these types of businesses could create a Jeff Bezos effect on these rather traditional businesses. Forward-thinking executives can bring updating and innovation to these businesses. Remember—Jeff Bezos didn’t wield his perspectives, driven by new technology, on some new-fangled business. He reinvented one of the oldest, most traditional businesses—the bookstore. And now he’s doing it again with another one—the grocery store!

If you’d like to discuss these businesses or others that we see every year at Sabre Capital, give me a call. I’d enjoy showing you why there are great opportunities for you to diversify your new-found, hard-earned wealth and make some longer-term plays in profitable companies that can bring you income and provide great testing grounds for your ideas, proven winners in the sectors where you’ve made your money. What I’ve found over time is that people that know how to run a business have skills that are often universal and industry-agnostic. Your attention to detail, profitability mindset, and ability to drive revenue while managing risk are great assets for any industry. Let me show you the way.