A business acquisition roll-up strategy. Will it work? Interested in being involved?

Money
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I’m Rob, a long-time business owner and real estate developer. As I’m gearing up to transition out of several projects by early 2025, I’m looking to reinvest some of that capital into a new venture. My plan is to acquire small, robust service-oriented businesses—think mom-and-pop operators with net incomes between $1M and $3M, in sectors that are less likely to be disrupted by AI, like tree trimming.

The core idea is to not just buy businesses but to integrate them into a larger framework where they can share key resources. For instance, once we acquire a company, it would benefit from our centralized marketing, accounts receivable, and accounts payable services. This in-house expertise can drive significant growth in market share and increase efficiencies.

The goal is to overcome the usual constraints small businesses face; they can’t be experts in all facets of the business. Pooling resources and knowledge in a platform, we could get a competitive edge, typically reserved for bigger players, and create substantial collective value.

Private Equity companies do this, but they don’t purchase smaller mom and pop businesses because of the management of these businesses. This is changing with AI and I think this is where the opportunity lies.

I have some ideas on how to capitalize the venture and I’m interested to hear peoples thoughts and ideas in hopes that we can figure out a way to work together.

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I’d be interested to see how you would manage the different needs, especially of long-term employees, owned vs leased properties, equipment requirements that could differ from anything like car lifts to ice cream dispensers to book shelves.

Will you provide insurance to your full-time employees (legacy businesses did) even if you have less than the required 50 to provide health insurance according to the ACA?

I’m curious how AI will fit into this.

  • Coffee Shop (leased space, 5 employees),
  • Auto Repair Garage (500K building, 8 employees, needs new roof due to storm damage, looking to retire),
  • Small Bookstore (leased, 4 employees, really needs online overhaul of UI),
  • Family Owned Restaurant (800K building, 12 employees, fully operational kitchen, replace walkin freezer, refrigerators),
  • Dry Cleaner (leased, 6 employees, replace dry-cleaning machine on the fritz)
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Thanks for contributing to the conversation. This is fun!

I think the overarching response to yours is that I think it is important to acquire one business type at a time while you ramp up and figure out what works and what doesn’t. This includes the real estate discussion. As a real estate guy, I like owning real estate for the control aspect, but I believe at first, it will be easier to purchase businesses that lease.

This gets powerful if you can figure out a strategy that works and target that business type, then rinse and repeat. My initial thought would be to create a database of tree trimming companies (or whatever is decided as the best) within 3-4 hours of my house. In the data gathering, try to figure out areas that have a strong population, but weak online advertising of the companies targeted. Once you have a market identified, you can start calling all the businesses and see if you can find one for sale.

Use AI for:
Marketing strategy and execution
Customer service enhancement, touches
Inventory/equipment control and management
etc…

Those are general categories and need to be drilled down, but the point of the strategy is to have in-house AI, tech, workflow, automation, marketing, operations, etc… to take these mom and pop businesses to the next level.

One of the issues, that I’m trying to work through, is if you bring many of the business services out of the business and to headquarters, then what happens to Rhonda who has been working with the tree trimming company for 15 years? I’d want to do anything I could do to retain good and happy employees. Increasing sales would lead to needing more people or at the very least, not less people. Increasing efficiency on the other hand, reduces the need for people. What do you do with Rhonda? Does she handle stuff for the business as well as for headquarters?

It may sound weird, but I’m not motivated by making as much money as possible. I’d be interested to see how Rhonda could benefit from the efficiency. If successful, there would be plenty to go around. How does that work? Would the goal of the venture be to work towards the best overall work life balance for all contributors? That’d be fun.

PS: My long term employees always have health insurance and I wouldn’t imagine changing that unless unforeseen market forces show a mutual benefit to outside healthcare.

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Research first, eh?

  1. Are live or live-cut trees still as popular as they once were? For various reasons, sales of live/live-cut trees has gone from 35M in 1990 to 27M in 2023. The trend seems… down.
  2. Artificial trees last longer, look more uniform, and end up costing less. Many people just leave artificial decorated and covered, just pulling them out of storage for Christmas.
  3. There are currently about 350M trees spread across about 15K farms all over the US.
  4. If there are than many tree farms where you live, you likely live in Oregon, North Carolina or Michigan. Maybe mountainous if NC.
  5. Average time in the ground is 7 years, with some as long as 15. So this is a long-term investment.
  6. I personally know 3 people who are allergic to live trees. It is for this reason that you won’t likely find them in commercial indoor displays today.

Determine first if this industry is actually fading or if it’s worth making it more posh/niche in the same way the market for horse stewardship is no longer in the realm of possible for most people. If the industry is getting more obscure, will you try to find a way to transition your employees to a new business model involving something else? Alternative/transition businesses could include:

  1. Grow blueberries. The climate is similar and blueberries don’t go out of style. The transition is easier too, because blueberries can be phased in.
  2. Grow hazelnuts and truffles. These also require a similar climate, offer double the rewards and are about as easy to phase in as blueberries.
  3. Start a couple of local mycelium packaging plants that grow a biodegradable alternative to styrofoam packaging. Again, same climate, good use of chipped wood, etc.

Of course these all require learning some new skills, possibly amending the soil, but people practical enough to run a tree farm would probably excel at any of these. They would probably make more money too.

You probably could get away from using artificial fertilizers too and pesticides, so that’s more sustainable.

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Consider deploying a fleet of drones and smart robot cleaners for post-weather disaster cleanup.
There’s likely a demand for this service.
To scale this venture effectively, securing contracts with cities or states even directly to insurance, would be essential, beyond merely targeting small local businesses.
I would be concerned if implementing this on a smaller scale could potentially displace jobs in local community.

Exploring automation for white-collar tasks—such as paperwork and permit processing—could be a groundbreaking step.
Leveraging chatbots to handle repetitive tasks could significantly improve overall efficiency and save tax money if done well.

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You might want to branch out (*) from tree trimming, I can see robots in a few years that could obsolete traditional “human employee based” tree trimming businesses. The main thing that has been holding robots back is software, and AI software is a perfect fit, so I’d expect that we’re going to see some insane advanced in robotics in the next couple years (which we’re already seeing and Wes is covering).

Tree trimming is in a lot of ways a perfect business to be roboticized, given that a major cost is accounting for safety, which pretty much goes away when you put robots on the job. Tree climbing robots would actually be pretty neat, although there might also be drones involved.

I guess the business is still likely to exist, but it may change radically, and involve laying off the majority of the people.

Aside from tree trimming, do you have other types of businesses you’ve thought of?

* I’m totally owning the pun, sorry. :slight_smile:

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This sounds like the “Roman Empire” approach to mergers and acquisitions; a strategy that was successful for a thousand years, right up until the leaders started to get greedy and thought they were gods. Not that I’m implying that here. Rome’s “embrace and extend” model of growth was a good one, and most of their “client” countries (if you could call them that back then) were happy with the organization and resources brought by acquisition. The new taxes were often hard to handle, but the resources brought improvements in productivity, so on balance everyone made out better. And then there were the Huns…

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I might be useful here… or not. As a mom, newbie to AI but nerdy in law, philosophy, language and neuroscience I actually managed to develop a non code AI App for transgenerational care, and I 'm in testing mode. I have the feeling that there are huge things going on for typical Joe’s in AI. R ecognizing where AI actually can help improve what one already does good is the best use case for locals and families. Certainly more can be done in the greening areas too, but people are where they are. Anyways, I am in a community of Joe’s AI incubators that is blossoming. I am sad to see that this Forum will be closing. I feel there are so many good insights, even for lurkers like me. :)Please reach out to me if you would like to know more. My email: neuroeducation at protonmail dot com

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It is not only possible it seems where people are heading towards. One just need to understand the repetitive tasks and the tasks that involve more natural language, so literally everywhere. Sure its going to change priorities and the way one understands workflows. Later then yes, i’d agree, if there is a long term, regenerative or ecosystemic mentality, that the workers may share, that can help.

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