This weekly roundup thread is intended for all culture war posts. 'Culture war' is vaguely defined, but it basically means controversial issues that fall along set tribal lines. Arguments over culture war issues generate a lot of heat and little light, and few deeply entrenched people ever change their minds. This thread is for voicing opinions and analyzing the state of the discussion while trying to optimize for light over heat.
Optimistically, we think that engaging with people you disagree with is worth your time, and so is being nice! Pessimistically, there are many dynamics that can lead discussions on Culture War topics to become unproductive. There's a human tendency to divide along tribal lines, praising your ingroup and vilifying your outgroup - and if you think you find it easy to criticize your ingroup, then it may be that your outgroup is not who you think it is. Extremists with opposing positions can feed off each other, highlighting each other's worst points to justify their own angry rhetoric, which becomes in turn a new example of bad behavior for the other side to highlight.
We would like to avoid these negative dynamics. Accordingly, we ask that you do not use this thread for waging the Culture War. Examples of waging the Culture War:
-
Shaming.
-
Attempting to 'build consensus' or enforce ideological conformity.
-
Making sweeping generalizations to vilify a group you dislike.
-
Recruiting for a cause.
-
Posting links that could be summarized as 'Boo outgroup!' Basically, if your content is 'Can you believe what Those People did this week?' then you should either refrain from posting, or do some very patient work to contextualize and/or steel-man the relevant viewpoint.
In general, you should argue to understand, not to win. This thread is not territory to be claimed by one group or another; indeed, the aim is to have many different viewpoints represented here. Thus, we also ask that you follow some guidelines:
-
Speak plainly. Avoid sarcasm and mockery. When disagreeing with someone, state your objections explicitly.
-
Be as precise and charitable as you can. Don't paraphrase unflatteringly.
-
Don't imply that someone said something they did not say, even if you think it follows from what they said.
-
Write like everyone is reading and you want them to be included in the discussion.
On an ad hoc basis, the mods will try to compile a list of the best posts/comments from the previous week, posted in Quality Contribution threads and archived at /r/TheThread. You may nominate a comment for this list by clicking on 'report' at the bottom of the post and typing 'Actually a quality contribution' as the report reason.
Jump in the discussion.
No email address required.
Notes -
What Happened to Society's Life Script
In the fifties, the American dream was, for the vast majority of people, pretty obvious. You find a job with the main employer of the town, whether that was a coal mine or a factory or a railyard or whatever the case may be. You marry, if not literally the girl next door, then something close; maybe a high school sweetheart. If you were a woman you were then expected to stay home and be a housewife, and except for a few very highly-female coded jobs, that's just what you did. If you were a man you might have been required to serve in the army beforehand, but few people went to college; only if you were wealthy and/or very, very smart. It mostly wasn't your decision either way, about any of it. 'Should I go into the military, or skilled labor, or go to college?' wasn't a question very many people had to ask; usually what you did next after finishing high school was readily apparent, often literally by having only a single option or a very small set thereof. If you did have the opportunity to go to college- most people didn't- both the university and your parents had much more say in what you did there. And I think we should note- the vast majority of people here could find respect as a worker bee. This is important because the vast majority of people have to be worker bees to have a functioning society.
Today, that is not the case. Everyone who wants to can go to university, or near enough. Many people stay in university long past the point at which it does any good, in point of fact. The military is 100% volunteer, and few people live with access to a single major employer. Young people can't find spouses, and these days don't seem to be able to blunder into relationships either. Every individual can, with certain reasonable limits, do what he wishes, and nobody with institutional power seems keen to say no, that's stupid, do this instead.
And it seems that we have lost something, there. Occasionally conservative pundits will start talking about the success sequence- finish high school, work full time, get married, and then have children. There's some other obvious things that go along with it, like 'don't do drugs'. But the gist of the success sequence is, well, a (somewhat vague)life script. And realistically the success sequence is the sort of thing our culture should be putting more effort into promoting; it isn't the default message despite every idea therein being a good one.
I think the youth agree with me, here. Jordan Peterson's popularity, notoriously, came from offering boomer dad advice. Recently there's been discussion of positive male role models to replace Andrew Tate; Andrew Tate's pitch isn't much different from tons of other redpill influencers. What's different is he's selling 'you, too, can be like me, just do x, y, z'. Obviously he's a lying grifter, but his fanbase are mostly teens. What replacement for his (dumb)life script are these positive male role models offering? The pro-social version of Andrew Tate isn't the male feminist activist. It's Mike Rowe.
Unfortunately, "work hard, at a quite possibly unpleasant job" isn't a great sales pitch. But I want to circle back to the point I made ending my discussion of the fifties- most people have to be worker bees. In a functioning society there are few girlbosses because there simply are not very many bosses- the average person will always make the median income, live a not particularly impressive lifestyle, and live in flyover. To put it more pithily, average people will always be average. And being average isn't, well, a flashy and appealing thing. In the past, lack of options meant people became average worker bees. Today, people have the option not to do that; they may not be Indian chiefs and fighter pilots and surgeons and other high status jobs instead, but they're being something, and usually that something is below average, gig workers and basement dwellers. It has to be said, therefore- most people can't figure it out on their own. For every unrecognized genius there's a dozen schizos. Boring middle-aged advice serves a useful purpose; to throw out the social pressure to follow it was a mistake. The question becomes, then, 'how do we bring it back?'
Housing Prices in most affluent Western countries have combined with the deterioration of the sexual marketplace and decline of employer-employee relations to cause this, though. I'd love it if my lifepath was getting an okay sinecure somewhere here, making 75th percentile wage for my country and buying a free-standing house and get some kids going.
Instead in order to achieve the unfathomable wealth required to buy a free-standing 3bedroom house somewhere within an hour's drive of my CBD I've had to do pretty well in the startup lottery and pick a fairly disreputable industry on top of that. The system no longer facilitates the normal path.
The Western World seems to be following Asia in many important ways.
#1 is sexlessness, apathy, and cratering fertility.
#2 is the meme that there is a narrow path to success, which runs only through approved channels.
They say that, to succeed, you have to get into a top school, get a specific corporate job, etc... And only like 10% of people can do that. By definition, high class jobs are only available to a few.
But riches have never been easier to obtain in the U.S. (can't comment on your specific country). A motivated young person can easily earn $300k annually by age 30. Not as a doctor, not as a lawyer or consultant, nor as a software engineer. But it's quite possible, even trivial. The catch is that you have to work in a disfavored trade such as tire repair, HVAC, or construction. Every year thousands of boomer millionaires retire, selling their incredibly profitable businesses for a pittance. You can buy a business doing $500k in profit for $1.5 million. Don't have a $1.5 million? Seller financing is available.
No one wants to do it because they want a path. They want someone to tell them what to do. They want to take some bullshit test, and then get that sinecure. There was a brief time in a few select countries where that was possible. The post-war boom was a unique time in history. But it's not coming back. Welcome to zero sum world! Unless you are talented, you have to forge your own path now. No one's going to give it to you.
If there are literally 500k biz available for 1.5m, then there is a massive opportunity for a micro PE fund to consolidate 20-30 of these businesses in the same field. I put in 15m debt finance 30m. I pay off the debt in 4 years. Yes there at costs to growing larger (eg controls etc) but also savings. Let’s say those net out.
Sell in Y5 for 5x multiple (I get a better multiple because the next buyer is buying a larger biz). That’s 75m. That’s a 5x return in 5 years.
Maybe this is happening and I’m just too far upstream (not PE but service PE funds) but seems like if not happening maybe it isn’t as straightforward as you suggest.
Is there? Typically the 500k profit includes the full-time labor of the owner. You can't just hire a manager to take care of it. Many businesses have idiosyncratic challenges.
Simple businesses or large business will command a higher multiple. Maybe. As far as I know, PE firms that do business acquisition have target IRRs of at least 20% – usually much higher. So that would imply that they are not paying large multiples either.
PE funds pay large multiples depending on the type of business. But 3x net income is cheap. Keep in mind leverage super charges equity return. If I pay 10x EBITDA for a 50m EBITDA biz but borrow 50% then even with the same multiple if I can increase EBITDA from 50m to 65m and sell within 3 years the EV is 650m of which 400m is equity. So I have a 150m profit on my 250m return.
I take your point re the labor cost.
More options
Context Copy link
More options
Context Copy link
There have been attempts and some successful consolidations, but also a lot of these small businesses are complete landmines that don't work as advertised
That is my theory. The idea there is free money is seemingly wrong
I'm sure that a certain chunk of these businesses are free money, some are okay returns on capital and some are toxic cesspools that the original owner is exiting for a good reason.
Yeah that’s fair. The problem is the cost of diligence becomes probably quite high to figure out if bucket A, B, or C
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
You’re way overestimating what all three of those make. HVAC techs make a comfortable living if they can budget(income can be rather seasonal) but once you adjust for things like buying tools we have a purchasing power on par with, like, teachers and police officers. A pretty good living, yes, nobody’s starving. But we’re not making $300k annually.
And this deal is mostly on offer to long time employees and relatives. Not to randos with hustle.
More options
Context Copy link
I think you're wildly oversimplifying the 'simply take over a business from a retiring boomer' thing. I used to work for one of those, and whilst it was sold with a fairly reliable source of income (Pre-Apple Store Apple importer who still had a license to do repairs on Apple hardware that the Apple Store refused to due to being a generation or two out of date). The seller refused to actually retire and kept servicing his best clients directly (who were largely also superboomers who'd had him as their 'computer guy' since 1980 and didn't want to get computers from anybody else), plus the actual business model itself was really coasting on inertia after being a good idea 30 years ago. You can't really steal the customers here since they're not price-sensitive, they just want to do their very intermittent tech purchasing from the guy who they got their first handshake from 30 years ago.
A lot of these incredibly profitable small businesses are coasting on servicing fellow boomers and based on the operator's relationship network.
Sorry if I am making this seem trivial. It's not.
I think the path to monetary success is relatively sure but it is much harder than the traditional go to college => get a government job path.
You'll spend your weekends filling out tax forms or doing manually labor because a worker just randomly quit. I know a guy who owns a tile-installation business. He probably makes at least $1 million a year, probably much more. But he has to take like 100 phone calls a day. Unlike a W2 employee, he's never truly off duty.
More options
Context Copy link
That's why goodwill is considered an intangible asset.
Untangling 'Frank's Automotive has good will' from 'Frank Frankerton who runs Frank's Automotive and has for the last 30 years has good will' is the hard part, though.
Yeah, that's it. If Frank retires and people stop going to Frank's Automotive because they would have gone elsewhere (too expensive, not great quality, takes too long) were it not for the relationship built up with Frank, then the business is not going to survive. If Frank retires and you keep the same level of quality and price and friendly service, it will do okay.
In my experience sometimes it's literally just Frank.
I used to work for one of these small businesses were the owner-operator was prettymuch Mr Krabs for Spongebob. Cartoonishly money grubbing towards customers, most of whom he'd known for decades at this point as their 'Computer Guy'. Towards the end the business was only really viable since he'd put about 2-3x the margin on getting tech for fellow boomers as they'd get from going to an Apple Store direct or the local Walmart equivalent. It wasn't quality, price or friendliness it was literally just 'Frank is my computer guy and he is who I buy computers from' inertia.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
And here I thought I was a gambler with my previous startup work. This "buy the retiring boss's business for cheap" plan is a wild gamble. What if he works longer than you'd think and then somehow transfers the business to his worthless son, etc, etc? You could easily get this snatched from you.
And even if you buy it, there's a lot of toxic pills in these things.
More options
Context Copy link
On the other hand, sometimes loyal employees literally get the businesses handed to them for free.
If the boss hands the business to his worthless son, just steal all the clients. Or failing that, strike out on your own. It's not like you can't easily get business in the trades.
Why don't I do this myself, you ask? Because I already make well north of these figures and I don't have to work with my hands. Still, I've thought about it. America really is the land of milk and honey. It's just sitting there.
More options
Context Copy link
More options
Context Copy link
Can you though? I've recently started watching these things, and the closest I've seen is a business with $700k revenue selling for $3 million. Supposedly "highly profitable" but I doubt the profit reached $500k.
Sure. Here you go: https://www.bizbuysell.com/Business-Opportunity/profitable-landscape-business-for-sale/2147774/
$300k/yr cash flow selling for $900k. Comes with $500k of equipment and over a million of signed contracts. Caveat emptor.
I'm confused about the business you are referring to. $700k/yr revenue for $3 million is a joke. Is this software? Because if not, no one is touching that. Standard price for a small business is 3-4x PROFIT not revenue. Reality check: you are expecting to actually run the business and not just collect checks, right?
Do I recommend buying this specific business or any business that is actively shopping itself? No. But this is an iceberg situation. For every business shopping itself, there are 10x more for sale. They are just begging for someone halfway competent to take over and continue their legacy.
If it's that good, I'd wonder why the guy is selling up. The link says that they invested a lot recently. Unless it's that he wants to retire or there is some other reason (family problems, health, so forth) to sell up now, I really would check out why he's selling this off.
Maybe there's problems coming up like new regulations, rent increases, or people giving up their contracts once they expire because they're cutting costs. You might buy this expecting to continue on with the million worth of contracts, only to find that half those contracts are due to expire and won't be renewed.
Selling a small business is a market for lemons.
https://en.wikipedia.org/wiki/The_Market_for_Lemons
With uncertain quality, the price goes down to very low levels. 3-4x annual profit is standard for small businesses. Keep in mind that these businesses will typically require the full-time presence of the owner, so you can't just buy 10 of them and retire to a beach.
The guy is probably old and doesn't want to run a landscaping business anymore. Now he takes what he can get. Because that is what the market will bear.
Definitely possible. On the plus side, you might double your contracts and make twice as much. It's not like smart people are launching new power washing and landscaping businesses every day to compete with you. If you can answer the phone, you're upper half. If you offer online appt scheduling, you'll be top decile.
Oftentimes in those cases the guy running the business is the business. Once he leaves the business is essentially worthless, existing clients will re-evaluate who they are buying from: you spent a million dollars and you would be in the same position if you had started your own landscaping business in the same area.
More options
Context Copy link
More options
Context Copy link
It's to fleece people that @jeroboam is "helping" with this "it's EZ to buy a business" nonsense.
The macro theory that retiring Boomer's are selling profitable businesses is true. But the devil is always in the details. There are toxic pills in so many of these businesses and, because markets eventually optimize to information, there are emerging small / micro PE firms that will blow you out of the water because they don't need to finance the way a solo-preneur does. It's a similar formula to what has happened in housing - it's not that you're competing on buying a house with another young couple, it's that BlackRock is coming to town with all cash offers sight unseen 10% above asking.
Again, it's about risk and number of opportunities. There are numbers aplenty for "1 out of every 10 startups" makes it. Fine. I want to see numbers for "of people who started a business 1/2/3/4+ times, here's how they make out"
We shouldn't shy away from risk and failure as a country. We should encourage it. The real evil of MegaCorp jobs is they slow feed you a median outcome when, if it were possible to weather some storms a little better, you might eventually catch a wave.
Color me skeptical. While PE is rolling up certain kinds of businesses, they are not buying landscaping and tire repair shops at the $1 million level. They aren't going to buy anything that depends on the sweat equity of the owner.
Financing as a solo-preneur is not prohibitive. There are SBA loans. There is seller financing. You can do it for 10-20% down, maybe less.
It's not "EZ" nor did I claim it was. That's why people don't do it. Most people would rather earn W2 income where someone else has all the responsibility and they just show up and drone.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
Well, I just checked on that $700k revenue business again and turns out I was entirely wrong. It actually is $700k in profit, or at least cash flow. That's super interesting, and I'm honestly halfway tempted to make it happen via seller financing.
Have you done something similar?
I've bought some very very small businesses but nothing at that scale.
The linked business seems comparable to what I've seen. If they take seller financing then it could be a very good opportunity. The catch? You would have to move to Utah and run a business with lots of low wage employees. Your days will be spent filling out tax forms and putting out fires. But I think you would get rich.
The owner might be reluctant to do seller financing with a stranger...
More options
Context Copy link
More options
Context Copy link
Again, in a lot of these cases it’s a guy who has ‘his’ clients for 20+ years and they’re often either old themselves or don’t want to switch to some random guy who bought the business. They have deep preferences you or your (likely high churn) employees mostly don’t know, and new client acquisition is often through a large, extensive network of communal contacts you probably don’t have, whether it’s church or the golf club or people the previous owner went to high school with. And they know where to find competent local (illegal, often) workers, may speak OK Spanish.
So what you’re actually buying for $900k is some old equipment and ‘contracts’ that will quickly vanish when the regulars realize it’s not the same company anymore. The only time you should buy one of these businesses is either if you’re a longstanding employee and the owner has no heirs OR if you’re in the same business locally, know existing and potential clients, and want to expand your operation.
Depends on the business. An accounting, legal, or insurance practice? Yes. My uncle sold his insurance business to a bank and then had to come back out of retirement because his clients left and the conditions of the sale were no longer being met.
A landscaping or tire repair business? Not so much. Do you know your landscaper or plumber personally? I don't. I just call the number I always call and a different random guy does the work every time. The business sale would be entirely transparent to the customer.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
This feels unlikely. Even as a software engineer, you're doing well above average if you hit 300k ever, let alone by 30 (source). Do you have a source on your end?
I don't know what specifically @jeroboam is thinking of here. But every time I've looked at one of those "the trades make so much money!!!" claims, it always seems to boil down to weird anecdotes. Like, 1 guy who had a sweet deal with the city of New York and milked it by working a ton of overtime one year. EG: these people: https://www.ibtimes.com/94-nyc-garbage-collectors-earn-300000-2021-net-100000-ot-pay-3356548 . Meanwhile, the average garbageman pay in NYC is $18 per hour. There's a reason people aren't flocking to take those jobs, and it's not just class snobbery.
You are misunderstanding me completely.
The trades suck. You should get a white collar job if you can. Higher pay, better environment, better benefits, doesn't destroy your body. And absolutely no one is saying "go be a garbage man".
That said, you can get wealthy by owning a business that employs tradesman. You're not out there changing tires, you are managing the people who do. At least until they don't show up for work, lol.
You will get rich on this path, but it's still probably not worth it compared to a nice white collar job that pays 1/2 as much but comes with zero responsibility or lost weekends.
Ah, sure. But that's... not an easy or risk-free path. It might be attainable for some, but not for the majority of regular people, even if they "hustle." It's not like you can start at the bottom, work your way up, and get promoted to "owner." You have to either start your own from scratch, or buy one, hoping and praying that it's not a lemon.
I don't know, I go back and forth. Like you I've spent time looking at buzbuysell and other business selling websites. It does seem like you can buy a profitable business for surprisingly small amounts of money. But I have to assume there's a catch, with all of them. At least, you'd have to do a ton of investigation to make sure it's actually sustainable. But I don't know, maybe that really is the answer. It's a capitalist system after all, so it makes sense that the business owners get the best rewards.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
Of course, see above. The difference is you actually have to take some risk and responsibility and not just collect a check.
I don't see anything.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
Housing prices aren't a problem that exists in isolation. People's lifestyles and expectations have inflated at a rate that at a 'minimum' is inline with the increase in housing costs, and on average, vastly outstrips it. People tend to live to the maximum of their income. There's plenty of affordable housing all across the United States. It may not be what you're looking for, the jobs may not be as great, but they're absolutely affordable if you're willing to cut back on your spending habits, eating out 3-5 times a week, buying the latest smartphone and wearing expensive clothing; just to name a few. But you're not going to be living the lifestyle that you're told is attainable in celebrity magazines.
This is unfortunately some boomer mentality stuff maybe, everything is just Weimar expensive these days. The 89c 5-layer-beefy burrito from taco bell is $5
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link