Buying Small to Then Buy Larger ($1m SDE) - Acquiring Minds Recap

Podcast: Acquiring Minds

Published: 2025-12-31

Duration: 1 hr 43 min

Summary

Joe Solberg's journey illustrates how starting with a small business acquisition can pave the way for larger investments. His first purchase allowed him to gain experience and ultimately led to a successful acquisition of a $9 million branding agency.

What Happened

In this episode, Joe Solberg shares his experiences with two distinct business acquisitions. His first acquisition involved a small shop that provided graphical renderings for real estate and home goods sellers, achieving around $400,000 in seller's discretionary earnings (SDE). This initial venture was a stepping stone for Joe, as he operated the business for four years, eventually generating approximately $200,000 a year while dedicating minimal time to it. This experience not only served as a practical introduction to business ownership but also provided him the financial means to pursue larger opportunities.

Joe's second acquisition occurred in August 2024, when he purchased Plan B Communications, a branding agency generating over $9 million in revenue and $1 million in SDE. This transition from a smaller operation to a much larger business was facilitated by the lessons learned from his first acquisition. With a president running the larger agency, Joe now focuses on strategic projects, demonstrating the advantages of scaling in business ownership. His journey emphasizes the value of a stair-step approach to acquiring businesses, allowing entrepreneurs to build experience and cash flow before taking on more significant investments.

Key Insights

• Starting with a smaller acquisition can lead to valuable experience and financial growth.
• The transition to a larger business is smoother when informed by earlier acquisition experiences.
• Having a dedicated team helps entrepreneurs focus on strategic growth instead of day-to-day operations.
• Many successful entrepreneurs follow a pattern of acquiring smaller businesses to build towards larger ones.

Key Questions Answered

What lessons did Joe Solberg learn from his first acquisition?

Joe's first acquisition taught him critical lessons about business operations and management. After running a small graphical rendering shop, he gained insights into what to look for in a business, the types of operational challenges he might face, and how to create cash flow. These experiences proved essential when approaching his second acquisition, allowing him to better understand his goals and the market needs.

How did Joe Solberg finance his business acquisitions?

Joe's initial acquisition provided him with the cash flow necessary to pursue larger opportunities. While specific financing details weren't discussed, the episode highlights the importance of generating income from smaller businesses to build the financial foundation for more significant investments. This approach reflects a common strategy among entrepreneurs who start small before scaling up.

What is the significance of Joe's acquisition of Plan B Communications?

Acquiring Plan B Communications marked a pivotal moment in Joe's entrepreneurial journey, as it represented a significant leap from a small business to a much larger agency. The agency's revenue of over $9 million and SDE of $1 million provided Joe with the resources and infrastructure to focus on strategic projects, showcasing the benefits of scaling up. This acquisition also illustrated the effectiveness of Joe's prior experience in guiding his decisions.

What is the stair-stepping approach in business acquisitions?

The stair-stepping approach involves starting with smaller acquisitions to gain experience and build cash flow before moving on to larger opportunities. Joe Solberg's journey exemplifies this method, as he began with a modest graphical rendering shop and later transitioned to acquiring a branding agency. This strategy allows entrepreneurs to learn the ropes and gradually take on more significant challenges.

Who is Irv Grosbeck and what role did he play in Joe's journey?

Irv Grosbeck is a key figure in the search fund ecosystem, having pioneered the model that allows skilled individuals to search for businesses to buy with the support of investors. Joe Solberg reached out to Grosbeck during his research into business acquisition, which provided him with valuable insights. Grosbeck's influence underscores the importance of mentorship and networking in the entrepreneurial journey.