What owning a small business or franchise stake actually is, how returns are made, how such a business is priced, evaluating a specific opportunity, its risks, costs and taxes, and where it fits in a portfolio.
Buying into a business you can actually walk into
Lessons
Buying a small business almost always means buying a job — A small-business purchase is rarely a passive claim on cash flow. Most of what you are paying for is bound up with the seller's own labour, and the legal structure of the deal decides which liabilities move with it. (9 min)
The return is discretionary earnings, financed with debt the business itself has to service — Seller's discretionary earnings is a reconstructed number built from add-backs, and almost every small-business purchase is financed with debt the business's own cash flow is expected to repay - which makes the add-back schedule the single most consequential piece of arithmetic in the deal. (12 min)
The multiple is a discount for size, concentration and dependence on one person — There is no exchange setting a price here. The multiple applied to SDE is a negotiated number that moves with customer concentration, revenue durability and how replaceable the owner is - and it sits far below public-market multiples for reasons that have nothing to do with the quality of the business. (11 min)
Appraising one business: verify the earnings before you price anything else — Seven checks on one specific listing, in an order that puts verifying the earnings ahead of everything the earnings are used to justify - because every other number in the deal is built on top of a figure the seller had every reason to shape. (13 min)
Franchise royalties and goodwill amortisation both compound quietly over the holding period — Beyond key-person and concentration risk, a small-business purchase carries recurring costs and tax treatment that materially change the price a buyer can justify and the return a seller actually keeps - none of which shows up in a headline SDE multiple. This lesson is general information, not personal tax or legal advice, and rules vary by jurisdiction. (12 min)
This asset class replaces an income, it does not just diversify a portfolio — Small-business ownership belongs alongside the decision to work rather than alongside a bond allocation - it is concentrated, illiquid and labour-intensive by nature, and pretending otherwise is how it ends up compared against the wrong alternative. (9 min)