172: The Truth About Buying Boring Businesses (What the Gurus Aren’t Telling You)

The Cash Flow Blueprint every business owner wishes they had sooner: coltivar.com/cashflow 

Steve pulls back the curtain on the whole "buying boring businesses" trend that’s being pushed by influencers. 

While the idea of grabbing a laundromat or a small trade business might sound like an easy path to profit, there’s a lot more to the story. Steve explains why the numbers being shared out there are often misleading and what’s really going on behind the scenes when it comes to profits, capital expenditures, and cash flow. 

By the end, you’ll see why understanding these details is crucial to making smart business decisions—and avoiding costly mistakes. If you're thinking about buying a business, or just curious about what’s really happening in these deals, this episode's for you. 

Disclaimer:   
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This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendations. The Company is not affiliated with, nor does it receive compensation from, any specific security. Please see https://www.byfiq.com/terms-and-privacy-policy for additional important information. 

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Transcript

I want to share a word of caution with you regarding gurus that are proclaiming buy boring businesses because although sometimes they have good advice oftentimes it's misguided and it's because they're missing the whole picture of the business both from a strategy, operations, and financial perspective and that's what I'm going to get into today in this episode.

The reason why I'm doing this episode right now is because over the weekend I was working in my yard and I had my earbuds in and I was listening to a podcast episode and then after that podcast was done it prompted another podcast by another influencer or a so-called influencer guru and the advice seems so compelling but then as I started to listen to it with more of a critical ear I was like wait a minute this can definitely deceive a lot of people out there.

So there are people on YouTube and they have a ton of followers way more followers than I do right and they talk about get rich quick schemes and ideas okay so I don't chase crypto, I don't chase drop shipping, I don't chase flipping houses, I don't do any of that stuff okay.

I focus on the fundamentals of business. I like to think about things in terms of private equity and what hedge funds do investment bankers do and venture capitalists do okay. I don't I'm not a speculative type investor but there's so many people that may be alluring especially to the younger generation because they speak with so much conviction but the information that they share is incomplete because they don't have expertise in actually running a business or actually turning around companies.

Now I'm not saying I'm the expert of everything and I have it all figured out okay trust me I don't but I just want to share a few things with you so you're very aware of what I'm referring to.

So I was listening to this episode let me just set the stage and is talking about buying boring businesses and that's how this influencer positions themselves on YouTube and they talk about buying laundromats for example and if you do the research the average laundromat in the United States makes between $150,000 and $172,000 in annual revenue and this is as of 2025. Now this figure can vary widely based on location size and services offered no doubt so even though the average is $150,000 per year some locations may do a lot more than that but let's just take the average and follow along with me.

Now regarding profit margins for laundromats typically they range between 20 and 35 percent meaning a well-run laundromat can net between $30,000 and $60,000 or more in profit annually and I'm just talking about the average but let's just roll with that. Let's just take the high end let's say it's $60,000 these influencers are really good about saying okay you go out there and you buy a laundromat and you make $60,000 and then you take that $60,000 and you reinvest it and you go buy another one and next thing you know you own 10 laundromats and you're making $600,000 a year off buying a boring business. Sounds super compelling right? Here's the problem though with that thinking.

Number one let's take the $60,000 which is in profit and account for taxes and let's just say a third of it goes to taxes for easy math that means you're left with $40,000 left over. Okay what about capital expenditures because if you're running a laundromat that means your washing machines and dryers are going to have to be replaced and let's say they have to be replaced every five years. Well there's capital expenditures that come out of the $40,000 so it's not $40,000 a year it may actually be $20,000 a year once you account for reinvestment in your capital investments right.

Now that's where understanding how financials work and how the financial statements actually read is so important because profit doesn't account for working capital and capital expenditures. Those two numbers don't show up on the income statement that's why profit is not cash flow but most people don't hear that. Most people instead hear profit and they think that's the amount of money I'm going to put in my pocket.

Now maybe these influencers aren't trying to be malicious maybe they're just trying to keep things really simple but by keeping things simple it creates complexity right. Because if you're running a business or you're managing a company and you don't speak with concision in other words if you're telling your team oh yeah we're going to have $600,000 in profit so we're going to be fine when it comes to covering our payroll and our future financial obligations you may be missing the boat because you're not accounting for the working capital the amount of money that's tied up in AR, in inventory, in accounts payable, or capital expenditures in that number. You don't really have that in cash to pay the bills and that's where you could be tricking yourself so that's number one.

So I was just listening to this episode and I was thinking those things and I'm like oh my gosh I wish somebody could explain to the masses and like I said they have a much bigger following than me so their voice is going to be heard much more than mine right now and it's just going to lead a lot of people astray.

Okay then after this episode like I told you the next one showed up right the algorithm gave me the next episode it's by a totally different influencer and he has a coaching business in the trades and he's talking about oh yeah investing in boring businesses like in the construction trades is a great idea and it's interesting because when I go back to my time at Duke when I was at the Fuqua School of Business doing my MBA all my classmates were talking about getting a job at Amazon or Google or Goldman Sachs or Blackstone and then they would ask me Steve what are you doing and I'm like well I'm running Coltivar and we turn around and grow construction companies and service-based companies and they would kind of snicker like oh that's cute you know but it's just interesting how the tides have turned because now with AI tech is disrupting software companies, SaaS businesses right and now a lot of people are like okay what businesses can I invest in that are least likely to get disrupted and then they look to the trades right and so that's essentially what this guy is saying.

He's like okay buying boring businesses is a safer proposition and a better investment because it's not going to be taken over by some AI agent in the future most likely right the day we have robots coming out to our houses doing plumbing repairs we're all screwed right that means like nobody's working but he's going down this path right and he's saying yeah so you could buy a concrete company and you could be making like 300 grand a year you could buy a painting business and make a million bucks a year and he's like in landscaping and landscaping's like my business I ran one for 13 years I know all the ins and outs of landscaping and I advise a lot of landscape companies and he's talking and he's saying oh yeah so like I have a buddy and he started a landscape business and they do design build work so they're designing these projects and they go out there and build them and they put in place like water features and outdoor kitchens and outdoor lighting and cabanas and everything else right they build the whole outdoor landscape for these residential homeowners and he's like yeah he started it and now he does two million dollars in revenue and he makes 400 grand a year take home puts that in his pocket and so he goes on and on to say like hey that's why trades are so great and I'm like wait a minute.

Okay pause because number one this is where people get confused and they get excited about business but then they don't understand the entire context like I was referring to at the beginning so let's break it down a landscape business right I've been around the block I know the numbers of a lot of landscape companies and I can tell you a good performing landscape business earns about 10% operating profit now sometimes it's higher sometimes it's a little bit lower but just for simple math it's about 10% it's not 20% maybe it's 20% and I'll tell you why it may be 20% in a second but let's just roll with 10% if it's 10% if his friend's doing two million dollars a year in revenue he's earning two hundred thousand dollars in profit okay that doesn't account for taxes that doesn't account for money tied up in working capital remember that's the difference between ar and inventory and accounts payable that you don't collect on immediately and capital expenditures.

And when you're doing landscape construction you got to buy trucks trailers you have to buy skidsters and trenchers and backhoes and sod cutters and rototillers it's very capital intensive to say the least so that's not being talked about either so that's where it skews people's thinking I was working with a landscape contractor not too long ago they do 50 million dollars a year in revenue they've been around for a long time they do super high-end work very successful and guess what their operating profit was around seven percent and their cash flow their free cash flow as a percentage of revenue was like 1.3 percent after accounting for working capital and capital expenditures so sure they had seven percent in operating profit right 3.5 million dollars but their cash flow was only 1.3 percent of revenue.

Big difference and so that's what drives me crazy now let me go back to the whole idea of 20 profit sure his friend may have a 20 profit margin because if they're structured as an LLC and he's not paying himself wages through the business then that compensation is not included in the numbers right so when I'm talking about a business earning 10 that's after paying the operator of the business a market rate salary so if you're running a landscape business and you're like yeah we're making 20 and I'm like well how much are you paying yourself you're like why not I'm just taking distributions okay that's not reflecting the true economic reality of your business or you may say yeah I'm paying myself 50 grand a year and I'm like you would never be able to find somebody to replace you as an operator a CEO of your business at 50 grand a year so you're skewing the economic reality of your business so pay yourself what you would have to pay somebody in reality account for that in your numbers then see what your operating profit margin is and it's probably more like two or three percent account for working capital and capital expenditures and you probably have negative cash flow and that's probably why you feel broke and why you're tapping into your line of credit every single winter just to survive until the busy season again and this is the kind of stuff that's not being taught out there in the world and that's why I'm so passionate about this episode is because you need to know this stuff otherwise you're going to chase all these shiny objects you're going to go down a path and you're not going to know what the heck's going on so I did an episode not too long ago about buying a business and when you go to buy a business brokers are great at window dressing in other words they'll make the business look all sexy they'll do all these ad backs and they'll beef up EBITDA they're not lying but they're just doing all these ad backs they don't know the numbers they present things in a skewed economic reality and then people buy these businesses and wonder why they don't work out so I don't want you to be discouraged by this I want you to be empowered by this because if you have the chance to talk to somebody or you're going to buy a business and you know your stuff you know your numbers and you know what to ask you're going to reveal the real issues of the business and more importantly you're going to know the opportunities that exist and how to fix things and how to transform things so that's why I wanted to do this episode is to at least maybe have a little bit of a dent on the world out there because like I said these influencers and these gurus are popping up all over the place and I would say just do your due diligence understand their background and make sure you understand their financial acumen because otherwise you're just throwing things out there but they really don't know the difference between revenue and profit and cash flow and working capital and return on invested capital in all the things I try to teach on this podcast like I said this isn't me against them I'm not trying to put anybody down I'm trying to sound a word of caution so you don't find yourself in a position that's really bad that hurts you financially one day all right that's what I have DM me on LinkedIn connect with me on LinkedIn DM me your thoughts on this episode what do you think do you agree with this do you disagree hey you can say whatever you want you can put things in the comments I'd love to hear your feedback join the conversation and until next time take care of yourself cheers