The art of buying, fixing, and selling businesses, and how The Profit Line helped him stay sane so he could grow the business and sell it at a multiple of its original value.
On paper, Steve Divitkos is many things.
CEO and business owner
Search fund investor
Acquisition entrepreneur
Podcast host
Husband and dad.
His current role is Founder of Mineola Search Partners which invests in search funds and the companies they acquire. His experience is deep and varied and he is uniquely positioned in that he has experienced almost every angle of this business himself.
He has had some incredible success and has also made some mistakes along the way, not to mention challenging his mental health with the stress and pressure of buying a business.
He has applied all this learning in a variety of ways. Some he monetizes through his investments and expertise at Mineola, and some he simply shares in his blogs and his podcast: In the Trenches, which he started a year ago.
One of his lucky charms has been his relationship with The Profit Line as a trusted partner. This partnership started over seven years ago, when, after nurturing a relationship with the then owner of Microdea, a software company that serves logistics businesses, he bought the business. Steve says that it "had just enough wrong with it, and just enough right with it” for him to be excited and confident that he could grow it and add value.
What was the journey to buying a business?
Steve researched and spent several months looking for a business to buy. He eventually purchased Microdea through a search fund. The business was then owned by a father and son combo who founded the business 20 years before. It was not for sale, but over an eight month courtship he patiently convinced them.
When an owner sells, it’s usually driven by money or emotions.
In the case of Microdea, the owners felt a connection with Steve, and a sense that he was committed to improving and growing the business.
Why that business? What were the criteria?
20 years of history and a good customer base
Steve felt he could “make first time CEO mistakes and not totally screw it up”; great training ground for him
Good upside: lots to fix and add value
Software is the core product: the business category he was looking for
Sold into 5 different end markets: maybe too many. In the second year: Steve focused on the transportation sector, which paid off
Why did he need outsourced accounting help?
In the first week, Steve KNEW he needed help. He realized it was a non-accountant doing the accounting work: the Father/ founder was doing it.
With search fund partners to report to, he needed audited and compliant paperwork.
There was a higher expectation and an increase in the sophistication across the board.
Meanwhile as a new CEO, he had 1000 other problems to deal with.
The books were a mess.
He needed to get the financial reporting in shape in one quarter.
How did Steve find The Profit Line?
With all the stress and pressure he felt during that time, Steve says he barely recalls how he was introduced to Fern and The Profit Line. He was overwhelmed and needed help. He put the word out to his network, which generated the recommendation to talk to Fern at The Profit Line. After a quick briefing, TPL got to work fast.
How did The Profile Line solve the problem?
The lead accountant from TPL took charge, defined the scope of the work, began to fix the books and prepared the reporting for end of Q1.
She was supported by a TPL Junior accountant.
The onboarding period was smooth and seamless.
How did this make an overwhelmed CEO feel?
Early on there was complete hand-over of the books and the trust that went with it.
Steve stayed in the loop by analyzing the work and asking questions.
Steve felt relief and a sense of stability as the TPL team allowed him to focus on the things he is good at.
In the end, TPL was with Steve for seven years, until he sold the company.
What's the relationship with The Profit Line now?
You could say he is a fan!
As Steve has shifted to the search fund space, he regularly recommends TPL to other business buyers and business owners.
TPL will also become a sponsor of Steve’s podcast In The Trenches in
February and March 2023.
Advice for people seeking to buy, fix and sell a business?
Of course, listen to the podcast In The Trenches for advice!
Ask The Profit Line to evaluate the financial health of the business and assess the quality of its books and related management reporting. When you buy a business, you expect to improve its performance over time, but you can’t do that on shaky accounting and reporting. You will want and need to get your finances and accounting in order quickly, so get outside help fast.
What’s Next for Steve?
As a search fund he is now investing in and supporting other operators as they identify businesses to buy and grow.
Businesses with a valuation in the $5-30 million dollar range with 100+ employees are his sweet spot.