Nick Patrick·February 8, 2024

First-Timer Turns $20k into $900k in 19 Months | Nick Patrick Interview

Nick Patrick, a 29-year-old former Fidelity wealth management employee with no operating experience, bought a 30-year-old husband-and-wife wedding catering business and venue in a small Colorado tourist town for $400,000 -- roughly 1x SDE -- using no SBA loan and no personal guarantee, with the seller carrying 70% of the note and the returned client deposits effectively covering his down payment, so his actual cash outlay was about $20,000. Despite having ruled out hospitality and food businesses in his search, he took a second look after the deal sat unsold for six months, and found a business with flawless reviews, a dominant local market position, high margins, and a favorable negative cash-conversion cycle from advance wedding deposits. He moved into a cabin on the property, worked 60-80 hour weeks for months learning every part of the operation, rehired a key former employee, hired chefs, rebuilt the sales funnel and marketing, raised prices, and built a management layer -- while also confronting his own conflict-averse leadership style for the first time. After growing revenue modestly and realizing the local market had a ceiling well short of his $2 million goal, he decided to sell rather than hold, ultimately selling to a local family office 19 months after acquiring for $800,000 (about 2x SDE), netting roughly $500,000 from the sale on top of about $400,000 in distributions taken during ownership -- turning his initial $20,000 into roughly $900,000.

Deal facts

purchase price: $400,000 (all-in, including marketing fee for booked events)
multiple: ~1x SDE at purchase; sold for ~2x SDE
sde ebitda: $440,000 SDE (with two owners working in the business) at time of purchase
revenue: ~$1m revenue at acquisition; grew to $1.25m in first ~10 months (2022) and on track for $1.4m in 2023
financing structure: No SBA loan, no personal guarantee. Seller financing: 30% down payment (~$130,000), remaining 70% (~$270,000) carried by seller over 10-year amortization with a 4-year balloon. Down payment was effectively funded by the seller returning ~$400,000 of existing deposits/cash in the business to the buyer at closing (buyer received a check for ~$260-270,000 net on day one).
notes: Only ~$20,000 of the buyer's own cash was spent total: $20k earnest money folded into the deal, plus ~$1,000 for a due-diligence mentor/reviewer, insurance, and a tax attorney. Over $1 million in future booked revenue and ~$400,000 in client deposits transferred with the business. APA included provisions reducing the seller note if key wedding venue relationships were lost or if COVID caused a revenue drop. Sold 19 months later for $800,000 (listed at $900,000): $80,000 broker fee, $5,000 attorney, ~$2,000 other deal costs, ~$210,000 remaining seller note payoff, netting Nick roughly $500,000 from the sale. Combined with ~$400,000 in distributions taken during ownership (separate from a ~$60,000/year salary), he turned about $20,000 of actual cash outlay into roughly $900,000.

Why this business

Nick explicitly did not want a business in hospitality or food, or one with owner-dependency, seasonality, or a small tourist-town location -- all of which this business had. He initially passed on the wedding catering/venue business (a broker's listing) for exactly those reasons. Six months later, with no other buyers, the broker convinced him to just talk to the sellers. He liked the husband-and-wife owners, then discovered flawless reviews (200+, none negative), a 30-year operating history, high margins (40-45% net for the owner-operators), a large book of future deposits ($400k) with a negative cash-conversion cycle, and the fact that it was the only off-premise caterer in its town (next competitor 30 miles away over a mountain). He systematically identified and mitigated the business's key risks (key-person dependency on the chef, customer concentration via venue referrals, COVID risk, seasonality) with contract provisions and hiring plans, and ultimately decided the risk-adjusted opportunity -- plus the near-zero personal financial risk of the deal structure -- made it a good "first at-bat" to learn how to operate and lead, even though he didn't love the industry itself.

What's working

Extremely favorable deal structure: bought at roughly 1x SDE with no SBA loan, no personal guarantee, and seller financing where the returned deposits/cash effectively covered his down payment, so he only put in about $20,000 of his own money
High margins and a negative cash-conversion cycle (clients pay deposits months before the wedding, so cash comes in well before costs are incurred)
Market position as the only off-premise catering company in the town, insulating pricing power and reducing competitive risk
Mitigated key-person risk by rehiring a 7-year veteran employee and hiring two experienced chefs (a head chef and sous chef) so no single person was indispensable
Improved a neglected sales funnel: rebuilt the DIY Wix website, invested in professional photography, and added a consultative sales process, which raised the odds of closing bookings and increased average event price
Raised prices and venue fees, pursued a liquor license, cut the bottom 20% of low-margin events, and focused on higher-end weddings
Built a management layer (a former wedding planner as operations lead, plus the returning employee for sales) that let him step back from day-to-day operations within about six months
Built strong team culture -- empowering staff to make decisions on the spot and treating even part-time 1099 event staff as part of a shared mission -- which he credits as central to the value creation
Sold the business after 19 months for $800,000 (about 2x SDE), roughly doubling enterprise value

What's hard

Extremely operationally intensive: worked 60-80 hours a week for the first four to five months, living on-site in a 120-year-old log cabin, doing everything from kitchen prep to cleaning bathrooms to staffing events
Had never managed anyone before and had to learn to lead, fire, and give direct feedback on the fly, discovering his own conflict style was to 'avoid and accommodate'
Failed to clearly communicate his planned pullback from day-to-day operations to the whole staff, which caused some employees to feel he didn't care and created doubt about who was in charge
High-stakes, complex live events (e.g., three simultaneous weddings serving ~500 people with 25-30 staff) created constant operational stress and risk of costly mistakes
Realized after a few months that the business's addressable market was smaller than hoped -- already capturing roughly 40% of local catering demand with the next competitor under 10% -- making the original goal of doubling revenue to $2 million unrealistic without a much larger, riskier geographic expansion
Concluded the business was too operationally hands-on and stressful (given the stakes of weddings) to comfortably fold into a long-term hold-co model, even with a strong operations manager in place
Emotionally difficult to sell given close relationships with employees, some of whom had bought their first homes while working there

Notable quotes

I bought it low. I mean I bought less than one times SDE, so you know the age-old saying of you don't make money on the sell but at the buy, I think applies, cuz I sold it roughly two times SDE.

My mental model was that this is a no risk opportunity to learn everything that I don't know about operating a business, managing people, growing a business, and I truly felt that the only way to truly learn this stuff is go do it.

I realized this later, but I think this is worth mentioning: I learned my conflict style is both to avoid and accommodate, and so that was challenging for me to address people and expectations when they weren't met.

I feel very strongly that the wedding services business is an extremely attractive kind of niche, maybe not so much for someone who's trying to grow a traditional ETA type company, but is a lifestyle business.