Ben Jasper·December 18, 2023

How to Buy a Manufacturer with $1m in Cash Flow | Ben Jasper Interview

Ben Jasper, a ~20-year Wall Street veteran (Morgan Stanley investment banking, then long/short and multi-manager public-market investing), left finance in May 2022 after a burnout moment on a family vacation, wanting more control of his time and presence with his young daughter. After a fast, disciplined self-funded search (looking at 80-90 businesses, initially aiming small and all-cash), he bought a ~20-year-old plastic bag manufacturer in Bergen County, NJ for roughly $3.5m (about 3.5x SDE on just under $1m of cash flow), financed with ~20% equity, an SBA note, and a friends-and-family note, closing within about six months of starting his search after fielding multiple competing full-price offers. The business's appeal was its 90% recurring revenue, durable end markets (pharma, food, apparel, industrial bags) largely immune to the 'paper vs. plastic' trend, and low capital intensity -- but the deal came with brutal owner-dependency: no management layer, decades-old custom 'Frankenstein' equipment nobody else could run, and only two months to absorb 45 years of the retiring owner's tacit knowledge, which Ben tackled by videotaping the owner and building his own 30-40 page manual and pricing model. The first months were psychologically grueling (2:30am starts, self-doubt, calls to his wife questioning the decision), but a stable, loyal, long-tenured workforce and disciplined, low-leverage financing let him recoup his full equity investment within about a year, even as manufacturing demand softened industry-wide. A year in, he describes the trade-off as worth it: lower pay than finance, but predictable hours, no weekend work, and his first real vacations since college.

Deal facts

purchase price: low-to-mid $3m range ("low threes" plus inventory/WIP/raw materials, taking total to "mid 3s")
multiple: ~3.5x SDE/EBITDA
sde ebitda: just under $1m SDE/EBITDA (mid-seven-figures revenue, ~20% margins)
revenue: mid-seven-figures (not stated precisely)
financing structure: ~20% equity, 67% SBA note, remainder a fixed-rate, non-amortizing note from friends and family with a 10-year bullet payment
notes: Plastic bag manufacturing business in Bergen County, NJ (tri-state area), ~20 years old, founder-owned with his brother-in-law (the maintenance guy); sourced via Biz Buy Sell / broker (Benjamin Ross Group, broker Mike Meyer); listed on a Wednesday, LOI within ~10 business days after 3-4 competing full-price offers, LOI accepted August 2022, closed end of October 2022 (~6-month search from May 2022). Buyer put in ~20% equity and recouped all of that equity within about 12 months of ownership.

Why this business

Ben left a ~20-year Wall Street career (investment banking at Morgan Stanley, then public-market/hedge-fund investing including multi-manager platforms) after a moment of burnout and reflection during a family vacation, wanting more control over his time and more presence with his wife and young daughter. He deliberately searched for a small business to buy, initially planning to buy something small and all-cash, but landed on this 20-year-old plastic bag manufacturer because it was highly recurring (90% repeat), had weathered COVID with no real volatility, was not exposed to housing (unlike a pest-control deal he passed on), and was reasonably priced relative to its stability. He was initially biased against manufacturing (fear of high capex and cyclicality) but got comfortable once he saw the business was not capital intensive and served durable end markets (pharma packaging, fish bags, bakery bags, ice bags, Nike/apparel bags) where plastic has no realistic substitute.

What's working

90% repeat/recurring revenue with a diversified, durable set of end markets (pharma, food, apparel, ice, auto) that are structurally hard to replace with paper or glass
Low capital intensity relative to EBITDA compared to typical manufacturing businesses
A loyal, highly tenured, ethical workforce (all 9 pre-existing employees stayed a year post-close; two foremen since the company's founding in 2002) that Ben calls the biggest positive surprise
Old, fully-depreciated, custom 'Frankenstein' equipment that is expensive/impossible to replace (replacement cost $4-5m) and requires deep tacit knowledge to run, creating a real barrier to entry once you can maintain it
SBA-preapproved deal with matching tax returns/CIM that let the deal move very fast (LOI within 10 business days, close in ~2.5 months)
Conservative capital structure (low leverage, high equity) let him recoup his entire equity investment in about 12 months
Remote login capability he added post-close made him more responsive to customers than the prior owner
Selling through distributors (accepting their margin) frees him from needing an outbound sales force

What's hard

Extremely demanding hours: arriving at 2:30-3:30am to manually warm up decades-old extruders through a ~2.5 hour startup sequence with no real management layer beneath him
No management layer at all -- as owner he personally handles all customer emails, quoting, shipping logistics, and sales in addition to running production
Knowledge transfer from the retiring seller (who had run the business for ~45 years) was compressed into a 2-month training window; Ben had to videotape the seller each morning, rewatch tapes on weekends, and build a 30-40 page owner's manual and Excel pricing model from scratch
Fragile, fully custom, 'Frankenstein' equipment that could break down at any time, requiring hard-to-find mechanically inclined maintenance staff and specialty secondhand-parts vendors
Had a maintenance employee steal from the business; had major freight/logistics failures (e.g. a damaged pallet to a top customer, a delayed resin railcar forcing a $20,000 emergency film purchase)
Manufacturing/industrial demand has been down broadly (~10-15% revenue decline) in the year after acquisition, which delayed planned capital investments and hiring
Emotionally brutal first two months -- multiple calls to his wife from the road at 3am saying he thought he'd made a terrible mistake
Tried to shift employee shift start times for efficiency/overtime reasons; employees pushed back because they prioritized family pickup schedules over extra pay, forcing him to keep the schedule as-is
Took a significant pay cut relative to his finance-industry compensation and had to learn to pay himself a 'reasonable salary' for tax/IRS purposes rather than distributions

Notable quotes

I was like this is great I'll learn how to do all this... they say when you buy a business with a million dollars of SDE at that level there's one of the appealing aspects of that threshold is that there's a management layer... I didn't check that box.

I had to videotape him every day because he was like yeah you need to write this all down you need to do this correctly otherwise you're going to destroy all this equipment.

I would tell, I'd caution searchers and self-funded search, is the golly gee shucks seller who you think you can run circles around is way better than you ever could have thought, because if they've been doing it... they just know the nuances.

I basically walked away from 20 years of building a very specific skill set that was working for me, and now I'm basically running a small manufacturing plant where I have no background except a desire to solve for different things in my life -- more control, more predictable hours, and ability to be more present.