How a 29-year-old CEO bought and scaled a small business
He acquired a niche automotive firm and doubled revenue in 3 years.
1A costly mistake
Lucas Philips made a critical error during his first acquisition attempt by renting a luxury car. When visiting a small Porsche interior manufacturer in Oregon, he arrived in a brand-new Mustang convertible from Hertz. The seller, seeing the flashy car, raised the price from $40,000 to $320,000. Philips later admitted, 'I should have just taken the Camry,' acknowledging this misstep in business judgment.
2Family legacy
Philips' entrepreneurial drive stems from his family history. His Jewish ancestors, who immigrated during the Ellis Island era, ran small businesses for generations. His grandfather sold paper products to New York bakeries, while his father pioneered importing sunglasses from China before transitioning to high-end furniture. Though Philips raised millions for a coffee startup in college, he found investor-backed ventures unsatisfying.
3Buy Then Build model
After discovering Walker Deibel's 'Buy Then Build,' Philips shifted his approach. The idea of acquiring existing businesses through debt financing appealed to him more than traditional startups. In 2021, he joined Acquisition Lab and within 10 weeks signed a letter of intent to purchase Newark Auto. Using an SBA loan, he acquired 100% ownership with 10% down payment and a personal guarantee for the remaining 90%.
4Personal guarantee risk
Philips' model differs from the popular MBA search fund approach. While traditional models offer 20-25% equity without personal guarantees, Philips opted for full ownership with significant personal risk. He references Noam Wasserman's 'Founder's Dilemmas,' choosing the 'king outcome' over the 'rich outcome.' He describes this as 'taking out a mortgage on your career,' emphasizing the substantial personal commitment required.
5Factory life
Though living in Manhattan's Upper West Side, Philips wakes at 4:30-5:30 AM daily to commute to his Newark factory. With production line workers starting at 7:30 AM, he maintains rigorous hours far removed from startup perks like ping-pong tables. This blue-collar work ethic has driven revenue growth to $3 million, proving his hands-on management approach effective in manufacturing.
6Growth strategy
When Philips acquired Newark Auto, its revenue stood at approximately $1 million. Through bolt-on acquisitions, he's tripled that figure. His strategy involves consolidating small businesses to achieve economies of scale. However, he's learned each acquisition carries unique risks, where minor details can derail deals—lessons like avoiding convertibles during business negotiations.
7Education imperative
Philips stresses the necessity of proper training before undertaking such risky ventures. He mandates reading 'Buy Then Build' and completing Acquisition Lab's search and due diligence modules. 'You need to understand what you're doing before mortgaging your career,' he warns aspiring acquirers, highlighting the importance of preparation in entrepreneurship through acquisition.
8Entrepreneurial mindset
Disillusioned by startup politics—reporting to investors and clashing with MBA co-founders—Philips sought greater control. 'This isn't for the faint of heart,' he admits, but the rewards prove substantial. Tripling revenue in three years validates his approach. His story demonstrates how alternative entrepreneurial paths can yield success outside conventional venture-backed models.
9Future of small business
Philips' journey offers hope for small business ownership amid generational decline. He continues his father's model—running a business while maintaining family time. His success with Entrepreneurship Through Acquisition (ETA) showcases this model's rise as a viable alternative, particularly in niche manufacturing sectors where operational expertise trumps disruptive innovation.
Original article: Fortune | FORTUNE — 29 yaşındaki CEO'nun işletme satın alma ve büyütme hikayesi