The 3 pillars of my favorite cashflowing businesses to buy

One of the most common questions I get from people who join Acquisition Ace is:

“What kind of businesses should I buy, and what shouldn’t I buy?”

Problem is, everyone who asks me this has different goals, skill sets, and industry expertise.

So I can’t just give a blanket answer that fits into a tidy email.

But I can give you something better...

This email is the first of a three-part series on what I call:

“The three pillars of cashflow.”

These are fundamental traits that indicate a business will keep bringing in steady cashflow.

Think of these as the core “rules of thumb” to tell whether a business is worth investing in.

First up:

Pillar #1: Recession resistance

This is the main reason why I advocate for buying “boring” businesses.

Businesses like car washes, laundromats, and storage services offer services that people will always need every day, week, or month, even if the world economy falls off a cliff.

A perfect example is accounting firms.

They’re super recession-resistant, because:

• People have to do their taxes every year

• Businesses need frequent bookkeeping done

• Businesses need to do payroll every month

And so on.

If you want to research even deeper, you can also look at which businesses/industries did well in the last recession.

Check back to 2008, '09, ‘10, ‘11. Which industries went through that economic slump without much of a problem?

(Spoiler alert: they’ll almost always be boring businesses!)

Which businesses should you always avoid?

Let’s get a little more concrete here.

Avoid acquiring luxury and “discretionary spending” businesses.

An example: Crumbl Cookies.

Don’t get me wrong, I love Crumbl — they’re delicious!

But I’d hate to be running a business like that when the next recession hits.

People who just lost their jobs aren’t going to spend $8 on a cookie. But they will keep spending money at the laundromat.

Also:

Avoid anything tied to new construction.

Construction requires specific industry expertise most people don’t have.

And on top of that, it’s also a boom-or-bust type of industry. When the market turns, contractors are the first to lose their shirts.

This also matters if you’re buying businesses indirectly related to construction, like an HVAC or plumbing company.

If so, make sure that your #1 customer is not home builders. They’re a volatile source of income. It’s much more safe and reliable to have residential/commercial customers.

Exceptions apply to this advice, of course.

But these are the guidelines I recommend to most people.

More to come in parts 2 and 3!

In the meantime...

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👉 I want to buy (or passively invest into) a small business

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Onward,

— Ben Kelly