""I call these 'gateway-drug businesses,'" says Codie Sanchez. That's because local businesses are often relatively straightforward to buy and come with existing customers and cash flow. Their owners may be retiring and don't want a long negotiation. So once you do it the first time, you might see the opportunity to do it again. "You'll realize that process of buying that laundromat is so damn close to buying an accounting firm, a law firm, a property management firm," she says - hence the gateway drug idea."
""When I look at startups, I think, Hey, the average startup fails for two reasons. Many fail because of product-market fit. You have an idea, all your friends say \"Awesome!\" and then they don't buy it. And then second is you just run out of cash. So I'm like, \"Wait. I could decrease my risk by buying a local business that already has product-market fit? People have been paying for it for a while, and it has cash flow because it's profitable?\""
Local mom-and-pop businesses are often straightforward to purchase and come with existing customers and reliable cash flow. Many owners are retiring and prefer quick, low-friction sales. Buying an established local business reduces risk by providing proven product-market fit and immediate revenue, unlike startups that frequently fail from lack of fit or running out of cash. The acquisition process for one small business translates easily to buying others in different service sectors, making initial purchases a repeatable pathway to building a portfolio. Small local businesses therefore serve as accessible, lower-risk assets for investors seeking predictable returns and scalable acquisition strategies.
Read at Entrepreneur
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