Deacon here with a story about valuation delusions, strategic discipline, and why some patterns are more reliable than financial projections.
While we were working through our funding strategy and the Canadian deal, another opportunity came through our mastermind group. Someone mentioned a hair supplement company that wasn't quite right for them but might fit our profile.
Let's call it "Follicle Future."
Initial appeal was high: unique product formulation, growing fast, hair/beauty space (which we were exploring), and another side-business situation where the owner couldn't give it proper attention.
The product was genuinely impressive. Clear differentiation, the kind of thing that makes you think "why didn't I think of that?"
But then we dug into the operational reality.
Lead times were nearly 6 months. Think about what that means:
Inventory orders require massive upfront capital
Growth actually hurts you (more growth = more cash tied up in future inventory)
You're essentially broke while growing successfully
Miss a demand forecast and you're either out of stock for months or drowning in unsold inventory
This creates a paradox: success becomes your biggest risk factor.
Here's what we realized: this could be a great business in a portfolio of 3-4 established brands where other businesses provide cash flow to fund the inventory cycles. As our next acquisition? Recipe for cash flow disaster.
We need our next deal to have stronger, more predictable cash flow. This business could be fantastic, but it came to us at the wrong time.
But here's where it got really interesting. The owner was absolutely convinced this business was worth 4x earnings (~$800K for a $200K profit business).
For context: businesses like this typically sell for 1.5-2.5x earnings. 4x is what you pay for predictable, cash-flowing, scalable operations with diversified revenue streams.
Travis offered 3x (already generous). Hard no.
The owner's response? "I already have multiple offers at 4x."
Two months later: "Hey, are you guys still interested?"
At this point we’re actually under LOI for a different deal. More on that next week…
Us: "Yeah, still interested… at 3x or less."
Him: "Still need 4x. I have other offers on the table."
It’s the same story about other offers. Always checking to see if we've changed our position. Holding firm to his 4x multiple because he has “proof” the market wants it 🙄.
Someone who genuinely has multiple offers at their asking price doesn't keep coming back to people who said no.
But more importantly, this taught us about strategic discipline versus FOMO. Sometimes the right business at the wrong time is still the wrong business.
For Operators: Understand what makes your business financeable. Long lead times and inventory-heavy models limit your options and realistic valuations.
For Buyers: Don't let great products override financial discipline. There's always another deal, but recovering from cash flow problems is much harder.
For Sellers: If you genuinely have multiple offers at your price, stop shopping and close one. If you don't, adjust your expectations to market reality.
We're still watching this space. If we had a strong portfolio generating excess cash, we'd revisit. But disciplined capital allocation means knowing when to say no, even to good businesses.
Sometimes the hardest decisions are the ones where everything looks right except the timing.
Next week I'll tell you about the deal that actually made it past the LOI stage – and why I was trying to manage due diligence from some pretty remote locations.
Have you ever walked away from something that looked perfect on paper but didn't fit your current situation? Sometimes the constraint forces better decision-making.
Until next time,
Deacon Bradley & Travis Zigler
P.S. We're getting better at recognizing timing mismatches early. But we're always interested in brands in the supplement space. Reply if you want to discuss a partnership or acquisition (no expectations or obligations).
Comments
Nothing yet. Say the first thing.
Sign in to join the conversation.