Tomorrow’s Fortune

Welcome to the action-packed newsletter designed to help you navigate the world of business and investing. If you missed last week’s post, check it out here. 😎 

Today’s Digest: 

• Invest Like the Pros: I’ll walk you through how pros think about investing and the process of diligencing a business to prepare for a Smart Money Committee!

• What’s Happening in the Markets? Latest on China Trade Discussions, True Cost of Stacking Tariffs, Stocks Are Back to Ripping and Nvidia Going to China?

• Wanna Buy a Business? We found a high-profit Painting & Sandblasting Company ($515K of Cash Flow). Click HERE for the listing

TOP STORY

Inside the Smart Money Investment Committee

Inside the Investment Committee: How Smart Money Diligences Deals

Every great acquisition starts with a simple sentence:
“We think we’ve found something.”

But in private equity, that statement is never enough. Before a firm wires millions of dollars or signs on the dotted line, the deal team must present the opportunity to its most skeptical audience: the Investment Committee.

At Blackstone, KKR, and other top-tier funds, Investment Committee (IC) is where great ideas are pressure-tested, fragile assumptions are destroyed, and only the best opportunities survive. It’s where deep conviction gets built—or blown apart.

Today, we’re giving you a front-row seat to how smart investors actually diligence a deal.

This is your behind-the-scenes look at the questions that get asked, the frameworks that matter, and the red flags that kill deals—before the money ever moves.

The Four Critical Diligence Streams

Every investment committee meeting is structured around four core streams of diligence. Each one plays a different role in painting the full picture of the business—and whether it deserves to be acquired.

1. Commercial Diligence: “Will customers keep buying?”

This is where you figure out if the business actually has real, defensible demand.

Key Questions:

• Who are the customers? Are they recurring or one-time?

• How concentrated is the revenue? Do 1–2 clients drive 40%+ of sales?

• Is the market growing, flat, or shrinking?

• What does the competitive landscape look like? Any signs of pricing pressure?

Why it matters:
You can’t fix weak demand with operational efficiency. If the market is declining or the company has no edge, you’re just buying a melting ice cube.

In context: For a sandblasting company, commercial diligence would include validating infrastructure maintenance budgets in Arizona, understanding how state contracts are awarded, and benchmarking how frequently ADOT rotates vendors.

2. Operational Diligence: “Can this machine keep running—or run better?”

Here, the focus is on execution. Are people, processes, and systems in place to sustain performance?

Key Questions:

• Is the owner holding everything together? Or is there a team that can run the business?

• How standardized are the workflows? Or is tribal knowledge driving results?

• What’s the condition of physical assets—trucks, equipment, inventory?

• Are there bottlenecks in hiring, scheduling, or fulfillment?

Why it matters:
Great margins on paper mean nothing if the operations can’t scale. If one employee quits and EBITDA vanishes, it’s not a business—it’s a job with overhead.

In context: If a sandblasting company has only three crew members and no ops manager, you’re exposed. If the owner personally bids and supervises every job, that’s a single point of failure that must be addressed.

3. Financial Diligence: “Do the numbers tell the truth?”

This stream tests the integrity and economics of the business.

Key Questions:

• Are revenue and cash flow numbers clean? Or is there owner addback magic?

• What are true normalized earnings after accounting for one-offs?

• What’s the quality of receivables, and how fast does cash come in?

• Are margins stable or volatile across years?

Why it matters:
You don’t buy revenue—you buy cash flow. And you don’t value projections—you value what’s proven. Financial diligence helps you understand what you’re actually paying for.

In context: A sandblasting business showing 56% cash flow margins might be hiding seasonal volatility, one-time contracts, or irregular payroll. You’d dig into invoice history, receivables aging, and customer-level gross margins.

4. Legal & Compliance Diligence: “Are we walking into a landmine?”

Even profitable businesses can come with hidden risk: lawsuits, regulatory gaps, or broken contracts.

Key Questions:

• Does the business have valid licenses and permits to operate?

• Are customer or vendor contracts assignable post-acquisition?

• Any outstanding litigation or insurance coverage gaps?

• Does the workforce follow OSHA or other safety protocols?

Why it matters:
You can negotiate a great price and still lose everything if you miss a legal time bomb. Diligence here prevents “zeroes.”

In context: In trades like sandblasting, licensing and OSHA compliance are non-negotiable. If the buyer doesn’t hold a contractor’s license or if crews are working at height without documented safety training, the risk can outweigh the reward.

Why IC Exists: Pressure Before Purchase

Investment committee isn’t about saying “yes”—it’s about testing your assumptions until there’s nothing left to question.

The goal is not just to understand how the business works today—but to build a thesis for how it could be made better. You don’t need perfection. You need conviction.

It’s why the best investors are skeptics first, owners second.

So when we dive into the specific sandblasting business later in this newsletter, we’ll use this same four-lens framework to judge it like a pro.

Will it hold up under pressure?

You’ll find out next.

Here’s the 5 Questions to ALWAYS Ask Before Buying a Business…

Find other cool videos on my channel HERE (👈 Click)

WHAT’S HAPPENING IN THE MARKETS?

• What a “Made in America” Car Would Actually Cost
  As tariffs escalate under Trump’s trade regime, attention has turned to the feasibility and cost of producing a fully American-made vehicle. According to industry experts, building a 100% U.S.-sourced car today would add an estimated $10,000–$12,000 to the sticker price, driven largely by higher domestic labor costs, limited local supply chains for components, and the absence of domestic battery cell manufacturing at scale. EVs would be hit even harder due to reliance on materials like lithium and cobalt—still largely sourced and processed overseas. While some automakers (Ford, GM) have begun reshoring key parts of their production, the integrated nature of the global automotive supply chain means that “fully American” vehicles remain a symbolic goal rather than a commercial reality. This highlights the tension between industrial policy and consumer price sensitivity in politically driven reshoring efforts.

• China Tariff ‘Stacking’ Sends Effective Import Taxes Soaring
  As Trump’s tariff orders ripple through the U.S. economy, a growing number of consumer products from China are being hit by cumulative import duties exceeding 30%—sometimes well above 50% once preexisting and new reciprocal tariffs are combined. This “tariff stacking” effect stems from the layering of the April 5 blanket 10% tariff, country-specific reciprocal tariffs (ranging 11%–84%), and pre-2025 Section 301 levies still in place on hundreds of Chinese products. The result: importers face complex, overlapping duties with no streamlined exclusion process, leading to price hikes for end consumers on everything from toys to electronics. Apparel firms and furniture importers have already begun reshuffling supply chains to Southeast Asia or Mexico, but capacity limits and certification hurdles are slowing the shift. For investors, this signals potential inflation persistence in consumer goods and margin compression in retail and import-heavy sectors.

• Stocks Bounce Back—Wall Street Shrugs Off Tariff Fears (For Now)
  Markets staged a broad-based rally Thursday, with the Dow jumping 150+ points and the S&P 500 climbing 0.9%, led by tech and consumer discretionary. Despite recent selloffs triggered by rising tariffs, investor sentiment rebounded on the view that the worst-case trade outcomes may already be priced in. Semiconductors, in particular, saw relief buying, with AMD and Broadcom posting gains after several sessions of weakness. Meanwhile, economic data offered mixed signals—initial jobless claims ticked up to 232,000, but retail sales and industrial production surprised to the upside, suggesting underlying resilience. The rally underscores a recurring market pattern: sell first on macro shocks, but re-enter as positioning resets and forward multiples recalibrate. While short-term volatility remains tied to tariff developments and Fed rate trajectory, market participants appear increasingly willing to look through the noise—at least for now.

• Nvidia Plans R&D Expansion in China Despite U.S. Export Curbs
  In a move signaling the strategic complexity of global chip supply chains, Nvidia is reportedly scouting a new R&D site in Shanghai, even as U.S. restrictions tighten around advanced chip exports to China. The company, whose AI accelerator chips have been subject to multiple rounds of export controls, appears to be doubling down on engineering and software development within China to maintain a long-term commercial presence. While the site would not involve advanced chip manufacturing, sources say the goal is to support local AI clients and adapt product offerings to meet Chinese regulatory standards. Nvidia declined comment, but the move reflects a broader industry trend: decoupling in hardware, but continued localization in software, support, and commercial strategy. For investors, it reinforces Nvidia’s intent to protect market share in China—its second-largest market—despite geopolitical headwinds and policy risk.

SO YOU WANT TO BUY A BUSINESS… 🏦

Deal of the Week: Specialized Painting & Sandblasting Contractor – Asking $1,100,000

Opportunity Overview

This Arizona-based surface preparation contractor offers industrial-grade sandblasting, painting, and protective coating services for public infrastructure, utilities, and select commercial clients. Founded in the 1980s and generating $900K in annual revenue with $500K in cash flow (56% margins), the business operates in a high-barrier niche with limited competition. Key accounts include the Arizona Department of Transportation (ADOT) and utility providers, where the company is one of only two contractors certified for specialized infrastructure work—creating a structural moat. With just three employees and minimal fixed overhead, the company is lean but reliant on the owner’s expertise and license. A new buyer could expand geographically, add complementary services like industrial coatings, or develop a private-sector sales function.

Cash Flow and Profitability

At $500K in SDE on $900K in revenue, the company’s 56% margin is exceptionally high for the sector—likely a result of skilled labor, minimal overhead, and long-term government contracts with low churn. This level of profitability implies pricing power and limited direct competition. CapEx appears low, and the business model doesn’t rely on heavy fixed costs or large job site crews, which improves cash conversion. However, the tight labor structure also creates fragility—particularly given the owner’s role in sales, bidding, and execution oversight. Nonetheless, the cash flow profile makes this an attractive bolt-on for a regional trade roll-up or an entry platform for buyers licensed in painting or surface finishing.

What We Like

Niche Market Position with Regulatory Barriers
The business is one of just two contractors certified by ADOT for this category of work. That effectively creates a duopoly for large-scale public infrastructure jobs in Arizona. New entrants would face licensing requirements, vendor approvals, and years of project history before becoming competitive.

Attractive Financials and Low Entry Multiple
A $500K cash flow stream priced at $1.1M (2.2x SDE) is well below market comps (typically 3.5x–5x for infrastructure services). That discount, combined with high margins and a defensible client base, provides real acquisition value—especially for strategic buyers with existing crews or licenses.

Multiple Levers for Strategic Growth
A new owner could:

• Expand into neighboring states with similar infrastructure needs (e.g., Nevada, New Mexico)

• Introduce complementary services like anti-corrosion coatings or line striping

• Target commercial and residential developers for high-end decorative blasting work (a higher-margin, less regulated segment)

Infrastructure-Backed Demand Tailwinds
With federal and state infrastructure budgets continuing to rise post-IRA and CHIPS Act, businesses tied to highway maintenance, bridge restoration, and public utility upgrades are well-positioned. Surface preparation is a mission-critical service in all of these scopes.

Human-Centric Trade With Low AI/Automation Threat
Sandblasting is physically demanding, context-specific, and often performed in irregular environments (e.g., bridges, overpasses, utility structures). It’s unlikely to be automated in the next two decades—providing job security and service durability.

What We Don’t Like

Extreme Owner Dependency
With only three employees and the owner managing bids, relationships, and compliance, the business lacks operational depth. Transitioning these roles to a general manager or project lead will be essential to preserve cash flow post-acquisition.

Customer Concentration Risk
The Arizona Department of Transportation appears to be the anchor customer. While the contract may be sticky, buyers need to understand how work is awarded (e.g., term contract vs. rebid cycle) and whether volume is project-based or recurring.

Labor Constraints & Succession Risk
With a small team, losing even one field technician would jeopardize throughput. Recruiting certified sandblasters with OSHA experience is difficult—especially if pay structures or benefits aren’t competitive.

Licensing Requirements
This is a regulated trade. The acquirer must hold—or hire someone with—the necessary state license to operate. That narrows the buyer universe and may require a transition plan to promote from within or partner with an outside operator.

No Sales or Lead Gen Infrastructure
The business appears entirely relationship- and referral-driven. There’s no mention of marketing, CRM, bid tracking software, or outbound sales. While this creates opportunity for improvement, it also reflects an unsystematized commercial engine.

Key Questions for Diligence

1. What percentage of annual revenue is derived from ADOT, and what is the structure of those contracts (e.g., multi-year, per-project, retainer)?
   Understanding revenue visibility and how reliant the business is on ADOT rebid cycles is critical to assess durability.

2. How transferable is the ADOT approval status—and would it apply to a new owner or entity?
   If the license or approval is non-transferable, buyers may face re-certification or re-qualification delays that affect revenue continuity.

3. What is the composition of backlog and pipeline for the next 12–18 months?
   Backlog coverage and bid activity determine how quickly new ownership can step into a cash-flowing operation vs. needing to ramp up work.

4. What are the job costing systems in place, and how accurate are historical gross margin estimates per project?
   In small contractor businesses, loose job costing often hides margin leakage. Diligence should stress-test pricing discipline and project-level margin consistency.

5. Are there any opportunities to lease or monetize idle capacity—e.g., equipment rentals, subcontracted labor, or scaffolding services?
   If the business owns expensive blasting rigs or scaffolding, can they be monetized outside of core jobs? This adds a layer of optionality to the model.

Bottom Line:
This is a high-margin, specialized surface prep business with regulatory barriers, low capital requirements, and clear upside—but operationally fragile due to its size and owner dependence. For a licensed operator or regional trades consolidator, it’s a compelling, reasonably priced acquisition with infrastructure tailwinds and multiple levers for growth. For a financial buyer, the diligence will need to focus on de-risking the transition and building a sustainable org chart.

This newsletter is for informational purposes only and does not constitute investment advice. The content is based on publicly available information, and the author makes no representations about its accuracy or completeness. Readers should conduct their own research before making any investment decisions.