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: 

• Picking the Right Market: First step to investing is to buy in a good neighborhood / market. Let’s unpack how to pick the right industry

• What’s Happening in the Markets? US is bullish on Intel, Canada dropping retaliatory tariffs, Hormozi’s record launch and AI spreadsheets for finance bros

• Wanna Buy a Business? We found a cash flowing Plumbing & Rooter business in California Texas ($200K of Cash Flow). Click HERE for the listing

TOP STORY

How to Pick the Right Industry to Buy a Business

When Warren Buffett looks at an industry, he doesn’t just ask, “Is this business good?” He asks: “Is this a business that will still be good 10–20 years from now?”

For acquisition entrepreneurs and investors alike, choosing the right industry is half the battle. The wrong industry will eat even the best operator alive. The right one? It will lift even an average operator to success.

Here’s Buffett’s simple playbook, applied to small business buying:

1️⃣ Favor Industries With Durable Demand

Buffett famously avoids fads. He wants products or services people must buy, regardless of the economy.

• Think: everyday needs (healthcare, food service, logistics, packaging)

• Avoid: businesses tied to short-lived consumer trends or cyclical splurges

💡 Investor takeaway: A business in a “need-to-have” category can weather recessions and interest rate swings better than “nice-to-have” categories.

2️⃣ Look for a Clear Value Proposition

The industry must offer customers something they can’t easily replace or substitute. Either it saves money, improves efficiency, or creates mission-critical outcomes.

• Price/value advantage (cheaper than alternatives)

• Switching costs (painful to leave the vendor)

• Mission-critical role (the customer’s business can’t run without it)

💡 Investor takeaway: A strong value proposition creates pricing power, a built-in moat against competitors, and customer stickiness.

3️⃣ Target Fragmented Markets

Buffett likes industries with many small players, no dominant incumbents, and room for consolidation. Why? Roll-ups allow buyers to bolt on new businesses at lower multiples and expand margins through scale.

• Mom-and-pop operators = acquisition runway

• No one owns more than 10–15% market share

• Larger customers prefer bigger, well-capitalized partners

💡 Investor takeaway: Fragmentation = deal flow, pricing leverage, and platform potential.

4️⃣ Favor Long-Term Tailwinds

Even better than stability is growth. Industries with secular tailwinds — demographics, regulation, technology, or sustainability — provide momentum that magnifies returns.

• Aging populations → more healthcare demand

• Green/sustainability mandates → eco-friendly packaging, recycling

• Digital migration → cybersecurity, IT managed services

💡 Investor takeaway: Industry growth can cover operational mistakes and accelerate compound returns.

📦 Case Study: Used Corrugated Packaging

A Buffett-approved industry hiding in plain sight.

• Durable demand: Every retailer and distributor needs boxes.

• Value prop: Reused corrugated packaging is cheaper and meets sustainability mandates for supply chains.

• Fragmentation: Hundreds of small “mom-and-pop” recyclers and resellers exist, often with outdated systems.

• Tailwinds: ESG and sustainability pressures are pushing big buyers (Amazon, retailers, DTC brands) toward recycled packaging.

The play: Acquire a platform company in corrugated packaging, roll up smaller players, standardize systems, and scale relationships with large distributors/retailers. Low CapEx, predictable demand, and regulatory tailwinds make this an attractive buy-and-build niche.

Bottom Line

Picking the right industry isn’t about chasing what’s hot. It’s about choosing a business model that has: (i) Durable demand, (ii) Clear customer value; (iii) Fragmented competition and (iv) Structural tailwinds

That’s the Buffett checklist.

Get the industry right — and the business you buy won’t just cash flow. It will compound.

Once you’ve found the industry, it’s time to source. Here’s my step-by-step sourcing playbook in this YouTube video!

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

WHAT’S HAPPENING IN THE MARKETS?

• U.S. Government Takes 10% Stake in Intel

  The U.S. government is set to acquire a 10% non-voting equity stake in Intel, in exchange for CHIPS Act funds. This follows a $2B SoftBank investment earlier in the week. Intel remains the only U.S. company capable of producing advanced chips domestically, though it continues to lag TSMC technologically.

  Why It Matters:

  • Marks a paradigm shift in U.S. industrial policy — from subsidies to direct ownership.

  • Implies a semi-nationalization of critical semiconductor capacity, underscoring bipartisan recognition that chips = security.

  • Intel’s execution risk remains high: Ohio fabs delayed to 2030, with “no blank checks” messaging from new CEO Lip-Bu Tan.

  • Valuation lens: government and SoftBank now anchor ~12% of equity, limiting downside but raising questions on governance and capital allocation.

  Investor Takeaway: Expect Intel to trade less like a pure equity story and more like a strategic national asset. Multiple expansion may be capped, but downside is increasingly backstopped.

• Canada Drops Most Retaliatory Tariffs Against the U.S.

  Canada announced it will remove most of its 25% counter-tariffs on U.S. goods, while keeping restrictions on autos, steel, and aluminum. The timing aligns with the upcoming USMCA review later this year.

  Why It Matters:

  • De-escalation signals improving North American trade relations ahead of sensitive negotiations.

  • Keeping autos/steel under tariff reflects strategic protection of Canadian manufacturing and labor constituencies.

  • For investors: lowers risk of a tariff escalation spiral that could have disrupted cross-border supply chains.

  Investor Takeaway: Reduced headline risk for North American industrials and exporters, but watch USMCA review outcomes — auto tariffs remain a political wildcard.

• Alex Hormozi Shatters Book Sales Record with $100M Money Models

  Alex Hormozi’s new release, “$100M Money Models”, sold 2.97M copies in a single day, obliterating Prince Harry’s Spare record (1.43M). By Day 3, sales exceeded 3.28M copies. Hormozi’s live nine-hour “masterclass” launch, with guest speakers like Leila Hormozi and Tom Bilyeu, turned the book drop into a multi-day, multimedia sales funnel.

  Why It Matters:

  • Shows the monetization power of founder-led media ecosystems.

  • Proof that direct-to-audience distribution can outscale traditional publishing and celebrity brands.

  • For investors: signals continued disintermediation of traditional media, and the rise of operator-influencers as scalable platforms.

  Investor Takeaway: The book isn’t the product — it’s customer acquisition at scale. Expect this playbook (content → funnel → community → deal flow) to proliferate across PE/VC-backed operators.

• Paradigm Raises $5M to Reinvent Spreadsheets with AI Agents

  Anna Monaco’s Paradigm has launched publicly with a $5M seed led by General Catalyst. The product reimagines spreadsheets with over 5,000 built-in AI agents that auto-populate, crawl the web, and execute workflows. Early adopters include EY, Etched, and Cognition. Competes with Quadratic ($6M raised), while Google/Microsoft build AI add-ons.

  Why It Matters:

  • Tackles a massive TAM: spreadsheets are still the universal business OS.

  • Paradigm’s differentiation: native AI-first design, vs. incumbents’ bolt-ons.

  • With consulting and finance users already engaged, product shows strong enterprise fit in data-heavy verticals.

  Investor Takeaway: Early innings of the “AI-native productivity” wave. Paradigm’s upside hinges on converting niche adoption into workflow lock-in before incumbents commoditize features.

SO YOU WANT TO BUY A BUSINESS… 🏦

Deal of the Week: Redwood City Plumbing & Rooter Co. – Asking $700,000

Opportunity Overview

Founded in 1997, this Bay Area plumbing and rooter company has carved out a loyal client base among property managers, contractors, and recurring commercial accounts. With $2.7M in annual revenue and $200K in SDE, the business offers diversified services spanning trenchless sewer replacement, wall patching/painting, and full concrete/asphalt restoration.

The company benefits from a skilled workforce of 12, many with 10–15 years of tenure, and owns a fleet of specialized trenchless and excavation equipment — valuable given California’s permitting and regulatory hurdles. For a buyer, this represents a plug-and-play platform in a fragmented, high-demand trade vertical.

Cash Flow and Profitability

At a $700K ask and $200K SDE, the deal trades at ~3.5x seller earnings. That multiple is slightly elevated compared to typical small-cap plumbing operators (2.5–3.0x), but justified by the equipment base, entrenched contracts, and Bay Area geography.

Key Profit Drivers:

• Sticky B2B Accounts – Long-term property management and contractor clients lower customer churn risk.

• Specialty Services – Trenchless sewer replacements and street excavation are high-margin, less commoditized services.

• Asset Base – ~$90K in inventory plus trenchless bursting rigs, dump trucks, excavators, and compressors included.

• Labor Tenure – Crew stability reduces key-man dependency — rare in a trade where turnover is high.

What We Like

1. Recurring B2B Demand
   Commercial property managers and contractors drive recurring work, creating a more predictable revenue base vs. purely residential plumbers.

2. High Barriers to Entry
   Trenchless sewer replacement requires specialized equipment and permitting familiarity — a competitive moat relative to “one-man van” plumbers.

3. Roll-Up Platform Potential
   Bay Area plumbing is highly fragmented; this operator has brand presence, equipment scale, and workforce to be a hub for tuck-ins.

4. Tenured Workforce
   A seasoned 12-person crew means immediate operational capacity and smoother transition risk post-sale.

5. Optional E-Commerce Upside
   An existing (paused) eBay store for plumbing supplies could be reactivated, adding an ancillary margin stream.

What We Don’t Like

1. Thin Margins Relative to Revenue
   At $2.7M revenue and only $200K SDE (~7% margin), profitability appears low — potential cost bloat or pricing under-optimization.

2. Bay Area Labor & Rent Pressure
   $6K/month rent and high local wages compress margins further — scaling may be capital intensive.

3. Owner Transition Risk
   While the crew is skilled, much of the marketing/advertising oversight is owner-driven — a handoff risk to diligence.

4. Unclear Customer Concentration
   No detail on how much revenue is tied to “exclusive” contractor/property manager relationships. Loss of a few key clients could materially impact cash flow.

5. Capex & Maintenance Drag
   Heavy use of trenchless and excavation equipment raises ongoing Capex requirements. No disclosures on fleet age/condition.

Key Questions for Diligence

• What percentage of revenue comes from recurring property management/contractor accounts vs. one-off residential jobs?
  Helps assess stability and vulnerability to client churn.

• What is the customer concentration of the top 5 accounts?
  If 20–30% of revenue is tied to a few PM firms, losing one could materially reduce EBITDA.

• What are the fully loaded labor costs vs. peers?
  Bay Area wages may be inflating SG&A. Benchmarking helps identify optimization levers.

• What is the average gross margin by service line (trenchless, excavation, patch/paint, residential calls)?
  Margin profiles differ widely; knowing the mix highlights scalability.

• What’s the age/condition of the trenchless rigs, dump trucks, and excavators?
  Deferred maintenance or near-term replacements could add significant Capex post-close.

• What is the marketing spend efficiency (leads per $1,000 spend)?
  Owner notes ad ranking improvements — but diligence should test ROI on advertising channels.

Bottom Line

This Redwood City operator offers a Bay Area plumbing platform with entrenched B2B clients, specialty trenchless capability, and a stable workforce — a rare find in a fragmented, labor-constrained trade.

The headline risk is thin margins despite high revenue, raising questions around cost discipline and pricing power. For a PE buyer or strategic consolidator, the play is margin expansion through better pricing, cost controls, and tuck-in acquisitions, leveraging the company’s equipment base and regional reputation.

At ~3.5x SDE, it’s not a steal — but in the context of California’s regulatory barriers and crew scarcity, it may be a strategic foothold worth paying up for.

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.