How to Use an SBA Loan to Roll Up from $6m to $140m
May 15, 2025
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Michael Davidov, managing partner at Pine Street Group and a self-funded searcher, shares his incredible journey of scaling a home care agency from $6 million to $140 million. He discusses his strategic use of SBA loans for acquisitions, the importance of seeing employees as customers, and his effective hiring criteria for leaders. Davidov also highlights the challenges of integrating technology and managing payroll during rapid growth, alongside treating caregivers as essential partners, all while navigating the complexities of the healthcare sector.
A gradual approach to business growth laid a solid foundation, enabling a shift from $6 million to $140 million in revenue through strategic patience.
Partnering for acquisitions in fragmented markets like healthcare proved essential for enhanced decision-making and leveraging combined expertise.
Transforming operational efficiencies through digital systems and empowered management contributed significantly to scalable growth and improved client experiences.
Deep dives
The Power of Building a Strong Foundation
The importance of taking a gradual approach to building a solid foundation for business growth is emphasized. After acquiring a home care agency, the focus was on fortifying the business to support future growth instead of rushing into immediate expansions. This strategic patience paid off, allowing for organic and inorganic growth over the years. The journey from a $6 million revenue business in 2019 to a robust diversified platform generating around $140 million in revenue attests to the efficacy of this patient, foundational strategy.
Navigating the Acquisition Landscape
The podcast highlights the strategic decisions made surrounding acquisitions, particularly the decision to maintain a focus on fragmented markets like healthcare. Acquiring businesses with strong revenue bases and low customer concentration is emphasized as a key metric for success. The decision to involve a partner facilitated the search for additional deals and promoted swift decision-making. This collaborative approach also enabled the founders to leverage their combined expertise, enhancing overall success in acquisitions.
Operational Improvements and Technology Integration
Implementing operational improvements and transitioning to digital systems was crucial in shaping the business's efficiency. Initial investments included streamlining hiring processes and upgrading the technology stack to eliminate paper-based processes. By transitioning to electronic systems, the management team also enhanced operational efficiencies and improved employee and client experiences. These upgrades allowed the organization to scale more effectively and respond rapidly to market demands.
Effective Leadership and Management Team
The establishment of a capable management team was a pivotal moment in the organization's evolution. Empowering experienced leaders to take charge of operations allowed the founders to refocus on new investments and acquisitions. This decision demonstrated the importance of delegating responsibilities while maintaining oversight. The new management team significantly decreased operational burdens and introduced a level of expertise that further propelled the business's growth.
Leveraging Debt and Strategic Growth
Utilizing strategic debt was a cornerstone of the growth strategy, particularly through SBA loans and refinancing options. This financial flexibility enabled the organization to capitalize on high-leverage acquisitions without excessive equity dilution. The podcast underscores how this financial strategy allowed the team to invest in multiple acquisitions while maintaining a stable revenue base. As the business exceeded expectations, this careful management of debt further solidified its position in the market.
Expanding Service Lines and Diversification
The strategy of expanding service lines by integrating complementary healthcare services is discussed as a powerful growth tactic. Entering new categories such as in-home autism therapy expanded the organization's service offerings and solidified its position in the market. This diversification allowed for cross-selling opportunities and added value to the client base. The ability to traverse related operational territories helped in creating a more resilient and comprehensive service model for their clients.
