Leveraging middle market strategies at the microcap scale

Our Vision

The "Baby Boomer" and "Gen X" generations currently own nearly 97% of all small businesses in the United States, representing approximately 32.2 million businesses. Over the next decade, these businesses will need to undergo ownership transitions, either through sale or transfer to new buyers. Many of these owners are deeply involved in the daily operations and may not be prepared for an effective handoff of responsibilities. Additionally, they are increasingly facing challenges that limit their ability to enjoy a fulfilling retirement, such as health issues, relocation, estate planning, or even unforeseen events like death.

At Chelsea Square, we recognize that the businesses in question are often long-established, reputable organizations that provide vital services to their communities. We respect the dedication and effort invested in making these businesses cornerstones of their local economies. As such, we are committed to ensuring that the next generation of owners can successfully continue their legacy.

Our goal is to facilitate a smooth, efficient transition for owners looking to exit their business, ensuring they receive fair value while also empowering them to confidently move into the next chapter of their lives. We take pride in being investors who seek win-win transactions, where both parties can achieve their goals.

Our Three-Pronged Market Thesis

There is a Massive Deal Funnel Of…

4.4 million

Businesses Owned by Baby-Boomers or Gen-X

That Have Between 1 and 20 Employees

…Cash Generating Businesses…

75%

Of Which Are Consistently Profitable and

Cash-Flowing Enterprises

…Owned By Motivated Sellers

60%

Of Business Owners Do Not Have

An Organized Or Viable Succession Plan

Examples of How We Create Value

- Many businesses have no financial reporting
- Building out automated reporting systems reduces guesswork and manual entry
- Monthly reporting establishes transparency for better operator decision making and pre-qualifies the business for SBA loans (e.g. makes sale process more attractive for new buyers)
- Owner-operators single-handedly manage operations which prevents transfer of responsibilities (e.g. self quoting, managing inbounds, self-servicing the work, etc.)
- Writing out standard operating procedures (SOPs) allows for cross-training / institutionalizing of business functions
- SOPs free up the operator’s time to address other cost / growth opportunities
- Most owners run their business to fund their lifestyle and don’t grow the business at the cost of their personal life
- Only 1 out of 3 boomer-owned businesses have some form of paid marketing (e.g. website, advertising, sales employees)
- By growing the sales org or establishing channel partner networks, the business can generate significantly more inbounds

Investment Criteria

We take an industry agnostic approach and are highly opportunistic in nature.

The main gating requirements:

The business must be stable and generating cash flows in excess of $200 thousand a year
The business must be well-established and operating for at least a decade
The seller is willing to partner or provide a reasonable transition period to offboard the business
The owner is willing to sell the business with its existing assets free and clear of any liens against them
The seller is upfront and transparent about the operations of the business - we are happy to look into unique scenarios as long as they are disclosed to us ahead of diligence