Small businesses in the United States employ 62 million people and contribute to nearly half of the country's GDP. With a large number of baby boomers retiring and their children showing little interest in taking over the family businesses, many owners are faced with limited options – either closing down the business they have spent a lifetime building or selling to private equity firms, a move that often results in staff cuts, price hikes, and distant ownership.
William Fry, the founder of American Operator, established the firm last year in Austin with the aim of providing a new solution to this dilemma. American Operator assists operators, typically experienced employees or industry professionals, in jointly acquiring businesses from retiring owners. Through this process, operators begin with a 10% equity stake and have a clear path to achieving 70% majority ownership. This approach allows sellers to have a liquidity event while ensuring the business remains locally owned.
Unlike private equity firms that buy and sell businesses for profit, American Operator has no intention of flipping the businesses it acquires. The company's objective is to maintain ownership of Main Street businesses within the community.
Fry emphasized the importance of industry expertise in their model, stating, "You need to know how an industry works, and then we handle the acquisition." Retiring owners also play a role in the transition by joining American Operator's advisory council, providing mentorship to the next generation and staying connected to the businesses they built.
In recent years, private equity firms acquiring businesses in sectors such as veterinary services, dentistry, and home services have driven up prices and displaced long-term employees, often bringing in external managers with little industry experience. This trend has been identified as a key factor in the significant price increases in veterinary services, leading to reduced access to care for pets due to affordability issues.
While American Operator may not offer the high prices of private equity firms, it prioritizes stability and sustainability over quick profits. The company also supports businesses in modernizing their operations through tools like bookkeeping, technology, and artificial intelligence, with a focus on enhancing efficiency rather than cutting jobs.
One example of American Operator's impact is Anne-Marie Rosario Flores, the founder of Anne the Plumber, who opted to pass on her business to Wilson Molina, an operator she had mentored over the years, backed by American Operator's resources. Molina now serves as the CEO with a clear path to majority ownership, while Flores remains involved in the business, ensuring continuity for the community.
Looking ahead, Fry envisions creating opportunities for broader participation in American Operator by potentially structuring the companies into an exchange-traded fund (ETF) and taking them public. With 95 deals and $300 million in transactions completed, Fry aims to build what he describes as "a basket of the American dream."
Fry remains optimistic about the future, emphasizing the importance of maintaining a positive outlook. He believes in the potential for young people to shape a better tomorrow and is committed to realizing his vision of empowering individuals to invest in a Main Street holding company that embodies the values of the American dream.
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