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Never raise capital again
Revenue base
Long Lake expects to do over four billion dollars of revenue next year, including the American Express Global Business Travel purchase. The revenue base is very stable, with dollar retention near a hundred percent, and the company is very profitable.
Never raising capital
The strategy is to buy established, profitable businesses. Because those assets already make twenty, twenty-five percent plus in EBITDA margins, the existing portfolio generates enough cash flow to compound on internal reinvestment for decades to come. The company never needs to raise capital again.
Three years in
After three years, Long Lake operates in roughly three trillion dollars of a twenty trillion dollar US services market, about fifteen percent of it, with close to forty companies and thirty thousand team members. It started in homeowner association management and now has five service lines: HOA management, HR services, specialty tax, infrastructure services including architecture and engineering, and travel.
How does reinvested cash replace outside capital?
A company that earns more than it needs can reinvest the surplus in growth instead of issuing shares or borrowing. That avoids diluting owners and avoids interest payments. Berkshire Hathaway is a well-known example of the approach, having paid just one dividend, in 1967, and kept its earnings to reinvest ever since.
Why are US service businesses so fragmented?
Many services are local and run on personal relationships, so owners often run them with local staff and have little reason to expand. The Small Business Administration reports that businesses with fewer than 500 employees make up 99.9 percent of US firms. Fragmentation like this leaves many industries with a long tail of small independent operators.
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