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Most businesses that look easy to buy will destroy your bank account. I'm David. I run a boring air filter company that makes $23 million a month. And every day, I buy or [music] invest in boring businesses to build my empire.
David Heacock explains why buying certain businesses is risky and shares his favorite types to buy or start for stable income.
Key Takeaways
- Avoid e-commerce brands due to high risk and lack of business protection.
- Creative agencies and similar service businesses are often unstable and client-dependent.
- Franchise success depends heavily on experience and understanding of the system.
- Landscaping businesses have high churn and enforcement issues, making them poor investments for most buyers.
- Look for businesses with stable customers, strong cash flow, and low reinvestment needs.
Summary
- David Heacock runs a successful air filter company and invests in boring businesses to build wealth.
- He warns against buying e-commerce brands due to inventory, supplier risks, and lack of protection.
- Creative agencies often rely on a few clients and knowledge that leaves with the owner, making them risky buys.
- Franchises can be problematic if the franchisor takes large margins and limits resale options, but some franchises like Domino's can be good with proper experience.
- Landscaping companies appear safe but have high customer churn and weak non-compete enforceability, making them risky investments.
- Laundromats are often overrated as passive income due to maintenance costs and operational demands.
- David emphasizes buying businesses with stable customer bases, good cash flow, and minimal reinvestment needs.
- He categorizes businesses into tiers (F, C, A) based on risk and potential, highlighting the importance of experience and protection.
- Private equity often outbids individual buyers on valuable businesses like landscaping companies.
- David promotes his podcast 'Boring Money' for insights on overlooked business opportunities.
Full Transcript — Download SRT & Markdown
Speaker A
These are my favorite businesses to buy or start. Throughout this video, I'll also share some of the most dangerous businesses that I would never touch.
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Before we get into the good stuff, I need to warn you about the businesses that will absolutely wreck you. And ironically, these are the ones that every YouTube video tells you to buy.
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E-commerce brands are the worst business opportunity you can buy. I see people buying e-commerce brands every day thinking that they found a shortcut.
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[music] The pitch sounds perfect. Existing revenue, customers already buying, no validation needed. I saw this in FilterBy World in air purifier manufacturers. Like during COVID, there was a ton of demand for air purifiers because everybody wanted to purify their air.
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Then by 2023, all the revenues were declining and people were trying to sell these businesses. And I actually know somebody who ended up buying one and realized he had bought a big lemon because these e-commerce businesses are hard. Maybe some revenue but oftentimes
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there's a lot of inventory risk or manufacturing risk or overseas supplier risk. It's a lot [music] more complicated than oftentimes meets the eye.
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Whereas a lot of these e-commerce businesses are purely marketing driven. They're basically buying something from overseas. [music] But what happens when the algorithm changes? What happens when the cost per click skyrockets? My verdict, F tier. If you're buying a
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business, you want businesses that are protected. E-commerce brands rarely have any protection at all. Next one hits close to home because I almost bought one of these early on. Imani ran a creative agency and built a business teaching other people how to do the
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same. What's funny is that he made more money telling people to create an agency than with the agency itself. Every [music] week, someone tries to sell me their agency with established clients and proven systems. They show you the
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client roster, their recurring revenue, and case studies, and it all looks solid [music] on paper, but when you dig into it, you realize inevitably that they have one or two large clients that [music] have a very high chance of
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churning, but it makes it easy for people to sign up. Also, makes it easy for them to churn and to go somewhere else if they're getting better service [music] somewhere else or if they think they're going to get better service
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somewhere else. Someone else could replicate this in six months [music] with a laptop and LinkedIn. Most agencies haven't built sustainable models. They're just selling time and relationships. The knowledge walks out the door with the previous owner. You want to buy businesses that are
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protected. My verdict, F tier. I have a terrible story about this next business that still makes me angry. My brother dropped $50,000 on a franchise without telling me. Here's what happened. He bought a hazmat remediation franchise,
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disaster cleanup, hoarder houses, death scene cleanups. At first, I thought it could be actually an interesting business model, but the franchise ruins it. He put in a $50,000 fee, and the franchise takes margins off the top, capturing the vast majority of the
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upside. It's not very sellable because you don't own the systems. The franchiser controls when and who you can sell to. Eventually, my brother realized he was competing with local operators who have lower cost structures while their franchisor keeps taking his cut.
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Compare this to a Chick-fil-A or McDonald's. They block competition in your area. You actually own that territory. Most franchises don't have that brand power. Here's the flip side.
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I met an Uber driver in New York City who's about to buy a Domino's [music] franchise. And I had this Uber driver who picked us up in a Rivian. I was asking this guy, I was like, "A Rivian is a pretty
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expensive car and you're driving in New York City. What made you decide to buy this car?" And I [music] was like, you know, this makes absolutely no sense.
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What he was really doing was preparing to buy a Domino's franchise. And I thought, that's interesting. He had gone in and worked with a family member who had done it before. He spent like three years working in the Domino's franchise,
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went to all their training, learned how to operate it, learned everything about the economics. And in this 15-minute Uber ride, this guy was able to walk me through the exact economics of a Domino's franchise. [music] He knew exactly where he wanted it to be, what
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type of customer base he was going to be looking for, what his [music] profit margins were going to be, how he was going to finance it. He's basically de-risked himself by going out studying an established system, going through all
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the training so that he knows he can operate that system. So my verdict, C tier. The same franchise can be A tier with four years of experience or F tier without. And I think that Uber driver actually will make it an A tier for
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himself. Now, this next business looks easy, but I learned the hard way that it's a trap. This is why you should never buy this type of business. I'm talking about landscaping companies.
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They look safe. Local customers, recurring weekly revenue, and simple operations. But here's the reality.
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People can switch landscaping companies very quickly. It's extremely easy for customers to just hire the next guy who knocks on their door. Buying one of these businesses is especially hard.
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Even with a non-compete, the person you buy from can still compete with you. This is where [music] I got burned. We bought an HVAC service business in South Florida where, you know, we lost [music] $4.5 million effectively. One aspect of
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that that I did not fully understand was that non-competes [music] oftentimes are not really that enforceable. So even if you do have a non-compete in place, which we did in that case, it doesn't mean that it's easy or really realistic
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to enforce. [music] Starting to offer competing services once they actually sold us the business. But here's [music] the paradox. If a landscaping company has real value, a strong edge, customer density, systems, private equity will come in and pay a premium to buy that
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business. As a normal person, you're not going to find a good deal on these businesses because private equity [music] has boxed you out. If you can afford it, it's probably not good enough. If it's good enough, you probably can't afford it. My verdict, F
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tier, avoid unless you have insider knowledge. If you're as obsessed with boring businesses as I am, subscribe to watch my new podcast, Boring Money, where I interview owners of businesses you never think to run. If you want to
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come on the show, click on the link in the description. Now, if I see one more tweet about laundromat passive income, I'm going to lose it. This famous business idea is so overrated that people are losing thousands of dollars
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because of it. The pitch, I see it almost every day, is seductive. Buy some machines, collect quarters, print money while you sleep. I love it. I used to dream of doing this. When you get in, [music] dig into the realities of these,
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you realize it's a lot more complicated than YouTube likes to tell you. What happens when those machines break? You got to go pay somebody to replace that.
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It's a lot more expensive. Oftentimes that's not included in the P&L that you see. A lot of times people are hiding it. It's really like some person who's good as a handyman themselves and they go and they do this themselves. So
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[music] it's oftentimes more of a job than a cash cow than meets the eye. But we want businesses with a stable customer base and good cash flow without needing lots of reinvestment. And by the way, those two things go hand in hand.
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Like you don't have good cash flow if it needs constant reinvestme
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My verdict, Ctier, they can absolutely work. Like you can be successful in these businesses, but you're competing with everyone who read the same Twitter thread now. Pallet recycling. I know you're thinking, "What the hell?" But stay with me. Boring B2B services have
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better moes than any consumer business. Nobody, except for maybe me, but nobody dreams about forklift maintenance or pallet repair. And that's exactly the point. Pallet repair and recycling are surprisingly big businesses. I actually hired someone who worked for a big
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pallet recycling company and it actually for a while entertained the idea of getting into it. And so if you see these painted blue pallets going down the interstate, if you open your eyes, you probably will see them. That's coming
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from one of these pallet recycling companies. Somebody who's actually figured out how to collect these pallets and basically resell them to people that need them. I like these because you get a sticky customer base that's very difficult to build. It's local and
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fragmented, so you're not worried about the big competitors. So, my verdict, B+. They're tricky to operate, and you need to know what you're doing, but they can be great businesses. This is a great business idea that anyone can start and
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make money from, but no one is talking about it. Don't start a restaurant, start a refrigeration business. Here's what makes it actually easy. Restaurants and stores can't afford downtime. When their cooler breaks, they need it fixed immediately, like that day or that hour.
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So, commercial refrigeration businesses can charge a premium to store produce. If you're the one that they call, you've got real pricing power. A restaurant loses thousands per hour when the cooler dies. But there's a catch. You need to
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look for long-term customer relationships and good maintenance managers who understand service [music] delivery. Industrial services have a compliance component and recurring need.
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My verdict, it's a B+. A stable business you can grow, but tricky to operate without knowing what you're doing. Now, we're going to get into the real money.
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Businesses that combine everything that we've talked about, modes, cash flow, and nobody's competing for them. A private equity firm is quietly buying bookkeeping practices and using AI, and you can steal their playbook.
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[music] Bookkeeping sounds boring and that's exactly the opportunity nobody else sees. There's a PE firm I know that's consolidating them and using AI to make them more efficient. I've actually been seeing this happening in a lot of different industries and I think that
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this is one of the best business ideas out there. But [music] it's going to take owning or really understanding an industry really deeply first. But I actually know somebody personally that's doing this [music] in accounting practices. And what they basically done
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is they've gone in and they bought one or two small accounting practices [music] and then they are systematizing how these practices work using AI. And so ultimately what they're going to be [music] able to do is have a system that
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then as they go out and buy other accounting practices, they're going to be able to use their AI to make them a lot more efficient. That means having a lot fewer accountants per customer and offering the same or higher level of
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service. [music] And here's what makes it easy. You have labor needs but no physical needs which means that they are going to cash flow really well. There's no inventory to manage, no equipment breaking down, no machines depreciating, just service
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[music] delivery. And with AI, you're making that service delivery more consistent and easier to scale. [music] And that's the trick. I think 10 years ago, this is a lot harder to scale. Kind of similar to the agency model business
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where that's hard to scale. But accountants aren't going away. People still need to be compliant. They need to file their taxes and you need to provide that expertise. But you can use AI to help you do that at a scale that you
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never could before. The key is finding businesses that are local with an [music] established book of business.
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That book of business would take you forever to build from scratch. What I would be doing would be going in and saying, "Okay, I'm going to buy this out maybe with some cash up front and then a buyout over a couple years from the
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owner of this practice and say, "Okay, in that this next couple of years, your job is to help me to systematize what you have going on in your business and I'm going to build the systems that are going to make this repeatable so that
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when we go out and buy other accounting practices, we're going to be able to integrate them much quicker." So, my verdict here is a tier. Find any local business with established customer relationships and cash flows. Then you found something that's worth buying.
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Commercial insurance agencies are another cash cow that most people walk right past. They can become great cash cows that are very sticky if you know what you're doing. It's the exact same playbook as bookkeeping. Local businesses with an established book that
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can take forever to build from scratch. Think about it. Try cold calling a 100 businesses to sell insurance. Now imagine buying an agency where those same 100 businesses have renewed [music] for five straight years. And there are no physical needs here, so your cash
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flow can transition easily. My [music] verdict, a tier labor only professional service with recurring revenue and established relationships. Almost nobody talks about this one, but it's a home run. If my kids wanted to be millionaires, I would tell them to
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perfectly understand [music] this dirty job. Nobody wakes up excited about grease traps, but that's why this is a perfect business. Every restaurant has grease traps and they're legally required to clean [music] them. Septic services are something where if you can
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buy an existing one and build on top of it, I find that way better [music] than starting from scratch. I love service businesses that are fairly simple and don't need a ton of specialty training.
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What I look for are local businesses offering a service, preferably with an emergency or compliance need that also has an [music] existing customer base and a way to deliver. You don't need to be a master plumber to run this. You can
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hire people for manual labor and manage [music] them. So, my verdict, S tier. I'd look for water filtration, grease trap, or septic services. Services that don't have [music] as much bigger company competition coming after them.
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I'll pay you maybe $50,000 and then I will work for you for [music] free for a year and negotiate some type of an owner buyout, you know, on the business. Like you're going to [music] start buying them out and then get any growth from
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that business and kind of work as an apprentice with them to learn that business. Now, the final S tier business reveals the entire framework for what you should be looking for. This is one of the most profitable businesses that
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you can buy, but no one is talking about it. Buildings need fire and backflow inspections by law. every year like clockwork. [music] Fire and backflow inspection services are compliant driven with recurring revenue at Filterby. In 2015, we actually had a fire and I lost a million
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dollars or so at that time was basically everything to me. I basically lost it in a fire and we had insurance but we did not get the full insurance payout because we were not fully compliant with something that I did not even realize we
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had to be compliant with. I realized that it's a huge business. And so, like, we actually pay somebody at Filterby at each of our plants to come in, make sure that the fire extinguishers are in the right places, that they're working,
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they're replaced when they need to be replaced. It's not something that anybody's going in looking at again.
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It's not something that gets flagged on a yearly budgeting review. So, if I wanted to buy one of these businesses, I would look for owner operated businesses where someone understood what they were doing enough to build it, but didn't
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know how to professionalize it. So, my verdict for this is S tier. I'd look for local services that don't have as much bigger company competition. Now, if you're serious about buying S tier businesses, subscribe. This is part one
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on my two-part series about buying a boring business in 2026.
Topics:buying businessesbusiness investmente-commerce risksfranchise pros and conscreative agency riskslandscaping businesslaundromat businessbusiness cash flowbusiness protectionboring businesses
