Little Engine Ventures endeavors to lower transaction costs for illiquid investments. We do this by simplifying the sale of private company interests. Many small businesses incur 10% or more of the enterprise value in transaction costs. As an example, a $2M company might spend 5-10% on a broker, and another $20,000 to $100,000 on legal and accounting fees.
By systematizing the transaction process (lower legal and accounting), closing fast (without a broker) and turning away high friction situations (only buy simple businesses), Little Engine Ventures retains more of the enterprise value within the partnership or the seller’s hands. Both the seller and the firm win.
By lowering the transaction costs, the partnership can also afford to do more transactions per year. (attorneys and accountants make up on lower per transaction with higher volume from us!)
This situation can recur and compound because we enjoy a faster recovery of the purchase price while retaining the full, on-going earnings power of the business. Plus, there are some 20% of the millions of small businesses that are considering selling on an annual basis. So, the pond we fish in is quite large, and quite inefficient.