Mark Olivito·November 20, 2023

Cash Flows Over Exits: Buying for the Long Term | Mark Olivito Interview

Mark Olivito is a career food-industry executive (Kraft, Sara Lee, Catalina Marketing, then CMO at Monogram Foods) who first bought a food manufacturing company at 40 via a private-equity-backed SBA deal, grew it from $2.5m to $4.6m SDE, and exited after 3.5 years at a strong IRR. Rather than search for years for a textbook $1-2m SDE acquisition, he impulsively bought PavArt, a tiny ($65-75k SDE, under $1m revenue) New Jersey manufacturer that turns cut pavers into custom mosaic designs (stadium logos, university branding, luxury patios) using proprietary CNC water-jet technology, paying roughly $900k in cash with no debt. The deal broke nearly every rule of conventional search-fund diligence — capital intensive, project-based, tiny, and rife with key-man risk — but Olivito was drawn to its national reach, patent-protected niche, and 15-year survival despite chronic undercapitalization. Over five years he tripled the business by reinvesting all cash flow (about $550k) into new machinery and a second location rather than taking distributions, while candidly describing the psychological toll of ownership (a recurring 3:30am 'mental freight train') and his philosophy of holding indefinitely for compounding cash flow rather than chasing a private-equity-style three-to-five-year exit.

Deal facts

purchase price: $750,000 (after escrow; ~$710k with an earn-back structure)
multiple: ~15x SDE (Olivito estimates the multiple was high given ~$65-75k of SDE)
sde ebitda: SDE was roughly $65,000-$75,000 at acquisition (listed as ~$100,000 but Olivito says real number was closer to $65-75k)
revenue: Under $1m at acquisition (business had never broken $1m in sales in 15 years); grew to over $2m by the time of the interview
financing structure: All-cash purchase, no debt; self-funded from proceeds of a prior business exit; capitalized the business with an additional ~$150,000 in the bank (total ~$900,000 all-in); originally bought with a partner (2/3 him, 1/3 her) who exited after four months and was bought out near cost basis
notes: Prior deal (his 'first acquisition,' the food manufacturing business in NJ) used a 504 loan for real estate, a 7(a) SBA loan, seller financing, and 27 investors; he personally guaranteed roughly $10 million of debt and held just over 20% equity. That business grew from $2.5m to $4.6m SDE and was sold/merged after a 3.5-year hold at a reported ~70% IRR. For PavArt, no SBA debt was used at all; growth capex (~$550,000 total, including a $135,000 machine and a ~$450,000 new location build-out) was funded entirely from internally generated cash flow.

Why this business

After exiting a food manufacturing company he'd run as CEO for a private equity group (bought at 40, sold at 43 after a strong ~70% IRR), Mark Olivito spent seven months searching for a $1-2m SDE business using the classic 'buy then build' criteria but found valuations too high (7-8x) and couldn't stomach a multi-year search. He stumbled on PavArt, a tiny ($65-75k SDE), capital-intensive, project-based, key-man-risk-laden decorative concrete/paver manufacturing business, largely because of a personal connection (he and his wife had just paid for an outdoor living project and wished they'd known about PavArt's product) and because he saw the company's 15-year survival, national reach, proprietary CNC water-jet technology, and unique niche (turning pavers into custom mosaic 'art' for pro sports stadiums, universities, and homeowners) as an underlying moat despite its risks. He consciously chose to buy small and 'do damage' rather than endure a long search, paying cash so he wouldn't need debt.

What's working

A durable niche/moat: proprietary CNC water-jet cutting technology and a patent that make it very hard for local contractors or GCs to replicate PavArt's custom paver-mosaic designs
National, non-geographically-constrained business model — PavArt manufactures in New Jersey and ships nationwide, serving pro sports teams (Philadelphia Eagles, Carolina Panthers), universities, and high-end residential customers
Strong brand/portfolio and word-of-mouth from marquee installations that make marketing efforts (digital marketing, Instagram, SEO) highly effective once awareness is created
Heavy reinvestment discipline: all cash flow (~$550k) plowed back into capex (new machines, a second location) rather than taken as owner distributions, tripling the business over five years
Building redundancy/resiliency around key employees and machinery to reduce the key-man risk that had kept the business in 'survival mode' for 15 years
Being a self-funded owner-operator (not needing a salary) allowed reinvestment; his personal balance sheet and $150k additional capitalization removed the need to sweat short-term cash flow
Being an owner (not a searcher) dramatically increased his ability to source/call on other businesses for potential bolt-on acquisitions

What's hard

The business checked nearly every box searchers are told to avoid: tiny, capital-intensive, manufacturing, project-based, and severe key-man risk (one machine or one skilled craftsman going down could threaten the business)
Original plan to run PavArt part-time (2-3 days/week) as part of a multi-business holding company thesis failed almost immediately — his initial co-investor/partner exited after four months once she realized the business needed a full-time hands-on operator, forcing him to commit fully
Spent the first ~18 months just building resiliency and getting the business out of 'survival mode' before he could even think about growth
Constant psychological/mental strain of ownership — describes a recurring 'mental freight train' at 3:30am that he manages with a daily 80-minute walk; says operators should expect a weekly version of the 'fetal position moment'
Blue-collar/manufacturing operating reality includes visceral human/labor conflict (witnessed near-physical altercations between employees) and harsh working conditions
Acknowledges he objectively overpaid on a pure multiple basis (~15x an already-thin SDE) and that the deal only makes sense if evaluated over a 15-20 year hold rather than a typical 3-5 year private-equity horizon
Contracting/hardscape installer channel is inherently fragile — contractors are the second-most-failed business type in America, creating channel risk

Notable quotes

So even though it was a prototypical from a size standpoint 14 and a half million, couple million dollars of SD, there was a lot of the risk that I see in smaller businesses... I think there's a little bit of a myth out there that the bigger you buy the perceived safety increases. I'm not sure I agree with that.

It defies everything that you should do in search. It's capital intensive, it's manufacturing, it's project based, it's small, it's keyman risk, you name it, we check off every box on what not to buy.

So the question is not did I overpay for the business? Look, I'll save you the trouble. Yeah, I overpaid for it over 20 years. What's this business going to be, or 15 years? So that's really the calculus that you've got to do if you want to be an operator and a dirt under the nails operator.

If you can't even picture forgoing four weeks worth of pay in a rough time, you got to question if this thing's right for you. This is not a job, these are... this is ownership. It's a cold hard reality.