Zach Smith·May 6, 2024

The Allure of Buying a Marketplace Business | Zach Smith Interview

Zach Smith spent seven years at Uber working in operations, strategy, and product, then consulted for early-stage tech companies before discovering ETA through 'Buy Then Build.' He bought American Dental Care — a 30-year-old two-sided marketplace connecting uninsured dental patients with participating dentists in Houston and Miami — in September 2023 for $450,000 (2.7x SDE), funding it with $250k of his own cash plus a $200k seller note at 8% over three years, with no SBA loan. The business had declined from ~$1.5m in peak revenue to ~$450k and was generating ~$180-200k in SDE when he acquired it; Zach saw the decline as primarily driven by a retiring owner who had stopped investing in either side of the marketplace. Six months in, Zach had cut two of four employees, rebuilt the consumer-facing website and sales funnel with an internet-first approach, and launched an updated fee schedule to re-engage dentists — accepting a further near-term revenue dip as part of an intentional J-curve reset. The core thesis is that a modernized digital sales process and active dentist recruitment, potentially layered with a B2B channel selling to small employers as a dental benefit alternative, can grow the ~2,500-member base to multiples of its current size.

Deal facts

purchase price: $450,000
multiple: 2.7x SDE
sde ebitda: SDE ~$180-200k
revenue: ~$450-460k (2022 top line)
financing structure: $250k buyer cash + $200k seller note at 8% over 3 years; no SBA; stock sale
notes: Business had peak revenue of ~$1.5m+; was shrinking at acquisition. Stock sale required due to non-assignable dentist contracts and state licenses. No outside equity raised.

Why this business

Zach recognized American Dental Care as a two-sided marketplace business — connecting dental practices with uninsured cash-paying patients — which mapped directly onto his years of marketplace experience at Uber. Despite having no dental background, he saw an owner who had stopped investing in both sides of the marketplace and a large untapped opportunity to modernize the sales process and grow a business that had once been much larger.

What's working

Existing membership base of 2,000-2,500 members provides stable recurring cash flow with no customer concentration risk
Network of ~250 dentists and specialists already in-network in Houston and Miami metros
Launched a new, updated fee schedule in early 2024 that better aligns dentist and member incentives
Bilingual sales and customer support staff serving a significant Spanish-speaking customer base
State licenses (Texas, Florida) provide regulatory moat that competitors must replicate
Asset-light marketplace model with ~40% margins at time of purchase
Seller provided favorable 50% seller note, enabling fast close without SBA or outside equity

What's hard

Business had been shrinking for at least five years before acquisition; revenue down to ~$450k from a prior peak of ~$1.5m+
Cold-start problem on both sides of the marketplace: stagnant dentist recruitment and outdated consumer sales funnel
Previous owner had completely neglected the supply (dentist) side for years, leaving the fee schedule dated and dentist relationships unmaintained
Previous sales model relied on phone-based outbound calls from leads captured via Facebook ads — inefficient and not converting well
Laid off two of four employees in the first month, then had to rebuild sales process from scratch, causing intentional revenue decline during transition
Individual consumer sales cycle is long — customers often need months to save for dental care before actually signing up
Industry suffered reputational damage from disreputable players in the 2000s; consumer skepticism remains in some markets
Stock sale added complexity: inherited prior-owner tax forms and records for months he didn't operate
Zach is only operator plus two employees, making it hard to pursue dentist recruitment, employer sales, and operational tasks simultaneously
Mental model shift from Uber's 'growth at all costs' VC culture to resource-constrained owner-operator reality

Notable quotes

I felt like I was making a very efficient trade of my time for money or occasionally equity and businesses that may or may not be worth something but I didn't feel like I was building a business that could continue to generate value without all of my time all of my professional time going into it.

As I looked at that range of outcomes I was comfortable enough that if my kind of worst case scenario is I get three years of experience owning and operating a business and learning a lot of probably in some cases painful but good lessons along the way that will have been worthwhile.

I kind of feel like I bought a platform to build on top of that gives me some comfort and some protection but that in a lot of ways there are some startup elements of like we're building we're sort of rebuilding product market fit and sales process and ideal customer profile.

You can tell yourself that will be the case but you really can't quite predict how it will feel the moment that reality shows up.