Introduction
In this insightful Q&A, Michael Davidov of Pine Street Group reveals how he implemented a strategic SBA loan business acquisition approach to grow from $6 million to $140 million in revenue. Discover the exact playbook he used to maximize leverage, build a scalable platform, and execute a successful rollup strategy in the fragmented healthcare industry. This is a masterclass in how to use SBA loans for business acquisition success.
Founder Success Story QnA
Michael, take us back. Why did you turn your attention to buying a business in the first place?
Yeah. So I think there was a couple pivotal moments for me that put me on this path. Before I went down this crazy world of acquisitions, I was working at a mid-market private equity fund. One day I was sitting across the desk from somebody who we had just written a fairly large check to and I thought to myself, hey, I’d like to be on the other side of the table. At the time I hadn’t operated anything. I’d done private equity and consulting but in the back of my mind that was the seed that ultimately grew into what we built today.
So you have this kind of a loose thesis. You partner with Jonathan. What are the parameters of your search look for as you guys embark?
I think we got pretty lucky in that a good deal came around pretty soon. The way that we were looking at it from a criteria perspective: first, we wanted to figure out where are there a robust amount of targets; second, we wanted to find places that had a good revenue base and where we felt comfortable with the stability of the business; and third, we needed to find a deal where we could keep as much of the equity as possible. We knew we were going to use SBA because that was probably the only real financing available. We were solving for what’s the most amount of EBITDA that we could buy with the max SBA exposure and the least amount of equity so that we could keep the majority of the economics.
Max leverage means giving away the least equity possible because why? Just take that the next two or three steps.
Max leverage meaning we wanted to use as much debt to finance the acquisition as possible versus equity. Given we were trying to buy stuff around initially in the 3 to 5 times range, often times you can max that out which is essentially like 90% on the SBA side. That 90% leverage is really unheard of outside of SBA. The SBA product is pretty amazing for what it does – it enables people who may not have a ton of liquid capital to actually participate. Sometimes I joke with lenders: you’re penalizing me for getting a good deal.
What do margins in a business like this look like?
It can vary a little bit. The biggest thing is what your different insurance payers pay you versus what your labor costs are. What you try to typically target is gross margins in the probably like high 30s. And then your EBITDA margins at the bottom line, they can vary just depending on how much support staff is needed, but you’re probably somewhere in the mid-teens if you’re operating effectively.
Did you have a plan to grow to over hundred million dollars in revenue? What did you think that was going to be year five and year 10 in this project was going to look like?
I think we definitely had a goal to get larger. We got into this strategy with a goal to grow really quickly and get big. We spent the first year creating what we tried to put in the best systems, the best people, the best processes because if you’re going to try and then go do a bunch of add-ons and integrate, you need to have a solid base and frankly a good framework on which to then put all those add-ons onto. So we spent probably the first year really doing that.
What were some of the levers you pulled, systems you put in place that made your platform stronger so that you could then acquire faster?
The organization we walked into was doing everything still pretty much on pen and paper. The first thing we instituted was on the HR and hiring front. We picked a good HRIS and payroll system and put in the appropriate processes. We wanted somebody to be able to get their paperwork done sitting on the couch at home if needed. That was the first thing we did. The other area was getting the general practice management software to go digital. It allowed us to schedule and document everything digitally. Once we had good data we were able to offer weekly payroll which was a big deal and really helped our employee base. We were giving our clients full digital access to their records and calendars, delivering a better overall product experience.
After pulling these levers and building this first acquisition into a real platform, take us through the next part of the story.
We went into acquisition mode after that. We’d grown the business nicely and gotten that rate bump which helped quite a bit. At that point we found another similar agency based in another part of Southern California to acquire. We refinanced our SBA debt. We were able to have enough EBITDA with our existing business plus the add-on to work with a small bank to write us a different type of loan. We did that one all debt and then kept going. A couple months afterwards we closed our third one. We also opened up organically a couple different offices. So in year two and a half, we really pushed it pretty hard – did the two acquisitions, opened up a bunch of offices and were sitting on a pretty nice size home health business with good coverage across almost all of Southern California.
So what does “nice size” mean after the end of year two?
We were probably somewhere in the high teens, so almost 20 at that point was where we were at from a base of six. So we tripled the business essentially over two years through both organic and inorganic growth.
Tell us more about how you worked with someone interested in being a searcher for your ABA business acquisition.
We had an intern who was another MBA and he had been working for us for a while and was interested in the in-home ABA autism therapy space. We found a deal that came across our desk that we liked and decided to work with him. We ended up using the SBA loan that we had at that point paid off. We actually took out a new one and bought an ABA business in home. We gave him equity and also a plan that he would be able to earn some additional equity over time as a CEO would.
What happened in 2023 that was transformative for your business?
2023 was a pretty transformative year. We entered organically into providing in-home care for individuals with developmental disabilities. There was an opportunity to acquire a business that does just that service line that was actually bigger than we were at the time. The only reason why we were able to pull off that transaction was they might have had more clients and revenue than we did, but we actually had the platform built. We were able to do that acquisition and ultimately absorb that business into ours. We combined all three segments into one business – we’re a diversified one-stop shop for in-home care for young adults and children.
When did you decide to step back from operations?
Around when we got that transformative deal under contract, we realized we’re at a scale now where we really should go out and put together a top-notch management team. As part of that deal we kicked off that process. We removed ourselves about 6 months after that deal. So early 2024 was when we started to step away. We found someone who had industry experience, understood how the space worked, was local, and showed good cultural fit with the existing organization.
Why did you decide against selling?
I think we still have a lot of room to run. In private equity, you spend all this time identifying a good company, build it out, grow it, and sell your best assets. In today’s world, it’s actually kind of hard to get good assets. Our view is let’s hold on to it until we stop compounding effectively. When that happens, then maybe we aren’t the right owners. But for now, we’re hitting on all cylinders with a great team coming on board. Let’s continue to invest behind this because we believe in it.
Just give us the revenue that you started at and where you are today.
We started at six million of revenue and now the whole portfolio is going to be doing about 140. So when I said 20x I was actually understating it.
Are you enthusiastic about this career path for others?
Yeah, the short answer is yes. If this is something that is right for you and you have that itch to be your own boss or go build something, I think it’s the best thing I’ve ever done. There were definitely days where it was not all up – days where we thought ‘Oh my god, what are we doing?’ But overall, it’s been an amazing experience. I would recommend it for anybody who really wants it.
Michael Davidov Business Stats
Michael Davidov’s strategic acquisition approach transformed a $6 million healthcare business into a $140 million portfolio in just six years. This remarkable growth showcases the power of leveraging SBA loans for business acquisition in a fragmented industry. Here are the key metrics that demonstrate the success of his rollup strategy:
- Initial revenue: $6 million (2019)
- Current revenue: $140 million (2025)
- Growth: 23x in 6 years
- Employee count: 3,000+
- Clients served: 3,000+
- Service lines: 3 integrated healthcare segments
| Year | Revenue | Growth (vs prior) |
|---|---|---|
| 2019 | $6M | Base |
| 2021 | $20M | 233% |
| 2023 | $60M | 200% |
| 2025 | $140M | 133% |
Michael Davidov Method
Michael Davidov’s successful business rollup strategy relied on specific, repeatable methods that enabled rapid scaling while maintaining quality. His approach transformed a single healthcare agency into a diversified portfolio by focusing on foundational elements first. Here’s how he executed his strategy step by step:
- Maximized SBA loan financing to 90% leverage on the initial acquisition
- Spent first year building operational systems before pursuing acquisitions
- Focused on industries with high fragmentation and stable revenue streams
- Treated frontline staff as customers to improve retention and service quality
- Digitized all manual processes to create scalability
- Used initial platform to finance add-on acquisitions with minimal new equity
- Targeted adjacent service lines to create cross-selling opportunities
Michael Davidov Tools
Davidov strategically implemented technology tools that addressed specific operational bottlenecks while creating scalability for future growth. Rather than adopting tools for their own sake, he focused on solutions that solved immediate pain points and enabled the acquisition strategy. Here are the key tools that powered his growth:
- ADP for HR and payroll processing that reduced hiring time from weeks to days
- Sage accounting system that provided enterprise-grade financial management from day one
- Healthcare-specific practice management software that digitized scheduling and documentation
- Custom digital client portals that improved patient and family engagement
- Weekly payroll systems that became possible only after digitizing HR processes
Key Notes
Several critical insights emerged from Michael Davidov’s journey that can benefit other entrepreneurs considering a rollup strategy. These key observations highlight both the opportunities and challenges of using SBA loans for business acquisition:
- Going slow to go fast paid dividends – the first year of platform building enabled rapid subsequent growth
- Healthcare’s regulatory barriers created natural moats despite being a service business
- Revenue stability during COVID proved the quality of their business model
- Operator readiness is more important than deal availability when scaling
- Partnerships with emerging searchers can be mutually beneficial growth channels
- Retaining key sellers as investors created smooth transitions during acquisitions
Get Started in Just 5 Steps
Following Michael Davidov’s proven approach, here’s how you can implement a similar SBA-funded acquisition strategy in five actionable steps. This roadmap focuses on practical execution rather than theoretical concepts, drawing directly from his experience growing from $6M to $140M:
- Identify fragmented industries with stable, recurring revenue where 90% SBA financing makes sense
- Structure your initial acquisition to maximize SBA exposure while retaining majority equity
- Invest the first year building operational systems before pursuing add-ons
- Focus on digitizing HR and scheduling processes to create immediate scalability
- Use your growing EBITDA to finance new acquisitions with minimal additional equity
Conclusion
Michael Davidov’s journey demonstrates that with the right strategy, how to use SBA loan for business acquisition can transform a modest investment into a substantial portfolio. By maximizing SBA financing, building a strong operational foundation, and executing strategic rollups, he achieved 23x growth in just six years. This case study shows that service businesses with fragmented markets present excellent opportunities for acquisition entrepreneurs willing to invest in platform development before scaling. For those considering this path, Davidov’s experience proves that going slow to go fast – spending that crucial first year building systems – creates the foundation for exponential growth.