❇️ New Deals - 1 Feb 2024

A tree service company, sandbag manufacturer, and 3 other interesting finds.

Author

Helen Guo
February 01, 2024

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1/ Tree Service Company

📍 Location: Florida
💰 Asking Price: $10,000,000
💼 EBITDA: $1,237,293
📊 Revenue: $2,367,369
📅 Established: 1985

💭 My 2 Cents: This is a tree service company, which is one of my favorite boring service businesses because of its recurring revenue (trees and lawns need regular maintenance) and the fact that it often comes with contracts. And they are even better in Florida where trees need servicing all year round. This specific company has super high 52% EBITDA margins and 9 employees, which I like (although this isn’t a super hard industry to hire for since it’s not overly technical). The price may look high at first sight but it includes real estate (which the owner is open to leasing instead) and $3.5M of equipment, which is nice because it makes asset-based lending an option since that equipment is collateral you can borrow against. Overall, it looks like a solid, boring business, but I do want to know what percentage of customers are residential versus commercial. If they have a good mix (or even just very sticky customers), then this could be a real winner.

2/ Managed IT Service Provider

📍 Location: North Carolina
💰 Asking Price: N/A
💼 EBITDA: $1,102,220
📊 Revenue: $2,698,610
📅 Established: 1998

💭 My 2 Cents: I know a lot of you are looking for MSPs to buy, so I was excited to come across this one. If you’re not familiar with MSPs, they help businesses with various IT services like data protection, storage, backup and recovery, cybersecurity, etc. How could I not love an industry that comes with sticky B2B customers, high-value contracts, high margins, and is expected to be worth $88.5B in 2028? This MSP has been in business for over 25 years, gets 76% of revenue from recurring contracts, retains 83% of customers for over 2 years (which is pretty sticky), and has a management team already in place. My only concern is if there are client concentration issues (any one client representing more than 10% of revenue). If there isn’t, then you should be good to go here, although I’d still dig into how many clients they have in total and their current sales and marketing efforts.

3/ Digital Marketing Agency

📍 Location: Arizona
💰 Asking Price: N/A
💼 EBITDA: $838,000
📊 Revenue: $2,900,000
📅 Established: N/A

💭 My 2 Cents: Digital marketing agencies are nice high-margin businesses, but they are a dime a dozen. An agency has to do something extraordinary if it’s going to catch my eye. For this agency, its strong 75% rate of repeat on 120 customers is what got it featured here. This is impressive because most marketing agencies suck at retaining clients. I also like that they’ve been around for 20 years and have been consistently growing YoY. One thing I’m curious about is what industries they serve. This is important for marketing agencies because clients who work in a demanding, highly saturated market are more likely to churn. I also noticed that their margins are a lot lower than a lot of agencies I know. This means they probably haven’t properly leveraged offshoring, so there is likely room for a new owner to come in and immediately juice margins, and thus profits.

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4/ Sandbag Manufacturer

📍 Location: Elkhart County, Indiana
💰 Asking Price: $5,026,349
💼 EBITDA: $938,937
📊 Revenue: $1,750,878
📅 Established: 2002

💭 My 2 Cents: This business manufactures and delivers sandbags nationwide. That’s a business you don’t see every day, and I think it’s a niche that will continue to grow because of the increasing frequency of natural disasters. I like that it’s basically immune to economic swings because it serves an essential function for flood prevention, military fortification, and landscaping (although I want to know what percentage of sales is represented by each of these segments), and this is pretty much confirmed by them being in business for 22 years now. I also like that the price includes real estate (valued at $970,000). I’m curious how much money is tied up in inventory at any given time. For businesses that sell physical goods like this, the cash conversion cycle is crucial. I’d also like to better understand the seasonality aspect of the business as that can make inventory forecasting and debt servicing a challenge if you decide to take out an SBA 7(a) loan.

5/ Plumbing Company

📍 Location: Fairfax County, Virginia
💰 Asking Price: $7,500,000
💼 EBITDA: $1,800,000
📊 Revenue: $6,400,000
📅 Established: 1977

💭 My 2 Cents: This is a plumbing company providing both residential and commercial services for the DMV area since 1977, which means they likely have a big client roster and a lot of repeat business. Plumbing is a great boring business because it’s an essential service. If you have a plumbing issue, you don’t have any choice but to get it fixed. However, it’s also an industry that requires skilled technicians that can be hard to find, so I’d understand what their team of mechanics looks like and how long they’ve been around for. I’d also want to know the revenue split between residential and commercial. Commercial clients are of higher value to me because they tend to require more regular maintenance. Relatedly, I’d want to know what contracts they have in place with these commercial clients and what client retention looks like. If that all looks good, then this is a great boring business with a retiring owner who is open to offering seller financing.

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This publication is a newsletter only and the information provided herein is the opinion of our editors and writers only. Any transaction or opportunity of any kind is provided for information only; SMB Deal Hunter does not verify nor confirm information. SMB Deal Hunter is not making any offer to readers to participate in any transaction or opportunity described herein.