❇️ New Deals - 11 April 2024

An absentee-owned towing business, bookkeeping firm for self storage companies, and 3 other interesting finds.

Author

Helen Guo
April 11, 2024

Today’s Sponsor

Hello SMB Deal Hunters!

Thanks for all the great feedback from the deals I shared on Tuesday!

I’m excited to share 5 new deals worth checking out.

Today’s issue is sponsored by Rejigg, a new platform that features exclusive off-market SMB deals.

1/ Bookkeeping for Self Storage Companies

📍 Location: New Jersey (Relocatable)
💰 Asking Price: $2,500,000
💼 EBITDA: $538,564
📊 Revenue: $1,377,324
📅 Established: 2011

💭 My 2 Cents: This business provides specialty contracted services, such as accounting and bookkeeping, to self-storage companies. Established in 2011, I really like the niche they are in, as bookkeeping companies generally come with lots of sticky contracts and recurring revenue. The self-storage industry also historically has been very stable, so I’d think this business enjoys some natural defensibility. I’d be curious to learn more about exactly what services they provide, as well as what their standard contracts are like, how long they are for, and how often they are renewed. At the same time, I’d want to know more about possible customer concentration and how intense the competition is. If everything checks out, there’s a definite opportunity to expand if that’s what you want to do, as there are a lot of mom-and-pop self-storage facilities and this business runs remotely with low overhead. There is also a dedicated staff of 20 in place, both easing transition concerns and letting a new owner hit the ground running.

2/ Non-Emergency Transportation Company

📍 Location: Essex County, New Jersey
💰 Asking Price: $2,350,000
💼 EBITDA: $1,100,000
📊 Revenue: $3,800,000
📅 Established: 2009

💭 My 2 Cents: Established in 2009, this non-emergency special needs school bus and medical transportation company moves students and patients across New Jersey, New York, and Pennsylvania. I love that this business works in a heavily regulated space that naturally provides barriers to entry. It’s not easy to obtain and maintain licenses for EMS and Basic Life Support, including wound care, health assessment, and cardiac arrest management. I also like that they have a staff of 107 full and part-time employees along with a fleet of 73 vehicles. This size operation indicates to me that there is a strong, steady base of clients (and it’s always nice to have quantifiable hard assets). I’d want to learn more about who their customers are, what their contracts look like, how much of their revenue is recurring, and the revenue split between the different routes. I’d also be curious as to how they’ve been able to adapt to increased costs, especially fuel. I’d finally want to look at staff turnover and what is involved in replacing the healthcare professionals in particular. Overall, though, this is a great opportunity at an asking price of only 2.14x EBITDA.

3/ Absentee-Owned Towing Business

📍 Location: St. Charles County, Missouri
💰 Asking Price: $6,990,000
💼 EBITDA: $1,331,525
📊 Revenue: $7,062,582
📅 Established: 1999

💭 My 2 Cents: I was completely sold on towing businesses after interviewing this entrepreneur who acquired one so was excited when I came across this large, 25-year-old towing company based in St. Louis. I learned from the interview that towing businesses are basically guaranteed demand through police towing rotations (and it's not easy to get in the door). With $7M in revenue, it appears this business is likely a major player in their community. I like that the owner has built this as an absentee-run business, with established systems in place to let it run smoothly without day-to-day involvement. I also like that there’s an option to purchase the real estate as part of the sale, and I’d be curious if there is also any FF&E in the transaction. While the numbers and reputation look good, there are a number of things I’d want to get a better handle on before fully diving in. I’d first want to understand what the local competition is like, since these would be the other companies on the same rotations. I’d also want to know who they have agreements with (police stations, private lots, AAA, etc.). Other questions I’d look to ask are the state of their fleet. Ultimately, towing is a boring, reliable business that will always be necessary. You can’t really go wrong here.

In Partnership With Rejigg

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Here are two interesting deals I found today that speak to the quality of the platform:

1) A healthcare claims management and payroll software with enterprise clients doing $400k in EBITDA

2) A full service pet-care company with $1M in EBITDA

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4/ Wastewater And Septic Service Company

📍 Location: Los Angeles, California
💰 Asking Price: $1,850,000
💼 EBITDA: $564,000
📊 Revenue: $4,656,752
📅 Established: 1991

💭 My 2 Cents: This wastewater and septic service company is your classic essential business offering a range of services from septic tank installation, repair, and maintenance, to stormwater management and test hole drilling. I always like a business that’s been around for this long (33 years), has a strong management team, and more than 10 employees (this one has 15). This generally indicates that you will be getting a business with real processes and systems in place. One thing to note is that this business requires California Gen A and C42 Contractor's Licenses. This probably means that the current owner is the person within the business who qualifies. I’d want to know if they’d be able to or willing to continue to sponsor the business post transaction. But, if not, there are also three long-term managers in place who would stay with the business and could possibly hold the licenses. I’d also want to understand how much of the business is ongoing maintenance with repeat clients versus new installations, as well as what the split between residential and commercial clientele is (B2B clients would come with more repeat business). Ultimately, this deal financially has a lot to like, with SBA financing available and a very reasonable asking price of $1.85M on $564K SDE.

5/ Commercial Utility Contractor

📍 Location: Southwest US
💰 Asking Price: N/A
💼 EBITDA: $1,150,000
📊 Revenue: $5,250,000
📅 Established: 1984

💭 My 2 Cents: This commercial utility contractor specializes in large-scale electrical installations, including highway lighting, traffic signals, and industrial power distribution. I like that they serve clients from grocery stores to sports complexes. I also like that as a preferred, certified vendor, they have built-in barriers to entry for the work that they do and the types of jobs they are able to bid on. They’re licensed in 4 states and, while busy now, have excess capacity to do more work with the equipment they already own, meaning they have room to grow without making any additional capital investments. I especially like that they are licensed to bid on government infrastructure jobs, as government contracts are always a stable source of revenue. As you can probably tell, licenses matter a lot in this business, so I’d want to be very clear on what licenses management holds and what is necessary to be an owner in this space. You’re going to want to know if the current owner performs any functions or holds specific licenses that are required for this business to operate and, if you don’t have these, if there is anyone else in the company who can provide them. I would also want to know how much of their revenue comes from government work vs other sources, what the bid process looks like for different jobs (and what their win rate is), how their contracts are structured, and whether this business has any specific comparative advantage in the markets in which it competes.

🐦 The Best of SMB Twitter (X)

How to structure compensation for a small business CEO (link)

Mini blueprint to grow your digital presence (link)

When should you hire a bookkeeper, CPA, and CFO? (link)

10 ways to incubate companies better (link)

Buying a business with $0 (link)

8 home service businesses (link)

Don’t give in to the sunk cost fallacy (link)

3 ways to get working capital into a deal (link)

See you next Tuesday!

P.S. Whenever you’re ready, here are a few ways for us to work together:

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🤝 Vendors and Lenders

I’m committed to helping the SMB Deal Hunter community close more deals, faster. Click on any of the links below and I will make a personal introduction to folks I trust.

SBA 7(a) Lender: The most common way to finance an acquisition up to $5M purchase price with 10% (give or take) down with the help of a government-backed loan. My preferred lender Elyse will help you out.

Non-SBA Lender: Best for smaller deals if you want to avoid the hassles of SBA. My preferred lender Grant and his team are the only private lenders I know who offer acquisition financing with long payback periods without any collateral requirements. Note: You must have great credit.

Quality of Earnings Provider: I always recommend conducting a QoE during due diligence to uncover any red flags. Get introduced to my preferred QoE provider that offers top-tier financial due diligence without breaking the bank.

Legal Counsel: A must-have on your team to help get a deal to the finish line. Get introduced to legal counsel with experience closing SMB deals that won’t rack up your legal bill.

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Disclaimer

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.