New Deals - 12 Oct 2023

By SMB Deal Hunter

Author

Helen Guo
October 12, 2023

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 Remotely Talents, a platform for hiring ridiculously talented and affordable marketing and eCommerce specialists.

Accredited Investors: Want to invest passively into a cash-flowing SMB deal I’m working on in the next 2-4 weeks? Reply “Invest with Helen” and I’ll share more.

1/ Profitable 2-Location Urban Funeral Home

📍 Location: Kansas City, MO
💰 Asking Price: $4,375,000
💼 EBITDA: $695,000
📊 Revenue: $2,602,410
📅 Established: 1925

💭 My 2 Cents: It’s near-impossible to find a more recession-resistant business than funeral homes. There’s a reason it’s a $23B industry despite being highly fragmented. This particular business has been around since 1925 and is currently owned by a non-funeral director, making it perfect for someone who wants to hire a CEO/GM and profit from afar. I like that the retiring owner is willing to stay during the transition process, that they have a very loyal connection with the local African-American community, and that the profit margins are an attractive 26.7%. With two locations and many funeral home owners starting to retire, this could be a good opportunity to jumpstart a funeral home roll-up play.

2/ Branding And Creative Agency

📍 Location: Chicago, IL
💰 Asking Price: $7,000,000
💼 EBITDA: $1,178,402
📊 Revenue: $5,819,160
📅 Established: 1974

💭 My 2 Cents: Founded over 40 years ago, this business is a branding and creative agency focused primarily on the senior living, hospitality, and apparel industries. It boasts an extremely impressive average monthly retainer of $13,500 and clients stay on for an average of 7 years, which is virtually unheard of in the marketing agency space. With that specialized niche, those stats, and a management team in place, there’s not a whole lot to dislike here. But, I do want to understand how the sales team is able to land such impressive clients, as well as what the owner’s role currently is. Some of these numbers are almost hard to believe, so it’s difficult to see why the owner would want to sell. If everything checks out, then this is a great opportunity for immediate hands-off profit with room to expand margins via offshoring some functions with the help of a team like Remotely Talents.

3/ Government And Nuclear Communications Firm

📍 Location: Orlando, FL
💰 Asking Price: Best Offer
💼 EBITDA: $1,564,000
📊 Revenue: $3,330,000
📅 Established: 1985

💭 My 2 Cents: There’s a growing opinion that nuclear energy is the solution to our dirty energy problem. It’s why you’ll see news like OpenAI CEO Sam Altman taking a nuclear energy startup public and Microsoft hiring nuclear energy experts to power its AI ambitions. This business seizes the nuclear opportunity by providing communications solutions for nuclear power companies and government agencies, which has resulted in thousands of customer sites and 80% recurring revenue. The recurring revenue component is especially attractive because a sizable portion of it comes from multiyear government contracts, and the government is the best client you can land as they are sticky and always pay on time. I also like that the seller is willing to offer financing, that the business has been operating for almost 40 years, and that there’s a very high barrier to entry. Two things I’d want to better understand are who the competitors are and what the team looks like. Chances are you’re not a nuclear expert, so you’ll want to have a team in place that can manage the day-to-day.

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4/ Party Equipment Rental Service Company

📍 Location: New York
💰 Asking Price: $1,800,000
💼 EBITDA: $526,378
📊 Revenue: $2,755,000
📅 Established: N/A

💭 My 2 Cents: This business is a party equipment rental service with over 15 years of experience. One of the things I like about party equipment rental service companies is that most of their business comes from referrals, which are basically free. I also like that they tend to get a good amount of recurring revenue from corporate clients, event planners, and the like. For this business specifically, I like that they have a strong relationship with the area’s venues and event professions. They are even the preferred and exclusive vendor for some, which is great. There is also a team of event specialists in place, which takes some pressure off a new owner. I am curious as to what’s the maintenance and upkeep on the rental items and how seasonal the cash flows are. I’m assuming that most events are during the warmer months, but if I’m wrong and the business has work all year around, that’d be a huge plus.

5/ Liquor Store With Property

📍 Location: Great Neck, NY
💰 Asking Price: $6,200,000
💼 EBITDA: $675,000
📊 Revenue: $4,100,000
📅 Established: N/A

💭 My 2 Cents: Funeral homes are the ultimate recession-resistant business, but liquor stores aren’t far behind. On top of the fact that people always want booze, liquor stores are fairly easy to operate and liquor has a long shelf life compared to perishables, which makes for easy inventory management. It is also difficult for competitors to invade your territory if you have a license, as there are often strict rules on how many licensed liquor stores can be in any given area. I like that the business is situated in a high-traffic area and comes with the property, which is never a bad thing. Overall, well-run liquor stores often become staples in the community and command a lot of repeat business, and this store looks like it fits that criteria.

🐦 The Best of SMB Twitter (X)

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Where Live Oak Bank stands on SBA partial buy-ins (link)

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How to budget better with cash flow modeling (link)

A Q&A about SMB, ETA, and M&A (link)

How to 10x your business using Twitter/X (link)

Turning layoffs from a difficult task into a business asset (link)

Offshoring only works if you have a system in place (link)

7 lessons from Stanford Business School’s guide to running a search fund (link)

The ideal compensation structure for agencies (link)

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See you next Tuesday!

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

1. Invest with me in cash-flowing SMB deals. I’m bringing on a select few investors from this community into businesses I’m buying and operating. Reply “LP” and I’ll share more.

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📚 What I’m Reading

Everyone always asks how I stay up-to-date, so here are a few of my favorite newsletters. Click on the below links to sign up in one click (all free):

  • The Sweaty Startup — “Boring business” entrepreneur Nick Huber who sold his 7-figure service business and now runs a self-storage portfolio shares actionable insights with entrepreneurs and investors.

  • Houck's Newsletter — Tactical advice every week from an a16z-backed founder on how to build, grow, and raise capital for your startup.

  • First Class Founders — Learn proven strategies to grow your business each week from today's top entrepreneurs

  • Sieva Kozinsky's Newsletter — The founder of Enduring Ventures shares weekly insights from his experience buying 17+ cash-flowing businesses.

  • Your Next Breakthrough — Every Monday, Mark Manson (the author of #1 NY Times Bestselling author of The Subtle Art of Not Giving a F*ck) sends an idea, a question, and an exercise that could spark your next breakthrough.

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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.