❇️ New Deals - 13 Feb 2024

A dental lab, CPA firm, and 3 other interesting finds.

Author

Helen Guo
February 13, 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 Steed, a team of tax specialists that ensures you pay the absolute least in taxes.

👀 In Case You Missed It:

I’m taking on 5 clients to help them find a business to buy in the next 90 days and handhold them through closing their first deal. 2 of the spots are already filled. If you’re interested, reply “me” and I’ll share more.

1/ Aquarium And Pet Fish Store

📍 Location: Sarasota, Florida
💰 Asking Price: $950,000
💼 EBITDA: $475,290
📊 Revenue: $1,463,030
📅 Established: 1975

💭 My 2 Cents: Believe it or not, the pet fish market is b-o-o-m-i-n-g. The global ornamental fish market (yes, that’s what it's called 😅) is projected to reach $11.3B by 2030, expanding at an impressive CAGR of 8.5%. And people love their home aquariums because as people move into smaller homes and rentals, they increasingly look to fish as pets as they take up less space. Afterall, it’s a lot easier to take care of a fish than a dog! I like that the company has been in business for almost 50 years, as this should mean strong name recognition in the area (Sarasota, which is the second fastest-growing region in the US by the way). I also like the multiple on this business. 2x EBITDA is a steal, especially considering there’s a management team in place with 15+ employees. Some 80% of its clients are residential, 10% are commercial, and, really interestingly, 10% are from the medical industry. This is something I’d definitely want to dig into. I’d also want to understand how much repeat business they get from their B2B clients. If those questions check out, then this is a cool business from a retiring owner.

2/ Animal Feed Manufacturer And Retailer

📍 Location: Nebraska
💰 Asking Price: $3,250,000
💼 EBITDA: $730,741
📊 Revenue: $6,088,453
📅 Established: 1978

💭 My 2 Cents: I love an essential product. This firm both makes and sells pet food and livestock feed for everything from cats and dogs to horses, poultry, and more. Unless we’re all going to feed animals Soylent, the need for these isn’t going anywhere. The animal feed market is a $109B beast and still growing at a CAGR of 4.3% through the rest of the decade, so it’s no surprise that this particular business is growing 20% YoY. I like that it’s 46 years old, so it likely has a lot of existing relationships with its clients, which are primarily local farms, pet stores, and veterinary clinics. I also really like that it specializes in premium high-quality pet food and specialized livestock feed, as the margins are probably higher. There is an experienced team in place and the owner, who is retiring, is open to a 1 year transition period, which is a great sign that he cares about the business’s legacy. I’d want to confirm how many clients they have, see their client breakdown by type, check customer concentration, and explore which vertical it might make the most sense to expand into. But overall, this could be a good opportunity for someone with a B2B sales background to come in, establish new partnerships and relationships, and really grow this thing.

3/ Dental Lab

📍 Location: Kings County, New York
💰 Asking Price: $9,500,000
💼 EBITDA: $1,500,000
📊 Revenue: $5,200,000
📅 Established: 2004

💭 My 2 Cents: This is a dental lab that makes crowns, bridges, and implants. It has two great things going for it. On the one hand, dental care is an essential healthcare service and will always be in demand. On the other, there is also a growing demand for cosmetic dentistry. The global cosmetic dentistry market was valued at $24.77B in 2023 and is projected to hit $54.16B by 2033, which is a strong 8.2% CAGR. Beyond the market tailwinds, I like that the business has very strong margins, has been around since 2007 and thus has an established client base of dentists and dental practices, and has a team of 30+ dental technicians in place. Since you don’t have to be a dentist to grow this business and there are no limits on additional clients (prospective clients are not limited to a certain geographical area), this could be a good way to get into the dental industry without having to actually own a dental practice or be a dentist. One thing I’m curious about is how many clients the business currently has and their retention rate, as this would tell me the quality of the lab’s products. I would also want to know what the firm’s sales team looks like. Finally, I would need to understand the seller’s role in the business.

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4/ Specialty Seafood Manufacturer & Processor

📍 Location: New Jersey
💰 Asking Price: $1,650,000
💼 EBITDA: $599,000
📊 Revenue: $2,270,000
📅 Established: 1996

💭 My 2 Cents: I know you guys love essential businesses, and since nothing is more essential than food, I had to share this opportunity. This is a specialty high-end seafood manufacturer and processor based right outside New York City. The seafood market is booming these days. What else can you call a market that’s projected to grow at an 8.92% CAGR from $338.47B in 2022 to $730.28B in 2030? I like that this business’s clientele is not independent restaurants (less financially stable, smaller order quantities). Rather, their clients are specialty food distributors around the country (a lot of repeat revenue), which by the way, are not easy to establish relationships with. Because the business focuses on a more premium niche, the result is very strong margins compared to other food businesses. It also has a retiring owner, which is always nice to see as a reason for sale. However, I do have some questions. How many distributors do they work with? Do they have any client concentration issues with specific distributors? And what contracts and payment terms do they have with distributors?

5/ CPA Firm

📍 Location: North Texas
💰 Asking Price: N/A
💼 EBITDA: $1,500,000
📊 Revenue: $3,225,000
📅 Established: N/A

💭 My 2 Cents: A lot of you have told me that you want to buy CPA firms because they have sticky B2B clientele with recurring revenue in the form of ongoing contracts and strong margins. But…you are worried at the same time about buying a CPA firm where the seller owns all the relationships, which are at risk when the seller departs. This is not the case with this second-generation CPA firm that has been in business for 50 years. One of the partners is retiring, but of the other two partners, one can stay on for another few years and the other a decade, which severely derisks the transition. With that taken care of, we can focus on the business’s insane 46% EBITDA margins and lack of client concentration issues. The only things I want to know are how many clients the firm currently has and how long they have been around for. Otherwise, this is a great opportunity to pick up a recession-resistant business in the growing north Texas region.

🐦 The Best of SMB Twitter (X)

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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.

See you Thursday!

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. Reply “LP” and I’ll share more.

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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.