❇️ New Deals - 14 Dec 2023

A roofing contractor, baby fashion eCommerce brand, and 3 other interesting finds.

Author

Helen Guo
December 14, 2023

Today’s Sponsor

Forwarded this newsletter? Join 21,000+ readers and sign up for free.

Hello SMB Deal Hunters!

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

Looks like the Amazon FBA pet brand (that’s growing 70% YoY) I featured was a big hit.

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

Today’s issue is sponsored by Frec, an investment platform that offers direct indexing, which can help you earn more by unlocking tax savings.

1/ Residential Roofing Contractor

📍 Location: Dallas County, Texas
💰 Asking Price: $2,950,000
💼 EBITDA: $985,000
📊 Revenue: $4,860,000
📅 Established: 2010

💭 My 2 Cents: Businesses don’t get much more recession-resistant than a roofing company. Shelter is at the bottom of the pyramid in Maslow’s hierarchy of needs, and if you’ve ever had a leaky roof, you understand why. Besides being recession-resistant, roofing is also a high-ticket service ($15k per roofing job on average). I like that the owner is retiring and willing to offer some seller financing, that the business comes with a team of 12, and that they have over 400 4.5-star reviews on Google. Most of all, I like that they’ve done ZERO paid advertising. Yep, you heard that right. Every lead they get comes from their high rank on Google. Not only does this make them very hard to compete with, but it means there’s definitely room to grow by spending on ads (which I would focus on). However, before scaling up, I do want to know how long the team’s been around for, how tough it is to hire laborers, and how much capacity they have to take on more jobs.

2/ Managed IT Service Provider

📍 Location: N/A
💰 Asking Price: N/A
💼 EBITDA: $2,100,000
📊 Revenue: $8,200,000
📅 Established: N/A

💭 My 2 Cents: Regular readers know that I adore MSPs. This one focuses on network management and security for municipalities, schools, and small businesses. Because all of these types of clients, the contracts are high-margin and sticky. You almost have to see these contracts to believe them. They run for 5-9 years and have MSAs with two-year extensions. The result is 99% retention and 88% recurring subscription revenue. Just absolutely insane (and beautiful) numbers. No wonder they’ve been growing slowly and steadily for over 20 years now. And the party doesn’t seem to be ending anytime soon. There are strong tailwinds from customers upgrading their wireless and cybersecurity infrastructure. There’s a reason the U.S. managed services market is expected to grow at 10.2% CAGR from 2023-2028, reaching a value of $88.5B. Luckily for us, this business can handle all this growth without additional Capex or overhead.

3/ Baby Fashion And Keepsakes eCommerce Brand

📍 Location: Remote
💰 Asking Price: $3,433,972
💼 EBITDA: $602,451
📊 Revenue: $3,121,792
📅 Established: 2015

💭 My 2 Cents: This is an 8-year-old D2C brand selling baby clothes and keepsakes. I like this market because there’s always new demand for the product with babies born every day, rain or shine. The company has strong profit margins for an eCommerce brand (19%) and it’s been growing very quickly and consistently month on month (3-year CAGR is 55%). It looks pretty solid, but there are some basic things I want to know: what are AOV, LTV, repurchase rates, and the CAC? On the product side, I’d want to understand who designs the clothing, what’s on the product pipeline (assuming new product launches are big for them), how many SKUs they carry, and what the manufacturer lead time is looking like.

In Partnership With Frec

Have gains but don’t want to sell because, well… taxes?

I recently discovered Frec, an investment platform that offers direct indexing. 

Haven’t heard of direct indexing? 

That’s because it’s a tax-optimized investment strategy that’s traditionally had high minimums and mostly available through wealth advisors.

The good news: Frec has built tech that removes the middleman and offers it directly to investors at a low 0.10% fee. 

It’s just as easy as investing in an ETF, but you own the underlying stock of an index which unlocks powerful tax loss harvesting on the individual stock level–so you get the performance of the index while generating tax losses. 

As a result, you typically capture 38% of your portfolio back in tax deductions over five years that carry forward indefinitely. 

I started using it and am kicking myself for not doing so earlier. 

Check Out Frec Today 👉

4/ Classic Car Sales Company

📍 Location: N/A
💰 Asking Price: N/A
💼 EBITDA: $766,244
📊 Revenue: $19,027,020
📅 Established: 2013

💭 My 2 Cents: If you’re into unique niche businesses, you’ll love this one. This is a classic car sales company specializing in consignment, marketing, and selling classic and exotic collector cars. If you’ve ever been to a car show, you know that people who are into cars are really into cars. They are so into cars that the global classic cars industry is estimated to be worth a massive $31.1B in 2021 and an expected $51.3B by 2028. This particular business operates out of one facility and rakes in 90-95% of its revenue from the consignment model. I like that because it means the company doesn’t have all its money tied in inventory, which is great for cash conversion. They also have a great name reputation, a large social media following, employees who run most of the day-to-day, and owners who are open to staying on as commissioned salespeople, which are all big pluses. Plus, given they’re only in one location, I like that there’s an opportunity to expand into new markets.

5/ CPA Firm

📍 Location: Salt Lake City, UT
💰 Asking Price: $6,075,000
💼 EBITDA: $1,461,000
📊 Revenue: $5,235,000
📅 Established: N/A

💭 My 2 Cents: CPA firms are boring B2B service businesses with lots of recurring revenue and sticky customers (who likes switching their accountant?), which means I absolutely love them. This CPA firm works with SMBs, governments, and NGOs, has a retiring owner, and comes with 25 employees (all positives). I do wonder how long the customers have been customers for and if there are any concentration issues. I’m also curious how long the staff’s been around for and what their current marketing process is. My hunch is that this CPA firm is like the others and lacks in the marketing department, so there might be a digital marketing play either through cold emails or ads.

6/ SPECIAL BONUS: Everyday Carry (EDC) e-Commerce Brand

📍 Location: Remote
💰 Asking Price: $2,000,000 - $3,000,000
💼 EBITDA: $611,779
📊 Revenue: $3,167,944
📅 Established: 2015

💭 My 2 Cents: In case you missed it, I got you guys access to an opportunity that you won’t find on any marketplaces. This is an 8-year-old e-Commerce brand that targets the everyday carry (EDC) community. If you’ve read Gear Patrol, you know this audience is tight-knit. No wonder players in the space like Ridge Wallets, Mini.Katana, and KeySmart have absolutely blown up. This brand sells high-quality carry gear handcrafted by talented artisans such as knives, multitools, pens, flashlights, and more. They boast an LTV of $451 and net profit margins close to 20%, which is incredible (and rare) for e-Commerce and speaks to how dedicated this niche audience is. What I like is they already have an established system to drive sales through weekly new gear drops that any future buyer can continue, and they have a full team in place (including a General Manager). Plus, the seller is flexible on deal structure.

🐦 The Best of SMB Twitter (X)

The marketing playbook on how to grow a boring niche business 50-200% annually (link)

How to find a great business to buy (link)

Stupid is a strategy (link)

Break down of the manufacturing business model (link)

The 2 biggest mistakes business owners make (link)

How you can get rich with creative financing (link)

5 skills that successful real estate investors all have (link)

The best way to make $10k/month right now (link)

Direct mail could be a big money maker for you (link)

The 5 questions to ask if you want to buy a cash-flowing business (link)

🤝 Vendors and Lenders

I frequently get asked by you guys for recommendations on SBA lenders, quality of earnings providers, and legal counsel.

I’ve decided to streamline this to help the SMB Deal Hunter community close more deals, faster.

Fill out this form and I will personally make introductions to folks I trust.

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.

2. Join the SMB Deal Hunters Mastermind, a community for serious acquisition entrepreneurs and investors where we share insights, ask questions, and collaborate in weekly calls and a Slack channel. Want in? Apply here.

3. Interested in selling your business? I’ll help you connect with buyers from the SMB Deal Hunter Community.

4. Want me to review a deal you’re working on? Sign up for Roast My Deal.

5. Want to promote your business to my community of 21,000+ entrepreneurs and investors? Advertise in SMB Deal Hunter

⏪ Catch Up On Recent SMB Deal Hunter Issues

How was today's newsletter?

Login or Subscribe to participate in polls.

📨 Share SMB Deal Hunter

If you refer 1 friend or colleague to my newsletter, I’ll also send you The Comprehensive Seller Interview Question Bank I’ve put together for free ($99 value). In it, I’ve compiled 50+ questions business buyers should ask during seller interview calls when evaluating a business.

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.