❇️ New Deals - 15 Feb 2024

A managed IT service provider, daycare, and 3 other interesting finds.

Author

Helen Guo
February 15, 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.

👀 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.

Today’s issue is sponsored by Steed, a team of tax specialists that ensures you pay the absolute least in taxes.

1/ Managed IT Service Provider

📍 Location: Northwest
💰 Asking Price: N/A
💼 EBITDA: $836,000
📊 Revenue: $4,300,000
📅 Established: 1982

💭 My 2 Cents: Every regular reader knows I love MSPs. How could I not love an industry that comes with sticky B2B customers, high-value contracts, and high margins? Plus, the service just makes sense—outsourcing security and backup (among other services) to a 3rd party is not only more cost-effective for companies, but it also means someone’s monitoring their IT infrastructure 24/7. Unsurprisingly, this specific MSP is pretty appealing. I like that it has more than 300 customers, a VERY strong 95% retention rate (many clients have been with the firm for decades), and low client concentration, with no client making up more than 5% of revenue. I also really like that many of their clients are in essential businesses such as healthcare, manufacturing, and agriculture. This should make the business recession-resistant. Better yet, one of the owners is staying on and ready to run things, there’s a management team in place, and the business was selected as one of the 2022 Inc. Magazine best workplaces, so I’d bet employee retention is strong. However, I do want to know what the roles are of the 2 owners who are retiring and what would be involved in filling these.

2/ Daycare

📍 Location: Maryland
💰 Asking Price: N/A
💼 EBITDA: $466,000
📊 Revenue: $2,057,000
📅 Established: 1994

💭 My 2 Cents: I like daycare services because as the trend towards more dual-income families and single parents increases, so will the demand for daycare. This daycare has been in business for over 30 years, which speaks to the demand in its area as well as the quality of its services. The business is in really good shape, as it’s currently at a very solid 84% capacity, is prequalified for SBA financing, and has a full team in place, although I’d want to know how long they’ve been around for, as employee retention can be a problem for daycares. I also like that it is part of a franchise, as this brings training as well as some name recognition. The owner has minimal involvement with the business, so this could be a good opportunity for someone who wants a turnkey operation. If you noticed the higher-than-average profit margins as I did, it’s because rent is only 7% of total revenue (!) and locked in until 2036. And, to top things off, this daycare is only open 5 days a week and takes off more than the average number of holidays, so one easy growth opportunity would be to simply open more days of the year.

3/ Commercial And Residential Tree Service

📍 Location: Florida
💰 Asking Price: $3,000,000
💼 EBITDA: $514,464
📊 Revenue: $1,815,001
📅 Established: 1987

💭 My 2 Cents: Tree services are some of my favorite boring businesses. Why? Simple: trees always need trimming or removal, so they naturally have a lot of repeat and recurring revenue. This is especially true in Florida where this business is located, as the nice weather means year-round tree maintenance. I like its revenues come mainly from commercial (50%) and municipal (20%) clients, as these tend to come with larger contracts and repeat volume since these clients must keep up appearances. I’d want to understand what client retention looks like, but they’ve been in operation since 1987, so they likely have existing relationships and a strong reputation (you don’t land AT&T as a client without one). I also like that there is an established team in place that is committed to staying with a new owner, although the current owner is willing to remain with the business for a few years (and finance up to 20% of the purchase price!) before he retires, which tells me he’s really invested in the business’s success and makes me much more comfortable with a transition. Considering that they’ve built the business purely through organic marketing, this is a great opportunity for someone to come in, leverage the firm’s reputation, grow out a B2B sales team, and really put the pedal to the metal.

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4/ Garden Center

📍 Location: San Francisco, California
💰 Asking Price: $2,500,000
💼 EBITDA: $560,000
📊 Revenue: $3,300,000
📅 Established: 1974

💭 My 2 Cents: Plants are in right now, so by default, garden centers are also in. This particular garden center has solid margins, strong reviews on social media, and a great location near the on/off ramps of a freeway. I’d also bet that because it’s been around for 50 years now, it has probably built a lot of brand recognition in the area, which usually translates to repeat customers. I like that the owner is retiring and there's already both a general manager and assistant general manager in place, so any new owner probably wouldn’t have to be very hands-on. This is also good because it means the transition is hugely derisked. With the owner willing to work with a buyer who will be using an SBA loan, this looks like a really nice opportunity. However, because they own the real estate, you’re going to want to negotiate advantageous lease terms before signing on any dotted lines.

📍 Location: Remote
💰 Asking Price: $3,000,000
💼 EBITDA: $840,167
📊 Revenue: $1,646,788
📅 Established: 2012

💭 My 2 Cents: I love agencies for their recurring revenue and high margins. The trouble is finding one with strong client retention. This agency provides SEO, PPC, and web development services to B2C legal firms. Think divorce, bankruptcy, immigration, and personal injury law. From the agency perspective, this is actually a really good niche to focus on. These kinds of law firms rely on a constant influx of new leads and small firms in particular usually can’t run their own digital marketing. This means they have a constant need for marketing services, which is reflected in this agency’s super high average client tenure of over 4 years. It’s also been around for 15 years, which is a long time in the digital marketing agency world. With an established management team in place and very strong 50% EBITDA margins, this looks like a business you’ll be able to comfortably walk in and profit from on day one.

6/ Standardized Surveys for Veterinary Hospitals*

📍 Location: N/A
💰 Asking Price: $2,000,000
💼 EBITDA: $298,000
📊 Revenue: $345,000
📅 Established: N/A

💭 My 2 Cents: This is a super interesting niche business providing standardized surveys, analytics, and industry benchmarks to veterinary hospitals. These vet hospitals often sign on to 1-year contracts with the company for their services. What I like is earnings have been very stable and consistent over the past 3 years, which means they likely have had strong client retention. The owner is retiring, but willing to train and consult a buyer for up to 6 months. I’d want to check client concentration (as some of the vet hospitals have multiple locations) and also dig into what % of contracts renew YoY.

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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.

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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.

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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 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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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.