❇️ New Deals - 2 May 2024

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Hello SMB Deal Hunters!

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

🔥 Community Top Picks from the Last Issue:

#1: Wholesale and retail bakery with high-value customers
#2: 4 location title and escrow practice with a 98% market share
#3: Multiple physical therapy locations with almost $500k of FF&E included in the price

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

Today’s issue is sponsored by BV Capital, a real estate private equity company specializing in ground-up multifamily construction deals in Texas.

1/ Public Insurance Adjuster

📍 Location: Palm Beach County, Florida
💰 Asking Price: $3,000,000
💼 EBITDA: $766,000
📊 Revenue: $1,738,576
📅 Established: 2011

💭 My 2 Cents: This business helps claimants receive what they are owed by insurance companies by having their own adjusters evaluate the damage and handle the claim process. I really like this niche because accidents and weather events in Florida are almost as inevitable. Basically, there’s always going to be demand for this service, which you can see in this business successfully handling 657 claims in 2023. While this is impressive, I’d want to dig in more into how they capture new customers, what the customer life cycle and related workflow look like, and the process for handling a claim after an adjuster has done an evaluation. I’d also want to take a look at where the major costs are and if there is a risk in doing work and having associated costs without the surety of being paid in the end. I like that the owner strictly does administrative work, so you don’t need to be a certified adjuster to step into their place, but adjusters are critical to the business, so I’d want to check if there are any staffing challenges to bringing them into the company. I’d also be curious if attorneys are needed on staff as well as what other roles there are in the company. At the end of the day, this is a cool deal that can scale up as much as a new owner sees fit, as you just need to hire more adjusters and increase marketing.

2/ Data Center Design And Installation Company

📍 Location: Hamilton County, Ohio
💰 Asking Price: $2,400,000
💼 EBITDA: $619,500
📊 Revenue: $2,000,000
📅 Established: 40 years ago

💭 My 2 Cents: This 40-year old company with an established team in place specializes in comprehensive data center and server room infrastructure solutions while also offering ancillary services like general electrical and HVAC design, installation, and maintenance. I love that they have found a differentiated service they have deep expertise in, but can also capture the revenue from more standard HVAC and utility work. It's also great to see that they’re involved from the design stage on through the maintenance phase of projects, as this tells me there are diverse revenue streams, some of which may be contracted and recurring. I’d want to get a better feel for what the revenue split is between data center work and electrical and HVAC contracting, and what the standard payment schedule looks like for design and construction versus maintenance projects. By extension, I’d be curious how large a part of their business maintenance is, how much recurring revenue this represents, and what their standard maintenance contract is like. I’d also want to dive into their process for acquiring customers and whether they have a steady flow of repeat business. In this type of business the scheduling of projects is critical, so I’d want to check on what their current backlog looks like and whether this is contracted work or still in the prospecting or bidding phase. Finally, I’d also look to ask how early they get involved in the design stage of projects and what their relationship is like with developers and architects.

3/ Meal Prep Service

📍 Location: Sacramento County, California
💰 Asking Price: $3,400,000
💼 EBITDA: $948,040
📊 Revenue: $2,969,422
📅 Established: 2015

💭 My 2 Cents: This company focuses on sustainable food sourcing and meal-prep practices while catering to a wide variety of dietary needs. There’s definitely demand out there for services like this, but the question is whether this is a unique enough niche for them to thrive as an ongoing robust business, especially with so different meal-prep delivery options out there today. The answer is found in their operation and finances. At first glance things look good as they’ve been in business since 2015, now have 32 employees, and operate out of a 4,700 sq ft central kitchen with 7 outposts used for distribution. This model of a centralized kitchen with a number of delivery hubs looks appealing, but I’d need to look at how much each hub costs to operate and how much revenue each one is able to generate. Growth also looks strong at first glance, expanding at 35% annually, but I’d want to see if this is just in the past year or for a longer timeframe. I’d also want to know how much of their business is recurring, what the breakdown is between one-off purchases and subscription plans, and what the customer acquisition process and cost is like. Most importantly for a food business, I’d be really interested in whether customers like and find value in their products (seen in reviews, for example) and how long new customers remain as clients. Assuming everything checks out, this deal has going for it nearly $500K in FF&E in the asking price, SBA pre-qualification, and an owner willing to provide seller financing.

4/ Full-Service Landscaping Company

📍 Location: Jefferson County, Louisiana
💰 Asking Price: $3,200,000
💼 EBITDA: $1,455,718
📊 Revenue: $2,076,338
📅 Established: 1996

💭 My 2 Cents: I always love to see full-service landscaping companies like this with a long history, solid track record for customer retention, and positive reviews. In business for over 25 years, they have attained an impressive scale with substantial revenue and cash flow along with a fairly robust staff of 12 full time employees and 10 contractors. While they are in a climate in Louisiana that would point to a year-round demand for their services, they derive 70% of their revenue from landscape installation, so it will be important to understand the growth trends in their area to get comfortable with new construction forecasts into the future. I’d also check on how consistent their revenue has been over the years and if current results are likely to continue. Landscaping has few barriers to entry, so I’d want to get a feel for what their competition looks like and how they gain and keep their customers. Finally, I’d need to know what role the current ownership plays in the operation of the business. If they’re involved with quoting, design, installation, or sales, you’ll need to make sure that any necessary licenses or skill sets transfer with the remaining staff.

5/ Auto Glass Replacement Company

📍 Location: New York, New York
💰 Asking Price: $9,950,000
💼 EBITDA: $2,081,321
📊 Revenue: $5,088,128
📅 Established: 1991

💭 My 2 Cents: Glass replacement one of those awesome stable boring businesses that you rarely see for sale in the New York area. This particular glass replacement company has been in operation for over 30 years, has a great reputation, and are a major player in their market with multi-year contracts with sticky clients including police departments, fire departments, and municipal governments. I’d be curious as to how much of their business is attributable to multi-year contracts and whether these are ‘right to work’ style contracts or if they guarantee a minimum amount of revenue. More broadly, I’d want to know how much of their revenue comes from core auto glass replacement versus ancillary services, how consistent their business has been over the years, and if there is any predictability to their cash flow. It doesn’t seem like client acquisition would be a problem, but I’d still want to understand how they gain new clients, to include how much this involves referrals from insurance companies or direct outreach from clients. I’d finally want to check if there are any staffing concerns and what assets transfer with the business. This is an industry that is usually dominated by national franchises, so this is an amazing opportunity to acquire such a large and lucrative independent player.

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See you next Tuesday!

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

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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.