❇️ New Deals - 22 Feb 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: Factoring business asking 2x EBITDA
#2: Aerospace and defense component manufacturer with 90% of revenue from repeat business
#3: Potholing and utility locating contractor with over 550 active government and commercial accounts

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

But before we continue…I’m curious:

Today’s issue is sponsored by SelectSoftware Reviews, your go to source for free advice on the best HR software to use for your portfolio.

1/ Oil Field Service Company

📍 Location: Midwest
💰 Asking Price: N/A
💼 EBITDA: $500,000
📊 Revenue: $2,000,000
📅 Established: N/A

💭 My 2 Cents: This company performs an essential service in the oil and gas industry, inspecting and testing products such as pipes and tubing used in the drilling and operation of wells. I love this because many jurisdictions have strict regulations requiring such inspection and testing to ensure drilling operations meet safety and environmental standards. Simply put, this business is legally mandated. I like that the firm serves energy companies through automatically renewing contracts, as these contracts are very sticky (they have a 100% repeat rate of business!). They also do some project-specific work, so I’d want to know the revenue split between contract and project work, with a strong preference for contract work. I’d also want to confirm there are no serious client concentration issues. Otherwise, this business is booming, as they're regularly asked to expand to other locations. They also have $3.8M in assets, which you can leverage for financing.

2/ Commercial Landscaping Business

📍 Location: Fort Lauderdale, FL
💰 Asking Price: $15,500,000
💼 EBITDA: $2,525,505
📊 Revenue: $14,018,923
📅 Established: 2008

💭 My 2 Cents: I really like commercial landscaping businesses because they come with a lot of repeat revenue. Almost nobody gets landscaping work done just once, and this is especially true where this company is located in Florida, where the demand for landscaping is year-round, and for commercial clients, who need to maintain a certain appearance. This particular business has been around for 16 years and serves over 350 properties, but I want to know what kind of contracts they have with clients as well as the client retention rate. I also want to check on client concentration, especially if clients own multiple properties. Otherwise, I like that the business produces solid margins, even with an established management team in place. It’s also nice that they have 180 employees, although I would still like to know how hard it is to retain workers (even though it’s probably not too hard to hire landscapers). Ultimately, at a price that includes $1M in working capital and $1.9M in assets, this is a strong starting point for those who want to get into commercial landscaping and roll up multiple businesses.

3/ Veterinary Clinic

📍 Location: Ventura County, CA
💰 Asking Price: $849,000
💼 EBITDA: $424,656
📊 Revenue: $902,964
📅 Established: N/A

💭 My 2 Cents: Regular readers know that I love the pet industry. Some 66% of US households own a pet, and this number is rising, particularly in millennial households who are having children later. After all, pets are the new kids. And people really do treat their pets like their kids now. It all adds up to vets being great businesses with lots of loyal customers. This particular vet clinic, now in business for over 30 years, is killing it with almost 50% EBITDA margins. This is mainly due to their very low rent ($1300/month), so I’d want to know how long they have those lease terms locked in. I like that they have an experienced staff that plans to stay with the business, but I do want to understand the owner’s role and how this might impact a transition. If those questions come back clean, then the obvious path to growth here would be to simply keep the clinic open more often, as it’s currently only open five days a week during banker hours. Thankfully, you won’t have to be a vet to take advantage of this opportunity, as anybody in California is allowed to own a vet clinic.

4/ Event Rental Business

📍 Location: Michigan
💰 Asking Price: N/A
💼 EBITDA: $276,536
📊 Revenue: $1,084,709
📅 Established: N/A

💭 My 2 Cents: I like event rental businesses, especially those that cater to weddings. Weddings are a great business to be in because people are always getting married and they tend to spend a disproportionate amount of money on the big day. Event rental businesses are also typically high-margin and come with a lot of repeat referrals from wedding planners and other event businesses (which means free marketing!). The EBITDA on this one is a little lower than most deals I share, but this business already comes with a management team and the current owner is largely absentee, meaning there are no additional replacement costs. The business is also located in a popular wedding destination, so you shouldn’t have any issues with demand. However, before buying, I’d want to understand sales by month (since these businesses can be seasonal) to make sure sales can pay back any debt taken on to buy the businesses, which is especially important if you’re looking at an SBA loan.

5/ Plumbing And Heating Business

📍 Location: North Dakota
💰 Asking Price: $1,200,000
💼 EBITDA: $571,200
📊 Revenue: $1,954,500
📅 Established: 2006

💭 My 2 Cents: This is a plumbing and heating business by a retiring owner that has a lot going for it. It offers an essential service, is located in North Dakota where winters are normally cold and long, and is the only business of its type in a 50-mile radius. The result is an awesome 95% market share in its area. The business also generates very strong margins and is asking for just 2x EBITDA. There is a team of 7 in place, but I’d want to understand staff retention as skilled technicians can be hard to replace. Similarly, I would also need to understand the owner’s current role and if additional replacements would need to be hired. If that all checks out, then this is an appealing option for anyone interested in an essential service business made even better by the owner's willingness to offer financing.

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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 next Tuesday!

-Helen Guo
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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 investing in. Reply “LP” and I’ll share more.

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3. Want me to help you find a business to buy in the next 90 days and handhold you through closing your first deal? Apply to Work with Me

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

5. Want to promote your business to my community of 45,000+ entrepreneurs and investors? Advertise in SMB Deal Hunter

⏪ Catch Up On Recent SMB Deal Hunter Issues

• February 20th, 2024

• February 15th, 2024

• February 13th, 2024

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.