❇️ New Deals - 30 April 2024

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Hello SMB Deal Hunters!

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

🔥 Community Top Picks from the Last Issue:

#1: Financial services industry expense management SaaS with 78% EBITDA margins
#2: Disaster restoration company that’s been in business for over 15 years
#3: 8 Orange Theory units with the right to develop 5 additional locations

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/ Wholesale And Retail Bakery

📍 Location: Miami-Dade County, Florida
💰 Asking Price: $2,000,000
💼 EBITDA: $971,054
📊 Revenue: $2,993,653
📅 Established: 2009

💭 My 2 Cents: This high end pastry bakery in Miami supplies upscale-casual pastries to highly selective retail and wholesale customers like luxury hotels and resorts and VIP event promoters. I really like the wholesale business as they’ve been operating in the community for a long time and seem to have established strong relationships with high-quality customers. Having a solid wholesale base is a great backstop to the risk of buying a business like this with a retail side. The repeat revenue can make the difference in keeping the lights on while you work to grow your retail customer traffic and sales. Given its value, I’d need to know everything about how the wholesale contracts work. Are they mostly for one-off events or (preferably) pre-scheduled, recurring supply agreements with hotels and restaurants? I’d also want to understand the revenue split between wholesale and retail sales. While it’s a real positive that there is a pastry chef who will be staying on, I’d also need to know if there are any staffing challenges, what the role of the current owner is, and where the baking and distribution are done. I believe there is room to grow here, and it being SBA pre-qualified shows that they have some good financial history, but you’d need to dig into any possible bottlenecks posed by sales, capacity, or staffing to find out where to apply pressure.

2/ Multiple Physical Therapy Locations

📍 Location: N/A
💰 Asking Price: $5,250,000
💼 EBITDA: $829,706
📊 Revenue: $4,037,273
📅 Established: 2005

💭 My 2 Cents: This physical therapy practice, with over 40 employees in 4 locations, focuses primarily on personal injury treatments while offering a full suite of physical therapy services. I like that they have seen strong growth in recent years, which let them recently open their 4th location, and that each of their locations has fully automated its billing and patient management. Some PT clinics are in dire need of system upgrades, so it's great to find one that has already modernized. If you are looking for more of a hands-off opportunity, you’ll also like that all the locations are staffed and managed without the need for daily input from the current owner. I also like that there are over $750K of leasehold improvements in place and almost $500K of FF&E included in the price. PT clinics can cost a lot of money to build out and equip, so it’s a big positive to have this baked in already. While all this is good, I also have some questions. To start, I’d want to know the historical performance by location to make sure you aren’t overpaying for any underperforming assets because they’re bundled into a portfolio. If you're not interested in the real estate, I’d recommend confirming what cash flow looks like and whether they have market-rate rents built into their results. I’d also need to check on the value of their equipment, including what condition it is in, if any upgrades are needed, and if there are any upcoming big capital expenditures. I’d finally want to get a good feel for their payer sources, rates, timing on receivables, and insurance requirements. If everything checks out, then this is a good opportunity to pick up an SBA pre-qualified business that you don’t need a license to run.

3/ Pet Food And Supply Store

📍 Location: District Of Columbia
💰 Asking Price: $1,800,000
💼 EBITDA: $573,093
📊 Revenue: $3,311,551
📅 Established: 2005

💭 My 2 Cents: People these days treat their pets like kids and are willing to spend the money for the highest quality care and attention. That’s why venture capital and private equity are starting to pay attention, and it’s why I like this holistic pet health supply company. 40% of their sales are from raw food diets, which they sell more of than anybody in the Northeast. While this is very impressive, I’d want to understand what other business lines they have outside the raw food sales. I’d also want to dig into whether their sales are mainly online, in person, or through distributors and other retailers. Similarly, I’d want to learn if their sales are primarily single purchases or if they offer subscriptions. While they receive many referrals from local veterinarians, I’d also need to know what advertising they currently do. I’d finally be curious as to whether they make their own product lines or buy from somewhere else and how this affects their margins. With their strong reputation in the Northeast, I think there’s a lot of potential growth opportunity in building out a presence in more states and expanding online shipping options. Depending on how strong their physical retail location is, you could also look into offering extra services like grooming and training.

4/ Commercial HVAC Business

📍 Location: Pinellas County, Florida
💰 Asking Price: $2,250,000
💼 EBITDA: $414,335
📊 Revenue: $4,386,151
📅 Established: 1996

💭 My 2 Cents: I love HVAC businesses, and I especially love them in Florida, with its consistent population inflow and related growth bringing a steady flow of new construction. This checks out for this business, as aside from the COVID-affected years, they seem to have had relatively stable earnings and cash flow, with more growth in recent years. I like that there’s a long-tenured management team in place that intends to stay with the business post-sale, including a key employee who holds a necessary license. It’s also nice that there is a long-term lease available at the current location with the potential for a buyer to purchase the real estate if interested. On the sales front, I want to know what % of sales are from maintenance vs new installations, how they win new projects, how the bid process usually works, and if they are competing on service or price versus relationships. Looking ahead, I’d want to know what their current backlog looks like and how far into the future they routinely have visibility on likely work. Overall, though, it’s hard to go wrong on HVAC, especially one that is SBA pre-qualification and listed at a very reasonable multiple.

5/ 4 Location Title And Escrow Practice

📍 Location: Arapahoe County, Colorado
💰 Asking Price: $3,950,000
💼 EBITDA: $761,879
📊 Revenue: $2,122,649
📅 Established: 2000

💭 My 2 Cents: This company was born out of the merger of two competing businesses and, as a result, they now control a 98% market share in their core geographic area (a huge advantage). Add to this that they provide the title insurance and escrow work required on virtually every real estate transaction, and you have an absolute cash cow on your hands. I assume they don’t need to do much advertising to be the first call for people needing this service. As the incumbent, their base business should be relatively protected, even though there aren’t recurring contracts in this space. Not surprisingly, 85% of their revenue stems from title insurance policy fees while the remaining 15% comes from ancillary services. And with 3 experienced managers who are planning to remain with the business post-transaction, a staff of 13, and a huge market share, they seem to have proven that they have the consistent business one would expect in this area. My main concern is what happens if home sales slow down. How flexible are their fixed costs and staffing and, if there is a downturn, how quickly could they react? By extension, how well did they do during COVID and how consistent are their revenue and cash flow now? I’d also want to look into licensing requirements and if the current owner is the sole license holder, as this could impact a transition. Looking ahead, I’d want to know the size of their local market and what would be required to expand into other markets in the state. Ultimately, though, with their market position and established track record, this is a deal that’s hard to pass up.

🐦 The Best of SMB Twitter (X)

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What you need to know about the new non-compete rules (link)

Everything you need to know about working capital (link)

Top 50 boring businesses (link)

The best-selling vending machine items (link)

10 steps to start searching (link)

Quick and dirty guide for buying an SMB (link)

Setting up scalable operations (link)

See you tomorrow with a new podcast episode!

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

1. 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.

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4. Join my mastermind community of 300+ elite business buyers to get support on your deals and meet fellow entrepreneurs on the same journey.

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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.