New Deals: A commercial cleaning company, flooring company, and 3 other finds

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NEW DEALS

1/ Commercial Cleaning Company

📍 Location: New York County, NY
💰 Asking Price: $4,300,000
💼 EBITDA: $1,000,000
📊 Revenue: $5,100,000
📅 Established: 1988

💭 My 2 Cents: This commercial cleaning company has pretty much everything you want in a stable, boring business. The singular focus on commercial cleaning should mean a lot of recurring contracts, while their customer retention rate should be boosted by their longevity (35 years in business) and the sticky nature of quality cleaning services. It’s also nice that they offer specialty services in order to capture more revenue from customers who already trust them. My main question is whether their business is mainly on an as-needed basis or if it’s on a set schedule. In an ideal world, you have a predictable booked workflow. Otherwise, I’d also want to confirm their customer retention rate and get a feel for their standard contracts, average customer lifetime value, and any possible customer concentration. Finally, because this is a labor-intensive business, I’d want to know the size and various functions of the staff, management, and current owner.

2/ Flooring Company

📍 Location: Volusia County, Florida
💰 Asking Price: $1,800,000
💼 EBITDA: $502,548
📊 Revenue: $2,485,096
📅 Established: 1953

💭 My 2 Cents: This flooring company has been in business for an amazing 75 years, which is awesome because it should provide a great reputational base to build off of and an extensive list of developers and contractors they’ve worked with in the past that you can sell to again. They are also not resting on their laurels as they recently built out a brand new showroom and have a strong online presence. I do want to know if they’re solely focused on sales or if they also do any installation, what the revenue breakdown between commercial and residential customers looks like, whether they win business on relationship, price, or product, how much repeat business they have, and what their performance historically has been like, especially during economic downturns. Ultimately, though, given their location in the steadily growing Florida, I expect their growth to continue as well.

3/ Collection Services Firm

📍 Location: Nebraska
💰 Asking Price: $4,500,000
💼 EBITDA: $1,250,000
📊 Revenue: $3,000,000
📅 Established: N/A

💭 My 2 Cents: Debt collection may be about as popular as going to the dentist, but it’s an essential part of our economy. This third-party collections agency specializes in debt collection for the financial services, higher education, and healthcare industries. They have a strong market position, with some 500 active clients and a staggering 95% of their revenue coming from repeat customers. I don’t foresee it being an issue, but with just over half of their revenue provided by customers in the healthcare industry, I’d want to check on any possible client concentration. I’d also want to dig in on their collection rate and what fees they charge. This is a specialized business serving very specific industries, so I’d need to get a handle on their licensing requirements and whether they could be affected by potential higher education or healthcare legislation. Finally, I’d want to understand the size and functioning of their staff and how much of their work is automated.  Ultimately, with debt collection being so necessary, there’s little risk of their customers leaving. If you can expand their licensing into additional states, there’s a clear pathway to growth here.

4/ Wholesale Bakery

📍 Location: California
💰 Asking Price: $1,800,000
💼 EBITDA: $534,513
📊 Revenue: $2,700,000
📅 Established: 1993

💭 My 2 Cents: This bakery has carved out a really nice niche, as they make a single product that they sell wholesale to several large regional supermarket chains. Given this focus, they should have developed an incredible expertise for what they do, helping make it hard for a competitor to come along and challenge them. Still, I’d want to know if there is anything that keeps either competitors or customers from copying their distinctive bakery product. I’m guessing they’ve stuck to just this one product because it’s been so successful but I’d also want to confirm this. To better understand their operation, I’d want to know how many customer accounts they currently have, what their customer retention and repeat business numbers look like, and if there are any customer concentration issues. Do they deal directly with their customers or go through a distributor and how stable historically have their cash flows been? In thinking about growth, I’d want to look into the potential demand for their product and if there is the possibility of expanding into other markets. They have 17 full-time employees all operating during one shift, so one way to expand would be to add an additional shift in their current facility. There is also the option of adding other products, and this looks like an intriguing opportunity for someone wanting to get into the baking business.

5/ Metal Finishing Company

📍 Location: Illinois
💰 Asking Price: N/A
💼 EBITDA: $533,948
📊 Revenue: $1,738,472
📅 Established: 1947

💭 My 2 Cents: This company provides finishing services to aluminum products used in industries from agriculture to electronics. I really like how they furnish a crucial manufacturing process for these industries, as this helps ensure that they’ll likely continue the 75 years of success they’ve had. I also like that they have developed expertise across a huge array of products, as this insulates them from any particular industry experiencing a downturn while also allowing for growth opportunities in any number of directions. Given their manufacturing focus, I’d want to know what key equipment they use, its current utilization rate, condition, and any need for repair or replacement. I’d also want to understand the revenue split between the different industries they serve, if there are any client concentration issues, if they (hopefully) have any recurring contracts in place, what their competition looks like, and if they have any specific capabilities that are hard to replicate. Given their long track record, I would think they get a lot of word of mouth and referral business, but I’d want to know what their marketing plan has been and what it would take to expand into other service areas. Otherwise, with one of the two owners open to having a new partner join them, there are potentially some interesting structuring opportunities here that can really smooth out the transition process.