New Deals: A residential and commercial cleaning business, pest control franchisor, and 3 other finds

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NEW DEALS

1/ Residential and Commercial Cleaning Business

📍 Location: Austin, Texas
💰 Asking Price: N/A
💼 EBITDA: $443,012
📊 Revenue: $1,200,422
📅 Established: 1994

💭 My 2 Cents: In general, I like how well-run cleaning businesses can be highly scalable, as you can readily expand through marketing and their low fixed costs mean that your margins increase as you grow. This particular cleaning company has been in business for 30 years, telling me they’ve built an excellent reputation, and have a sizable staff of 26, pointing to well-established policies and procedures in place that make things much easier for a new owner. Add to this that they have a solid mix of residential and commercial clients that gives them 2 different revenue streams, a number of long-standing clients providing a steady source of recurring income, and an Austin location with tons of residents with disposable income and a robust rental sector, and things look pretty dang good. However, I’d want to get a better feel for their numbers, including the breakdown in revenues between residential and commercial clients, what the terms and duration of their standard contract look like, and what percent of their business is recurring revenue. Competition is also a concern because there are no real barriers to entry, so I’d need to know who their main competitors are, how they differentiate themselves from them, what current marketing they have in place, and how they acquire new business and retain their clients. Overall, this looks like a solid business with growth potential, with the added bonus that the seller is open to providing financing.

2/ Pest Control Franchisor

📍 Location: Houston, Texas
💰 Asking Price: $3,200,000
💼 EBITDA: $805,000
📊 Revenue: $2,175,000
📅 Established: 2012

💭 My 2 Cents: This is a really interesting pest control company with a model that is different from what you normally see with franchisors. It generates revenue through its agreements with franchisees like a standard franchisor but also brings in revenues from 3 locations that it directly owns and operates. You can see the importance of these corporate-owned locations, as they currently get about $645K of their SDE from them and $160K from their 25+ franchisees. I love how this business is in a super space, as pest control is an essential service (as anyone who has dealt with pests knows), and that they have multiple ways they can grow. The beauty of being a franchisor is that you can scale indefinitely on the number of franchisees with limited capital investment. Given its importance, I’d want to know the nature and terms of their standard franchise contract, the ongoing support provided to franchisees, and how new franchisees are identified and brought on board. I’d also want to dig into what a standard customer contract is like both at their corporate locations and franchisees, how business varies among their franchisees, and who their main competitors are. I’d finally want to know how their staff handles the responsibilities of managing both their corporate locations and franchisees, what the licensing requirements for the business are, and what would be involved in replacing the owner. There are challenges that come with being a franchisor, such as ensuring that franchisees provide the high level of services needed to protect the corporate brand, but the opportunity to be both a service provider and franchisor doesn’t come along often.

3/ Multi-Venue Wedding and Event Company

📍 Location: Florida
💰 Asking Price: $4,500,000
💼 EBITDA: $909,675
📊 Revenue: $3,054,108
📅 Established: 2004

💭 My 2 Cents: This company organizes and conducts weddings and other events at multiple venues on a 20-acre property filled with gardens, groves, and water features. I really like that they have been at this location for 20 years, employ 30 staff members and a manager who handles all the day-to-day operations, have built a wonderful reputation (which really matters when it comes to weddings), and bring in steady revenues with great margins. I also like how weddings and related events often get booked far in advance, so there should be a lot of contracted future business, but I’d want to check if there are any issues with seasonality or changing customer trends. Importantly, this company doesn’t actually own the property, so I’d look to ask if the seller is related in some way to the owner of the land and venues, what lease terms are in effect, if this business has exclusive access to the facilities, and what revenue sharing agreements might be in place between this business and the location. There is also an option to buy the property if wanted, so I’d want to get the details on the real estate available for purchase and its projected value. I’d also want to know what sets this company apart from their competitors, what their current marketing and sales strategies are, and if they are generally fully booked or could handle more business. With the current owner not involved with the day-to-day, this looks like a nice turnkey opportunity.

4/ Online Admissions Consultant

📍 Location: N/A
💰 Asking Price: N/A
💼 EBITDA: $1,200,000
📊 Revenue: $7,500,000
📅 Established: N/A

💭 My 2 Cents: This EdTech business provides a full suite of services in support of applications to highly competitive degree programs in business, law, medicine, and dentistry. I like their online platform and proprietary software, use of subcontracted tutors and admission experts, and comprehensive services that allow them to capture revenues from all sides of the admission process. These revenues should only grow, as the education market is expected to expand at a 12.1% CAGR through 2030. I like how scalable their model is, as their online platform and use of subcontractors make it so that the only thing limiting growth is how many clients they can attract. And with their strong 4.8 average Trustpilot rating based on 8,000+ reviews, they shouldn’t have trouble landing more business. I definitely want to look into the drop in their 2023 financials, even though it was due to one-time expenditures in support of growth. While the 2024 projections look really good, I’d need to know what these are based on. I’d also be curious as to why their margins were so high in 2021. There is intense competition in this space, so I’d want to understand their marketing and sales strategies and on what basis they vie with their competitors for new clients. I’d also want to know their standard client acquisition cost and lifetime value, client churn and repeat business rates, the relative value of their different revenue streams, how they find, retain, and compensate their tutors, and if there are any challenges in recruiting tutors for specialized fields like medicine. If their bounceback in 2024 revenue checks out as expected, this deal is great for someone seeking to get into or expand in the EdTech space.

5/ Pallet Manufacturer, Repair, and Recycling Business

📍 Location: Cumberland County, New Jersey
💰 Asking Price: $3,900,000
💼 EBITDA: $1,300,000
📊 Revenue: $8,400,000
📅 Established: 2008

💭 My 2 Cents: This company specializes in building, repairing, and removing wooden pallets, providing an essential service for various retail, commercial, and distribution industries. I like their strong repeat business, excellent reputation which results in a lot of their new work through referrals, ability to expand through the increased use of automation, and emphasis on repairing and recycling pallets, which fits nicely with the growing awareness of environmental concerns. While this is a straightforward business, I still have a number of questions. I’d want to look into their standard customer contract, how much recurring revenue they routinely bring in, if there are any customer concentration issues, who their main competitors are, and if they compete on price or other considerations in winning new business. I’d also want to check if they regularly face any supply-side issues, what the qualifications and experience of their staff are, and if there are any factors that might limit their growth. The business operates from a 14-acre property that is available for long-term lease or sale, so I’d need to get the details on what is involved with either option. With $300K in equipment and inventory included (I’d need to check on its condition) and the seller willing to stay on to help run the business, this looks like a great boring business that the owner still has confidence in.