❇️ New Deals - 16 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: Bookkeeper for self-storage companies with sticky contracts
#2: Absentee-owned towing business with $7M in revenue
#3: Non-emergency transportation company with a fleet of 73 vehicles

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

Today’s issue is sponsored by Rad AI, an AI startup that’s disrupting the $633B Content and Data Industry.

🎙️ New Interview

Before diving in, I wanted to share this interview with acquisition entrepreneur Ujwal Velagapudi, who left his corporate career working in supply chain management to buy 10 small businesses. In the interview, we discuss:

• The unexpected place Ujwal found his first few deals (hint, it was not Bizbuysell)

• How Ujwal bought and ran his first business, a sports bar, while continuing to work his 9-5

• The creative ways Ujwal financed his earlier deals

• How Ujwal hires operators to run the day-to-day of the businesses

• Why Ujwal is doubling down on his amusement vending business portfolio

And more!

Watch the full 57 minute interview with Ujwal 👉

1/ Management Consulting Firm

📍 Location: Southeast, US
💰 Asking Price: N/A
💼 EBITDA: $2,518,541
📊 Revenue: $7,856,729
📅 Established: N/A

💭 My 2 Cents: This is one of the larger consulting companies I’ve seen for sale recently, with a team of over 60. Specializing in advisory, technology, and analytics services, they serve government agencies (which I love), large public, and private companies, winning multiple awards in the process. Their revenue has seen really nice growth over the last 4 years, and I especially like that 97% of revenue is now from repeat clients and that they have an impressive $7M work backlog. While the repeat business is great, consulting companies can vary widely in the type of work they do as well as the structure of their client engagements. Given this, I’d want to understand what a typical contract and project scope look like and how this impacts cash flow. I’d also want to check if there are any customer concentration issues. I’m really taken with their high Adjusted EBITDA margins of nearly 40%, as this means as you continue to scale the business you should be able to see strong growth in the bottom line, but I’d need to dig into why Adjusted EBITDA hasn’t grown as quickly as revenue and gross profit. As consulting businesses can also vary in how they are set up, I’d finally be curious as to this company’s organizational structure, including what the employee split is between management and the other functions on staff. The benefit to larger transactions like this is that you are generally buying a more robust business. There will likely be levels of management and clear systems in place to aid in a transition. Also of possible help is that the company is owned by two shareholders, one of whom is active in operations and is willing to remain with the company post-sale. Ultimately, if you’re looking to get into consulting, this is an unusual opportunity to do so with a proven, profitable business.

2/ Technology Integration Services Company

📍 Location: Hamilton County, Ohio
💰 Asking Price: $2,800,000
💼 EBITDA: $670,000
📊 Revenue: $6,840,000
📅 Established: 2012

💭 My 2 Cents: This is a technology integration firm that offers a full suite of services, from design and installation to systems operation. In business since 2012, they have grown into a good-sized company with 32 employees that in 2023 generated $6.84M of revenue and $670K SDE. Everyone knows I love managed IT service providers, so I’m curious as to how much of their work is on that side of the space, as this is a great source of recurring revenue. That doesn’t mean providing new infrastructure for companies is bad, the revenue may just not be as predictable. The other main thing I’m curious about is the limiting factor on growth. It could be finding new clients, tough competition, lack of marketing, or a million other things. Whatever it is, you’re going to want to find out, because some are easier to fix than others. The way I’d suggest going about it is finding out more about their end markets and who their key clients are, as this will inform you on what competition is like and who they need to win business over. From there, you can figure out the right plan of attack.

3/ Surveillance And Access Controls Company

📍 Location: Buffalo, New York
💰 Asking Price: N/A
💼 EBITDA: $605,000
📊 Revenue: $4,790,000
📅 Established: 2004

💭 My 2 Cents: This surveillance and access control company is an essential business that should be recession-resilient, as security services companies will always be necessary regardless of how the economy is doing. This particular company provides the design, implementation, and management of surveillance and access control systems for a diverse clientele in the education, government, and private business sectors. I like that 35% of their revenue comes from recurring services like management and software solutions, as well as that much of the other 65% comes from long-standing, repeat customers, with this combination translating into really nice consistent revenue streams. If you were able to convert more customers into ongoing subscribers or managed systems, you’d really have a recurring revenue giant here. I also like that the owners are willing to stay on for a 12-month period post-sale to ensure that a new owner has ample time to take over running the business. You’re going to want to make sure there are no client concentration issues, that their new projects are actually from repeat business, how they acquire new customers, how big their team is, and if there are any skilled managers who are staying on post-sale, but otherwise, this looks like a solid opportunity to get into the security business.

4/ Inbound Tourism Business

📍 Location: Cliff Park, New Jersey
💰 Asking Price: $1,600,000
💼 EBITDA: $605,756
📊 Revenue: $1,573,904
📅 Established: 1978

💭 My 2 Cents: This tourism company based in New Jersey has carved out a nice niche providing convenient airport transfers and customized guided tours to such destinations as NYC, DC, and Boston to primarily Spanish-speaking clients (a rapidly growing sector). In business for an amazing 45 years, they now have 13 full-time employees, a fleet of 5 Ford transit vans, and 1 Lincoln Navigator. It’s not easy to survive that long, so I really want to know what their current marketing and website look like and where most business is driven from. If they have a decent online presence, they could have decades of reviews which could be a real asset in differentiating the business in the crowded tourism space. Right now it looks like they currently get their leads through travel agencies and tourist wholesalers, so there’s a lot of room to grow if you can revamp the website and business plan. Otherwise, I’d definitely want to know the condition of the vehicles, if there are any upcoming large capital investments that might be required post-transaction, the owner’s role and what might go into replacing them, the consistency of past years results, and how often they suffer from down years.

5/ Flooring Contractor

📍 Location: South Florida
💰 Asking Price: $2,799,918
💼 EBITDA: $823,355
📊 Revenue: $4,522,923
📅 Established: 1988

💭 My 2 Cents: This flooring contractor has going for it not only that it is a classic boring business but also that it is in a great location, as a ton of people are moving to South Florida, meaning a whole bunch of demand for new floors. In business for 35 years, the company has grown to where it now has a team of 14 supervising over 100 subcontractors at any given time. Most of their work is in new construction and tenant improvement, which raises the question of what happens if (or when) this slows down. Although their large backlog of contracted work should provide them some cushion, I’d still want a plan for an economic downturn. I’d also like to see more detailed historical financials and if, as is likely, they suffered a downturn during Covid. If so, how did they rebound, and is their return to current business a normalization to historical levels or a short-term recapture of delayed projects from the pandemic? It also seems like current earnings are below long-term historical averages, so I’d want to better understand that trend and what it will take to return to those levels. If you can get confident in the stability and continued longevity of this company, then this is a great boring business with a long history and a long-time management team in place that will be staying with the business post-sale, easing transition concerns.

🐦 The Best of SMB Twitter (X)

How to know if you can raise prices (link)

The doom scenario when a business takes a steep decline post-close, and how to avoid it (link)

Why the Silver Tsunami hasn’t happened in SMB (link)

Guide to drop down financing (link)

8 lame but lucrative businesses (link)

5 franchises you can start with less than $50,000 (link)

Primer on the Net Working Capital Peg (link)

A couple of SBA lender nuances (link)

See you Thursday!

-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.

2. 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.

3. Raising money for your deal? I’ll connect you with investors from the SMB Deal Hunter Community.

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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.

⏪ Catch Up On Recent SMB Deal Hunter Issues

• April 11th, 2024

• April 9th, 2024

• April 4th, 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.