This Week In SMB PE | July 15th, 2024

Welcome to This Week In SMB PE. Our weekly recap of deals in the SMB space.

In this newsletter we highlight interesting opportunities from this past week in SMB M&A, Micro Private Equity, and Search Funds.

We target cash-flowing companies under $10MM in acquisition value.

Business For Sale? Free Valuation For Cash-flowing Businesses under $10M

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• 101 Learning & Education: Learn more about SMB Acquisitions

• Business Sellers, Business Owners, Founders: Valuation For Sellers

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• M&A Advisors: Brokers, Lending, Legal, Tax

Prior Posts:

1. 3/30 | SMB PE | Deals Of The Week

2. 3/22 | $5.5M - Holiday Inn Express in Scottsdale, AZ

3. 3/15 | $4M - 18 Hole Public Golf Course + Restaurant Grille

This Week In SMB - Video Deal Reviews (Links Below)

1. Commercial Flooring - $563K Cashflow

2. Residential HVAC - $738K Cashflow

3. Plumbing Company - $625K Cashflow

4. Ski Resort Transportation - $773K Cashflow

5. Aerospace & Defense Manufacturer - $845K Cashflow

6. Pool Service & Maintenance - $301K Cashflow

7. Accounting Firm - $505K Cashflow

Table of Contents - Video Deal Reviews

• 1. Commercial Flooring - Arizona

• 2. Residential HVAC - Arkansas

• 3. Plumbing Company - California

• 4. Ski Resort Transportation - Colorado

• 5. Aerospace & Defense Manufacturer - Connecticut

• 6. Pool Service & Maintenance - Delaware

• 7. Accounting Firm - Georgia

Disclaimer: This is not investment advice. Please do your own research (DYOR) and consult your professional tax advisor and legal advisor before making a decision. Any examples used in this material are generic, hypothetical and for illustration purposes. We list below at Seller’s Ask Price to be consistent with online listings.

1. Commercial Flooring - Arizona

Deal Summary:

• $1.05M Ask Price

• $2.2M Revenue

• 1.9x Multiple

• $563K Annual Cash Flow

What does the Company do?

1. Installation of various flooring hardwood, carpet, tile, etc.

2. Diverse clients big-box stores, corporate, residential.

3. Majority of contracts (80%) are commercial use cases.

4. Repair and maintenance services for damaged floors.

5. Custom design solutions clients to choose best option.

Highlights:

1. Established brand and reputation with loyal customers.

2. Located prime location w/ access to commercial clients.

3. Owner retiring after 19 years in business.

Risks/ Concerns:

1. Real estate of $1.25M: What is lease rate and term?

2. Small skilled team of 4 people: Willing to stay on?

3. Market competition: Local and national competitors?

2. Residential HVAC - Arkansas

Deal Summary:

• $2.3M Ask Price

• $1.8M Revenue

• 3.1x Multiple

• $738K Annual Cash Flow

What does the Company do?

1. Maintenance: Regular inspections of HVAC systems.

2. Mostly residential(90%) with some commercial(10%).

3. Repair services for malfunctioning HVAC units.

4. Upgrade Services: Periodic system updates.

5. Energy consulting services to improve energy efficiency.

Risks/ Concerns:

1. Competition: HVAC competition is intense.

2. Equipment & Technology: Anything outdated?

3. Employee Retention: 6 person team - anyone key leaving?

Highlights:

1. 20 year old HVAC business with a retiring owner.

2. 150+ recurring maintenance contracts w/ customers.

3. Less than 5% of revenue comes from new construction.

3. Plumbing Company - California

Deal Summary:

• $2.1M Ask Price

• $3.2M Revenue

• 3.4x Multiple

• $625K Annual Cash Flow

What does the Company do?

1. Residential plumbing services and custom new homes.

2. Leak detection, drain cleaning, sing repairs, water heater.

3. PEX re-piping to replace old, corroded pipes.

4. Installation of energy-efficient Tankless Water Heaters.

5. Team of 18, plumbers, office manager, project managers.

Risks/ Concerns:

1. Licenses: Owner has a C36 license - buyer will need C36.

2. How has AB5 ruling & CA regulations impacted hiring?

3. Real Estate: What are current lease terms and %?

Highlights:

1. Owner retiring after running the business for 25+ years.

2. No marketing or advertising campaigns to-date.

3. Company has strong reputation and recurring customers.

4. Ski Resort Transportation - Colorado

Deal Summary:

• $2.3M Ask Price

• 3.0x Multiple

• $773K Annual Cash Flow

What does the Company do?

1. Airport shuttle services to Steamboat Springs, CO.

2. Covers ski season, weddings, corporate events, tours.

3. Includes vehicles, software, equipment, professional staff.

4. Fleet can accommodate both private rides and shared rides.

5. Covers Yampa Valley Airport, Denver (DIA) and Eagle/Vail.

Risks/ Concerns:

1. Competition from UBER and other airport shuttles?

2. Marketing: What are customer acquisition costs? Repeats?

3. Vehicles: Condition underlying vehicles? Any major Capex needed?

Highlights:

1. Professional staff well trained in local driving conditions.

2. Highly profitable business that is ready-to-operate.

3. Founded in 1997, business has been around 27 years.

5. Aerospace & Defense Manufacturer - Connecticut

Deal Summary:

• $2.9M Ask Price

• $1.5M Revenue

• 3.5x Multiple

• $845K Annual Cash Flow

What does the Company do?

1. Airport shuttle services to Steamboat Springs, CO.

2. Covers ski season, weddings, corporate events, tours.

3. Includes vehicles, software, equipment, professional staff.

4. Fleet can accommodate both private rides and shared rides.

5. Covers Yampa Valley Airport, Denver (DIA) and Eagle/Vail.

Risks/ Concerns:

1. Why are Owners selling? Limited information provided.

2. Client concentration - any client large portion revenue?

3. Capacity constraints - limitations in terms of capacity.

Highlights:

1. High-barriers to entry, clients cannot do in-house.

2. Over 150+ loyal clients ensuring steady revenue streams.

3. Owners willing to stay on and help in knowledge transfer.

6. Pool Service & Maintenance - Delaware

Deal Summary:

• $757K Ask Price

• $1.3M Revenue

• 2.5x Multiple

• $301K Annual Cash Flow

What does the Company do?

1. Full-service pool maintenance routes.

2. Cleaning services vacuuming, skimming, brushing, debris.

3. Checking and adjusting water (pH levels + chlorine levels).

4. Seasonal Services: Opening and closing pools.

5. New pool design, renovations and construction services.

Risks/ Concerns:

1. Seasonality: Pool service industry highly seasonal.

2. Labor Shortages: Finding and retaining skills technicians.

3. Subject to strict health and safety regulations.

Highlights:

1. Consistent cash flow and regular maintenance contracts.

2. Loyal customer base with strong historical retention.

3. Fragmented market with ability for M&A add-ons over time.

7. Accounting Firm - Georgia

Deal Summary:

• $999K Ask Price

• $915K Revenue

• 2.0x Multiple

• $505K Annual Cash Flow

What does the Company do?

1. Full-service Accounting Firm established in 1980.

2. Bookkeeping: Maintaining accurate and updated financials.

3. Prepare financial statements (B/S, I/S, C/F).

4. Tax preparation and payroll processing services.

5. Customers are mix of individuals (65%) and Business (35%).

Risks/ Concerns:

1. Average Order Value (AOV): What is AOV for customers?

2. Labor: Team of 6 - anyone leaving post transaction?

3. Licensing: State Accountancy Business and CPA required.

Highlights:

1. Recurring revenue and diverse customer base.

2. Professional service companies have high cash margins.

3. Owner semi-retiring after 40+ years in the industry.

SMB PE Resources

We receive many inquiries about how to find SMBs for purchase. Below are digital products to help speed up your search process.

All-Inclusive Paid Community - $39/month:

• Skool Monthly Subscription: Join our SMB PE community to access all materials launched to date. (Link)

One-Time Purchases À La Carte - No Subscription Required:

• SMB Marketplaces Database ($49): List of 60+ marketplaces to find and search SMBs. (Link)

• Due Diligence Volume I Database ($49): List of 111 questions to consider during due diligence. (Link)

• Business Brokers Database ($149): List of 1,000+ business brokers to contact to increase deal flow. (Link)

Please reach out with any questions or recommendations for the newsletter. We will do our best to incorporate.

SMB PE Disclaimer

For informational and illustrative purposes only. This communication does not constitute an offer to sell, a solicitation of an offer to buy or a recommendation of any security or any other product or service by SMB PE LLC. Prior to making any further decisions, investors should seek individual advice from their personal financial, tax, legal or other profession advisors to take into account the risks associated with their own specific situation.

While SMB PE LLC uses reasonable efforts to provide accurate and timely information, SMB PE LLC makes no representations or warranties as to the accuracy, reliability or completeness of any information included in this document. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purposes described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. Certain information contained in these documents may be superseded as new guidance or interpretations are issued and any contents or financial projections included are subject to change without notice. All materials are meant to be reviewed, including any footnotes, disclaimers, restrictions or disclosure, and any copyright proprietary notices. Access to information about investments is limited to investors who either qualify as accredited investors within the meaning of the Securities Act of 1933, as amended, or those investors who generally are sophisticated in financial matters, such that they are capable of evaluating the merits and risks of prospective investments.

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