❇️ New Deals - 11 Jan 2024

A med spa, towing company, and 3 other interesting finds.

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Hello SMB Deal Hunters!

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

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

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1/ Medical Spa with Membership Model

📍 Location: Fairfax County, Virginia
💰 Asking Price: $2,599,999
💼 EBITDA: $600,000
📊 Revenue: $2,000,000
📅 Established: 2010

💭 My 2 Cents: As I’ve said before, botox is the new bitcoin. People these days really care about their appearance, so med spas like this one that offers services from botox to hair removal treatments are absolute cash cows, especially because these treatments require regular maintenance. It’s why the med spa market is expected to grow at a CAGR of 13.75% from 2022 to 2028 and why this particular business has more than 48,000 customers. Besides the sizable customer list, this med spa sets itself apart with its membership (aka subscription) business model. This provides stable and predictable recurring revenue, which separates it from other medspas out there. I’d want to see what customer churn and retention look like, but otherwise, this is a great business with tons of room to expand by either offering new services or even opening new locations.

2/ Luxury Shoe Brand

📍 Location: Tampa, Florida (Relocatable)
💰 Asking Price: $2,975,000
💼 EBITDA: $849,963
📊 Revenue: $7,607,351
📅 Established: 2014

💭 My 2 Cents: This is a luxury shoe brand that sells both through wholesalers and DTC through their website. The wholesale side of the business is really interesting to me. They have 200+ wholesale accounts (including legit retailers like Nordstrom and Bloomingdale’s) and have a wholesale AOV of $10k - $25k, which is great. However, the DTC wing is nothing to sneeze at either with a $114 AOV and 27% repurchase rate. What I like about this setup is that the retail presence naturally creates a flywheel effect for the DTC business because people who see products in stores often end up buying online, which ultimately lowers DTC marketing costs (the dream). Besides that, I also really like that the owner wants to roll equity and stay on and keep running the company in the hope of a second exit down the line. This perfectly aligns incentives, both derisking the transition and making it so you don’t have to be involved on a day-to-day basis. It really looks like an ideal situation, but before forking over any cash, I’d want to better understand what CAC and LTV look like on the DTC side and how in-store sales, wholesaler retention, and order frequency look like on the wholesale side.

3/ Amusement Park Manufacturer

📍 Location: United States
💰 Asking Price: N/A
💼 EBITDA: $1,144,420
📊 Revenue: $9,893,140
📅 Established: 1971

💭 My 2 Cents: Because of increasing urbanization leading to demand for leisure activities and experiences within city limits, the amusement park market is projected to grow to a whopping $109.3B by 2032. This has led to private equity players getting into the space. You may have even seen that Permanent Equity bought Chance Rides last year. Well, this is a similar type of business. This company manufactures a certain type of popular ride product, and they are the ONLY one in the US that does so. The next closest competitor is all the way over in Europe. You’ll be hard-pressed to find a stronger moat than that. And like the previous deal, the owner is retiring but looking to roll equity and stay involved, which is a great sign of faith. I’d want to make sure they don’t have any client concentration issues, but overall, this looks like an absolute layup of a deal. And who knows, maybe you’ll grow it and be flipping this to a PE firm in a few years.

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4/ Towing Company

📍 Location: Morgan County, Alabama
💰 Asking Price: $1,900,000
💼 EBITDA: $500,000
📊 Revenue: $1,138,809
📅 Established: N/A

💭 My 2 Cents: Like the best boring businesses, towing companies are great because they have fantastic margins and are an essential service. What I like about this towing company is the municipal contracts it has. The government is the best customer you could have in towing because regardless of the economy, municipalities are responsible for parking enforcement and law enforcement. I’d want to dig into the details of those contracts (how long are they for, how often do they get renewed, and average contract size), the employee hiring process, and the health of the trucks they own, but overall, things look nicely set up for a smooth transition and immediate profitability.

5/ Freight Forwarding Service

📍 Location: Cook County, Illinois
💰 Asking Price: $4,100,000
💼 EBITDA: $1,390,000
📊 Revenue: $16,915,000
📅 Established: 2010

💭 My 2 Cents: It takes a village to get cargo to its destination. An important part of this village is freight forwarders, who are the people who manage the logistics of cargo from customs to the final destination. Basically, they make sure you get your stuff. This freight forwarder specializes in goods coming from Germany, which is the US’s 5th largest import partner. They specifically handle a lot of odd-lot and major equipment moves that often require special treatment, which has led to margins much higher than the industry standard. More generally, I like this business because it’s asset-light and requires specific licensing and certifications (which provides a barrier to entry). I’d want to know how many clients and the sales by client breakdown to understand if they have any client concentration issues, but at a very fair 2.95x EBITDA valuation, this business is definitely worth taking a look at.

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