❇️ New Deals - 30 Nov 2023

A state-run liquor store, a gym marketing agency, 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 Thursday!

Looks like you all loved the residential and commercial trash company I featured (who doesn’t love a good old boring business 💪).

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

Today’s issue is sponsored by RYSE, the AI powered smart-home tech that’s disrupting the entire smart shades industry. Today's the final chance to invest ahead of their retail launch into 100+ Best Buy stores.

1/ State-Run Liquor Store

📍 Location: Southern Montana
💰 Asking Price: $8,167,000
💼 EBITDA: $500,000 - $2,500,000
📊 Revenue: Over $5,000,000
📅 Established: 1995

💭 My 2 Cents: On the surface this seems like any other liquor store - a nice recession-resistant business. But it’s actually much more than that. It's the largest state-run liquor store in Montana, letting it operate as a quasi-monopoly due to state regulations requiring bars, restaurants, casinos, and other liquor stores to purchase exclusively from state-run stores. And it keeps getting better. Laws were just passed to allow a new owner to stay open and sell on all Sundays and Holidays, giving a new owner 65 more days a year of sales. It’d be pretty hard not to grow with that. But, somehow, that’s not all. the store also benefits from a killer cash conversion cycle, as state-run liquor stores enjoy net 60 terms, which allows this store to turn its product on average 6 times before the original invoice is due. I call that a cash cow.

2/ Full-Service Staffing Firm

📍 Location: North Carolina (Relocatable)
💰 Asking Price: N/A
💼 EBITDA: $1,119,427
📊 Revenue: $6,914,959
📅 Established: 1990

💭 My 2 Cents: Staffing firms are often great asset-light businesses, and this particular firm comes with a team of 20, including managers. I like that they included a realistic $230k replacement cost for ownership in their EBITDA calculation. This feels very honest to me compared to the usual $50k ownership replacement cost peddled by many other brokers and sellers. On that note, I want to know what exactly the owner does that’s worth $230k. I also want to know what industry niches the firm serves, and especially if they are cyclical (which means they could be exposed). You can see this by seeing how constant the revenue generated from individual clients is. Most of those clients are long-term clients (some over 10 years), but I’d want to see if there are any client concentration issues and what the contracts look like.

3/ Amazon Marketing Agency

📍 Location: Remote
💰 Asking Price: $2,100,000
💼 EBITDA: $550,513
📊 Revenue: $3,726,149
📅 Established: 2019

💭 My 2 Cents: This is a digital marketing agency with a focus on Amazon marketing. The reason I featured it is probably not what you are expecting. Drum roll please…I featured it for its lower-than-average margins, as this hints to me as an opportunity. Maybe they need to hire more offshore staff (now the industry standard), put into place better systems, or fix their sales funnel. Whatever it is, if you can figure it out, then you have the blueprint for growth. In any case, with clients spending an average of $2,500 monthly, there's a solid foundation in place. The agency also offers a diverse range of services beyond Amazon marketing like paid search and email marketing, which enables them to reach both startups and established companies. Add in that they white-label their services to other agencies, and they have pretty much all of their bases covered. What I really like is that the contracts are billed monthly in advance of services being provided, so they’re effectively getting prepaid for work and aren’t as susceptible to bad debt. If the team and client contention rate looks good, then this is a deal worth exploring.

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4/ Gym Marketing Agency

📍 Location: Houston, TX (Relocatable)
💰 Asking Price: $2,500,000
💼 EBITDA: $723,000
📊 Revenue: N/A
📅 Established: 2020

💭 My 2 Cents: This is another marketing agency, but I like it because it’s very focused on a specific niche: gyms. Gyms always need more clients, so they help over 110 gyms grow with Facebook and Instagram ads. The agency also has a unique client acquisition channel from being an approved vendor with the biggest industry association (700 paying members). Their pricing stands at $2,000 per month, which includes $1,000 of ad spend, and the average client LTV is $10,000, although it’s unclear if this is inclusive or exclusive of adspend. Regardless, there’s probably an opportunity to improve LTV through either better service or by upselling additional services to clients like email and SMS marketing. You could also grow in general by acquiring new gym clients through cold emails and cold calls, which they don’t currently do. There is a team in place, although I do want to know what the owner’s role is (an owner, by the way, who is willing to provide 20% owner financing).

5/ HVAC Business

📍 Location: Greenville, SC
💰 Asking Price: $2,200,000
💼 EBITDA: $500,000
📊 Revenue: $2,000,000
📅 Established: 2003

💭 My 2 Cents: You guys already know I like HVAC because it’s an essential service. There’s a reason PE is rolling it up left and right. This one is 20 years old, almost exclusively focuses on residential service and replacement, and up for sale due to the owner's retirement. It has an existing team of 7, but I’d want to understand how long they’ve been around for since it can be hard to hire skilled workers. I also want to know how many service contracts and maintenance agreements they have, as many HVAC companies offer annual or bi-annual maintenance agreements that include regular check-ups and servicing. If that all checks out, then there’s a great opportunity to grow by ramping up advertising in Greenville, the 23rd fastest-growing city in the country.

🐦 The Best of SMB Twitter (X)

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🤝 Vendors and Lenders

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I’ve decided to streamline this to help the SMB Deal Hunter community close more deals, faster.

Fill out this form and I will personally make introductions to folks I trust.

📚 What I’m Reading This Week

The Money Maniac

Daniel Anderson, an ex-Wall Street analyst, shares the secrets to financial freedom through his newsletter.

His most recent step-by-step guide on how to save for a house while renting was a great read that I’ve shared with several friends already.

I’ve enjoyed learning from Daniel and think you will too.

See you next Tuesday!

P.S. Whenever you’re ready, here are a few ways for us to work together:

1. 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 operating. Reply LP” and I’ll share more.

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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.