Acquisitions Anonymous - #1 for business buying, selling and operating - $1.2mm revenue Court Maintenance Company for Sale! - Acquisitions Anonymous episode 158

Episode Date: January 13, 2023

Michael Girdley (@Girdley), Bill D’Alessandro (@BillDA), and Mills Snell (@thegeneralmills) talk about a sports surface company that is for sale in New Hampshire. The company has served clients for decades and is known for its quality and expertise. We’ll review the revenue numbers, operations, and our guess on key employees. Lastly, we discuss why it is a booming business right now and some incredibly creative strategies to grow it remotely. Mills has some fantastic ideas he's picked up by running his firm.Company: Premier Sports Surface Company for SaleLocation: New HampshireStated Financials: Gross Revenue:$ 1,239,387   |   Cash Flow:$ 519,735Asking Price: Receiving offers-----Thanks to our sponsors!CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.-----Show Notes:(00:00) - Introduction(00:30) - Our Sponsor is CloudBookKeeping.com(02:45) - Deal & financials: Premier Sports Surface Company for Sale(04:16) - Who’s the Broker again?(05:09) - Is it home-based and relocatable?(07:00) - Why do we like it? What might operations look like?(10:30) - The elephant in the room(13:10) - Does @girdley have Vermont vibes?(16:02) - Why does @BillDA like it?(20:41) - Would we buy it? How much would we pay for it?(21:13) - Is there a buy vs. build conversation here?-----Additional episodes you might enjoy:#157 - Make a $1mmyr with a Language School#156 - 60% Profit Margin Amazon Online Community for Sale#155 - A $3mm profit-a-year water delivery business!#154 - A Truck Driver School for sale in Texas#152 - Should we buy this Ambulance company?#150 - Let’s buy a medical staffing business#148 - Growth Marketing explained: Shopify Superfood Greens Brand with 40% subscription rate w/ Baller Jesse PujjiSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, everyone. Welcome back to another episode of Acquisitions Anonymous. I am Bill Dallessandro, one of your hosts. And this week, Mill Snell and Michael Girdley and I talk about a business all three of us actually liked. I hope you're sitting down for this one. It is a sports court resurfacing business. We talk about not only why is it a good business at the moment, but we talk about some really innovative ways to expand it remotely. Mills has some awesome ideas that he's learned from his business that he operates. So I hope you enjoy this episode. But first, I would really, really like it if you guys would go on wherever your podcasts are sold and leave us a review. I hope it's five stars. We are the internet's number one podcast discussing buying and selling and operating small businesses. If you think so too, please leave us a five star. It really helps us. Thanks a lot.

Hey, Michael here. Want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good person. And what cloud bookkeeping does is offer a full suite of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your quickbooks online set up in the right way, and a number of things around payroll as well. So definitely know them and recommend them.

If you want to find out more about cloud bookkeeping, you can go to their website at cloudbookkeeping.com, reach out to Charlie. I know many of you have and see if he can help you make running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast, it would help us and help Charlie know that we're supporting him as well. So thanks a bunch and cloudbookkeeping.com as the sponsor for today's episode.

Welcome back everybody to another episode of Acquisitions Anonymous. That's how we usually break the ice. we are, I don't know if we are the internet's number one podcast on small business M&A, but we've been saying that confidently and we're just going to keep saying it. We definitely are, dude. We have manifested it. Thanks, Bill. I wasn't sure of the right word, the woke word to say this.

So, yeah, we're just going to continue to manifest it. And boy, do we have a deal for you today. All right. So I'm reading it today. And also, you know, we did before the episode, Mirko coached us. on how to be, do a better episode. And let me pull this up. And one of the things I'm supposed to do is when I read the deal this time,

I'm supposed to be less monotone. So I hope you're ready for this in a world. And by the way, if you are not watching this on YouTube, I would highly encourage you because every week that goes by, Michael looks more and more like he's in a television studio because he's buying, he has this incurable addiction to AV equipment, thus proving that you can spend more money to look better, younger, and hotter. on the internet. So check out this podcast on YouTube. It's phenomenal. Dude, I just got this light.

I'm pretty stoked about it. I knew, Bill, I knew as soon as you said it. You ever get a portrait done? It was going to be a new piece of hardware. It was already waiting in the background. That thing looks like it would be on a movie set. Well, then the other thing I'm going to be doing, I'm moving to a bigger office. So like this kind of boring, somewhat boring background that I'm having. I mean, it's actually going to be much more interesting. So there's going to be a full Vegas show going on behind Michael. But yeah, this is all done. I mean, I could already click a button and change the light based on how I like the deal and make it green or red or purple.

So I'll go for purple. Okay. So here's the deal we're talking about today. It is located in New Hampshire, the state of New Hampshire here in the United States. And it says premier sports surface company for sale. It is listed by the ROI Corporation. And the broker is Dennis Meserzisysski. How does it try to see.

How does Denise Meseritsky, Denise Meseritsky. He passes our test bills. What do you see here in this picture? He's not wearing a hat. I see wearing a suit. He looks pretty legit. Yeah, I would buy a business from this guy for sure. Okay.

So here we have a picture, and there's a picture of a sport court, which is like, you know, you see those tennis kind of courts. They are asking for offers. They have no asking price. The business cash flows $519,000 in free cash flow a year on revenue. of 1.2 million, and it's been around since 1987. We don't have a ton of information here, but I'll go through it. 14 employees, 2,500 square foot industrial facility based out of the guy's home, or the lady's home, whoever owns it. There is some seller transition in the business.

They are retiring, so they want to sell the business, and it is home-based and relocatable. It looks like anywhere through New England or New Hampshire. So here's the description. For sale is a long-established premier tennis court construction and maintenance company that can be located anywhere in New England. The company has service clients for decades and is known for quality and expertise. 95% of revenue comes from reconditioning and resurfacing tennis courts annually at private clubs, camps and private residents, creating a stable, recurring business. I am 100% sure that Bill is going to love that sentence. So I'm going to pause there. If you weren't on you, you're lucky the video stops at my neck level. I wasn't sure of the right way to make that joke and you just

made it the right way. Thanks, Bill. What happened? Michael, we'll leave you to listen to the episode again after we record it to get that joke. Did it make some sort of... No, no, Bill. Bill made the end of it. No, I did. I mean, I was just very excited by the sentence, 95% of revenue comes from reconditioning and resurfacing tennis courts at private clubs, camps, and residence

is creating a stable, recurring business. I thought this was an installation company, but is in fact a tennis court or sport court maintenance company. Right. Yeah, and it says here a bit further, they are one of the few companies specializing exclusively in soft court services creating a great demand for their services. The owner is looking to retire,

but will continue to provide hands-on training on their proprietary techniques and services to ensure a smooth transition to the new owner. This is a fantastic opportunity not to be missed. So let me look at what we're supposed to do next in our episode. Okay, catch up, yes, deal read out. Okay, first thoughts on the deal. Mills, do you have first thoughts on the deal?

I think I like it. I don't like it as much as Bill. I mean, I think about it, I think about it in terms of how frequently does this have to happen and how many tennis courts are there out there that, you know, are willing to probably pay for this. And is there a point where you kind of reach a certain level? of saturation. They say that anywhere in New England, and so that makes me think they probably do travel extensively to do this. The thing I like about this type of business, and then I'll let Bill just really go off on why he likes it, is that it appears to be very technically difficult to do this.

Like, no HOA is like, yeah, yeah, yeah, we'll redo our own tennis court. But at the end of the day, it's probably the same, like, five to ten different products and you apply them the same way every time. You pressure wash the tennis courts, you know, you roll this stuff out. You seal the cracks and you repaint the lines. It has the appearance of technical difficulty, but it's really not that technically difficult. I love those types of businesses. Yep, yep. Hard enough that you won't do it yourself, but not so hard that you can't train a new employee to do it pretty quick.

There are a surprisingly large number of tennis courts in New Hampshire. My wife is learning tennis, so she'll be like taking out to the tennis courts. We've been spending time in New Hampshire in the summer or some. And there are a lot of tennis courts. Every school has them. Every park has them. So I like that aspect of it. Like there's actually a bigger team than what you think, I think for a business.

How much do you think somebody pays? Yeah, I think it's culturally big in the Northeast, right? I don't know. I mean, it depends on how big it is. Like some of these places have, you know, like if this is a private club or a playground or something like that, like they could have four or five courts, I would think or more. Like, it could be a couple grand. I think their average order value is probably like two to three.

thousand dollars a court if I had to guess. Oh, I bet you it costs a lot more to resurface a tennis court than that. Yeah, it depends if this is like annual maintenance or like every five years it's got to be redone. If it's every five years got to be redone, it's 10,000. I don't think so. I mean, now, I don't think they're going out there with like, you know, unless like an abrasive piece of equipment and like a sander and they're scraping this whole thing down.

I think they are probably pressure washing it, taking a leaf blower, blow blowing it all off, drying it off, and then like with a paint roller, they're rolling on some, you know, really specific type of surface application that, you know, is grippy and non-slip and, you know, seals back the concrete that's there. And then there may be treating any cracks. Maybe it's, maybe it's twice what I said, but I don't think it's tens of thousands of dollars. The national average range to resurface the tennis court is $8,000 to $12,000. $1. Resurfacing is a two-phase process. The first phase repairs the damage to the court, and in some cases, the problems that led to the damage, so if there's roots underneath or whatever,

or cracks, then the second phase involves installing the new top service and restoring your tennis court to its optimal condition, and typically it's done every four to eight years, and at the very low end, you could super cheap your way through a clay tennis court for $3,600. On the high-end, resurfacing and asphalt tennis court is hold your wallet, $20,000. Interesting. All right. Expensive. I'm into it. So let's talk about the elephant in the room with this deal. You have to move to New Hampshire and spend your summers resurfacing tennis courts and your winter's waiting for the summer

to come. I mean, do you? There's 14 employees on this thing, right? Oh, you're not the one doing the surfacing the tennis courts, but this seems like the size where the owner is definitely doing the estimating and selling. I mean, is there any other situation going on here? Or do you think is this big enough that the owner can actually outsource some of that or have an employee doing bidding and stuff like that for them? I mean, as you said, Michael, like, I don't think it's that complicated. I think you could probably train someone to estimate these. And, you know, maybe you, you review, he takes pictures when he estimates and he sends you the estimate and the photos and you say, yeah, it seems reasonable, right? And you make sure that they don't miss anything

insanely wrong. There's a half a million bucks of cash flow here. Like, you could easily, and 14 employees, one of these could easily be a $75,000 year estimator. I mean, Mills, do you employ estimators, right? I would say, I would say 100% chance that the current owner is doing the estimating. And there is a pretty high degree of certainty that you could train an estimator to do this. One thing about this type of business that I really, really like is that you can get on Google Maps and you can see the tennis courts and you can probably tell, like, we have this in roofing. You just look at the building on a satellite image and you can tell, like, if the roof is less than five years old or if it's more than 20 years old. And that, That is like a very, very useful and dangerous tool.

You could probably, honestly, empower your customer to send you pictures. You do a takeoff aerially and measure it and you can estimate like, you know, from a distance. You could probably estimate remotely in this type of thing. Remote estimate. Cool. Super. And I bet the existing guy is not doing that. If I just had to guess.

You know, I mean, in New Hampshire, have you guys spent much time in New Hampshire? None. Not a ton. It's not bad. It's a little weird. Well, there go 8% of our listeners. Thanks, Mike. It's like weird.

One percent. Well, like, you know, we spend a lot of time near Lake Winapasaki. Have you guys heard of Lake Winnipezagi? Yeah. This is enormous inland lake. And, you know, my kids have for years went to camp there and like Adam Sandler and Taylor and Taylor Swift and all these people have houses there. And then at the other end of the spectrum, there's like biker rallies, like literally where they

have like bike week around this area. And it's just like just the bizarre, most bizarre mixture of people, everybody from top tier wealthy people all the way down to just like, you know, bikers. I'm going to get a little out over my skis here, which is always fun. But what cracks me up about this part of the country is you have Vermont, like spooning New Hampshire, right? And Vermont is like the most hippy, crunchy, like, you know, Birkenstocks and hairy armpits, you know, culture in America maybe, right? Subaru's. Michael, don't you drive a Subaru?

Stickers on every single one. Right. Dude, I do. And I will explain to you why I drive a Subaru. But anyway, go ahead. Did you have to peel the coexistence sticker off of it when it came from the factory? I drive a Subaru for, for two reasons. Number one, at six foot five. there's a very limited number of cars you can fit in comfortably. And a Subaru has great leg room. Number two, the thing I hate doing the most, like I like going to the dentist more than I like dealing with car salesmen and buying a car.

So I wanted to buy the car that has the least likelihood of exploding, and I have to go buy another car again because I want to drive a car for six or seven years because I never want to talk to a car salesman or a car dealer because it's just the worst thing in life. So that's why I drive the Subaru. Number three benefit of driving a Subaru. When you arrive anywhere, no one assumes you own a successful business. I went to like a very high-powered meeting once, where sometimes people invite me to,

and like one of my buddies saw me driving up. And they're like, he and the other guy were like in these ridiculous, like Audi A-14s or something, like $150,000 cars. And like I drive up and my buddy's like, oh, Gridley, just drop the kids off at soccer practice on the way over. It's like, ah, such a loser. Well, we learned something new about Michael today. But what I was going to say is so you have, you have Michael's home state, Vermont, where, you know, everybody drives Subaru's and where's Birkinsonstocks.

And then right next door, you have New Hampshire where the state motto is literally live free or die. And it's like this like weird libertarian, get off my lawn. The state, in the state, probably like a like a don't tread on me situation. Also, like, they're like so, like live for your die, New Hampshire is spooning you like ultra liberal Vermont. And it's just so strange to me up there. Yeah. Yeah. I mean, and that's part of the deal with this business, right?

Like, it's a size where you need to probably be an owner operator. It runs out of this person's house. You know, probably most of your staff lives nearby. So like this is not like we've looked at some other stuff where you could live anywhere. Like that's part of the tradeoff here. and probably way it'll be reasonably priced is you're going to have to be comfortable with living in that area running a business this size and it'll probably always be this size. Well, there's nothing wrong with that. It's just part of the cost of a business just like the price. You mentioned, Michael. Okay, let me say why I really like this. Let me say why I really like this one. So you're right, Michael. Like, this is around since 1987 is run from a guy's house since 1987. It is like this is not the thing that you switch. Like you have your guy. that resurfaces your sport court, right? And he does it every year.

And unless he, like, doesn't come or dies or, you know, ruins it. You're calling him again next year, right? And there's a maintenance schedule and he can have a CRM where he's going to call you and go, hey, it's time to resurface your tennis court. Like, this has got to be stable as all get out. I would also think, as Mills said, it's not that hard, which means you can probably train new people to do it. It's also asset light, I would think.

I mean, how much does it cost to buy a tennis court resurfacer? Right. And as Mills said, it is appraisable potentially, areaally. You could expand the crap out of this thing from your house, right? Like, yeah, there's only so many tennis courts. Let's say they're perfectly 100% penetrated in the part of New Hampshire, Vermont, or wherever they are. They have every tennis court. Just start hiring crews and buying them resurfers for five grand or whatever it costs and

start calling. and taking business. I think you could expand this thing like crazy. You know, cut your guys in, cut your estimators in and your guys in on the profit of the jobs and like scale the crap out of this thing. Is this going to be the first acquisitions

anonymous deal that we actually do? Yeah, let's buy this thing. I freaking love it. Who's doing it? Who's going to do all the, okay, let me ask you the gridly question.

Who's going to do all the work? You're going to do it in the Subaru. You're going out there in Subaru. What? I don't want to, oh, man. There's no way Mrs. Gurdley's getting anywhere near a place with snow nine months a year.

You made that point, Michael, and it's super important. I mean, this type of business in this part of the world is highly seasonal. These tennis courts are all outdoor. I don't think any of them are covered. And there's going to be probably eight months of the year, nine months of the year that you can't do this work. I think that in certain parts of the world and in certain cities where it's like, tourist based. That actually works really well for your employees. Like if it can be something counter cyclical, like they work, you know, at the, at the ski slopes on season and then they come

work for you off season. Like that could work super well. But it, you just need to be aware of the, the seasonality and the cyclicality. Roofing is that way too. Like we have 12 months of roofing weather here in South Carolina, but a lot of other roofing contractors have like six, eight. Yeah. I think you look at the biggest hassle you're going to have owning this business. And it's definitely going to be staffing like 100%. Like that's the thing I'd be scared about. It's not like there's a deep pool you're most likely choosing from here. And I would be curious how close this business is to kind of the major quote unquote metropolitan areas of New Hampshire because there's Manchester and a couple of other different ones that have, you know, two or three hundred thousand

people or even 100,000 people. And then there's a bunch of towns with like 4,000 people and a bunch of meth production. Four thousand people and a bunch of meth production. So it's one of those situations where you've got to figure out where you are because that could really increase, I think, the difficulty level for this business. So that being said, their gross or their net margins, rather, are like 40% here. So, like, I assume that even if they are dispersed, that all the costs of employees and trucks and gas and schlepping and all that stuff is baked into this, right? So they must be pricing it well, you know, and getting paid for it. Let's see. So gross revenue is $1.2 million, and he has 14 employees or she has 14 employees. So what do we think of,

an employee is fully laden here? Well, we, I don't know, 50 to, that, that would be on an annual basis. I don't think these people are, they're full time, right? No, I don't think they're all full time. I think they're, I think they're seasonal. So, yeah, they may be making bank for three or four months, but I don't think they're, I don't think, I don't think they're paying payroll 12 months out of the year for all these people.

So I think Mills is right, because this business has, just by basic math, $720,000 of total cost between revenue and cash flow. If you assume all of the total cost is employees, that's $51,000 a year per employee, which doesn't leave you any room for chemicals or gas or any of that stuff. So this is definitely seasonal, partial year. And there's a 0.0% chance the owner's comp for the work they're doing to estimate and all that kind of stuff is deducted from that cash flow number.

That's a seller's discretionary earning number. So you've got to, if you're going to be hiring some staff to make your life better than their life is, you're going to be hitting your margins again. But it's still, I mean, it's good. So, okay, all right. So what are we going to do? We're going to go find somebody to go up there and buy this business at two times earnings?

Yeah, so what do you think you got to pay for this business, right? A million bucks? A million five? There's got to be some seller financing on the table as well. You could get an SBA loan for this for sure. It's been around since 1987, assuming they have consistent profit. Mm-hmm. So you probably, you know, $200,000 to $400,000 cash down top.

plus a note. Now, that being said, we just described how asset light it is, how it can be remotely estimated, how in theory you could probably train up folks pretty quick. Is there a buy versus build conversation here? Like, can you just go, I don't know, compete with this guy or just do this? Hey, this is a cool business model. Let's do it in my area. Yeah. Yeah, I think you definitely could. Usually I'm the one who's like, yeah, just copy it. How hard could it be? But like, I think it'd be cut off. What about it? Really? Why? They have relationships. Like Bill talked about number one, relationships with all the recurring

buyers. I think you have to, you have to dislodge them. You have to go learn how to do this type of resurfacing. So you need to go spend a year or two working in one of these businesses to learn how it works. You have to go get your first clients and you have to go figure out how you're going to then transition from owner-operator to figuring out how to hire crews and manage those. So you have to locate those people. So, you know, all of that, if this business, if I have to do all of that or I get to buy this business at two, two and a half times cash flow with some seller financing, I choose the shortcut route.

So I know that's very unguirdly, but like, that stuff's a pain in the butt. Like, I don't want to do this. It's better to throw money. I take the opposite approach on this. And I think we're usually reversed, Michael, because I don't really like, I don't really like building things from scratch. But I think when you say, I think it takes one to two years to learn this, I think it takes like one to two months to learn this. It's not, it's not technically involved at all.

I don't think. I don't even think there's like specific heavy equipment that's associated with it or even like small engine equipment associated with this. And I think you could dislodge the heck out of this because you just go and, you know, you look at, you have somebody, you know, scrape a bunch of map data and find the tennis courts. And then you cross reference that with the, you know, ownership information. and you start just some massive outreach campaign, that's not my cup of tea, and I don't do that in my business right now, but we know plenty of people who do, right?

It's not a secret sauce to build a direct outreach campaign to, you know, HOAs or municipalities or, you know, the parks and rec or whatever. All right. I think we should wrap this one up. But I would say, let me call an audible on this, and let's do something we've never done before. If you are a searcher or a prospective operator,

you're going to listen to this show, and you want to move to New Hampshire and do this business, I think we have the core makings of an investor group for you right here. And we'll see what we can do for you. So we are taking applications to go do this. First thing we'll ask you to do is call this broker and get some more details on it. So we can go from there. I do like it enough because, I mean, to Bill's point, I think you could say,

hey, look, I want to do this same thing in Texas, whether you buy this or you compete. I think you could say, hey, is there a market for this in Texas? let's figure out how many tennis courts there are. And I think you could easily jump into a totally different market that is, you know, 12 months out of the year available for work. I'm like very interested in this. I think it's cool. All right.

Help us answer the who's going to do the work question. We'll go from there. Gurdler even led to his Subaru. All right. I, let's have it up. Mills, take us out. So thanks again to cloud bookkeeping. helping for helping us entertain ourselves looking at this tennis court resurfacing deal.

We actually really like it. And you know what? I'll go ahead. I'll put a flag down. If we buy this, cloud bookkeeping is doing the bookkeeping work. Absolutely. Absolutely. Cloud Bookkeeping won the longest running sponsors of the pod also.

So thank you guys. They're good people over there. Everything I hear from listeners of the pod who become customers, all super positive. really good. So give them a call cloudbookkeeping.com. Thanks, guys. We'll see you next week.