Acquisitions Anonymous - #1 for business buying, selling and operating - $4.2M Security Business… With $773K Revenue?!

Starting point is 00:00:00 Welcome to Acquisitions Anonymous. Today's podcast was about a deal brought by Connor Gross, our friend in the franchise world, who brought a deal around private security. And I went on a rant of epic proportions that happened toward the end. So please listen to this deal and stick around to the end. You'll enjoy where we ended up, though it may kind of be obvious where we end up.

Starting point is 00:00:21 All right, here's the deal. We'll set acquisitions anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100% beers anymore. and thumbs downing on just the plus inventory. Hey, everyone, it's Bill, and I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called CapitalPad, and it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So CapitalPad is a marketplace for acquisition entrepreneurs that is people who want to buy a business and need capital to list their deals and solicit capital from other

Starting point is 00:01:01 people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is a place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing, too, from the investor side, is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions all up front in black and white. Basically, CapitalPad professionalizes investing in small businesses. And the returns can be really, really good. I'm so stoked that they exist.

Starting point is 00:01:41 It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out Capitalpad. and tell them that Acquisitions Anonymous sent you. So yeah, we're getting more and more on the fly with these podcasts, Bill, because we used to wait until we figured out what deal we were doing before clicking and record. Now I just click record.

Starting point is 00:02:11 Well, I love it. If there's any doubt about this show being live, this is the hot, unfiltered takes on deals. Connor has a deal. Wait, St. Antonio, Texas. I'm in. How much is it? Oh, Connor's good at this, man. good at this.

Starting point is 00:02:26 Yeah, wait until you here. Yeah, wait until you hear below the San Antonio headline, and we'll see if you're still in. But so, so a highly profitable security business for sale, they're asking $4.28 million with gross revenue of $773K. They do not disclose EBITAB, but by that asking price, I'm going to hope their margins are, you know, within striking distance of 100%. but we'll see. All right, so security services franchise with recurring revenue and growth potential. The Signal Franchise Network is dedicated to providing peace of mind to communities and building a profitable, sustainable business. This isn't just about stepping into revenue. It's about growing something bigger. Why Signal? Why this opportunity? Immediate revenue and clients, you'd be stepping into a business

Starting point is 00:03:15 that's already generating cash flow with active contracts in place. This means you'll see revenue right away instead of waiting to build a client-based. Industry leadership, Signal is ranked number one in security services, number 20 and fastest growing franchises, number 63 in the 2025 franchise 500. Remind me to come back to that because it's fake. This credibility, quote unquote, makes it easier to win new contracts and expand the business, bullshit. Lower operational cost and higher margins, affordable ownership with financing, payroll lending, and exclusive insurance savings, signal officers, offers, excuse me, flexible financing options that cover most startup cost and making franchise ownership more accessible than competitors requiring large upfront investments.

Starting point is 00:03:58 Advanced technology for growth. So this is basically a staffing business for security, like patrol and guard services, is how I understand it. I'm actually not super familiar with this brand. But it's talking about this lot, which I'm assuming is what they mean, a territory contains a population of 2.7 million opportunities, 1,100 commercial businesses. They talk about distribution facilities, manufacturing companies, industrial entities. Right now, independent security companies face increasing challenges, rising insurance costs, administrative burdens, and competition from larger, well-branded providers. The security industry is projected to grow from $117 billion in 2020 to $211 billion by 2030, and now is the time to position yourself for long-term success.

Starting point is 00:04:45 So what does this business do, Bill? So they staff mall security guards, basically? That's what it sounds like. I mean, metaphorically, but right? Just private security. Are the segues included? Is there any differentiation or this is just generic Renicop stuff?

Starting point is 00:05:09 I think it's generic Renicop stuff, but I do think that it's more, like, it sounds like they're targeting, trying to find where it said that. You're targeting commercial security. So it sounds like this is office buildings, apartments, distribution facilities, manufacturing companies, etc. So my business here is that I have some vehicles, a brand. I go out to commercial sites who have security needs, whether it's gate watching, patrolling,

Starting point is 00:05:42 apartments, all that kind of stuff. if I sign a contract with them, which is maybe month to month, maybe longer if I'm lucky, to provide X services. And then every day I have to wake up and make sure that $10 an hour employees show up and do their job patrolling these apartment buildings and then deal with the inevitable kind of craziness when something wacky happens at 2 in the morning. That's the whole business? Yes. Your thoughts? Did I make it sound great or no?

Starting point is 00:06:09 I think you nailed like my number one concern with something like this is that you are never. going to be rewarded for doing a good job, you're only going to be punished for doing a bad job. Whenever something happens, no one's going to be like, oh, this is wonderful. You know, we didn't have a break-in today or we didn't have an incident, but, you know, all hell is going to be unleashed when there is something that happens on your watch. And to your point, Michael, this is not, you're not exactly staffing a skilled and highly qualified workforce here. You know, this is lower-level security that this sounds like a very challenging business to staff adequately. Yeah. My son, I don't think I told you, Bill. My son just took a job full-time as a valet

Starting point is 00:06:53 Parker at a mid-priced budget hotel here in San Antonio. And some of the stories we hear are like, yeah, I showed up to work today. My boss had been fired. I don't know what happened. Like, they're promoting me. Like that, you know, it's just like all this stuff where it's like, oh, wow, the bar. The bar is low. The bar is low. And there's a reason why the hotels and the apartments, they don't staff them, these things themselves. They outsource it to victims like the owner of this business. Just because it's just such a nightmare. So, Connor, what is the franchise 500? Oh, that's the list that, um, yeah, if you look at the, the franchise 500 list, it's, you'll see it's like either the highest profile business that you could

Starting point is 00:07:40 come up with like McDonald's and Taco Bell and everything. Like that'll be like the first few. And then you'll notice it'll just drop in like, um, you know, Bill's barbecue or like Michael's lawn care or whatever, something that nobody's ever heard of. And it's because it's paid marketing. It's because you know, brands are paying to get all on this list and be mixed amongst McDonald's and Taco Bell and the ones that everybody already already know. So the point of it. So the point of it. And it's, is it's nothing merit-based. You shouldn't read into that like it's anything other

Starting point is 00:08:14 than what it is, which is paid marketing PR, you know. So moral story again is you can't trust anything on the internet. Correct. It did remind me

Starting point is 00:08:24 when I started to subscribe the first time to Entrepreneur Magazine and I learned, oh, this is just a franchise promotion magazine. These are the only people that are in this thing. So, yeah.

Starting point is 00:08:35 It's like I got, you guys probably get the emails. Like Bill D'Alessandro has been selected as business person of the year for a, you know, a feature fee of $2,000. And it's like, you know, they don't even know who you are. They clearly span, like it's like a MADLibs email, you know, and it's clearly they spanned like thousands of people.

Starting point is 00:08:52 Why haven't you responded to me yet? I'm waiting for your check bill. Sorry. All right. That's like that, is that like the wine business we did a while ago that you can just like pay and you win the wine awards? Yeah, but at least then you get to drink wine. This business, you have to deal with your employees showing up drunk and doing

Starting point is 00:09:10 I mean, because that's the other problem with this thing, right? Back to our, back to our deal. Like, you have to inevitably, this $10 an hour person you have driving around pretending to be a cop is going to do something stupid. Like, it is inevitable. They're going to do something stupid and you're going to have to go clean it up. You're going to end up a court, something like that. I mean, just a nightmare. If I was a franchisee of this, that is the place you would expect the franchisor to cover your butt, right? Insurance, you know, the shit hits the fan. They step in and help you defend the case, et cetera. But what will probably actually happen is they will completely evaporate and go, this wasn't us. This was this local business owner who's an idiot, right?

Starting point is 00:09:49 Maybe. I don't know. And Smash, like, Smash had an ongoing lawsuit because a franchisee got sued and the franchisor did a really good job stepping in and, you know, defending them because that was the precedent that was needed to defend the rest of the system. So it depends on the brand. But like the other thing to think about here is like the, they're going to promote this as because security is super important. That's why brand matters and that's why, you know, this is such an asset to be an established brand, but that can be a liability too, because one signal franchisee, you know, has a situation with an employee on the other side of the country and it's negative PR, that can come back and bite you in the tail just as easily. So it's not always going to be

Starting point is 00:10:30 positive from that perspective. One thing that really bummed me out about this one was, and Michael, who are ever screen sharing, maybe Sue Connor, have already found it. Flip over to the website. So this is like the home page for it. And the thing that really bum me out is the big headline is start a security franchise. The whole website is just about selling more franchises. Nothing about this website is about selling security services to the businesses who buy it. Like this would be like if you went to chickfil-a.com or McDonald's.com and it said,

Starting point is 00:11:05 buy a McDonald's franchise at the front. Like, this whole franchisor is just about selling more units. They're not at all about helping you create any revenue. This is such a bummer. If you scroll and you look very closely, you can see there's a button here that says become a signal customer, though. But it's below the own a signal franchise one, which is to the left. I mean, it's like, this is just a bummer, man.

Starting point is 00:11:30 It's kind of gross. Yeah, I'm with you. here's the reason part of the reason i thought to talk about this today is uh like there is going to be an increase in spending on security in some capacity there has to be after the you know the um the CEO of united that was assassinated like i don't know just like there there has to be an increase on executive security i don't think that it will be on like mall cop capacities like this But I'm curious what you guys think about, like, investing in an executive security business amidst the current climate. I think that's a much better business than this one.

Starting point is 00:12:12 I agree. I think that's a totally different business than this one. Yeah. I think you have, yeah. I think with commercial apartment buildings, they're checking a box with the big difference is that somebody like United Health or somebody like that who's paying for executive level services, which I've read anecdotally, those services have all been just overwhelmed with. demand lately. And then the Charlie Kirk thing doesn't help either. And then all the other political violence going on, you know, with that stuff going on, like, I think that's a great business to be in right now because those people are willing to pay up because they don't want to die. Like,

Starting point is 00:12:45 that's what they're paying for. Whereas with this, like, you're just checking a box for some portfolio manager. Probably doesn't even live in the same town as the apartment building. And so, like, I like that other business much better just because of the consumer dynamics. I like it a lot better too, Michael. But like one of us, three squishy guys can't come in there and just buy this. I mean, they're staffing that thing with Navy SEALs. And like, you know, if you're the CEO of United Healthcare, like, you don't want a mall cop. You want a Navy SEAL guy. And that Navy SEAL guy has probably also got to own the, like, you're running a mercenary army at that. Yes. You know, they're not going to respect.

Starting point is 00:13:20 One of us to own in that business. Yes, but I actually would rather staff like Navy SEALs than the workforce that you would staff with this, because I, you're going to pay the, them more, they're going to make more money. And there's probably going to be a lower quantity of them that are higher quality employees than something like this where you're just, you're just staffing a bunch of folks. Oh, yeah. But I'm just saying, like, imagine, like, if you're going to own the business as staffs the Navy SEALs, like, you can't just come in and be like, I know how to operate a business. I know what a P&L is. Like, I can probably learn how to operate a restaurant or whatever. I don't think I can learn how to, like, operate a team of

Starting point is 00:13:57 private security operators and all of, like, the tactical, you know, strategy. that is required to do threat models and all that, you know, the CEO is going to speak in this Coliseum, how are we going to make sure that he's safe? I mean, that's stakes that I don't want any part of. Are you ready to take a leap into business ownership but you don't know where to start? Well, look no further than Acquisition Lab, the premier resource for entrepreneurs seeking to buy their dream business. Founded by Harvard MBA and acquisition expert Walker Dibble, the lab is your fast-tracked success in the search diligence and acquisition process. With hands-on support, world-class resources, and a community of like-minded entrepreneurs,

Starting point is 00:14:34 Acquisition Lab gives you the tools and confidence to navigate every step of the journey. And we're proud to call Walker and Chelsea, the lab's director, longtime friends of the podcast. They're passionate about helping entrepreneurs like you take the next big step. So don't wait to make your business ownership dream or reality. Visit AcquisitionLab.com today to learn more and schedule your free consultation. And when you do, be sure to tell them the Acquisitions Anonymous podcast sent you. So, you know, I had one of my friends is a serial builder of zero to one government contracting organizations, Bill. And she's done some fascinating stuff, but there's been times where she's like hired Navy SEALs.

Starting point is 00:15:11 She is not a Navy SEAL. And I don't, I think they own weapons, but not in that way. That's that type of family. So I think it's, I don't know. I think there's a level of business is business. But again, like, there's, you're putting people's lives in, you know, your hands when you're taking. on security and it's got to get done right. So there's a level of expertise there.

Starting point is 00:15:30 So I see the both of it, but man, hiring some seals. That would be pretty awesome. I did also spend some time last year with a guy who did private security. They would basically work on you in contracts and get flown around the world. He was not what you would expect. He was like 5'3, like 120 pounds. But then you talked to him, he'd be like, oh, yeah, this guy's really, really dangerous. But one of the things he said was when he would go on these security things, in general,

Starting point is 00:15:57 they didn't arm themselves. They would be like in Ethiopia and places like that. They wouldn't carry arms because the whole aim of the thing was how do you make sure that you don't need a gun? And if they armed themselves, they felt like it would get them in a position where they were more likely to get themselves in a situation where they would need a gun, as opposed to just focusing all their effort on not doing any of that stuff, staying in the right place, traveling in the right way. So it's just a more of a deterrence thing than it is an actual avoidance. Avoidance. Basically, they don't want to, they're trying to avoid armed conflict, and so they're going to not go in with guns because that, you know, I mean, that's like the saying,

Starting point is 00:16:36 like if you're going to carry a gun, you need to be prepared to use it. And it's, so these guys, they were, they didn't want to get in those types of altercations. And it wasn't worth it to try to go through customs with like, you know, with like a baretta or whatever. The handgun is like to get into Ethiopia. Like, it was more trouble than it was worth. Yeah. Oh, I would feel like you obtain the weapons once you get to Ethiopia.

Starting point is 00:17:00 In my case. And leave them in Ethiopia when it's time to leave. Again, more, and then you end up with a weapon you don't trust. Like, just more trouble than it's worth. That was his, his spiel on the whole thing. That's interesting. Yeah, if I, I think if I owned this business, I would be immediately pivoting into executive security.

Starting point is 00:17:18 And maybe that's why they're divesting this. But they need to price it a little better if that's what they're trying to do. Well, let's come back to the price last. I think one thing I definitely want to talk about here is the future for this business. Like, you're seeing flock security. You're seeing all of these, like, that's a startup that's growing really quickly, that's building, doing a lot of technology to replace this. A friend of mine owns a company, Bill, and I don't know if he's seen them,

Starting point is 00:17:43 but those little portable units that are like solar powered and sit there and their camera monitored on construction sites. Like, he started one of the original, one of those that's located here in San Antonio. It's turning into a huge business. Like, technology is coming for a lot of this stuff. Like, it's, I'm worried about that. Before we even start talking about that the price is crazy. Yeah, that's true.

Starting point is 00:18:04 Because a lot of, like, the, you know, mall security type stuff, you don't expect them to actually respond, right? Like, they're just a deterrent in a uniform. And, you know, they try to get a description of the guy who did the crime, right? They're just trying to beat the official guy and give directions. And a camera can do that. too. You know, that's a deterrent. And also, you know, just manning like entrance to whether it's a building or an apartment complex. That's, I think what, you know, this kind of quote-unquote security is

Starting point is 00:18:36 doing is just kind of manning the gate and letting people in. But there are all sorts of, you know, ways that apartment complexes are doing that, you know, between fobs and apps and all sorts of things that I think do a better job for a lower price. Um, so I think to your, earlier point, Michael, about how this kind of security is more for places that are checking the box rather than it is, you know, really moving the needle. I think that there are ways that the boxes are going to be checked that don't involve putting an hourly employee on site. Yeah. Well, let's maybe talk about the price before we close down my hatred of this deal. So they're asking $4.3 million for a deal that like gross revenue-wise. So this, that would probably

Starting point is 00:19:21 include salaries. So these guys are maybe taken home 150 in STE. So it says here, our locations operate at an average gross profit margin of 39%. Yeah, but I'm not, I'm not buying those locations. I'm buying this crappy one in San Antonio. Right, right. But I'm just, I'm just saying if it's the net margin, if the gross margin is 39%, the net margin can be nothing sexy. It's funny to me that with many generating over 1.2 million in annual revenue. That's the flex. And it's funny that it's not just, oh, many do over a million.

Starting point is 00:19:59 It's like 1.2 million. I don't know. So what do you think? What do you think they're taken home on this? So they say they have $773,000 in revenue. What do you think this one's taken home, given it looks like it's an underperforming location? Oh, maybe.

Starting point is 00:20:17 Yeah, maybe that. If it may be if the owner's running it full time, perhaps, but I think that this is, I mean, probably close to break even. Because if it's, if they were average, which they're probably below average gross profit margin, given that they're underperforming, almost certainly. But even if it was right at average, 40% of 800K is, well, that's 300-ish of gross profit. And then you back out all of your operating expenses plus owners comp. I mean, I doubt they're turning much of a profit, if any. I don't know where they got that number. Well, I know where they got that number.

Starting point is 00:20:55 So I was like, who is the broker? And it's over here business listed by this guy, Eric Wallace. Eric Wallace works at Signal Security as a franchise development associate. So this is, I'm not even sure this is, I mean, maybe it's an existing territory. Maybe it's like an aborted startup. or maybe the franchisor had to seize the territory back from the franchisee or something.

Starting point is 00:21:21 But I would say this is highly distressed. Highly distressed. Yeah, that was my first thought too, but I usually those are, usually if it's a franchisor that's trying to like bait and switch you, like you see these ads on Bizby Sell all the time where it's like eye-popping numbers

Starting point is 00:21:37 between the asking price and the revenue and cash flow and all they're doing is they're putting the startup costs for the franchise as the asking price and then putting the revenue and cash flow as like their average performance. But they're just trying to bait and switch you to get you to do an inquiry and then say, oh, just kidding, this isn't an existing location. Come check out our franchise. But that still doesn't represent 4.2 million.

Starting point is 00:22:00 I mean, that's what's weird about that since it came from the franchisor. You know what? I bet it's if you call. They go, we were asking 4.2 million, but we'll give you 50% off if you commit before the end of the month. I bet it's that type of thing. Yeah. And call now and this is a franchise sales organization based on the website, you know? Yeah. I don't know. I would steer, I would steer very clear of this. Yeah. Can we go to, can we skip to the part where I talk about how much I hate this? Well, wait. Haven't we already been doing that, Michael, for 20 minutes?

Starting point is 00:22:34 Yeah, we have. Oh, I was just going to reiterate all my. Yeah, we didn't get to the biggest issue with it, which is that this thing's in San Antonio. I mean, that's a, is it that. Who wants live there. That's a problem. Only steers and idiots live there. Yeah. So Michael, yes or no? What are you getting? I don't know on this.

Starting point is 00:22:54 Like, I don't understand any part of this. There's every red flag in history about this, the, from the website of the franchisor, to how much they're asking, to the type of business that it is, to the way it's written, like, I haven't seen one green flag on this other than it's written in English.

Starting point is 00:23:09 That's the only green flag on this deal. So I have hated deals before. I have never hated a deal as much as I hate this deal. I hate this deal with the passion of the fry cooks at a million chick filets. That's how much I hate this deal. That's an odd analogy, but okay. That's a good franchise. That is a good franchise.

Starting point is 00:23:30 Well, is that a franchise? You can only have one. I guess it is a franchise. You just only get one. It's a bizarre setup. Yeah, Connor, you may want to talk about how chiquelais is set up uniquely. I mean, it's a, it is not. a franchise by definition of the law. It's a, they have an incentive structure set up for their

Starting point is 00:23:48 operators where they're like, they're paid out part of the cash flow that the store generates without having to put up a lot of the money. So, you know, but ultimately they're, they're highly paid managers. So they're not a legally, they're not under legally a franchise system. I thought they were. Just it was bizarre that they had restrictions and they didn't have to put up much cash, but they're not legally a franchise? No, because, I mean, Chick-Fleigh corporate owns everything. So they own the land, they own the business, they own the operating entity. And then basically the operating entities pay a royalty or like a management fee, I think is what they call it, your traditional percentage of sales to Chick-fil-A corporate. And then they back out, you know, the rent for, I believe, the building and the equipment.

Starting point is 00:24:33 And then out of whatever's left, that's what they're assuming is like the operating profit of that location. That's what they split, 50-50, between 50% going to Chick-Fillet corporate and 50% going to the operating. So the operators, which are basically what they would call, they're quote-unquote franchisees, they still end up making good money. You know, they make several hundred thousand dollars a year, but it's not ownership. They don't own the business. It's not a, they can't sell the business. They're not building value. Got it.

Starting point is 00:25:01 Okay. All right. So there, I'm a thumbs down. Yeah. You don't say. So other than all of that, I love this deal. Anyway, go over to you. I'm a thumbs down.

Starting point is 00:25:13 I mean, this shows you, I think this is great. Connor, I'm glad you brought it because it kind of showcases a lot of kind of the, what can be the predatory side of franchise sales. Completely. And by the way, I'm obviously a thumbs down. I don't like the business, but I would be interested in executive security. I think somebody should start an executive security franchise. That would be interesting.

Starting point is 00:25:34 I have never heard of this franchise before for what it's worth. Usually I have heard of franchises and have a strong opinion one way or another, but that was kind of the first red flag to me from this. start is that I had not heard of them. So anyway, thumbs down from me as well. Why don't you start the executive security franchise were? To your earlier point, that's not really, you know, when you see a five foot six, like 140 pound dude, I don't know that I really fit the profile of this dude. That's where you're a partner. Are you offering? I know nothing about security. I don't own any guns. Well, no, I'm sorry. If anybody's just

Starting point is 00:26:10 in this, I own a lot of guns. They're everywhere. They're all loaded. You came in the elevator? We have a gun evader. Your gun rack that goes up based on much floor. No, the key thing, you've got to go find somebody who's a specialist in this and do a one plus one equals three. Like I think the scenario to incubate a franchise system like that is you bring the franchise expertise, the marketing knowledge, how to make the system work in the business building. And you go find somebody who's worked in private security, ideally as a mental manager or a leader. And they understand the business.

Starting point is 00:26:41 and you guys, you know, you put together each things that the other one is missing. So then you guys sell some franchises. If anybody out there is a former Secret Service agent and really wants to start a franchise, reach out. I know a guy who's been a run-a-cop, I'll have him call you. Sounds good. His name's Paul Blart. Cool. Okay.

Starting point is 00:27:05 We're all thumbs-down? Yes. Thumbs-down. All right. I'll speak for Heather. She hates this, too. So does Mills. Good.

Starting point is 00:27:11 And every other guest we've ever had. They all hate it. Bums down. Womp, womp. All right, everybody, thanks for being here. Cotter, great job again today. These were two good deals. So A plus for review, Carter, bringing deals and insights.

Starting point is 00:27:25 So well done. And if you would, help us grow the podcast. Tell a friend about this episode. If you found it at least hilarious or found it stupid, then also tell a friend about it and tell them not to listen to this episode and listen to some of the other ones. But we would love to keep growing the podcast. The best way to do that's your word of malice.

Starting point is 00:27:41 So please tell a friend, and we'll catch you next time.

Acquisitions Anonymous - #1 for business buying, selling and operating - $4.2M Security Business… With $773K Revenue?!

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