Acquisitions Anonymous - #1 for business buying, selling and operating - $500k CAD Drainage Business in Canada / $880k CAD Profitable Equipment and Party Rental Business - e37

Episode Date: July 21, 2021

Joined by special guest Morgan Tate of Paratus Business Resources (paratusbr.com), we analyze two deals:- $500k CAD Drainage Business in Canada- $880k CAD Profitable Equipment and Party Rental BusinessEnjoy!-----* 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.-----Past guests on Acquanon include Nick Huber, Brent Beshore, Aaron Rubin, Mike Botkin, Ari Ozick, Mitchell Baldridge, Xavier Helgelsen, Mike Loftus, Steve Divitkos, Dzmitry Miranovich, Morgan Tate and more.-----Additional episodes you might enjoy:#62 Two Landscaping Businesses for Sale - Mike Loftus CEO of Connor's Landscaping#66 Analyzing Software Businesses for Sale with Steve Divitkos, experienced industry CEO#42 $900k Moving and Storage Company / $500k Rural Mini-Storage#61 Two Manufacturing Businesses for Sale - Brent Beshore - Founder and CEO at Permanent Equity#24 $5mm pool services and lifeguard staffing co / $2mm septic services business -  featuring baller @WilsonCompanies as a special guest!#45 $800k/yr cleaning business in Midland, TX / a $565k/yr window cleaning business in San Antonio, TX #48 Two Landscaping Businesses for Sale - Mike Botkin of Benchmark Group--- Support this podcast: https://anchor.fm/dealtalk/supportSubscribe 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]

All right, welcome to Acquisitions Anonymous. It is the middle of July vacation season. So me personally, Mills, I've taken Acquisitions Anonymous out on the road. I'm taking away from my family vacation to get to spend time today with you and our guest who will announce to a second. I don't know if you're making the right choice. Mrs. Gurdley can use some time away from me. I'll just say how this is. I think if I was in New Hampshire with my family and I told my wife I was going to record a podcast,

I might be driving home alone or something. Well, we'll get there. We'll get there. Well, so for those of you who are new to the podcast, Acquisitions Anonymous is the internet's number one podcast that talks about small businesses for sale. And each week we get together, we look at two small businesses that are currently on the market or sold recently, oftentimes with a great guest, which we have today. And we review those and then we pontificate on them.

and then we move on to next week. And that's the whole podcast. And it's going great. And we really enjoyed doing it. We're coming up on 40 episodes. So pretty cool. Today's guest is Morgan Tate, who's coming to us. Well, I think our first guest, Mills, who has broadcasted from an island.

And also, today is our first day to do all this with video. So I'm pretty excited about starting to publish these to YouTube. But Morgan, thanks for coming on today. Thanks for having me on. Yeah, I'm a big fan of the show. I think I've listened to all 40 episodes, actually. So there we go. All right.

Well, you and my mom have something like that comment. I was really about to say the same thing, but I don't think mom's listening to all 40s. I'm in the niche. I'm deep in the niche for this podcast. Well, we're very grateful and we're very grateful that people like it and get something out of it. But you've been a great guest so far. You brought two deals yourself, but love to give you a minute or so to kind of introduce yourself to the listeners. And then we'll get rolling on the two deals.

Yeah, thanks. So, yeah, as Michael mentioned, I live on an island up in Canada for the people that are familiar with Andrew Wilkinson, same city as Andrew and went to the same high school as Andrew. I went to the local university and played rugby there on the varsity team for four years and at the same time did my licensing to be a wealth management person, and quickly realized that wasn't the career for me and really wanted to work with entrepreneurs and then realized I just wanted to be an entrepreneur and work with business owners. And so I did a kind of stint at a tech startup, water technology startup.

And then I had met an M&A firm in town, Chinook, through my wealth management work and just kind of reconnected with them and joined the firm a couple of years ago. And then we launched this software company, Prattis, to help simplify the business for sale process for Main Street. So that's what I've been working on in the last year or so. And we talked a little bit about Paredes and the show prep. But what niche does that fill and kind of who's your target market and how does it work? Yeah.

So we designed it for the business owner that would come to us as an M&A advisory and they're either too small to really get the full benefits of a broker because our minimum commission could be 20,000. And if their business is 100,000 or even, you know, 150,000, that kind of that's really small range. It becomes a very large percentage of the business. And then as well, there's a lot of owners. that might even have a bigger business than that,

that just don't want to use a broker for a variety of different reasons. Maybe they're just not prone to using or paying a commission. They're pretty sophisticated themselves in terms of business dealings. They just haven't done the process before. So we want to just create an alternative approach. And so it's now fitting that probably sub two million in terms of business value range, more kind of towards the smaller end of that range, I would say, and for anyone who's looking to do it themselves.

That's awesome. How do you guys get paid? Yeah, so we went with, we have a kind of two product offerings, one for people that are looking to get a business valuation and actually exit plan. So most business owners have no exit plan in place. So it's $20 a month and they get access to a community of resources to help them actually improve their business valuation after they get it. So all of our valuations are market-based.

And we integrate with a couple different deal transaction databases to, get the comps for them and help them through normalizations and everything. And so that's kind of the lead in to our business for sale tool, which is Deal Builder. That's $100 a month. It's free for buyers to sign up and review deals. And so we're just monetizing on the sell side. Awesome. Really cool.

Cool. Well, let's jump into some deals. So as I mentioned today, Morgan, you brought both of these. So you're Canadian. You brought Canadian deals and they're anonymized. So pretty good, pretty good start there. And I think Mills, you're going to do the first one around the drainage business. Yeah, that's good.

These are all in Canadian dollars. Is that right? Yeah, so they're like, you know, just 60, 80%, just cut off the value and then you have it in American dollars. Hey, Mills, the way this work is Canada's 20% off. That's all you got to just imagine. Everything's 20% off in Canada. I made that mistake before looking at deals like, oh, man, this is great. This is totally in the sweet spot.

And then realize it's in Canadian dollars. And it's like, oh, it's too big, too small, whatever. The proportions are all the same, right? But if you were planning on getting a million-dollar seller's discretionary earnings business and you realize, oh, it's actually maybe $700,000, USD. All right, so this is a profitable drainage for his business that Morgan brought. The summary, for those of you are on YouTube, you can see it for those of you who are on podcast, I'll read the highlights.

It's more than 12 years old. This drainage and waterproofing business has earned an enviable reputation for quality and customer service. They have over 1,000 customers throughout the years. They have five-star Google reviews and lots of repeat business. The current owner is moving to another province. There's your tip that it's in Canada for family reasons, and now he only spends about 20 hours a week on the business.

He's got a group of trusted subcontractors. The business has grown revenue and profitability. They think there's more growth on the horizon. The firm is set up with a wide variety of equipment, which allows them to hand up. handle residential inspections, repair, and installation. If you're mechanically inclined and want to step into a reliable, longstanding, and well-respected business, maybe your opportunity. So the business size-wise, or actually, let me just say really quick, the model, the business model is that they make money multiple ways. They do perimeter drainage inspections, perimeter drainage cleans,

drain repair, drain replacement, foundation repair, foundation ceiling, yard drainage, concrete removal, camera service, probably subterranean, and drainage replacements. Their project values range from 5,000 to 30,000. Revenue in 2020 was 522,000 and they did 213,000 in sellers discretionary earnings. The EVVETDA was around 145,000 on that same year. Previous years, it looks like they've been roughly in line in terms of revenue. Revenue's been, you know, between 490, and 530,000 over the past three years. But it looks like SDE and EBITDA has fluctuated from kind of a low of the 140s up to most recently 213,000.

So not really sure what the rationale is behind that, why they've gotten a lot more profitable in the most recent year. But, you know, usually want to dig into that a good bit more. Maybe Morgan on them more about that. So let's see. They're asking price is $350,000. So it's $1.6.000. times weighted SDE, not really sure how it's weighted, two and a half, two point four times

weighted EBITDA. What does that mean when they say weighted like that? Yeah. So the idea on this is just based on the years if you're waiting the different years, it's taking the, like if it was 25%, 24, I can actually do proper math here, but yeah, 60, 40%, if you had two years, it's actually taking those SDs times by the 60% and the 40% and doing the kind of average, basically weighted average over the last couple years. 60% weighted towards the most recent year, 40% towards the prior year.

Yeah, let me just see what the, I think I have the actual weightings here of what they did. So this was 50, 30, 20. Yeah, given more recent years, higher weight. Okay, that makes sense. And the reason I ask is because sometimes if you had like a, I've seen cases where somebody has a disproportionately really good year and they're saying, hey, look, we're not asking for dollar credit or a disproportionately really bad year. And they're saying, you know, don't penalize this too much or whatever it may be.

So it's always helpful to know. That's good, Morgan. Yeah, we had even a case last recently with a, it was a franchise business that had acquired a couple other territories. So the business was substantially different two years ago than was three years ago, just because it had acquired a brand new two more territories than one year. So the EBITDA had, you know, jumped significantly. so we kind of excluded the prior years because it didn't really reflect the new business.

So, I mean, first glance of this, a couple things come out. Augmented means I think this guy or whoever owns it is doing a lot of the work themselves and running crews out there is what is what it kind of looks like. And then the second thing that really sticks out to me is based on the size of this, like they're doing a pretty wide set of functions. They're doing drainage stuff, foundation stuff. camera service calls? Like, how does that? One of these things is not like the other. I think all that actually does go together. So, correct me if I'm wrong, Morgan. So I own a home

and I realize there's water in my basement. And I'm not really sure how it's getting in, but I try and DIY it myself and put some stuff on the walls and that doesn't work. And then I get frustrated. My wife gets frustrated. We are worried about mold in our house and we call somebody like this to say, hey, can you come help us figure out what the heck is going on? They're going to look at the exterior wall of the house, the foundation wall of the house. They may also need to look in the walls inside, Michael. So they would use like a scope camera. That's the camera service.

It's not like they're doing an alarm. Okay. Not like head shots in your yard with the foundation. School photos. Yeah. Morgan, is that close to right? Yeah. This business is located in a coastal city that's really low near the water and sea level.

So what happens is that there's a lot of flooding. and a bunch of different issues that happen. So it's part of the reason why there's so many different, such a big mix, a lot of residential work. Gotcha. I had a mentor, we don't have that many basements here in South Carolina. It's not like a normative thing. And I had a mentor one time who told me mills never buy a house with a basement because there's always going to be water in it. So that's what, that's what these guys help with. Do you know, what are they self-performing versus what are they subbing out? I don't know the exact breakdown of what they're subbing out. I think a lot of the labor is subbed out because if you look at the income statement, basically there's like no salaries and wages.

It's all subcontracts and cost of goods. So it seems like their actual project-based labor is all basically subbed. Gotcha. Gotcha. So a company like this, they basically function as a sales, marketing and project management organization. They go get the leads, convert them, sign them up. And then they go, all right, look, we need to do excavation. So we're going to call on this guy. We need to apply some below-grade waterproofing and above-grade waterproofing. So we call on this guy. And then we need the sheetrock to be repaired on the inside of the wall. So we're going to call in it. Yeah, exactly. Got you. Any idea what their, like, what their lead funnel is like, or they, is it just word of mouth? Do they have any kind of sophistication? Or is it just like most small

businesses like they just have been doing it? They have a name. Yeah. Like on the, on the on the sim, it's basically no significant marketing activities as most small business. So, especially at this size are. Most of it's been Google search and word of mouth, and they used to do some print advertising from door hangers. Gotcha. That's a pretty strong brand. Oh, pretty strong brand.

Yeah. So it seems like that's a lot of what you're buying. You're buying that and mine share with the customer base, some good reviews on Google, and then relationships with the subs. And be curious what they're, what they'd be doing for you as a buyer, if you're not already a drainage expert? Because it seems like there's a level of expertise you need to have in this business to be able to do this stuff.

That actually brings up a really good point, Michael. I think that what I like about this business is when it's happening to your house, it scares you. And it feels incredibly complicated to think about, you know, excavating around your house and applying waterproofing. But at the end of the day, a business like this is not all. that complicated. I don't think, at least in the United States, I don't think it's heavily regulated. The use of chemicals is like pretty limited. You basically would just need to find a supplier.

And in a lot of cases like these businesses, the supplier can kind of be your technical expert. You go out, you scope the job, you measure it, you do some probing, you figure out, hey, look, it's cinderblock wall that's not finished. You go to your supplier and you say, hey, here's what I've got. it's really muddy down here and here's what the wall condition is and you know which product like one two or three do I actually need to put on the wall and then you're basically painting um it's not even always just spray I mean sometimes you're just literally digging a hole and putting paint on a wall and that gets the the roof waterproof now some of these things like drainage it's a french drain so you're digging and you're you're needing to build it back up the right way which is laying some rock

and some sand and maybe, you know, drainage pipe that has, you know, a way to slowly move the water away from the house or down through the soil. But I love businesses like this that seem really scary to an outsider. But then once you get into it, you realize it's actually really simple. It just, who wants to go and start digging out around the foundation of their house? Like, that sounds like a terrible thing. But at the end of the day, it's not incredibly sophisticated. I will point out too, Michael, that the current owner is actually not even living. in the area. It's living in a different province and running the business.

So it can be run. That is why I thought it was kind of interesting. It's very small, but it's one of those unique cases where the owner's kind of a bit more absentee yet, even at a very small level, which is interesting. Is the owner working full time on it? Like 20 hours a week from a place where you definitely couldn't easily jump over to do a job. Interesting. So these guys, that means he's got at least a little.

level of salespeople on the ground in wherever this coastal place is. And he's got some sort of, so estimating is getting done. And then he's got project management and operations happening. Did he say how many employees he has? It doesn't say. I do have these numbers here. The team is basically it's the owner and a receptionist who does the answering the calls and booking appointments. And then I believe that basically everything else is sub-doubt. I have a list of the owner's current task and responsibilities. So providing some drainage inspections, consultations, estimates, monitoring job progress and ensuring client relations, invoicing, equipment maintenance is functional, and then making sure the sub-trades have required tools and equipment to remain

effective, efficient. So I would imagine that number one, that drainage inspections and consultations well gone is probably not even a big one now anymore. I guess I'm totally lost it. How is he doing this business from another province? I think it's mostly just handling the subcontractors and invoicing the clients and probably coordinating with the office admin to just kind of more of a project management role, I would imagine. Very interesting.

Yeah, I think this is one, Michael, where you're just sending, you know, you get a lead, right? And then you say, all right, we're going to schedule and we'll come take a look at it, you know, Monday of next week, and then you call your excavation guy and say, you know, hey, will you go out there? I mean, it would require a pretty sophisticated system or I say relatively sophisticated system to like take measurements right for estimating and budgeting purposes, but you call your excavator out and say, hey, how much is it going to cost to dig out this wall, you know, or dig out from around this wall? And by the way, how many feet is it? And then you call your waterproofing applicator and you say, hey, it's a 50 foot wall that's going to be,

three and a half to four feet tall, how much you're going to charge them to put stuff on it? You probably know that anyways, right, because you work with the same guys. The risk it brings up to me is if the only role that you're playing, right, is an intermediary and just kind of a gatherer of sorts, then what's going to stop those other, what's going to stop your some contractors from going around you,

you know, and just going direct. And they probably do some direct work, honestly. That would be the risk that I would want to know about. This is fascinating. I guess I get it, but I don't get it. I'm like, okay, well, wait, when there's a dispute with a customer who's driving out to their house and this guy, he's in Alberta or something, you know?

Yeah, I was just, I was ream. Maybe he's in transition. I know that owner has been in and out quite a bit, like kind of transitioning to this new province. So I would imagine that some of those like in-person stuff is still occurring and any owner-operator likely want to be relocating to this location. But yeah, it is, it is pretty interesting that they've been able to kind of detach themselves from most of the day-to-day stuff at that scale. Well, I guess he may have three subs that he's worked with forever. So there's a risk there.

But like, that's okay. He goes out and sells three or four jobs and then he can trust those guys to deliver, you know, trust is kind of an important word there. So that's tough. All right. Well, I don't hate it. I do think they have an interesting point here that this business has a relatively low barrier to entry and someone else can start to expand a similar business in the area. That definitely sounds like they're not that optimistic that they have a defensible market position that you'd be buying. And for context, too, Morgan, did you guys put together this kind of overview? I mean, I know you put it together, but like, is this part of what your firm would do? Yeah. So I just to show you what the actual sim. looks like if you want. But you could see what the output actually looks like from basically how the product works on our end is that there's like a series of questions with templates built in. So we've pre-ridden out like we've gone through a bunch of SIMs and pre-populate it.

So then the owner just has to fill in the blank and fill out a couple tables and things. And then it formats into a presentation, a digital presentation for buyers, which is where I just kind of summarized here. Yeah, got you. All right. That makes sense. So it's not necessarily the business owner saying this is a threat. It's kind of you guys helping fill in the blanks. Yeah, this particular business was broker represented, but there is do it yourself business owners that comes through the platform as well. Awesome. That's a good one. Thanks. I started to spoil the second deal. So you got to finish.

Finish reading the second one. This one's definitely got more text to it. So I'll do my best. So this one is a profitable equipment and party rental business. So if you're on YouTube, you can see what I'm seeing. The executive summary, this business is entering its 19th year of business under the current ownership, and they've enjoyed a history of profitability. They rent and repair equipment to a diversified clientele of contractors, developers, and events. The business is located in a small community, approximately 30 minutes from a mystery location. This is actually not on this.

This is anonymous. So it sounds like there are kind of been an excerpt, little small town outside of a substantial Canadian town. So the good news is there's not that many of those, so you can kind of guess. It's either Vancouver, Calgary, Edmonton, wherever. Okay, the owners attribute their success due to superior customer service, leading market share, and high word or mouth referrals. Further opportunities exist to further expand its market share into the surrounding areas.

there is minimal competition in the area and this area has a population based below 50,000. So this XRB idea. As a result of the great reputation, the business has produced seller discretionary earnings averaging $290,000 Canadian over the past two years. The revenues have steadily increased over the years and now approach $1 million in annual sales. The owners are diligent about repairs, maintenance, and replacement on their rental inventory. Therefore, all equipment is in excellent condition. They offer construction rental equipment as well as party rental options. This is that business that's like in a small town that's only big enough to support one rental

operation and is nothing that you have to worry about one of the big players coming in because it's just too small in the market. They are the industry leader in the local marketplace and developed a reputation for uncompromising customer service. With the help of dedicated staff, they ensure that every rental is a success. As an ancillary, I saw a cool business once, guys, that was in a hot wedding market in an Excerer outside of Austin and San Antonio. And it's just like there's only one rental place and you buy from these people, just like a license print money. So pretty cool. There's one in Charleston,

South Carolina, which is like the wedding capital. And all they do is rent pews, like all church pews for people to have an outdoor. Yeah. So you can find a niche. That's, that is super nichey. Okay. More about this particular business. This business could be operated as it currently is under the ownership of a husband and wife team. Alternatively, the business is robust profitability, make it possible to hire a full-time manager or replace one of the current owners, yada, yada, yada. The return on investment capital is close to 50%

for this opportunity. If you desire great income and an unparalleled lifestyle, this business checks all the boxes. Should have purchased or wish to landed building, that could be acquired for 800,000 Canadian. Business model, we talked a little bit about that, equipment rentals, repairs, and resales. And they sell on behalf of echo equipment.

Business merchandises, smaller parts of behalf of echo equipment. What is echo equipment? Is that a manufacturer of equipment? I believe so. Yeah, it's like Husk Varner or still. Like so, okay. Yeah. It's like a Canadian version of this.

Gotcha. I think we have it here in the States. Do we have? Yeah. You don't have like a garage full of, you know, riding mowers and, you know, tillers and humorously enough I you would be shocked to hear how unhandy I am. Not handy at all. The only thing I fix at my house are computers.

We're right. So true story. When we started the coffee business, I went into make myself an espresso with our $14,000 coffee machine and I broke it. Those things are finicky. I can't be. And expensive. And then I try to use the grinder.

and I pressed the wrong button and it proceeded to grind all the coffee that was in the grinder. And so there was like a little mound of coffee. All right, back to this business. This business also provides party rental equipment. This includes tables, chairs and linens for local events and weddings. Last four year revenue has been relatively flat, though bumpy. 750,000 in 2017, 880,000 in 2018, 940,000 in 2019, and then back to 880,000 in 2020. profitability has been seller's discretionary earnings. So the amount of money the sellers putting in

their pocket has been averaging about a quarter million dollars per year, Canadian dollars, and EBITDA has been about the same. Though a little bit lower, it looks like they are getting depreciation from stuff that's allowing them to produce their tax liability bits. So like in 2020, sellers discretion earnings was 250, EBDA was 176. And I have a the full share, the full list of normalizations if we want to share that too. Oh, cool. A very high gross profitability, 84%, seller discretionary earnings, 28%. EBDA, 20% of sales.

Let's see some of the stuff we haven't covered. Lots of strengths listed, good web presence, central location, all that kind of stuff. Making money, weaknesses, systems and procedures could be upgraded. More effective use of software infrastructure and maintenance documentation could be improved. Opportunity, not a ton of business sales from existing customers. This seems to indicate, do more in their community, offer more subscriptions and stuff like that. Threats, stuff like this is very dependent upon the economy, regulatory, and potentially entrance of new competitors. And they said before, it's a husband and wife team selling, and they would like to sell for

$750,000 Canadian, which is just shot. of three times weighted seller's discretionary earnings and just shy of four times EBIDA. What do we think? So, Morgan, is the SDE is higher than the EBITDA? Is the EBITDA unadjusted and the SDE is including their salary? Yeah. So on the SDE, we have, the owners have been taking a pretty decent salary each year between the two of them, what relative to their positions.

So one of them is 20 hours a week in the winter as an admin and 40 hours. and the kind of more busy season. And the other one's more the repair equipment repair guy. And I think they've averaged like 79,000 in salary each per year, 94,000 in 2019, 58,000, 34,000. So it's steadily increased in terms of what they're taken out. That makes sense. And then we're just the replacement in terms of the replacement cost, the idea being that to replace the owner who's doing all the technical work would be

75,000 a year to kind of put a shop manager in place. Gotcha. So just for our listeners, you know, this is something that you see a lot of times with adjusted financials as they're being represented by a business owner or their broker or advisor is, hey, I as the owner have been getting paid $150,000 a year. But all I do is, you know, come and take out the trash once a week. So I'm going to add back all $150,000. But then I'm going to give you an allotment for in a replacement. It costs $15 an hour to get somebody to take out the trash. And so we're going to put that in for, you know, I don't know, $5,000 a year. It may be that I'm the CEO and I'm overpaid and now I'm going to show you this is market rate for a CEO. That's the way that works, though,

is they're saying, hey, look, you're going to have to replace me, whether it's you as the buyer or you as an investor having to hire an executive or whoever it is to fill the role. That's a common practice. So don't let that scare you away from a deal if that is the case. You just need to push on and figure out, can you actually hire this person for what they say you can? Usually, maybe not. Because you have a smaller community like this, probably one of the challenges is, can you find someone for 75K? Maybe they want to live there, maybe not. And it becomes more of a personal life decision than when you're in a big city, then you might have a influx of talent. Yeah. Well, and I think that does come down to, you know, Bill, who's not with us today,

talks about like this buyer, buyer company fit. And like both of these businesses, unfortunately or fortunately for the buyer and seller, you have to find somebody that wants to live and become part of the community out in the middle of nowhere, which reduces your buyer universe for sure. The question on this type of business that, you know, you would get into as you dug into the details and it's probably in the sim is, you know, the delineation between, you know, their different revenue channels, right? So you've got, you know, reselling equipment. The gross margins on that are going to be probably very low, but their average gross margins like 83%. So that tells me it's

probably not a ton of their revenues selling echo equipment as a distributor, as a licensed distributor. Doing repair work, right, hey, I broke my weed eater. Can you come replace, can I bring it to you and you replace the carburetor? So that is very high gross margin business because, you know, you're buying a part for relatively little and you're paying, you know, somebody, it sounds like maybe one of the owners does repairs, you're paying, you know, $25 an hour or something and you're billing that guy's timeout significantly higher. But I would also want to know what's the delineation between equipment rental, which has a very different customer base than party rental. I've known some guys, I know a guy who they had a party rental business that really blew up over the past 10 years,

like 90 million in revenue and they or they with COVID they were doing a tenth of that. You know, on a rental business, it's really, we've talked about this with dumpsters and other short term rentals. It's very fascinating. You spend maybe $30 on a chair on a nice chair and you rent it out for, you know, five dollars a day, you know, so you do the math and your payback period is great. You've got to buy maybe 200 of them or 300 of them depending on the size of the events you want to cater to. Same with tables and linens and, you know, all the other stuff that goes along with party rental. It can be a very fascinating business. You just would want to drill down into this and figure out who, like, you're selling to two very different types of customers in all likelihood.

The general contractor or the masonry contractor who comes into a saw and also the wedding planner or the bride who's trying to figure out, do I like the way these chairs look? It's not a bad thing. These kind of places exist. I mean, we have them here. in Columbia, which is a much bigger metropolitan area. And they definitely have their need. I mean, we as our business, as a roofing contractor, we rent big heavy equipment from specialty equipment companies like United Rentals, right? We need a massive for a job or a boon truck or a crane.

But we also, like, we just needed a generator really quick the other day because all ours were down and we went to a tiny little rental place. And they happen to have one and it meets a need. So I see the viability of this for sure. I do have those number breakdowns too and a nice little graph for the YouTube audience, Michael, if you want me to share. But I have the rental breakdown or the revenue breakdown if you're curious. Yeah, go ahead.

Can I guess first? Yes. I'm guessing it's 90% regular equipment and 10% party. That's pretty good. Do we have another guest coming in? I'll say 80.20. Since you said it's close, I'll say 8020. So this is our digital SIM product, which kind of like,

I was saying from the survey populates the whole document. And I've made this all anonymous, too. But basically, you can see the basic rental income was about 44% scaffolding rentals, 10%, sales of rental equipment, 15%. Merchandise sales was 14%, large machine rental, 8%. And delivery and party income is 9%. So it really is right on the money. In terms of dollar values, just popping in, you can see here, rental income is the vast majority of the income statement there with the general revenue, which I would imagine, it wasn't categorized specifically from the account of prepared, but it's probably an extension of that. And then there's product sales and service rental.

So there's a total revenue breakdown there. In my mind, I can see what the store looks like for this couple. They've probably been doing it for 40 years. It's a metal building. It's got a big glass front. looks like it was built in 1965, goes in there,

it smells like an old tuna fish sandwich. Like, that is exactly what's going. And there's a big counter. It's all built in wood. And then like the key to the city they got in 1984.

Like that's, I had to remove the photos, but, you know, I did add in some rental equipment photos for you. Thank you. Nice.

Yeah. So we, yeah, this is kind of what it is. But yeah, exactly. What you're describing I mean, is very, very accurate.

That's the most Canadian photo I've ever seen here. And so I thought, I try and bring it in. This is one of our mascots. That's great. Yeah, I looked at a business very similar to this in the southwest side of Cinitonia that was doing about the same amount of sales, no party rentals. But they were in a small town and they were the only business in miles for like 60 miles that if you needed to get some part for your oil well or your water well or your gate open or broke,

you called these guys and you couldn't wait for Amazon to get it to you five days later. Tractor supply would have to order it. And they would run like 80% gross margins on these repair parts. But they had the same problem, which was if you want to be in this business, you're probably going to have to be on call all the time. You're going to have to join the local church and the rotary. and you're going to have to be the person that, you know, everybody knows when you need it.

You call these guys. So you don't want to live in a place like that. It's totally fine. It's just not, it's just not, it won't be that big, right? Whatever size it is, you may be able to improve, I don't know, 20 or 30 percent. It's going to be marginal. It's not going to be exponential, partially because, hey, if you want to take this type of rental business and grow to $10 million in revenue, then you've got to buy $25 million worth of equipment.

and start renting it out. It's just a different ballgame, which is totally fine. Just know this isn't like, oh, I'm going to buy it and have this great arbitrage opportunity and throw it to the moon. I like it, though. I mean, for the right person, I mean, this is a great, this is a great kind of standard of living and you're making decent money. And if you enjoy this kind of thing and tinkering with equipment, like, it's right up some

people's alley. Buying yourself a lifestyle, which is great. Like, I'm not going to knock it. It's much better than getting the W2 for a lot of people. that's great Morgan what else what did we not what insights do we miss about this one

do you have thoughts about it yeah so I can give a little bit of a post deal because this was based kind of time stamped before a couple of deals so I know the broker that was working on this one and had two deals

that fell apart for kind of different reasons one of which had to do with the building and some small town legal advice from the by side so everything was taking a lot of

along and then, you know, a small town lawyer didn't have a lot of transactional experience, started kind of demanding some things, late and due diligence that weren't really a risk factor in terms of just like land, the ownership, and buying the building. And so that kind of fell apart. And I can't remember what happened with the other, with the other buyer, but it had to do with just the dependency on the owner. So I think that they might have lost a staff member during the last year or so. So it became much more dependent on that one owner to do all the repairs. And in a small town, I think there was some problem with finding talent.

And so they're kind of now taking an off market to just make it a little bit more robust, put some people in place and make it a bit easier to sell. But again, it's that we talk about saleability versus value all the time. You might have a business that's based off of the profitability and certain attributes is very valuable but not saleable. And there's a, that giving that distinction in sellers' minds can be pretty hard to overcome a lot of times, like that buyer fit that you're talking about. Well, you also have to have a country club's last chamber of commerce fit, which is the buyer has to sell it at a high enough number that they feel like they can brag for the rest of their life

that they got a good deal when they sold their business because that's how successful they're going to be. So I'm dealing with dealing with a seller right now that's, you know, that's the, thing. It's got to be that number because it's an emotional number. It's not a logical one. So totally dig it. Totally dig it. We had a business the other day that we were interacting with, and the seller came and said that their psychic told them what their business is going to sell for in three months. By September, it's going to sell for this number. They were pretty convinced they were taking a net space value. So maybe we'll have to give them a finder's fee if that's the final sales price.

Please update us on Twitter. What happens with that? Yeah, I mean, I might want to offer them a job. Do you know how hard it is to underwrite some of these deals? Who is called psychic? How would that go over with LPs? Yeah, you got to not know. What you do this process like?

No. We have this lady in Canada who is Groomama. Or James, I. He's not wrong yet. So technically, yeah. It's true. I'm telling you, keep us updated on Twitter.

I wanted to have. Okay. Undefeated. Undeated. All right. Well, cool. These were cool ones. Definitely like good, good head scratchers and wants to talk through about some of the

issues here. So well done, Morgan. Yeah, I think we're in a good place to go ahead and close the episode for today. You know, how, how Morgan can people support you? Obviously, there's the platform. If they're a small business owner and interested in selling or if they're a buyer, they can go visit it there at ParatusBR.com. you personally, what or anything else can our listeners do to support you or follow you in your journey?

Yeah, I'm Morgan Tate underscore on Twitter. Trying to be a bit more active there. I don't quite have the fame that you guys have on there yet. But I'm also active on LinkedIn, which I know, Gertley, you're a huge fan of. Actually, I've started cross-posting on LinkedIn. So I will be getting my journey as a LinkedIn influencer. I don't know what I want to influence people to do. there, but I will, I will, it's not costing me anything. I just click an extra button in a cross post.

Great. Well, yeah, I, you know, you and I connected over Twitter and, you know, the, the intelligence and forethought and preparedness that you brought to this episode comes across also in your Twitter feed. So kudos to you, and we're really grateful you were here today. Thanks for having me. This is great. Had a lot of fun. And thank you for being the first one to be on our video. I hope. hope it turns out great. No, I wasn't sure I was going to go, but hopefully it doesn't come out too greenie on my end. But this is great. Yeah, no, I really enjoyed it. Awesome, guys. All right, talk to you next week.