Acquisitions Anonymous - #1 for business buying, selling and operating - $800k/yr cleaning business in Midland, TX / a $565k/yr window cleaning business in San Antonio, TX - ep45

Episode Date: September 30, 2021

This week we're joined by guest Bryant Suellentrop (https://twitter.com/SullyBusiness) as he drops some science on the cleaning space!  We reviewed two deals this week:  - a $800k/yr cleaning business in Midland, TX  - a $565k/yr window cleaning business in San Antonio, TXEnjoy!-----* 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!#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]

Welcome to another episode of Acquisitions Anonymous, the podcast where we talk anonymously about two or three. We're going to try to get to three today, small businesses that are for sale. We usually try to bring on a guest that the deals are in their area of expertise. So I am your host, Bill D'Alessandro. We also have Michael Gurdley, my co-host. And today, our guest is Bryant Sullentrop. So, Brian, why don't you take just a couple minutes and introduce people to yourself and tell

what you do. Yeah, good to see you guys. We run a small janitorial company in eastern North Carolina. Started about a year ago. We got about 10 employees now and a couple contractors do you work with. And we do everything from small offices to daycares and schools, that kind of stuff. Awesome. And Brian is a great Twitter follow also if you want to learn about what it's really like to run a cleaning company. So we're going to talk about cleaning deals today. But first, I want to throw it over to Michael. for a read from our sponsor. Yes. Well, today's sponsor,

and I'll share their information here for those of you on YouTube, is financial clarity. They are a cloud-based bookkeeping service. So they have given us perhaps the most detail-oriented read that I've seen, so I will paraphrase it, but they have an international team. They do a great job for small businesses,

whether you're a searcher who's bought a business or somebody that owns one and wants to spend more time on your business and wants to find a trusted partner with fixed monthly fees, no contracts, and the ability to work around your systems like QuickBooks or Zero. I've talked to Jason before, and we're excited to be sponsored by something that everybody needs and everybody hates. Well, maybe some people don't hate bookkeeping, but I definitely do. And I'm glad these guys exist. And sadly, not everyone realizes they need it. Like, I've run into so, I mean, we review so many businesses on this podcast that have terrible

accounting and don't even know how much money they make. So please get an accountant. And think clarity would be a great place to start. Well, good, I mean, that's exactly right. Good books are like a huge way to get more value for your business. Like it's a huge enterprise value multiplier when you're selling and people just, they blow it. So super cool. Yeah, absolutely. All right. Well, Michael, you want to take us in our first deal? Yes, I do. All right. Let me pull this sucker up. Where did I put it? It's on one of these screens. Here it is. Okay. Cool. All right. So, you know, Brian is a sanitation and janitorial expert, which it turns out based on our preparation beforehand, neither Bill nor I know Jack shit about it. So we're excited to learn.

I am not a television expert. I can't with the camera for my office. Well, you know, for those of you that listen to the show, we figure out the deal beforehand. Like there's a five minute period. And Brian said something. We're both like, no way. Like so it should hopefully you'll have the same feeling we did. Cool. So our first deal is off a buy-biz sell, which seems to be our go-to these days because they have good teasers. There's some places with bad teasers, but by Bicill tells you enough to think about it. So this is a sanitation and janitorial company, comma, profit over 30%. A beautiful picture of some, it looks like some sponges and stuff. They are asking $800,000. Yeah, like clear. They're asking prices $800,000, and the business cash flows $314,000 a year.

It does just shy of a million dollars in revenue, so $900,000 in revenue. EBADA is $274,479. FF&E is $40,000, so furniture, fixtures, and equipment is $40,000. They keep $5,000 in inventory, and it was established in 2017. Maybe I'm just having a senior moment, but EBDA being less than cash flow seems off to me. But anyway, we'll get there. All right, this serves the beautiful region of Midland Odessa. By the way, one of my friends just went to Midland Odessa for our conference.

The nicest hotel there is called the double tree. And the joke around town is that they couldn't get a nicer place. So everybody calls it the single tree because it's like a rundown mask. Like it's just a fascinating place. Also, Midland Odessa has the highest GDP of any county in the nation. It's all oil. It's really fascinating. Wow.

Michael, that's the first nice thing I've heard you say about. a Texas town that is not San Antonio. You want to know what's nice about it? I don't have to go there. Here we go. That's more on, Brandon. In case your first-time listener in Adoptistian is Anonymous, it should be subtitled,

Michael Poops on everywhere else in Texas that is not San Antonio. Dallas is good. I'm going there next week. It'll be great. Yeah, I'm cool with Dallas. Fort Worth's nice. Emerillo is great, though. Huge fan of Amarillo.

All right. Servicing the Midland and Odessa region of Texas. This listing showcases a commercial janitorial provider servicing commercial, industrial, corporate housing, man camps. Man camps are like these big, like RV parks and like mobile housing where oil workers go, like, live when they need to be out in the field. That's a new phrase to me. Fully insured, cleaning services include windows, floors, and more for offices, break rooms, restrooms, and lobbies. In addition, the company provides rental, make, reinity cleaning and post-construction cleanup. The recent pandemic has

brought on a new revenue source with added fogging services for commercial, industrial, and residential clients. The return of the oil industry has boosted sales considerably as well. Total revenues from 2020 reached $908,000 alongside discretionary earnings of $314,000 and adjust to EBITA values of $274,479. The prime centralized office complex totaling $1,600 square feet. I love how it's $1,600 square feet and they're like, the prime complex. That's how big my office is. There's four people in here. So does it, man.

Yeah. It serves as a training facility and features parking spaces as well as room for administrative purposes. Man, this broker is really stretching. Parking? Like, that's a feature? Anyway, sorry. The annually lease property comes in excellent condition and is flexible for a tenant transfer, also capable of handling extra capacity.

Possibilities for expansion are achievable, assisted by experienced personnel of 36 non-union employees, the company has a near-perfect rating and is ready for smooth ownership of one year, ownership training in one year, while streamlined operations make new management easy. Besides an online presence through Google SEO and a website, marketing efforts center on supplementing verbal referral sources from their recurring customer base, inventory, furniture, fixture, and equipment, and facilities. They transition over, and the owner is willing to stay or be helpful for a year. And the reason for selling is approaching retirement.

And let's see if there's anything else here that's interesting. The broker actually looks like somebody who is trustworthy, which is kind of a first. That's a start. It's like, well, does this look like a guy who's got to rob me? Maybe, but probably not. Okay, good. And Michael, what are they asking for it? They are asking $799,000.

So a bit over like two and a third times owner's discretionary earnings. Okay. That doesn't seem great at first blush, actually. Well, the question is, does the guy have a manager in place under him at all? Because he might be working insane hours. You know, a lot of what I see. This SDE are, you know, owner's discretionary earnings here, I mean, it seems very high. Or like, you know, it just doesn't seem like he has any help with him.

I've never seen a business. usually they don't have this high of profit margins at this scale unless the owner's doing a lot. So that's very interesting to me. Now, one thing that I would initially point out that maybe is the reason for their increased profit margins is this added fogging service that has been all but debunked in the last year. With COVID, people were doing everything they could to spray things down. and this service that people were charging $80, $100 an hour for, which doesn't cost them anything, was extremely profitable. So if I was looking at this deal,

I would take all of that out immediately because that's not coming back. Customers aren't even asking for that at all. That's all but gone, except for in some very specific markets. It's almost like a joke. So you've got to realize that there's probably a lot of one-time revenue here in the TTM. Right. Just like you look at an HVAC or plumbing business to see if it's service versus install. It's like how much of this is one-off business versus truly recurring? And I would say,

you know, that's going to be a first thing to take a look at. Right. What would you to expect, you mentioned the discretionary earnings are really high. So it makes you suspicious. You've got some 60, 60, 70 year old person who's ready to retire working themselves at the bone. What would you expect is, you know, this run with a manager and set up kind of in the way you were talking about as as reasonable earnings? I don't know what wages go for in Midland Odessa, but if you're going to have somebody that's working during the day doing sales and customer, you know, management and also managing teams in the evening and always pretty much being on call, you're probably paying that person

at least 70, 80 grand a year to have a good ops manager. I mean, I just don't see any. other way. Hey, Brian, will you expand you? I saw you writing on Twitter the other day, some stuff that really opened my eyes about the labor model. Can you talk just a little bit about if you've got a commercial cleaning company, who works there, what hours they work, how many hours they work a week, like kind of the staffing structure of a business like this? Yeah, so there's different models. Some people do like the whole second shift thing where people will only work from 5 p.m. to 2 a.m. like every night. But like in a lot of facilities, like it makes a lot more sense to hire people who are looking for a side hustle. So all of my

employees are part-time working on average about 15 to 25 hours a week. And so they work about three hours a night in addition to their extra jobs, which is the reality of the situation is that the labor market is a lot more open to me because I can talk to people who have I mean, most of my employees have bachelor's degrees. So they're just looking to make some extra money on the side so they can pay down their student loans or whatever. And that just helps a lot, right, when other people are hurting for labor.

So because I look at this business, it says they got 36 non-union employees, right? And they're doing a little under a million bucks in sales. If I take 36 people, and let's say they're working, And you said they work on like half time maybe. Let's assume they are. Because unless they didn't make $15 an hour, so $30,000 a year. 36 times $30 grand a year is a million bucks in payroll.

So I know they're not all working full time. But even at halftime at $15 an hour, that's $550,000 of payroll. If you got 36 people working half time. So that sounds about right. Does that seem about right? Gross profits of maybe 40% probably sound about right 40 to 45 percent. I mean, at this scale, that probably seems about right. And what other costs are there? I mean, like you have to run in a 16-in-off an office, like maybe the chemicals, but those

are probably basically free. That's the thing. There's very little costs outside of that. The most expensive piece of equipment I own is a $400 vacuum. So, you know, we have one of those at every location, but outside of that, you've got rags and basic cleaning chemicals you can get from lows. You know, you could set up a new account for less than 80 bucks. Okay. So this is really pure labor arbitrage. Exactly. Okay. So it sounds like if this guy's doing 900K of sales, he's probably got 550 of labor cost in it. He's already down to 350 and then he's got to pay a manager. You know, you said probably 75, let's say, now he's down to 275, which actually is exactly what he lists as EBITDA, which is kind of interesting. So I wonder, I wonder if this actually is the giveaway

that he is acting as the manager, because if you put that 75K back in, that's kind of what takes you from EBITDA of 275 to owner's discretionary of 314, roughly. I'm really struggling to understand how the EBITDA is lower than the SDE. And maybe it's a senior moment, but like, how does that make sense? I'm like, okay, well, taxes? No? No. I actually think it's a sign of honesty here because he's putting his own salary on the P&L,

you know, and reducing his EBITDA by his own salary, but then he's adding it back to EBIT to get to SD, I would think, which you don't see often, which is probably why you're surprised by it, Gurdley. Right? But I think that's what's happening here. It's fascinating. So, Brian, how does the, what is the industry normal for? or what the customer relationships look like.

Are these months a month or are they annual? Would that affect how you would value a business like this? Yeah, I think I would be more concerned with the customer relationships where the business sits in the market. Like if they're the cheapest option or a cheaper option, I'd be more concerned if, you know, than I was if they have to be on year-to-year contracts. frankly, like, we don't put anybody on a yearly contract. Everything is month to month. Because if they're not happy with us, it's rare that we're happy, you know, that it's a good working

relationship the other way around. But, you know, I mean, your contracts, those are always worth more. So I would, I would like to see those if we could. But it's just tough to run a business that way in this business. Do those, you know, let's say that what's been happening where you're inputs go up in what we're seeing with like the $15 an hour minimum wage. Do you run a risk of getting upside down with those annual contracts given so much the inputs here are labor? Or does that get typically built in that I don't have to worry about Amazon deciding to pay everybody $20 an hour and then suddenly none of my contracts are profitable anymore? No, that's exactly right. I think you have to, that's the other advantage of going month to month is that you're not locked in

for something like that because you never know, I mean, in a town like this where they have Walmarts and things like that, you never know when Walmart's going to increase their wage a couple of bucks an hour. And, you know, people might go to that for their side job instead of the janitorial company. So just like you said, I think you nailed it. Yeah, it's been interesting, you know, as I've gotten in the past few years into being on the acquirer side, you know, going in, I bought the common wisdom that, oh, you want annual contracts because those are just so much better. but now like I realize Nirvana is monthly contracts with very sticky customers because it just gives you so much power to be like,

okay, guess what, sorry, prices are growing up 20% and there's nothing I can do about it, like take it or leave it, which I know you've talked about some of that on Twitter as your experiences as well. Like what has that experience been like? Yeah, I mean, it's never fun to raise prices on customers, but they understand it. And especially this past year, obviously they've been understanding on the fact that, you know, I've been pretty transparent.

They've seen me working in there plenty of times, so they know I'm working my way out of the business. So I just kind of pitch it to them, hey, in order for me to profitably serve you and keep quality up, you know, we got to, I have to charge you more so I can pay my guys enough so that they show up. And then everybody says, of course, of course,

because it's the Wild West out there for hiring. And no one wants to change genitorial providers. It's a total pain. Yeah. What is the methodology that say somebody like this, and just, I mean, so you guys know, Midland Odessa is a hugely tight labor market. It's a small city and you're competing against people going out into the oil fields and stuff like that where they're paying 50 bucks an hour to, you know, move slop of stuff

around and, you know, get their fingers cut off drilling wells. But anyway, what is the, what is the impact of, say, like being in a small market like this versus where you are, where there's just kind of more people and more opportunity. How does being in a small market like Midland Odessa where there's a lot of labor challenges affect how you would think about a business like this? How big is Menlin Odessa like population-wise?

Maybe like 100,000, 200,000? 350,000 in the MSA? That's a bigger market than I'm in. What I would say is, yeah, my market's probably 200. It's growing, but it's probably 200,000 people. And yeah, everybody knows everybody. So, you know, you're going to have the same people reapply for the same jobs, you know, stuff like that happens.

And so I think it's really important that you have a good, obviously hiring reputation because, like, especially when people have options, you know, you need to be known as an employer that takes care of the people and not just like to, you know, to look good, but like it's, you really have to do that. And that's your whole, you know, you die, you live and die by that because the best way to get employees is always referrals. And so you really want to be good to your people. How realistic is it for somebody who's in Kansas or San Francisco to decide to own something like this remote control and hire a manager and all that stuff? Or is that just never, not a possibility that you'd ever be competitive?

I don't see a world where you'd really be able to do that. The only way I mean, someone from the community from Midland Odessa needs to buy this or someone that already owns a cleaning company in Midland Odessa needs to buy this. There's no way that I'm buying this coming over to Midland buying this. All these customer relationships run super deep. I mean, a lot of these companies they're born and working with,

they probably, I mean, he's been in business 20 years. He's probably had half these customers for 10. And so those relationships, you know, seeing people at the local bar, that kind of stuff. It is the most local business that you could think of besides maybe a restaurant. You know, it's really built on those local reputations. What are the some, are there little things that you can do in this business to, to generate more awareness and more inbound?

You know, I think about people wearing uniforms or the vehicle, you have company vehicles potentially or signs that you have your people put on or signs out front of office building. Are there anything that you've seen work well or don't work? Or is this just a nasty, like, fighting over Google and Google reviews type business? How have you seen that work or not work? Well, I mean, the reality situation is a market like this. The Google ads spend is probably not very high. I mean, we, in our market, we spend about $500 a month on Google ads.

And that usually gives us, like, one closed customer at $500 a month in revenue. So it's not like it's atrocious, at least not in our market. But yeah, I mean, that's a referral is everything. All these facility managers know each other. Like all the churches around here, they all know each other, they talk. And it's ultimately about people trusting you because when you go in and you replace a different cleaning company, oftentimes it's because the cleaning company just like wasn't even, every facility's manager has been lied to and told, hey, we're going to do this, this,

this, this, this, and this. And then they don't. And so, so you, that's why referrals are so crucial, because everybody has heard the same story. Every facility manager already knows. And so the only people you can, you know, trust are literally your friends on this. Brian, we have a 50,000 square foot facility here at my business. We change cleaning providers like three times because they come in. They're like, yeah, we're doing all these things. And then they don't. And you're just like, you're like, I'm trying to run business and I just want the trash cans be empty. Like I just, I just, I need to not think about this. How is this so hard?

It's incredible how low the bar is for execution in this space. And if you find a provider that is over it, you really don't let him go over a couple of bucks. Every time I come into our office here, it's a six-person office. And I'm coming in the morning and the toilets are cleaned and the trash is empty. It's like a miracle. It's like a miracle. I get so excited. Yep, that's the story. Same everywhere.

So really, really, you know, to make this work, it sounds like you need to be somebody either in Midland, Odessa, willing to be part of the community, already in the business there, or wanting to make this their business. And that can help explain why these type of businesses trade where they are. And also, I mean, it just seems like the buyer universe is just so small for this. That's kind of what I'm hearing from you.

Yeah, the only thing that I would say that when you look at a business, like this that is maybe attractive to me is if all of their if all they're doing is labor arbitrage there and like I'm just you know like you said general janitorial services but they have customer relationships with you know however many customers for going back 10 to 15 years how many services can they add on with a small crew of people that you know they upskill just a little bit um whether that's floor polishing or you know just different different different facility services that you need, pressure washing, things like that, you could actually see your margins because you're capitalizing on the relationships that are already there. And so that's cool.

But yeah, the buyer universe is tiny. Tiny, tiny. Cool. All right. Well, I think this is a fun one. Man, I just learned a lot about the janitorial business. Yeah. All right. Well, let's move on to number two, Gurdley, you were the co-pilot here. So if you could screen share it, I will read through it. This is a business. I was psyched to do this one because it's right over her home play for Bryant, but also this was a search fund darling category a couple years ago. And that is an established and profitable window cleaning business in San Antonio, Texas. So Gurdley already likes it. I found this one, by the way. Just spoiler alert. So this is established and profitable window cleaning. They're doing about 565,000 of revenue. They're doing about $150,000 of cash flow,

and they're asking $300,000 for it. So 2X SDE, so it's SDE, it's SDE, not cash flow. It says this is a family-owned window cleaning business and has served as residential and commercial, all the searchers just got so excited, commercial customer base for more than 20 years. Uh-oh, it is part of a franchise with great support and success. throughout the country. The organization employs about 10 people, including the owners, and provides several cleaning-related facilities services. So maybe it's not just Windows. It has a customer base of more than 2,500 active customers, so 2,500 customers to make 565 grand a year of revenue. Located in San Antonio, Texas, it was established in 1995. It has 11 employees. They

seem to think the business is relocatable, which is interesting. Because as we said, it's based in San Antonio, Texas, and that's probably where all the windows are that need to be cleaned. It says there are several other competitors in the same area, but the subject business has served the market longer than most of them. This company has potential to grow revenue by going after the fast-growing residential market, as well as expanding the commercial side of the business. They're selling because the owner is retiring.

He has offered to stay on for one month of transitionary training. and he might sell or finance you. So that's what we've got on the window cleaning business. Bryant, when we previewed this before recording, you had some interesting insights in this one. So I'll let you kind of kick off with what else would you want to know about this business? What strikes you? Yeah.

I mean, what you're referring to is like I was asking, do you clean windows year around in San Antonio? Because the thing I hate about the window cleaning business and the lawn care business in a lot of situations is you don't freaking do it year around. And so if you have to lay off your staff in the fall or in the winter and you have to, you know, try and find those guys again in the spring, it's a nightmare to only, you know, scratch out $150,000 in cash flow. Because those guys won't be there, you know, in the winter they'll go and do something else. They might come work for me or they're going to come, you know, work for, so just somebody doing something in the winter. And so that's a huge

nightmare that I just initially think of. Window cleaning is an interesting business. I would be very surprised if these employees are W-2s. Maybe they are, maybe they're not. But it's a very high workers' compensation business. So most of the people you compete against end up being 1099s for that reason. And that is a hard way to go. The biggest differentiator, I think,

if you're in the window cleaning business, especially on the residential side, is if you do have your marketing dialed in and you charge higher prices and you get your Google reviews and all that stuff, I think, you know, you might be able to actually make some actual profit. But that doesn't really seem like that's what they're doing here. This just seems like they have a lot of legacy customers. I'd be considered, I'd be interested to see if it's mostly residential or commercial. Yeah, so talk a little bit about the split between the residential and the commercial business. and kind of which is good business, which is bad business, what do you want to see more of?

Well, personally, I think residential is probably better business. It just depends. You're going to charge more. So it depends. Residential can be better because it's easier to convey value and separate yourself from, you know, I think, a smaller player. Like, I don't know how to say this. Homemakers, they care about brand. businesses don't usually care about brand when they're looking for a window cleaner, at least in my experience.

They want the job done. They can see that the windows are clean. That's good enough for them. Now, it's a whole different story when you've got somebody that's coming into your home because you also have to realize they're doing interior window cleaning also. And so somebody's coming into your home, you have to trust them. It's the same thing that you have to have in the housekeeping space. You know, you got to be careful about who you're sending into people's homes because, you know, the homeowner's got to feel very confident. So, you know, residential can be good in that if you can, I think you can offer a premium service there.

I don't know if you can do that on commercial as much. Okay. So that, so I was thinking that the difference between kind of residential and commercial is commercial is, you know, a 15-story office building where you've got guys on scaffolds, you know, hang going. So our office building is like three stories tall and it's all glass. And like every so often they come with the scaffolds and I see the guy. my window, you know, wiping it down. And those, those contracts, I think, are like long-term contracts. I know the searchers a couple years ago were all hyped about this because it was long-term commercial contracts. It's pretty sticky, you know, much like commercial cleaning. People don't

want to switch as long as the windows are clean. You could charge a lot because you need the scaffolding and not just anybody can do it. But then I guess there's the other side, and that's a totally different business than someone comes into your home with a rag and wipes down your windows, right? And even maybe on the walks on your roof, like no scaffolding required, you know, and just, and just wipes it. That's much more like residential cleaning. And I suppose there's probably also a lot of commercial cleaning that's like that, too, you know, ground level retail, lawyers offices, things like that. So I guess it's a lot more granular than just commercial versus residential. Yeah, that would be my guess. I would say like all those small offices are a lot closer to

residential than they are to what you're talking about with those scaffolds. I mean, at this revenue point, I would guess that they're not using a lot of equipment, you know, to get up, getting scaffolds and things like that. I'm guessing that this is a lot of like small offices and things like and homes primarily, which is just a totally different beast. Yep, that's true. Yeah. So they've got $565,000 of revenue and the SIM says they have 2,500 customers, 2,500 active customers. So if we take their word at that and you do that division, that means each customer pays them $225 a year. That's a lot of small accounts.

I don't think there are any scaffolds involved for $225. Yeah, I mean, even if you doubled that, it's still a very small account. The other thing that's, the other thing to notice is if you've got people on scaffolds, that's that workers' compensation is also, I keep coming back to this, but it's bifurcated between whether they're on a ladder or not. If they're on a ladder, I think the workers' compensation is like 22% of whatever payroll is or something. It's very high. It's like the highest of almost any industry, I think. And so it doesn't make sense. A lot of people make the mistake of paying workers' compensation

like the people are on scaffolds for all their window cleaners. So that's just another thing to be careful of and what kind of, you know, separates this. And the skills are different too. I think it's just a little bit different when you're the same person that you see. send into somebody's home is not the same person that you put up seven stories high, generally. Yeah. So that's a really interesting point you just made about the workers' comp insurance. If you're buying a business, it's so it's super complicated to offer workers' comp and to bifurcate your workforce, as you just described, we actually found when we buy businesses, so we buy

e-commerce businesses that typically have warehouse workers, which also has a higher workers' comp rate, you know, people who are actually working with their hands or manufacturing things versus somebody sitting at a desk, clicking buttons. We've actually often found a ton of savings because they're paying the warehouse rate on everybody. And so we just go to the insurance company and you go, look, three quarter of these people are sitting at desks. They're not warehouse workers.

You could save thousands of dollars just by doing that. Obviously, a lot of sellers overpaying for workers' comp. Not surprising at all to me. The last thing I wanted to hit on this business is it mentions it's a franchise. And in the pre-read, you had some thoughts on franchise cleaning businesses. What are those? Well, I think franchises with a good brand that are like a strong brand is probably usually worth it.

So in my area, Janet King does a lot of business. They're a janitorial franchise that's pretty well known. But, you know, you hear these other random like pay 100 grand to be affiliated with some kind of franchise that no one's ever heard of. Well, you might as well be Bob's Window Cleaner. or something like that. Just get a vinyl wrap. You'll look just as good as a franchise,

download Jobber or some other kind of service-based CRM, and you're good to go. I mean, I don't think that there's anything unique that a franchise is going to offer you for a freaking window cleaning business. I think a lot of franchisors would say, well, we're going to give you an operating manual, we're going to tell you how to hire people,

we're going to tell you how to run this business. Are you basically saying, look, it's a freaking window cleaning business. It's just not that hard. Yeah, I mean, Bill, I can teach you how to clean a window in an hour. I mean, what are we doing here? Whoa, just an hour? Ready to go.

I'm not very smart, though, so maybe that's why it takes, take an hour and teach me a clean a window. It takes me all afternoon. And that kind of leads into, we did have a bonus third deal here that we wanted to touch on before with a Bryant go. it is called the Heaven's Best Carpet Cleaning franchise in Fort Worth, Texas. This is an all Texas episode today. It's in Fort Worth. If you're watching the YouTube, you can see their beautiful wrapped van, Heaven's Best Carpet Cleaning. They're asking $43,000

for this franchise. It doesn't seem as though it has any revenue or cash flow. It says it's a turnkey opportunity. So I got to assume this is a new franchise that they're trying, they're trying to sell you a carpet cleaning franchise for a little under 50 grand, ish. Your face looks just so offended right now. Well, I just think they're trying to sell you a van, basically. I mean, 48 five, 45 star Google reviews, let's say that they got like a, you know, 20% of their customers have left them a review. They've probably serviced 500 customers. I mean, what is that?

That's not a business. That's just a van. And, you know, and there's not a lot of supplies behind it. I mean, the equipment, sure, you got a carpet cleaning machine or whatever. But, I mean, at the end of the day, you're just paying royalties. You don't need to. This is a van with 48 five-star Google reviews and a carpet cleaning machine in the back and a nice wrap for 43. thousand dollars yeah there might be a twin bed in there where the owner's sleeping too no no one really

knows i have come to believe that biz by sell is basically the anti list of any franchise you want to own like if it's like any franchise i think you want to own is not listed on by biz sell the biz by sell franchise guy is going to come after me on twitter again by the way he followed me after you pooped on him. So thank you. I needed the followers. Yeah. So the reason, so for if people are listening and don't know what we're talking about,

I wrote on Twitter that biz buy sell. So when franchises are sold, there's often a franchise broker in the middle. And a franchise broker helps you the franchisor, sell franchises to franchisees. I'm an investor in a franchise business, which is how I learned this. The broker can take between sometimes 40 to 70% of the franchise fee up front, which is crazy to me. And I, like, I just had no idea that the VIG was so high.

And it's because these franchise fees are 100% margin fees, right? So they, you know, the franchisor would rather have one more franchisee even at no franchise fee, right? Even to make a dollar franchise fee. You know, the franchisor is going to make money on the royalty ongoing. So these brokers are like, hey, I can sell you one more franchisee, but it's going to be cost you 50% of the franchise fee. And most franchisors take it into teeth. And then I went, oh, my God, no wonder I see so many franchises on Biz by Sell. And then this guy on Twitter from Biz By Sell came after me and go, we're not the broker.

We just charge him a fixed fee, et cetera. But he used very, like, precise language that made me kind of feel like they definitely often act as the broker sometimes, but not all the time. Which is, I guess, fine. But I was like, oh, that's why there's franchises all over business by side. There's money to be made there. Yeah, it's really interesting. You know, I spent early part of this year a couple months just like going deep in the franchise space as a potential franchisor in the future and learned a lot about it. It's definitely threadworthy for Twitter.

Like it's it could be a great business. It could be a terrible business both as the franchisee and the franchisor. And I'm really sorry for people that I see get stuck in bad franchises. like this one. Yeah. Well, and one last thing is that, I mean, they, I think I looked at their equipment stack or something, and I don't know a lot about carpet cleaning, but they say they have a proprietary machine.

Proprietary machines means you're buying proprietary pads from the, you know, franchisor. So you just, even if this is a loss leader for the franchise, they're going to make their money on you. So I think that's more about what this is about. I would, there are, I mean, Stanley Steamer. Everybody knows that I've never heard of having its best. Oh, man, it sounds like I got to open a cleaning franchisor is what this sounds like. Being the franchisor is the place to be in this business arrangement.

Well, I mean, one of the things I learned in the franchisor business is when you own Chick-fil-A or Waterburger or one of the franchises, you know, crumble cookies, which is now the new hotness, like, that is an amazing business to be in, like one of the best, Orange Theory. When you own crappy Orange Theory as a franchisor, like your life is miserable. Because you can't, you know, so much of what makes your life as a franchisor good is your ability to attract quality folks. And it's scarce in terms of the number of people that are actually good people that you want to work with, that you don't spend all of your time taking calls at 2 a.m. on Friday morning because somebody's paranoid, they're not going to make payroll a week from now. and you have to handhold them like crazy. So it's super interesting.

Like you've got to figure out how you're going to be the Harvard of franchisors because if you're going to be like the ITT of franchisors, like it is perhaps one of the worst businesses I've ever seen. It's a horrible existence. All right. This is definitely threadworthy.

Okay. So I think TLDR, like don't buy a cleaning franchise. There's no reason to do this. That's what I think. Yeah, absolutely. 100%. Yeah. I don't see any reason either.

We did three this week. Bonus three deals this week. Everybody gets extra for all the nothing they're paying most in this episode. Yeah, that's right. Get one more free. For two or three also. Unless you are a supporter, in which case, thank you. We really appreciate you helping us pay the editing bills if you were a patron.

But also thank you to our sponsor. Gertley, we please do the Fin Clarity Read again. Yeah, it's fenclarity.co, F-I-N-Clarity.com, and they are a cloud bookkeeping service, no long-term contracts, fixed-fe, responsible, dedicated team, global labor pool. So definitely reach out to Jason if you're a small business with bookkeeping needs, which all of you should be. Yep. Awesome. So, Brian, thank you for being with us today, man.

Really appreciate your insight. It was really fun. How can people find you, you know, find you on the internet? if they live in a certain town, should they hire you to clean their building? You know, how can people get in touch with you? What do you want to plug at the end of here? Sure, you can find me on Twitter, and we've been hanging out in a Discord community that I have linked there.

But then also, if you're in Eastern North Carolina, Easter Raleigh, I'd love to talk to you about some cleaning services. No, I just, thanks guys for having me on. I really appreciate it. Are old people allowed in your Discord, and what qualifies as old? Only cool old people, and I will not answer. answer the latter question. What if you're still confused by how Discord works?

Does that qualify make you old? Well, then I would be considered old. It is the most, it in Snapchat. Like, I have a computer science degree. I've written four books on computer programming. And somebody's like, let's get Snapchat. I'm like, no. I have no idea how this works.

That's how about TikTok. I was like, oh, God, do I have to do TikTok? Oh, God, I've crossed the Rubicon. I'm too old for the new social media thing. Oh, God, I'm old. It's so hard. It's so hard. Yep.

Oh, man. Well, great job, Brian. Awesome. Thanks, guys. Thank you, Brian. I will click stop now. Thanks, everybody. See you next week.