Acquisitions Anonymous - #1 for business buying, selling and operating - A $4mm EBITDA apparel manufacturer in Iowa and Vietname / an ice machine service rental and service business in Northern CA - e26

Episode Date: April 20, 2021

We're back this week with special guest Eric Newman (@newmanea) who is a successful searcher based out of the SF Bay Area.We talked two deals for sale this week:- a $4mm EBITDA apparel manufacturer in Iowa and Vietnam- an ice machine service rental and service business in Northern CAThanks to Eric for jumping in at the last minute. He was great!-----* 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 yet another Friday, and we are here recording again. I'm your co-host, Michael Girdley. I am joined today by one of our two regular co-host, Bill. Good morning to you, Bill. Good morning. Your haircut looks fantastic. Thank you.

Which supercuts did you go to? I did not go to supercuts. Believe it or not, during the pandemic, my mom has been cutting my hair. She lives in town, and I haven't been going to a bar. so she has figured out how to do it. And it's actually great because you get to see my mom, you know, like an excuse for us to hang out and I get a free haircut. And I get to talk a little bit. So mom came over last night for dinner, got an haircut. That's great. Mom, mom is definitely better than super cuts. Well, today, today we have a special guest crowdsourced from Twitter,

who we have known for a long time, approximately 24 minutes since got introduced to Eric. But I put out a call on Twitter because Mills can't make it today. And Eric, Eric was the best candidate that came through. So Eric, we're super excited to have you here today. Yeah, thanks for having me. And I think you're going to be great because you told me you've never listened to an episode. So this should be perfect. I know exactly what to expect. Well, cool, man. Why don't you give us like a one-minute thumbnail sketch of how you got to where you are today? And I think that'll explain to people why I thought you'd be awesome on the show. Yeah, absolutely. So I grew up in a small family business. My grandfather actually

did entrepreneurship through acquisition way back in 1937. He bought a paint company in my local hometown in northern New York. And my family had the pleasure of running that business for 80 years until we sold it in 2017. So after a tour in corporate America and consulting and business school and a startup, I decided to go back to that route, kind of get back to my routes that led me to do a self-funded search that lasted 25 months and resulted in me acquiring a small industrial IOT business based in Emoryville, California, about 10 minutes from my house, which is a nice bonus on the search criteria, but have been running that business since August of 2020 and loving every day of it. Yeah, that's great. For those of you

listening via audio, Eric is kidded out in full East Bay, San Francisco gear today with his looks like he's in a very old building and he's got a flannel shirt on. So nothing but the best from somebody living in the Oakland, Oakland, Berkeley area. Exactly. We're, the factory here is a little bit under the radar relative to what most might think of as Silicon Valley. So maybe we'll do a video like Silicon Workhouse as far as I'm concerned. Lest anyone tell you search is sexy, right? It's what you're looking for, flannel shirts and industrial warehouses. You got it. you you diminished a little bit. I mean, you went, something impressive. You went to Harvard Business School as part of this. Not just any business school, the business school of that stuff.

So pretty impressive stuff and very cool career. So we're glad you're here. And in the 24 minutes I've got to know, you seem fantastic. Well, thanks. Hopefully that can hold for a little bit longer. Yeah, that's great. Well, we've got two deals today. These are both listeners submitted. And I think some are really in line with both the experience of what we have as a team here, but then also stuff that I've heard people have an interest in from the listener community. And so thanks everybody that keeps sending us deals to consider and talk about. It's the lifeblood of the show now and keep it up. So the first one is a contract manufacturer of custom corporate and collegiate apparel.

So like if you want to get branded T-shirts or, well, I guess the technical term is swag, all that kind of swag. This is a swag company. So a headline of the deal is they do nearly $60 million in sales. And from that, they generate just over $4 million in free cash flow a year. So $60 million business in terms of sales, $4 million in cash flow. They have a listing price for the business just shy of four times cash flow. So they want to sell it for $16 million, and that would be $16 million sales price.

They claim to have $7 million in inventory. They have $2.1 million in accounts receivable, and they sell swag nationally. So it's for licensed collegiate products sometimes, but also for clientele across the country. The businesses in Des Moines, Iowa, where they do design and sales, and then they actually do manufacturing and production in Vietnam. Company size is 32 people, so that's 30 full-time workers, two part-time in Iowa, and then Vietnam, the factory. is 85 people there. So it looks like about 120 people total. And again, they do $4 million in cash flow.

And it's technically a contract manufacturer. So they claim to have a full management staff already in place. And in Iowa, just to recap, they do all the sales design, order management, everything. And then Vietnam is where everything gets made. So I assume that they're mostly doing the kind of work on top of the existing thing. So you get a Patagonia jacket manufactured already in China. or Vietnam gets shipped there. They do all the embroidery, that pressing stuff that they do. And they put it in there. And then that all gets sold to to corporates, whether it's caps, bags, garments,

and all that kind of stuff. So I actually read this, Michael, as they were doing it. Because they said they've got pattern makers and design techs and stuff. So I think they're actually making the clothes. I think this is fully vertically integrated in Vietnam. Oh, wow. Okay. Thank you for the correction there. 85 people doing it in Vietnam. I mean, I think they got a garment factory in Vietnam. Yeah, so maybe you're not getting your stuff on Patagonia. So they got a full garment factory there. So that's definitely a unique advantage there. And then they have deals with colleges, universities to do their customer apparel, swag, manufacture their stuff with the logo on it. I guess this would explain why my college's t-shirts were so terrible in the college store.

And of course, the broker thinks that the company can grow tenfold and should be bought by somebody already in logistics manufacturing and could expand what they're doing. And that's where we're at. So sellers willing to stay for a couple years. They don't have, oh, here's the reason for selling. The reason for selling is huge growth potential and the business needs someone who has the ambition to grow it. Isn't that always the case? Is it never the case?

Average sales site is very interesting, three to four thousand. They'll do all kinds of stuff, PPE, headwear. So I guess caps and visors and stuff, bag, shirts, sweatshirts, jackets, vests, pants, shorts, promotional products, whatever you want. I guess they'll do it. And they do design and manufacturing of the custom stuff. So, yeah, thanks for correct me on reading that poorly. And they sell across the U.S.

So what do you guys think, Bill? Yeah. So what's interesting is I almost bought way back in the day in 2012 a business very much like this. They were not vertically integrated, but they did make collegiate apparel. It was actually a great business. The only reason I didn't buy it is they wanted a bonkers price. It was a great business because they were really tapped into like the alumni. basis. And the royalty fees were way less. I think they're paying about 1%. There's this one company called

CLC that controls like almost all of the royalties for colleges. So if you want to say sell a shirt with, you know, Indiana University or Texas or whatever, you don't go to those colleges. They have outsourced it at this company, CLC, who kind of vets you, you know, does all the paperwork or whatever and administers, they probably keep a hefty portion of it before passing it along to the college. So at least the guys I was looking at, we're paying about 1%, which I thought was crazy low. And maybe that's changed. This was back in 2012. The other thing that's changed since 2012, at least in the collegiate space, is the rise of fanatics who have just eaten that whole market. They're taken over. Most college bookstores are actually run by fanatics.

Like they white label the fanatics platform, fanatics handles all the inventory, and just kind of sends the college a cut. So that is something I would definitely, I mean, they're a, they're a billion dollar company, huge business. They are the player in collegiate and actually pro licensing. So like if you go to Carolina Panthers.com, like I think it's run by Fanatics on the back end, their store. So like absolutely huge. So I would want to understand how these guys kind of what the competitive dynamics with Fanatics was. But if you have the licenses, you know, I assume that Fanatics has the license. You have the license.

So you're going to be slugging it out with Fanatics on the SERPs, on the ads, all that stuff from an e-commerce perspective for sure. And they have everybody, Michael's scrolling on his screen through. If you just go to Fanatics.com and click on college, every, you know, even your practically local community college, like they've got it. They're doing apparel. So definitely like a big player, I'd want to understand that. The other experience I have here is I had my cousin actually bought a business that,

did corporate custom apparel, did dye sublimation and like custom corporate stuff, which I think is what these guys are doing a lot of being their average purchase or their average sale amount is $3,000 to $4,000. And they kind of talk about kind of like custom run. It seems to me like this is a little bit more of a B to B business is my best guess, whereas Fanatics would be definitely like B to C. So at least for the business that my cousin bought, he, it was very much kind of an SEO based. business. People were searching from this specific thing, and he was just basically contracting

it out. He wasn't even vertically integrated. But he actually did pretty well. Like, this is a huge market. People wanting custom stuff, huge market. I would imagine it's tough to differentiate. And that probably means the margins are a little bit competitive. And I would think that's why these guys have spun it up in Vietnam to maintain their, I think they've got, you know, what they got? Probably 8% margin here, 4 million bucks on 60 million in sales. So, I mean, I think it's interesting. I'd want to understand a lot more about who their customers really were and how they went to market and if they felt they had any differentiation. Yeah, it is interesting they have, out of all of the colleges in the United States, they only have 18.

So it feels like this is the folks that aren't big enough to work with fanatics. Perhaps. Well, one dynamic of that industry. And so I'd worked for a brief period for a company called Follett. Ballet operates about 50% of the bookstores in the country, Notre Dame, Boston College, Miami-Dade Community College. It is a really interesting market. It's really huge.

On the licensing front, though, what I saw was that the medium and long-tail, you can license their stuff all day every day because for them, for Louisiana State, selling an extra shirt and getting that commission is great. The Texas is of the world, the Alabama's. the big kind of tier one blue chip schools that have the athletics and the fan base behind them understand the value of that brand and they're very protective of it. So it would be interesting to understand who those 18 licenses are and if they're direct potentially because I think that could drive a lot of value. The other thing I think is important to dig into here is what exactly

is the advantage? What exactly is different or unique about this? Because if you're out there trying to outspend fanatics, Bill, to your point, on, you know, on Google, forget about it, right? You're just going to be throwing money in the Google hole and never seeing it back. But if you have some direct relationships, you have alumni relationships, if there's an interesting or unique strategy on the collegiate side, that could be really powerful and really, really profitable. And then obviously the corporate side is different as well. So, you know, what's the split between collegiate and corporate? And what's the nature of, of the relationships that they have. Are they just going direct? Are they just getting, you know,

a third-party license to do long-tail stuff that doesn't have a lot of demand? So there's a lot to dig into there once you get beyond these top-line numbers. Yep. The business I looked at was a long-tail one. And he actually, exactly like you said, he said the golden goose in this industry is Notre Dame. Yep. He said they are like the collegiate brand because their fan base is so huge. It's like every Catholic in America is a Notre Dame fan. So their fan base is so huge. And the same way that, like, you know, they strike their own TV deal. Like, they, you know, they don't play ball with any of the conferences. They do the same thing on the licensing side. Um, like they, you have to work directly with them. It's like a seven figure upfront fee. They vet the crap out

of you. Um, it's like no joke. But if you get the Notre Dame license, it's like a license to print money. Yep. Absolutely. They do say here the licensed portion of the business accounts for approximately like 10% of their revenue, while the other 90% is essentially through large specialty product distributors. So I think these guys are to some extent, like when AT&T contracts with a local group, right, our local swag, swag vendor to give them 50,000 shirts, I think these guys get involved at that point. I think it's the primary part of their business. I don't think the licensing appears to be that much of it. It's just 10%. Interesting. So these are more, this is more of a B-to-B business, we think.

But really, it's more of like a B-to-B-to-B, right? Like, they go to like one of these local swag companies, and they're the company behind the scenes that makes it into Vietnam for them. Because why they've got a 7% cash flow margin. Yes. Yeah. I mean, I think the tough part about you look at how much these guys have in terms of asset heaviness, right?

All these people, all these males to feed, which week to we get our assets that you can get rid of if you let them go. but that plus $7 million in inventory, plus all these accounts receivables, that means they're selling stuff on terms. This is going to be, to some extent, a cash hungry business with, it feels like a lot of risk to it. Like, you need to be well capitalized to deal with some lean times when you're, you know, have COVID show up. Like, I don't, I don't imagine COVID was that strong for these guys. It must have hurt. Yeah. So that was also interesting to me, because when you read the description here, it sort of sounds like they make to order, right? Their project.

But like it says, the average length of time from an order being placed to being delivered is 55 days. So this kind of sounds like they take an order, they make it deliver it. And yet they're sitting on $7 million of inventory. And I'm going, you know, how does that work? You know, I'd like to understand that. And the other thing, too, in apparel, inventory is a nightmare in apparel, sizes, colors, you know, last season's, you know, pattern that's now out of style. Like, so as a buyer, I would really want to understand that's $7 million and how much of that is triple XL three years ago stuff that we can't sell. It's a very classic seller trick to try to get you the buyer to bail them out of all their inventory mistakes. I think that's what we talked on the podcast before about Halloween costumes.

And this is sort of like the same thing. You know, like they're trying to sell like old Ron Burgundy Halloween costumes that like nobody wants anymore. This I think would be like the same thing. you know, what's in that $7 million, and I definitely would not be paying a full price, you know, 100 cents on the dollar for that inventory. Yeah. Although I do love that this is a seller. They're just like, here's the price.

Yeah. And it's reasonable. Yeah. I mean, it's so, which makes me wonder, there's, there's, there's got to be something when you double click on this, you're going to be like, eh, not so great. You got to give them credit for listening it under four times with a real price and saying, you know, come with bits. I do appreciate that.

I've run across this broker before, and they actually, compared to most brokers, they do a really good job of having reasonable multiples and being pretty upfront with their listing and what their expectations are. It's actually kind of refreshing as a buyer. Yeah. Yeah, and we can talk about what this deal is. It's a teaser from a brokerage called The Firm, and that's the firm ADV, so alpha deltavctor. dot com and they're a brokerage out of, I guess, wherever they are.

Didn't everybody out of Florida these days? No, they're out of the Midwest. I think it's 402 area code, wherever that is. Omaha. Omaha. All right. But they have listings all over the country. This isn't an immediate pass, if you're the right buyer, I think.

Is that kind of the consensus we have? Yeah, yeah. At the very least interesting to dig into, I'm sure. There's worse ways to try to get rich than this. Okay, perfect. Well, you guys are ready to move on a number two? Let's do it. All right. So this one comes from a listener. And this particular listener loved our Deepa episode,

by the way. So I thought that was a great one. And this is a deal that this person wanted to send in. This is a business that is a sales of ice machines. And they basically do service of those kind of machines like hosesaki and stuff like that. They are located in Northern California. And basically they are split into two entities. So one does sale maintenance and rental refrigeration products. And that's branded. And then the second thing they'll do is they'll go in and also do design, build for people. And then the second thing they do is rental and leasing.

So if like a restaurant doesn't want to buy their ice machine, then they can come to these guys and do that. So the cool thing I think about this business, if you think about what they do, you know, they sell you the razor. and then they have the razor blades in terms of maintenance that you sign up for and come back to them. And they run as an S corporation. So asking $2 million for the business. Supposedly, the searcher said this actually ended up selling to somebody else. So it's a deal that passed. So if you go look for this one, it's not going to be out there unless you want to try to buy it from whoever bought it.

They operate out of a 5,000 square foot facility and looks like typical tilt wall kind of stuff up in northern California. Have a couple trucks. So just as you imagine here, economically, the business has been pretty steady. So they hold just under 200,000 in inventory. And then revenue for the past few years has been just over $2 million with one really good year in 2019. So 2.1, 2.1, 2.4, 2.1. Their cogs were about 20% of total sales. They had labor and G&A and all that kind of stuff, about a million.

And then they claim that the business has been averaging it. looks like about 850 grand in seller discretionary earnings. So seller discretionary earnings, people ask us, by the way, people ask us to define technical terms there, so I'll do that. Seller discretionary earnings is basically a computation for small businesses to where you add back, you basically add back in what the seller makes running it, including the seller's salary and if they buy themselves a boat and stuff like that out of the company. So, this business is making about 850 on average, pretty repetitive though, 20-20, was down a bit with regards to that stuff. I assume that's because of COVID type stuff.

It looks like they just had more expenses in 2020 because the revenue held on at 2.1. Yeah, that is a weird one. But COGS went way down. Maybe the restaurants were using less ice. I don't know. It could have been a shift in, you know, definitely that would be something to look into. You know, when you look at these kind of things, you look for changes in patterns and that can help you learn about the business. So their COGS were 550,000. $550,000, $550,000, and then $460,000 in 2020. So there was a big dip this year.

And COGS is the cost of goods sold. So that could have been in terms of ice machines or equipment or any of that kind of stuff. But expenses, expenses didn't go up that much though, Bell. Look, they've been inching up year every year. They went from $1.175 to $1.2 million in those from 2019 to 2020. And it looks like 2019, maybe they had a big project because they're 21,21, 24, Oh, yeah. So I don't consider 2020 to be down.

It seems like that's actually in line with expectations. Yeah. Well, it's interesting. You know, we saw this like last week, Eric, with a manufacturer and installer, I'm sorry, an installer and designer of grandstands for high schools and stadiums and stuff like that. Like at this kind of size, the difference between feast or famine for a year at $2 million in revenue is like maybe two projects. It's pretty interesting how high these guys have in terms of fixed costs. Did they also say that there are no employees? No, they actually give us here.

This is actually a great summary of the business. They actually give us here the employees. So they have a sales head who's making about 100K. And then three in the house folks, in office folks who appear to be making, let's say, 50, 60, another 50, about 120,000, 130,000 between the three of them. and then they have four service, five service techs and a manager that are running around. So it looks like a 10-person business plus a CEO, nine-person business. I think this is pretty cool business. I mean, it seems pretty darn stable.

That's got the razor-raiser blade thing going. You know, people are going to need ice until the end of time. You know, I don't really see any like huge disruptive threats to this thing. I don't hate this at all. I think it's pretty interesting. Yeah, so here's some facts that may change your mind. the seller has been working on the business, 32 hours a week. So congratulations, Mr. Seller, you work four days a week.

I want to get there someday. There is a license for this in California, a C-38 license. I guess that's some sort of... That's California for you. Yeah, I got, yeah. The next thing you know, they're going to be making you get a license to land at San Francisco Airport. Yep. Good looking here, good-looking office.

and then it looks like they do give us a breakdown of their sellers, discretionary earnings, and adbacks, which is all very small for an old man to see. Please say you have a boat. Please say you have a boat. It doesn't look like he has a boat. Sorry. It's one of my bet thieves when people use their businesses to buy their boat. He does have a car.

He's got $7 or $8,000 of auto expenses for owner benefit running through the business. It's definitely an F-F-3-50 with Dooley and a Lyft. It's never not that. Yeah. I found the SDE. The details of it are always a great indication of how reasonable the seller will be to negotiate. Oh, yeah? Tell us that, but tell us about that. Well, absolutely. I mean, if you've got folks that are trying to add everything in the kitchen sink and into the SDE that just inflate what it looks like, you know that they're going to be pretty stubborn when it comes to negotiating any specific terms.

I mean, it also shows that the broker may have set their expectations inappropriately around the price. If you've got the broker telling them they're making $900,000 a year in SDE and really it's more like six because I got a bunch of fluff in there. It's hard to get sellers off of that expectation once it's been set by a broker. Yeah, because they get the sales price in their head. The seller does. Exactly. Exactly. For X million dollars.

And then you go, this SDE is BS, right? It needs to come down. Like, I'll hold your multiple, but SCE comes down. And now the seller goes, I thought he was going to make $3 million. I'm only going to make $2 million. It's a very powerful anchor. Yes. The thing I would always tell folks when I was searching when they'd come back at me with

that sort of thing was your accountant can put any sort of number on a spreadsheet, but they're not going to pay you the cash that I'm willing to pay you for the business. So if your accountant wants to buy the business for $3 million, by all means, go ahead and sell it. I'm here offering you two and a half, and that's a good offer. And you could have that in your bank account in six months. And that always seemed to loosen things up a little bit. That's a great, great way to put it.

This is really interesting. Okay, so the thing's been just rough thumbnail math. They've been averaging about 800K in solid discretionary earnings. So round that down to 750, given some of the wonkiness that is inherent in broker listings. And they want $2 million for the business? Yeah, not even $3.X. Reasonable. Yeah.

Yeah, very reasonable. It's not surprising to me this thing sold. That seems pretty reasonable. Yep. A couple of things I would have wanted to understand about this business is the unit economics on like a single ice machine. You know, how much do they buy the ice machine for? How much does it rent for?

How long until it's paid back? And then critically, when does it break and I have to replace it? Because you may have some hidden cap X in this thing because this is, you know, in some ways this is an equipment rental business, right? So whether you're renting trucks or cranes or whatever or ice machines, eventually those things are going to crap out. So what I would want to understand is, you know, yeah, I'm getting a fleet, so to speak, of ice machines when I buy this business for two million bucks, but how much useful life is left in that fleet of ice machines, when I'm going to have to buy a whole new fleet

ice machines. And I have seen that dramatically change the ROI calc on some of these rental businesses. The good thing is that as a rental business, you want to rent things and have them sit wherever you put them for a long time. Yep. And this seems like a business like that. You're not moving the ice machines around to different festivals or other locations, which eats into your margins. Exactly. And all you got to do is fill them with water. It's not like dumpsters. You got to keep renting or emptying, right? Every couple days, like you plug these things in, water, you're done. I mean, we have, for our coffee business, we have an ice machine and it's always a pain in the ass. It's like, it makes only so much ice a day. We're having to go over to the

grocery store and buy ice. Like, you know, it's just part of the gig. So, This is great. You want to become a customer. Well, it's kind of like when you go buy a car. My dad would always point this out. He's like, okay, so I watch this. You go buy a new car and the salesman tells you how great it is and it's never going to break.

And they take you to the finance manager and the finance manager tells you how it's going to break and you need to buy an extended warranty. Like, well, which one is it? Like, let's make one. Uh-huh. Kind of the same thing. Yep. Well, there's a little joke about auto dealers are just, they're just service and parts

distributors with sales arms, you know, in front as content marketing. So anyway, exactly, exactly some of what goes on here and why it's a good business. So all the auto dealers are on me flying private jets. So it tells you something about that. You know what? I think it would be pretty cool to have an auto dealer come on the podcast and break down that business. I've never really seen inside an auto dealer. I bet that would be fascinating. All I know is the real estate they're in is super pricey. So there's got to be some money being made there. There's a lot of money being made there. I'm sure of that. Our guy here in Charlotte, Rick Hendrick sponsors NASCAR teams and has private jets and has one of the largest private car collections in the country. So I think he's doing all right.

Yeah. One time, and we're getting totally off topic, but near my in-laws in Fort Lauderdale, we used to drive past this one house that was, just had a ridiculous boat, like behind it, and it was like a $20 million house. And I'd always be like, who the heck is that? So I went and like figured out the guy's name, Googled it. And it was the guy who went to Toyota and, the 1960s when nobody thought that Japanese cars were going to do anything and got the license to import all the Toyotas into the southeast of the United States. And so for the past 50 years, he's been making like 200 bucks every time a Toyota gets sold in America. Damn. There you got that. So that was not as cool, though. In Fort Lauderdale, there was the guy

who started Taco Bell's house, or who started Taco Bell. Guess what his house looked like. Did it look like a taco or something? It looked like a freaking Taco Bell. Like, I had a big bell in front of the door. I was like, it's crazy. I love that. Super crazy. Living the brand. You got to live the dream, man. Go all in. Why not? But what do we think? We think about the ice company. I like it. I think it's cool. I mean, I would also want to know, like, how do I expand this thing? Like, can I, you know, clearly seems to work. Like, are there, is this type of thing where I'm licensed only in this city and this is only as big as I get and the government's only giving out so many licenses or, geez, I don't know, could you franchise this thing?

I would be thinking about, you know, how does this get bigger? Yeah. When you can SBA this thing, right? It's got assets and right size everything so you can get a SBA loan. Yeah. What do you think, Eric? I like it too. I think it's a good business, good recurring revenue.

Being a, being the resident Californian here on the show, the licensing piece isn't as scary as it might seem. They're not geographic based. They're more based on experience in California. So you can either hire someone to be that RME for you. and hold the license and have the liability. That's a common thing out here in California. So I think that's very easy to overcome.

The one thing I would want to understand on the geographic constraint that you brought up, Bill, is do they have a specific footprint from their ice machine company? So is there some sort of limitation on your growth because of the brand that you're representing with the ice machines? I don't know. Maybe there is. Maybe there isn't, but that would be a thing that I want to understand. Yeah.

So would you view the California license almost out? a moat in that case? Like, they have the license and it might be, they have experience in California and maybe it would be hard to start this up and compete? I think so. The licensing in California is kind of an interesting beast, and there's a lot of instances where you need one. It definitely serves as a moat, but a lot of folks have found ways around that moat with the RMO, RME type of relationship. I mean, a lot of general contractors, if you buy an electrical contractor, for example, you can hire someone to be that RME, which stands for responsible managing employee,

which is effectively like the engineer who stamps the drawings in civil engineering. So yeah, it certainly can be an advantage, but it will require a little administrative work to sort it all out. Very cool. All right. Well, good. That sounds like we got some winners being sent in from the listener.

So thanks to everybody who's submitted deals this week. we got more to work through. Also, call out, we're still losing money, Bill, on doing this podcast. Actually, I'm the one losing money because I keep forgetting to ask you guys to contribute. But if anybody wants to join us as a patron where our goal is to break even, right, for what we're paying to be edited. So go to our anchor site and any money is appreciated. And then Eric, I think our listeners would love how to follow you and watch you on your journeys and that sort of thing. What sort of things would be helpful for people to know about you. Yeah, sure.

So you could follow me on Twitter, obviously, which is how this whole discussion came about. My handle is Newman E.A, N-W-M-A-N-A-N-A. You could also find me on SearchFunder or my search website is burdocapital.com. Always happy to take introductions and meet people in the ETA space and pay it forward and help everybody who need it. Yeah, man.

Well, you've been awesome. So well done. All right. another great episode in the books. All right, guys. We'll catch you next week. Eric, thanks a bunch. You're great.

Thanks, guys. Thanks, Eric.