Acquisitions Anonymous - #1 for business buying, selling and operating - Boat rental business in Austin (with strings attached) - Acquisitions Anonymous 248

Episode Date: November 24, 2023

In this episode, Michael, Bill, and Heather discuss the opportunity to buy a boat charter business located on Lake Travis in Austin, Texas.The hosts explore the build vs. buy decision, considering the cost of purchasing boats and the business. They also touch on the seasonality of such businesses and staffing challenges during the off-season. Despite the seasonal nature, they believe this business could appeal to the right buyer, especially one with digital marketing skills.Check out the listing here: https://www.bizbuysell.com/Business-Opportunity/fast-growing-and-profitable-boat-charter-company-on-lake-travis/2036131/Thanks to our sponsors!CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.-----Double Jump Media is your one-stop shop for creating engaging, high-quality videos.Double Jump is a boutique video production company with over a decade of experience creating professional, memorable videos for clients from around the globe and in various industries. All while helping those clients generate millions in sales through video content.So, whether you’re rebranding a business you recently purchased, launching a new product or service, or want to look awesome, Double Jump is down to clown.Visit www.doublejump.media to check out their portfolio and schedule your free consultation today.Subscribe 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]

Michael here. Welcome to Exodus Anonymous. Do you want to own a boat rental business in Austin and get to hang out with people on the lake, having good times, all that kind of fun stuff? We went through a deal that I think is pretty interesting. Located on Lake Travis, west of Austin, it is a relatively new business that rents boats to people and had some interesting stuff about it. We went super deep into the boat rental business, how to think about it and what we liked. And of course, as always, what we did not like. Here's the episode. Michael here, want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good person. And what cloud bookkeeping does is offer a full suite of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of

helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your quickbooks online set up in the right way, and a number of things around payroll as well. So definitely know them and recommend them. If you want to find out more about cloud bookkeeping, you can go to their website at cloudbookkeeping.com, reach out to Charlie. I know many of you have and see if he can help you, make running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast. It would help us and help Charlie know that we're supporting him as well. So thanks a bunch and cloudbookkeeping.com as the sponsor for today's episode.

And we're back. And we're back. I think Michael just scrolls through BISBicel and picks the prettiest pictures and says, ooh, let's do that one. Look, I only want to do Texas deals. But I think this one's actually interesting. And I think it's pretty cool because it's just down the road from me. It's in Austin, which I don't know if you've heard is a suburb of San Antonio.

Are you guys aware of that? I did hear that on a podcast once, yeah. Yeah, they're nice people down there and look forward to them, you know, getting consumed by San Antonio at some point in the future. So this one, you know, we were talking about before we click record, a lot of people don't know there's a lot of lakes around Austin. There's also lakes around San Antonio and all the places in between. And the two cities are about 75 miles apart. But west of Austin, there are a number of really beautiful lakes.

And then that extends down into Austin itself where they have town lake, which has turned out of a really neat downtown for Austin, which is super cool. So what this is is Lake Travis, which is one of the more popular lakes. around Austin and creates a cool lifestyle for a number of people. You can live at Lake Travis and like driving to Austin to work and stuff like that. And so you live like this lake life. Do you guys, I guess does Southern California have like Lake Life type people? Not lakes. We have no lakes.

We have the ocean, Pacific Ocean. You do boat charters out there or through the harbors and whatnot, but we don't have lakes. Nope. Yeah. And then Bill, what's North Carolina? Do they have like lake life there as well? Yeah, yeah. We've got a couple lakes near Charlotte and Lake Norman, Lake Wiley.

super cool okay well um actually do you do you guys know which uh which state has the most lakes it's minnesota is it not land land of a million lakes it's like their tagline yeah it's crazy it's on their potter lando lakes it's from minnesota all those glaciers like plowed through like 30 000 years ago and created all this like opportunity for lakes and then it like rains and stuff like super cool yeah we stayed in downtown minneapolis over the summer and it's really really neat they have lakes right in the middle of town. Okay, so this one is a fast-growing and profitable boat charter company on Lake Travis in Austin, Texas, in Travis County.

They're asking $650,000 and it cash flows $195,000. Gross revenue is $376,000. Inventory is $10,000. EBADA is $121,000. Wren is $4,000 per month. It was started in 2022, and FF&E is $350,000. So just get my head around the numbers there. Gross revenue is 376, cash flow is $195, but EBDA is a lower number of $121,000?

That doesn't make sense to me. Bill, I'm an idiot. Cash flow is SDE. Cash flow has got to be SDE. My favorite, SDE. Yes. All right. So SDE, let's just, I mean, that just, that makes sense.

SDE of 195, revenue of 375, and the asking price is $6.50. which we'll come back to in a minute. At first glance, the prospect here is you live somewhere near Lake Travis, you spend every day on the lake, and your job is to make sure people have a good time on the lake, and you make $200,000 a year for the privilege of doing so. It seems kind of good. So strategically located in a fully turnkey with automation and staff,

we are one of the fastest growing boat charter companies in the state. We operate on Lake Travis in Austin, Texas, are companies established and in the top three highest rated companies in Austin, Texas with thousands of five-star reviews and rated in the top two on TripAdvisor in our category. We leverage automation and have developed a playbook that has made our growth rate the envy of all other charter companies. Our boats are less than three years old, maintained on an aggressive schedule, and located in a marina that can never go dry, which is a highly strategic advantage. The business comes with all assets, including the website, Google My Business page,

boats documentation as well as an established team and management that can make this truly turnkey and optional for an owner to participate in has two employees ff and e including boats is included in the asking price facilities are seven luxury and highly maintained pontoon boats less than three years old with associated safety equipment lily pads and coolers on each boat office space rented if needed high converting website and associated advertising campaigns business phone and automation with regards to communication established and available for an extra fee. They have a highly competitive market, they say.

However, most of the competitors operate on legacy advertising models. Our company has disrupted the market and went from new entrant to most feared competitor in a very short amount of time by leveraging next generation marketing tools and deployment of automation and operational structure and focus. Expanded details will be shared privately. The strategic location inside of a marina,

as most marinas do not allow commercial operations or do not allow new companies, math of gross opportunities, as this is the company is truly just getting started, even though most consider us one of the top companies on the lake. Cash flow positive and completely owner absentee due to management in place and automation, massive opportunity for someone who is growth-oriented and looking to continue the momentum that has been established. Seller financing will be considered and willing to support for one month, but business is completely

turnkey with established management in place. They say they are selling because they are relocating out of state. And my favorite detail, they list here on Biz by Sell, who the listing agent is. And it says business listed by Jeff. That's just Jeff. It's like share, print, Jeff. That's funny.

I did. I actually worked on a business very similar to this in Hawaii last year. That was a snorkel tour business. And basically what made the business, the franchise value was the limited number of licenses. And it sort of sounds like there's sort of a limited number of entrance that can get into the market here because of the marina location. And the other piece that I learned about that other business was the SEO marketing and the importance of that and price point. It sounds

like they're bragging here about their capabilities in terms of marketing. But what I learned about the deal in Hawaii is a lot of them sort of when demand is at its peak, and there's only so many boats and everybody's wanting to go out on the lake that day, they sort of share leads. So if one business has too many people signing up, they sort of cooperate with the other, at least in Hawaii they did this.

And everybody sort of stays busy. And the market is really controlled by the limited entrance or the limited number of licenses or spaces or dock spaces or whatnot. I wonder if that's the case here. Well, and some of those Hawaii licenses are because they're taking people out to like a wildlife sanctuary or that sort of thing. So there's three buoys you can tie up to, and that's just the number of people that are going to let go out to that reef at any given time.

So it's a genius kind of thing if you own one of those boats. So my favorite charter boat story, I don't think I've told you guys this, but my wife and I went out to Maui for our honeymoon, and we go out on one of those boats to go to a little island called Molokini, I think it was, where you go out and like you snorkel for a day. And we get on there and it's like us and like all Korean newlyweds. Like all Korean newlyweds. And I'm like, this is the weirdest thing ever.

Why is this all Korean newlyweds? And then I look up and like the staff is acting like it's totally normal. They're all like people like clearly Americans. And they all speak broken Korean to these people, these Korean newlyweds on the boat. And all the Koreans are taking selfies. and they're having fun, they're popping bottles. You know, like, it's just ridiculous. And so I asked the staff, I was like,

what is going on here? Like, why is this all Korean newlyweds? And they told me that in the past couple years, some Korean K-pop star had made going on this particular charter in Maui part of their video and like it went viral across all of Korea. And from then on, every Korean newlywed, that was something you had to do at that time to go out on this particular boat to celebrate your

stuff because that was just how it was done based on that one K-pop star doing it. And so all the staff had picked up Korean, like, they were catering to Korean. All the signs were in English and Korean. Like, it was a trip, man. It was just super cool. Wow. Talk about like going viral in such a strange way. Like they went from just a regular company to now viral Korean halfway around the world.

Well, and you see weird stuff like that happened societally that's just totally unpredictable. And like they talk about how like in the madman era, remember all those men like they would wear hats like everywhere. Like that was just part of the thing, right? And there was stylish hats that you would wear. And then like JFK, you know, and this may be kind of apocryphal, but like JFK gets up there and is the first kind of president to give his inauguration speech without a top hat. and like everybody after that like top hats and all those kind of classic things just like go by the wayside but it was just because of this monumental moment that a leader of society or whatever had changed it and then like all of society is suddenly like nope we're doing this other thing now thank you like yeah

we're not wearing top hats anymore like we're done so back a boat charters uh sorry my bad because i've thought about this uh because as i mentioned we have two big lakes And it seems like easy money, because these things are slammed in the summers, right? Basically, this is like ran a pontoon boat, take it out, either with or without a captain, drink a bunch, have a great time, return it. This is, I think your kind of simplest illustration of buy versus build. So these folks are two years in. It started in 2022.

They're two years in. It's late 2023. They say they got $350,000 of FF and E. I'm going to assume that means these boats are two years old, which is not that old, assuming they bought new boats. So the first thing you want to do is diligence like the quality of these boats because the boats that you're renting are the business, right? But let's assume they got $350,000 of new boats. They are selling a business for $650,000. So basically your question is, should I go buy $350,000 of boats and compete with these people?

or should I buy $650,000 of boats plus brand plus license in this marina, you know, and Google rank? That's essentially the bill versus by decision here. So I would be saying, first of all, do I really need $350,000 worth of boats? Do they have the right boats? Are these the boats that I would buy if I were starting this business again from scratch? And by the way, I would ask the seller that too. If you were starting this over, would you buy these exact same boats or would you have some different boats? I would also definitely go talk to this marina and the marina's around and verify that claim

that they're actually not letting new companies in because that would be very easy to write in an OM here, but not actually be the case. Like you slip somebody five grand, you might get a new operating license pretty quick, you know, on Lake Travis. You never know. But it just, whenever I see a super young business like this, you know, props to them, right? Like they came in, they probably said, everybody sucks at digital marketing. we're going to have a great trip advisor page.

We're going to run Google Ads. We're going to have a good online booking system, and we're just going to make this easy. We're going to be easy to deal with. And we're going to have boats, and Brock and Roll will take some share. It seems like that's what they've done. But there's not a lot of moat around a lot of that, right?

Just good. And I can tell you there's no moat around it because at the bottom of this listing, the seller offers to do the marketing remotely for a fee to continue to do your marketing. So not that it's not good marketing, but like this is, I got to believe, kind of basic local business digital marketing playbook, you know, executed well.

So you can buy, I think you could buy $350,000 of boats, grease a guy at maybe even a better low marina, 50 grand, and do your own marketing. And probably within six months, you've probably got this business. What do you guys think? Well, and the fact that the fact that these guys did that, right, in 2022, leads you to believe maybe there's an opportunity to do it again, right, to go do a de novo version of what this is. Do you need video content for your business that doesn't suck?

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in producing amazing video content to help meet your business needs and goals. And thanks to them for sponsoring today's episode. One thing I do want to add is like if people are thinking these are like ski boats. These are not ski boats. These are like those pontoon boats that are like on aluminum pontoons and they might have like a 15 or even a 45 horsepower motor. Like we've rented these before. They're super fun and but they're not like you're going to go 60 miles an hour and go skiing behind them. So just just FY. These are like party boats for sure. And I think to your point, Bill, it comes down to whether there really are, whether there are permits available or not.

you'd have to diligence that. Because they didn't make it clear, did they buy in to somebody else's permits, or did they get a new permit? And that would be my question. If they got a new permit, then you're right, then anybody can.

Yeah. It depends on like, okay, maybe this one marina is closed, but maybe there's another marina that's even better. It's just pay to play. It's 50 or 100 grand,

and you got your own permit. You know, I think it's just, when you think about build versus buy, this is a simple enough business that you can see the build cost. pretty clearly. It's an equipment rental business, buy the equipment, and what else do you really need to do? Maybe you need a permit. Maybe that costs 50 or 100 grand. And then you've got to ask

yourself, is the spread between the startup cost and the business valuation here really worth it? If this were me, I would approach these guys, and I'd offer them 400 grand. You know, I'd value those boats. Or maybe I'd offer them 350. I'd offer them whatever the value of the boats were on the open market plus like a token 25 to 50 grand and say you're moving out if you're really moving out of state I bet you want to be done with this and yeah like there's a wind down diet of business you can sell these boats individually on Craigslist or to a dealer or whatever I'll offer you 50 grand more than that and I'll close immediately that's how I'd approach this guy man it's tough to try to sell a business that's like 15 months old like there's not a lot of history there you're I mean

I agree with you bill like you're you're talking about basically doing an asset sale for the boat for boats and everything, that tends to make a lot of sense when you have this little history. I'm going to venture to guess from what you said earlier, you know, Michael, about people wanting to this lifestyle. And because this price isn't very high and there's some seller financing, I bet they do sell it for this to someone who really is in love with the idea of the lifestyle. Not saying it's worth that, but I think they'll find a buyer. One thing, I agree with you. I think they're totally going to get it. I think it's reasonably price for what it is. I think people are like, I can move to Austin, I can live by a lake,

I can hang out with boaters all day. I'll tell you, there's a huge service between boaters and drunk boaters, and you deal with a lot of drunk boaters, which they talk about here about the level of coolers and yeties and stuff that are included. This is, this is party boat city. The thing we're thinking about with this is Texas is not Florida, and like your business is going to get done here between May and September, and then it's going to shut off like a light for the year. I mean, we, Heather, I know this would have been life-threatening to you, but the weather here got below 60 degrees last week, and it was still October. And like, you know, since you're from Southern California, I know that's like very scary. That is very, very scary. I'm glad you made it.

We survived. We put on a jacket. So here's another thing to know about Texas rivers and Texas lakes. A lot of the lakes around this area, we, we, we put on a jacket. We, we, we, we put on a jacket. So, don't have a ton of water, but a lot of the lakes around South Texas actually exist because back in the 1930s when they were doing during the Great Depression, they were doing the New Deal and all that stuff to try to reboot the economy, they came in and built a number of dams to create these lakes. Okay. So like, for example, northeast of San Antonio, there's this chain of lakes along the Guadalupe River that

were all these dams, like four or five different dams that were built during the Great Depression. and the idea was they created these things to be power generating dams. And that seemed like a great idea. That was the business model for all of these dams to continue and the government own them and all that kind of stuff. But what it turns out when you dig into it and the way technology went, small-scale dams are actually terrible in terms of being efficient to generate power

versus, say, just opening up like a natural gas plant or a nuclear power plant, for example. So eventually these dams were left after 20 or 30, years with no business model to support themselves. So because there was no money and Texans also don't like to pay taxes, you ended up with these dams falling into basically a period of basically no maintenance and reaching their end of life, like over 100 years. So three years ago, right before COVID, one of the dams failed and like a whole lake, like just emptied out and like, like surprised everybody, flooded houses, all this kind of stuff. And they went through, and basically shut down all the lakes.

You couldn't go on any of these lakes. My parents have a lakehouse. We couldn't go on the lake. And then eventually it got so bad that because it was so dangerous, they were like, okay, we got to empty out these lakes. So your lake went from like this nice ski lake to like a little tiny stream going in front of your house and a bunch of mud.

And so my parents and a bunch of people I know who have lake houses in between San Antonio and Austin have had basically creek houses. for the past four years because you got to go through this whole process. Like, who's going to pay for it? None of the baby boomers show on those houses. We're like, wait, we have to pay taxes to build a new dam. Like, that's not our problem.

Like, borrow the money. Like, let's make this happen. Our kids will pay for it. And anyway, so they had to figure out over a couple years who was going to pay for it. Finally, the boomers agreed to, and all the property owners agreed to have a tax levy. And now they're going back and rebuilding all of those dams. But look, like, I think it's worth pointing out with this deal. like when you are on a lake like this,

nature and humanity's impact on nature, that's part of the deal. We have droughts here all the time where it doesn't rain for a year that's happened in my lifetime, and these lakes get so low, you can't boat on them or do anything. And they mentioned this in this particular ad,

which is like, hey, like, you're in one of the parts of the lake that if it goes down three feet, which happens all the time, like you can still access the marina. But there are other marinas and even people's houses that you can't access be a boat if the lake goes down. So anyway, that's just something to think about with this deal, but also, like, to Bill's point,

like, if you're going to buy something like this, go, like, spend three or four months and talk to everybody about the history of the area because there may be stuff you need to know about, like, I don't know, how old is the dam on this lake? It's worth digging into as you do your diligence. Oh, yeah. Oh, yeah. The other thing worth mentioning,

to your point about how this dries up in the winter, right? People aren't boating in the winter. Those, on one hand, great, you just kind of dry docked the boats and wonderful. I have six months off. On the other hand, though, businesses that run for six months and then stop for six months, alternately, are almost impossible to staff. I mean, not impossible.

They're just a huge pain in the butt because basically you start from scratch every year because, you know, all your employees go do something else. They got to eat for the winter. And so it's very hard to find an employee that somehow has an exactly counter seasonal job and they kind of have two jobs and is a long, and they're going to do that for a decade. So functionally, every year, you're rehire. hiring your help. So you've got to have really good systems, really good process, training, oversight, controls. There's an HR function here that doesn't go away. I mean, one of the

nice things about owning a business for a long time is hopefully you settle in with some stable employees. You get to know them. They get to know their jobs. You know, everybody's happy. But this is, this looks like a different company. The boats are the same, but the people are different every year. I think that the nice thing about that is you can potentially like find coaches or teachers who come back every season. But there's a problem with that. And I call that the life card problem, which is the pool near me has to do exactly what you're talking about, Bill. Like, they have to hire these college kids and high school kids to operate their pool and work in them as lifeguards and staffers and all that kind of stuff. It's perfect. And they get coaches to supervise

the pool and it all turns out pretty well. But there's a problem, which is all the customers want to go to the pool through Labor Day and maybe even this September. But college and high school starts in Texas in the second week of August. So, like, basically what you see is, like, this is massive. Like, the entire staff was like, see, I'm going back to school. And, like, you're stuck trying to figure out how to staff this business for, like, another month. So it creates, like, a huge mess.

But, yeah, super fun. Yep. All right. Maybe I will own a boat rental business one day. But this is a great retirement business, I think. I think, yeah, it seems like fun. I think it's a cool opportunity. I actually like this.

I think for the right person, if this seems like fun to you and you also have those like digital skills, like I think it's a good, it's a good business to buy like a husband and wife team and the husband's like a or the wife's or either one like a digital marketing nerd like and the husband loves people and wants to hang out with drunk 22 year olds all the time and spray down their puke off of a boat. Like fantastic. Yeah. Am I not really selling it? Well, you know, maybe not to some listeners, but to others, I bet you're selling. on it.

Okay, cool. Anything else you guys want to wrap up this one? The only thing that this is missing is that they don't make pizza on the boats. If they made pizza on the boats, I would be in. Pizza boat. I love the pizza boat. Yeah, we'll put a link below to the episode number for the pizza boat. So, super fun.

All right, thank you guys. We'll see you next week.