Acquisitions Anonymous - #1 for business buying, selling and operating - Buying a $1.2M in Revenue Aircraft Service Center in New Jersey? - Acquisitions Anonymous 292

Episode Date: April 26, 2024

In this episode of Acquisitions Anonymous, Michael Girdley, Bill D'Alessandro, and Heather Endresen discuss buying an aircraft service center. They review the business details, noting its strong sales of $1.2 million and good profit margins. This episode is perfect for anyone interested in aviation and what it takes to run a niche service business.Check out the listing here: https://synergybb.com/listings/well-established-aircraft-service-center/Thanks to this week's sponsor:Have you thought about exiting your current online business or buying one to start a new journey as an entrepreneur but have no idea where to start? Unlock business opportunities with Boopos.com! Boopos is the #1 platform for buying and selling profitable online businesses with built-in acquisition financing for qualified buyers. At Boopos.com, you can source opportunities from Boopos exclusive listings and other marketplaces or bring your own proprietary deal flow for approval. Boopos can offer pre-approved financing for recurring revenue businesses, allowing you to access fast funding with no personal guarantees.Want to find out more? Go to go.boopos.com/michaelgirdley, sign up, and get qualified to sell your business or find your next deal.---Learn how to buy a business.If you are interested in buying a business but unsure how to start, you should check Michael's Buy a Business Course.You will learn:• Build a thesis for the type of business that's right for you‍• Learn how to stand out in a sea of buyers• Create a working, scalable Deal Engine getting you leads• Maximize your chances of finding great dealsShow Notes: 00:00 intro01:40 Private Planes and the $500 Hamburger04:21 The Dynamics and Safety of Plane Manufacturing05:00 The Price Range of General Aviation Planes06:50 Michael's anecdote09:10 Exploring the Business for Sale: An Aircraft Service Center11:37 The Risks and Challenges of Owning an Aircraft Service Center13:16 Is this a transferable business? 14:42  Why airports don't own this service?18:50 Did we find the business? 24:40 The Ideal Buyer 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]

All right, today's episode is all about general aviation in New Jersey, two words that you probably did not expect that would go together today. But Bill, myself, Michael, and Heather, we had a great time going through and digging into an aircraft service center that was in New Jersey outside of Philadelphia. And I think we actually figured out what company this is, which is our typical M.O. And then we spent a lot of time talking about the general aviation business and who should buy this business, which was priced at only two and a half times. earnings. So check it out and enjoy the episode.

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for up to 80% of the value of the business. Their team of advisors will explain it much better than anyone, so reach out to them at go.boopost.com slash Michael Gridlight and sign up to get in touch with them for your next deal. All right, so we swapped out Mills and Bill is here now. I'm here. I consider it sad and also. an improvement. At the same time. It's bad and good. Welcome to Acquisition is anonymous.

Hopefully better this time. Cool. All right, Heather. How many times have you been in a private plane? A few, actually. But not these little ones. I'm afraid of these little ones. The prop plane scare me.

But I have been in a private jet a few times, which is really cool. That is super cool. We went up riding with my buddy, because my eldest son is going to Embry Riddle University in the fall. And one of the things they offer is the ability to get your private pilots license while you go to college. And he's very excited about that. And so we went up flying with my buddy who's like one of these plane nerds.

So he's just like super excited to take you up on his plane and like go get the $500 hamburger. Have you guys heard of the $500 hamburger? I've heard of sort of like this. It has gold leaf on it or something. No, it's, this isn't Vegas. No, the $500 hamburger is this. You and your buddies go, you go fly out in your plane or planes, and you go fly for two hours someplace or an hour someplace,

and you land at one of these little general aviation fields. Like, we went to Hondo, which is west of San Antonio, and it's out in the middle, nowhere. And you land and you taxi over to the side, and then there'll be like a little fixed-based operations and FBO. And a lot of times they have little restaurants or cafes. So you go in there and you, you know, you paid $10 or $20 for the hamburger and have lunch and all that kind of stuff.

And then you get back to your plane and then you fly back. It's called the $500 hamburger because you just spent $500 in plane maintenance and fuel to go 30 miles away to have a hamburger. So we had the $500 hamburger. I love the idea of these little planes. So I guess we should mention the deal is an aircraft service center for small, you know, like what would you call it? What's the category of airplane here?

General aviation, right? Yeah, these are small general aviation. Yeah. Yeah. So, like, these have always scared the crap out of me. I unfortunately have had a friend pass away in one of these in an accident. So, like, I am so freaked out by these. But the idea of them is so cool because it's basically a car that flies.

And you can go to all kinds of different places, relatively easily on your own schedule, and relatively inexpensively. Yeah. Like, what does one of these go for? Like, the one picture of Mooney, you know, general aviation plane? Like a couple hundred thousand dollars, right? So that in the picture looks like a Cessna 172, which is like the most common one. If you see people, it's a high wing type thing.

It may be a Mooney, I don't know. But so, but like those can go anywhere from $25,000 to a million and a half dollars. Whoa. Yeah. So the spread on planes is insane because of the dynamics of how planes work, right? So there's very few manufacturers, right, compared to, say, cars. and things really, really have to go right in a plane. Unlike a car, if the engine dies

where you just pull over the side of the road and you put out one of those little triangles and you call your mom to pick you up, your plane, you do not want that engine to die when you're taking off. So it becomes this really interesting dynamic around aviation. And then inside of it is all differing levels

of radios and electronics and engine rebuilds and refitting and repainting and recabining and all this, kind of stuff. And like, you know, if you look at the inside of a cabin, like of a private jet, a little like $20 switch, right, for your air to turn on the air conditioning vent in the back, that'll be like a thousand dollars worth of work. Well, why? Because they have to take off like the entire roof of the thing, like to get in there and do that stuff. So anyway, it could be

anywhere from $25,000 for like a 50-year-old plane that hasn't been updated and needs an engine overall and needs a coat of paint to one that's got all new avionics, all new replacement, new engine, just redone all that kind of stuff. You can spend seven figures on a plane very easily. It's just amazing how quickly you can get there. But, you know, a typical plane like that with new stuff and might be 30 or 40 years old

and it's in good shape might be 200 grand, 150 grand. Okay. So that's more expensive than I thought. I've heard of people buying plans for like $80,000. So my buddy bought a his plane is, was built in the 80s, early 80s

of Cessna. It's a 40-year-old plane. And rough math, he bought it for 70 or 80 grand, pretty standard. But he has gone in and redone the engine, had all the overhauls done on all the controls. He still needs to get a repainted, which will be another 10 to 15 grand. He replaced all the avionics. So if you go in there, it looks like an iPad. He's got all new radios, all this kind of stuff. So he has another 125,000 in it that he has put in the plane. So you can get a cheap plane. Now, do you want to safe cheap plane. You want to fly in a cheap plane, not necessarily.

Yes. Right. And this is where I get the anxiety that you have, Bill. These are small planes and, like, who's making all these decisions before you get in this plane? Is it, you know, is it really safe or is someone cut some corners? You know, that's where I think it's a little scary. Well, that's why you need a place like this deal, which we should probably talk about here.

Yeah. Which is going to tell a aircraft service. Can I tell a story about when I consider getting a private pilots license and I knew it wasn't for me. So I was in Bentonville hanging out with my family. I'm like, you know what I do? I'm going to go do a discovery flight. That's what they call it.

They'll take the pilot will take you up. The teacher will take you up and kind of sell you on the whole prospect of doing it. You get to take the plane off and like fly around. And I like, we're just flying along. We're in this like old Cessna 172. It's just basically like a couch in this guy. And it's like the instructor is like 20 years old. And he's the, he's the old instructor because the junior instructor was sitting in the back.

She was 19. What? I'm like, I know 19-year-olds. You guys' brains are not fully functional yet, and they were very professional. But so we're just like, tutling along and the instructors like, you know, I'm asking about stuff. And then he's like, okay, you're flying. And I'm like flying. I'm doing the pedals and a little thing.

You know, I'm like the little kid that you get the plastic thing in the passenger seat, you know, driving the car. That's what I felt. And so then he goes, watch this. And he like turns off the engine and pushes the stick forward. And I was like, I was like, bro, you got to tell me. about this man at a time. My stomach is like up here and then he like pulls back and we just go back normally.

He turns on the engine. He's like, okay, now we can fly. I was like, what? You're supposed to be selling me on this. That's selling me on not doing this. But it's just like all their exercise. When you get your pilot license, that's what you do repeatedly as you practice any engine failure like that.

Stalls, spins, engine outs, stuck throttles. You practice all that kind of stuff. It's just like, I've got to go ride Southwest Airlines. I think those guys don't do it. I agree. I agree. But like the power of having just walk out to your plane, turn the key, let's go is pretty cool. So my buddy, when we rode with him, he got there an hour and a half before we did to get the plane ready to go.

All the checks, all the maintenance. All the stuff. And then we did the walk around with him and then putting the plane away. We helped him put it away. So, you know, you may not be going through security, but you're paying for it another way. Yeah. And a lot of times you do all that and you can't take off because there is something wrong. you know, and that's it.

So this is basically a boat. I'm more of a boats person, but it's basically a boat. You got to take it out. You got to put it away when you're done. You got to maintain it. Everything's too expensive, et cetera. All right. Now that I've sold everybody on why general aviation is for everybody,

let me read you this aircraft service center that I found from Synergy Business Broker. So the price is $850,000. Annual revenue is $1.2 million. Net cash flow is $350,000. So it looks like they run it maybe like 30% cash flow margins on 1.2 million, and they're selling for a little over two times cash flow, two and a half times cash flow.

Wow, a reasonable sale price. Yeah. Yeah, indeed. Industry of Transportation located in Mercer County, New Jersey. I bet we could Google it and figure out which airport they're at because there's not that many airports in Mercer County, New Jersey. The industry's premier aircraft center on the East Coast, the company is a one-stop destination for top-notch aircraft care,

conveniently located at the Central New Jersey. Central New Jersey Airport. It has a reputation for delivering exceptional work and its expertise is unparalleled. The company has an extensive reach with services that attract customers from across the east coast, from Maine and the north to as far south as Alabama. They are proud to build a loyal customer base that spans multiple states. As a factory authorized Mooney Service Center, the company's dedication to excellence in years of growth is certified by the very manufacturers themselves. Over 50% of business is driven by the loyal following of esteemed beachcraft, SESNA, and Piper owners

demonstrating the trust customers have in the company. Comprehensive services include annual inspections and maintenance, ensuring customers keep their aircrafts in peak condition, pre-purchase evaluations, insert customers make well-informed decisions when acquiring an aircraft, major airframe structural and sheet metal repairs

handled by skilled technicians to handle significant repairs with precision expertise. Aircraft new weight and balanced calculations ensure optimal performance and safety, glasses and speed modifications to enhance customers' aircraft performance and aesthetics. So when they say, Glass. I think they're referring to like all the instruments and stuff, but that may be wrong.

Not the windshield. Correct. I mean, it may be glass, but anyway. We're hitting the edges of my expertise here. Custom instrument panels and upgrades to our customers aircraft to their exact needs. Fuel tank repairs, since safety is a priority, ferry recovery services for anyone requiring assistance in moving or recovering their aircraft. Man, I guess if your aircraft is broken down or whatever. cool the business posed for significant growth

reason for sale the owners are looking to retire and will support the new owner in transition owner qualifications the ideal candidate for this business would potentially be a buyer in the aviation industry looking to grow by acquisition or any aviation educator enthusiast looking to own their own business so I mean this is by every definition

this is like if you were driving down the highway 60 years ago and you stopped a full service service center and they could fix your car and you know take a break all that's this is that for airplanes And charge you for the privilege of doing it. Yeah. Yeah. I mean, it's like if you're a general aviation pilot, you need all this stuff on a

regular basis. Like, this is the shop. And if you're based out of this airport, and I did some Googling, I'm pretty sure this is based out of Trenton Mercer Airport. KTTN is the airport code. And if you are based out of Trenton Mercer Airport in your general aviation, you're these guys' customer. There's probably, you know, I guess you could fly somewhere else and use a

different service center and a different small. airport, but if this is your home airport, you're probably using these guys. So there's kind of a nice captive customer base. And I think the owner is probably the chief mechanic. They didn't talk much about a staff or, you know, a team there. So this is sounding to me like maybe buy a job. And they at least rightly point out that the buyer needs to have that, that background. And probably, I would imagine there's some certifications that a person should have to own a business like this. Yeah, I mean, I wouldn't want to just buy this business and like, now I'm fixing your

airplane. Probably not good. Well, which is probably why it's priced the way it is. They have a very, very small market of potential buyers that could take this over. And, you know, and one of them is not an employee. You know, I think this is a good kind of business that you could pass on to a key employee, but obviously they're listing it so they didn't do that. Yeah.

It's just you're so beholden here. If you buy this and you are not an aircraft mechanic, you've maybe got one more aircraft mechanic on staff. And if he gets hit by a bus or retires or doesn't like your face, your business is over. Yeah, doesn't like your face. And that happens. It happens all the time.

So it's just, this is so hard to transfer, especially if the owner is the lead mechanic. But even if the owner is not the lead mechanic, you have such key man risk on the mechanics. And I don't know in, I don't know how easy it is to hire one of those, but skilled trades can be hard to attract.

Right. And you have to hire one right here at this airport that lives nearby and can come here every day. So you have a really, really kind of finite labor pool and your customers are pretty well-defined as well. It's not like you're going to grow this business to another airport very easily, I don't think. I think this is kind of a buy-a-job right here

at this airport. And it's a really important job. You know, this is safety. Airplane safety. It's a really, really important job. So that would be my first question. Is the owner performing some of the work? And I'm guessing at this size, they probably are.

And how can we replace them? Why does the airport itself not provide the service? I mean, it seems like this is a necessary service, to your point, Heather, But this existing as like a stand, I want to call it a parasite business, but a business that is totally dependent on this one airport, this kind of seems like it should be an airport service. But clearly the airport doesn't. You know, I learned a little bit about these small airports from a client. I did a deal in Texas where they, the business owned a fleet of Cessna, these small aircraft that did some services for oil and gas industry. And they actually ended up coming back and buying the airport that they worked out of.

It came up for sale and they ended up buying it. So I learned a little bit about that. The airport just sort of makes fees off of, you know, you coming and going out of their landing strip. And then they have other small businesses that are sort of the concessionaires, if you want to think of it that way, that do these kinds of things, including fuel. Usually the fuel is not necessarily owned by the airport either.

It can be, but sometimes it's not. Sometimes there's another business there. So it's, you know, like a lot of things, you peel back the layers and you find out it's always a network of small businesses, you know, more than it is one big monolithic business. And the small airports kind of work that way as well. The FBOs are different businesses.

And you'll go to small private airports where there's two different FBOs. They're competing for the business there. So they'll each have their own hanger and they'll offer different rates. And, you know, so it's its own little ecosystem of small businesses usually. Wow. I feel like I'd rather be the gas guy than the mechanic guy because your gas pumps can't quit on you. So it is, that's right. The whole gas game is really interesting.

They call it avgas. You have to have like special aviation gas for these type of planes. So the private pilots all kind of figure out who has the cheapest gas and like game the system on where they're going to pay. So like, for example, San Antonio Airport for a big international airport has like super cheap gas, but like Austin airport is like super expensive. So it creates a really interesting thing where people are like, okay, here's what we're going to do.

We're going to refuel in San Antonio on the way to Mexico or whatever to save a bunch money. And they'll save $400 or $500. So the other reason I think it's separated besides what Heather mentioned, Bill, a lot of times these airports are owned by people like the counties or cities. Like, you know, there's a reason why like all the, like, San Antonio International Airports owned by our city. because it's a huge moneymaker.

They make $50 million a year just basically in pure profit from parking. It's just crazy. Kind of that idea we've talked about a lot that a lot of businesses are just like paid parking operations with other stuff attached and like most of your airports

are shopping malls and paid parking operations with airplanes involved. And this airport, Trenton Mercer, is actually, says it's county owned. Yeah. So it is a county-owned airport.

Yeah. So I pulled up this other one, which is Trenton-Robinsville, appears to be right around the corner, which looks more like the type of an airport that would support and be specialized for these little kind of Cessna 172 and small general aviation planes. And here they have a gas service where you can buy, so they don't have a full FBO, like you can buy gas from a self-service thing. So I guess you've got to pull your plane up to it.

And other ones, like they'll bring a tanker out, like a tanker truck out and they fill you up. Then there's a flight academy, aircraft paying and detailing, air mods, flight and service. Service Center, which I think maybe this one, Bill, because it says authorized Moody's Service Center, Professional Aircraft Control and stuff like that. And then there's a competitor for them at the same airport, cutting edge aviation. Yeah, so there's two. If I were the competitor, I would be finding a way to pay this guy to go away. There's a reason they're not selling to the competitor. That's interesting. I pulled up their website and basically they list the exact same stuff the summary of services on their website is on the listing.

So I'm going to give a, I'm going to give props that I think I found it. Which one is it cutting edge or air mods? Oh, I see, I pulled it up, this one here. Air mods.

Oh, air mods. Like, here the first line in summary of our services, annual maintenance repairs. Comprehensive services from the listing, annual inspections and maintenance. Okay.

I was like, okay, cool. Yep, lazy brokers sometimes. Like, brokers at least run the business his website through ChatGPT and say, like,

rephrase this, please. So Michael can't Google it. Somebody sent us a listing that was totally written by ChatGPT, and they left the prompts in it and, like, put that in the teaser. Man. It was pretty bad. The whole world is getting so. I saw this analysis of medical papers published on PubMed,

and apparently there's this known quirk where ChatGPT uses the word Dell. like more than people do, like at a statistically too high rate. And that's one of the ways you can tell. And they charted the occurrence of the word delve in all the total papers submitted to PubMed over the last 20 years. And it's like zero zero and the last two years,

it 100 exists. So like these medical papers are being written by ChatGBT. This is terrifying. It is. I think ChatGPT is going to become our doctor, though. I think that's like you're just going to like punch in like, here's what's wrong and the tap Shabbt is going to say, oh, you need to go see a doctor for this. So I actually had an experience like that. So I had a bunch of blood work done. And they gave me the,

I use a service and they interpreted it for me, but they also gave me the like the raw lab corp outputs. I uploaded all the raw lab corps to GPT4. And I basically said, you know, acting as blah, blah, blah, blah, blah, like this is the blood work for a 38 year old male. You know, what, you know, what do you see here? what lifestyle interventions would you recommend, et cetera. And it actually noticed, and I told her all the supplements I was taking and everything, and it suggested I discontinued my vitamin C supplement because my iron absorption was too high. And there's an interaction between vitamin C and iron absorption, which no one had ever told me, and I checked up on and was absolutely accurate.

So like- I think it's great for that. It's wild. It was incredible. Yeah. All right. Yeah, I looked at a business. I looked at a business.

I've been traveling a lot lately and went to Harvard a couple weeks ago, and they do these cases that they bring up some actual deals. And one of them was this medical monitoring business where people, you know, cardiology patients might wear a little risk monitor to detect AFib or whatever. This is making a lot of money. But the first thing that went through my head was, can't chat GPT do this pretty soon or one of those AI platforms? Because you could wear the thing and have it connect to an AI. and it would tell you, hey, you know, your rhythmia or whatever, your heart rhythm is not right. And you need to go call your doctor. Why do you need a nurse monitoring that?

Why do you need to pay for that? I think a lot of businesses are going to get meteored by Chuck GPT that really don't see it coming. Let me tell you something cool about this, about this deal. I just found it. I'm just really excited to talk to you guys about that. Okay, so one of the things they do, which wasn't in a listing, is they do these things that are called ferry tank installations. So basically what they do is you have a plane

and you want to extend the range of it. What they'll do is they'll go install like a custom tank in the backseat. So here basically they took this this Kodiak type plane, right? And that's the name of the plane. And they wanted somebody who's flying it from Maine to South Africa.

So they went and took the, and added and basically doubled the amount of fuel this plane could carry to go from 315 gallons to 615 gallons total. And it could just enable them to just go, like, way beyond their normal range, right? Of course, the plane's heavier, but, like, you trade off, like, carrying less stuff for more fuel. So, like, then they've done these projects over and over again. Here they did it to a Cessna, a Carta Cardinal, all this kind of stuff.

And they have cool pictures. Clearly, the owner of this has really nerded out on doing this sort of extra fuel-type tanks. So, anyway, to continue on, the most interesting aspect of this is there is a flight school in Honolulu, right, in Hawaii. And this was like nine, 12 months ago. In the flight school, there was a problem, which is they do Cessna 172s, which are like these very basic training aircraft that a lot of people fly.

They're very common. But that plane does not have the range to fly from California to Hawaii. So you're like, okay, well, you know what you guys should do? Like just take off the wings and dismantle the thing, put it on a ship, and then reassemble it. Well, the problem is if you do that,

it's kind of like Humpty Dumpty, right? Once you take it apart and put it back together, it's never the same as when it was first put together. And so out of the factory. So you don't want to do that. So what these guys did in order to get the plane to Hawaii was figure out how to fly it from California to Hawaii and they put these spare tanks in there.

So this guy who flew it basically did a Cessna 172 flight at like 80 miles an hour, like at 3,000 feet of elevation, all the way across the Pacific Ocean, totally unsupported, with these nothing but a stat phone and a life jacket. And he flew for like 14 hours or something ridiculous to go from like basically Sacramento down to Hawaii, but they did it through these kind of excess ferry tanks.

So, anyway, this has nothing to do with the deal, but it was just like one of the coolest things because everybody on the internet was like, is the guy got to make it? And it's like you're just watching the sky track of like this plane, like going across the Pacific Ocean and just, you know, thousands of miles of water in every direction. And all the guy just has a life jacket and a sat phone

and a bunch of fuel behind him in a box. It's crazy. Crazy. And that's the type of aircraft nerd you need to be to buy this business. Look, the people that own the airport that my buddy flies at, that own the flight school, that they, like, that own the repair stuff, like, they are the type of people that would, you know, own a business like this. They would also build their house on the side of a private runway so they could fly all the time. And like, I think this is the type of business, like exactly what you're saying, Bill, like the right buyer for this is somebody who wants to nerd out on planes.

And look, like, this particular business, like they barely listed their contact information, but they have 14 pages about, like, putting all these custom tanks and projects. I mean, look at this stuff I'm scrolling through. Like, you know, if the guy didn't have enough time to put the address for the business on here, but he had enough time to write 14 pages

with detailed photos about what they did on these tank projects. Like, this is a nerd, plain nerds dream. Like, what's going on here? What about a veteran? A veteran pilot. We have a lot of military veterans that come out, want to buy a business, they don't want to have to go work in corporate.

And a lot of them have been, like the deal that I did in Texas, they were military veteran pilots. And so I'm sure out of the military, you've got a lot of mechanics, aircraft mechanics as well. So this might be a good opportunity for someone like that as well.

Yeah, the guy who owns the runway and flight school and all that kind of stuff here in San Antonio is exactly that former military guy doing a second thing. So yeah, cool. Cool. All right. Well, I think we figured out who should buy this. It's none of us. And I think Bill had to go to his next meeting. So it's a good place to wrap this one up. Anything we missed, Heather, you think on this? I don't think so. It's a good one.

Yeah, it's a really interesting. Some of these business that are out there. And look, I think we had a debate whether we've done this deal before. So we've had 300 episodes. We're like, we have we done this one? Because it created a really, an interesting dynamic, which is like what happens. maybe we talk about in a future episode. Like, what happens when you see a deal that's been on the market for like two years? Like, how do you deal with that situation?

It's pretty interesting. Yeah. I think that we should have us episode. That and broken deals, when you've been told by the broker that they've been in a process that broke, enter with caution because we don't ever really get the full story on why it broke. A million percent. Cool.

All right. Well, I will click stop there. And we'll catch everybody next week. I will be gone for two weeks, by the way. My wife and I have an 20th anniversary getaway. and I'll see you guys later this month. We'll have fun. Back from Europe.

So it should be good. A great time. Thank you. We need it.