Acquisitions Anonymous - #1 for business buying, selling and operating - Do you want to own a cleaning company? - Acquisitions Anonymous 173

Episode Date: March 8, 2023

Michael Girdley (@Girdley), Bill D’Alessandro (@BillDA), and Mills Snell (@thegeneralmills) review a cleaning company in Michigan. Good times were had by all! -----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.-----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]

Hey, everyone. This is Bill D'Alessandro, and welcome back to another episode of Acquisitions Anonymous. This one got weird. So it started off a commercial cleaning business that Mills and I were talking about. So actually really good insights about why this is a great industry, but why small deals are really hard to make pencil. And we walk through how you should think about doing small deals. And then just we're about to wrap it up, Michael joins the call, totally unannounced, hangs up another conference call because he has so much to say about this deal. So stick around to the end to hear Michael come in off the top rope. I hope you enjoyed this episode of Acquisitions Anonymous. Hey, 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 pay role 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 bunch and cloudbookkeeping.com as the sponsor for today's episode. All right, Mills, welcome back

to another episode. We are again unsupervised today. Michael, so Michael is not technically here, but he is here lurking watching us because he's on another call and cannot record, but he had to log in to hit the button because he's the host. So Michael is listening to us, but can't say anything, which is the best part. We're just going to get angry messages. He's texting us. Okay. So, Mills, we have a janitorial services provider today. Will you read it to us?

I'll put it up on the screen. Yep. Yep. So this is another deal from Calder Capital. We don't have any affiliation with these guys, but they do post pretty good deals. So we keep going back to them. This is a commercial janitorial services provider in central Michigan. This opportunity is a well-respected provider of commercial cleaning and janitorial services.

founded over 65 years ago. So I'm thinking it's got to be at least second generation or, you know, second round of ownership. Maybe it's inner family or just a second set of owners. They developed a secure reputation, dedicated workforce, and diverse customer base by offering services such as floor care, emergency cleanup, construction site cleanup, and window cleaning to customers. Its services are provided to local governments, universities, health care facilities, state

affiliates and other private companies. They also have a wholesale distribution entity for cleaning supplies. Family owned and well known within the region, the owner is willing to provide a customary and reasonable transition assistance. I love that. That's just like totally negotiable, right? It could be two weeks or it could be six months. You don't really know, but they want to submit transition. They occupy two buildings. Each of them are about 2,200 square feet. They're well lit and spacious. I think that's a fun. All right. Well, you got to have a lot. All right. Well, you got to The lights work, okay? They contain 680 square feet of office space and the rest is shop and warehouse.

They're both leased from an unrelated third party. The 2022 full year revenue was just a little bit over $1.3 million. And their 22 cash flow, they're saying is SDE, sellers discretionary earnings of $213,000. They have 23 W2 employees and 25 W9 independent contractors. They've been around since 1965. We talked about the facilities. They are selling the business in order to pursue a more flexible schedule while spending more time with family.

Investment highlights, there's two. One is effective operating systems and processes. And two is recent investment in new equipment and supplies. I got to think that's like a low-cap-ex kind of. New vacuum recently was purchased. Unless it's like floor cleaners, and those might be a few thousand dollars each. So as a percentage of SDE, it's probably significant. Growth opportunities, surprise, surprise, geographic expansion, restoration market augmentation.

So that would be like if, you know, the building floods or pipe burst, those kind of things. And then e-commerce development and sales team implementation. Interesting. Okay. Bill, what do you think? All right. So there's some things to like about this. So we can start with the fact that this thing is 65 years old.

And generally, you know, I hate to be the guy that uses the term Lindy effect, which has become so cliched, you know, on Twitter. But basically the Lindy effect means that if something has been around for a while, it will tend to be around for a long while more. Like the older something gets, the more likely it is to get even older, which is why people like to buy established businesses. And this is one. I mean, the fact that this business has stuck around for 65 years, you know, tells you something. something about the service they're providing about the brand that likely built in central Michigan. You know, this isn't just some upstart industrial cleaning company that started two or three years ago. So I do like that, right? I mean, does that, that counts for something, doesn't it?

Yeah, yeah, it definitely does. I mean, this, you see this, I know, I know it's an overused term, but you see the Lundy effect in a bunch of things like airplanes, right? Theoretically, people are like, oh, my gosh, I wouldn't want to fly in that 20-year-old airplane. I'd rather fly in the brand-new one. And it's like, well, actually, if something's going to go wrong, it's probably going to be in the one that's brand new and doesn't have all those tested hours. Right. Yeah, that old one has flown for a million hours and never had a problem.

Yeah. But the new one could have a latent defect and you just don't know about. It's like the sort of that survival effect too. Have you seen the diagram in the airplane with all they're like, you know, all the bullet holes are, you know, in these places. But that was only the shot down airplanes. Yeah. And all, you know, all the other ones are still flying.

Yeah. So it's sort of the same thing. So this business, 1.3 million in sales. 213K in SDE. The thing that is a bit of a bummer here is why is this not bigger after 65 years? I mean, this is the epitome of buying a job, right? Yeah, like you buy this thing, you make $200,000 a year overseeing a group of cleaners. Well, and not to mention, I mean, my whole, like, you know, my favorite soapbox is does it pencil?

You know, to put any debt on this thing, you're talking, you know, realistically, you're cutting the SDE at least in half. So, you know, now you're working for maybe $100,000 a year, and that $100,000 is all of your margin of safety, is your comp, because the debt service definitely gets paid first. So I think it's a little bit of a tricky, you know, tricky scenario. There's no asking price. And so I think that makes it a little bit difficult to just gauge expectations. But that would be a big question right out of the gate is, you know, how realistic is this? and does it even pencil. And if you have a decent broker on the other side,

they can do that math as well. One of my favorite arguments to use in setting pricing expectations with a seller is literally, like you reverse engineer, this is as much as a lender will lend. So sure, there are people who maybe just have cash in their pocket, but I hate to break it to you. They are not the ones who are going to come overpay.

They have cash in their pockets, you know? You can reverse engineer and just say, well, a bank will not allow me to pay something that ends up with the debt service coverage ratio lower than 1.25 or 1.5, whatever it may be. And so there's only so much cash flow that's available for debt service and debt is available under these terms. And so I can only pay a certain amount. That kind of burst their bubble a little bit. You highlight something I think is really important for people when you think about buying deals, especially buying deals with debt.

Because there's actually, when businesses are sold on an SDE number, embedded in that, there's actually three claims on that SDE. It's called SDE, the seller's discretionary earnings, but the seller is not the only person or the buyer, you the buyer is not the only person has a claim on those dollars, right? As soon as you do the deal, the SDE dollars get divided up into three pies. Pi one is debt service. That gets paid first, right? First in the packing order.

Right, that's first in the packing order. So whatever amount of leverage you put on a deal, the SDE goes down. the amount of money that you can put in your pocket goes down. That might be obvious to some, but I think that is not obvious to others. This is your cash flow before debt financing. So first, your SDE is going down by however much you have debt financed. Then the next thing is there's a buffer here between how much it can decline before it starts impacting your, the owner's comp.

And then the last person who has claim on the SDE is the owner for their comp. So in a business like this, with $213,000 of SDE, if you've got $100,000 a debt, now you've got $113,000 left over. And if you as the owner want to make $100,000 a year, you can only absorb $13,000 of, oh, shit, before it starts coming out of your pocket. Right. And you start not making rent, et cetera, right? So there's not a huge buffer. In a much larger business, you know, if you only got to make $100,000 or $200,000 a year, but you have $3 million of EBITDA. and a million dollars of that go-to-dead service,

and you've got $2 million of post-dead service cash flow, a lot can go wrong before you're out on the street. But a business like this, you start absorbing the go-wrong stuff right out of your personal cash flow almost immediately. And it's nothing to do with this business, and there's actually a lot I like about this business, which we'll get into a minute.

It's just the size makes it risky. Yeah, absolutely. I'm just running some quick math. like, you know, if, if, you know, you could get just whatever, you know, reasonable terms, you keep talking about, I'm going to just run these numbers really quick. So another thing that's that I do like about this is it's a B2B service. So Mills, you know, your business is a B2B service, you know, putting roofs on schools and other places.

You know, this would be to be service too. If your building is clean, you know, every day, you come in on Monday and the cleaners have been there over the weekend or or come in the morning, they've been there overnight or whatever. And it's clean. This is the type of thing that you just don't. cancel for 20 years, right? You know, the price is reasonable, the quality is good. There is no reason to change. So I would think it should be, this business should be very, very sticky if you can do it well.

The question, though, is again, why is it not bigger? You know, it's been around for 65 years, it should have very, very sticky clients. So you should, even if you add one client a year, you know, you should not be churning very quickly and you should have a bigger business, I would think. So that's a diligence item, but that's actually a part that I really like. about this category, these B2B cleaning businesses, they can be super, super sticky. All you got to do is clear the bar of, like, did you mop the floor? And like, did you do it on time? And like, people probably won't cancel. One of the like red flags to me and their services is that they've gone so broad. You know, like, oh, we also have a wholesale, you know, supply distribution business.

It's like, okay, I understand how you got there. And I understand why you probably started doing that because you had a bunch of stuff sitting on the shelf and you're like, we could sell this stuff to other people who don't have, maybe have the same purchasing power as us. But I think those types of, those types of tangential growth things end up being, you know, a little bit of more of a distraction than they are an opportunity. To your point, Bill, like, if you're good at cleaning, right, and you're good at staffing, and you're good at the actual customer acquisition model for, for, you know, fulfilling this work, then go grow that, right?

go grow the high margin service instead of the low margin distribution. And so when you see these businesses that like have kind of drifted outside of their core competency, I view it as more of a risk, right? And kind of a distraction than it is like, oh, wow, they have diversified revenue. I would be totally fine if 100% of their revenue is cleaning services. Yeah, because this is a good category, right? I mean, if you can have sticky customers, it's a service business, it should be decently good margin. I wouldn't call this like high level technical services great margin, but you know,

it should be a decent margin. Let's talk a little bit about Mills how you staff something like this, because staffing, it's a service business, right? So if you can't staff it with people who can deliver the service, you're cooked, right? So that's really the whole ballgame. This business has 23 full-time W-2 employees, but then they also have just as many 25 W-9-1099 independent contractors. Mills, talk a little bit about why it probably is that way and how you staff a business like this. My guess is that it's probably like the flexibility of whether it's seasonal work or just kind of work that ebbs and flows, that they may have, their on staff folks are almost like a lead person or a lead cleaner, you know, a person who is interfacing with the customers can make

sure that, you know, they have the keys, right, or the keypad access to the building, you know, they're in charge of all the cleaning supplies, those kinds of things. And then there's, you know, a helper or two who are, you know, meeting your staff person on site. And they're 1099. They're independent contractors. It's either that kind of the leader helper model or it's, you have dedicated crews that are captive employees. And then you have, you know, independent contractors who they just do, you know, they're self-contained, self-sufficient. They bring all their own stuff and you just sub-jobs out to them. There's a lot of very specific rules about the way the IRS will allow you to treat

independent contractors. And there's means testing for that that we don't really have the, you know, the bandwidth they get into today. But you would want to find out like what's the nature of this from a work, you know, a workflow and a workforce standpoint. Both can work. I mean, the same thing happens. I talk about this all the time. The same thing happens in the roofing industry, and it's maybe a little bit more, you know, highly skilled than, you know, interior office cleaning. But also, you're talking about putting people into somebody else's office. Like, theft is a big deal. And then everything that's less serious than that, that's also problematic. We've talked about it. My brother owns a moving business. The biggest, like, no, no for roofing,

I mean, for moving contractors is, you know, they go in and they destroy somebody's bathroom in their home while they're moving. And it's just like a customer service nightmare. So you would want to drill down into it. There's ways you can make either model work, but you definitely want to know what you're getting into. Do you own your labor, you know, or is it a mix? Yep. And you also want to make sure that all that labor they don't own,

the 1099ers, that they are doing it in an IRS compliant way and not directing those people's activities, all that stuff. Otherwise, they could sue for benefits and W2 status and all that stuff. So that would be something to diligence. Yeah. The other thing that's really interesting about staffing a business like this, a cleaning business specifically, a B2B cleaning business, is that generally your customers want this service done at night or on the weekends, right? If they're in their office, they can't

have a janitor coming in at 2 p.m. run the vacuum, wiping down their desk, emptying the trash, all that stuff, right? So these businesses are generally nights and weekends businesses, which from an owner lifestyle point of view cannot be great. But the separate problem is that all of your employees, you are hiring and staffing third shift employees, right? And part-time employees and very often second job employees, right? And that often can be why you've got a lot of 1099s because these are side hustlers, right? You know, they've got a daytime job and they're trying to get a couple hours a night cleaning to supplement their income, which is fine. But as soon as the shit hits the fan, you know which job they're not going to show up for. It's yours, right? And then

your client comes in and that, you know, the bathrooms aren't clean. And they're upset at you. And The only way this becomes not a good business is when your clients churned because their bathrooms aren't clean. So you're pinning your whole reputation on the guy with the second side hustle is your primary employee. That's a challenge. Which is why this is ultimately like a systems reliant business. It's, you know, if this business is still running the same way it did 65 years ago where the owner is keeping all the plate spinning and they're the one who knows, you know, who called out, who no call, no showed, you know. But what you would love to see here, and if it's not there, then you view it as an opportunity, but you don't pay up for a highly systematized business is some kind of, you know, not like true

automation, but just something that is systems oriented. When the cleaners get there, they check in, like, you can view it remotely in some way, shape, or form. They're keeping track of their hours and something that is, you know, transparent and asynchronous and not, you know, just them sending you text because you got to imagine if you've got, you know, 15 crews out on a nightly basis, you just have to have some kind of platform to organize this. Yeah, I mean, you need almost like a dispatcher, right? Like if your crew does not check in via GPS on their phone at the location within 15 minutes of when they're supposed to be there, someone should be getting a notification and should not be you. And that person then, if they're definitely not there with, they's calling

them and then they can't get a hold of them by 30 minutes late, they're dispatching another crew who is on standby. Yeah. Right. And switch, of course, you have to staff and make sure you've got a standby crew, et cetera. It's a nightmare. I'm just telling you, because we deal with this in our service department where people are like, well, you know, your crew said they were here and you sent me an invoice, but nobody checked in and nobody checked out and we didn't see them. And it's like, you know, if we're just relying on, you know, our word versus theirs and not

some kind of, you know, authentication, some kind of proof, you know, some kind of photo evidence that we actually did what we said we were going to do in charge for, it's, and you multiply that, you know, times X number of crews and X number of Y number of customers. It's very problematic. Yeah. And it's not, the tech here is not hard, right? Basic, like, it's basic app on your phone, basic check in, maybe take a picture of the bathroom after you've cleaned it.

I mean, it is not hard to be unimpeachable here as having done the job on time and perfect. And I really don't think this is the type of software that you would have to build yourself internally. I am, I do not know of it by name, but I am pretty damn confident there exists software that you can just buy. to do this. Yeah. Bill, let's go back to purchase price because this is, this is my favorite hill. So if the business is doing $213,000 in SDE, and let's just say they want a four times multiple, that's an $8502,000 purchase price. Let's say that, you know, you're putting 20% down in the form

of, you know, equity, friends and family, and let's just even leave sellers note aside. You're bringing 20%, you know, about, you know, about $200,000 a little bit less. But you're financing around $6,000 $50,000. On a seven-year am and a 6% interest rate, your annual debt service is $122,000. And a seven-year am, like most commercial lenders, if this is your first time borrowing money, they're not going to want to stretch this thing out seven years. It's just not that big. There's not that much wiggle. But you're left with on kind of the, you know, SDE minus debt service, you're left with $90,000 a year. And like you said, you know, that is not just your salary, but it's your salary and all of your, you know, your wiggle room, all of your

access-free cash flow. So that means if one client cancels, right, you go from making 90 grand a year to 60 grand a year. Yep. Yeah, exactly. If there are, yeah, $2,500, you know, a month customer. And so that, you know, tells you probably purchase prices is, is not four times. It doesn't really work under that scenario.

And, you know, you can reverse engineer and just say, hey, look, I mean, from a debt service coverage ratio, here is what a lender will. will provide and will allow. And it can be a helpful tool in the toolbox. Yeah, absolutely. I think people don't understand that when I think about buying business with debt. That service is real and it comes out of your SD. And that's the tough thing about this business. It's just not going to trade for, tough for the seller. It's not going to trade for four times. Like there's not a ton of enterprise value here. And big part of it is just because it's small. It's not necessarily that the business model is bad or there's anything wrong with it.

Right. If this business were five times the size and doing a million in SD, I would freaking love this business, right? I would love it. So in the services, in the in the realm of service-based businesses, you know, you kind of people generally think about it as kind of residential services versus kind of commercial or general business services. And then there's kind of multiple tranches off of that. The thought behind it is that residential is kind of one hit, unless it's a reoccurring type thing. Like, we're going to come change your HVAC filters or your light bulbs or we're going to do lawn service and it's reoccurring. But most job-specific things are kind of project-based. We're going to come, you know, install a sink or we're going to come

plant a tree or we're going to come pave your driveway. Those types of things are just, they happen like once every five, ten, 15, 20 years. On the B-to-B side, what's not about it is that if you're doing a job, like a project-specific thing, you are probably dealing with a multi-asset owner. Like, if you're going to stripe the parking lot for them, statistically they probably own more than one building and have more than one parking lot, and you can resell those people based on doing a good job. So it's stickier in that way, but it's also stickier in that, you know, if your spouse decides to work part-time or something, or, you know, you take a pay cut, you're going to be going through.

and like canceling Hulu and Netflix and, you know, all the different things and trying to lock down your bills. The theory is that in B2B, people are just not as, they're not as, you know, price sensitive. And so therefore, those relationships are more, you know, are more sticky. I had an instance recently with a dumpster, you know, not a construction dumpster, not a roll-off, but just like an eight-yard dumpster on a commercial building that I own. And I reach out, you know, ask a bunch of people, hey, who do you like for this? and everybody says, I hate who I use.

And I got like five different names of who not to use. But that's all the service providers. So I end up kind of going with, you know, the least of the worst options. And they want a five-year contract, 125 or $145 a month for dumpsters, a five-year contract. And I just was like, look, man, we've never worked together. I don't, like, I'm not going to sign a five-year contract on this. And they're like, well, you can get out if we don't perform and if you sell the building and all this stuff.

And I'm like, how about a year? and they tried to tell me that they had a significant sunk cost. And I'm like, well, the dumpster itself is not like screwed into the ground. It's not like you put it in concrete. Like, if we cancel, you take it with you. You really don't have any sunk cost on this. That's not true sunk cost. That's just your CAPEX, but you take this thing with you somewhere else if I fire you.

Right. So they agreed to a 12-month contract. They leave the dumpster in the middle of the one loading dock on the building, like smack dab in the middle of it. I sent him a picture ahead of time and said, this is where it needs to go. Just because there was a breakdown in communication and the person who was dropping it off didn't think. So they leave it. And for four and a half days, I call the guy every day because my tenant is calling me saying,

hey, look, you know, it's blocking our loading dock and it's disrupting deliveries. And finally, I get to the point with the guy where I use one of our superintendent's lines and I just say, look, I'm going to bring a forklift out there and I'm going to drag your dumpster into the middle of the street, into this four-lane street, and I'm going to leave it there if you don't come pick it up today. But so all that happens, I still haven't changed service providers. That's the nature of the sticky relationship in B2B is that, you know, it's just, I just want it out of sight, out of mind, and I don't want to go through the whole sales process again. Now, if this was the guy who was, like, mowing my lawn and he kept, like, I don't know,

running over my kids' toys with his riding lawnmower, like, my wife's going to be on me. I'm going to be on that guy. we're going to have switched service providers. But in B-to-B, I feel like there's a slightly different relationship. So it's one of the pros of this realm, of this vertical. Yep. I love like petty disputes like that where people are like, yeah, the dumpsters in front of dock and it's like, brother, I will drag this into the middle of the highway and the police

will be calling you. It has your name on the side of it. It's inevitable. I had the same thing happen with the landscape guy on that building where he cut down all this stuff and he just left it in the parking lot. and we're short on parking spaces anyways. And there's like bamboo stacked in the corner. And I'm like, dude, you got to move.

You can't leave the debris in the parking lot. Like, these people are paying rent and they expect, you know, parking spaces. But I didn't, I didn't fire him either. So I'm just the total softy. Well, dumpsters are a great example, right? So one of the most successful roll-ups of all time is waste management. Mm-hmm. Right.

Pointe-Hindsinga. I mean, that is a multi-billion billion-dollar roll-up of dumpsters. because it's a great business. It's really sticky. The assets are leverageable. So you've got two things that really contribute to this being a great business to borrow against. It's got a hard asset base in dumpsters. And it's got really, really sticky contracted revenue.

Yeah. I mean, like, that is a lender's dream. So these are great businesses to buy because you can use a lot of debt and a little bit of equity. So Wayne Hizenga did an incredibly successful roll up called waste management, which you guys have all seen in the grain trucks. with the grain, even the waste management open, the golf tournament in Arizona, like huge, huge success, all in dumpsters. One of the things that, you know, is different in this cleaning business than something like

dumpsters is barriers to entry. And you mentioned this, like it's a nights and weekend thing, your competition, and this recently came up with somebody that I was talking with, they were looking for a referral for an office cleaner. And they ended up saying, well, you know what? Actually, like one of our employees, you know, has a sister who's going to come. do it and we're going to try her out. Because literally, and there's, you know, there's plenty of great people on Twitter

who've talked about this and how they, you know, spun these businesses up. But, you know, you literally can go spend like 50 to 100 bucks and you can be the cleaner. And so the barriers to injury are so low that, you know, it's hard to differentiate yourself, I think in the short term. In the long term, if you just consistently deliver, you're going to beat out that person who's like, you know what, I'm bored on Thursday nights and I'll do it once at week. And that's where over the long term, I think you really can't differentiate. Yeah, well, that also illustrates sort of the ideal customer segment for a commercial

cleaning business. And that's another thing that I would be diligently. If you come in here and most of their clients are, you know, 5,000 square foot offices or small warehouses or whatever, that's dangerous because that's the type of client who doesn't have really complicated needs, who you can come in and get ankle bitten by all of these guys with a vacuum, right? That under underbid the contract by 40% because, you know, they have no overhead and they don't know how to price it and they're not valuing their own time and all this stuff. But if the clients are one million square foot office buildings and you need a team of 40 every night to do the job, and you like, that's the type of thing where you have a long-term contract. You have dedicated teams.

Like that is an incredibly good business. I've also seen some that are differentiated in like like kind of cool, unique ways like one guy that I knew, it was a cleaning service, but it was for data centers. So it's not like they're like, you know, taking the mop bucket around in these, you know, in these data centers. It's very, very locked down. It's very specific. It all has to be vacuumed in a certain way with very specific types of equipment. And there's kind of a discerning level of you can't just, you know, spill cleaner in the, in the server room, you know, in the data room. Yeah. So they commanded, a very, very significant premium, and it was very, you know, kind of hefty contracts.

The other is, I've seen folks who, it's not just cleaning, but do any types of services in facilities that have top secret or secret clearance where, you know, like all the files are locked up and all those kind of things, but just to go in the building, just to put somebody in there to take the trash out, you're already like a level above. And you have to scrutinize those people. You have to do background checks and you have to pay them more and all those kind of things. they're awesome when you can kind of get a little bit of an edge that is, you know, differentiating in that way. Yep.

Oh, yeah. That's interesting. So imagine a janitor with top secret clearance, right? What's the billing rate for that guy? Well, and typically they don't have to have the clearance. Like, IT, they have to have clearance is what I've seen. If you're doing IT work for people who have top secret clearance, you have to have top secret clearance, that kind of thing.

But if you're just the janitor, you know, going in and emptying the trash and cleaning the bathrooms and vacuuming the carpet. You don't necessarily have to have to have that clearance. It's just that they really, really care about who comes in the building. Right. You can't be stealing state secrets out of the trash can. Yes. Yes, exactly.

You know, gluing back together the shredded document. I mean, like, every spy movie, right? Like, that's how they get the documents is from the janitor, right? Yeah, yeah. All right, Bill. So to wrap this one up, what under what scenario do you think, you know, this makes sense? To me, it's like an absolute deal killer, and I'm just a geography. snob, but I would not want to be in central Michigan. No offense to the folks from Michigan.

So it's like, I'm out. But if this was in South Carolina and, you know, it was in my backyard and I felt like I could develop a relationship with the sellers and like find somebody to run this business, like under what scenario to paint me this picture? So here's where I think it makes sense. It makes sense if you have a commercial cleaning business in central Michigan and you want to buy the clients, right? Like as a as a direct bolt on to increase your density in the same geography, probably makes total sense. That being said, I wouldn't pay a lot of money because you would also just go steal those clients. Exactly. You could compete it away. You could compete it away, right? So I wouldn't pay a ton of money, but potentially. The other place where it can make a ton of

sense is you are already operating a commercial cleaning business in an adjacent town. You know, could make a lot of sense. So it's just a short hop over. You could back up all of their crews with your crews that are already existing, even though it would be a little bit of drive, et cetera. So a short hopscotch geographic expansion within driving distance or close driving distance could make sense. I could potentially also see it making sense if you had a business doing other B2B services in the same geography. You know, like if you were doing parking lot striping, for example, in the same geography

and you want to get into cleaning, you know, bolting that on and then, of course, cross-selling services. Speaking of cross-selling services, this is one reason I actually like that it's in central Michigan. It snows all the time there, right? So their parking lots are trash, like it needs to be restriped. They need to be plowed and shoveled and the people track snow and salt into the, you know, you need a lot more janitorial, especially in the winter. But if you're in Florida, like, it never snows in Florida. So you can't cross-sell any of that stuff. Yeah. So those are things where I think it makes sense. Guys, I'm here now. Could you catch me up

on everything you just talked about for a lot of 30 minutes? You're only cannibal and at the last minute. loves this deal so much. He hung up his other call and tapped in from the top rope. Yeah. Sorry. It looked like I was, you know, I was on another call where you guys were doing this. And I saw you pull up the deal and I was, I saw you pull up the deal and I said, oh, this deal looks awesome. I would much rather be on that than doing this phone call. So anyway, glad you guys have fun. So Gurley. So, okay, so completely zero context. What are your thoughts on commercial cleaning businesses? Love them or hate them? I think there are niches of it that are very interesting. I think most of them are terrible.

Why are they terrible? The older I'm getting, the more I am very interested in two things. One is, what is the weather like where I am? And number two, what people do I work with? And I think by and large, certain businesses attract people that are not that fun to work with. And cleaning and cleaning up poop and all that kind of stuff seems like exactly the type of stuff I don't want to be doing all day and probably. Gertly too good to clean toilets in summary.

I totally will. I mean, look, I've cleaned a lot of toilets in my day. And if I'm like on the equity cap table, I totally will. I'm just not going to voluntarily sign up for it unless I really, really have to. That's how I think about it. Yeah. It's awesome. You got to always, as we've talked about this on prior episodes, like you have to, in

the back of your mind, always consider what the business does. And that there is a high likelihood you as the owner will do it at some point. Maybe not every day, but you're going to be doing it. And so worst case, Gertley is selling fireworks on the side of the street corner in Texas. I think he can handle that. But worst case, he's cleaning out toilets on the side of the street corner in Texas. Nope, below the line. At this point in life, yeah, life's too short for me.

Just not interested. You act like you're like in your 70s currently. You're like, with the limited amount of time I have left. I have remaining. Oh, man. You know, I had lunch yesterday of my buddy who's 70, and like, it becomes pretty clear. Like, that's, you know, I've got, I'm 48 right now. I've got friends that are that old.

And like, and then I'm seeing it real time. Like, my parents and my in their mid-70s, it comes at you pretty fast. That's the lesson I'm learning right now is like, oh, man, like, it's a blink of an eye between 48 and 68. On that note, of doubtership. Let's go do some shots. So if you are young and like cleaning toilets, commercial cleaning is a great thing. So to wrap this up, I think the commercial cleaning business space can be really interesting if it's differentiated in some way, server rooms, you know, biology labs, who knows what,

or bigger buildings, more complex jobs where you don't get ankle butt bitten by a guy with a vacuum cleaner who doesn't value his time. This specific business, I think, is tough because of the size, even though I like that it's 65 years old. You know, Lindy, it's probably got some long customer relationships. It's just, there's so much risk in it only being $200,000 of SDE. One of my favorite businesses that I looked at really seriously several years ago, they would do industrial cleaning, but they would do it during like plant shutdowns. So they would go into places like concrete plants where there's just like dust everywhere.

and one week a year, two weeks a year, these concrete plants shut down, and then they have to go, like, get the dust off of everything, you know, where it's accumulated. And it is just like terrible, dirty, you know, like industrial cleaning. But the premium that those businesses get, because it's like, look, you need to put 20 people here for a two week period, and they absolutely have to be here because we're shutting down the plant. And it costs us millions of dollars a day to be shut down. those types of things are super interesting or getting into certain manufacturing facilities like we have a bunch of weapons manufacturers

in South Carolina like you know if you're going to go into the building where they make the guns like just any differentiation that you can but chances are right this is kind of more run of the mill and I definitely don't think it's something that you go out on a limb or you know

stretch your neck out too far forward lever up by the small cleaning business all right now I'll do it for another episode of Acquisitions Anonymous with guest appearance by Michael Girdley off the top rope at the end. Leo Save Review, if you enjoyed this, us messing around, and we will see you next week.