Acquisitions Anonymous - #1 for business buying, selling and operating - Fun with a chain of $13mm family fun centers - Acquisitions Anonymous 267

Episode Date: January 30, 2024

In this insightful episode of Acquisitions Anonymous, the hosts delve into a network of indoor family entertainment and recreation centers. With a focus on the business's strategic Midwest locations, operational excellence, and impressive financial growth, the team navigates through various aspects such as the impact of COVID-19, capital expenditure considerations, market competition, and potential buyer profiles. This episode offers a balanced exploration of both opportunities and challenges in acquiring a large-scale entertainment business.Today's deal comes from Axial.  Axial is a trusted deal-sourcing platform serving professional acquirers in the American lower middle market.Thanks to our sponsors for this week:Acquisition Lab and their team have been longtime supporters of the pod.Created by Walker Diebel author of Buy Then Build: How to Outsmart the Startup Game, is an accelerator with a highly vetted cohort-based educational and support community for people serious about buying a business.Acquisition Lab exists to help people buy a business and navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close.If you are serious about buying a business, check out acquisitionlab.com or email the Lab's director Chelsea Wood, [e-mail].-------------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]

Happy New Year and welcome back to another episode of Acquisitions Anonymous. This is Bill Dallisandro. And this episode, you have all four of your hosts, me and Mills and Michael and Heather. And we are doing another axial deal. It is a $4 million chain of trampoline parks. If there's one thing you take away from this episode is that Heather has an absolute killer pun about halfway through. So it's a really cool business. It's growing.

It's 25% EBidon margins. definitely financeable, you know, good one for a family office or a large researcher. I hope you enjoy this episode of Acquisitions Anonymous. This episode of Acquisitions Anonymous is sponsored by Acquisition Lab. Acquisition Lab and their team, they've been longtime supporters of the pod, and they provide a really great service for people who are looking to acquire a business. So it's created by Walker Dybel, who's become a friend, the author of Buy, Then Build, how to outsmart the startup game.

So Acquisition Lab is an accelerator with a highly vetted, cohort-based educational and support community for people who are serious about buying a business. So a lot of our listeners like you, you tune in every week to our deal reviews, you want to get in on buying a business. You know, you're on this podcast because you're trying to learn how to buy a business. But if you're not quite sure where to start, acquisition lab is a great place to start. So they exist to help people buy a business and to navigate all those complexities of the process, everything you hear us talk about on the show. They provide a proven framework, tools and resources that support you all the way from search to close.

They do it. There's a whole bunch of educational material and support. So if you're serious about buying a business, check out AcquisitionLab.com, or you can actually email the program director Chelsea Wood directly. Her email is Chelsea at buy then build.com. All right. We have got all four hosts on this beautiful first week in January. 24 Acquisition Anonymous.

Let's go. our condolences. I'm going to say starting off with a bang. Yeah. So did you guys have a good New Year's? Did you guys go anywhere? I mean, Michael, you had an explosive New Year's, right? Like tons of fireworks sold?

Yeah, it was a good season. So the weather really cooperated. So sometimes you eat the bear. Sometimes the bear eats you and we ate the bear this year. So it's pretty good. I'm not going to complain. I saw this video on the internet that I do not think was shared by you, but it was like an aerial pan of the city of San Antonio.

I saw that. That was amazing. It looked like almost it was being bombed. But like there were so many fireworks going off. It was like panning across the whole city. It was like you personally drove around to every home in San Antonio and handed them like a ton of fireworks. I was shocked. Bill, when you watched that video, did you hear a cash register ringing in your ear?

That's exactly what I was thinking. When I saw it, I was just like, cha-ching, cha-ching, to-ching, to-ching, Michael. Our creditors watch that, and they hear their money getting paid back. It's the thing to do here in San Antonio, and there's other places that are like it around the world. I saw another video in Tokyo, which was kind of similar, but there the video was cooler. It looked the same thing, but instead of like just freeways and fireworks behind the freeways, it was right next to Hedneda Airport in Tokyo. Like, it was cool.

Like, just like you see these 747s and triple seven's taken off. And it's like in the background. So kudos to people to get out and celebrate. I think it's a good thing. You kind of have to, though. I have an economic interest in that and illegal. It's like Bill saying you should treat your dog well. Treat your dogs well.

Cudos to all those people. Look, I don't like dogs either. I mean, it's fine. The dogs don't like fireworks. I'm a cat guy. Yeah, this is incompatible. The dads hate the fireworks. Yeah.

That's good. I don't like the dogs either. No, don't worry. No, Michael, we are not at odds. In fact, you are also my best friend because we do sell a lot of calming supplements at the year's Eve and Fourth of July. We have whole marketing pushes around. Fourth of July, the fireworks are coming.

Chill your dog out. I got you. Are we supposed to do a deal today? Oh, yeah. What's this podcast about? Wait a minute. Is this a podcast? All right.

Who's reading it? It's a good one. It's another Axi one today. Who's got it? I've got it. I'm got it. I'm going to read. Yeah, it is a, it's from Axial. It is a 4 million EBITDA network of indoor family entertainment and recreation centers. The company owns and operates a network of four established indoor family fund entertainment recreation complexes strategically located in the Midwest. managed by a centralized team, each complex strategically positioned near bustling suburban neighborhoods outside major metropolitan areas, enjoying a stellar reputation in their respective local markets. With recent extensive facility and attraction renovations, the business is positioned for robust growth and enhanced profitability. Strategic locations, situated in a busy suburban

neighborhood, each complex benefits from proximity to major metropolitan areas. I already said that, and a solid customer base. Premium entertainment offerings distinguished itself in the market. The centers boast diverse array of attractions including laser tag, trampolines, go-carts, arcades, climbing walls, rope courses, and more, ensuring a unique and engaging experience for visitors. Operational excellence under the current ownership, they have streamlined costs in operations at each location, resulting in high profit margins and efficient operations, proven growth strategies.

The ownership team has meticulously developed an infrastructure and growth plan positioning the company, organic expansion, and increased market share. So they list the attractions again, which I already went through, and to kind of repeat the rest of it, I think, again, in investment consideration. So if you could scroll down, well, let's see, maybe you did already, I'm on a different page here. Sorry, I'll scroll down. So revenue. 21 to 23, 13.1, 13.9, and 15.7 million in revenue. So they grew a lot in 23. Year over-year growth, that was 6.1% in 22 and 12.9% in 23. EBITDA was 3, 3.6, and 4 million. And the EBITDA margin has been 22.9, 25.9, and now 25.5.

So that is the deal. It is basically a trampoline park with a few other things going on in it. Wait, so how did these guys do okay during COVID? This doesn't make any sense at all. Well, you don't know that. I mean, we don't see 2020 here. 2021, they had $13 million in revenue. Yeah, I think 20 is not there.

So 20 was probably the really bad year. And 21, they probably reopened. It's in the Midwest. I think it all depends on, you know, where things were. whether they were more lax or more tight. And this probably is an area where parents were more than happy to get their kids in these places. Maybe a little bit of a post-COVID bump, I would imagine. The other thing it doesn't disclose here is this is a network.

So this is a chain. They could have just opened a ton of new locations. So we don't have any visibility here on kind of revenue per location and how that's trended. That would be one of my primary questions. You know, their revenue is, you know, it's up from 13-1 to 15-7. but if they doubled the number of locations, that's suddenly not so good anymore. Right.

And these are interesting because they are sort of, it's a location, it's a destination. You've got to go there to experience all this. Before we started recording, I mentioned that I'm working on a deal that is a bounce house business. And I really like that business. And it's kind of a funny story because I actually funded

the current seller back in 2018 when he bought it. the seller that he sold, he bought from still works with me and is looking at other businesses to acquire. And I'm now like in the middle of a transaction to another guy who, believe it or not, is a super sophisticated investment banker that's kind of stepping down from a career there to run a bounce house business. In fact, it was kind of hard. The bankers all kind of said, is he really going to run this? And he really is. So it's kind of a cool story. But I like that business because it's portable.

They rent bounce houses and like take them to your house or to the park or whatever and set them up. Right. And community events and church events and all those kinds of things. And it's a different, you know, the opportunities for growth when you are mobile like that are very different. Because, you know, you store everything in a warehouse and you can just get a bigger warehouse and you can do some marketing and you can expand your geography, you know, very cheaply, relatively speaking. This, to Bill's point, you've got to add a, you know, a whole new location. You have to do the CAPEX to build one out. Or is probably a pretty good, a pretty good level of scale for something like this. But, you know, there's probably going to be

a top performing location and probably a little bit of an underperforming location somewhere in there. It's interesting to think about the unit economics on these, you know, let's just assume averages. They're doing three or four million dollars in revenue plus or minus $750,000 in EBITDA. I am dying to know how much they spent on the recent. innovations, you know, and CAPEX that's not, not going to be reflected in EBITDA, and how often you have to do that for these kind of things. I mean, laser tag, you know, I guess doesn't go out of style. People have been doing that for decades, but how often do you have to, you know, you know, redo your whole system, you know, indoor climbing walls, video games, stuff like that.

Yeah. I have another anecdotal story on climbing walls. I looked at a deal where a group put in, a very extensive indoor climbing, rock climbing gym, and they abandoned the whole project. Not only was it bad timing because it came online in 2020, but they finally realized that they just couldn't have enough people on the wall at any given time that they had a capacity problem, basically. They hadn't really figured that out until they built it. And so climbing walls are, you know, I understand fairly inefficient use of space. So I imagine this is probably one simple little corner of this space. A big climbing wall facility can be a tough, a tough way to try to make money. But it's so cool, though, Heather. It's so cool.

I think that's what gets people into it, because it's so cool. They probably do it themselves. And it's kind of like my hobby. My hobby is horseback riding, but, you know, it's a great way to lose a lot of money is to try to be in the horse business. Or what do they say to turn, you know, $5 million into $2 million or whatever it is. It's a lot of of people get into these kinds of things because they love it, but not because it's profitable. Only place it makes sense to make it a business on your tax return, right, at least for three years until the IRS figures out it's a hobby business. I have some friends that are in this business. They own one here in San Antonio.

COVID was horrible for them. I just, I just think I've still had PTSD from like taking them out to lunch and they're like, we don't know what's happening. We're not going to make it. Then the other thing that happens with these things that happened to them was, your landlord, you have wholesale transfer problem, right? Your landlord immediately is trying to skim as much out of you as possible. And so in their case, they bought into like a franchise version of this. And then the franchise war turned out to be a totally illegal franchisor. It was really good, really good business story, but not good for them.

And they ended up getting out of it, whatever. But like as part of all that, the landlord started to see how much money they were making. and it was just like massive extraction of all profits. They're like the landlord is basically just creating it where it's just worth it for us to keep doing it, but we have no upside whatsoever. And actually their landlord picked up all that right during COVID because they couldn't pay rent, right?

They were paying a couple hundred thousand dollars, I think it was like $70 to $80,000 a month in rent. And they obviously just couldn't keep doing that. So anyway, I don't maybe be really negative about this. I have another thought, but I'll try to say it for a few minutes or now. What I've seen here in our area with these is that it's really good on the entry because some of these indoor trampoline kind of arcade type things, they'll go into like a vacant grocery store or like a Lowe's, you know, or Home Depot or something that's closed that's really hard to release. And they can get in at a really attractive price and maybe sign like a three or five year lease. it's not that expensive to

fit if you're just putting in they're big boxes and you're filling them with trampolines or laser tag. It's not like medical equipment or cold storage or something crazy expensive. But then when your lease comes back around, it's like, well, hey, now the building is cash flowing.

It's much more desirable. And now you have all the sunk costs. So where are you going to go and you're going to find another 50 to 100,000 square feet? That's the big issue is these are massive buildings. If you're going to do indoor go-carts, like you got to have a huge amount of space. Yeah, it's got, I mean, it's got to be rural, right?

Like, I mean, when I used to live in Denver, there was one like outside the city. And it was awesome. Like, they built out go car track and everything inside, but it was two stories. It was like this giant warehouse thing. I don't know what, like if they left, it's sort of this like weird standoff situation because if they leave, the landlord's got to do a ton of work to make it not a go card track anymore or for anything else. But also, if the tenant leaves, they've got to do another.

a whole bunch of work to build a go car track somewhere else. So I don't, I'm not a real estate professional, but I don't know how these kind of mutual assured destruction situations get resolved. Right. Oh, how do you, how do you sell it? Yeah. There's been a lot of capital flowing into this space, at least me watching it here in Texas. There's a chain called Andretti's, and then there's main event, and there's like another one that have come in. And to me, like, look, I like that this is in a city like San Antonio, there's nothing to do outside for like, five months of the year. It's just too hot with your kids and you want to be active and have a good time. And if it's St. Antonio, you also want to figure out how to eat, you know,

mozzarella sticks as often as possible. Like that is, you know, this caters to that crowd for sure. We're not the healthiest city in the world. I'll just tell you. But this to me also has what I kind of call the Dutch brothers problem, which is like Dutch brothers fundamentally is selling the same exact ingredients prepared with the same exact recipes as every single other. kind of coffee chain. That's one of the things I learned in the coffee business. You go and you look, it's the same identical stuff. Everybody was selling the same thing. And crumble cookies has this problem as well, like totally undifferentiated product when it comes down to it. You know, McDonald's, on the other end of the spectrum, has a differentiated product. But all of these guys who run

main event, Andretti's, these guys, you know, somebody opens up right next door and they're offering the same exact stuff. They're all buying the same laser tag kits. They're all buying the same go cards, it's not differentiated at all. And to me, that's, I think, the biggest risk as I look at this, because I'm watching where there used to be one of these near my house, there's five of them now, and they all are exactly the same. So that just would have to be into my mind. Not saying this is a bad business, it's just like, oh, as I look at where this is going to go and where the, trying to skate towards the puck, like money is flowing into this space and you don't have much of a mode in terms of a differentiated product at all. It's totally undifferentiated. I mean, that being said, question.

though, this is different than a Starbucks or like a, like the CapEx to open a Starbucks. You can open it in a tiny space and everybody in their brother wants to open a, you know, a Starbucks. Like if I want to build a go car track, it's kind of insane for me to open it next to an existing go car track, right, and just split the market with them unless I can be like drastically better. But that seems crazy when I could just go to another place, not nearby them. Yeah.

I mean, I'm watching it like I'm watching with New Build, the movie theaters here in St. Antonio, there's three companies that are all going hard at it. There's a local chain, which happens to be owned by a nonprofit, like this really rich guy gave a $200 million business to the local nonprofit and expected them to run it well. It's a fascinating case study in philanthropy. So they're building, and then there's two other chains that are building the exact same movie theater plus entertainment complex. And like right down the street here, 10 miles away in the suburbs, there are two of them right next to each other within a hundred yards.

And like, I think to your point, Bill, sometimes it only takes one moron to ruin a market, one moron with a lot of money. And anyway, I've tried to bring positive Gurdly on Friday, but I'm just sharing some hard-earned lessons and all this things, having started a coffee chain,

and then watch Dutch brothers show up and put $50 million into a market. You're like, oh, this isn't as much fun as I thought it was going to be. So hang on, can we just go back to be gave a $200 million operating business to a nonprofit. Yeah, is that not interesting? So if you're a nonprofit and you receive,

let's just get this on record, and you receive the gift of a $200 million operating business, the very first thing you do is you hire an investment banker and you sell it. I don't think you usually can. So like there was a big instance of this that just came up on our radar because this company has actually continued.

There's a big company called Barnhart Crane and Rigging. They like have a massive, rigging, like if you have to move things that weigh thousands of tons from like a port inland, they developed these big rigs to move it across bridges. These two brothers own this business. I think in the mid to early 2000s, the business was doing like 250 million in revenue and they donated the entire business to the National Christian Foundation. And I dug into this this week. National Christian Foundation has received, I think it's like over a thousand businesses where they donate, I think it's voting or non-voting, like the family still has some operational control,

but basically all the proceeds of the business are reinvested into the business or donated and given away. But when they donated the business, it was like a $250 million gift. It's a big like financial planning tool now that a lot of big endowments are using, but they can't sell it. That's the big thing, right? Because part of the planning for these folks is I'm giving this business so that it can remain very, very long-term focused instead of just, you know, being folded into, you know, the typical M&A process. All right, taking a quick pause here. I have something to tell you.

This is Michael. I hate bookkeeping. I hate bookkeeping. I hate doing HR. I hate doing all that kind of stuff. But for bookkeeping, I have found a solution. It is my friend Charlie's business called cloudbookkeeping.com. So that's cloudbookkeeping.

They are your perfect partner if you want to get bookkeeping out of your hair and focus on making your company, your customers happier and more successful. So please give them a call, call Charlie, cloudbookkeeping.com, tell them we sent you. They're a great way if you're a business buyer, if you're a business owner, you're tired of hassling with getting your bookkeeping done. He's got a whole fleet of people that are well trained and work for him. He's located here in St. Antonio. So I can tell you because of that, he's awesome.

and they're a great partner for you to potentially call to help with all your bookkeeping needs so you can do the important stuff in your business rather than worry about getting your books right. So give Charlie a call, cloudbookkeeping.com, and now back to the episode. But don't you, I mean, so it's the same thing as, you know, donating appreciated public stock, right? You get the full value, you eliminate the capital gain. Like you get the full values of tax deduction, and then usually the charity sells the appreciated public stock instantly. and they keeps the money. But the difference in this case is, you know,

the terms of the gift where that they have to keep running it. I think Michael's point, though, is, whoa, like not many nonprofits are going to handle this very well. No. Well, I have not studied it closely because it's kind of like, it's kind of like when you're standing in front of a busy traffic intercession and you're like, oh, I know what's going to happen here. I'm kind of that kind of, you know, spidey sense.

I just don't want to see what happens here. but I didn't see an article where like the whole estate was valued at like $350 million, and then like 18 months later, they're like, just kidding. It's really worth $150. We're totally joking now that we've got our head around the whole thing. But yeah, I think it's fundamentally, to your point, Bill, nonprofits are in the business of making donors feel good and doing what the donors want and not in a great business of running a business.

And there's the reason the private sector wins a lot of that. stuff. So look, it's called Santico's, if you want to look it up. There are a local movie chain, really smart people. One thing about these businesses that has been kind of interesting in terms of professionalization is that they were obviously super mom and pop for a long time. And like the old, you know, broken down go-car track and, you know, like the batting cages and all that kind of stuff. And it was very feaster famine. What I've seen a lot because I'm totally the victim of this is we had a new trampoline park open up in a grocery store. I have four kids.

If it's raining, if it's too hot, which it is for, like you said, Michael, you know, several months out of the year, you need some place to go to get your kids out of the house. This one, when it opened, they had like an introductory promotion. It was $10 per kid per month and you could go every single day for two hours. Well, it costs like $15 just to go once. So we were like, oh, yeah, heck yeah, we're going to sign up. I think I'm going to probably pay this thing until my kids are like $1,000. 40. Like, there's no way out of it. It's somehow, some way I'm locked down. But, like, the novelty is kind of worn off. And my kids are getting a little bit older, so they don't really go as much.

But getting people onto a subscription, right? Some kind of recurring revenue helped kind of balance some of this out. And then, you know, people will host birthday parties. One of these places, they rent, I think they own them, Heather, but they bring in tons of bouncy houses. And in a corner of the whole facility, there's like, you know, 20 different bounce houses. And it's like, Like, that's a dream for, you know, parents with young kids is you just go let your kids, you know, take off and play. And you're at least inside and it's somewhat kind of confined. What I don't think these have done that you have like, you know, the Buffalo Wild Wings and Dave and Busters and those is that they're not really capturing food and drink and alcohol sales. They have not combined those, I think at least at scale in our area.

And it doesn't seem like they don't mention anything about that here. I think this is just a family fund center, not, you know, an adult arcade. My son sold those subscriptions. I sorry, I had to jump in and say that. This was one of his first jobs, was at a trampoline park nearby, and they sold the subscriptions, and they got commissions. I mean, so, like, the kids that were selling it were all excited because they were making, you know, decent money for their little job.

And, yeah, I agree with you. The primary driver of these businesses was selling those subscriptions, and then you're right, the parents have a tough time getting rid of them. And then I agree with Bill's point about competitive density. You know, the one that's near us that my son used to work out, no one's come along and put one nearby. So, you know, it's been there for a long time. It had a very tough time during COVID. But, you know, I think it does sort of deter competition from coming in. They've got to get a big building. And, you know, it does have a fair amount of CAPEX. So I think it becomes very location dependent. But I would be super.

curious to know what happened, how the lease has gone over the years and what that's done to the margin. So here in San Antonio, and you know, it is the center of the universe, as you guys know, but precisely what you're talking about, Mills, like there's a chain called Andretti's, it's licensed, they've licensed Mario Andretti's name. It is all of this crap. And then they have taken and put a giant bar and grill and sports bar attached to it. Mom and Dad show up, mozzarella sticks and Bud Light. Kids go drop. 50 bucks on all this exact stuff. And like, that's how I would, you know, evaluate this deal.

Like, A, like, Andretti's and those guys started in wherever they're coming from. They're hitting Texas. They're going to go to Florida and then they're going to come to your state. And it's just getting prioritized. So I would totally just think about the long term looking at this deal. Like, what is this going to look like 10 years from now? Am I going to get to a point where I have to have that barren grill or I'm not going to be competitive anymore?

and I'm dumping two, three, four million dollars in each one of these locations to build that out. Maybe I can't because I don't have the space. All of that is the stuff that like before I jumped into something like this, I'd want to see both the micro trend. Like how many of these other things can spread up within a mile of me? Because they're coming. People want money.

That's just how it works. But the macro trend of, okay, where are these in the grand scheme of what a modern version of this stuff looks like? And if you go to one of these Andretti's, like, it ain't tired. It's brand new. They dumped $15 million in this place. and they've got it down to a science to extract money out of parents who want mozzarella sticks and their kids to be entertained.

I want to go. That sounds great. All right. Let's bring it back to this deal here, the indoor family entertainment and recreation center. So this business, 13 million of revenue, 3 million of EBITDA two years ago,

23% margin. This year, 2023, 15.7 million in revenue, 4 million of margin, 25.5% EBITDA. margin. What do we think this is worth? I just have to say, I am so happy to look at a deal where the trajectory is normal. Like, this business has grown 7 and 13% in revenue year every year, and their EBITM margin is functionally the same. It's expanded a little bit. It's gone from 23% to 25.5%. Like, this is normal as heck. We look at so many deals on this pod where the

EBidon margin, of course, in the most recent year, doubles, or, you know, revenue is scaling absurdly. And this is just in the beautiful way, a boring, stable business. I really like that. And at the same time, I bet that this business does not have very much debt on it right now. I'm sure they have some debt on their balance sheet just from this recent cap-ex. I don't think they funded it through operations. Looking at it right now, steady state, with its current.

capitalization is a totally different thing to stomach and digest than thinking about running it with debt. If this business has $4 million of EBITDA, I would guess that on a normalized basis, you know, after CAPEX, you're probably pushing $3 million in EBITDA. And you're talking about probably what, at least a million, million and a half dollars a year in debt service under any normal deal scenario, all of a sudden it's starting to get thin. Yeah, the capax and the opening new locations is the big thing that we don't see here. Because it could take that $4 million of EBITDA down substantially. Yeah, absolutely.

There's a lot of businesses that are great without debt that aren't so good at all with debt. And this one, you know, absolutely a lot of that EBITDA is going to be going towards interest and the depreciation that they're adding back is going towards CAPEX. So does that, you know, $4 million become two or less? It probably does. But, I mean, I've never owned a trampoline. park, this could be one of those things where you install it and then it's fine 20 years later.

It's not like the trampoline technology is changing that incredibly, right? So, you know, if it's the type of thing where the stuff is not depreciating or does it or maybe, I mean, of course, depreciating, but it's not, you don't need to replace it a lot or if you do, it's not expensive. This is a super financeable business, right, Heather? I mean, it's four million bucks you need to die. It's stable. I mean, it's something you can understand. It's like a retail business. It has a lease. Like this seems like something you could buy. I mean, it might have a little expensive for an SBA loan. We'll talk about it later, but you could buy this with debt for sure.

Yeah, absolutely. You definitely could, especially because it's four locations. I think, you know, that diversity kind of helps. And they've got a team that sort of knows how to open locations. So that makes it interesting to a lender as well. There's some way to kind of grow out of the debt. But yes, also probably too big for SBA because, you know, the SBA limit of five million. is there.

And then you have a few lenders that will do this SBA plus Perry Pesou, but that kind of stops at about 8 million of debt. So this is really probably too big even for that. This is definitely in Cleveland. I just got to tell you now.

You think so? My money is that this is definitely Cleveland. So you've got to move to Cleveland. Don't leave it. You've been full time. No. Well, you just think about it. It's like, okay, where is the place

you're probably going to get stuck when you own this business, and it's definitely Cleveland. Don't you love that they say they're strategically located in the Midwest? They're just incidentally located in the Midwest. They didn't, like, these businesses are just there. They didn't, like, pick a map and go, hey, we're going to the Midwest. That's where we need to be. That's the beauty of a business broker.

Once you hire a business broker, everything you've ever done is strategic. And value add. So many good adjectives there, yeah. Yep. This 4 million EBID is definitely too big for an SBA loan. Who buys this? Like, does this have to be a private equity deal? Like, how much does this sell for?

I think it's private equity. And I don't know what multiples, because this industry was wiped out during COVID. And it is now just three years post-COVID. And to Michael's point, a lot of this industry had a bad 20 and 21. Like my bounce house place, they basically had a terrible. whole 20 and 21. Both years were identically bad and finally bounced back. Oh, that was a good pun. In 22 and 23. I'm on a roll here. And so, you know, you've got this industry where you may only have right now two good years since COVID.

So it is kind of a kind of an interesting industry to value. I'm not sure what the valuation is. Bill, I like this actually for for a family office. You know, I think it's going to end up in a place where the, the debt's going to kind of be in a weird place where it's, you know, it's too big for SBA. But somebody who can underwrite buying a business like this and being okay with their potentially being some headwinds in the future. You know, and there's a couple of family offices that I've run into. They do basically their own, you know, captive search funder, you know, programs where they buy businesses like this.

And they're okay with injecting capital into stuff. They're okay with variable kind of returns. they partner with a young professional to go buy a business like this. I think that's, you know, it's a $200 to $500 million family office that likes to kind of throw around $3 to $5 million in equity at a time. I could see them doing something like this with the right operating partner. Also people who like the real estate angle. You know, there's a family office here in South Carolina that's made several plays

in the like, you know, garden center kind of niche. And it's because they really like the real estate. estate associated with it and the garden center is just kind of, you know, for fun in the meantime. But it's almost like a covered land play. I think someone will, I mean, someone will buy this. Somebody looking for a kind of stable year old to buy this. I mean, I also could see, depending on where it's geographically located, great bolt on to something like Andretti's. If Andretti's wants to be in Cleveland, you know, I don't know if they've got, if it's got to look a certain way to be in Andretti's,

it's got to have certain, you know, I don't know how intense they are on what it means to have an Andretti's experience. But I could see a, similar chain coming in and saying, great, we're in Cleveland now, if this is in Cleveland. But a good geographic expansion. Edretti's and Main Street here are typically standalone buildings, and it looked like I haven't gone to look at it, but my

suspicion is they went and bought their real estate and locked it up. They bought a big pad site, big five acre pad site and built these big standalone. Here, for example, they're right next door to our top golf, you know, which is kind of that part of town. It's just like top golf. We

bid one recently for some roofing. and there's one GC who's like, we've built, you know, 39 of these. Like, we've done them all over the country and we know the play. There's like the big one, the monster one. There's one that's like a little bit smaller. And then they have the format that's like indoor and it's all virtual. And like they're like, we can build these like with our eyes close. That's a great general contractor business to get into.

And I've, I ran into a guy, you know, Bill, we talked to that one guy who was at that event, you and I went to who basically is just. just like a captive real estate developer for Amazon distribution centers. And that's just all. He's like, yeah, they just call me and they tell me they're going to spend $200 million with me, cost plus, and this is how I do it. And they just tell me when they want it. And then we get it.

So to Heather's point, you have some risk there with a single source of revenue. But man, the way up sounds like a lot of fun. I don't think you're creating a ton of enterprise value. But the guy was just like, yeah, I didn't know if I was going to have a good year. Now I'm going to make $5 million. It's like, okay, cool. Yeah, he's like, my phone rings in $500 million or $5 million on the other end. Like, so he's like, so I always answer my phone.

Unbelievable. All right. Well, there's a good one. Anyone else, anything else to add? I'm sorry to be so negative, guys. Like, I want to like this one. It's a, you look at the numbers and it's good. And I'm just like, oh, it feels like you're picking up, you're picking up nickels in

front of a steamroller to some extent. So maybe the devil's in the details on this and it's better than it smells. But there's just so many little mini red flags for me that just has me worried. So if anybody buying it. us, let me know how it works out. You can come on the podcast and tell me I'm an idiot. Like, join our list of guests ready to come on and tell me I'm a moron. Well, we should just have one of those episodes where it's just everybody, like a string of people come on for like 60 seconds and tell us we're stupid. Like, you know, a long time, listen to a first time caller.

Like you guys said that thing about the bounce house park and man, yeah, I was really dumb. Okay, thanks. Bye. Who's next? Next caller. I have a fantasy of doing this as a lender for all the deals that got turned down that I know went well. Like that was like I would love for have them like have the credit officer that said, because when the credit officers sometimes say no, they don't just say no, I don't want to do this one. They say this thing is terrible. It's going, it's doomed. And then, you know, I follow up and I know the people in this turned out great. That's my fantasy.

Is it that the credit officers all have to sit there and see all the people that they said were for sure going to fail and see that they did really well. that is awesome i love that we should do that too we should have to have business buyers on and be like i got turned down from all these loans and all of my all of those underwriters behind the shadowy curtains you know up yours have to face it yeah have to face the success well i think that's where you know a pattern where you see that happening if you know if if you're doing something that is consensus right there's a good chance there's a good chance it's priced pretty well but if you're doing something that is consensus wrong, but you know it's right for one reason or it's right for you for a special reason. That's where opportunity exists. So I hope I am wrong often, just because

I want to see people succeed. And sometimes the way you're going to succeed is because I'm an idiot. So you're welcome world. I'm here for you. All right. We'll wrap that one up. Thanks for listening to this episode of Acquisitions Anonymous. We will see you next time.