Acquisitions Anonymous - #1 for business buying, selling and operating - How This Event Ticket Resale Business Generates $1.7M in Cash Flow

Episode Date: January 28, 2025

Discover the fascinating world of ticket resale as the hosts analyze a unique business generating $1.7 million in cash flow by selling concert and event tickets.Business Listing: https://www.bizbuysell.com/Business-Opportunity/saas-marketplace-entertainment-venue-tickets-in-house-tech-stack/2308898/Sponsors: Leanware – Shoutout to Leanware for sponsoring this episode! If you need a trusted partner to handle the tech side of your business, check them out at https://www.leanware.co/aa. They bring your ideas to life so you can focus on growth!Viso Business Capital – Helping you secure the right SBA loans for business acquisitions. Sign up for a free SBA loan Q&A session at VisoCap.net.In this episode, the team delves into a thriving ticket resale business with substantial cash flow and an intriguing operational history. They explore the impact of events like Covid-19 on its performance, scrutinize its resilience, and evaluate its potential for future growth. The discussion also highlights the benefits of leveraging SBA loans for business acquisitions and the importance of reliable tech partnerships for entrepreneurs.Key Highlights:- Overview of the ticket resale business model and its profitability.- Discussion of operational challenges during Covid-19.- Insights on evaluating a business's historical performance.- The role of SBA loans in financing business acquisitions.- How tech partnerships like Leanware can drive growth.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]

People make a lot of money in tickets. Like, it's incredible. Yeah. I mean, 1.7 million, that's pretty good. Yeah. That's pretty good cash flow for what it is. But like I said, I kind of want to see the whole history. I want to see going back.

I don't know how they did well in COVID because what kind of concert tickets would you, were they selling? I don't believe that. All right. Aquisition Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100% here. Hey, Michael here. Welcome to Acquisitions Anonymous.

Today's deal is a deal. that claims to be a software company, but the more we dug into it, we don't think it's a software company. So it's in the ticketing space, and Heather and I had a great time, used perfect grammar and talked about our Gen X foibles, and it was just a delightful episode. And here you go. Do you ever feel like you're one step away from the next big thing? You've got the idea, the vision, and the drive to make it happen, but no clue how to handle the tech side? Well, don't let that stop you. You can let leanware handle it. For the past five years, lean wear has been the trusted partner to American businesses turning ideas into cutting-edge digital products. From mobile apps to custom platforms,

Leanware takes care of all of the tech so you can focus on what matters in growing your business. Leanware isn't just a dev shop. They're here to create a genuine partnership to bring your vision to life. And that's Leanware, L-E-A-N-W-A-R-E-D-R-E-R-E-D-O-A-A-A. And thanks to them for sponsoring today's episode. Oh, Heather, how have you been? I've been busy. How about you? I've good. I've been busy too. So All right. Well, I brought us a deal today, and it's right up your alley. It's a SaaS business.

Oh. Because I know how much you like giving loans to SaaS businesses. Yeah. They're kind of tricky to do. So are there lenders in the SBA world that will do software businesses or they generally say that? Well, yes. And I have done some. I have clients who are even doing a roll up and we've gotten a couple done for them lately.

The key is the multiples are high. and there's only so much leverage cash flow can afford. So the SB lender has no problem against it if you can bring in enough equity basically so that you don't over lever the cash flow. That's the problem is when they're kind of weak on the cash flow, but they've got this great ARR, that's not something a lender, an SBA lender would lend on.

They've got to have cash flow. They've got to have EBITDA or adjusted EBITDA to borrow. to borrow against. And if you're paying a high multiple for something like that, that's fine. You could still get an SBA loan. You just have to come up with a lot of equity. Yeah. In most cases.

Yeah. And so what, and I guess there's stuff in different, different kind of segments of the technology lifecycle. There's stuff that's early stage, high growth. And that's where multiples of EBIT are a real problem. Right. I guess there's stuff that's sleepy and maybe even in decline that that presents it even a different set of challenges for litters.

Right. Exactly. Or it could just be, you know, kind of old school software that's got some good cash flow, but a buyer is going to come along and, you know, sort of change the business model a little bit. You know, they can, the SBA ends up being a nice way to borrow on those because you can get the loan based on the existing cash flow, but you're not going to have covenants. So you could actually make your investments in improving the software, shrink the EBITDA while you're doing that. As long as you're making payments, you're not in default on the SBA loan. So sometimes the SBA loan can be a nice option for something like that, where you know you're going to shrink the EBITDA after you close initially. Interesting. And then you said the multiples are a problem, right?

There's just there's a ton of software buyers now. A ton of software buyers. And, you know, they're thinking of the valuation more in terms of a multiple of the recurring revenue, which is not, is not a metric that a lender is going to lend on. So, you know, the price as a multiple of EBITDA is actually pretty high, usually. And that's where you've got to come up with enough equity. You know, an SBA loan in general, with today's rates, you can only get about 3.5 times adjusted EBITDA in debt. So if you have a million dollars of adjusted EBITDA, you can borrow about $3.5 million of SBA generally. So if you're paying, you know, 6x, you've got to come up with 2.5x of equity.

That's really the key, is kind of knowing how much as a multiple of EBITDA can you borrow and how can you make up the gap between that and the actual price multiple. I see why people work with you. See? I think you know what you're talking about. All right, let me pitch you on this deal and you tell me if you think the SBA wants to play. It's off of Biz Buy Sell and it's a SaaS marketplace that is an entertainment venue tickets and in-house tech stack and located in Tampa, Florida, and it is relocatable. They're asking $8.5 million for it and it cash flows $1.7 million.

It does gross revenue of $12.5 million with EBDA of $1.7 million. So EBDA and cash flow are the same. And it was established in 2019. And so website closers, our favorite brokerage, presents a top-tier SaaS-based ecosystem in the ticket reseller market focused on the entertainment industry, including concerts, theaters, and sports ticket sales. The company stands out as a top tier and primary and secondary ticket reseller and affiliate marketing network, driven by a highly valuable in-house proprietary SaaS tech solution and tech stack, with a focus on providing effortless ticket resale experiences, empowering, affiliates, the company operates in the lucrative and ever-evolving U.S. secondary ticketing industry. For over 10 years, the company has delivered consistent cash flow and demonstrated resilience

even during the COVID-19 pandemic. It's interesting. They said the company was founded in 2019, but now they say it's 10 years old. Okay. I'm confused. I'm not good at math, but I'm pretty good at that math. The company generated sales of over 12.5 million last year and is already at 9.6 million in sales within eight months in 2024.

Supported by a targeted email database of over 260,000 subscribers and a highly engaged social media audience of more than 90,000 followers. Their multiple income streams provides stability while opening doors for more expansion. Operations are streamlined and require minimal owner involvement thanks to the integration of automation and efficient remote team management system. Their proprietary software offers unparalleled capabilities in content creation, SEO, and affiliate management making an asset for affiliates and businesses. Their combination of proprietary tools, reputation, and a track record of substantial revenue streams makes this business acquisition a great opportunity.

Well-positioned for growth, proven business model, and the business owner is primarily focused on development of the in-house technology, and thus is more than willing to roll equity and or remain with business post-clothing. As the company has grown, he has had to wear many hats, including operations, human resources, marketing, and other aspects of the business that he'd rather a new owner manage. His real passion is on the development side and he can continue. continue to be a huge asset to the business as it scales if the owner needs such an asset. Contact website closers today to explore this one-of-a-kind business in the entertainment resellers industry, 13 employees located in Florida. Okay. All right.

Do we know what they do? I mean, I think so. I went to a concert recently and had to open up another app. Every single time I go to a concert or, you know, a game even sometimes I get, you know, a different app I seem to have to use to get those tickets. for that event. So it feels like there's somewhat of a fragmented market, these different apps that you use to buy somebody else's ticket, basically. It's resold tickets. I assume they are contracting with the venue. So they sort of get some exclusivity with certain venues is what I, what I imagine

this works like. And then they obviously get fees on the ticket sales that, you know, the volume that that goes on there. I would really like to know if it was established in 2019 or if it's 10 years old, though, because that feels like it makes a big difference to me. Maybe time to spell check your listing here. Yeah. So I'm not sure what they do. They are a secondary ticketing industry. That's what they describe as secondary. So the way I understand it, and I'm not a ticketing person, this primary ticketing is when the venue or the like, artist sells you the tickets. Yeah.

Secondary is when somebody sells it who's a third party, sells it to another third party. I think so. And, you know, this is where having an expert, I think in this field would be really helpful if you were to go into looking at this business. But like when you go Google like Barry Manlow tickets, which is obviously the concert you went to, you're right? No. I went to Duran Duran, a true child of the 80s.

And it was rad. So if I could tell you a Barry Pandalos story, my, my grandmother who passed away a few years ago at the age of 93, stopped driving when she was 88, but she was part of that generation that always drove Cadillacs. And so we saw have the Caldlac at the 2008 Cadillac STS that my son is forced to drive as his first car. But it has a six CD changer in it. Oh, yeah. In the dash. Yeah.

And from 2008, six CDs. and it came with my grandmother's collection of Barry Manilow playing the hits, playing show T's CDs. It's got six CDs of Barry Manalo's hits of the... He's loving it. Your son is just having a great time out there in that car. Yeah. It has like 16-inch wheels on it, like they're really small. I'm trying to find the ticket app.

I must have deleted it already. But yeah, I mean, I think that's right. I think your description is right. This is when somebody is trying to sell their ticket to somebody else, and they go through one of these platforms. So maybe they don't contract with the venue. I don't know how that exactly works as far as the how you get your ticket volume. I think it's like anything. It's a supply side business.

I always like to say that when I see something like this because really this business depends on where they get the tickets. And, you know, do they get the good tickets? and what events are they? And that's why I was thinking the 10-year history of the business would be more valuable. You would think it would take about 10 years to really build a solid supply chain for these kinds of tickets, I would think. Yeah. And it makes me wonder that what it says they are a primary and secondary ticket reseller and affiliate

marketing network driven by a valuable in-house proprietary SaaS solution at Tech Stack. It makes me think that they are plugged into a number of these networks that are either doing SEO or doing paid ads. They're doing SEO or paid ads to resell those tickets to you and me and taking an affiliate commission on it. So this feels much more like an SEO style play to me than it is like what I think you and I would rather it be, which is like, oh, like we would love if you were like a ticketing company. Yeah. We would go to venues and sell tickets and have those. kind of contracts. I think this smells much more like an SEO kind of, you know, reseller, like playing the Algo kind of game. Right. And the price multiple is actually a little bit under

five. So we were talking earlier that, you know, SaaS price multiples are high. This is actually not, not like in a SaaS price multiple. So I don't know that I would even agree with the description anymore, SaaS marketplace. I guess it's a marketplace. You know, yes, there's obviously some technology behind it, but I don't know that this is really a SaaS business. It's not like there's subscription revenue that we typically think of with software. So I'm thinking of it more of just an online marketplace. And like you said, kind of SEO dependent and driven. Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't

one size fits all. There's the best rate, fastest to close. the specific loan structure that you need, or a little of all of those things. That's why my company, Vizzo Business Capital, works with over 30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal. Sign up for a free live Q&A session on SBA loans at Vizocat.net. Then click Zoom sign up in the top right corner. That's V-I-S-O-C-A-P.net and click Zoom sign up. Yeah, well, this, they talk here about the affiliate marketing.

angle that they do. So they're probably getting commissions. And so there is SaaS here. There's software going on. But it looks like the owner has built themselves a bunch of software to run these SEO and affiliate marketing plays and generate pages for stuff. And the reason I'm pretty sure this happens and is what these guys are doing is like, let's see, Duran Duran, right? Concert.

And where was it? I was in a, you. Yamava, the Indian casino in Southern California. Oh, well. That's where I went. Yamava. Yeah, I'm not sure how to spell it. So here you have some of the original ones, but then there's just a bunch of different, like.

Oh, yeah, there it is. Yep. Yep. So I don't know which one I bought it through, actually, anymore. That's right. Yeah. AXS, Ticketmaster, Bans in Town, eBay, AXS. Tickets smarter, San Bernardino Theater, undercover tourists, jam base.

So highly likely one of the things this business is doing is has a bunch of software that puts together these kind of links and is playing playing SEO games to try to get you to buy tickets through them. And they're probably, so there's the one thing I did learn when I went into this space is there's a handful of kind of like, like reseller networks where these people are buying and selling. and like it's only it's all B2B, it's not B2C, where people that are doing this kind of affiliate marketing, they can list and go see what kind of inventory is there and then try to basically market it through what a lot of these people are doing with the CEO and kind of these landing pages and stuff. Yeah.

So it's probably one of these. I mean, 1.7 million. That's pretty good. Yeah. That's pretty good cash flow for what it is. But like I said, I kind of want to see the whole history. I want to see going back. I don't know how they did well in COVID because what kind of concert tickets would you

were they selling? I don't believe that. But maybe I'd want to see some history so I know how solid, you know, can we really count on that 1.7? But that's pretty good cash flow for what it is. You know, they've got to have a pretty good control of some supply of tickets. People make a lot of money in tickets. Like it's incredible how much money has flown through for decades.

from these people that were historically ticket brokers. My, you know, and I've seen examples of that where like I recall when I was a kid, my, my parents had season tickets to the to the spurs. And like we got into the NBA finals against the New York Knicks and some rich person from New York came down and paid basically for our two seats for the finals game. They paid for the entire our entire season's season ticket package for just that. one game. Just incredible. Yeah. I mean, it would be a fun, it would be a fun business to own because you could get your hands on some tickets whenever you wanted to, I guess. It is interesting. I've, I've known to people whose families have been ticket brokering for a long time. And a lot of the kids are not ticket brokering anymore, like they're doing other stuff.

A lot of them are earned out real estate private equity. I think it's just gotten to be a pretty tough business, frankly. Like, there's a lot of headwinds for ticket brokering. For example, they have cracked down a lot on ticket brokers buying season ticket packages and then selling individual seats. And then, you know, the teams and the leagues themselves have tried to cut out the ticket brokers even to the point where they make it illegal for them to not, you know, actually use the tickets enough and take away the seats. which is I guess goes back to what I was saying it's a supply side business so how secure is the supply of the tickets that you're getting is kind of the key to me if I was going to buy this business are they getting their tickets in a way that could be you know they could be cut out easily since that's sort of the trend in the industry or are they are or is the SEO you know are they getting the ticket supply some better way that is a little more secure what what I think is.

this business is is this guy has built software that runs on top of kind of these networks, these background B2B networks where ticket brokers and stuff are buying and selling tickets between each other. And he is using that software to go create a bunch of landing pages to go B2C and try to resell that stuff. And like I think that is a much worse business to be in than the way ticket brokers used to work where it was like five dudes all smoking cigars like on the phones. like in the 80s. Yeah. Like buying and selling tickets.

And I remember my ancestors and I'm going back 50 years, like calling those people being like, hey, I want spurs tickets or whatever, Cowboys tickets. Like I think that was a great business because those guys were like the old school like bond traders like making markets. And this guy like you're fighting the algorithm here. Yeah, right. And fighting the algorithm is kind of a scary thing today when we've got AI sort of competing with Google search and where is that all going to land, I guess, you know, to be scary.

That's a really good point. Like at some point, the AI, well, you know, Open AI, if you track kind of the example of what they're talking about for their first agent, you know, this agent is AI that can actually do things, is a travel agent like piece of software that can like interact with you and do, you know, go call all the resorts in Cancun and like tell you which one you should go. to. So, you know, a travel agent is kind of the first one that the AI bots want to do. But it's just a matter of time until like a ticket broker or a ticket buying agent is doing it for you. Yeah, exactly. And could set up your whole, your whole event, you know, if you if you've got to get a

hotel room there and it's going to do the whole thing and put it all together in one spot for you. One thing I do like about this is the reason the guy's selling is very plausible to me. He's like, I just want to program. I don't want to be like, I want to be like, yeah, he's a developer. People doing taxes. That all sounds horrible. Yeah.

Yeah. That's what he says. But I don't know. If he's a tech guy, he may be thinking what I'm thinking, which is if, you know, this is going to be a tougher and tougher business to, you can have to be doing a lot of programming to keep up with AI.

Or maybe you just can't keep up with AI. And maybe that's why he's selling. That's my skepticism there. Yeah. Yeah. Well, thanks for being such a downer. I know. That's my job. I'm glad you you've reward me for it so well. The way we go, you downer. I mean, to our thesis that this is not a software business, the multiple that it's listed for definitely aligns with.

Think how website closers would actually, you know, price an affiliate marketing business, which is what this feels like it is. Yeah. Yeah. So don't buy the headlines. Got to read carefully and think about what the business really is. Kudos to them for like just coming up with something positive here. So who should buy this business? Who do you think? Gosh, I don't want to see much leverage on it.

That's for sure because of everything we talked about is potential headwinds. It's a little too big. You know, it could fit in an SBA deal if you are going to put a lot of equity in and not too much leverage. So you could still use that. But it needs to be someone who is already really savvy about this type of marketing, maybe doing it in some other way. And it's kind of an add-on or adjacent to something else that they're doing. I wouldn't want a first-time buyer to just own this kind of as a standalone.

Yeah, I'm with you. I don't see how this works for anybody who's not an owner operator. And I would really like, if there's anything else, I think people take away from this episode, like I know a lot about a lot of businesses. But I like, if you hear me talking about this market, I'm like, oh, there's a lot I don't know. Like if I was going to consider getting into this ticket business, you are competing with some sharks if you get into this business. And I would spend at least three months going all in talking to every expert and every person I could to try to learn how this whole ticket business works.

Yeah. Because on one side, you're competing with Taylor Swift. On the other side, you're competing with, you know, the venues, Tropicana Stadium at Tampa. And on the other side is Live Nation and Ticketmaster. Like, those are some big sharks and you're just kind of like in the pool with them. I would make sure I knew what I was doing before I jumped into that pool. Yeah, absolutely. Okay, so you love this one, huh? And thumbs downing it as a lender. As a lender, as a concert goer, I love it.

That was one of the things that people were ticket brokers used to always do. They always seemed to be at the great events and great seats. Yeah, there you go. For them, like, they were getting seats at just random. And I remember, like, in the cigar-chumping days, like, if you had X-Gas, access tickets and you called up the ticket broker. Let's say they were a $500 list price ticket for first row at some premiere event. They might give you 150 bucks for it. And then they would turn around and sell it for $1,500. No scruples. Yep. What's wrong with that? Everybody got to make

a buck. Yeah, there's a there's a funny. I got to, maybe I'll try to flip the screenshot after we get off the air, but there's a funny shop that is near me here in San Antonio. And it it's a combination of ticket broker, CBD, guns, and ammo. That's the whole story. I would just go in just to just be there for a while, just see what's going on, what the vibe is. One of my actual early business ideas that I never pursued was called Vice World. And basically, it would just be like a Walmart for Vice. So you sell tobacco, alcohol, this is before marijuana, but marijuana.

You saw adult-oriented things, oriented media. You saw fireworks. You just saw everything. And that was the whole scheme. We're going to be the warehouse of vice. Oh, that's funny. Well, it sounds like that store is coming close to your original concept.

So there you go. Well, the problem is, the problem is unlike a Walmart or a Costco, the localized rules in all these states are so different that you can't really do that. You guys can sell hard liquor at Safeway. We can't do that in Texas. So it creates kind of a mess where you can't really get to scale. You've got drive-through guns and we've got drive-through liquor. I really want to make like a liberal politics joke, but I'm too tired.

At some point, we should record an episode where we actually have a chat about California and Texas politics and don't publish it. I think that'd be fun. Don't publish it or publish it anonymously like block out our faces or something. Oh, you know. It's me. Oh, man. All right. Well, look, I think to finish this one up, I am not thumbs down on this business.

I think if if there's a story here where this guy really does want to get out and want somebody who wants to be a business builder to be a partner with them, I think it could be pretty exciting. And I'm just not sure of the tailwinds or the headwinds with all this stuff. And, you know, again, I think the right buyer probably knows something about the ticketing and the affiliate world and wants to get into that because they know it really well. I think, you know, me, I feel like I would, I would be the idiot at this at this poker game. And I wouldn't do it until I felt like I was an expert. And to your point, I don't think many lenders could size the deal up and really understand it either. So if you're getting a loan, you're kind of on your own, on your job.

diligence, your lender may not understand the deal and may not do it just because they don't understand it. Yeah. It is probably one of the most interesting things about being a lender, but also probably one of the most frustrating things is trying to understand different business models and how they work. And it's really, that's been one of the eye-opening things for me is how much as a business owner and a borrower you end up doing educating your lenders on.

And sometimes they'll, yeah, the lenders. Sometimes they won't get it. Sometimes it's all about. And that's where your communication abilities really are a major factor. You know, are you able to explain it in a way that the lender is going to understand? It's not easy. Yeah, crazy. Cool.

All right. Well, we'll wrap this one up. I'll see you next week, Heather. Thanks for being here. And thanks everybody who enjoyed this episode. Tell a friend. Go walk out down to the bus station. Finds me it looks like they want to buy a business.

Tell them about that because it's anonymous. Please. Yes. I appreciate. All right. Catch you next time.