Acquisitions Anonymous - #1 for business buying, selling and operating - Making millions with a Vancouver services business? - Acquisitions Anonymous 255

Episode Date: December 19, 2023

Tune into today's episode as Heather and Michael discuss a disaster recovery and restoration business for sale in Canada, priced at $2.53 million. They emphasize the importance of having contracting experience, local knowledge, and substantial cash to buy this business. They touch on the challenges of operating in a Canadian market and the unique dynamics of the disaster remediation industry. Michael also mentions his upcoming course on how to find and buy businesses, emphasizing the need for a more modern approach to deal sourcing.Check out the listing here: https://app.dealbuilder.co/blind-profile/e0830db2-7072-42c0-996f-ff06efdc6f65Thanks to this week's sponsors.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]

Acquisitions Anonymous, Internet's number one podcast about business buying and investing. I'm your co-host, Michael Girdley. Today, Heather and I reviewed a deal that she found on Vancouver Island in Canada. And then we wanted to go a bunch of cool rabbit holes to talk about that deal, who should buy it, and whether we like it or not. So stick around to find all that out. And here is the episode. 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 Dival, 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 turn in every week to our deal reviews, you want to get in on buying a business. 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 would directly. Her email is Chelsea at buy then build.com.

Heather, good morning. Good morning. I see that I'm outdressing you again, which is what I'm trying to do. It's not difficult. Okay, so I have some news for you. Ty, who is our general manager of the podcast, he did a study

of the hosts. And you and I turned out to both be winner but in different competitions. He did, he counted which hosts have showed up to the most episode recordings, and guess who was in first place? Probably me? No, no, no.

You won a different prize. I won this prize. Okay, that was you. Because I got a head start on you. You did, that's right. Then there was a second contest, which was who has had the best attendance rate since the summer? And guess who won that? I won, all right.

By far. I have been showing up. I've been working. What are you guys been doing? Come on. I'm here all the time. I'm here all the time. So I was in second place on that too. So anyway. All right. Well, I feel good. This is a good way to start the morning then. Well, you are always a winner in my book. So you brought a deal. So let me share this. And I think you're going to share it with us. And then we can poop on it like we do on everything else. Yeah. This one is from Deal Builder. So really, I love the way they list their listings, by the way. So we'll get. to that, but I think they do a nice job. So this is a profitable disaster recovery and restoration business. It is in Canada. It is listed for $2,530,000 mid-North Vancouver Island, weighted revenue. This is what some of the things I like, 4.4 million, weighted SDE, 560,000, weighted adjusted

EBITDA, 440,000, asset value 313,000. A locally owned and operated disaster restoration company on North Vancouver Island has been steadfast, been a steadfast presence in the community for over two decades. During this time, they have garnered a strong reputation for their exceptional service in aiding homeowners and businesses and the restoration of their properties following calamities, working closely with various insurance companies. Heather, can I ask your question? Yes.

What does weighted revenue mean in this situation? Well, when we scroll down, you're going to see, because they actually show you the math, which is something that, you know, some listings don't really do. Okay. But they actually, they're going to show us. They're going to show us what they mean by that. So I just think it's kind of a cool concept, like the way they're being a little more transparent with numbers.

Okay. So to continue on, the company's commitment to its clients is unwavering as they provide around the clock emergency services with live answering support, ensuring a rapid response to all urgent needs. Their extensive service area encompasses locations such as Campbell River, Quadra Island, Powell River, Cumberland, Mount Washington, all kinds of places I don't know, sorry, they're all in goes on and on in Canada. With a deeply rooted presence in these communities, the company is deeply invested in helping its clients when they need it most. One of the company's standout attributes is its dedicated and experienced team. Many of the employees

have built their long-term tenures, which is a testament to the company's commitment to fostering a stable and skilled workforce. Their strong reputation has been primarily driven by word-of-mouth referrals showcasing the power of their exceptional service as their primary marketing strategy. This underscores a significant opportunity for a new owner to harness and develop a more comprehensive marketing approach to further expand the business's reach and impact. The company offers a wide array of restoration services to both residents, and commercial clients, they excel in repairing water and sewer damage, offering thorough cleaning services, and handling the removal of hazardous materials among other services.

Their diverse service portfolio positions them as a reliable one-stop solution for clients facing various restoration challenges. With the track record of excellence spanning more than two decades, this business continues to be a trusted and dependable partner for those in need of restoration services in their community. So they were established. established in 1990. There are 22 employees. The sellers own the real estate. Global disaster industry is currently valued at 41.2 billion. So there's this kind of some industry data. The worldwide demand for disaster restoration expects to increase significantly through 2033, growing at a Kager of 5.7 percent to reach a market value of 80.1 billion, I guess, by 2033. So it kind of goes on

with what different types of disaster remediation encompasses. This is just more industry stuff. And then let's look at growth and expansion. See if there's anything exciting there. Expansion, no, nope, this is kind of generic stuff. But here it is, here it is, scroll down to, this is where we get the weighted stuff. So what Deal Builder does here is they give us what I love as a banker.

Man, I love this, right? There's columns, and it goes all the way back to 2019, and I can see revenue, cost of good sole, gross profit, net income, SDE, and adjusted EBITDA, because, you know, there are different numbers. And then what they do is they wait the different years. So in this case, they weighted them evenly 25% 2020, 21, 22, 23. I suppose they may have other deals where they wait them. differently, but that's what they mean by that. So it's basically in this case, it's an average of

the last four years. But I like that. That's some numbers that you can kind of wrap your brain around a little bit. What do you think, Michael? This is very interesting. And I mean, and the other thing I like is, A, you get to live in Canada, in the Canadians, really nice, and you get to live on Vancouver Island. The downside is, you know, it's a relatively small market on Vancouver Island. But I know people that love it. So that's good. But man, what a steady eddy business. Like, that's the best way I can describe this. Like revenue year by year, 5.1 million in 2019, 4 million in 2020, 4.3 million in 2021, 22, 5 million, 4.5 million. It just, like, just as straight up, like, totally, like, they, people need this. Like, it's an enduring demand kind of business. Right. And I've looked at a lot of

restoration companies. And I think you're right, sometimes the growth is a little bit limited by their geography, because obviously they're covering a geography. There are some of these, of course, in the U.S. that are franchised. So you see like Paul Davis Restoration, and I think the other one is called Service Master, something like that. You know, so you see a lot of franchised. But they're very interesting businesses. What I find interesting is the growth potential of the industry. I don't know whether that's going to necessarily apply to Vancouver Island exactly. But with, you know, climate change and whether events becoming a little more extreme, flooding, et cetera, you're going to have more demand for restoration services. That's sort of the thinking,

and that's what's been happening. And also fires, of course, you know, the droughts and the fires and the winds. So these all contribute to growth, unfortunately, and sadly, growth in the industry that helps people rebuild from all those kinds of problems. So I think they're great, steady businesses, and I think there is growth potential based on climate change. I love the reason for selling here is listed. The seller is moving to the mainland and will be pursuing other interests. They make it sound like they live in Hawaii.

Guys, you live on an island like 12 minutes away from the land. Like, this is true for them. You're not in Bermuda here. guys like come on relax island fever must be a real thing right you know

you feel a little trapped I guess after a while so yeah it would be interesting to know a little bit more about why you know

what the age of the seller is and that sort of tells us that they're not retiring yeah and that's something to watch out for too

we're seeing more sellers that are not the silver tsunami that everyone likes to talk about that are not retiring and that I think

makes you have to think a little bit harder about the non-compete and what you would do if they did violate the non-compete. If you have a strong enough one and, you know, how you would even enforce it. Right. If they did violate it. Yeah. One thing I've noticed, and I don't think we've talked about it enough, because I'm going through this in one of my businesses, like we've been in it for a long enough time, and I was in one of the calls the other day, and, like, I looked around, and we had just brought on a new person on the team. And that new person was so optimistic and had so much energy. And I looked around at the rest of us that were like around the table. And I realized

we were just tired. And I think that's like I know that they don't, you never see that on business listings, but I'm starting to get that as like an okay reason to sell. It's just like, you talk to people and you're like, why are you selling? This is a great business. Well, you know, I'm making a lot of money, but I'm just tired. I've been doing it for 12 years. Yeah. You know, in our family fireworks business, I've never, I've never had a normal holiday in 20 years, like that I've been a bowl. in that business. I never had a normal Christmas, never had a normal New Year's, I never had a normal Fourth of July. And after a while, that kind of stuff just wears on you. So I think there's, as I, I didn't used to get it, but now that I've gone through it, like, when I see people that are

just like, yeah, it's just time. Like, I think I'm giving them a lot more credit for that, you know, than I used to when I look at business for sale. Yeah. And I think it's interesting. When I started, you know, really serving the space and believing in the silver tsunami, we didn't call it that 12 years ago, but, you know, believing that this was going to be something that was going to grow, we fully expected it all to be retirement. That would be the only reason to sell. And I think that because so much liquidity is now in the space, because we have loans and lots of lenders and because we have equity providers with experience, all that liquidity has made it possible for people to sell for other reasons. Just like you might sell your house and move, you know, to another city in the same

state, people want to sell the business and move to another industry. And I think that's great. I think that's a real benefit of the whole movement that's happened. So I think there are, switch back to the deal a little bit. I love that comment. And it's great to see, it's great to see the world evolving that way a bit. Like, it's a much more wholesome relationship to business, which is part of one of the things I believe is important. But switch back the deal a little bit. We've had some guests on that have talked about the dynamic of an industry like this and why it's attractive. And ultimately, like, this is actually pretty profitable for a contracting business. I mean, you're on Vancouver Island and you're taking home between half a million and

almost one year, almost a million, you know, of money that you're able to pay yourself. Like, that's pretty cool, like, for doing remediation and contracting. And I think, you know, what I've been told is the reason disaster remediation is so interesting is because it's rarely like a bid out kind of situation. It's a homeowner. There's three feet of water that's just leaving their basement or whatever, and they need somebody to be over there right now to start doing that stuff. And so it creates a lot of opportunity for people that can be highly on demand to jump on those things. And so we talked to some folks that were, I forgot which guessed it was, but it was several hundred episodes ago, but kind of talked about that dynamic

that because somebody needs it right now is kind of like here in San Antonio, I call it the August factor for air conditioning. If your air conditioning goes down at 3 o'clock on August 20th, you'll survive, but it's 105 degrees outside

and humid, and you're not going to have a good time in your house and your kids are going to hurt and all that kind of stuff. So you just want somebody over there right away. And I think that's one of the cool things about this business as well is this disaster remediation. And when it happens, like you got to jump on it and somebody comes in there and does it.

And anyway, that's just the dynamics of this entry. And I think why it's attractive. Yeah, absolutely. Now, there's the insurance company side of it, right? So you've got to have relationships with the insurers. So that's really critical. And that can get a little more complicated. I mean, I think that's where the industry experience would be helpful.

It's not absolutely necessary here, but would be very helpful. Because you've got to manage those relationships. You know, you sort of have what we like to call us pay or risk, right? You have the insurers that are paying your bills, even though the homeowners are your sort of customer. You really, your insurance companies are really your customer. And you've got to know how to stay within the guidelines that they have around their policies. And also just be responsive. You know, they're not going to keep using you if you don't do a great job every time.

If there's a homeowner that's screaming and yelling, State Farm or whatever insurance didn't take care of me and it's your fault, you're out. You know, that's a risk for these kinds of businesses. 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.com. they are your perfect partner if you want to get bookkeeping out of your hair and focus on making 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. Yeah, and then for us as American buyers, let's talk about the maple syrup in the room here, which is this is a Canadian business. And they're very similar to us stupid Americans in culture, but Vancouver is much more European and does stuff. Canada has a different set of rules.

So that's the other thing about this. And probably also limits the number of buyers that could buy this because, man, like an American, like, I'm just thinking of myself, like a dumb Texan buying this business on Vancouver Island, like, ooh boy.

So that's a limited set of buyers there. And also just a different rule set. Like I feel like if this business was San Antonio, like, I know what the rules of the road are really well, and it gives me an advantage of buying the business. This, like, insurance, I don't even know who the insurers are in Canada. It's an interesting dynamic. And the lenders, you know, so as an SBA lender, I can't tell you how many times I've been approached by people saying, well, I'm Canadian citizen. I can't get an SBA loan. Do you happen to know, is there any bank in Canada that does

something similar? No, they don't have the same thing. So it's kind of another comment on how lucky we are in the U.S. to have the SBA program and the liquidity that it provides, it's a lot tighter for credit in Canada, is my understanding. There's, you know, bigger banks, not so many small banks, and, you know, the credit, to get a loan on this, you have to bring in a lot more equity and have maybe more experience, that kind of thing. People do not appreciate how business-friendly America is with stuff like SBA-7A. Like, that stuff. That stuff, does not exist in other markets. And then like the loan guarantees,

just the whole thing. Like it is so business friendly here. And like I look at people trying to buy businesses. Other countries, they're like, yeah, we don't have any of that stuff. I'm like,

what? Like, do you know how easy that makes it that the government like basically underwrites, you know, the transition of small businesses from one small business owner to another and makes it easy

so those things just don't die or like, you know, languish. And, you know, you look at what happens when you don't have those things, you know, you have company, like Mexico is an example there, right? And like you're either, the only way you're getting like a good banking relationship there, for example, is if you're like a super big corporation and then really well established,

your family's had money forever. And or like if you're, but you're like a regular schmuck selling stuff on, you know, Mercado Libre, which is the eBay there, like, good luck. Like, there is no credit for you. There's nothing in between an SBA and all like I said. It just doesn't exist. So, Yeah, I'm so thankful for the SBA, not to mention because they gave us PPP also, but I'm so thankful for them. Yeah. Well, it's a good point. It's a really good point. As a, I have a little side story.

When I was working for Union Bank, they were owned by their Japanese owned. And we always had folks from Japan, from Bank of Japan coming, you know, kind of for two months stents to learn. And I was out to lunch with a bunch of them. And I was saying, oh, well, what I do is. you don't have, I'm sure you don't have that in Japan. I do these government guaranteed loans. And they pulled up their phone and had it translated to English and put it in front of me and said, no, that's what we have too.

Oh, wow. So I learned something that day that Japan is the only other country I know of that actually does have a program. And in talking to them, it sounded like every single small business loan under a certain size company, every single small business loan is government backed in Japan. or they kind of makes sense the way Japan works. Well, they, I mean, the story over there is actually really interesting. All that stuff is super cool in terms of these businesses and transition, all that kind of stuff. But their problems, from what I've been told from friends who've tried to explore over there,

is it's cultural, right? Like, your entrepreneurship is not revered like it is here in North America. And then second is, like, they don't, you know, you're the Japanese or, or not. Like, you know, like, you and I are American. Somebody walks over and they're of Hispanic origin, they're an American too. Like, we're all Americans, right? That, as I've traveled to other places, I've been reminded how that is not always the case. Japan is case of point. Yes. And the Chinese even take it even further where like, like we see where our nation makes us American, being Han Chinese makes you Chinese. It doesn't matter where you live in. You're Chinese.

So it's a very different, very different mindset in terms of all that stuff. Well, and I took a cultural training, a business cultural training class when I was at Union Bank, and it was very eye-opening. But he basically told us a couple things that were funny, that a lot of the things we were saying on conference calls were actually insulting, that we didn't know, but we learned. And the other part was that if we are not Japanese, there's certain information they're never going to tell us.

like as a business partner, you're not equal at all. And it was very eye-opening and sort of disappointing to me at the time. I learned. Fricking, I love America. Yeah, right, better appreciate it. These people that give out their passports, what a bunch of jerks. Like, it's not cool. Bad idea.

Bad idea. All right. So let's talk back to this business. So who should buy this business? Obviously, someone who's got some contracting experience already. I mean, I think that that's necessary here. And I think it needs to be a local. Yeah.

Yeah, really does need to be someone, at least from Canada or from that area of Canada, who understands what Vancouver Island. I didn't know that they were very European in Vancouver Island. That's something I wouldn't have known. Oh, I'm sorry, just BC, British Columbia, that whole area. I haven't been to Vancouver Island, so. Okay. All right.

Well, but, you know, obviously somebody who knows the area well, and they've got to have probably a fair amount of cash because they're not going to get a lot of financing on this. It doesn't even say seller financing available. Like most the listings we look at in the U.S., they always say that. This doesn't even say that. So it sounds like you need a fair amount of cash to come in with this.

Well, it's the beautiful thing about SBA is with SBA, you know, contrasting it to this Canada situation, you can have somebody whose whole life is 100% all in, no 401K, no nothing, building up wealth in that business, and then there was a market to sell it at the end.

And you know that market's going to be three to five times EBDA because SBA, that's the SBA way. And like, it can be, you can have somebody entirely focused on that. But you look at this and there's a good chance this person, they're in a small market. They're one of only a couple providers on this. There's no financing readily available for a buyer. This is one where a buyer probably has to come in and be day to day. You're going to be going to job slides all the time. Like your universe of buyers, but then on the upstream, like that person who spent their whole life building this business, like they're stuck, and it's kind of sad.

I mean, and it used to be that way here before acquisition lending really got big. So just go back 15 years. There was very little liquidity. So when you owned a small business, you passed it on to your kids. And, you know, that's when this sort of started is their kids didn't want it. And we started trying to figure out something else. But yeah, that's totally changed in this country in the last 15 years quite a bit. It's tough.

Look, if you, if this is the other thing, thing is you're going to put all this money into this business and you're going to, if you're not already living in Vancouver Island, you're going to move there and you better be damn sure you want to live there and you want to hang out with other contractors. It's a man, the nice thing about a potential buyer, if you are that person, this stuff is not going to trade for a lot of money. No, right. It's not going to trade.

So what were they asking? There's no asking price. Unless this is at $2.5 million. Yeah, that's it. Yeah. So I guess four times. more power to them. Yeah, yeah, we'll see what it trades for.

But you're right, it's a very narrow group of potential buyers there. You know, one thing I've realized is everybody's talking about how bad the economy is and all that kind of stuff. There is still just so much money sitting on the sideline chasing these deals. Like just of every size. Like there is just money pouring into every, it's just continuing to pour into every crack. just like the quote unquote recession. Like I see absolute and it's Friday, so I'm going to use some French language here,

some absolute dog shit. And people are still trying to buy this stuff. And I'm like, absolute dog shit. Are you sure you want to do this? And they're like, yeah, yeah, yeah. So this is my jam here. I'm going to buy this piece of crap business. Like, okay.

Yeah, right. I think part of the issue with all the capital pouring in is the other asset classes are not looking good right now. You know, not at all. And so this has become sort of the only one that people have found that feels a little better. I think also because we feel like we have a little more control. You go to the stock market, you have no control. And honestly, no offense to the real estate people, you have no control.

Real estate is a cycle business. And this is at least small business is at least something where people feel like they have control. And that's a different kind of stress. It's a better kind of stress for people, I think. Yeah. Though businesses like this, they're fragile. I've been involved in these. They are fragile.

Everybody will look up six months and you're like, wait, this was a good business. What just happened? Well, everything that was helping us totally started hurting us. And like, it just, one by one, we died. So anyway, I didn't mean to be a downer. So I've been through some distressed businesses before. Yeah, I was sorry, Michael.

They suck. They suck. They suck. They suck. But you just don't let them ruin you. Cool. All right. Well, I think this is a good space to be in.

I think there's a whole like double click on the dynamics of disaster remediation and the specific area that's like their serve pro and all these chains and the franchises there and the dynamics of okay well do you want to be in a big market or a small market do you want to be captive and insurer or not like I think there's all these dynamics that if I if I was to go buy this business by the way I'm working on another course which is called how to find a business to buy it's going to be good it's much better my last course is good this is going to be even better and I know that because my team is telling me it's really good. All right.

And they never lie to me. I believe them. Actually, I learned a lot from making my first course to make the second course. But it's basically like three hours. Like, so the pitch is if you look in the HBR book, like there's like five pages on how to find a deal. And it's like, peruse listings and call a broker is like, that shit don't work. Like you can't do that. Like, doesn't it work now?

It's a long time to go. I'm defending them because I know the authors. That was a long time ago. This ain't in 1995. That ain't going to work no more. Like, come on. So it just talks about the whole process of like taking what like the private equity guys do and the serial acquirers do and the systems they run to run sales funnels to go find deals at scale and like putting that into a course. So.

That's great. I'm very excited. That's needed. Much better. Yeah, that's awesome. It's much more fun than writing books. As we tell you because it's much more tactical and it can be just like point point value type stuff. Anyway, I don't know why I went down that rabbit hole.

But I think there's, with this, if I was to run that process that I talk about in that course, like one of the things you go do is when you're trying to learn the space, you talk to a lot of sellers before you pull the trigger on something. You also go talk to people and start to network to people that are connectors and experts in the space. And there's a lot of retirees or like somebody who used to sell serve pro franchises to people. Like I would go talk to that person, reach out to them and have a call with them. And, you know, after 15 or 20 of those calls, you become an expert.

in this market. And, you know, I think hopefully somebody walking away from this understands you and I are relatively savvy and smart about business, but we do not know those specifics, but that's the path to go and figure that out. And that's the first thing I would do if I was going to look at this business. Like, spend two weeks, like networking and having phone calls from people and reading stuff about the market, and you will be an expert very quickly after you have all those calls. Absolutely. Good advice. On that note. Okay, well, this is a cool deal. Great job finding a deal today. Well done. You know what? It came off Twitter. So, Thank you, Twitter. Followers. Yes, this was from Twitter. I appreciate it.

Amazing. All right. Co-hosts of the Day Award for you. Well done. Oh, thank you. I'm so excited. All right. We'll see you guys next week. If you love these podcasts, please tell a friend. And we'll see you next episode.