Acquisitions Anonymous - #1 for business buying, selling and operating - Renting golf carts in front of hurricanes in Texas - Acquisitions Anonymous 278

Episode Date: March 8, 2024

In this episode of Acquisitions Anonymous, Michael, Heather and Bill discuss a potential acquisition of a successful golf cart rental business in Port Aransas, Texas. They explore the business model, noting its location in a beach town and its reliance on concierge service and delivery. They discuss the financials, including the asking price of $4 million, the EBITDA of $1.1 million, and the assets included in the sale. They analyze the seasonality of the business, the challenges of financing due to its highly seasonal nature, and the possibility of starting a similar business in a different coastal town. Despite concerns about the climate and the competitive landscape, they acknowledge the potential for growth and the unique lifestyle opportunity the business presents. This episode highlights the importance of thorough due diligence.Check out the listing here: https://www.bizbuysell.com/Business-Opportunity/Successful-Golf-Cart-Business-with-Property-in-Port-Aransas-Texas/2173339/?utm_source=bizbuysell&utm_medium=emailsite&utm_campaign=shtmlbot&utm_content=headlineThanks to this episode's sponsor: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] to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, Michael here, Internet's number one podcast on business buying and selling, acquisitions anonymous. Today, myself, Heather and Bill talked about a deal very close to my home down in Puerto Ranzas, Texas, which is about two hours away from where I live in San Antonio. And it is a golf cart rental business being sold by a couple who's retiring and wanting to move back to Europe. So we found it to be a totally fascinating one. We went through a bunch of stuff, everything from hurricanes to financing this,

the deal to why are there so many golf carts in the photos and then basically an office that looked like it still looked like in 1985. We really liked this one. And it was potentially a good deal for the right buyer, just not any of us. So here is the deal. Hope you enjoy it. 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 Labs 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 Wood directly. Her email is Chelsea at buy then build.com. All right, last week we did a SaaS business. We're going to do the opposite of a SaaS business today. Are you guys down?

Let's do it. Old school. But before we start, though, when I joined this podcast, we were sharing screen. So Michael's face was little bitty. But now it's blown up on my screen, and I see that Gurley is rocking the beard. This is new. I've not seen this before. This is my first beard in history.

Yeah, we'll see how long this lasts. Mrs. Gridley may tell me to get rid of it, but she's historically vetoed beards permanently. I think I'm tentatively into it. I think I like it. Yeah? It depends on what you do from here. Like there's a lot of decisions that have to happen in the next. Should I go full mills?

Full mills. Yeah. If you need a beard growth coach, you have mills. Yeah, that's right. He's such a man and I'm not. It's so brutal. You're working on it. You're about like an eighth of an inch towards true manhood right now.

I like, I have like some red hair and gray hair. So it totally. I totally appreciate it. Girdley the red. What color would your actual hair be if yours, if you had any, or let it came in? Would it be red as well? I'm picturing you now as a ginger. Brown hair with a little bit of gray.

Yeah, this is all kind of brown. I trimmed it this morning to go, to go or anything. I'm now picturing you as like a redhead Viking, which would be awesome. I had beautiful hair when I was a young man, beautiful blonde hair. And now look at me. We'll have to dig up a photo of. flowing locks, Gurdley. So I went on this guy's trip last week, by the way, and one of the guys was, he's single,

and he shows up, like, you know, we got to bars and stuff, and he shows up, like, wearing these, like, pirate shirts, like blouses and stuff. And, like, he's a single guy, so he dresses like it, and I dress like a dad. And he's like, he goes, he goes, curdley, I noticed you're wearing a lot of plaid. I was like, yeah, I'm a dad. That's what I do. I've worn new balance sneakers. And, you know, he's like, well, you know, I was like, I have no reason to not

wear plaid, I just need to dress easily. Anyway, he shows up, he serves up dressed like, you know, Johnny Depp from Pirates of the Caribbean and stuff. One of the joys of being a dad is just you cannot care if you don't want to. You can wear new balance sneakers and comfy jeans and Platt. No incentive to care.

On that note, Heather, do you have anything to add to this topic? I'm seeing quiet on this, you know, forget it. I have nothing to say. Just show up as your best self and be happy with that. That's good. All right, I brought a classic old school deal from BizBicel, and it is located two and a half hours from me in Puerto Ranzas, Texas. And I think I actually know where this is. I've seen this place.

But it is a successful golf card business. So let me pull it up here on the screen, and we can go through it. You guys can love it or hate it. All right, it is a successful golf cart business with property in Puerto Ranzas, Texas, located in Oasis County. So that's outside of Corpus Christi. Are you guys familiar with Corpus Christi? Is this on the beach? Is this like a beach town golf cart thing?

It is a beach town golf cart thing. This is not actually on the beach. This is on one of the roads in the little town. But it's not a golf course. This is like rent a golf cart? Golf cart rental, yeah. Yeah, for pleasure, like around town. Yeah.

So this little town is called Puerto Ranzas. It's on the end of a barrier island. And like there's a bunch of, it's a golfing community, but then it's also like standard kind of Texas development where like they didn't really make it walkable but they also made it to like our version of walkable involves you getting in a golf cart and driving around. That's Texas walkable.

Okay. Great. So they have a picture here of the golf cart place which appears to be kind of a red shack in between two other red shacks and a bunch of golf carts. And I've rented these before. Oh, here's where then there's a truck

where you can drive your golf carts around and typically these are gasoline-powered golf carts is the way most of these work, because Texas. Well, no, actually, there's our reasons for that. It's because if they're electric, the batteries die over time with like a lot of cycles, especially when they're rentals. And so you have a lot of CAPEX to replace the batteries. So the gas is actually a lot cheaper to maintain,

and also you can just fill it up. You don't have to charge it. And also you don't have to like send chargers out with the rental into the rental houses garage so like so they can gas back up you can turn them really quick if you want like gasoline carts are just way better suited for rentals uh they have lots of pictures of the whole thing look at these filing cabinets bill so that looks like they're full of 20 years of golf cart rental records uh i don't know if that i would take i would put that picture on but okay but see now so i don't know if i the seller would put that picture on because as

I, the buyer, see literal walls of filing cabinets and clipboards. Michael, if you go back to that, there is a wall of probably 20 clipboards. You know what I see here? Opportunity. I see a business that has been run on paper and clipboards for 100 years and is still printing money despite itself and being completely unorganized. This smells to me like bring in the technology, automate the crap out of this. Oh, man.

Okay, well, cool. This reminds me, like, when I first moved back to St. Antonio, I joined our family business and our office looked like this. We've since moved offices twice, but yeah. You had all the clipboards on the wall. Oh, everything was on paper. Yeah, we had, this was 2003. We had one fax machine.

We had no internet. And we ran everything off of a Radio Shack, TRS 80 with custom software that was written in the late 80s with a green screen and floppy dough. Like one guy was in you at the time. And this is 20 years later, this company is still doing it. Yes. Yeah. What's also very interesting about this picture is the office itself has been stuck in

1985, but this one desk where clearly the one employee who runs the whole place has a modern chair, cleaned it up, like she, he basically has a computer. Like, there's a level of professional employees involved in all this thing, but the management is clearly stuck in a dukes of hazard. That's basically what it looks like. Maybe the management passed away several years ago and nobody noticed. Definitely possible. All right. Okay, so asking prices $4 million, not applicable cash flow, $1.1 million in EBITA listed, and they don't list revenue. So they have a million dollars in real estate and it was established in 2010. So this is an incredible opportunity to own a profitable

golf cart rental business with five-star reviews in Port Aransas, Texas. The sellers have said, quote-unquote, let's retire, typo, and move back to Europe. What? There's nobody living from Europe. I'm picturing this, like, you know, debutante Italian couple that says, I know what we're going to do. Move to Texas to Port Aransas, Texas, and open a golf cart rental place for these Texas Americans. They're going to get rich, and then we're going to move back to Europe. Oh, there are no, okay, anyway.

This tenured company has been in business for the past 13 years and is a huge repeat clientele on an awesome income. The owners have carved a niche market with concierge service and delivery, allowing them the luxury of taking time off in winter to re-energize while continue to operate with the current staff who is keen on remaining. Looking to throw off your business attire and live the quote-unquote island life. In shorts and flip-flops, this business is being sold with everything for continued success and a room to expand with additional income.

Both 311 and 317C aisle, two contiguous commercial lots, along with on-site warehouse mechanic shop and office are being offered with the sale. Great location, seller will consider odor financing with substantial down payment. Make this your dream. Come live on island time.

Located in Puerto Ranzas, Texas, the real estate is owned. They have 1,600 square foot building with three employees, double lot, maintenance shop, 60 golf carts, all tools and maintenance items, trailer truck phones, and everything needed for continued success.

One thing, by the way, that I found interesting, Heather, they list that they own 60 golf carts and basically every single one of them appears to have shown up in the photos. Like, you know, like, I was like, wait, wait, don't you want these rented? Like, where are they in the photos? Yeah, hopefully that was a day they were closed for some reason. That's right. Although there are several awesome competitors on the island, they all work together in times of trouble and need to assist of Neskisari.

Each of the other card businesses have their own way of selling direct customers. Red Carts is strictly concierge's delivery set up ahead of arrival. There is room for growth by adding hourly and daily rentals if a new owner wants to be open longer hours, etc. The island is growing exponentially, so continued growth looks good on the horizon, substantial down payment, moving for selling, moving back to Europe and retiring. And here's the address, 311 C. Isle Drive in Puerto Ranzas, Texas. I bet these people are Greek. I bet you that they're from Greece just because of the way they emphasize islands and the island life.

and I've seen so many great Greek entrepreneurs over the years. That's my guess. Are the Greeks really into clipboards? I've seen them on all kinds of really interesting things. That you might otherwise kind of go, wait a minute. I just, I don't know why I feel like they might be Greek. If anyone finds out, let me know if I'm right about that. But, you know, I think where I'd be a little worried is whether there's some cash going on in this business.

It is, you know, it's a tourist town and they're not giving revenue. They're just giving an EBITDA figure. I would hope, you know, if you're going to finance this, and if you want to believe the numbers, hopefully it's not a lot of cash under the table that's being included in this number. Yeah, that scares me a lot. This is super seasonal. And there's two seasons I want to talk about. One is the standard summer and spring break season type stuff.

and you're basically dead zone during the winter because the Texas coast is not that nice in the winter. It's actually not that nice in the summer either. But I say that as a Texan. And then there's another season to worry about. But I'll pause there. Let's just talk about the seasonality of summer and spring break versus the rest of the year. Right. So your revenue is not consistent.

And you have months where you've kind of got some OPEX to cover where there's really hardly anything coming in. or maybe you even shut down the business during those months. Heather, does that make it completely impossible to get a loan for this business? Yeah, depending on the highly seasonal business, yes, it can be impossible to get it. Because the lender then has to believe that the buyer is going to conserve cash. First of all, they need to close at the beginning of the busy season. They should not close any other time. So you have like one shot every year to sell this business and get it closed.

That's hard enough right there. And then a lender's got to believe that the buyer, is going to be right on top of the whole cash conserving, you know, topic. They're going to save the excess cash that they're going to need to get through the slow season. And lenders, you know, are going to be rightly concerned that someone might not be able to do that. They can't really structure the payments seasonally, not regular SBA loans. You know, crop loans and USDA loans for the food production, they could, but not for businesses. And so it really is tough.

That's what I was going to ask. Can you just say, hey, your next six months of loan payments are due on the last day of busy season. But with classic SBA, you can't really do that. It's not really a fit. So, yeah, you can't really do that. The most I've ever done is like a landscaping business where we, from day one, scheduled interest only during the three or four months of winter and the P&I only in the other eight or nine months. And even then, that was tough because, you know, SBA lenders want more of a homogenized payment. schedule because most of them are selling the guaranteed portion in the secondary market.

That's how they make their money. And the more your loan is kind of needs to be an oddball, the less attractive it is for many letters. So, I mean, that being said, there's golf carts here, right? There's hard assets. And we talked on a recent prior episode about, you know, the collateral is only valuable if it can be resold. I imagine you can pretty easily understand what the resale value of a bunch of golf carts are. I don't know. how much golf, how much, how many assets these really are, like what portion of this $4 million dollars is golf carts.

I mean, they say it's a $4 million purchase price. They've got a million bucks of real estate. So, I mean, assume real estate is nearly 100% financeable. So you've got a $3 million business with 1.1 of EBITDA. Maybe you got a million bucks of golf carts. I mean, you're going to have to put equity in here, but there's probably some debt you can get on this business. Yeah.

If that 1.1 is really what they're showing in a tax return, like I said, I have a little bit of a concern. Maybe it's not. But if it is, then, you know, three turns, you know, or you're paying three times, they're a little less than that, really, at $3 million for the $1.1. Your cash flow coverage is going to be very strong in a deal like that, even if you put the bare minimum, which is like two and a half or five percent if, you know, if you have a certain type of seller note. So this can certainly take leverage and have good deal. the SCR, a bank will like the fact that they've got collateral. One thing they don't like about rolling stock or vehicles, and I don't know what the situation in Texas, so maybe you know this, Michael, but if those all have to be registered with the DMV, the lender, the SBA requires the lender to get the titles and lean the titles on every vehicle. And then every time you sell one as a borrower, you have to trade out the titles. And believe it or not, it's a deterrent. Some banks don't, some SBA banks don't like to lend to businesses who have big fleets like this because the cost of servicing the loan, not even just closing, but servicing the loan becomes really, really challenging, really high.

So, I mean, the thing I know about this little town, I'm trying to think back to the license plates that I've seen on all the golf carts. I think they just have city licensing of the use. So they're not, they don't have state license plates, but you buy like a little license that lets you drive around on the city roads. And this little town of Puerto Ranzas is its own city. The other thing that's crazy about Texas beaches, which just blows people's minds from other places, like in Massachusetts or Maine or California, is like all of our beaches in Texas are considered public land.

And they're also considered public right-of-ways. So, like, you can basically drive your car all over the beach. Are you guys familiar with this? No. I did not know that. That is weird. So even on your regular, your truck,

your four-wheel drive truck can just drive up on the beach and park there? Like you can, they're all public land. They're all right away. There's somewhere you can't, but like right around here,

you can just drive your truck there. And so you'll see these people that have like $5 million homes fronting the beach in Texas and especially in this area. And then like some guy will just like pull up with his RV and like park right in front of house on the beach and like camp out for a week.

Wow, that's pretty, that's pretty terrible, actually, a homeowner. But I guess great for the RV guy, right? Because here you have to, you have to reserve your park. You know, there's a few beach camping places and they're really hard to get reservations for. Nope. No, I mean, then the cities can regulate it in terms of overnight camping and all that kind of stuff.

But like, like right here in front of this, like my parents had a condo. And like, yeah, like some guy who just roll up with like an RV. Like just, you wake up one morning and it's like, what's the name of the cousin from, you know, American vacation? And he's like out there out there emptying out his stuff in the sand. It's totally how it happens. Texas is a weird place. So all that being said, I kind of like this business. Yeah.

I do too. So here's why I like it. It does have a capital moat, right? because you got to buy all these golf cards. So you can't, you know, a new competitor is going to need, you know, several hundred thousand dollars, if not more, to start up and actually compete with you. I like they've got kind of dedicated real estate that has some value that's going to be included or that you can finance into the purchase that the business runs from.

They don't have unrealistic expectations on the value of that. It doesn't seem. I like that there actually is a little bit of a distribution mode because they say all their business comes from kind of prearranged concierge, concierge, bookings, right? People who are renting houses and there's like a pamphlet in the house that says book with big red cards or there's a, you know, whoever sets it up, arranges for the golf card to be there as part of the rental. So you're not competing in Google AdWords and, you know, all that stuff in kind of the red ocean of who can pay the most for a lead. I like all that.

I like that it hasn't changed since it was founded in 2010, clearly. So there's probably some opportunity. I am also intrigued by the fact that they say there are several other competitors who are awesome who they get along with. And while that's nice, if all their walls are covered in clipboards too, and my business does not currently advertise on Google and I have Slack capacity, is there a case to be made here for going at their throats, right? And taking some share. Like buying some more cards going after it. I will tell you, I've spent some time down here. This is a these weird people. You're not going to deal with standard middle of the road.

People that end up, my dad used to always talk about it, which I thought was genius. He said, like there's certain places in the world, like San Francisco is one, Key West is one, where, you know, there's just like weird people who just keep walking and they just keep traveling. Well, eventually they can't walk any further. They reach water, and they all just kind of stay there. That's why Key West is like so weird. It's because, like, all the weirdos you know, they just keep walking for place to place, to find their place, and then eventually they ran out of land, and they ended up in Key West.

So there is a level of just kind of oddity when you're in this town. I've spent a lot of time here. I grew up going to this town. People are just weird. So you should expect that there's going to be some oddball stuff going on from a business perspective if you end up at Puerto Rances. I would just also throw in, you might have some fleet financing in that EBITDA. There might be some interest expense that shouldn't be out and back, because you might have to

use that same kind of fleet financing. So watch out for the interest expense in the EBITDA and also the depreciation. It sounds like they may be expensing a lot of their maintenance, but you'd have to confirm that. So EBITDA, maybe not the right metric for this particular business, depending on the answer to those two questions. All right. Let me talk about something else. Something else you should know about this. This town of Puerto Ranzas is kind of like Galveston. Every decade or so, a hurricane comes in and blasts everything. That is something else to know about this. So you need to be prepared that you and that red truck and that trailer are going to be

every few years packing up every one of these golf carts and driving them far inland and dropping them off somewhere because you cannot leave them next to the water here because this whole town has flooded out numerous times because they are at the same time. I like that. If you have a restaurant in Puerto Rances, good luck putting it on a trailer and moving it inland. At least in this case, you can be able to. pick up your assets and keep them safe. So the other thing about this business, so like I think we kind of like the model, right?

Vacation, town, asset rental, you know, assuming kind of all everything kind of pencils, this can be a good business. Yep. But do you buy this business for $4 million in Puerto Rances, Texas, or do you get in your head that, geez, I would really like to live in a coastal town and own a golf cart rental business? And I'm willing to pay up to $4 million to do it. Do you kind of canvas the entire coast of the United States, find a,

coastal rental town that has two golf cart rental places and you think could support three golf cart renter places by half a million dollars of golf carts and just come into somebody's market and build, you know, instead of spending $4 million, spend half a million dollars and, you know, grow into it. I think that's probably a really good plan. Depending on the market, whether or not they have special licenses for those kinds of businesses, you know, whether it's a limited number there are allowed or not. But I think that's actually a really good idea.

frankly. Yeah. It's also, they talk about it in the listing. What you're buying here is a lifestyle opportunity. Like, I would just not choose to live in Puerto Ranzas. This is not the lifestyle you would die. It's fine. But like, it's got to be for the right person.

Like, this is just not, I'm not signing up for that. Like, if I'm going to choose a lifestyle business, I'm choosing a different lifestyle. And definitely not in Puerto Ranzas. If you're going to go buy this business, go there in June, sit outside for a couple hours at 2 o'clock in the afternoon and make sure that you enjoy 180% humidity at 100 degrees day after day for that period of time. This is not SoCal, Heather, I was telling you, this is not, this is not the OC. I couldn't handle it. This is more like the AC. Yeah, I'm out. I'm out. My hair would, I would have more like an Afro kind of hair

style if I live there. That's, that's a tough place. Back to your point, Bill, about why not just start one versus buy this? I didn't think about saying this, but it's financing. It's much easier to get financing on a going concern that's already proven it can cash flow versus a startup. So if you're going to start this whole thing up with $4 million, it might be a lot more of your own capital, your own equity in that startup situation, a lot less dependency on financing of a loan. Whereas in this situation, you can probably. probably get 90% or more financing. And I think maybe that's a tradeoff too when you think about whether to do a startup or buy this. So normally, yes, but I can go buy a golf cart and get 80%

financing from the dealership, like straight away, right? And your only assets are functionally the golf cart. So like, I wonder if this is one of those where like the financing market is sort of inefficient here in that you can get that it's hard assets. You can buy them with golf cart loans because most people are buying one golf cart and you're just going to buy 20 golf cards but you don't need 20 you probably need five to start and then you gradually and I'm sure and of course there's a buy versus lease decision which could minimize your capital up front you know I just wonder if this is if you don't care where to live and as Michael has established if you're moving to Puerto rancis you don't care where you live and you really more want to be in this this type of business right if you like

this business and you don't care where you live it strikes me This doesn't strike me as like the most hyper-efficient competitive market such that every beach town has exactly 2.71 golf cart rental places per capita. You know what? Like it seems like you could probably get smart on this industry over a couple months, go to a couple places and pick a spot where you had a high likelihood of winning. Yeah, I don't. You're right. With the fact that you could just borrow on the actual golf carts themselves and then you fund the rest of the working capital to kind of get started, maybe you're, You're right.

Maybe this one, the financing arbitrage isn't really as strong as it would be in something that doesn't have an asset like that. So maybe, maybe it's a good idea. I think it's a great business model, just not in, I don't want to live in coastal Texas. Because if Michael Burdly says, don't live there, he already lives in San Antonio. So if he doesn't like it, I am out. I mean, surviving what I do every summer in the San Antonio heat, like, I could not imagine being like, you know what I really want to do? I want to give up all the benefits I have here being in San Antonio, and I want to go get to a place with even worse weather.

It's like there's just a reason I want to do that. Yeah. So on that note. All right. Well, this is a cool business. I mean, kudos to these people for setting it up and making it happen and carving out a little bit of a little bit of a homestead there in the, in the, uh, in the intra lands down in Puerto Anzis.

I like it. I like the model. I may not like the geography, but someone will, um, someone will probably buy it. I don't know how you finance it, but I don't think this thing shuts down. Look, there's a lot of tailwinds going on down in this area because the other coastal areas are getting so expensive. You're seeing more and more folks trade down to something like Puerto Ranzas. And there's been massive development there. You know, I remember when I first moved back to Texas 15 or 20 years ago, you could buy 20-acre lots fronting the ocean for like 100 grand, literally, 20 acres.

And now those are all multiple millions of dollars. They've all been bought up by Atlanta and East Coast and West Coast investors who have been like, well, you know, somebody's going to want this stuff someday and they've been right. Like there's massive developments going in there, these big integrated communities and golf course resort style communities. There's a little airport here as well. You can fly in your private plane if you want. So there's a lot of tailwinds to what's going on. Just the weather is not awesome. That's what I would say.

All right. Well, if anybody out there knows about golf cart rentals or opens one, tweet us at Aquanon on Twitter. We'd love to hear from you and learn more about this business. I think that'll do it. Please join us next time for the next episode of Acquisitions Anonymous.