Acquisitions Anonymous - #1 for business buying, selling and operating - Should Heather clean septic systems in Montana and why is the answer no? - Acquisitions Anonymous 256

Episode Date: December 22, 2023

In this episode with Michael Girdley and Heather Endresen, they explore the potential of a septic services company in Montana. The company offers various services, primarily focusing on septic tank-related work, and generates significant revenue. They speculate that the business may be most valuable to a buyer already established in the area. While there are opportunities, they acknowledge that the buyer pool for such a niche business might be limited.Check out the listing: https://www.bizbuysell.com/Business-Opportunity/septic-services-company/2056886/Thanks to our sponsors!CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, Michael here, Acquisition Anonymous, back again. We have a deal for you to talk through today, which is a septic pumping system and company located in Whitefish or somewhere near there, Montana. So this business was for sale for $3 million, and there were some stuff we liked about it and some stuff that we found, well, a little poopy. So stick around for the episode and you'll find out what we thought about it. Hey, Michael here. Want to talk to you about today's sponsor for the episode. which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good person.

And what cloud bookkeeping does is offer a full suite of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate, and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping,

sophisticated reporting, definitely helping you get your QuickBooks online set up in the right way, and a number of things around payroll as well. So definitely know them and recommend them. If you want to find out more about Cloud Bookkeeping, you can go to their website at Cloudbookkeeping.com, reach out to Charlie. I know many of you have

and see if he can help you make running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast, it would help us and help Charlie know that we're supporting him as well. So thanks a bunch and cloudbookkeeping.com as the sponsor for today's episode. Heather, I sent a message out to all the co-hosts

and told you guys I was stick of everybody bringing shitty deals and then you went and exceeded expectations. I took it to, I took it literally, you know, that's kind of how I am. Yeah. Okay, for those of you not watching the dad joke on the screen, it's because Heather brought a septic services company out of Montana. And I did challenge everybody else on the team. Like, I felt like I was bringing only one bringing deals.

Like, you guys bring some deals to. and Heather, Heather came through today because she brought the last one and this one. You may not ask me to do this again after this one. So I think it was a big way out, right? This one looks like a little shitty. It looks a little shitty. Actually, and I want to tell you,

this one was also sourced off Twitter. Oh, really? Yes, this was a listener, suggested this one. I mean, was it a joke? I don't know, but they did send it. And I thought it was kind of interesting because it is its home services. So would you like me to read it?

Sure. All right. So that is septic services company, Montana, relocatable. I'm questioning that one. Asking price $3 million. Cash flow, $819,000, 296, gross revenue, $1,992. Nff and E 885 established in 1994. business description. It's in Western Montana, high profit margin service business,

qualified staff, equipment, well-maintained, desirable area in Western Montana, well-established septic services company that offers septic tank locating and pumping, drain sewer, septic line cleaning, grease trap, and restaurant servicing, car wash servicing, concert and special event, portable toilets, hydro excavation, and wildland fire infrastructure support. Oh, that's interesting and servicing. This company has held an excellent reputation for over 25 years and serves as the market leader in the area.

Approximately 60% of revenue is generated from septic services, while 20% is from portable toilets and the final 20% through hydro excavation and supplying support for wildland fire crews. Real estate with acreage shop and rental property on site are also available, not listed, not included in the list price. Don't miss this highly profitable opportunity. Call today. Real estate is leased, 10 employees,

FF&E is included. Real estate is available, not in price. So I don't know if it's leased or the seller owns it. I think the seller owns it. The company maintains the lion's share of business in the area. I would hope so. There is normal competition for this type of business. Oh, so there is some competition.

Population is booming in this area with nearly all new homes requiring septic. A company currently does little to no marketing and sales. Lender pre-screened with 600,000 down. That's an interesting way of putting it. We'll train for six weeks at zero cost. After 20 years in business, owners are ready to downsize and pursue other interest. It's sort of cut off there. But they're just getting out of the poop business, I think, is what's happening.

Oh, intro. Yeah, and this is listed by Levi Pollard at Murphy Business. Okay. So what you think, Michael? Let's check out, let's do some shorelocking here. So you can click on Levi's name, and he's in Whitefish, Montana. So there's a good chance that this services business is also in Whitefish, Montana. Yep.

So let me pull over here, and I can pull up my famous super secret tool called Google. Google Maps. Yes. And I type in Whitefish, Montana. And you see that Whitefish Montana is here, now Calispell. So that's probably where we're looking at, is this corner. It's Flathead Lake, right? Whitefish is right by Flathead Lake.

I know that area, actually. So interesting anecdote for you. I live in this kind of bougie part of San Antonio called Alamo Heights. Most of the Texas cities have a place like this. And I think other states do too, like Cleveland has Shaker Heights and stuff like that. I think it. And then in Dallas, it's called Highland Park.

In Austin, it's called Westlake. It's like the affluent. How to eat, but you still send your kid to public school kind of place. And so sometime in the 80s, like one of the bigwigs in the little community here decided to get out of town when it was hot each summer

and picked whitefish Montana. And so the whole flock of seagulls of San Antonio like elite scene goes to Whitefish. And so my Facebook fills up with, we're hearing whitefish, and that's what goes on here. Yeah, it's, I mean, it's a big lake, the flathead lake. But as I remember it, it's, you know, pretty flat around there. There's not a, it's still pretty empty.

I mean, I guess it's probably grown up since I've been there. I haven't been there in 15 years, but. Right. Yeah. And sounds like there's new home build. People like to live by the lake. I'm sure that's very, very popular still. You've got, you know, pretty cold winters.

So it's probably a seasonal business, right? You probably can't. Well, I don't know. Maybe you still, I don't know. I don't know how that works with septic. I think you're pumping you around unless the poop freezes. But I don't think it freezes. Or if it freezes, you have a problem.

That's all I know about poop. Thank you for attending my TED Talk. I don't know if I'm going to learn any more about this. I decided to stop that line of discussion. Yeah, but okay, you kind of got a captive market, it sounds like. And this is probably the number one go-to provider and everybody's on septic. So I think it's a good, stable business. And if this is an area where you want to live and it sounds like it's becoming a more and more desirable area.

It is pretty. And Calispell's not that far away. So it's a, you know, good-sized town, city, not too far. far away. Yeah, I think this is kind of an interesting business for someone who's okay with, you know, the industry. Yeah. So I Googled it, continuing on with our sleuthing here to figure out which company this is. And there are only three Whitefish Montana septic service companies. The good news is they all have high ratings. A1 sanitation appears to be the biggest one based on the number of the number of reviews. They have 83 reviews. So we can click on their

website and see where they are here. Share this tab instead. They serve all of Flathead County, need some help. They have a Gmail account as their professional email address. And let's see, do they have an about thing proper license and insured since 1991? This company's been around since 1991, right? I think that's what it said, yes. Yeah, okay. Well, this is the most fun thing about these deals. Who cares about the deal being it again?

Like figuring out which one it is. You like the challenge of figuring it out. I think you did a good job here. This is probably it. So these guys appear to be the monster in the area of this space. So they're the dominant provider. Yeah, and this looks like all the stuff that CCTV inspections, hydrovalli...

Yeah, they do. Yep, all this is it. A little bit of everything. Yeah. And I like that they have the port-a-potty business, and they have the wildfire support business. Because I think both of those are in demand as well. And unfortunately, wildfires are a big problem in the West

and are just going to continue to be. So, you know, I like that there's that diversification. And, yeah, there's a lot of low-hanging fruit from a marketing perspective here. the Gmail account is one. The fact that they don't do any marketing. They probably don't have any, you know, SEO that they've been doing,

although you did find them pretty quickly. I typed in Whitefish Montana Septic Service, and they showed up in Google Maps pretty easily. So that's a good sign, and they have more, there's this other group, Peterson & Co. Pumping, which appears to be number two.

And it's not really clear where they're located. Oh, they're located way over here in the middle of nowhere. Further in the middle of nowhere. Oh, wow. Yeah. They're not even on my map. So it looks like A1 sanitation has been around for a while, executed well, and has become the one everybody calls.

That's what I see here. Yeah. Good business. Yeah, so who cares about SEO? You want your SEOs? Nobody else can do your service because it's not like this can be done remotely. No. Although they said it was relocatable, which was really strange in the listing.

Yeah, that just feels like broker clicking the wrong button to me. Yes. Yeah, it doesn't make sense. Yeah, there's some other ones that come up in Google that aren't that one. But, man, I think at a certain point, as polluted as Yelp and Google SEO has become, like everybody just goes to Google Maps now. That's the search engine for me to find local services on anything. Well, and we have the whole Bard and everything else coming into play.

We'll see how that plays out. But this is kind of, this feels like very insulated. You have a small market. You're already the number one there. Everybody knows you, and all the residences and commercial properties are on septic. And so their services are very consistently needed. Well, it's the cool thing where of a small market like this. You buy a potentially cornered resources because guess how many people in whitefish are driving poop trucks?

Very few. There's not a big supply of them. And so you can potentially get to a market. and I've seen this in some of my other businesses. You go to a small market and an established competitor is there. And you say, I'm going to come in and compete with them directly. Well, that market is big enough to barely support one vendor and do pretty well with it. But it's never big enough to support two vendors.

So you end up with just a monopoly because you're the right type of business in a small market. And you may have that factor here. Yeah, that's what it looks like. And I guess you'd want to find out, do your research, not only on the industry, but on the growth in the area. You know, what are the trends? Who's moving there? Are they still building houses?

You know, or is this kind of a stable market where it is? It sounds like there's new houses being built. So that's interesting. I believe it. I mean, the nice thing about this is it is a multifaceted set of things this company is doing. Like you are here doing septic line cleaning, grease trap, servicing, car wash, servicing, portable event toilets, hydroxervation, wildfire infrastructure. support and servicing, and you're like, man, they do all that stuff. That must be a huge business.

What's the gross revenue? One point nine million. It's like what? You don't even do your, you're like half of the size of a Starbucks. Like that's how big this business is. Yeah. And yeah, so this is, that's an interesting thought is to you can't really grow it, right? They're already doing everything that, you know, relates to this in this area. Right. And the area may grow a little more, but, you know, it's not going to be astronomical. So, you know, what's a fair multiple to pay when the growth is pretty limited? I think my new thesis is this may not be the bigger dominant provider. Because established 94 and the one I just looked at A1 was 1991.

So I think this may be, this smells to me like Jack and his two employees and Jack was never a good manager and Jack still drives the truck and his wife does the books in the back. and you got a few clients, but by and large, most of them went to the other guys. When you said this smells, I started laughing, but okay. Yeah, I think you're right.

It's probably not A1. And then it begs the question, why didn't A1 buy them? Right. They don't need to. So when this changes hands, does A1, you know, take over your customers?

A lot of times the big competitor is like, here's why I'm not buying you. One, I'm just going to take your good customers anyway. And number two, I don't want your bad customers. because you got to imagine there's the one customer who calls you, who has the rent house that calls you every three months in the middle of a blizzard

because the toilet's backed up again because their tenant put something down there that they're not supposed to. You know, I think those are all things to worry about. It is. Yeah. As we double click on this, I'm like, oh, this is why this business is still for sale. Yeah, it's too, yeah, it's not the big provider, unfortunately. And yeah, you got to watch out for that.

They do probably, like you said, there's only really room for one, but the small provider gets the sort of crumbs of the other one, and do you want the business that has just the crumbs? No, that wouldn't be fun. When people rolling these up, right? Like, PE is making platforms around subject services. That's everything I've read they are. Yes, they are.

They are. Anything home services, they are. But, I mean, they look at a map. Do they really need Montana, a really small one in Montana? Probably not. You know, when they look at kind of what they need to fill out their, their portfolio. I find it interesting whenever there's a PE roll-up. You know, sometimes we look at and think, wow, PE really overpaid for that one. But if you knew the whole picture, it's because

they just needed to fill that gap. That was part of the overall, you know, and that was worth it to them to kind of overpay for this one H-FAC company in this particular market because they needed one there to make it all work. So you can get lucky that way, but, you know, you don't rely on getting lucky, of course. Can we talk about the hilarity of the picture that they chose here to represent the thing? Like, it's a poopy pipe basically taken with somebody's cell phone. Like, why did you guys think this was the right thing to represent the business in the listing? I don't understand that.

That is pretty scary. It is pretty scary. Maybe they just want serious buyers who understand what they're getting themselves into. I don't know, but that's a horrible picture. Yeah. I even have the homeowner, I don't want to see that, right? Even if I had them coming, I would leave. I would leave.

I'd say, okay, you guys do your thing. I'm out of here. I don't even want to know. So what did, you said you found this one on Twitter? What did Twitter like about this business? You know, they didn't really say. So what I did a few weeks ago is I asked for people to tell me some deals that they found interesting.

And this was one of several, the other one we did just earlier. They didn't really say a whole lot about why they liked this one. Maybe it's someone kind of local that's thinking about. it and just wanted to know our thoughts on it. Or sometimes I think they just pick stuff that is in an industry they're thinking about and they want to hear our thoughts on the industry. I think this is a good industry in the right areas. This may just not be the right company that you want to buy.

I have heard on good accord that people will still keep pooping in the future. Yes. I probably shouldn't agree it up, but it's been on Twitter a couple times. There's people who get paid for their poop or is like their gut buy. bio. Oh, yeah. Yeah, so we've been making jokes about that, too. So there's a lot of business around poop.

Look, as a now student of the gut, because my son has had tons of GI issues over the past few years, and it's been really tough on the fam. I see where people will try stuff like that and replace their biome. And I've seen it happen with me as well. Stuff changes entirely based on the supplements all eat and take, and how that can affect, you know, consistency of number two, all that kind of stuff.

Like, yeah. So, but yeah, if you're one of the, you know, the chosen few who have the premier. Good biome. Yeah. Yeah. So there is a thesis there that your gut biome is like one of the biggest determining factors to your, your obesity rate. Like the bacteria will tell you to eat more or eat less.

Really? Yeah. I don't know. I did not know that. There's a bunch of pseudo. science and all that stuff. Yeah, we don't know. I know. People say a lot of things about what we should eat and what's going on with obesity. I don't know. I think it's fast food. Eat real food, mostly plants, not too much. Like, Michael Pollan had it right. Like the problem is,

is with not things that like, you know, says easy does hard. You know, that's what that is for sure. And our society has made it harder is what I think. That's what I mean by fast food. It's just in your face everywhere. The smell, the, you know, pictures. and people just eat it because it's right there. Have you ever, I mean, have you gone and like spent time eating food in foreign countries like at restaurants and stuff like compared to American processed food? Yeah, I've traveled. Yeah, absolutely.

Just the food, even in Mexico or Canada that you get at the grocery store, like it just tastes and feels different. Like, and it's not, you know, of course there's like being a foreign country, but the reality is like the food is just like you don't wake up the next day feeling hung up. after you go eat at a restaurant. Like my wife and I would go out when we were in Paris and in Marseilles, we would go and eat like a three-star restaurant equivalent every night, right? And it's, yeah, it was really fancy four or five courses, dessert, and you wake from

the next day and just feel like a human being. You do that at an American restaurant. You go to the Cheesecake Factory, I'm down for like two days. Like I have a hangover from that stuff. And it's even if it's the same thing, like, hey, just give me a fish filet with a side of mashed potatoes. like it's just totally different when you go to these foreign countries. And I think it's all about it's the food supply is totally different.

You know, I think that's part of it. This is why I have a garden. I'm a big proponent of having a garden, grow some of your own vegetables and you see the difference. Like certain things, you go, wow, this is way better. If only you owned a worm farm that could keep that healthy. I'm a consumer of the worms. I use the worms in my garden, which, by the way, everyone's been asking us what happened with the worm farm?

Well, you know, we did that thing last week about who shows up most of the podcast. The guy we put the guy who does ever shows up in charge of it. And that's it. So I did get some messages about the worm farm. And what it turned out, the reason they're selling at the top and the reason it was so big time and so profitable was because of the cannabis industry. It was a byproduct of the cannabis boom. that everybody was buying worms to feed the soil for their cannabis stuff. And I think that's what happened.

And now cannabis has crested and is dying horribly. And, you know, that's what you see. Fascinating. All right. We'll see the worms in the garden, that was wholesome. The worms for the cannabis, see, that was a bubble. Not so much. Not so good.

Well, back to the poop. I wouldn't buy this one. Yeah. This is one that probably is going to trade for not much. I don't think it's going to sell for two and a half times cash flow to do the also-ran provider in Montana. Now, could it be worth something closer to that as a bolt-on for one of the existing guys, especially you have good customers or PE with low-cost capital who already has a, you know, a what's what you call it like a platform, you know, in the Montana? area, definitely. Here's the other thing about Montana. I think last I saw the state has like 450,000 people in it. Like, it's just not, that creates opportunities for people, but it also creates, you know, disopportunities, which is, you know, P.E. isn't listing Montana in their top 10 markets to go after. They want to go after Houston and San Antonio and stuff like that. Yeah, absolutely.

Ten employees. They have 10 employees here to do, to do 1.9 million in revenue. That's actually pretty good. I mean, $200,000 per person. But like sick profitability level, this is a testament to what some of these businesses can look like. These people are making $800,000 a year on $2 million in revenue. And so that means they have 10 employees. That means their average comp per employee all in. Let's see, it would have to be, well, let's say you say they run at 50% SG&A. like that means they're paying those people like 50 to 60,000 a year. Man, that seems tough in whitefish. Yeah, right.

They're probably not living in whitefish. They're probably coming in from somewhere else. Call spell or whatever. Yeah. Yeah. It's cold up there. That's basically Canada. Yeah.

Super good. Okay. Oh, they have real estate too. The company maintains the lion's share of business in the area. Maybe, you know, maybe this is wrong. Yeah, instead of 1990, this is 94, but this is where the listing broker might have just made another mistake here. Yeah.

Levi here looks like the type of guy I would imagine would move out to live the good life and be a real estate broker and relevant type thing. So I don't know. Good for them. Dexter Sherman. I love Montana. I love business. Offices in Billings, Bozeman, Missoula, and Calispell.

Looks like Dexter Sherman is the guy who is the guy who is the. business broker from Montana. Looks like he has a lot of listings here. What was the other guy? I think he works with this guy. Oh. He sells a lot of construction. Ooh, hot road manufacturing?

We should definitely do that in the future. Count me out. I don't know anything about cars. Nor do I want to. I don't want to. All right. Well, hey, this is a good one. I don't know.

I would just, depends on what you want. I guess if you already know this space and you want to go live in Montana, again, this is another one of those like the buyer universe, It's just like super narrow for something like this, unless PE or a roll up comes along,

which you have to ask yourself, why haven't they already bought it? So there's probably a good reason there. Awesome. All right, well, this was a cool one. This is the way business buying works, by the way. You're just like, all right, swipe right. It's kind of like tender, but for P&Ls.

All right, Heather, great job today. I will see you next time. Thank you. Bye-bye.