Acquisitions Anonymous - #1 for business buying, selling and operating - The $13M Revenue Warehouse with Just 25 Full-Time Employees

Episode Date: December 31, 2024

In this episode, we explore the ins and outs of a $3.5M EBITDA 3PL warehousing company and its role in the fast-evolving logistics and e-commerce space.Sponsors:Acquisition Lab: Thinking about buying a business? The Acquisition Lab offers a proven framework and expert guidance to help you navigate your acquisition journey. Learn more here: https://www.acquisitionlab.comViso Capital: Need funding for your next acquisition? Viso Capital specializes in providing tailored financing solutions for small business acquisitions. Find out more here: https://visocap.net/This episode dives into the fascinating yet challenging world of third-party logistics (3PL) as the hosts evaluate a $3.5M EBITDA warehousing company based in the US Pacific region. With insights on its scalable, asset-light model, impressive margins, and unique value-added services, the team discusses the company’s strengths, growth potential, and hurdles such as customer concentration, labor dynamics, and geographical limitations. Learn how this business stacks up in an increasingly competitive industry driven by e-commerce and logistics demand.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]

But you should never, ever, ever, ever put a 3PL in California. If this 3PL is in California, you should just simply not buy it and walk away. Man, this is a great deal. This is really interesting. Bill, I love when we talk about stuff that you know a lot about. I learn so much every time. Hello, another episode of Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous.

We don't have 100% here. Welcome back, everybody to another episode of Acquisitions Anonymous. I'm Mills-Snell, one of your co-host, me, Bill, and Heather talk about a really interesting business today. It's a 3PL provider, which is third party logistics. It's a warehouse fulfillment business located somewhere in the U.S. Pacific. It's on Axiol. Three and a half million in EBITDA, really decent margins, 21% margins.

We really like this business. We don't know a ton about what exactly they focus on. Phil has an amazing perspective on this, though, because he's run his own internal logistics, not third party, first party, I guess. And he now uses third party logistics. So we get really nitty gritty into some of the things that make this business tick. What makes it hard. I think my favorite line is this is this is a,

business is really hard to own and still be able to go on vacation. So if you've ever looked at anything like this, it's very alluring. You could kind of ride the upswing of e-commerce and more, you know, direct-to-consumer business, but we talk about the ins and the outs, what's good, what's bad. Really think you're going to like this episode. If you've ever looked at anything like this or ever looked at anything that uses a third-party logistics provider and wonder, you know, could I peek behind the curtain? What does that business really like? So stick around for a quick word from our sponsor. Are you ready to take a leap into business ownership, but you don't know where to start? Well, look no further than Acquisition Lab, the premier resource for entrepreneurs seeking

to buy their dream business. Founded by Harvard MBA and acquisition expert, Walker Dibble, the Lab is your fast-tracked success in the search diligence and acquisition process. With hands-on support, world-class resources and a community of like-minded entrepreneurs, Acquisition Lab gives you the tools and confidence to navigate every step of the journey. And we're proud to call Walker and Chelsea, the lab's director, longtime friends of the podcast. They're passionate about helping entrepreneurs like you take the next big step. So don't wait to make your business ownership dream of reality. Visit AcquisitionLab.com today to learn more and schedule your free consultation.

And when you do, be sure to tell them the Acquisitions Anonymous podcast sent you. All right. Christmas Acquisitions Anonymous, December 17th we were recording this. I don't know if you're supposed to say that because people know it's on lag, but we're not on that much of a lag. No, no. We really need more festive. You guys are kind of festive in your attire.

I need Santa Claus. Yeah, I agree. Yeah, there's got to be some way, like, can we, like, put Santa Claus background on or something? That's what we need. Yeah, that's what I need. Well, I am psyched because this is, or I'm psyched, but I'm also, like, under the gun because this is the last week of work. It is Tuesday, December 17th. And after this Friday, I feel like a whole world stopped and I'm not going to be able to get anything done.

So I'm in sprint mode over here. Me too. Like, we were talking earlier. Like, some people just think they're trying to feel like. like they're productive this week. And I was like, no way. I am so productive this week. It's insane. How much I'm getting done every minute. We talked on the last recording, like the cutoff when people reach out to Heather is like September. Like if you're trying to close by year in and you're reaching out mid-November, like it's too late, man. It's not going to. What is the drop dead day for

you guys when like do you all announce, hey, look, after, you know, after December 15th, we can't guarantee you're getting stuff in time for Christmas? Yeah, it's rolling. So like, you're, you're missed it. So it was like the 12th for like fast or slow free and cheap shipping. Yeah. So now you're into like priority mail and then like probably by tomorrow you're into like two day. Yeah. If you want to buy Christmas. You know, luckily for our stuff, it's not super gifty like dog supplements. So we don't have like this pre-Christmas rush. People don't do dog stockings and stuff like that. They do. They do. Absolutely. I do. Absolutely. Dog stocking stuffers is a thing. We have sold many this year. But like, and then the last kind of up to the wire, we just start pushing people to Amazon Prime.

Yeah. Because they can get it there faster than we can, you know, up to like Christmas Eve. Wow. And then it just goes pretty quiet for a couple days. But weirdly like our stuff kind of by the 26th or 27th kind of pops right back. Yeah. But we don't have the big peak, but we also don't have the big trough. That's awesome. And then we have a really good January because it's kind of like new year, new year, new you new dog. The dogs get that. I didn't know that. People are like, I got a gym membership and I'm really trying to take better care of my dog.

That's right. That's right. And people get dogs for Christmas too. Oh, yeah. So we usually have a solid January. Nice. But by way of segue, well, actually, before we segue, I should say, shout out to anybody trying to close their deal by the end of the year.

Good luck to you. And I hope it doesn't agree on Christmas. My heart goes out to you. But by way of segue, speaking of being busy for Black Friday Cyber Monday, we have a cool deal. Drop dead shipping dates. You know, drop dead shipping dates. Exactly.

This is a deal from our friends at Axial. If you're not familiar with Axial, it is a vetted marketplace for M&A deals. Usually the deals on Axi a little bit bigger, a little bit more polished than say the ones you would find on biz buy sale. So we like going through Axial to find some bigger businesses. And that is one of the ones we have today. So who's going to read it? Mills or Heather?

Yeah, I'll read it. So there's a $3.5 million EBITDA, 3PL warehousing company. 3PL is third party logistics. And Bill's going to teach us everything to know about 3PL in 10 minutes today. So this company is a well-established third-party logistics and warehousing provider that offers a comprehensive suite of services, including third-party distribution and fulfillment. They have efficient logistics solutions catering to various customer needs. They have value added services like customized offerings to enhance customer satisfaction and operational efficiency. Freight brokerage, they have a complete brokerage services

covering intermodal truckload and less than truckload shipments. Historical growth, they say revenue and EBITDA have shown steady increases with projected growth rates of 20 to 40% over the next few years. They're operational highlights. They have 25 full-time employees plus temporary staff. They have an asset light model. They operate with minimal fixed costs, reducing overhead and improving scalability. They have a diverse customer base serving a wide range of clients across different sectors,

providing stability and growth potential. The investment highlights is strong market presence. They have an experienced team, long-term client relationships. They say they have strong ties with both suppliers and customers. customers, and it's a scalable business model. They can grow with geographic expansion or service expansion. Their growth opportunities, they can plan to grow their service by saying, hey, we'll do white glove installation and delivery, product diversification, B2B and B2C segments, and then increase marketing efforts, our favorite one on every growth opportunity.

2020, their revenue was 13.3 million and $3 million in EBITDA with a 22.6% EBITDA margin. Then in 2023, they grew top line at 23%. They were at $16.4 million in revenue. EBITDA was $3.5 million, so added about half a million to their EBITDA margins were at 21%. They say they're looking for a sale or change of control. and the geography is U.S. Pacific, which I think matters a lot in this business. All right, guys, what do you think? What do you think, Heather? What do you know about this industry?

I don't know a ton about this industry. I mean, obviously with e-commerce growing, I would think that's going to be affecting the growth rates. I'm a little curious why the I betel margins shrunk when the top line grew. So there was obviously some kind of pressure on margins, not sure whether, you know, was it fuel cost increases or some kind of cost increased on them there. So I'd be curious to know a little bit about that. And, you know, skeptical about the white glove opportunity for growth. You know, it feels like it's two different businesses.

That's a, you know, it feels like a pretty different segment. Not sure that that would really be a great area to grow company that's already of this size. But what do you think, Bill? You're going to know more than I will. Before you start, Bill, can I, can we, can we, can we, can we? we pontificate really quick about what what this business does and let me install every 3PL provider out there yeah i want to hear you do this go ahead okay so this company rents warehouse space they probably don't own it they rent warehouse space a big warehouse probably 40,000 square feet or more

and then they tell their customers send all of your stuff here and then we will keep it on palates and we'll plug into your e-commerce or your fulfillment and when you tell us to ship one of those things off that pallet or maybe to and package them together, we will send it out via FedEx or, you know, less than truckload or intermodal, but we'll, we'll send this stuff. You send it here. You don't have to take possession of it. We'll send it to your customers and you pay us to move things around on pallets and put them on trucks. That's right. This is basically you don't want to run your own warehouse. These guys run their warehouse for you. And you have done both. And I have done both. Yes, I have run all my own warehouses. And now.

Now I am a customer of a business exactly like this one who handles all of our, there are logistics. They are the third party that handles our logistics. So as orders come in, we send those orders to them. Here's the line items and where they need to go. They pick, pack, and ship those orders to where they need to go. The revenue model of a business like this breaks down in they typically charge like a per order fee and then like a per line fee. So they'll charge a pick fee. Usually it'd be like $1.30 in order plus like 30 cents for each incremental line item if this is B2C e-commerce fulfillment.

And then they will chart and there are different prices for case picks for B2B orders or pallet picks or whatever. And then they will give you a shipping rate card. And the dirty little secret of this whole industry is they make a margin on shipping. So what they do is they aggregate all of the shipping demand from all of their customers. and then they go to FedEx and negotiate and get a great rate from FedEx, and then they give you their great rate plus, I don't know, 10 to 20%, which still feels like a really good rate to you and better than you could ever get on your own because you don't have that kind of volume with FedEx, but they're absolutely taking a spread.

So when you go to a 3PL, you can negotiate both the labor rates, but also the shipping rates. They will never disclose you what their spread is, but those rates are negotiable. So the way they make money, so the way three peels make money and have good margins, and this one does have good margins at north of 20% is they make money on kind of high volume B to C fulfillment where they can crank out like how many orders per hour, right? It's basically labor arbitrage. And they invest a lot of money in technology and automation to help make their people faster.

batch picking and all these types of things that let you do, you know, automations, also process improvements to really get leverage out of your people. They make money there and they also make money on the spread between postage. As I mentioned, the places they don't make money are anything high touch, like B2B fulfillment, receiving, like all the fees, you know, a lot of times build the stuff out at $40 to $60 an hour and you feel like they're crushing you on it, but they're not making any money on that. They do that stuff to win the account. And the high margin stuff is the ripping out high volume B to C and making a spread on postage. So like would white glove things like this be like, hey, it comes in, you know, maybe the packaging configuration isn't exactly right. And I need you to,

you know, unpack it, put it in a different box and like put some kind of branded sticker or something on it. Like are those, is that what they mean by white glove or is it a QC? Unlikely. So that would be called value added services typically, Mills. You know, like I get 100 of A and 100 of B. get them into 100 A plus B boxes or whatever. No, that is kind of value added services. They'll bill hourly. They will hold their nose and do it. But they don't love to do that. It's not high margin business for it. And what is just because I don't know anything about this, but what is copacking in this industry? So co-packing is generally one step up. The value chain is typically like a contract manufacturer. It's another word for co-manufacturing, co-packing or contract

manufacturing, where people, you give them your recipe, they make your product, they put your label on it. It's this, but for outsourcing your factory instead of your warehouse. So co-backers probably aren't even handling the logistics, the third part of logistics in the shipping, which is. Yes, usually the copacker sends the product to the 3PL and the brand never touches it. A bunch of friends in real estate. And they all joke that nobody loves their property manager. Like everybody hates their property manager, but it's kind of like friends in the the, you know, in the ownership, in the real estate ownership business are like, nobody likes their dumpster provider. Like, they're just all bad, but you just choose the one who's least bad.

I get the impression from people that like, nobody really loves their 3PL provider. Is that, do you hear that? Is that a common sentiment, Bill? One thousand percent. Nobody loves their 3PL provider. I have yelled a lot at my 3PL provider. And this people always ask me if I would ever start a 3PL. I said, hell no, because I have been on the one side of phone calls that I never want to be on the other side. Yeah. what are the things that go wrong? I mean, you're obviously saying, hey, look, my job is to build my brand, source a product, and then your job is to get it into my customer's hands in a timely way.

So, like, I think about technology issues and, you know, you're getting an angry call from a customer who says, you promise me I'd get this in 48 hours. And you're like, I don't know, let me check into that. And then they, you find out they haven't shipped any orders in a week. Correct. And what happened? You didn't know about it. Yes. So I kind of joke that 3PLs are like the long snappers of business. Like if you are hearing the long snappers name, something has gone really wrong. Yeah. Right. Like you, you want to be invisible, you know, not seen and not heard. You know, that's the goal of the 3PL, which is a bummer because when you do great, you get no accolades. And then when you screw up, you know, people melt your face off. Yeah. And that's just kind of the nature of this industry. The other thing that makes it hard is that you're you're arbitraging blue.

labor, right? And so you have every incentive to keep your wages low and thus the quality of your people low. Yeah. Right. And that just leads to not a lot of fun, right? You know, managing a lower quality workforce, which can be really tough. And you look at what Amazon has done in their distribution facilities and they've like, they have robotic, you know, little couriers that pick up, you know, the stand of all the product and move it to the person to create labor efficiency and all the things that they're not doing that aren't they're they're doing that aren't even public most 3PL providers like this doing 16 million in revenue they can't compete with that it's still a very manual business and they're going to try and tip the scales anyway they can but like maybe it's

we introduce barcode scanners or something like oh yeah it's something very minimal yeah it's getting less manual though mills okay like i you know i was at a three pill lately and they've got all laser scans on all the carts. They've got video game controllers, like Dance Dance Revolution drums, video game controllers that they have hacked. So like instead of like grab the packer like clicking the mouse and clicking next order,

they just go, bam, next order. Wham, completely. Oh, I need that. It's really cool.

And they've got little fingertips scanners. So like when they reach up and grab the box, they scan the little barcode on the shelf as they grab the box, which tells the system what size box. blocks they've used. So like this is why they make money on the DDC fulfillment. They are squeezing seconds. Yeah. You know, so efficiency really matters. This reminds me of a business that I looked at years and years ago was represented by an investment bank. And I imagine that they have just toned it. But they, it's I think where I would rather be in the value chain. They were a, a hardware distributor,

reseller and a technology implementer who would go to, you know, manufacturing and distribution facilities and say, hey, here's how we can put this automation to work for you. They weren't like, you know, they weren't making assembly lines, but it was here's how we can implement those types of things, you know, in your, in your facility. So that when your forklift drives across this thing, you know, you know that XYZ is happening. Or when somebody pulls something off the shelf, it's automatically tracked and cataloged and then tied to the right account, those kind of things. Yeah. I mean, Bill, this is what we were kind of talking about earlier. Every small business needs an automations consultant just about these days, right?

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 Vizocap.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. Oh, yeah. But if you're a 3PL, you don't have a consultant. You have a full-time. You are the consultant. You better be the expert. Yeah. Right.

And I love going to. these businesses and touring them and being in the warehouse and looking at all the ways that they're building systems and trying to squeeze out, squeeze out efficiencies. Because it's like, it's systems, but it's not super high tech. So like you can kind of understand what's going on and see the ingenuity and go, I could have come up with that or what else could I come up with? It's really fun to tinker in a warehouse. And we did some version of that in our warehouse and we ran it for almost 10 years. And ultimately, the reason we outsourced it is I realized that I could not compound that area of the business nearly as fast as a 3PL code.

Right? I mean, they, I've been to 3PLs where they are 3D printing their own little enclosures and like designing their own scanners and stuff because they got an on-site tech team. You know, it's just, I was never going to do that. It's not our business. Like, it's a cost center for us. It's a revenue center for them. So that was why we ultimately outsource.

So 3PLs are, you know, the 3PL industry has really been growing and is a huge part. of our economy. So this is not going anywhere. So with all this growth, and I fully buy into the, you know, the 20 to 40 percent growth rate feels like that that's pretty attainable, given the industry tailwinds, if you will. Why would someone sell at this point, three and a half million EBITDA? Is it because possibly the stuff we were just talking about, what it's kind of not a fun business to be in? It's kind of you catch all the complaints and it's just not fun. I could absolutely see burnout as a reason for selling, for sure. I mean, just the constant management of people. It's important to note, this listing says that they have

25 full-time employees plus a temporary staff. Most 3PLs run between 50 and 75% temp labor, which means that if you've got 25 FTEs, you might have as many as 75 temps in the building at any one time. And the reason they do that is because, and this is why they get yelled at, but their job is hard, right? What if the brand is on Oprah? Boom, all the order. to come in, right? And they didn't have any heads up and they need to scale up. And then all those orders are out and they need to scale right back down. So most 3PLs have a very, very symbiotic relationship with their local temp contracting agents. The thing that feels harder to me to scale that would be very difficult to navigate is the real estate component of this. You know, if you have, you know,

50,000 square foot or 100,000 square foot warehouse, you know, if you're, let's say it's 100,000 square feet and you're only half full, well, that's a huge drag. You know, know on your profitability because you're paying rent on the whole building but you haven't filled it. But if you're at, if you're fully occupied in that 100,000 square foot building and you've got racking and you're vertical and all those kind of things, you can't sell any more work. You can't take on any new accounts because you know, hey, they're going to take X amount of cubic feet of my rack space and I don't have space for them. And so you're probably signing maybe five to seven to 10 year leases on this type of space depending on the market. And then it's a

chicken and egg kind of dynamic that with temp labor, you know, you can staff up and staff down. That you, you delegate that to the staffing company. But the real estate, it seems like it'd be a lot harder to scale that function. It is. But one of the ways they manage that is a couple ways. One, you can open a new building and it can be incremental. Like you don't have to go from 50,000 square feet to 100,000 square feet. You just open a second 50,000 square foot building. And then you run it like two buildings in the same town with, you know, and you can share some staff, but you just divide the customers by buildings. So you can grow incrementally like that. The other way they do it is they grow geographically. And what's interesting, and this comes back to this one being in

the U.S. Pacific region. The next thing these guys need to do is open something on the East Coast because you've got to be close to your East Coast customers because time and transit, first of all, just the time, but the cost, like shipping all these small parcels all the way across the country, West Coast is not a super efficient place to put a 3PL. So these guys need an East Coast facility. So during diligence, I would be asking, what are your plans for an East Coast facility? Why have you not already done one? And this may be a dumb question, but why is the West Coast inefficient for this?

Well, in the same state cost? Well, yes. So West Coast has some problems that are unique to the West Coast, which are really California problems. Sorry to bang on California, Heather. But you should never, ever, ever, ever put a 3PL on California. If this 3PL is in California, you should just simply not buy it and walk away. The reason being, obviously, all just the costs are higher for being in California. But then the two things you may not know about, the compliance is so much harder being in California.

California has a fine. If you have a truck idle at your dock for more than a certain amount of time, the state finds you because of like the pollution. So there's just so, and that drives cost up, right, cost of using the 3PL. And then finally, and this is one thing you may not see coming, if your 3PL is in California, that means your inventory is in California, which means you have nexus in California, which means that you have to collect and remit sales tax in California and you're responsible for income tax in California, if you're a pass-through on the portion of your sales that are done in California because now you have inventory in California, now you have nexus in California.

So all the time, people sign up to become customers of California, 3PLs. go, oh, 35% of our revenue is in California. That's what all of our customers are. Put your revenue or your inventory in Nevada. Don't put it in California. And that's why Reno and the surrounding areas are huge 3PL towns. Just to ship over the border into California. Wow. Fascinating. But the other reason West Coast is bad is the same reason East Coast is bad. You know, if your only note is Nevada and someone orders from New York, that's a long box, right? So high time in transit. It's in more expensive. expensive box than Nevada to Arizona.

Right. So same thing. If you're only in Pennsylvania, California is a long box. So there's actually a ton of math on this, as you guys can imagine, the whole logistics industry has figured this out. The optimal place to put logistics is in like Ohio, Kentucky area because of the population densities and the radius. From Ohio, it's something that you can reach 80% of the U.S. population in three days or

something from Ohio. It's basically everybody that doesn't live in California, you can get in the three days from Ohio. It has to do with where the highways are and everything. And that's why FedEx has big Kentucky presence, right? Like it's not by accident. Wow. So these guys should be opening in Ohio, Kentucky, Western PA, something like that. So, Bill, you've said some things that, you know, if you sign the NDA on this and you look at it, some things that would automatically disqualify it.

what would be some things that if you sign the NDA and you get the book that you're like, this is amazing. Like I can't walk away from it. Yeah. Well, I already love the margins. I mean, 20% plus EBITDA margins for what is functionally real estate and labor arbitrage business are quite good. So I would be digging into why do you have super normal margins?

I would be shocked if the whole free PL industry didn't operate on single digit margins. So 20% plus is quite good. I'd want to understand that. So I already like that about this business. What you'd want to see is really long-term customers because if that means you're keeping them happy. And if you keep something, it's a real pain in the ass to move to switch three PLs, like a re-technation on the technology side, retraining. You know, there's easily, you know, five to six figures of freight, just moving all your stuff, plus receiving it into the new 3PL. Like, it's a bummer to move.

So this is inherently a little bit sticky, but also it's very easy to piss someone off. so much that they will absorb all those switching costs. Yeah. Because if you're not shipping their orders or you're shipping to Walmart wrong and Walmart's hitting them with six-figure billbacks because you screwed up, I mean, brands can, even though switching costs are high, the cost of staying can be even higher with a bad 3PL. So you want to understand really how long and sticky and happy their customers are. That is hands down what you'd want to diligence.

You'd also want to understand kind of the fraction of the revenue that comes from freight arbitrage, of arbitrage from value added services, which is like the stuff they bill out by the hour, and then the D to C fulfillment and kind of the margin profiles on each of those. And you would see that the vast value added services by the hour, the B to B stuff is not profitable. It's the D to C stuff. So something that was like all D to C with sticky clients who were growing, that would be really attractive. Is there anything like truly unique in this business that is attractive or are the unique ones?

it's a bug not a feature uh honestly the unique thing is great execution like relentless high quality execution and never dropping the ball like this is like a like a data center it's like about how many nines of uptime you have yeah and about just you know put one foot in front of the other like no silver bullets just lead bullets every single day not dropping the ball that's interesting that seems like a ton of pressure yeah it's it sounded worse all the time business to own. It is, I personally, I think they're really tough businesses. I just, it's very hard to like win and take victory labs.

It's very easy to get very angry people calling you all the time and could cost your clients a lot of money and just it never stops, right? You ship all the orders today. There's two more orders in the next 10 seconds. Yeah. You know, it just always comes. I haven't looked at multiples for 3PL in a while, but I mean, what is this sell for, Bill? You know, that's a good question.

They don't get the highest multiples. I mean, this is a logistics business. It's a labor and real estate arbitrage business at the end of the day. I do like that it's big-ish. I mean, if the margins were more typical, this would be closer to 30 million in sales, right? If they had a 10% margin, but it's about 13 million in sales business because their margin's so good. I don't know. I think maybe this sells for five times.

Yeah. That's kind of what I was thinking too. I would think, I would think there's a lot. of value for consolidators in this space. I don't know any firsthand, but it seems like there's a lot that would say we just need to grab more market share because then we can negotiate better with the shippers. And, you know, if let's say somebody on the East Coast and they can buy this in the U.S. Pacific and go, we just doubled our footprint and now we drive that much more cost savings to us and our customers if we're, you know, if we're geographically inclined that way.

Exactly. There's a buy versus build and you're a quad, whether it makes sense for your acquirer depends a lot on the acquirer's existing footprint. Right? If they've got one in the same town, now if they got one in the same town with a ton of extra real estate, maybe it makes a ton of sense. If they've got one in the same town and they're bursting at the seams, maybe they want to buy something the other side of the country. Yeah.

At this size, how likely are they to have a customer concentration? We pay our 3PL about a million bucks a year. So like, you know, they could. have as few as 13 customers at 13 million in sales. So that is scary. Like you said, it's sticky, but it's not because people can feel like they have to leave. So that is interesting. And it's, but it's a catch-22, Heather, right?

Because the bigger customers, you get more efficiencies because it's a certain overhead in this business to having a customer, to learning about all their products, to, you know, receiving, like, you'd rather do fewer receipts of three truckloads rather than 25 receipts of two pallets each. right there's just there's more cost in smaller customers so bigger customers give you scale and this is a scale business and efficiency's business but then it's also scarier because if you lose one you're in a fixed cost business and the fact that they mention you know intermodal full truckload and less than truckload makes me wonder if there's something about this that it's like it's non-sortable

items it's big items like what if it's something what like what if you sign the book and you find out this is like airplane parts or something, you know, and like you go, oh, okay, this isn't, you know, maybe there's some industry concentration for better or worse, but it's not, you know, it's not just e-commerce, you know, high volume or something like that. It makes me really curious. I think that would make it more interesting. Yeah. Yeah.

Yeah. Yeah. Yeah, for sure. Because the e-commerce stuff, it's functioning in commodity. And so it's all about excellence in execution and positioning and pricing. Yeah. But if you're the only ones that have some license to ship airplane. parts of the U.S. government or something. Now this gets way better. Well, we just thought of a great

business, whether or not that's what this business does, that seems like a great business. Yeah. Yeah. And I should say that also there are some 3PLs that specialize. So like our 3PL has certain, they're climate controlled. They have lot control. They have certain certifications, specifically around cosmetics and food, which, you know, that's value added. So now they win deals. So there's all kinds of like, but at same time, they won't do flammables, you know, obviously. But some 3PLs, they specialize in apparel, you know, so they kind of carve out their niches. So I would like this better if it was a niche year 3PL rather than kind of we do all things for all people. Yeah. And like, you know, that probably lends itself to like you said,

some competitive advantage, but also probably doubles down on your, maybe it's not customer concentration, but it's like if all you're doing is electronics or something. Yeah, that, that's a that's probably a huge advantage relative to somebody who's used to doing cosmetics. But if electronics as a whole starts having major headwinds, you're going to feel it first. Yes. Yes. Exactly. Man, this is a great deal.

This is really interesting. Bill, I love when we talk about stuff that you know a lot about. I learn so much every time. Those are the best episodes of this pod, right, when somebody really knows the industry and can I pack it. So I don't know. What do you guys think? thumbs up or thumbs down. Heather, can you borrow money to buy this business? What do you think?

Yes, you definitely can if there's not too much of a customer concentration. And, you know, it's three and a half million of EBITDA. So, you know, the lenders who are outside of the SBA realm would be interested at least. That's kind of the smaller end of what they would look at. So yeah, you definitely could borrow. But it's too big for SBA for sure. Yeah. I would totally sign the NDA on this. Really, really interesting. Yeah, this is a good one. I mean, I think as far as 3PLs go, this is a good one. I still want nothing to do with 3PL. Yeah. It just the pressure, like, I don't want to be on the other end of the phone calls. It seems like you could sign, you know, a hundred NDAs on

3PLs. And, you know, I think your, I think your hit rate is going to be a lot lower just because it's more commoditized. Maybe their margin is a really good sign of them doing something unique. But my guess is is that this is, you know, this is a cluster that by and large, you're going to, you're going to pass on more than you're going to really want to go after. This, this is just one of those businesses where if you own it, it's really hard to go on vacation. Because like the shit, I'm out. I'm out. That is a great business. I own one of those already. I don't need to. Yeah. It's just it just can go. It can fall apart so fast. And like when you get behind and then the queue starts to build, it's not like you can be like, stop sending me orders. I just need to catch up. Right. So that's,

if you are gone like, you're always thinking like is the machine working like, you know, something gone wrong. There's a lot. All right. Well, fun one. Thanks, Bill. I'm out. I'm out on this one, but that's because I'm out of the whole sector. It's not made us a bad business. It's just a level of stress that I don't want. All right. Should we wrap it up? Yeah. All right. Well, that concludes this episode of Acquisition's Anonymous. If you guys like this one, we have tons on ACQUanon.com, all tagged by industry. We've never done another 3PL, but we've done a ton of e-commerce businesses who are the typical customers of this. And we've also done several co-manufacturers and co-packers who, probably send their product into this type of business. So if you're interested in this value chain, go on our website and you can learn a lot more about it. You can also hop on our email list. If you're not, you know, don't like to subscribe to podcasts or miss it. Once a week, we drop all

the episodes we record as well as cool stuff from the hosts into your inbox on our newsletter. It's just one episode a week or one email a week, rather sometimes with multiple episodes in it with summaries as well. So you don't even have to listen to the audio if you don't want. So hop on our newsletter also at acqueu anon.com. and follow us all on X, also ACQU, Anon, and you can also find links there to each of the hosts, myself, Mills Snell, Heather Anderson, and Michael Gurley. Wishing all of you a Merry Christmas and a Happy Holidays.

We will see you next time.