Acquisitions Anonymous - #1 for business buying, selling and operating - The $2M Aviation Business That Might Pay for Itself

Starting point is 00:00:00 Hello, everyone, and welcome back to Acquisitions Anonymous. This is the Internet's number one podcast on buying, selling, and operating small businesses. Today, we have a fun one. I am here with Heather Anderson and Jordan Flegel from Acquisition Lab. And we review a flight school in California. It's got a million bucks of SDE. They own a couple airplanes. It's a really interesting industry dynamic because there's a lot of structural tailwinds with a pilot shortage.

Starting point is 00:00:26 And Jordan also tells us about accelerated depreciation. and how you can own this business for free by combining the tax benefits, the write-offs, with an SBA loan to basically be $0 out of pocket to own this business because it has a certain number of assets. So it's a pretty cool deal structuring conversation in this episode as well. So I hope you enjoy this episode of Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100% beers anymore.

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Starting point is 00:01:28 You answer a few questions and Franzy shows you franchise opportunities that align with your capital, lifestyle, and long-term goals. You also get free coaching from people who have actually built and scaled franchise businesses. If you are exploring E-T-A and want to understand whether franchising fits your acquisition strategy, visit franzi.com. That's F-R-A-N-Z-Y.com. And thanks to them for sponsoring today's episode. Hello and welcome back to Acquisitions Anonymous. I am here with Heather and Jordan Fleigel from Acquisition Lab. Jordan, nice to have you, man.

Starting point is 00:01:58 Great to be here. We're psyched to have Jordan because maybe besides Heather, Jordan has seen more deals than maybe anyone I can think of because he helps searchers buy businesses all day, every day. So we wanted to bring Jordan on to some episodes and have him weigh in from his perspective. Someone who's coached a lot of searchers. So thanks for being here, Jordan.

Starting point is 00:02:20 Thanks for having me, longtime listener, first time on the show. So this is cool. All right. Love it. Well, we pulled a classic acquisition on the style. We have pulled a deal that is new to all the hosts. So we are learning right along with you. So that's a fun part of the show.

Starting point is 00:02:37 You get to see our live reactions to these deals. So Heather, since you found this one, do you want to take us through it? Yes, I do. And it is also in my home of Orange County. So maybe that's how I found it here, I guess. This is on Biz by Sell. It's a high profit, fully operational flight school.

Starting point is 00:02:56 Academy in Orange County, California. Asking price is $1,995. Cashflow SDE is $950,000. Established in 2015, gross revenue, $1,0.8. Business description, oh boy, this seems like a little, maybe some AI was left in here because it says, query successful. And then it goes into the description. This successful aviation training business offers comprehensive flight instruction programs ranging from introductory discovery flights to full certification for private and commercial pilots, including specialized airline pilot tracks. Key characteristics include they offer a structured curriculum for the airline pilot program, a private pilot program, and an aviation camp, and they accept international students. Instructors, the training is conducted by experienced

Starting point is 00:03:51 instructors, some of whom are former airline and commercial pilots. Value proposition. They emphasize clear set pricing with no hidden fees, no club fees, fuel surcharges, or taxes, and offer flexibility, pay as you train options with no deposits required. Partnerships. The school maintains strong industry relationships, including a partnership with a major airline to provide a pilot pathway program, a lot of peas there, sorry, and an affiliate partnership with an established aviation college. The business operates a fleet of fixed-wing airplane aircraft, maintained to high federal standards, and provides training in a fun, professional, and fully certified environment. The aviation training industry is in a period of robust and sustained growth,

Starting point is 00:04:44 primarily driven by an acute global pilot shortage. Flight school market outlook, strong growth, the flight. school market is projected to grow significantly with a cager of 6% to 14% through 2034 due to high demand for entry level training. Key drivers, growth is fueled by massive airline hiring needs, global air travel recovery, and expansion in regions like Asia Pacific. Operational dynamics, flight schools benefit from high enrollment but are challenged by a shortage of flight instructors who are rapidly moving to airlines and the high cost of equipment. The future will emphasize advanced simulation and closer partnerships with airlines,

Starting point is 00:05:23 including airline-owned academies to secure the pilot pipeline. Interesting. That sounds like the competition. Commercial pilot demand, critical shortage, the commercial aviation sector faces a structural shortage, which is expected to worsen before peaking, driven by a wave of mandatory retirements. High hiring major forecasts project a need for over 660,000 new commercial pilots globally over the next two decades. A favorable career, although post-pandemic hiring surges has normalized the long-term outlook

Starting point is 00:05:57 remains highly favorable. Aspiring pilots inter-training today are well positioned to capitalize on the sustained, high-paying demand and rapid career advancement in the next decade. A lot of AI, I felt like a lot of AI there. Yes. This episode is brought to you by a company

Starting point is 00:06:12 I genuinely use across every single one of my businesses. It's called Mercury. I've incubated a lot of businesses over the years, a media company, a podcast business, a staffing firm, a quality of earnings firm, and several others. And Mercury has become my go-to banking across all of them. I've personally been a Mercury customer for more than three years now. So when they reached out about working together, it was honestly a no-brainer. I already used the product, and I recommend it, and I'm a big fan of what they've built. One of the things that originally won me over was just

Starting point is 00:06:39 how hilariously easy it was to get set up. When you're starting a new business, you need to focus on actually building the business. Now paperwork, phone calls are figuring out. some banking interface that feels like it was designed 20 years ago. Mercury is the complete opposite. Everything is incredibly intuitive. I can open the dashboard and immediately see what's happening across the business. Review expenses, move money, send ACHs or wires, manage cards and permissions, and just get a really clear picture of where things stand. And when you're involved in multiple businesses at once, having that visibility without adding more complexity is incredibly valuable. Now that I've been using Mercury for a few years, traditional banks honestly feel like going back in time.

Starting point is 00:07:17 in a bad way. That's why Mercury is one of the few things I set up when building new businesses. Visit Mercury.com to learn more and apply online in minutes. Mercury is a fintech company, not an FDIC insured bank, banking services provided through Choice Financial Group and Column NA, members FDIC. Inventory, 900,000, what? That feels like. Airplanes, baby. Equipment. That's got to be the airplanes. It seems like I would call that equipment rather than inventory. It's got to be airplanes. Facilities executive office with pilot, study lounge, and flight simulator room, all computers and furniture competition. They talk about the shortage of pilots again, more about the growth and expansion again, repetitive stuff. Let's see, financing available.

Starting point is 00:08:01 They don't say SBA. And seller may finance, okay, and must have knowledge of industry and owner will stay on at part-time capacity for two months. He started his own jet charter business. he is the chief pilot. Oh, huge bomb at the end. Yeah. Yeah. Okay. It's coming away.

Starting point is 00:08:25 Okay. So, Jordan, what does this business do in your understanding? They train people to be pilots. So like professional pilots. I get the sense they are doing some of kind of private pilot. You want to fly your own aircraft. But I think there's a sizable portion of you're going to become an airline pilot. You're going to fly for America Airlines.

Starting point is 00:08:46 United, et cetera, after going through this school. You know, part of my ignorance, Bill, maybe you know, maybe you don't, but is there not, I don't know, the major airlines, Delta, American Airlines, United, do they not have their own training programs? Is it really like you can just go to any random flight school and learn, and then you can actually get a job at one of these big airlines? I always thought it was more you come out of the Air Force or something you transition into a commercial career, or you go through some program that they have. It just seems weird that they don't sort of own that whole pipeline end-to-end or there's not a more clear way of becoming a major commercial pilot versus going on.

Starting point is 00:09:26 I have come across this before. So I think there's both. And I think the teaser kind of told us that the airlines are going to beef up their programs to help, you know, themselves with their own shortage. So that becomes maybe this company's competition. But in fact, yes, people can start out in a private pilot training program. program, what I understand is they've just got to get a certain number of hours at each level. And so this is the most basic level. And you still have to get so many hours at this level of flight time before you can be eligible for like a regional pilot position in an airline. So I think because it's all about flight hours, you've got, you know, sufficient demand for these kind of independent companies kind of going alongside the airlines as well. I did a deal. a number of years ago, very successful searcher deal where they flew airplanes over pipeline, oil pipeline. And the reason they do that is to find where it's leaking. So this is in the Permian Basin of Texas,

Starting point is 00:10:32 and that's how you find out what's leaking and where exactly it's leaking. And there was a service to the oil companies that this business performed. And I learned a lot. That business itself was the pilots, that they had coming in and going out were just getting their hours. They were just flying in that business for a few months, basically, so they could get enough hours to go to the regional pilot programs. And so there's all kinds of things that they look for, you know, how can I get more hours? And what's interesting is a lot of the flight instructors at this low level are just getting their hours. They're still actually kind of new pilots as well. And they're teaching white school to get their hours.

Starting point is 00:11:16 Well, Heather, that's not this business, but I love that the pipeline inspection business, their pilots are probably doing it nearly for free just to get their hours so they can advance. It's kind of like that. Do you remember the ferrier business we looked at horse shoeing business a long time ago where it was a ferrier school

Starting point is 00:11:34 and they were able to basically charge people to have their horses shoot while their students learned at the fairier school? Kind of the same thing in the business, Utah. talked about. And, you know, Jordan, I think to answer your question, it's probably both and. Like, I, I know all of the major airlines are training pilots, but in an acute pilot shortage, you know, you're more than happy to hire an already trained pilot off the street if you can, versus somebody that you've got to handhold and bring all the way up. You know, I think if you'd probably come out of the military or something, you go through the American Airlines flight school and learn how to fly 787. But if you can come in, you know, there's only so many guys coming out of the military that know how to fly airplanes. So this probably, you know, supplements that pipeline. So the folks that come out of these programs probably sit right next to the military aviators in the learn how to fly a 7-8-7 class at American Airlines, I would think. If I had to guess, I would assume that the majority of their

Starting point is 00:12:30 clients are looking to be their own, you know, fly solo, solo, solo pilots, fly their own small plane. I had my co-founder of my first company did this and he went through the flight school. He got his hours and he flies a small four-seater and it's great. Take a little trip. You go to two-hour flight, go to, you know, have lunch on Martha's Vineyard in Nantucket or the Hamptons or whatever. He lives here in New York City and fly back. It's just super fun. But yeah, I know for him the decision was based on location.

Starting point is 00:13:00 I feel like Bill and Heather, this is maybe the type of business where, you know, location matters the most to get your hours in because you've got to go often. And so you're not going to go for a week to do this and then fly back to wherever you live. You're going to probably wants a place you can drive to. So imagine sort of location and maybe not so much the sort of, which is, I think, to the positive of potentially buying this business. I don't imagine I saw chief pilot. The seller is the chief pilot.

Starting point is 00:13:30 But it doesn't feel like a business where the personal brand reputation of the owner is what would maybe push someone into paying for the service or not versus just the location and convenience and I guess price point. Is that your understanding too, or do you think brand matters for a small place? I think, so it's so funny that we're recording this podcast episode today because last night I was at Fantasy Football Draft and one of the guys in my Fantasy League is an instructor pilot. So he works at one of these businesses.

Starting point is 00:14:03 is. So he lives here in Charlotte, North Carolina, but he works in Mississippi at this flight school in Mississippi because he basically has his pick and they're paying him the most. So he said everybody at their flight school is just desperately trying to get their hours. They're just like there's a pilot scarcity. You know, you've got to get, I don't know how many hours it is. It is a lot, though, up in the air. And you need, you know, qualified trainers that can fly with you and you can book it. And there's a shortage of them too because they're all getting pulled into the airline pilot programs. It even even says this here on the competition section that are challenged by a flight school's benefit from high enrollment, but are challenged by a shortage of flight instructors who are rapidly moving to the airlines and the high cost of equipment. So what's interesting about this business is the value here.

Starting point is 00:14:57 you know, we've spent, you know, Jordan, you've probably seen this at Acquisition Lab, you know, with all the people buying the home services businesses that are very dependent on HVAC technicians and master plumbers and all these things that are hard to source and retain. I think you have the same thing going on here in this flight school that the flight instructors are the scarce resource. And if you have enough flight instructors, the demand will find you. If you don't have enough flight instructors, you can't deliver the service, you can't deliver the hours and your business is not. You going to go so well. So for me, that is a primary point of diligence here is who are my instructors, how long tenured are they, how well do we pay them, how does that compare to their alternatives in the marketplace, and how are we kind of sourcing, do we have any kind of durable advantage or something that we can offer to flight instructors? So I'm always going to be fully staffed. Because if you're not, you're going to be in a world of hurt, I think, pretty quick in this business. Yeah. Labor supply is the constraint, a lot like home health. We see home health care companies with the same thing. You have lots of demand, but your constraint is usually the labor, and it feels like that's the

Starting point is 00:16:04 same thing here. The seller did point out must have industry knowledge. So on the surface, it seems like you could come along and buy this flight school without being a pilot. But the seller kind of telling us he doesn't think so. He thinks maybe you should have some industry knowledge before you try to run this school. I mean, before I teach people to fly at airplanes, I would think I should at least get my own pilot's license at a minimum. Give you some credibility, yes. Is there a license, Heather?

Starting point is 00:16:35 And if you're buying this as an asset sale, that might be a concern, no? I don't know if there is a school license. That's an interesting question. In some forms of professional education and technical education, you do have licensing and credentialing. They didn't mention it here. So I'm sure what it probably boils down to in this case is it's the credentials of the instructors that are going up in the plane with you. You know, the teachers basically must be credentialed. Maybe not the school. You know, maybe it's maybe that's not necessary. But they're offering a pretty fair multiple if we're to believe this SDE. I'm very intrigued by that.

Starting point is 00:17:16 That's what I'm so curious about, guys, because this is by the description. Now we have now signed the NDA so we don't. have the financials, the trending financials. But by the whole description and what we know about the industry, this is a capacity-constrained industry with a whole bunch of demand, with sort of structural tailwinds. And this business has a million bucks of cash flow, and they're asking two times for it, two million bucks of total purchase price. What gives? Why is such a low multiple? I wonder, it could be recent growth. Maybe they were smaller last year and the year before. And they have not factored in or told us much about the aircraft fleet and maintenance CAPEX. So it's very possible that your million dollars of cash flow gets cut in half, if maybe could even be worse, based on the cost of maintaining the aircraft fleet.

Starting point is 00:18:12 Yeah, because they said they've got $900,000 worth of airplanes. It sounds like a lot. And they said it's a fleet. So is that at three at least? Yeah, probably three small airplanes. So that would mean the purchase price is $3 million, so $3.X. SDE. I think you're making a good point, Heather, about the capax to maintain the airplanes.

Starting point is 00:18:34 I mean, that's, I would hope that would be in this, taken out of this $9.50, but maybe not. It so rarely is on a teaser listing that I'm assuming it's not. So, and I don't, yeah, there is a business broker on this, George Kozum of the Chase Group. But that's my concern is that, is that really $9.50 of cash flow after I take, and, you know, maintenance of aircraft is extreme, of course, is it needs to be. The maintenance logs are extremely detailed and what you have to do at certain number of, you know, miles or whatever hours of use is just totally regimented. So you would hope some of it's built into the P&L, but you've got to believe there's some CAPEX, like replacement of the plane.

Starting point is 00:19:23 You know, like how old are these planes? And if you are to grow, you are also CAPX constrained because you've got to buy another plane. Yeah, that's the other problem, is that you kind of have this lumpy, snare step growth where you've got to buy more planes. So your growth here is constrained by ability to source flight instructors and ability to have enough operational.

Starting point is 00:19:45 aeroplanes for them to fly. Right. Otherwise, I mean, with this, it's kind of interesting, you can almost think of this as a marketplace business, right? Like you are trying to aggregate demand from students with the instructors and the flight time for them to go up together. And you're kind of matching that three-way, the two-way people plus the assets.

Starting point is 00:20:08 I think you're both absolutely right to drill down on CAPEX as well as the staff side. And, you know, for me, and looking at this, outside of the multiple being so low, just start jumping at a 2x multiple on SD approximately, which, you know, that there must be a reason why. And I think, yeah, declining, you know, earnings perhaps is one. And maybe a lot of delayed deferred maintenance is another one. But, you know, when you think about this business, if you're someone, if you're a searcher that has a lot of income, I almost put this in the category of a car wash or a yacht business or a luxury car rental business, short-term rental business, which you're probably not going to see on here, but assets that you can buy in the form of a business with a lot of the value here, it's a $900K of the $2 million purchase prices, inventory of savings planes. But where you can get a huge write-off.

Starting point is 00:21:07 So I'm just seeing, I just look at this and I see bonus depreciation. I see 179 deductions and bonus depreciation. And so, George, walk us through that a little bit. So we've got, you know, we're so we buy this thing at asking price. So you're going to pay $3 million. You know, one of the million is the plan. Two million, right? Two million is the ask price on the business.

Starting point is 00:21:27 They said $900,000 inventory. So we think that's. Oh, not included in asking price. Okay. Yeah. That's right. So it's $2 million of asking price. You add in $900 of planes.

Starting point is 00:21:36 It's 2.9. Call three. So you got a million bucks of planes and $2 million bucks of enterprise value, how does that work from a tax deduction point of view for a buyer? Yeah, so just napkin math. Let's say it's, let's say it's three million purchase price, simple numbers. And let's say you're going to buy this business at SBA 7A loan and you're going to put in the full 10%, you know, required downpaying yourself, not have investors for that. And I'm assuming that some seller financing could probably get, but let's even say they've got

Starting point is 00:22:01 an SPA loan for the other, you know, 90%, 2.7 loan, that example. So you buy a business for $3 million, you're putting $300k down of your own money. We're with me so far? Now, can mess. So far, yes. So far, so good. So 10% down on that 300K. And let's just assume about a million of the business I can write off the first year. There's 900K's planes.

Starting point is 00:22:19 You can write off the planes 100% the first year you buy. It's for 100% commercial use, which this is. Ballparking on the numbers called a million. So I'm putting a 300k down and I'm getting a $1 million right off on a $3 million purchase, 10% down payment, 90% debt. If my tax bracket, again, simple numbers is about 33%. On that million dollar in the first year right off, I'm getting 33,000. Maybe a little higher.

Starting point is 00:22:48 I live in a high tax state. I have a huge income. You know, state taxes and so on. Could push that even higher. I mean, they get $400K right off on that million dollar right off, 400K savings. So it's called 330 to 400K. And actual cash savings to me this year by buying the business.

Starting point is 00:23:07 I'm only putting $300K down. Wait, Jordan, are you telling me, are you telling me Uncle Sam's buying this business for me? Yeah, Uncle Sam's buy this business for you. And that's why when I see this right away, I'm just going, oh, I get a free business. I get a free business. And I'm hearing staff issues and this and maybe it's declining.

Starting point is 00:23:23 Yeah, yeah, but if I have the income. You're fine with that. I'm getting a free business this year. Now I have to send a personal guarantee for that $2.7 or whatever, it ends up being a million-dollar loan. That's scary. If it's declining, that's scary. but I'm potentially getting a free business here.

Starting point is 00:23:39 Wow, you're getting the business with functionally, it's not really no cash out, it's cash you would have already sent to Uncle Sam. I'm putting $300K in, but I'm instead of sending Uncle Sam 330 to $400,000 this year, I'm not doing that. So I'm actually, you know, I'm getting this business and $20,000 to $70,000 thrown in.

Starting point is 00:23:58 Yep. And you can even if you, even if you don't happen to have that much income, the 900k or so of income outside the business. The instant you close on this business, you have $950,000 of SDE, right? Yeah. And so you can start writing off against that.

Starting point is 00:24:18 Yep, and I have a null. That will roll forward. So all my future cash flow from previous years would be offset by the first year of my 2026 loss, paper loss this year on the plate. Yeah. Now, asterisk on that, though, right? When you sell this business,

Starting point is 00:24:34 they're going to recapture that. Right. Buy until you die, though, right? Heather, never sell these businesses. That's what they say in real estate. If I have a nice fun, I've got a couple planes, I'm making a little money. How do you ever sell that?

Starting point is 00:24:50 Cash flow. But now this is where me, not being a tax account kicks in here. Even if I keep the business, if I sell the airplanes, right, there's recapture. Like if I roll my fleet over and I buy new ones, right?

Starting point is 00:25:03 Now, still, like, time value of money, like Uncle Sam has effectively financed my down payment for free for the life of the airplane, for the remaining life of the airplanes, which is not a bad deal. But I have seen people get really kicked by the recapture later because recapture is at ordinary income rates because you avoided ordinary income as well. So you can get bit on the recapture for something like this. If it's a piece of property, you know, or more like a car wash, something you can hold forever, you know, better. buy and then die type thing like you mentioned. But the tax benefits are, I think, often overlooked by buyers when you buy an asset-heavy business. That's correct, especially one where you can take a 100% deduction the first year. When you close the deal, you inherit the cyber and IT problems that have been piling up for years. Inzo Technologies, that's INZO, helps acquisition

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Starting point is 00:26:37 That's I.N.Z.0 Technologies.com slash ETA. Jordan, what are like the criteria for taking 100% deduction? Like if I buy a building, I can't take the whole value of the building. Right. So what is used in the business? Yeah. And hey, first time here coming on the show, I'm not a tax account. Consult your tax people, lawyers, whatever, whatever. But yeah, you know, really rich people buy assets that they can. right 100% off of. Now, hopefully they're productive assets. So if you buy a building, real estate,

Starting point is 00:27:07 short-term rentals, you'll hear a lot about, I'm moving away from plane zones. But what you do is something called the cost segregation study. I've done this. I own real estate short-term rentals. When I have a big tax year, I want to buy a property and take advantage of bonus depreciation. So you buy a property, you do something called the cost-sex study, cost segregation study, cost to a couple thousand dollars. And they'll go in and look at the building and say, okay, everything that's in the five-seven, 15, 20-year useful life. We're going to qualify that. Landscaping improvements,

Starting point is 00:27:37 fencing, your roof, your appliances, your floors, things like that, are fall into those different buckets. All of that now, thanks to Trump administration,

Starting point is 00:27:49 it's just really been a boom to bonus depreciation in real estate investors. You can write all of that the first year, write it all off the first year. Typically, if you buy a million dollars short-term rental,

Starting point is 00:28:00 you're going to get something like got $300,000 to $400,000 first year right off on that property. The land is not depreciable. And the core building components, the walls, the foundation, that sort of stuff. You have to appreciate over the life of the building, which, you know, residential is like 27 and a half years, commercials long-due. But so a lot of people buy real estate for that reason. But when it comes to yachts, which you can charter out, place and service, that's, you know, if you're doing it really as a business, as well as planes. So private jets and yachts. Vehicles, in particular, vehicles over 6,000 pounds. It's supposed to be trucks for farmers, but now it includes things like

Starting point is 00:28:43 Mercedes G-Wagons and Range Rovers and-C-dollens. You see those driving around. That thing was fully appreciated. Yeah. So people will wait until the end of the year. Okay, I've got a big tax income this year. If I have a business that I can buy this vehicle for or if I'm a real estate professional and I can write it off. I'll buy a truck at the end of the year. Policeman service that year, I get a $100,000 right off or a G-Wagon or one of these very premium luxury vehicles. So that's a, you know, it's an important strategy because you are, in the case of a plane or a boat or a vehicle, they're depreciating. So they actually are depreciating assets. But when you buy a car wash, which has a very high first-year depreciation offsets from all the improvements to the property, all that equipment, the, I don't

Starting point is 00:29:30 what do you call those things that wash your car and the jets and all that stuff, you can write all that off the first year, even though it's going to serve you way longer than that. Self-storage gives you really great write-off for a year write-offs. And these businesses hopefully will continue to produce the cash flow or increase the cash flow. And if you're also buying the real estate involved with them, that real estate should continue to appreciate. So you can get really great write-offs on net net. You can get really great write-offs on planes and cars and boats used for business, but they're depreciating. But when you buy real estate or car wash for self-storage, you still get pretty good write-offs, short-term rentals as well, but they're

Starting point is 00:30:10 appreciating assets. So that's kind of the holy career. Interesting. So Heather, are you going to lend me money to buy this business that, you know, Jason just kind of hand-waved that 90% SBA loan. Can I get an SBA loan for this? I think you can. I see no reason why you cannot. I think the challenge, like I did that loan where there were aircraft involved, and it was an SBA loan, and we had to put liens on the aircraft. So I think this constraint here is not every lender has a process, or most don't, I should say, for leaning aircraft. It's different than rolling stock, you know, vehicles or regular business equipment. So, but I've done it, and I know there are banks out there that can do it. So yes, I think you can get an SBA loan here. Yes. You know, we need to,

Starting point is 00:30:59 we will be lending if we do an SBA loan off the cash flow after maintenance CAPX. So we will have to factor that in. So this 950 SDE, what we're going to look at here is let's just say there's three aircraft. We're not going to use growth CAPX like buying that fourth one as part of the calculation. We're going to say out of the three, what does it cost to, like, what do we have to set aside to be able to keep them running and or replace them? So if one of them's coming up for replacement in two or three years, we need to know that, you know, what the average cost per year to, you know, put those funds aside, those dollars aside for replacement. That could get a little tricky. So there's probably some maintenance cap X analysis that really a buyer would have to do before they could figure out financing. But if they could get past that point, yes, an SPA loan could be done here. And I would love to help you do it. I'm here in Orange County, but I am not going up in any of the planes. Are you getting, Heather, is there a hybrid loan structure here where some of the loan on the aircraft? Because it's a full one-third of the purchase price.

Starting point is 00:32:06 Yeah. Where the aircraft loan is at different terms in the business loan? Or can you write to roll this all in? I like the way you think, Bill. Yes, you could maybe carve out the million dollars that's for the airplanes if they have a useful life that's longer than 10 years. You know, normally it's a 10-year term. Let's just say they have a useful life and you can document that they've got 20 years to go. you could get a 20-year term on the equipment piece either through 7A or the 504 program.

Starting point is 00:32:35 So you can combine those two programs sometimes. Sometimes it's beneficial to do it. And it would leave you more 7A runway for add-ons or whatever else or new aircraft that you might want to buy. So, yeah, you could potentially get a longer term if we know more about the fleet of aircraft and what the remaining useful life is. If I'm buying these airplanes, I'm going to hope they have a useful life longer than 10 years because I don't want to buy three new airplanes inside of 10 years or that's got to go in the Excel model. Correct. Yeah, that would be your maintenance. CapEx would be really heavy if that's the case. So I feel like this has got so much in terms of tailwinds. I think lenders would understand that

Starting point is 00:33:17 quite readily that this is a business that will be in high demand. A buyer would have to show that they have enough experience to run this. maybe a pilot's license themselves. They have to show a really good lender plan on their labor constraint issue, you know, how they're going to be constantly recruiting new instructors and where they get them from and what that whole process looks like. And then the maintenance CAPX analysis of the aircraft. That's kind of three things. You can cover those.

Starting point is 00:33:48 You could definitely get an SBA loan if those all turn out well. Intelligence. All right. So Jason's math, pencils. You can do Uncle Sam's going to cover your 10% down via tax deduction on your, on your salary depreciation. Heather's going to loan you the other 90, and you own a flight school for free. And so as long as the business performs, you're in like Flynn. And you're flying over Newport Beach every day. You can go to the beach afterwards. It's beautiful. Yeah. I'm assuming you're leasing a hanger. Probably. Probably. If the hangar was also for sale, which you could finance over a longer term, right? They did not mention it, but yes, you could.

Starting point is 00:34:34 And I have financed hangers before. They're on these long-term land leases with the airport. So as a real estate deal, they can get pretty hairy because you're not on fee, simple land. You're on land lease with a lot of restrictions, obviously. But I have done those before as a SBA loan as well. Interesting. So it says facility's executive office with pilot study lounge and flight simulator room, all computers and furniture. So it doesn't say hangar, Jason, but obviously the planes have to go somewhere. So maybe they just lease it, you know, or they pay a nightly fee to the airport or something. All right. Well, we are coming up on time. So thank you for listening to this episode of Acquisition Anonymous. Jason, can you tell people a little bit about where to find you and what is Acquisition Lab? Sure. If you really want to look for me, I'm on Twitter and LinkedIn and things like that. I don't post that often, but I'm also happy to give out my email. I'm Jordan at Acquisition Lab.

Starting point is 00:35:37 If you're interested in what we do, I'm the CEO of Acquisition Lab. We are the leading community and the acquisition entrepreneurship space in the country. I've been around for six years. We also have a fund where we invest in deals like this. We're buying a business with an SBA loan, $20 million fund. So we're actively deploying. And we have a platform, of course, where you can find source deals as well as as off-market deals that our team finds. And then once you bought that business, we have a portfolio service arm.

Starting point is 00:36:07 So we do accounting, finance, staffing, so on, specifically for acquisition entrepreneurs who have run small businesses. You can check out our website. We have a lot of content. We do events, meetups, quarterly meetups now in 20 cities across the country. you can come to, even if you're not a lab member. And then after that, you can join the lab, we're an annual summit.

Starting point is 00:36:25 So plenty of opportunities to engage, be part of the community. And when you need capital, when you need portfolio services, we have that stuff too. I feel like we should have led with that. Jordan and the Acquisition Lab team are pretty much the go-to in this space

Starting point is 00:36:38 for support in all types of ways. If you were interested in entrepreneurship through acquisition, you want to get trained on how to do it. You need support through your deal, and then you need post-closing, execution support, and education,

Starting point is 00:36:49 the guys at Acquisition Lab are the ones to talk to. So you can find them at AcquisitionLab.com. Yes, Jordan. Did I get it right? Yeah. AcquisitionLab.com. And there's a form on there. You can fill it out and someone will be in touch with you.

Starting point is 00:37:04 Thank you for listening to this episode of Acquisitions Anonymous. If you liked it, there are 500 more, 500 more, geez, just like it on ACQU-U-Anon, aquanon.com, our website. You can also get on our email list where we will email you. the new episodes. If you don't have time on your commute to listen to all the audio, you can skim it via text and just dip into the ones that interest you. So hop on our email list so we can get in touch with you. That's ACQU-Anon.com. And you can search all of the old episodes also by industry to find something you're into. So thank you for being with us today, Jordan. And thank you listeners for joining us for this episode of Acquisitions Anonymous. And we will see you on the next one.

Acquisitions Anonymous - #1 for business buying, selling and operating - The $2M Aviation Business That Might Pay for Itself

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