Acquisitions Anonymous - #1 for business buying, selling and operating - This Alaska Gift Shop Makes $500K a Year... But There's a Catch

Episode Date: July 31, 2026

In this episode, the panel analyzes a 100-year-old Alaska gift shop serving cruise passengers, uncovering how location risk, seasonality, and SBA financing can completely change the value of an otherwise exceptional business.Business Listing – https://www.bizbuysell.com/business-opportunity/historic-alaska-gift-jewelry-and-art-retailer-prime-downtown-location/2519758/Welcome to Acquisitions Anonymous – the #1 podcast for small business M&A. Every week, we break down businesses for sale and talk about buying, operating, and growing them.Looking to build a professional website in minutes? Try Wix: https://wix.pxf.io/c/6898629/3115214/25616?trafcat=templateHubSpot is the backbone for how businesses scale without chaos. Try them out here: https://go.try-hubspot.com/OeG9VrSubscribe for more episodes: https://www.youtube.com/@AcquisitionsAnonymousPodcast?sub_confirmation=1Subscribe to our Newsletter: https://www.acquanon.com/newsletter💰 Sponsored by:CapitalPad is a private equity co-investment group for lower middle market deals. Accredited investors invest in searcher and independent sponsor transactions on a deal-by-deal basis, with minimums starting at $25K. Acquisition entrepreneurs with a deal under LOI can raise equity through CapitalPad's single-SPV structure, closing with one partner and one wire. Raise capital or invest at https://capitalpad.comAcquisition Lab, the leading community, platform, and fund backing serious acquisition entrepreneurs. The education and deal-search tools are free, and a real board of advisors will talk you out of a bad deal as fast as into a good one. There's no clock and no pressure. See what it's like: sit in on a free live roundtable at acquisitionlab.com/roundtables, and mention Acquisitions Anonymous!This episode examines a historic Alaska gift shop that has been operating since 1908, generating approximately $1.6 million in annual revenue and more than $500,000 in seller's discretionary earnings while serving cruise ship passengers during Alaska's busy tourism season. With over a century of operating history, the business appears to be a straightforward retail acquisition—but the deeper analysis reveals several critical considerations buyers can't afford to overlook.Key Highlights: - Historic Alaska gift shop established in 1908 with approximately $1.6M revenue and $500K+ SDE.- Seasonal tourism business benefiting from cruise ship passenger traffic and decades of brand recognition.- Major discussion on how relocating a cruise terminal could dramatically impact business value.- Deep dive into SBA financing challenges for highly seasonal businesses and strategies to structure successful deals.- Lessons on seller financing, working capital forecasting, and why location-dependent businesses require exceptional due diligence.Subscribe to  weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking hereDo 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]

Hello, everyone, and welcome back to Acquisitions Anonymous. This is the internet's number one podcast on buying, selling, and operating small businesses. And we have got an awesome episode for you today. This one fired me up. We went for almost 40 minutes because we had so much to talk about. On the surface, this looks like a gift shop in Alaska. It's doing over half a million of SDE. But there are so many layers on it.

We get into, especially in the back half of the episode, how to structure SBA deals. if there are some hiccups in the business or some things that you might kill the deal, how to work around those and still get a loan done. We talk about how to work with loan brokers on the back end of the episode. We talk about how to structure deals for seasonal businesses.

So there's a lot more than meets the eye on this one. I really enjoyed it. I hope you also enjoy this episode of Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100% beers anymore. I can thumbs downing on just the plus inventory line. Hey everyone, it's Bill, and I want to tell you about maybe the most exciting sponsor we've had

in a long time on the pod. It's called CapitalPad, and it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So CapitalPad is a marketplace for acquisition entrepreneurs that is people who want to buy a business and need capital to list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is a place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing, too,

from the investor side is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions, all up front in black and white, basically CapitalPad professionalizes investing in small businesses. And the returns can be really, really good. I'm so stoked that they exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out Capitalpad.com and tell them that Acquisitions Anonymous sent you. Right. Well, we are all warmed up. Welcome to Acquisitions Anonymous. Let's go. I have my coffee. I had cold brew this morning. I'm jacked. I'm excited. Talk Gurdley into getting on Wigovi.

Yep. Yeah. We just checked all the boxes. You guys are just tuning in, but we just had a 15-minute pitch for Gerdley to get on GLP-1s. Yeah. I think we might have a big-boned. Just so you know. You are big-boned. Me too. Listeners, I don't know if you know, Gurley is like seven feet tall, IRL. I don't know. If you've never met Gertie. Like, fun story. Like, Michael, how long had we been friends and other podcasts before ever meeting in person? A couple years. A couple of years.

So, like, Michael and I were legitimately friends before we finally met in person at SM Bash, the first SM bash. And I didn't know how tall you were. And then I saw you on the street. I was like, whoa. Very tall. How tall are you actually?

Six foot six. Six foot six. Yeah. Two meters for our European listers. Exactly two meters. How tall are you? I'm two. Yeah.

So yeah, I'm fired up. We have a cool deal. Again, shout out to Girdleyclaw, who is now our captive deal researcher and is scouring the internet for interesting deals for us to do. It is delivering better, more interesting, like, radio content for us, basically, like deals that are interesting to talk about,

then when we had a human doing it. And it's just like, it's $3 a night. And it just goes out and does it. It's just incredible. So step up, listeners. Now you've got to compete with Gertley Claw. Send us your interesting deals. We will do them.

But this is a cool one. So if you're with us on YouTube, I would encourage you guys to listen to the show on YouTube because you get to see our beautiful faces and you get to see it on the screen and we sometimes pull up stuff to run the show. So more depth on YouTube. But okay, so here's the deal for today.

So this is from future sponsor of the podcast, Biz Buy Sale, one day, eventual sponsor the podcast, historic Alaska gift, jewelry, and art retailer in a prime downtown location. So this makes the second Alaska-based business. We've done the pod this month. We did the Anchorage, Alaska-based liquor store that delivered liquor by dog sled a couple weeks ago. So if that sounds cool, you'd go pull it out of the back catalog. That one was awesome.

But this is also an Alaska-based business. They say they've got $1.6 million of revenue in their Alaska gift shop and half a million bucks of EBITDA. So pretty sweet 30% EBITDA margins here selling gifts in Alaska. And they're asking $2.2.25 million. So a little over four times, almost exactly four times for this gift shop. And if you go on, if you're seeing this picture on YouTube, this is like your class. classic like mountainy gift shop. They've got stuffed mooses.

They've got mugs that say Alaska on it. They got postcards of Alaska. They've got T-shirts. They've got a moose head on the wall. It looks like your classic kind of, you might see the same in like Vail, Colorado, like your classic kind of touristy gift shop. But get this.

Founded 1908. Whoa. This business is over 100 years old. I think this might be the oldest business we've ever done on the pot. That blows me. We'll talk about Lindy. Established 1908. You want to know more about it?

Yeah. Yeah. Okay. Here we go. So expect a opportunity to acquire a highly established Alaska tourism retail business with a downtown location in a premier cruise port destination. This is a well-known gift jewelry souvenir apparel and Alaskan art retailer. It has operated for more than a century and has been owned by the current family operators for 40 years.

The owners are preparing for retirement and are seeking a buyer who can continue the legacy while modernize and expanding the platform. The business is located in the heart of a historic downtown location. This is obviously Anchorage, right? Like there are no other places in Alaska for cruise ships to dock or go, I would think. I could be wrong, but this has got me. Let me girdle you. I'm going to girdle explain you. There are a bunch of other places like Ketchikan and stuff like that.

And the sources, I've actually gone with older people on these cruises. and a lot of like that kind of strip that goes from like the west south of anchorage there's a lot of cruises that go from the u.s up to there from seattle and stuff like that and so there are a bunch of little ports thank you okay that's helpful so let me pigeonhole this thing maybe not anchorage but it is located in the heart of a historic downtown location within walking distance of major visitor attractions the small boat harbor and a cruise passenger traffic the operation occupies a large 12,000 square foot retail billing that's big with multiple departments including authentic, Alaskan art and carvings, jewelry, gifts, apparel books, souvenirs, and locally sourced handcrafted merchandise. The product offerings range from affordable keepsakes to higher value original artwork, creating brand appeal across tourists, cruise passengers, RV travelers, and local customers. Financial performance has been strong and consistent, despite the business being operated primarily during the May to September tourism season,

so it's seasonal. Revenue was approximately $1.6 million in 2025, and a just to debatah of approximately 512,000. Gross margins have remained attractive and the business has historically generated meaningful cash flow with minimal advertising spend and no current e-commerce platform. A buyer may have opportunities to increase revenue through online sales, digital marketing, extended seasonal or year-round operations, phone orders, improved exterior presentation, a better sign, I guess, and better monetization of the residents and adjacent parcel. The business benefits from longstanding supplier and artist relationships, a broad merchandise mix, low customer concentration, and limited key employee dependency. Current owners manage the purchasing, inventory, staffing, maintenance, and registers.

Okay, so you work there. Supported by a small seasonal staff. A buyer will receive a proven retail platform, established vendor introductions, included-based inventory. Wow, that's reasonable. Amazing. They include the inventory on the shelves. And a transition period from the sellers. It's got half a million bucks of inventory, which is included in the asking price.

I want to send this business broker a gift for just like being reasonable about that because you can't buy a gift shop without inventory. There's $92,000 of FF and E included in the asking price. Six full-time employees. There's a bunch more about kind of growth and expansion. They rely a lot on walk-in traffic and legacy reputation. There's meaningful upside for a buyer with retail merchandising, online marketing, tourism partnerships, and hospitality experience. It's basically they're new. It says a gift shop.

It's the other cruise terminal. People walk in. The cruise boat shows up. It dumps and bust your customers on your front doorstep, literally, and they buy a whole bunch of Alaskin stuff, and they leave. The seller is selling because they're retiring, offered up to one year of support and training. And seller financing is available. And this comes to us by J.C. Strauss from Archstone business brokers, who looks very professional. He's wearing a suit, and he looks like he knows what he's doing.

I looked him up, he's out of Orange County. I was like, why does this Alaska guy have such a tan? He ain't in Alaska. That makes that. That makes that. All right. So, Heather, what, is this a good business? It's a gift shop.

Yeah, I mean, I think it's very location-driven business. And what surprises me about it is I thought that I've read a lot of these gift shops where near the cruise terminals and where the cruises stop are owned by the cruise companies. So, you know, this is one that's remained independent for a long, long time. And that sounds about right for Alaska. That sounds like, this sounds like a place where they would, they would have held out, not sold to the cruise lines. But it does have me wondering, why aren't they selling to the cruise line now, maybe just out of that spirit of independence still. But yes, I think it's, it's really very much dependent on the lease of this location. You know, they didn't say anything about it.

They didn't say, you know, there's obviously a residence there, and, you know, they say you can sort of rent that out. So I'm really curious, do these sellers own that property and they're your landlord, which would make the whole deal a lot easier? Or is there a landlord that's a third-party landlord that you're going to have to negotiate with? Because the only way this family has owned this place in this spot for so long is controlling that location, I think. Yeah, I mean, I think, yeah, this is like a lease was a bit with a business wrapped around it. Yeah. Pretty much, right? Right.

Yep. If I had to bet, I would bet they own it because it says you got to better monetize the residence. Yeah. And adjacent. That's the only hint. So, yeah, I think these guys own the building. I mean, another hint is it's been there since 1908. Yeah.

So I don't think they've had, they're on a hundred year lease. Yeah, probably not. So, and that would have been nice to, I think that JCs should have told us that because that makes it, that makes it more appealing because you can get into the right kind of lease with, you know, with this seller here. Are they going to try to say you got to buy the building separate? The broker here has been very reasonable on inventory and FF&E included here. But like, you cannot buy this business without the property, I don't think, because when the lease is up, you are screwed. I mean, you can't move this business. There's no business without the building.

And the whole point is that the cruise ship dumps all the customers on your doorstep. So maybe you need a 100-year lease or you need to own the building. I don't see a fantastic lease or you need to own it. Yeah. Yeah. The photo of the inside of this store and they only give us more, and it is gorgeous. Like this is a really well-run store. You could just look from the photo, like things are well-merchandized.

You know, they get it in terms of what this business does, right? It's people come off the cruise ship. They're buying crap. They're overpaying for it once in their life. And they want to have something nice, whether it's a stuffed bear or a mug or postcards to take home to family and friends. Or they were underpacked and they need to buy a sweatshirt. Like that's all, that says Alaska on it.

So it's all really well done in terms of just looking at the photo. And I assume this is the store and not just a stock photo. I mean, they've had 100 years to get it right. You know, it's, I mean, that's the thing. Like, this is dialed, right? Like, the SOPs must be fantastic. You know, you buy from the same vendors every single time. You know, I can't imagine there's much repeat business.

So, like, you don't have to re-merchandise the thing, you know, like every couple weeks to keep it fresh. You know, everybody that walks in the door is their first time. And they're primed ready to go. And they did Alaska sweatshirt and a stuffed moose for their kids and all that stuff. You only work about four months of the year, right? And I think that's part of the beauty of this deal, Heather. We were on spring break this spring, and I was talking to an Australian couple in the town we're in. It's a very similar kind of tourist-trapped town.

And they're like, yep, we come up here every year from the beginning of tourist season to the end of tourist season. Then we go back home. And they just come up and that's their lifestyle. Like they're moving with that and they're not spending winter, in this case, in this tourist town or in Alaska. It's actually a pretty cool thing if you were from Texas or Arizona or someplace like that. Orange County and you want to get away from the horrible weather each season and make that your life that you're just going to pack up and go spend the time in Alaska, you know, amongst some of the most beautiful geography on the planet. Yeah, make good money and come back

and have the rest of the year to do whatever you want, wherever you want. I think this is kind of cool. And maybe that's the residents. Maybe they do that. They live there just during the summer months and then they could rent it out to somebody local when they leave. This Australian Cup I talked to actually was doing exactly that. They were in a building. They had rented. It had a little residence. They would come up, except the only difference was they were, it was a sushi operation. So very, very different than this, but still selling overpriced stuff to tourists. The model is the same. I think it's, I think what a lifestyle. What a great lifestyle for somebody. They were surprisingly burned out on it. Oh, really? Yeah. Yeah. I think after about 15 or 20 years,

you're like, got to go back to Alaska and sell some more postcards. They felt too locked in. Maybe. That could have. happen after a period of time. But I guess at the right stage of life, it could be interesting. We're being tough with kids. I guess it needs to be bought by somebody who doesn't have those considerations, perhaps. Good empty nestor business. Yeah, empty nestor. Yeah. So Bill, to nerd out on this a little bit, there is actually a whole branch of microeconomics around tourist traps like this. Sometimes they're called cruise ship economics. Sometimes they're called tourist track epinomics. But one of the things that you see is location is above all the most important thing.

Everybody's selling the same crap. It's undifferentiated. The customers are never coming back. And so what you tend to see is that everybody prices their product at a monopoly price. That's like the gain theory equilibrium that happens here. And location matters everything. If you want to be the first tourist trap or the second tourist trap, you have a great business. If you're the third in line as a location, as people get off the cruise ship, you have a terrible business. And, you know, that's exactly, I think y'all's instinct that location, location, location matters here. This is basically a covered land play is exactly right, Warren. And so covered land play, the question is, is this the highest and best use of this parcel?

It probably is. Yeah, I'm going to guess, yes. I think you did. It's been, what else? I mean, maybe like a restaurant or a coffee shop or something, but like that's a much harder business. you know, than this one. And it's certainly not a 30% EBITDA margin business. And in that, what, 100 years, they probably tried that once.

You know, you probably look back at history. They've got 12,000 square feet. So they probably, in that building, probably optimized for what it is, what is the highest and best use because they probably tried those other things. I mean, I think like they talk about monetizing an adjacent parcel. I wouldn't hate renting it to a Starbucks or something or like launching a coffee shop over there, kind of flowing. you can have like a cool mountainy coffee shop vibe, like with more of a bookstore no corner that

sort of flows into the big gift shop. Because like those are the two things. Like sell gifts, sell coffee, sell booze. You know, like those are the three things you want to sell to tourists. The first question I would ask these guys is do you have like a little counter, like a corner of this big store where you're selling coffee? Because that does seem like a way to monetize it even better. Here's your plushy bear and also your your cup full of caffeine. But the question I have for you guys is, how do you think the macro kind of trends of what's going on in the world affect this? The boomers have been going on cruises like crazy for the last 20 years. They're starting to age out.

My generation doesn't have as much interest in going on a highly manicured cruise through looking out at the window of places like Alaska. Like we want to get in and get our hands dirty and live like locals. And then the younger generations like my kids, this is not tough. they're going to be doing, much less buying a moose head, which appears to be one of the things these guys are showing. So how do you guys think about kind of the broader, like, are we buying this at the peak? Like, is this as good as it's going to get or is it going to get better? I don't know. What do you, Heather, what do you think? I think that this particular cruise, Alaska, has a different appeal than most cruising.

You know, I think there's a lot of cruising, at least for the U.S. market, is beach-based or Caribbean or, you know, something warm weather. This one's really different, and I kind of think the demand for the Alaska cruise holds up a little better. I think there's families with kids where they think that is kind of a neat vacation to take the kids to see Alaska. They're less likely to go stay in a hotel in Alaska and try to discover it that way. They might, you know, I think Alaska is probably safer than most other routes for the cruise industry. That said, you are totally dependent on it. I have looked at deals not too long ago where it was based on tourist traffic in Alaska.

And you know, you just have to look at the COVID years and see that it doesn't take much to completely shut down the cruise business. You know, any kind of viral, you know, thing that goes around can really be devastating to the industry for short periods of time. So I think there's risk there, but maybe Alaska is a little bit more, you know, a little bit safer in other places. To sum up, I think what you're saying is this is more adventure cruise versus, you know, drink margaritas and bacon sun, Cancun cruise. And the younger generation, it feels to me, would index a little bit more on adventure cruise. Yeah. I mean, that being said, you know, let's say Gurley's right. And by the way, I love you always poses a question, which is like, we've assumed that this has been true for 100 years.

Like, is this going to continue being true? You know, like you always bring this up about alcohol and bars or like how are the younger generations different in the older generations? And you can't fall into that trap. And I do think there's some of that here. But I don't think, I mean, knock on wood, another pandemic aside. Like, Michael, even if you're right, I don't think this falls off a cliff tomorrow, right? You know, like, maybe you do buy this and it's in like slow decline for the next decade or 20 years, right? Like, I don't think like this generation isn't going to die off instantly tomorrow.

So I think you probably do have a decade or two of relative, worst flat, right? This business is almost impossible to grow, you know, because you only have so many cruise passengers. dump on your doorstep every day. Maybe I guess you can try to sell them more things, coffee and stuff, but like there's a little bit of a tam there. I would like this a lot better if it was Anchorage than if it was one of the other little towns, because to Michael's point, if the cruise ship stops coming, either because the demand for cruises is not there or the cruise ship goes, we're dropping this port

for a different one, you are cooked. It is over. I don't think they're going to drop Anchorage. And also, even if they do, like, there's a little bit of an economy in Anchorage. Like, maybe this building still holds value. You know, you can convert it into a restaurant or whatever, and there's local patrons. I like this way more in Anchorage than anywhere else, just for that reason, the downside protection. They did say a new terminal is that they mentioned it at the bottom, like the new terminal is expected to do something.

So it sounds like the cruise industry has, you know, renewed its commitment to this port if they're building a new terminal. So that's a, that's a green flag. But I agree, there's no growth here. There's just hanging on to what you've got. And, and that could be, it could be a little scary because you are totally dependent on cruise passengers. But I bet it's super, I mean, this is an annuity, right? I mean, it's been an annuity for a hundred years. It's you're bordering on perpetuity, right?

You know, so you structure the debt, the right, I mean, this is perfect. I mean, Heather, is this not like SBA home plate right here? Well, there's one problem. One problem. Seasonality. Other than that, it would be. But as soon as you talk to a lender and say, we're only going to have cash flow five months of the year, four months of the year. And the rest of the time we're going to be closed up and but we're going to still pay you those other months of the year. We're going to save up enough cash and we're going to pay you. Yeah, that's legitimately what you should do and how you could do it. But banks don't trust you to do that. They don't like it when there's months that you. you are going to have to pay the bank that you're not getting any cash flow. It's not impossible, but it makes it pretty tough. I can see how they wouldn't like it, right? But is it a deal killer? Because, like, this business is super profitable.

It's got half a million dollars of EBITDA. And, you know, they're asking a reasonable multiple. Like, the DSCR is going to be fine. You know, you're going to have a, you know, what is it? You'll have probably a $1.5 million SBA loan, right? So you got 150K of principal AMOR every year plus another, I don't know, 75 of interest. So you probably got 225 of, you got your 2x covered. Yeah.

And it's a hundred year old business. Like, this should be fine if you look at it annually. But if you look at it monthly, it looks a little scarier. Right. So one there. Well, there's two things you would have to do. There are some banks that would probably still do it, but you'd have to do the following two things. you would have to, for sure, close at the beginning of the busy season.

You're not going to close this deal in September or October and get the bank to fund it then. No, because you're, you know, then you're going to have to have a huge sum of cash, you know, to make the payments because you had no cash flow yourself. So you have to look at what time of year you're going to have to close this deal. And, you know, I have done deals like that where the buyer and seller agreed on an LOI and then waited five months, which is risky, but they did it successfully. and then closed at the beginning at the busy season when the bank could get comfortable. The second thing you would have to do is a working capital forecast. So that's a lot more

granular than the annual debt coverage. And it's not just debt coverage, it's cash. What's going on with, you know, our starting cash or inventory. You don't even have receivables here, but basically your starting cash or inventory, maybe some payables. And you're going to have to forecast that monthly. So you can show the bank what, happens during the slow season. How much cash do you need in the bank account going into the slow season so that you can sort of chip away at that, making your payments and then be ready and not run out of cash before the next busy season begins? If you can do those two things, close at the right time, and do a really good job of a working capital forecast, yes, you probably

could find an SBA lender. But there are plenty of banks that would still say no even with that, you know, that just don't want to touch a seasonal business. I mean, honestly, it's a great recipe for seller financing, right? I mean, the business is around for 100 years. They've owned it for 40. What's seller financing it for another 5? As long as they don't have to work the register. Yeah.

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I think I found the problem. No. Okay. So I asked Claude first. I said, Claude, which cities in Alaska are building new cruise terminals currently? There's only one. It's Juno,

which is halfway between Ketchikan, so down to the south and up north in Anchorage, but it's on the coast. Gorgeous. There's lots of pictures of it with cruises. So that's kind of number one. So it makes it Juno. And it's a cute little town,

Like, I see why a business like this is the only other like real place in Alaska, right, besides Angus. Yes. Yeah. Well, you can go to Fairbanks, but that's fun. But, yeah. It's in the middle of nowhere. Yeah. So, but what's going on is the town is reconfiguring all of the cruise ship access to bring it closer to downtown.

And right now, the flow means that this. This is a pretty darn good business, but the moment the flow of people walking off those cruise chip changes, you have to ask yourself, does that blow up this business by making us go from the number one spot to the number eight spot of where a strap kind of economics? So that's the very, it doesn't mean that's a damning aspect of this or that it's one way or another, but that is the biggest question for me now looking at this listing. It's like, oh, what happens when the government reconfigures the new criminal is moving the flow of people, which makes sense, right? So that, so I took. The new terminal as like a positive sign, but actually it could be a big risk factor because you'd have to really see exactly where you land. Oh, wow. Oh, man. And for that reason, I'm out. I'm out. And for that reason, I'm out. I mean, that is, this is, that changed the whole thing, Gurdley. Sherlock Gurdley over here. That is, I mean, this is a bagholder situation. They know it's coming. And they've, they've owned this thing for 40 years and it's time to get the heck out because they're moving the cruise ship terminal. buyer beware Could be I don't know for sure

But this is the very first question I would have Very first question Oh man And I noticed they did not Disclose that In the listing That's

Well they said new terminal That was enough That was the kernel of Truth here But that was really good To kind of Use that to figure out Which one it is

And then you already know The flow of people Off the ship is the key It says I mean here in growth And expansion It says creating a compelling tailwind for a motivated new owner,

I would check and see if, you know, J.C. writing that is actually true. That's the thing I would say. I don't think it's DMing at this point. This is still a good business for the right person, but I would see if there's this fundamentally, fundamental shift that's going to change the business dynamic entire. I mean, if the cruise ship terminal is moving,

it is fundamentally damning. Like, you cannot buy this business. Because you can't forecast it, right? So, like, even if it's not going to kill the business, it is, it's a singularity for this business that you cannot see past, right? And so you can't forecast through that. And so it makes the whole thing untransactable until the new terminal opens and you get two years of T, T, T, of trailing P&L with the new terminal location. Normalized, yeah, it has to normalize post new terminal.

Yep, I agree. Yep. And so this is, this is actually an interesting dynamic about kind of what makes a business sellable. So this business, they've owned it for 40 years, right? As soon as the new terminal is announced, nothing has changed, right? But everything has changed. As soon as the new terminal is announced, like the next day they opened their doors, the same number of people walk through.

But overnight, the business becomes unsellable because it is now has this cloud hang over it and it's unforecastable. And so this really sucks as a business owner because like, let's say they announced the new terminal is four years away. You are now instantly in this four to six year purgatory where your business is completely unsellable, right? Even though it's four years away, no one's going to pay four X for your business, you know, three years before the terminal opens.

And so I always empathize so much with sellers, you just get completely handcuffed to it, right? For five more years probably in the situation I laid out. And that is why I always tell people. Like, if you have a willing buyer who is willing to buy your business at a fair price, you should sell the business because you just never know. And even if, like, the new terminal opens and it's fine and it doesn't affect your business, doesn't matter.

You won't be able to convince a buyer to take all that risk. And your business is now not transactable for five years. And all kinds of macro things happen in business that. shift the whims of investors where suddenly your category is not hot anymore. You know, and they're not talking about it at private equity conferences and they would look stupid amongst their private equity friends if they bought a business in whatever industry it is. And nothing's actually wrong in the business, but your industry is out of favor. You know, you just never know, so if you have a willing buyer at a fair price, you know, at a middle of the bell curve, 50th percentile,

multiple, you should probably take it. Everybody thinks, oh, if I just hold out, the business will be bigger, or I want an 80th percentile outcome or whatever it is, but like, the stars have to align to exit a business. It is a hard thing to do. And if the iron is hot, I think you should strike. And this is an example of why. Good advice. 40 years, just one foot in front of the other, annuity style, and then boom, out of nowhere,

a new terminal. There's one more dynamic I want to talk about this business that you can see it from this photo, like little micro retailers like this, they only thrive at this, level of high performance if somebody is in there making it their entire life's mission to be all over their supply chain. I would love if these goods were coming from Alaska. They ain't. They're Chinese-made and Vietnamese-made sweatshirts that have Alaska written on the front of them. And you have to be like, you'd look at how many skews are just in this photo of the corner of their store. Somebody is making their entire life the other nine months of the year, like stocking and

staffing or filling this business, merchandising this business the right way. And if you are somebody who does not want to do that as an owner and then find joy in micromanaging a bunch of seasonal employees, like you should not buy this business. But those are the two things. The thing I worry about this business is somebody buying this and thinking they could be hands off and just collect checks. No, you need to be all up in this business to make it work, in my opinion. I think you are almost always totally right, Michael. If there was ever going to be an exception, though, might it be this business? I mean, it's a hundred years old.

You know, the merch does not change. It's the same, like, of all of the gift shop businesses, is this not the one that has a chance to be systematized? I mean, there is a lot of technical innovation in the stuffed animal category and the moose heads. But yeah, I hear what you say. You know what I mean? Like, you're totally valid point. But, like, if there were ever a business that you might not need to do that for,

it might be this one. Because you've been buying the same moose stuffed animals for 50 years. And I think my point is I bet if you bought this business it's generating $500,000 a year, a good $200,000 of that is because in profit, a good $200,000 of this is because the owners are so hands-on,

passionate about the merchandise, know it, talk about it when somebody comes into the store, can give a story behind it. Like, they're in it to win it in that angle. That's what that picture tells me. And I just think, yeah, this could be fine, but I think it's over time that's going to degrade without that kind of care feeding and ownership kind of mentality being hands on. I think this is what I'm arguing for. I think that's true of any business, Michael.

I mean, that's fair. Right. I mean, generally, like, if you, if a business as part of a transaction is transitioning from owner actively managed to investor passively run, that is a risky transition. Right. Not that it can't be done. It's done all the time. it's totally possible, but you have to be aware that that is risk and you need to price that in the deal.

Interestingly, what this also tells you is if you own a business and you are able to execute that transition before you sell your business, it makes your business a lot more valuable. Right? If you can actually legitimate, like these guys, they're working the frickin' register, you know? So now you need a buyer's willing to work the register or you need a buyer's willing to take on the risk of getting the ownership mentality out of the building every day. And that shrinks your buyer pool versus if you were selling this thing and going, this business is in Juneau, the owner lives in California. That's, and is totally run remotely, and there's a GM and there's

SOPs, and it's been in place for 40 years. That's a totally different pitch to a buyer. Yeah. All right. The owner lives in Orange County, nine months of the year. You're probably right. So what interesting is that actually makes it workable, right? So if you're like, oh, I got to buy his business and got to move to Juno, they're like, you're like, oh, that sucks. Let me reframe this for you. You need to live in Juneau during the three most beautiful months of the year to live in Juneau, right?

And it's like you get to vacation in Juneau and like kind of retire and work the register at this kitchy gift shop. And then you get to go back to Orange County when it gets cold in Juneau. That's not so bad. It's gorgeous. You look at the photos. this little downtown, it is so cute and so gorgeous. There's waterfalls like right near downtown, like, just like, oh my God. So now it's quite romantic, this whole idea of, you know,

working the red her three months a year and living in Orange County the other nine. Yeah, I'll go, I'll go right downstairs and tell my wife about it. I'm sure she'll be stoked. It seems like almost, this is like the reversed pizza boat. Like instead of going to live in the vacation destination, you go to live in the Alaska vacation destination, and then you go back to wherever you live for the rest of the year. Yeah. All right, let me land this plane. Girdley, you're first.

Are you running downstairs to tell Mrs. Gurdley you're bidding on this thing? No, not for us. But I do, I'm thumbs up on this business. I think if you can solve the future with the cruise ship kind of stuff happening and get okay with that, and then you want to live this lifestyle, I think it's a great business. Like, I really like it. Okay.

Nice. Heather, can you write an SBA loan for this thing? No, definitely not now. I already had the problem with seasonality to begin with. And once I discover the new terminal, if I'm a good underwriter, you know, this is something that could get by the bank, by the way. This is something the bank could miss. They could get so overly focused on the lease and the lease term.

Or are you buying the real estate and get excited about that, that they might not even do the underwriting on, uh-oh, what happens when the terminal goes in. So I'm not, now that I understand what might happen there, no, no loan here. Sorry. needs to be seller financing. Question for you then. So, okay, so no SBA loan from you. This kind of raises a tactical question.

So let's say you're buying this business. Turns out the terminal is moving, but you find a way in diligence to get comfortable with it, right? Either you bake it into your price or you feel good about it and you still want to do the deal. You're going in eyes wide open. You buy or know that the terminal is moving. You're okay with that.

And in this case, substitute the terminal is moving for any big event that is coming. coming down the pipeline that you buyer are comfortable with, but bank is, it could freak a bank out. Right. Let's say I'm getting a loan for this business. Am I obligated to tell the bank that the terminal is moving or do I just tell them what that, do I answer the questions they ask? I'm not saying you hide it on purpose, but like, am I obligated to come forward with this fact

that I'm comfortable with this buyer, but I know is going to wig out the bank if they don't ask me about it specifically and then get my loan and move on. What's the strategy here? Yeah. You're not obligated to just tell them every little thought that passes through your head or every little bit of analysis that you've done. And frankly, I don't think most buyers kind of know if you flood the bank with enough information, they're going to find risk in it that you may not, that you may not agree with. Like if you've done, you know, you, the buyer should have done more analysis than the bank, frankly. You're the one signing the personal guarantee. You're the one that's going to really pay some consequences personally if this doesn't go well. So to your point,

no, you don't have to feed them extra information that they didn't ask. But, you know, there's a middle ground there where do you, you know, are you that confident, you know, in this deal and what you're going to do if the terminal does kill your numbers. If you really know, right, you are. Then they don't have to tell them. If you have a backup. plan and you know you can pay this loan back regardless of that happening, then no, you don't need to, you don't need to tell them every thought process that you've gone through. To me, though, you have to kind of weigh it, right? Because you're like, okay, this, if the bank turns over this stone, it's going to kill my loan, right? Just because banks are more conservative

than equity investors generally, right? So this thing is going to trip their risk threshold, but not mine. So if they see it, the bank's going to be out. So you basically have two options. You can not tell them and hope they don't find it and they might not. But if you do that and they do find it, your three weeks from closing and your loan evaporates, right? And now you can't close and it maybe blows up your deal. Or you go, I'm going to practically get ahead of this. I'm going to bring it to my broker, my loan broker or my lender like up front and give them this whole mitigation plan. And maybe they get there. Maybe they don't. But at least my deal doesn't get blown up on the one yard. And there's what I would rather my clients do because as a broker, we have the whole

network of all the banks to work with. So yes, some of them might not buy the mitigation plan. And I can usually tell which ones wouldn't, but there are others that would. And we all, I just prefer a process where everybody kind of knows the same set of facts and made the same decision based on that same set of facts. Are you required to tell them? No, to your point, you're not. but there's some risks to not doing that. And yes, it could blow up your deal at the end if you didn't. I do think this is one of those weird things, though, that probably most banks would miss. I don't think, I think they would see terminal, new terminal going in, like I did in the beginning, think

positive and not even think through the, uh-oh, what does that do to the flow? And so this is probably one that bank wouldn't ask about or wouldn't assume that is going to be a problem. Yeah. It also kind of indicates the value, like the difference in the value, working with a loan broker versus just going to one bank because like Heather, I mean, how many banks do you work with? We have over 40 in our network now. Okay.

And like some of those 40 like you've done deals with and you know that with a proactive mitigation plan you could probably get them there on this. And you probably know some of those banks will not touch a seasonal business with a 10 foot pole. And some of them have done seasonal businesses, right? So, you know, I go to you. I do my loan with Vizzo and you kind of help me package it and go to the right banks that are going to be able to swallow this pill versus if I don't know you, I get a recommendation

from my buddy who has his SBA lender, who did great for him, right? And there's nothing wrong with that. It's a different deal. So I get a warm intro and I go, great. And I got my bank, rock and roll. This guy, I have a good, this is a great banker. My buddy loved him. He was great for my buddy, et cetera. But the problem is, you're is a different deal, right? Like, you have a seasonal gift shop in Alaska. The buddy was an e-commerce business. And the credit committee of that bank might view those two completely differently. They will. Yeah. They will. Our job is we keep data across all the responses we get back from all the banks. So we know not just what their kind of credit grid says, but what practically their credit appetite really is around things like that. So we do,

we go on a targeted search to the right banks for the deal, which is important. And that's why I want to like harp this point for people, because to me, this was the thing. I did my, you know, a couple deals. I didn't use a loan broker. I had no idea. I just got a warm intro for my friend, right? And, you know, I rolled the dice. But to me, this is like one of the huge hacks that has been uncovered from knowing you and doing this pod with you for the last couple of years is like, I would never do a deal now direct with a bank. I would always go to a broker because it's free for you the buy, like, you know, the bank, whichever bank eventually funds your deal is going to pay your loan broker. Right. And the bank, you kind of built into their business

model. So like your pricing doesn't change. So like it's literally free and no downside. But there's like real tangible upside from working with a broker that knows the credit committee is like your chance of closing that deal goes up materially with a broker instead of just your buddies, the SBA lender that was awesome on your buddy's deal because every deal is unique. Yeah. It's a better business model. Literally I was I was a banker for how many years over 30 and I was risk averse about being an entrepreneur. but when I kind of understood the business model I was about to go into, I thought this is a win-win. This has got to work because it makes so much sense.

It's just a better way to do things. Yeah, I think so too. Okay, so this SBA loan, a little tough, but generally, like, if anyone was going to get it done, a broker would probably be able to take it to a bank whose credit box might do it. So for me, I really like this one. The terminal thing, I just can't buy it because the terminal is moving. And I can't see past that singularity.

If that weren't happening, I was thumbs up on this one. So, all right. Well, let's wrap this thing up. Thank you for listening to this episode of Acquisitions Anonymous. If you liked this one, I want to tell you two things. The first thing is that we have 500 more episodes just like this one on our website, which is at acqueuanon.com, aquanon.com. So if you want more gift shops, we've done them.

If you want construction companies, we've done them, e-commerce companies, we've done them, ad agencies, we've done them, whatever. you're into, you can filter by industry on our website and you can listen to us, RIF, on all kinds of different stuff. Second, if you are listening to this, but you don't have time to listen to all this audio every single week, get on our email newsletter. Again, go to the website. We will just email you summaries of the episodes. So you don't need to listen to our voices necessarily, but you can still stay in the loop and kind of stay on top of our pod and dip in when it seems interesting to you. So all that is on our website. Thank you for listening to this episode of Acquisitions Anonymous. We'll see you

next time.