Acquisitions Anonymous - #1 for business buying, selling and operating - Two Real Estate Adjacent Businesses for Sale - Acquisitions Anonymous - e52

Episode Date: November 18, 2021

We look at two real estate small businesses for sale. One is a home staging business in Silicon Valley. The second is a specialty real estate appraiser firm in the southeast.Enjoy!THANKS this week to TinyAcquisitions.com, our sponsor!-----* 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.-----Past guests on Acquanon include Nick Huber, Brent Beshore, Aaron Rubin, Mike Botkin, Ari Ozick, Mitchell Baldridge, Xavier Helgelsen, Mike Loftus, Steve Divitkos, Dzmitry Miranovich, Morgan Tate and more.-----Additional episodes you might enjoy:#62 Two Landscaping Businesses for Sale - Mike Loftus CEO of Connor's Landscaping#66 Analyzing Software Businesses for Sale with Steve Divitkos, experienced industry CEO#42 $900k Moving and Storage Company / $500k Rural Mini-Storage#61 Two Manufacturing Businesses for Sale - Brent Beshore - Founder and CEO at Permanent Equity#24 $5mm pool services and lifeguard staffing co / $2mm septic services business -  featuring baller @WilsonCompanies as a special guest!#45 $800k/yr cleaning business in Midland, TX / a $565k/yr window cleaning business in San Antonio, TX #48 Two Landscaping Businesses for Sale - Mike Botkin of Benchmark Group--- Support this podcast: https://anchor.fm/dealtalk/supportSubscribe 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]

All right, welcome back to another episode of Acquisitions Anonymous, the internet's number one podcast where we review small businesses for sale, usually south of $20 million, and we talk about whether we would buy them or whether we would not. Usually, we have a guest from the sector for the deals that we're talking about, but today, you get just the three of us, myself, Bill D'Alessandro, and my two co-host, Mills Snell, and Michael Gurdley. The theme of today's episode is transaction. Adjacent Real Estate Services, which is the sexy name we came up with for a real estate appraisal business and a home staging business.

So we figured, hey, we go buy both of these, call it transaction adjacent real estate services and raise it five-tonguedgeant Revenue. So we're going to talk about all the services adjacent to a real estate transaction. You've already received three term sheets since we started recording, so congratulations. It's called Brandly. This one, the branding guy. All right, but first, thank you to our gracious sponsor. I'll throw it over to Michael to introduce them. Yeah, so one sponsor today.

We have Tiny Acquisitions.com. They are our longest running sponsor, by the way. So thank you to those guys. Tiny Acquisitions is a site where you can go online. That is a place where you can go acquire a very small, tiny project-based businesses that are typically $5,000 or less. And basically, they're typically tech that's already built or a product that's already built that needs to be taken to market and grown.

So really good for somebody that's looking for a side hustle, looking to run their marketing chops and that sort of thing. And I see on their website here, they just got the number three product of the day on product hunt. So that's a real deal to get up there on that site. So thanks for Tiny Acquisitions on our Neverending Quest to make this podcast break even. So thanks to them. And back over to you, Bill.

All right. Cool. Thank you, Michael. So Tiny Acquisitions has not only the, distinction of being our longest-string sponsor, but our only sponsor for today. So double thank you to tiny acquisitions. You get two for one today. So we're going to get right into it. So our first deal is going to be, which one do we decide? Mills or Gerley? Who's going first? I'll take it. I'll take it. So this is a real estate appraiser firm in the Southeast,

and it kind of caught my eye. I like to at least just take a look at anything that's southeast based that, you know, based on the descriptor, you know, piques my interest. And this was one, I think these businesses are kind of interesting, but also tricky. So we've got a teaser on it. It's a southeast based real estate appraiser founded in the year 2000. Their ownership is supported by 13 full-time appraisal professionals. Management indicates that the current personnel can facilitate the planned growth, revenues generated from the company's appraisals, which account for 100% of the revenues for 2020. They've been focused on convenience and gas properties historically, but they currently are expanding and they are specializing in service offerings to branded fast food and quick

service restaurants, QSRs. The company offers excellent service quality to clients and is focused on a highly specialized market, which drives word of mouth referrals and repeat business from customers. The primary means for expanding its customer base is direct marketing to prospective clients and promotion via trade shows and industry-related group activities. They are doing, in 2020, they did $1.4 million in revenue and $230,000 in EBITDA. In 2021, they're projecting, and I don't exactly remember when I pulled this, but they're projecting $2 million in revenue and $632,000 in EBITDA. So it looks like they're, you know, we don't have full financials on this, or at least that I can talk about, but it looks like their overhead, their fixed cost is somewhat, is somewhat truly fixed, right?

And there's not a lot of variable costs because a lot of that revenue increase fell to the bottom line. they are primarily like 98% of their customers are banks, right? So if you're buying a piece of property, you have to get an appraisal done. And it's a somewhat regulated process. The bank puts it out to bid and the appraisers can respond with a price and a time frame. Like, I'll charge you 500 bucks, but I'm going to do it in a month or I'm going to charge you $1,000 and I'll do it next week. It's typically the way it works. Then they show us their geographical breakdown in 2020. About 25% of it's based in Georgia,

7% in South Carolina. 9% in North Carolina. 8% in Virginia and 51% in other states. So I think it sounds like most of this is their niche driven. So if they've made their way focusing on gas stations and convenience stores,

I really like that as a differentiator. Ivaeim margin has fluctuated from 2018 to 2021, but they're certainly top ticking right now. 2021 is 31% EBidim margins and two years

ago was 6.9%. So you'd really want to dig in and figure out what that variability is about. Two owners, 13 appraisers. It says that they're not very dependent on current ownership. I'm not sure if most of the appraisers are remote or

independent contractors or all sitting in the same office, but I would have a lot of questions about that. Strong client relationships. a lot, like 90% rate of repeat business. Top five clients have been working with the company for a minimum of 13 years, 13 to 20 years. They say that it's easy to replicate, standardized growth formula. They have opportunities to scale and that they have an efficient reach.

Their operations are easily carried out from the company's headquarters, key personnel occasionally travel to client locations, but the company primarily manages all client interaction from afar, resulting in more efficient operations. What do you guys think? Wow, does this not suck? This is pretty cool. The people think that we hate every deal and what they, I think,

hopefully realize is that the more deals you look at, the pickier you get. So there is a level of regulatory barriers to entry on this. So you do have to go through in most states a licensing process to become a real estate appraiser. And then my buddy just went through it. So he did like a whole year of classes. And now he's like an apprentice working for another real estate appraiser.

So I think like some of, the other stuff we've looked at, like the RAAs and the dentist offices and stuff, you know, you're going to have to go through some of that, though it's not that hard. It's not like trying to become a lawyer or something. It takes five years. It seems to take about a year, a year and a half to get you there. But there is regulatory barriers to being in this business, I think. It looks like a really one of the most pure fixed cost businesses, at least from the numbers that we've seen in a while, because if you look at their, they're projecting to go from 1.4 million to 2 million in revenues. So 600K of incremental sales is going to lead to almost

exactly 400K of incremental EBITDA. That is a hell of a flow through margin on incremental revenue. And that's what takes their EBITDA margin from 16% to almost 32% kind of overnight. So it could be that, you know, I'd ask, I'd ask questions about, you know, we don't have the 2019 and 2018 revenue numbers. But, you know, this could be they've got kind of a network of licensed real estate appraisers, you know, in each of the states, as per the pie chart in the sunscreen right now, and they just kind of farm them out work, pay them a fixed fee and charge whatever they can to the bank. I imagine, got to imagine those client relationships are really sticky. It says here, the top five clients have been working with the company for a minimum of

13 years to a high of 20 years. Like, once you get in with a bank, I mean, like, can you imagine like somebody who's more just like stamping it out on a daily basis than a commercial banker? Like, just call my gas station appraiser guy. Like, I really don't think he's shopping for, like, the best rate on appraiser. So this is, like, service business, like, as long as you are clearing the bar and making him happy and send him a gift basket at Christmas, this feels like it could be pretty sticky business. So there is, the way I understand this works from the banking side, there's been regulatory

things that have shifted with regards to how appraisers work. So if you remember back to the savings of loan scandals of the 80s, when people would do fake appraisals and that kind of stuff. And then again, in the 2008 real estate crash, you had problems around that too. So regulatory-wise, and I'm not an expert on this, it has become much more difficult for a bank just to call their guy. So like when I go now for a real estate loan, especially for owner-occupied or specialty property, which it appears what this is, they will put it out to bid. And there's a pool of like four or five that will bid an individual job or they'll say, I'm too busy. And they will tell you, okay, here's how much

it's going to cost to get it appraised for the loan. And then secondarily, they'll tell you, you, this is how long it's going to take. So you might choose the one that's $2,500, but takes three weeks over the one that's $2,100 and takes seven weeks. So those are two things that comes back. So, you know, I think what these guys appear to have is, and I'm not an expert in this space, just see it on the other side. They guys appear to have relationships where they've gotten on the lists, the preferred list for these five banks. And then I think it's super cool that they are not general real estate appraisers. So they're not competing with all the other ones. They're just like, okay, these are the only things we do. And that, I think, put you in a much left competitive,

you know, position than if you were just a generic one doing apartment buildings or many storage or something like that. In this case, less competitive being good. That's good. Because you have to slug up with a ton of capacity. That's good. That means your high bids are sometimes going to be accepted, which is the goal of a business like this. Especially, right, when you think about it from the bank's perspective, from a credit and underwriting view, like, you know, hey, we don't just want the guy who does multifamily housing to, to put a number on this, you know, this convenience store and gas station. We want the guy who's the expert because we want to make sure that we've got, we're correctly collateralized on

this thing. So my, that's a great one. My guess is businesses like this often transact the way engineering firms do, which is they sell or to general contractors, right? They sell to insiders or staff members come in and do a management buyout of some sort. That'd be one of the things I'd want to look at on this, which is why, why out of 13 appraisers, none of those folks are interested in what seems like a pretty good business? What, what don't we know? Because there's something about this that's like, wait a second, none of these 13 people are interested and it's SBA qualified, and you know the owners really well and you know the business really well. Like something doesn't smell right about that aspect of it. I'd want to understand why. My guess is that it has something

to do with the sellers wanting a multiple of 2021 EBITDA. Oh, I mean, if, you know, I mean, if If you had to guess, right? I mean, that's going to, I would be willing to bet that, you know, this particular broker told these guys, hey, look, yeah, I mean, somebody will pay you a multiple of, you know, last 12 month or maybe an average of the last two years. And the insiders are like, well, we could just go start our own and compete. Like, why would we pay you a bunch of money when we could just compete, you know, and establish our own banner? So the tricky thing to me about this is how do you make sure that all of the value doesn't walk out of the door? It'd be like a law firm, right? Buying a law firm. It's all non-transferable goodwill. And so, you know, you got to make sure, right, that those people are going to stay. And if you

try and walk in their, you know, in due diligence and say, hey, everybody's getting non-competes, everybody's getting these, you know, handcuffs, so to speak, even if, even if they feel like golden handcuffs, I think you scare people away. And the really difficult to keep that revenue going. Yeah. Have you guys ever seen a successful model where someone comes in and buys a business like this and takes these 13 appraisers and kind of gives them a small chunk of equity or ties them up in a way that it's like a half management buyout, but led by the new financial buyer? Have you ever seen a structure like that work? Only on much larger transactions than this. Yeah, because even if you gave, you know,

3%, it's just, that's not a lot of money that they could still. walk from. Yeah, but the other way I've seen it work is like a subset of those folks who are like the leaders will do the buyout. So it's not everybody or like, or like you pick the two or three and you make them partners because they have more of an owner's mindset than the folks who are generally just happy being an employee, right? So I've seen that happen both on, you know, general contracting businesses and then also like on specialty, specialty engineering forms as well. Or like architecture, right, environmental services. It's where you have a person, right, who's highly compensated, who has some level of credentials and, you know, expertise, law firms, again,

same kind of thing. It's all professional services that at the end of the day, you've got to thread that line. And as a sponsor, right, if you were going to try and sponsor a deal like this, you're saying, okay, I'm going to take pretty much all the financial risk because this person might be used to making $100 or $150,000 a year. And they don't want to, they don't want to take a discount from that in order to like squirrel away money for the buyout or or to you know pay down a portion of their equity as a vest or something it just seems like you're spreading you know you're spreading it too thin there's not enough to kind of go around with a deal this size so here what here what you're buying is you're buying the appraisers you're buying the brand

and you're buying some some industry knowledge and history and then you're buying the relationships with the banks is there anything else that you're really getting in terms of assets when you buy this business? I think this is a really slow business to grow organically. So just having a jumpstart is probably worth something. You know, if you said, okay, look, I've got half a million dollars. I want to try and build a competitor to this business. I mean, it's just really hard, I think,

and a very, very slow, you know, lead cycle, sales cycle on getting this type of employee because their alternative is, I'm just going to work for myself and I'm probably going to make more money, you know? So it'd be hard to get 10 appraisers. You know, it takes you years, I think, to get 10 appraisers. If you do the average, they're paying all-in costs for these appraisers a little bit over 100 on it. Yeah. If you do 1.4 divided by 13.

So, yeah, you run the risk. And I know individual, I know individual commercial appraisers who are making three or four times that amount. Now, they've been at it a long time and they have a reputation and all that stuff. But low overhead, they work when they want to, they take off when they want to. you know, and they're making bank. There's one other thing that's a risk embedded here that might not be easy to see at first, which is that your customers here are 98% banks, which means all of your business is driven on refinancings,

basically either financing, you know, with a sale or refinancing, which means that I want to know what happens to my business when interest rates are rising and no one wants to refinance their convenience store and gas station. And because of their commercial real estate, interest rates are rising, it's probably depressing cap rates, or it's increasing cap rates. And so you're kind of losing value on your commercial real estate. So I just wonder if that's why they had a great, you know, coming out of 2019, and then the rates got cut and back half of 2020.

2021, rates are super low. Everybody's refining their convenience store and gas station. I wonder if that's why they had a great year. You're kind of exposed to the bank financing market here fairly significantly. And if for some reason loan volume dries up, your business is going to dry up too. And it seems like you have a fixed cost business, which is potentially a scary combo, especially if you bought it with debt. Looks like that's what happened in 2019.

Yep. That's why I would never want to buy, especially with debt, one of these, this residential focus, because you just ride these waves of housing, boom, and bust. I would bet that this is somewhat insulated, but you're right. I mean, it's not immune, you know, but I don't think it's going to be as volatile as residential. I mean, earlier this year, I was hearing from residential real estate brokers and appraisers that, you know, the brokers were having a hard time getting appraisers because they were just booked so far out. There was so much transaction volume.

So you just have to make hay while the sun's shining. And then, you know, if you're the owner of this type of thing and you financed it with debt, you've got to prepare for debt service obligations that you may not have the cash flow for later. So one thing also about this, I think you need to have a thesis on is what's going to happen to convenience stores in the long term, right? There's a there's a thesis that EVs are going to make nasty. I mean, let's face it, most convenience stores except for maybe Buckees and a loves are pretty horrible to go into. How many of those are going to survive as EVs go from whatever percentage, let's say, you know, we're single digit percentages right now to a third, right, of the of the automobiles in the U.S. And yeah, I can, can they survive not selling gas, but like, why do you want to go there when GoPuff is going to deliver me my, you know, my Twinkies? Do I really need to go to the convenience store? And it is interesting. I talked to somebody who was on the board once of a C store, and this was five or six years ago, a big chain. And I was like, well, you know you guys are in trouble long term because

EV's going away. And he said, no, no, we're going to become neighborhood centers. I'm like, oh, okay, well, let's see how that works out for you. But I think you need to have a thesis around that because, you know, as the demand for gas goes down, that means the other stuff they actually make their money on is C stores, you know, in theory is going to go down too with less people coming to the door. I hear that, but I also think, you know, there's parts of the country where that would absolutely scare me to death. And there's other parts of the country that I think will be 30 years, 40 years, 50 years away from it, you know, for the same reason the dollar general goes in and, you know, they're the only place you can buy groceries in a lot of, in a lot of areas.

We've had people asking us about this, but I think this, we don't always highlight it, but I think this business probably trades for somewhere between 50% and 75% of revenue, like, stabilized. I highly doubt that, you know, it's going to transact off of, you know, the 2021 projections. So let's see. That would be half of revenue. That would be about two and a half times EBITDA. So somewhere between a typical Main Street, four to five times EBDA and a very low typical services business.

multiple? I think so. I would have guessed two to three times EBITDA for this business too. That being said, seeing some silly stuff out there in 2021. And it's SBA approved. So there's leverage. I could see it going for hire, but I would get nervous paying any multiple of 2021 EBITDA or more than three times. So, Bill, you talk about like buyer deal fit. You know, if you're a not an appraiser and you don't know the business well or even even this particular niche, would it scare you a bit that some strategic who maybe is the next town over hasn't decided to buy these guys at whatever multiple you're paying? Or do you think this is one of those ones that's not one where I should be scared of that? I don't know. It's hard to say. I don't know this industry

well enough, like whether there are huge conglomerates or if this is something more like notaries, you know, where it's just fragmented like crazy. If it were, fragmented like crazy, you know, you don't have to worry about that. So it's something I don't want to learn at, learn. This one, I don't know. It's just, it doesn't seem super complicated because it's, it's a, it's white collar workers, so you probably not have as much turnover, right, the appraisers. I'm assuming they got to be either 1099s or at least pretty autonomous. Like, you don't need to manage them that much. You just give them a job and they do it. And they take all in check. They're calling these guys staff. So I don't know if that means they're W2 or not, but

there. Well, even if they're W2, like my point is it's pretty transactional job description. Now, you don't have to, it's not like a whole bunch of strategy and like, you know,

people managing other people and, you know, things like that. It seems like probably close to one layer. And it seems like a smart person could come in and learn this. And there's not a lot of like really kind of dirt under the fingernails, industry specific complexity that, you know,

like there is in some of the yard maintenance. it's businesses or home services or the stuff that seems easy from the outside and you get into it and you're like, holy smokes, this is way more complicated, right, and difficult that it looks. This one smells like it might actually be not super complicated. And it's kind of just more white-collar transactional business. And so you might be able to get more of your traditional financial buyer in feeling a little more comfortable in a business like this. I think the nexus of value on this one is where did the leads go?

If the leads go to individual appraisers, then you as the owner have very little value or very little leverage, right? But if this is primarily like a sales organization and the owners are the ones who receive all the leads and then they say, oh, I have a guy who's really good or I have a guy in South Carolina or in, you know, in, you know, Florida and I'm going to send it to him, that becomes a lot more valuable because then the appraisers are just waiting to kind of receive their weekly allotment of leads or, you know, of customers. I think also you could buy this thing if you were, I wouldn't want to be like an electrical

engineer from Des Moines and like try and buy this thing and move to Georgia. But if you're like a broker or a property manager or you, you know, are in the mix from a real estate perspective, I think you could you could get up to speed on this. And it's fairly formulaic, right? You don't have to have 30 years experience in commercial appraisal in order to do one of these things. But there is, there is a hurdle, a compliance hurdle like you said, Michael. Yeah. I think I would, if I was digging into this business and interested in it, first thing I'd do, I'd get the SIM, and I'd go find

network to two or three people that are like the old saws in this business and be like, what don't I understand about this? This looks pretty good. Or how would I make this work? And yeah, that's one of the nice things about getting old. Like, I know a bunch of 60-year-old men and women, like I call them and be like, hey, tell me how not to be stupid

about this. And, you know, networking to those is really a good thing, because I think they would tell you some stuff and be like, oh, you need to think about it this way. or, you know, there's a new law coming down that's going to affect it this way. I mean, that's besides the regulatory hurdle, there's also, like, you know, do they change the banking rules yet again to make it more difficult on the appraisers? Like, they could regulate your fees. Right now, I don't think that's the case, but lots of bad things could happen if we do it in the name of consumer production.

Yeah. All right. Let's wrap this one up. Move on to our second deal. So, Michael, this is you. Sweet. Let me pull this one up. Okay, so this is a fun one.

at least I found it fun. Hopefully everybody else does too. It's on buy-biz cell and so it came out a week or so ago. And it's actually a real estate staging company in Silicon Valley. So basically what they do is when somebody wants to sell a home, the owner or the broker will pay this company to come in, put together a plan of what fake furniture is going to look like. And then they deliver install furniture and make the home look like it. it's lived in and is really nice. So, you know, you see those funny Zillow listings where, like, somebody has, like, a full suit of armor on the wall or, like, a weird, like, you know, dungeon in the basement. Like, this is how you make it middle of the road to where it's more appealing to buyers because it's been shown just that a staged house will sell for more than a blank house. So people invest in it, and they pay a firm like this to come do that.

So these guys are in Santa Clara County, so Harder, Valley. They're asking $350,000. cash flows $221,000 on $350,000 or on $450,000 in revenue. So asking $350 for it, so about one and a half times revenue or one and a half times seller earnings. The business, $450,000, according to them, EBITA is not applicable, so that's fine. Zero FF&E. Inventory is not applicable. We'll probably want to dig into that because these guys own furniture. And it was established in 2015.

So this is a business that, according to broker during the fiscal year from April 20th through March 21st, the pandemic, 12 months, sales went up almost 3%. But the seller discretionary earnings went up almost 35%. So that number we were just quoted in terms of them making $221,000 looks high compared to the average over time. As I said before, real estate staging is the most important factor in effective marketing of upscale homes in the Silicon Valley metro area. this established six-year-old profitable company is highly respected and sought after interior stager in Santa Clara County using their versatile and fashionable furnishings. The experienced designers and stagers serve the exacting requirements of the most prestigious real estate brokers. So if you're selling a $6 million home in Atherton, which is a fancy neighborhood there in Silicon Valley, you're willing to pay $10,000 to $15,000 to have one of these guys come in and make the home look like Martha Stewart just came through with a magic wand.

primarily serves Santa Clara County, San Jose metro area, and San Francisco Peninsula, so very much a local business. Services include staging, design, and property preparation. Annual sales are in the $440,000 range with the latest year's STE, SEDLers, discretionary earnings of $221,000. On 2020, they were 448 and yada, yada, yada, and about the same size for the previous year for 2019. They operate out of two 1,800 square foot warehouses renting for $5,300 a month, and the prospective buyer could continue that. And you sell to real estate agents who engage services directly or refer sellers to the business. They have over 36 active customers, about 500 in the database. The three largest customers represent 13, 12, and 6.5% of sales, respectively. So they're trying to tell you there's

not a lot of customer concentration. They talk about staff and growth, yada, yada, there's basically one full-time owner-manager, two part-time employees, and two part-time on-demand contract movers. So this is a business clearly where the owner-manager is out doing everything. You're a jack or Jill of all trades. They have a bunch of assets, sofas, chairs, tables, rugs, mattress, pillows, paintings, vases, et cetera. And the cost to replace all these at book is $521,000. We haven't really talked about that. But it looks like that is included in the asking price, of $349,000. Yeah, because they say the cost to replace all these

items would easily exceed the asking price for the business. Yeah, so you buy the business. You buy the business, you get decor for life thrown in. All the throw pillows you could ever need, Bill. Hope you like their taste. By the way, I go to a coffee shop with my friends, and

literally the owner of the coffee shop, I think he hates us, because there are throw pillows everywhere. There's no place to sit. Like, it is ridiculous. There are more throw pillows in there than customers by order of magnitude every time. Anyway, Doug. He wants to keep your turn it over, right?

Throw pillows are the dumbest thing ever. Like, I have no idea why the university. We need to ban those when I'm king. All right. All right. So, yeah, the broker and yada, yada, yada. So this is the business. Looks priced really good.

What do we think? So this is, have you guys ever, if you're listening and you've ever paid for this, if you're selling a house? You probably had sticker shock when they told you how much it was going to cost to stage your house. I mean, it's thousands and thousands and thousands of dollars and I wish for. But when you think about it, it's causes of pain in the ass. Like you got to move all this furniture in.

You got to decorate it. You got to sit there. You got to move it out. You probably break it every so often when you move it. So I think this is, what this business basically is, is you got to be friends with realtors. Because my experience is that the realtor drives the leads here, right? You know, you hire a realtor to sell your house. And the realtor goes, look, man, you should really stay.

it, you know, we're going to get more money. I'm going to make more money in my fee. And this is the stager that I use. So I would be asking around on customer concentration. You know, maybe I don't have a lot of concentration in the people who cut me the checks, but maybe I do have a lot of concentration in where my leads come from. Or one firm, right? One firm. Yeah. Maybe it's one real we're about to sell our house and our real estate broker, our listing agent, is including staging in their listing fee, you know, or in their commission. if we want to, if we need to. So I hear you, because my impression bill is that, like, this would be several thousand

dollars, you know, for a $400,000 house or something like that, you're paying, you know, probably $5,000 or something. So that was my impression, but also, like, that, I don't think, I don't think the listing agent is going to pay $5,000 because it would be the majority of their commission. You know what I mean? Not in Silicon Valley, though. I mean, they're getting six percent on, totally different. They're getting 6% on $3 million tract homes in Palo Alto.

Mills, your South Carolina is showing. Yeah, oh, yeah, yeah, exactly. I live in a really nice neighborhood. I promise it's not a shanty, you know. The other thing that's interesting, too, is written right here in the teaser. It says the cost to replace all these items, you know, is more than the asking price. But literally the next sentence says, nothing is old or tired. The assets are regularly called, so only the best is used in staging.

which gives you the tip here that, remember, you know, good housekeeping or better homes and gardens or whatever changes what's in style like every six months. And your house better look hip if you want to sell for millions of dollars. So what I wonder, I don't know this business, but I wonder if, you know, whether you actually want to own the sticks, you know, the fabric and the wood furniture, or whether you want to like have some like rental model, you know, where you want to give it all back to Renicenter every six months, you know, and turn it over and be more of a less than fixed cost model. So I really want to understand, you know, I'm always the guy that says, look at the quality of that inventory. In this case, you know, it's the quality of the inventory, the equipment,

if this were, you know, it's basically an equipment rental business. And it's like, what's the useful life of this equipment, the furniture? Yeah, you have, you, there's an unknown level of CAPEX that has to happen here every year that, at least in the previous year, it didn't show up in the cash flow. But, you know, when the, when the, when the fads change, like, and everybody goes to Hot Pink in their house. Like, it's just a matter of time. Yeah, talk about buyer business fit. Like, this is, if I own this business, a, not designer.

So soonling, I would have a designer on staff. That person would come to me every six months and be like, we need to buy this thing. And I go, absolutely not. Like, no, like that other couch is fine. We've had it for four years. You need more throat bill. Exactly. And so I would not be a great owner for this because I would tire very quickly of turning

of not only turning over all my style, but spending KAPX. Well, it could explain somewhat why the business is going to trade at this kind of asking price. Like, you need almost a unicorn of a person that wants this sort of hassle and this sort of activity, right? So you've got to love doing design. You've got to love schmoozing. You've got to love corraling what looks like a bunch of kind of difficult part-time

employees, right? You've got to love doing all the other aspects of your business. And you've got to be okay when they call. call you and it's like, hey, we have an open house in 45 minutes. Somebody spilled coffee on the couch. What are you doing about it? And it's Sunday morning and you're at brunch. Like that is a, you deserve to get paid, but it's also like all of those things together, somebody wanting to do that, which none of I know you guys pretty well now, none of us on the podcast should do that job. That sounds like

the worst, worst job ever for us. But they're, you know, to find somebody that wants all of those things at Venn diagram, like, good luck. I think you've got to be a designer. Right. You just got to like love interior design. Or you own, right? You own a, like, I don't know why somebody who does, like, own, you own a furniture store in this county, you should totally try to do this yourself, right? And maybe you buy it with some very unique deal structure. But if you already own the furniture and you have slow moving inventory and you just are,

you know, sticking it into this kind of environment, I think that makes a lot of sense. Or like I've talked about my brother's business on the podcast before, if you own a moving business. This makes a lot of sense because to me the hardest part is the designers, like, they know this stuff and you could probably rinse and repeat and reuse the same inventory. But getting it in and out of the house, like you said, I mean, it's like, hey, we're listing the house. By the way, we kind of forgot to give you a heads up. But, you know, the listing is going live in 48 hours and we need the stuff in. Or the house sold and we need that stuff out right away. That's logistically very tricky. But the price is right.

The price is right. It's a good add-on maybe if you're elsewhere in the value chain, if you're adjacent in the value chain to this, or if you love interior design. Or if you're doing a transaction-adjacent real estate services roll up and are raising it 5x revenue and just need to buy something. Where do I send the term sheets? Yeah, I mean, the other thing that affects this, right,

is, yeah, the SDE is pretty good, But like, I think given what it costs to live in the Bay Area now, like there's no, the buyer universe for this has to be somebody that lives in Santa Clara County already. Like, you're already established there because there's just like the way housing prices are there, there's just no way like a normal person can come in, afford a house there, and sign up for the risk associated with this job that gives off this kind of cash flow only. And I know this is the most crazy. Not to mention that SDE is going to get cut down, right?

I mean, you're talking about probably 60, 75. thousand dollars a year in debt service if you buy this business. You know, so then all of a sudden your SDEs whittled down even more. You definitely can't afford to live in that area and be in the circles you would need to be in. Maybe the buyer of this has a really wealthy spouse and this is their hobby. There you go. Hobby business. Yep.

Well, that was a good one. So that brings the conclusion our real estate transaction adjacent services episode. Thank you for listening. And Michael, if you would give a shout out to our longest running sponsor, Thanks again to Jake and the team at tinyacquisitions.com, the site where you can go and buy ready to run tiny businesses and get your feet wet with that either as your full-time job or a side hustle. And if you're a prospective or interested supporter or advertiser of the podcast, DM email us. We are accepting more advertisers. And if you're a listener and you want to help us do better editing and all that kind of stuff and eventually break even, please go to our podcast page where you can become a patron and give us.

money every month. So we are very grateful to accept any of that. Thank you. Michael. Thank you to our sponsor, Tony Acquisitions, and to all of our patrons out there on the interwebs. That's it for this episode of Acquisitions Anonymous. We will see you guys next week.