Buying a Mysterious Retail & Distribution Business in Orlando
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We don't know the dispersion of their revenue across the kind of wholesale distribution retail channels. I like the stability, right? Like it's highly desirable. It's in a earnings level that so many people are targeting. I don't know if I would be selling. I was only working 10 hours a week and I could make that kind of money. There's something that just doesn't match with all of this. Oh, so that was next to the office. Oh, and we're actually back with some anonymous. We don't have 100% viewers.

And thumbs down on just the pluses. Acquisitions Autonomous, internet's number one podcast about buying, selling, and investing in small businesses. Today, me, your host, Michael Girdley, and my fellow co-hosts, who we had a special guest, Chelsea Wood, today from Acquisition Lab.

Heather Anderson, podcast co-host, and Mills Snell, who is fresh off of a disaster at his business. We all got together and talked about a deal that was actually listener submitted. And remember, if you have a deal you want us to cover on the podcast, you can send it to any one of us and we will cover it. But today's deal was in Florida because all the crazy interesting deals are in Florida. That's just the way it works. We dug in and then we didn't all hate it. Actually, most of us liked it. I was the one that hated it.

Listen up and see how we got there. Thanks for being here. 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 Capital Pad. And it is the thing that I wish existed when I started my journey of operating

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You told me last time I fully came in prepared. Just rolling in hot. We have one rule at the Exorcist Anonymous podcast. If I'm here, we're starting pretty close to on time, usually on time. There's no other rules. Well, I was just catching up on Days of Our Lives, a.k.a. Mills' Office. But...

Yeah, that's the thing they don't teach you about running a small business. You think you've left high school, you think you've left babysitting, but it's just babysitting with bigger people. Walker talks about that all the time, actually. Oh, I love this broker. Jackie. She sent us this deal. Thanks, Jackie. Thanks, Jackie.

Jackie Austin Hirsch, who is just a lovely person on Twitter. She's really nice. She did not make it to our conference. She's also lovely, by the way, in person, not just on Twitter. Arguably better in person than on Twitter. Indeed. I mean, I like both versions of her, but, you know, she's adorable. So I'll take the live one any day.

So one thing I talk about with Heather a lot is in the business buying space, it is a male dominated space for sure. Really? So she and I talked about it. What's that? I'm sorry.

I hadn't noticed. Oh, well, I think there's some ladies that I think like being in male-dominated cultures because you only have to worry about one type of personality and approach to stuff. It's easier because it's narrowed down. There's more of a mono kind of thought approach to stuff. Yeah.

Anyway, I don't know if you have any commentary on that or you're welcome to say next topic, please, Girdley. No, I love talking about gender dynamics in M&A any day. I love all my female buyers. That's all I'll say. I love to see people apply to the lab that are female. Yes, it's a lot of dudes.

How do female buyers tend to approach things differently than your typical male buyer? In my opinion, and it resonates from what I used to do career coaching too, is like a female buyer never thinks she's ready. She could have run somebody else's company for 25 years and she still is like, well, I don't know. It wasn't exactly the size. Whereas like my male buyers, I'll get a new grad with his bachelor's, never worked a day in his life. He's like, I'm going to buy a $50 million company tomorrow. So I think that's the biggest difference. Um,

And so I get really excited because the female applicants that I do get are typically extremely qualified. And I get really excited to kind of see their success. I think Mills, I think she just said we're totally unqualified for our jobs. You are. And I think that I actually told my last call that I was like, I got to get on this call with this horribly unqualified people that are going to start play before I even dial in. It's going to suck. Yeah.

Well, I like having Chelsea here. This is fun. Yeah, I knew this was coming. Heather, we were talking about, I know you just jumped on. We were talking about gender dynamics when it comes, because we were talking about Jackie who sent us this listing. We were talking about gender dynamics between male and female buyers. Interesting topic. Yeah, and I think a lot of what you're talking about, Chelsea, where

And this is stereotypical, but a lot of times women don't think they're ready for stuff or are apologetic about their qualifications. Like that happens in job applications and everything, right? Where it's just like, there's something we men have screwed up in our society that causes women to do that. Y'all suck. I think it's honestly not your fault. That's how we're socialized, right? But I would get these female applicants that have run global divisions, run companies, and it's like,

Yeah, I would love for more females to own companies. I think that they're highly qualified and especially those of us that come out of corporate America and are somewhat limited and, you know, being in like a male dominated space or even just a traditional workforce, right, where men are promoted over qualified females. It gives us an opportunity to take control over our, you know, what we're capable of and to give opportunities to others by building a culture that promotes everyone. Yeah.

I don't want to sound too diverse, supportive here on this podcast, but you know what I mean? I support everyone regardless of anything. I think that's okay. Chelsea said everyone should buy a business. There should be no employees left. It's just all business owners, no employees. Which is so funny because, so I'm doing office hours tomorrow because I do think that everyone is being told like everyone go buy businesses and somehow it's

working in corporate has become like the enemy of good. It's like corporate America is beautiful. Like there are some people y'all should be workers in small businesses and large companies. Like there's no risk, like, or there's no shame. Right. And just working for someone else. It's not as glamorous as everyone's making it out to be. And I like what I came on. Michael was giving my meals a hard time about the dynamics, but

Right. The human capital dynamics, we'll say in a nice way of owning a small business. And it's not as glamorous as everybody's making it sound right. There's still challenges and hurdles. And some people should just stay in corporate America. Some people should own businesses. I support both paths. Sometimes you catch roofs on fire, which happens. Yeah.

On that note, let me pitch you on this deal that we actually have submitted to us. Let's talk about a business that isn't roofing related. Roofing related. And because it's Ladies' Day here on the podcast...

Presented to us by a lady, a female broker, Jackie Hirsch from Twitter. So pretty awesome. Heather, have you run across her? Oh yeah. I met Jackie in person. I've known her for a long time. I closed a deal with her way back when I was at Live Oak and I met her at SM Bash a few weeks ago. So it was great to meet her in person finally. She's amazing. I met her last May actually.

Let me pitch you guys on this deal. And then Jackie said she wants us to be extra mean. No, I'm just kidding. I can't wait. I can't say that. Okay. So it is a natural products retail and distribution company in Orlando, Florida. So kind of one strike against it already. Purchase price, $6.3 million. It's a wholesaler, distributor, and retailer of natural products and accessories located in Central Florida.

They have been in business for decades, and it is a force in Central Florida. They have a full management team in place to oversee staff and continue the trajectory of growth. The seller works 10 hours per week, and this business can be taken to the next level. Accounting is done professionally, and all computer software and business systems have created a platform which can be expanded even further locally as well as nationally. They have exceptional records and have been pre-qualified by a lender.

I pause at these moments, Chelsea, just to see what Heather's face looks like. Jackie and I will have to talk about this SBA pre-qualified thing. Heather gives the same look, Mills, as kind of like when my wife catches me finishing off an entire gallon of ice cream on a Friday night. You're like mid-bite. It's just like, yeah, that's Heather's look when we get the pre-qualified thing.

All right. Year-end 2024 are completed. Full management team is in place. Must speak with potential buyers and have bio and financial statement with NDA on file before receiving the SIM. I love that. I love that. Very qualified. So established in 1999. They have a full team in place. Owner will your transition. Located in Orlando, Florida. Includes $275,000 of inventory. And the SBA financing is available. So data-wise...

They have basically the P&L, tax return, tax return, and statement. Okay, so they give us three years of financials here. Gross revenue is pretty steady around $10.5 million. COGS is $4 million, $4.5, $4.7 million on average. They are spending $5.9 million a year, plus or minus, on expenses. So that means the discretionary earnings from this business is $1.4 million, $1.5 million on average per year.

for the last three years. And the purchase price is $6.3 million. So they're charging, what is that? That's four and a half times. Is that right, Mills? Bill GPT is not here today, so I can't ask him. He usually does the math. So about four and a half times discretionary earnings for a purchase price of $6.3 million. So Mills, do you know what these guys do? And when you say you don't, I'm going to ask Chelsea. I don't. Natural products, they're a wholesaler.

distributor and retailer. So they're not manufacturing any natural products, but it's natural products and accessories. Do you think that there's a chance that this is like a CBD product and they're just not saying it? Is that natural? The sun, the picture on this teaser is just this amazing pink sunset in Florida. Like a hallucination is what you're saying. Yeah. Yeah.

So maybe, yeah, maybe it's like, you know, psychedelic. I don't know. I mean, this could be, this could be. Although for the record, that would not be eligible for SBA financing to be clear. No, it's not. So I feel like that, that's a clue. Good, good. Thank you. So it could be like what Bill calls lotions and potions, right? This could be a skincare product. It could be a haircare product. It could be, you know, I don't know. There's a full range of what natural products could be. Maybe.

Maybe it's like, okay. So ironically I grew up in central Florida outside of Orlando living on a lake that looked a lot like this. Does your family own an actual products retailer that has about 10 million in revenue? No, but I feel like I know the company because it was a distributor and a retailer, not a wholesaler thing. I could see how it would work, but like in my mind, I guess I'm trying to figure out, is this an actual product company? Because the way they're pitching it,

They, there's a million things going on in this listing Jackie I love you. And so I think that it's a product company, but maybe they actually it's just a license they have carry a license for a specific product because I doubt they're actually like you said not manufacturing it.

So I wonder if there's IP involved. Like most lotions and potions companies don't make and mix their own stuff. They contract manufacturer with somebody who has a certified facility and, you know, has all the testing and the clearances and the compliance to mix up raw ingredients and put them in small packages, small bottles and containers.

So if the inputs are domestic or imported kind of matters right now, right? Correct. Yeah. So, but since we can't, we're not sure what they are. I don't know. I always think of something in Florida as being something, well, that might be a hub for where imports are coming in. And so that, you know, it might be a product that is imported. So I would really want to know that, I guess, first off. It feels like it has pretty decent margins, right?

And the headline says retail and distribution. So is it more retail and a little bit of distribution or is it the other way around? And, you know, that would sort of inform us a little bit on, you know, why the margins are so good. I also am mindful of the fact that they don't mention e-commerce on this. So it is not a predominantly online business.

They have a retail, at least one retail storefront, but we don't know the dispersion of their revenue across the kind of wholesale distribution retail channels. Okay.

Okay, so this is crazy. And I'm not going to say that this is this business, but my brain keeps going to growing up. There was a retailer, one retailer that sold natural products for horses. That would be awesome. I would love this business. And Heather, sorry. I would love this business. I'm starting to like it. But it was like they had all of the horse care products. It was all natural products.

They had a giant like pole bar. I grew up in like not Orlando, like, you know, but they had like a giant pole barn that you would go to to buy like this. And they did wholesale. I don't know about the distributor thing, but they did the retail and the wholesale piece. And so is it I doubt that it's pet related or animal related because that's normally a selling point to like an evergreen market versus a trendy market. And I feel like she would have listed that as a because that's a selling point. Yeah.

But I'm curious, I guess, to see like, is there IP involved or is this just a pass through kind of, they have like a license agreement or something. I also am curious because the discretionary earnings, the expenses are going up while their revenue is going down, the COGS are going down, but I don't feel like it's as representative as the revenue. Like as a, you know, as the revenue, it seems like it's disproportionately changing. And so I'm just curious if like,

are they hiring and scaling because they know they're exiting and that's why the discretionary earnings has gone down the last couple of years and the expenses have gone up because it's introduced another 1.3 million in expenses for a very similar level of revenue. And a lot of times you do see that, right? They'll hire, they'll staff up so that the business is more transferable. But I'm just curious if it's somehow related to economic growth.

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This all kind of comes down to what is the natural product? I mean, it could be so many things. If it's weed, to your point, Mills, that's like one thing. If it's horse vitamins, that's another thing. If it's something they're importing from China, that's another thing. If it's made, if they have some sort of exclusive license to it.

So from a number standpoint. I feel like if she would have told us what it was, it would have been so obvious what this business was, right? Correct. Probably. Correct. She said it's a forest in central Florida. The other thing that I really like here, which we have a lot of lab members that have pivoted in this space. So we get a lot of – like over half of our members have engineering degrees, which is super funny. Everybody always thinks MBAs. Nope, it's an engineering degree for the acquisition lab. But it says they have accounting. It's done professionally. And then –

And all computer software and business systems have created a platform which could be expanded even further locally as well as nationally. So because SaaS is hard in this space because the economics don't really support acquisition entrepreneurs buying profitable SaaS companies, we'll have software engineers buy companies like this where there's a software component that they can then spin out as a separate product.

And then they'll exit the brick and mortar and they'll keep the SAS product. And so I like that this has that pitch almost built into it to say like, hey, there's this other revenue piece if you know how to do it well. And we have a lot of lab members who do. And so this is the type of business that is really attractive to them.

in that regard. You got to like the numbers. It's very metronomic. It's like, "Hey, how much did you make last year?" Somewhere between 1.4 and 1.6 million. "Did you do that for the last three years?" "Yes." Fantastic.

Like you got to like that aspect of it if you're a buyer here. I like the stability, right? Like it's highly desirable. It's in a earnings level that so many people are targeting that unfortunately, at least in the lab, and I probably look at 40 deals like in a week's time, which is insane. But

Very rarely do I see this level of performance sustained year over year. Way too often it's a price tag like this. The last one I saw was $7 million and it was one year of $1.4 million earnings. And then the prior year was like $400,000 and the year before that was like $200,000. And so to have this level of stability I think is actually really nice because

I'm dying to know what the products are and if there's IP value in it. I like the software kind of extra piece. I like that there's a management team in place. I always like, I love you, Jackie. I don't mean this in any negative way, but I really love it when it's like owner is willing to transition on listings. Yeah.

Where I'm like, well, yeah. What else do you think they're going to do? Just keep working for free? Like, I want one to be like, they are unwilling to talk to you at all. Like, right? Like, yes. And I, for the purpose of education, which is what this podcast is meant to do, is like, the owner transitioning is part of what you're paying for. Like, they can't not do that part. It's not, that's not up for negotiation. The length of time is, but like, yes, they have to be willing to transition or you're not giving them any money.

And I'm hoping they're retiring as the reason for selling. I don't think she says here, but they're only working 10 hours a week, making a million four. I don't know if I would be selling.

If I was only working 10 hours a week and I could make that kind of money. And I tell members not to get too, not to get too hung up on why. Right. Cause like there's a million reasons somebody could be wanting from a cycle psychology perspective could be wanting to exit. It's like, sometimes you just don't have the mental bandwidth anymore to even think about something, even if it is only 10 hours of your time. Um,

but I'm with you. Like if I could work 10 hours a time and make 1.6 million, you're going to pry it out of my dead cold hands. Yeah. So there was a good discussion about this on Twitter and to push back a little bit on that, there are reasons to sell that are non-monetary in situations like that. And one of them is psychological. Correct. And I've seen folks and like, I'm here, right? Like you, you,

you, even if there's, you're only working 10 hours a week, Clinton Fiore had a really good point where he said, a lot of times you're an owner and you may be only working 10 hours a week, but it's taking 110% of your emotional energy. And you're, you have this sense of responsibility about what's going on. And I think that's right on the money, right? So there's,

There's reasons to sell where somebody's saying I'm only working 10 hours a week and I'm making a metric ton of money. There's good reasons for that, my opinion. I know people hate on those sellers, but having been one, I'm like, it makes sense sometimes. I agree. I agree. I will say, this jumped out at me when you were reading it out, but this little paragraph at the bottom says,

where she's kind of fencing, you know, the buyer pool must speak with potential buyers and have bio and financial statement with NDA on file before receiving the SIM. I think some brokers, you know, kind of,

I don't know. Sometimes they miss the point. Like, and they, you know, I, when I was working in private equity, I would have certain brokers who would want like a copy of my driver's license. You know what I'm like, I promise it's not relevant. And I'm, you know, I'm not going to abscond, you know, with the business or something. Um,

But I like as a buyer, I like knowing that the business has not had all of their financial details just widely dispersed to anybody online who could e-sign an NDA. It gives me some comfort to know that the people who are actually reviewing the confidential information memorandum,

have been vetted, even if it's just a light vetting, just making sure that they're a real person, they're genuinely interested, that they have some means or experience. I think it's a little bit weird when a broker's like, we want to see proof of funds because if somebody has $6.3 million, they probably don't even want to liquid, they don't want to send you their financial state.

So I think she's approaching it the right way, and it's not tone deaf, but it's also appropriate for this size business to do some vetting. It's one of my favorite things.

just kind of little tells about how the broker and maybe even the business owner are approaching the sale process. Yeah. And Jackie was just honestly on X talking about somebody's intern submitting things for an NDA and she sniffed it out and wouldn't give them anything. So she does do a good job of vetting it out, like you said, making sure it's a real person. And that is important. Yeah. For all parties. Yeah.

All the buyers, you know, should feel better about working with a broker that does this right. Well, I think that like one of our biggest struggles in the lab and for our lab members is people want to know high quality brokers that they can work with. Right. There's a vast majority. It's a pendulum spectrum of brokers.

The quality of brokers out there. And Jackie is one of them. Like when her and I first met, she's like, I don't need your buyers. Like I don't, I have, I bet mine. I don't need more. And that's the kind of broker that you want. Right. Because she's being very picky and,

And so I trust the quality of her listings a thousand times more than I trust, you know, I won't name any, but like other brokerages. Right. So I, I guess there's part of me that wishes she, the only like maybe critique I would have for this is I wish there was a little bit more info about what they did.

But I also fully expect that if we sign the NDA and we got the info, there would be some aha moment where you go, oh, of course, you couldn't say, you know, horse related products or something because you don't want to be too descriptive. And it's our favorite game to Google and see. So maybe maybe this was a test and we passed the test. Yeah, I was going to say she thwarted us. Yeah, yeah, I do. I do think it would be nice to know, like, personally, I would like to know, like,

How big are we talking? I don't need to know industry or anything that would make it identifiable, but I would like to know if there's IP involved. I would like to know if there's some kind of exclusive agreement, if it's a licensing thing. I would just like to know one more value lever about the business because it sounds very...

Jackie has the halo effect with me right now because I trust her as a human. But if this was done by a not, not her, like if I didn't know the broker, I would be like, what the hell is this?

Yeah, because as a buyer, you're looking at tons of things and you go, okay, it's probably going to take me multiple phone calls to get the SIM. And I don't know enough to like hook me. You know, if there was like, like you said, one more kind of level, one more value lever, that might hook me enough to go, okay, I can't wait to know more about this. At this point, it almost, unless I'm already doing this, it almost seems too generic to spend, you know, the extra time.

I, for this, because of the pattern, the performance, because of historical performance, I would click.

Because I would just want to know more. But I think because she's telling us to be brutal, natural products isn't enough for me because I feel like natural products can go one way or another. So I would like to know one thing to give me an inkling as to the quality of the business we're looking at, like something just to give me a little bit more. But I understand, you know, maybe why she didn't do it. And I think there's a hint there of saying it's a force.

that it would maybe be pretty identifiable if she went more specific, but it would be nice to see at least one more value lever. And hey, I'm going to give her credit. She said SBA financing available. So look, that's actually the right way to do it. Not SBA pre-qualified, but available. So, and I do think, I mean, this is a good size company, uh,

You know, an SBA loan is not going to be predicated on discretionary earnings. They're going to minus your salary, your replacement salary from that. So let's just say maybe it's a million two. We go from a million four to a million two. You can afford about three, three and a half turns of SBA leverage based on today's rates.

So you can get a four plus million dollar loan on this, but you know, the purchase price is 6.3. So you've got to, you've got to bridge the gap there with some equity, a fair amount of equity in a deal of this size and possibly a seller note. Well, and I noticed that the inventory was included because I was trying to do the math really fast because it seemed like a high multiple. And I was like, Oh, well, inventory is included, but that's not high enough to justify. And so then my brain was going towards working capital and,

Like there's got to be something to Heather's point to make this math work. I will say as a distributor, that seems like a low amount of inventory. I mean, that's kind of the role of distributors more times than not is they are acting as the, you know, the kind of clearing house of, of the inventory. So it's not sitting on your books. So I'm, I'm dying to know more. I'm thumbs up on this, Jackie, nice work. Very curious. Yeah.

And I can't wait for you to tell us on Twitter. She's like, you were all just totally wrong. It's none of those things.

I really, the thing that I, hopefully people will take away, especially folks coming out of SaaS is she did a beautiful job of giving a little nod that this is, there's like a, there's a diamond potentially buried here for folks that want SaaS because they're constantly looking for things that have proprietary software included that can be made into its own product. So like, to me, my SaaS buyers tend to have more capital to outlay. So like this would work for them because they typically are coming down with a much higher down payment. Yeah.

But I do like that she included that. So good job, Jackie. And you should call me because I probably have a buyer. Heather, Michael, thumbs up, thumbs down. I have to approve Jackie's deals, all of them. So yes, it's a funding secured from Heather. Full asking price. It's pre-approved. Look, I'm thumbs up on Jackie because she's really nice to be on the internet. And I think she's really sweet.

There's something that just doesn't match with all of this. Like there's my spidey sense is up and I usually just trust that. And I would probably just swipe right on this and not look at it. There's just something weird about it. The level of it is pink.

Is it the amount of pink in the teaser? It's very pink. Bro, it's ladies' day here at Acquisitions Anonymous. But I'm asking you, Michael. I'm asking a male. Is that why you don't like it? What's your problem, Michael? No, it's a combination of how much it's being asked for, the asking price, the fact the financials are really good, Jackie's a good broker, and then the size of it, and then how vague she's being in the teaser. Yeah.

And that she sent it to me. Like... So all these things together... There it is. There it is. There's just... No, it's one of many factors. But there's just something wrong here. So that's what I'm saying. That's all I'm saying. So one of you should get the simp. And then...

And then come back and tell me if my Spidey senses, I mean, this is just going to be something in a hundred. We'll get the SIM. And then in 120 days, we'll be like, Hey, surprise, Michael, we closed on it. And I'm the proud owner of wrinkle cream and like collagen and all kinds of lady things, which is why it's pink. That's why it's anti-aging. That's what the sunset is about. It's anti-aging products. I'm pro that. Well,

Well, Jackie, thank you. This was a great one and fostered some great conversation. Send us some more. Just give us a little bit more detail next time. Please do. Try to be a better host. All right. We'll see everybody next week. Thank you.