$3.5M for a Dump Truck Fleet? Breaking Down This Deal
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My fear here is full-time realtor, part-time business broker is not understanding the way buyers are going to see this business and has set up a pretty big expectations gap between seller and eventual buyer.

It's a hard business to make any operational changes in because you don't have scale in order to really experiment with those changes. You could do well, but there's some fragility there for sure in terms of, you know, how companies can get in trouble really quickly. Acquisitions Anonymous. Another episode of Acquisitions Anonymous. We don't have 100% beer anymore. And thumbs down on just the plus inventory alone.

Welcome to Acquisitions Anonymous, the internet's number one podcast about buying and selling small businesses. And today, myself, Michael Girdley, Bill, and Mills went through something we've never done before, which is a dump truck company. And that is a dump truck company located in Phoenix. And this was one of the first times we did a deal that we dug into it. And at first glance, you're like, why does this suck? And then it got better. And so I hope you enjoy the episode. Here it is.

Hey, everybody. If you've listened to the show, you've probably heard us talk about franchises. While franchises can be a great path to business ownership for the right person, like there's a lot of pitfalls and it's important to be really careful as there are certainly good franchises to be in and bad franchises that you don't want to be in.

Connor Gross is a friend of the pod and a resident expert on franchises. And Connor not only owns and operates his portfolio of multiple franchises, but he's also a franchise consultant and helps others work through while picking the right franchise for them. So as he's sponsoring today's episode, everyone should totally click in the show notes below to join Connor's newsletter and attend one of his gateway to franchise ownership workshops. If you're ready to move and move quickly, schedule a call with Connor and his team today. I brought a dumb truck deal.

I want to do the dump truck deal. I like big machines. So we're not going to say I like big dumps, but I cannot lie. Mills. I cannot lie. We're starting. We're starting. How's everybody doing? I'm good. I'm good. Heather's not here for 10 seconds and we're making dump truck.

We do need adult supervision. There's no doubt about that. Yeah. Me and Chelsea recorded one the other day. I was like, we'll see where this goes. We have no supervision. Sometimes those are the best ones. Yeah. She's great. I don't know if you guys saw it, but Mike Botkin wrote an entire essay about the episode you did for the lawn care and maintenance one. Yeah. It was me and Heather Solo, lawn care and maintenance. And I was hoping Mike would listen to it.

For those that don't know, Mike is probably the most experienced lawn care roll-up operator in the country and has been very successful doing that and has become a friend of the pod. And he, we did a couple episodes ago was in a landscaping deal and Mike wrote on Twitter or X a big...

a big breakdown of the things we got right and a couple of things that new buyers miss on landscape deals. So go check that out. I think we probably retweeted it on our Twitter, ACQU Anon. It's there. I mean, the two things that were stunning to me

One is he wrote basically a glowing review of you guys breaking down that business and knowing very, I mean, neither one of you is very experienced. I know Heather's underwritten some of them, but like, that's awesome. When you guys come in cold and somebody who knows the space is like, yeah, that was pretty good. And so, hey, kudos to you guys. So it was a good episode, mostly probably because I wasn't there. But then number two, I think it was impressive when he's like, okay, here's how it works with lawnmowers. Like,

At past 2000 hours, like you're on borrowed time, you might as well just write the whole thing off and like, forget about it. I was like, holy crap, that is a specific industry piece of knowledge that is part of this. I think a lot of what we talk about, like if you're going to try to go in a new industry, like go talk to a lot of people who know it very well and have them educate you. And that was just super cool when I read it.

Yeah, I mean, one of the benefits of if you're a searcher, raising capital from people who have been in your industry for a little while, they can not only help you diligence it, but then once you get into it, just skip stubbing your toe so many times if you have somebody who's been there. A million percent. All right, well, now for the world's worst segue, let me tell you about this dump truck company that I found on BizBuySell. Don't you love the title of this? There's no punctuation in the title. No.

I had to read it like four times to go, okay, what is this? This is maybe like the perfect, the Super Bowl for this particular deal for us because there are so many dump truck jokes, back that truck up jokes that are going to happen here. And the other not here, I don't know where it's going to go. So we'll get there. So let me read this to you guys and then let's figure it out. So the title is,

is uh driving me crazy because it has terrible punctuation but it says 1.15 million dollar net seven unit dump truck company located in phoenix arizona maricopa county and then they have a picture of mills this is a dump truck it's a brand new dump truck brand new this is like a stock photo it's a clean dump truck is what it is and that's how you know what are all these extra wheels on it

You see how there's like six, there looks like there's three big wheels on this side and then there's four like random other smaller wheels that are not touching the ground. Do you know what those are? Yeah, you've got to have that for stability and load. So this is an empty dump truck right now. But also that whole back...

This actually looks like a roll-off container more than a dump, but this is dump trucks. There are some dump trucks that you can operate with a Class B CDL. This is one that I'm 99% sure would require a Class A CDL. And the Class A is the one that's harder to get. Harder to get. The people that drive 18-wheelers have? Correct. Yep. And this is an individual cab with what looks like a roll-off container on the back because of some of that rigging.

100%. Okay. Well, that is a Gore. It looks like a Freightliner or something like that. A big cab, heavy duty dump trucks is what at least this picture is. And this doesn't look like a stock photo. This probably looks like one of their trucks. I think it's too new. I think this is like...

Somebody, the broker, Googled dump trucks, and this is like probably, it looks like they took a picture of a picture of, like we get all these things in the mail that's like buying equipment, you know, kind of used or slightly used or new from these secondhand dealers. That's kind of what it looks like to me.

Got it. Okay. Well, then we'll figure it out here. All right. Asking price is $3.5 million. Cash flow is $1.15 million. So it runs about 30% profit margin in terms of cash flow. Gross revenue is...

Oh, no, I'm sorry. 50%. Yeah. Over 60% gross cash flow for gross revenue is 2.1 million. And they have furnitures, fixtures and equipment of 1.7 million. So I assume, Bill, that is trucks, 1.7 million in trucks.

All right. Business description. This is an amazing net for a very rare opportunity. If you're looking for a strong dump truck company based out of Phoenix with consistent solid growth in volume year over year with a seven-truck fleet consisting of three simple 16 dump trucks and four simple 18 dump trucks,

that serve a solid and consistent clientele. The owner is very involved in the company and has drivers in place as well. The owner has created a very solid company that is ready to continue on its trajectory in more growth and expansion. The business has tons of potential for growth and adding even more trucks. The business also includes $1.7 million of value worth of trucks in the price. These businesses don't come up very often. Hurry up, this deal won't last, especially with all the assets and income and great price point."

It's located in Phoenix, Arizona. All the equipment is included in the asking price. So, Bill, if my math is right here, they have $1.7 million worth of trucks, and they're asking $3.5 million for the business? Which means $1.8 million for the business, $1.7 million for the trucks. Worth of trucks. All right. Supposedly, assuming that the depreciated value, which it never is. Yeah. Yeah.

plus deferred maintenance, plus all that kind of stuff. So we'll get to that. The trucks are parked at a rented lot. There's tons of room for growth by adding more trucks. The seller will give you up to a month of training, two weeks in person and two weeks by phone and email. And the reason for selling is retiring. And it is listed by Mike Darmo, who is part of American Realty Brokers, which is interesting. I wonder if Mike is also mostly a business broker. Yeah, no, it looks like all real estate. Yeah.

Yeah, that's what they do. So they do all kinds of real estate and stuff like that. He's been a realtor and business worker for over 18 years, and he's not wearing a hat. Looks like a sweet guy. And he's bald. So I like this guy already. Cool. So Mills, what do these guys do? What is the business exactly? Sorry, I went down a Mike Darma rabbit hole. I think that these are like contract haulers.

If you run a sand mine, these are the guys who are coming to pick up the sand and take it to a job site. The site work contractor, if they're big enough, probably has their own fleet of trucks, but these are trucks that are available for hire.

They probably deal in aggregate. They probably work with concrete companies, DOT contractors, roadwork contractors, and construction in general. We've talked in the past about roll-off containers, which is, hey, I need a 30-yard dumpster dropped at my job site and come pick it up in a week when it's full of stuff. I don't think they're doing that. I think they're hauling

probably aggregate sand, fill dirt, gravel, those kind of things in between point A and point B. They don't own the contents that go in the truck. They're just moving them from point A to point B. So, I mean, is it recurring revenue here or they're just doing per project stuff? It's probably per project, but like,

I think we've talked about this maybe with Port-A-Johns or with dumpsters. We don't have a contract with a provider, but as long as they're doing a good job, their phone rings off the hook from us. As long as these guys are doing a good job, as the buyer, you would never get inside the business or sign the NDA and get the SIM and see recurring revenue contracts. But they're probably doing work for the same company

you know, 20 people week in and week out. And as long as you don't mess up, which messing up is I will be at your job site at 7 a.m. with the load of gravel. As long as you don't mess that deliverable up, you're probably OK. But trucks break down. Drivers don't show up. Drivers show up drunk and you can't put them behind the cab, all those kind of things.

And Bill, to quote one of your lines, if you buy this business, you're definitely driving one of these trucks at least a couple of days a year. Well, for sure. It's in the description. It says buyer or seller is heavily involved in the business. I see a lot of guys who own businesses like this and they get to a scale where they run, they're driving and running the whole business from their cell phone in the cab as they're driving one of these trucks all the time. Like I've dealt with

I've dealt with tons of kind of just standard like freight haulers and stuff like that. A lot of Mexican-American immigrants here in San Antonio are that way. They barely speak any English, but they're just out there hustling and they have five trucks that they've bought over time and they're driving one of them. And their cousin's driving another one, their son's driving another one. It's pretty impressive. I mean, so I always say like in any business that you buy, like how many call-in six are you away from driving a truck, plunging a toilet, flipping a burger, whatever it might be?

That being said, I don't know. I would drive one of these trucks once a month. Seems kind of fun. Dump trucks are like every kid's dream. You load it up with aggregate. You dump it in a giant pile. It's fantastic. One time early in my career, I went out to West Texas. And I was talking to a guy trying to do a deal on some property. And their day job was to drive those big –

farm combines around and in the winter in the summer they would do it and they'd rent them out and go drive and work 24 hours a day like threshing wheat and all that kind of stuff in west texas but in the winter they would uh drive them around as snow plows and plow plow the snow and so you know i'm hanging out with these guys and trying to do a deal on their property and stuff for the day and they let me drive the giant combine and it was super cool so fun

So anyway, that's just the whole story. I wish I had a picture of me driving this. I think a long time ago on the show, Michael, didn't we do a business that was an entertainment situation where you could go and like drive and smash things? You could drive huge construction equipment and like smash cars and stuff? Yeah. Such a...

That's one of those things that just seems like such a good business. But like, how often are people driving two hours away from the Dallas Metroplex to go do that and pay, you know, hundreds of bucks in diesel fuel to go smash cars and stuff. But what's crazy is these trucks. So they say there's seven of them.

These trucks run about $300,000. So, you know, one of the things that I see a lot of times in this type of, it's not quite for sale by owner, but it probably turns into for sale by owner with this real estate broker involved, um,

is a lot of times a seller will say, hey, I have $2 million worth of inventory. But you get in and you're like, oh, well, half the inventory is completely obsolete or stale, or I'll never be able to sell it. Like, I won't be able to move it. They'll do the same thing with assets a lot of times. Like, hey, we have $1.7 million worth of assets. That might be cost. That might be retail or replacement value, not necessarily the depreciated value. So,

I think that they're kind of, in this case, seven trucks times about $300,000.

And that's probably the maybe replacement value, depending on how many miles are on these things, if a new one's $300,000. But you kind of have to frame it a little bit because it's not necessarily, you can't just liquidate these trucks for $1.7 million. How are these guys so profitable? It says here they're bringing in $2.1 million in revenue, and the owner claims to be taking home almost 60% of that in cash a year. Yeah.

Does that seem off to you guys? The biggest variable on this is do they own the trucks or lease them? And then if they own them, is there any financing in place? In this type of business at this size, it's not inconceivable that the owner would have just paid cash for the trucks along and along. And if there's no debt service involved,

you have a ton of insurance costs, you have a ton of fuel costs, and you're paying drivers probably, I don't know, in this market, you might be paying $40 an hour or $45 an hour for their time. But as a new buyer, if you come in,

The next truck you buy, you're probably not shelling out $300,000 in cash. And so the whole balance sheet is going to shift, especially the efficiency of those assets. Yeah, the pro forma balance sheet post-close is very different than the pre-close balance sheet. So you've got to totally remodel the cash flow. And I guess...

I mean, always with this stuff, like how old these trucks are, how deferred the maintenance is. I mean, you may be buying trucks that are barely hanging together and at their end of life. Yeah, and you got to think, this is not accounting for the maintenance capex. If you have seven trucks, these trucks don't last seven years. But let's just say for easy math, they last seven years. You're spending $300,000 a year replacing one truck.

And you're having to do that every single year just to maintain what you have, not even including growth. So that cash flow immediately goes from 1.15 to 850,000.

just for maintenance purposes, just like keeping up with the equipment. And that's not including, you know, maybe the mechanic and all the other stuff that goes along with it. So I want to highlight, I'm sorry to bag on our broker here who looks very nice. But this guy is a realtor. And this highlights why you should not hire a realtor to sell your business. Because a good business broker, like what I'm afraid I'm seeing here,

is you've got a intermediary that does not understand how to cast the business's financials in a way that a buyer is going to understand.

So what's going to happen is the intermediary has probably made promises to the seller about sort of valuation on the business and multiple on cash flow, et cetera. Buyer's going to come in and see this very, very differently because all the things you guys just mentioned, all the deferred capex, et cetera. And he's not going to get bids for 3.5. He's going to get bids for 1.7, right? And it's going to blow up the deal entirely because expectations were so far off from the get-go.

And this just underscores the importance of having a good intermediary who understands your category of business and who can give you a good estimate of what it is actually worth based on how buyers are going to see it. And my fear here is no.

Hey everybody, if you've listened to the show, you've probably heard us talk about franchises. While franchises can be a great path to business ownership for the right person, there's a lot of pitfalls and it's important to be really careful as there are certainly good franchises to be in and bad franchises that you don't want to be in.

Connor Gross is a friend of the pod and a resident expert on franchises. And Connor not only owns and operates his portfolio of multiple franchises, but he's also a franchise consultant and helps others work through while picking the right franchise for them. So as he's sponsoring today's episode, everyone should totally click in the show notes below to join Connor's newsletter and attend one of his gateway to franchise ownership workshops. If you're ready to move and move quickly, schedule a call with Connor and his team today. Because think about it. If this were a real estate deal, right?

If there was a three and a half million dollar purchase price and the net operating income was one point one five million. This is a fantastic real estate deal, which is why every time he says net, meaning the net income of the business, it's in all caps like he's amazed. It looks like a screaming deal. Well, so what am I actually buying here? Like I'm buying some used trucks, some relationships with customers who hopefully call me the next time they have a job.

And some drivers that I have relationships with who hopefully show up next time I have some jobs, show up to work tomorrow. I mean, what else am I getting here? In a fixed asset intensive business like this, like the pendulum is pretty on par to say, what's the...

The replacement value of the assets is pretty close to the actual value of the business. Like it's probably slightly better than liquidation value because of the things that you're saying. But these are really, really hard businesses to make any changes in. Because if you have seven trucks and you come in and you just change, you know, the slightest thing, if you alienate three of your drivers, right?

That's like that's 40 percent of your revenue right there that is not billing out that day. It's just a it's a hard business to make any operational changes in because you don't have scale in order to really experiment with those changes. And because reliability is so important, right? Because as you mentioned earlier, Mills, you don't have contracts like you are maintaining your business because when the phone rings, you show up.

Because if you don't show up, they can't move their construction job forward and everybody is getting hurt. And then they get another bid and then you've lost the business forever. And this is really probably not bid type business. You know, this is, hey, I need a load of gravel picked up tomorrow morning or this afternoon. I need you to dump it tomorrow. What's the cost on that?

It's probably all done like from the owner's cell phone with this type of thing. His phone rings and he is a rainmaker. I mean, he gets things where people need them in a jam. But there's probably no like formal contracts. My guess is he has a stack of invoices on his desk that he always needs to send out. And he's probably really, really slow at billing. Or his wife's doing it. Yes. Yeah. Yeah.

So you think this is probably them delivering aggregate and stuff like that? And by that, I mean, gravel and fill and all that kind of stuff. Is that your thesis? Yeah. At least here in San Antonio, we get really cheap aggregate and really cheap concrete because there's limestone everywhere. And people are totally comfortable digging holes to dig it up. Like there's actually a hole like that way, like a mile where they dig it up. So it's super cheap and super easy to get.

But the way those guys work is you call up the aggregate, they call up like the people that dig it out of the ground and say, hey, I need this, right? I need concrete or I need gravel and I need it this size and I want it this consistency and I want it delivered here. And then what they actually do is they quote it. Then you say when you want it and where you want it. Then they call the trucking companies and they coordinate and build that into their price.

So is that what's happening here in Phoenix as well? Or is like San Antonio unique in terms of how that works? No, that is pretty typical at scale. So I, when I was doing M&A work, sold a business, it was a sand mining operation, but they had an affiliate. It was two brothers. One of them ran the sand mining operation and one of them ran the dump truck business. And

Most of the sand got hauled by their affiliate dump truck business, but you could also show up and pick up your own load of sand if you needed to. Most of the people who are buying this stuff, they don't want to deal with that. They want it to be kind of turnkey. It could be other things like mulch and stuff like that, but people aren't usually getting this much sand.

of a bolt good unless it's sand or aggregate or fill dirt or a commercial landscaping project or something. Yeah. Yeah. I knew a guy actually, and I don't know if he's still doing it, but he, he was trying to build a company and, but his side hustle was he would go find people that were, um,

wanting like extra fill right so fill is like just like clean dirt that you can use to go put into construction sites to build up a pad or whatever and then he would go find people who had he knew where all the construction sites were and he knew all the people who were doing construction and site work in san antonio and he would basically like go just he had formed like a brokerage to like

buy and sell Phil. And so he would go tell these people, they would call him and say, Hey, we have excess Phil. And he knew who needed Phil. And he would like call and make like 25% on the deal just by like coordinating the two of them over and over again.

So like whenever he needed money, he'd be like, yeah, I need a couple hundred grand for building my company. So I just went and brokered a few deals and now I'm back to building the company again. It was just a great business forming like a little fill brokerage. Cool. I love all those little side hustles. I think this – I think like if you are – if you're searching for a business to buy and you're close to this market, this would be an incredibly educational –

process to go through. To deal with a broker who maybe this isn't their full-time gig and to go have a site visit with this type of seller, you would learn so much. And there's so many businesses that

You will look at that bump into something like this or kind of run adjacent to it. If you're doing anything kind of, you know, construction infrastructure, you know, large scale maintenance like you're it would help you to understand this business from the ground up. But it's core. There's a reason this business is stupid cheap.

It's like it's well, it's not that I think it's it probably gets more expensive, the more due diligence you do, because the earnings are not actually one point one five. Yeah. You know, they're probably seven hundred and fifty thousand. So at a five times multiple, this is pretty expensive.

Then there is probably some weird stuff going on as well where guarantee like the guy has some hookup with a truck shop who's doing repairs for cash only. Or there's probably a lot of customers who are like, hey, can I just give you cash? Yeah. You know, instead. I guarantee the cash flow number that's listed right here is dang sure not what's showing up on some website.

1120 form 1120 in terms of the corporate reporting for this thing. And who knows the whole thing may be under some guy's name. Like he may not even have a corporation.

Maybe it's a proprietorship. But like that highlights, I think, both the risk and alpha of doing small business deals, right? Like, I don't think this is a bad business at all. Like, this is a hard business to buy. This is a hard business to get a transaction closed, to bridge the expectations gap between seller and buyer, to share risk in a way that is fair to you and fair to seller, right? And there's so much you have to agree on.

the condition of the assets, how we're going to share the risk, the purchase price, et cetera, et cetera, et cetera. It's hard to get this closed. But I don't hate this as a business, right? I mean, it's definitely leveraged to construction and growth in Maricopa County, Phoenix, Arizona. So you got to be comfortable with that. Like I'm sure if there's a big housing bust, this business does not do great, which is a little bit scary buying it with debt.

So like there's, I think there's like the cyclicality concerns, but like, I'm not worried that, you know, they're not going to have stuff to haul around, you know, longterm, you know, if this area is growing, which I think it is, this is, this is okay business to own. It's just a really hard business to buy. It's one of the great ways to just make a living if you're just willing to work. That's the thing. If you have the risk appetite for this and you're willing to roll up your sleeves and like maybe go get, I mean, I think you got to get your class a CDL if you don't have it. Um,

I mean, let's just say all in, right? Even after debt service obligations and like you shake all the kind of hair off this deal, if it's cash flowing half a million dollars a year and you buy it, right? Like that is you're clearing quite a bit of free cash flow. You're going to work for it, but like that's nothing to just, you know, schlub off.

The water I will throw on all of this is if you look at large companies in the United States, like big 50, $100 million a year or more companies, there are two types that go bankrupt on the regular.

in today's economy. One is trucking companies. They go bigger. The second one are general contractors and contractors, right? Those are the two that you see bankruptcies happen. And that is a sign that this is not an easy ticket, right? And I think back to Bill's point, why a business like this has a hard time transacting, because you could do well, but there's some fragility there for sure in terms of...

you know, how, how companies can get in trouble really quickly on that note. If you're also, by the way, I think this could be a good add on if you're already in dump trucks in Arizona, you know, pick up a few more trucks and a few more routes, you know, this is a great add on for some scale. If you're already doing trucking or, you know, maybe you're already in and around construction in this area makes a ton of sense.

Absolutely. All right. Well, uh, should we dump on the dump truck business now? Thumbs up, thumbs down bill. Uh,

I'm thumbs sideways on it. I mean, again, really hard to buy. But if you can buy it right, I don't hate this business. Trucking ain't going nowhere. I think you just got to be a good operator. So Mills? I'm thumbs up. I mean, I think you absolutely, if you're looking for a business to buy, especially if you're in the area, you sign an NDA. There may not, I mean, who knows? There may not even be an NDA. But you go get the SIM, you go meet with the seller. You'd learn a ton.

Does somebody want to channel our inner Heather? She'll hate this. She would say the assets are worth something from a lending perspective. On that note. All right, everybody. Thanks for being here this week. We will see you next week for another episode of Acquisitions Anonymous. And if you enjoyed this one or you know something about trucking, talk about it on social media. Tell us about it and do like Mike Botkin did and say we were smart, but then add some smartness to it. We would appreciate it. All right. See you next week.