In this episode, we reviewed a $4.5M plumbing and HVAC business with a strong focus on repair and replacement services in the Northeast US. With 1.4M EBITDA and 2,500 active accounts, it has a balanced revenue stream, recurring income, and no exposure to new construction. The big question is whether the impressive 33% margins are sustainable as the business scales.

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Acquisition Lab and their team have been longtime supporters of the pod.

Acquisition Lab exists to help people buy a business and navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close.

If you are serious about buying a business, check out acquisitionlab.com or email the Lab's director Chelsea Wood, chelsea@buythenbuild.com and mention us ;)

Business At A Glance
Revenue: $4.5M (2023)
EBITDA: $1.4M
Customer Base: 2,500 active accounts
Location: Northeast US
Revenue Mix: 60% plumbing, 40% HVAC
Team: 23 employees
Focus: Repair & replacement only
What We Thought
Customer Base Questions
John raised concerns about the definition of "active" accounts. If the 2,500 accounts are truly recent, it's impressive. Otherwise, it could indicate a weaker client base than advertised.

Multi-Trade Challenges
At $4M, managing both plumbing and HVAC might hurt focus. John thinks focusing on one service would improve margins.

Northeast Market Strength
The business benefits from higher ticket prices in the region due to hydronic heating systems, but unionization could pose a challenge depending on location.

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We found an interesting deal in episode 332—a theatrical supply and construction company based in Wisconsin that’s been around since 1981. It’s a niche player in stage setup and lighting for venues like theaters, casinos, and schools. The company is projected to hit $28M in revenue for 2024 with $1.3M in EBITDA. The two brothers running it are looking to exit, though one may stay on for a transition.

Thanks to this week's sponsor:

Acquisition Lab and their team have been longtime supporters of the pod.

Acquisition Lab exists to help people buy a business and navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close.

If you are serious about buying a business, check out acquisitionlab.com or email the Lab's director Chelsea Wood, chelsea@buythenbuild.com and mention us ;)

At A Glance

• Business Type: Theatrical supply and construction
• Location: Wisconsin
• Revenue: $28M (2024 projected)
• EBITDA: $1.3M (2024 projected)
• Employees: 74
• Established: 1981
• Customer Base: Theaters, casinos, schools, TV studios, and theme parks
• Owners: Two brothers, one ready to fully retire

What We Thought:

Red Flags

• Inconsistent EBITDA over the years—especially the 2020 peak during COVID.
• Margins are razor thin for a business with $28M revenue.
• Large employee headcount could be a drag on profitability.
• Owners possibly running personal expenses through the business.
• Inventory management could be difficult with old or obsolete equipment.

Green Flags

• Strong, diversified customer base, from casinos to schools and theme parks.
• The business is rebounding after COVID, with steady revenue projections.
• Potential for growth with AV companies needing high-end lighting and rigging.
• One owner is open to staying on for a smooth transition.

The Verdict

Michael likes the business and thinks it’s the right type of specialty contracting company, but there’s likely something odd under the hood. The inconsistencies in EBITDA and odd financial behavior raise red flags. Heather gives it a thumbs down, particularly from a lender's perspective, as the unpredictable margins and unclear financials would make financing a nightmare.

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In this week's episode of Acquisitions Anonymous, we’re looking at a content-based business listed on Quiet Light—a recipe site with six years of future content ready to go, pulling in over 50 million page views in the past year. Joining us today is Chelsea Wood from Acquisition Lab, who shares her expertise on the potential of this business.

What We Thought:

Strong Metrics but Lacks Clarity on Revenue Sources

Heather pointed out the lack of clarity about how the business earns its revenue. Is it primarily through ads, affiliate marketing, or a mix of both? Since the website is recipe-focused, it’s unclear if it relies on affiliate marketing tied to ingredients or if it’s purely ad-driven. This information would significantly influence how sustainable its income is, especially in a competitive content market.

Why Sell Now?

Chelsea voiced an unusual concern—why is the owner selling if the business is so profitable? With six years of content ready and such high margins, the site could continue to generate strong earnings without much effort. The skepticism here lies in whether there’s something beneath the surface that’s motivating the sale.

Chelsea was also wary of the asking price. A nearly 5x multiple is steep for a content-based business, especially in an environment where many such businesses are struggling. That said, the evergreen nature of recipes makes it a little more reliable than other types of content, like travel blogs.

Red Flags

• Unclear Revenue Streams: We don’t have a solid breakdown of where the revenue comes from, which is crucial for evaluating long-term viability.
• Potential Personality Reliance: If the founder's identity is tied to the brand, there could be a drop in engagement after the transition.
• High Asking Multiple: At 4.91x, the multiple feels high, particularly given that content-based businesses are generally valued lower.
• Why Sell Now? The timing of the sale is suspicious, considering the potential for continued earnings.

Green Flags

• Strong Engagement Metrics: 50M page views, a 44% email open rate, and massive social media following all point to a loyal audience.
• Evergreen Content: Recipes don’t go out of style, giving the site a steady, long-term value proposition.
• Six Years of Content: With 2,000 recipes ready to publish, a new owner has a major asset in pre-produced content.
• Owner’s Low Time Commitment: The current owner only works 4-5 hours per week, making it a semi-passive income opportunity.

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