The Business Inquirer #171
Sharing a septic service company serving NM and CO, a fractional CFO firm that's fully remote, and a construction equipment supplier in SC.
Hello Friends!
In this week’s issue:
🏡 Main Street - 3 listings
⚒️ Tools & Resources
💡 How I Can Help
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🏡 Main Street
Construction Equipment Dealership- $7.5M
Established 2013
Based in Charleston, SC
Revenue: $3M
Profit: $600k
Margin: 20%
Multiple: 12.5x (includes real estate)
💬 Quick Take
This Charleston-based construction equipment dealership represents a stable foothold in a growing market with steady infrastructure development. The inclusion of 17.7 acres of owned real estate provides long-term value and flexibility for expansion or subleasing. While the adjusted multiple on cash flow becomes more reasonable after considering real estate, the valuation may still be elevated for this type of business. The consignment services and strong brand partnerships add appeal and opportunity to diversify revenue. However, achieving an ideal ROI will likely require strategic growth initiatives, such as rental services or expanded service contracts, to capitalize on the market’s growth trajectory.
✅ What I Like
Real Estate Advantage
The 17.7 acres provide ample storage and expansion space, potentially supporting rental income or further development down the line.
Established Market Presence
Over a decade in the business has cemented this dealership’s reputation, customer loyalty, and market familiarity.
Brand Relationships
Partnerships with leading brands like Caterpillar, John Deere, and Komatsu add credibility and draw repeat business from loyal customers.
Consignment Revenue
Offering consignment services diversifies revenue, reduces inventory risk, and provides a unique option that differentiates it from competitors.
Certified Dealer Benefits
Certifications with brands such as Easy Lawn and Reinco broaden the product offering, tapping into landscaping and agricultural equipment markets.
Growing Local Demand
Charleston’s booming construction market, supported by the Port of Charleston and job growth, suggests stable, long-term equipment demand.
Expansion Potential
Real estate ownership allows for flexibility in layout or adding revenue streams like equipment rental or repairs.
Supplier Relationships
Long-standing relationships with key suppliers help maintain consistent inventory and favorable terms, which can be essential in high-demand periods.
❓ Concerns
High Asking Price
Even with real estate included, the valuation of the business may be elevated. A proper real estate appraisal would be needed to determine the right multiple.
Small Staff Size
With only three employees, scaling operations or adding new services could require immediate workforce expansion and training.
Economic Sensitivity
Construction equipment demand can vary with economic conditions, posing potential risks during downturns or cuts in infrastructure funding.
Inventory Management
Carrying a broad inventory of high-value equipment requires significant working capital and may limit cash flow flexibility.
Regionally Confined
The business currently serves a single market, potentially limiting growth without regional expansion or mobile services.
Rental Services Lacking
The absence of established rental options means a missed opportunity for recurring revenue, which is common in the equipment sector.
Cyclic Industry
Being in a capital-intensive, cyclical industry can create unpredictable cash flow, especially in periods of reduced construction activity.
💼 Due Diligence Questions
Real Estate Valuation: Can we confirm the market valuation of the 17.7-acre property? Understanding the real estate’s market value will help assess the overall deal structure.
Supplier Stability: Are there long-term supplier agreements in place? Continuity in supply is crucial for maintaining inventory and customer satisfaction.
Workforce Requirements: What roles do current employees fulfill, and will additional hires be necessary to expand services like rentals or maintenance?
Revenue Mix: What portion of revenue is derived from consignment services, and are there any high-margin service offerings?
Inventory Turnover: What is the historical turnover rate for inventory, and how does it compare to industry benchmarks?
Equipment Conditions: What is the condition and remaining lifespan of current inventory? This impacts potential resale value and necessary reinvestment.
Client Base: Are there any large, single clients or industries that disproportionately impact revenue?
Rental Market Potential: Is there a demand analysis available for rental services in Charleston, and what would be required to implement it?
Growth Strategy of Previous Owner: What growth tactics has the current owner pursued, and what were the outcomes?
Financial Stability: Are three years of financials available to verify cash flow consistency and identify any seasonal fluctuations?
🚀 Growth Levers
Introduce Rental Services: Adding rental options could generate recurring revenue and attract smaller contractors, capturing a larger share of the equipment market.
Develop Maintenance Packages: Launch service and maintenance contracts for existing customers, creating a steady revenue stream and enhancing customer loyalty.
Target Adjacent Regions: Expanding into nearby markets in South Carolina would grow the customer base and diversify revenue sources.
Digital Marketing Expansion: An improved digital presence, including local SEO and paid advertising, would drive more leads and improve customer acquisition.
Flexible Financing Options: Offering financing for equipment purchases could appeal to budget-conscious buyers and drive higher transaction volumes.
Leverage Real Estate: Consider subleasing part of the 17.7-acre property or developing storage facilities, adding a passive income source.
Focus on Service Training: Invest in staff training to improve customer service and differentiate the business from competitors based on service quality.
Consignment Program Growth: Expanding consignment offerings could attract clients looking to sell equipment with minimal commitment, generating additional revenue without heavy upfront costs.
Partnerships and Networking: Build a referral network with local contractors and construction firms, generating recurring business and solidifying market presence.
🙋🏻♂️ The Buyer
Experience in Construction or Equipment Sales: A background in heavy equipment or construction would enable the buyer to understand the market and client needs effectively.
Growth-Minded Approach: The ideal buyer should have an appetite for growth, willing to implement and manage rental services, maintenance packages, and regional expansion.
Operational Savvy: Familiarity with inventory-heavy businesses would be beneficial to streamline stock management and optimize space on the 17.7-acre property.
Marketing Expertise: A background in digital and local marketing would support lead generation, client acquisition, and branding efforts.
Relationship Building Skills: The ability to foster strong supplier and customer relationships will be essential to maintain inventory flow and drive repeat business.
Real Estate Acumen: Knowledge of real estate development or leasing could maximize the value of the property and increase revenue potential from additional uses.
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Fractional CFO Firm - $3.5M
Launched in 2017
Fully remote; Includes Mexico-based professionals;
Revenue: $4M
Profit: $880k
Margin: 22%
Multiple: 4.0x
💬 Quick Take
This Fractional CFO firm presents a strong acquisition target in the high-value financial services space, with a profitable model and scalable nearshore workforce. Its unique position as a W2 employer with both U.S. and Mexico-based professionals offers cost efficiency without compromising on timezone alignment—a significant advantage over offshore alternatives. However, while the firm’s recurring revenue model and low owner involvement make it attractive, growth may be constrained without offering complementary services, such as tax preparation. With a capable team and streamlined operations, this firm is well-suited for a buyer seeking a low-hassle, high-margin business with substantial growth potential through service expansion.
✅ What I Like
Efficient Labor Cost Structure
Leveraging nearshore labor in Mexico allows for competitive pricing without sacrificing quality or client engagement, making the model cost-effective.
Recurring Revenue
The large, recurring monthly engagements ensure predictable revenue, making cash flow more reliable and attractive to potential buyers.
Streamlined Payments
All clients are on automatic payment systems, simplifying cash flow management and reducing administrative overhead.
Skilled and Stable Team
The firm’s 25 employees have high tenure, providing continuity and stability in service delivery, which is vital for maintaining client trust.
Professionalized Management
Over the past two years, the business has optimized management processes, ensuring that systems and teams operate efficiently.
Geographic Flexibility
As a fully remote firm, the business can serve clients across the U.S., increasing its market reach without the need for physical offices.
Untapped Service Demand
Many clients request CPA and income tax services, creating an easy entry point for expansion with high revenue potential.
Client Size and Loyalty
With an average annual client value of $36k, the firm’s client base consists of large accounts, likely to have higher retention rates and stability.
❓ Concerns
Limited Service Offering
The lack of CPA and tax services, despite client demand, may limit potential growth unless the buyer introduces these services.
Regulatory Challenges
Operating in two countries may require the buyer to navigate complex regulatory and compliance frameworks.
Client Churn Risk
High-revenue clients could pose a risk if one or more were to leave, affecting cash flow stability.
Competitive Market
The financial services sector is crowded, with many firms competing on price and service, especially in the fractional CFO space.
💼 Due Diligence Questions
Client Concentration: What percentage of revenue comes from the top 5 clients, and is there a dependency on any single client?
Service Expansion Feasibility: Have any efforts been made to evaluate the potential for offering CPA or tax services?
Employee Retention: What specific retention policies or incentives are in place for the tenured workforce?
Nearshore Compliance: What are the legal and regulatory obligations associated with employing nearshore labor in Mexico?
Pricing Strategy: How is pricing structured relative to the competition, and is there room to increase rates without client attrition?
Client Acquisition and Retention: What has been the historical client churn rate, and what channels are used to acquire new clients?
Cost Structure Breakdown: Could we review a breakdown of labor costs and other major expenses to assess margin improvement opportunities?
Revenue Growth Drivers: What were the primary growth drivers over the past two years, and how sustainable are they?
Sales and Marketing Channels: What are the primary channels for lead generation, and what is the client conversion rate from inquiries to long-term engagements?
Owner Transition Timeline: How long does the current owner plan to stay involved post-sale, if at all, and will they assist in client introductions? Why is the owner selling the business?
🚀 Growth Levers
Introduce CPA and Tax Services: Expanding into income tax services would meet existing client demand and could increase revenue per client significantly.
Expand Nearshore Hiring: Scaling up the nearshore workforce with careful management oversight could improve margins while maintaining client service quality.
Target High-Growth Clients: Develop a marketing strategy focused on acquiring clients in growth sectors, such as tech startups or e-commerce, which have high financial service needs.
Invest in Client Education: Providing financial education resources, such as webinars or guides, could deepen client relationships and increase service uptake.
Upsell Financial Planning Packages: Offer tiered service packages that include more comprehensive financial planning, appealing to clients seeking long-term stability.
Refine Digital Marketing: Optimize SEO and digital ad campaigns to increase visibility, targeting keywords specific to high-value financial services.
Leverage Client Testimonials: Use client testimonials and case studies to build credibility and attract new clients, especially for premium service packages.
Offer Advisory Retainers: Introduce strategic advisory services on a retainer basis, encouraging clients to rely on the firm for ongoing insights beyond traditional accounting.
Build a Partnership Network: Form alliances with CPA firms or tax service providers to create cross-referral opportunities, filling service gaps without new hires.
🙋🏻♂️ The Buyer
Financial Services Experience: A background in financial services, especially in accounting or CFO roles, would help the buyer understand client needs and service expectations.
Growth-Oriented Leader: Ideal for a buyer who can identify and implement new service lines like tax or consulting, driving additional revenue.
Nearshore Management Familiarity: Experience managing nearshore or remote teams would be beneficial, given the firm’s unique labor structure.
Marketing Savvy: A buyer with a solid understanding of digital marketing could help increase client acquisition through targeted campaigns.
Process Improvement Skills: The business has established processes, but a buyer with process optimization expertise could further refine efficiency.
Client Relationship Builder: Strong interpersonal skills will aid in maintaining client trust, especially during the ownership transition period.
Compliance Knowledge: Familiarity with cross-border employment regulations would be valuable for handling any compliance complexities in the U.S.-Mexico workforce.
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Septic Services Company in NM & CO - $2.2M
Founded in 1960
Revenue: $1.1M
Profit: $660k
Margin: 60%
Multiple: 3.3x
💬 Quick Take
This established septic services business with a 60% margin is a well-rounded acquisition target with a stable client base across New Mexico and parts of Colorado. Its profitability, geographic flexibility, and solid asset base make it an attractive proposition, especially for buyers seeking a home-based, relocatable operation. Although its growth trajectory could be accelerated by expanding service areas and commercial contracts, it currently relies heavily on the owner’s leadership. A well-structured transition plan, especially for the licensed employees, will be critical to maintaining operational continuity.
✅ What I Like
High Profit Margin
With a 60% margin, this business demonstrates impressive profitability, enhancing its appeal and making it well-positioned for strong cash flow.
Stable Growth
Consistent revenue growth at a 5.7% CAGR over two years indicates stable demand and reliable client retention, providing a solid revenue base.
Geographic Expansion Potential
The opportunity to expand further into New Mexico and additional counties in Colorado offers a clear growth path for increasing revenue.
Commercial Contracts
A mix of residential and commercial clients, including gas companies and hospitals, adds diversification and enhances revenue stability.
Asset-Heavy with Replacement Value
Key assets, including pump trucks and an excavator, have a replacement value of $450k, which is included in the purchase price.
Experienced Team
The team includes a licensed inspector and installer, which supports operational continuity and reduces immediate training needs for a new owner.
❓ Concerns
Owner-Dependent Operations
With the owner and spouse actively involved, some transition planning is essential to prevent client or employee turnover.
Seasonal Working Capital Variance
Working capital fluctuates significantly with higher needs in summer, which could affect cash flow during the off-season.
Aging Assets
Some vehicles date back to 2007, which may lead to additional maintenance costs or the need for replacement in the near future.
Limited Marketing Strategy
The business relies on organic growth and minimal marketing, potentially limiting client acquisition opportunities without a concerted effort.
Local Competition
Expansion into new counties may face local competition, requiring a clear differentiation strategy or price competitiveness.
Single Licensed Employee
With only one employee holding necessary licenses for inspections and installations, service continuity could be at risk if they leave.
Customer Concentration
The mix of residential and commercial clients is positive, but reliance on specific commercial contracts could be a risk if these clients change vendors.
💼 Due Diligence Questions
Client Breakdown: Can we get a detailed breakdown of revenue by client type (residential vs. commercial) to assess customer concentration and revenue diversity?
Service Coverage: Are there additional permits or licenses required for expanding into new counties or regions in New Mexico or Colorado?
Employee Retention: What is the likelihood of the licensed employee remaining post-sale, and are there incentives to ensure their commitment?
Asset Condition: Could we review maintenance records for the vehicles and equipment, especially older assets, to assess future capital expenditure needs?
Working Capital Needs: How does working capital vary seasonally, and is there an average buffer required to manage lower revenue in winter?
Contractual Agreements: Are any contracts with commercial clients long-term, or do they renew periodically? Understanding contract terms will clarify revenue predictability.
Competitive Landscape: Who are the main competitors in existing and potential expansion areas, and what differentiates this business from them?
Marketing and Lead Generation: What marketing strategies are currently in place, and how does the business attract new clients, especially in residential markets?
Owner Transition Plan: How long is the owner willing to stay on post-sale, and what level of support (e.g., consulting) is anticipated?
Growth History: What specific strategies were employed to achieve the 5.7% CAGR, and are these growth drivers sustainable moving forward?
🚀 Growth Levers
Expand Geographic Reach: Increasing service coverage to additional counties could tap into new customer bases and potentially grow revenue significantly.
Commercial Contract Focus: Targeting more commercial contracts, such as with gas stations and hospitals, would provide recurring revenue and smooth out cash flow fluctuations.
Implement Targeted Marketing: Developing a targeted digital marketing campaign, especially for residential customers, could increase brand awareness and lead generation.
Increase Online Presence: Building a user-friendly website with SEO and online booking options would streamline client acquisition and reduce reliance on organic referrals.
Introduce Service Packages: Offering bundled services, such as inspection plus regular pumping, would encourage repeat business and enhance revenue predictability.
Invest in Equipment Upgrades: Replacing or upgrading older vehicles and equipment could improve operational efficiency and potentially lower maintenance costs.
Hire Additional Licensed Personnel: Adding another licensed inspector and installer would alleviate dependency on a single licensed employee, supporting continuity and growth.
Focus on Customer Retention: Implementing a loyalty program or offering discounts for repeat clients could help maintain a stable residential client base.
🙋🏻♂️ The Buyer
Service Industry Experience: A background in service-based businesses, particularly in plumbing, maintenance, or waste management, would allow the buyer to understand customer needs and operational requirements.
Licensing Knowledge: Familiarity with licensing for septic or related services would benefit the buyer in ensuring compliance and smooth expansion.
People Management Skills: Strong leadership and team management abilities would be crucial, especially for retaining the existing team and navigating the owner transition.
Client Relationship Builder: Building strong client relationships, particularly with commercial accounts, would be valuable for maintaining and expanding contract work.
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⚒️Tools & Resources
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