The Opportunity

We have an opportunity to acquire 100% of a small plumbing service company in Arizona.

Basic Outline

$1.8 Million of revenue

$600,000 of net income

10 technicians

Market Signals

Most companies with $2M+ of cash flow are being swept up by private equity. This business is small enough that it’s “under the radar”. The right operator will need to roll up their sleeves and run this business full-time.

What We Like

The business is mostly service, which is a good business to be in.

Right now they’re making $180,000 per full-time technician. Based on our industry knowledge, that number should be closer to $250,000 per technician. So there is a meaningful growth opportunity to be at closer to $1.5M in cash flow by just raising the prices and training the staff.

This can be a good search fund deal.

The staff mostly have tenures of 5 years or more (reflecting a good work culture)

The business is in a fast-growing metro market. Even if you don’t do much to grow the business, this company will likely grow from the local demand as more people move to Phoenix.

Challenges We See

The business is operated and led by the current owner who wants to retire within a year. This means the buyer will need to find a Master Plumbing license to work under, or one of the staff will need to qualify for it.

For someone who doesn’t have plumbing experience, this could be a risky venture.

Potential Future Buyers

Private equity is currently paying 5x-8x for businesses with $2Million of cash flow and up. If your intention is to sell, this is a good market to look at.

We prefer to hold for the long term. If you run a good business in this market, you can pocket $1.5-2M in cash per year.

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