$11M Trailer Dealership: Great Business or Sketchy Add-Backs?

0:00Jack Sondheim:Acquisitions Anonymous, Internet's number one podcast about entrepreneurship through acquisition. The way we do it is by looking at one deal for sale each week in the episode. Today's deal, myself, Michael, and Heather went through a trailer dealership located in Missouri that had a huge cliffhanger at the end. So stick through the whole thing and you'll see where we ended up on it. It was pretty fascinating. Hope you enjoy it.

0:30David Barnett:Thumbs down on just the plus inventory.

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2:00Jack Sondheim:All right, Heather, I do apologize. Unlike Mills, I shaved off my beard. So I'm a disappointment to many, except for Mrs. Girdley. She doesn't like the beard.

2:12David Barnett:She likes it better this way. This is better.

2:15Jack Sondheim:According to her, I am not very smoochable if I have a beard. oh well that's true so yeah yeah mills how do you deal with the scratchiness of your beard for myself or for other people for other people it's not scratchy for me my kids are like oh ow it it hurts it tickles like no i think i've talked to my wife and kids about shaving it and they're like well we don't like i mean now i've had it for i don't know five or six years but um i'd never had a beard before that and now they're like please don't shave like it would be weird uh why why would it be weird yeah just because they've gotten so used to seeing me with it and i like i'm a creature of habit i wear the same like pants and shirt and boots like i just

3:01David Barnett:i don't mix it up that much i think i just saw a video online of of dads revealing their shaved face for the first time to little kids and little kids are just scared and wincing and so yeah i get

3:13Jack Sondheim:it it goes with construction too you know speaking of being scared and wincing i brought a deal from dealonomy uh that is a midwest trailer dealership can i uh can i pitch you on this and also it says good deals only so so yeah i want to i want to play a little game i'm not going to tell you why i picked this okay uh but i also will tell you i have not read the whole deal yet so So there you go. Well, today, actually, today, sorry, I'll give you a funny girdly anecdote. I've done this multiple times. I just spent 15 minutes on the previous call giving somebody a lecture about a business concept that comes out of a business book.

3:55Jack Sondheim:And then at the end of it, I go, and I haven't read the book, but I did watch a YouTube video on it. And I'm an expert.

4:03David Barnett:I'll do you one better, Michael. I hosted the book club with my friends last week, and I didn't read the book. Nice. It was kind of embarrassing.

4:15Jack Sondheim:My favorite example of this is, have you heard of the book Profit First? Yeah, yeah. Have you heard of this, Heather, or no? No. So basically, here's the idea of Profit First. The normal person goes out and says, how much revenue are we going to make this year? What's our goal for our revenue goal? And then builds your business top down. The last thing is you fill out kind of this profit number at the bottom. Yeah. So Profit First says, you as the owner should say, how much money do I want to make this year? What's my profit that I'm targeting for? What am I solving for in terms of my life? And you go build a business around that, right?

4:46Jack Sondheim:And you build your P &L the other way. So I've also not read this book, but it turns out that's the whole book.

4:54David Barnett:But you're an expert on it already. So that's good. I'm an expert.

4:56Jack Sondheim:This one, I didn't even watch the YouTube video. I just read the cover. And then I was like, what could this possibly mean? And then I confirmed it by asking Chad GPD. So that's the whole thing. Okay. Anyway, back to regularly scheduled. Midwest Trailer Dealership on Dealonomy. Good deals only. This is a new deal that is for sale. If you're on YouTube, you can see the shots here. They actually, Mills, these look like actual trailers. Yeah, these are utility trailers. Maybe there's a couple enclosed trailers in the back, but yeah, these are not semi-tractor trailers, but they're just like general utility trailers.

5:30Jack Sondheim:Like we use them in our business all the time. We got a dozen of them. So this is a Midwest Trailer Dealership. Price range between five and seven million, which is, I guess, a feature of Dealonomy, Heather. They only take deals with a price range they think will trade at. Is that accurate?

5:44David Barnett:I think so.

5:45Jack Sondheim:I think you're right. Run by our guest, Clint Fiori, in front of the pot. All right. Revenue is$11.4 million, and EBITDA is$354 ,000. Interesting. This long-established trailer dealership. And remember, the game we're playing today, guys, is why did Girdley decide to bring this deal? This long-established trailer dealership operates as a stable cash-flowing retail business with a strong reputation, meaningful on-hand inventory, and a diversified customer base. Across a multi-state region, the company's top customers represent only a small portion of total revenue, with the majority coming from a broad mix of contractors, dealers, individual buyers, and roofers from South Carolina.

6:30Jack Sondheim:Mills. Got it. Got it. Yeah. Nailed it. revenue streams include trailer and truck bed sales, in-house repair, and maintenance services. You can learn more about this business by clicking on the link. There's a steady flow of walk-in and scheduled customers, maintains inventory to meet customer demand quickly, and strategically located to serve a wide mid-rest customer base. And then you can click on the link to learn more about the business from this teaser. So I guess maybe we start with Heather. Do you have a good feeling for what these guys do?

7:00David Barnett:Yeah, I have looked at businesses like this before. We just call them commercial trailer dealerships. And there's different types of inventory they could have. I looked at one that also included horse trailers even in the inventory. It depends on where they're located, what kind of clientele they have. So I think it's just, you know, it's got probably some agreements, some dealership agreements with manufacturers for this particular geography. And, you know, they sell to businesses located in and around there. What is something I usually see with dealerships, anything from water sports, regular car dealerships, or even trailer dealerships, is that the inventory is usually on something called a flooring line of credit or inventory flooring line of credit where they pay some interest on it.

8:00David Barnett:They don't buy the inventory outright usually while it sits on their floor. They use a financing facility that comes from a specialty lender, not the typical SBA type of lender. And it has been a barrier in the deals I've seen for a new buyer because not only do you have to qualify for whatever financing you're going to use to buy the business, but you also have to qualify for that flooring line of credit or you won't be able to operate. And those lenders are really fussy in particular if you don't have industry experience, because you really do have to know how to manage what inventory you have on your showroom or your floor to make them satisfied and happy.

8:42David Barnett:So that's, I'm curious about that because otherwise the valuation doesn't make any sense unless they own this inventory. But usually when I see these, they don't own the inventory.

8:51Jack Sondheim:In the trailer market mills, and maybe you might know as well, Heather, is it like automobile or other dealerships where there's a handful of established brands that people go to? you know and in heavy equipment it's caterpillar and cat and all that kind of stuff um like what is what is the dynamic here or is it just much more kind of a red ocean of there's just like a bunch of brands that people are buying everything from johnny's homemade trailer to a big manufactured one the biggest name in the space is big techs and they have like kind of bright yellow lettering that stays on the trailer you know after you bought it they're i think the best at name recognition in like what is an insanely fragmented space.

9:36Jack Sondheim:I mean, this is, you know, everything from we have one, we actually have one, uh, we have a trailer. It's not really road safe all the time. So it's a, it's like a spare of a spare, but it was like a mobile home frame that got converted into a utility trailer. Like, so you have highly professionalized, highly standardized utility trailers that are very sophisticated and like very repeatable from unit to unit all the way through to like you have people who cut the bed off of a pickup truck and made it into a trailer and it's a very wide dispersion between them um the fragmentation aside you know these guys are not making anything here they might be doing like they say some you know repairs and maintenance to them, uh, which trailers break all the time.

10:27Jack Sondheim:Like if you're using it and, and you're doing it correctly, like you're wearing it out, you're going to break the screw jack on the front. The chains are going to, you know, break lights get broken all the time, all the time. And especially the wiring for the lights. The issue I have with this is that the majority of people just fix their own trailers. They don't take it back to the dealer to put like a light in. You just do it yourself. You get it off the shelf at Lowe's or Harbor Freight or something. you do it yourself. So I think that the thing that this business has going for it is these are heavy duty trailers that you cannot buy at Lowe's.

11:04Jack Sondheim:The trailers that are for sale in the parking lot of Lowe's are single axle. Like if you zoom in on this picture, Michael, they're all double axle, which means they're 7 ,000 pounds or over because it's usually 3 ,500 pounds per axle. These are heavy duty trailers that like you could, you know, you could put heavy materials on or like one of those is a tilt trailer where you could drive a vehicle up on it or a heavy piece of equipment you can't do that with the ones at low so the people who are buying these they know what they're buying and you're spending between you know i would say five thousand dollars on the low end upwards of you know fifteen thousand dollars for the larger more sophisticated ones this photo looks ai generated or is that just me doesn't it heather because you know what i think

11:48David Barnett:the shadows are kind of the shadows are off that's the problem yeah and ronald mcdonald running in the background that just seems like it's no i'm just kidding first of all uh but yeah

12:03Jack Sondheim:but at least they did a nice job of of only the heavy duty trailers yeah um which is right on so i mean i like this business but like in the purchase price relative to eva da there's obviously, they say they have a meaningful on-hand inventory, like it's a positive thing. I would say that's probably more of a detractor in why they need to clear$5 to$7 million for, you know, what is that?

12:31David Barnett:That's going to be 14 times earnings. Yeah, exactly. You guys have, by the way, you won.

12:39Jack Sondheim:That is why I looked at this. I was like, wait, this is a good deal, which dealonomy only has good deals but why does it mean i didn't it didn't make sense to me why 14 times earnings for a midwest trailer dealership is it is appropriate and i was just like well

12:52David Barnett:there's something i don't know here so so my financing brain says they don't have a flooring line of credit and they've had to acquire the the inventory that they sell and that's a tough business model because look you're you're carrying five million or more of inventory and you're only making$354 ,000. And just as a return on your cash investment, that is way too low, you know, in addition to all your other operating risks. That is my guess. And that's kind of curious as to why they wouldn't have, why the existing owner wouldn't have had this flooring line of credit situation. It could be the type of, you know, the manufacturers that they represent just aren't good enough for the flooring lenders.

13:33David Barnett:Like I said, I've gone down this rabbit hole with a few clients before where they're trying to find the line of credit lender. And there's not very many of them. And like I said, they're very particular. So it's maybe not the easiest thing to get the flooring lines. And maybe that's the situation here. This seller doesn't have one.

13:51Jack Sondheim:So it sounds like this seller has a problem and they're trying to get me to buy their problem. Mills, you're smiling, but like I've seen these deals before where the seller has a problem. They're like, you know who would have a great time with this problem? Somebody else. I'm going to sell this company. Are you ready to take the leap into business ownership, but you don't know where to start? Well, look no further than Acquisition Lab, the premier resource for entrepreneurs seeking to buy their dream business. Founded by Harvard MBA and acquisition expert, Walker Deibel, the lab is your fast track to success in the search diligence and acquisition process.

14:25Jack Sondheim:With hands-on support, world-class resources, and a community of like-minded entrepreneurs, Acquisition Lab gives you the tools and confidence to navigate every step of the journey. And we're proud to call Walker and Chelsea, the Lab's director, long-time friends of the podcast. They're passionate about helping entrepreneurs like you take the next big step. So don't wait to make your business ownership dream a reality. Visit acquisitionlab.com today to learn more and schedule your free consultation. And when you do, be sure to tell them the Acquisitions Anonymous podcast sent you. So I think the bull case for this is that if, you know, in the dealership model, there's exclusivity.

15:00Jack Sondheim:If they have the exclusive territory for a really specific high profile brand, that is worth something. You mentioned Caterpillar earlier. It's not as exclusive as like Caterpillar or John Deere, where those never change hands. They just literally never sell. They never hit the market. They're not available. They're not creating any more of them. They're actually consolidating like multi-generationally. This is not that kind of case. This is the case where if this business went away overnight, big techs would find somebody else who also has, you know, an established trailer sales program and just sells other lines and they would go, you know, try and work their way in.

15:41So, you know, it's a little bit different than like the car dealership model because there are more manufacturers on the trailer side than there are on the car dealership.

15:51Jack Sondheim:I mean, on the trailer side, it reminds me a little bit of like these motorsports stores that we've looked at before where they may sell like Can-Am and Sea-Doo and like multiple different, you know, kind of categories like water sports and, you know, ATVs and UTVs and, you know, dirt bikes. Um, because they, they can't get enough volume from one. Like you, if you drive through, you know, small to medium town America, you see these places all over, all over. Right. And they're in varying sizes. Um, we buy like one or two trailers a year and we don't necessarily shop based on, I mean, price is important, but, um, we just usually go to like one of the closest places that has good inventory and get exactly what we want.

16:39Jack Sondheim:Cause we're very specific about what we want. We want a 16 to 20 foot trailer, seven feet wide, double axle. Like, you know, we know exactly what we want. And you have to go somewhere specific to get it. Because these are not complex machines. That's kind of like, because the core of this problem, right? If you look at Caterpillar or you look at a Ford dealership, right? There's fundamentally complexity there. My son had to take his Ford, by the way. and they had to go in because only the Ford dealer could do something with a stupid computer. It's just such a scam. I was like, this is a scam. I turned to my son.

17:16I was like, son, I'm about to parent you.

17:18Jack Sondheim:This is a scam. It was a total scam. They charged him$450 to go and press a button on a computer. I was like, this is a scam. But there's none of that here, right? I guess one man's scam is another man's good investment. But the one thing I I'm curious about is they do say truck bed sales. So this is also kind of congruent with the dealership model, but like service body pickups, you know, the ones that have like the, not just a toolbox in the bed, but like toolboxes built into the bed. and it's a smaller bed space, but you've got lockers and different things on them. Those are a more interesting business to me.