Best of Acquisitions Anonymous - The $250K Port-A-Potty Business?!

0:28Welcome back to Acquisitions Anonymous. Question for me, if I buy this deal, should I expect that I have to be the person driving the poop truck? If I have horses, I'm used to poop anyway.

0:42Hey, Michael here. Welcome to Acquisitions Anonymous, internet's number one podcast about buying, selling, and investing in small businesses. Today, we had the whole crew here, all four of us, and we dug into a deal that it's a listener request, people asking if we would do a Port-a-John business, port-a-potty business, and we found one and it's here in San Antonio. So join in and listen in and see what we thought about it. Here we go. Hey everyone, it's Bill. And I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called Capital Pad. And it is the thing that I wish existed when I started my journey of operating and investing in small businesses.

1:20So Capital Pad is a marketplace for acquisition entrepreneurs, that is people who want to buy a business and need capital to list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is the place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing too from the investor side is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions, all up front in black and white.

2:05Basically, CapitalPad professionalizes investing in small businesses and the returns can be really, really good. I'm so stoked they exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out capitalpad.com and tell them that Acquisitions Anonymous sent you. Mills, how are you today? Oh, we're recording. I'm great. How are you? I thought we were looking for a business. I did. I found one. I found a click record.

2:42Perfect. I was getting on websites to look for businesses and then you're like, how are you doing? Like, oh gosh, we're on. Hey, Heather. Good morning. Michael just pulled a Michael and hit record without being known. Okay. Yeah. We got to start on time. Yeah. Well, so listeners on social media have requested that we do a porta potty and or septic business so those sounded like the opposite of a poopy idea so i thought we'd do it of course we're supposed to have a couple minutes of chit chat before oh it's in san antonio okay there's so many shitty things about this business that's one of them so let's get let's get the dad jokes out of the way and then we can talk about this deal so how's it be doing heather are you surviving the blizzard and tsunamis there in california i did survive the tsunami i am trying right now to survive year-end closings you know that is the war that i am currently in and uh it's it's almost over but it's you know it gets a little rough at this point in the year uh close to close to the end of the year where everyone's still trying to close and banks are moving their communication gets pretty poor at the end you know you hear sporadically and everyone's kind of left in the dark most of the time.

4:03So it's rough emotionally. Do you guys want to hear my nightmare New Year's Eve closing story? Heather was not involved in this, I should say. I didn't do it. This was before I knew Heather. Otherwise, I would have used Heather. So me and a couple people were buying an e-commerce business. This would have been in like 2021. and we were buying it from a seller. It was not a brokered process. It was someone we knew. And the seller really wanted to close by the end of the year because she was worried the tax regime was going to change the following year. This was like right before the build back better thing, which ended up getting vetoed, but it was going to increase the capital gains rate.

4:47So she's really hot on closing by the end of the year. We started to work on this deal in September. Like we were way ahead. But we had about 15 investors in it. There were kind of three main guys doing it. And then we had a whole bunch of small checks. All of the small checks were below 20 % ownership. So nobody was going to have to personally guarantee. We had been super upfront with our lender the whole time that there are investors in this. Like we had even given them the cap table and they knew everybody. They actually made everybody verify funds. They had interacted with these people. They knew that there were 15 people.

5:28It is Christmas. It is the 23rd of December. I am at my in-laws house in Pennsylvania, in rural Pennsylvania. This deal is supposed to be done. We get an email from the lender saying our compliance department has vetoed this deal. Our lawyer, bank counsel, has decided, and this direct quote, this looks like a private equity deal. This looks like a private equity deal, so it's not in compliance with the SBA. And we said, explain, because I don't agree with that. It's made up. It's made up. And they basically said, oh, in long story short, a bank lawyer had not looked at it until a week before closing and had not looked at it and suddenly had all these problems with it.

6:20We had to call, we had Christmas. We have to call seller on like the 26th. Tell her what's going on. The other thing that's happening in parallel is the guy who's going to be the CEO lives in Las Vegas. The business is in North Carolina. He has already left. He is driving cross country to arrive on New Year's for closing and meet all the employees the following day. And so he's in Texas and he's like, should I keep driving? And we're like, okay, like I think we're getting encouraging noises from bank council. Like you can drive for one more day. And so he's... Oh, hold on. Hold on. Hold on. I have a joke.

6:59The answer is if you're driving through Texas and you call someone and ask, should I keep driving? The answer is always yes. Yes. Don't stop. So anyway, we eventually are able to strong arm bank counsel to agree to it. They have to send a notary to my in-law's house on New Year's Eve. It's two feet of snow. And I'm at my in-law's kitchen table and they're looking at me like, what is wrong with you? Like I've spent the whole Christmas week like in my father-in-law's office trying to close this deal, like yelling at lawyers, freaking out. We finally do get it closed and it's notarized on my in-law's kitchen table on New Year's Eve.

7:35and we did get it closed. The guy arrived in North Carolina on the closing day, and we got it done. But I will never use that bank again. Their counsel did not look at it until the week before closing. Can I tell you a secret? All the banks share several different firms for SBA closing counsel. There's really only so many firms that do it. So they're all kind of rotating between those same firms, they are all on fixed cost. They are not on hourly. And that is the reason why in SBA loans, you don't find out all these things until the last minute because they all don't look at the deal until the last minute.

8:13And there's another secret. A lot of them take on too many deals at your end, especially, and they can't get to all of them. And instead of saying, I can't get to it, they make up fake problems that they then later accept. Maybe that's what happened to me. It happens all the time. It happens all the time. It was a fake problem. Because if you get through it, like you didn't really change anything and then they accept it later. That's my hint that they made it up to buy time because they were too busy with too many deals. And I see it all the time. His mind is blowed right now. Yeah. Mills, you remember that?

8:50Was I talking to you about that deal as it was happening? I remember it too because then it came back around. We looked at a deal probably in the first 100 or 200 episodes that was like a mobile notary service. And we were like, I've used one of these in rural Pennsylvania. They exist. You're still having trauma. It was PTSD for Bill. Deals ruin Christmas. The way deals, lawyers ruin Christmas. Remember that. Lawyers ruin Christmas. Yes. Heather, if we try and buy this profitable and established port-a-potty and septic cleaning business starting December 6th, Is there any chance that we could close by end of year?

9:29No, that is no, no, and no. What's the deadline that you typically tell people? Oh, go ahead. Oh, I tell people they should plan for 90 days from signed LOI and that it's very easy for a deal to go 120 and that they're not really in control. No one party is in control of the timing and that's part of the problem. So if it's past September, don't get your hopes up. pretty much right. That's right. It's always rough at year end. In light of the year end being kind of a poopy time of the year, let me show you this deal. Here we go. By the way, Lister's asked for this, so we're doing it. So, all right.

10:12Man, we found one in San Antonio. This is amazing. I didn't know there were businesses in San Antonio. We just got electricity mills. High quantities of bullshit. South Carolina will look forward to that in the future.

10:26yes okay so it's off biz buy sell and is a profitable and established port-a-potty and septic cleaning business located in san antonio texas and then how do you guys pronounce these words here bexar county right bexar i was i already remember what i was told before bear yeah it's bear county i got it it's a i went so it should be pronounced southerners bill it comes It comes from the Spanish Bejar, but then all the gringos have totally ruined it. And it's now just called Bear County. So there you go. All right. And that's my Cia Antonio story for you today. All right. So the picture here on the listing is a line of generic yellow porta potties behind a warehouse.

11:12Beautiful. Yeah, that is what it is. So the asking price is$250 ,000, has NA for cash flow. So gross revenue is$253 ,000 and inventory is$172 ,000. And they've been around since 2010. They do not have EBITDA or furniture, fixtures, and equipment listed. So I assume here, Bill, inventory, they were foring the port-a-potties. I think they got$172 ,000,$725 ,000 of port-a-potties. I wonder if that's a depreciated value because I can't think of many things that probably depreciate faster than a port-a-potty.

11:48uh how much does it cost do we know how much does it cost to buy like a new port-a-potty no idea i'm not buying a used one that's for sure i mean it got to be like yeah i wonder if they're i wonder who makes those that'd be really interesting to dig into that industry there's probably only a few yeah i've heard it's a shitty business um okay so business description this is a huge growth opportunity pro asset advisors is proud to present this porta potty and septic cleaning service for sale it has been in business for 10 years and is owned by a father and son and are a lifetime residents of attascosa county texas so attascosa county is the county immediately south of saint antonio it's kind of a rural area there's little towns like poteet and jordington and pleasanton down there um so pretty rural they are family owned and operated small business that rent portable toilets hand washing stations holding tanks and provide septic tank plumbing the business is It's located, oh, here you go, 25 miles south of San Antonio.

12:44They provide service to Addis Cosa, Wilson, and McMullen counties, and occasionally other counties as well. These are super rural counties outside of San Antonio. On a weekly basis, they service anywhere from 100 to 150 portable toilets to their regular contracted customers. In addition, they also have special event toilets that they rent out for weddings, parties, FFA, 4-H, school, sporting, and many other events. They typically service 15 to 20 septic tanks per month. The company has always strived to provide excellent service to their customers. To learn more about this business, go to proassetadvisors.com slash NDA to complete the required NDA.

13:18Competition, the business is always in high demand. Inventory is included in asking price. They have very little competition. Expansion and growth are phenomenal for this business to its geographical location. Their sellers are willing to operate a negotiated period of time for introductions to all customers, and they want to focus on other business interests. and it is listed by Brad Ellison from Pro Asset Advisors. I wonder if he's here in San Antonio. I don't know. My first guess is, oh, sorry, go ahead. Yeah, yeah. My first guess is they don't have tax returns.

13:56You've seen this one before, Heather, huh?

14:01That's awesome. That's why it's all N.A. well well thanks everybody for being here for this week's episode you can tell the mood i'm in swipe gone heather has run out of f's to give at this point in the year and she's just like it's true it's true i'm sorry okay so port-a-potties and septic thanks yeah go ahead bill i think so the the crux of this and and i wish we had a real expert on instead of us jokers but i'm 99 sure it's the same piece of equipment the pumping truck that is used to go you know drain and then refill port-a-johns on site that you're using for a septic tank you know in somebody's backyard that's the that's the common kind of asset between these two port-a-johns cost like they cost like 850 bucks to get a new port-a-john but the problem is having a port-a-john doesn't help you at all.

15:02We spend thousands and thousands of dollars a month on port-a-johns. Having a port-a-john in and of itself, the unit economics are amazing from a rental standpoint because the port-a-john does no good unless you can clean it out properly. And the equipment to clean these things out is very, very valuable. I don't know if you know off the top of your head. What do you pay per week? I got it pulled up right here. I was doing this as we were reading it. construction toilet rental. I think this is, I don't know if this is per week or per month. We have two on this job. We're paying$23 per toilet for$46.

15:42Then there's also a fuel surcharge of 14%. And then you pay, we're paying$56 per toilet twice a month for the service. So the equipment rental is just, we're putting it on your site, but then it has to get cleaned out every two weeks. Each one of them does. And so call it, what does that end up being about$100, $125 a month? You said it's$23 a week for a toilet. For two weeks. I think that's 50 bucks a month for the toilet to sit there. Yep. Just to sit there. And they cost about 800 bucks. So you're got all your capital back in under 18 months on a Port-A-John, which is not too bad as a rate of return.

16:25Although they get used hard, I would imagine. I don't know what the lifespan of a Port-A-John is. Are you ready to take a 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 success in the search diligence and acquisition process. 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.

16:56And 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. There is one of one of my like pet projects that I really, really want to do from a social media standpoint is memes from Port-A-Johns because the Port-A-John humor is amazing. It is so funny on these job sites, the drawings and the jokes that get written on them.

17:38My favorite one, and this will be my only tangent on this, is that there's a plastic lock that just toggles up and down. It's very low, like low mechanics. But I was in a Port-a-John once, and the lock, basically when it's locked, it says pooping alone. And then when it's unlocked, it says pooping with friends.

18:01But the things that you can find in Port-a-John are incredible. So it rents for$50 a month, and then you said, Mills, it's like$60 every time it gets serviced? Service is, yeah. So call it like another$100 probably. And then there's a fuel surcharge of 14 % of the bill, which ends up being like$65 just because they find those tax fees. And they're servicing a couple of John's per visit, right? So like if you've got, you happen to have two on this job site, but bigger job sites have more. So like the truck comes out once. So there's basically like a route component of this, right? where it's picking up a couple Johns on your site, it's going to another site until the truck is full and then they empty it.

18:41Yep. Yep, exactly. And the interesting thing about this business that I really like from a business development, like they mention it even in their transition is we'll stick around long enough to introduce you to the customers. But these customer relationships, there's no contractual revenue. There's no like, you know, but it's very reoccurring because I'll tell you, like at AquaSeal, the guy who calls these in, if you get on his bad list because you didn't call out a toilet, you didn't come get that toilet when we were done with it quickly enough, or you didn't get one out there when we were starting the job, or you weren't servicing it regularly enough and it started to like overflow, he'll never call you again.

19:21But if you're on that guy's good list, he's not shopping around for price. He's just like, I'm calling my guy at XYZ. I need two out there. It's probably going to be about a month. And then he never thinks about it again. Like so many things, it's service. I pulled up. It's the port-a-john. You don't want to think about it. As soon as I have to think about it, I'm mad. I'm willing to pay the don't think about it price for port-a-johns. Thanks.

19:47uh i pulled up uh to to the thesis that this is like a a dad and a son in a truck business i pulled up like some of the photos of what the trucks actually look like i i have never slowed down to actually study them it seems like there's three types of trucks you can get a truck that is like a combo of the the tank where you suck out the the you know effluent and put it in the tank um for the kind of emptying of the port of johns and then it also has the ability to basically move the port of johns with a lift on the back so you can put four or six port of johns on the back of the pickup truck and then then there are trucks that are just solely the pump trucks that are just doing the emptying of the poop.

20:33And then they're the ones that just solely do the delivery and pickup of the items of the porta potties. The nice thing about them is like when they're empty, these things are light. They're incredibly light. One person can push them around and move them. So it's not like you don't have to have a specialized piece of equipment to load and unload them. These look like they might have a lift gate on them, these trucks. uh some do this one does here this all-on-one from portal logic uh which has a patented combo truck which is this kind of you see the picture here that's either a pump truck it's both pump truck and the delivery truck and the one important distinction that they call out you don't have to have a cdl to drive these so it makes from a staffing standpoint it's a little bit easier to find somebody who can operate this.

21:27And I think that comes to something I'm scared about with this deal. I mean, obviously this is a small business for a reason, as our friend Brent Besore says, but like the labor pool in Atascosa, Wilson and McMullen counties, like I think the biggest town is 10 ,000 people in those counties, like they are small. So trying to hire somebody who wants to do this job in today's labor market, like not going to be easy. they say they service 100 to 150 toilets um and i did the math on the 172 000 of inventory if that's 900 a unit let's just if that was the cost that would be 191 porta potties so it sounds like they have about 200 i'm gonna guess so you're basically to me you're buying kind of a customer list a territory, if you will, a truck and 200 porta potties of varying ages that you may have to replace.

22:25I don't know what the replacement cycle is on porta potties. As we said, it probably depreciates pretty quickly and you don't have them to use maybe too long. And I think this is probably one, maybe two trucks max, if I had to guess, I don't think that it's much bigger than that. To do 100 to 150 toilets a week, I like this. I mean, if you live in this area, there's never going to be a construction site without Port-A-Johns. I can't imagine in 20 or 30 years still, every job site is going to have. And what's interesting is when we go to a job site, we have our own Port-A-Johns, but there's also a general contractor who has their own Port-A-Johns.

23:05And there's other subcontractors who have their own. Wait, because you guys are too good to poop in the GC's Porter Johns and he's too good to poop in the architect's Porter Johns. No, it's more like if there's if there's, you know, 50 to 60 people on a job site, there's not enough to go around. And a lot of times, depending on the job, we might put it on. Wait, what?

23:33they make they make these cages that go around them that um you can lift them with uh with like a forklift or a telehandler or a boom crane that we have and we'll set them up on the roof i have learned something new man today did you guys ever watch scrubs the tv show this reminds me of scrubs where they have the toilet on the roof of the hospital and they go up there to poop and it overlooks the whole city and they like relax pooping on the roof. They love it up there. Oh my gosh. So question for me, if I buy this deal, should I expect that I have to be the person driving the poop truck? I think the current owners are operating that way.

24:13Yeah, because it says owned by father-son. Which means, yeah. That have been lifetime residents of this area. You could drive the poop truck. This would be easy. This is buyer business fit and you poop, I assume. Right. This is perfect.

24:29Once every couple of weeks. Actually, do you do you have to I mean, do you have to operate this business? That's a fundamental question, right? Or there's probably not a two hundred and fifty thousand dollars of revenue. There may not be enough marginal cash flow to have somebody operating the business. It's an owner at this size. We're making that assumption. I mean, down in this end of the county and stuff, right? Like out here in these rural places, there's not a big labor pool. You're competing with the oil field. So Eco Ford is south of there, which is not as boomy as it once was. But like there's still a lot of oil field jobs down that way.

25:10And you're competing with people commuting into San Antonio for work. But like my guess is you're going to have to pay up for some – I mean this is not a job that people are like, You know what I want to do? Smell poop all day. For a non-CDL driver, you're probably paying 70 to 80K a year at least in San Antonio to do this job to get a good person. So yeah. So I don't know if the math still works there. I think what this is illustrating is I actually really like this category. I mean, I like a port-a-potty business. It's an asset rental business with a service component, which generally is better than just a pure asset rental business.

25:50Because the pure asset rental business is basically a financing business. And the big guys have cheaper financing than you, so it's hard to compete on price. But something with service, it kind of makes it more of a real business rather than just a financing business. So I like this, but the problem is it's too small, right? So you have to drive the poop truck. If this has 2 million in EBITDA, I love it, right? The other thing that's interesting about these is they typically get paired with my other favorite white whale business, the dumpster rental business, right? And other site services, right?