Inside a $1.5M Pool Service Company Making $450K Profit

0:00Hello, ladies and gentlemen, boys and girls, and welcome back to another episode of Acquisitions Anonymous, this is the internet's number one podcast on buying, selling, and operating small businesses. And we have a great one for you here today. It is the quintessential searcher roll-up business. It is a pool maintenance company. This is a route-based business taking care of people's pools, but in a somewhat unexpected location, it is in Ohio. So there's some unique dynamics in a seasonal market like that. The business makes half a million bucks a year of SDE, so it's a good one. It says SBA pre-approved.

0:35There's a lot of fun things about this one. And we also have Rand Larson guest hosting with us today from ScalePath. So without further ado, I hope you enjoy this episode of Acquisitions Anonymous. We'll set Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % ears anymore. And thumbs downing on just the plus inventory. Hey, everyone, it's Bill. And I want to tell you about an event that's honestly become one of the highlights of my year and that's Main Street Summit in Columbia, Missouri. I've been a speaker and an attendee at Main Street Summit for a couple years now and I'm going to tell you firsthand it's really not your typical conference at all.

1:13It's more like a thousand business owners, operators, and entrepreneurs all gathering in Columbia, Missouri for three days of practical and actionable business content. It totally takes over downtown Columbia and they have probably 20 different venues. It's very cool. One of the things that really sets Main Street Summit apart for me is the relationships. I wrote on X after last year's event that it was great talking about business and life with people who really have become much more than just conference buddies. You know, business really can be a great vehicle towards deep friendship if you're willing to go there with people.

1:45And that's exactly what happens at Main Street Summit. You're really not sitting in massive auditoriums. You're in intimate settings, art galleries, small classrooms, etc. With world-class business owners and operators who have lived the challenges that are keeping you up at night. So really, no matter what industry you're in, from plumbing to e-commerce, there are specialized tracks designed for real practitioners like you. Main Street Summit is coming up. It is November 4th through 6th, 2025. It is in Columbia, Missouri. Do not miss this chance to connect with people who really get what you're building.

2:17You can visit MainStreetSummit.com to grab a ticket, and I will see you there. I'm speaking again this year. So if you find me, come up and say hi. See you at Main Street Summit. All right. This is one of those days where we said, hit record, hit record. We started talking about the deal before we hit record. But here we are. You know what I'm thinking, Bill? What we should do, you know how certain podcasts will do a one-hour episode, but then if you're a paid subscriber, you get the two-hour episode? I think our paid subscriber would just be like, we hit record as soon as we're on. It's just everything beforehand.

2:53we just talked about eight other deals and we're like nah nah yeah okay yeah you get to heal the story of how michael stole a street sign from san antonio that was a good story yep which we talked about right before we got on which i will not incriminate him about but uh i'm very thankful that he did uh but we do have both a guest and a fun deal today so ran larson from scale path is here. Thanks for being here, Rand. Yeah, thanks for having me. You do not look like you're in a van anymore. You're settled back in. How long were you in the van? Like six months or something? Seven months straight and then give or take another couple months.

3:28Tell people what you did in the van. Yeah, yeah. I traveled around the U.S., basically everywhere east of Dallas. I mean, everywhere. I was throwing small business owner searcher meetups all around the U.S. During that trip we probably did 15 to 20 cities um and i've done a ton of other meetups around the u.s and i i was like hey you know instead of getting hotels and airbnbs everywhere i go it would be equally as economical to buy an asset which is a camper it's the it's the most ridiculous business asset ever um and it totally works like like i've saved money by buying a 42 000 van and it's like yeah i would go around the country and live and sleep in it and like give tours of the van whenever i popped intost louis or wherever wherever bill did ran come see you in person heather did he come see you guys he did he came to charlotte and i was out of town and i felt really bad yeah i got a tour of the van in the aqua seal parking lot oh you are special and we are not well then ran was like i gotta go i have a more important meeting so he was there for like 12 minutes so yeah yeah but you stopped you stopped so that was awesome thank you absolutely yep uh well rand well hang on just rand will you give the quick what the heck is scale path here before yeah yeah uh i i bought a majority of scale path from michael girdley we're a community with small business owners we build peer groups we do uh educational sessions bring in guest experts some variety of topics.

5:04We've got a private podcast. We've got a Slack room, a bunch of that stuff. Our goal is to connect entrepreneurs, small business owners, and help them share experience and information so all of us can grow faster and make less mistakes in a nutshell. So peer group for small businesses, which you bought most of from Michael Girdley and then promptly replaced him on this episode of the podcast. So you're the new better looking Michael Girdley. The fish that ate the whale ran larson yeah yeah one step at a time very nice um well so rand has seen a ton of small businesses through the scale path community and actually brought today's deal uh which is a fun one so i'm going to put it on the screen and let's check it out thank you to bring in thank you to rand for bringing this so this is a pool service company in northeastern ohio um so very specific location Northeastern Ohio.

6:01It's relocatable. It's relocatable. Okay. We'll see about that. It has 1.95 million of revenue and$454 ,000 of EBITDA. It says it has$554 ,000 of SDE. So there's a$100 ,000 exactly bridge from EBITDA.SDE. It says it has$750 ,000 of real estate, which is not included in the asking price and they want 1.5 million, 1.495 million for it. So almost exactly three times SDE EBITDA, three times the midpoint of SDE and EBITDA has been around since 1963. That is amazing. That is amazing. That is an accurate description to say it is a long standing profitable and reputable pool service company uh as described by kim kim kurt the broker of trusted business transaction advisors yo i haven't been to this part of ohio in a long time but i don't think this photo is that northeastern ohio no if it is yeah no seriously that could be northeastern ohio i mean it's actually way too flat that's that's the only thing that throws me off.

7:15Ohio is a little bit hilly, but houses do look that nice and it costs $500 ,000. It looks like there's a beach. If this is Northeastern Ohio, Kelsey Larrick has been really lying to me about what Northeastern Ohio is like, because I need to move there. I did not see the beach. So no, this is, unless this is not on the area as well. Okay, sorry. Go ahead, Bill. Okay, so questions about the photo aside. It says this is a second-generation pool service and maintenance company with an impeccable reputation with customer accounts, full service and support to clients, as well as operating from a well-known retail location.

7:58The business has a well-developed customer base and is the leading expert service provider within the market service area. Key personnel are in place for continued successful operation with new ownership. The asking price includes$80 ,000 of inventory, but does not include the real estate which they own, which I assume consists of, as listed here, a 13 ,000-square-foot building, which includes inventory shelving and a service area, offices, conference room, and retail space. It's a well-known location with drive-by traffic and easy access from several local roadways. It says competition. There are two smaller competitors, but this is the leading service provider in the market.

8:36has eight employees. The business could be expanded by increasing the service territory and adding additional techs. The business previously installed in-ground concrete pools and has migrated over 50 plus years into a service-based pool maintenance business, focused on providing specialized services such as pool heater installations to commercial and residential customers. The business could also easily re-engage the market with the installation of the in-ground pool structures. Heather will be happy to know the deal is already SBA lender They're pre-qualified. Celer will also continue a small note payable to supplement as well as provide eight weeks of transitional training or maybe even stay on longer with an additional consulting agreement.

9:17But they are retiring is what it says. So that is everything we know. What do you guys think about this one? I'm going to be worried if they're not SBA pre-qualified at this point, even though we've established it doesn't mean anything. if they're not saying it there's a red flag that goes off to me right this is just sort of standard and and at this multiple i can see you know any sba lender saying sure we pre-qualify this is it doesn't have any red flags at least from what they've told us so far um i do find it interesting that they've migrated away a long time ago from installs from putting in new pool projects so they're not a construction pool company which is kind of really where the dividing line is when you start looking at pool services, are they doing new build project oriented work?

10:07Or is it, you know, recurring type, reoccurring type customers where it's just maintenance? It sounds like this is pretty much all maintenance with maybe a little bit of project work with installing heaters, you know, but it's almost all maintenance, which I like. That's something that kind of threw me off is eight employees on almost 2 million in revenue. feels like that's not a lot of employees. I'm not so familiar with revenue count per employee, but that seems like the employee side is a little bit low. But in a good way, right? I mean, they're doing pretty good revenue per employee. Yeah.

10:41I wonder about the crew size for this too. This might be a one person in a truck, you know, kind of crew. I don't think it's a two person crew. So it's a route based business, which is really nice because then you're just trying to figure out route density, you know, optimization. Heather, your point about you like the service and maintenance side of it versus project. The only counterpoint I have to that is the average order value is probably$40 ,000 on a shotcrete or a gunite concrete pool versus this is probably, I don't know, a hundred bucks a month or something like that, you know, but, but it's very recurring.

11:25So that, those are the trade-offs here. And it's very seasonal, I'm sure, because it is in Ohio. Um, you know, obviously in the Southern States, it's not too seasonal. People are having the pools maintained and cleaned and they're full all year long. I would imagine in Ohio, there's like two seasons where you kind of close down the pool, uh, for the winter. And then there's like the open the pool season. So it's probably got a fairly good swing in those, you know, those months and probably pretty low on cash flow in the middle of winter. That, okay, as far as the SBA pre-qualification, this is where I'll argue, where it's maybe not that easy to just say this is pre-qualified because the more seasonal the cash flows are, the tougher it is for the bank at the end of the day to make the loan.

12:11Even if they like everything else about it, if they see too much seasonality in the cash flow, they worry that a new buyer is not going to be able to conserve cash or cut expenses or whatever it is they need to do to get through the slow period. And even if they do get comfortable with that, they will absolutely want to close the loan at the beginning of the busy season, right before the busy season starts, certainly not in the slow season. So those are some things the lender would think about for something like this. What do you think about this retail space that they mention a couple times. I see that a lot with pool services companies that I've looked at, where they've got a store, basically, that their customers can come into and purchase all their supplies and nets and whatever else they need.

12:59A lot of the pool services companies I've looked at also have a retail store. And maybe after you sign the NDA, you get some clarity there. like when I read it in the first part of the listing, it says they operate from a well-known retail location, which made me wonder, like, are they cohabitating with, but they own the real estate. So it's not that, but it's just quirky to me. I do. I agree. Like you got to go buy, you know, your, you know, chlorine tablets and you got to buy your shock and you got to buy salt and all that kind of stuff. And I think you go down a rabbit hole really quickly with pools where you realize like Lowe's and Home Depot don't have what you need.

13:41The local, one of the local pool stores here, they also sell like patio furniture and expensive grills and things like that because the people who are coming in there are probably also, you know, consumers of those things. One of our, one of our members in Scale Path has bought a number of pool service companies in the San Francisco Bay Area. And something I learned recently is it's kind of hard or there's not a really good reason to move a location once you're in pool service because of how route-based it is. There's no, you know, you can't integrate everyone into a large location if you grow because then your technicians are driving now 45 minutes and not 15 or 20.

14:25And so I wonder when they say, you know, this is a well-known location. I mean, they've been there since 1963. three. Everyone does know that they're there and there's no real reason to move. So I guess it would depend a lot on whether the retail store really drives business or if this is essentially located to your point, Rand. There's a lot of questions before I can merely make a judge on this. The one thing I do know is if they own the building, you need a negative add back to EBITDA here for market rent if you're going to value the business. Yeah, they're probably not paying themselves market rent in the P &L.

15:01So you've got to adjust that whether you're buying it or not If you're buying it if you're going to buy the real estate You need to make sure your loan sort of you know gets factored in there You add back their historical rent you take out the loan But if you're not buying it you still have to adjust historically to what market rent is going to be for you And a lot of times that eats up a big chunk of our of our stated EBITDA in these kinds of deals So I have seen a very interesting dynamic happen once or twice where sellers kind of, or buyers rather, kind of cut off their nose to spite their face.

15:35Like if you put, if you undercharge the business for rent, right? Real estate is going to be valued on a cap rate, right? And typically at a much higher multiple than the business, right? Like a 10 cap is a 10X. Like a, I don't know, an eight cap is what? Like a 12 and a half X or something, right? So every dollar of business valuation you get back at 3x, you sacrifice on valuation for the real estate at 12x or whatever. And if you put your own business in this building on a 20-year below market lease, you've really impaired the value of the real estate. Right. On the flip side, though, if the seller doesn't really understand that you, the buyer, can get the business and or the real estate rather valued based on the below market rent and then immediately break your own lease, move out, right, release the building at market rate and make a ton of money, basically flip the real estate out of this transaction.

16:33If the seller has got his own business in there below market rate and then that lease is what is used to calculate the cap rate. There's also, I mean, maybe a role for a sale lease back here. You know, if you, if you kind of could fine tune the numbers, there's a business in Columbia right now. We've roofed part of it. It's a pharmaceutical business. They have a 64 acre campus and it's 700 ,000 square feet of buildings. They're doing a 20 year triple net lease, sale leaseback,$340 million, which is just a staggering, it's got to be, it'll be the largest real estate transaction in South Carolina history if they pull it off.

17:16But sale leasebacks are a really, really interesting mechanism that almost never make it to like main street businesses, but private equity firms use them all the time because they can package the deal and go, okay, purchase price allocation between working capital, between the operating business, between employment agreements, and they can kind of fine tune some things and then recoup a lot of cash outlay almost immediately right after the purchase. 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 CapitalPad.

17:52And it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So CapitalPad 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.

18:36They handle standardized terms, standardized governance, standardized distributions, all up front in black and white. Basically, 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. we do see them sometimes in main street businesses i mean i've seen them if you try to do it with an sba loan you can't take the net proceeds from the sale lease back and have that be your equity you have to still put the equity in and then maybe you'll get some back from the the sale lease back proceeds that that's one way to do it but if you let's just say you tried to do what bill was talking about on this one and get an sba loan the sba lender is going to have a bad not probably going to let you because it's a retail location.

19:37Then they're going to say retail is location dependent. We don't want to see you moving. Even though the retail little storefront is probably not really driving that much revenue, lenders will get hung up on that and say, we don't want you to lose your retail location and have to move to another one. So that would become a little sticky if you tried to do that with SBA debt. But otherwise, if you just kind of went down the middle and bought the real estate and just stayed in it, or you don't buy the real estate and you just enter into a market rent. And as long as that doesn't take away too much of your cash flow, a 3x multiple, it sounds pretty good for a business like this, to be honest.

20:14I think the only negative I see so far is seasonality. So, I mean, location wise, you think about your total addressable market on something like this. It's in Ohio. The pool companies that I've worked with more closely in the past were in like Scottsdale where everybody had a pool and you kind of had to have a pool in order to survive. This is a really peculiar location. And is there a way to grow this business? It seems difficult. There's not a lot of pools in Ohio because you can't use them six months out of the year. It's too cold. I don't see that, you know, the density, like you can't go, okay, now I'm going to service this home, go next door.

20:59There's probably not a pool next door. There's probably not a pool in the next 10 houses you're going to visit. Well, they did say you could get back into installing pools again, which they supposedly did for a long time. I would be really interested in why they got out of that and when they got out of that. If they got out of that two years ago, you have a problem because then your SBA lender is probably going to freak out. So hopefully there's not a big decline in the recent history as they backed out of installing. But this business has been around since 1963. So hopefully that was a long time ago.

21:27They've probably iterated a bunch of different times, like in a bunch of different ways. My guess is they got out of the pool construction business because it's really freaking hard. And it's a totally different business than what they're doing right now. The only thing that's similar is the pool, right? But everything else, staffing, equipment, maintenance, you know - Working capital. Working capital. Like your marketing and your business development is totally different. The like, it's just, it's a night and day different business. And all the pool builder folks I know are like, oh, like I don't even want to handle the service.

22:04Like I'll, I'll give those leads away. I don't even want them. Because different business, right? Different businesses. Yeah, absolutely. But I mean, there, so there has been a lot of private equity interests in this space. A lot of roll-ups done. uh brand you said you have someone in scale path that's doing it um is it is it pool service that they're doing yeah it's pool service it's commercial plus residential but 100 pool service and this is why like this weird ohio pool service company that's why it's a bit more interesting there's probably more pools in the bay area in san francisco but this this guy in our community i'm gonna i'm pretty sure he said that he has the number one largest pool service company in the area because within two years, he bought four of them.

22:51They're all like two, two and a half million in revenue. And he now has the number one pool service company in the area because private equity doesn't go to seasonal places like this. So my thought here is like, you know, is Ohio a good market to buy more of these? I'm not sure because it's probably much even more different than San Francisco, but private equity hasn't looked as far north as I mean, definitely Florida. You go down to Florida trying to buy this type of company, unless you want to buy something that is a one-man shop, it's going to be extremely difficult to buy because private equity is invested everywhere.

23:27But even in San Francisco, there's not a great market for it. And you'd also probably, being that it's seasonal, you can't use a lot of debt on this thing, right? Because you're not going to be able to service it half of the year. So this is probably more equitized and you just got to know what you're getting into. Yeah. And you need some working capital. You need some extra cash to make sure you can get through the slow period and pay your debt. And so that does make the cost of running the business a little bit higher. You'd have to really see the 12-month monthly breakdown for a couple of years to see how seasonal it is.

24:03That's one thing I've noticed a lot in looking at seasonal businesses. We ask the question and we'll get the first answer. It'll come back. Yeah, it's a little seasonal, you know, and we go, okay, well, let's find out how seasonal it is. And we need to know that pretty soon. And, uh, and it can be, you know, it can be a deal breaker. Sometimes we look at some businesses where they're just way too seasonal for any debt. So, um, it's always a really important question to get into the details on as early as you can. And I'm just, I'm in Ohio. That's where I'm based. I don't think I would want to go into it.

24:35It's not going to be hot enough in September all the way through easily April. It is never going to be hot enough to want to be in a pool unless it's indoors and you're at a commercial facility or something like that. All outdoor pools are shutting down for seven months. One thing I really like about this, though, is not just the service part of the business, but the actual goods that they're dealing with. I wouldn't say it's Amazon proof, but you're talking about like 50 pound bags of chemicals. So from an e-commerce perspective, I think everybody buys this local. It'd be like buying cinder blocks, right?

25:16Nobody goes on Amazon to buy cinder blocks or bags of mulch because it's so cheap and the freight is so dilutive to the gross margins. And so you kind of have to have like a local distributor like this, even if you aren't doing the pool maintenance. But what almost always happens is the people who are doing the maintenance, they will self-perform the maintenance for you. Like, you know, full service turnkey will come test your water. I don't know if you guys have ever done this, but like, you know, if you have a pool, it's always changing. And so you got to go take like a little test tube and they tell you, Hey, you need this many bags of this.

25:53And like, you know, a couple of cups of this. And then like, let's see. And it's like a science experiment. So you can come in and DIY it or they'll come and do it for you. But either way, they're still getting some revenue from it, even if they're not sending a truck to your house. I like that about this. and you know there was a there was a chlorine shortage a few years ago i remember looking at pool deals around that time i believe there was a manufacturing plant that went down for a while that may be what caused it but it was a pretty big deal like no one could get chlorine for a while and so you know this industry had to kind of scramble and of course those that had stockpiled a little bit of it were selling it expensive and uh it was kind of an interesting period of time.

26:38So yeah, you're right. Being the supplier, the local supplier of the chemicals is a good spot to be in as long as you're able to always get your supplies. So, I mean, yeah. Okay. So there's some hard things about this. It's seasonal, et cetera, but the business is over 50 years old. So clearly they find a way to make it work, right? I mean, they probably got reliable people that work there. It's that they got eight employees that key personnel are in place, but those same eight people probably haven't worked there for 50 years. So there's some model where they've figured out the seasonal staffing, they figured out the routes.

27:13I mean, I don't think that's a reason to write it off on its face because this business makes half a million dollars a year and has for 50 years. And it's 25 % net margins. Yeah. Yeah. I mean, this is a good business. I don't want to come across that we're pooping on this thing because it's recurring or was it between recurring and reoccurring? I can't remember. Contracts, I think. Yeah. You know, have your credit card automatically to me, if they have your credit card automatically and they're billing you, it's recurring. Reoccurring is you're like, you keep calling and maybe I come every quarter, but I don't automatically have your card and bill you, you know, indefinitely.

27:54Reoccurring would be you de-winterize and winterize my pool every year, but there's six months in between and maybe you call, maybe you don't. Yeah. But recurring is bill you every month, I'll see you every week to check your chemicals and all that stuff. So if this is primarily recurring revenue, and I bet there is winterize and de-winterize, I bet they have a busy season on both ends of the season. And then maybe you just go to, I don't know, you go to Florida for the winter and don't worry about it. Maybe it's really nice. Maybe it's a great lifestyle business. Ryan, why aren't you buying this?