This Firewood Business Makes $375K... But Would You Buy It?

0:00Hello, everyone, and welcome back to Acquisitions Anonymous. This is the internet's number one podcast on buying, selling, and operating small businesses. And today we have a really cool business. It is a firewood delivery business in Texas. And what's especially cool about this business is the cogs are free. This is one of those kind of trashed treasure businesses. So we break down the economics of that. We talk about some unique deal structures for transferring a very seasonal business like this one. and we were also joined by Will from Bedrock QV to kind of give the accounting take on it. So this was a fun episode.

0:34I hope you enjoy this episode of Acquisitions Anonymous.

0:49Hey everyone, it's Bill and I want to talk to you about Quiet Light Brokerage. I was so psyched when Quiet Light agreed to sponsor the podcast because I am a customer. I have used Quietlight to sell three businesses. And if I were selling an e-commerce or a SaaS business, I really would not consider anyone else. Like I said, I went back to them three times. I work with three different brokers at Quietlight, had a great experience all three times. Even on one occasion, they found a buyer for a business that I just didn't know it was even going to be possible to sell. So they have pulled rabbits out of their hats several times for me.

1:23They've been in the e-commerce and SaaS business brokering game a very, very long time. They really know what they're doing. They have great reach with both buyers and sellers. And the other thing I really love about Quietlight is all the brokers there are former operators. So you can't just show up and go, hey, I'm a lifetime business broker. I want to work at Quietlight. You have to be a former operator. So they all know what it's like to be in the operator chair. So if you go to Quietlight.com, they have free business valuation calls, which they'll do with you. No obligation. Just tell you what they think about your business, what they think it would be worth, and then what you might need to do to kind of get it ready for market.

1:58Those guys over there are great, great SOPs, great systems. I just felt like I was in really good hands all three times with Quiet Light. So if you're interested in selling your business, especially in e-commerce or SaaS, hop on over to quietlight.com, fill out their onboarding form for a free valuation call, and you can tell them Bill or Acquisitions Anonymous sent you. All right, Friday Acquisitions Anonymous. These are some of my favorite ones because all the East Coast people are feeling good because it's Friday and Heather is caffeinating in real time because it's 7.30 on the West Coast. So Heather usually has a little spicier by the end.

2:33Yeah, I'm a little slow to start here. But we have got Will McCurdy with us today. Will, glad to have you on the pod. It's great to be here. Thanks for having me. All right. And let's get into it because Mills found what he called a wholesome business that everyone wants a little bit in their heart. To be fair, Girdley found it. which is always the case, but I found it wholesome. Don't give Girdly too much credit. His open claw, Girdly claw, found it for us, who finds us interesting deals for the pod now, which is fun. So you guys want me to read it? I've got it up here on the screen. If you are listening on audio, I would encourage you to check the pod out on YouTube because we share the screen and you can read along.

3:17So this is a profitable 35-year-old firewood business in the DFW Texas region. So 35 years old, pretty good. It has 1.25 million of revenue and 375 of SDE. And they want 1.2 million for it. So that is what? 3.2 times? And it was established in 1983. So it's been around a long time. Okay, math does not work. I was born in 89 and I'm 37 years old. That's my only, I'm not usually that good at math, but I know that that math. You know that one. So it's either older than 35 years or it's established a little bit more recently than that. Either way though, a business is old as mills. That's an old business.

4:11So it is a, it says we are pleased to offer this profitable 35 year old firewood business serving the greater Dallas Fort Worth, Texas region for sale. They offer a multitude of wood varieties for both cooking and heating for both pickup and delivery. It says, attention, landscaping, lawn services, and other businesses looking to expand winter operations. This reputable turnkey business is perfect for you or an owner-operator looking for a seasonal business. So they flag right up front, seasonal. It says, seller financing may be available. It's a confidential offering. It's offering on a confidential basis, blah, blah, blah.

4:46lot. And that's why, let me remind you listeners, this is Acquisitions Anonymous. We have not signed the NDA, so we only know what is publicly available in the teaser. It says there is$80 ,000 of inventory included in the asking price and$315 ,000 of furniture, fixtures, and equipment also included in the asking price. Seller financing is available and the owner is preparing for retirement. This one kind of shocks me. It says they lease their facility and that it's a 130 ,000 square feet. That is a huge facility. And it's only$1 ,400 a month. Yeah. So I have a suspicion that that is a lot. Yes.

5:29It's just open land and maybe it has some covered storage for the firewood. Yeah, I brought a couple of pole barns and stuff like that on it. Yeah, but I don't think this is 130 ,000 square foot building. But nice try. I'm going to start using that. Yeah. There's just a whole lot. Exactly. How many square feet is it? An acre. That's a big building. So Mills, what does this business do? What is it exactly? I think they just chop and wait. They chop firewood, they wait, and then they sell it when everybody wants it, which is not summertime. Okay. So they wait. Slightly before winter. So you think they harvest all of the trees in the summer, chop it all up, and then let it sit there?

6:12I think most of these businesses, if you're doing it right, you're not actually chopping the trees. All you're doing, somebody brings you logs that they're trying to get rid of. Sometimes you pay for them and sometimes you're just doing the arborist a favor because the arborist has to haul the wood off and dump it somewhere. and usually they'll find drop sites or you know they'll just like know somebody who has a bunch of land and you can just like dump it out in the woods um but usually there's a symbiotic relationship between the arborist and somebody who has some use for the wood interesting so you think this business's cogs are free or close to free yep wow so so this is uh you know you have a way to get rid of a whole bunch of wood and the value you add here is you turn an arborist trash you know tree removal service or something you know their trash bulk trash heavy trash into you probably process it into logs like little fireplace size logs uh and then sell it and deliver it but you got to season it and like they mention here multiple different um they offer a multitude of wood variety for both cooking and heating.

7:23So like, uh, you can't burn pine in a fireplace because the sap, uh, from the wood, you know, will mess up the, the, uh, internal lining of the chimney and it makes it a fire hazard. So like people don't want to, they don't want firewood that's pine, um, oak and hickory and stuff like that are, you know, typically better because they, they burn like really densely and not super fast. But if you're smoking, you know, or you're like using the wood for barbecue purposes, I know like crazy barbecue guys who are like, I only buy wood from this one place and they get truckloads of it because of the flavor profile.

8:02Like there's that range of specificity when it comes to wood for things like this. Oh yeah. So I have actually been a customer of a business like this. So I have a, we have a fire pit in our backyard. Um, and I got tired of what I found out is if you just burn whenever you have a laying around, it sucks, you know, it's smoky and it, you know, it doesn't burn for a long time or it burns for, you know, it's just not great. But if you get a seasoned firewood, which basically means dried out, right Mills. Um, and it's often the very best firework firewood is kiln dried, uh, instead of just dried out by sitting outside, right?

8:38Because it's only going to get so dry, especially here in Charlotte, North Carolina, where it's humid. And I imagine it's humid in DFW as well. It's only going to get so dry. But if you kiln dry it, it works way better. Like it's much more high quality firewood. So I wonder if these guys have a kiln dryer or if they're just selling air dried or air seasoned firewood. And you can get more for kiln dried firewood. So I would wonder if, you know kind of i'd love to see like the menu like maybe they've got all the different varietals of wood and they've got kiln dried or not um they the place i get it from has like a cheaper one that's like a mixed hardwoods like if you don't really care you just don't want pine or you can still get pine as long as you burn it outside it's fine but you don't want the sap building up on the inside of your chimney um but pine also doesn't it burns a little bit faster and not as hot.

9:29It's not as good as the dense hardwoods. So I love this business because it's just a repurposer of garbage. Yeah. It does have some hold costs, right? It's got the rent and, well, a little bit of cogs because it's got all that equipment for the, you know, chopping up of the wood and sorting it and whatnot. And it's got that seasonality and holding the inventory. I guess it would be really interesting to try to analyze their inventory. I don't imagine it's a very sophisticated system that they use. How many logs do they have available? How many did they sell? It would be a little bit challenging to acquire just to get your arms around that part of it, I think, especially whatever time of year you were planning to close.

10:17Are you closing at the end of the slow season or in the middle of the busy season? Could be a huge difference in the inventory level. But it would be interesting to understand how they keep track of that. What is in their cogs? What do you think, Will? Yeah, I was thinking that as well. Especially on small businesses like this, the inventory tracking, there's usually some kind of old ancient system that they use or there's no system at all. And I'm very curious how they came up with$80 ,000 of inventory that's included in the purchase price. I would bet it's just a guess by the owner of the business.

11:00It could just as likely be$50 ,000 or$150 ,000. Yeah. You'd be determined, right? He looks at the lot. He sees that there's some wood out there. It's$80 ,000. But it is interesting, the cogs being free, if it is free. And I'm just trying to think about what other costs are included or does this business incur to get to$376 ,000 of cash flow? Because the rent is only$1 ,400 a month. And then the equipment, that's all should be on the balance sheet and depreciated. So yeah, I don't know. Payroll is probably a big piece here. they probably have employees that are doing the chopping that the seasoning, the wood and things, but I'd be curious what the actual P and L looks like for this.

11:56I bet a big part of it is delivery cost. So like typically when you buy this, like you want it in the rack of firewood behind your house, you know, and usually sell it by like the quarter cord or the half cord or full cord of wood. Uh, Mills, do you have a sense for how much a cord of wood is? Is this a lot? Yeah. Like, And I mean, so that's one of the points I was going to make is that, you know, depending on the level of equipment they have, the highest margin way to sell this is in like a single bundle like you see outside of a grocery store, you know, in our neck of the woods. Where you're paying like, I don't know,$15,$20 for just like, you know, a stack of wood that like is going to be one fire's worth.

12:38Um, but if you catch the right guy on the side of the road with, you know, his tailgate down selling firewood, you could get like, you know, 40 fires worth, you know, for not that much more, but it's not shrink wrapped. You know, it's not just walking with you in, you know, into your car at the grocery store. You've got to have a place for it. You got to find a way to keep it dry. They may or may not unload it for you. So there's a sliding scale here of value add for what this person may or may not be doing. Because a big part of this is that it's big and heavy. So it's not just buying the wood.

13:18You need the wood in the right place at the right time. And that's why you're willing to pay a dollar a log practically outside the grocery store for a just-in-time amount of wood that you carry with you. But I bought a half a quart of wood. So to give a listener an idea, a full cord, C-O-R-D is the measure that wood is sold and chopped wood. A full cord of wood would be like two or three really big racks of firewood like that you would have out behind your shed. So I bought a quarter cord of wood, which is like one medium sized rack stacked like five or six feet tall. Maybe like, you know, a rack of firewood six foot wide by six foot high.

14:02so that's still a ton of firewood uh and i got it delivered for like 300 bucks delivered and stacked in my firewood rack like the guy came in a fire truck carrot put it all on a wheelie took it back there stacked it up and left and that lasted me for years you know of outdoor fires versus had i bought that you know 15 at a time it would have been 10 times that price probably um so i think most of the cost in this business is getting the wood to where it needs to be. The salaries, the trucks, the gas, all that stuff. And maybe the moat is the location. You know, I guess, well, to your point, Bill, it depends on how much is delivery versus how much people come by and pick it up like a retail.

14:49The one I think of in my neck of the woods is everyone drives by and picks it up, you know, in their truck or whatever. I don't think that they even offer delivery. It's just a lot that everybody drives by and goes to. So I guess it would be interesting. What is the moat here? You can't, you know, can't anybody do this? Can't anybody go, you know, find the wood supply and a lot and sell it? Is it the list of customers? Is it the location? I was going to say, there could be a customer list here that is of some value, you know, where people just get in a, you know, from creatures of habit, like the familiarity of like, I always call Bob and he always brings my firewood in September, you know?

15:32And for the arborist too, right? This is just in our SRP is where we take the logs, right? And it's just the value in this business is sort of the inertia of the locked up supply chain. And it's not a billion dollar business, right? That somebody's coming after. Like this is, it's a hard business. It's a seasonal business. It's not that high margin. Like I think that there's a certain amount of this that people are like, I don't want to, I don't want to mess with it. Yep. And I haven't spent much time in Texas, but what is the season here? I know in the Northeast, it's firewood is huge. It's, you know, October to May is when everyone's using firewood.

16:11But in Texas, do you guys have an idea? Is it, it's got to be shorter than that, that people are using firewood. I think it does probably really depend. This is DFW, so I'm not going to pretend to know. Our Texas expert is not here today. So today's video is actually sponsored by a company I started called Bedrock Quality of Earnings. And Bedrock is a service for business buyers. If you're going out to buy a business, one thing you don't want are surprises. There are tons of stories out there of people who buy businesses, they get into them and three months later they realize the numbers that the seller told them, well, they weren't true.

16:47In a situation where people are often buying businesses and signing personal guarantees, meaning they're really on the hook to return that money to a bank or anybody they borrow it from, that could be a disaster. So Bedrock is a quality of earnings firm. They're people you hire that go in and look at the seller's books to make sure what you're being told is actually true. And there's lots of quality of earnings firms out there. What makes Bedrock different is it's the only one that has three things. Number one, a CEO, a guy who comes to us from a big four firm and has been doing quality of earnings reports, well, basically for a long time, his whole career basically.

17:20Bedrock is also backed by people you trust and know, including me. You know where to find me if you're unhappy with their service. And number three, Bedrock uses the latest technology, AI and all that different kind of stuff to make sure you get the best results at the best price. So if you're interested, book a call with the CEO Will. You can go to bedrockqoe.com or check out the link in the comments below or the one on the screen. Thanks. Yeah. So you guys can see if you're with us on YouTube, you know, this is about how much a half cord of wood is, and they're selling it for 250 for a half cord or 450 for a full cord.

17:52Now this is in Charlotte, North Carolina. This is where I live. So a full cord is about 300 pieces of firewood, half cord about 150. So it's not, I think it's just not a super high margin business, even with the cogs are free, just because you got to handle it. You got to dry it. You probably got fuel for the kiln. I don't know how expensive that is, but this business is, It's a good business. It's not the best business I've ever seen. The buyer might be another seasonal business. So we see a lot of landscaping businesses where they offset the warm season with snow removal. And I guess this is, I've never thought about this, but this could be, the landscape company could even use their own lot.

18:37And you would think the landscape company would have access to the wood a little bit easier. Some of it could even be their own. So that's kind of, that's just an interesting suggestion that I never, I haven't seen a landscaping company do this, but I think it's pretty smart. Yeah, vertical integration, basically, right? Like the arborist or whoever is cutting down the trees, if they just hold onto it for a little while longer, their trash becomes worth money to them. Yeah. Heather, that's a good point because I think I do hear that all the time, especially people in snow climates say, you know, this is a plan that I have or maybe something that I've contemplated is to create some counter seasonality.

19:16But I have not heard people, you know, say this. I think because it's kind of, again, it's a smaller total addressable market and a smaller, you know, pot of revenue to go after. The other nice thing about this that I think y 'all both started to hit on is there is some like shared equipment needs. So just because somebody drops the logs on your lot does not mean that they are ready, you know, for firewood. This is not, if you're selling a million, one point, you know, one and a quarter million dollars of firewood, you're not Paul Bunyan chopping it by hand. You know, this is, there's some level of equipment that's like speeding this up and creating some efficiency, which we'll hit on.

19:58It's fully depreciated, you know, for sure. I doubt any of this is like state of the art new, you know, laser measured for optimum, you know, yield. but just because somebody drops the logs on your lot doesn't mean you're ready to cut them you've got to have a piece of equipment to move those logs onto another piece of equipment that is going to cut them into sections and then start splitting them and then the stacks of wood have to be moved like there's a lot of different elements to this um i had a friend who had ran a sawmill in another market and he, uh, he just let tree companies park their heavy equipment, like their big boom trucks and like heavy, you know, kind of crane crawler, uh, setups.

20:45He let them park on his land for free and set their trailers there and stuff like that. But in exchange, they had to bring him all the wood. So there was like this beneficial kind of, Hey, how much am I actually going to get for charging for this ground lease, 500 bucks a month or something? Well, I'm going to get thousands and thousands of dollars worth of value from the raw material that I don't have to pay for in exchange. And it helps them because they need a place to drop it off. What's interesting is this is not financeable as a standalone because of the seasonality. But I can see a bank financing this for a landscaping company.

21:22If a local landscaping company comes along and says, bank, if I buy this, it offset, you know, I actually look better. You know, my seasonality smooths out and, you know, we've got the, you know, we think we can grow it as well. Totally financeable that way, but probably not financeable if someone just comes along and just wants to finance this on its own, which is problematic because for those buyers, I think it would be tough to come out of pocket with a million two, you know, three years worth of EBITDA, Um, so it feels like the best buyer really is the landscaping company and kudos to Aaron, uh, from Sunbelt in Dallas who suggested that.

22:04That's a, that's a good point. I mean, I think if you're a landscape company, you're staring a buy versus build decision right in the face. Right. I mean, because you've already got the access to the wood and you probably know a couple other landscapers who give you the wood too. So it's how much equipment do I have to buy? Do I have the excess space on my lot? and let's say it costs me$200 ,000 of equipment, which would be a lot, but let's say it does, I still have a million bucks left to spend on ads to try to build up this opportunity in my market. So buy versus build for a business like this if you're vertically integrating could be a challenge.

22:41I also don't think this is the type of thing where these customers are definitionally valuable to a landscaping company, like where there's obvious cross-sell. like if you're buying fireplace you also want to buy landscaping you know not obvious so to me if i'm thinking if i really want to be in this and i'm a landscaper i'm thinking about vertically integrating building it rather than buying it um i to me i think the best buyer for this is a nearly 100 seller financed uh kind of transition to a hustler yeah um you know and it does say that their seller financing is available. You know, if, if I were a young guy and I want to make this my business and I want to make$375 ,000 a year, um, or I wanted to add it on to something I was already doing, I would offer this guy 50 % of the profits for six years or something like that.

23:35Yeah. Yeah. You know, and then that's still, he gets his, still gets his number. Um, I'm protected in the off months. I don't have to pay him anything in the busy, busy months. I pay him a lot, you know and it's just kind of scales up and down and it's it's 50 percent of profits or you keep it off from 50 percent of profits until you receive 1.2 million dollars yeah so i would do a more of a transitional relay baton handoff type structure on this business will you look at a lot of company financials what you know what have you seen in terms of like seasonality being like i feel like it can be it can be so much of a killer in a deal but like bill just said there are some times that it's such a killer that it can also unlock like creativity like that yeah yeah you can definitely get creative um yeah it is tough seasonal businesses because in the off season revenue can be zero but you know you have payroll costs you have insurance costs utilities um Um, and on top of that, there's probably these employees.

24:41I don't know how many employees are working here, but you know, part-time or seasonal employees that you have to think about every new season, like hiring again, finding, um, employees to help you out. I feel like that can be a headache, but, um, and I think there's definitely strict like strategies you could use when, you know, structuring a deal like this. like what Bill mentioned. It's a tough, I've seen a lot of seasonal businesses. It's hard. You kind of need to, especially when it, depending on the timing of your close, like I think this right now is, you know, the busy season is going to be starting soon.

25:19So I think it's a good time to get in. Whereas if it was the beginning of the end of the season, you'd probably have to inject a little bit of capital into the business just to keep the cost running in the business going until you get to the busy season. Yeah. And like you said earlier, I mean, we don't really know like, okay, yeah, they have kind of a ballpark idea of revenue right now, but how does that compare to the same point in time a year ago and two years ago and three years ago? Like, are they relatively high on inventory now? Probably not. The guy hasn't been, you know, probably like front running his inventory really aggressively.

25:59He's probably been very conservative and going, you know, I'm not going to necessarily plan for this thing to go gangbusters. And so has he been like planting the right seeds, pun intended, you know, for there to be inventory to sell if sometimes the cure time and the seasoning of this wood is 12 to 24 months? Like those are things we just don't really know. Yeah. Yeah. Because he could be, he's planning to sell. he probably didn't look into obtaining inventory in the off season. And just going to let the buyer deal with that. And they'll be on the hook to figure that out once the season starts.

26:39And yeah, I'd be curious what the, how that revenue was, was measured also. If that's just 2025 revenue or is that a projected revenue? It's 1.2 on the, on the dot. So it would be curious how that was calculated and how they're. Much as cash. Yeah. no heather there's probably no cash there's none

27:05yeah it seems like aaron for all the things that he has done well about addressing the issues with this it seems like he really missed an opportunity for a great photo there is no photo on this i was disappointed in that too so many things man like you could have put this like jack burly dude you know in overalls like splitting firewood like you could have done a romantic fireplace like there's so many things you could do with this and we just have this really odd you know price tag that biz by sell puts it says no photo available all right well i think i think that covers it for this one but this is a cool business uh i mean any business where the cogs are free i'm into it I mean, it's probably not debt financeable, but like this, I think this business can transfer for sure.