This VR Biz Trains Forklift Drivers... and Makes Bank

0:00Welcome to Acquisitions Anonymous. Today's episode is a fascinating one. Mills, as you know, is volunteering with the Entrepreneurship through acquisition class at the University of South Carolina. and they went and found deals for us to do. And we did one of them today. And you'll see how we felt about it. Maybe it'll be educational when they watch this episode and see what they thought about it. But it was a fascinating forklift and VR training deal, which we all came to consensus about relatively soon. So here's the episode. Let us know what you think. See you, bye. We'll start Acquisitions Anonymous.

0:36Hello, another episode of Acquisitions Anonymous. We don't have 100 % beard anymore. And thumbs down on just the plus inventory line.

1:11elicit 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. Basically, CapitalPad professionalizes investing in small businesses, and the returns can be really, really good.

1:51I'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. Hello, dear listener. I clicked records too soon before Mills had a chance to pull the deal up. He said we have a deal. And then Michael went, ah, great, click record. Let's go. Well, I don't know if you've noticed my outfit today, but I brought out, it's a little cold here.

2:28One of my old school track suits. I've had this for like 20 years. If I ever have to dress up for Halloween as an Eastern European soccer hoodlum or soccer coach, I wear this. So it's my, if you're on audio only, it's Adidas, a black track suit with white stripes on it. That is awesome. Heather, your hair looks freaking amazing. I don't know what's going on, but it's one of those days. You know what's really important is I got a 93 sleep score. So watch out today. I didn't realize that there was a correlation between sleep score and hair. I think so. It's a whole attitude. Everything changes. Everything's better.

3:12Is this your bedhead? Because it is 7.30 Pacific time. Or did you get ready? Yeah, it's only 7.30. So Mills has a deal. Okay, so I do have a deal. So I let you guys know that the University of South Carolina Moore School is, they launched an ETA class and they are using the podcast heavily in the class. So I went and spoke to the class last Friday and part of their homework was to listen to a bunch of episodes ahead of time. And then they kind of did a competition to pick a deal for us to talk about on the podcast. So Brandon Mendez is the professor and he sent me this last night at 1040. He was working late into the night.

3:54And this is the quick background here. He says, my class selected a business listing for you guys to cover on the podcast. They were really interested in the idea of using virtual reality to make training more efficient and less costly. I had experience with this during Naval flight school. Due to parachuting injuries, the Navy moved away from, quote, the redneck parasailing model, which was where you hook students into a parachute harness and use a Jeep to pull you and get you airborne, then disconnect you and you float to earth and perform a parachute landing fall. So they found a deal on Flippa that is a virtual reality parachute.

4:33So we're going to talk about that. What's interesting. Wait, could you slow down and describe this redneck parachuting thing again? Cause I did not. This is not firsthand experience, Michael. I don't have a video. Like, how does this work? They hook you. Okay. So they put you and your instructor in a parachute behind a jeep and they drive you through a field until you get up in the air and lift and then you disconnect and you like parasailing without water i'm shocked that they had injuries related to this activity i mean girdle you're from texas i don't know if you've done this but you know here we'll do this with like sleds in the snow right you get behind a jeep and they tow you and you try not to die yeah no i i know exactly what you're talking about we do it behind boats it's called water skiing but the the difference is when you fall down there you hit some water from three foot up as opposed to the ground from 30 meters up which is totally different i'm looking at this for the first time so i don't know if this is related to this or or if that was just the hook that brandon used to get us um talking about this so hang on one sec let me Let me show my screen.

5:43This is on Flippa. What Brandon did was he created a web scraper to screen through Flippa and then created some methodology using AI to evaluate and scrub the listings and kind of gave them a list. He sent me the spreadsheet of the top 50, but we can talk about that another time. So this is what he sent me. This is on Flippa, and it's a SaaS business. It says eight plus year old virtual reality training and workplace development platform. It's located in Georgia. The website is nine years old. They profit$50 ,682 a month. Their profit margins are 66%. They get 14 ,878 page views a month. and it looks like they are, okay, so the asking price up here is$2 ,142 ,000, which is a 3.5 times profit multiple or a 2.3 times revenue multiple.

6:49And they say their overall churn is 10%. I have not signed an NDA on this and I'm not a premium buyer and skipping the NDA, But there is a description here. So this says a U.S.-based virtual reality company founded in 2017 specializes in immersive simulation for training and workforce development. Operating in the education and industrial safety sectors, the firm's proprietary product, a virtual reality forklift simulator, supports educational institutions and commercial clients. With 85 % gross margins on educational licenses, the company has demonstrated strong profitability. Currently, the business is run by a two-person team.

7:30Its offerings include a premium VR simulator, a mobile version, a web and iOS app, and live remote trainer connectivity. Revenue stems from hardware sales and software licenses, primarily through educational and commercial licensing models. The firm's customer base spans career and technical education, workforce development, and commercial entities. It has established significant contracts, including deployment across a statewide technical college system and initial installations with high-profile commercial clients. The expansion pipeline targets new regions and industries with further growth anticipated in international markets.

8:08Business thrives without paid marketing, relying on organic growth and direct outreach. Strategic growth opportunities exist in commercial expansion, replication in additional states, international market penetration. The founders, seeking a capital-backed acquisition to scale operations, have initiated a sales process. Assets offered in the sale include all relevant intellectual property, hardware inventory, and a well-documented transition plan. The advisory firm handling the sales specializes in digital company transactions and provides comprehensive M &A services for interested parties in the technology sector.

8:42There's a lot more information here, but it is all blurred out because I didn't sign the NDA. So this, I guess, is not actually a redneck parachute substitute, but that was what Brandon said it made him think of because it's forklift virtual reality. How does the business work, Travis? Do you understand this? I think they're selling training where you sit in a little virtual reality simulator and learn how to drive a forklift and their customers are, I don't know, warehouses and people like that who want to train their people before they let them loose in a warehouse full of bazillions of dollars worth of inventory.

9:21So they don't show up on YouTube with those great videos where like everything's collapsing. Yeah. So I guess my question, Mills, why? So they say they want to sell to somebody who's going to invest capital to help them grow. Like training is a asset light business. Like why do they need a bunch of capital to help them grow? Like, I don't understand that. I bet this, the piece of hardware that they're talking about, the simulator is probably pretty expensive. And if you put one, like the technical college thing is super interesting to me that like has all of my attention. All these technical colleges offer forklift certification classes because if you walk into a business and say I'm forklift certified, it doesn't mean you're actually good at the forklift.

10:05It just means you sat in an eight-hour class, sometimes online, that costs like 200 bucks and you can make 15 bucks an hour after having done that. So it's like driving a car without actually driving a car. You're just a teenager hopping on. But I think that obviously if I'm the, you know, provost of the technical college and I can make, you know, I don't know,$85 ,000 investment to, forklifts are expensive in and of themselves. So if I could have an actual, you know, module or like a piece of equipment, fake equipment that somebody could sit in and learn and make them that much more proficient, I think this makes a lot of sense in the technical college world.

10:49I think you would have to be a massive warehouse operator in order for this to make sense and like have one in your warehouse to train people on. But I really like the technical college piece of this. Did anybody see the video online of robotic forklifts where they like just go under the pallet and like lift it up like an elevator? So I just recently saw that. It was fascinating. And when you watch it, you're like, OK, yeah, it's moving around the warehouse like a Roomba. I mean, I'm sure its capabilities are limited just based on how it was designed, but it does feel like that's an work lifts in general then are are on the on the table to be disrupted by technology.

11:32Have you guys seen the Shanghai port? The videos of that? It's the entire thing's automated. Like no one's driving around these things. It's insane to watch. There's no union there. You're saying, Travis? Exactly. But yes. well i think i mean it's it's interesting if you look at how the different unions across the globe approach stuff like that like a lot of the european ports are unionized but they are the the union leaders are like my job is to protect the jobs of the people that we have not protect what they're doing every day so they're like okay well like let's automate and then let's figure out how to make this port more efficient so then more traffic comes through so then we can pay the the longshore men or whatever more money and maybe they have better jobs through automation and we protect those jobs and give them better lives here we're like no no you run a crane that was designed in 1984 we're going to make sure that job exists for the next 50 years doing exactly that so you never have to change or get trained it's kind of so i would say the union thing kind of depends on what geography you're in yeah big time so i have a question has anybody done any of this vr training does it actually work i've run a forklift but i have not done virtual reality forklifts.

12:44Yeah, I think it's part of the problem with a lot of these things. Like, you know, I went and toured a big manufacturing facility here in San Antonio the other day, and they have like 400 people working there, CNC machines everywhere, all computer operated, all that kind of stuff. Their entire model for training is apprenticeship based. Like they bring in folks and they're like, okay, we're going to teach you how to actually do this stuff in practice. Cause the problem is in the classroom or virtual reality. Like I didn't see one virtual reality headset. All I saw was a bunch of younger, hopefully, folks, like shadowing the older guys around, learning how to do stuff.

13:16And that was how the model actually worked for the training for them. It wasn't classroom stuff. It wasn't watching videos. It definitely wasn't VR. One of the biggest risks in entrepreneurship through acquisition is buying a business with fragile systems, unclear demand, or a single owner who holds all the knowledge. Franchising approaches that problem differently. You are buying into an established brand with documented systems, unit-level data, and repeatable operating playbooks. The hard part is knowing which franchises are actually worth evaluating. That's why Alex Merezniak, former CEO of 2U Laundry, built Fransy.

13:45Fransy is a free platform that helps acquisition-minded entrepreneurs explore franchise ownership without broker bias. You answer a few questions, and Fransy shows you franchise opportunities that align with your capital, lifestyle, and long-term goals. You also get free coaching from people who have actually built and scaled franchise businesses. If you are exploring ETA and want to understand whether franchising fits your acquisition a strategy, visit franzy.com. That's F-R-A-N-Z-Y.com. And thanks to them for sponsoring today's episode. I wonder how much of an actual SaaS company this is versus more hands-on instructional.

14:20Like not everyone's rocking around with a VR headset that would work with this and the equipment, right? It's not like you're just not using an Xbox controller or something like that. You have to have something that mimics the forklift thing. So it seems like there's got to be a hardware base to it as well. Probably quite minimal, I would assume. Which I do think they say. I do think they talk about a hardware component to this. But then it's not a SaaS business. It's a hardware and a supporting software business. Yeah, which fits the multiple. It's not priced like a SaaS business. And there's nothing wrong with that.

14:52If you can get your client to pay for the Razer and then you sell them Razer blades every month through the software, Like that's a great business to have where it sounds like these guys are, is they're having to pay for the razor and they give it to the client and they're like, okay, well, cool. Now you pay us per month and hopefully we'll recoup our initial investment of this VR setup we just gave you. That sucks. Which kind of goes back to my core thesis with this business is, you know, why is it so small? And does VR training actually really work? And so therefore, does anybody actually want to buy it?

15:23And this thing's 10 years old. VR should have, this should be a much bigger business if there was true customer demand around it. And it's not, which to me is scary as hell. Did it say something about like, there's two people in the business? Is that what I remember? You know, I have people hit me up with like different companies for like help all the time. And every time there's someone making an enterprise play, I'm like, hey, this is a great opportunity. I have no idea how enterprise works. It's really hard is all I know. So I can imagine some guys who really know forklifts deciding to go into this maybe don't have the enterprise sales pedigree that might be needed to, I don't know, get this in Amazon warehouses or something like that.

16:03That could be a nice expansion from there. If they're just maybe they know these community colleges, that's the only way they're going. But there's a lot of corporates out there who might be willing as well. So this may or may not be the company I just Googled, but it's called forklifts. simulator.com and it actually even if it's not this is very indicative i think of what i was imagining you're putting on a vr headset but the actual kit that it comes with is you know it's it pedals and it's controls and it's a steering wheel like it would very much mimic the forklift experience and it comes in like a sturdy travel case i don't know why this did it to me but this just reminded me of the video game called goat simulator.

16:47Heather, have you ever seen goat simulator? No, no, I have not. Okay. Cause I'm, I'm asking you in particular cause I'm, I'm leading into a horse question here, but so goat simulator is like a video game where you run around in the video game. Like you're a goat, but you're a goat who can kind of do crazy stuff. And like you run around, you eat stuff, you bounce your head off of things. It's fascinating. So maybe think there There is a market out there for horse simulator. Oh, yeah. Like horse riding simulator. Horseback riding, virtual reality. Yeah, you're right. Let me get on that. All right.

17:21Gotta go. Yeah. After this SBA loan brokering thing, you're doing so well. You know, if you make billions from that, then you could go to the horse simulator. So, okay. Over to you, Mills. Go back to goat simulator. I mean, forklift simulator. It was so easy. Virtual Reality Training Center in Georgia Industrial Safety Forklift Simulator. Put that in Google. It shows the list of the community colleges. It's like, oh, come on. That's interesting because we found two different ones, though. So there is competition here. All right. Which is good. So it's a thing. We didn't out. We didn't out. Supposedly, we didn't out the one.

17:57But I don't like it as much since there is competition. Like other people are already doing virtual reality training for forklifts. That's a really small TAM. maybe it's bigger than I think, but even if you're splitting it up with three or four different people, what's your competitive advantage? Maybe a cheaper entry price point for the hardware and lower recurring costs for the community college? More like an equipment rental business to me. That's what it's starting to feel like. You're renting out these kits. They're in those specific schools because they have their relationships and if they go...

18:32Little bit of both. Yeah. And probably if that's true, Travis, then there's probably customer concentrations that you have to worry about because this is only a million of revenue. And if it's mostly technical schools, there could be a couple schools that make up a big percentage of that million dollars. Yeah. So these guys are taking home$50 ,000 a month. Yeah. State the obvious. Like, that's not bad. Yeah. You could buy a lot of horses with that. Right. It could pay for your horse hobby for sure. the problem is they want three and a half million for it so from their part right like what goes into operating this thing because they this is the the classic situation like there's not a team like you're buying a job but sounds like there's a lot of extra margin around for doing a lot of things really whether that's to install a team to run operations i don't know what that consists of or just doing it all yourself for like a really nice high-paid job it is there yeah i suspect you're spending a lot of time building custom courses per client and then hoping they continue to deploy that you know pay per month ongoing after that which when it works it works you know and it's working for these guys at least to the point they're making 50 000 a month which is a lot of money in any universe one thing that uh stood out to me that's not really related to the deal itself is that Flippa has a link here for insurance.

20:00It's reps and warranties insurance, but they don't call it that. But there's this little thing here, verified eligible for M &A insurance. And when you click on it at first, it says coverage includes protection for up to 100 % of the enterprise value, which I think there are places that reps and warranties insurance It matters and it can be very valid. It's pretty expensive. But when you actually get more info, all it is is reps and warranties. Basically, if the seller doesn't, if they tell you, hey, we've disclosed everything about the business and then you find that they haven't disclosed something, then, you know, and there's a breach of the reps and warranties, which they say right here, resulting from breaches or inaccuracies in the seller's representations or warranties.

20:50they'll cover up to the entirety of the purchase price, which the claims on these things I think are really, really difficult to actually get damages from. But it's interesting that they've embedded this so seamlessly into the Flippa dashboard. Yeah, I think I know which product this is because they've been out there trying to, it's kind of, they developed a product for small deals to get some form of M &A insurance. But like you said, it's limited coverage and I I don't think like making a claim has been tested because it's relatively new and it's always hard to make a claim on something like that.

21:24And then there's a whole other realm of people out there. It doesn't exist as a product, but they keep promoting that they want to have personal guarantee insurance, which I don't think is actually feasible. I'll buy that. Which does not cover like I'm an idiot and I lost our biggest customer and my key employees. it's just somebody lied to me in the due diligence process and you know and you can prove it and you can prove they did it and that they intentionally did it it wasn't misinterpreting like that's the problem with all this rwi stuff or the board of directors like liability like insurance i have i have never seen like they should be paying they never pay never they don't i've like that's a great insurance business, you take premiums, make everybody feel good, and then you never pay any claims.

22:14Like, okay, that's amazing. And that's the whole, those whole businesses for these things. I've had one situation where they, I know they sued the seller. The seller did lie quite a bit. They were able to document it because they did it on email, which is always funny because you turn that whole email system over to the buyer and they got access to all of it. But they sued and they won and they collected. I have never, it's one time I've ever seen it. Once. And you've been involved in thousands of deals. And usually what you get is an offset against the seller note. That's why seller notes are so important because you're not going to go get money back.

22:50You might be able to not pay the seller note, but you're not going to get money back. But this one case, they got the seller note clawed back and they got like a couple million dollars that they collected from the seller because it was so egregious and so well-documented. But it was a huge drag on the business and the business owner for like two years while they litigated it. Most people wouldn't have even taken it to court because it was so difficult. So I have a question for you guys on this deal. This is a business that looks like it should have massive tailwinds with VR, like blue collar training, all that kind of stuff.

23:23Does it have tailwinds or does it have headwinds? I think in a few years it has headwinds. Technology. Yeah, why is that? Technology. I think it's just so obvious this can be turned into a robot driving a forklift. A lot of it. That does compute. That totally does make sense as we move away from less human drivers and more just people overseeing things. I mean, look at the military now. They're recruiting gamers to fly the drones and whatnot. I know. I feel really bad for all the times I told my son to stop gaming. should have seen those videos of the forklifts in the amazon facility and instead of like a worker walking around to pick items from the shelves it is like a mini forklift that just goes under the pallet and like raises it nominally and it brings the pallet to you and you take the stuff off of it instead of you having to walk around it's kind of crazy but those are the more and amazon is outspending everybody in that field by many multiples but yeah i do think i mean the stuff that we do with forklifts, I find it hard to imagine a scenario where it could be automated because you're in the middle of a construction site and there's a lot of variables and it's not like a smooth concrete floor where you could drive a Roomba.

24:37But I could see there being more maybe domestic manufacturing probably helps this business, but there's a lot of external threats. Humanoid robots, bro. We're betting our entire Tesla market cap on them. 100 % that's all they've got left all you gotta do is drive one of those Xiaomi cars and you're like okay we're going to humanoid robots I drive a Tesla full self driving all the time I love it you do what model do you have Heather I have the X which they are no longer gonna make and I use the full self driving it took my nervous system a while to get comfortable there is a learning curve there of just getting relaxed about it but once you do and it keeps getting better and better.

25:22It's wonderful. I love it. I could see the Chinese releasing an open source version of that. Ford and everybody just scoops out. Does everybody do it? Yeah. Yeah. I mean, the fascinating thing that's going on right now, the Chinese are running a massive trade surplus and all the signs are there that they're trying to get through their economic downturn by flooding the world with goods. There's a massive consumer surplus in these cars that are coming out because they're courtesy of Chinese debt that they're racking up to put these cars out at less than cost. Like it's, it makes me sad that it's happening because it hurts American industry.

25:57But as a consumer, I'm like, oh, let's go. Like, this is great. Thanks for all the free stuff, Chinese government. So anyway, I totally recommend looking into the Chinese EV thing. Super fascinating. So everyone knows that the manufacturers are dumping overseas because they had too much inventory. It's happening within the country too. There was something like, I don't like 100 EV manufacturers popped up and they were spending all they could to make these things because obviously it only works at scale. But if you have 100 people competing for the same thing, they just started competing on discounts on discounts.

26:28And like the Chinese government had to step in and be like, hey, stop discounting because they saw the collapse. Like no one's making money. They're selling the cars for less than they're making it for. Domestically, it's totally crazy as well. Totally look into it. It's fun. All right. I've got this way off the topic. Let's go back to horses. No, I'm serious. Let's go back to the deal. Sorry. I think this is like, it's an interesting business and I think they've built a pretty little viable business, but it just seems like there's too many external factors, but I think it's priced probably appropriately for what it is.

27:02Like, could this, you do due diligence on this and you find that their installed base in this technical college network is pretty embedded. And if you grow it, it's an amazing opportunity. And if it plateaus, it's not a bad deal. We are coming up on time. Do you guys want to rate this one where you're at and who should buy it? I'm thumbs up. I would sign the NDA and I'm really curious about it. I don't think the purchase price is crazy for, you know, call it$600 ,000 a year in EBITDA. It doesn't excite me, but if the person buying it has special insight here or they evaluate the company and realize the current owners just weren't doing a lot with like outreach and marketing then it would get a lot more interesting for me yeah i think that if a buyer felt they could get their money back the purchase price back in like three years it's it's a go but otherwise i'd be worried about the longer term yeah and i think i'm i'm where heather is i think the buyer for this is somebody that's a strategic that's already in the space whether they're a peer or slightly bigger vendor or somebody who's in the in the midwest and wants to open up in the southeast like that totally makes sense but i think there's if you're if you're a young entrepreneur who's in an eta class maybe in south carolina or another state like that like i think there's easier businesses to go after than this one this one feels hard uh compared to some of the other stuff they could possibly do all right well that's it for this episode thanks everybody for being here if you enjoyed this one uh please tell your friends about my tracksuit hopefully they will respect me more than Milstead for wearing it.

28:32Game. Game. Game. Game. Game. Game. Game. Game. Game. Game.