Would You Buy a 30-Year-Old Book Bindery?

0:00Hello, everyone, and welcome back to Acquisitions Anonymous. My name is Bill D 'Alessandro, and this is the internet's number one podcast on buying, selling, and operating small businesses. We've got a cool deal today. This is a book bindery. They're asking a little over a million bucks for it. Book bindery in 2026, yes, is making 30 % operating margins. One of the interesting things about this business is it is very asset-heavy. They've got more assets than the purchase price. So we talk about some interesting financing and tax considerations when structuring a deal with heavy assets like that.

0:35So I hope without further ado, you enjoy this episode of Acquisitions Anonymous. We'll set Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % beers anymore. I'm thumbs downing on just the plus inventory alone. 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.

1:10That's why Alex Merezniak, former CEO of 2U Laundry, built Fransy. Fransy 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 strategy, visit franzi.com. That's F-R-A-N-Z-Y dot com. And thanks to them for sponsoring today's episode.

1:40All right. Acquisition Anonymous with a full slate featuring also Brad Wayland from OverQuietLine. Thanks for being with us, Brad. Yeah, thanks for having me. I always love Brad because you don't pull any punches. Brad has been in e-commerce and startups and all kinds of things for a long time and seen a lot of stuff. So I love it. I love having Brad. So glad you're here, man. I thought you were going to say you liked him because he has a better beard than Mills does. He's a better beard than Mills and better hair than me. So it's hard to beat. If you're on YouTube, you're going to need to join us on YouTube to see what we're talking about.

2:19I appreciate this. I was recently at a camp with my kids and there was like a young cabin and they asked about the guy, Brad. And then someone that was their counselor said, how old do you think he is? And they said, maybe 60. Wow. You got great hair for 60. Very nice. That was very troubling. The beard has turned white. So yeah, my kids think I'm 80. So yeah. Well, there you go. Yeah. um well speaking of being old i feel like this business is a blast from the past like how's that for a segue uh so this is a cool one who's reading who's reading this one i could do it all right guards let's hear it because you found this one you the girdly claw found this one in true girdly fashion we don't actually have to look for deals anymore i have a bot that every night spends 20 minutes to find us a cool deal and i found this one um and it is a profitable book bindery fully staffed with strong repeat business located in massachusetts and the photo appears to be i guess heather this looks like book binding machines like a bunch of paper yeah printers books yeah and they're big machines printers like production line style printers like We're going to print 10 ,000 copies of your book and bind it type things.

3:42Yeah, with little knobs and dials and it looks like old equipment. It's wild. All right. So asking price is$1.1 million. Cash flow is$340 ,000. And gross revenue is$1.05 million. So they are making SDE, so seller's discretionary earnings,$341 ,000 on a million dollars in revenue. And it is an established book bindery with significant equipment assets and repeat customer base. So Brad, what does a book bindery do? Do you know? No, I don't. But I'm thinking that they put a binding on the outside of a book. But I don't know if they do the printing and the binding or just the binding. I'm actually not sure.

4:32Yeah, I think this is like you have a self-published book and you want a thousand copies of someone's got to do it. Like you can't do it at FedEx Kinkos, you know, and these guys do it. What I love, before you even scroll, shout out to future sponsor of the pod, BizBuySell. We always give them crap for never doing any innovation, right? It's like the same website for a hundred years. I think I spy some BizBuySell innovation. There is now an SBA loan eligible badge on the listing, which is probably the first code change pushed to BizBuySell in 20 years. Thank goodness it doesn't say pre-qualified.

5:13It's just eligible. I'm just not even, I'm speechless. I'm just not even going to say anything. I can tell. Sorry to take the words right out of your mouth. All right. Let me keep reading about the company. This long-established bookbindery presents an excellent acquisition opportunity for a buyer seeking a profitable turnkey operation with meaningful, tangible assets and decades of market presence. Operating continuously for more than 30 years, this business has built a strong reputation for quality, reliability, and customer service. The company serves a well-established base of commercial and corporate customers with a high-level repeat business that provides revenue stability and ongoing demand.

5:52The operation is fully equipped and includes furniture, fixtures, and equipment with an estimated replacement value, if purchased new, of more than$1.9 million. The facility is production ready and outfitted with industry standard bindery equipment, allowing a new owner to step in with minimal disruption. Experienced personnel and management are already in place, creating a smooth transition path for a buyer and supporting continued operational continuity after closing. over 30 years of continuous operations strong repeat business and a lot of stuff we've talked about they think it's well positioned for continued success under new ownership and a buyer could maintain the existing profitable operation or pursue growth opportunities the business is located in approximately a 10 000 square foot facility doesn't say if it's leased or owned the owners have not made any marketing or sales efforts in recent years implementing marketing would be good every broker says that it is sba loan eligible according to them uh sba financing with as little as 10 down may be available to a qualified buyer and the owner is committed to a smooth transition they are selling because they are retiring and the real estate is leased and they pay 7 500 a month so yeah did you did you blow through the part that they have 1.9 million dollars in equipment Like if you were, it says to buy this equipment new, it will cost$1.9 million and they want a million bucks, right?

7:20A million bucks for the business. Right. Right. Yeah. That's what it says. Well, props to them for not asking for, you know, 1.1 million for the business plus 1.9 for the equipment. Plus 400 ,000 in receivables. My, my buddy owns a, a pretty significantly sized CNC shop. and they have about 40 machines they're running. The average age of the machine is 40 years old. They've been running the same machines since basically the late 80s, which is pretty fascinating. So it makes me wonder. I'm sure this has gone through the bonus depreciation, the full depreciation, and then they're like, well, maybe we'll depreciate it again.

8:03So I'd be willing to bet these machines are sitting on their books at$0 value at this point. So, but tell me if I'm wrong here, but through the magic of accounting, you buyer get to depreciate them again do you not because you can allocate purchase price so actually actually this is fascinating so you could potentially allocate as much as much as seller will let you and brad maybe you can help us up the negotiation here but if you buy this business for 1.1 million you could allocate all of it if seller would let you agree to to the machinery and then you could depreciate the full functionally the full purchase price of the business.

8:42I mean, you could allocate a dollar to the Goodwill or some nominal amount. And you could get a tax shelter from all of this. So your first million bucks of profits, tax-free. But Brad, what's the rub? Sellers won't like it or they'll agree to it. And then they'll go to their lawyer and their accountant and they'll come back and be like, hey, I can't do that. We need to do a standard 80-20 or something like that. Doesn't always kill the deal, but I would say that it is a big risk if you're trying to like use that kind of a little too favorable for the buyers the way they'll probably end up saying.

9:20He called you a shark, Bill. Well, you know. Brad, for the listeners who are not accountants, can you kind of explain the push pull here and why buyer and seller want different things? Yeah. So in an asset sale is what we typically do at Gwaii Light and what a lot of business transactions are asset sales. There's reasons to not do asset sales, but most deals that we do are asset sales. And that is mainly because the buyer doesn't want to assume the liabilities of the seller and because the buyer wants to depreciate the purchase. Now, a lot of those buyers don't realize that if they go resell the business in like three years, they're going to recapture that depreciation that they took.

10:01So they're going to get taxed ordinary income on all that depreciation that they did if they go flip the business. But assuming that they don't flip the business, having accelerated depreciation like a section 179 or something like that can be really beneficial because you go buy this business and in the first year you might depreciate 50 % of it. So you might pay zero tax on any of your earnings in that first year. So when you do the sale, you have to allocate the purchase price across the assets or the goodwill, and those are taxed differently. And so that's what we're kind of talking about there.

10:34So if you were to get it really favorable for the buyer, it would be where they could depreciate the whole thing, like we were just talking about. But a lot of times the seller would be told by their accountant, hey, that's not going to be very friendly for me on my taxes. And so the bottom line, right, is like if I allocate it all to machinery, machinery has a short depreciation schedule. I can blow that all out pretty quickly in a couple of years. um but the flip side of that is seller has zero basis in that machinery because it's probably fully depreciated so he's going to get ordinary income on all of that recapture right versus seller has basis in his goodwill right or the sale of his goodwill is taxed differently so he'll pay cap gains if most of the purchase price is allocated goodwill but it will take me 20 years to depreciate the goodwill.

11:25Or 30, I forgot what the latest guidance is, so much longer. So for me as a buyer, I want to depreciate all that really, really fast. The seller doesn't care. He wants to pay cap gains. He wants it all allocated to goodwill. That's the crux of it, right? Yep. It is. Now, one thing that's interesting, not that it matters for this too small, when we do private equity deals, in every private equity deal I've done, they get the best of both worlds. They do a stock transaction and an asset transaction all in one, and everybody gets what they want, and it's done by spending a lot of money on lawyers.

11:58Lawyers. Yeah. Brad, at what scope does that make sense? So, yeah, so we can't get private equity. I would like to work with private equity more because in the quiet light world, we have a problem of that there's not a lot of capital available besides the SBA. So when we get a deal that's above a million in acquisition price and below, let's say six or seven million, that's a big gap. If we don't have SBA, we have a hard time filling that gap with buyers. There's just not a lot of cash buyers that want to hang out there. Private equity, they have mandates for what they're willing to take on. And so you can find some that will stretch and some that we've enjoyed working with will do as little as 1 million for a platform investment.

12:50and then they'll do maybe something smaller than that for an add-on, for a bolt-on acquisition. But a lot of them have moved upstream in the last couple of years. Some that I used to work with are now telling us, hey, we want to do 2 million EBITDA or 3 or 4 million EBITDA. Well, we don't have lots and lots of listings that are at 4 million in EBITDA. So private equity makes sense. Generally, I've been saying for a platform investment above 2 million EBITDA, for an add-on investment. It can be any size. If you find the right, why I say that is a private equity firm, they make platform investments.

13:25So if it was book binderies, maybe the book bindery is the platform investment. We're going to build a portfolio of things around this bindery. And then they're going to go add-ons. So maybe they add on commercial printers in some local town or whatever. I don't know what the add-ons would be, but those add-ons sometimes don't come with any minimums. They just want to build on more revenue and more profit so that when they go and sell it in three to five years, they're able to sell it for more. So they want to grow through acquisition as one channel. And so a lot of times where we can still find some value with private equity is the add-ons because they'll add on at just about any size.

14:02So you sell something in aviation, any aviation listing you have, they're interested in. And so they're coming in, you know, kind of asking for that. So, but for platform, which is where you're going to get your larger deals, you're, you know, for a quiet lie, like a 25 or$50 million deal, those are going to be platform investments. So for a business like this, heavy assets, now I got to look at my lender here. Is the huge amount of assets here, how they're going to affect the way I finance this deal? Or is this still kind of over home plate SBA 7A land? Because of the size, I think it's just a regular 7A loan where the equipment doesn't really help or hurt.

14:42You know, it's just too small to help. If this was a larger company, this looks like equipment that you might be able to make the case for it being a longer than 10-year useful life. And if it was larger, the benefit there would be you could shift the equipment component of this deal into the 504 program because the SBA has now uncoupled the two. You get$5 million in each program for a combined total of 10. So, like, if it was bigger, that might make sense to shift some of the long-term equipment assets over into that and preserve more of your 7A runway for future goodwill acquisitions or working capital.

15:20But it's too small for that to really make sense here. So I think this is just a kind of down the middle 7A deal where the equipment is just kind of neither here nor there. It doesn't help or hurt. Is the benefit of the 504 program purely freeing up more of your$5 million 7A limit or are the terms more advantageous in 504? It's a little bit of both. So the 504 is a two loan structure where a bank does a conventional 50 % loan to value first. And then the SBA has this direct program, which is the second, it's 40 % of the deal. And that second is a subsidized fixed rate. So the rates are in the sixes.

16:03They're lower than bank rates. So you do get, you know, usually the blended average rate is lower than your typical. So you get that advantage. There is a prepay penalty on it. So that's, you know, there's things to weigh, but it's usually a little bit cheaper money, a little more hassle because it is a two loan system. But I think for most of our business buyer clients, the main driver to using it is keeping your 7A runway free for future acquisitions or more goodwill. Interesting. Okay, and it has to be equipment with at least a 10-year useful life. It's two things, 10-year useful life equipment or commercial real estate that's owner-occupied.

16:41So anytime you're buying the building, you could use 504 for that portion or anytime you're buying that 10-year useful life equipment. Those are the only two cases. Ah, real estate, a bank's favorite thing. Favorite thing. We love it. Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't one size fits all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things. That's why my company, Viso Business Capital, works with over 30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal.

17:23Sign up for a free live Q &A session on SBA loans at visocap.net, then click Zoom sign up in the top right corner. That's V-I-S-O-C-A-P.net and click Zoom sign up. Okay. So back to this business, is this a good business? I mean, do you guys want to own this business? What I'm dying to know about this business is what have they done historically? Because Amazon was nothing in this business, you know, at a certain point. And then they started selling books. Well, we have a Amazon printing facility here in Columbia, Amazon publishing, and you can kind of self-proclaim yourself an expert and write a book and hire out a third party editor and print a hundred copies if you want.

18:09And you can be like, look, I'm an author, you know? Um, and people do that a lot. And it is obviously as Amazon would be, it's incredibly economical for the author or the kind of wannabe author to publish that way. I imagine that a lot of the folks that they're binding from, you know, probably are using Amazon as a, unless this is like, unless they sell to like K through 12 or they sell to like, you know, higher education who needs to bind a bunch of like research papers or something like that for, I just, I can't imagine that Amazon isn't eating into this. they did say here in the listing that the company serves a well-established base of commercial and corporate customers which makes me wonder if this is kind of a niche thing for corporations that are preparing you know a thousand books for a conference and stuff like that yeah yeah maybe not so amazon publishing and i mean that would kind of make sense on the repeat side too yeah this is probably more batch, right?

19:14Like I need a thousand books for this thing versus I want to make my books available for sale. Like this is probably not print on demand. Yeah. Maybe it's like, you know, the church vacation Bible school or something like that, or, you know, things like that. The, the issue I have with a business like this, I'm looking at one like this right now. And Heather, it's the one I had mentioned to you that I thought was a potential 504 capability. and the problem I have is that Michael like you said in your friends uh was it tool and die or so c and c and c yeah so I go into this business and the guy's like you know hey we're just planning on you know selling the assets and there's a viable business there but the equipment is so old it works perfectly for him and he knows like you know where you gotta like kind of bump it the right way or like tap it with a hammer or like do a little dance to make it work right.

20:09My concern is like, if I move that equipment like a hundred yards to the building next door, it's probably not going to work the right way for me. And so I'm kind of getting a great deal. The replacement value in my case is probably four or five times similar to this, right? The replacement value of the assets is incredibly, you know, many multiples higher than like what you're actually going to pay for it, but can you move it? Do you like have the wizard, you know, that comes with this business who understands how to make this equipment work right and where the like kind of skeletons are, so to speak?

20:44Well, one of my, my buddy, like the nightmares that you're talking about, like those 40 year old machines, he was potentially going to have a couple of million dollars of exposure of CapEx he was going to have to do because the company that he had bought the machines from had been bought and was deciding to sunset the version of the software that he had integrated everything into. And he was like super mad about it. And I said, well, you know, this software is 35 years old, right? And he's like, yeah, I can't believe they're discontinuing it. It's just getting started.

21:17Well, and the SBA, if you're going to get that loan, is going to want you to have a 10-year lease. So to your point, Mills, you know, the SBA wants you to stay here when it's anytime it's a manufacturing, it's got equipment, like you're talking about where it's really expensive and scary, scary to move it. They're going to want you to have a 10 year lease. So they didn't mention how much is remaining. And a lot of times what happens when the SBA has that requirement, the landlord can take a little bit of an advantage of the buyer. So they're saying$7 ,500 a month is the current rent, but you may not get that as your, as your new rent when you negotiate that 10 year lease.

21:56yeah so i mean for me i want to know not just the history but i got to figure out who the customers are and how i go get more of them because like that's the thing i can't tell it says established customer base with strong repeat business so you know maybe these are books that are just in print you know and they sell a certain number and then they order more and you're basically their their supplier i would think that is great i would be a little bit scared if I had customer concentration, you know, cause if that book becomes unpopular, you know, all of a sudden your business is going to dry up.

22:31Uh, so I would really want to kind of underwrite the cost, not just the companies that were buying from me, but like even the titles, like if there was any title concentration, you know, to figure out if I had risk there. Um, but where, like, where do you go get new customers? Like, do you want to bind to, it's not the self-publishing print on demand. Like I don't know how to do demand gen for this. I'd have a lot of questions about that. And it's got to be somewhat geographically constrained. Like I'm not going to print, you know, three pallets of books and ship them cross country. There's a printer closer who can do it with less freight.

23:02So you're going to be somewhat geographically constrained. But there's something to say. I mean, this business has been around 30 years continuously. So like the Lindy here is really nice. Like whatever they're doing, Amazon's been around for like 15 of those 30 years. So like there, I think there's some staying power. Yep. The Lindy is strong with this one. Although I am, I am curious. I'm curious about the trend. Were they a million dollar business and now they're a million? Yeah. I mean, and not, you know, if it's declining at 5 % a year predictably, I mean, there is a price where that's a great investment.

23:43Yeah. And I mean, Heather, is there like, let's say it's declining 5 % a year every year, but I'm paying 1x EBITDA. You know, like, can I ever get a loan on this or just no way? I think you can with a few lenders. There's still most of your lenders are just going to say declining trend declined. Forget it. We won't do it. But if it's, you know, if the declining trend is kind of slow and steady and we can kind of look far back and see that it has been constant, the rate of decline, and you are paying such a low multiple that what you want to be able to do is do a projection and show as long as we stay on this current trajectory of decline, we can still pay our loan off in 10 years.

24:25if in year six or seven, all of a sudden you're in DePaul, right? They're going to say no, but that's basically what you'd have to do in that kind of scenario. And still a lot of banks would have some unease and wouldn't do that, but there are some banks that would be more aggressive and would be a little more practical about it. So, yeah. To Brad's point earlier, and Heather, I think you and I've talked about this on the podcast and offline. I think there's like a huge opportunity here for folks to do kind of awkwardly sized deals that are, you know, maybe not perfectly in the SBA sweet spot and with an established lender.

25:02Like as somebody who's running an operating business, I'm amazed at the kind of, even if it's not an add-on in the sense that like I own a roofing business and I'm going to add on another roofing business, I just have an existing relationship with the lender and I can go to them and say, hey, you see my activity. You see what's happened with this business since I bought it. I want to buy a, you know, a small electrical contractor or something. And it's amazing. They're going to keep those, those loans in house. They're not going to go SBA. You know, they're going to have, I think, much broader bandwidth because you're an existing relationship.

25:36To me, it's like one of the few places where I actually see value in the chain overall right now. It's not the two and a half million dollar EBITDA businesses. Like those are so highly picked over, like for the reasons that you said, Brad, I mean, their platforms or their add-ons and either way, the competition is so fierce for those right now. Well, and doing deals opens the door to doing more deals. And that's the way banks see you. You know, you're running a business. You've proven you know how to do that. You've bought a business. You've proven you know how to do that. Then getting debt and getting, you know, lenders behind you for small, medium, large deals gets easier every time.

26:15Absolutely. So I think the risk with this is, I don't know that you eliminate it, but I think you can ascertain the level of risk by 10 minutes of this post-NDA. You look at the trend of revenue, you ask for some very, very high level, even anonymized, you know, kind of customer concentration or industry concentration. you look at an org chart and understand, okay, they say there's experienced personnel and management. Are they all, you know, as old as this equipment and they're going to be seeing themselves out also? Like you could answer those questions, I think pretty dang quick. All right.

26:52Anything else to hit on this one or should we give it thumbs up, thumbs down? I want to hear thumbs up, thumbs down. I'm thumbs up in the sense that I really want to know more about it. And like part of me is thinking, okay, it's like roughly three times multiple, there's got to be something wrong. Like what, what do we not know right now that we sign the NDA and find out? I think there's some, uh, kind of stalking, you know, horse. Well, so there's always something wrong, right? I mean, like, like this is small business acquisition, like one, except in Brad's deals, of course, but otherwise there's always something wrong.

27:26Like that's why you pay three X. Like that's why the market is kind of where it is. the question is, is it deal breaker or can you structure around it or can you fix it? And I think that's a point worth making because I talk to searchers and they've been looking for a year and they're like, yeah, just everything I see just has so much hair on it. I'm like, yeah, welcome to, this is what you're signing up for. It's going to have hair on it. You've got to figure out what hair you can deal with, bake it into price and go. Otherwise, if you're looking for a business with a million bucks EBITDA that has no hair on it, good luck there there are a lot of rich people that own five million dollar a year ebita businesses that are freaking hairballs like every business every business has its horrible things let me tell you yeah they're all loosely functioning disasters uh until you try to buy it then it's uh this is perfect it is perfect yeah and it's very passive and the owner only works seven hours a week.