Would You Buy a Flamethrower Company for $2 Million?

0:00All right. Hey, welcome to Acquisitions Anonymous. Today's episode is going to blow your mind, literally and figuratively. We had Brad Whelan, who joined us from Quiet Light. He was amazing first time here. And then the rest of the gang was all around me, Heather, Bill, and Mills. So always more fun when there's lots of us here. And that's what happened today. Here's the episode. I hope you enjoyed it. We'll start Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % beers anymore. And thumbs downing on just the plus inventory line. Hey everyone, it's Bill.

0:34And 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 Quiet Light 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 Quiet Light. 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.

1:07They'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.

1:41Those guys over there are great, great SOPs, great systems. I just felt like I was in really good hands all three times with QuietLight. 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. Dear listener, we have a special guest today, Brad Whalen from Quiet Light, who was starting to tell us about an episode in which he was defending what we did for one of his segments, talking about one of his listings, and he emailed Bill.

2:14And then what happened? What happened? Well, I emailed Bill and I was like, you know, when I listen to your podcast, I get very frustrated because I kind of want to jump into the podcast to defend myself. And he was like, and here we are. Here we are. I'm here to defend. Guess who's not here? Bill. Brad's about to rip us a new one. And guess who's not here? No. You know what? We're going to be so nice about the listing today. It'll be like all just sunshine and rainbows. I promise to play friendly. Well, Brad, would you do us a favor and introduce yourself to the audience? Sure. And then I brought a deal, which I guarantee is going to blow you away, blow you away.

2:56Yeah. All right. So I'm Brad Whalen. I live on the North side of Nashville, Tennessee. I have been an entrepreneur for 25 years. I was a buyer 26 times and sold a portfolio to private equity in 2015. I also bootstrapped a company with some friends that was in the custom t-shirt space. We became one of the largest screen printers in the United States. That's why I live in Bowling Green, Kentucky, where we distributed from. For many years, we had 110 ,000 square foot facility that we were producing shirts out of. I have been with Quiet Light since 2017. In my time at Quiet Light, I have closed 113 deals.

3:34And I'm a managing director of the firm as well. So I also try to help our team with just, you know, deal flow, deal problems, anything that supports our advisory. So how are you guys structured? Are you just like a standard investment banking style partnership or is there a single owner? How does it work? Yeah. Mark Dowst is the founder of Quietlight and currently owns 100 % of the firm. but QuietLight is unique because for one every advisor at QuietLight runs a company underneath QuietLight. We have 15 in our advisory and QuietLight works on a shared fee model. So one of the things that we've seen from buyers that do a lot of shopping at the different platforms is they always tell us you know when I come to QuietLight I feel like I'm getting a little bit of a curated list of businesses for sale.

4:25That's basically because we work on a shared fee model. If you see a listing on Quiet Light, some advisor has looked at that and said, hey, I think I might be able to generate fees selling this business. And if I can't get it sold, I'm not going to make anything. So over time, I think that just is a natural kind of curator of businesses for sale. So it doesn't mean you're going to love everything on our site, but we're not a pay-to-play platform. One of our competitors is a franchise. We're not a franchise. we have a long line of people that want to be quiet light advisors um it's you know we we have a good reputation in the industry that we're in and it's i think it's because of the way mark set it up you guys have some really interesting listings too you guys as employees get get individual you get salaries working there and if you if you want to just skip to the deal and tell me to shut up i'm fine with that but so you guys get salaries and then there's a shared fee structure where you guys all have a bonus pool based on the fees that get generated and then there's an individual pool that you get for your own deals?

5:28Is that kind of how it works or did I misunderstand things? Think of it more like a real estate firm. So there is no, for the advisory side, we do have a whole other side that does admin work that's salaried. But on the advisor side, you earn zero. Your income comes solely from deals. If you don't generate fees, you do not make money. And then the other thing that's kind of matched with that, because sometimes people think, oh, well, can I just sign up to do it? But there's actually a pretty long line of people that want to do it. And so we've been bringing on about two advisors a year. And so, like we've just added a new guy this week.

6:09So we're trying to bring on about two a year. We'd like to get to about 25 advisors. We have 15 today. And so that shared fee model can be a little bit punishing in a bad market. but we do feel like it's been kind of a better mix. Now, to be fair, I do have some guaranteed pay because I do the managing director work. So I get a percentage of the other side of the deals that comes in from just every deal that closes. I get a very small percentage of. Yeah, super fun. All right. Well, Bill is here. He's arrived. Do you have anything you want to get off your chest before I start to pitch you guys on this deal I brought?

6:46Hey, Brad. Awesome, see ya. I was just sitting here farting around on my laptop and realized that the podcast recording had started nine minutes ago. So, hi. That's how organized I am today. At least he's honest. Brad was telling us about defending him, wanting to bust through the speaker and defend himself when we picked on some of his deals. So, and he said he'd sent you an email. He has sent me emails. And you're not the only broker to send us emails, Brad. Many people would like to jump through the speakers. But I'm glad you enjoy it, though. I listen, so, you know, that's fair. We appreciate you.

7:21All right, so I brought a deal, which is guaranteed to blow you guys away. Blow you guys away. By the way, just so you guys know, my open claw found this one. My open claw is finding us killer deals. It seems like one that your open claw would have found. Yeah, my open claw basically has the deal sensibility of a seven-year-old boy, so it's perfect. All right, this one's on Biz Buy Sale, not on Quiet Light, but we'll do a Quiet Light one soon. It is a flamethrower manufacturer that is relocatable in Cuyahoga County, Ohio, which, Heather, that's Cleveland, right? You're asking me? I don't know.

7:57I don't know. Yeah, you're from Southern California. I thought you were super familiar with you. No. Ohio geography? No. Well, I know because the Cuyahoga River caught on fire. So that's all I know about that. How ironic. Yeah. Gridley data. All right. So there's a picture here. And Bill, this looks like a guy. what's he doing he so this is a guy with a flamethrower and he is clear it's a flame let me try this again it's a guy with a flamethrower and he is clearing a field it looks like a brush which is a legitimate use of flamethrowers that is what flamethrowers are for uh is for clearing i mean maybe other things too more fun things but mundanely they're they are used to clear brush out of fields so guys like kind of walk back and forth and just torch, you know, grasses and fields.

8:51I guarantee you they're not allowed to do this in California. Wait, what is going on now? We got some kind of droid. Michael just changed the slide and now it is not a man with a flamethrower. It is one of those Boston Dynamics robo dogs with a flamethrower strapped to its back shooting fire. You have to join us on YouTube for this episode. Yeah. Wow. Okay. Fun, girdly fact of the day. If you're interested in some depressing stats, go look at the survival rate for those guys that ran around with flamethrowers in World War II. It was a horrible existence. Very brave guys. Anyway, I'll keep going.

9:34All right. The asking price for this business is$2.2 million. Cash flow, seller's discretionary earnings is$542 ,000. Generated gross revenue of$836 ,000. and established in 2015. So Mills, that means they're doing, what's the profit rate here? $542 ,000 on$836 ,000? 66%, something like that. Yeah, who needs to sell drugs? You should be in the flamethrower business. 65%, I was close. That's insane. Either way, it costs us fuel, I suppose, right? It's crazy. All right, so great business for sale. Founded over a decade ago as a passion project, this premier brand has evolved as a market leader within a specialized flamethrower industry.

10:23The company designs and sells high-performance systems for a wide range of applications, including agriculture, fire ecology, vegetation management, and the entertainment sector. The business operates within a highly regulated niche, benefiting from significant barriers to entry and minimal direct competition. Key performance indicators include acceptable margins. They maintain 80 % profit margins through vertically integrated production and in-house fulfillment. They have a proven sales track record with cumulative revenue of over$6 million with a premium order value of over$2 ,400. The catalog features a diverse mix of wearable systems, handheld units, and a specialized remote control platform supplemented by recurring revenue from accessories.

11:03With a decade of brand equity and high online visibility, The company is well-positioned for its next phase of growth. The business model is characterized by low customer concentration and efficient, controlled operations. They think you can grow the business by expanding into retail and traditional distribution channels. They have international wholesale opportunities to meet global demand and affiliate marketing programs to leverage existing brand authority. There are two partners. They're in Cuyahoga County, Ohio, which I'm pretty sure is outside of Cleveland. They're in a lease building of 2 ,000 square feet and the lease expired back in 1970.

11:35So that can't be right. so that's it Mills so what do these guys do how would you describe it do you think anybody can have we're saying 60 plus percent gross or net margin they're saying they have 80 percent net margin what's listed in the description I don't know any manufacturer like for something like this that has margins they're actually making flamethrowers yeah And Brad, are they still on direct-to-consumer, you think? Is it wholesale? What's the channel for this? I have no idea. Haven't come across too many flamethrowers as I walk through the aisles of Target. But I will say, something seems amiss to me.

12:24I agree with Mills. Usually if I see a business that's bringing in$836 ,000, You know, maybe the gross profit could be$5.42, but in today's day and age, we usually see a pretty hefty line item for paid advertising and other types of expenses along there. So, the margins seem kind of insane. I do think because they say average order value, they're selling direct to consumer, right? Mm-hmm. Yeah. Maybe. It's like a catalog. I actually don't think so because of the margins. So I went on Amazon and believe it or not, there are tons of flamethrowers that you can buy on Amazon. They are typically like BYO propane or butane.

13:11Like they screw onto the top of like one of those small propane or butane canisters. Or you can attach it with like a hose to your grill propane and you have a flamethrower. But they are like 50 bucks. I mean, there certainly are not 80 % margins in these. The thing that tips me off is, you know, Michael, if you'll scroll down, they said that, or the description here says they sell into a highly regulated niche, benefiting from significant barriers to entry and minimal direct competition. That plus the margins does not support B2C flamethrowers. Same thing with the average order value of$2 ,400.

13:52dollars i think this is a business to business or business to government or something you know maybe they make the flamethrower packs that strap on to the robo dogs that go kill the people in afghanistan like i don't know but i think this is a more specialized flamethrower than just the haha or burn the weeds or melt the asphalt or whatever it makes me think of the fireworks distinction michael they're like what is it the um 1.4 versus 1.3 well what what is the what's the uh the the designation that you can buy at a roadside stand is it fun and uh okay it's like safe and fun or something i can't promise myself i wasn't gonna girdly splay you something today but i have to now that you asked so all right so so um so there's 1.1 g which is basically dynamite That requires a certain license.

14:47You get that from the ATF. Then there is 1.3G. That is the display fireworks. That's the stuff you see like shooting at SeaWorld or Disney. Believe it or not, Disney is the number one consumer of fireworks in the world by far. They buy more fireworks than anybody else. They do it every night in multiple parks, right? Yeah, it's crazy. They are one of the biggest. They are the biggest. So that's 1.3G. That requires an ATF license. it's federally controlled. You or I can't buy that without a license. You can get the license. You just have to go through background checks with the ATF. Then there's what's called 1.4G, which is the stuff like in South Carolina, you can go buy anywhere.

15:30I think North Carolina, I don't think you can. You can't buy any of that stuff in California. You can't buy it in Texas. And that's the stuff that bursts in the air. That's firecrackers. That's the whole thing that any consumer can buy without a license. That's the backyard fireworks. there is a subset of that stuff that is what you typically buy in say places like north carolina or uh in california and that is a subset of the consumer fireworks world called safe and sane which is basically just like little fountains and the little tanks and stuff like that i was thinking of yeah yeah so safe and sane is a subset of 1.4 g but it's not actually like a federal classification it's just a like a state regulation by california that other states have adopted.

16:09So that's an amazing mansplaining. Thank you. And I would never pass an ATF background check, so I'll never be able to get the 1.3 G. But I think that this business is something very, I think, I think it's segmented, right? If you want a bad-ass flamethrower, like you can't just buy it on Amazon, like Bill said. I think there's a segment of this that is off limits to most people. yeah and i actually purchased one of those amazon ones and really had some thoughts about what i was going to do with it and it did not turn out the way that i was expecting so i have a garden i've been like an english garden and my wife is like hey you can't spray roundup in the aisles like it'll kill us there's like gravel in there and little weeds come up through there so i was so i saw this flamethrower just like what bill's talking about on amazon and i was so excited to buy that propane tank and do it.

17:06And to describe how it actually played out versus what I was envisioning, I was thinking sort of like the picture we were looking at here where there's flames coming out for like 30 feet and it's just torching all the weeds at once. But it was more like I got the thing going, there's a little flame coming out of it and I put it on a weed. And for some reason, the weed seems to be indestructible. Like maybe it's not actually a plant. It's not burning up. It doesn't go away. I just sit it on there for a very long time and nothing happens and I've never touched it since. So it did not so much throw the flames as like a glorified candle.

17:43Pretty much. Well, I mean, it was a propane tank. So you're basically barbecuing the weeds, which is what this like, which is slow roasting. It was going to take a long time, which is what this is the boring company. So Elon Musk's supposed flame flora was precisely that. It's like a little propane tank. It's basically the full self-driving of flamethrowers. Great name, but not exactly what it is. Sorry if there's any Tesla fans in the audience. I use full self-driving. It's good. Yeah, but it's not full self-driving. I do too. It's not full and it's not self-driving because you're sitting there watching it.

18:17Don't get me started. Close to full. Yeah, it's nearly full. Which is, I don't like it. be technically accurate with your marketing. But this is not propane in here. To your point, Brad, this is like, there's something, there's a combination of like kerosene and some propellant in here and they're mixing up front. And if you mess this up, you're getting really messed up. Yeah. This guy has like compressed something back here. This guy compressed the air that he's shooting out. Like it is, he's not messing around. It's founded as a passion project. So this is founded by a pyro, basically. I think, like, to this business's credit, it's 10 years old.

19:04I would love to see, I mean, I love when people say cumulative sales. I'm like, wow, that's cool. That does nothing for me except to tell me that, okay, in 10 years you've done$6 million worth of sales. There's hopefully some trajectory that has, like, growing revenue, not flatline, over the past 10 years. um but like are is this durable maybe i like i think i think you probably could count on maybe 750 000 a year in sales of flamethrowers is it ever going to quadruple just if you take over this business and don't change anything no i don't i don't think so well i don't know mills i mean to me it's how big is the tam and can you take some take more of it right like yes I think you would have to work for it is what I'm saying.

19:51It's not going to, the TAM for flamethrowing is not going to forex, you know, over the next 10 years. But this is the thing that I, this is one of my hobby horses about small business is people will get so hung up on the TAM. They'll go, is the T is the flamethrower TAM one that I want to be in? What are the long-term trends in the TAM? Yeah. Is it a trillion dollars or not? Yeah. And it's like this business is$800 ,000 of sales. this business can 5x while the TAM shrinks just by taking share and probably just by doing like good blocking and tackling and brad i know you see this all the time probably in e-commerce businesses is like you know if a business is poorly run or not doing growth marketing you can go out and grow it just by taking more TAM not you don't need it's easier if the TAM's expanding but in small business, the micro overwhelms the macro and search people and small business investors often, I think, over index on the macro.

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21:20You also get free coaching from people who have actually built and scaled franchise businesses. If you're exploring ETA and want to understand whether franchising fits your acquisition strategy, visit Franzi.com. That's F-R-A-N-Z-Y.com. And thanks to them for sponsoring today's episode. One of the things I wonder about this, sometimes someone will bring me a business that has like incredible gross or net margins or both. And it's like on the surface, like I look at this sort of like this, you know, listing that we're looking at now and it looks incredible. And then when you actually see the P &L, what you see is like a very lumpy set of like 24 months.

22:01You know, this is 10 years. But you see this kind of lumpy set. And so when you talk to the founders, you get this narrative of like, yeah, all you need to do is add marketing. Just add marketing and you're good. And I think it's hard to move those businesses because when people actually look at them, what they see is like, this looks like a business that if I buy it, like, I don't know how to get this handful of people that have made up all the sales to keep coming back. and why were there no sales in the month of October at all or something? And so I do kind of wonder if we've got a lumpy, like, set up of financials going on here.

22:39Because, you know, on the surface, a very unique product. It's appealing. You definitely can find, like, I don't know who the target market is, but I'm sure you can find them. So we've got people that can be targeted here. and yet, you know, not like a crazy multiple for the margins that we're seeing here. So it makes me wonder if you uncovered into the financials if what you would see is sort of a, kind of a strange trajectory of where the sales came in to where it's kind of hard to explain to a buyer like, hey, like, yeah, you just add marketing. And what those buyers are thinking is, well, if it was just as easy as add marketing, why didn't you do it?

23:16Why didn't you just pour a little water on it, you know, and make it work? well and also given the end markets that i'm hypothesizing this is it's probably b2b more project revenue i mean it'd be awesome like what if they make a flame thrower that goes into a larger you know agricultural robot or something like that's a great contract but they probably don't make these things every day all day and so it might end up being pretty lumpy now but like that's can be okay unless you load it up with a ton of debt

23:51Yeah, I agree.

24:18this person has been able to achieve these margins. And is a new buyer going to be able to do that? Is it just, you know, from 836 ,000 in sales to 542 in SDE, I mean, there's hardly any expense here. And they say there's two part-time employees. There's also got to be a facility, I would imagine. Not necessarily. I wonder if this is, I mean, just given the margins, I wonder if this is some sort of almost drop ship where like they source it from China, bring it into an American facility that basically gets it certified and blesses it and makes it 10 times the price and sells it to a government contract or something like that.

25:03I mean, storage unit size facility. Is there a lending issue, Heather, with something that's in the pyrotechnics category? Not per se. I mean, there's no rule against it with SBA. You could, you know, we've even done a firearms retailer with SBA. So you could do that. What you will run into is this other category we call reputational risk. That's how the banks think about it. is there a danger that someone could get hurt or use this in the wrong way you know a product that was sold here and you know it gets traced back that xyz bank assisted with the loan and you know that a lot of banks will be concerned on that level they might also be concerned about liability product liability you know how much product liability insurance do you have you know that could be something that would eat into this margin if you go as a new buyer and just look at you know, new, getting new insurance, maybe this, this owner is a little underinsured and you come along and it's going to cost you a lot more.

26:07Um, so it's lendable potentially, but there's a lot of, a lot of risks that are kind of outside the normal financial risks on this one. So guys, I've, I found something that I need to read. There is a, there is a Wikipedia article about this company. So I found this, I Googled business listed by Sean Whitehead. I assume Sean Whitehead may be the broker. Sean Whitehead is not the broker. I believe Sean Whitehead is a relative of the founder of this business. So, and I searched for Sean Whitehead flamethrower. Okay. So just to put it back out there, we have not signed an NDA. we're just using something that is on biz by cell we're on biz by cell and google those are our tools here on this podcast um this company uh has changed its name it is now called throw flame founded in 2015 by someone named quinn whitehead the company initially sought to provide flamethrowers for agricultural purposes but the same year the company introduced the x15 a handheld flamethrower with a range of 50 feet, which drew media and legislative scrutiny due to its unregulated status.

27:24In 2018, they developed the XL18 flamethrower for a government client and later made that available to the public. In 2019, they released the TF19 Wasp, a UAV mounted flamethrower attachment, so a drone mounted flamethrower. And in 2023, the company introduced the Therminator, an FPV robotic dog equipped with a flamboyant attachment. So that picture from the listing is not a stock photo. It's not an AI image. That is the real product. That is a RoboTog. It's the Therminator. All right. This is terrifying. This business is actually very scary. You say terrifying, I say awesome. them.

28:11Okay. I guarantee right now that they are underinsured. Whatever level of insurance, it's not enough. That's right. So this company, this is awesome, appears to be a pioneer in these different type of form factor flamethrowers. So as we suspected, not your Amazon, your typical Amazon flamethrower. So So these are drone and robotic dog, remote operated flamethrowers. And so you go, okay, like, why do you do that? Obviously you're like, are you going to use these to murder people? I'm sure you could, but I imagine these are much more useful for like remote, like brush clearing in remote areas, right?