Would You Buy This 6.9M Revenue Sign Manufacturer?

0:00Welcome to Acquisitions Anonymous, Internet's number one podcast about buying and selling and investing in small businesses. I am one of your co-hosts, Michael Girdley. Today, Heather and I welcomed a guest, Brian, who we'll introduce here in a bit. And he did something special. He brought us a deal that he's actually looking at. Hasn't signed the NDA yet, but it was fascinating to dig into a deal with somebody who's actively looking at that one. And Brian's a cool guy, and I think you'll enjoy it. And then stick around to the end, and you'll find out what we thought about it. Here's the episode.

0:27We'll start Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % peers anymore. I'm thumbs downing on just the plus inventory line. 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.

1:00Fransy 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 fransy.com. That's F-R-A-N-Z-Y dot com. And thanks to them for sponsoring today's episode. All right. The good news is our pre-show covered all the important stuff, which is, first of all, Heather's hair looks awesome today.

1:32So we covered that. So Heather, congratulations on being you. Thank you. Thank you. Second of all, Heather, I surprised you by inviting a guest today who is brand new. This is the first time I've talked to him, but he and I emailed back and forth about some deals he's working on. I was like, Brian, you should come on the podcast. It'll be chaos and fun. So this is Brian. Nice to meet you, Brian. Nice to meet you as well. I'm happy for the meeting invite, calling out the full name of the show because I wasn't sure which AA meeting I had scheduled today. So I appreciate whoever was in charge of doing that.

2:06Give it a few more minutes, Brett. We'll be there. This is the one that seems like QAnon when you go to the website. Okay, yeah. Yeah, I had no idea what to expect. Well, Brian's awesome because we had some good chats, but then he also brought a deal. So Brian, you want to take a couple of minutes and just introduce yourself? And I know you're working on another deal, but we're not going to talk about that one today because you're under NDA on that one. So we're going to talk about one that you're not working on. But yeah, introduce yourself and then we'll jump into the deal you brought. All right, great.

2:34So Brian Kibisa, I am a searcher backed by kind of a family office. So single investor, been searching for a little bit over 18 months. Background's military and distribution and project management. So I'm really interested in companies like this. So interested to get into the weeds with it. Yeah. So how did you decide, like, what was your background before? So you did military, like how did you end up and getting into the current kind of situation? Yes. I mean, I think it really just started with the military gave me this sense of like having a mission. And so I was like, I want this for the rest of my life.

3:07And then I went to undergrad after the military, started working in the corporate world. I was like, wow, that mission stuff is kind of gone. So I was like, I got to do something else. And I happened to intern kind of with a searcher, went on, bought a great business, succeeded with that. So I've been on the path ever since, I think about eight or nine years. And actually, I think I was listening to this podcast five years ago. So it's nice to be on the other side. Amazing. So how did you get hooked up with your backer, the investor who's working with you? And why just work with one investor as opposed to multiple?

3:39Yeah, so I looked at all the different options. I definitely wanted to have investors with me, given that my background isn't really strong finance. I'm not really a deal guy. I'm more just kind of an operator. And so I wanted to partner with a team of folks who knew that side of M &A. I ended up liking the idea of having one sponsor because I think so much of this is being able to have communication constantly about what you're working on, deals and things of that nature. And when you're backing 30 people, it's kind of hard to have the full attention of every single searcher and be able to give them the support they need as soon as they need it.

4:17where I'm at now with my sponsor. I've actually co-located with them. So I'm in their office right now. And so I can just walk into somebody's office and say, Hey, I like this deal. Want to talk about it? And so I really liked that. That's awesome. Um, Heather, do you have any questions? Otherwise I have one more for Brian, then we should talk about the deal. No, I mean, I see, I do see a lot of searchers come through a similar path to Brian. So it makes a lot of sense to me. Um, you know, managing small teams and leadership position. Uh, if you come out of the military a lot of times this just is a great fit yeah yeah i think so and then so target size and then structure how are you guys thinking about stuff like are you going to use debt like how big businesses are you going after what are your criteria so really i'm looking at stuff that goes all the way down to 1.5 million in true adjusted ebitda up to about three and a half or four million adjusted ebitda and usually we do it kind of like a third of it will be a third to 40 % could be equity.

5:14And then we use kind of commercial debt and seller note to cover the rest. So we typically don't look at SBA size deals. So that's, that's another slight benefit. Don't have to do the PG. I would if I do too, but I don't have to. Yeah. And is your, is the financial sponsor giving the bank assurances around stuff or how, how is that? Like, are you having to personally guarantee stuff as the sponsor doing it? Like neither me or the sponsor have to personally guarantee it's just based on the cashflow of the business. And since we usually would try to come to them with a larger business, the banks seem to be a little bit more comfortable, especially in the times where we get to$3 to$1 EBITDA business.

5:48Everybody seems to be a lot more excited about that. Exactly. I was going to say there's a big demarcation in finance, like personal guarantees and SBA guarantees are needed pretty much under 2 million EBITDA and sometimes even under 3 million EBITDA. The banks don't want to lend conventionally without those extra guarantees, personal or SBA, until the companies are quite a bit larger. And then, like you said, how much equity are you putting in a more like 40 % or, you know, a huge, much larger percentage than 10%, which is what you see on SBA. So it's just like a little bit different, different playing field on the conventional side.

6:25Super cool. All right. And so just so I understand, are you in terms of kind of, you said you, I said you were a researcher, are you looking for something that you're going to operate? Are you looking, are you doing multiple deals? You're, you're still looking for your one deal. One deal is enough for me. I don't need the badge of six or seven. Gotcha. Okay. Well, let me read, let me present this deal that you brought. So Heather, by the way, guest of the day award for Brian, like bringing a deal, being entertaining, living an interesting path. So, so far having done no pre-screen or met before this podcast, we're off to a good start.

6:59So good job, Brian. Great. I am pleased. So this one's on BizQuest. So you're, you haven't signed an NDA on this one. Got it. Okay. So it's a Miami. And by the way, where's your sponsor? Where are you located today? I'm in New Orleans actually. Oh, nice. That is a fascinating place. Okay. I will leave it there. Asking price is 6.3 million. Gross revenue is 6.9 million. They have$50 ,000 in inventory. FF &E is 700 ,000 plus, And there's$4.7 million in real estate that is not included in the asking price. And Heather, this is one of those situations where it looks like the owner may have created more value for themselves by owning their headquarters than by the business themselves.

7:41Yep, exactly. So this is an experienced, experienced excellence in, okay, this is not what I'm looking for in terms of how to word a. Alliteration. Yeah. Experience, excellence, and architectural sign design, manufacturing, and installation tailored for the commercial market. With a remarkable track record of over 28 years and extensive portfolio of unique projects, they are known for collaborating with renowned designers and architects. Their skilled team employs a wide array of fabrication technologies and cutting edge equipment to craft high-end signs using an impressive range of materials, including glass, acrylic, resin, wood, hardwood metals, laminates, stone, and marble, plastic polymer, and digital printing.

8:22Recently, they have expanded operations by relocating to a spacious 17 ,000-square-foot building from the previous 10 ,000-square-foot facility. Revenue is steadily rebounding and has passed pre-pandemic levels. Clientele are industry leaders such as All Cruise Lines, Rich Carlton, Baskin Palmer, and Mercy Hospital. Notably, their success has been achieved without sales personnel or advertising, driven solely by word-of-mouth referrals and repeat customers. The sellers are dedicated to ensuring a seamless transition and are willing to provide ongoing support. Perspective buyers are required to submit a personal financial statement, a bio and proof of financial qualification.

8:57The real estate is available for$4.75 million. The sellers were financed. The real estate over 25 years, Amort with balloon in three years. They've been around for 29 years, 27 employees. There is no other local competition that does the high-end work they produce. And since the cruise industry is going back full steam, business has increased and expected to grow. This year, 2025 sales are tracking$6 to$7 million in revenue. They own the revenue or own the real estate. I think that's it. And the owner is retiring. And we'll give you one month of transition, Brian. Just enough time to show you where the bathroom is.

9:33And it's presented by John Preston of Wellstone Group. So Heather, how would you describe what this business does in a concise way? I mean, it's a building product that's obviously going into large projects, cruise ships, hospitals, whatnot, hotels. But I haven't quite figured out exactly what it is because they're designing and manufacturing something. Is it countertops? Maybe I missed that part. So I'm wondering if, you know, like the side of Mercy Hospital, the beautiful little sign that goes on there, if they're creating those kinds of things and putting them on there. What was the headline?

10:08Can you scroll back up? but I architectural sign. Okay. Sorry. Yeah. Okay. So it's very, very nice signs, big signs. Sorry. I got into the description and I forgot the headline sign manufacturer. Okay. I mean, I've worked with some sign manufacturing companies that do very nice work. This is, this is a bigger company than what you typically see in this space. So they've, you know, they're definitely, um, they must be doing something unique with their signs. If the, if this is all word of mouth. I think that's pretty interesting. Someone sees their work somewhere and goes, I want my sign to look like that.

10:44And they, you know, this is how they get their business. So I feel like they're doing something really kind of special and unique in their design. Yeah. This doesn't feel like, I mean, there's, if you go bid out kind of classic channel letters or, you know, PVC sign or Dibond or any of that kind of stuff these days, there are, you know, in any given city, there's five to 15 to 25 of these guys doing exactly the same stuff. And I I think a lot of them are actually getting the materials all produced in the same factories. I learned once that if you bought like big banners, like 50 foot by 100 foot banners, they were all getting produced like in Greenville, Texas.

11:20Like there's just one factory and everybody was buying from that one. But it sounds like these guys are not kind of the standard middle of the road signage like that. You know, the more generic stuff that you see on every single building. It sounds like these are really specialty high end. and maybe that's why it says architectural, like specialty signage, like the beautiful sign when you walk into the Carnival Cruise Line. These guys make that out of acrylic or whatever. Is that your reading, kind of, Brian? Yeah, I mean, I think they talk about somewhere in there, like kind of they use like specialists for their material and their design.

11:51And I guess if we just assume maybe they're doing 20 % margins because of how big their customers are, they may be at like 1.4 in EBITDA. That's pretty good for a side manufacturer. Yeah, it is. they must be doing something you know specialized yeah did you look um so it says i could sign in to view the cash flow did you look did you sign in i haven't signed i did not i did not yeah i don't know if anybody wants to sign into biz quest and uh let's see how much that's the one thing missing from this listing like are you making any money that's my first question you'd like you guessed a 20 margin and that's how you came up with 1.4 brian yeah yeah yeah i mean 20 margin would be good for something like this could be higher because, you know, they, it could be like monument style signs, you know, so it could be really high end, something very unique.

12:41So far, I like it just based on the fact that they don't even have a sales team. You know, that's a huge growth lever, potentially, they may not have a big TAM or, you know, total market size, right, that this signs are for big marquee, you know, buildings or projects. And maybe there's just only so many new ones going in every year. So that could be a limiter. But I like the fact that they don't, they get all this business without even having a sales force. It's good and bad. It's kind of, it's good. Like I would love to run a business where I don't have to have sales or marketing, but as a buyer stepping into the business, it's like, okay, I can turn that on, but they've ran this business for 30 years and they didn't do it.

13:22So it's like, what's the what would be the challenge to being able to like proactively go out and reach out to these companies facility owners and you know get that dial i don't know if they tried and didn't work people were getting overpaid or or what uh yeah so i'll give you the counter to this i think when they say we don't have a sales force and we don't have any sort of marketing and that kind of stuff. That is code for the owner and his wife or her wife, her husband. The couple that runs this business do everything. They're going to every trade show. They know everybody. I would be willing to bet the National Association of Specialty Sign Makers, these people have been on the board of it at least two or three times.

14:04Like I would be willing to bet that they are the entire sales force and the broker is spinning that in a way that is consumable for us investor types. But they'll train me for a month. They'll show you where the bathroom is. This is the bathroom. This is the coffee maker. See you later. I think it's funny when they advertise something that bad. That's terrible. One month and you're going to advertise it? Don't even say a time limit then. Just don't say it. It's funny. All right. So I signed up for BizQuest while I was making that hot take, by the way. That shows you how good of a multitasker I am.

14:41Heather, I don't know if you know this, but I look like a Gen X. but I'm truly gen alpha. That's, I can do everything all I want. So it turns out that the cashflow is 1.9 million in seller's discretionary earnings on a 6.3 million asking price. Good guess, Brian. Yeah, close. Because I would assume it's not, there's no salary in there for the husband and wife or wife and wife. Well, that's SDE. I'm assuming there is. I always assume the 1.9 turns into like 1.6. Yeah. Yeah. So what does that make this multiple then? 635 divided by 1, what did we say? 190, so 3.3 times? I did this DE, yeah. Okay, that seems really good.

15:29Maybe I shouldn't have gone on live TV with this team. How long is this listing been up? That's my question. Well, 3 ,700 people have seen it. Well, one of the things we've seen is sometimes when a listing stays up for a very long time, but it looks too good to be true, that is a sign it is definitely too good to be true when you go click on it. Could be a large project. The EBITDA that we're looking at could be the peak year, one or two really big projects that are not repeatable could be something like that. And this is, I mean, this has got to be project work, right? There's not like you're replacing these kinds of signs very often.

16:14Maybe some of it is replacement, but most of the time I think it's project work. It's not repeat customers. So that's not such a great quality, and that's what makes sign manufacturing companies skew towards lower multiples in general. And the problem with this one could be also that there could be some concentrations or some large projects that just made one year look especially good. yeah what if what if the customers are just what they mentioned there's just like one cruise line ritz cross that's the realest yeah i mean these are the guys you call when you need the 200 000 sign i mean that's the crazy thing about this if those are 200 000 250 000 projects that could be like 20 signs in a year now with 29 and they said they have 29 full-time employees 27 full-time employees.

17:08That's a big, you know, that's a big nut to overcome each year in terms of the expenses that you're going to have. And the transition risk, because you don't have a sales force and because probably the current owners are well-known in the industry, it is a little scarier in that regard as well. Are you not going to get those 20 projects next year because you're new, you know, and they don't know you? That's a huge risk. So Brian, if you buy this, Are you moving to Miami? Are you taking your talents to South Beach? Is that what you're doing? I will. I will. I'll bring a championship home. Bring a championship home.

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19:10What do you guys think about the real estate on this? They're going to sell or finance all of the real estate. Is that normal? It's not. I don't see it very often, but I actually have a deal that they're doing exactly that right now. I think probably when they finance it themselves, it's for tax purposes. They don't want all the gain at once. And so they can spread it out that way. Maybe, you know, I, I, I'm not a tax accountant, so maybe that's not quite the advantage that I think it is, but you don't see it that often. Maybe they really want to sell both. They don't want to sell just the enterprise and have you maybe buy the real estate later.

19:44So they're offering financing. So you'll buy it all as a package now. Not to be the suspicious type, but it's also sometimes a sign that they've priced the real estate so high that there's no way it'll appraise for that. And they're willing to sell it to you for that in exchange. They will finance it for you. But it's not like they're letting you overpay for it and kind of live with that debt because the balloon is in three years. I didn't even see that part. I was like, oh, they're going to finance it over 25 years? I love these guys. yeah so yeah 25 year mward okay thanks a lot the three-year balloon is kind of a problem um which to me like a way to very intelligently in like these guys situation transfer wealth to future generations as you have your operating business it buys land the operating business pays real estate you know pays rent to the the land company that owns the land and then when it's time to exit you just sell the operating company with a lease to your existing land you get to spend all the money that you just got when you retired from selling that business congratulations but you still have something left over that's a recurring revenue asset for your kids with a lot of tax advantages in the form of a headquarters and basically you just keep that and it's you know it's checks for the family forever but these guys seem to not be that excited about doing that so maybe they want to move to the villages and party it up or whatever but it's interesting that they said that recently they went from 10 000 square feet to almost 17 thousand square feet right before selling like why would they do that yeah so they could sell the real estate sometimes we do see in the sba world we do a lot of real estate lending to other occupied commercial real estate lending and you will find um if a if a real estate market is particularly tight you will find um these types of companies buying something too large and having a subtenant you know having a tenant in there um because that's all they could find you know so they're kind of buying something for rent control but they can't find just the perfect size so they end up buying something larger that happens a lot i mean you have to like being in miami and located near the cruise lines like that's a you know they're not going to be buying these signs from indiana they're going to be buying them from you know the world headquarters of cruise lines which is fort lauderdale miami um have you guys ever taken a cruise out of miami or Fort Lauderdale?

22:06I've never been on a cruise. First of all, okay, here's my rant about cruises. Most people think cruises are horrible, they're trashy and all this kind of stuff. It is, you should at least try it once. It is remarkably fun. People watching, just being, it's like being at this like weird traveling summer camp. You see all kinds of crazy stuff people doing and these people like rolling up to the buffets, being very confused and trying to figure out why the entire ships are staffed by filipinos like just the whole aspect of it of people watching just totally makes it worth it and it's actually fun because everything's just like done so anyway people tell me they hate cruise i'm like just go on one just go on one just try it you'll like it i know so anyway that's my rant about cruises um but i think this this highlights something worth talking about it says revenue is steadily rebounding in his past pre pandemic levels.

23:00To me, that screams these guys have massive customer concentration with the cruise lines. Yeah. And it rebounded. So everything shut down during COVID and for a while afterwards, especially with cruises. And so that does lead me back to thinking that this is a peak year that they're trying to sell on. Maybe they were ready to retire. This happened a lot. There are a lot of people who were ready to retire, but hadn't done anything about it. And then COVID hit. And then they got stuck with the business for five more years because they had to get through COVID and out to the other side. And there's a lot of businesses on the market today that I kind of feel fit that profile.

23:33They finally climbed all the way back out, but this could just be serving some pent up demand and not something that's normalized yet, you know, just because of this particular niche that they serve and the fact that it's big projects. Do you think someone could get an SBA loan on this if they did like Perry Pursuit or you think concentration and project base would just kill it? Well, here's something interesting. Yes, you could get a peri-pusu. I'm going to say the EBITDA, the adjusted EBITDA, we'll call it 1.6 because I'm going to lop off$300 ,000 of that 1.94 salaries. So we'll say 1.6 times 3.75.

24:12You can afford to borrow on a DSCR basis about$6 million. So yes, you could do a 5 million SBA plus a 1 million Perry Pursu. To get a Perry Pursu, though, you need to have a little bit better than average application. So that means really good resume fit, a decent personal financial statement with some liquidity, you know, not, you know, so it needs to look a little bit better than average. But yes, you could. You could also, this is what's interesting. A lot of people don't realize this. They think, okay, that they're maxed out on SBA. They've used the 5 million. You could still buy the real estate with an SBA loan.

24:45I know they're offering seller financing here, but there is a program called the 504 program for owner-occupied real estate. And it has a feature called the green program. And if you make this project green, which is energy efficiency, basically adding solar panels or some other LED lighting, whatever it may be, you certify that it's going to improve the energy efficiency of the building by I think it's 10 percent, then you can get another$5 million for the real estate. So you could actually do both in this case if you did a 504 green. So, yeah, but I think, you know, it's one of those where it depends on how the other prior years looked.

25:25If this is just a one good year and the last two wouldn't have good DSCR, then you probably wouldn't be able to get a peri-pusu. Banks, you know, take the underwriting of those peri-pusu deals a lot more rigorously and they want better cash flow coverage in multiple years for those. And that ladies and gentlemen is why if you're going to get an SBA loan, you are insane if you don't call Heather. So just so you know. And I have a whole team. It's not just me doing your loan, but I will be on top of it for you. And yeah, please call me. So Brian, what are the first like two questions you ask after you sign the NDA and take a look at this deal?

26:07What do you want to learn first? So I don't think I could do this unless there was some sort of maintenance involved. And I know like, you know, probably a brand new sign outside of a hospital isn't getting that much damage. But on the crew side, it's water damage, at least. Like if there was some form of repeat business that I could count on, or at least the knowledge that maybe there's, you know, like some of these have multiple locations. And there's maybe a single person in charge that could, you know, say like, okay, we need this boat that's on this dock or this boat on this other dock. I don't think I could do it if it's just they're doing one-time projects down there in Miami.

26:45That's just because of investor mandate and how you guys are thinking about the business or why that restriction for you? Yeah. I mean, I think we really care about revenue quality. It kind of depends on how strong the other factors of the business is, but we don't need contractually recurring revenue, but at least 50 % reoccurring to know that we did something this year, we'll probably do something next year. It doesn't have to be the exact same amount, But if it's all just one time, the husband and wife on this thing are calling up their buddies and saying, you need anything this week? And they're saying, yes, actually, we do.