Deal Flow: Specialized Home Services Business
An Established Enterprise with Profitability, High Growth Potential, and Partial Seller Financing
I’ve come across an off-market business opportunity that very well could be an wet dream for the right acquisition entrepreneur — over $2 million EBITDA, enduring (over 17 years in business), and the owner/operator is retiring. This specialized service business is a strong candidate for a motivated owner/operator due to its market dominance, high profitability, included tangible assets, and growth potential. A well-planned transition and potential for seller financing can further mitigate investment risks for the new owner. FULL DISCLOSURE: I know the owner and am consulting with him on various aspects related to the transition. If you’d like more information, contact me here.
Here’s a comprehensive analysis based on the information available at this point::
Financial Overview
- Asking Price: $2.9 million
- Gross Revenue (2024 projected): $5 million
- EBITDA (2024 projected): $2.5 million
- FF&E: $1 million (included in price)
- Inventory: $300,000 (included in price)
- Real Estate: $500,000 (1.15 acres office building included in price)
Business Operations
- Established: 2007
- Location: Florida
- Employees: 14–24
- Services Offered:
- Mobile home anchoring
- Mobile home inspections
- Releveling/blocking
- Vapor barrier repair
Market Reach: Entire State of Florida
Analysis
Valuation and Price Justification:
- The asking price of $2.9 million is justified by strong financial performance, including an EBITDA of ~ $2.5 million. The price-to-EBITDA ratio is approximately 1.16, which is significantly lower than typical business valuation multiples, meaning the business is priced very attractively given its profitability.
- 2024 was a banner year. The normalized revenue base rate is $2.25 to $2.5 million per year with 46% + EBITDA margins. This is reflected in the asking price.
- Included assets (FF&E, inventory, real estate) add substantial tangible value, reducing the effective purchase price.
Strengths:
- Established Reputation: The business has over 17 years of experience and a reputation for excellence in a specialized service industry.
- Strong Financial Performance: Both projected and normalized EBITDA margins are high (46% +). This indicates efficient operations and potentially lucrative free cash flows.
- Asset Inclusion: The inclusion of significant assets in the asking price (real estate, FF&E, inventory) provides immediate value to the buyer.
- Market Dominance: The business has minimal competition and high customer satisfaction, indicating ongoing success. Of the ~ 850,000 mobile homes in the State of Florida, approximately 12 to 15% have been serviced who are eligible under State assistance programs.
Risks and Considerations:
- Economic Dependency: The business is somewhat dependent on the health of the mobile home market and broader economic factors.
- Regulatory Risks: As a service provider in the housing sector, the business may be subject to regulatory changes, especially concerning mobile homes. However, work performed is considered home maintenance, which is a non permittable function.
- Owner Dependence: The business is heavily reliant on the current owner’s expertise and relationships, which could be a risk if not properly managed during the transition.
Opportunities for Growth:
- Expansion into New Markets: While the business already serves all of Florida, there could be opportunities to expand services into neighboring states or other regions.
- Service Diversification: Introduction of additional services related to mobile homes or expansion into related markets could be an option. In addition, a new owner could earn a mobile home dealer’s license and buy and sell new and used mobile homes. The new owner could also revive the mobile home rehab division the company ran from 2009–2013.
- Government Contracts: Leveraging existing demand in the state government sector will expand a stable revenue stream and enhance business value. Non-removeable parks began receiving funding as of 2022. There is a 5 year backlog.
Support and Training:
- The seller is committed to a thorough transition period for the new owner. This is vital for continuity and will help mitigate the risk associated with the business’s key man dependence.
- The new owner will need to become a licensed mobile home installer for the State of Florida. The seller will assist with the process.
Reason for Selling:
- Retirement. This is typically a low-risk reason for a sale. And a favorite in the world of acquisition entrepreneurship.
Market Potential
According to research from Mordor Intelligence, there are an estimated 4.3 million manufactured home sites in the United States. Manufactured housing industry trends and statistics show 22 million people in the United States live in manufactured or mobile homes. And manufactured homes make up 9% of annual new home starts.
It’s well-documented that Florida is one of the places with the highest concentration of mobile homes in the United States, indicating a significant market for growth.
- Market Presence: Florida is known for its significant number of mobile home communities, catering to retirees and seasonal residents. This provides a robust market for mobile home services.
- Industry Growth: The mobile home market nationally has been growing, driven by affordability and the increasing acceptance of manufactured housing as a viable alternative to traditional site-built homes. Given Florida’s demographics and housing market characteristics, one can assume the state reflects similar growth trends.
- Economic Factors: The affordability of mobile homes compared to traditional housing makes them particularly attractive in Florida, where there are high levels of retirement and fixed-income populations looking for cost-effective living options.
Dive Deeper
There’s a myriad of things to consider when buying any business. I’ve put together a list of some things a potential buyer might want to think about when exploring this opportunity:
Regulatory Compliance
- Local and State Regulations: Mobile home services often fall under various zoning, safety, and housing regulations that can vary significantly from one jurisdiction to another. The potential buyer will need to understand these regulations to ensure compliance and assess any potential legal risks.
- Building Codes: Ensure the business complies with all relevant building codes and standards that apply to services like anchoring and releveling.
- Environmental Regulations: Depending on the location and nature of the services, there may be environmental regulations that impact operations, such as waste disposal and pollution control.
Customer Base and Revenue Streams
- Customer Diversity: Relying heavily on a limited number of clients or a specific sector (e.g., government contracts) could pose a risk if those revenue streams falter. Diversifying the customer base can provide more stability.
- Contractual Agreements: Review existing contracts for terms and conditions, duration, and profitability. Long-term contracts can provide revenue stability, but unfavorable terms might pose unforeseen challenges.
Operational Risks
- Staff Expertise and Reliability: Given the specialized nature of this business, the expertise and reliability of employees is critical. Assess the potential need for ongoing training and certification.
- Supply Chain Management: Evaluate the reliability of existing supply chains for essential materials. Disruptions can significantly impact service delivery and customer satisfaction.
As always, potential buyers should do thorough due diligence to understand the risks with acquiring a specialized service business in order to make a well-informed business decision.