Welcome!
I’ve looked at thousands of businesses for sale, and learned to read between the lines. Every issue, we'll take a deeper look at a listing, learn something, and I'll rate the deal at the end!
This week’s listing: This company is a legacy brand in the vacuum business. It makes regular vacuums and specialty vacuums, everything from giant car wash blowers to tiny dusters for cleaning electronic components. It also makes a killing on specialty replacement parts.
The numbers: They’re asking $14M on $2.8M EBIDTA in 2022, at a 20% margin. (I’d definitely want more up-to-date financials!)
Green flags
First, any business that’s been around for 80 years has the Lindy effect—if it’s been around a long time, it’ll probably be around a long time.
Next — this company isn’t just competing for average household products. They make niche, professional products, from horse grooming to car washes. Getting a foothold in a niche is a lot stickier than being one brand of a million to the everyday consumer.
Then there’s the repeat business. Once you sell a vacuum, you can keep selling replacement filters and bags, which is why you see 90% of revenue from repeat business. I love that.
And how about that Made in the USA patriotism? Sure, some other company might undercut you with cheaper Chinese products, but with some customers you’ll get lifelong loyalty.
Lastly, they’re super diversified. If the car wash industry cools off (which it won’t), you still have pet care, consumer electronics… your bases are covered.
Red flags
Fundamentally, there’s a questionable moat against new competitors. There’s no reason you can’t make the best stainless steel vacuum ever in China. And that “Made in the USA” branding will only take you so far if the price difference is big enough.
They’re also pretty small for their age. There are a lot of competitors in the vacuum business. So how do they get bigger if they haven’t already?
And honestly… I don’t want to live in New Jersey, so the location sucks.
What I’d ask
- How “USA” is Made in the USA? Are they manufacturing these vacuums here, or importing parts and assembling them? If they’re manufacturing, it’s an easy growth lever to offshore that labor.
- Where do the sales come from? As in, what percent of their sales are in the pet market? What percent is car wash blowers? I’d want a better sense of where the money is coming from.
- What are the latest financials? I’m not doing a deal based on numbers from 2022. Where are things today? What direction are they trending?
My rating
Despite all the questions, I’m hoovering up this business. Or at very least, I’d sign the NDA for more information on those financials.
But…
It’s already sold.
So I’d say this deal 10/10 SUCKS - and I mean that in a good way! (Vacuum joke, get it?)
This deal is on Axial — so you’ll need to make an account to check it out!
Have a great week!
Michael
