Would You Buy This $5M Manufacturing Business?

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Today, we take you inside a deal for a $5M manufacturing business. Make sure to hit reply if you want more of these!

(If you’re looking to buy or sell a business, try giving BizScout a spin.)

NUMBERS

One of our community members — we’ll call him Ben — is sizing up a 40+ year-old chemical manufacturing biz in the Midwest.

The company makes soaps and cleaning chemicals for car and truck washes, and distributes equipment like pressure washers and replacement parts.

It’s an off-market deal, and Ben is working to figure out what a fair price might look like. As soon as he brought it to the community, a few critical questions came up:

Let’s pop the hood.

DEAL GLANCE

Ben’s target has been operating for over four decades and comes with a few strong fundamentals. Here’s how the reported financials shape up:

Ben’s initial proposal to the community? $2.7M — well below the rough $5M valuation. He laid it out like this:

As he told us, the offer is designed to account for certain risks, minimize cash out of pocket, and ease lender concerns. But this was just a first draft.

The final structure might look very different — and a lot better for both parties — thanks to the community’s help.

DIGGING DEEPER

Ben’s deal lives at the intersection of two fragmented but resilient industries: chemical manufacturing and distribution, and car and truck washing.

Chemical distributors — about 7.5k firms — generate over $173B annually. Margins tend to improve when businesses focus on specialty products or offer value-added services like custom blending or just-in-time delivery. But this is a logistics-heavy business, and inventory, sourcing, and transportation challenges are real.

Meanwhile, the $16.2B car wash industry, with 18.5k+ locations, is shifting toward subscription models. SBA loan data suggests a period of generally lower acquisition activity in the space, with car wash operators investing more in expansion and improvement across real estate and equipment.

But if you’re a soap manufacturer, this isn’t doomsday. It’s time to win loyalty with existing operators and help boost revenue per wash. As weaker players exit, stronger chains will consolidate, and they buy in bulk from trusted suppliers.

But let’s be clear. While the fundamentals of these industries appear relatively strong, their complexities might be cause for concern, all of which can impact what the business is truly worth to Ben and the broader market.

COMPS

Ben’s initial offer values the business at just over 3x SDE, generally consistent with industry benchmarks, given the specifics of the deal and this business.

Multiples in this space vary widely depending on margin profile, customer stability, operational matters, and more. In this case:

On paper, it looks like Ben might have the room he needs to negotiate.

RED FLAGS

Immediately, one of the community’s deal coaches, Candice, flagged 3 key areas to watch:

One customer makes up 25% of revenue. The top 10? Over 70% — and none appear to be under long-term contracts.

How cash-intensive is this business? For a buyer planning to expand, understanding how money moves will be critical to avoid liquidity crunches. Here’s a quick tip:

The broker is asking for an Indication of Interest before moving to an LOI. Ben wondered: Is that an issue?

Candice broke it down further:

Bottom line: These aren’t deal-killers, but they’re not rounding errors either. Ben’s success here depends on how he gathers intel and navigates the nuance.

THE BOTTOM LINE

A few other insights from deal coaches stood out:

Even if only 20 hours a week, one coach noted this could signal deeper reliance than the owners let on. “In diligence, I’d want to understand exactly what he does and ask the team directly if you can, respectfully.”

“You need to be really careful about market saturation… It could be that they’re already working with 9 out of 10 players in the area.” If that’s true, future growth might not come from better marketing or sales, it might require expanding to new geographies altogether.

Most buyers see a bad website (or none at all) and think: easy win. But our community deal coach, Lloyd — a longtime business owner and broker himself — offered a caution: “No online presence can be a red flag.”

Sometimes, it means low-hanging fruit. Other times, it signals a business that may be masking deeper issues in sales, systems, or operations.

THE DECISION

Ben’s leaning in, and the coaches are, too. The consensus? There’s real potential here IF Ben moves fast, conducts thorough due diligence, and structures smart.

Another deal coach, Hants, was blunt: “Time kills deals, especially off-market ones. You need to be thinking in hours and days, not days and weeks.” His advice? Try to bypass the formal IOI process, if possible.

Candice agreed: “I’ve seen brokers try to use buyers to test the market. Don’t ask. Tell.” With that in mind, Ben’s immediate plan was to:

In true Contrarian Community fashion, other members offered a hand:

Now it’s Ben’s turn to get creative, get decisive, and get moving.

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