Business for Sale, Would I Buy It? | Water Compliance Agency

This is the “Would I Buy This Business” series, and today we’re looking at a municipal water department compliance agency with a 97% client retention rate. Okay, interesting. I haven’t heard of this business before. Let’s look at the numbers to start. The asking price is 6.5 million. Okay, so that’s a pretty good size asking price. Gross revenue of just over $2 million [2,024,411]. And cash flow of $1.3 million [1,333,233]. So, wow, that is a really high-profit margin. That means whatever they’re billing people for it’s costing them 30 cents on the dollar to actually provide that service. So, I’m a fan of high-margin businesses. This definitely is a high-margin business. Let’s look into it a little more and see what a municipal water department compliance agency does if they tell us that. It’s a government-focused agency with three decades of experience providing compliance services to municipal water departments across the nation. Specialty is creating and distributing consumer confidence reports mandated by US safe drinking laws. I wonder if they mean safe water drinking laws. These services are crucial for the safe operation of local water departments, giving this agency a high $5,000 plus average contract value. Municipal water departments return to this company annually for copy editing, technical reviews, report designs, and report hosting, giving them a lifetime customer value of $80,000. Competition is low, and the clients are very sticky. Serve more than 500 water departments nationwide, and their customer base continues to grow by up to 10% annually, maintaining a low turn rate of just 3%. 26-year-old online business. How many employees do they have? The internal system is the main reason they’re able to sustain such favorable margins. Due to scalability, they’re able to successfully manage thousands of clients’ reports.

I mean it sounds to me like this is a solid super niche business. I definitely like what they’re doing. I like that they’ve got 500+ customers so if anyone quits no big deal. If there are lots more ways they can grow and if they’re creating reports based on a government requirement, then as long as that government requirement is in place they’re gonna continue to have a reason to exist. I would bet that there are probably even ways to further improve the margin if they’re not using overseas contractors for some of the writing and design work. The only downside of this is it’s a little bit pricey. It might be hard to get an SBA loan to cover all of the asking price that you’d want with the normal down payment, just because of the multiple. But on the other hand, it could easily cover those payments. So, yeah, I mean this is a pretty cool business. This is something that if I was in the market to expand, I would definitely be considering this one. I think it’s unique. I think it’s a high margin. I think it has a sustainable moat around it that it’s not gonna go away anytime soon. And that it could continue to grow. So, I like this business. I would definitely check this out.

More about this series, CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses up for sale and see if Matt would be interested in buying them.