July 9, 2024

Buying a $4.5 Million Butane Filling Business

July 9, 2024
34
 MIN
Buying a $4.5 Million Butane Filling Business
Consumer Goods
July 9, 2024
34
 MIN

Buying a $4.5 Million Butane Filling Business

In this episode of Acquisitions Anonymous, we review the potential purchase of a butane filling business listed at $4.5 million.

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In this episode of Acquisitions Anonymous, we review the potential purchase of a butane filling business listed at $4.5 million. Bill, Michael Girdley, and Mills, break down the deal's details, covering the financials, risks, and potential rewards. They keep the conversation accessible, making it easy to follow along whether you're a seasoned investor or just starting out.

What's the Deal?

We're looking at a butane filling company based in Greenville, North Carolina. The business generates $1 million in cash flow and includes $500,000 worth of real estate. The asking price for everything is $4.5 million. This includes both the operations and the property, making it a substantial investment.

Key Numbers

Here are the main financial points:

  • Asking Price: $4.5 million
  • Cash Flow: $1 million
  • Real Estate Value: $500,000

These numbers show a business that's currently profitable with tangible assets backing it up, which is a big plus for potential buyers.

Risks and Concerns

A few key risks come up in the discussion:

  • Customer Concentration: There might be only a few buyers in the butane market. If one major client is lost, the business could be in trouble.
  • High Fixed Costs: Manufacturing comes with high ongoing costs. If demand drops, the business could quickly face negative cash flow.
  • Safety and Compliance: Handling explosive materials like butane involves strict safety and regulatory measures. Any lapse could lead to serious accidents and legal issues.

Potential Rewards

Despite these risks, there are several upsides:

  • Leverage on Fixed Costs: If the business grows, fixed costs stay the same, which means higher profit margins.
  • SBA Financing: Government-backed SBA loans offer low-interest rates and long repayment terms, making financing more manageable.
  • Expansion Opportunities: There's potential to branch out into filling other types of gases, which could diversify revenue streams.

Strategic Advice

Bill D'Alessandro suggests securing long-term contracts with multiple customers to reduce the risk of losing major clients. These contracts should ideally cover the period of the SBA loan repayment.

Michael Girdley stresses the importance of thorough due diligence. This includes understanding the market, assessing competition, and ensuring the equipment and facilities are in good condition.

Episode Transcript