Would you buy this $5M manufacturing business?

INSIDE THE NUMBERS

Would You Buy This Business?

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:

• Is a company with no online presence missing out on growth… or hiding something?
• The owners are partially absentee… but are they still the glue holding things together?
• What does the heavy customer concentration mean for the deal?
• And is this a growth play with continued upside, or a steady business with a ceiling?

Let’s pop the hood.

DEAL GLANCE

What It Has Going For It

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:

• $300k down
• $2.1M SBA loan
• Seller financing for the rest

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

Industry Snapshot

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 — inventory, sourcing, and transportation challenges are real.

Meanwhile, the $16.2B car wash industry, with 18.5k+ locations, is shifting toward subscription models. Loan data also show car wash operators investing more in things like real estate, equipment, and expansion, a possible signal of long-term confidence.

So why does that matter for Ben?

• More washes = more recurring chemical orders.
• Larger, regional players will be looking for reliable chemical service providers.

But let’s be clear. While the fundamentals of these industries appear strong, their complexity might be cause for concern, all of which will impact what the business is truly worth.

COMPS

What’s It Worth?

Ben’s initial offer values the business at just over 3x SDE, generally consistent with industry benchmarks.

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

• Recurring revenue? Yes.
• Long-term contracts in place? No.
• Customer concentration? High — 25% from a single client.
• Owner dependence? Semi-absentee, but still unclear.
• Digital infrastructure? Weak to nonexistent.
• Recent sales growth? None.

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

RED FLAGS

Potential Roadblocks

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

1. Customer Concentration

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

2. Working Capital Needs

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:

3. Navigating IOI Before LOI

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:

• Enterprise value: Offer a range — e.g., $2.5–$3.5M — not a hard number.
• Cash at close: Another range.
• Structure: Clearly outline how the rest will be made up — seller note, equity rollover, etc.

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

What Other Experts Flagged

A few other insights from deal coaches stood out:

1. The Owner’s Role Might Be Bigger Than It Looks

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 that directly if you can, respectfully.”

2. Flat Revenue Might Mean Flat Market

“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.

3. No Online Presence: Opportunity… or Warning Sign?

Most buyers see a bad website (or none at all) and think: easy win. But our community head, Lloyd Silver — 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

What's Next?

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:

• Loop back with the coaches on Slack to sharpen the offer structure
• Talk to the deal source to better understand the story behind the $5M valuation
• Reach out to the broker to verbally discuss the IOI

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

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

This story scratched the surface of just one of the dozens of real deals we break down inside the community every month. Want in? Reach out to our team here.

The information contained here is educational, may not be typical, and does not guarantee returns. Background, education, effort, and application will affect your experience and the profitability of any business. Individual results may vary.