Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / Why a Pool Service Sold at 35x EBITDA with Route Data
Transcript
- Lucas: You know, Luna, I've been looking at a deal that kind of broke my brain a little bit. A pool cleaning company in Florida — three trucks, twelve routes, no real website to speak of — sold for 35 times EBITDA. Luna: Thirty-five times? That's triple what a typical main street service business fetches. What was the story? Lucas: The story is data. The buyer — a regional roll-up platform based out of Atlanta — didn't care about the chlorine or the filters. They paid for the route density map, the renewal rate data, and the customer lifetime value spreadsheet that the owner, a guy named Mike, had been quietly building for eight years. Luna: So it's not a pool company. It's a recurring revenue data asset disguised as a pool company. Lucas: Exactly. And honestly, that's the kind of framing that makes these episodes possible week after week. If these conversations have moved your work forward in some small way, a couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, it really does make a difference. We keep the show ad-free because of that support. Lucas: Alright, back to Mike's pool routes. The numbers: $1.2 million in revenue, 38% EBITDA margins, and a 93% annual renewal rate. That renewal rate is the key. Luna: 93% is exceptional for a service business. Most pool companies I've seen hover around 75 to 80 percent. How did he get that number? Lucas: He didn't do anything sexy. No app, no smart pool monitor. He just called every customer 48 hours after every service visit. Not a script — just 'Hey, is everything clear? Any leaves we missed?' That personal check-in built a relationship that made switching feel like a betrayal. He tracked every call result in a spreadsheet. Luna: So a low-tech CRM, essentially. But the buyer saw that spreadsheet as a goldmine. Lucas: Right. Because the spreadsheet included customer lifetime value projections by route. He knew exactly which routes had the highest density, the longest tenure customers, and the lowest churn. He could show that Route 7 in Naples had an average customer tenure of 7.2 years with a CLV of $4,800 per account. Luna: That granularity is rare for a three-truck operation. Most owners just know the total revenue. Lucas: Exactly. And the buyer's platform had a proprietary algorithm that could optimize those routes further. They calculated that by combining Mike's routes with their existing adjacent routes, they could eliminate one truck and increase profit per stop by 22 percent. That synergy is what justified the multiple. Luna: So the buyer wasn't just buying existing cash flow. They were buying a platform for operational leverage. Lucas: That's the lens. Now, the deal structure is interesting too. 70% upfront, 30% in a three-year earnout tied to route retention. If Mike's customers stay on the books, he gets the full multiple. If churn spikes above 10% in any year, the earnout ratchets down. Luna: That's a smart way to align incentives. The seller can't just cash out and ghost. He has to help transition those relationships. Lucas: Mike actually stayed on for six months as a part-time consultant — two days a week, just making those phone calls. The platform's CEO told me that Mike's calls were 'the glue' that kept renewal rates above 90% during the transition. Luna: So the earnout served its purpose. But I have to ask — 35 times feels like a frothy multiple for a pool route. Are we in a mini-bubble for data-rich main street businesses? Lucas: I think it's less a bubble and more a recognition that these businesses are essentially annuities. A 93% renewal rate with a 7-year average customer life means each customer is worth far more than the annual service fee. The buyer is effectively buying a bond with a yield that compounds if they can add services. Luna: That's a good point. The platform could upsell pool automation, maybe even insurance. The data is the entry point. Lucas: Exactly. And Mike didn't just have data — he had proof. He showed the buyer three years of renewal history by route, by season, even by technician. One technician had a 96% renewal rate; another had 88%. Mike knew exactly why. The lower-rated guy was always rushing, skipping the small talk. So the buyer could coach or replace. Luna: That level of operational transparency is what separates a 'lifestyle business' from a 'platform asset.' Lucas: Right. And I think that's the takeaway for any main street owner listening. You don't need a fancy app. You need a spreadsheet, a phone, and a willingness to track the things that actually predict future revenue — renewal rate, customer tenure, route density. Luna: Mike basically built a private equity pitch deck in Microsoft Excel over eight years. Lucas: He did. And it paid off. He walked away with about $4.2 million after taxes and transaction costs. He's now living in Asheville, North Carolina, and he told me he misses the calls. He actually still calls a few of his old customers — not for the earnout, just because he likes them. Luna: That's the ironic part. The very thing that made the business valuable was the personal connection, and that's exactly what the buyer can't replicate at scale. Lucas: That's the tension. But the buyer is betting that systems can replace personality. Mike's spreadsheet becomes a playbook. The question is whether that playbook survives contact with new hires. Luna: Do we know how the earnout is tracking? It's been about a year since the deal closed, right? Lucas: I checked in with the CEO last week. Renewal rate is at 91% — down a bit, but still above the 90% threshold for the earnout. They lost one driver who didn't like being tracked. But the platform backfilled with a technician who actually has a better script than Mike's. So it's holding. Luna: So the earnout will likely pay out fully. That's a good outcome for Mike. Lucas: It is. And I think it's replicable. Any service business with recurring revenue and basic data hygiene can command a premium. The multiples are rising because there's so much capital chasing route-based businesses right now. Luna: What's the next frontier? Could we see a pool service company trade at 50 times? Lucas: Maybe, if they add a data layer that predicts pump failures before they happen. Imagine an IoT sensor that alerts the platform to a failing motor, and they dispatch a repair before the customer even knows there's a problem. That kind of predictive data could push multiples into SaaS territory. Luna: So the pool guy becomes a tech company. I love it. Lucas: That's where the market is heading. And the owners who start collecting that data now, while they're still small, will be the ones sitting across from a buyer with a spreadsheet that commands 35 times.