Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How an Ice Machine Rental Business Sold at 600 Times EBITDA
Transcript
- Lucas: There's a business that most people never think about until their drink goes warm: commercial ice machine rentals. And one of those companies, IceCo Services, just sold for 600 times EBITDA. Luna: Six hundred times? That's even higher than that dog daycare we covered. How is that possible? Lucas: Well, the absolute EBITDA number is tiny — we're talking about a small regional operator with maybe six machines on lease. But the multiple reflects the quality of those contracts. Every machine is on a three-year lease with automatic renewal, service included. The churn rate is effectively zero because once a restaurant or a hotel installs an ice machine, they're not switching unless it breaks. Luna: So the buyer is paying for the certainty, not the current income. Lucas: Exactly. The seller, a guy named Mark who started this as a side hustle ten years ago, had thirty thousand dollars in EBITDA last year. But each contract has three years left, and the renewal rate is ninety-nine percent. A private equity firm that aggregates these kinds of asset-light service businesses saw it as a perfect bolt-on. They can drop the same machines into their existing customer base and not add a penny of overhead. Luna: What's the typical lease payment per machine? Lucas: Around four hundred dollars a month. The machines cost about fifteen hundred dollars to buy wholesale, so the payback period is under four months. After that, it's pure margin minus occasional maintenance. Mark's EBITDA margin was over seventy percent. Luna: Seventy percent? That's better than most software companies. Lucas: Right. And it's almost entirely recurring. The buyer didn't even blink at the multiple because they're effectively buying a long-term annuity. They did their diligence, checked the contracts, and closed in six weeks. Luna: So what's the catch? Why don't more people start these businesses? Lucas: The barrier is sales. You need to cold-call restaurants, which is brutal. Mark told me he got a no ninety percent of the time for the first two years. He built his route one machine at a time, often giving away the first three months just to get a foot in the door. But once you have a base, the recurring revenue is incredibly sticky. Luna: And the buyer gets to consolidate. So this deal is less about the ice and more about the customer relationship. Lucas: Exactly. It's a classic roll-up strategy. They bought Mark's six accounts, but they already have a hundred other similar accounts in the region. They'll cross-sell ice machines to their existing customers and service contracts to Mark's customers. The combined entity is worth far more than the sum of its parts. Luna: I love that this is a 'boring' business with huge multiples. It's the opposite of flashy tech. Lucas: That's what makes this podcast fun. We keep coming back to these unsexy niches that quietly print money. And if you're building a business like that, understanding what a buyer values — predictable cash flow, low churn, high margins — can make the difference between a three-times multiple and a six-hundred-times multiple. Luna: For sure. And speaking of value, these conversations have helped a lot of our listeners think differently about their own businesses. Luna: Yeah, it's a small way to say this matters. And now back to ice — any final advice for someone looking to start an ice machine route? Lucas: Start with one machine. Lease it to a friend's restaurant. Prove the model. Then scale slowly. The multiples come when you have a book of contracts that a buyer can trust. And don't underestimate how much businesses hate dealing with broken ice machines — if you offer reliable service, you own that relationship for years. Luna: So the real product isn't ice — it's reliability. Lucas: Exactly. And that's a business model that never goes out of style.