Why I Love Water Treatment Businesses

Okay, water treatment, market cap. Let me explain how this deal came to me and, like, how I think about this deal. I get a deal where it's on biz by sell. It's got $2 million in free cash flow. I call the guy. The broker calls me back right away. I get on the phone, I say, listen, I'm gonna be in Wisconsin. This thing is seven miles away from a place that I live. Or I have a house. I'd never go to this property. I. But this is like serendipity. I can't believe you answered your phone. You called me back. It's got $2 million in cash flow. I love this deal. We get on the phone, we set up a time to meet in person. It just snowballed really quickly. I find out that they had another location in Illinois. And then I find out that this location was actually bought last year. And what this guy's trying to do is roll these two things together. Well, then I start doing research like this, and I go, okay, water treatment. So the thesis is, the water is hard in southern Wisconsin and northern Illinois. And homeowners that don't have a well that are on city water have rusty water. Okay? Or mineral deposits build up over time. They have rusty water. So, like, okay, how big of a market cap is this? Who's doing this? Right? Turns out it's a $652 billion market cap by 20 by 60, 30 by 2034. This has been growing at 6 and a half percent from 2025 to 2034. The market size is estimated at $347 billion. Okay? Then I start finding, like, who's doing the publications, who's buying the companies, who's doing what in the space. I go, okay, water treatment. Again, acquisitions, 2024, United Flow Technologies acquire TH TDH and enhanced wastewater Treatment. Now, again, that's commercial. I'm not interested in wastewater. I'm interested in residential systems, what these guys are doing. Okay, major acquisitions. Smart Water magazine. There's publications and information dedicated to the each industry, each respective industry. I don't care what you're looking at. And so start doing the research here to go. Okay. Dupont's decision to spin off a billion and a half water water business. Okay? GF Building Flow Solutions. Again, this is wastewater treatment. This is commercial side of the business. I want to see who's doing what in the residential side. And of course, you can buy these independent reports. Don't get swept up in becoming a professional student. Right? This is. I loathe when everybody like Goes over the top and like talks himself out of something. It's fair to do this, this research on the front side. But don't go, you're going to find something. There's no perfect deal. You're going to find something wrong with every single industry. Oh, well, Trump administration could potentially pose a looming threat to the water industry because it's an alternative energy as opposed to something like oil production. And so for those reasons, Bloomberg posted some article about the Trump administration and all of a sudden this is out of sight, out of mind. We're talking about businesses like a Helen Brand water dealer distribution company that's been around for 20, 30, 40, 50 years. We're talking about a real life problem that consumers have, which is they're going to the grocery store to buy bottled water or get a bottled water delivery service to their home because their home water sucks. Right? They are. We're talking about replacing and installing an iron filtration system, a $10,000 system that requires no plumbing license in order to do that. Talking about a reverse osmosis system that's $150 that you install underneath the sink. And the way that these guys make money is they install it and lease it to the customer for $25 a month. That's what Culligan Water does, right? So we're talking about a myriad of things. I don't want you to get swept up in the details. I just want you to go and do the research as to who's buying what and why so that you can plan, you know, if you do plan to sell the business, which I think all of us are trying to do, right, we're trying to buy, grow it, stabilize it, grow it, and exit it for the most amount of money in a reasonable timeframe so we can live off the dividends. If you're not here for that, that's okay. You might be here for income replacement. Wanna build a legacy? We all have different reasons. My goal is to sell companies later. So I do a lot of this and that's why I have the pitchbook account. I do a lot of work on the front end. I go, okay, where is the opportunity? What are they trading for? Who do I have to start having conversations with now when I wanna sell this type of a business? Okay? Then I go, so here's some information on the transactions. Here's the players in the space water treatment trade shows. All right? Where did these guys and gals live and breathe? Where are they gonna be? So I know that this is in Long beach in April, I'm actually gonna go to this show because I'm super interested in this business. And I'm, you know, Scott's got one. I lost the $10 million transaction. I. But what it did was it opened my eyes up to the Water Quality Association. It opened my eyes up to the education around how to grow this type of business. It opened up my eyes around the potential that this business actually has. Let me show you something quick, pure again. Service Titan. Look at this. So my friend, Tommy Mello with a one garage door, huge proponent of Service Titan. Everybody that's in the group is going through and getting Service Titan. For the plumbing companies and the H vac and the electrical. This is like the creme de la creme software. As I'm doing my research on this water filtration, I know that these guys service a bunch of different trades. Look at all the trades. H vac, plumbing, electrical, garage door, chimney sweeping, commercial cleaning, landscaping. All the things that I love that we're talking about here. These guys have the preferred CRM system. Now, you're going to hear from people that it's a pain. It's a pain to set up. It's expensive, it's this, it's that. But let me tell you why we're doing this. We're doing this because this is what the private equity companies want. When you go around to sell this company, it's not about saving, you know, $1,500 a month on your software system. It's about dressing this up to get the most amount of money. On the other side. If I know that ABC Company is a private equity company that's going to buy the pest control business, I'm going to make sure that the technicians are done a certain way, that they're all reporting and using the same systems and processes. I want to make sure that they're installing the right equipment, they're using the right brands. We're using the right software, we're tracking the right KPIs. Our books are dressed to match their books. The way that they do their things, right? These are the things that I'm thinking about because I'm buying something with the intention to resell it later. Okay. But as I was doing my research, I found these guys in my backyard. This is really interesting. They sell. I spend more time in Service Titan and it's the more features I uncover. It's really great. Blah, blah, blah. This they are using survey. And they are a poster boy. 20, 20, 2020. That's during COVID by the way. Post Covid. Covid happened. Q3 of 19, the business made $3.6 million in revenue. 20. 21 they did just short of $7 million. 22, they did $20 million. 23, they did just short of $40 million by implementing service Titan software. When I saw this and I saw, look, they're in all the markets I want to be in Las Vegas, Houston, Phoenix, and they're in San Diego. They're five miles that way. So I know success leaves clues, right? I looked at this first deal, I uncovered it. It's got $2 million. I'm like, why is nobody looking at this? Why are there no private equity companies doing this? Where's the consolidation happening in this? How many water treatment facilities or water treatment type companies that sell just water treatment are available in the U.S. what's the total addressable market? You know, if these guys can increase their sales by 10x by just implementing this software in the first, you know, in the first four years of ownership, imagine, I mean, imagine going from 3.6 to $40 million in four years. That's what I'm trying to do. I'm looking for lift, I'm looking for scalability. And all of a sudden, you know, okay, what's. Let's go, let's go to their website. PUR again, what's their service offering? And this is the research you got to do. Puran Water Escondido. I live in Carlsbad. They're like seven minutes from me. Okay, go to their website. Do you rent or own? Own. Well, I'm not going through that straight to book a call, talk to a water expert. What are you looking for? They paid some puff piece here to with these guys. I forget what the name is that guy there. 68 bucks a month. Here's the offer. Whole house, filter, zorb filtration, conditioning system. 68 bucks a month. That's $150 wholesale unit right there. And so 150 bucks, they sell that at Costco. This alkaline system here, boy, they really want you to schedule an appointment. This is $42 a month. They get it, you know, 150 bucks retail, it's $75 wholesale. They're in your house, they're making $42 a month. When they're in your house, they go, well, you know, this is the bottom of the bucket alkaline system here. You need a water softener. You need an iron filtration. We have this carbon system. I could get you all the bells and whistles. And I Can connect this to your pool as well, Mr. Jones. And this is a $8200 package. So their loss leader is a, you know, $24 system, a $42 system, a $68 system. Their actual creme de la creme sale is an $8,000 piece. And so that's how they expanded to. They're running ads. They're pushing ads and traffic, booking appointments. They have appointment setters and closures. Booking appointments. Somebody comes out. You don't need to be a licensed plumber to install a system like this. It's plumbing light, right? And so it turns into an opportunity for an $8,000 sell. And as a result, they went from 4 million bucks to 40 million bucks. So when I'm doing all this research, I'm going, jesus, does this make sense? Let me see what's on the market here for buy a business. Search a business. Filters. Let me put in water treatment and see what's available out there. Okay. 950, 267. This seems like a retail store, though. A wellness business with brand. Let's see. Water damage Restoration. Restoration services company. Profitable and growing. Pool services. Okay, so this is just Florida. It looks like shower filter. That's a different spin off of it. Water damage restoration Jersey Water conditioning. 250 for 90. It's too small. Not enough tech. Not enough technicians in that business. Not interested. Water environment cleanup. That's not it. Advanced water treatment with proprietary tech. No information. I'd like to learn more. Okay, there's one of the. I know there's got to be one of these. All right, here's one. Under contract accepting B2C water purifier. 53% profit margins. 11 to 2.5 in margin. Look at the. Look at their gross sales. They're making huge margins here. They've only been around since 2020, so it's not going to be buy box. But my point is success leaves clues.