Breaking Down This $400K Defense Contractor Deal

Should you buy this defense contractor for sale in Rochester, New York? It's cheap, but is it a good deal? I don't know. It is a DOD contractor with over 100 federal contracts selling complete inventory. It is a government acquisition cost of over $9 million. Over 100 pallets of mostly NATO-era 1990s to 2010 new and old stock inventory includes industrial electronics, aircraft and ship parts, valves, gears, and breakers, hardware and machine parts, and much more. Very little field gear. I don't know what field gear is. Probably like the stuff you wear to go out in the field, like ammo pouches and stuff. Cross-branch and cross-platform items. Many high-value parts, 50K plus each. Inventory spreadsheet available upon request. Will not break up or separate. Good traceability. Specialized and lucrative opportunity. Price for a quick sale: owner financing available with 50% plus shipping. Could be up to 30K depending upon destination. Down 25%, do it year 2 and they'll finance it, all that kind of stuff. Best deal, 100%, no financing, cash offer. Will you pick up, pack and load? We'll do it for you. So what is this business? It's somebody who apparently was a government supplier and had a bunch of inventory. They're selling the business for $400,000 out of Rochester, New York. It is owned by a sole proprietor, so it wasn't even incorporated. It has a business registration. I don't even know if that's any good. So established in 2012, they last did financial statements in 2022. They did $100,000 in sales last year and they earned $75,000. They include no land or building and they're selling 100% of it and there are personal reason for sale. So yeah, buyer does not need to have experience owning and operating a business or franchise. Okay, so what are you actually buying here? So number one thing you need to know is you are buying a business which has one customer and that customer is the United States Department of Defense. That is the people that buy stuff for our different military, basically branches, right? And all the other stuff that goes with the Department of Defense. So they've acquired all this stuff in 2012 with the idea of selling it to the government. And last year, after investing over $9 million over the life of the business in a bunch of crap, they now own a business that has all of this stuff. So I'll pull up this stuff. So old stuff that is getting picked over and apparently bought through and they're selling it all for $400,000. You can come pick up all this crap and try to sell it to the government yourself. So that's the thing to know. Number one about a business like this is You look at it and you're like, well, I have all these different SKUs, all these different items, and I could potentially sell them to lots of different people. It looks like this is all stuff that gets sold to one customer, the United States government. And so it's up to you to figure out, okay, are you the right person to sell this stuff to the United States government? My suspicion is this is a bunch of crap that the government doesn't want anymore because it's so old. So yeah, crazy. There's probably just a bunch of stuff sitting in a warehouse and then occasionally they'll see requests for this type of stuff and it gets, you know, sold to some government entity trying to pick up something along these lines. My suspicion is there's a combination of stuff here that is, number one, nobody needs it because that stuff has been retired, right? If you have some plane type that was put out of service or some piece of equipment that's put out of service 20 years ago, nobody's ever going to need a replacement part for that. And then you have a second issue where potentially there's other suppliers that are already supplying this stuff that is actually valuable to them. And here you look at the category here, industrial electronics, like electronics. Like, you know what all the electronics are worth? Not much. Mostly just, mostly just recyclable value. You hope to get some money out of the metal inside of them, and then hopefully that is more than what it costs you to get rid of all the hazardous waste that comes with a business like this. And then there's a downside of a business like this. So they've owned all of this equipment and stuff for over 10 years, right? And it doesn't look like they're getting new equipment. And when you have that kind of situation, eventually a hodgepodge kind of inventory of stuff like this, the inventory gets worse and worse each year. You think about it, Why does that happen? It's because you have this mishmash of stuff that they acquired somehow, and then the stuff that people want gets bought, and you're left with just the stuff that people don't really want. And look, I think the other red flag with this is if you own this stuff and the government, you know, you just have it sitting in a warehouse, obviously it's kind of a huge mess. I mean, look at this, look at this stuff just everywhere. Look, I think you're gonna buy something like this, yeah, maybe they sell it to you for $400,000, but like there's probably 150,000 different item types in here that you got to categorize and do all that kind of stuff. And you have to ask yourself, if this is already set up, it's already categorized, it's already all here, and the government could potentially buy it from you if there's stuff here that they want, like, why are you going through all the hassle of selling the thing? Now, to them, if I'm making $75,000 a year, I would probably sell this at $400,000, especially if somebody's willing to come pick it up, which is one of the things they want to have happen here. Apparently this has gone from early on likely being something that made them good money. But then as this inventory has gotten staler and staler over time. So look, in the end, I think this just looks like a huge hassle. I mean, you're just dealing with a bunch of paperwork for in the end what is not much money as a return on investment to $400,000. You know that you're on the struggle bus here. Plus, you know, you have to put in also all it's going to cost you to move this stuff to wherever you're located. And, and go from there. Now, who should actually buy this? Man, let's say you're somebody that wants to hang out, and the most fun thing you can imagine doing in life is having a warehouse full of NATO-era pseudo war parts and stuff like that, and categorizing it would be the most fun thing you can do. By the way, I have a friend and his wife, her number one thing that she likes to do to relax is to buy IKEA furniture and build it following the instructions. Like, other people do jiu-jitsu or whatever. She builds IKEA furniture following the instructions. So I mean, people are into stuff like that. So if you're into that, if this seems like something fun for you and browsing like the government RFP database, and maybe you're a former veteran, so you have an advantage, you know, into selling stuff like this to the government, like, yeah, maybe it's a good side hustle for you, especially have a free warehouse somewhere. You know, this one's in Rochester, New York, so they clearly had low cost and go from there. And look, the seller is even willing to finance it for you. An interesting play here that I would consider doing, especially if you had no money, is go to them and say, look, I'll take the whole thing off your hands, but here's the deal. I will give you 50 cents of every dollar or 40 cents of every dollar that comes in as I sell this stuff, but that way you don't have to take all this risk of cash. And that's maybe the way I would try to structure this if I was looking for a side hustle. You know, if they're willing to finance it, they are probably willing to do a deal like that too. But look, in the end, I would want to understand what's happening with these annual earnings. Are they decreasing each year? My suspicion is they've been going down, down, down year after year, and you have to appreciate that at some point, like, they're going to go to zero because all the stuff you want to sell has been picked over. So definitely an interesting one. I think it's the right thing for the right buyer. But also you have to wonder about, you know, for this kind of money and this kind of hassle, you know, is it worth your opportunity cost? And maybe it is. Maybe it's super fun for you and this is exactly what you want to do. And you could sit right next to my friend's wife who likes to build IKEA furniture, and you could catalog all your NATO-era equipment from, you know, refrigerators from 1985 or 1920 or 1990. Does anybody want to buy this stuff? I would find out before I put it in my warehouse, that's for dang sure. I like this kind of oddball stuff. You don't see this very often. And I think with some creative financing, you could really make an interesting deal happen here. So yeah, if you want a big old warehouse full of crap or stuff, big old warehouse full of stuff. So rating on this one, I think for the right person, it would be pretty interesting. Comes down to deal structure. So maybe I would give it 3 chilies out of 4. Not a good deal for me just based on size. Not worth the hassle. But look, if this looks like fun for you, definitely go do it.