Any ideas on how to properly diligence a hot tub repair business?

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April 20, 2021

by a searcher from Harvard University - Harvard Business School in Boston, MA, USA

Hot tub sales and repairs are through the roof these days. The new COVID-induced lifestyle had a very positive impact on hot tub usage and therefore increased repairs. There is a huge backlog of new hot tub sales, and dealers can't keep up with demand.

However, how do you think a repair business in this niche will perform after COVID times? Will repair plateau or will it dip for a while? Will those massive new hot tub sales generated during COVID help the repair side in a few years? How soon? These are all very relevant questions to come up with a fair valuation that is not just based on last year's abnormal profits.

Any ideas on how to study this niche and get accurate data and/or insights? I have thought about cold calling other repair shops and asking them directly. The Hot Tub Manufacturing IBIS world report is outdated (mid July) and clearly inaccurate. There are some articles online with some insights but I haven't been able to learn much.

Thanks in advance for any ideas!

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Reply by a searcher
from Columbia University in United States
Sounds like an interesting business. My guess is the repair side will in part depend on new housing formation which drives longer term repair cycles. That could take time to materialize into repairs. If selling today, I would assume they will try to sell on an inflated SDE/EBITDA figure, so you'll have to normalize for more typical repair environment. COVID could have also pulled forward some repairs due to increased usage, so would be interesting to understand what happens to repair needs post COVID when the pent-up demand to get out of the house occurs.
commentor profile
Reply by a searcher
in Portland, OR, USA
If the market is hot you may overpay for the business. Hot tubs are essentially heat exchangers, pumps, and a concrete or plastic polymer (acrylic) lined tub. Seems like the better way to approach a small, niche, project based business like that would be to be very sure that current revenue will stay the same then have a plan to service equipment that is similar or the same but at a larger scale (e.g. wastewater systems, hydroponic farm facilities).
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