Industry Thesis Tear-Down: Niche Environmental Testing Labs (Water & Wastewater) — Fragmented, Recurring, 20–30% EBITDA? Please Shoot Holes In This

Hi all I’m a self-funded searcher based in New York, ~10 months into the hunt. I’m targeting boring-but-critical B2B services with recurring/regulatory-driven demand and low tech disruption risk. The niche: Small environmental testing labs focused on potable water and wastewater compliance for municipalities, utilities, and industrial facilities. Think routine sampling, analysis, and reporting required by EPA/State regulations. Why I like it (hypotheses): - Regulation = recurring revenue: Mandatory testing cycles (monthly/quarterly) create sticky, contract-like repeat business. - Fragmentation: Many sub-$3M EBITDA labs owned by founders nearing retirement; limited PE roll-ups so far outside food/pharma labs. - High switching costs: Methods are accredited (NELAP/ISO 17025), customers don’t like re-validating vendors. - Decent margins: Anecdotally seeing 20–30% EBITDA in smaller labs with disciplined ops. - Cross-sell potential: Add related services (stormwater, soil, PFAS testing, field sampling). Red flags / unknowns I’m trying to diligence: - Customer concentration with municipalities—how price sensitive are they when budgets tighten? - Capex & equipment obsolescence: How fast do methods/equipment change? Hidden reinvestment needs? - Talent risk: Key chemists or lab directors walking = value destruction? - Accreditation/quality systems: How painful/expensive is maintaining ISO/NELAP? - PFAS and other emerging contaminants: Opportunity or regulatory minefield? - Any “gotchas” with liability/insurance (false negatives, missed deadlines, etc.)? My ask from the community: - Has anyone evaluated or owned a lab/testing business (enviro, food, materials)? What surprised you—good or bad? - Lenders/investors: appetite for this niche? Any structural quirks you’d flag (e.g., SBA eligibility with heavy lab equipment, environmental indemnities)? - Operators: happy to hop on Zoom to trade notes; I’ll share my rough model and outreach list. Warm intros to owners or brokers in this vertical are gold—will reciprocate. Happy to give back: - I can share my cold outreach cadence, a simple KPI dashboard for proprietary sourcing, and a templated IOI structure I’m using for service businesses. DM me and I’ll send over. Appreciate any pushback or pointers—thank you! Josh