George Goates·August 7, 2023

How to Buy & Build a $10m City Bus Business | George Goates Interview

George Goates, a finance professional who worked at Bear Stearns, in private equity at Leucadia, and briefly at HP, bought RTW Management — a 16-year-old Salt Lake City shuttle and bus company — in 2016 for approximately $2.5m (roughly 4x earnings, 1x revenue) after a failed startup attempt pushed him to search in earnest on BizBuySell. The business had three VA Hospital shuttle contracts, but two were subsequently lost to service-disabled veteran set-asides, forcing George to pivot into municipal transit. He won a contract with the city of Scottsdale (20 buses) and used that reference to build a multi-state portfolio now operating in Baltimore, Radford Virginia, and Morgan State University, growing revenue from $2.5m to nearly $10m over seven-plus years. The business is asset-light on city-owned contracts (the city or federal government funds ~80% of the fleet), with value driven almost entirely by the quality of on-the-ground general managers and the company's ability to out-execute large, complacent public-transit operators. Growth is gated by political relationships rather than operational performance, COVID disrupted momentum for several years, and litigation from riders claiming soft-tissue injuries is a persistent drag. George views paratransit as the next adjacency and considers long-term hold or strategic sale to a large transit operator as his exit options.

Deal facts

purchase price: $2.5m
multiple: ~4x earnings
revenue: $2.5m at acquisition; ~$8.5m in 2022; targeting $10m in 2023
financing structure: SBA loan (initially denied; George wrote his own valuation to get it approved)
notes: Described as paying approximately '1x revenue' and '4x earnings.' SBA loan was denied initially; George submitted a 3-page self-written valuation that was accepted. Business had three VA Hospital shuttle contracts at acquisition.

Why this business

George had been looking passively for years while in private equity, but a failed startup attempt (subprime auto finance company) forced him to search in earnest. He found RTW Management on BizBuySell and liked its long-term VA Hospital contracts, barriers to entry (GSA set-aside qualifications, CDL driver regulations, Department of Transportation rules), predictable fixed-route margins, and a 16-year operating history. He saw municipal transit as an adjacent and addressable growth market.

What's working

Winning municipal transit contracts by out-competing large, complacent incumbents on service quality and on-time performance
Identifying and promoting undervalued on-the-ground managers (e.g., Earl Hawkins in Scottsdale) who run operations with high autonomy
Finance background enabling more rigorous bid modeling than competitors, winning contracts and eking out better margins
Captive insurance structure that allows the company to retain unspent premium pools in low-claim years
Proactive outreach to municipalities 12+ months before bid cycles to build relationships and learn pain points
Growing from $2.5m to nearly $10m revenue through municipal contract wins across multiple states (Baltimore, Radford VA, Morgan State University)

What's hard

Extreme customer concentration at acquisition — three VA Hospital contracts, each roughly one-third of revenue — and losing two of them to service-disabled veteran set-asides after purchase
COVID caused a multi-year stall in municipal contract rebidding, which killed growth momentum and caused contract losses
Political/relationship dynamics dominate contract awards over operational excellence, making growth slow and unpredictable
Lost the Scottsdale contract (first major municipal win) after failed pricing negotiation — overconfident in operational superiority
A partner arrangement with a service-disabled veteran went badly (partner withheld payments), George pulled equipment and shut him down; the abrupt action cost them a profitable contract
Litigation risk is high: moving people on government routes attracts soft-tissue injury claims; settled one fraudulent claim for $200k
Finding and retaining qualified general managers is the binding constraint on growth — all operations depend on them

Notable quotes

I realized I want to do it myself. We were buying these companies from these people who started whatever company — a guy who's out in the oil field and buys a few rigs and sells his company for 100 million dollars. I think, well, I really like that competitive set, relative to the guys I was working with, MBAs from Harvard.

We basically paid 1x revenue or kind of four times earnings for the company. It was good value in my opinion.

Every question was the answer was Earl — who does this? Earl. Who does that? Earl. And I'm like, well, gosh, why isn't Earl running this place? So we ended up promoting Earl to general manager and he did a phenomenal job. He was just this undervalued employee, this gem that we found there.

The contracts that we've won are really because the incumbent made somebody mad. That's a hundred percent of it. If they not made someone mad they could probably get away with a little higher price, a little lower quality. But you make someone mad and like, that's it.