The Business Inquirer #015
In this week's issue I highlight a display ad website, an ecommerce store, and an Amazon FBA business along with what I learned last week.
Every week I highlight interesting online businesses which are for sale adding my own commentary. This newsletter is for those who are interested in business, digital assets, and entrepreneurship. Subscribe below to receive it directly in your inbox.
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Hello Friends!
In this week’s issue I want to try something a bit different. I’ll be highlighting one business with a price tag of <$25k, one with $25k - $250k, and one for >$250k. Let me know if you like this format.
In this week’s issue:
Display Ads - Automotive Niche
eCommerce - Faith-Based Jewelry
Amazon FBA - Faux Plants
What I Learned Last Week
Display Ads - Automotive Niche (Asking: $15.3k)
Description
For sale is WindowTintLaws.us which is a 1-year old vehicle window tint review website generating revenue through Amazon Affiliate and EZoic display ads.
Description
Sale includes WindowTintLaws.us & TintLaws.com
63 articles written by seller
Authority Score: 38; Backlinks: 2.8k; US Organic Traffic: 21.4k
Avg Revenue: $556/m
Asking: $15,310 (Dutch auction)
Multiple: 27.6x
🤓 Why I’m Highlighting This Business
Website in an evergreen niche with strong traffic and diversified revenue. A lot of levers to grow the revenue stream and easy improvements to make.
✅ What I Like:
Evergreen niche
Growing traffic & revenue trends
Tintlaws.com included in the sale
Levers to grow the business
Valuation is reasonable
❌ What I Don’t Like:
Competitive niche - 2 other larger competitors
Website needs redesign (also an opportunity)
Short operating history
🚀 How I Would Grow This:
Redesign the website to modern standards, better UI/UX, more car graphics, better branding, change ad placement
Add lead capture element
Add local directory of “best” car tint shops (scrape Yelp)
Look into affiliate offers outside of Amazon
Promote affiliate offers more prominently
Add gallery of cars with various window tinting - graphics win in this niche
You can view this listing on Motion Invest.
eCommerce - Faith-Based Jewelry (Asking: $160k)
Description
Wonder Woo is a 1.5 year old ecommerce store selling faith-based jewelry using the Shopify platform. 50% of business is inventory and 50% dropshipping.
Description
3.1% conversion rate; 9.9% return customer rate;
26k mailing list; 2.2k IG;
Unique Visitors: 27,965/m
86% of traffic comes direct, social, or e-mail
9k units or $126k of retail inventory value
AOV: $28.50
LTM Avg Profit: $6,299/m
Holiday Avg Profit: $12,724/m;
Non-Holiday Avg Profit: $4,770/m
Profit Margin: 16% (blended)
Asking: $160,000; BIN: $260,000
Multiple - Asking: 2.1x; BIN: 3.4x
🤓 Why I’m Highlighting This Business
At this point it shouldn’t be a surprise that I am a big fan of any business which is in a political or religious niche. These niches benefit from easy (relative) targeting, engaged fans, and spending power. There is 100% an opportunity to do a roll-up of these types of businesses.
✅ What I Like:
Faith-based niche - evergreen, engaged, passionate buyers
Jewelry is usually a high margin product
Well designed store that has higher conversion rate than industry avg
Relationships with suppliers, and 3PL are already in place and will transfer
Detailed listing
❌ What I Don’t Like:
Profit margin & AOV seems too low for a jewelry business
Not a lot of traffic from organic search
Holds inventory of best selling products
Social media following is not where it should be
Valuation isn’t cheap
🚀 How I Would Grow This:
Analyze levers to increase the AOV. Either raise prices or introduce higher-priced & higher margin products
Outsource social media marketing to maximize that distribution channel. Test TikTok as another channel.
Explore affiliate programs and other PR initiatives
You can view the listing on Flippa.
Amazon FBA - Artificial Plants (Asking: $890k + Inv)
Description
For sale is a 3-year old Amazon FBA business selling artificial plants. The business differentiates itself from the competition on superior quality, product curation, and business automation. Not a lot of detail in the listing unfortunately.
Details
13 highly ranked SKUs, 3,750+ reviews, 4.6 average rating
Pricing premium of 20-30% over competitors
Many products see 30% conversion rates
Revenues & SDE grew 160% and 176% in 2020
LTM Revenue: $933,229
LTM Income: $257,325
Margin: 27.6%
Asking: $890,000 + Inventory
Multiple: 3.46x
🤓 Why I’m Highlighting This Business
I’ll get one thing out of the way - I do think this business is a bit overpriced. The indoor plant industry saw incredible growth in 2020 due to COVID and you can see that reflected in the numbers in this listing. Feels a little bit like the seller may be getting out at the top of the market. Having said that - it’s a great industry. I personally did extensive research into the succulent market - real & fake, and I think there are opportunities. This is especially true if people continue to WFH. I wish there was more detail in the listing but since it’s with QLB, it’s been well vetted.
Interest in artificial plants is close to ATH but it’s really been trending higher since 2012…
✅ What I Like:
Niche is literally “evergreen” 😂
Higher quality faux plants sell for >$250. High AOV
I’ve purchased faux plants and it’s mostly crap. This business seems to be selling high quality plants which is a big differentiator.
Nice margin of 28%
High number of reviews creates a moat
❌ What I Don’t Like:
There are well known pros and cons to FBA
Being dependent on Amazon is risky
Doesn’t appear that the product is exclusive. How easily can someone offer it?
Would be better if there were more SKUs
Valuation is a bit aggressive
Have to see how this business would do in a post-COVID world
No details on how this business markets itself
🚀 How I Would Grow This:
Look into launching independent website to diversify away from Amazon
Offer affiliate program
Add relevant low-cost but high margin products. Plant maintenance, aesthetics, etc.
Look into adding influencer marketing with IG & TikTok
One angle is to directly partner with a few influencers and work with them to design a custom faux plant. They handle promotion, you handle the manufacturing and logistics. Do a rev share.
You can view the listing on Quiet Light Brokerage.
🧐 What I Learned Last Week
Aesthetics
For the above faux plant listing I randomly looked up the word “aesthetics” and was surprised by the Google search volume
Everything that comes up on the first page simply points to the definition of the word. Why are people searching for this term?
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Why invest in a website fund
I’ve written about website investment funds previously and we discussed them at a Clubhouse event. Mushfiq Sarker did a nice write-up on the various fund structures and vetting process for some of these funds. It’s a great read.
From Mushfiq…
Why invest in a website fund? 4 Reasons
There are a handful of reasons why an investor may invest in a fund. Here are the ones that resonate with me:
1. Passive Income
In general, investing in a fund is as passive as it gets. You give someone else your money and they do the rest. Specifically, in the digital business space, where it can be time-consuming and emotionally taxing at times to manage the assets yourself, a fund sounds like a great way to get the high-returns (albeit lower than a DIY approach) in a passive manner.
Takeaway: Funds are passive. You receive quarterly dividend payouts and lump sum amounts as the fund liquidates assets.
2. Diversification from conventional investments
If you are heavily reliant on real estate, stocks, or other conventional investments, investing in a website fund can provide the necessary diversity.
Digital assets are relatively uncorrelated with the stock or real estate markets in terms of day-to-day operations. However, there is a correlation of the stock market to website buying/selling in terms of cash available for individuals/companies to deploy money into digital assets.
Takeaway: Website funds provide a new asset class to diversify your portfolio.
3. Diversification of other digital asset classes
Chances are if you are reading this write-up, you are already active buying websites or building them. You may already have your funds tied into your own digital assets.
Each investment fund has a thesis of what they will invest in. There are funds solely focused on content websites, Amazon FBA, SaaS, among others.
If you are highly invested into content websites, it makes senses to invest in a e-commerce fund to get that exposure. The only other alternative is to DIY your own e-commerce business but that takes away from your current ventures.
Takeaway: If you are invested in some sort of digital assets, investing in a fund unrelated to your assets can provide necessary diversification.
4. High returns
Website funds should be providing higher returns than, for example, your traditional real estate fund. This is because websites generate significant cash flow as a function of their acquisition cost (i.e., assets can bought at 30-35x multiple of monthly revenues) and have many “levers” to grow.
Takeaway: higher returns can be obtained, but higher returns comes with increased risk.
I highly recommend you read the whole post which has a lot of detail on this topic.
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Asset correlation
One thing I’ve been thinking about is correlation. Website funds and digital assets are touted as being an “uncorrelated asset class”. Are they?
Someone smarter than me can probably provide an educated answer but my quick thought is that we just don’t know yet. Website and digital asset investing is a relatively new space that’s becoming more democratized. We don’t know what the long-term track record of this space will look like.
Using the last few years performance simply doesn’t provide a good answer. The reality is that you really had to try very hard to not get double digit returns in risk assets over the last two years. I’d love to see some data on how these digital asset classes performed in a sell-off. I know Bitcoin was down 73% in 2018 - not very “un-correlated”.
There’s an old saying in financial markets - “in a crisis, all correlations go to 1”
In case anyone is curious, below is the annual periodic table of returns for popular asset classes.
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MicroAcquire raising pricing
Received an e-mail this morning from MicroAcquire that they will be raising prices. Today MicroAcquire Premium is $290/yr but will increase to $390/yr starting March 1st. You can lock-in the lower price forever if you sign-up before the price increase. They will be using the additional revenue
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Why people share
James Currier is a general partner at seed-stage investment fund NFX. From 2000-2006, he ran the world’s largest psychological testing website — Tickle.com. He had 5 psychology and statistics PhDs on staff at the company, and their goal was to develop a system for understanding human motivations in order to get products to go viral.
James recently published a great post on “Why People Share: The Psychology Behind Going Viral”.
As an investor, I've used this framework to help early-stage startups go from the beginning to 10 million+ users, including Poshmark (NYSE: POSH) and Goodreads (acq. Amazon).
For the first time, I'm making public the 8 Reasons People Share, including:
Status: Why scarcity motivates people to share.
Identity Projection: How we achieve vindication through our identity.
Being Helpful: Why it's compelling to share things that we find useful.
+ 5 more
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That’s all for this issue of The Business Inquirer!
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Important Disclaimer: This newsletter is provided for informational & educational purposes only, and should not be relied upon as legal, business, investment, or tax advice. This newsletter may link to other websites and certain information contained herein has been obtained from third-party sources. While taken from sources believed to be reliable, it has not been independently verified. The Business Inquirer makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. References to any companies, securities, or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any business, tax, or investment decisions. Content in this newsletter speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.