The Business Inquirer #031
In this issue, I highlight 7 listings including a online addiction prevention app, a boho jewelry brand, an explainer video Agency, and What I Learned Last Week.
The Business Inquirer covers the most interesting tech-enabled business acquisition opportunities. Written for entrepreneurs, search funds, investors, and business owners. It’s completely free and you’re guaranteed to learn something new.
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In this week’s issue:
🛒 eCommerce - 2 listings
☁ SaaS - 3 listings
🕸 Content/Marketplace/Service - 2 listings
🧐 What I Learned Last Week
🛒 eCommerce
Boho Jewelry - $475k + Inv
For sale is a 5-year-old bohemian jewelry brand built on the Shopify platform.
700k e-mail list; 560k+ social media followers;
400+ 5-star reviews on TrustPilot; 4.5/5 rating on Etsy;
TTM Revenue: $919k; Profit: $152k; Margin: 17%
Asking: $475k; Multiple: 3.13x
✔ What I Like
I have a soft spot for jewelry businesses. There’s been consistent demand for this style of jewelry…
The business is well aged with proven customer acquisition strategy. The huge e-mail list and large amount of positive ratings provide a moat/differentiator against competition. There are opportunities to expand to Amazon and other sales channels. Perhaps can add adjacent products that appeal to this demographic.
❓ Questions & Concerns
Gross product margin is 70% and net margin is 17% which means there are high acquisition costs. The listing mentions one supplier, this could be a risk. What % is repeat business? How sustainable is this jewelry niche?
You can view the listing on Quiet Light Brokerage.
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College Party Accessories - Open to Offers
For sale is a 4-year-old Shopify store selling college partying accessories such as bottle openers, apparel, and other gear. This could be a good e-commerce learning business.
$21 AOV; 416 unique visitors per month;
TTM Revenue: $2,425; Profit; $1,212; Margin: 50%
Asking: Open to Offers
✔ What I Like
SwiftExits is a new Shopify marketplace and they verify all the numbers. This is a business that was making $47k in 2017/2018 when the owner focused on it. It’s been neglected for 2019-today. The owner has a clear playbook for running and growing the store. I think this could be an interesting, inexpensive way to learn e-commerce by getting a bit of a head start.
❓ Questions & Concerns
There’s nothing original about what this business sells. The danger is that it’s much more expensive to scale this business today than it was in 2017. I suspect there could be a wide gap between what this business is worth and what the owner would accept. I’d have a very clear plan with enough capital to grow this business.
You can view the listing on SwiftExits.
☁ SaaS
Online Addiction Prevention Apps - $3.3M
For sale is a portfolio of 5 mobile apps in the internet addiction prevention niche.
4.5-star rating on Google Play Store;
309k installs LTM; 13.3k paying users;
TTM Revenue: $840k; Profit: $732k; Margin: 87%
Asking: $3.3M; Multiple: 4.51x
✔ What I Like
Interesting niche with a lot of opportunities.
Margins appear very healthy for the business and the 4.5 star rating provides a moat if there’s a large volume of ratings. It might be interesting to partner with a content leader in this space for an affiliate relationship.
❓ Questions & Concerns
How crowded is this space? What’s the competition? How are customers acquired? What’s the churn? Is there a risk that OEMs will simply build these features in the near future into their software/hardware? Valuation is something to think about.
You can view the listing on FE Int’l.
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Shoppable IG Stories - $165k
For sale is a 5-year-old Shopify app that enables users to create Shoppable Instagram galleries to increase engagement on Shopify stores.
Competitors: Foursixty, Showcase
1k+ active users
TTM Revenue: $50k; Profit: $49k; Margin: 98%
Asking: $165k; Multiple: 3.37x
✔ What I Like
Shopify is growing exponentially and any app that allows merchants to increase engagement through Instagram is on-trend. There’s clearly a PMF with over 1k users. A few large competitors to learn from.
❓ Questions & Concerns
Foursixty seems like the leading competitor with some large brands as clients and good ratings. What’s the differentiator? Why would a merchant choose this app vs. the same app that Fashionova uses? How do the reviews look on the app store? What type of marketing has been done? What’s the churn? How are those margins calculated?
You can view the listing on MicroAcquire.
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WooCommerce Food Delivery Plugin - Open to Offers
For sale is 5-year-old WooFood which is a food delivery plugin for WooCommerce. This plugin is used by merchants to accept, route, and print food delivery orders.
5-star rating
$120k ARR
TTM Revenue: $250k; Profit: $240k; Margin: 96%
Asking: Open to Offers
✔ What I Like
WordPress is by far the most popular CMS with a very robust ecosystem. This particular plugin seems to be one of the most popular for restaurant delivery integration. Nice ARR to go along with the one-time purchases.
❓ Questions & Concerns
Requires constant updates to make sure it’s compatible with popular themes. I’d be curious to see the growth numbers and churn for this plugin. There are a few competitors in this space - is there enough demand?
You can view this listing on MicroAcquire.
🕸 Content/Marketplace/Service
Explainer Video Agency - $200k
For sale is a 9-year-old Agency that specializes in creating animated explainer videos for brands across the globe. These videos are used for internal and external communication.
Notable clients include Amazon, Samsung, Soc Gen, BCG, Vodafone, Reliance Jio, and more. Registered as an approved vendor with many brands.
5-person team; Bootstrapped; Project based pricing;
TTM Revenue: $58k; Profit: $29k; Margin: 50%
Asking: $200k; Multiple: 6.90x
✔ What I Like
Anyone who has worked in a corporate setting has seen plenty of these animated videos from HR, marketing, and other departments. It’s an interesting Agency business with a niche focus on the enterprise. Nice margins. Good reference clients. Proven client acquisition strategy. Appears that there’s recurring revenue coming from Amazon and Soc Gen.
❓ Questions & Concerns
I think this business needs a direct sales team which can get expensive. How difficult is it to hire video editors to do the work? Why have they not been able to scale this business in 9-years? Unless there’s some strong growth, the valuation seems expensive. Is there an opportunity to move away from project-based pricing and into a monthly subscription model? Or both? Are you competing against software? Who else?
You can view the listing on MicroAcquire.
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UK Accounting & Bookkeeping Service - $1.5M
For sale is a 3-year-old accounting and bookkeeping service based out of the UK. Very detailed listing with some great data.
450 paying customers; 70% of customers are > 1 year old;
Possibility to rent a UK bank license
TTM Revenue: $1.2M; Profit: $1.1M; Margin: 92%
Asking: $1.5M; Multiple (est): 1.40x
✔ What I Like
Good industry with consistent demand. The monthly revenue/profit numbers are steady. Great margins. Customers have been acquired through partnerships with FB communities. I like the detailed listing. Valuation seems very reasonable.
❓ Questions & Concerns
How secure are those partnerships? What would the CAC be without them? Does the valuation seem too cheap? Not sure here. Heavy due diligence would be required for this one.
You can view the listing on Flippa.
🧐 What I Learned Last Week
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Investors are fueling the latest housing boom
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Lessons learned buying micro-SaaS
I’ve written about Andrew Pierno and XOXO Capital previously. They are a 6-month-old partnership that buys and grows micro-SaaS businesses. They’re starting small to test the waters and plan on raising a fund once they get a track record. They document a lot of their work online and they have a nice collection of blog posts. I thought their most recent post outlining the lessons they’ve learned in the last 6-month is a good read.
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Acquisition trends in Shopify apps
Jakob Greenfeld writes the Opportonities.so newsletter. Recently, Jakob hosted a podcast with Daniel Sim who’s deep into the Shopify App Store ecosystem. Daniel founded a popular plugin and sold it after 7-years to SureSwift Capital. Anytime you sell something to a company that has “Capital” in its name, you know there’s some $$$ involved. Now Daniel’s running App Store Analytics. Recently, he created a database that makes it easy to find underoptimized apps, apps that have been acquired, etc. You can get access to this data on Gumroad.
Jakob and Daniel had a great discussion around acquisition trends in Shopify Apps…
Since selling his app business, Daniel has monitored the Shopify app acquisition industry closely. Here are a few trends he's seeing right now:
The sub-$500k space for Shopify apps is seeing extremely high multiples. A financial buyer would usually value on a 3-5x seller's earnings multiple. Recently, he's been seeing sales go through on an 8x or more multiple.
That means if you're just buying these apps for a financial return it's going to take a long time and has a lot of risk. As a pure financial acquisition paying 8x doesn't make sense. But what's happening is that folks are spending $50k cash to buy learning. Instead of starting from scratch, they start with a working app with existing customers and history.
This is also, for example, what happened with Shaan Puri's micro-SPAC experiment. They ended up buying the Sold Stock app for $22k and gifted it to one applicant who's now operating it primarily as a learning opportunity.
So if you have the cash then spending it to buy an app that already generates some revenue, gets you a lot of learning. You then have a platform to develop that app, or use its merchants to market your new app.If you can break out over $1m then multiples get back to sanity and can be a good financial investment. Then further up the market we see multiples go high again as strategic buyers enter the picture.
There’s a lot of great content in Opportunities.so. Honestly, I have no clue if I am a paying subscriber or not but I get the e-mails and would encourage others to sign-up.
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New investor class fueled by FBA roll-ups
Nick Stuart writes about the Boston startup ecosystem, VC funding, etc. Like me, he’s been closely watching the Amazon FBA roll-up space. In his latest newsletter, he shared some interesting thoughts on a new investor class that’s emerging.
There is now a multi-billion-dollar market ready to purchase early-stage ecommerce companies. Much like in VC today, that capital is becoming increasingly competitive and commoditized. These buyers have admitted that there may only be ~50K businesses on the Amazon marketplace doing more than $1M in revenue that fit their profile. My guess is that this will force aggregators to start buying much younger/riskier businesses with far more aggressive terms before they’ve reached product-market-fit. Sound familiar?
I think this will have a interesting impact on the ecommerce industry as whole. You essentially have an exit strategy that was nonexistent three years ago that now has billions of capital in search of deployment. This is a huge opportunity for not only founders interested in launching an ecommerce business, but also an opportunity to become a seed investor in DTC businesses.
These buyers want a $1M+ revenue business, and they’ll buy them at a hefty multiple. That’s only 10K customers buying a $100 product. I think in the last year alone, plenty of independent sellers have done this with a 1-2 person team. It sounds like a great time to start an incubator that launches hundreds of brands a year, or an investment group that funds niche ecommerce ideas for an equity stake.
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Saturation in the Amazon Marketplace
Marketplace Pulse is out with a new article demonstrating that that marketplace is not saturated.
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WP Trends
Iain Paulson writes the WP Trends newsletter where he provides updates on the WordPress ecosystem, plugin trends, and acquisition opportunities. The latest issue just came out and as usual, it’s a great read. I’d recommend subscribing if WordPress plugins are in your wheelhouse.
Number of new plugins added to the WordPress ecosystem:
That's interesting to see the dip between 2017 and 2019, and with the year to date number suggesting a further dip or at best a plateau, have we reached the saturation point in the repo, are plugin authors going down a premium-only route?
That's a good topic for another email, but for now here's the number Mihai was after.
A whopping 65% of plugins on the repo haven't been updated in the last year. 55% haven't been updated in the last two years, and 47% in the last three.
46% of plugins have zero reviews. 2% have less than 100 downloads, and 35% with less than 1,000 downloads. A massive 61% have less than 100 active installs.
Tons of great content in the latest newsletter which you can read here.
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That’s all for this issue of The Business Inquirer!
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