The Business Inquirer #109
The Business Inquirer #109
In this week's issue, I highlight 4 listings including two digital marketing agencies, a manufacturing SaaS, and an IT MSP.
Hello Friends!
In this week’s issue:
☁️ SaaS - 1 listing
💼 Online Service, Media, Marketplace - 2 listings
🏡 Main Street, Offline, Other - 1 listing
⚒️ Tools & Resources
This issue of The Business Inquirer is brought to you by DueDilio.
DueDilio is a leading marketplace to hire highly vetted M&A due diligence service providers.
Our large and growing network of independent professionals, boutique, and mid-size firms specialize in finance, legal, technology, commercial, and other key areas of business diligence.
We save our clients the time, hassle, and cost of hiring a due diligence professional.
Submit your project.
Review qualified proposals.
Hire a service provider.
Simple and FREE.
☁️ SaaS
Digitize Processes for Manufacturing (Acquire) - $500k
Launched Dec 2021
Competitors: Dozuki, Poka, Fulcrum
B2B SaaS with user-based pricing
15 paying clients; Most clients on annual contracts;
Product Demo: Loom Link
Revenue: $145k
Profit: $111k
Margin: 77%
Multiple: 4.50x
✅ What I Like
SaaS business model with recurring revenue. I like products that have a very well-defined target market. This makes it easier to optimize your marketing spend and increase ROI. The small client base makes it easy to manage and get feedback.
Read: How to sell into the manufacturing industry and get manufacturing companies as customers
❓ Questions & Concerns
Not a lot of operating history. Small client base so there’s a lot of concentration risk. How does the competition look? How long is the sales cycle? Hiring a direct sales team is expensive and will eat into the margin.
🚀 Growth
Outbound sales
Industry events/conferences
Industry publications
Partnerships
🤝 Who’s the Buyer
Strategic with access to the client base
Someone with experience in the manufacturing sector
Tech background or access to a dev team would be helpful
💼 Due Diligence
Analyzing the tech stack is key to making sure everything runs smoothly. This can cost anywhere from $3k to $5k. Financial DD is easy for SaaS businesses and shouldn’t cost more than $3k for a business of this size. DueDilio can help you hire the right due diligence service provider.
💼 Online Service, Media, Marketplace
Digital Marketing Agency (Acquire) - $150k
Launched June 2010
Competitors: Boostability, Reach Local, Hibu
B2B agency charging monthly recurring fees for services
Revenue: $85k
Profit: $56k
Margin: 66%
Multiple: 2.68x
✅ What I Like
These are great starter businesses. This one has some operating history. There’s recurring revenue. Easy to outsource a lot of the actual client work, if needed. Many opportunities to cross-sell other products to the same clients. There’s consistent demand for digital marketing services.
❓ Questions & Concerns
Valuation is too high for this type of business. Is there any client concentration risk? A lot of competition in this space. Do they focus on a particular industry? How are clients acquired and for how much? How secure are those recurring revenue contracts? Is there any key-person risk?
🚀 Growth
Partnerships
SEO
Direct outreach
Paid advertising
🤝 Who’s the Buyer
Small strategic acquirer who wants to buy the revenue
Someone who wants to start an agency and skip the step of acquiring your first few clients
💼 Due Diligence
Small business so the due diligence costs should be relatively low. You want to get a very basic Proof of Cash for around $2,000. Maybe do a few client interviews for around $500. With such a low deal size, I’d recommend doing the rest of the due diligence yourself to limit the costs.
__ __ __ __ __ __ __ __ __
Digital Marketing Agency for MedSpa (BizBuySell) - $2.6M
Launched in 2020
110+ clients; $2,150 monthly AOV;
One owner; 15-person team;
20% seller financing
Revenue: N/A
Profit: $925k
Margin: N/A
Multiple: 2.81x
✅ What I Like
There’s a lot to like about this listing. Nice client base with a high monthly AOV. Business can be relocated and operated remotely. Serving a very specific client base that’s growing rapidly. Team already in place to handle the day-to-day. There’s a FB group and an online course. Seller financing is available.
This is a good compare & contrast between this agency and the one above it. Clearly, this is an infinitely more attractive opportunity for the same valuation. Broadly, I think there’s a lot of opportunity in providing services to the MedSpa industry. I recently read that MedSpa for men is the next frontier.
❓ Questions & Concerns
Will the existing team stay in place with the new owner? Is there any key-person risk? How does this business compare to competitors? Are there any regulations around advertising this type of business?
🚀 Growth
Partnerships
Direct outreach
Industry events
Targeted online advertising
Direct mail campaigns
Acquire competitors
Go after larger franchises instead of single-location stores
🤝 Who’s the Buyer
Strategic serving the MedSpa industry
Another agency wanting to expand
Individual with experience in this industry
💼 Due Diligence
Besides the typical financial and legal due diligence, a buyer of this business may want to consult with an SME who’s familiar with the target market. Spending a few hours to understand the MedSpa industry and its pain points would yield a lot of benefits. You should be able to hire someone for $200 to $300 an hour for a consultation.
🏡 Main Street, Offline, Other
Miami IT MSP (Synergy) - $2.5M
Launched 30+ years ago
Serves SMBs; Full suite of services;
Revenue: $1.5M
Profit: $480k
Margin: 32%
Multiple: 5.21x
✅ What I Like
A lot of operating history. Located in a fast-growing market of Miami-Dade. Team already in place. A lot of the revenue is recurring.
❓ Questions & Concerns
It appears that SDE is growing a lot faster than revenue - why? What does client churn look like? A lot of client concentration risk with the top 5 clients representing 48% of revenue. How easy is it to hire? Valuation is high but this is a very hot sector right now. Why have they not grown more in 30+ years?
🚀 Growth
Referral programs
Local events
Local publication
Local Google & Facebook ads
🤝 Who’s the Buyer
Strategic already serving this market
Searcher who’s looking for an MSP business
💼 Due Diligence
For financial due diligence, you’ll want to get at least a lite scope Quality of Earnings Report. That’ll run you anywhere from $6k to $15k for a deal of this size. You also want a good M&A attorney for legal due diligence. The attorneys in the DueDilio network charge anywhere from $250 to $450 per hour.
⚒️ Tools & Resources
I want to share some tools & resources that I have found helpful. Please note that some of these may contain affiliate links. This means that I may receive compensation if you sign-up and use them.
PrivSource - PrivSource helps you source deals and connect with transaction partners without ever paying a success fee.
BizNexus - Marketplace + off-market origination in one platform. The marketplace averages about 10k active listings & pre-CIM opportunities, and the off-market origination focuses on data & multi-channel. Local Boston company and I consider the founder (Adam Ray) a friend.
X5 Deals - Proprietary deal sourcing. They do the outreach and send you relevant, actionable deals directly into your inbox.
Import Dojo - a newsletter that sends eCommerce and Amazon FBA businesses for sale to your email inbox. They send deals each Wednesday at 9:00 AM CST.
Kumo - Find every deal in one complete platform. Spend less time sourcing deals and more time closing them. Kumo aggregates 180K+ business listings into one easy-to-use platform.
Cerebro Capital - Cerebro has a network of 1,500+ lenders who can provide debt financing for your acquisition, refi, etc. $500k minimum.
Curators - Proprietary deal sourcing. You need targets that fit your investment criteria, and Curators delivers week after week - we even update your personalized database on a daily basis with new information on best-fit targets.
Deal Flow Scout - Peer-to-peer deal flow exchange. Free, open, transparent.
Deal Sourcing Guide - A directory I put together of online marketplaces, brokers, DFY deal flow, and more.
How did you like this issue of the newsletter?
If you enjoyed reading this newsletter, why not share it or subscribe?
Let’s connect: LinkedIn, Twitter
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.