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
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☁️ 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.
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