The Business Inquirer #111
In this week's issue, I highlight 5 listings including a tactical gear e-com business, a text to speech SaaS, a CPA firm, and more.
Hello Friends!
In this week’s issue:
🛒 eCommerce - 1 listing
☁️ SaaS - 2 listings
💼 Online Service, Media, Marketplace - 1 listing
🏡 Main Street, Offline, Other - 1 listing
⚒️ Tools & Resources
This issue is brought to you by PrivSource.
PrivSource is a private, deal-sourcing network for experienced lower and middle-market M&A professionals.
The platform helps professionals source buyout/capital raise opportunities, connect with transaction partners, and keep up with lower and middle-market M&A news/activity.
Thousands of firms and intermediaries across the lower middle market M&A ecosystem use PrivSource to source and list buyout opportunities.
Quality - fully vetted deals and network
No Fees - no commissions, referral, or success fees
🛒 eCommerce
Survival & Tactical Gear (AppBusinessBrokers) - $5M
Launched in 2018
Sells products and memberships; $1M in ARR;
850k e-mail list
Revenue: $3M
Profit: $1.7M
Margin: 57%
Multiple: 2.94x
✅ What I Like
The business has very strong fundamentals. The 57% net profit margin is very high for an e-com business. I like that 30% of the revenue is recurring (21k subscribers). It looks like the owners built a very well-oiled machine here.
❓ Questions & Concerns
The listing doesn’t mention anything about product sourcing, fulfillment, or customer service. Is this a dropshipping business? Are there any issues with transferring accounts (Clickbank) from one owner to another? Any seasonality?
💼 Due Diligence
First, you want to hire a firm or professional who specializes in e-commerce businesses. DueDilio can help.
Legal
Review owners and company history
IP rights and agreements with 3rd parties
Total legal costs can run $15k to $20k
Finance
The goal here is to verify the revenues, expenses, and costs that are specific to an e-com business.
Costs could be in the $8k to $15k range
Marketing/Technology
Verify customer acquisition channels & CAC
Review the tech stack
Costs could be in the $2k to $4k range
Operations
Product sourcing, fulfillment, returns, and customer service
Payment accounts & transferability
At DueDilio, we have many due diligence providers who specialize in e-com businesses. A full due diligence package can range from $5k to $15k.
🚀 Growth
I would continue with the current owner’s strategies.
Facebook
CPA networks
Paid mailings
Affiliates
E-Mail marketing
🙋🏻♂️ The Buyer
Experienced e-com entrepreneur
☁️ SaaS
AI Assistant for Teachers (Tiny Acquisitions) - $5k
Tabitha.ai uses GPT as the back-end
25 users; 2 paid users at $19/m;
Revenue: $456
Profit: N/A
Margin: N/A
Multiple: N/A
✅ What I Like
This young project appears to have good bones. You have a working SaaS, a good website, logos, and some users. This SaaS targets a very specific audience. At first glance, the price seems reasonable.
❓ Questions & Concerns
Clearly, this is a very young project that’s not proven. It has a lot of features and may be trying to do too much. Using the latest technology presents its own set of risks.
💼 Due Diligence
For such a small deal size you want to do as much DD yourself as possible. You’re really paying for the tech so that’s what I would focus on here. You can hire someone for $1k to $3k to do a quick code review.
DueDilio can help source the best due diligence provider.
🚀 Growth
You have a clear target audience - teachers.
Online communities, newsletters, and trade publications specifically for
Implement a referral program
Start a free newsletter on how AI can assist teachers
Facebook ads
🙋🏻♂️ The Buyer
Not a bad project for a first-time buyer/entrepreneur. Would be ideal for two people who have complementary skillsets - tech & marketing.
__ __ __ __ __ __ __ __ __
Convert Text to Audio (Acquire) - $500k
Launched Oct 2020
Uses AI to convert any text or blog post into audio
Competitors: Play.ht, LOVO, ReadSpeaker
375 clients
Revenue: $500k
Profit: $250k
Margin: 50%
Multiple: 2.00x
✅ What I Like
I see a lot of use cases for this type of SaaS. There’s a good number of clients using it already. Small team with no outside funding.
❓ Questions & Concerns
The financials shown in the listing don’t make sense. Stripe account data is very different from the stated revenue. How are clients acquired? Who are the clients for this SaaS? What does churn look like?
💼 Due Diligence
SaaS businesses have unique due diligence requirements.
Legal
You want an M&A attorney to review the IP and trademarks, and help with the transaction
Total legal costs could range from $8k to $15k for a deal of this size
Technology
Code review could cost anywhere from $3k to $6k
Finance
Relatively easy to verify the P&L if they use Stripe. Get a Proof of Cash report for $2k to $4k.
Website/Marketing/Operations
This involves analyzing website conversions, marketing ROI, client reviews, churn, and more.
With DueDilio, you can hire a due diligence firm or professional that specializes in SaaS businesses.
🚀 Growth
Affiliate marketing
Paid Google and FB ads
SEO & content marketing
🙋🏻♂️ The Buyer
Could be interesting for a micro-PE fund to add to their portfolio.
💼 Online Service, Media, Marketplace
Web Hosting & Design (BizBuySell) - $300k
Launched in 2015
150 paying clients throughout the country
$75k in recurring revenue; $500/yr per client;
Revenue: $200k
Profit: Unknown
Margin: Unknown
Multiple: N/A
✅ What I Like
Good operating history. A simple business that’s in an evergreen niche. Very large TAM. Easy to outsource day-to-day work. Recurring revenue. Opportunity to expand revenue with add-on services.
❓ Questions & Concerns
Think about what you’re buying here - a client list & reputation. There’s no tech, IP, or proven sales funnel. Valuation has to be appropriate.
Very crowded industry with no differentiation. Acquiring clients through paid channels is very expensive. Not a local business so you’re competing with everyone. Very low switching costs for clients.
I’d want to understand the revenue and how that’s broken down. How many clients are recurring? What do those contracts look like? How much revenue is from hosting vs. design? What’s the client churn? Any customer concentration? How are clients acquired? Who does the design work?
💼 Due Diligence
I would focus on the financials and the clients.
For finance, I would order a Proof of Cash for $2k - $4k. This will validate all the business expenses, revenues, and tax returns.
If possible, I would talk to two or three clients to get feedback. Why are they using this company? What do they like or don’t like? What additional services do they require?
DueDilio can help.
🚀 Growth
Launch a referral program so that existing clients can spread the word and get paid
Attend local events for business owners
Explore SEO
Affiliate advertising
🙋🏻♂️ The Buyer
Someone who already owns a web services business would be a natural fit. A first-time business buyer with marketing know-how would also do well.
🏡 Main Street, Offline, Other
CPA Practice (BizBuySell) - $2.9M
Launched 2008
50/50 mix of personal and business clients
7 FT and 10 PT employees; 75% of revenue is recurring;
~800 tax returns annually
Revenue: $2.0M
Profit: $602k
Margin: 30%
Multiple: 4.82x
✅ What I Like
A lot of operating history. Easy to understand business in an evergreen niche. Recurring revenue. Relatively easy to hire from a global labor pool. Listing mentions that they are turning clients away. Seller can stay on as a practicing CPA.
Further reading:
❓ Questions & Concerns
Revenue is heavily concentrated during tax season. Timing of the transaction is very important in this type of business. How do client reviews look? What does client churn look like? Need to have a transition plan in place. I’d structure this deal based on client retention.
💼 Due Diligence
I’d focus on the financials and operations.
For a deal of this size, you’ll want to get a lite scope Quality of Earnings Report. It’ll cost you anywhere from $8k to $15k.
For operations, you want to analyze internal processes and workflows. What are the breaking points?
You can hire a consultant who can help you analyze the operations as well as develop a transition plan. We’ve handled many similar requests at DueDilio. These consultants typically charge anywhere from $125 to $250 per hour.
🚀 Growth
Local business events & networking groups
Mailers
Local Google ads
Highlight client reviews
🙋🏻♂️ The Buyer
Clear fit is another CPA or professional services firm. Buyer should have familiarity with this industry.
⚒️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.
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.
Cerebro Capital - Cerebro has a network of 1,500+ lenders who can provide debt financing for your acquisition, refi, etc. $500k minimum.
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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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.