The Business Inquirer #114
In this week's issue, I highlight 4 listings including an Amazon FBA brand, a newsletter, an AI SaaS, and more.
Hello Friends!
In this week’s issue:
🛒 eCommerce - 1 listing
☁️ SaaS - 1 listing
💼 Online Service, Media, Marketplace - 2 listings
⚒️ Tools & Resources
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🛒 eCommerce
Baby & Toddler Travel Products (Website Closers) - $1.9M
Founded 2017
Amazon FBA business; $26 AOV;
No employees; Owners work ~10hrs/wk;
Revenue: $2.9M
Profit: $517k
Margin: 18%
Multiple: 3.68x
✅ What I Like
Kids products are a great e-commerce niche. The business must be very streamlined since the owners only work 10 hrs/week. Additional products are ready to launch. Opportunity to expand to DTC and other marketplaces.
❓ Questions & Concerns
I’d want to understand the normalized earnings of this business. How did it look prior to COVID? Is there any seasonality? How much revenue is generated by each product? What’s the repeat order rate? What’s the return rate? How do the client reviews look compared to competitors? Website Closers doesn’t have a great reputation so a lot of DD is required for all their listings.
Here are some broad questions to ask when evaluating an Amazon FBA e-commerce business:
What is the revenue and profit margin of the business over the past few years? Can you provide financial statements to verify this information?
What is the product mix, and what is the demand for these products? Are the products seasonal, and how does this affect sales?
What is the current inventory level, and how often is inventory turnover? Are there any slow-moving or obsolete inventory items?
What is the percentage of sales that come from Amazon, and what are the sales trends on Amazon? How does this compare to other sales channels?
What is the current ranking and rating of the products on Amazon, and what are the customer reviews and feedback? Are there any negative reviews or complaints?
What are the marketing strategies used by the business, and how effective have they been on Amazon? What is the plan for increasing sales and expanding the customer base?
What are the fulfillment and shipping processes, and are there any bottlenecks or challenges? How does the business handle returns and refunds?
What is the Amazon account health, and are there any compliance issues or violations? Has the business faced any suspension or penalty from Amazon?
What is the seller rating and feedback score, and what are the metrics for measuring seller performance on Amazon? How does the business compare to other sellers in the same category?
What is the competition on Amazon, and what are the key competitors? How does the business differentiate itself from competitors?
💼 Due Diligence
I’d recommend hiring a DD firm that specializes in e-commerce. The benefit is that they can assess the financial, operations, and technology portions of DD all under one roof. You can expect to pay in the range of $5k to $15k for a full DD engagement.
At DueDilio, we have many service providers who specialize in e-commerce businesses and can help you hire the right DD provider.
🚀 Growth
Introduce additional products
Expand to other marketplaces (eBay, Walmart, etc)
Explore DTC
🙋🏻♂️ The Buyer
May be a good acquisition for a first-time buyer interested in e-commerce.
👇
👇
For fun, I ran this business listing through ChatGPT. Here’s the result…
Based on the listing, there are several positive aspects of this business for sale:
Strong Growth: The business has shown year-over-year growth of 194%, which is an impressive performance. This indicates that the business has a successful track record of growth and has the potential for further expansion.
Established Brand: The business has an established brand in the baby and toddler travel products niche. The brand has received thousands of positive product reviews, which can be a significant asset in building brand trust and loyalty.
Amazon FBA: The business operates as an Amazon FBA seller, which means that it can leverage Amazon's fulfillment and shipping capabilities. This can help to streamline operations and reduce costs associated with shipping and logistics.
New Products in the Pipeline: The business has new products in development, which can be a potential source of future revenue growth.
However, there may be some potential risks or areas of concern that need to be further investigated before making a decision to purchase the business, such as:
Dependence on Amazon: The business may be highly dependent on Amazon for sales and revenue. Any changes in Amazon's policies or algorithm can impact the business's performance.
Limited DTC Sales: The business has not yet established a direct-to-consumer (DTC) sales channel. This may be a missed opportunity for the business to diversify its revenue streams and reduce its dependence on Amazon.
Competitive Landscape: The baby and toddler travel products niche is highly competitive, and the business may face intense competition from established brands and new entrants.
Overall, this business appears to have a strong track record of growth and an established brand in the baby and toddler travel products niche. However, as with any potential acquisition, it is important to conduct a thorough due diligence process to assess the risks and opportunities of the business before making a decision.
☁️ SaaS
AI Transcription Service (Acquire) - Open to Offers
Launched in 2018
Competitors: Sonix.ai, Rev.com, Otter.ai
Revenue: $250k
Profit: $125k
Margin: 50%
Multiple: Sellers asking for 3-4x
✅ What I Like
Impressive side project. Some operating history. The listing is very detailed and it’s clear that the sellers put some thought into it and are serious. Serves B2B and B2C clients. Great margins. Sellers open to a sale or acquihire.
❓ Questions & Concerns
The business has focused on large enterprise clients (Universities) so there’s a clear customer concentration risk. I don’t think this business has a lot of pricing power. The sales cycle in this segment is long. Finding a dev team knowledgeable in this area may be very difficult. Who is reviewing the AI-generated work? If using an external API for the AI, you’re susceptible to pricing changes.
Here are some broad questions that you should be asking when evaluating a SaaS business:
What is the monthly recurring revenue (MRR) and annual recurring revenue (ARR) of the business? How have they been trending over the past few years?
What is the customer churn rate, and what is the plan for reducing it?
What are the customer acquisition channels and the cost per acquisition for each channel?
How does the sales team operate, and what are the sales cycle length and conversion rates?
What are the key features and functionalities of the SaaS product? How does it compare to competitors in terms of features, price, and performance?
What is the technology stack of the product, and is it up to date? What are the ongoing maintenance costs?
What is the customer support process, and what is the response time for customer inquiries or issues?
What is the software development methodology, and what is the product roadmap for future development?
What are the partnerships or integrations with other SaaS providers or technology platforms, and how does this benefit the business?
💼 Due Diligence
Legal
With tech businesses, you want to really focus on the IP and contracts.
The all-in legal costs could be in the $20k to $30k for this type of transaction.
Technology
The business is built on a very modern tech stack. Finding AI experts for DD will be costly.
The costs for a full tech audit could be in the $25k to $30k range.
Finance
Financial DD for tech businesses is usually straightforward unless their accounting systems are a complete mess.
The cost for a lite scope Quality of Earnings Report for this type of business could cost in the $10k to $15k range.
DueDilio can help you source and hire the right DD professionals for any transaction.
🚀 Growth
Expand the B2C side of the business
B2B cold outreach
SEO
Content marketing
Partnerships
Direct mailers
🙋🏻♂️ The Buyer
Strategic acquirer. A company looking to add AI capabilities.
💼 Online Service, Media, Marketplace
iOS Developer Newsletter (Acquire) - $2,500
Launched in 2016
Newsletter & website highlighting tools for iOS devs
~1,711 subscribers; 75% open rate; 20 DR;
Revenue: $2,367
Profit: $1,924
Margin: 81%
Multiple: 1.30x
✅ What I Like
A lot of operating history (important for domain health). Niche audience that’s hard to reach and target. Nice open rates and domain rating. The asking price is very reasonable. Opportunity to build a community and possibly a niche job board.
❓ Questions & Concerns
Not a lot of subscribers for a ~7-year-old newsletter. How are they acquiring readers? Who writes the content?
Here are some broad questions you should be asking about this type of business:
What is the subscriber base of the email newsletter, and how has it grown over the past few years? Can you provide subscriber demographics and engagement metrics?
What is the website traffic, and how has it grown over the past few years? Can you provide website analytics and user behavior metrics?
What is the content strategy for the newsletter and website, and how does it serve the needs of the iOS developer community? What is the plan for creating and distributing new content?
What is the advertising strategy, and what is the advertising revenue and cost per acquisition over the past few years? How does the advertising mix between the newsletter and website?
What is the social media strategy, and how does the business engage with the iOS developer community on social media platforms? What is the social media following and engagement rate?
What are the partnerships or sponsorships with other companies in the iOS development industry?
What is the technology infrastructure, and what are the ongoing maintenance costs?
What is the legal and regulatory compliance, and are there any intellectual property or copyright issues?
💼 Due Diligence
DIY for a transaction of this size.
Confirm subscriber count, open rates, and CTR
Check tech stack for stability and scalability
🚀 Growth
Maybe an opportunity to build a community & niche job board from this newsletter.
🙋🏻♂️ The Buyer
Someone familiar with the iOS dev space. Maybe an agency or a publisher trying to reach this audience.
__ __ __ __ __ __ __ __ __
Digital Marketing Book of Business (BizBuySell) - $1.1M
Rank Monsters SEO agency is selling a part of its client base
220 clients on recurring contracts
Revenue: $800k
Profit: $360k
Margin: 45%
Multiple: 3.06x
✅ What I Like
Interesting listing. For sale directly by the agency owner. No need to deal with brokers. This particular part of the business has its own website and workflows. Could be an interesting opportunity for a marketing agency owner.
❓ Questions & Concerns
The listing is a bit confusing. What are the actual assets for sale here? How do those client contracts look (annual or monthly)? Any assurance that the clients won’t simply leave once transferred? It’s not easy to integrate two agencies. Valuation is a bit elevated for this type of business.
💼 Due Diligence
Legal
I would estimate the legal costs to be in the $15k to $20k range for this type of transaction
Financial
No need for a full QofE here. You just want to verify the financials that are presented.
Basic financial DD could cost $3k to $8k for this transaction
🚀 Growth
Rollout the service to additional US states
Upsell existing clients
Content marketing
SEO
Partnerships and affiliates
🙋🏻♂️ The Buyer
From the listing:
I am only interested in speaking with established Internet Marketing Companies that provide website design (WordPress), SEO, and paid ad management. Also, a company that specialized in Christian organizations, church website design, or that would have no issue working with Christians organizations.
⚒️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.
DueDilio - a marketplace to hire highly vetted M&A due diligence service providers. Submit your project, review proposals, and hire a DD service provider.
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.