The Business Inquirer #118
In this week's issue, I highlight 4 listings including an SEO agency, a lawn equipment sales & service business, and more.
Hello Friends!
I continue to play around with the format of this newsletter. I’m trying to incorporate insights from AI tools as well as my own commentary. Let me know what you think of this issue.
In this week’s issue:
🛒 eCommerce - 1 listing
💼 Online Service, Media, Marketplace - 2 listings
🏡 Main Street, Offline, Other - 1 listing
⚒️ Tools & Resources
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🛒 eCommerce
Pet Brand Selling E-Collars (QuietLight) - $1.2M
Launched in 2015
Sells e-collar straps for dogs and cats
Primarily sells through Amazon
Revenue: $745k
Profit: $323k
Margin: 43%
Multiple: 3.72x
✅ What I Like
Evergreen niche (pet products). Recession-proof with a large TAM.
Diversified revenue across various products, reducing the risk associated with reliance on a single product.
Good online presence, with many products consistently ranking on the first page of Amazon for top keywords.
Minimal inventory requirements and short lead times due to domestic manufacturing, reducing the risk of supply chain disruptions.
Strong profit margin of approximately 43%.
❓ Questions & Concerns
The recent strong growth may be unsustainable.
The business primarily operates on Amazon, which poses a risk.
The growth tactics rely heavily on adding new SKUs and increasing online marketing efforts. This will require additional capital from new owners.
Is there anything differentiated about the products? Are they exclusive?
💸 Valuation
The asking price of $1,161,700 represents approximately 3.6x of the profit ($323,000). This multiple is on the higher end for e-commerce businesses but may be justifiable given the strong growth and high-profit margins. Today, the typical e-commerce multiple ranges from 2.0x to 3.5x profit.
💼 Due Diligence
Can the owners provide detailed financial statements for the past 3-5 years?
What is the cost structure of the business, including manufacturing, marketing, and shipping costs? Pay particular attention to customer acquisition costs and advertising costs.
Are there any existing contracts or partnerships that the business relies on?
How dependent is the business on the current owners? Would their departure affect operations?
Are there any pending legal issues or liabilities associated with the business?
Are the product rankings on Amazon stable, or have they fluctuated significantly over time?
How much inventory is currently on hand, and what is its value?
DueDilio is an online marketplace to hire highly vetted M&A due diligence service providers. We’ll work with you to analyze the target business and connect you with the right M&A professional for your needs and budget.
🚀 Growth
Develop an independent e-commerce website to diversify the sales channels and reduce reliance on Amazon.
Implement a robust digital marketing strategy, including SEO, paid advertising on social media platforms, and email marketing.
Expand the product line to include more pet-related products beyond e-collar straps.
Establish partnerships with pet clinics and pet stores to increase brand visibility and sales.
Expand into international markets, particularly those with high pet ownership rates.
Consider a subscription model for repeat purchases, enhancing customer retention.
🙋🏻♂️ The Buyer
Existing e-commerce business in the pet industry: Looking to expand their product line or gain a competitive edge.
Brick-and-mortar pet-related business: Seeking to increase their online presence and diversify their sales channels.
Experienced e-commerce entrepreneur: Someone with a good understanding of e-commerce operations and digital marketing to drive further growth.
Pet enthusiasts or professionals: Individuals with an understanding and interest in the pet industry.
💼 Online Service, Media, Marketplace
SEO Agency (BizBuySell) - $2.4M
Launched in 2018
Serves dental offices and cleaners; 70 active clients; CLTV of $20k;
15 employees; 21k contact e-mail list;
Revenue: $1.9M
Profit: $683k
Margin: 36%
Multiple: 3.51x
✅ What I Like
High client retention: The business has strong recurring revenue with over 70 active clients and a high lifetime value (LTV) per client.
Low owner involvement: The owners have effectively delegated operations to their team, reducing the new owner's operational burden. I assume there are well-developed SOPs in place.
Included assets: The library of over a dozen courses on B2B selling, analytics, and lead nurturing adds value to the acquisition. Large e-mail list of 21k contacts.
AI: Introducing AI into this type of business may help lower operating costs.
❓ Questions & Concerns
Dependence on local businesses: Any economic downturns affecting local businesses could impact the agency's revenue.
Client acquisition cost: The cost to acquire a new client is high, potentially limiting growth.
Niche focus: The agency's focus on SEO might limit its service offering compared to full-service digital marketing agencies.
💸 Valuation
The typical valuation range for digital marketing agencies often falls between 4 to 6 times EBITDA for larger firms, and 2 to 3 times SDE for smaller firms.
The asking price of $2,400,000 is approximately 3.5 times the annual profit, which is within the typical range for digital marketing agencies.
Given the agency's strong growth, high client retention, and unique value proposition, this multiple could be justified.
💼 Due Diligence
Can the owners provide detailed financial records for the past 3-5 years?
What are the specific costs associated with delivering the agency's services?
Are there any existing contracts with clients or third-party vendors?
How much would the departure of the current owners affect the agency's operations and client relationships?
What is the agency's strategy for acquiring new clients, and how effective has it been?
Are there any pending legal issues or liabilities?
How does the agency ensure the quality of its SEO services?
DueDilio is an online marketplace to hire highly vetted M&A due diligence service providers. We’ll work with you to analyze the target business and connect you with the right due diligence service provider for your needs and budget.
🚀 Growth
Expand service offering: Adding services like social media marketing, email marketing, or paid advertising could attract more clients.
Target new niches: Expanding into other industries beyond the dental and cleaning niches could drive growth.
Implement a referral program: Encouraging existing clients to refer new clients could generate additional business.
Strategic partnerships: Partnering with complementary businesses could provide cross-referral opportunities.
🙋🏻♂️ The Buyer
Existing digital marketing agency: Looking to expand its client base, service offerings, or geographical reach.
Entrepreneur with SEO expertise: An individual with a deep understanding of SEO could continue to grow the business.
Investor in digital marketing businesses: Investors could be attracted by the agency's strong profitability and growth prospects.
Company in a related industry: A company in a related field, such as web development or graphic design, might see this as an opportunity to diversify its services.
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Webflow Agency (Acquire) - Open to Offers
Launched in 2020
Services the restaurant, automotive, and industrial sectors;
Revenue: $56k
Profit: $49k
Margin: 88%
Multiple: N/A
✅ What I Like
Simple, profitable business with a nice margin.
Opportunity to scale with the right outbound marketing efforts.
Has a vetted design process and large referral networks, indicating good reputation and client satisfaction.
Introducing AI may reduce operating costs
❓ Questions & Concerns
Not a lot of detail in the listing.
Very competitive space with price pressures.
Revenue is relatively low, indicating a small client base. Current owners may have underinvested in growth.
The asking price is not specified, which may lead to difficult negotiations.
Dependence on a few industries could be risky in case of industry downturns.
The business seems to be heavily dependent on the owner, which could pose transition challenges.
💸 Valuation
If we consider a typical valuation range of 2-3x SDE for service-based businesses, the company could be valued anywhere from $98,512 to $147,768.
💼 Due Diligence
Who are the major clients and what's the client retention rate?
How is the company currently acquiring clients?
What are the contractual terms with clients?
Can we review financial statements for the past 3 years?
What are the details of the company's current marketing strategies?
DueDilio is an online marketplace to hire highly vetted M&A due diligence service providers. We’ll work with you to analyze the target business and connect you with the right due diligence service provider for your needs and budget.
🚀 Growth
Increase pricing to improve revenue without needing to significantly increase the client base.
Hire a B2B sales team to acquire new clients and penetrate new markets.
Expand service offerings to include other digital marketing services.
Invest in SEO and digital advertising to increase visibility and attract more clients.
Improve the company's online presence through content marketing and thought leadership.
🙋🏻♂️ The Buyer
An existing digital marketing or web development agency looking to expand its client base and service offerings.
An entrepreneur with knowledge of Webflow and Figma, looking to own a profitable business.
A company in a related industry looking to diversify its services.
A marketing professional looking to own and operate their own business.
🏡 Main Street, Offline, Other
Lawn Mower Sales & Repair (BizNexus) - $600k
Launched in 2002
Based in Broward County, FL; Owner is retiring;
Revenue is 70% sales and 30% repair
Revenue: $1.7M
Profit: $325k
Margin: 19%
Multiple: 1.85x
✅ What I Like
Established business with two decades of operations and a strong reputation in the West Broward area.
Diverse revenue streams: 70% sales from new equipment and 30% from servicing.
Experienced staff: The presence of two experienced mechanics on staff reduces the need for immediate recruitment or training efforts.
Location advantage with no competition within a 10+ mile radius.
Not seasonal in this part of the country.
❓ Questions & Concerns
Dependence on manufacturers: Buyers must qualify with the manufacturers and bank for the floor plan, adding an extra step in the acquisition process.
Limited diversification: 70% of sales are from new equipment, meaning the business could be vulnerable to shifts in the market for new lawn equipment.
Reliance on local market: The business may be overly dependent on the local market and vulnerable to any economic downturns in the area. Hurricanes may have an impact.
The business might be heavily dependent on the current owner's relationships with suppliers and customers. How involved is the owner in the day-to-day?
💸 Valuation
The asking price is less than 2 times profit, which is lower than the typical valuation range of 2-3 times the net profit in this industry.
The business's profitability and established presence in the market could justify a higher valuation.
The lack of competition in the immediate area also adds value.
The necessity for industry knowledge and relationships with manufacturers may limit potential buyers, possibly suppressing the business's market value.
💼 Due Diligence
How are relationships with suppliers and can they be easily transferred to a new owner?
What is the company's strategy for attracting new customers and retaining existing ones?
Can we review the financial records for the past 3-5 years?
What are the terms of the lease for the business location?
DueDilio is an online marketplace to hire highly vetted M&A due diligence service providers. We’ll work with you to analyze the target business and connect you with the right due diligence service provider for your needs and budget.
🚀 Growth
Expand the range of products and services offered to include more types of lawn and garden equipment.
Invest in online sales and marketing to reach a wider customer base.
Establish partnerships with landscaping companies and property managers to secure bulk orders.
Offer loyalty programs or discounts to repeat customers to increase customer retention.
Acquire other similar businesses in the surrounding areas.
🙋🏻♂️ The Buyer
An individual or company already in the lawn care or home maintenance industry.
An entrepreneur with knowledge of and passion for lawn care and maintenance.
A regional or national lawn equipment retailer looking to expand into the West Broward area.
⚒️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.
DueDilio - #1 marketplace to hire highly vetted M&A due diligence service providers. Your source for finance, legal, tech, and other key areas of due diligence. Submit your project, review proposals, and hire.
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.
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.