The Business Inquirer #124
In this week's issue, I share 6 listings including two home service businesses, an SEO tool, a lead capture plugin, and more.
Hello Friends!
In this week’s issue:
☁️ SaaS - 3 listings
💼 Online Service, Media, Marketplace - 1 listing
🏡 Main Street, Offline, Other - 2 listings
⚒️ Tools & Resources
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☁️ SaaS
Leads Communication (Acquire) - $1.1M
Launched in 2020
Competitors: Active Campaign, Hey Market, Podium
Helps service-based businesses manage lead communication from inquiry to booking.
Revenue: $434k
Profit: $227k
Margin: 52%
Multiple: 4.85x
💬 Quick Take
Large TAM and great margins. Could be operated by a non-tech buyer as it uses a whitelabel tech stack. This SaaS really requires someone with marketing expertise. The valuation needs to be negotiated down.
✅ What I Like
Healthy Profit Margin
The business maintains a profit margin of over 50%, suggesting efficient operations and cost management.
Low Customer Concentration
The highest revenue-generating customer only contributes 5% of total revenue. This reduces the business's vulnerability to the loss of any single client.
Big Market
The product targets small to medium-sized service businesses which presents a large TAM.
Strong Strategic Partnerships
Existing relationships with franchises and other target audience owners provide a steady stream of new customers.
Whitelabel Tech
Using a whitelabel solution eliminates the need for a large in-house tech team.
❓ Concerns
Dependence on Strategic Partnerships
The growth of the business is highly dependent on partners. This reliance could be risky if these relationships were to change.
Lack of Predictable Growth Engine
While partnerships have supported the business's growth so far, the lack of a predictable, internal growth engine could be a concern. Testing new marketing strategies will eat into the margin.
Whitelabel Operating Platform
The core operating platform is developed by HighLevel, which might limit customization and differentiation, and introduce risks associated with changes or issues on Highlevel's end.
💸 Valuation
The asking price implies a multiple of about 4.85x net income, which is in line with the typical range for SaaS businesses. Considering that there’s no proprietary tech, IP, or systemized client acquisition, the valuation should be lower.
💼 Due Diligence Questions
What is the customer churn rate and lifetime value of customers?
What is the nature and terms of the strategic partnerships that drive customer acquisition?
Can we have more insights into the agreement with HighLevel? What would be the impact of any changes on their end?
What are the growth projections for the next few years, based on the current business model and market conditions?
DueDilio can help you assemble your M&A deal team including due diligence service providers. Our marketplace has over 250 highly vetted service providers that fit your needs and budget.
🚀 Growth Levers
Invest in developing a more predictable and diverse growth engine, such as content marketing, SEO, or PPC advertising.
Consider upselling and cross-selling opportunities to increase average revenue per user (ARPU).
Explore other strategic partnerships or affiliate marketing programs to diversify the customer acquisition channels.
Continue to innovate and enhance the product to increase its value proposition and differentiate it from competitors.
🙋🏻♂️ The Buyer
An investor with experience in SaaS businesses and an understanding of the interaction management industry.
A buyer who has the capability to improve the predictability and diversity of the growth engine. Someone with a strong marketing background.
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Backlink & SEO Analysis (Acquire) - $300k
Launched in 2011
Competitors: SEMrush, Ahrefs, Moz
Revenue: $90k
Profit: $60k
Margin: 67%
Multiple: 5.00x
💬 Quick Take
Small SEO-focused SaaS with a lot of operating history and nice margins. Doesn’t require active management. Interesting acquisition for someone with a marketing background.
✅ What I Like
Profitable SaaS Model
With $60,000 in profit against $90,000 in revenue, the business exhibits solid profitability.
Recurring Revenue
A subscription model based on the number of domains, competitors, and backlinks creates a steady income stream.
Valuable Service
The service meets a critical need for SEO marketers, helping them to optimize their efforts and gain insights into competitor strategies.
❓ Concerns
Limited Customer Engagement
The lack of proactive communication may have limited the business's growth and customer relationships.
Dependence on SEO Dynamics
The business is subject to changes and trends in SEO strategies, which might affect demand for the service. AI may negatively impact this business.
Large Competitors
There’s a lot of competition in this space and competitors like SEMRush and Ahrefs are dominant.
💸 Valuation
While the business has solid profitability with a profit margin of approximately 67%, the asking price represents a multiple of 5.00x profit. According to FE International, a leading SaaS business broker, the average SaaS business was selling for a multiple of around 3x to 4x yearly profit. Therefore, the asking price seems on the high end and requires careful analysis.
💼 Due Diligence Questions
Customer Retention: What is the customer churn rate and what steps have been taken to reduce it?
Competitive Advantage: What differentiates this service from other similar services in the market?
Growth Trends: How has revenue and profit growth trended over the last three years?
Technology Platform: How robust is the technology platform and what kind of maintenance does it require?
User Feedback: Can we see some user feedback or reviews of the service?
DueDilio can help you assemble your M&A deal team including due diligence service providers. Our marketplace has over 250 highly vetted service providers that fit your needs and budget.
🚀 Growth Levers
Customer Engagement: Proactive communication and customer support could lead to higher customer retention and acquisition.
Marketing Efforts: Investing in marketing could increase brand visibility and attract more customers.
New Features: Developing new features based on user feedback could increase the service's appeal.
Pricing Strategy: A revised pricing strategy could improve the value proposition and increase revenue.
🙋🏻♂️ The Buyer
SaaS Experience: The ideal buyer would have experience in running and growing SaaS businesses.
SEO Knowledge: Knowledge of SEO strategies and trends would be beneficial to maintain and improve the service.
Marketing Skills: Strong marketing skills are needed to enhance brand visibility and customer acquisition.
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E-Mail Capture (QuietLight) - $1.7M
Launched in 2014
WP plugin & Shopify app that converts website traffic into leads
1,900 paying clients; $86k in MRR; $1,250 CLTV;
Revenue: $1.2M
Profit: $849k
Margin: 71%
Multiple: 2.06x
💬 Quick Take
Turnaround opportunity as the business has been neglected since 2017. Still producing impressive numbers. Several price reductions so the sellers may be very motivated.
✅ What I Like
Established Presence
This business has a long-standing position in the market with a 9-year history.
Strong Infrastructure
The business is well-integrated with major email service providers, underlining its core competency and market-fit.
Existing Customer Base
A healthy customer base with high lifetime value (LTV) offers a strong foundation for revenue continuity and expansion.
Large Email List
An email list of 100,000 subscribers could be a goldmine for outreach and engagement.
❓ Concerns
Declining Revenue
The business has experienced a decrease in MRR over the past few years, demanding a turnaround strategy.
Neglected Operations
The founders' shift in focus has led to stagnation in business development and marketing efforts.
Possible User Attrition
The business's monthly churn rate, although not significantly high, could indicate customer satisfaction concerns.
Unclear Path for Future Growth
The business seems to lack a clear growth strategy, possibly affecting its potential for expansion.
💸 Valuation
The asking price represents a multiple of about 2.1x of the cash flow, which seems reasonable for a SaaS business. However, given the declining revenue trend, the valuation might need closer scrutiny.
💼 Due Diligence Questions
Revenue Stabilization: What measures were taken to stabilize revenues following the decline?
Retention Strategy: How did the business manage the ~3.2% churn rate, and what strategies were employed for customer retention?
Marketing Efforts: What marketing efforts, if any, were undertaken since the founders shifted their focus?
Infrastructure Maintenance: How has the technological infrastructure been maintained and updated in the past years?
Customer Feedback: What feedback and ratings have customers provided regarding the service?
Sellers: Why did the current owners abandon this business and focus elsewhere?
DueDilio can help you assemble your M&A deal team including due diligence service providers. Our marketplace has over 250 highly vetted service providers that fit your needs and budget.
🚀 Growth Levers
Revitalize Marketing: Reintroducing focused marketing initiatives could help regain the business's growth trajectory.
Enhanced User Engagement: More proactive user engagement could potentially reduce churn and increase customer loyalty.
Product Development: Investing in noncritical feature development could enhance the product's value proposition and stimulate growth.
Leverage Email List: The 100,000-strong email list presents a significant opportunity for renewed customer acquisition and outreach.
🙋🏻♂️ The Buyer
SaaS Expertise: An individual or firm with experience in managing SaaS businesses, particularly with turnaround expertise.
Marketing Oriented: Strong marketing acumen will be crucial to reinvigorating the business's growth and customer acquisition.
Financial Preparedness: The buyer should be financially equipped for the asking price and the potential investment required for growth initiatives.
💼 Online Service, Media, Marketplace
Online Yoga Education (QuietLight) - $565k
Launched in 2015
Online educational course & certification program
Revenue: $392k
Profit: $203k
Margin: 52%
Multiple: 2.78x
💬 Quick Take
Solid education business catering to yoga teachers, spiritual healers, and more. These businesses can be cash cows. Team in place with low owner involvement. Not for everyone but an interesting business for the right buyer. A lot of untapped opportunities.
✅ What I Like
Unique Offering
The business stands out due to its unique focus on teacher training in yoga and spiritual practices.
High Course Completion Rate
Customers have a completion rate 3-4x higher than the industry average, indicating high quality and customer satisfaction.
Positive Reputation
Over 500+ reviews averaging 4.6 stars demonstrate a strong brand reputation and customer satisfaction.
Efficient Operations
With a dedicated team managing operations, the current owner only needs to work less than 5 hours per week.
❓ Concerns
Post-Pandemic Revenue Drop
While the business had a significant boost during COVID-19, revenues have since returned to pre-pandemic levels.
Reliance on Single Product
The business is largely centered on a singular proprietary yoga method, which can lead to revenue vulnerability.
Limited Marketing Efforts
There seems to be limited ongoing marketing effort, which might be hindering growth.
Lack of Recurring Revenue
The business doesn't seem to have a membership or subscription model, which would provide a steady, recurring revenue stream.
💸 Valuation
The asking price of $565,000 represents a multiple of around 2.8x cash flow, which is within the typical range of 2-3x for online education businesses. However, given the declining revenues post-COVID and the relatively niche focus of the business, a closer review of financials and future growth potential would be advisable.
💼 Due Diligence Questions
Course Development: How frequently are new courses added or existing courses updated?
Customer Acquisition: What are the primary channels for customer acquisition and their respective costs?
Future Plan: What was the plan for countering the post-COVID revenue drop?
Marketing Strategy: How has marketing been handled to date and what potential marketing opportunities have been identified?
Team Transition: Is the existing team willing to continue with the business under new ownership?
DueDilio can help you assemble your M&A deal team including due diligence service providers. Our marketplace has over 250 highly vetted service providers that fit your needs and budget.
🚀 Growth Levers
Marketing Enhancement: Implementing a more aggressive marketing strategy could drive customer acquisition and boost revenues.
Community Building: Establishing an online community for customers can provide additional monetization opportunities.
Expansion of Offerings: Diversifying and expanding into related trainings can provide additional revenue streams and reduce dependence on a single product.
Membership Model: Introducing a membership or subscription model can provide steady, recurring revenue and improve customer retention.
🙋🏻♂️ The Buyer
Interest in Online Education & Yoga: A buyer interested in or experienced with the online education sector would be ideal. Knowledge and interest in yoga would also be helpful.
Marketing Acumen: Given the need for a more aggressive marketing strategy, a buyer with marketing experience would be beneficial.
Strategic Vision: A buyer with a strategic vision to diversify the offerings and explore new growth avenues would be advantageous.
Operational Management: A buyer comfortable with managing a team and able to oversee day-to-day operations.
🏡 Main Street, Offline, Other
Landscaping Business (BizNexus) - $995k
Launched in 2007
Based in Naples, FL; Owner is retiring;
Revenue: $1.8M
Profit: $360k
Margin: 20%
Multiple: 2.76x
💬 Quick Take
I visited Naples, FL last weekend. There are worse places to live. This is a well-established business with team in place and low owner involvement. No seasonality due to location.
✅ What I Like
Established Reputation
Having been in operation for 16 years, the business has built a strong reputation in the community, fostering trust and credibility.
Efficient Management
A project manager handles the larger jobs, ensuring operational efficiency while the current owner supervises smaller tasks.
Versatile Offering
The company provides full-service landscaping solutions to both commercial and residential clients, broadening its customer base.
New Equipment
The listing highlights new equipment which is a big plus for this type of business.
❓ Concerns
Limited Marketing
The current owners have not actively marketed the business or pursued additional opportunities, which could limit growth.
Dependence on County Relationships
The business heavily relies on its relations with the county for project acquisition, which could be vulnerable to changes in county administration.
💸 Valuation
The asking price of $995,000 is roughly 2.76x times the cash flow, aligning with standard industry multiples for landscaping businesses. The purchase price should factor in the real estate rental costs, the state of the equipment, and growth prospects.
💼 Due Diligence Questions
Customer Retention: What is the current customer churn rate?
Project Pipeline: What does the future project pipeline look like?
Equipment Status: What is the state and age of the current equipment?
Client Mix: What’s the split between commercial vs. residential work? Are there more service contracts than new construction?
County Relationship: How dependent is the business on its relationship with the county for project acquisition? Is there any key-person risk?
DueDilio can help you assemble your M&A deal team including due diligence service providers. Our marketplace has over 250 highly vetted service providers that fit your needs and budget.
🚀 Growth Levers
Marketing Efforts: Increased marketing could capitalize on the company’s reputation and significantly expand the customer base.
Additional Services: Expanding the service offerings could attract a wider customer base and create additional revenue streams.
County Projects: Actively bidding for county projects could provide a steady stream of work.
Efficiency Improvement: Investing in technology or other efficiency-boosting strategies could improve margins.
🙋🏻♂️ The Buyer
Operational Experience: A buyer with experience in running a landscaping business would be beneficial.
Marketing Expertise: Given the need for marketing expansion, a buyer with strong marketing skills would be ideal.
Growth-Oriented: The business offers significant growth potential for a buyer willing to capitalize on its reputation and seek new opportunities.
Local Knowledge: A buyer familiar with the Naples, Florida area and its particular landscaping needs would be advantageous.
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SoFlo Residential HVAC (BizNexus) - $1.6M
Launched in 2000
Based in Broward County, FL
Revenue: $1.4M
Profit: $551k
Margin: 39%
Multiple: 2.99x
💬 Quick Take
This 23-year-old air conditioning contractor from Southeast Florida has a strong residential customer base and a high retention rate. The business's year-over-year growth, experienced staff, and seller financing options make it a promising acquisition prospect. Also, it's worth noting that the business has a license qualifier in place and has been pre-qualified for a 7-A SBA loan.
✅ What I Like
Established and Growing Business
With 23 years of operations and consistent year-over-year growth, the business is well-established and resilient.
High Customer Retention
The business maintains a high level of repeat business, indicating strong customer loyalty and satisfaction.
Condominium Contracts
The company's contracts with about 510 residential condominium units provide a stable income stream.
Financing Options
The seller's willingness to hold a 33% note for the buyer offers a flexible financing option.
❓ Concerns
Dependence on Residential Market
The business's heavy reliance on the residential market (95%) may limit its growth and make it vulnerable to fluctuations in this market.
Use of Independent Contractors
The use of independent contractors for installation services could potentially lead to quality control issues.
💸 Valuation
The business's asking price of $1,650,000 represents a multiple of about 2.99x the cash flow, which is in line with industry standards for HVAC businesses.
💼 Due Diligence Questions
Contract Details: What are the terms of the contracts with the condominium units?
Employee Tenure: How long have the current staff members and independent contractors been with the company?
Customer Base: Can you provide more details about the customer base, such as demographics and buying habits?
Licenses: What are the specifics of the license qualifier transition?
Seller's Role Post-Sale: What role would the seller play if employed by the buyer post-sale?
DueDilio can help you assemble your M&A deal team including due diligence service providers. Our marketplace has over 250 highly vetted service providers that fit your needs and budget.
🚀 Growth Levers
Commercial Market Expansion: Diversifying into the commercial market could significantly increase the business's revenue.
Marketing Campaigns: Increased marketing efforts, particularly in digital channels, could attract a wider customer base.
Additional Services: Offering related services such as maintenance or energy efficiency consulting could provide additional revenue streams.
Geographical Expansion: Expanding operations into neighboring areas could boost growth and profitability.
🙋🏻♂️ The Buyer
HVAC Experience: A buyer with a background in HVAC services would be ideal given the technical nature of the business.
Growth-Oriented: The ideal buyer would be keen on expanding the business by tapping into unexplored markets and services.
Residential Market Understanding: Knowledge of the residential and condominium market would be beneficial due to the existing client base.
⚒️Tools & Resources
I want to share some tools & resources that I have found helpful. Please note that some of these are paid sponsors of the newsletter.
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.
X5 Deals - Proprietary deal sourcing. They do the outreach and send you relevant, actionable deals directly into your inbox.
Rejigg - Platform that connects searchers/investors directly with owners of off-market software businesses ($500k - $15m revenue) considering exits. All deals are sourced by the Rejigg team, ~5 added per week.
Scott Oldford - If you're interested in gaining insight into the process of building, scaling, acquiring, and selling online businesses, Scott Oldford can help.
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.
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.
🚀 Interested in partnering or advertising with us? Get in touch here.
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