The Business Inquirer #126
In this week's issue, I share 4 listings including a niche SaaS, a marketing agency, a liquidation retail business, and more.
Hello Friends!
In this week’s issue:
☁️ SaaS - 1 listing
💼 Online Service, Media, Marketplace - 1 listing
🏡 Main Street, Offline, Other - 2 listings
⚒️ Tools & Resources
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☁️ SaaS
Marketing Automation for Insurance Agents (Acquire) - Open to Offers
Launched in 2020
Competitors: InsureIO, Radius Bob
15 employees; 218k e-mail list;
Revenue: $1.4M
Profit: $84k
Margin: 6%
Multiple: N/A
💬 Quick Take
Promising acquisition for the right price. SaaS with multiple revenue streams. Robust year-on-year growth in user base and per-customer revenue and a dedicated team in place. A lot of DD is required to understand the very low margin.
✅ What I Like
Niche Market Focus: The business targets a specific niche, insurance agents, which can allow for a focused marketing strategy and product development process.
Strong Revenue Growth: The business boasts 40% YoY growth in user base and per-customer revenue, signaling a sustainable and growing business model.
Multiple Revenue Streams: Revenue diversification through base subscription, upsells, affiliate offers, and digital courses mitigates risk and enhances earning potential.
Highly Skilled Team: The presence of a competent team, including a COO, offers continuity and operational efficiency post-acquisition.
❓ Concerns
Dependence on Key Personnel: The presence of a COO who oversees operations could mean significant changes if they were to leave after the acquisition.
Cash Flow Concerns: The business's cash flow margin is very low.
Unutilized Assets: The digital course library and its customer database, while presenting an opportunity, remain underutilized and could require resources to effectively exploit.
Undefined Asking Price: The open-ended nature of the asking price could lead to complex negotiations and possible overvaluation.
💸 Valuation
More detail would be needed about the main sources of revenue to come up with a proper valuation. Is this a SaaS or an online education business? Very different multiples.
💼 Due Diligence Questions
Revenue Mix: What is the revenue split between the SaaS, courses, affiliate, etc? How has that trended over time?
Customer Acquisition Costs: What are the business's customer acquisition costs, and how have these trended over time?
Technology: How stable and scalable is the tech stack? How do support tickets look?
Customer Retention: What is the customer churn rate? Are there specific retention strategies in place?
Product Development: What's the roadmap for future product development?
Operational Costs: Can we have a detailed breakdown of operational costs?
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
Sales Team Expansion: Increasing the size of the sales team could drive customer acquisition, with associated costs and high impact.
Marketing Efforts Boost: Investing more into marketing, particularly digital marketing, could increase brand visibility and bring in new customers, with moderate cost and high impact.
Product Enhancement: Introducing new features or improving existing ones could increase user engagement and reduce churn, with high cost and high impact.
Leveraging Underutilized Assets: Effectively utilizing the digital course library and customer database could provide additional revenue streams, with moderate cost and high potential impact.
🙋🏻♂️ The Buyer
Existing SaaS Operator: A current operator in the SaaS space looking to expand their portfolio could capitalize on synergies and cross-selling opportunities.
Insurance Industry Player: A business in the insurance sector seeking to enhance their offerings could leverage this platform to reach their existing audience more effectively.
First-Time Buyer: Someone looking for a well-established business with a strong team in place could find this business an ideal starting point.
💼 Online Service, Media, Marketplace
Marketing Agency (BizBuySell) - $1.7M
Focused on the jewelry industry
8 employees; HQ in Tampa, FL but fully remote;
Revenue: $2.3M
Profit: $507k
Margin: 22%
Multiple: 3.35x
💬 Quick Take
Full-service marketing agency serving the jewelry industry. I like the niche as it has a very high AOV and target clients have spending power. Fully remote with 95% recurring revenue. Team in place. Margin on the higher end for the industry. The valuation seems reasonable.
✅ What I Like
Niche Market Position: This firm has carved out a niche within the jewelry industry, providing it with a unique competitive advantage and creating barriers to entry for potential competitors.
Recurring Revenue: The firm operates on a 95% retainer base, which guarantees consistent and predictable cash flow.
High Customer Retention Rates: Excellent service delivery has resulted in high customer retention rates, showing the firm's capability to build and maintain strong relationships.
Expert Team: The firm boasts a team of industry experts who are able to deliver high-quality results for clients, enhancing its reputation and client trust.
❓ Concerns
Reliance on Specific Industry: While specialization is a strength, it can also be a risk if the jewelry industry faces an unexpected downturn or disruption.
Dependence on Key Personnel: The business is heavily dependent on its current team of experts. Losing key team members could potentially disrupt the operation. May be strong reliance on current owners.
💸 Valuation
Priced at a 3.35x multiple, the valuation seems reasonable at first glance. Considering its robust financial health, industry niche, and recurring revenue, this marketing agency is priced right.
💼 Due Diligence Questions
Owner Involvement: How dependent is the business on the two current owners?
Client Contracts: How long are the client contracts and what are their specific terms?
Employee Retention: What measures are in place to retain key employees?
Financial Analysis: Could we get a breakdown of the costs associated with the operation?
Customer Acquisition: What is the firm's current customer acquisition strategy and cost?
Competitive Landscape: Who are the firm's main competitors in this niche?
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
Expand Service Offerings: The firm could consider expanding its range of services, such as by adding influencer marketing or content creation.
Target New Markets: While the current niche is lucrative, exploring related luxury industries or international markets could provide growth opportunities.
Partnerships: Forming strategic partnerships within the jewelry industry could increase visibility and bring in new clients.
🙋🏻♂️ The Buyer
Experience in Digital Marketing: A buyer with a background in digital marketing could bring fresh insights to expand the business.
Understanding of Jewelry Industry: Knowledge of the jewelry industry would be valuable in understanding client needs and market trends.
Management Skills: Strong management skills would be required to effectively manage the expert team and develop the business further.
🏡 Main Street, Offline, Other
MedSpa & Anti Aging Clinic (BizBuySell) - $3.3M
Launched in 2000
Based in Orlando, FL
Revenue: $1.6M
Profit: $966k
Margin: 60%
Multiple: 3.42x
💬 Quick Take
Popular industry for acquisition entrepreneurs. MedSpa services consistently see high demand (see chart below). In FL, anyone can own a MedSpa without needing a special license as long as the actual work/procedures are performed by licensed staff. This is an established MedSpa with a diverse service offering and strong profitability. Valuation is a bit elevated.
Further reading: Medical Spa Due Diligence Questions – M&A due diligence checklist for buyer
✅ What I Like
Brand Reputation: With a 23-year and a 19-year presence in the industry, the two clinics have developed strong brand recognition in the Orlando area.
Extensive Client Database: The combined customer base of over 30,000 and high repeat business ratio reflect a strong value proposition and customer satisfaction.
Broad Service Portfolio: Offering a wide array of services, from acupuncture to laser hair removal, expands the customer pool and creates opportunities for upselling.
High Revenue Per Customer: Particularly at the med spa, annual revenue per customer is high, indicating a strong pricing power and customer value perception.
Qualified Staff and Supportive Transition Plan: The business has a strong team including ARNPs and a medical doctor. Furthermore, the owner's willingness to stay on as a paid consultant ensures continuity and smooth transition.
❓ Concerns
Industry Competition: The health and wellness industry, especially med spas, is highly competitive, which could put pressure on customer retention and pricing.
Staff Retention Risk: The business's success is significantly tied to its experienced staff. A potential risk is the staff choosing not to stay following the business's acquisition.
Regulatory Risks: The medical sector has stringent regulations that could change and impact the business's operations or profitability.
Dependence on Key Personnel: The loss of key medical staff may impact customer loyalty and the overall service quality.
Economic Fluctuations: Given the nature of services, demand could be sensitive to economic cycles, with potential downturns impacting disposable incomes and therefore revenues.
💸 Valuation
The business is priced at approximately 3.4x profit which is a bit elevated compared to similar businesses. The higher price may be justified by the business's strong brand, loyal customer base, and experienced staff. However, this should be negotiated.
💼 Due Diligence Questions
Staff Retention Plans: What are the current staff's plans and motivations to stay post-acquisition?
Regulatory Compliance: Is the business in compliance with all relevant healthcare and business regulations? •
Client Acquisition: How does the business acquire new clients and what are the associated costs?
Financial Analysis: Could we have a detailed breakdown of the revenue and costs associated with each service offered?
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
Expand Digital Presence: Invest in digital marketing to attract new clients.
Introduce Membership Programs: Offer subscription-based services or discount packages to improve customer loyalty.
Partner with Local Businesses: Collaborate with fitness centers, salons, etc., to increase referrals.
Invest in New Technologies: Keep up with the latest trends in the industry, like new skincare technologies.
🙋🏻♂️ The Buyer
Experience in Healthcare Sector: The buyer should ideally have experience in the healthcare or wellness industry.
Capability to Retain Staff: It's crucial for the buyer to have good people-management skills to retain the existing staff.
Familiarity with Florida Market: Knowledge of the local market dynamics will aid in maintaining and expanding the client base.
Willing to Invest in Growth: Someone open to investing in technology and marketing would be well-suited to grow the business.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Clothing & Home Goods Liquidation Store (BizNexus) - $600k
Launched in 2018
Retail space in GA
Revenue: $1.1M
Profit: $509k
Margin: 46%
Multiple: 1.18x
💬 Quick Take
I don’t typically highlight retail businesses but this one is interesting. Financials are very strong with a reasonable valuation. The store boasts a good location, unique product mix, and a robust customer base that extends beyond the local area. Not a fit for everyone but an interesting opportunity.
✅ What I Like
Strong Profitability: The margins are on the higher end for a clothing liquidation business. Revenues have grew at least 10% since the store opened.
High-Quality Inventory: The merchandise is sourced from notable retailers and pre-sorted, ensuring a consistent supply of attractive, high-quality goods.
Prime Location: The store's location in a newly constructed commercial complex and proximity to major highways enhance its accessibility and visibility.
Broad Customer Base: The business attracts customers from a wide geographical area, including from out of state, attesting to its strong reputation and product appeal.
❓ Concerns
Reliance on Supplier Sorting: The pre-sorting of merchandise by the supplier could present a risk if the supplier's standards or processes change.
Marketing Dependence on Facebook: The primary marketing strategy leans heavily on Facebook advertising, which could be an issue if platform algorithms or rules change.
Potential Competition: While there's no current direct competition, the entry of a similar business in the area could impact profitability.
Dependence on Current Owner's Expertise: The business's success might be partly due to the current owner's retail expertise, which a new owner would need to match or exceed.
💸 Valuation
Typical valuations in this industry are 1x-2x revenue. This business seems to be fairly priced.
💼 Due Diligence Questions
Supplier Contract: What are the terms and conditions of the current supplier contracts?
Customer Analysis: Could we get a breakdown of the customer demographics and buying behaviors?
Cost Analysis: Could we get a detailed breakdown of the operating costs? Particular emphasis on labor and advertising.
Employee Details: What are the roles, responsibilities, and tenure of current employees?
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
Expand Marketing Channels: Broadening the marketing approach beyond Facebook to include other social media platforms and local advertising could draw more customers.
New Product Lines: Expanding the product range or adding new categories could attract a wider customer base.
Online Sales: Establishing an online presence and e-commerce capabilities could significantly increase sales volume.
Additional Locations: The business could be expanded by opening additional retail locations in underserved markets.
🙋🏻♂️ The Buyer
Retail Experience: A buyer with retail experience would understand the unique dynamics and challenges of this sector.
Marketing Knowledge: Understanding of modern marketing practices, especially in social media, is crucial for this business's success.
⚒️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.
Acquisition Lab - The Premier Accelerator for Buying a Business created by Walker Deibel, Author of Buy Then Build: How Acquisition Entrepreneurs Outsmart the Start-up Game. They combine world-class education, a vetted community, extensive group coaching, and resources to provide the first do-it-with-you buy-side advisory service.
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.
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