The Business Inquirer #132
Sharing an IT service firm with 25% growth, offshore customer support service for startups, and a highly profitable appointment setting agency for realtors.
Hello Friends!
I’m currently traveling (hopefully won’t be impacted by the hurricanes) so this issue is a bit shorter than usual.
In this week’s issue:
💼 Online Service, Agency - 2 listings
🏡 Main Street, Offline - 1 listing
⚒️ Tools & Resources
💡 How I Can Help
This issue of The Business Inquirer is sponsored by Smash.vc
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💼 Online Service, Agency
IT Company Specializing in SaaS and Support Services - $1.7M
Established in 2017
HQ in Denver but operates fully remote
Minimal owner involvement
Revenue: $1.2M
Profit: $465k
Margin: 39%
Multiple: 3.76x
💬 Quick Take
This IT company saw 25% YoY revenue growth. It specializes in SaaS licensing and has 100% remote management. It is especially resilient to economic downturns and has a well-diversified client base. However, potential challenges lie in its market competition for SaaS reselling and reliance on key personnel for day-to-day operations.
✅ What I Like
Diverse Service Lines
This business has successfully transitioned from a single-service focus to a provider with three main service lines: SaaS reselling, IT Management, and IT Projects. This diversification offers multiple avenues for revenue generation.
Minimal Owner Involvement
The business boasts a full-time team that manages day-to-day operations, allowing for an owner to be minimally involved while still ensuring efficient management.
Recession-Resilient
This IT company not only survived past economic downturns but also witnessed moderate growth during challenging times like the Covid pandemic, demonstrating business resilience.
Established Brand & Processes
The company has a trademark-protected name and logo and a wealth of intellectual assets including case studies, whitepapers, and testimonials. There are also robust systems and processes in place for sales, customer support, and more.
❓ Concerns
SaaS Reseller
The company faces strong competition in the SaaS reselling landscape, which accounts for approximately 45% of its revenue. This competition comes from both large distributors and other Managed Service Providers. SaaS reselling is typically a low margin business.
Lack of Physical Infrastructure
While its fully remote model may be an advantage in terms of operational costs, it could also be a limitation for clients who prefer an on-premise service provider.
Dependency on Mid-Market Clients
The business primarily serves mid-market clients in specific sectors like Construction, Manufacturing, and Local Government. Any sectoral downturn could impact revenue.
💼 Due Diligence Questions
Revenue Breakdown: What % of revenue is one-time? Recurring?
Client Contracts: Are there long-term contracts in place with major clients? Any client concentration?
Employee Retention: What measures are taken to retain key staff members?
Intellectual Property: Are all IPs, especially software and customer databases, legally owned or licensed?
Competitive Positioning: How does the company differentiate itself from larger SaaS resellers?
Marketing ROI: What is the ROI on the sales and marketing automation platforms?
Customer Churn: What is the annual customer churn rate?
Up-Selling Metrics: What percentage of existing clients have been upsold additional services?
Technology Infrastructure: Is the technology stack up-to-date and scalable?
🚀 Growth Levers
Expand Service Offerings: The business can diversify further by adding complementary services, leveraging its existing client base for quick adoption.
Geographic Expansion: Since the business is not geographically confined, it has the potential to expand its client base into new markets or countries.
Strategic Partnerships: Forming alliances with software providers can enhance the service portfolio and attract a wider clientele.
Customer Referral Program: A structured referral program can take advantage of the business’s strong reputation and customer satisfaction for new client acquisition.
Focused Marketing Campaigns: Data-driven and focused digital marketing campaigns can further penetrate sectors where the company already has a strong presence.
🙋🏻♂️ The Buyer
Experienced in IT Sector: A buyer with an existing background in IT would be advantageous for seamless business continuity.
Comfortable with Remote Operations: The new owner should be familiar with managing remote teams and virtual business operations.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Offshore Customer Support for Tech Startups - $1.2M
Established in 2021
Competitors: Peak Support, Boldr, CXstomer
7-person team
Revenue: $1.1M
Profit: $346k
Margin: 31%
Multiple: 3.47x
💬 Quick Take
Interesting business. The company offers outsourcing support and frontline customer support staffing to growing venture-backed SaaS and marketplace startups. The business offers a healthy profit margin and a predictable, monthly recurring revenue model. Its reliance on word-of-mouth for leads presents a growth opportunity for the new owner. Concerns include competition and the required CAPEX to scale. There’s not a lot of detail in this listing.
✅ What I Like
Recurring Revenue
The B2B agency has a recurring revenue model. They collect client payments on the 15th and pay staff on the 25th which adds liquidity.
Owner Flexibility
The current owners work limited hours. New owner can be relatively passive or step in and actively try and scale the business.
Untapped Marketing Channels
Leads primarily come from word-of-mouth, suggesting that the business has not yet leveraged digital marketing and could benefit from doing so.
❓ Concerns
CAPEX
The business is relatively early-stage and may require significant investment in marketing and sales for faster growth. There’s no clear CAC.
Market Competition
The customer support outsourcing industry is competitive, especially for tech startups. Companies are able to hire VAs themselves.
Geographic Risks
Being an offshore business could expose the company to geo-political risks, currency fluctuations, and potential issues with quality control.
💼 Due Diligence Questions
Client Churn: What is the rate and reasons for client turnover?
Client Contracts: Are there long-term contracts, and what are their terms?
Employee Status: Are staff members contract-based or full-time?
Quality Control: How is quality measured and assured?
Legal Matters: Are there any pending or past legal issues?
🚀 Growth Levers
Digital Marketing: Investing in digital marketing can widen the top of the sales funnel, creating new opportunities for growth.
Sales Team: Hiring or outsourcing a sales team can further capitalize on the company’s existing momentum.
Expanding Services: Adding ancillary services like advanced tech support or customer success services could increase revenue per client.
Target New Markets: The current focus is on venture-backed SaaS and marketplace startups. There are opportunities to target other industries or types of companies.
Customer Retention Programs: Implementing customer retention programs could reduce churn and increase lifetime value.
🙋🏻♂️ The Buyer
Hands-on Entrepreneur: Someone who wants to be involved in the day-to-day to unlock the business's full growth potential.
Investor with Sales/Marketing Expertise: Someone who can fill the business's current gap in proactive sales and marketing efforts.
Existing BPO or Customer Service Company: An existing company in the same sector could achieve synergies and cost savings.
Tech Savvy: As the business serves tech startups, technological literacy would be beneficial.
🏡 Main Street, Agency
Appointment Setting Agency for Realtors - $920k
Established in 2022
Revenue: $540k
Profit: $300k
Margin: 56%
Multiple: 3.07x
💬 Quick Take
On the table is a high margin agency specializing in qualifying leads for realtors. The business has locked in a recurring revenue model and employs a specialized team to handle operations. However, the business is very young and faces some risk due to its dependency on a niche workforce.
✅ What I Like
High Profit Margins
With a TTM profit of $300k on revenue of $540k, the agency is highly profitable with room to invest in growth.
Recurring Revenue Model
The company's per-lead pricing structure coupled with a lead minimum ensures a recurring and stable revenue stream.
Team in Place
Having a dedicated team consisting of appointment setters, sales manager, customer success manager, and a virtual assistant makes for streamlined operations.
Solves a Real Problem
Realtors often find in-house calling too costly and risky, and this business effectively addresses that pain point.
Targeted Market
By focusing on realtors, the business has a clear customer profile, making scaling and marketing easier.
❓ Concerns
Dependency on Small Team
The business's operations rely on a small but specialized team, which could present a bottleneck for growth.
Cyclical Market
Being tied to the real estate market, which has its ups and downs, could introduce revenue volatility. Some indicators point to a downturn in the near future.
💼 Due Diligence Questions
Customer Churn: What's the churn rate, and is it in line with industry averages?
Contract Lengths: Are there long-term commitments with clients that guarantee revenue?
Revenue Concentration: Is the revenue reliant on a few key clients?
Workforce Stability: What is the turnover rate among the appointment setters and other team members?
Technology and Systems: What CRM and other technology does the business rely on?
Competitive Landscape: Who are the main competitors and what differentiates this business from them?
Business Scalability: How easy is it to scale the current business model?
🚀 Growth Levers
Geographic Expansion: Targeting additional regions could broaden the customer base and increase revenue.
Service Diversification: Introducing adjacent services, like CRM management or digital advertising, could offer clients more value and increase revenue streams.
Automation: Implementing more automation could enhance operational efficiency and allow the business to handle a larger volume of leads.
Strategic Partnerships: Forming alliances with real estate platforms or other industry-relevant businesses can bring in additional clients.
🙋🏻♂️ The Buyer
Industry Experience: Someone with experience in the real estate sector or in B2B services would be ideal.
Technology Savvy: A sound understanding of CRMs and digital marketing would be beneficial for leveraging the business's existing systems.
How did you like this issue of the newsletter?
⚒️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.
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.
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.
Smash.vc - Whether you're looking to sell minority stakes in your business to take some chips off the table, looking for a partner to acquire an asset, or needing capital to complete an SBA deal, we'd love to chat with you.
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.
Search Fund Coalition - community for the Entrepreneurship Through Acquisition ecosystem. Monthly events and meetups for acquisition entrepreneurs.
Deal Sourcing Guide - a comprehensive list of business marketplaces, brokers, deal origination firms, and more.
💡 How I Can Help
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