The Business Inquirer #138
Highlighting a low workload dropshipping store, a B2B video testimonial SaaS, a well-established window cleaning business, and a multi-service commercial property business.
Hello Friends!
This newsletter is written with the help of guest editors Corey and Riley, two searchers looking for digitally native businesses <$2M in total transaction value. If you’re interested in networking, please reach out to corey@skyviewadvisory.com and riley@skyviewadvisory.com.
I am very grateful to Corey & Riley for their assistance with this newsletter.
In this week’s issue:
🛒 eCommerce - 1 listing
☁️ SaaS - 1 listing
🏡 Main Street - 2 listings
⚒️ Tools & Resources
💡 How I Can Help
This issue of The Business Inquirer is sponsored by Smash.vc
Buying a business with the SBA?
Would having a capital partner help?
At Smash.vc, they do two things:
Buy minority stakes in existing small businesses.
Partner with entrepreneurs trying to acquire new ones.
If you're actively looking to buy a cash-flowing business using an SBA loan, hit them up if you'd like a partner.
They contribute capital, give advice, or help with growth when asked... but stay out of the way the rest of the time.
Silent partners there to help when necessary, nothing more.
If interested 👉 go say hi!
🛒 eCommerce
100% Dropshipping Electronics eCommerce Store - $195k
Launched in 2021
Competitors: JB HIFI, Harvey Norman, Bing Lee
Revenue: $178k
Profit: $93k
Margin: 52%
Multiple: 2.1x
💬 Quick Take
This dropshipping business, while posing some considerable risks, is value-priced and could be a good fit for both an experienced entrepreneur as well as a beginner looking to dip a toe into ETA with a relatively straightforward business.
✅ What I Like
No Inventory
As with dropshipping businesses, this business carries no inventory which simplifies the business considerably from an operation and working capital perspective.
Low Operational Requirements
The owner claims it only takes about an hour per day to run the business, making it ideal for someone looking to manage it part-time or add it as an additional revenue stream.
High Margin
With a gross margin of 52.7%, this business is profitable, providing a cushion to experiment with growth tactics and scale the business.
Location Agnostic
The business can be operated from anywhere, providing flexibility and making it particularly appealing for digital nomads or those looking to enter the eCommerce market internationally.
❓ Concerns
No Patent/IP
This business is essentially a marketing engine with no associated patent/IP on the products it sells - it could be easily disrupted by a superior marketing entrepreneur.
Dropshipping Dependency
The business relies 100% on dropshipping. Any disruptions in the supply chain or changes in supplier terms can significantly impact the business.
Scalability Uncertainties
While the business suggests that increased ad spend would proportionally increase revenue, this isn't guaranteed and needs to be validated. Any changes in CPC will have an outsized impact on this business.
💼 Due Diligence Questions
Customer Lifetime Value: What is the average customer lifetime value, and how does it compare to customer acquisition costs?
Supply Chain Reliability: Who are the main suppliers, and what are the contingency plans for supply chain disruptions?
Ad Spend Efficiency: How effective are the current advertising channels in terms of ROI?
Ownership Responsibilities: Are there any undisclosed responsibilities or tasks that require the owner's time?
Reason for Sale: Why is the owner selling the business now, and are there any undisclosed issues?
Seasonality: Is the business subject to seasonal fluctuations in sales or profit?
Technology: Are there any custom-coded features on the Shopify store, and will they be transferred upon sale?
Customer Support: What is the average volume of customer support inquiries, and how are they managed?
🚀 Growth Levers
Inventory Expansion: Diversifying the product range could attract a broader customer base and increase upsell opportunities.
International Markets: Given the business can be run from anywhere, exploring international markets might be a logical next step.
Marketing Channels: Expanding beyond the current marketing channels to include SEO and email marketing could yield significant gains.
Customer Loyalty Programs: Implementing a customer loyalty or referral program could significantly increase customer retention and lifetime value.
🙋🏻♂️ The Buyer
eCommerce Enthusiast: Someone with a background in eCommerce could easily build upon the existing success.
Part-Time Investor: Given the low time commitment, this business could be an additional revenue stream for a part-time investor.
Digital Marketer: Someone with expertise in digital marketing could leverage the high margins for scalable growth.
Global Operator: As the business isn't tied to a specific location, it would be ideal for an owner located outside the USA but looking to enter the US market.
☁️ SaaS
Video Testimonial and Survey-Building Platform - Open to Offers
Launched in 2014
Competitors: Vocal Video, Video Peel, BirdEye, Podium
Carveout out from a web design and dev agency
Revenue: $428k
Profit: $280k
Margin: 65%
Multiple: N/A
💬 Quick Take
This B2B SaaS platform specializing in video testimonials and surveys shows impressive numbers despite being a side project. The 65% gross margin is robust, and the technology stack is solid with advanced features like in-browser video editing. However, the business is a side project in a larger agency and raises questions about resource allocation and standalone growth. The fact that it’s been largely set and forgotten might imply untapped growth potential but could also flag neglect.
✅ What I Like
Strong Profit Margins
A 65% gross margin for a side project is quite impressive, suggesting that the business model is sustainable and potentially lucrative.
Low Maintenance
The business requires minimal oversight, indicating that a new owner could focus on scaling rather than resolving operational bottlenecks.
Feature-Rich Platform
The platform's features, such as advanced form building and in-browser video editing, offer a competitive edge and add value to the customers.
Established User Base
Many customers have been using the platform for years, offering a stable revenue stream and potential case studies for marketing.
❓ Concerns
Casual Management
Given that this SaaS platform has been a side project, there's a risk of potential neglect that may require immediate attention.
Undefined Marketing Strategy
The business has relied on organic search and inbound marketing, but a more comprehensive strategy will be essential for scaling.
Lack of Partnerships
The business has not explored partnerships or freemium models, which may be low-hanging fruit for growth but also indicate untapped channels.
💼 Due Diligence Questions
Business Processes: How dependent is this business on the parent company it’s being separated from? Are certain employees staying? How much of the growth is dependent on the parent business?
Customer Churn Rate: What is the customer churn rate? Is there any client concentration risk?
Legal and IP Concerns: Are there any outstanding legal issues or intellectual property concerns?
Technology Stack Maintenance: How is the technology stack maintained, and what are the associated costs?
Trademark Transferability: Is the registered US PTO trademark transferable?
Customer Data Security: How is customer data stored and secured?
Pending Feature Releases: Are there any pending feature releases or product updates?
🚀 Growth Levers
Freemium Model: Implementing a freemium model could significantly boost user adoption rates, leading to higher conversion into paid plans.
Agency Partnerships: Forming partnerships with web agencies could open a new channel for customer acquisition, leveraging the agencies' existing client bases.
Enterprise Sales: The platform's robust features make it ideal for larger organizations, and a focused enterprise sales strategy could yield high-value contracts.
SEO and Content Marketing: As the platform already performs well in organic search, doubling down on SEO and content marketing can expand its online visibility.
🙋🏻♂️ The Buyer
SaaS Experience: The ideal buyer should have a background in running and scaling SaaS businesses. Given the technical nature of this platform, prior experience can be a significant asset.
Marketing Savvy: The perfect fit would be someone with strong marketing skills. The business has untapped growth potential that could be unlocked with the right marketing strategies.
Tech Team or Access: Having a tech team or access to developers will be crucial. The platform has complex features and may require ongoing development and maintenance.
Resource-Rich Organization: An organization with ample resources could leverage this product across multiple locations or verticals. This could maximize the value derived from the existing features of the SaaS platform.
Strategic Fit: The best buyer would be one who sees this acquisition as synergistic with their current operations. They should have a clear idea of how this platform fits into their broader business ecosystem.
🏡 Main Street
Interlake Window Cleaning in Seattle, WA - $1.1M
Launched in 1986
Based in Seattle, WA
Revenue: $1.4M
Profit: $520k
Margin: 37%
Multiple: 2.1x
💬 Quick Take
This window cleaning business presents a strong track record with over three decades of operation. It has adapted well to market needs by shifting its focus to the commercial sector. However, it hasn't updated its marketing strategies in five years, which could be a point of concern or an opportunity. The relocation to a new office space adds a layer of operational complexity but could be an exciting phase of growth if managed well.
Website: Interlake Window Cleaning (interlakecleaning.com)
✅ What I Like
Established History
The business has been around since 1986, providing a level of trust and reliability that newcomers can't easily match.
Focus on Commercial Sector
With 80% of revenue coming from the commercial sector, the business has a diversified income stream that is often more stable than residential work.
Recession Proof
Commercial clients like office buildings, retail stores, or medical facilities may be less likely to cancel cleaning contracts as these services are essential to maintain a professional appearance and meet certain regulations.
❓ Concerns
Lack of Marketing Initiatives
The business hasn't invested in marketing for the past five years. While it may have built a strong clientele, the absence of an active marketing strategy could make it vulnerable to competition and changes in market demand.
Reliance on Commercial Sector
With 80% of revenue coming from the commercial sector, the company could be at risk if there's a downturn in this market or if it faces stiff competition in securing commercial contracts.
Office Relocation
Although the new office is in the same vicinity as the previous one, relocation could potentially disrupt operations temporarily or have an impact on client relationships if not managed carefully.
Stagnant Service Offering
The business has not expanded its service portfolio beyond window cleaning. This lack of diversification might limit its appeal to potential clients looking for a one-stop solution for maintenance needs.
💼 Due Diligence Questions
Revenue Breakdown: What is the percentage breakdown between commercial and residential clients?
Lease Terms: What are the terms of the new lease?
Client Contracts: Are there long-term contracts in place with any clients? Any large contracts coming up for renewal? Any client concentration risk?
Employee Turnover: What is the employee turnover rate? How easy is it to hire?
Competitive Landscape: Who are the main competitors and what is the business's market share? What is the TAM?
🚀 Growth Levers
Digital Marketing: The business has not updated its marketing in years. A focused digital marketing campaign can generate new leads and awareness.
Expand Services: Offering additional maintenance services could provide more revenue from the existing customer base.
Pricing Optimization: A review of the current pricing strategy may reveal opportunities for increased profitability without alienating customers.
Geographical Expansion: With a strong reputation already established, expanding into new areas could tap into an entirely new customer base.
🙋🏻♂️ The Buyer
Experienced in Services Sector: An ideal buyer would have experience in the service industry, which will assist in understanding operational nuances.
Marketing Skills: Given the lack of marketing efforts, someone with strong marketing skills could unlock significant growth.
Strategic: The best buyer would see this acquisition as a strategic addition to existing operations, deriving synergies from combining resources.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Commercial Lawn Services, Landscaping and Property Management - $1.4M
Launched in 1999
Revenue: $2.4M
Profit: $543k
Margin: 23%
Multiple: 2.6x
💬 Quick Take
This commercial property services business in middle Tennessee is an expansive and diversified operation with a focus on commercial and industrial clients. With more than 260+ accounts and several services under one umbrella, it's a one-stop-shop for clients. The lack of advertising in recent years and over-reliance on referrals could be a double-edged sword. The business could potentially benefit from marketing efforts and technological upgrades.
✅ What I Like
Strong Client Base
With a diversified client base of over 260+ accounts, the business has a solid foundation to build upon. This variety in clientele adds an extra layer of resilience to market fluctuations.
Multiple Services
The extensive range of services offered makes the business an attractive one-stop-shop for commercial property needs, from landscape design to snow removal.
Scalability
The business has already scaled back less profitable ventures, indicating a focus on profitability and efficiency. This suggests that there's room for further expansion, especially with a second base location.
❓ Concerns
Marketing Neglect
Despite a strong book of business, there has been a lack of marketing initiatives, which might slow down the rate of customer acquisition in the long term.
Owner Transition
The owner is starting a new related business, raising questions about how much focus will be dedicated to a smooth transition and possible competing interests.
Single-Source Referrals
Currently, new business is primarily generated by referrals, putting the company at risk if the referral network weakens.
💼 Due Diligence Questions
Contract Durations: What is the average length and terms of contracts with clients?
Employee Turnover: What is the employee turnover rate? How easy is it to hire?
Asset Condition: What is the condition of the current equipment and machinery?
Lease Terms: What are the terms for leasing the real estate, and is there an option to purchase?
Competitive Landscape: How does the business fare against local competitors in terms of pricing, quality, and range of services?
🚀 Growth Levers
Geographic Expansion: Opening another base location could facilitate servicing more clients efficiently, given the broad range of services offered.
Marketing Strategy: Investing in online and offline marketing can exponentially grow the customer base, given that the business is already well-known.
Technological Upgrade: Implementing software for inventory management and client communication can streamline operations.
Service Diversification: Exploring services that are complementary to the current offerings can attract new customer segments.
🙋🏻♂️ The Buyer
Experienced in Service Industry: A buyer with experience in property services or a similar industry can seamlessly integrate into the business.
Operational Savvy: A buyer who can identify inefficiencies and has a knack for operational effectiveness would be ideal.
Growth-Oriented: A buyer focused on growth can leverage the business's existing strengths to scale it to new heights.
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 small businesses ($500k - $10m revenue) considering exits. All deals are sourced by the Rejigg team. Their team adds 7-10 new deals each 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
Whenever you’re ready, here are a few ways for us to work together…
Schedule 1:1 consulting on deal sourcing, due diligence, M&A ecosystem, newsletters, entrepreneurship, or anything else you’d like to discuss
Promote your brand to business buyers, investors, SMB owners, and other M&A participants by sponsoring this newsletter
Access or share deal flow with your peers through Deal Flow Scout
Assemble your M&A deal team with DueDilio.
If you enjoyed reading this newsletter, why not share it?