The Business Inquirer #140
Sharing a highly profitable niche CRM, a set of GDPR compliant CRO tools, a linen & laundromat business including real estate, and an electrical generator install business in SoCal.
Hello Friends!
In this week’s issue:
☁️ SaaS - 2 listings
🏡 Main Street - 2 listings
⚒️ Tools & Resources
💡 How I Can Help
This issue of The Business Inquirer is sponsored by Smash.vc
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☁️ SaaS
OnlyFans CRM - $8.0M
Launched in 2022
450+ clients; 11 employees;
$450 ARPU; $3,580 CLTV;
Divestment from an agency
Revenue: $1.1M
Profit: $850k
Margin: 77%
Multiple: 9.4x
💬 Quick Take
A SaaS platform tailored for OnlyFans content creators, boasting a substantial MRR and ARR with minimal marketing. Concerns hover around the high valuation and operational naivety of its agency founders, signaling a need for strategic leadership post-acquisition.
✅ What I Like
Strong MRR/ARR with Minimal Marketing
The business commands an MRR of $185k and an ARR of $2.2M, achieved with minimal marketing—a testament to its market fit and the potential for scale with strategic marketing initiatives.
Scalable Tech Architecture
Built on a modern stack with Java, React, and hosted on AWS, the business is technologically equipped for growth, indicating potential for expansion without significant tech hurdles.
High User LTV
An LTV of $3,580 per user suggests a compelling value proposition and customer satisfaction. The high LTV also leaves room for customer acquisition costs.
Resources for Growth
The positive cash flow and profitability provide ample resources for further development, marketing efforts, and expansion into new markets.
❓ Concerns
Limited SaaS Experience
The current owners lack prior experience in the SaaS industry, which may pose challenges in scaling the platform and navigating the complexities of the market.
Industry Regulation
Given the nature of the adult content industry, the platform could face regulatory scrutiny and evolving compliance requirements that require careful management.
High Asking Price
While the business demonstrates profitability, the 9.4x multiple is a bit elevated considering all the risks.
Dependency on Owners
The business was created by an OnlyFans agency, and the ownership transition might affect the existing customer relationships and operations.
Competitive Landscape
The OnlyFans industry is highly competitive, and staying ahead of competitors and retaining market share will require effective strategies and $$$ investment.
Technical Debt
Without prior SaaS experience, there may be technical debt or architectural challenges that need addressing to support future scalability.
💼 Due Diligence Questions
Customer Retention Strategies: What mechanisms are in place to maintain the impressive LTV and minimize churn among the existing customer base?
Product Development Roadmap: How does the current product development pipeline look, and are there any anticipated innovations that could impact the platform's competitive edge?
Operational Efficiencies: What are the current operational costs, and where do opportunities lie for streamlining and cost reduction?
User Data Security: What measures are in place to ensure the security and privacy of user data, especially considering the sensitive nature of the adult content industry?
Technical Debt: Is there any accumulated technical debt or legacy systems that might require extensive updates or refactoring in the near future?
Scalability Assessment: Can the current tech stack and infrastructure handle potential spikes in user growth without performance degradation?
Competitive Analysis: How does the platform compare to competitors in terms of features, pricing, and user satisfaction? Are there any unique selling points?
Customer Satisfaction: What is the platform's customer satisfaction rate, and can you provide references from current customers for validation?
Customer Acquisition Cost Breakdown: Can you provide a breakdown of the customer acquisition cost, including marketing expenses, sales efforts, and customer onboarding costs?
Technology Stack Maintenance: What is the plan for maintaining and updating the technology stack, and are there any dependencies on third-party services or software?
Employee Transition: How will key personnel, such as developers and support staff, transition to the new owner, and what is their level of commitment to the business post-acquisition?
Legal Agreements: Are there any significant contracts, licensing agreements, or partnerships in place that would affect the business's operations or revenue streams?
🚀 Growth Levers
Market Expansion: Broadening the target market beyond OnlyFans to include similar platforms can mitigate risks and increase the user base, leveraging the platform's adaptable features for wider appeal.
Strategic Partnerships: Aligning with key players in the adult entertainment and tech industries can provide new channels for customer acquisition and brand credibility.
Enhanced Analytics: Further development of analytics and reporting features can offer users deeper insights, increasing the platform's value proposition and user retention.
🙋🏻♂️ The Buyer
Strategic Industry Player: An existing company in the adult entertainment or SaaS space would bring the necessary operational experience and could integrate this business to strengthen its portfolio.
Tech-Savvy Entrepreneur: An individual with a strong tech background and understanding of the adult entertainment market could leverage the existing tech stack for rapid innovation and growth.
Familiarity with Adult Content Industry: A deep understanding of the unique challenges and regulations in the adult content industry would be advantageous.
Risk Tolerance: Buyers should be aware of the competitive nature of the OnlyFans industry and be prepared to mitigate associated risks.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Conversion Rate Optimization - $950k
Launched in 2009
Competitors: VWO, Optimizely, Hotjar, Heap, Zuko
Owner operated business; +50% MRR Y/Y growth;
Revenue: $361k
Profit: $290k
Margin: 80%
Multiple: 3.3x
💬 Quick Take
This Conversion Rate Optimization (CRO) SaaS business shows promising financial health with an impressive 80% gross margin. Its toolset is comprehensive and caters mainly to Enterprise clients, accounting for 89% of its revenue. A major highlight is the organic growth achieved solely through referrals. However, there are concerns related to its tech stack and dependence on a limited number of clients for the bulk of its revenue.
✅ What I Like
High Gross Margin
The business boasts an impressive 80% gross margin, indicating strong profitability.
Diverse Client Base
With 13 clients optimizing various types of websites, the business shows versatility and potential for further expansion.
Flexible Pricing
Offering pricing based on online traffic and volume discounts for Enterprise accounts provides flexibility and scalability.
GDPR Compliance
Being GDPR ready is a significant advantage in a market where compliance is crucial.
Growth Potential
The business has grown organically without significant marketing efforts, offering the potential for rapid expansion through customer acquisition.
Founder's Support
The founder's willingness to provide support for up to 12 months post-acquisition ensures a smooth transition.
❓ Concerns
Heavy Reliance on Enterprise Contracts
While 89% of revenue comes from Enterprise contracts, diversifying revenue sources could reduce risk.
Limited International Revenue
Revenue from outside of Poland accounts for less than 15% of revenue, indicating potential for international expansion.
Outdated Backend Code
Some parts of the backend code are outdated and may require attention and investment.
Sole Founder Dependency
The business has been primarily operated by a single founder, highlighting the need for a team to support growth.
Competitive Market
The market for Conversion Rate Optimization tools is competitive, and staying ahead of competitors is essential.
Brand Awareness
Investing in marketing and improving brand awareness will be crucial for growth. This will require significant investment.
💼 Due Diligence Questions
Pricing Structure: Can you provide a detailed breakdown of the pricing structure based on customer online traffic, including volume discounts for Enterprise accounts?
GDPR Compliance: What strategies have been implemented to ensure GDPR compliance, and are there any pending or historical compliance issues?
Marketing and Customer Acquisition: Could you elaborate on the current marketing and customer acquisition strategies, considering the potential for growth in this area?
Backend Code Maintenance: What specific areas of the backend code are outdated, and what plans are in place for code maintenance and updates?
Intellectual Property Assets: Are there any intellectual property assets related to the software, such as patents or trademarks?
Diversification of Revenue: How does the business plan to diversify revenue sources beyond Enterprise contracts?
Competitive Landscape: Can you provide insights into the competitive landscape of the Conversion Rate Optimization tools market and how the business differentiates itself?
Client Churn: What has been the churn rate for enterprise clients over the past 24 months?
Customer Lifetime Value: What is the average lifetime value of a client, and how does it compare with customer acquisition costs?
Ownership Structure: Are there any contractual obligations or royalties owed to the former CTO who owns the remaining 4%?
Sales Channels: Since growth has been organic, what insights can be shared about unsuccessful sales and marketing strategies attempted, if any?
Post-Acquisition Plan: Are there any specific conditions for the seller's involvement post-acquisition?
🚀 Growth Levers
International Expansion: Explore opportunities to expand the customer base beyond Poland, especially in markets where GDPR compliance is essential.
Marketing Investment: Invest in marketing and branding to increase brand awareness and customer acquisition efforts.
Product Enhancement: Continuously update and improve the software, addressing any outdated backend code and adding new features.
Customer Retention: Implement strategies to retain existing clients and encourage them to upgrade to higher-tier plans.
Strategic Partnerships: Explore partnerships with e-commerce platforms and agencies to increase the distribution and adoption of the software.
Team Development: Build a capable team to support product development, customer support, and sales efforts, reducing founder dependency.
Upsell and Cross-Sell: With a comprehensive toolset, creating bundle packages or add-on services can increase the average revenue per user (ARPU).
Freemium Model: Introducing a freemium model could attract smaller businesses and later convert them into paying customers.
🙋🏻♂️ The Buyer
Experienced SaaS Entrepreneur: An ideal buyer should have experience in the SaaS industry, particularly in scaling software businesses.
Understanding of CRO Market: Familiarity with the Conversion Rate Optimization space will be beneficial for strategic decision-making.
Marketing Expertise: Buyers with strong marketing expertise can leverage growth opportunities.
Global Market Understanding: Understanding international markets, especially GDPR-sensitive regions, is advantageous.
Product Development Capability: Buyers with the ability to enhance and update the software can maximize its potential.
🏡 Main Street
Linen Importer & Laundromat - $2.5M
Launched in 1971
Based in PA; Includes commercial & residential real estate;
Revenue: $4M
Profit: $550k
Margin: 14%
Multiple: 4.55x
💬 Quick Take
This opportunity presents a well-rounded package with multiple revenue streams. The linen importing and wholesaling business boasts over 50 years of success, an impeccable reputation, and a valuable inventory. The accompanying laundromat adds steady cash flow with minimal oversight required. The inclusion of commercial and residential real estate further enhances the deal. However, the need for a hands-on owner post-acquisition and the potential for missed marketing opportunities are considerations. With strategic marketing and tapping into the existing brand recognition, this acquisition has the potential to grow and thrive.
✅ What I Like
Longevity and Reputation
The linen business's 50+ years of experience and unparalleled reputation in importing and wholesaling are strong assets.
Diverse Revenue Streams
With three revenue streams, including linen sales, laundromat income, and real estate, this opportunity offers diversification.
Quality Control
Owning and managing their warehouse allows for stringent quality control and nationwide service.
Asset Inclusion
The inclusion of real estate in the asking price adds long-term value and stability to the acquisition.
Untapped Marketing Potential
The minimal marketing and advertising efforts leave room for expansion by capitalizing on the existing brand and customer base.
Steady Cash Flow
The laundromat provides a steady stream of income with relatively low day-to-day oversight required.
❓ Concerns
Hands-On Ownership Requirement
The current owner seeks a hands-on transition, which may require the buyer's active involvement in day-to-day operations.
Limited Marketing
The lack of advertising and marketing efforts represents a missed opportunity to maximize the business's potential.
Industry Competition
The linen industry may face competition from both traditional suppliers and online retailers.
Transition Period
Managing the transition with the current owner's involvement can pose challenges in terms of decision-making and leadership.
💼 Due Diligence Questions
Customer Base Breakdown: Can you provide a breakdown of the customer base for the linen business, including key clients and their contribution to revenue?
Inventory Management: What is the turnover rate for the $1 million inventory, and how is it managed to prevent obsolescence?
Supplier Agreements: Are there any existing contracts or agreements with suppliers, and what are their terms and conditions?
Laundromat Operations: How is the laundromat currently managed, and what are the historical cash flow patterns for this business segment?
Market Share and Competition: What is the market share and competitive landscape for linen importing and wholesaling in the region?
Equipment Condition: Are there any pending maintenance or equipment replacement costs for the laundromat's machines?
Marketing Strategies: Can you elaborate on the existing marketing strategies or plans in place for both businesses?
Real Estate Condition: What is the condition of the included commercial and residential real estate, and are there any ongoing maintenance or renovation needs?
🚀 Growth Levers
Strategic Marketing: Develop and implement a comprehensive marketing strategy to increase awareness of the linen business, tapping into its 50-year reputation.
Inventory Optimization: Implement efficient inventory management practices to reduce carrying costs and improve turnover.
Laundromat Expansion: Explore the potential to expand the laundromat business by adding additional services or targeting new customer segments.
Real Estate Development: Consider potential development or leasing opportunities for the commercial and residential real estate to generate additional income.
Online Presence: Establish an online presence for the linen business to reach a broader customer base beyond its current network.
🙋🏻♂️ The Buyer
Hands-On Operator: The ideal buyer should be willing to actively manage and oversee the day-to-day operations, especially during the transition period.
Marketing Expertise: A buyer with marketing expertise can capitalize on the untapped potential for expanding the linen business.
Real Estate Savvy: Knowledge or experience in real estate management and development can optimize the value of the included properties.
Diversification Strategy: Buyers looking for a diversified income stream across multiple businesses and real estate assets will find this opportunity appealing.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
SoCal Electrical Generator Installation - $1.4M
Launched in 2019
$14k AOV; 50% referral business;
Owner works full-time in the business
Revenue: $675k
Profit: $599k
Margin: 89%
Multiple: 2.34x
💬 Quick Take
This business, specializing in generator installation services in Southern California, presents an intriguing acquisition opportunity. The region's unreliable electrical grid and increasing demand for backup power solutions make it a high-potential market. The company has built a strong reputation for quality, efficiency, and prompt service, leading to organic growth through referrals and a robust online presence. The high AOV, low overhead, and the use of subcontractors contribute to profitability. However, further analysis of the business model is warranted to understand whether this is simply an online lead-generation business.
✅ What I Like
Growing Market Demand
The demand for backup power solutions in Southern California is on the rise due to an unstable power supply, creating significant growth potential.
Reputation and Trust
The company has established a trustworthy reputation, leading to a substantial portion of projects coming from referrals.
Online Presence
A strong online presence with effective SEO strategies positions the business as a leader in the region.
Consistent Sales
Sales remain steady throughout the year, reducing reliance on seasonality.
❓ Concerns
Dependence on Southern California
The business's success may be closely tied to the Southern California market, potentially limiting geographic expansion.
Pay-Per-Lead Service
While effective, the reliance on a pay-per-lead online service can lead to fluctuations in marketing costs.
Owner-Centric
The owner's full-time involvement may pose challenges in terms of transition and scalability.
Competitive Market
The generator installation market could become more competitive with growing demand.
Subcontractor Dependency
The reliance on subcontractors raises questions about post-acquisition workforce stability and management.
Business Model
The lack of recurring revenue is a concern. How sustainable is the business model? Reliance on digital marketing and SEO can lead to fluctuations in business performance.
💼 Due Diligence Questions
Lease Terms: What are the lease terms for the business's office or operational space, and is there an opportunity for renegotiation or any pending lease agreements?
Subcontractor Management: How are subcontractors managed, compensated, and integrated into the project workflow? Are there existing contracts with them, and what are the terms?
Client Retention Strategies: What is the current client retention rate, and what strategies are in place to maintain and grow the customer base, considering the importance of referrals?
Legal and Regulatory Issues: Are there any pending or historical legal or regulatory issues related to generator installation services in Southern California that potential buyers should be aware of?
Supplier Relationships: What are the key supplier relationships for equipment and materials, and are there any long-term contracts or agreements in place?
Customer Contracts: Are there any long-term customer contracts or service agreements, and what are the terms and renewal rates?
Competitive Analysis: Can you provide a competitive analysis of the local generator installation services market in Southern California, including key competitors and their market share?
Insurance Coverage: What types of insurance coverage does the business carry, including liability and worker's compensation insurance, and are there any pending insurance claims?
🚀 Growth Levers
Geographic Expansion: Explore opportunities to expand the business to neighboring regions or areas with similar power supply challenges.
Diversification of Services: Consider offering additional services related to backup power solutions, such as maintenance contracts or renewable energy options.
Marketing Optimization: Continue investing in SEO and online marketing while exploring cost-effective lead generation strategies.
Product Offerings: Explore partnerships with generator manufacturers for exclusive or specialized product offerings.
Employee Transition Plan: Develop a plan for transitioning from owner-centric management to a team-based approach to enhance scalability and reduce reliance on the owner.
🙋🏻♂️ The Buyer
Experienced Entrepreneur: An ideal buyer should have experience in the service industry and be capable of managing and expanding the business effectively.
Regional Knowledge: Knowledge of the Southern California market and its unique challenges would be advantageous.
Marketing Acumen: A buyer with expertise in online marketing can capitalize on the existing strong online presence.
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.
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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.
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