The Business Inquirer #141
Sharing a growing LinkedIn lead gen tool, an innovative UX testing software, a highly profitable education platform, and an exhibition booth design & installation business in Miami.
Hello Friends!
In this week’s issue:
☁️ SaaS - 2 listings
💼 Online Service & Media - 1 listing
🏡 Main Street - 1 listing
⚒️ Tools & Resources
💡 How I Can Help
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☁️ SaaS
LinkedIn Lead Generation - $450k
Launched in 2017
300 monthly paying clients
Revenue: $98k
Profit: $70k
Margin: 71%
Multiple: 6.4x
💬 Quick Take
This SaaS startup presents a good opportunity for someone with SaaS and marketing expertise. The product—a lead generation tool for LinkedIn—is in a growing niche with a solid customer base. While the financials are promising, the business's heavy reliance on direct traffic are areas for potential concern. The valuation also seems elevated at first glance.
✅ What I Like
Stable Profit Margins
The company maintains high profit margins, indicative of a strong value proposition and pricing power.
Growing User Base
With over 300 monthly paying clients, the startup has demonstrated its capability to attract and retain a solid customer base. This consistent client growth can be an indicator of market demand and product-market fit.
SEO Upside Potential
Recent SEO initiatives have shown positive trends, indicating untapped potential in organic growth strategies.
❓ Concerns
Market Competition
The presence of established competitors like Linked Helper and Dux Soup could pose challenges in market share acquisition.
Single Traffic Channel Risk
A heavy reliance on direct traffic increases vulnerability to market changes and limits outreach.
Platform Dependence
Relying on LinkedIn could be risky if platform policies change or if competition intensifies.
💼 Due Diligence Questions
Customer Acquisition Costs: What are the current customer acquisition costs, and how have they trended over time?
Tech Stack Scalability: How adaptable and scalable is the current tech stack in the face of rapid growth or pivoting demands?
Intellectual Property Protections: What measures are in place to protect the company's codebase and IP? Given that the codebase and IP are key assets, their protection is vital for long-term sustainability.
Churn Rate: What is the monthly churn rate, and what retention strategies are in place?
Revenue Concentration: Are there any clients that make up a significant portion of revenue, and what's the risk associated with this?
Competitive Landscape: Who are the main competitors, and what is our competitive advantage?
🚀 Growth Levers
SEO and Content Marketing: By focusing on SEO and regular content creation, the company can significantly increase organic traffic and leads.
Sales Team Development: Establishing a skilled B2B sales team can improve conversion rates and drive revenue growth.
Expansion into New Markets: Exploring new markets and industries can diversify the customer base and reduce dependency on a single market segment.
Product Diversification: Expand beyond LinkedIn to include other platforms, reducing dependency and increasing market reach.
Market Education: Develop educational content that demonstrates the value and utility of the tool to potential users.
Strategic Partnerships: Forge partnerships with complementary service providers to tap into new customer segments.
🙋🏻♂️ The Buyer
SaaS Experienced Entrepreneur: Ideal for a buyer with experience in SaaS who understands the nuances of scaling such a business. An experienced entrepreneur can leverage existing skills to optimize the product and grow the business effectively.
Strategic Buyer with Complementary Portfolio: A company with a suite of B2B tools could integrate this product to enhance their offering. A strategic buyer with complementary products can cross-sell and upsell to an existing customer base, maximizing revenue potential.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
UX Testing Tool - Open to Offers
Launched in 2010
Competitors: Userlytics, UserFeel, Lookback, Maze
Revenue: $550k
Profit: $110k
Margin: 20%
Multiple: N/A
💬 Quick Take
This SaaS business, with its cutting-edge integration of OpenAI's ChatGPT, offers robust user experience insights, striking a balance between qualitative depth and quantitative breadth. The tiered subscription model provides flexibility for various customer needs. While its growth through inbound marketing and referrals is impressive, there is a lack of a diversified sales strategy. There is significant growth potential if it can effectively leverage an outbound sales team and additional investment in marketing. A buyer should evaluate the risks of customer acquisition costs and the competitive landscape.
✅ What I Like
Innovative Product Integration
The integration of OpenAI's ChatGPT places the business at the forefront of the user experience testing space.
Subscription Model
Recurring monthly and annual subscriptions offer stable cash flow and predictable revenue.
High Scalability
The business is positioned for scalability, especially if incorporated into a larger platform with an established sales force.
Strong Inbound Growth
The business has demonstrated healthy growth through inbound marketing and referrals.
❓ Concerns
Limited Sales Channels
Current growth is limited by reliance on inbound marketing and could benefit from a diversified strategy.
Market Competition
Rapidly evolving technology requires continuous innovation to stay ahead in the market.
💼 Due Diligence Questions
Customer Acquisition Costs: What are the current costs and lifetime value of acquiring customers through inbound channels?
Churn Rate Analysis: What is the monthly or annual churn rate, and what retention strategies are in place?
Market Position: How does the company compare with competitors in terms of market share and customer perception?
Technology Stack: How scalable and maintainable is the current technology stack, especially with ChatGPT integration?
User Feedback: What feedback has been received from users, and how has it influenced the product roadmap?
🚀 Growth Levers
Outbound Sales Strategy: Implementing an experienced outbound sales team can aggressively expand the customer base.
Marketing Channel Diversification: Investing in a broader range of marketing channels can attract new user segments.
Product Expansion: Developing additional features or complementary products could open new revenue streams.
International Expansion: Exploring new markets could tap into unserved or underserved customer bases.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: An individual with a background in technology and SaaS would be ideal to understand and scale the product.
Strategic Investor: An investor with connections to larger platforms could leverage synergies for rapid growth.
Strategic Growth Mindset: A buyer with experience in scaling SaaS businesses would be ideal, especially one with a robust B2B sales background.
Marketing Prowess: An individual or entity that can bring in marketing expertise to leverage untapped channels and increase market share.
💼 Online Service & Media
Virtual Education Platform (Math Focus) - $4.0M
Launched in 2008
Caters to students grades 6-12; Serves school districts and parents;
2 owners work full time on the business
Based in Bellevue, WA (relocatable)
Revenue: $2.1M
Profit: $1.4M
Margin: 67%
Multiple: 2.9x
💬 Quick Take
This virtual education platform stands out with its robust math curriculum and digital resources tailored to align with State Standards. Its substantial profit margin and established footing in the regional market underscore its operational efficiency and potential for expansion. While the focus on math education is a strength, it also narrows the target audience. The reliance on a small operational team could present challenges in scaling, yet it also means there's a lean structure for a new owner to build upon.
✅ What I Like
Specialized Curriculum
Offering a specialized math curriculum positions the company as an expert in its niche, attracting focused demand.
Digital and Print Resources
A combination of online and physical products broadens the appeal and provides diverse revenue streams.
Prepared for Growth
Existing regional success provides a strong foundation for national and international expansion.
❓ Concerns
Narrow Focus
Specialization in math limits diversification and may restrict market size.
Operational Scale
The current small team may struggle to handle significant growth without a strategic hiring plan.
Transition Dependency
The success of the business post-sale heavily relies on the founder's knowledge and client relationships.
💼 Due Diligence Questions
Content Update Cycle: What is the frequency and process for updating curriculum to ensure ongoing alignment with educational standards?
Customer Acquisition Cost: Understanding the spend and return on acquiring new customers is essential for evaluating marketing efficiency.
Retention Data: Insight into customer retention, especially among school districts, will inform the sustainability of long-term contracts.
Customer Segmentation: Which segments (school districts vs. individual parents) contribute most to the revenue, and what are the growth trends in each segment?
Content Licensing: Are there any licensing agreements in place for the curriculum content, and what are the terms?
Technology Infrastructure: What technology platforms are used, and how scalable are they for potential expansion?
Compliance and Certifications: Is the curriculum compliant with all states’ educational standards, and does the company have any certifications that aid in institutional sales?
Intellectual Property: What intellectual property does the company hold, and are there patents or trademarks on the curriculum or platform?
Customer Satisfaction: What are the current customer satisfaction metrics, and how is feedback incorporated into product development?
Sales Cycle: What is the typical sales cycle length for new school district customers, and what strategies are used to navigate procurement processes?
Renewal Rates: What are the renewal rates for the paid memberships, and what retention strategies are in place?
Competitive Analysis: How does the company's offering compare to competitors', and what are the identified competitive advantages or disadvantages?
🚀 Growth Levers
Market Expansion: Aggressively pursuing opportunities in untapped states and countries can drive substantial growth.
Curriculum Diversification: Expanding beyond math to include other subjects could widen the potential customer base.
Digital Marketing: A strategic digital marketing campaign could increase visibility and attract new online customers.
🙋🏻♂️ The Buyer
Education Industry Insight: A buyer with experience in the education sector would be well-suited, understanding the nuances of selling to schools and districts.
Operational Expertise: An individual or team that can manage and scale small operations effectively would thrive in this setting.
🏡 Main Street
Exhibition Booth Design & Installation - $1.6M
Based in Miami Beach, FL
Revenue: $1.4M
Profit: $777k
Margin: 55%
Multiple: 2.1x
💬 Quick Take
This business presents a good opportunity to take advantage of the post-pandemic growth of business conferences and exhibitions - particularly in Miami. The financials are solid and the valuation seems reasonable. The owner runs a similar, larger business in Romania so it’s important to understand any complications that could arise out of that.
✅ What I Like
Reputation and Quality
The company is known for its exceptional design and installation services, which positions it well above the competition. Strong brand equity is a positive.
Scalable Business Model
Their subcontracted manufacturing approach allows for scalability without significant capital expenditure.
Profitability
The business has a relatively high profit margin allowing it to invest in growth and customer acquisition.
Growth Ready
The post-pandemic resurgence in exhibitions presents a ripe opportunity for expansion with dedicated local management.
❓ Concerns
Owner Dependent
The business's success is currently tied to the owner's expertise, which is potentially challenging post-acquisition.
Industry Recovery
While the industry is rebounding post-COVID, monitoring for stability and sustained demand will be crucial.
Location Limitation
The business's physical presence is limited, which may restrict market penetration beyond its current scope.
💼 Due Diligence Questions
Client Retention: What strategies are in place for client retention, and what are the historical rates?
Supplier Agreements: How stable are the subcontracting agreements, and what are the terms?
Operational Transfer: What processes and knowledge transfer will be necessary for a new owner?
Intellectual Property: Does the company hold any design patents or proprietary manufacturing processes?
🚀 Growth Levers
Market Expansion: A focused strategy to expand into new geographic markets could significantly increase the customer base.
Service Diversification: Broadening the range of design services offered could attract a wider clientele.
Digital Marketing: Leveraging digital marketing to showcase the company's portfolio can attract new business.
Operational Efficiency: Streamlining operations by bringing some manufacturing in-house could reduce costs and improve margins.
🙋🏻♂️ The Buyer
Industry Savvy: Ideal for a buyer with experience in the exhibition industry or a related field.
Business Development Focus: A buyer who can dedicate full-time attention to business development and operations would be beneficial.
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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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
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