The Business Inquirer #143
Sharing a young but promising AI powered email tool, a B2B SaaS with enterprise clients, a niche manufacturer, and a recreation equipment rental business on the Gulf Coast.
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
AI Powered Mass Email Tool - $101k
Launched in 2023
Contact alex@anotheracquisition.com if interested
Originally, a divestment from a marketing agency
Revenue: $13.7k
Profit: $7.4k
Margin: 54%
Multiple: 13.7x
💬 Quick Take
Nyxion presents a compelling acquisition opportunity in the email solution space, especially for buyers looking to take over and scale a young SaaS. The project has “good bones” and a few early clients. Its partnership with AWS and a unique pricing strategy set it apart in a competitive market. However, the limited operational history and high valuation might pose challenges.
✅ What I Like
Robust Technical Foundation
Nyxion's use of Ruby on Rails and AWS hosting ensures scalability and reliability, key for any SaaS product.
Comprehensive Service Offering
The ability to manage multiple types of email campaigns in one platform is a significant advantage.
Operational Efficiency
Low operational costs and high automation level make it an attractive, lean operation.
Existing Customer Base
A ready customer base and untapped client leads offer immediate revenue-generating potential.
❓ Concerns
Limited In-House Expertise
Outsourced technical support might affect long-term product development and customer satisfaction.
Revenue Generation
Limited history of revenue generation post-restructuring could be a concern for potential buyers.
Market Saturation
Email solutions is a highly competitive space, demanding continuous innovation and marketing efforts.
Valuation
Young businesses are notoriously difficult to value.
💼 Due Diligence Questions
Revenue Sustainability: How sustainable is the current revenue model in the long-term?
Customer Retention: What is the current customer churn rate, and what strategies are in place to improve retention?
Product Development: How are product updates and technical improvements managed with outsourced teams?
Competitive Analysis: How does Nyxion differentiate itself from similar products in terms of features and pricing?
Operational Scalability: How scalable is the current operational model as the user base grows?
Market Penetration Strategy: What are the strategies for penetrating a saturated market?
🚀 Growth Levers
Expand Marketing Efforts: Implementing a robust marketing strategy to increase brand visibility and market share.
Develop In-House Expertise: Building a dedicated technical and customer support team to enhance product development and user experience.
Partnerships and Integrations: Form strategic partnerships to enhance product offerings and reach new customer segments.
Customer Feedback Loop: Establish a feedback system to continuously improve the product based on user input.
Diversify Product Offerings: Explore additional services or features to increase the product's appeal to a broader market.
🙋🏻♂️ The Buyer
Experience in SaaS: Ideally, the buyer should have experience in managing and growing SaaS products.
Sales and Marketing Acumen: A buyer with a strong background in sales and marketing can capitalize on Nyxion's potential.
Technical Savvy: Understanding of the technical aspects to manage product development effectively.
Strategic Vision: A buyer with a vision to scale the product and explore new markets.
Resource Allocation: Ability to invest in necessary resources for growth, including marketing and technical support.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
B2B Link Shortening SaaS - $250k
Launched in 2017
14 paying enterprise & mid-market clients
Revenue: $109k
Profit: $72k
Margin: 66%
Multiple: 3.47x
💬 Quick Take
This B2B SaaS business stands out with its specialized link-shortening software, catering to a niche market of mid-sized to large enterprises. The impressive client roster, including a Fortune 500 unicorn, points to its market fit and reliability. However, the reliance on a small customer base and minimal marketing efforts suggest areas for improvement. The business's lean operation model is a double-edged sword; it implies efficiency but also underlines underutilization of its growth potential.
✅ What I Like
Strong Customer Base
The business boasts high-profile clients, demonstrating its product's value in the market.
Efficient Operations
With minimal maintenance required, the focus can be shifted to growth and expansion.
High Gross Margins
Reflects the cost-effectiveness and profitability of the business model.
SOC 2 Certification
Expensive to obtain. Adds credibility and may attract more enterprise clients concerned about security.
Untapped Marketing Potential
Current growth with minimal marketing suggests significant potential with strategic marketing efforts.
❓ Concerns
Customer Concentration Risk
Reliance on a limited number of high-value clients could be risky.
Scalability Concerns
The current lean operation might need restructuring for substantial growth.
Sales Cycle
Selling into the enterprise market requires unique positioning and a tolerance for a long sales cycle.
💼 Due Diligence Questions
Usage: Are the paying clients actually using the software or is it simply sitting on the shelf?
Contracts: Are the clients on monthly or annual contracts? Any big renewals coming up?
Customer Retention Rates: How has the business maintained its client base over time?
Technology Stack: Details on the technology and infrastructure behind the product.
Founder's Role and Transition Plan: How will the founder's departure affect operations?
Product Roadmap: Future plans for product development and upgrades.
Market Trends and Customer Feedback: Insights into market dynamics and customer perspectives.
🚀 Growth Levers
Develop New Features: Innovating to stay ahead of technological trends and customer needs.
Explore Strategic Partnerships: Collaborating with complementary businesses or platforms.
Optimize Pricing Strategy: Adjusting pricing models to maximize revenue and market share.
Invest in Technology Upgrades: Keeping the product technologically competitive.
Expand Internationally: Exploring opportunities in untapped global markets.
Community Building: Creating a community around the product to enhance customer loyalty.
🙋🏻♂️ The Buyer
B2B SaaS Experience: A buyer with a background in SaaS would understand the intricacies of this market.
Strategic Vision for Growth: The ideal buyer should have a clear vision to scale the business.
Understanding of Enterprise Clients: Knowledge of dealing with large clients and complex contracts.
Marketing Acumen: Capabilities to develop and implement effective marketing strategies.
Tech-Savvy Leadership: Understanding of the technological aspects for continued innovation and growth.
🏡 Main Street
Niche Machine Component Manufacturer - $8.0M
Launched in 1974
Based in PA
9 FT employees; 12k sqft facility included;
Revenue: $2.6M
Profit: $946k
Margin: 36.4%
Multiple: 8.46x
💬 Quick Take
This machine component manufacturer represents a compelling opportunity for a buyer with the right experience. Its proprietary product line, large customer base, and high margins are major draws. However, the valuation and the niche nature of the components are potential concerns.
✅ What I Like
Strong Market Standing
With 50 years in the industry, the company's reputation and experience are invaluable.
Robust Customer Base
Serving small to Fortune 500 companies ensures a diverse and stable revenue stream.
Innovative Product Line
Patented, proprietary products place the company at the forefront of its niche market.
Operational Efficiency
Advanced automation in engineering, manufacturing, and sales underpins its high profitability.
❓ Concerns
Valuation
The $8.0 million valuation demands careful consideration of ROI and growth potential.
Owner Dependency
The business's success may be tied to the current owner's expertise and relationships.
Technology Upkeep
Continual investment in technology and automation will be necessary to maintain competitiveness.
💼 Due Diligence Questions
Customer Retention: How has customer loyalty been maintained, and what are the strategies for continuing this?
Customer Concentration: Is the business reliant on a small number of major customers, and what risks does this pose?
Product Innovation: What is the current pipeline for new products or improvements to existing ones?
Market Expansion: What are the identified opportunities and challenges for market expansion?
Regulatory Compliance: Are there any industry-specific regulations the business must adhere to, and how has compliance been managed?
Equipment Condition and Age: What is the current state and age of the manufacturing equipment? Are there any pending upgrades or replacements needed in the near future?
Employee Skillset and Training: What are the qualifications and skillsets of the current employees, particularly those handling specialized manufacturing equipment?
Workforce Stability: What is the history of workforce stability and employee retention rates, especially among key manufacturing staff?
🚀 Growth Levers
Market Diversification: Explore new markets or sectors to expand the customer base.
Product Development: Invest in R&D to innovate and improve the existing product line.
Digital Marketing: Enhance online presence and digital marketing strategies to reach a broader audience.
Strategic Partnerships: Form partnerships for technological advancements and market expansion.
Operational Optimization: Continuously improve operational efficiency to maximize profitability.
🙋🏻♂️ The Buyer
Industry Experience: A buyer with experience in manufacturing or a related industry would be ideal.
Financial Capability: The ability to invest significantly, considering the high asking price and potential growth initiatives.
Operational Expertise: Knowledge in managing and optimizing complex manufacturing operations.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Car Rental, Equipment Rental, Beach Rentals - $3.7M
Launched in 2019
Based in Baldwin County, AL (Gulf Coast)
Revenue: $1.5M
Profit: $550k
Margin: 37%
Multiple: 6.73x
💬 Quick Take
This Alabama Gulf Coast recreation equipment rental service stands out for its diverse range of offerings and established market presence. Its strength lies in the variety of vehicles and beach equipment for rental, catering to a broad spectrum of leisure activities. However, the seasonal nature of the business and elevated valuation may be areas of concern.
✅ What I Like
Diverse Rental Offerings
Offers a wide range of vehicles and beach equipment, appealing to a broad customer base.
Strategic Location
Situated in a popular tourist destination, ensuring a steady flow of customers.
Proven Track Record
5 seasons in business indicates resilience and market acceptance.
Owner Financing Option
Flexibility in financing could be attractive to buyers.
Dealer Partnerships
Relationships with multiple product dealers could ensure a diverse and quality inventory.
❓ Concerns
Valuation
At 6.7x cash flow, the valuation may be considered elevated for this type of business.
Seasonal Business Fluctuations
Being a seasonal business, it may face significant revenue variability.
Maintenance and Upkeep
Continuous investment in maintenance for a diverse fleet is required.
Market Competition
The business must constantly innovate to stay ahead in a competitive tourist market.
💼 Due Diligence Questions
Cost Management: How is the business managing its costs to maintain vehicles and equipment?
Customer Retention Strategies: What strategies are in place to ensure repeat business?
Seasonal Revenue Stability: How does the business mitigate the impact of seasonal fluctuations?
Market Analysis: How does the business compare with local competitors in terms of pricing and offerings?
Maintenance Records: Can detailed maintenance and repair records of the fleet be provided?
Customer Demographics: Who are the primary customers, and what are their spending patterns?
Marketing Effectiveness: How effective are current marketing strategies in attracting new customers?
Employee Management: How is the staff managed, especially during peak and off-peak seasons?
🚀 Growth Levers
Online Presence Enhancement: Strengthen online marketing and social media engagement to attract more customers.
Loyalty Programs: Introduce loyalty programs or discounts for repeat customers.
Partnerships with Local Businesses: Form partnerships with local hotels and tour operators for referrals.
Seasonal Promotions: Run special promotions during off-peak seasons to attract customers.
Expand Product Range: Regularly update and expand the range of rental products to keep offerings fresh.
Event-Based Rentals: Offer special packages for events like weddings or corporate retreats.
Technology Integration: Utilize technology for easier booking and fleet management.
🙋🏻♂️ The Buyer
Tourism-Focused Investor: Ideal for someone with an interest or background in the tourism sector.
Entrepreneur with Growth Vision: Suitable for a buyer looking to expand and innovate in a seasonal business.
Operationally Savvy Individual: Beneficial for someone skilled in managing operational complexities of a rental service.
Customer-Centric Approach: A buyer who values and understands the importance of customer experience and satisfaction.
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.
Interexo - Curated deal flow and data solutions. Since 2016 Interexo has been M&A industry’s trusted source for deal flow, with extensive coverage of industry data, from Private Equity to Lenders, Hedge Funds, Brokers, and more.
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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Schedule 1:1 consulting on deal sourcing, due diligence, M&A ecosystem, newsletters, entrepreneurship, or anything else you’d like to discuss
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