The Business Inquirer #148
Sharing a dropshipping store, a cybersecurity SaaS, an EdTech platform, an accounting practice, a supply chain business, and a shade and screen company in Palm Springs.
Hello Friends!
In this week’s issue:
🛒 eCommerce - 1 listing
☁️ SaaS - 1 listing
💼 Online Service - 1 listing
🏡 Main Street - 3 listings
⚒️ Tools & Resources
💡 How I Can Help
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🛒 eCommerce
Kids Clothing & Accessories - $159k
Launched in 2021
Dropshipping store built on Shopify
Revenue: $330k
Profit: $70k
Margin: 21%
Multiple: 2.3x
💬 Quick Take
Dropshipping businesses have a bad reputation but I think the right store can be a great way to get into the e-commerce space, especially for first-time business owners. The 4.3 out of 5-star rating on Trustpilot underscores a strong trust and satisfaction among customers. However, the relatively modest net profit margin indicates potential challenges in cost management or pricing strategies. The store's dropshipping model, while reducing inventory risks, may also pose challenges in supply chain control and product quality consistency.
✅ What I Like
Focused Niche Market
Specializes in baby and mom essentials, a market with dedicated customer segments.
Consistent Growth Trajectory
Demonstrated growth in revenue and customer numbers over three years.
Positive Customer Feedback
High rating on Trustpilot, reflecting customer satisfaction and loyalty.
Dropshipping Business Model
Minimizes inventory risks and overhead costs.
Brand Identity
Has developed a strong domain and brand presence in its niche.
❓ Concerns
Moderate Profit Margins
A net profit margin of 21% suggests room for improvement in cost efficiency.
Supply Chain Dependence
Reliance on dropshipping can lead to supply chain vulnerabilities.
Product Quality Control
Limited control over product quality due to the dropshipping model.
Pricing Strategy
Need to evaluate and optimize the pricing strategy for better profit margins.
💼 Due Diligence Questions
Supplier Reliability: How dependable are the current suppliers, and what are the backup plans?
Customer Acquisition Costs: What is the cost involved in acquiring new customers?
Retention Strategies: What strategies are in place for customer retention and loyalty?
Product Quality Feedback: Are there any recurring issues or feedback regarding product quality?
Marketing Efficiency: How effective are the current marketing strategies and channels?
Operational Processes: How streamlined are the operational processes, especially in order fulfillment?
Market Analysis: What is the competitive landscape and market trends in the kids' clothing sector?
Customer Demographics: Detailed understanding of the customer demographics and buying behaviors.
🚀 Growth Levers
Expand Product Range: Introduce a broader range of products to attract new customer segments.
Enhance Online Presence: Invest in SEO and social media marketing to increase visibility.
Strategic Partnerships: Form partnerships with complementary brands or influencers.
Customer Loyalty Programs: Implement loyalty programs to encourage repeat purchases.
Optimize Pricing Strategy: Review and adjust pricing for better profitability.
Improve Website Experience: Enhance the website for a more user-friendly shopping experience.
Targeted Marketing Campaigns: Launch targeted campaigns focusing on specific customer segments.
International Expansion: Explore opportunities to expand sales internationally.
🙋🏻♂️ The Buyer
E-Commerce Savvy: A buyer with experience in online retail and e-commerce platforms.
Marketing Acumen: Understanding of digital marketing strategies to drive traffic and sales.
Supply Chain Management Skills: Ability to manage and optimize a dropshipping supply chain.
☁️ SaaS
Vulnerability Intelligence As A Service - $1.4M
Launched in 2019
Remote team based in Europe but clients are mostly US
Revenue: $318k
Profit: $306k
Margin: 96%
Multiple: 4.6x
💬 Quick Take
Interesting listing for those with experience in cybersecurity. The business is in a niche market of vulnerability intelligence, a critical component in today's data-driven world. However, its reliance on organic growth and the absence of diversified marketing channels could limit its reach.
✅ What I Like
High Profit Margins
With a 96% gross margin, the business demonstrates exceptional operational efficiency and profitability.
Recurring Revenue Model
The subscription-based model ensures steady, predictable income streams.
Market Niche
Specializing in vulnerability intelligence, the business has carved out a significant niche.
Scalable Business Model
IaaS nature allows for easy scaling without significant additional costs.
❓ Concerns
Limited Marketing Efforts
Reliance on organic growth may limit potential market reach. Lack of diverse customer acquisition channels might hinder growth.
💼 Due Diligence Questions
Customer Retention Rates: What are the historical customer retention rates, and what drives them?
Technology Reliance: How dependent is the business on specific technologies or platforms?
Competitive Differentiation: What sets this service apart from competitors like RiskIQ and VulnDB?
Data Security Measures: What are the current data security and privacy measures in place?
Intellectual Property: Are there any patents or proprietary technologies involved?
Customer Acquisition Cost: What is the current cost of acquiring new customers?
Market Penetration Analysis: What is the current market penetration and potential for expansion?
Regulatory Compliance: How does the business comply with data protection and privacy laws?
Technology Upgrade Plans: Are there plans for technological upgrades or innovations?
🚀 Growth Levers
Expand Marketing Channels: Introducing diverse marketing strategies to reach a wider audience.
Partnership Development: Form strategic partnerships to enhance market reach and service offerings.
Technology Innovation: Continuously innovate to stay ahead in the rapidly evolving cybersecurity landscape.
Customer Engagement: Increase customer engagement through community building and educational content.
Global Market Expansion: Explore opportunities in international markets for broader reach.
Service Diversification: Develop additional services or products to complement the existing offerings.
Data Analytics Enhancement: Enhance data analytics capabilities to provide more in-depth intelligence.
Tailored Customer Solutions: Offer customized solutions to meet specific client needs.
🙋🏻♂️ The Buyer
Industry Insight: A buyer with a background or understanding of cybersecurity and big data analytics.
Growth-Oriented Vision: Someone looking to scale a business with a solid foundation and high growth potential.
Marketing Prowess: A buyer with marketing expertise to capitalize on untapped channels.
Technology Enthusiast: Interest in staying at the forefront of technological advancements in cybersecurity.
💼 Online Service, Media, Marketplace
EdTech Platform for Youth Entrepreneur Education - $12.5M
Launched in 2013
Subscription and transaction revenue
Revenue: $3.0M
Profit: $2.2M
Margin: 73%
Multiple: 5.7x
💬 Quick Take
The strength of this business lies in the high-demand niche of youth entrepreneurship, leveraging government and school contracts. The 80% client retention rate attests to the value it delivers. However, heavy reliance on government contracts could pose risks if political or budgetary priorities shift. The absence of a comprehensive marketing strategy, though not a hindrance so far, might limit future growth. The dual revenue streams from the for-profit and non-profit arms offer unique tax and operational benefits but could complicate the business structure for a new owner.
✅ What I Like
Strong Market Niche
Specializes in youth entrepreneurship education, a growing and impactful sector.
High Client Retention
80% retention rate, demonstrating customer satisfaction and service quality.
Impressive Growth Rate
273% YOY growth highlights rapid market acceptance and scalability.
Substantial Government Contracts
Contracts with governments ensure stable, long-term revenue.
Innovative Service Offerings
Offers unique courses that are in high demand by schools and governments.
Language Accessibility
Material available in 12 languages, catering to a global audience.
Dual Revenue Model
Benefits from both subscription-based and transaction fee revenues.
Non-Profit Arm Synergy
The non-profit arm enhances contract opportunities and offers tax advantages.
❓ Concerns
Government Contract Dependence
Heavy reliance on government contracts could be risky due to policy changes.
Limited Marketing Initiatives
Lack of a robust marketing strategy may hinder potential growth.
Complex Business Structure
The intertwining of for-profit and non-profit entities could be challenging to manage.
Competition in EdTech
Potential challenges from emerging and established competitors in the EdTech space.
SEO and Online Presence
Limited optimization of the Learning Management System for search engines.
💼 Due Diligence Questions
Contract Renewal Rates: What is the history and forecast of contract renewals with governments and schools?
Technological Infrastructure: How advanced and scalable is the current technological infrastructure?
Market Expansion Plans: What strategies are in place for expanding into new markets or regions?
Competitor Analysis: How does the platform compare with competitors in terms of content and delivery?
Staff Expertise: What are the qualifications and experiences of the current staff?
User Feedback and Engagement: What is the feedback from the users, both students and educators?
Regulatory Compliance: How does the company comply with educational and data privacy regulations?
🚀 Growth Levers
Expand Geographic Reach: Target new cities and countries to increase global presence.
Robust Marketing Strategy: Develop and implement a comprehensive marketing plan.
SEO Optimization: Enhance online visibility through improved SEO practices.
Corporate Partnerships: Align with corporations for CSR initiatives and workforce development projects.
Technology Enhancement: Invest in AI and other technological advancements to improve offerings.
Internship Pathways: Create opportunities for students to secure internships post-course completion.
PR and Media Engagement: Utilize a PR firm to increase visibility and credibility.
Educational Policy Advocacy: Advocate for integrating entrepreneurship education into school curricula.
🙋🏻♂️ The Buyer
EdTech Experience: Ideally has experience or a strong interest in the EdTech sector.
Government Relations Skills: Ability to navigate and maintain relationships with government entities.
Innovative Leadership: Committed to driving innovation in educational content and delivery.
Marketing Insight: Knowledge in developing and executing effective marketing strategies.
Educational Sector Understanding: Familiarity with the dynamics of the educational sector, especially in youth entrepreneurship.
🏡 Main Street
Full Service Label Supplier in Ohio - $5.7M
Launched in 2000
Based in Ohio; 5 employees;
Revenue: $5.9M
Profit: $1.1M
Margin: 19%
Multiple: 5.2x
💬 Quick Take
This full-service label supply business, with an 19% margin and a 5.2x valuation, presents a solid acquisition opportunity in the supply chain sector. Its 25+ year history and expertise in custom and stock labels have cemented its reputation as a reliable solutions provider. The consistent growth and diversification in the customer base are promising. The moderate gross margin suggests potential efficiency improvements in operations. Expansion in internet marketing and a new CRM system present clear growth opportunities.
✅ What I Like
Established Market Presence
Over 25 years in the industry, demonstrating stability and experience.
Diverse Revenue Streams
Offers custom and stock labels, thermal ribbons, and hardware/software solutions.
Consistent Growth
Steady increase in revenue and profitability year over year.
Strong Customer Relationships
Approximately 60% repeat work indicates high customer satisfaction with room for improvement.
Well-Diversified Customer Base
No customer exceeds 10% of revenue, reducing dependency risks.
Successful Internet Marketing
Approximately 50% of web leads close, showing effective online presence.
❓ Concerns
Moderate Gross Margin
Indicates room for improvement in operational efficiencies or cost management.
CRM and Automation
Lack of modern CRM and automation systems for sales and marketing.
💼 Due Diligence Questions
Customer Satisfaction Metrics: Insights into customer satisfaction and loyalty measures.
Supplier Relationships: Stability and terms of current supplier contracts.
Operational Processes: Efficiency and scalability of current operational processes.
Market Positioning: Analysis of market position compared to competitors.
Employee Skills and Roles: Understanding of employee roles and potential for skill gaps post-transition.
Technology Infrastructure: Assessment of current technology and need for upgrades.
Growth Projections: Forecast of growth and potential in existing and new markets.
🚀 Growth Levers
Expand Market Reach: Target new territories or sectors within the supply chain industry.
Enhance Online Marketing: Further develop SEO, content marketing, and PPC strategies.
Upgrade CRM Systems: Implement modern CRM and automation tools for efficiency.
Diversify Product Portfolio: Introduce new products or services to meet evolving market demands.
Strengthen Supplier Relations: Develop strategic partnerships for better supply chain efficiency.
Optimize Operational Processes: Streamline operations for improved profitability.
Increase Staffing: Expand the team to support growth and reduce owner dependency.
🙋🏻♂️ The Buyer
Industry Experience: Ideally experienced in the label, printing, or packaging industries.
Growth-Oriented Vision: Focused on expanding and scaling the business.
Operational Expertise: Skilled in managing and optimizing business operations.
Marketing Acumen: Knowledgeable in digital and internet marketing strategies.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Tax & Accounting Firm in Fresno, CA - $1.7M
Launched in 2012
12 employees; 477 active clients;
Multiple service lines
Revenue: $2.0M
Profit: $521k
Margin: 26%
Multiple: 3.26x
💬 Quick Take
Popular industry for acquisitions. This Fresno-based CPA practice, with a 26% margin and a 3.26x valuation, stands out as a well-established firm in the accounting industry. Its diversified service offerings – tax preparation and planning, accounting and auditing, and consulting – cater to a broad client base. The firm's consistent revenue over the past three years and a dedicated team of twelve staff members are key assets.
✅ What I Like
Diverse Service Offering
A mix of tax, accounting, and consulting services addresses varied client needs.
Established Client Base
Serving approximately 477 active clients, indicating strong market penetration.
Experienced Team
Twelve skilled staff members contribute to the firm's success.
Consistent Revenue Streams
Averaging nearly $2M in gross revenues over the past three years.
Balanced Revenue Breakdown
Nearly equal distribution among different service lines suggests stability.
Good Profitability
A margin of over 26% is commendable in the service industry.
❓ Concerns
Market Competition
The accounting industry is highly competitive, posing challenges in client acquisition.
Regulatory Changes
Constantly evolving tax laws and accounting standards require continuous updates.
Client Concentration Risk
Any reliance on key clients could pose risks.
Staff Retention Post-Acquisition
Ensuring the retention of experienced staff members is critical.
💼 Due Diligence Questions
Client Retention Rates: How has client retention been maintained over the years?
Staff Experience and Credentials: Detailed overview of staff qualifications and experience.
Service Efficiency: Analysis of operational efficiencies in service delivery.
Client Demographics: Breakdown of client types (business vs. individual) and industries served.
Technology Utilization: Assessment of current technology and software used in operations.
Competitive Positioning: Understanding the firm's position relative to competitors.
Growth Projections: Forecasted growth and potential in the Fresno market.
🚀 Growth Levers
Expand Service Offerings: Explore additional services such as financial planning or specialized tax advisory.
Enhance Digital Presence: Increase online marketing efforts to attract new clients.
Strategic Partnerships: Form alliances with complementary service providers.
Leverage Technology: Invest in advanced accounting software and technologies for efficiency.
Staff Development: Offer continuous training and development to staff.
Geographic Expansion: Explore opportunities to expand services beyond the Fresno area.
Client Education Programs: Offer workshops or seminars to engage and attract clients.
Acquire Smaller Practices: Consider acquiring smaller firms to expand client base and market reach.
🙋🏻♂️ The Buyer
Industry Experience: Ideal for buyers with experience in the accounting or financial services industry.
Growth-Oriented Mindset: Focused on expanding services and client base.
Technological Savvy: Understanding of the importance of technology in modern accounting practices.
Customer Service Orientation: Committed to maintaining the high level of customer service.
Adaptability: Ability to adapt to the evolving accounting industry and regulatory changes.
Team Leadership Skills: Aptitude for leading and retaining a skilled team of professionals.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Screen & Shade Company in Palm Springs - $1.4M
Launched in 1984
10 employees
Revenue: $2.3M
Profit: $531k
Margin: 23%
Multiple: 2.64x
💬 Quick Take
This seems like the right type of business to operate in Palm Springs. The business specializes in high-quality custom screens, shades, and shutters for various types of properties. However, the niche market focus could limit expansion opportunities. The asking price seems fair given its profitability and established reputation, but the potential buyer should consider the scalability and future market trends in home and commercial property improvements.
✅ What I Like
Specialized Product Offering
Custom solutions for residential and commercial shading needs.
Solid Customer Base
Established relationships with homeowners and commercial clients.
Diverse Product Range
Offers a wide range of products, catering to different needs.
Strong Local Reputation
Well-known for exceptional service in the community.
Outdoor Space Solutions
Expertise in exterior shading solutions, a growing market trend.
❓ Concerns
Regional Focus
Business is heavily reliant on the local market conditions of Palm Springs.
Competitive Landscape
Facing competition from larger home improvement chains and new entrants.
Dependency on Skilled Labor
Relies on maintaining a team of skilled professionals.
Customer Acquisition
Strategies to continually attract new customers in a competitive market.
Economic Sensitivity
Vulnerable to economic downturns affecting home improvement spending.
💼 Due Diligence Questions
Customer Retention Strategy: How does the business maintain its customer base?
Supplier Relationships: Stability and terms of material suppliers.
Market Analysis: Detailed understanding of the local market and competitors.
Staff Expertise: Depth of the team’s skills and experience.
Operational Efficiency: Review of production and installation processes.
Marketing and Sales Strategies: Effectiveness of current marketing and sales approaches.
🚀 Growth Levers
Expand Geographic Reach: Explore expansion opportunities into nearby regions.
Enhanced Digital Marketing: Strengthen online presence and digital marketing efforts.
New Product Lines: Introduce additional product offerings or complementary services.
Partnerships: Form strategic partnerships with builders, architects, and interior designers.
Diversification: Branch into related home improvement areas for diversification.
Operational Optimization: Streamline operations for increased efficiency.
Customer Referral Program: Implement a referral program to attract new customers.
Technology Integration: Adopt new technologies for product customization and installation efficiency.
🙋🏻♂️ The Buyer
Experience in Home Improvement: Ideal for buyers with a background in home improvement or related industries.
Customer-First Approach: Emphasis on maintaining high standards of customer service and quality.
Local Market Knowledge: Familiarity with the Palm Springs area and its surroundings
Operational Management Skills: Ability to effectively manage a skilled team and operations.
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⚒️Tools & Resources
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