The Business Inquirer #149
Sharing a loyalty platform for retailers, a sales automation SaaS, an eLearning business, and an e-commerce business in the crafting vertical.
Hello Friends!
In this week’s issue:
🛒 eCommerce - 1 listing
☁️ SaaS - 2 listings
💼 Online Service - 1 listing
⚒️ Tools & Resources
💡 How I Can Help
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🛒 eCommerce
eCommerce Brand in the Crafting Vertical - $500k
Launched 2013
Sold on Etsy and DTC through Shopify;
Revenue: $344k
Profit: $141k
Margin: 41%
Multiple: 3.5x
💬 Quick Take
This thriving eCommerce brand in the crafting vertical has loyal customers, an impressive social media presence, and a niche product line. However, the reliance on a single product vertical and the need for expanded marketing strategies present challenges. I like that there’s minimal workload for a new owner. Could be a great acquisition for someone passionate about the crafting space.
✅ What I Like
Established Online Presence
Stellar reputation with 15,000+ 5-star reviews on Etsy and a vibrant Facebook community with over 100,000 members.
Strong Customer Engagement
High levels of engagement through social media and email marketing drive organic traffic and foster customer loyalty.
Low Overhead Costs
The business model allows for low operational costs, contributing to impressive profit margins.
Loyal Customer Base
A significant portion of the customer base consists of repeat buyers, indicating high customer satisfaction and loyalty.
❓ Concerns
Product Concentration Risk
Heavy reliance on a single product vertical (quilt-making fabrics) could pose risks if market trends shift.
Untapped Marketing Channels
Current marketing strategies are effective but underutilized potential in SEO, PPC, and influencer collaborations.
Inventory Management
Managing a large and diverse inventory requires careful planning to avoid overstocking or stockouts.
Market Niche Limitations
While being a niche player has its advantages, it may also limit market reach and growth potential.
Dependency on Seasonal Trends
Sales peaks indicate potential revenue volatility during off-peak seasons.
Age of Customer Base
A customer base skewed towards an older demographic may require specific marketing strategies and could impact long-term growth.
Digital Presence Optimization
While the digital presence is strong, there's room for improvement in website optimization and content marketing.
💼 Due Diligence Questions
Inventory Turnover: How frequently is inventory cycled, and what strategies are in place to manage overstock or understock situations?
Customer Acquisition Costs: What are the current customer acquisition costs, and how do they compare to industry averages?
Supplier Reliability and Contracts: How stable are the relationships with fabric suppliers, and are there any long-term contracts in place?
Operational Efficiency: What systems are in place to manage order fulfillment, inventory, and customer service efficiently?
Market Adaptability: How quickly can the company adapt to changing market trends or customer preferences?
Product Development Pipeline: Is there a process for continually developing and introducing new products or patterns?
Digital Marketing ROI: What is the return on investment for current digital marketing efforts, and what opportunities exist for improvement?
Customer Feedback and Insights: How is customer feedback collected and integrated into business decision-making?
🚀 Growth Levers
Diversify Product Line: Broadening the product range to include related crafting materials or tools could attract new customers and increase average order value.
Optimize Digital Marketing: Leveraging SEO, PPC, and influencer marketing could significantly increase brand visibility and drive sales.
Expand Market Reach: Exploring new market segments or geographical areas could open up additional revenue streams.
Enhance Customer Experience: Introducing features like personalized recommendations or loyalty programs could improve customer retention.
Invest in Content Marketing: Creating valuable content like tutorials or pattern ideas could establish the brand as a thought leader and attract organic traffic.
Leverage Data Analytics: Using data to understand customer preferences and buying patterns could lead to more targeted and effective marketing campaigns.
Explore B2B Opportunities: Partnering with other businesses for bulk sales or exclusive fabric lines could offer new growth avenues.
Improve Operational Efficiency: Streamlining order processing, inventory management, and customer service could reduce costs and improve customer satisfaction.
Develop Community Engagement: Hosting or sponsoring crafting events or competitions could enhance brand loyalty and word-of-mouth marketing.
Innovate Product Offerings: Continuously introducing new and unique fabric designs or quilting accessories could keep the product catalog fresh and exciting.
🙋🏻♂️ The Buyer
Crafting Enthusiast: A buyer with a passion for the crafting industry will understand customer needs and trends.
Digital Marketing Pro: Someone skilled in digital marketing can leverage untapped channels and optimize current efforts for better ROI.
Operations Strategist: A buyer adept at managing and scaling operations to handle increased order volume and inventory..
E-commerce Expert: Someone with experience in e-commerce can optimize the online platform for increased sales and better customer experience.
☁️ SaaS
Tool for Retailers to Create a Loyalty Program - $2M
Launched in 2015
Competitors: Loyalty Lion, FIvestars, Marsello, Preferred Patron, Kangaroo
Spinoff from a larger business; On autopilot since 2017;
Revenue: $733k
Profit: $533k
Margin: 73%
Multiple: 3.75x
💬 Quick Take
This SaaS loyalty platform presents an interesting opportunity. Its strong partnership with leading POS companies and the integration of its loyalty program within these systems create a sticky customer base with very low churn. The 100% recurring revenue adds to the stability of the business. However, the fact that it has been in maintenance mode since 2017 raises questions about its innovation and adaptability in a rapidly evolving market. The unadjusted pricing since 2017 could be a red flag or an untapped opportunity, depending on the buyer's perspective and strategy.
✅ What I Like
Recurring Revenue
The business model ensures a consistent cash flow with 100% recurring revenue, which is a significant metric for stability and predictability.
Low Churn Rate
The difficulty for merchants to switch loyalty programs translates to a low churn rate, ensuring customer retention and steady revenue.
Established Partnerships
Collaborations with leading POS providers not only lend credibility but also offer a ready-to-tap customer base.
Unexplored Pricing Potential
The pricing of the service hasn't been reviewed since 2017, indicating a potential upside if adjusted correctly.
Free Trial Conversion
A base of free trial users represents a direct growth opportunity if conversion strategies are implemented effectively.
Market Expansion Potential
The opportunity to expand the addressable market by integrating with new POS systems and adjusting pricing is substantial.
❓ Concerns
Maintenance Mode Since 2017
The lack of significant updates or innovations since 2017 might indicate stagnation or a lack of investment in staying ahead of market trends.
Unadjusted Pricing
While this presents an opportunity, it also raises concerns about the business's adaptability and response to market changes.
Market Saturation
The loyalty program market is crowded, and differentiation might be challenging in a sector with many free or low-cost alternatives.
Dependence on POS Integrations
The business's success is heavily tied to its POS partners. Any disruption in these relationships could significantly impact the business.
Customer Acquisition Costs
Transitioning free users to paid users can be costly and requires a well-thought-out strategy.
Technological Advancements
Rapid changes in technology could make the current offering obsolete if not continuously innovated.
Data Privacy Regulations
Increasing scrutiny and regulation around data privacy can impact how loyalty programs operate and use customer data.
Integration Complexity
Integrating with additional POS systems could be technically complex and resource-intensive.
💼 Due Diligence Questions
User Engagement Metrics: What are the usage statistics for the current customer base? This can provide insight into the product's stickiness and customer satisfaction.
Customer Acquisition Strategy: What methods have been most effective in acquiring new customers, and what is the cost of acquisition?
Retention Strategies: How does the business plan to retain customers and reduce churn, especially among those who are on free trials?
Competitive Landscape: Who are the main competitors, and what differentiates this business from them?
Technical Scalability: Is the current technological infrastructure scalable, and what would be required to integrate with additional POS systems?
Regulatory Compliance: How does the business ensure compliance with data privacy and other relevant regulations?
Customer Feedback: What has been the feedback from the current user base, and how has it been addressed?
Pricing Strategy: What is the rationale behind the current pricing, and what factors will guide future adjustments?
🚀 Growth Levers
Pricing Optimization: Adjusting the pricing strategy to align with market standards can significantly boost revenue.
Conversion Strategies: Implementing targeted strategies to convert free trial users to paid users can expand the customer base.
Customer Success Programs: Developing programs focused on increasing customer engagement and upselling can enhance revenue per user.
Market Expansion: Integrating with additional POS systems can significantly widen the market reach.
Innovation and Updates: Regularly updating the platform to include new features or integrations can keep the product competitive and relevant.
Marketing Campaigns: Implementing targeted marketing campaigns to raise awareness and attract new customers.
Strategic Partnerships: Forming partnerships with complementary services or products can provide cross-promotional opportunities.
Customer Feedback Loop: Establishing a robust feedback mechanism to continually improve the product based on user needs.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: An individual with a strong understanding of SaaS platforms and the ability to drive technological innovations.
Customer-Oriented Visionary: Someone who values customer relationships and is keen on developing robust customer success programs.
Pricing Strategist: An individual adept at analyzing and optimizing pricing strategies to increase revenue.
Growth-Minded Leader: Someone with a clear vision for scaling the business and expanding its market presence.
Data-Driven Decision Maker: A buyer who relies on user engagement metrics and market analysis to drive the business forward.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Sales Automation (SalesRobot) - $1.2M
Launched in 2020
3,200 users
Revenue: $598k
Profit: $321k
Margin: 54%
Multiple: 3.7x
💬 Quick Take
I'm highlighting this listing for a couple of reasons. Firstly, it presents a fantastic opportunity for individuals in the sales tech arena. Secondly, the CIM of this listing is impressively comprehensive. I'm particularly drawn to the "Continuing Obligations" section, which meticulously outlines the operational costs of the business, as well as the "Questionnaire" section. Overall, it offers an intriguing and detailed insight into the business.
✅ What I Like
Strong Profit Margins
With a 54% gross margin, the business demonstrates efficient operations and a solid profit model.
Robust Inbound Leads Engine
The business successfully attracts 8.5k visitors monthly, converting them into 30-40 new leads, indicating a strong market presence and effective lead generation strategies.
Untapped Outbound Sales Channel
The potential for outbound sales is a significant growth opportunity, with estimates suggesting an additional 30-40 customers per month.
AI Integration
The use of artificial intelligence for text and image personalization offers a competitive edge, enhancing user engagement and satisfaction.
Positive User Base Growth
Over 3200 users and counting, with an increasing trend, reflect the market's positive reception and trust in the product.
SEO Success
Rapid growth in website traffic, from 0 to 9000 visitors in 12 months, demonstrates effective SEO strategies and potential for further scale.
Whitelabel Capabilities
Advanced whitelabel options offer significant value to clients, enhancing the product's appeal and utility.
❓ Concerns
Competitive Market
With competitors like Outreach, Salesloft, and Apollo, the market is highly competitive, necessitating continuous innovation and marketing efforts.
Reliance on Inbound Leads
Heavy reliance on inbound leads could be risky if market dynamics shift. Diversifying lead generation methods is crucial.
Unexplored Outbound Sales
Despite the potential, outbound sales remain untapped, possibly leaving a significant revenue stream on the table.
SEO Dependency
Current success is heavily tied to SEO performance. Any changes in search engine algorithms could adversely affect traffic and lead generation.
Product Differentiation
Maintaining a competitive edge requires constant innovation, especially in a tech-driven market.
Customer Retention
Retention rates and strategies are not mentioned but are critical in the SaaS business model.
💼 Due Diligence Questions
Financial Health: What are the detailed breakdowns of operating expenses, especially in marketing and R&D?
Customer Acquisition Cost (CAC): What is the current CAC, and how has it trended over time?
Customer Lifetime Value (CLTV): What is the average CLTV, and what strategies are in place to maximize it?
Churn Rate: What is the current churn rate, and what measures are taken to reduce it?
Product Roadmap: What does the product development roadmap look like for the next 12-24 months?
Market Analysis: What market trends or shifts could potentially impact the business?
Legal and Compliance: Are there any ongoing or potential legal and compliance issues, especially regarding data privacy?
Customer Feedback: What are the most common pieces of feedback from current users, and how is the company addressing them?
Technology Stack: What is the current technology stack, and are there any plans for upgrades or changes?
Employee and Culture Insights: What is the company culture, and how is the team structured, especially in key areas like sales and product development?
🚀 Growth Levers
Expand Outbound Sales: Implementing a robust outbound sales strategy could significantly increase the customer base and revenue.
Further SEO Optimization: Continued focus on SEO could further increase traffic and lead generation, building on the current success.
Product Development: Continual innovation, especially in AI and personalization features, will keep the product competitive and attractive.
Market Expansion: Exploring new market segments or geographic areas could open up additional revenue streams.
Partnership and Integration: Forming strategic partnerships or integrating with other platforms could enhance product offerings and market reach.
Referral Programs: Implementing a referral program could incentivize current users to bring in new customers.
Content Marketing: Investing in content marketing to establish thought leadership and attract organic traffic.
Customer Success Initiatives: Enhancing customer support and success initiatives to improve retention and upsell opportunities.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: With a solid understanding of SaaS metrics and a keen interest in AI and automation technologies.
Growth-Oriented Leader: Someone ready to invest in and explore untapped channels like outbound sales and advanced marketing strategies.
Competitive Strategist: An individual with the acumen to navigate and succeed in a competitive market by differentiating the product and building on its unique strengths.
SEO and Content Marketing Enthusiast: With the skills to continue and enhance the SEO success and content marketing initiatives, driving organic growth.
💼 Online Service
eLearning Platform for K-12 - $160k
Launched in 2019
$1k CLTV
Revenue: $165k
Profit: $52k
Margin: 32%
Multiple: 3.08x
💬 Quick Take
This eLearning company presents a promising opportunity, nestled in the rapidly growing digital education sector. Its subscription-based model, extensive course offerings, and global teacher base signal a solid foundation. The partnership with reputable institutions like Stanford and The Open University enhances its credibility. However, the relatively short average customer lifespan and the intense competition in online education are concerns. The automated payment system and diverse digital marketing strategy show a mature operational model, yet the valuation demands careful consideration of growth potential and market positioning.
✅ What I Like
Broad Curriculum
Offering courses from coding to languages broadens market appeal and taps into various learning needs.
Expert-Designed Courses
Collaboration with prestigious institutions adds immense value and credibility.
Global Teacher Base
Having over 35 teachers worldwide ensures diverse perspectives and a rich learning environment.
Strong Digital Presence
A well-rounded digital marketing strategy leveraging SEO, ads, and social media speaks to a robust acquisition funnel.
Automated Revenue
The subscription model with automated payments provides predictable, recurring revenue.
Customer Retention Strategies
Features like personal instructors, flexible schedules, and rewards systems are excellent for customer engagement and retention.
Substantial Achievement Metrics
Over 60,000 lessons and 50,000 web projects indicate a successful operational history.
❓ Concerns
Customer Lifetime Value
An average customer lifetime of 7 months could indicate challenges in long-term engagement or market saturation.
High Competition
The eLearning space is crowded, and distinguishing the platform can be challenging.
Dependence on Digital Marketing
Heavy reliance on digital ads and SEO could become costly and may not guarantee conversion rates long-term.
Scalability Limits
Expanding the teacher base and course offerings will require significant resources and strategic planning.
Technology Dependence
Keeping the platform and courses up-to-date with the latest technology is crucial and potentially costly.
💼 Due Diligence Questions
Teacher Retention and Quality: What are the retention rates for teachers, and how is teaching quality ensured and monitored?
Customer Acquisition Cost: What is the current customer acquisition cost, and how has it trended over time?
Technology Infrastructure: How scalable is the current technology platform, and what are the associated costs?
Regulatory Compliance: How does the company navigate and comply with educational regulations across different regions?
Course Completion Rates: What are the completion rates for various courses, and how are they addressed?
Competitor Analysis: How does the company's offering compare with major competitors in terms of pricing, course quality, and technology?
Customer Feedback: Is there a systematic process for collecting and integrating customer feedback into course development?
Intellectual Property: What are the intellectual property rights arrangements for course materials and technology?
🚀 Growth Levers
Expand Course Offerings: Introducing new and trending courses can attract a wider audience and meet evolving market needs.
Partnership and Collaborations: Collaborating with schools, educational institutions, and corporations can open new channels for student acquisition.
Referral Programs: Implementing a referral program can leverage existing customer networks for growth.
International Expansion: Exploring new geographical markets could tap into untapped demand.
Mobile Application: Developing a user-friendly mobile app could enhance accessibility and user engagement.
Community Building: Creating a vibrant online community for students can foster engagement and improve retention.
Corporate Training Programs: Offering specialized courses for corporate clients can open a new revenue stream.
Content Marketing: Investing in content marketing (blogs, webinars, etc.) can improve SEO and establish thought leadership.
Data Analytics: Utilizing data analytics to understand customer behavior and personalize marketing and course offerings.
Technology Enhancement: Continuously updating the platform to ensure a seamless and modern user experience.
🙋🏻♂️ The Buyer
Educational Enthusiast: Ideally passionate about education and familiar with the eLearning space, valuing its impact on future generations.
Strategic Visionary: Someone with a clear vision for scaling the business and navigating the competitive landscape of digital education.
Tech-Savvy Investor: An individual with an understanding of the technological backbone of eLearning platforms and the ability to drive innovation.
Marketing Strategist: A buyer with a strong grasp of digital marketing and customer acquisition strategies in the online education market.
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