The Business Inquirer #150
Sharing a bundle of e-commerce plugins, an e-mail marketing agency, and a consumer products wholesale business.
Hello Friends!
Over the last few weeks, I’ve noticed a slowdown in actionable deal flow to highlight in the newsletter. Wondering if you’re seeing the same.
In this week’s issue:
🛒 eCommerce - 1 listing
☁️ SaaS - 1 listing
💼 Online Service - 1 listing
⚒️ Tools & Resources
💡 How I Can Help
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🛒 eCommerce
Wholesaler of Consumer Products - $770k
Launched in 2018
Two separate brands; Bath products and drinkware products;
HQ in Las Vegas but can be relocated
Revenue: $924k
Profit: $306k
Margin: 33%
Multiple: 2.5x
💬 Quick Take
Opportunity to acquire a stable wholesale business with potential for DTC. I like the dual-brand strategy, tapping into the giftable market with bath products and drinkware accessories. The 65% sales contribution from the bath brand suggests a robust product line. The untapped 45k email list is a DTC opportunity waiting to be explored. The business's post-COVID recovery and increased profitability in 2023 are promising. The valuation seems reasonable.
✅ What I Like
Diversified Revenue Streams
The business has smartly diversified its revenue, balancing between bath products and drinkware accessories. This diversification reduces risk and offers stability.
Established B2B Relationships:
The strong B2B relationships forged over time ensure recurring business and provide a stable foundation for future growth.
Potential to Split Brands
The option to split the two brands offers flexibility and might cater to different buyer preferences or strategic directions.
Dedicated Team in Place
The presence of a committed team, along with a tentative transition plan, provides continuity and eases the ownership transfer process.
Untapped Email List
A large, unused email list presents a ripe opportunity for direct marketing and engagement, potentially unlocking new revenue streams.
Post-COVID Recovery
The business's ability to bounce back post-COVID, especially with improved profitability in 2023, indicates resilience and market adaptability.
Location and Operational Flexibility
Being based in Las Vegas with the option to manage operations remotely or relocate offers logistical advantages and operational flexibility.
❓ Concerns
Dependency on Third-Party Platforms
Dependence on third-party online platforms for sales could be risky if these platforms change their policies or fees.
Limited Brand Visibility
Absence of a strong social media or influencer marketing presence might limit brand visibility and customer reach.
Operational Transition Risks
The transition of operations, whether keeping it in Las Vegas or moving, carries inherent risks and requires careful planning.
Market Saturation Risks
The giftable product market is highly competitive, and sustaining growth could be challenging amidst market saturation.
💼 Due Diligence Questions
Sales Channel Breakdown: What is the detailed breakdown of sales across the various channels, and how do they contribute to the overall profitability?
Customer Retention Metrics: What are the current customer retention rates, and what strategies are in place to improve them?
Inventory Management: How is inventory managed, and are there any challenges related to overstocking or stockouts?
Supplier Contracts and Reliability: Can you provide details on supplier contracts and their reliability, especially for outsourced products?
Employee Roles and Expertise: What are the specific roles and expertise of the current team members?
Transition Support: What level of support and training will be provided during the transition period?
DTC Strategy: What plans or strategies have been considered for expanding into direct-to-consumer sales channels?
Marketing Efforts and ROI: What marketing efforts have been made so far, and what is the return on investment for these efforts?
Regulatory Compliance: Are there any regulatory compliance issues or upcoming changes that could affect the business?
Customer Feedback and Product Development: How is customer feedback incorporated into product development and business strategy?
🚀 Growth Levers
Email Marketing Activation: Utilizing the 45k subscriber list for targeted email marketing campaigns can significantly boost DTC sales and customer engagement.
Expand DTC Sales Channels: Developing and optimizing DTC sales channels, including the business's own website and platforms like Amazon, can open new revenue streams.
Social Media and Influencer Marketing: Leveraging social media and influencer partnerships can enhance brand visibility and drive customer acquisition.
Private-Label Partnerships: Exploring private-label manufacturing for other brands can diversify revenue and broaden market reach.
Product Line Expansion: Introducing new products or variations can cater to changing consumer preferences and expand market share.
Big-Box Retail Partnerships: Entering into partnerships with big-box retailers can amplify sales volume and brand recognition.
Enhanced Customer Experience: Improving the customer experience, both online and offline, can increase customer loyalty and referrals.
Strategic Wholesale Marketing: Intensifying marketing efforts in the wholesale channel can strengthen existing relationships and attract new business partners.
🙋🏻♂️ The Buyer
E-Commerce Savvy: A buyer with a strong background in e-commerce and digital marketing can maximize the untapped potential of DTC and online sales.
Supplier Relationship Management: An individual skilled in managing and negotiating with suppliers would benefit from the established outsourced supply chain.
Experience in Wholesale: Beneficial for a buyer with experience in wholesale, able to further strengthen and expand B2B relationships.
☁️ SaaS
Bundle of WooCommerce + WordPress Plugins - $114k
Launched in 2013
Revenue: $38k
Profit: $34k
Margin: 89%
Multiple: 3.35x
💬 Quick Take
A niche opportunity in the eCommerce space. The business has smartly utilized content marketing and cross-promotion strategies for growth. However, the current revenue and profit figures suggest a relatively small-scale operation, which might limit immediate returns but offers substantial growth potential. The opportunity to expand through various marketing channels and the development of new features, as indicated by the feature request list, are promising avenues for growth. The asking price appears to be a reflection of the business's potential rather than its current financial performance.
✅ What I Like
Unique Product Offering
The plugins offer unique solutions in the market, reducing direct competition.
Content Marketing Success
Effective use of content marketing demonstrates a proven strategy for organic growth.
Opportunities for Expansion
Multiple avenues for growth, including social media marketing and selling on the WooCommerce Marketplace.
Customer-Driven Development
A feature request list guides development, ensuring product relevance and customer satisfaction.
Cross-Promotion Potential
Existing plugins offer cross-promotion opportunities, potentially boosting sales.
❓ Concerns
Dependence on Specific Platforms
Reliance on WooCommerce and WordPress could be risky if these platforms change their policies or lose market share.
Competitive Market Dynamics
The rapidly evolving nature of the eCommerce and plugin market requires constant innovation.
Technical Support and Updates
Ongoing commitment to technical support and regular updates is crucial for customer retention.
Monetization of Free Plugins
The strategy to monetize free plugins needs careful planning to avoid alienating current users.
💼 Due Diligence Questions
User Base Metrics: Detailed breakdown of the current user base for each plugin, including active installations and user feedback.
Sales and Revenue Trends: Historical sales data to understand revenue trends and seasonality.
Development Roadmap: Detailed insight into the planned development roadmap and feature enhancements.
Marketing and Sales Strategies: Detailed overview of current marketing and sales strategies, including efficacy and ROI.
Technical Support Structure: How is technical support managed, and what are the associated costs?
Intellectual Property Rights: Clarification on the ownership and rights of the plugins' intellectual property.
Platform Dependency Risks: Assessment of risks associated with dependency on WooCommerce and WordPress platforms.
Competition Analysis: Detailed analysis of potential indirect competitors and market positioning.
Customer Retention Strategies: Strategies in place for retaining customers and encouraging upgrades to premium versions.
Cost Structure: Breakdown of the cost structure, including any recurring costs for maintaining and updating the plugins.
🚀 Growth Levers
Expand Marketing Channels: Utilize untapped marketing channels like Google Ads and social media to reach a broader audience.
Develop Premium Versions: Create premium versions of the free plugins to generate additional revenue streams.
Enhance Feature Set: Continuously update and enhance the feature set based on customer feedback and market trends.
WooCommerce Marketplace Presence: Expand sales by listing the plugins on the WooCommerce Marketplace.
Strategic Partnerships: Form partnerships with complementary businesses for cross-promotion and bundled offers.
SEO and Content Marketing: Intensify SEO efforts and content marketing to drive organic traffic and improve online visibility.
User Experience Improvements: Invest in improving the user experience and interface of the plugins for higher customer satisfaction.
Community Engagement: Engage with the WordPress and WooCommerce communities for feedback, beta testing, and brand building.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: Ideal for someone with a background in tech, especially in eCommerce and WordPress.
Marketing-Oriented Vision: A buyer with strong digital marketing skills can leverage untapped channels for growth.
Community Engagement Skills: A buyer who can effectively engage with the WooCommerce and WordPress communities.
💼 Online Service
E-Mail Marketing Firm - Open to Offers
Launched in 2002
Fully remote staff of 9; Co-founder willing to stay in the business;
Revenue: $3.0M
EBITDA: $1.7M
Margin: 57%
Multiple: N/A
💬 Quick Take
Opportunity to purchase an online service business with nice margins. May be a good fit for someone with marketing expertise or in a complementary business. The fact that the majority of its business comes from word-of-mouth and referrals speaks volumes about the quality of its services and client satisfaction. The owner's decision to not actively market the firm may have limited its growth, making it an exciting prospect for a new owner with a vision for expansion. The opportunity for the buyer to work alongside one of the original owners is a unique aspect, offering invaluable insights and continuity.
✅ What I Like
Strong Client Loyalty
Clients with over a decade of tenure underline exceptional service quality and reliability.
Remote Operational Model
Proven effectiveness in remote operations, offering flexibility and lower overhead costs.
Organic Growth
Growth through word-of-mouth and referrals demonstrate the business's strong reputation and client satisfaction.
Established SOPs
Well-defined procedures for client and employee management ensure operational efficiency and scalability.
Key Employee Retention
The willingness of key employees to continue under new ownership provides continuity and stability. One owner's desire to stay on brings valuable experience and facilitates smoother transition.
❓ Concerns
Lack of Active Marketing
Heavy reliance on word-of-mouth could be risky in a competitive digital marketing landscape. Implementing marketing strategies will compress margins.
Client Concentration Risks
Heavy reliance on a few large clients could pose risks if any key client relationship falters.
Revenue Mix
75% of revenue is from “Associations” while only 15% is from for-profit businesses.
💼 Due Diligence Questions
Client Acquisition Strategies: How does the company currently acquire new clients, and what strategies could be implemented for expansion?
Employee Skill Sets and Roles: Detailed understanding of each team member’s role and skills to assess capabilities and potential gaps.
Client Retention Data: Detailed statistics on client retention rates and strategies for improving long-term client relationships.
Technology Stack Review: Understanding of the technology and tools used in service delivery and their scalability.
Competitive Landscape: Insights into the competitive landscape and the company’s positioning within it.
Owner’s Future Role: Detailed discussion on the continuing owner’s future role, expectations, and salary considerations.
Market Expansion Plans: Exploration of potential for market expansion, including international markets.
Client Diversification Strategies: Plans and ideas for diversifying the client base to reduce dependency on a few large clients.
🚀 Growth Levers
Expand Service Portfolio: Introduce complementary services like PPC, paid media, and SMS marketing to provide a more comprehensive offering.
Active Marketing Campaigns: Implementing a structured sales and marketing campaign to actively reach new clients.
Technology and Innovation: Invest in the latest marketing technologies and innovative strategies to stay competitive.
Strategic Partnerships: Forge partnerships with complementary businesses to expand service offerings and client base.
Global Market Penetration: Leverage the remote model to expand services to international clients.
Team Expansion: Gradually grow the team to support increased business volume while maintaining service quality.
Client Education and Engagement: Host webinars and workshops to educate existing clients on additional services, strengthening client relationships.
Leverage Owner's Expertise: Utilize the staying owner’s experience to mentor the team and guide business strategy.
🙋🏻♂️ The Buyer
Digitally Proficient Entrepreneur: Ideal for a buyer with a strong understanding of the digital marketing landscape and remote operations.
Relationship-Focused Leader: Someone who values and can maintain strong client relationships, a key strength of the business.
Experience in Team Management: Skilled in managing and growing remote teams while maintaining a strong company culture.
Collaborative Mindset: Willing to collaborate with the staying owner, benefiting from their experience and insights.
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.
Rejigg - Platform that connects searchers/investors directly with owners of off-market small businesses ($1M - $10M of revenue) considering exits. All deals are sourced by the Rejigg team. Their team adds 7 to 10 new deals each week.
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.
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
Whenever you’re ready, here are a few ways for us to work together…
Schedule 1:1 consulting on deal sourcing, due diligence, M&A ecosystem, newsletters, entrepreneurship, or anything else you’d like to discuss
Promote your brand to business buyers, investors, SMB owners, and other M&A participants by sponsoring this newsletter
Access or share deal flow with your peers through Deal Flow Scout
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