The Business Inquirer #153
Sharing a blue-collar workwear brand, a craft & hobby e-commerce business, an SMS marketing SaaS, an e-commerce SaaS, and a property management business.
Hello Friends!
In this week’s issue:
🛒 eCommerce - 2 listings
☁️ SaaS - 2 listings
🏡 Main Street - 1 listing
⚒️ Tools & Resources
💡 How I Can Help
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🛒 eCommerce
Blue-Collar Workwear Brand - $4.6M + Inv
Launched in 2016
Sold through Shopify & TikTok
All production is in-house
Revenue: $4.1M
Profit: $1.5M
Margin: 30%
Multiple: 3.07x
💬 Quick Take
This 7-year-old blue-collar workwear brand presents a compelling acquisition opportunity with its solid footing in a niche market and great margins. The strength of its online sales channels, notably the burgeoning TikTok Shop, underscores successful adoption of digital marketing trends. However, the heavy reliance on social media advertising, while effective, introduces vulnerability to platform changes. The in-house production offers control over the supply chain but may limit scalability without strategic investments.
✅ What I Like
Strong Niche Focus
Catering exclusively to the blue-collar worker demographic has allowed the business to carve out a significant market position.
Diversified Sales Channels
The addition of a TikTok Shop to the existing Shopify store platform has opened new revenue streams.
Robust Social Media ROAS
Achieving 3.8x on Facebook and Instagram and 5x–6x on TikTok is impressive, especially in a challenging advertising landscape.
Product Expansion Potential
The success with hard-hat stickers alongside safety shirts shows the brand's ability to innovate within its niche.
In-House Production
Maintaining production in-house ensures competitive pricing and quality control.
Ready for Immediate Growth
The business is primed for expansion, particularly on TikTok and potentially on Amazon. Adding the product catalog to Amazon represents a significant untapped opportunity.
❓ Concerns
Scalability of In-House Production
While it offers control, the current setup may require significant investment to scale up.
Platform-Specific Risks
TikTok's evolving landscape poses both an opportunity and a risk, depending on regulatory and market changes.
Advertising Budget Constraints
Increasing the advertising budget to grow revenue might not be sustainable long term as it will significantly compress margins.
💼 Due Diligence Questions
Supply Chain Details: How does the business manage its supply chain, especially with in-house production?
Customer Acquisition Costs: What are the specific CACs for each sales channel?
Customer Retention Rates: How has the business managed customer retention and loyalty?
Inventory Levels: What are the current inventory levels, and how are they managed?
Operational Workflow: Can you outline the day-to-day operational workflow and any existing challenges?
Employee Roles: What are the specific roles and responsibilities of the current team members?
Platform Analytics: Can you share detailed performance metrics for the Shopify and TikTok shops? Who manages those marketing channels? Who creates the creatives?
Legal and Compliance: Are there any current or potential legal or compliance issues related to the products or business operations?
Future Plans: What strategies have been considered for future growth and expansion?
🚀 Growth Levers
Expand Digital Footprint: Broaden the online presence beyond TikTok and Shopify by leveraging other e-commerce and social media platforms.
Enhance Product Line: Introduce new, related product lines that appeal to the existing customer base to drive repeat business.
Optimize SEO: Improve website SEO to increase organic traffic and reduce reliance on paid advertising.
Strengthen Community Engagement: Build a stronger community around the brand through social media engagement, loyalty programs, and brand ambassadorships.
Explore B2B Sales: Target businesses that require workwear for their employees to diversify sales channels.
International Expansion: Consider expanding sales internationally to tap into new markets.
Leverage Email Marketing: Develop a more robust email marketing strategy to improve customer retention and increase lifetime value.
Operational Efficiency: Streamline production and fulfillment processes to handle increased volume without compromising quality.
🙋🏻♂️ The Buyer
E-Commerce Savvy: An individual or entity with experience in e-commerce and online marketing would be ideal to leverage existing digital channels effectively.
Interest in Blue-Collar Sector: A buyer with an understanding or interest in the blue-collar sector could bring valuable insights into product development and marketing strategies.
Operational Expertise: Skills in managing supply chains and in-house production would be beneficial for scaling the business.
Digital Marketing Acumen: Proficiency in digital marketing, especially in social media advertising, to sustain and grow the business's online presence.
Financial Capability: While not stating the obvious, a buyer should have the capacity to invest in growth initiatives beyond the purchase price.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Craft & Hobby Brand - $2.1M
Launched in 2019
HQ in California
Production & DTC sales
Revenue: $2.1M
Profit: $712k
Margin: 34%
Multiple: 2.95x
💬 Quick Take
The business has seen consistent growth over the last 4-years. The model of producing on-demand products minimizes losses and optimizes production costs, making it a lean operation. The reliance on rubber stamps for the majority of revenue could be seen as both a strength and a potential risk. The wide array of products and the substantial SKU count speaks to the business's market depth. The valuation seems reasonable.
✅ What I Like
Diverse Product Range
Offers over 731K unique SKUs, providing customers with a vast selection and the business with multiple revenue streams.
On-Demand Production
Minimizes inventory costs and unsold product losses, demonstrating a lean and efficient business model.
Strong Online Presence
Sells across major e-commerce platforms like Amazon, Etsy, and Walmart, ensuring wide market access.
Revenue Growth
Yearly revenue increased by 29% and earnings by nearly 40%, indicating a strong market demand and efficient operations. Growth has been consistent over the 4-years.
Skilled Workforce
The inclusion of a senior graphic artist and production specialists adds valuable expertise to the business.
Cross-Trained Employees
Enhances operational flexibility and reduces risk associated with employee turnover.
❓ Concerns
Platform Risk
Selling mainly through third-party platforms may expose the business to changes in terms, fees, or competition.
SKU Complexity
Managing over 731K SKUs could present logistical and inventory challenges, even with an on-demand model.
Brand Differentiation
Standing out in a crowded online marketplace requires constant innovation and marketing effort.
Product Line Concentration
A significant portion of revenue coming from a single product line may pose a risk to diversification.
💼 Due Diligence Questions
Supplier Relationships: What are the terms and stability of relationships with suppliers, especially for key materials?
Customer Demographics: Who are the primary customers, and what trends have been observed in their purchasing behavior?
Market Trends: How is the craft and hobby market evolving, and what are the future trends?
Competition Analysis: Who are the main competitors, and what differentiates this business from them?
Operational Processes: How are the production processes managed, especially with such a wide range of SKUs?
Marketing Strategies: What marketing channels are most effective for the business, and what is the ROI on marketing spend?
Product Development: How does the company decide on new products, and what is the process for rolling them out?
Customer Feedback: What mechanisms are in place for gathering and responding to customer feedback?
🚀 Growth Levers
Expand Product Lines: Diversify the product range further to capture more market segments.
Enhance Digital Marketing: Invest in SEO, social media, and email marketing to increase online visibility and customer engagement.
International Expansion: Explore opportunities to sell products in international markets through global e-commerce platforms.
Improve Website Experience: Optimize the website for better user experience and conversion rates.
Collaborations and Partnerships: Partner with influencers or brands within the craft community to expand reach.
Customer Loyalty Programs: Implement loyalty programs to encourage repeat purchases and customer retention.
Product Customization: Offer personalized options for products to cater to niche customer preferences.
Data Analytics: Leverage data analytics to better understand customer behavior and tailor marketing strategies accordingly.
Eco-friendly Products: Introduce eco-friendly and sustainable product lines to appeal to environmentally conscious consumers.
Automation and Efficiency: Invest in automation tools for production and order processing to scale operations efficiently.
🙋🏻♂️ The Buyer
E-Commerce Savvy: Should have experience or a strong interest in e-commerce and digital marketing to capitalize on online sales channels.
Creative Industry Interest: A passion for crafts, hobbies, or the DIY market can provide valuable insights into product development and marketing.
Operational Expertise: Ability to manage and optimize complex operations, especially in a high-SKU environment.
Growth Mindset: Should be focused on scaling the business, with a willingness to invest in marketing, product diversification, and international expansion.
Strategic Networking: Having connections in the craft and hobby industry could be beneficial for partnerships and brand development.
☁️ SaaS
SMS Marketing Platform - $675k
Launched in 2020
Revenue: $275k
Profit: $90k
Margin: 33%
Multiple: 7.5x
💬 Quick Take
This SMS marketing platform stands out for its high engagement potential, leveraging the near-universal open rates of SMS to boost client retention and revenue for businesses significantly. Its easy integration into SaaS for agencies adds valuable utility. The dual application for direct-to-consumer and agency use broadens its market appeal, while AI integration introduces cutting-edge content creation capabilities directly within communication flows. However, concerns about market saturation, reliance on evolving technology, and the high valuation warrant careful consideration.
✅ What I Like
Robust SMS Platform
The platform's ability to enhance client engagement through high open rates of SMS is a key asset, offering businesses a direct line to their customers.
AI Integration
The incorporation of AI for content creation within the software and mobile apps is innovative, setting this platform apart from competitors.
Versatility
Its applicability across industries for both direct-to-consumer and agency models increases its market potential.
High Conversion Potential: Leveraging SMS for marketing can dramatically increase conversion rates due to higher visibility.
❓ Concerns
Market Competition
The SMS marketing space is competitive, with numerous players offering similar services.
Regulatory Risks
SMS marketing is subject to regulatory changes, which could impact operational practices.
High Valuation
The asking price might be steep for the current profit margins, affecting ROI calculations.
💼 Due Diligence Questions
User Metrics: How does the platform perform in terms of user engagement and retention metrics?
Competitive Advantage: What sets this platform apart from its competitors in a crowded market?
Technology Updates: How frequently is the software updated to keep up with technological advancements?
Regulatory Compliance: How does the platform ensure compliance with telecommunications and privacy laws?
Customer Success Stories: Can you provide examples of businesses that have seen significant ROI using your platform?
Scalability: How does the platform support scaling up marketing campaigns for larger audiences?
AI Capabilities: Could you detail the AI's role and its impact on content creation and customer engagement?
Market Analysis: How do you view the market's current saturation and the platform's potential to penetrate further?
Support Infrastructure: What kind of support and training does the platform offer to new users?
🚀 Growth Levers
Market Expansion: Target untapped industries with tailored marketing strategies to broaden the user base.
Feature Enhancement: Continually update the platform with innovative features that keep pace with technological advancements.
Strategic Partnerships: Form alliances with complementary services or platforms to enhance product offerings.
Customer Success Program: Implement a robust customer success program to maximize client satisfaction and retention.
Content Strategy: Utilize the AI integration to develop unique content strategies that differentiate users from competitors.
International Markets: Explore expansion into international markets with localized messaging capabilities.
Community Building: Create a community of users to share best practices, enhancing the platform's value proposition.
Data Analytics: Enhance data analytics capabilities to offer users deeper insights into their SMS campaigns' performance.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: Someone comfortable with SaaS platforms and eager to explore AI's potential in marketing.
Marketing Agencies: Businesses looking to augment their service offerings with a powerful SMS marketing tool.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
SaaS for E-Commerce Brands - $650k
Launched in 2017
Revenue: $648k
Profit: $220k
Margin: 34%
Multiple: 2.95x
💬 Quick Take
The listing lacks some details about the business but presents an interesting opportunity. The SaaS specializes in boosting revenue for e-commerce clients. The low churn rate and high customer lifetime value signal a strong product-market fit, particularly within the e-commerce space. Despite these positives, the business's current maintenance mode and lack of active growth initiatives raise questions about its untapped potential. This also presents an opportunity.
✅ What I Like
Strong Value Proposition
Clients experiencing an average of 20% sales growth highlight the effectiveness of the software.
Low Churn Rate
A churn rate of 2.5% suggests high customer satisfaction and product stickiness.
High LTV
An average LTV of over $20K indicates significant revenue potential from each client.
Positive Market Reputation
A 4.7-star average review rating underscores the product's quality and customer satisfaction.
Broad Integration Capability
Compatibility with all major e-commerce platforms suggests a vast addressable market.
Diversified Client Base
No client contributes more than 5% to MRR, mitigating risk.
Untapped Growth Potential
The current maintenance mode presents a growth opportunity for new ownership.
❓ Concerns
Underutilized Features
75%-80% of clients not using all features indicates potential revenue left on the table.
Lack of Growth Focus
Current ownership's focus elsewhere may indicate potential operational or strategic gaps.
Customer Acquisition Strategy
Needs revamping to kickstart growth.
💼 Due Diligence Questions
Client Retention Strategies: What mechanisms are in place to maintain the low churn rate?
Technology Stack Review: How current is the technology, and what updates are planned?
Market Adaptability: How does the product stay competitive within the rapidly evolving e-commerce sector?
Customer Satisfaction Insights: Can we access detailed customer feedback or case studies?
Operational Efficiency: What are the current operational costs, and where can efficiencies be improved?
Sales and Marketing Strategy: What strategies have been considered or attempted for growth?
Competitive Landscape Analysis: How does the company differentiate itself in a crowded market?
🚀 Growth Levers
Establish a Sales Team: Building a dedicated team could significantly increase customer acquisition.
Expand Marketing Efforts: A strategic marketing plan could tap into new customer segments.
Feature Utilization: Encouraging current clients to use all features can increase revenue per customer.
Customer Success Initiatives: Enhancing customer support to further reduce churn and increase referrals.
Technology Innovations: Continually updating the software to keep pace with e-commerce trends.
Partnership Development: Forming strategic partnerships with e-commerce platforms for better integration.
🙋🏻♂️ The Buyer
Growth-Oriented: A buyer with a clear vision for scaling the company will find this opportunity particularly attractive.
Tech-Focused: An understanding of SaaS products and e-commerce integration is crucial.
Strategic Investor: Someone looking to expand their portfolio within the e-commerce sector.
🏡 Main Street
Property Management Firm - $3.3M
Launched in 2007
85% multi-family housing/apartments, 10% single-family homes (multi-unit),
and 5% commercialRevenue: $2.2M
Profit: $799k
Margin: 36%
Multiple: 4.13x
💬 Quick Take
This property management firm, with its robust foothold in both Milwaukee and Kenosha, Wisconsin, offers a lucrative opportunity characterized by a strong multi-family housing focus. The owner's readiness to stay on for a transition period and roll equity underscores a commitment to sustained success. However, the business's concentrated client mix and geographic focus present both stability and limitations. The comprehensive leadership team and the owner's ongoing involvement in site sourcing are positives, yet reliance on a specific market segment and region could be potential growth bottlenecks.
✅ What I Like
Established Market Presence
Over 15 years of operations have cemented a reputable standing in the property management sector.
Dedicated Leadership Team
The inclusion of a Controller, two Senior Vice Presidents, and a Superintendent ensures operational efficiency and expertise.
Owner's Transition Support
The owner's offer to remain for up to 5 years provides continuity and invaluable industry insight.
Diverse Client Mix
While predominantly focused on multi-family housing, the inclusion of single-family and commercial properties broadens the client base.
Assets Included
The acquisition includes tangible assets valued at approximately $450K, enhancing the deal's value.
Equity Roll & Promissory Note
The owner's willingness to roll equity and provide a promissory note indicates trust in the business's ongoing success.
Operational Autonomy
The existing staff's ability to manage day-to-day operations allows for strategic focus by new ownership.
❓ Concerns
Geographic Concentration
The firm's focus on Milwaukee and Kenosha limits its exposure to regional market fluctuations.
Client Concentration
A heavy reliance on multi-family housing could pose risks if market dynamics shift.
Market Competition
The property management sector is highly competitive, with constant innovation required to stay ahead.
Economic Sensitivity
Property management demand can be cyclical, tied to economic health and housing market trends.
Regulatory Environment
Compliance with evolving property and tenant regulations requires constant vigilance and adaptability.
💼 Due Diligence Questions
Client Retention Rates: What has been the historical client retention rate, and what strategies are in place to maintain it?
Market Analysis: How does the company position itself against competitors in Milwaukee and Kenosha, and what are the growth plans for these markets?
Technology Utilization: How is technology being used to streamline operations, and what investments are necessary to upgrade systems?
Staff Continuity: What are the plans for retaining key staff post-acquisition, and what impact might the transition have on them?
Asset Condition: What is the condition and expected lifespan of the included assets, such as vehicles and equipment?
Owner's Role Post-Acquisition: Specifically, how will the owner's role be defined during the transition period, and what are the expectations?
Growth Projections: What realistic growth projections exist for expanding into new markets or client segments?
Operational Efficiencies: Are there opportunities for cost savings or operational improvements without sacrificing service quality?
🚀 Growth Levers
Market Expansion: Exploring opportunities in adjacent markets or regions could diversify risk and unlock new revenue streams.
Client Base Diversification: Broadening the focus to include more single-family homes and commercial properties can mitigate reliance on multi-family housing.
Technological Innovation: Investing in state-of-the-art property management software could enhance operational efficiency and client satisfaction.
Strategic Partnerships: Forming alliances with real estate developers or investors could provide a steady stream of new business.
Service Expansion: Adding ancillary services, such as renovation management or real estate advisory, could increase per-client revenue.
Marketing Strategy Revamp: A comprehensive marketing strategy targeting untapped markets or demographics could drive growth.
Operational Streamlining: Identifying and implementing cost-saving measures without compromising service quality could improve margins.
Staff Training and Development: Investing in staff development to enhance service offerings and client interactions can lead to higher retention and acquisition rates.
🙋🏻♂️ The Buyer
Industry Experience: Someone with a background in property management or real estate could leverage existing operations while innovating for growth.
Operational Expert: A buyer skilled in optimizing operations and harnessing technology could enhance efficiency and profitability.
Networking Strength: A buyer with strong connections in the real estate sector could open new doors for business development.
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⚒️Tools & Resources
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