The Business Inquirer #154
Sharing a cornhole manufacturer, an inventory management SaaS, a scheduling SaaS for cleaning services, a trampoline park, an HVAC contractor, and a parking lot sweeping business.
Hello Friends!
In this week’s issue:
🛒 eCommerce - 1 listing
☁️ SaaS - 2 listings
🏡 Main Street - 3 listings
⚒️ Tools & Resources
💡 How I Can Help
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🛒 eCommerce
Cornhole Manufacturer & Sales - $6.6M
Launched in 2008
HQ in California
Revenue: $5.2M
Profit: $1.6M
Margin: 31%
Multiple: 4.1x
💬 Quick Take
There’s a lot to like in this business. With a solid online sales model, significant market recognition, and a loyal customer base spanning the US, it’s an interesting opportunity for a new owner. However, it’s not clear how differentiated the products are compared to other manufacturers. Plus a reliance on a single sport/product category is risky.
✅ What I Like
Strong Online Presence
With all sales conducted through its website, the business showcases an effective, direct-to-consumer online model.
Loyal Customer Base
A database of 45,000 registered users and over 40,000 orders in 2023 highlights a strong market demand and customer loyalty.
Nationwide Brand Recognition
The brand is well-recognized across the US, offering a solid foundation for further growth and market penetration.
Ready for Expansion
Plans to begin shipping to Canada indicate readiness for geographical expansion and market growth.
Experienced and Stable Team
A team of 15, including a COO capable of running daily operations, ensures business continuity and operational efficiency.
❓ Concerns
Online Sales Dependence
Sole reliance on the company's website for sales might pose risks in the face of digital market shifts or technical disruptions.
Market Saturation Risks
As the niche grows, so does the competition, which could affect market share and profitability.
Expansion Execution
Expanding into Canada presents logistical and market entry challenges that require careful planning and execution.
Supply Chain Management
As production scales, especially with international expansion, supply chain complexities could increase.
💼 Due Diligence Questions
Market Analysis: How does the business plan to maintain its competitive edge in the face of growing competition?
Operational Workflow: Can we review the operational processes and how the business manages its supply chain and product development?
Customer Satisfaction: What insights are available regarding customer feedback, return rates, and loyalty programs?
Intellectual Property: Are there any patents or trademarks associated with the company’s products?
Expansion Plans: What specific strategies are in place for the Canadian market entry and beyond?
Staff Retention: How does the company plan to ensure staff retention, especially in key positions, post-sale?
Online Sales Strategy: Can we delve into the analytics behind the website’s sales performance and customer acquisition strategies?
Product Innovation Pipeline: What new products or improvements are currently being developed?
🚀 Growth Levers
E-Commerce Optimization: Enhancing the online shopping experience through website improvements and SEO can attract more customers.
Product Line Expansion: Introducing new products or accessories can cater to a broader audience and encourage repeat business.
Market Diversification: Entering new markets, starting with Canada, then exploring other international opportunities can drive growth.
Corporate Partnerships: Establishing partnerships with corporate clients for events or branded merchandise could open new revenue streams.
Community Engagement: Hosting or sponsoring cornhole tournaments and events can increase brand visibility and community engagement.
Digital Marketing: Leveraging social media and digital marketing to reach a wider audience and drive online sales.
Customer Loyalty Programs: Implementing loyalty programs to reward repeat customers can enhance customer retention.
Operational Efficiency: Streamlining operations and exploring cost reduction strategies without compromising product quality can improve margins.
🙋🏻♂️ The Buyer
Strategic Investor: Someone with experience in e-commerce and direct-to-consumer sales models can leverage the company's online strengths.
Passionate About Sports/Outdoor Activities: An individual passionate about sports, specifically niche ones like cornhole, will find this business appealing.
Experience in Scaling: A buyer experienced in scaling small to mid-sized businesses, especially in manufacturing and online retail.
Vision for International Expansion: An entrepreneur with a vision for taking niche brands into new markets, starting with Canada and potentially beyond.
☁️ SaaS
CRM, Warehouse, & Inventory Management - $600k
Launched in 2020
Revenue: $256k
Profit: $180k
Margin: 70%
Multiple: 3.33x
💬 Quick Take
This CRM platform presents an interesting opportunity for someone with sales expertise. Its seamless integration of inventory and e-commerce management is tailored for diverse business models presenting a large TAM. However, the founder's sales challenges raise concerns. The system's proven efficiency in real-world applications and the developer's deep industry experience suggest a solid foundation for the business.
✅ What I Like
Comprehensive Solution
Offers a full suite of CRM, inventory, and e-commerce tools, addressing a wide range of business needs.
Developer Expertise
Over 25 years of experience in system development ensures a robust and well-designed platform.
Broad Market Appeal
Designed for both B2B and B2C operations, making it versatile across industries.
Proven Effectiveness
Already in use by real companies, demonstrating reliability and user satisfaction.
❓ Concerns
Sales Expertise Gap
Lack of sales experience by the founder limits market penetration. Not clear if there is true product-market fit. Hiring a sales team is costly.
Marketing Strategy
Absence of a strong marketing strategy to promote the platform. Testing customer acquisition channels can be expensive.
Competition
High competition in the CRM space requires distinct advantages to stand out.
Dependence on Founder
Heavy reliance on the founder's expertise may pose risks to continuity.
💼 Due Diligence Questions
Customer Satisfaction: What feedback have existing users provided about the platform's functionality and reliability?
Market Position: How does this CRM platform differentiate itself from competitors in both features and pricing?
Clients: Is there any client concentration risk? Are any large client contracts up for renewal?
Technical Scalability: Is the platform built to scale efficiently with growing user numbers without significant additional investment?
User Onboarding: What processes are in place to ensure smooth onboarding of new clients onto the platform?
Data Security: How does the platform ensure data security and compliance with relevant privacy regulations?
Future Development: What future development plans exist for new features or integrations?
🚀 Growth Levers
Market Expansion: Target untapped markets with tailored marketing strategies.
Partnership Development: Establish partnerships with complementary service providers.
Feature Expansion: Continuously innovate and add features based on customer feedback.
Sales Team Building: Invest in building a skilled sales team to drive client acquisition.
SEO and Content Marketing: Enhance online visibility through strategic SEO and content marketing efforts.
Referral Programs: Implement referral programs to incentivize current users to attract new clients.
Pricing Strategy Optimization: Review and optimize pricing strategies to balance competitiveness and profitability.
Customer Support Excellence: Invest in customer support to enhance user satisfaction and retention
🙋🏻♂️ The Buyer
Sales Savvy: Ideally possesses strong sales and marketing expertise to overcome current limitations.
Growth Mindset: Committed to scaling the business through strategic investments and expansions.
Tech Appreciation: Has a foundational understanding of tech platforms and their potential impact.
Strategic Networker: Can leverage industry connections for partnerships and growth opportunities.
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Scheduling for Cleaning Services - $499k
Launched in 2020
Bullet Point
Revenue: $171k
Profit: $85k
Margin: 49%
Multiple: 5.87x
💬 Quick Take
I like niche software such as this one. Its comprehensive automation features—ranging from Zapier integrations to two-way calling and online bookings—position it as a vital tool for operational efficiency. I'm particularly impressed by its multiple revenue streams, including website template sales and white-label partnerships, which demonstrate a savvy business model with growth potential. However, there are a lot of risks including the reliance on manual processes for parts of the sales cycle, the unfinished state of its version 3 platform, the excluded owner salary from the financials, and the relatively small scale of this business. I sense that the valuation will become very unreasonable when all of this is taken into consideration. A risky acquisition.
✅ What I Like
Automation Excellence
The platform automates crucial aspects of the cleaning business, enhancing efficiency and customer engagement.
Multiple Revenue Streams
Diverse income sources, including user licenses and white label partnerships, indicate a robust business model.
Sales & Marketing
Established advertising campaigns and a solid sales process contribute to its strong market position.
Support for Transition
The founder and lead developer's willingness to support the transition ensures continuity.
❓ Concerns
Version 3 Completion
The unfinished state of the next platform version poses risks to immediate operational capacity.
Manual Sales Processes
Dependence on manual efforts for parts of the sales process could hinder scalability.
Market Competition
Navigating a competitive landscape requires continuous innovation and marketing strategy adjustments.
User Adoption
The transition to the new platform version could face resistance or require additional marketing efforts.
💼 Due Diligence Questions
User Feedback: What is the customer satisfaction level with the current platform, and how has it impacted their business operations?
Technology Stack: What technology stack is the platform built on, and how does it support future scalability?
Market Analysis: How does the platform stand against competitors, and what are its unique selling propositions?
Revenue Breakdown: Can you provide a breakdown of revenue by stream to understand the dependency on each?
Operational Costs: What are the detailed operational costs, and where are there opportunities for optimization?
Development Timeline: What is the expected timeline for completing version 3, and what features will it include?
Marketing Strategy: How effective are the current marketing strategies, and what plans exist for expansion?
Partnership Stability: How stable and lucrative is the white label partnership, and what terms govern it?
Support Framework: What support framework is in place for users, and how is customer feedback integrated into development?
🚀 Growth Levers
Expand Marketing Channels: Diversify marketing efforts beyond current platforms to reach a broader audience.
Automate Sales Workflow: Implement automation in sales and customer engagement to increase efficiency.
Develop Additional Features: Continuous development of features that address user needs and market demands.
Enhance User Experience: Focus on improving the user interface and functionality based on feedback.
Strengthen White Label Partnerships: Deepen existing partnerships and explore new ones to expand market reach.
Optimize Pricing Strategy: Review and adjust pricing strategies to balance competitiveness and profitability.
Leverage Social Media: Utilize Instagram and YouTube for marketing content to drive traffic and engagement.
Explore New Revenue Avenues: Consider opportunities like white label payment processing to diversify income.
🙋🏻♂️ The Buyer
Tech-Savvy: Understands the value of technology in scaling service businesses and is comfortable with software development.
Marketing Strategist: Has a strong background in digital marketing, capable of enhancing current strategies to boost growth.
🏡 Main Street
Trampoline Park w/ Gourmet Cookie Franchise - $3.5M
Launched in 2020
Located in Illinois
Revenue: $2.5M
Profit: $873k
Margin: 35%
Multiple: 4.01x
💬 Quick Take
This combination of a trampoline park and gourmet cookie franchise represents a unique and potentially lucrative investment. The successful management structure allows for semi-absentee ownership, a plus for investors looking for minimal daily involvement. However, the reliance on consumer discretionary spending and potential safety liabilities inherent in such active entertainment venues warrant careful consideration. The asking price reflects a business that's thriving but a lot of due diligence is required in this listing.
✅ What I Like
Diverse Revenue Streams
Multiple attractions and the cookie franchise cater to a wide audience, ensuring steady income.
Semi-Absentee Ownership
Experienced management allows for an investment that doesn't require day-to-day oversight.
Year-Round Revenue
Birthday parties and events provide stable, year-round income.
Growth Potential
Expansion plans for the cookie franchise's catering service promise additional revenue in 2024.
Strong Lease Terms
An attractive lease with renewal options offers long-term location security.
❓ Concerns
Market Sensitivity
Dependence on discretionary consumer spending could be a risk in economic downturns.
Operational Complexity
Managing two distinct but integrated businesses adds complexity.
Safety Liabilities
Active entertainment venues carry inherent risks that require constant vigilance.
Renewal Dependence
The business's future is somewhat tied to the lease renewal terms, posing a potential risk.
💼 Due Diligence Questions
Financial Health: Can detailed financial statements be provided for both the trampoline park and the cookie franchise?
Operational Metrics: What are the key performance indicators for customer footfall, party bookings, and cookie sales?
Safety Records: Are there detailed records of safety inspections and incident reports?
Management Structure: Can you provide more details on the roles and effectiveness of the current management team?
Market Analysis: What market research supports the business's growth projections, especially for the catering side?
Competitor Landscape: How does the business differentiate itself from other entertainment options and cookie franchises?
Customer Feedback: What does customer feedback reveal about strengths and areas for improvement?
Expansion Plans: Are there detailed plans and financial projections for the expansion of the cookie franchise's catering business?
Staff Retention: What are the staff retention rates, and what training programs are in place?
Legal Compliance: Are there any pending legal issues or compliance challenges?
🚀 Growth Levers
Marketing Expansion: Broaden marketing efforts to highlight unique offerings and attract a wider customer base.
Event Diversification: Introduce new event packages to attract corporate clients and other groups.
Menu Innovation: Regularly introduce new cookie flavors and limited-time offers to keep the menu exciting.
Community Engagement: Partner with local schools and organizations for special events and fundraisers.
Loyalty Programs: Implement loyalty programs to encourage repeat visits and higher spending.
Online Presence: Enhance online booking and e-commerce capabilities for the cookie franchise.
Operational Efficiency: Leverage technology to streamline operations and improve customer service.
Brand Partnerships: Collaborate with well-known brands for special promotions or co-branded products.
🙋🏻♂️ The Buyer
Experience in Recreation and Food: Background in managing or investing in the entertainment, recreation, or food service sectors.
Risk Management Acumen: Understands the intricacies of operating a high-energy entertainment venue and a food franchise, including safety and compliance issues.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Sacramento County HVAC Contractor - $1.6M
Launched in 1989
3 FT techs; 4 service trucks;
Revenue: $1.9M
Profit: $562k
Margin: 30%
Multiple: 2.85x
💬 Quick Take
This established HVAC contractor represents a good opportunity in the heart of Sacramento County. The blend of commercial and residential services, alongside emergency after-hours assistance and warranty services for major brands, positions it as a comprehensive solution provider in the HVAC space. However, potential buyers must be ready to dive into the operational and technical aspects of the business, with an owner's active involvement required. The opportunity for semi-absentee ownership seems limited, urging a hands-on approach. The included transition support and the possibility of SBA financing sweeten the deal, making it an attractive proposition for those equipped to step into this technical field.
✅ What I Like
Established Market Presence
A 30-year history in Sacramento County underlines its durability and customer trust.
Comprehensive Service Offering
Services spanning installation, maintenance, and emergency support cater to a broad customer base.
Professional Team
A skilled workforce and fully equipped service fleet enhance the company's service capabilities.
Training and Transition Support
The seller's commitment to training and acting as RMO facilitates a smoother transition.
Major Brand Affiliations
Authorized dealership status with major HVAC manufacturers adds credibility and business opportunities.
❓ Concerns
Licensing Requirements
The necessity for the buyer to obtain a C-20 license could be a hurdle for those not already in the industry.
Market Competition
Navigating competition in a populous area like Sacramento County demands continued excellence and innovation.
Economic Sensitivity
HVAC services, especially installations, can be sensitive to economic downturns affecting construction and renovation.
💼 Due Diligence Questions
Customer Base: What is the breakdown of commercial vs. residential clients, and how does this diversity impact revenue stability?
Employee Retention: What are the retention rates for technical and administrative staff, and what training programs are in place?
Market Share: How does the business position itself against competitors in Sacramento County, and what are its unique selling propositions?
Vendor Relationships: What are the terms and conditions of the agreements with HVAC manufacturers and suppliers?
Service Contracts: Are there ongoing service contracts or maintenance agreements that will transfer to the new owner?
Operational Efficiency: What systems and processes are in place to manage scheduling, billing, and customer service?
🚀 Growth Levers
Digital Marketing Expansion: Enhance online presence through SEO, social media, and targeted digital advertising to attract new customers.
Service Portfolio Diversification: Introduce new services or specialized solutions to meet emerging market needs and environmental standards.
Geographic Expansion: Explore opportunities to expand service areas beyond Sacramento County to capture additional market share.
Strategic Partnerships: Develop partnerships with construction firms and real estate developers to secure installation contracts for new developments.
Energy-Efficient Solutions: Focus on green and energy-efficient HVAC solutions to cater to the growing demand for sustainable home and commercial solutions.
Customer Loyalty Programs: Implement loyalty programs and annual maintenance contracts to encourage repeat business and stabilize revenue.
Technology Adoption: Leverage the latest HVAC technologies and management software to improve service delivery and operational efficiency.
Staff Training and Development: Invest in continuous training and certification programs for staff to maintain high service standards and technical expertise.
🙋🏻♂️ The Buyer
Industry Experience: Ideally possesses experience in the HVAC sector or a related technical field, with a willingness to actively manage the business.
Technical Knowledge: Has, or is willing to acquire, the technical knowledge necessary to understand and innovate within the HVAC industry.
Financial Acumen: Understands the financial aspects of running a business, including managing cash flow, financing growth, and optimizing profitability.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Commercial Parking Lot Sweeping & Property Maintenance in FL - $2.7M
Launched in 2001
Revenue: $14.5M
Profit: $635k
Margin: 4%
Multiple: 4.25x
💬 Quick Take
An interesting and complex business. Its status as the largest contractor in its niche, combined with a sprawling operational footprint across Florida, Georgia, Alabama, and South Carolina, underscores market dominance. The recurrence of over 80% of its revenues hints at stable and predictable cash flows, a critical asset for any prospective buyer. However, the profit margin against gross revenue suggests operational efficiency or cost management may warrant closer inspection, given the scale of operations. The requirement for substantial liquidity post-acquisition and direct industry experience delineates a high entry barrier, ensuring only serious and capable buyers proceed. May be best positioned for an acquisition by a strategic.
✅ What I Like
Market Leadership
Dominant position in the Southeast U.S. as the largest contractor of its kind.
Strong Client Base
High-profile client list including Costco, Wal-Mart, and Home-Depot ensures robust business continuity.
Recurring Revenue
Over 80% recurring revenue provides a stable financial base and predictability.
Expansive Operation
Services across multiple states indicate a well-established operational framework.
Comprehensive Services
A broad range of services from sweeping to general maintenance caters to extensive customer needs.
Operational Willingness
The General Manager's willingness to stay post-acquisition could smooth the transition.
Asset Inclusion
The asking price includes $1.5M in Accounts Receivable, offering immediate working capital.
Employee Base
A strong team of 160 employees underpins the company's operational capabilities.
❓ Concerns
Profit Margin
Relatively low profit margin in comparison to gross revenue signals potential for operational efficiency improvements.
Liquidity Requirement
High liquidity requirement post-acquisition may limit buyer pool.
Industry Experience
Requirement for direct industry experience narrows the field of potential buyers.
Operational Complexity
Managing a workforce of 160 across multiple states presents significant operational challenges.
Customer Concentration
Dependence on a few large clients, while currently a strength, could pose risks if relationships falter.
Transition Risks
Ensuring continuity of service quality and client relationships during the ownership transition.
💼 Due Diligence Questions
Client Contracts: What are the terms and duration of contracts with key clients, and are there any upcoming renewals or risks?
Operational Efficiency: What are the primary cost drivers, and are there opportunities for cost reduction?
Employee Retention: What strategies are in place for employee retention, especially key operational staff?
Expansion Opportunities: Are there identified opportunities for geographic or service expansion not yet capitalized on?
Regulatory Compliance: How does the business ensure compliance across different state regulations?
Asset Condition: What is the condition and age of the essential operational assets, including the sweeping and maintenance equipment?
Risk Management: What risk management practices are in place, particularly regarding client concentration and operational risks?
🚀 Growth Levers
Service Expansion: Broaden the range of maintenance services offered to existing and new clients.
Geographic Expansion: Explore expansion into adjacent states or regions not currently served.
Technological Integration: Leverage technology for operational efficiency, client engagement, and service tracking.
Marketing Strategy: Enhance marketing efforts to target untapped commercial properties and retail chains.
Operational Optimization: Review and optimize operational processes and cost structures for improved profitability.
Employee Development: Invest in training and development to enhance service quality and expand service offerings.
Strategic Partnerships: Form partnerships with property management companies and real estate developers for referral business.
Sustainability Practices: Implement eco-friendly practices and sustainability services as a differentiator in the market.
🙋🏻♂️ The Buyer
Industry Experience: Possesses direct experience in property maintenance or a closely related industry, understanding operational and market nuances.
Operational Leadership: Capable of leading a large team and managing multi-state operations effectively.
Financially Equipped: Meets the liquidity requirements and has the financial acumen to optimize and grow the business.
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⚒️Tools & Resources
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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.
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