The Business Inquirer #156
Sharing an e-mail marketing Saas for e-commerce, an invoicing & payments platform, a plumbing company in TX, a metal building contractor, a window & door installation business in Tampa.
Hello Friends!
In this week’s issue:
☁️ SaaS - 2 listings
🏡 Main Street - 3 listings
⚒️ Tools & Resources
💡 How I Can Help
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☁️ SaaS
E-Mail Marketing for E-Commerce - $610k
Launched in 2017
Revenue: $575k
Profit: $206k
Margin: 36%
Multiple: 2.96x
💬 Quick Take
This SaaS presents a compelling acquisition target, demonstrating a strong value proposition with its focus on boosting clients' revenues by about 20%. The low churn rate of 2.5% and high customer satisfaction (4.7-star average review rating) highlight a product-market fit. However, the business's current maintenance mode indicates untapped growth potential. The current lack of marketing efforts could be seen as both a challenge and an opportunity for growth-focused buyers.
✅ What I Like
Sticky Product with Low Churn
The low churn rate of 2.5% signifies strong customer retention and satisfaction.
High Customer Lifetime Value
With an LTV over $20K, the business demonstrates significant profit potential from each client.
Proven Revenue Boost for Clients
Clients experience a 20% average increase in sales, showcasing the product's efficacy.
Positive Customer Feedback
A 4.7-star average review rating reflects well on the product's market acceptance.
Broad Ecommerce Platform Integration
Compatibility with major ecommerce platforms like Shopify and WooCommerce broadens the potential customer base.
SBA Pre-Qualification
This status can facilitate financing for potential buyers, making the acquisition more accessible.
❓ Concerns
Maintenance Mode Operation
The current state may require strategic shifts to reignite growth, demanding buyer's attention and resources. Significant investment may be needed to expand operations.
Gap in Features
75%–80% of clients use another email platform in addition to this one. This is a risk and suggests a potential gap in product features.
Owner's Divided Attention
Previous owner's focus on other ventures might have stunted the company's growth trajectory and software maintenance.
💼 Due Diligence Questions
Customer Retention Strategies: What measures are in place to maintain the low churn rate?
Feature Utilization: Why do most clients not use the full range of features available?
Sales and Marketing Plans: What strategies can be implemented to initiate growth?
Competition Analysis: How does the product compare to competitors, especially for clients using dual platforms?
Technical Scalability: Can the current infrastructure support rapid growth and integration with new ecommerce platforms? Does the tech stack need to be updated? How easy is it to maintain?
Client Acquisition Cost: What has been the historical cost to acquire a client, and how can it be optimized?
Product Roadmap: What future developments are planned for the product, including SMS capabilities?
International Expansion: What opportunities and challenges exist for expanding the client base internationally?
🚀 Growth Levers
Implement a Dedicated Sales Team: Establishing a sales force to actively pursue new clients can significantly increase MRR.
Enhanced Marketing Efforts: Investing in SEO, content marketing, and targeted ads could attract new customers.
Feature Expansion: Developing and promoting underutilized or new features, like SMS capabilities, to enhance product appeal.
International Market Entry: Exploring opportunities in international ecommerce markets to diversify client base.
Partnership and Integration Expansion: Forming strategic partnerships with more ecommerce platforms for broader reach.
Customer Success Programs: Enhancing customer support and success initiatives to increase feature adoption and satisfaction.
Referral Programs: Encouraging current clients to refer new customers through incentives.
Vertical Expansion: Extending services to adjacent sectors within ecommerce, like services for brick-and-mortar stores going online.
🙋🏻♂️ The Buyer
Growth-Oriented Entrepreneur: An individual with a vision for scaling businesses and tapping into untapped markets.
Tech-Savvy Investor: Understanding of SaaS and ecommerce platforms is crucial for exploiting the product's full potential.
Strategic Sales and Marketing Expertise: A buyer with experience in these areas can leverage untapped channels for growth.
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SMB Invoicing & Payments - $219k
Launched in 2021
Targets SMBs and contractors
Revenue: $72k
Profit: $66k
Margin: 92%
Multiple: 3.32x
💬 Quick Take
Niche invoicing SaaS with a lot of room for growth. The platform's integration with Stripe and QuickBooks, coupled with a high App Store and Play Store rating of 4.5, underscores its reliability and user satisfaction. The conversion rate of 5-7% from organic signups demonstrates effective product-led growth. However, the reliance on organic growth and a single pricing strategy suggests room for optimization in marketing and revenue diversification. This is a startup that needs heavy investment to scale.
✅ What I Like
High User Satisfaction
The platform's high ratings across App Store, Play Store, and Capterra indicate strong market acceptance.
Effective Product-Led Growth
A conversion rate of 5-7% highlights the product's ability to attract and retain users.
Integration with Key Financial Tools
Seamless integration with Stripe and QuickBooks caters directly to the target market's needs.
Market-Specific Solution
Tailored specifically for contractors and small businesses, ensuring high relevance and utility.
Scalable Business Model
The SaaS model combined with high gross margins offers significant scalability and growth potential.
❓ Concerns
Dependency on Organic Growth
Relies heavily on organic signups, suggesting underutilization of paid and strategic marketing channels.
Digital Marketing Utilization
Limited current investment in digital marketing channels could be a growth bottleneck.
Ecosystem Integration
Potential to create more value through integration with a broader range of SaaS platforms.
💼 Due Diligence Questions
User Retention and Churn Rates: What are the current user retention rates and churn metrics?
Market Research: How does the platform perform in competitive analysis against similar SaaS offerings?
Growth Metrics Analysis: Can we review detailed growth metrics and conversion rates over time?
Product Development Roadmap: What is the current product development roadmap and future feature pipeline?
Customer Feedback Mechanisms: How is customer feedback collected and integrated into product development?
Marketing Strategy: What marketing strategies have been employed, and what are the plans for expansion?
Operational Costs: Detailed breakdown of operational costs and potential areas for efficiency improvements.
Partnership Opportunities: What potential partnerships or integrations are being considered to enhance the ecosystem?
🚀 Growth Levers
Diversify Marketing Channels: Invest in digital marketing strategies like PPC, SEO, and social media to increase visibility.
Expand Market Reach: Broaden the target market to include new industries beyond contractors, offering tailored solutions.
Optimize Pricing Model: Implement usage-based pricing and additional tiers for larger teams to capture more value.
Enhance Product Features: Regular updates based on user feedback and market trends, focusing on AI and advanced analytics.
Leverage Content Marketing: Develop value-driven content to establish thought leadership and attract a wider audience.
Conversion Rate Optimization: Employ A/B testing and user experience improvements to enhance conversion rates.
Ecosystem Integration: Pursue strategic integrations with other SaaS platforms to offer a more comprehensive solution.
Explore International Markets: Identify and enter new geographic markets to expand the customer base globally.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: A buyer with a background in technology or SaaS, capable of leveraging the platform's technical strengths.
Marketing Expert: An individual with experience in digital marketing to exploit untapped channels and optimize conversion rates.
Strategic Growth Planner: A buyer with the vision to expand the product's market reach and develop new features in response to customer needs.
🏡 Main Street
Plumbing Company in TX - $1.7M
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Central NM Metal Building Contractor - $3.5M
Launched in 1994
Revenue: $5.2M
Profit: $716k
Margin: 14%
Multiple: 4.89x
💬 Quick Take
With over 30 years of operation and a broad service offering that includes everything from storage units to metal building homes, this company has built a solid foundation. The gross margin of 14% reflects industry norms where material costs can be significant. The firm's extensive geographic reach and well-established reputation are major assets. However, the reliance on word-of-mouth for marketing, while cost-effective, may limit growth potential in an increasingly digital world. The long tenure of employees and minimal marketing spend are both strengths and potential areas for modernization and expansion.
✅ What I Like
Comprehensive Service Offering
From hangars to commercial buildings, the range addresses various client needs.
Long-Term Employee Retention
Demonstrates a stable and experienced workforce, contributing to operational excellence.
Well-Established Reputation
30 years of quality service has cultivated significant goodwill and customer loyalty.
Minimal Marketing Spend
Reliance on reputation and word-of-mouth has kept costs low while maintaining growth.
❓ Concerns
Digital Marketing Presence
Limited investment in digital marketing could hinder growth in an increasingly online marketplace.
Reliance on Word-of-Mouth
While effective, may limit rapid scalability and market penetration compared to strategic marketing campaigns.
Industry-Specific Risks
Construction sector volatility and material cost fluctuations can impact profitability.
💼 Due Diligence Questions
Client Portfolio: Breakdown of clients by sector and geography to assess diversification and dependency.
Employee Skills and Certifications: Overview of workforce qualifications to gauge service delivery capacity.
Contractual Obligations: Insight into ongoing and future projects to understand revenue continuity.
Vendor Relationships: Information on supplier agreements and terms to evaluate cost efficiency and reliability.
Market Analysis: Comprehensive market research to identify potential growth opportunities and threats.
Legal and Regulatory Compliance: Review of compliance records, especially for multi-state operations.
Technology Use: Assessment of current technology and systems for project management, billing, and client communication.
Sustainability Practices: Understanding of eco-friendly practices and materials usage.
Customer Satisfaction: Access to customer feedback and satisfaction surveys to validate reputation and service quality.
🚀 Growth Levers
Expand Digital Marketing: Leveraging SEO, PPC, and social media to broaden market reach and attract new clients.
Modernize Branding: Refreshing the brand to appeal to contemporary markets and differentiate from competitors.
Service Line Expansion: Introducing new services or specializing in high-demand areas like eco-friendly construction.
Geographic Expansion: Entering new markets or strengthening presence in existing ones through targeted marketing and partnerships.
Technological Integration: Adopting advanced project management and customer relationship management (CRM) tools.
Strategic Partnerships: Forming alliances with suppliers or complementary businesses to enhance service offerings.
Customer Engagement: Implementing loyalty programs and referral incentives to enhance customer retention and acquisition.
Sustainability Initiatives: Emphasizing green construction practices to meet growing market demand and regulatory requirements.
🙋🏻♂️ The Buyer
Experienced Construction Professional: Individuals with industry experience can leverage existing operations and guide growth.
Strategic Acquirer: A company in a complementary sector looking to diversify services or geographic coverage.
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Window & Door Sales & Installation in Tampa - $945k
Launched in 2010
Real estate included at $1M valuation
Revenue: $10.2M
Profit: $804k
Margin: 8%
Multiple: 3.48x
💬 Quick Take
This business in the Tampa Bay and St. Petersburg areas, with real estate included, presents a rare opportunity in one of the fastest-growing counties in the US. With 99% of its business focused on replacements, it capitalizes on a consistent market demand. The inclusion of $1M in real estate in the asking price not only adds tangible asset value but also potentially reduces operational expenses for the buyer. However, the gross margin of 8% suggests a competitive pricing strategy, which, while ensuring market penetration, might limit profit margins. The valuation at 3.48x, excluding real estate, points to a healthy financial standing but emphasizes the need for strategic growth initiatives to enhance profitability.
✅ What I Like
Inclusive of Real Estate
A significant asset that could provide operational cost savings or investment appreciation.
High Market Demand
Focus on window and door replacements in a booming region ensures steady business.
Long-term Vendor Contracts
Competitive pricing contracts with vendors enhance profitability and price stability.
Experienced Management
Seasoned management and streamlined operations indicate an efficient business model.
Solid Employee Base
A mix of W-2 employees and 1099 sub-crews allows for operational flexibility.
❓ Concerns
Low Gross Margin
Reflects the competitive pricing strategy's impact on profitability.
Market Concentration Risk
High reliance on the local market could be risky if regional dynamics shift.
New Construction Market Share
Only 1% of business is from new construction, suggesting untapped potential.
Economic Sensitivity
The business may be sensitive to economic cycles affecting construction and renovation spending.
💼 Due Diligence Questions
Customer Demographics: Breakdown of the customer base to assess market penetration and diversification.
Vendor Contract Details: Specifics of pricing contracts and terms with vendors.
Market Analysis: Comprehensive review of market growth potential and competitive landscape.
Employee Retention Strategies: Plans to retain key management and skilled crews post-acquisition.
Real Estate Assessment: Evaluation of the included real estate's condition, valuation, and strategic importance.
Growth Performance Metrics: Insights into customer acquisition costs, lifetime value, and conversion rates.
Technology Utilization: Overview of current technology for operations, sales, and customer management.
Post-sale Support: Specifics of the seller’s extended training and support framework.
🚀 Growth Levers
Expand New Construction Services: Capitalizing on the booming real estate market by increasing new construction projects.
Digital Marketing Strategy: Enhancing online presence through SEO, social media, and targeted advertising.
Geographic Expansion: Exploring opportunities in neighboring regions to diversify market risk.
Service Diversification: Introducing additional services like energy-efficient upgrades to meet growing demand.
Strategic Partnerships: Forming alliances with real estate developers and contractors to secure larger projects.
Operational Efficiency: Leveraging technology to improve project management, scheduling, and customer relations.
Customer Loyalty Programs: Developing incentive programs to encourage referrals and repeat business.
Sustainability Initiatives: Offering eco-friendly products to tap into the growing market for sustainable building materials.
🙋🏻♂️ The Buyer
Experienced Entrepreneurs: Individuals with a background in construction, real estate, or home improvement industries.
Strategic Investors: Looking to capitalize on the booming real estate market in the Tampa Bay area.
Strategics: Those seeking to broaden their geographic or service offerings within the construction sector.
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⚒️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.
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Deal Sourcing Guide - a comprehensive list of business marketplaces, brokers, deal origination firms, and more.
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