The Business Inquirer #157
Highlighting a swimwear brand, a digital products business, a niche software dev firm, a CPA practice in FL, a raw meat broker, and a custom plastic injection molding plant.
Hello Friends!
In this week’s issue:
🛒 eCommerce - 1 listing
💼 Online Service - 2 listings
🏡 Main Street - 3 listings
⚒️ Tools & Resources
💡 How I Can Help
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🛒 eCommerce
Swimwear Brand - $500k to $1M
💼 Online Service
Education/Speech Digital Products - $1.7M
Launched in 2013
Revenue: $608k
Profit: $478k
Margin: 79%
Multiple: 3.55x
💬 Quick Take
This business boasts an impressive track record with an 11-year history and a stellar reputation among pediatric speech-language pathologists. Its 79% margin is particularly attractive. However, the reliance on a single marketplace for distribution and the lack of marketing efforts could be seen as areas of potential risk and opportunity. The chance to expand through untapped marketing strategies and new distribution channels presents a good opportunity for the right buyer.
✅ What I Like
Established Niche Presence
The business has carved out a significant niche in the digital education space, demonstrating a deep understanding of its customer's needs.
Highly Profitable
With margins at 79%, it’s a highly efficient operation, showcasing its potential for continued profitability.
Strong Product Offering
Over 130 proprietary, high-quality digital programs make it a go-to resource for SLPs, underlining the value of its products.
Positive Customer Feedback
The abundance of positive reviews highlights the business's reputation and product efficacy, indicating a loyal customer base.
Untapped Marketing Potential
The absence of paid advertising and affiliate partnerships opens up numerous avenues for growth through targeted marketing efforts.
❓ Concerns
Marketplace Dependence
Heavy reliance on TeachersPayTeachers for revenue introduces risk should marketplace dynamics shift unfavorably.
Lack of Marketing Infrastructure
The current owner’s admission of not being a marketer points to a potential gap in exploiting full business potential.
Subscription Service Maturity
The newly introduced subscription model might require time and investment to fully mature and become a significant revenue stream.
Direct Sales Opportunities
Currently unexplored direct sales channels to clinics and school districts could represent a missed revenue opportunity.
Knowledge Transfer
Ensuring the new owner can maintain or enhance the current level of product quality and innovation will be crucial.
💼 Due Diligence Questions
Customer Acquisition Cost: What has been the historical cost of acquiring new customers?
Customer Lifetime Value: What is the average lifetime value of a customer, especially in the context of the new subscription service?
Market Trends: How does the business stay current with evolving educational standards and technology trends in speech-language pathology?
Competitive Landscape: Who are the main competitors, and what differentiates this business from them?
Intellectual Property: Can you detail the protections in place for the proprietary digital materials?
Seller’s Future Role: What exactly would the seller’s role look like post-sale in terms of content creation?
Subscription Model Performance: How has the subscription model performed since its launch in terms of retention and revenue?
Technical Infrastructure: What is the current state of the website and digital delivery infrastructure?
Revenue Concentration: How is revenue distributed across the various products and services?
Growth Strategy: What specific plans or strategies have been considered but not implemented?
🚀 Growth Levers
Enhance SEO: Implementing a robust SEO strategy could significantly increase organic traffic and visibility.
Diversify Marketing Channels: Introducing paid advertising, affiliate partnerships, and social media campaigns could attract a broader audience.
Expand Direct Sales: Directly approaching clinics and school districts could open new revenue streams.
Subscription Model Optimization: Enhancing the value proposition of the subscription service could improve conversion and retention rates.
Product Line Expansion: Continuously adding to the library of resources, especially in underrepresented areas, could attract new customers.
🙋🏻♂️ The Buyer
Digital Marketing Savvy: A buyer with strong online marketing skills could unlock significant growth potential.
Education Sector Experience: Understanding the unique needs of educational institutions and professionals will be crucial.
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Software Development and Consulting Firm—Cruise and Maritime Industries - Open to Offers
Revenue: $5.1M
EBITDA: $2.5M
Margin: 48%
Multiple: NA
💬 Quick Take
This Orlando-based software development and consulting firm stands out with its specialization in the cruise and maritime industries, showcasing a strong growth rate and a significant EBITDA margin of 48%. The firm's stability, highlighted by its repeat customer base and global reach, speaks to its expertise and market demand. Concerns might arise around the concentration in niche markets and the sustainability of growth rates, but these are counterbalanced by the firm’s proven track record and operational strengths.
✅ What I Like
Specialized Expertise
Deeply ingrained knowledge in hotel and technical applications for niche markets offers a competitive edge.
Strong Growth
A compound annual growth rate of 36% underscores strong market demand and effective business strategy.
High Profit Margin
EBITDA margin of 48% reflects operational efficiency and healthy financial management.
Repeat Business
Over 98% of revenue from repeat customers demonstrates client satisfaction and predictable cash flow.
❓ Concerns
Market Niche Concentration
Specialization in cruise and maritime industries might limit diversification opportunities.
Sustainability of Growth
The strong growth rate could be unsustainable for the new business owner.
Client Dependency
High revenue concentration from a small number of clients could pose risks if key relationships are lost.
Talent Retention
As a knowledge-centric firm, attracting and retaining top talent is crucial and potentially challenging. This could be an obstacle to growth.
💼 Due Diligence Questions
Client Contracts: What is the duration and renewal terms of current client contracts?
Growth Sustainability: How does the company plan to sustain its impressive growth rate?
Technological Roadmap: What is the company’s roadmap for product development and innovation?
Client Concentration Risk: What strategies are in place to mitigate risks associated with client concentration?
Operational Processes: How scalable are the current operational processes?
Competitive Landscape: How does the company position itself against emerging competitors?
Talent Management: What strategies are in place for talent recruitment and retention?
Market Expansion Plans: Are there plans to diversify into related sectors or industries?
🚀 Growth Levers
Market Diversification: Exploring adjacent markets within the maritime sector to broaden the client base.
Product Innovation: Continuous investment in R&D to develop new products or enhance existing offerings.
Strategic Partnerships: Forming partnerships with other tech firms to offer integrated solutions.
Geographical Expansion: Expanding into new geographic markets with high growth potential in the maritime industry.
Digital Marketing Strategy: Leveraging digital marketing to increase brand visibility and attract new clients.
Customer Success Initiatives: Enhancing customer support to ensure client satisfaction and retention.
Operational Efficiency: Implementing new technologies to improve operational efficiency and reduce costs.
Acquisitions: Considering strategic acquisitions to quickly enter new markets or acquire new technologies.
🙋🏻♂️ The Buyer
Industry Knowledge: Familiarity with the cruise and maritime sectors to understand client needs and industry dynamics.
Innovation-Driven: Commitment to investing in R&D and innovation to keep the product offerings competitive.
Global Operations Experience: Experience in managing and scaling global operations to navigate the complexities of international business, especially in the maritime sector.
Technology Savvy: Deep understanding of software development and emerging technologies to drive product innovation and operational efficiency.
Relationship Building: Ability to maintain and expand the firm’s client relationships, ensuring continued revenue from repeat customers.
🏡 Main Street
3 Location CPA Practice in SE Florida - $2.3M
Launched in 2020
Revenue: $1.7M
Profit: $532k
Margin: 31%
Multiple: 4.3x
💬 Quick Take
This CPA practice has a diverse service offering and a solid base in SE Florida. The strength lies in its comprehensive suite of services, including niche areas like forensic accounting and financial fraud investigation. However, the reliance on the current staff structure and the specificity of its client base might pose challenges in scalability and integration for some buyers.
✅ What I Like
Diverse Service Offering:
The range of services, from forensic accounting to QuickBooks consulting, caters to a broad clientele. This diversification reduces risk and opens various revenue streams.
Established Presence
Over 24 years in business with three office locations in SE Florida provides a strong foundation and a reputable brand.
Experienced Staff
A team comprising 4 CPAs, 3 office managers, and 6 accountants ensures high-quality service delivery.
❓ Concerns
Staff Retention Post-Acquisition
Ensuring the experienced staff remains with the firm post-sale could be challenging.
Market Competition
The accounting industry is highly competitive, especially in regions like SE Florida.
Dependency on Current Ownership
The business's success might be closely tied to the relationships and reputation built by the current owner.
Client Concentration Risk
If a significant portion of revenue comes from a few clients, there's a higher risk involved.
💼 Due Diligence Questions
Client Retention Rates: What are the historical client retention rates, and what strategies are in place to maintain these?
Staff Turnover: What has been the staff turnover rate in the last five years?
Technology Utilization: How has the firm adopted technology in its operations, and what software does it currently rely on?
Client Concentration: What percentage of revenue comes from the top five clients?
Operational Challenges: What are the biggest operational challenges faced by the business?
Market Position: How does the firm differentiate itself from competitors in SE Florida?
Legal and Compliance: Have there been any recent legal challenges or compliance issues?
Post-Acquisition Support: Is the current owner willing to provide support during the transition period?
Growth Strategies: What growth strategies have been considered or implemented recently?
🚀 Growth Levers
Digital Marketing Expansion: Leveraging digital marketing to attract more clients, especially targeting online businesses needing accounting services.
Service Diversification: Exploring additional niches within accounting, such as cryptocurrency taxation or international tax planning.
Geographical Expansion: Considering expansion into neighboring regions to capture a larger market share.
Technology Integration: Implementing more advanced accounting and CRM software to improve efficiency and client communication.
Strategic Partnerships: Forming partnerships with law firms and financial advisors to offer integrated services.
Client Education: Hosting webinars and workshops on financial literacy and tax planning to engage the community and attract clients.
Staff Training: Investing in continuous professional development for staff to enhance service offerings.
Online Presence: Enhancing the firm's online presence through an improved website and active social media engagement.
🙋🏻♂️ The Buyer
Industry Experience: Ideally, the buyer should have experience in the accounting or financial services industry.
Management Capability: Ability to manage a diverse team of professionals
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Raw Meat Broker in Miami - $2.0M
Launched in 2014
Revenue: $18.8M
Profit: $645k
Margin: 3.4%
Multiple: 3.1x
💬 Quick Take
I’m not sure I like this business but it’s certainly an interesting one.
This established meat broker/trader/wholesaler boasts a robust network within the proteins and raw poultry industry across the Caribbean, Central America, and North America. Its direct purchasing capabilities from US slaughter facilities underscore its competitive edge in pricing and supply chain efficiency. However, the relatively low margin of 3.4% highlights the operational tightness typical of wholesale businesses. The reliance on third-party logistics and the high volume, low margin nature of the industry present both challenges and opportunities. The owner’s openness to remain with the business or roll equity with the right partner offers a unique advantage for a seamless transition and continued growth.
✅ What I Like
Broad Market Reach
Extensive customer base across multiple regions, ensuring diversified revenue sources.
Strong Supplier Relationships
Direct connections with some of the largest US poultry producers enhance competitive positioning.
High Demand Product
Specialization in poultry, a high-demand, low-cost protein, supports sustained demand regardless of economic fluctuations.
Insured Receivables
The use of credit insurance for 80%-90% of receivables significantly mitigates financial risk.
Flexible Ownership Transition: The current owner's willingness to remain or roll equity offers valuable continuity and expertise.
Efficient Supply Chain
Utilization of third-party shipping and storage facilities optimizes operational efficiency.
❓ Concerns
Low Margin
The business operates on a thin margin, characteristic of the wholesaling sector, necessitating tight operational control.
Dependence on External Logistics
Reliance on third-party logistics providers could introduce vulnerabilities related to cost fluctuations and service reliability.
Regulatory Risks
The food industry faces stringent regulatory requirements that can affect operations and compliance costs.
Limited Product Range
Specialization in poultry constrains diversification opportunities within the broader protein market.
Economic Sensitivity
While demand for low-cost proteins is relatively stable, economic downturns can still impact customer purchasing behavior.
Supply Chain Risks
Direct purchasing from slaughter facilities, while a strength, also exposes the company to risks associated with supply disruptions.
💼 Due Diligence Questions
Customer and Supplier Contracts: Can detailed terms of contracts with key customers and suppliers be provided?
Insurance Details: Please provide specifics on the credit insurance policies, including coverage limits and claim history.
Operational Metrics: What are the key operational metrics for logistics, including costs, turnaround times, and reliability scores?
Market Share Analysis: How does the company position itself in terms of market share within its operating regions?
Compliance and Regulatory: What are the current compliance measures in place, and have there been any recent regulatory issues?
Risk Management: How does the company manage risks related to supply chain disruptions and market volatility?
Growth Strategy: What strategic plans are in place for revenue growth and margin improvement?
🚀 Growth Levers
Product Line Expansion: Introducing additional protein products could diversify revenue sources and mitigate market risks.
Geographical Expansion: Exploring new markets within existing regions or entering new territories to grow the customer base.
Technology Integration: Implementing advanced supply chain and logistics software to improve efficiency and reduce costs.
Brand Development: Building a strong brand to differentiate from competitors and foster customer loyalty.
Vertical Integration: Considering investment in or partnerships with storage facilities to reduce dependency on third parties.
Sustainability Initiatives: Adopting sustainable practices could appeal to environmentally conscious consumers and clients.
E-Commerce Platform: Developing an e-commerce platform for direct sales to smaller businesses and possibly end consumers.
Strategic Partnerships: Forming partnerships with complementary businesses to offer bundled services or cross-sell products.
🙋🏻♂️ The Buyer
Industry Knowledge: A buyer familiar with the food distribution or wholesaling industry would navigate the market dynamics effectively.
Operational Expertise: Experience in managing logistics-intensive businesses would be crucial for optimizing supply chain efficiency.
Relationship Management: Skills in maintaining and expanding the company's existing relationships with suppliers and customers, as these are crucial for sustained success.
Risk Management Acumen: An understanding of the risks involved in the meat trading industry and the ability to manage these effectively, including supply chain disruptions and regulatory changes.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Custom Plastic Injection Molding Plant - $3.2M
Launched in 1977
HQ in Colorado
Revenue: $4.2M
Profit: $644k
Margin: 15%
Multiple: 4.97x
💬 Quick Take
This custom plastic injection molding company presents a unique blend of a successful established business with significant growth potential. However, the reliance on wholesale customers and the specifics of the asking price, which includes a hefty chunk for machinery and working capital, presents a mixed bag. While the machinery and working capital inclusion is positive, the non-inclusion of property and the preference for a lease arrangement might be an issue for some potential buyers.
✅ What I Like
Historical Success
A rich history since 1977, showcasing stability and market resilience. This longevity in business speaks volumes about its reputation and operational success.
Skilled Workforce
A well-managed team with long-tenured senior staff indicates a low turnover and a wealth of institutional knowledge.
Assets Included
Over $800,000 in machinery and more than $1 million in working capital enhance the value proposition.
Transition Support
The current management’s offer to provide training and transition support can smooth the ownership changeover.
❓ Concerns
Property Ownership
The owners' preference to lease rather than sell the property could complicate the long-term operations of the business.
Capital Expenditure
The need for ongoing investment in machinery and technology to stay competitive can strain future cash flows.
Market Evolution
Rapid advancements in manufacturing technologies and materials could necessitate continuous adaptation.
Transition Risks: The potential for cultural and operational shifts post-transition may disrupt the existing business harmony.
💼 Due Diligence Questions
Customer Concentration: How is revenue distributed among the customer base, and what risk mitigation strategies are in place?
Technology Adaptation: How frequently are machinery and technologies updated to maintain competitive advantage?
Environmental Compliance: What measures are in place to ensure compliance with evolving environmental regulations?
Operational Capacity: What is the current operational capacity utilization, and what steps are needed to expand?
Employee Retention: What strategies are employed to retain key staff, especially after the ownership transition?
Intellectual Property: Are there any patents or proprietary technologies that give the company a competitive edge?
Market Trends: How does the company plan to address potential market shifts away from plastic use?
Lease Terms: What are the proposed terms for leasing the property, and how do they compare to market rates?
Training and Transition: What specific training and transition support will be provided by senior management?
🚀 Growth Levers
Expand Operational Days: Increasing operational days from four to five or more could significantly boost production capacity and revenue.
Diversify Customer Base: Broadening the customer base to include more industries and geographic locations can reduce dependency risks.
Enhance Digital Presence: Developing a robust online marketing strategy could attract new customers and open up direct-to-consumer avenues.
Innovate Product Offering: Investing in R&D to innovate and expand the product line can meet evolving market demands.
Optimize Supply Chain: Streamlining the supply chain and sourcing could reduce costs and improve profit margins.
Sustainability Initiatives: Adopting more sustainable practices could appeal to environmentally conscious customers and markets.
Technology Upgrades: Regularly upgrading machinery and adopting automation can improve efficiency and product quality.
Employee Training Programs: Enhancing employee skills through regular training programs can improve productivity and innovation.
🙋🏻♂️ The Buyer
Industry Experience: Ideal for buyers with experience in manufacturing or the plastic industry, understanding the intricacies of custom production.
Change Management Skills: Ability to manage the transition smoothly while retaining the core values and staff that have contributed to the company’s success.
Networking Savvy: A buyer with strong relationships in related industries can leverage those connections for business development and growth opportunities.
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⚒️Tools & Resources
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