The Business Inquirer #165
Sharing a no-code agency and education platform, a pickleball league platform, a consumer IT services business, and an HVAC in NC.
Hello Friends!
In this week’s issue:
💼 Online Service - 2 listings
🏡 Main Street - 2 listings
⚒️ Tools & Resources
💡 How I Can Help
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💼 Online Service
No-Code Agency & Education Platform - $2.1M
Launched in 2016
Revenue: $1.2M
Profit: $439k
Margin: 36.6%
Multiple: 4.8x
💬 Quick Take
This no-code agency and education platform presents a unique blend of services that cater to a diverse client base. Its impressive gross revenue of $1.2M and a healthy cash flow of $439K reflect a profitable operation. However, reliance on a limited number of marketing channels and the current demographic focus in advertising are areas that require attention for further growth.
Food for Thought: If AI can write code and build apps, who needs no-code tools? This could be a risk to the whole industry in the not too distant future.
✅ What I Like
Innovative Service Offering: The combination of education and done-for-you services provides flexibility for clients at different budget levels and needs.
High Margin Products: Developing apps for $200-$500 and selling them for $8K creates a significant profit margin, positioning the company competitively.
Strong Community Engagement: Attracting 5,000 new entrepreneurs monthly through open house classes demonstrates effective community engagement and lead generation.
Large Audience: A sizable audience of 150,000 email subscribers and 75,000 social followers aids in marketing efforts and potential upsells.
Media Recognition: Being featured on Good Morning America and other major publications enhances credibility and brand recognition.
AI Integration: The AI-powered education platform and app scoping tool are cutting-edge features that can streamline operations and reduce costs.
Scalability: The business model and tools like the AI-powered app scoping tool suggest potential for scaling with fewer resources.
❓ Concerns
Competitive Market: The no-code development space is increasingly competitive, with many players offering similar services.
High Asking Price: A 4.8x valuation multiple seems very elevated, especially since there doesn’t appear to be any recurring revenue.
Scalability Challenges: Scaling the done-for-you service might require significant investment in hiring and training new app builders and account managers.
Technological Dependence: Heavy reliance on proprietary AI tools means any technical issues could significantly impact operations.
💼 Due Diligence Questions
Market Diversification: What steps are planned to diversify marketing channels beyond Facebook/Instagram ads and email partnerships?
Demographic Data: Can we get a detailed breakdown of the current customer demographics and engagement metrics?
Scalability of AI Tools: How scalable are the AI-powered education platform and app scoping tool? What are the associated costs and technical requirements?
Competitive Analysis: How does the business plan to stay ahead of competitors in the no-code development space?
Customer Retention: What strategies are in place to improve customer retention and encourage repeat business?
Operational Efficiency: How efficient are current operations, and what are the key areas for improvement?
Technological Updates: How frequently are the AI tools updated, and what is the process for handling technical issues?
Customer Feedback: What mechanisms are in place to collect and act on customer feedback?
🚀 Growth Levers
Expand Marketing Channels: Explore advertising on Google, TikTok, influencer partnerships, content marketing, SEO, and a referral system to broaden reach and lower customer acquisition cost.
Increase Webinar Frequency: Offer live daily or pre-recorded webinars to boost sales and show-up rates.
Introduce Retainer Services: Offer retainer app maintenance and other ongoing services to ensure steady revenue streams.
Expand Course Offerings: Develop and market additional courses, such as marketing courses or advanced no-code development techniques.
Leverage AI Tools: Fully launch and optimize the AI-powered app scoping tool (Tabitha) to scale with fewer resources.
Customer Loyalty Programs: Implement loyalty programs to incentivize repeat business and referrals.
Optimize Sales Funnel: Streamline the sales funnel from free classes to paid services to increase conversion rates.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: Someone with a solid understanding of no-code development and AI technologies.
Marketing Strategist: A buyer with strong skills in digital marketing to diversify and optimize marketing channels.
Scalability Focused: An individual or team experienced in scaling tech-driven businesses.
Experience in Education: Background in educational platforms or training programs would be advantageous.
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Pickleball League Platform - $42k
Launched in 2023
1900 customers; $59/player registration fee;
Revenue: $91k
Profit: N/A
Margin: N/A
Multiple: N/A
💬 Quick Take
This pickleball league platform is an intriguing opportunity in a niche but growing sport. The platform benefits from a competitive price point and operational efficiencies, which allow for scalable growth. However, reliance on paid search for customer acquisition and the lack of cash flow details could be concerning for potential buyers. I assume the business is profitable.
✅ What I Like
Competitive Price Point: The registration fee is lower than many alternatives, attracting cost-conscious players.
Scalable Model: The use of virtual assistants and automation allows for easy scaling.
Growing Sport: Pickleball is increasing in popularity, providing a growing market.
Remote Management: The ability to run leagues remotely increases flexibility.
Established User Base: 1,900 customers show a solid demand for the service.
Technological Integration: Built with modern tech stack (Python, Airtable, AWS) which is reliable and scalable.
❓ Concerns
Customer Acquisition Costs: Heavy reliance on Google Ads could be a risk if costs increase.
Market Saturation: Presence of many alternate leagues in various markets.
Limited Revenue Streams: Currently, revenue is generated solely through player registration fees.
Seasonal Variability: Potential fluctuations in revenue based on seasonality of the sport.
Geographical Expansion: Challenges in expanding to new cities without local presence.
💼 Due Diligence Questions
Customer Retention: What is the customer retention rate year-over-year?
Ad Spend Efficiency: What is the ROI on the current Google Ads campaigns?
Operational Costs: Detailed breakdown of operational expenses including VA and automation costs.
Technical Maintenance: What are the ongoing costs for maintaining the platform built with Python, Airtable, and AWS?
User Demographics: Is there a detailed breakdown available of user demographics and engagement metrics?
Market Competition: How does the platform differentiate itself from competitors?
Growth Potential: What strategies have been identified to leverage additional acquisition channels?
Scalability: What challenges have been faced in scaling the platform to new cities?
🚀 Growth Levers
SEO Optimization: Improve organic search rankings to reduce dependence on paid ads.
Content Marketing: Create engaging content to attract organic traffic and build community.
Partnerships: Form alliances with local sports clubs and community centers.
Referral Programs: Implement referral incentives for current users to bring in new players.
Social Media Engagement: Increase presence on Facebook Groups and other social media platforms.
Local Ambassadors: Hire local pickleball enthusiasts as ambassadors to promote leagues.
Event Sponsorship: Sponsor local events and tournaments to increase brand visibility.
Email Marketing: Build a robust email marketing campaign to engage and retain customers.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: Ideal for someone with a strong understanding of automation and online platforms.
Sports Enthusiast: A buyer with a passion for sports, particularly pickleball.
Marketing Expert: Experience in digital marketing and customer acquisition strategies.
🏡 Main Street
Consumer IT Services in NJ - $150k
Launched in 2004
HQ in Central NJ
Revenue: $196k
Profit: $131k
Margin: 67%
Multiple: 1.14x
💬 Quick Take
I think there’s a lot of opportunity in this type of business. As the population ages, they will need more and more help with their technology and devices. This particular business offers a strong cash flow and a large customer base in the Jersey Shore area, making it an attractive acquisition for both expanding IT businesses and individual tech entrepreneurs. The services provided are diverse, ranging from computer repair to new computer sales, indicating a well-rounded operation. However, the valuation seems modest, which could be a red flag regarding growth potential or market saturation. The inclusion of experienced staff is a plus, ensuring continuity post-acquisition.
✅ What I Like
Established Customer Base: Over 2,700 customers and 75+ regular/recurring service clients. This provides a solid foundation and recurring revenue streams.
Diverse Service Offerings: A wide range of IT services, from repairs to sales. This diversification reduces dependency on a single revenue stream.
Experienced Staff: One full-time staff member likely to stay. Ensures operational continuity and a smooth transition.
High Cash Flow Margin: 67% margin is impressive. Indicates efficient cost management and strong profitability.
Strategic Location: Based in the Jersey Shore area. Benefits from a large, tech-savvy population and local business demand.
Growth Opportunities: Potential for expansion into nearby areas. Easy to replicate successful model in neighboring regions.
Low Valuation Multiple: Asking price of 1.14x cash flow. Suggests potential undervaluation and room for negotiation.
❓ Concerns
Market Saturation: Limited growth in a well-served area. Expansion might be challenging due to existing market penetration.
Reliance on Key Staff: One key staff member. Dependency on a single employee poses a risk if they leave.
Geographical Limitation: Services are local to Jersey Shore. Growth outside the area might require significant investment.
💼 Due Diligence Questions
Customer Retention Rates: What are the historical customer retention rates?
Staff Contracts: Are there any employment contracts in place for the full-time staff?
Service Breakdown: What is the revenue breakdown by service type?
Customer Demographics: Who are the primary customers (e.g., residential, small business)?
Growth Trends: What has been the revenue and cash flow growth trend over the past three years?
Vendor Relationships: Are there any exclusive or long-term vendor agreements?
Technology Stack: What technology and software are currently used for service delivery?
Financial Records: Can we review detailed financial statements for the past three years?
Customer Feedback: What is the feedback from the top 20% of customers?
Marketing Strategies: What marketing strategies have been used, and what has been their ROI?
🚀 Growth Levers
Expand Service Area: Target neighboring areas to increase market reach. Leveraging the current customer satisfaction and brand reputation can facilitate entry into new markets.
Upsell Services: Introduce premium services for existing customers. Offering enhanced service packages can boost average transaction value.
Partnerships: Form partnerships with local businesses. Collaborations can drive referrals and co-marketing opportunities.
Digital Marketing: Invest in SEO and social media marketing. Enhancing online presence can attract more tech-savvy clients.
Service Automation: Implement automated booking and service systems. Streamlining operations can improve efficiency and customer experience.
Customer Referral Program: Encourage current customers to refer others. Incentives for referrals can increase customer base at a low cost.
Tech Workshops: Offer educational workshops and seminars. Positioning the business as an expert can attract more customers and generate additional revenue.
Subscription Models: Introduce subscription-based IT support. Recurring revenue models can provide steady income and increase customer loyalty.
Diversify Offerings: Expand into new tech areas, like smart home setups. Broadening the service portfolio can attract a wider customer base.
Customer Feedback Loop: Regularly collect and act on customer feedback. Continuous improvement based on customer insights can enhance satisfaction and retention.
🙋🏻♂️ The Buyer
Tech-Savvy Entrepreneur: Someone with a strong background in IT. Ideal for an individual looking to leverage their technical skills and industry knowledge.
Existing IT Business: An established IT company looking to expand. Strategic fit for businesses aiming to increase market share and diversify services.
Local Resident: A buyer familiar with the Jersey Shore area. Local knowledge can be advantageous for market penetration and customer relations.
Customer-Focused Leader: Experience in managing customer-centric businesses. Essential for maintaining high service standards and customer satisfaction.
Growth-Oriented: Looking to scale the business. Motivated to implement growth strategies and expand operations.
Operational Manager: Strong in managing day-to-day operations. Ensures smooth running of diverse service offerings.
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HVAC in NC - $2.3M
Launched in 2009
Revenue: $1.9M
Profit: $596k
Margin: 31%
Multiple: 3.86x
💬 Quick Take
This HVAC company presents a solid acquisition opportunity with a strong cash flow margin of 31% and a reasonable valuation of 3.86x. The business benefits from a long-standing reputation built over 15+ years, with no need for advertising due to a robust referral network and strong Google presence. However, the owner’s deep involvement in daily operations could pose a transition risk, and the lack of advertising may limit growth potential.
✅ What I Like
Established Reputation: Over 15 years in business has built a reliable brand. This longevity indicates stability and customer trust.
Consistent Revenue Stream: The company has ~450 service contracts at $150 each, ensuring a steady flow of income.
Diverse Client Base: Serving both residential (80%) and commercial (20%) clients diversifies revenue streams and reduces risk.
High Cash Flow Margin: A margin of 31% indicates efficient operations and strong profitability.
Referral-Driven Business: No advertising costs due to a strong referral network and organic Google presence, showcasing customer satisfaction.
Included Assets: Sale includes 6 vehicles, reducing initial capital expenditure for the buyer.
Growth Opportunities: Current lack of advertising and limited operating hours suggest untapped potential for business expansion.
Employee Structure: Combination of W-2 and 1099 employees provides flexibility in managing labor costs and staffing.
❓ Concerns
Owner-Dependent Operations: The owner's heavy involvement in sales and service could create challenges during the transition period.
No Advertising: Relying solely on referrals limits potential customer reach and market penetration.
Limited Service Variety: With 75% of revenue from installs, diversifying service offerings could balance income streams.
Employee Retention: Ensuring the retention of key employees post-sale is critical to maintaining service continuity.
Economic Sensitivity: HVAC services can be sensitive to economic downturns, impacting residential and commercial spending.
💼 Due Diligence Questions
Transition Plan: What steps will the owner take to ensure a smooth transition and transfer of knowledge?
Client Retention: What is the customer retention rate for service contracts, and are there any at-risk accounts?
Employee Agreements: Are there non-compete or retention agreements in place with key employees?
Referral Sources: What are the primary sources of referrals, and how can they be maintained or expanded?
Technology Systems: What technology or software is currently used for managing operations, scheduling, and customer relationships?
Commercial Contracts: What are the terms and durations of the three commercial contracts?
Vehicle Condition: What is the condition and maintenance history of the six vehicles included in the sale?
Growth Strategies: What strategies has the owner considered for growth, and why were they not implemented?
Economic Impact: How has the business performed during economic downturns or slow seasons?
🚀 Growth Levers
Expand Advertising: Implement digital marketing strategies to increase customer acquisition beyond referrals.
Extend Service Hours: Offer extended hours and emergency services to capture additional market share.
Diversify Services: Introduce new services, such as energy efficiency audits or smart home integrations.
Leverage Technology: Invest in CRM and operational software to improve efficiency and customer service.
Referral Incentives: Create referral programs to encourage existing customers to bring in new business.
Commercial Focus: Increase focus on securing more commercial contracts, which often offer higher margins and longer terms.
Training Programs: Develop training programs to enhance employee skills and service quality.
Partnerships: Form partnerships with local builders and real estate agents to drive more business.
🙋🏻♂️ The Buyer
Experience in HVAC: Ideally, the buyer should have a background in HVAC or related services to understand the technical aspects.
Operational Management Skills: Strong skills in managing day-to-day operations and staff.
Sales and Marketing Savvy: Ability to implement and manage effective sales and marketing strategies.
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⚒️Tools & Resources
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