The Business Inquirer #169
Sharing a printing business in FL, a commercial property maintenance firm in Denver, a Shopify app, and a UX research SaaS.
Hello Friends!
In this week’s issue:
☁️ SaaS - 2 listings
🏡 Main Street - 2 listings
⚒️ Tools & Resources
💡 How I Can Help
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☁️ SaaS
UX Research SaaS - Open to Offers
Launched in 2015
Revenue: $283k
Profit: $232k
Margin: 82%
Multiple: N/A
💬 Quick Take
This UX Research SaaS platform presents a solid acquisition opportunity with its high margins, enterprise-level clients, and a promising sales pipeline. The platform’s AI-driven features and unlimited storage make it a cost-effective competitor in the market, appealing to clients looking to reduce expenses. However, with cofounders currently managing all aspects of the business, operational risk and scalability may be a challenge. For a buyer with SaaS experience, this business has great potential for growth, particularly through paid marketing and enhanced content strategies. Given the high margin, ARR growth potential, and minimal operational expenses, a valuation of around 3x to 5x cash flow could be reasonable.
✅ What I Like
High Margin: The 82% margin demonstrates efficient operations with minimal costs relative to revenue.
Enterprise Clients: The business has proven its ability to attract and retain enterprise-level clients, providing stable recurring revenue.
AI-Driven Platform: Features like AI-assisted analysis and automatic report generation offer a competitive edge, enhancing the platform’s value proposition.
Low Churn Rate: A monthly churn rate of 4% is a positive indicator of client satisfaction and long-term retention.
Strong Pipeline: With $180k in potential deals, the sales pipeline is a clear indicator of growth opportunities.
Unlimited Data Storage: Offering unlimited data storage at fixed pricing is a strong selling point for cost-conscious clients.
LTV and ACV: The LTV of $6.6k and ACV of $4.9k show strong client value and average deal size, which are key metrics for scaling.
Cost-Effective Alternative: Competitor price hikes provide an opportunity to capture more market share as clients seek lower-cost solutions.
Growth Potential: The business has a solid foundation and is primed for further expansion with the right investment in sales and marketing.
❓ Concerns
Founder-Dependent: With both cofounders managing all business functions, the company is highly dependent on them, making the transition riskier.
Limited Marketing Efforts: The business relies heavily on a sales-driven model with minimal marketing investment, suggesting untapped potential but also missed opportunities.
Scalability Challenges: Expanding the team and automating processes will be essential for scaling operations beyond the current level.
Operational Risk: The SaaS platform could face growing pains as more clients sign on, particularly if the current infrastructure isn't optimized for larger-scale operations.
Competitive Market: The UX research market is competitive, with larger players offering similar services. Staying ahead will require continued innovation.
Product Roadmap: There is no mention of a product development roadmap, which could indicate a lack of focus on future feature enhancements or differentiation.
Customer Support Needs: As the client base grows, there may be a need for more dedicated customer support, which could increase costs.
Sales Pipeline Risk: While the pipeline looks promising, closing these deals will depend on the ability to execute the sales process effectively.
No Established Valuation: With the asking price open to offers, it may be challenging to gauge whether the price will match the buyer's expectations.
Concentration of Clients: If a significant portion of revenue comes from a few large enterprise clients, the loss of one could impact cash flow.
💼 Due Diligence Questions
Client Concentration: What percentage of total revenue comes from the top 5 clients?
Sales Pipeline: What is the current close rate on deals in the pipeline, and what is the expected time frame for closing?
Platform Scalability: How scalable is the current infrastructure to support future growth without compromising performance or increasing costs?
Marketing Strategy: What marketing efforts have been made, and what specific opportunities exist to expand customer acquisition through paid channels or content?
Product Development: What is the future product roadmap, and are there plans to introduce additional features or integrations?
Customer Support Costs: How are customer support functions currently managed, and what are the projected needs if the client base grows?
Competitor Landscape: How does the platform compare with competitors on key features, pricing, and user satisfaction?
Churn Management: What strategies are in place to reduce churn further, and what feedback mechanisms are used to understand client dissatisfaction?
Technology Stack: What is the current technology stack used to build and maintain the platform, and how future-proof is it?
Co-founder Transition Plan: What is the cofounders' exit plan, and what measures are in place to ensure a smooth transition of knowledge and operations?
🚀 Growth Levers
Expand Paid Marketing: Invest in Google Ads, LinkedIn campaigns, and retargeting to increase customer acquisition, particularly for enterprise clients.
Leverage Content Marketing: Develop and enhance a content marketing strategy focused on UX research trends, case studies, and best practices to attract inbound leads.
Industry Partnerships: Build partnerships with UX agencies and consultants to create referral networks and integrate the platform into their workflows.
Explore International Markets: Expand into non-US markets by localizing the platform and establishing partnerships with global firms.
Capitalize on Competitor Price Hikes: Aggressively target clients of higher-priced competitors with a cost-effective, feature-rich alternative.
Upsell Existing Clients: Introduce premium features or services that provide enhanced value, encouraging current clients to increase their spending.
Optimize Pricing Strategy: Test different pricing tiers or packages to capture more value from high-end enterprise clients while offering entry-level options for smaller teams.
Sponsor Industry Events: Increase brand visibility by sponsoring UX research conferences and webinars, positioning the business as a thought leader.
Automate Onboarding: Streamline the client onboarding process to make it faster and more scalable as the business grows.
🙋🏻♂️ The Buyer
SaaS Experience: A buyer with experience in scaling SaaS businesses will understand the nuances of subscription models, client retention, and platform development.
Sales and Marketing Expertise: Someone skilled in digital marketing and sales strategies will be able to tap into the business's growth potential and implement effective customer acquisition.
Tech-Savvy Operator: A buyer comfortable with SaaS product management and AI-driven technologies will be well-suited to enhancing and expanding the platform.
Growth-Oriented Mindset: The ideal buyer should be focused on scaling the business through marketing, international expansion, and product development.
Customer-Centric Focus: A buyer who understands the importance of customer satisfaction and retention in a recurring revenue model will help maintain the business’s low churn rate.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Shopify Product Bundling App - $1.5M
Launched in 2021
2,000+ merchants
Revenue: $330k
Profit: $322k
Margin: 97%
Multiple: 4.6x
💬 Quick Take
This Shopify app presents an attractive opportunity with an impressive 97% profit margin and solid growth in annual recurring revenue (ARR). Its focus on product bundling, a highly sought-after feature in the Shopify ecosystem, gives it strong market positioning. However, while the app's simplicity is a strength, the lack of new feature development and limited customer support may cap future growth unless addressed. For a buyer with experience in SaaS scaling, there are numerous clear growth levers that could propel this business to the next level.
✅ What I Like
High Profit Margin: A 97% margin demonstrates highly efficient operations with minimal costs relative to revenue.
Significant ARR Growth: The 65% ARR growth over the past year shows strong momentum and future potential.
Scalable SaaS Model: The app operates under a subscription-based model, which ensures predictable, recurring revenue from over 2,000 merchants.
Top-10 Search Term: Product bundling is a popular feature among Shopify merchants, providing a strong demand foundation for the app.
Fixed and Dynamic Bundling Options: Merchants can choose different bundle configurations, making the app flexible and appealing to various business models.
High Return on Ad Spend (ROAS): A 1,410% ROAS from Shopify app ads indicates an efficient customer acquisition strategy.
Low Operational Complexity: The business has been run with a "lifestyle" mindset, indicating that there is plenty of room to optimize and scale.
Proven Customer Demand: The app has successfully attracted a sizable number of merchants, including those on Shopify’s Basic plan.
❓ Concerns
Limited Feature Set: While simplicity is a strength, the lack of additional bundling options or advanced features may limit the app’s appeal to more sophisticated users.
Customer Support Bottleneck: With only one part-time customer support person, scaling support operations could become an issue as the user base grows.
Founder Dependency: The business is currently run as a "lifestyle" business, which means operational dependencies on the founders could make the transition challenging.
Minimal Marketing Efforts: Aside from Shopify app ads, the business hasn’t explored content marketing or partnerships, leaving growth potential untapped.
Highly Competitive Market: While the app performs well, product bundling is a competitive niche within the Shopify ecosystem, and differentiation through features or marketing will be necessary to maintain market position.
No Dedicated Development Team: Lack of a dedicated developer means that new feature development could be slower, affecting the ability to keep up with competition.
Reliance on Shopify Ecosystem: The app’s dependency on Shopify’s platform means that any changes to Shopify’s policies or features could directly impact business performance.
Pricing Strategy: There could be missed opportunities to increase pricing or introduce tiered pricing models to capture more value from enterprise users.
💼 Due Diligence Questions
Churn Rate: What is the current monthly churn rate, and what strategies are in place to reduce churn?
Merchant Concentration: How diversified is the merchant base, and what percentage of revenue comes from the top 10% of customers?
Feature Development Plans: Are there any upcoming plans for feature development, such as bundle builders or recommendation widgets?
Customer Feedback: What is the primary feedback from current users, and what are the most requested features or improvements?
Cost Breakdown: What are the key cost drivers, and are there any opportunities to reduce operational expenses further?
Marketing Efforts: Has the business explored partnerships, influencer marketing, or content strategies to drive additional growth?
Support Scalability: What are the current response times for customer support, and how scalable is the support function as the user base grows?
Competitor Analysis: How does the app compare to competitors like Rebolt Bundle, MBC Bundle, and PickyStory in terms of features, pricing, and user satisfaction?
International Expansion: What plans, if any, are in place to expand into non-English-speaking markets?
Platform Dependency: What risks could arise from changes to Shopify’s platform or policies?
🚀 Growth Levers
Introduce New Features: Adding more bundling types, like bundle builders or personalized bundle recommendations, could attract a broader range of Shopify merchants.
Increase Pricing: Consider raising prices or introducing tiered pricing plans that offer advanced features to merchants on higher Shopify plans.
Content Marketing Strategy: Launch a content marketing initiative focused on educating merchants about the benefits of product bundling and how to maximize their use of the app.
Partnerships with Other Shopify Apps: Explore strategic partnerships with complementary Shopify apps to cross-promote and increase user acquisition.
Expand to International Markets: Localize the app and its support services to tap into non-English-speaking Shopify markets, significantly broadening the user base.
Improve Customer Support: Hiring additional support staff or implementing live chat or self-service tools could enhance the customer experience and improve satisfaction.
Build a Developer Team: Bringing on a dedicated development team would enable faster rollouts of new features and integrations, keeping the app ahead of competitors.
Leverage Influencer Marketing: Partner with Shopify-focused influencers or consultants who could promote the app to their merchant followers.
Offer Educational Webinars: Host webinars on Shopify merchant best practices, focusing on bundling strategies to both retain current users and attract new ones.
🙋🏻♂️ The Buyer
SaaS or Shopify Experience: A buyer with experience in SaaS businesses, particularly within the Shopify ecosystem, would be best positioned to scale this app.
Growth-Oriented: The ideal buyer should be ready to implement growth strategies, including pricing adjustments, marketing, and geographic expansion.
Product Development Expertise: A buyer with a background in product management and development will be able to introduce the new features needed to stay competitive.
Marketing Expertise: Someone skilled in digital marketing, especially in the eCommerce space, will be able to fully exploit the untapped marketing potential.
Operational Focus: A buyer with experience in building scalable support and development teams will help grow the business beyond its "lifestyle" setup.
Customer-Centric: Understanding the importance of customer retention and experience in subscription-based models is crucial for keeping churn low and driving ARR growth.
International Expansion Focus: An ideal buyer will have the expertise or resources to expand the app into non-English-speaking markets to unlock further growth potential.
🏡 Main Street
Print Manufacturing in FL - $2.4M
Based in South East Florida
Revenue: $2.9M
Profit: $612k
Margin: 21%
Multiple: 4.0x
💬 Quick Take
This light print manufacturing business offers a well-established reputation and strong client relationships, with consistent revenue generation. The company’s digital capabilities and sustainability practices provide a competitive edge, making it a forward-thinking operation in an evolving industry. However, the valuation feels slightly aggressive given its relatively modest margin. Operational efficiency and expanding market share will be key areas to focus on for a new owner looking to grow.
✅ What I Like
Strong Client Relationships: Long-term relationships with repeat clients ensure reliable revenue streams.
Established Brand: Decades of operational history give this business a well-known, trusted name in the industry.
Sustainable Practices: The focus on sustainability positions the business favorably with eco-conscious clients and provides a future-proofing element.
Digital Capabilities: Being fully digital allows the business to stay at the forefront of industry technology.
Dedicated Workforce: A loyal, long-term team reduces operational risk and ensures continuity during the transition.
Growth Opportunities: The potential to add shifts and organically grow with existing clients presents a clear path for revenue expansion.
Prime Location: Proximity to transportation hubs aids in efficient logistics and lowers operational disruptions.
Stable Cash Flow: A consistent cash flow of $612k demonstrates solid financial performance.
❓ Concerns
Low Margin: With only a 21% margin, the business operates in a tight financial range. Increasing margins will require operational improvements or cost reductions.
Valuation: A 4x multiple on cash flow is slightly above industry averages for a business of this size.
Lease Dependency: The reliance on leased real estate adds a layer of risk regarding potential future rent increases or changes in lease terms.
High Capital Expenditure: Expanding production may require significant capital for new equipment or hiring, which could impact near-term profitability.
Client Concentration Risk: If too much revenue is dependent on a few major clients, losing one could significantly impact the business.
Competition: The print manufacturing industry faces stiff competition, especially from larger players with greater economies of scale.
Labor Market Challenges: Recruiting skilled labor could become a bottleneck if the business aims to expand operations.
Market Saturation: The local market may be saturated, requiring significant marketing effort to expand market share outside the current client base.
Supply Chain Dependence: The business may face disruptions or price increases from suppliers, especially in a post-pandemic environment.
💼 Due Diligence Questions
Client Diversification: What percentage of revenue is derived from the top five clients?
Technology Investment: How frequently is new digital printing equipment purchased or upgraded?
Lease Terms: Can the lease be renegotiated for longer-term stability, and are there any planned rent increases?
Employee Retention: What is the turnover rate for key management and warehouse staff?
Sustainability Metrics: How are the sustainability claims validated, and do they contribute to any cost savings or pricing premiums?
Supply Chain Reliability: How secure is the supply chain, and what contingencies are in place for potential disruptions?
Market Position: How does the business compare to competitors in terms of market share and pricing?
Growth Capacity: What additional production capacity can be gained from adding shifts or expanding facilities?
Client Contracts: Are long-term contracts in place with key clients, and how often are they renegotiated?
Industry Trends: What are the current trends in digital printing, and how is the business positioned to capitalize on these?
🚀 Growth Levers
Increase Shift Capacity: Adding additional production shifts can immediately boost output and revenue.
Expand Digital Marketing: Enhance online presence to attract new clients, especially from eco-conscious industries seeking sustainable printing solutions.
Diversify Client Base: Actively pursue clients in different sectors to reduce client concentration risk and tap into new markets.
Leverage Sustainability: Highlight sustainable practices to command premium pricing and attract environmentally-focused brands.
Offer Value-Added Services: Introduce new services such as design consulting or logistics management to increase revenue per client.
Develop Strategic Partnerships: Partner with complementary businesses, such as marketing agencies, to create a steady stream of referral business.
Invest in New Technology: Stay ahead of competitors by investing in cutting-edge printing technology to improve efficiency and quality.
Geographic Expansion: Consider opening satellite offices or expanding delivery services to reach customers outside the current metro area.
Cross-Sell: Expand product offerings to include other print-related items or services that can be sold to existing clients.
🙋🏻♂️ The Buyer
Experience in Print or Manufacturing: Familiarity with the printing industry or light manufacturing operations would be ideal.
Operational Focus: A buyer with strong operational skills to improve margins and streamline efficiency would benefit this business.
Client Relationship Management: Ability to nurture and grow long-term client relationships is crucial for maintaining stability.
Growth-Oriented Mindset: A buyer ready to explore expansion opportunities through additional shifts, new clients, or geographic reach.
Staff Leadership: Strong leadership skills to retain and motivate the dedicated team.
__ __ __ __ __ __ __ __ ____ __ ____ __ __
Commercial Property Maintenance in CO - $
Launched in 2022
Based in Denver, CO
Revenue: $1.6M
Profit: $549k
Margin: 34%
Multiple: 3.1x
💬 Quick Take
This commercial property maintenance business offers solid financial performance with an impressive 34% margin. The fact that it has doubled its revenue in less than two years without an outbound sales strategy suggests significant growth potential. However, the reliance on leased real estate and possible market saturation in the Denver area could pose challenges. The strength of the business lies in its experienced staff, automation tools, and equipment, making it an attractive acquisition for a buyer looking to scale operations further. Seller financing availability sweetens the deal for the right buyer.
✅ What I Like
Strong Profit Margins: A 34% margin is very healthy, especially for the property maintenance industry.
Impressive Growth: Doubling revenue in under two years shows that the business is in a growth phase without relying on outbound sales.
Automated Management: Software tools allow remote management, which reduces the burden of daily operational oversight.
Diverse Service Offerings: From landscaping to snow removal, the business provides a wide range of services, making it less vulnerable to seasonal fluctuations.
Seller Financing Available: Seller financing could make the acquisition easier for buyers who may not qualify for full conventional financing.
Reliable Workforce: A long-standing, experienced team means a smoother transition and lower employee turnover risk.
New Equipment: Recent investments in trailers and other equipment position the company for future growth without the need for immediate capital outlay.
Prime Location: Operating in the Denver metro area provides a large, built-in client base of commercial properties.
Strong Client Relationships: Existing customer relationships are likely contributing to recurring revenue and client retention.
❓ Concerns
Lease Dependency: The business relies on leased real estate, which introduces risk if lease terms change or the property becomes unavailable.
Limited Sales Efforts: While the lack of outbound sales hasn't hindered growth, this also means there could be untapped market potential, but it will require a focused sales effort and investment.
Weather Dependency: The business's snow removal services are weather-dependent, which could lead to variable income during years of lighter snowfall.
Potential Market Saturation: The Denver market may have stiff competition, and further growth may require aggressive marketing or geographical expansion.
Operational Complexity: Managing diverse services (landscaping, snow removal, irrigation, etc.) requires a strong operational infrastructure.
Equipment Maintenance: While new equipment is a positive, it also requires ongoing maintenance, which could become costly over time.
Economic Sensitivity: Commercial property services may be vulnerable to economic downturns as businesses scale back non-essential expenses.
Lease Expiration: The lease expiration in 2027 could be a potential risk if the terms are unfavorable for renewal.
💼 Due Diligence Questions
Client Contracts: Are there long-term contracts in place with key clients, or is business conducted on a more ad hoc basis?
Lease Terms: Are there renewal options on the lease beyond 2027, and how likely are rent increases?
Growth Plans: What specific opportunities does the seller see for growth beyond organic client expansion?
Weather Impact: How significant is the income generated from snow removal, and how has it fluctuated in past years?
Sales Opportunities: What efforts have been made to establish outbound sales or marketing strategies?
Equipment Costs: What is the average annual cost of maintaining the equipment fleet, and are there any upcoming major repairs or replacements needed?
Labor Retention: What measures are in place to retain key employees, especially during seasonal spikes in work?
Regulatory Risks: What local regulations affect the services offered, and are there any pending changes that could impact operations?
Revenue Breakdown: What percentage of revenue comes from recurring contracts versus one-time jobs?
Customer Diversification: How diversified is the client base, and are there any risks of overdependence on a few large clients?
🚀 Growth Levers
Implement Outbound Sales Strategy: Introducing a structured outbound sales effort could tap into untapped market potential and drive new client acquisition.
Expand Service Area: Consider expanding into adjacent areas beyond the Denver metro to capture a larger market.
Seasonal Service Packages: Offer year-round service contracts that bundle landscaping, snow removal, and seasonal clean-ups for steady, recurring revenue.
Leverage Digital Marketing: Boost online presence through SEO, PPC, and social media marketing to attract commercial property managers seeking maintenance services.
Upsell Current Clients: Offer additional services to existing clients, such as tree removal or irrigation repair, to increase average client spend.
Explore Commercial Partnerships: Partner with commercial real estate agencies or property management firms to establish referral networks.
Add Residential Services: Expanding to include residential property maintenance during slower seasons could help balance cash flow.
Diversify Equipment Offerings: Rent out specialized equipment during off-peak periods to generate additional revenue.
Enhance Automation Tools: Further investment in management software could streamline operations and improve scalability.
🙋🏻♂️ The Buyer
Operational Experience: A buyer with a background in managing service-based businesses will benefit from the operational complexity of this company.
Growth-Oriented Mindset: Someone focused on scaling the business through outbound sales and geographic expansion would be well-suited to this opportunity.
Commercial Real Estate Knowledge: Understanding commercial property dynamics and relationships would be a strong asset in this business.
Experience Managing a Workforce: A buyer with skills in managing teams will be able to effectively lead and maintain the current staff.
Customer Relationship Focused: Ideal for a buyer who excels in maintaining and growing long-term client relationships, a key part of the company’s success.
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⚒️Tools & Resources
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