The Business Inquirer - Issue #3 (11/16/20)
In this issue I highlight two contrasting affiliate websites in the drone niche, a dropshipping arts & crafts store, a concierge job search service, and what I learned last week.
Every week i highlight interesting online businesses which are for sale adding my own commentary. This newsletter is for those who are interested in business, finance, and entrepreneurship. Subscribe below to receive it directly in your inbox.
Hello Friends!
In this week’s e-mail:
Affiliate - Drone Information & Review
Affiliate/Display - Drone Information & Review
Dropshipping - Arts & Crafts eCommerce
SaaS - Full-Service Job Search & Apply
What I Learned Last Week
Affiliate - Drone Information & Review (Asking: $3k)
Description
Droners Guides is a 4-year old affiliate website providing information and reviews of aerial drones. The website is built on Wordpress and generates affiliate revenue from Amazon Associates. 4-days left in the auction with 2 bids currently.
Details
Avg non-holiday revenue: $148/month
Avg non-holiday unique traffic: 1,151/month
Avg holiday revenue: $255/month
Avg holiday unique traffic: 2,570/month
95% of traffic is organic, 54% of traffic is US
Ad spend: $0
Costs: Wordpress hosting (minimal)
Asking price: $3k (auction)
Multiple: 20x monthly non-holiday revenue
🤓 Why I’m Highlighting This Business:
This business would be a great asset for someone who is just starting out in affiliate marketing as well as someone more experienced looking for a project. Good niche, easy maintenance, low costs, already generating traffic & revenue, high authority score. You can apply many lessons learned from the next drone listing I highlight.
Search volume for “best drones”
✅ What I Like:
Drone niche is popular and will only continue to grow
Website is easy to maintain on Wordpress. Domain aged for 5-years.
Only current cost is Wordpress hosting which is very minimal.
Website has high Authority Score of 38, 74 referring domains, 141 backlinks, ranks for 867 keywords
28 high quality articles written by original owner. Good to see reviews for individual drones as well as more general guides.
54% of traffic coming from US and the rest is from UK, Canada, Australia, India
Many opportunities to grow the website
Auction is currently at $3k which is about 22 months of non-holiday revenue - this is an OK valuation.
Traffic & revenue increases exponentially during the Nov/Dec/Jan holiday period. You’ll be the owner at this time.
Seller has 100% positive feedback.
❌ What I Don’t Like:
Drone niche is competitive (but what isn’t?)
Only 54% of traffic is coming from US. Not a huge issue but something to keep in mind.
28 articles is on the low end for a content website
Traffic trends have a lot of seasonality
Listing is an auction so tough to say what the website will sell for ultimately
Seller is based in Romania. Unclear if seller is the original owner of the website.
🚀 How I Would Grow This:
The next listing I highlight is a clear example of a somewhat successful affiliate site in the drone niche. I would certainly apply lessons learned from that listing.
The Wordpress theme needs to be updated to something that’s more appealing to the target audience.
Do an SEO audit of the website as I bet the current owner hasn’t really put much effort into it lately.
Research Google search trends/keywords and add additional content to the website. The next listing shows that a VA to do guest posts costs around $140/month. I’d add content like “Best Drone for Vloggers”, “Best Drones for Beginners”, “Drone Reviews Under 200”, “Best Drones for TikTok”, etc.
Go on Amazon and see what are the best selling drones and add reviews of those particular models.
Add Ezoic or another network to generate display advertising revenue in addition to affiliate
Research additional affiliate options besides Amazon Associates. From the listing below we learn that UAVCoach & M4Trix are possible affiliate options we can add.
Expand the content to include reviews of drone accessories (memory sticks, backpacks, battery), classes, etc.
Add community aspect to the website - highlight best drone videos, etc.
Add guest posts from influencers in the drone community.
You can view the listing HERE.
Affiliate/Display - Drone Information & Review (Asking: $19.9k)
Description
Aerofly Drones is 2-year old information and review website for aerial drones. The website earns revenue from Amazon Associates and display advertising. Seller is the 2nd owner of the website who revamped it when he bought it in Jan 2020 and is now flipping it to focus on his other projects.
Details
Avg non-holiday revenue: $1,003/month
Avg non-holiday unique traffic: 12,055/month
Avg holiday revenue: Unknown
Avg holiday unique traffic: Unknown
88% of traffic is organic, 77% of traffic is US
Ad spend: $0
Costs: $21/month on average
Asking price: $19,850k (auction)
Multiple: 19.8x monthly non-holiday revenue (devil in detail here, see below)
🤓 Why I’m Highlighting This Business:
Highlighting and comparing two similar websites in the same niche is very informative especially when there’s such a revenue and asking price difference. On it’s own, I think there are too many moving pieces in this listing (display network, drop in users). Maybe interesting for someone experienced in growing affiliate websites but I wouldn’t touch this as a beginner.
✅ What I Like:
Website was professionally redone by the new seller who appears to have experience in this space. Having said that, unique visitors have been cut in half since he purchased it. Unclear if this is an opportunity or a red flag.
High Authority Score of 37, 613 referring domains, 88.8k backlinks, 18.8k keywords
Revenue comes from affiliate as well as display ads
Fixed costs are low at $21/month
Revenue has been trending up since August and we’re approaching the busy holiday season
Unique visitors has been steady over the last 6-months. Google search algorithm change doesn’t appear to be a risk here.
❌ What I Don’t Like:
Majority of display ad revenue comes from MediaVine and my (very limited) understanding is that account can’t be transferred. You’d already need to have a MediaVine account or use another network. So that revenue can’t really be counted on.
Seller provided P&L actually shows that unique visitor traffic has been cut in half Y/Y. Kudos for transparency but why provide that detail when you don’t have to? Maybe this seller isn’t as experienced in this space as first thought.
Traffic has not grown in 6-months and page views have been consistently lower
You can view the listing HERE.
Dropshipping - Arts & Crafts Store (Asking: $400k)
Note: This business is under NDA so I’m unable to provide more detail.
Description
For sale is a dominant online retailer established in late-2017 within the arts and crafts niche. Business has no inventory as orders are shipped directly from suppliers.
Details
TTM Revenue: $1.1M
TTM Profit: $284k
Gross Margin: 66%
Net Margin: 26%
TTM Profit Growth: +150%
Asking Price: $400k
Multiple: 1.41x TTM profit
🤓 Why I’m Highlighting This Business:
Arts and crafts is an evergreen niche with a very fervent following. The valuation for the business is very reasonable especially if it’s a dominant retailer with brand name recognition.
✅ What I Like:
Arts and crafts is a broad niche that’s projected to grow
Turnkey business with existing suppliers, infrastructure
Current owner works just 10-hours per week on the business
Owner hasn’t put products on Amazon, eBay, Etsy. Opportunity there.
Opportunities to expand the product offering
Revenue and profit appear to be trending up
Valuation is very reasonable at 1.41x TTM profit
❌ What I Don’t Like:
Arts and crafts is broad so tough to tell from the listing exactly what this business sells.
Broadly, arts & crafts is projected to grow at 3.9% CAGR over the next 5 years. Not a bad growth rate but certainly not a breakout.
Helpful to be interested in arts & crafts space
You can view the listing HERE.
SaaS - Full-Service Job Search & Apply (Asking: $8k)
NOTE: I’d put this in the “interesting” business category.
Description
JobMate is a B2C, pre-revenue SaaS targeting the job seeker market. Founded in April 2020, the service completely automates the process of finding and applying for jobs. Users submit their resume and job requirements and JobMate recommends openings based on those requirements to the user dashboard. The user reviews the recommendations and selects which ones JobMate should submit their resume to.
Details
Pre-revenue
200 free “beta” users from Reddit
Built on a no-code platform called Bildr
Bootstrapped, 1 person company
Asking: $8k
🤓 Why I’m Highlighting This Business:
Very interesting business idea. I’m sure we’ve all been in that job-search mode and remember spending hours every week applying to jobs. While I don’t think this service is for everyone, I do see a wide appeal of automating the whole process and how people would subscribe to this. This business model is a different take on the headhunter business.
✅ What I Like:
Interesting idea with a clear message and benefit
Recruiting, job search, employment are great niches
Unemployment levels are near all time highs and this would benefit from that
Concept has been somewhat validated by current owner with Reddit response.
Built with no-code tool (Bildr) for easy maintenance
A lot of distribution options. Partner with resume writers, staffing agencies, career centers, etc.
I think you can replicate this for significantly less than $8k
❌ What I Don’t Like:
Not everyone is comfortable to outsource their job search & applications
Listing doesn’t offer details on why the seller is selling so soon
No hint on how seller came up with the $8k asking price but today it’s not worth that
If this is easy to replicate, then it means there’s no existing moat unless you add one
🚀 How I Would Grow This:
First, I’d consult with someone who is familiar with HR/recruiting. What do they think of this idea?
I’d GTM with a product led freemium model
I’d think about if it makes sense to switch pricing from monthly to weekly. No one does this but perhaps for this product it would be enticing
A lot of advertising opportunities on job boards, career centers, groups. Affiliate marketing with resume writers, etc.
Perhaps it would be interesting to niche down. List specific industries where this service would be most helpful - ie hospitality, technology, nursing, remote jobs, etc.
Lazy students (or their parents) would pay for this
You can view the listing HERE.
🧐 What I Learned Last Week
As Snoop Dogg once said “Sourcin’ Ain’t Easy”
Of course that’s not exactly what Snoop said but it’s certainly true. It was more difficult to find interesting businesses to highlight this week.
A couple of quick observations:
Seeing a lot of gun/ammo/knife related assets for sale. From content sites to retailers - at least 4 or 5 such for sale businesses have come across my desk. I tried doing a simple Google search to see if there’s some new regulation or other catalyst for sellers dumping these businesses, couldn’t find anything.
In the last newsletter I highlighted a questionable marketing agency which sold views, likes, followers. I’m seeing more of these businesses for sale. They’re all generating very healthy traffic and profits. I still don’t know the legality of this business model but the service certainly seems to be in demand.
Valuations are increasing. Empire Flippers had an interesting podcast recently where they talk about valuations, among other topics. Their view is that website valuations will increase to 40x - 45x in 2021.
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2020 OpenView SaaS Product Benchmarks Report is out
Each year, OpenView surveys CEOs and product leaders from over 150 SaaS companies to enable operators to compare themselves against their peers in various conversion metrics. It’s a great read, especially if you run a SaaS business. You can download it here.
A few interesting observations from the report:
Product-led-growth (PLG) companies grow users faster than non-PLG over the long-term. They scale faster.
Conversion rates from free trials/freemium products increase substantially when there are 11+ touchpoints. Meaning, you need to ping those free users 11+ times to convert them to paid.
Size of your “Growth Team” doesn’t correlate with how quickly your business is growing.
Number of growth experiments you run does correlate to how quickly your business is growing (not surprising)
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“Digital Rollup” trend expands and moves to Europe
Just last month two Boston startups raised $530M to become PE firms for ecommerce - Perch and Thrasio. These are a relatively new breed of startups focused exclusively on buying mature D2C businesses built on Amazon’s FBA Marketplace.
Adam Keesling at Napkin Math wrote a great overview of this model and what he called the “Digital Rollup” acquisition strategy
“They buy under-optimized businesses in a highly-fragmented industry. Then, they improve operations, mash together the backends and either milk the cash flow for dividends or sell at a higher multiple….And not only can a small business sometimes be run more effectively by a sophisticated buyer, but just by becoming a larger business the earnings become more valuable.”
Now two European companies have raised $70M to do the exact same thing - Heroes and Razor Group. The interesting part is that these startups are just a few months old.
Adam Keesling brought up another interesting question - what other types of marketplace businesses could benefit from a rollup-style acquisition model? Could somebody acquire dozens of paid Substack newsletters? 💸
In the first newsletter I mentioned my core belief that digital assets will only become more and more valuable. This points to continuation of that trend.
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James Clear, author of Atomic Habits has some great quotes
I’ve never read the book but I’ve recently seen it mentioned a few times in the Twittersphere. I’m going to add it to my reading list. Apparently the book has tons of great quotes but this one really resonated with me…
The flip side of this quote is that whatever you’re doing today, right now, is a leading indicator of your future. Go build!
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That’s all for this issue of The Business Inquirer!
As always, please don’t hesitate to contact me with any questions, comments, or feedback. I also check all comments in the web version of this newsletter.
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Important Disclaimer: This newsletter is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. This newsletter may link to other websites and certain information contained herein has been obtained from third-party sources. While taken from sources believed to be reliable, it has not been independently verified. The Business Inquirer makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. References to any companies, securities, or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any business, tax, or investment decisions. Content in this newsletter speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.