20204.08.11 - Online Businesses For Sale

Hey hey peeps, today I am coming to you from a state of purgatory where due diligence has been completed on an online business I am buying, and a closing date set for Aug 16th.

I say purgatory because I sit here with a growth plan I’ve made and can’t jump into, and also have ceased working on any other ‘projects’, so I am ready to attack this new business.

Alas, I am continuing to search for more online businesses. Today we have…

1. 39k/yr Email Tool for Identifying Website Visitors

2. 106k/yr RV Renovation Content & Marketplace Portfolio

3. 1.8M/yr Email Marketing Firm with Remote Staff

🔫 Gun to my head question:

If I had to write a check for one of the businesses in this email, with no other details which one would it be?

I’d go with that email marketing firm. It’s got high margins AT SCALE and a 20+ year track record. Now we don’t have an asking price for this one, but the fact that it is SBA elgible gives us an indication.

1. 39k/yr Email Tool for Identifying Website Visitors

💰 Asking Price: $113,500
📊 TTM Revenue: $56,000
💼 TTM Profit: $39,000
📅 Established: August 2023

I like this business because it operates in a huge market, with tools like this becoming a standard for eCommerce businesses. The product adds value by helping brands convert anonymous website visitors into identifiable customers, making the revenue sticky. The 2.9x multiple is attractive, especially considering the strong growth potential. To be successful with this, you'll need experience in third-party data and/or email marketing, as the market of internet user behavior and data is ever-evolving.

However, one detail stands out: with 14 active customers generating an annual recurring revenue (ARR) of $76,000, this indicates high customer value, but it raises some concerns. Why isn’t the revenue higher given this high customer value? Is there a risk of customer concentration that could impact the business's stability?

• Huge market as these tools become standard for eCommerce businesses

• Value-added product with sticky revenue

• Attractive 2.9x multiple

• 75% of sales are direct, showing strong customer interest

• 14 active customers with an ARR of $76,000, indicating high customer value but potential concentration risks

Questions:

❓ Why is revenue not higher given the high customer value, and is there a risk of customer concentration?
❓ Who are the competitors, and how does this tool differentiate itself in the market?
❓ What are the potential growth opportunities outside of the narrow niche currently targeted?
❓ How scalable is the current business model with existing customer acquisition strategies?
❓ What is the risk of market evolution, and how can the business adapt to changes in internet user behavior and data regulations?

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2. 106k/yr RV Renovation Content & Marketplace Portfolio

💰 Asking Price: $260,000
📊 TTM Revenue: $130,010
💼 TTM Profit: $106,481
📅 Established: N/A

This seems like a good content business, but I generally don’t favor content-heavy models. However, this one has a large Facebook group, high email engagement, and a passionate audience with money to spend. The business also includes a marketplace, which keeps users coming back to the site, which is great for branded search.

One key concern is that it requires significant owner involvement, and its performance has been impacted by Google’s helpful content updates. The line "Recent performance has declined due to reduced owner involvement as she balances the life of a busy mom, frequent travel, and the impact of Google’s helpful content updates" is telling. It suggests that to keep this business growing, you may need to be an active RV enthusiast yourself.

• Large Facebook group and high email engagement

• Passionate audience with money to spend

• Marketplace element keeps users engaged and improves branded search and brand value.

• The business has 15 freelance writers, but it’s unclear what they actually do

• High split of display ad revenue is concerning and suggests vulnerability to Google’s updates

• Interesting that listings in the marketplace have increased fourfold despite reduced owner involvement

Questions:

❓ What is consuming all of the sellers time?
❓ How much has revenue declined due to reduced owner involvement and Google’s updates?
❓ Is there an opportunity to better monetize the marketplace, perhaps by converting it to a commission-based model?
❓ What’s the full story behind the current owner's involvement and why the business may have been more demanding than expected?

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3. 1.8M/yr Email Marketing Firm with Remote Staff

💰 Asking Price: Not Disclosed
📊 Gross Revenue: $3,124,547
💼 Cash Flow: $1,819,262
📅 Established: 2002

This business stands out with high cash flow and strong margins, operating successfully for over 20 years with a focus on email marketing services rather than a broader marketing approach. There’s no active marketing; instead, the business has grown organically through word-of-mouth and referrals. The average client tenure of 6 years shows strong customer loyalty, and the company boasts an impressive $284k revenue per employee.

However, replacing two owners could be more challenging than replacing one, and this would need to be factored into the P&L when considering the business's valuation. The only potential deal breaker would be if the sellers had a significant personal connection with the clients, such as family ties or previous corporate relationships. However, I don’t believe that to be the case here, as the business's growth is driven by partnerships with top email service providers (ESPs) and organic referrals, not personal connections.

• High cash flow at a high margin

• 20+ years in business

• Agency with a concise focus on email marketing services

• No active marketing; growth driven by referrals and word-of-mouth

• Average client tenure of 6 years, indicating strong loyalty

• $284k revenue per employee, highlighting efficiency

• Key employees willing to stay on

Questions:
❓ What do the two owners specifically do, and how challenging will it be to replace them?
❓ Can it be confirmed that there are no significant personal connections between the sellers and major clients?

*EST Asking Price & SBA

This listing does not have an asking price, but the listing states SBA eligible which indicates a buyer could expect to do a SBA. With an SBA loan max of 5 mil and about 15% down, the max a buyer could pay for this business is 6mm which is about a 3.3 multiple. At that valuation I think this would be a great deal. That said, depending how well fleshed out operations are, this could be target for private equity acquisition as much high multiple —- but then why include the line about sba eligible???

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