2024.10.08 - Online Biz Acquisition Opps

Hey hey peeps happy Tuesday evening.

It’s been damn near a month since I’ve reviewed deal listings. I’ve had a BUSY last month. I made an offer on another business and was working on due dilligence, when I got an email from the broker stating “they were no longer interested in completed the transaction”. I believe it was around my offer of 33% seller note that they didn’t like. The business listing has now been ‘pending’ for 2 weeks since they renigged on me which indicates someone probably came along with offer not including seller note. Rude their part and the brokers, but it happens. Beyond that I’ve been working on the accounting CPE business, and trying to make the most of the very end of summer here in Whistler Canada. You can see some of my mountain biking adventures on my Instagram.

In going through online business acquisition opps over the last month, there’s quite few nice ones hitting the market. Today we have:

// Jewelry & Accessories Wholesale and eCommerce Business | 4.7x Multiple

// ISO Certified Web Hosting Firm | 80% Retention Rate | 3.1x Multiple

// Virtual Post Office with USPS Postage Purchase & Printing | 6.4x Multiple

🔫 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’m going with the Web Hosting Firm. The multiple is nice. It’s well established, and has some accolades. I like the vertical and see a lot of opportunity there.

So here’s the deets on all of them!

// Jewelry & Accessories Wholesale and eCommerce Business | 4.7x Multiple

💰 Asking Price: $3,300,000
📊 Gross Revenue: $3,231,374
💼 Cash Flow: $692,574
📅 Established: 2010

Overview:
This established business offers vintage-inspired statement jewelry and accessories, with an impressive B2B presence and a strong brand following. Having been around since 2010, it’s resilient in the jewelry/accessory market, which can sometimes see short-lived trends. Despite recent revenue fluctuations tied to a major client, the business has rebounded, showcasing its adaptability and durability. Inventory management is streamlined, with the supplier holding inventory directly.

The company primarily sells B2B (80%) to large wholesale stores, with only 20% of revenue coming from direct-to-consumer (D2C) eCommerce, which provides a clear growth opportunity to expand D2C sales at higher margins.

Highlights:

• Established Brand: In operation for 14 years, proving its product is not trend-dependent.

• Resilient to Revenue Fluctuations: Successfully rebounded after a significant client-related revenue dip.

• High B2B Share: 80% B2B revenue, with established relationships in wholesale.

• Inventory Held by Supplier: Minimizing on-hand stock needs and reducing warehousing costs.

• Growth Potential in D2C Sales: Increasing the 20% D2C share could significantly boost margins.

Questions:

❓ How recognizable is the brand to justify the high 4.7x multiple?
❓ Are the 21.4% margins sustainable given market changes?
❓ What strategies could be employed to further grow D2C sales and reduce reliance on B2B customers?

View Listing

// ISO Certified Web Hosting Firm | 80% Retention Rate | 3.1x Multiple

💰 Asking Price: $625,000
📊 Gross Revenue: $629,415
💼 Cash Flow: $201,355
📅 Established: 2012

Overview:
This 12-year-old, ISO-certified web hosting firm, also a Microsoft Partner, stands out with custom hosting solutions and an 80% client retention rate among its 865 active clients. Supported by a dedicated customer service team, the business generates 88% of its revenue from recurring hosting services. With an impressive 50,000-subscriber email list and minimal reliance on advertising, it offers substantial growth potential through upselling high-ticket services.

Highlights:

• High Client Retention: An 80% retention rate and long-standing client relationships, with some clients onboard for over a decade.

• Microsoft Partner & ISO Certified: These endorsements enhance trust and authority in a competitive industry.

• Established Support Team: A fully developed team manages customer interactions, adding to operational stability.

• Large Email List: 50,000 email subscribers present an untapped audience for upselling additional services.

• Significant SEO Value: A 12-year-old domain with content history likely holds high SEO potential.

Questions:

❓ What are the primary methods for customer acquisition, considering the low reliance on advertising?
❓ How is the email list currently leveraged, and what strategies exist for upselling additional services?
❓ Are there untapped opportunities for high-ticket service offerings given the established customer base and trust level?

View Listing

// Virtual Post Office with USPS Postage Purchase & Printing | 6.4x Multiple

💰 Asking Price: $3,000,000
📊 Gross Revenue: $2,300,000
💼 Cash Flow: $471,000
📅 Established: 2019

Overview:
This virtual post office allows users to purchase and print USPS postage online, catering to both businesses and consumers with easy-to-use, flexible plans. With a steep 6.4x multiple, the valuation hinges on its tech capabilities and any regulatory moat protecting its ability to offer USPS services. The business claims impressive customer retention, a key factor in sustaining profitability in a space where customer acquisition can be challenging. Operating on a 20% margin, the company may benefit from high markup potential on postage, though it remains to be seen if the tech infrastructure justifies the premium.

Highlights:

• High Margin: Operating at a 20% profit margin, suggesting strong markup potential in postage services.

• Established Technology & Approval: Potentially includes regulated elements or approvals for USPS postage, adding to defensibility.

• Recurring Customer Base: Expected high customer retention driven by a sticky service with significant repeat use.

• Growth Opportunities: Expansion possible through digital marketing and upselling other high-ticket services.

Questions:

❓ How much of a technical moat exists, especially with USPS partnership/approval to limit competitor entry?
❓ What percentage of revenue is recurring versus one-time purchases, indicating customer retention strength?
❓ Are there additional high-ticket service upselling opportunities to leverage the platform’s user base?

View Listing