2024.06.17 - Online Biz Acquisition Opps

Hey hey peeps in todays edition we’ve got 3 business, all priced BELOW a 3x multiple.

And they all seem like pretty good businesses!

Here’s the game; which one would I buy if i HAD to write a check for one of them?

This is tough. I’ll take digital products of over physical products, so that rules out the ecom. I do like the Interview prep Saas, but I’d rather sell b2c as opposed to b2b (i’m jaded from a recent outbound sales push in one of my businesses; so I would go with the Photo Editing iOs App!

Which one would you take?

Photo Editing iOS App - Strong Subscription Revenue 2.6x

💰 Asking Price: $440,000
📊 Gross Revenue: $460,339/year
💼 Net Profit: $168,285/year
📅 Established: 2020

💭 My Take: An app that’s generating 168k proft per year, with this many reviews, at this low multiple is an head turner. This photo editing iOS app is well-established and generates steady subscription revenue. It has an impressive rating of 4.7 out of 5 from 124,280 reviews, which speaks volumes about user satisfaction and app quality. Apps are known for their sticky recurring revenue once they gain traction, and this one is no exception. The app boasts 4,100 daily active users (DAU) and 46,000 monthly active users (MAU), highlighting a solid user base.

With a 2.6x multiple, the valuation is reasonable given the app’s strong performance metrics. The app enjoys a high 36% margin, which raises questions about whether this is due to efficient updates and development or effective advertising strategies. The teaser mentions "high converting marketing" but provides no further details, which warrants closer examination. Overall, this app presents a lucrative opportunity for someone looking to capitalize on a proven, high-margin digital product in the photo editing space.

Honestly, the 2.6x multiple makes me seem a little skeptical. Is this a great deal or am I missing something?

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eCommerce Brand - Wine Storage Solutions 2x

💰 Asking Price: $816,000
💼 Cash Flow: $408,200/year
📊 Revenue: $766,500/year
📅 Established: 2015

💭 My Take: I like that this business has great margins for an ecom business.This eCommerce brand, specializing in wine storage solutions, boasts an impressive 61% gross profit margin, which is outstanding for an eCommerce product. The business is attractively priced at a 2x multiple, which is excellent given its age and high margins. With an average order value (AOV) of $287, it strikes a balance by providing a high contribution margin without entering the high-ticket sales territory.

However, several critical questions need addressing. The business claims to have exclusivity agreements with product suppliers, but it's essential to know how many suppliers there are and whether there is a high supplier power, meaning the business's reliance on a single supplier could pose risks. Additionally, understanding whether the target market is retail consumers or contractors who install the products as part of a project is crucial, as the business could potentially cater to both markets. Despite the ease of using third-party logistics (3PL), the current owners have not implemented this strategy, which could represent a growth opportunity. The business has established patterns and trademarks, adding to its value.

The 2x valuation is perplexingly low for a business with these characteristics, leading to speculation that it might be driven by organic search traffic and could be experiencing a decline due to recent algorithm updates.

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Automated Interview Prep SaaS for Career Readiness Organizations 2.5x

💰 Asking Price: $300,000
📊 TTM Revenue: $159,000
💼 TTM Profit: $121,000
📅 Established: 2018

💭 My Take: I like an established SaaS at less than 3x multiple. This SaaS product offers a high-margin solution tailored for career readiness organizations, focusing on industries that don't require college degrees. With a strong base of B2B clients, the automated mock interview tool provides realistic job interview experiences with instant feedback, and it has consistently generated between $125,000 and $175,000 annually over the last three years.

The product’s niche focus is unique, serving high schools, job training programs, and government job programs. However, the potential exists to expand this tool to other industries that could benefit from automated interview prep. Despite implementing various growth strategies such as LinkedIn ads and social referrals, the business hasn't achieved significant growth, which could be due to a lack of sustained marketing efforts. This presents a significant opportunity for a new owner to leverage its high scalability and established market presence, applying more consistent and comprehensive marketing strategies to unlock further growth potential.

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