2024.08.25 - Online Biz Acquisition Opps

Author

Corey Philip
August 26, 2024

Hey hey peeps, I’ve got some recently listed online businesses for you!

On my own recent acquisition, I’ve been working on getting proper server side tracking set up so I can get to work cranking ads. This doesn’t sound that overwhelming BUUUUUT adding the necessary tags/code to the site threw a wrench in our speed optimization. So yea that’s where I am; and now I am here, looking for my next deal!

🔫 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 for the music software distribution. It seems to have product that is not easy to compete with and that SaaS stickyness where the existing customer ltv will be higher than the acquisition price.

// Platform Streamlining Digital Music Software Distribution

💰 Asking Price: $650,000
📊 TTM Revenue: $380,000
💼 TTM Profit: $166,000
📅 Established: 2021

This SaaS startup specializes in digital music software distribution, serving both B2B and B2C segments. With an 85% gross margin and a low-churn, sticky customer base, the platform generates revenue through B2B distribution fees and B2C storefront sales. However, the profit margin is under 50%, likely due to high ad spend or operational costs. Managed by a dedicated manager, the business requires minimal owner involvement, making it an attractive, hands-off investment.

Highlights:

  • High Gross Margin: The platform operates with an 85% gross margin, indicating strong pricing power and cost control.

  • Fully Managed: The business is now fully managed by a dedicated manager, requiring minimal time investment from the owner.

  • Sticky Customer Base: Low churn rates among B2B clients, with most top customers engaged for over two years.

  • Fair Valuation: The 3.9x profit multiple is attractive for a SaaS business of this nature.

Questions:

❓ What is the breakdown of the cost structure, particularly in terms of advertising spend?

❓ Are there opportunities to increase the profit margin by optimizing operational efficiencies?

❓ How ‘sticky’ is the manager?

// 5+ Yr Old Sleep Enhancement Products Brand | Endorsed by Pro Athletes 

💰 Asking Price: $2,140,000
📊 Gross Revenue: $2,522,202
💼 Cash Flow: $684,438
📅 Established: 2019

This premium brand, specializing in sleep enhancement products, has carved out a strong position in the wellness market, addressing the critical issue of sleep quality—a major pain point for many consumers. With a solid 25% margin, this ecommerce business has achieved impressive sales volume across multiple channels, including Amazon, Shopify, Walmart, and social media. A recent influencer-driven TikTok campaign significantly boosted its growth, leveraging the brand’s strong reputation, including endorsements from Olympians and other professional athletes.

Despite the listing's mention of 'meticulous inventory management,' details on this aspect are sparse, leaving room for potential buyers to investigate further. However, the business benefits from products that are small, lightweight, and easy to ship via third-party logistics (3PL), which adds to its operational efficiency.

Highlights:

  • Healthy Margins: A 25% profit margin is strong for an ecommerce business with high sales volume.

  • Multiple Sales Channels: Products are sold across Amazon, Shopify, Walmart, and through social media, diversifying revenue streams.

  • Influencer Marketing: A successful TikTok campaign has driven substantial growth, proving the brand's appeal.

  • Ease of Shipping: The products are small, lightweight, and ideal for 3PL, simplifying logistics.

Questions:

❓ What specific inventory management practices are in place, and how do they support the business's claims of being meticulous?

❓ Is the influencer marketing systematic and scalable?

// Long-Established Industrial Equipment Dropship Business

💰 Asking Price: $395,000
📊 Gross Revenue: $568,231
💼 Cash Flow: $144,233
📅 Established: 2007

This dropship business has been around since 2007, focusing on industrial equipment. It's got 50 suppliers, so there's plenty of variety in the products offered. The seller's retiring, and assuming that’s due to age, there are likely some easy wins for a new owner to capitalize on.

That 25% margin is not bad, but the business is very small and listing doesn't mention advertising, which would eat into that figure. This is unlike the sleep product business above which does 6x the revenue and pays for ads. I’m curious how they’re acquiring customers and if the seller has added value by offering expertise to customers.

One concern: these are big items, so what’s the return rate like? And how are warranties handled? Shipping industrial equipment isn’t cheap or easy, so understanding those logistics is key.

Highlights:

  • Running since 2007.

  • Lots of Suppliers: 50 in total.

  • Likely older seller leaving easy wins.

  • Reasonable Multiple: Priced at 2.75x, which seems fair for what’s on offer.

Questions:

  • ❓ How are they acquiring customers?

  • ❓ Has the seller added value through expertise? ie expert in industrial equipment

  • ❓ What’s the return rate, and warranty rate?

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