New Deals - 21 Nov 2023

A body jewelry eCommerce brand, cloud automation SaaS, full service septic servicer, and 2 other interesting finds.

Author

Helen Guo
November 21, 2023

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Hello SMB Deal Hunters!

Thanks for all the great feedback from the deals I shared on Thursday!

Many of you were interested in the B2B content marketing agency I featured (how could you not, they run on 50% net profit margins 👀).

I’m excited to share 5 new deals worth checking out.

📣 Today’s issue is sponsored by Roast My Deal, a new service I’m offering where I share a 15-minute private video review of a deal you’re working on in under 48 hours.

1/ Body Jewelry eCommerce Brand

📍 Location: New York, USA
💰 Asking Price: $8,571,000
💼 EBITDA: $2,637,240
📊 Revenue: $13,589,901
📅 Established: 2003

💭 My 2 Cents: In the cutthroat eCommerce market, any brand that has been around for 20 years is one worth paying attention to. This body jewelry business with an extensive catalog of over 15,000 SKUs (10x larger than any competitor) including belly button rings and nose studs is one such brand. It boasts a healthy 20% net profit margin and 40% repeat order rate, and despite having such a wide catalog, no single SKU accounts for more than 1% of sales. They have their own warehouse and office in NY and I like that management works closely with their manufacturers to develop trendy jewelry, although I do want to understand this process better. It’s also nice they have a long-term advertising agency and 50 employees, including a key VP of Operations, as this derisks the transition (you even probably want to give the VP of Operations some ownership or a promotion, they are that important). I’d want to dig into the cash conversion cycle, sales distribution across DTC and Amazon FBA, customer acquisition costs, and average customer LTV, but overall, this is an intriguing deal at a very reasonable price.

2/ Cloud Automation SaaS Company

📍 Location: New York, USA
💰 Asking Price: $22,350,000
💼 EBITDA: $2,489,000
📊 Revenue: $8,088,000
📅 Established: N/A

💭 My 2 Cents: This company is a decade-old cloud automation SaaS provider focusing on efficient data service automation used by large and mid-size corporations across North America, Asia, and Europe. If you have no what that means: the service would automatically handle the storage, organization, and protection of all of a company’s data across various cloud platforms. What really caught my eye is its remarkable 100% client retention rate over the past three years. As is usually the case with SaaS, I love the very high profit margins and a steady CAGR of 16% between 2019 and 2023. It’s also nice that there’s a 64-member team in place. The questions I have are the usual ones for B2B SaaS companies. Are there any client concentration issues? Who is their Ideal Customer Profile (ICP)? How long is the sales cycle? What is the average contract size? How do they compare to competitors? And how do they attract leads?

In Partnership With Roast My Deal

How to De-Risk a Business Acquisition:

The most common request I get in my inbox is for feedback on the deals you guys are working on.

As one reader put it, “Since this could be a life-changing decision, I have to ask: can you take a minute and look at it?”

I’ve taken a few one-off coaching calls to help. But the thing is, I charge $1000/hour for a call. And that’s not palletable for most people…

That’s why I’m excited to announce the launch of Roast My Deal.

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And between now and Thursday, I’m offering a special launch deal for anyone who signs up for a roast (if you’re still searching for a business to buy, know that you can use it anytime in the next 3 years).

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3/ Septic Company

📍 Location: Orange County, Florida
💰 Asking Price: $2,500,000
💼 EBITDA: $800,855
📊 Revenue: $2,687,914
📅 Established: N/A

💭 My 2 Cents: This is a septic system maintenance business servicing both residential and commercial clients. It's a really recession-resistant business because it’s an essential service. Property owners need to keep their septic systems in top shape to comply with health and environmental regulations, so they require regular maintenance, inspections, and repairs. The result is a steady flow of recurring revenue. What’s great is that the seller is willing to finance 50% of the purchase, which you don’t see every day. If I were to do this deal, I’d aim for a reverse seller note for downside protection. For example, if the business declined by over 20%, I’d structure the deal so that 50% of the seller note would be forgiven. There is a full team in place, but I would check how long they’ve worked for the business and if any of the team members are family members (which is often the case with service businesses). It’s also important to check how much of the revenue is recurring vs. one-time and how many of the clients are residential vs. commercial. The more commercial clients the business has, the better, as they tend to come with larger, stickier contracts. Finally, you’ll want to ensure the transferability of necessary licenses and certifications.

4/ IT Solutions And Staffing Service

📍 Location: New Jersey, USA
💰 Asking Price: $4,900,000
💼 EBITDA: $1,238,168
📊 Revenue: $5,903,433
📅 Established: N/A

💭 My 2 Cents: This is an IT company providing on-demand talent to companies around the world, and they are netting a solid 20% net profit margin from it. I’m personally bullish on leveraging global talent, and am especially bullish on it in IT, as talent is expensive in the US and can be very cost-effective when outsourced. This helps both small companies who can’t afford a full-time IT department and big companies who want to scale operations based on demand. It’s always nice to find a company operating within a growing trend (global talent) in a growing market (IT), but I’d suggest you first examine the client base, including the proportion of Fortune 1000, mid-sized, and startup companies, and the nature of their contracts in terms of length and size. I’d also dig into potential client concentration issues, the percentage of recurring business, client retention duration, what industries they work with, what the team looks like, and how long the sales cycle is.

5/ Custom Sporting Apparel And Uniform Business

📍 Location: N/A
💰 Asking Price: $2,800,000
💼 EBITDA: $524,934
📊 Revenue: $2,719,647
📅 Established: N/A

💭 My 2 Cents: Here we have a family-owned business selling 100% in-house designed and manufactured custom sports and corporate uniforms. Their client base consists of schools, sports teams, little leagues, and local businesses. What I like about having school sports teams and little leagues as clients is they generally come with repeat business, since these teams usually get new uniforms every year (although I would want to confirm this and understand how long they’ve had relationships with each account). What’s great is they’ve sponsored a lot of local events and sports teams, so I’d assume they have a strong reputation in the community. I do wonder what the team looks like, particularly the number of family members involved. The less the better in that regard, as the last thing you want is to have to hire a whole new staff.

🐦 The Best of SMB Twitter (X)

How to buy a cash-flowing business with $0 down via the S.T.A.C.K method (link)

A 6-step process to buy your first business (link)

How to sell a business, make a ton of money — and pay no taxes (link)

5 businesses not to touch with a 10-foot pole (link)

The 3 ways to get working capital into your deal as a buyer (link)

How to get buy-in from the existing team (link)

If you want to maximize your chances of success, formulate a detailed plan BEFORE closing (link)

Some key considerations to keep in mind during a partial change of ownership deal (link)

Always have a day 1 action plan ready to go (link)

Here’s why the customer isn’t always right (link)

🤝 Vendors and Lenders

I frequently get asked by you guys for recommendations on SBA lenders, quality of earnings providers, and legal counsel.

I’ve decided to streamline this to help the SMB Deal Hunter community close more deals, faster.

Fill out this form and I will personally make introductions to folks I trust within 24 hours.

See you Thursday!

P.S. Whenever you’re ready, here are a few ways for us to work together:

1. Invest with me in cash-flowing SMB deals. I’m bringing on a select few investors from this community into businesses I’m buying and operating. Reply “LP” and I’ll share more.

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Disclaimer

This publication is a newsletter only and the information provided herein is the opinion of our editors and writers only. Any transaction or opportunity of any kind is provided for information only; SMB Deal Hunter does not verify nor confirm information. SMB Deal Hunter is not making any offer to readers to participate in any transaction or opportunity described herein.