❇️ New Deals - 4 April 2024

An intermittent fasting app, Managed IT Service Provider for SMBs, and 3 other interesting finds.

Author

Helen Guo
April 04, 2024

Today’s Sponsor

Hello SMB Deal Hunters!

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

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

Today’s issue is sponsored by Steed, a team of tax specialists that ensures you pay the absolute least in taxes.

1/ Subscription Intermittent Fasting App

📍 Location: Remote
💰 Asking Price: N/A
💼 EBITDA: $2,200,000
📊 Revenue: $5,600,000
📅 Established: N/A

💭 My 2 Cents: This is a subscription-based app that provides subscribers with a personalized intermittent fasting plan. Weight loss is a niche that is high in demand but also high in supply, so it can be hard to stand out. Thankfully, this app does so with its thousands of 5-star reviews on Google and the Apple App Store. The app also has a great recurring revenue model, as customers are immediately locked into the subscription plan upon signing up. I like that the margins have increased each of the last 3 years, coming in at an EBITDA margin of 38% in 2023 with no signs of slowing down. However, with everything hinging on subscriptions, I’d want to know a lot more about the customer base. For starters, I’d want to understand how they acquire a new subscriber and how much it costs to do so. I’d also want to confirm that there is still room to capture new subscribers doing what has worked so far, while simultaneously checking if there are other possible avenues for future growth. Second, I’d need to look at the direct competition. Intermittent fasting is a broad niche, so what makes this app more appealing to users? Third, I’d be curious to know more about customer usage, mainly how frequently people use the app, how long they spend in it, and how frequently short-term subscribers convert to long-term, an especially important metric that the company is actually doing well at, as revenue from long-term subscribers grew by 89% from 2022 to 2023. This tells me that the app is doing its job. Finally, I’d want to get a handle on what subscriber retention looks like. Assuming everything checks out, with its high margins, low overhead, and scalability, this could be an excellent opportunity for someone who doesn’t want to deal with operating a people-heavy business.

2/ Managed IT Service Provider For SMBs

📍 Location: New York
💰 Asking Price: $2,320,000
💼 EBITDA: $704,592
📊 Revenue: $2,867,115
📅 Established: N/A

💭 My 2 Cents: Every regular reader knows that I love MSPs. How could I not love an industry that comes with sticky B2B customers, high-value contracts, and high margins? Plus, the service just makes sense—outsourcing security and backup (among other services) to a 3rd party is not only more cost-effective for companies, but it also means someone’s monitoring their IT infrastructure 24/7. This particular MSP offers both in-person and online assistance to SMBs, Making it easy for their clients to engage in whatever way makes them most comfortable. They also conduct regular visits to their clients even when there aren’t any issues. This white-glove service helps differentiate them as customers feel like they’re getting an in-house IT department. The result is 75% of their revenue coming from monthly subscriptions and annual agreements, a nice steady cash flow. However, I am curious as to how long they’ve been in operation and how long they’ve been generating this cash flow. I’d also want to know how they go about beating out their competitors in winning new clients. Finally, I’d want to check on client churn and whether this affects certain business lines more than others. Otherwise, given the $2.3M asking price on $705K of EBITDA, this looks like a pretty sweet deal.

3/ Marble And Bronze Manufacturing Business

📍 Location: Florida
💰 Asking Price: $11,900,000
💼 EBITDA: $3,359,943
📊 Revenue: $10,586,826
📅 Established: 1996

💭 My 2 Cents: It’s not every day that you see a business like this for sale. What they do is design and sell marble and bronze products (including their own custom products) to buyers ranging from architects to independent trade partners. The company transacts its sales from both a 5-acre showroom with a long-term lease and a user-friendly website with great reviews, which is a great sign considering how important reputation is in this industry. Beyond the really cool product, what makes this business interesting is its sales terms. It’s SBA prequalified and included in their $11.9M asking price is their current inventory worth over $7M. This means that the liquidation value of the assets you would be buying plus about one year of SDE ($3.4M) would cover the entire purchase! I do want to know the revenue split between the lot and website, what degree of sales are custom projects, how they generate sales, what they're doing for marketing, and accurate pricing of the inventory, but overall, there’s a lot to like here.

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4/ Janitorial Firm

📍 Location: Northbrook, Illinois
💰 Asking Price: $1,300,000
💼 EBITDA: $202,000
📊 Revenue: $3,806,461
📅 Established: 2009

💭 My 2 Cents: Janitorial companies are wonderful boring businesses. This particular firm, in operation for 15 years with 38 employees, offers a full mix of day and night time janitorial services. The management team consists of the two owners who operate remotely and there is one office that could be relocated with a support staff that can stay on to help a new owner with logistics. The sellers are willing to stay on for 3 months to train new ownership, which should make the transition easier. As they are in an industry where the type of client really matters, I’d need to know what their client mix is. Ideally they are mostly working for commercial clients with long-term contracts in place, and if so, I’d want to understand what those contracts look like and how much of this revenue is recurring. I’d also need to clear up how the EBITDA add backs get to SDE and make sure I’m comfortable with the earnings being $560K as opposed to closer to $200K. Otherwise, I like that this is a long-established business that is being offered for a very reasonable multiple compared to other similar firms, and it has a clear growth opportunity through expanding into related services like pressure washing and window cleaning. To put the cherry on top, the seller is willing to offer some financing, which is always nice to have.

5/ Landscaping Company

📍 Location: Columbus, Ohio
💰 Asking Price: $975,000
💼 EBITDA: $521,663
📊 Revenue: $1,592,000
📅 Established: N/A

💭 My 2 Cents: Landscaping companies are always worth a look, but recently they have started trading at higher multiples. So you can imagine how happy I was to find this one listed at a mere 1.875x EBITDA multiple. I like that it offers both standard services like mowing and lawn care as well as specialized services like pond and sports field management. It’s also nice that they have a longstanding and trained team of 17, as staffing can be hard in this industry. To get a handle on revenues, I’d want to understand the split between commercial and residential clients as well as if there are any long-standing ongoing service contracts. If the business, as I suspect, does skew commercial, I’d also want to know what customer concentration looks like and how long clients stay with the company. On the growth side, I’d want to explore whether there are any higher-value services a new owner could focus on promoting. However, at the end of the day, a landscaping business at this price is hard to resist.

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See you next Tuesday!

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🤝 Vendors and Lenders

I’m committed to helping the SMB Deal Hunter community close more deals, faster. Click on any of the links below and I will make a personal introduction to folks I trust.

SBA 7(a) Lender: The most common way to finance an acquisition up to $5M purchase price with 10% (give or take) down with the help of a government-backed loan. My preferred lender Elyse will help you out.

Non-SBA Lender: Best for smaller deals if you want to avoid the hassles of SBA. My preferred lender Grant and his team are the only private lenders I know who offer acquisition financing with long payback periods without any collateral requirements. Note: You must have great credit.

Quality of Earnings Provider: I always recommend conducting a QoE during due diligence to uncover any red flags. Get introduced to my preferred QoE provider that offers top-tier financial due diligence without breaking the bank.

Legal Counsel: A must-have on your team to help get a deal to the finish line. Get introduced to legal counsel with experience closing SMB deals that won’t rack up your legal bill.

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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.