❇️ New Deals - 7 Dec 2023

A web dev agency, kitchen hood cleaning service, and 3 other interesting finds

Author

Helen Guo
December 07, 2023

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Hello SMB Deal Hunters!

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

Looks like you all loved the (super unique) classical music competition business I featured.

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

1/ Commercial Janitorial Business

📍 Location: San Diego
💰 Asking Price: $3,500,000
💼 EBITDA: $851,672
📊 Revenue: $3,430,536
📅 Established: 1998

💭 My 2 Cents: This janitorial services company has been cleaning for commercial clients for over 25 years now. It has over 150 recurring B2B clients, strong margins (26-27% net), a team of 63 (although I’m not sure if any of them are management level), no client representing more than 10% of revenue, and is priced reasonably at just over 4x EBITDA. That, my friends, is the ultimate boring business. The fact that it operates remotely is just icing on the cake. But, I do have some questions. What’s the owner’s role? How long have the clients been around for? What is their sales and marketing funnel to bring on new clients? What does employee churn look like? And finally, how do they find new employees? The marketing and employee questions are the especially important ones. Staffing is absolutely essential to this business, and if the marketing is lagging, then there could be a good opportunity to institute something like a cold email program.

2/ Website Dev Agency for Service Businesses

📍 Location: West Virginia (Remote)
💰 Asking Price: $2,295,000
💼 EBITDA: $550,000
📊 Revenue: $600,000
📅 Established: 2019

💭 My 2 Cents: Agencies can be a great high-margin business, especially if you serve a sticky niche. This particular web development agency specializes in serving small service businesses, an industry that usually lacks sophistication with its marketing and web presence and thus relies heavily on external support. My gut tells me this dependency makes these clients stickier, but you’ll need to confirm client retention with the seller. My gut is also telling me small clients probably don’t come with client concentration issues, which can often plague agencies. With 90% recurring monthly revenue from services like web design, social media marketing, and Google ranking management, it looks like the agency has positioned itself as the “web guy” for mom-and-pop service businesses, which is exactly what they’re looking for. I love that the business is run completely remotely and leverages subcontractors and AI for the work, as this keeps expenses low (and margins high!). It overall looks like a strong deal, but I do want to better understand the owner’s role and how they are marketing themselves to land new clients.

3/ Kitchen Hood Cleaning Service

📍 Location: California
💰 Asking Price: N/A
💼 EBITDA: $2,734,000
📊 Revenue: $6,100,000
📅 Established: N/A

💭 My 2 Cents: I’m not sure if there’s B2B service business I like more than this one. This is a kitchen hood cleaning service, which is a MANDATED service for restaurants. Yep, you heard that right. The National Fire Protection Association requires trained and certified personnel to clean restaurant hoods and exhausts regularly, with the mandated schedule requiring various services monthly, quarterly, semiannually, and annually. The result is a 97% rate of repeat business, which is absolutely insane. You know what they say: there is literally nothing better than an essential recurring service that’s mandated by the law. What’s even better is that they have a management team in place already so you don’t have to be super day-to-day in the business. And, unlike something like HVAC, it’s not that hard to find and hire kitchen hood cleaners. There’s so much to like here. The only question I have is whether they have contracts in place. If they do, then this should be a deal you jump at.

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4/ Custom Print Wall Art eCommerce Brand

📍 Location: Remote
💰 Asking Price: $1,800,000
💼 EBITDA: $474,041
📊 Revenue: $3,900,200
📅 Established: 2001

💭 My 2 Cents: This is a 22-year-old eCommerce business making custom wall art for special occasions that is personalized to include names and important dates for each customer. It’s not every day you see a 22-year-old eCommerce brand, so it makes sense that it has over 15,000 five-star reviews and partnerships with major wholesalers like Bass Pro, Walmart, and Kohls. I like that its sales are well-diversified, with 50% through Amazon, 35% across other online channels (Walmart, Etsy, DTC), and 15% in wholesale. I also like that it's already SBA pre-qualified and has a team of 13. However, I do need to understand basic metrics on the DTC/Amazon business, like lifetime value, repurchase rate, and customer acquisition cost. If that checks out, an immediate opportunity I see to help is to improve their cash conversion cycle via better inventory management. There’s no reason they should be keeping 4-6 months of inventory on hand at all times. I’d also try to grow the retail business, since they already have some relationships there.

5/ Pet Health Testing Kit E-Commerce Brand

📍 Location: Pennsylvania (Remote)
💰 Asking Price: N/A
💼 EBITDA: $2,030,000
📊 Revenue: $12,535,000
📅 Established: N/A

💭 My 2 Cents: This company provides at-home functional health assessments for pets (i.e. testing kits for intolerances). If you think that’s silly, then consider that I saw a meme today that said “Shout-out to everyone who works hard to support their dog’s extravagant lifestyle.” The fact of the matter is that pet-related businesses are in high demand right now. This brand has very strong 91.2% gross profit margins, solid 20% EBITDA margins, and very quick growth (69.6% and 141.9%, respectively, from 2020 through 2023), which is largely due to the quality and reputation of the brand and products (several major retailers sell the company’s products on its websites and one major retailer carries the products in its stores). I love that 2 of the 3 owners are willing to stay involved post-sale, as they’ve clearly done a good job growing this thing. I also love that since they have existing retailer relationships, there’s an opportunity to grow their product line with something like supplements. But before doing anything, I’d want to get a breakdown of the various sales channels.

6/ Music Rights Management Service

📍 Location: N/A
💰 Asking Price: $20,000,000 - $30,000,000
💼 EBITDA: $2,400,000
📊 Revenue: $15,700,000
📅 Established: N/A

💭 My 2 Cents: We’re going back to back on the music companies today. This is a music rights management service featured on the 2023 Inc 5000 list for the second straight year as one of the USA's fastest-growing companies. Besides the steady growth (EBITDA increase from $2.2M in 2021 to $2.7M in 2023) and team of 18, what caught my attention was that the company generates 100% of its revenue from monthly recurring services. It turns out that offering music rights management, UGC monetization, and digital music distribution to independent artists, songwriters, and music rights holders is a pretty lucrative business. I like that the owner wants to stay involved, which is a great sign of faith, but before I could take a leap of faith, I’d want to see what client retention and the sales funnel look like.

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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.