❇️ New Deals - 23 Jan 2024

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Hello SMB Deal Hunters!

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

🔥 Community Top Picks from the Last Issue:

#1: Dog e-Commerce brand with over $500K in EBITDA
#2: Marketing agency with sticky government and healthcare clients
#3: Tactical gear subscription box with a killer cash conversion cycle

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

Today’s issue is sponsored by Flippa, one of my go-to marketplaces to find online businesses for sale.

But before we continue, I’m curious…

1/ Commercial Janitorial Service Company

📍 Location: Virginia
💰 Asking Price: $1,800,000
💼 EBITDA: $550,000
📊 Revenue: $2,900,000
📅 Established: N/A

💭 My 2 Cents: This company provides janitorial (cleaning) services to public and private schools, office buildings, and other commercial venues. I like this client profile over residential cleaning because these are more regular and recurring, and they come with larger contract sizes. After all, for schools and office buildings, cleaning is an essential service. I also like that the seller is a retiring owner and that there’s already a management team in place, so it should be a very smooth transition. Overall, this looks like a good old boring business, but I do want to know what the contract terms are, how many clients they have, what the average contract size is, what client retention looks like, and what their current marketing efforts are (and if there aren’t any, this is a growth opportunity!).

2/ Music SaaS Company

📍 Location: Florida (Relocatable)
💰 Asking Price: $16,000,000
💼 EBITDA: $2,500,000
📊 Revenue: $4,500,000
📅 Established: 2010

💭 My 2 Cents: This 14-year-old company sells a patented software-based music sequencer that can create high-quality music even if you have no musical ability. They currently work with clients in two sports verticals, which leads me to believe that they sell the technology that creates the music you hear during professional sports games. That’s a pretty cool product, and the company itself has all the signs of a successful SaaS business. The margins are high, it can be run fully remotely, the owner is completely hands-off, and it has the potential to grow by expanding into new sports leagues or new verticals besides sports. At a 6.4x EBITDA multiple, this is a fairly priced SaaS business if the retention metrics are strong. However, before forking over $16M, I do have some questions. What’s the average contract size? What’s churn and retention like? How are they acquiring customers? What does their sales team look like? And what’s the competitive landscape?

3/ Label Supply Business

📍 Location: Ohio
💰 Asking Price: $5,750,000
💼 EBITDA: $1,022,760
📊 Revenue: $5,988,736
📅 Established: N/A

💭 My 2 Cents: What is something that virtually every physical good has in common? Answer: they all come with a label. Labels are essentially an essential business, and because of that, label supply companies like this one are both recession-resistant (sales grew through Covid) and have lots of repeat revenue (60% repeat rate). There really is a lot to like here. The majority of revenue (58%) is coming from custom labels, which is great because it means they don’t have to hold a lot of inventory; they just buy materials after customer orders are placed, which leads to a great cash conversion cycle. Their digital marketing system closes 50% of their leads, which is exceptional and indicates to me that the business is primed for expansion. The margins are solid. They’ve been growing nicely for the last 3 years. They’ve been in business for 25+ years, so they likely have some very loyal customers. They have a solid $1500 average order size. There are no customer concentration issues. And the owner’s retiring. I’m curious about what industries they serve and the breakdown of sales by industry, but overall, this business looks like a winner.

4/ Educational Toy e-Commerce Brand

📍 Location: Remote
💰 Asking Price: $2,700,000
💼 EBITDA: $586,844
📊 Revenue: $3,895,389
📅 Established: 2020

💭 My 2 Cents: This appears to be a pretty vanilla e-Commerce deal at first glance, but let me tell you why it’s worth digging into. It's a DTC brand selling educational Montessori-style toys, so it’s geared toward very young children (0 to 3-year-olds). The customer acquisition methods are the standard paid advertising and influencer marketing, and retention is done with the usual email and SMS follow-ups. They also already use a 3PL for order fulfillment, so handing off the inventory management to a new owner will be simple. But now let me tell you what makes this deal cool. The educational toy market is growing at a 9.5% CAGR (!) over the next decade because parents today care more about education than ever before. And as more parents become concerned over screen time, I wouldn’t be surprised to see this number grow even more. As with all e-Commerce deals, I do want to know what their product pipeline looks like (continuous product launches are key to maximizing their email and SMS audience) and what their AOV, LTV, and repurchase rates look like.

5/ Truck Cleaning And Maintenance Business

📍 Location: Denver, Colorado
💰 Asking Price: $6,495,000
💼 EBITDA: $1,338,579
📊 Revenue: $38,457,884
📅 Established: 2018

💭 My 2 Cents: This is a truck cleaning and maintenance business, which is a B2B service that’s essential for the transportation industry. This essentiality means that these businesses often have contracts with trucking companies, which leads to a lot of repeat revenue since trucks have to be maintained and cleaned on the regular. This particular company also already has various locations, so an obvious growth opportunity would be to continue expanding geographically. The fact that the business has double-digit YoY growth and a sales and marketing team in place means you’re already set up for it. I’d want to better understand their contracts, but otherwise, this looks like a chance to get in on a growing freight and logistics industry with a company that is located at a strategic point for transportation and logistics companies.

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🤝 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.

See you Thursday!

-Helen Guo
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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.

2. Upgrade to SMB Deal Hunter+ to unlock full access to all deals I feature in this newsletter and get invited to weekly mastermind calls with fellow acquisition entrepreneurs and investors.

3. Interested in selling your business? I’ll help you connect with buyers from the SMB Deal Hunter Community.

4. Want to promote your business to my community of 32,000+ entrepreneurs and investors? Advertise in SMB Deal Hunter

⏪ Catch Up On Recent SMB Deal Hunter Issues

• January 18th, 2024

• January 16th, 2024

• January 11th, 2024

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.