New Deals - 7 Nov 2023

By SMB Deal Hunter

Author

Helen Guo
November 07, 2023

Today’s Sponsor

Hello SMB Deal Hunters!

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

The B2B air freshener eCommerce business with a $4800 AOV and 42% repeat rate was quite a hit 💥

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

Today’s issue is sponsored by Michael Anderson from Steadfast Fitness. Michael is offering a special opportunity for SMB Deal Hunter readers to invest in the expansion of his fitness franchise locations.

Want to promote your business or deal under LOI to my community of 14,000+ entrepreneurs and investors? Reply “advertise” and I’ll share my media kit.

1/ Liquid Vitamins eCommerce Brand

📍 Location: N/A
💰 Asking Price: $15,000,000
💼 EBITDA: $2,460,066
📊 Revenue: $7,700,277
📅 Established: 1998

💭 My 2 Cents: This is a 25-year-old eCommerce brand specializing in the massive liquid supplement industry (growing at a CAGR of 4% and projected to be worth $93B by 2030). They already have an omnichannel presence, with 70% of their sales coming from Amazon, 20% DTC, and the remaining 10% from major retail distributors. I have a soft spot for supplements because of the sweet margins and natural repeat nature of the business, and this is seen through the company’s solid 30%+ net profit margins and very strong 50% repeat order rate. I like that there’s a full team in place and that the seller is willing to roll 20-30% of the equity, as this is a great show of faith. It’s especially nice in this case because the seller owns the manufacturing facility and you can probably get better-than-average pricing. I’m curious to see what retail velocity is like and what percent of their DTC sales are from subscriptions. The subscription point is crucial because that’s an area I’d want to focus on since LTVs on supplement subscription businesses can be very high (especially given their AOV is a solid $65). Overall, this looks like a good opportunity, and especially so if you can close before Q1, the busiest time of year for supplement businesses.

2/ Event Equipment Rental Company

📍 Location: Pennsylvania, US
💰 Asking Price: $4,200,000
💼 EBITDA: $1,123,774
📊 Revenue: $2,995,143
📅 Established: N/A

💭 My 2 Cents: This SBA pre-qualified company specializes in equipment rentals for events, parties, and special occasions, and they’ve been doing so for several decades now. This is important because event planners and venues often use the same equipment vendors repeatedly. By being around for several decades, this company likely has good relationships with the local venues and vendors. And considering there’s a staff in place, these relationships probably won’t be going anywhere even after an ownership change. I love the margins and the fact they sell to both consumers and businesses, although I do want to know what the revenue breakdown between B2C and B2B is, as B2B customers are more likely to repeat. I also want to know what the seasonality looks like (I assume most events are during the warmer months) and if any specific vendors, venues, or partners make up more than 10-20% of sales. If you do take a shot on this business, you really want to make sure you keep a tight ship. I once knew a wedding vendor who messed up just once, causing the wedding planner who was his main referrer to stop recommending him. His business was gone basically overnight.

3/ Personal Development eBook Marketplace

📍 Location: N/A
💰 Asking Price: $2,500,000
💼 EBITDA: $712,196
📊 Revenue: $1,311,312
📅 Established: 2021

💭 My 2 Cents: This company sells personal development eBooks through either standalone sales or via a subscription service. I find this very interesting because the personal development industry is hot right now. It’s growing at a CAGR of 5.5% and is projected to hit $67B by 2030. 55% of the company’s sales come from the subscription service, which has doubled in members over the last year to 5,000 (which speaks to the value of the offer and the quality of the content). I like that management adds 50 books a month (it increases LTV) and that both partners are willing to stay on board in a minority equity position (a sign of good faith). Customers are mainly coming from paid marketing, so it is important to know the CAC, the LTV:CAC (want something above 3x), and the payback period (which determines how much you can scale). Above all else, it’ll be essential to find out what makes this business unique. Why go to them instead of another eBook store? Is it the quality of the offerings? The customer service? Better marketing? Whatever it is, you need to figure it out, as that will guide how you grow the business.

Invest In Fitness Studios Led by An Experienced Operator

I recently asked Michael Anderson, an entrepreneur with a strong track record in the fitness industry who currently runs two fitness studios (including the top studio) in a well-established fitness franchise, to let SMB Deal Hunters invest in his next deal. 

Michael agreed—He’s now offering an investment opportunity in the transformation of four under-performing gym locations he has under LOI, with a goal of turning them profitable within 6-12 months.

Michael is leveraging the operational practices that have proven successful in his existing locations to turn these additional locations around.

This investment presents a deal structured with a 10% preferred return for investors, a yearly profit share, and a promising return on cash invested upon a strategic sale.

He is raising $500,000 to support the acquisitions and operations.

A thriving industry, strong projected returns, and an experienced operator with a successful track record? This is certainly an opportunity worth exploring.

Click Here to Learn More 👉

4/ Dry Food Co-Packer

📍 Location: Jacksonville, FL
💰 Asking Price: $2,985,000
💼 EBITDA: $859,000
📊 Revenue: $1,178,000
📅 Established: 2001

💭 My 2 Cents: If you’ve ever thought about getting into manufacturing, this is your opportunity. This is a 23-year-old dry food manufacturer, blender, and packager. As a former food entrepreneur, I can tell you this business is probably as easy as it gets to understand: copackers like this one will order ingredients (i.e. nuts and seeds) in bulk, blend them, repackage everything into smaller packaging, and slap labels on. Voila, granola! The company also boasts insanely high margins because of wise investments made in automation equipment (and only needs 2 employees to keep things running smoothly). Automation also sets them apart from competitors as they should have better quality control and be able to offer better pricing. However, I do have a bunch of questions. How many customers do they have? How regularly do these customers place orders? How big are these customers in terms of revenue (are they startups or more established)? And does any customer account for more than 10-20% of sales? If everything checks out, then this is an excellent opportunity to buy a simple business with a great cash conversion cycle (most customers prepay) that still has room to grow (most co-packers absolutely suck at marketing, and they have room to add more shifts). You could probably get asset-based lending to help with the financing since they have equipment, and if you’re feeling really spicy, you can even purchase the building separately for $1,450,000.

5/ Emergency Response Service Provider

📍 Location: Gulf Coast Region, TX
💰 Asking Price: N/A
💼 EBITDA: $1,538,000
📊 Revenue: $10,205,000
📅 Established: N/A

💭 My 2 Cents: This is an emergency response company that has approximately 150 Master Service Agreements in place with everything from industrial terminals to municipal agencies (it’s actually one of the only two companies in the area vetted to clean industrial terminal tanks!). It offers 24/7 emergency availability for regional incidents with a 120-minute max response time. I like that the owner wants to team up with someone to really grow this thing. I also like that there are strong regulatory tailwinds, as recent changes in plastic resin cleanup laws position the company well for long-term, high-value contracts. The business claims to have long-term contracts in place, but I’d want to know exactly how long the contracts are for, how long the clients have been clients, and what percentage renews. I’d also want to know what the team looks like (the last thing I want to do is answer cleaning calls at 3 AM). Finally, I’d want to know if the other company in the area is willing to sell as well. If they are, then you’d have a monopoly in the region, and this deal would go from a good one to a potential home run.

🐦 The Best of SMB Twitter (X)

How to protect against key-man risk when buying a business (link)

What to do to maintain a healthy relationship with your business partners (link)

The 80/20 for any profitable business (link)

Debt from an M&A perspective (link)

A quick primer on distressed acquisition opportunities (link)

Don’t forget to use a healthy dose of offline marketing (link)

If you see the words “Silver Tsunami”, run (link)

Always optimize for entrepreneurial profit (link)

How Apple, Google, and Amazon continuously create value (link)

How to consistently outperform the competition (link)

🧠 Join the SMB Deal Hunter Mastermind

If you want to be part of an active community for serious acquisition entrepreneurs and investors, apply here.

We share insights, ask questions, and collaborate in weekly Zoom calls and a Slack channel.

On our call last week, we discussed how to structure a seller note for a deal one member has under LOI.

Spots are limited and will be released on a first-come, first-served basis to qualified applicants.

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.

2. Join the SMB Deal Hunters Mastermind, a community for serious acquisition entrepreneurs and investors where we share insights, ask questions, and collaborate in bi-weekly calls and a Slack channel. Want in? Apply here.

3. Interested in selling your business? Get an offer from me.

4. Want me to review a deal you’re working on? Sign up for a 1-on-1 coaching call.

📚 What I’m Reading

Shoot Your Shot by Cam Houser

Cam Houser is a 4x entrepreneur and professor at the University of Texas who shares honest tips on entrepreneurship once a week.

I particularly enjoyed his recent newsletter on how he helped an entrepreneur get a platinum-selling rock star to wear his clothing brand.

I look forward to his emails every week, and I think you will too.

⏪ Catch Up On Recent SMB Deal Hunter Issues

How was today's newsletter?

Login or Subscribe to participate in polls.

📨 Share SMB Deal Hunter

If you refer 1 friend or colleague to my newsletter, I’ll also send you The Comprehensive Seller Interview Question Bank I’ve put together for free ($99 value). In it, I’ve compiled 50+ questions business buyers should ask during seller interview calls when evaluating a business.

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.