This business is a long established, niche ecommerce business that specializes in uncommon and exclusive preserved and dried decorative plants. Founded in 2004, this profitable niche multi-channel retailer
We are proud to offer a unique ecommerce business that designs and manufactures branded Apple accessories from natural, unique variety of high quality natural materials such as wood, stone, rust, hay or sea shell. Founded in 2015, this profitable niche multi-channel retailer offers MacBook cases and skins, as well as iPad and iPhone cases, and more. The company’s products are inspired by nature and their natural real touch brings consumers warmth, whilst the slim covers deliver comfort and convenience. Inventory is stored in the form of finished materials and products are only made to order once an order is placed.
Since the company’s inception five years ago, the company has processed over 15,000 orders and its high Etsy and Amazon ratings underscore its prestigious reputation. The owner has placed an overall focus on providing the highest quality products paired with outstanding customer service, producing an extremely loyal customer following, as is further illustrated by the company’s stellar seller ratings. This branded ecommerce manufacturer/retailer has averaged 38% gross profit margins and 22% net profit margins over the past two years as the products sold have minimal competition, which offers exceptional flexibility for overall price markup. Moreover, there are endless avenues for growth which the company has not embarked on due to the owners’ limited time. With a proven track record of consistent cash flow, this scalable business presents a great acquisition opportunity for a new owner looking to take over an established e-commerce business with a viable brand in a niche sector. Additionally, the Company is well-positioned to capitalize on the growing demand for its products in the marketplace.
This nascent drop ship ecommerce business has swiftly made a name for itself in the women’s activewear market. From its inception in May 2019, this ecommerce business has demonstrated explosive growth right out of the gate, as monthly revenue has grown at a CAGR of 39%. In fact, they just recently crossed the $3.5MM monthly revenue mark during April. The company does not even need to worry about managing inventory as its main supplier drop ships the website’s products directly to its customers. Strong drop ship factory relationships are very important, and the company’s discounted pricing is just one of the main factors leading to its great instantaneous success. Despite the COVID pandemic this year, business is booming and with average gross profit margins of 68%, net profit margins of 13% along with average monthly sales north of $1.7MM, net profits of $220,000, as this online retailer is extremely nimble, efficient and immensely profitable.
The online retailer’s mission is simple: To create activewear that makes women feel sexy, stylish, and comfortable at an affordable price. The company has forged invaluable drop-ship relationships with suppliers offering prompt customer delivery, which allows for a business model that is not capital intensive as it does not require the owner to hold inventory. Therefore, the company has promptly established a strong presence in a thriving industry, anticipated to double to $254 billion by 2026, growing at a staggering CAGR of 8.2% over those next several years. The rising health consciousness among women, especially those with an increase of disposable income, becoming increasingly active in sports and fitness activities, has helped this market segment to substantially outpace all other apparel sectors. Even with its impressive immediate growth and cash flow, there are still several growth opportunities which give this business strong potential moving forward. Ultimately, this turnkey business can be relocated anywhere in the world and is a high-quality acquisition opportunity offering plenty of potential growth and upside for overall return on investment.
For more information, please contact Lenny at [email protected], call 312-291-4495 or fill in the form below:
This award winning website design and SEO Company specializes in providing digital marketing solutions, custom website development, and more. Founded in 2017, this full-service digital marketing company provides valuable development and marketing services for businesses of all sizes in multiple verticals. They create custom SEO and PPC marketing strategies for their clients. Unlike many marketing and web development firms that rely on one-time development projects, this boutique agency has established a highly valuable base of recurring revenues with approximately 30% of the TTM revenues coming from residual income. About 60% of revenue comes from website development, 30% from SEO and 10% website maintenance/updates. The company is overly efficient, with minimal fixed expenses, as this is clearly illustrated by its 87% net profit margin. Furthermore, business is booming with impressive YOY growth in 2019, as sales were up 58% and EBITDA was up 43%, compared to 2018.
The reputable firm and its attractive recurring revenue business model allow for a low working capital structure with minimal fixed overhead expenses. Nearly all aspects of the business are operated by the owner. However, she does utilize a few contractors that help with extra work such as graphic design or fixing updates on existing websites. She also uses one PHP developer that helps with software related items. Additionally, she has one content writer and 4 bloggers that provide content for free throughout the month to help with their own SEO. With an increasing number of clients maintaining an active marketing campaign and/or development maintenance, this business represents a high quality acquisition opportunity with strong and growing cash flow and a highly valuable base of recurring client relationships and revenues.
For more information, please contact Lenny at [email protected], call 312-291-4495 or fill in the form below:
It shouldn’t shock you to learn that when you sell a business, you will have to pay taxes on the sale. However, the amount of taxes you will pay can vary depending upon the expertise and advice of a knowledgeable accountant and business broker. While there are many nuances to each sale, here is a brief summary to help sellers understand the general tax implications of selling an online business.
There are two types of business sales; asset sales and stock sales. Most transactions are structured as asset sales.
Asset Sale: With an asset sale, the buyer acquires the business’ assets, rather than the corporation or entity. This is the preferred route for buyers as they are only acquiring the assets but no prior or potential future liabilities.
Stock Sale: With a stock sale, the buyer will purchase the legal entity of the business, which includes all its assets and liabilities. While the purchase agreement signed by both parties will typically indemnify the buyer from any known or unknown legal or tax liabilities which occurred prior to the sale, the buyer is still liable for such damages and must then litigate against the seller.
Obviously, an asset sale is a much cleaner process and usually the only time that our transactions are structured as stock sales are when there are licensing agreements tied into the entity which are not transferable or assignable.
When the asset purchase agreement is finalized, there is an accompanying asset allocation which will list all the assets of the transaction, with monetary amounts assigned to each category.
For instance, in an online business sale, the allocation might be divided into the following categories: fixed assets, intangible assets, goodwill, and non-compete agreement. The intangible assets and goodwill are taxed as capital gains, which can be anywhere from 15-20%. The other categories would be taxed as ordinary income, which clearly would be at higher rates than capital gains.
The majority of our sales are negotiated to be nearly entirely all intangible/goodwill asset allocated and thus taxed at a significantly lower rate. However, not every website broker is experienced in such matters and understands the complexity of these tax issues. They will likely push this job on your CPA. Our advisors have advanced finance degrees and are properly educated in these matters. Therefore, we are able to favorably negotiate this significant phase of the process for our clients.
As we are only briefly touching on this subject, there are additional extremely beneficial strategies which we discuss with our clients when we list their online business.
If you are considering selling your website business and would like some proper guidance, feel free to give us a call, email or complete an inquiry on our website. We’ll be happy to work with you!
Each year, hundreds of online businesses that are listed on the market are not sold. Sometimes external conditions such as the economy, an industry or access to capital are factors but most of the time the reason is that the seller is simply not properly prepared by his or her advisor. When a seller is not properly prepared by his broker, fatal errors can occur, which can easily destroy the transaction process. Some of the most common mistakes are listed below, in no particular order.
- The owner either has or is given unrealistic expectations in terms of the valuation of their internet business. Some online business owners believe that their business is worth more than it truly is and find a rookie business broker that is eager for a listing and will therefore agree to list it at an unreasonable multiple. A more seasoned broker will provide a rough valuation upfront and advise the potential client that their expectations are unreasonable and unachievable, and that it would simply be a waste of everybody’s valuable time to proceed with the listing at an unobtainable price.
- When an internet business owner does not have a proper website broker advising them in the process, they will likely not be properly educated about the different sort of buyers that are out there. For instance, private equity buyers might just be looking for a strong ROI and might be seeking to improve margins by eliminating employees. A strategic buyer or competitor would be a great suitor but sometimes they do not offer an attractive enough multiple to entice a seller. Other buyers may only be looking to put down 20% and finance the acquisition with an SBA loan. There are intangibles with each type of buyer and it is important that the seller is properly educated on such. Some sellers believe that they are saving themselves money by not hiring an online business broker to begin with. Unfortunately, they have no idea of how time-consuming and intensive the process is and the inevitable mistakes that will be made and the subsequent fallout either. An online business sale is extremely nuanced and complex. Additionally, an educated and experienced website business advisory service such as W3 Business Brokers will ensure that you’re reaching the right buyers and receiving the highest possible price for your business along with the best terms. We would provide you with the proper guidance during each step of the process and protect you and your business while making it as stress free as possible for you.
- Owners sometimes believe that the best buyer for their business is a local competitor, customer, supplier, friend, or family member. However, those buyers may not be interested or financially qualified to consummate the deal. In today’s global environment, the buyer of your online business does not need to be local. The majority of our website sales are to buyers in other states. It is a fairly simple process to transfer the business with its tangible and intangible assets to another state or country. The ideal internet business broker will have a database and Rolodex of institutional and individual buyers who are actively seeking profitable private website businesses. It is crucial for a broker to identify the ideal buyer pool to market the business to. For that reason, when interviewing a prospective broker, it would be prudent to inquire about their buyer data base. We know the types of online businesses and price-points that our buyers are looking for and the types that our competitors’ buyers are as well. There are some website brokers that mainly represent businesses with cash flows of $50,000-$100,000, while our listings begin at the $100,000 level. We simply know that our buyers are looking for higher priced businesses and would therefore refer a potential seller of a smaller business to one of our competitors if we did not believe that we could properly serve them.
- It is also important to present the business in the best possible light. Some brokers spend very little time on their presentations, while we spend dozens of hours on our prospectuses, highlighting the key aspects and highlights of the business, such as growth opportunities, reputation, industry position and overall analysis, supplier relationships, valuable intangible assets and other factors which buyers will certainly need to be made aware of. We make it appoint to be as transparent as possible, knowing from being one of the oldest website brokerages in the country, what questions prospective buyers might have and certainly what they should know. Unfortunately, not all online brokers understand this, nor do they put in the ample time necessary to prepare a professional and inducing CIM.
- An experienced and financially educated internet broker also knows what financials, documents and data will be requested and necessary during the due diligence process. Based on the 100+ deals that we have closed, we can easily advise you in advance so you can prepare and organize all the necessary documents ahead of time, which will make the due diligence process more seamless and quicker, leading to a smooth and prompt close. We can assure you that not all brokers will do this, and this very well might hamper the due diligence phase, which many times may kill a deal.
The bottom line is that if you’re considering selling your profitable online business, you want to work with an experienced internet business broker, who will educate you and prepare you for the transaction as it will eliminate key errors during this important process.
Will Rogers once said that “you never get a second chance to make a first impression”. Whether you realize it or not, that is extremely valuable advice. When reaching out to a broker of an internet business brokerage firm, such as W3 Business Advisors, you must understand that we usually interact with hundreds of prospective buyers that are interested in any particular online business. Unlike a local or regional brick-and-mortar business, which has a limited pool of prospective buyers, online businesses attract buyers on a national and sometimes international level. Therefore, you should realize that there are usually other serious buyers looking at the same website business that you are. That said, we have come up with a list of “Don’ts” for serious buyers to consider when interacting with website brokers.
- Be truthful – This isn’t our first rodeo and we can usually smell BS from a mile away. If a broker asks you how much cash at closing you have for a business and your response is that it’s irrelevant because you have investors that you can go to if you need to, we know that you are a newbie tire kicker that likely does not have enough money to buy a business and/or you do not have your financing in place. We are extremely busy so please understand that we do not have the time to waste on buyers who aren’t really serious, qualified, or ready. Once an online broker knows that a prospective buyer is exaggerating and is not truly serious or qualified, it will not bode well for future interactions as they will not waste their time on them in the future. If you are in fact serious, then be truthful and the broker will likely be very accommodating and will want to work with you.
- Do not copy & paste generic questions and send them to a broker – Unfortunately, this does occur and many times, a prospective buyer will send over the identical questions for multiple web businesses he inquires about. We try to be as comprehensive as possible and answer buyers’ questions with detailed answers, and this does take the brokers’ and the sellers’ time. Again, if we reasonably suspect that a buyer is wasting our time, we will not take him or her serious in the future. If you are really interested, then take your time and ask valid questions because it will convey your seriousness.
- Do not ask questions that are already covered in the prospectus – Other internet brokers may not put much time into their CIMs, but those who have viewed our prospectuses know that we certainly do as we try to be as transparent and comprehensive as possible. Before asking a broker questions, put some time into reviewing the prospectus in detail and in its entirety because if you do ask a question that has clearly been covered in the prospectus then we will know that you did not read it , which does show that you are not very serious about that business.
- Do not make an offer prior to asking questions – Some buyers will make an offer immediately after receiving the prospectus without asking any questions about that business. To a seasoned internet broker, this is a red flag as it is apparent that the buyer is just trying to tie up the business during an exclusive due diligence period, which he will use this time period to either try to obtain the money for the purchase (he likely does not have it) or to negotiate the deal down. With this type of buyer, they will then find something that they don’t like about the business (they often invent something), but something that they easily could have discovered if they read the CIM in detail and if they actually took the time to ask some valid preliminary questions. An experienced broker will vet buyers who make offers and will make sure that the buyer isn’t just tying up the business and wasting everyone’s time. He will do his homework and make sure that the buyer is serious and that there is a high probability that he will close the transaction.
- Don’t ask unrealistic requests – An experienced broker knows that he does not have a serious buyer on hand when the buyer asks for sensitive information such as tax returns, customer lists, supplier information, and other potential trade secrets prior to making a valid offer. You can do enough preliminary due diligence without such information prior to submitting an LOI and can review the relevant documents during the actual due diligence period. All serious buyers understand that it is unreasonable to ask for such prior to due diligence.
- Do not submit a one-sided LOI – Again, you are not the only one looking at a particular online business, so if you do make an offer, then do your best to do so with terms that are as fair and neutral as possible. If a buyer’s LOI does contain one-sided terms, which obviously only favors them, then we will know that they will be very unrealistic and difficult going forward and will likely be impossible to work with when getting to the purchase agreement. Therefore, we would much rather prefer to work with another buyer who appears much more reasonable. Try to have open and reasonable expectations to how the transaction works and the logistics of it. It is not solely about the price offered and agreed upon, because the terms of the transaction, such as cash at closing, time period to close, earnest deposit, due diligence period, etc. are also very important variables to all parties involved.
There are other red flags that turn off brokers and sellers but if you are a serious buyer and follow the advice above, and also show that you have reasonable expectations, then you will indeed be taken seriously and be given the opportunity to be considered a desirable buyer for a highly-coveted business, where there is ample competition and a crowded playing field.
Just about a month into the new year, small-to-middle market M&A confidence appears to be gaining. A few recent surveys questioned M&A participants and business owners about their expectations in 2019. Most responded that they believed M&A activity would increase due to a strong economy, baby boomers exiting their businesses, GDP growth, and a favorable business environment.
Both strategic buyers and Private Equity firms are sitting on a lot of cash, eagerly looking for solid deals. The majority of the respondents also stated that they expect the average size per transaction to increase this year as well.
On the sell-side, we are noticing the same as there are many family businesses and baby boomers contacting us as they are exploring their exit options. Some are looking for outright exits, while others are open to taking most of their money off the table while sticking around for a prolonged transition.
On the buy-side, deal particulars vary as some buyers are seeking outright acquisitions while others would prefer to purchase a majority stake with the owner retaining a minority stake and remaining as the operator for some time.
While it is tempting to anticipate the future M&A market with rose colored glasses, there are some potential headwinds to consider. For instance, rising interest rates and economic uncertainty can be potential obstacles for deals.
Many respondents of a recent Deloitte study, “The State of the Deal M&A Trends 2019 Survey”, said that rising interest rates would slow their activity or reduce their ability to execute on deals. However, the “baby boomer effect” does remain a powerful potential tailwind as many of these small business owners ($100,000 to $10 million in sales) are looking to retire soon.
Last year, 36% of small business owners who responded to the survey said they plan to sell or transition their business within the next five years, which is up from 27% just seven years ago.
Therefore, based on Economics 101 – Supply vs. Demand, with a larger number of businesses up for sale over the next five years and with the current economic environment and corporate tax code, the conditions for a ripe M&A market are surely favorable.
W3 Business Advisors has been around for 10 years and we are extremely selective, only advising on around 15-20 transactions per year. Our team of brokers all have a comprehensive background in finance and accounting that was learned from the top business schools in the country and gained by working in the investment banking area while the other brokers in this niche don’t even have college degrees in general business.
In addition, W3 has actual offices in New York and Chicago while the other brokers typically work from their homes. We have our pictures on the “our team” page of our site because we want you to know exactly who you are working with compared to the other firms who not only don’t provide pictures, but don’t even provide proper background information on their specific qualifications to advise on transactions of this type.
So, while some of the other brokers might have more listings than us, we only focus on quality businesses with EBITDAS over $150,000 and we won’t dilute our invaluable services, spread ourselves too thin or waste our time with lesser deals. All our competitors constantly have their “quality” businesses on the same page as their subpar businesses that are worth less than $100k.
Alright, so you received a Letter of Intent (LOI) with a reasonable offer. Sounds good, right?
Yes, but in addition to the purchase price and deal structure, there are other essential aspects of the agreement that must be discussed and negotiated. Two of the significant terms which other online business brokers might not emphasize are earnest deposits and exclusivity. In this section we will discuss the meaning and importance of each.
It goes without saying that most buyers would prefer not to put down a deposit once the LOI is agreed upon. However, as our client’s broker and advisor, we believe it is a necessity. An earnest deposit is typically equivalent to about 5-10% of the total transaction value and is almost always fully refundable should the deal not get to closing.
The primary reason behind the deposit requirement is really a show of good faith on the buyer’s part that they are somewhat financially qualified to fund the transaction. With a seller providing sensitive financial information and revealing many aspects of the business during the due diligence phase, an earnest money deposit is customary for transactions of all sizes / types as it proves the buyer is serious.
If a buyer refuses to come up with an earnest deposit, which is held in escrow, then that clearly illustrates that they either do not have the money to close or that they are NOT as serious as they have demonstrated. After all, a non-binding piece of paper (LOI) without an earnest deposit is not sufficient for our clients to engage in the due diligence phase, and we advise them as such.
Some buyers request 100% exclusivity upon execution of the LOI, which means that we can no longer market the business. That is troublesome as there is no guaranty that the buyer will close and if he does in fact back out of the transaction, then we would have to begin our process from square one again.
We understand that the buyer needs some sort of comfort that if he is going to expend a lot of time and money into due diligence, he does not want to risk the seller having the ability to “ditch” him and engage with another buyer. That is perfectly understandable.
That is the reason that we propose to add exclusivity language which is more than fair. The language that we have drafted for this exact purpose clearly gives the buyer an exclusive on the business and ensures that he has the exclusive right to execute or cancel the deal up until the closing date.
So, for instance, on a deal with a 30 day due diligence period, without a non-refundable deposit, a buyer can technically walk away from the deal for any reason on the last day of due diligence while retrieving their entire deposit, which means we would have lost an entire month on this listing.
As a result, we need the ability to continue to field backup offers in case a buyer decides to back out at the last minute. Therefore, if the buyer does back out, I can immediately engage with the other serious buyers who I have cultivated and retained during that month, for that very reason.
If the buyer does genuinely want the business, which most do, then this should not be a concern as the language clearly ensures that they have the EXCLUSIVE first right to execute the deal up until the closing date, and that any other offers received could only be treated as backup offers if they don’t close on the deal.