Acquisitions Anonymous - #1 for business buying, selling and operating - $4.4 M Diabetes Patch Brand: Hidden Gem or Hidden Trap?

Episode Date: November 7, 2025

In this episode of Acquisitions Anonymous, the hosts dig into a $4.4 M e‑commerce business in the diabetes sensor accessory space and debate whether its 41% net margin, Australian base, and licensing opportunity make it a smart buy—or a risky startup in disguise.Business Listing – https://websiteproperties.com/websites/13755-sticking-with-success-great-business-opportunity-in-the-growing-diabetes-market/Welcome to Acquisitions Anonymous – the #1 podcast for small business M&A. Every week, we break down businesses for sale and talk about buying, operating, and growing them.💰 Sponsored by:Go High Level – The all-in-one sales and marketing platform built for agencies and entrepreneurs. Automate, manage, and grow your business at https://www.gohighlevel.comCapital Pad – A platform connecting accredited investors with vetted small business acquisition deals. Discover exclusive opportunities at https://capitalpad.comThe team explores a listing for a home‑based Australian business selling branded adhesive patches for continuous glucose monitors (CGMs) — the listing claims approximately US $3.5 M in trailing 12‑month revenue (converted from AUD) and US $1.46 M in cash‑flow (~41 % net margin). The business model includes Amazon FBA plus a couple of major U.S. pharmacy accounts, with the owner working ~10 hours/week.Key Highlights:- Asking price ~US $4.4 M, trailing cash‑flow US $1.46 M (≈41 % net margin)- Business based in Australia, selling (via Amazon + pharmacies) consumable patches for CGMs — a growing diabetes adjacent market- Opportunity for U.S. expansion + licensing of characters/brands to build a moat- Risks: Australian entity, potential Amazon seller‑migration issues, unclear SBA financing, low barrier to entry in consumables- Strategic path: Use Aussie cash‑flow to buy and build U.S. subsidiary, invest heavily in influencer / TikTok, build brand/licensing to protect marginSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hello, everyone, and welcome back to Acquisitions Anonymous. This is the Internet's number one podcast on buying, selling, and operating small businesses. And today, we have one of the best episodes we've done a while. It is me, Mills, and Heather, me being Bill D'Alessandra, one of your hosts. It is a diabetes continuous glucose monitor patch sticker company. They sell on Amazon, but they also sell through pharmacy chains. And there's some really interesting international dynamics, some interesting, interesting kind of compliance medical device dynamics. And we also talk into the economics

of licensing and then cash out refinance SBA loans. So we are all over the place, but some really interesting rabbit holes as we discuss a great business today on Acquisitions Anonymous. So without further ado, let's get into it. We'll set acquisitions anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100% years anymore. And thumbs downing on just the plus inventory line. Big thanks to High Level for sponsoring this video and helping us pay for our editors. High Level is the all-in-one CRM that handles your emails, text, funnels, and more all in one place.

Think of it like the Swiss Army Night for Small Businesses, and you can try it for free for 30 days at gohighlevel.com slash Michael Gurdley. All right, it's caffeinated Friday. Acquisitions Anonymous. My wife went to Starbucks and she brought me back. I tooks cold brew and I did not have breakfast and I am like lit this morning. So we started so early that I usually have like a cup of coffee when I leave the house and then like maybe two, you know, at work. And then I met somebody for coffee at 8 a.m. and they were like, you don't want a coffee. And I was like, this would be like my fifth cup. At this point, I can't have any more coffee. I'm sorry to be rude, but no. Yeah. I'll just sit here and watch you

drink here. Yeah. Well, Heather, you got you already had your coffee at 7.30. I start, yes, I have to have one before I get on. So I did have one and I have, you know, backup right here. All right. We are good to go. And Mills even came with the deal. Okay. Speaking, I'm going to try and segue this.

Speaking of high blood sugar and Starbucks drinks, I saw this thing that I've never, I've never looked at anything in this space. I'm curious if you guys have. This is an online broker. Bill, have you ever looked at website? properties. Have I ever looked? I bought my first business from website properties. Oh my gosh. All right. Well, there's got to be a story that you'll tell after this about. It is a good one. So this, it says sticking with success. And it's listed as a pending sale, which is kind of intriguing.

It says great business opportunity in the growing diabetes market. It says, I don't know what these little tags mean up here, but it's been on the market, I guess, for a year. September 3rd of 2024 has a listing ID, Amazon and consumer goods is what it says, but the asking price is $4.4 million. It says this opportunity's trademarked products have the exclusive feature of holding diabetic sensors in place without sticking to the sensor itself. The patches are sold through their website, Amazon FBA, and have achieved distribution and brick and mortar outlets as well. The success of the patches landed accounts with two major U.S. where they are sold as a sole brand, generating approximately 789,000 in revenues in the last 12 months and resulting in overall profit margins of 41%. One pharmacy has requested four more skews this year, which

presents a huge opportunity to drive profit margins higher. With the FBA and 3PL model inventory is shipped directly from suppliers to the company's 3PL facilities in Amazon FBA, where items are stocked and prepared for customer fulfillment. The owner is currently working 10 hours per week overseeing and managing operations. With its excellent margins, huge addressable market, and other ideas for expansion, this is the perfect time for a new buyer to acquire this business and take you to the next level of growth. They said they have 64% gross profit and 41% net profit for the trailing 12 months that they clocked in April of 2025. So a few months ago now. It is a trademark brand with brand awareness, established to,

distribution network, exploding market, and regular inbound business development opportunities. They're trailing 12-month April through 2025 gross revenues was $3.5 million in change. And the trailing 12-month April 2025 cash flow was $1.46 million. I'm wondering if these are type of, oh, no, okay. Here's the rub. You just found the rub. I was like, why don't these numbers match? So Bill beat me to it.

There are also revenue and cash flow figures not in U.S. dollars, but Australian dollars. And then it says converted from AUD to U.S.D at the exchange rate of point. So, Mills, I don't think there are some. I think this is an Australian business. Yeah, I think all of it is Australian. They're saying they've got 5.3 million of AUD revenue. And then they're converting to get 3.5 in U.S.D. So I think they're doing close to all of their revenue in AUD.

I think you're right. So they say down here, they left the employee line item blank. Inventory is not included in the asking price because I think they're saying they don't have any. And location is Australia. It is a home-based business, no-seller financing. And they have some stuff about grow the two major U.S. Farmers. Okay, so I think they do have some U.S. customers, Bill, because they tell about the U.S. pharmacy. Maybe it's an Australian-based business that is selling on Amazon U.S.

I'm Amazon U.S. being the largest Amazon market by a lot. Yeah. So maybe they're just Aussie-based and they do all their books in AUD, but all the revenues are in U.S. and then getting converted. So I would want to understand, but maybe you could still buy this as a U.S. buyer and just, well, then you've got to change the entity on the Cellar Central account, which can be a little complicated. So I just want to diligence that, but probably not a deal breaker. So this business, so they got, let's just talk about it in USDA because that's how they positioned it.

Three and a half million in sales and how much profit? $1.46 in cash flow. Okay. So they're only asking $4.4. Yeah, it's pretty good. Okay. So great margins. They said gross margins of 64% and net margins of 41.

Yeah. This tells me they probably got. like a kind of loaded gross margin. Like I bet they've got all their Amazon fees and everything else above gross margin. Because Amazon selling fee commission is going to be 15% of sales. So if that's not in gross margin, that's the entire bridge from gross to net. So that tells me it has to be up in gross,

which is fine. So they've got a loaded gross margin after Amazon fees of 64%. Tells me the product margin on this stuff is got to be insane, which probably makes sense because they're basically stickers, I think. Yeah. Yeah. Let's talk about what it is. My son has type 1 diabetes. Okay. So tell us what this is. Six years old. So the sensor is, I mean, people know about the insulin pump. This is nothing to do with the insulin pump. This is just for sensors, which you don't have to wear. That's optional. But that is like a continuous glucose monitor is what a sensor is. So that's a separate little device that you could put on your arm or your leg, on your abdomen. and it's instead of finger-pricking,

it's continuously every five minutes or whatever, telling you what your blood sugar is. And you stick it, you kind of, it's under your skin, there's a little cannula, but you also need to stick it down, so it doesn't get, you know, it doesn't fall off easily.

Yeah, yeah. Now, I've never bought separate stickers for it. You know, like the... Is it intrinsically sticky? Like, it's a consumable item, right? Well, it happens with its own set. Yeah, like, there's different brands and the hardware itself is going to come from different makers,

depending on what system you decide on and your insurance pays for. And we've always gotten stickers with it. So this would be sort of like an additional sticker, you know, especially when kids are younger or very active, they might, you know, need some additional stickers or, you know, tape to kind of keep it on them, keep it waterproof, whatever. But that's what's kind of intriguing about this. It's sort of like just the stickers.

So they're not like maybe there's something about it doesn't stick to the device, which I mean, in the hierarchy of regulation, medical devices are, you know, somewhere near the top. So I wonder if there's something kind of uniquely proprietary, but maybe not, you know, absolute rocket science about the fact that this is maybe a, it's a sticker, but it doesn't, it just encompasses the sensor, doesn't actually touch the sticker. The sensor. Something like that. Maybe this is in some way like an aftermarket sticker, like an upgrade sticker. Either it's more stylish or it's more comfortable or it's something like that where, yeah, it comes with the stock stickers, but these are better for some reason. Yeah, right.

Exactly. So this is like an extra thing you would buy because you're active or because it's a child or whatever. And now they talk, I've looked at other diabetes businesses before and they talk about the exploding growth or whatever. it's mostly in type 2 diabetes where the growth of, you know, new diagnoses are. And they don't always wear sensors. Even type 1 don't always use sensors. So it's not like just because you have more diagnosis that everybody's going to be even using sensors, let alone buying their own stickers for the product.

So there's that side of it as well. There's also the rise of continuous glucose monitor use for non-diabetics. Right. Then that's a good point. Right. So like this, I think this market is is probably a good end market, you know, over time. My question would be is there is this defensible at all? You know, if it's just stickers on FBI, I'd be terrified of it.

The thing that actually makes me way more interested is that there is clearly something about it. They've been able to get these two pharmacy chains interested. And the pharmacy trains, I would assume, are not interested in just some random garbage from FBI. So there's got to be something unique about it that got these pharmacy chains interested in it. And they're buying $800,000 a year of stickers. And they want more skews for next year. That totally changes this for me. If this was 100% FBI, I would think there's almost no moat.

And it's probably easily knocked off. And it's just stickers. And these margins are amazing now. But Chinese sellers are coming for your margins. The fact that the pharmacy chains want it and they can sell it through these. pharmacy chains command margins still. They said they have great margins to the pharmacy chains and they're reordering and wanting more next year.

I, you know, we haven't signed the NDA. This is acquisition anonymous. But that makes me much more excited. Yeah. And I think it must be that they're more stylish because just not sticking to the sensor. I don't know how exciting that is, but because you can always unstick it. But it is an intriguing product. I would love to see it.

Cool. I think I found it. It's kind of interesting. I don't think we're doxing them just for me to share this. Do you all? You got to tell us a little bit about it, Mills? I think I'm just going to show you. It does it.

Let me see. Where was it? It's kind of cool. So I think this is it, although it looks like the couple hasn't updated the About Us part of their website since like 23, but they're actually looked like a British family, but they may have, you know, just moved to Australia at some point. Um, but these, you know, these patches, they're, they're very stylistic and kind of thematic, you know, there's a boys pack, you know, a floral essentials pack, a girls

pack, you know, uh, I guess some of these are kind of branded, but you can also do custom ones. Oh yeah, they've got a Laboooo, which is like those very trendy stuff to things. The opportunity to do licensing here is incredible. I want NFL. I think it's also a big risk, right? Like, do you think they're actually, do you think they actually have licensing in place to print some of these things?

I mean, I would definitely diligence that. Otherwise, a lawsuit when it happened. But like, I don't think, like, I'm not seeing NFL on here.

You know, I'm not seeing like they're obviously infringing. Yes. Yep. Right. This is just rainbows and unicorns and, you know, all kinds of stuff.

It's clearly public domain. And what I love about a business like this is in just briefly scanning it, the origin of this business was because the founder, or the founder was a female. And her and her husband, she like, her duvet cover in the bed ripped off her sensor. And she's like, I need something. I can't find it. And created a business that way. Similar to how, like, a lot of food brands, you know, may start.

Like, my kids have food allergies. they're like all the food allergy brands all the allergy sensitive companies it started because they had a child with food allergies and they were looking for you know granola bars that were safe or whatever um so i like this as an origin story i think there's some kind of interest in that i like i like this a lot now yeah they didn't have these when my son was younger so and if they did we would have bought all different kinds because uh yeah it's it's it's so Oh, these are cool. These are great.

I mean, there's a lot of skews is what it looks like. Yeah. Yeah. Yeah. I mean, it's this is the cost of goods are basically zero. The market, this is why the margins are amazing. The shipping is basically free.

This is like the quintessential, amazing e-commerce brand. Right? Great gross margins. Small, light, revenue dense. I love this. Run it from home. So it doesn't matter that it's in Australia.

you could buy it. No, you just got, I mean, it's probably not SBA eligible, right, Heather? Right.

If it doesn't have U.S. tax returns, it's not SBA eligible. So that's going to hurt, right? I mean, this is big enough

is a $4.5 million deal and you can't get an SBA loan for it. So that's going to be tough. I mean, there's plenty of other ways to finance a deal, but that's a hurdle.

You've also got the kind of probably international entity, you know, like diligence and structuring is hairy on this one. but this is a good business. I like it. I do worry I would be trying to get into licensing as fast as possible because this podcast is going to come out.

Like this stuff has been on Amazon for a long time. Like the competition is coming for this. The margins are amazing and there's nothing truly proprietary. Like I'm sure they don't have a patent on these stickers. I don't think there's a way to do that. So I think the best mode here is licensing if you can have the NFL and no one else has it or whatever. I do like the name. I think it's a good, like, from a brand awareness standpoint, it's not, it's nothing like obscure. Yeah. But I agree. I think the licensing would be. And it's a, it's not like your, you know, something on the kind of the fringe of what the NFL wants to be associated with. Like it's not, D.I. It's not, you know, something that, it's not like cigarettes, right? The NFL's never going to come out and say, yeah, you can be the official cigarette sponsor of NFL or something like that.

This is like very wholesome. It's very pragmatic. And I think like people would generally like, yeah, we want to support, you know, we want to support diabetes. What do you think, Bill, about like, I just noticed this in the bottom. They have Klarna, clear pay, after pay, lay by. Have they already kind of like fine-tune this thing? If they're, if they're already accepting, you know, kind of the installment pay type. vendors, like, do you think this is a well-oil machine and they've, like, gotten all the value out of the

existing model that they can? Yes, to the first part, no to the second part. I think this is probably a well-run business. I mean, to your point, like they've, they've seemed to be doing everything right. We're on their website here. It's a good website. What I'm first, next one to check out, Mills, if you could find them on Amazon, we can put that on the screen. And I can opine a little bit because that's where most of their revenue comes from, right? I'm betting their Amazon listings look quite nice. The growth in this business is going to be entirely probably running Facebook ads, getting it in front of more people. I'd want to make sure that this isn't getting banned or blocked from Facebook because Facebook might think this is a medical device, even if it's not really,

you know, diabetes adjacent. I would want to really figure out if I could run Facebook ads because if you can't, that's going to be a handicap to growth. Now, it's not, doesn't mean you're dead. The next thing I would do is go hard on influencer with this. this brand. I mean, my cost of goods are zero. Any diabetic person with an Instagram account is getting one of these for free in the mail from me. Like, I'm blanketing the influencer landscape here. It's so Instagramable. It's so shareable. It's colorful. I mean, I would be hitting influencers so hard with this business. And then I would also be pushing for licensing as fast as I could to try to build them out.

So, you know, I looked for this name, type 1 style, in Amazon, and over here, I'm looking at all the possible sellers, and I don't see their name, but if you just look up type 1 style patches, there are, you've got expression med, expression med sponsored. It's hard to tell, though, Bill, but I don't, none of these really look like theirs to me. Yeah, I don't really see it. Try type 1 style, all one word. You did multiple words. That's their brand is type 1 style, one word.

There you go. Is that that? CGM. Let me see. That's over, I think. $56 one. Click into the listing. And let's look at the seller name.

Yeah, brand type 1. So now click on type 1 style right below the buy box or right there is fine too. And now you can see all of it. What's really interesting here, here. They don't have that many skews on here, though. You know what? You're on Amazon US. I wonder if you need to be on Amazon, um, Aussie. Uh-huh. I mean, you're probably not even set up to be able to do it. Um, but that, so this now makes it harder because this means they're actually, if, if they're not selling in Amazon US, this is double-edged short on one end, massive opportunity. Yeah.

Massive, right, to bring this to the U.S. market on Amazon. On the other hand, now this is really more an Australian business, right? And you're doing business in Australia, and that's a little harder. And maybe that's why they mentioned working with two U.S. pharmacies and having almost $800,000 worth of revenue, because if that's their gateway to distribution is just through two existing pharmacies, those, like I say pharmacies, it could be a dedicated U.S. website that just sells this kind have medical equipment, medical consumables online, and they just, you know, wholesale with them or something. But to your point, still massive opportunity to bring the directed consumer business to the U.S. Yes, huge business. I mean, they clearly, yes, it says free worldwide

shipping on all orders over 30 pounds. If this is in fact the brand mills, you're, you're guessing this is the brand, right? Yeah, yeah, I'm guessing. It says we ship to the USA, free track shipping worth $8. So, I mean, potentially just huge opportunity to bring this to the biggest economy in the world. You know, we have a lot of diabetics here. You know, so like huge opportunity. Not going to be easy because to your point mills, there's a ton of competition on Amazon that that you found in one keyword search that is clearly bidding on their terms. You search type 1 style and there were sponsored results. Yeah. So, you know, the competition. knows they exist and is bidding on their terms.

But just getting this on Amazon U.S. and make sure you have U.S. 3PL, so you do free ship, like, it should not cost $8 to ship this stuff to the end consumer, right? You should be able to offer free shipping all day long. I mean, you've talked about this, but it's small, it's lightweight, like it could probably fit in an envelope, depending on the quantity. Yes, I would be engineering the packaging, so it would.

To get my shipping costs down. Big, big, big opportunity. There is a search fund community in Australia that's growing. I kind of am connected to them on LinkedIn, and, I mean, it would be a great opportunity for one of them. Yeah. Yeah. Why do you think that this is only selling for three times? I think it's Aussie.

I think there's no financing available. I think it's got some hair on it. Not from the business, the P&Ls of the business seems not hairy at all. In fact, it seems wonderful. But all of your buyers are in the United States, your business buyers, right? Yeah. I think that's it. Or there's something that we don't understand about it,

or it's like super young, maybe. It's been around since 2019 for e-commerce. That's like two decades. Yeah. There's got either something like it's, maybe it's declining. Maybe that's, I don't know. There's either that.

They were told in trailing 12 months. And it was for sale for a year. I just wonder if it's just hard to match buyers and sellers, given the Aussie nature of it, the no SBA day. you know, et cetera. Yeah. So, Bill, let's play it out.

You like this business. You want to pursue it. You've got to, you know, one, deal with the complications of buying a foreign entity. And then two, you've got to deal with the complications of migrating their Amazon seller account from that old entity to a domestic entity. Yeah. And we don't know what the revenue mix is on their own.com, on Amazon, and through these you know, other kind of distribution channels.

But if you're migrating your seller account on Amazon, it stands to reason that your Amazon revenue could go to zero for a period of time. Well, that's why I wouldn't do it that way. So what I'm realizing now, because we couldn't find them on Amazon U.S., this means that they're selling on Amazon, Aussie Amazon, which means they probably are an Australian entity. So what I'm actually doing is I'm probably starting a new wholly owned U.S. subsidiary and I'm registering fresh on Amazon.

So you're starting over with, you know, reviews and. Well, yeah, we're doing that anyway. Well, so maybe because what I'm, what you can probably do is bring the ASINs over to the new market and hopefully you get some reviews porting over. But yes, you were potentially starting from scratch in the U.S. But that doesn't damage your Aussie business. Yeah. I mean, that business probably keeps on clipping along. But yes, you're probably starting from ground zero in the U.S., which is why, but like you probably have a lot of email traffic.

I'm definitely emailing everybody I know and going, we're now in the U.S. I'm trying to get a U.S. 3PL set up. I don't know where this is manufactured, but make sure I'm co-locating inventory in the United States so I can replenish Amazon.com, FBI from the United States. You're bootstrapping a business from scratch in the United States, but you have everything behind the scenes worked out. You have a supply chain. You have a product.

You have a brand. And then you start running ads in the U.S. And yeah, it's going to be like, I don't think this is easy. turn it on and instantly you're swimming in profit. But there's a pretty, I think, direct path to setting this up in the U.S. and over a year or two scaling it. Don't you think, too, that this is just a perfect, like almost guerrilla ground game marketing where you are in the Facebook groups, like you said, Bill, like you're sending people free samples. Because your cogs are so low, you can send them to them. Like you said, you could find,

you know, influencers who are, you know, publicly, you know, talking about their journey with diabetes, you could, you know, like there's just so many things you could do to just ground game. Influencer would kill it on this point. And no paid customer acquisition. And you've got huge margins so you can offer huge affiliate payouts. So I'm sending, you know, I'm offering to 50% of revenue to influencers, right? Like huge affiliate payouts. And you could be, you would bootstrap this overnight. And you push all the TikTok shop would rush. This would crush on TikTok shop. It's so visual. You know, like you could probably sell.

Their 50 packs are pricing at like 50 bucks. I would immediately have a 20 pack. I get it to 1999 or I'd even get a trial pack to 999 or something. And I do, I do a 999 trial pack. I'd revenue share 50% with the creator. I'd make no money. But I would be, I would be trying to go viral on TikTok shop and push all that volume to Amazon to bootstrap

my Amazon USA. Yeah, yeah. Hey, everyone. It's Bill. And I want to tell you about maybe the, most exciting sponsor we've had in a long time on the pod. It's called Capital Pad, and it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So CapitalPad is a marketplace for acquisition entrepreneurs that is people who want to buy a business

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And the returns can be really, really good. I'm so stoked they exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out CapitalPad.com and tell them that Acquisitions Anonymous sent you.

Why should we not go try and buy this? This is like, there is risk, But don't you think there's a massive arbitrage play to say, I want to buy something that isn't viable right now. It's not, you won't get SBA financing. It's a foreign entity. Like, you could probably at least two to three X the value if you just, now I'm not saying it's easy, but you take the steps that we're talking about. You immediately are driving so much. Yes. Yeah. I think you got to know what you're doing. Like, Mills, if you bought this, I mean, no offense. I was going to say, Bill knows what he's doing. You know, like you've got to understand how to like build and influence your ground game on TikTok shop, which is learnable. You know, but like I would, if I bought this business who was doing that, I wouldn't stumble my way through it. I would like take a course on how to do it. I would, you know, network my way to people who've done it before and get good advice and push and expand this thing in the United States.

And the great thing also is it's all synergistic because when we're trying to launch a product on Amazon, ultimately what you need is off Amazon traffic. right so you're you're having to launch on amazon us anyway and you're also trying it's so perfectly suited for tictock shop or influencer more broadly off amazon traffic right so you're kind of doing this all at the same time and it all works together i would expect to make no money on my u.s business for the first year to i would expect to reinvest all of the margin in affiliate commissions and ads to just get the u.s business bootstrapped i think you get revenue growth going pretty quick but i think you'd be reinvesting all of the EBITDA in the U.S. But if you've got the core Aussie business, you could probably afford to do that because

you may not even be burning cash as much as you are just, you know, chopping your profits by 75 to, you know, 80 percent or something like that. Yeah, I would be, I would expect to use the Aussie business to service my loan, which is not going to be an SBA loan, but probably a private loan, and pay for my lifestyle, right, if I'm going to buy this and be the CEO. and all my investing is going to go into the U.S. side of the business, and I'm also going to be just going so hard on licensing. Because if this works, there's not really any IP mode here, I don't think.

So you've got to borrow someone else's IP licensing, right, and make sure you get an exclusive in the category. But I mean, not just sports. Like, I'd be doing all characters. I'd be doing, I'd be doing blueie for kids. I'd be doing anybody that would license me the IP, I'd be doing it. So, okay, Bill, let's talk through that. I don't know anybody first.

hand who has done something like that. There's a guy on Twitter who has like the Buckees merchandise online or something like that. I can't remember his name. Do you either of you all know anybody who has like licensed something with like Disney or the NFL or like. Oh yeah. I have a time of friends. I mean John from Ridge wallet like Ridge does NFL wallets and all that stuff. So how does this work? You go you go to the NFL which I imagine there's you know a million people hitting them up all day every day and they're very judicious about what, you know, they will allow licensing on. Yes.

You find some way to get them to answer the phone or respond to you. And then they hand you probably the most one-sided negotiation of your life, which is you're going to sign our legal documents. There are no red lines. Like, the rates are what they are. So you probably don't go right to the NFL. So the way this sort of happens in practice is like franchising. Like you don't just go to McDonald's.

You're like, hi, I want to open McDonald's. Right? you have to like open five KFCs first and some subway shops and then like and then you go to McDonald's and you're like I want one McDonald's right that's the same way like you want to start with like you know some movie characters you want to start with major league baseball you want to start with some of the other non-markey stuff yeah uh and you climb the ladder so like we actually have explored doing some licensing for dog supplements and so I'll use non I'll be non specific on names but what it is is you go to the rights holder uh and you basically say

hey, we have this idea for products, we want to license your IP, and you basically pitch them. Yeah. And then you negotiate the deal. And the way the deal is typically structured is you pay them a royalty, a percent of revenue, which can be anywhere from like five to 15 percent, typically. And it's very negotiable. And every rights holder will have their own kind of, you know, NFL is probably going to want on the higher end. You know, lower tier IP is going on the lower end.

They'll typically charge you different percentage. for channels, like retail is typically less because they know your margins are less, et cetera. And then there's typically a royalty guarantee over a certain number of years. So you'll say, like, we will guarantee you 50 grand a year in royalty payments for three years, which means if you don't sell anything, you're still on the hook. And those guarantees for lower tier IP can be 25 grand a year, 50 grand a year, etc. The guarantee for NFL is probably way higher.

Yeah. Is it the kind of thing? where like if let's just say it's NFL or like NCAA, do you have one deal with the parent organization, they are the rights holder? Or is it like, well, actually, I want to just do Panthers and Cowboys stuff, but I don't want to do 49ers and I have to cut separate deals with all of them? No, the leagues, I think you license at the league level. Uh-huh.

Because otherwise it would be a mess. Yeah. You can do sponsorship deals with the team, like the official diabetes patches of the Carolina Panthers, but you don't get to use the logo. Okay. You know what I mean? You can be the official diabetes patches of Carolina Panthers, but that doesn't really help you in the case of this business. Yeah, yeah. Right. Then you're more like advertising in the stadium. Yeah. We have looked at that. It's kind of interesting. The numbers that I heard surprised me kind of in the wrong direction. So to be the official roofer of the Gamecocks, you have to be spending the University of South Carolina Gamecocks. You have to be spending about $400,000 a year. on, you know, just general marketing spend, like radio and in the games and all that kind of stuff,

and they give you that. A third-party agency reached out, and they were doing the same thing for the Panthers. And the Panther, Carolina Panthers, it was only like $40,000 of spend to be the official roofer. And I was like, maybe it's because they're not having a bad, you know, not a good season. But these are, they're multi-year deals, you know, and there's escalations each year. and you get some kind of perks along the way, but I was surprised that it was so cheap. It is cheaper licensing.

We have talked to some top tier, like kind of movie and TV IP, and the guarantees are $25,000 a year for like two years. So, like, you can get into licensing. It's more about proving credibility to the rights holder that you're going to be a good steward of their brand. And the best way to get in with rights holders, by the way, is to find someone who's already licensing the IP

and get introduced to their contact. So, like, there are people, at, you know, Universal Studios or, you know, the NBC or whoever these right holders are, they have whole departments that just do licensing. Yeah. No, all the time. So you just have to, if you get introduced into the person rather than like trying to fill out the form on the internet, it will go way better for you.

So a huge opportunity for this to have like real licensed IP. I just blinked and we've talked for 30 minutes. I really, really enjoyed this one. My last kind of thought before we wrap up is, are there? any kind of quirks to medical devices? Like they mentioned that they have ISO 10993 certification, which is like for, you know, it's pretty specific these ISO certifications. It's biological evaluation of medical devices is 10993. Heather, have you done any deals, financing for deals that were medical equipment, like durable or consumable medical equipment? Yeah, I have actually

financed a diabetes pump supply company. So yes, absolutely. So yes, there's a lot of compliance. I can't imagine what kind of compliance for the sticker on the sensor. Yeah. Yeah. Then it just has to fit. And they showed that in what we looked at different size sensors. But yes, I have. Yeah. And I guess if you're in this case, they are not the manufacturer. They are just the market. The market, though. Yes. Yeah. Which is important. You know, what can I say? Like, you know, you're the seller. You're the merchant of record.

So, yeah, yeah. Subject to a lot of compliance, probably. I'm just thinking you would also be pushing that, you know, through the supply chain because the factory itself is probably the one who's actually making it is, I think, probably where that like, that is rubber meets the road the most. So it's important to Mills. There's like what I'll call it true compliance, which is driven by governments. But then there's also like de facto compliance. which is driven by your channel partners of all types. And the one I would be specifically worried about here is your advertising partners,

aka Facebook, Google, et cetera. Because they don't review every single advertiser. This is going to trip every algorithm on the internet. And they're going to go medical device, medical device, medical device. You can't advertise, you can't advertise, you can't advertise. So like navigating that maze. Because like this probably, if you get a human to look at this, you probably can advertise this.

Like it's not actually a medical device. It's a sticker, you know, et cetera. But you are going to spend your entire life getting banned and unband. Yeah. That's just a fact. Like every time you submit an ad on Facebook, it's going to get rejected and you're going to have to ask for manual review every single time. So you would want like that, I think, institutional knowledge.

If this business has it, you'd want to learn it. If it doesn't have it, you're going to need to develop like an SOP. Like even if I think I'm allowed to say this word in market, If I say this word, it tricks the filter and we can never get any ads in. So you're going to be very much dancing around the compliance policies of meta and YouTube and all that stuff all the time. Constantly. I really like this, though. This is really interesting.

I really like it as well. And this is one of those things like if you're a business buyer, this is where your ability to deal with complexity and hassle creates real value. because this is off the table for like your standard. I've never done a deal before. I'm SBA financed, 5% down, you know, buyer. Just can't do it, right? For logistical reasons, not because it's not a good business, but because it's Aussie and all that stuff.

Yeah. And like this, like I would be a very good buyer for this, right? Because I don't need an SBA loan and I have the expertise. So there, I mean, there's other bills out there, right? So like if you are the right buyer for this, this is amazing. You're going to get a good deal just because you fit the buy box, the strike zone for the person that can do this deal. And all buyers, all business buyers, like this is what you are looking for. You are looking for a deal that most people can't do, but you can do.

That's how you have a successful search. Yeah. Heather, you could use SBA to refinance, right, post-acquisition. So let's say you bought this with, you know, no debt or maybe it was just some, you know, traditional bank. debt, not SBA. You get two or three years in, you've done all the things that we're talking about. You could do kind of a refi or cash out refi, right, with SBA? Not cash out. That's the one thing that's a bummer. So whatever leverage you can get on it, that's all you're going to be able to refinance into SBA. So if you have to go really low

leverage, you could refinance it, but you're not going to be able to get any cash out. Okay. But you could. Yeah, after a couple years. Can you use the 7A loan? Like, let's say there's only $2 million worth of debt. you are paying it down over a couple years. You've got, you know, a little over a million or a million and a half dollars worth of the debt. Could you get an SBA loan for two or three million dollars and not cash out in the form of the distribution, but put the cash on the balance sheet and use it for growth? Theoretically, there's nothing wrong with that in the rules. It is harder to get a bank to finance growth working capital. That's all that I'll say about that. But yes, you could. I mean, theoretically, you could get that. Okay. Well, I know you can't do like a cash out refinance with an SBA loan. But let's say I've got, you know, a million bucks of debt on the business. Can I take down one and a half million bucks of SBA lending with 500K to the balance sheet for working capital? And then a year from now do a $500,000 distribution. Now you're getting, now I can't go on record and answer this. I mean, a year from now, like, hey, look, we have X's cash in the balance sheet, you know.

Let me ask you a different way that I'm not going to get you in trouble, Heather. Do SBA loans have a clause that you have to pay down debt before you do distributions? Or can you still do distributions if you're servicing the debt appropriate? Not directly, but the SBA did put a new rule out in June that says it's kind of vague. And it says any kind of equity that acts and looks like debt, we're going to. to treat it like debt. So you have to be careful that distributions don't kind of create that look. Well, yeah, but you're not going to pay it back. It's a distribution of shareholders. Like, it's not like you're going to loan it's shareholders. Just giving the shareholders the

money. Yeah, right. I think with any distribution with an SBA loan, even though the loan documents don't necessarily require it, should always get the consent of your bank first. You know, this, yes, we do have excess cash. And yes, we've been, you know, we've got plenty of cash flow to continue to make the payments. And I think under those conditions, yeah, you could do what you're talking about. You don't want to have the right to block it, right? So they don't have. And also, you're personally guaranteed. So if you, the capital's coming right back in, even, you know, if you can't service the loan. But you could be, I mean, I've dealt with businesses that are in covenant default, but they haven't missed payments, right? They've just blown their debt service coverage ratio or, you know,

days working capital on hand or like whatever, you know, it's all the devil's in the details of those companies. In my experience, this is just anecdotal, and some other anecdotes that I have heard, once the loan is funded, you don't have a lot of communication from your lenders so long as you make the payment every month. I mean, is that factually true? You have to provide quarterly financial statements. Most banks will require that. So there is that level of looking at, you know, how are you doing? And if it's not good, they're going to pick up the phone or want you to pick up the phone and talk about it. But what I think you're describing is there's not covenants usually in SBA loans because the SBA does not want lenders declaring technical defaults.

They don't want them shutting down small businesses over a technicality. So defaults in SBA are generally something very serious. It's either you miss the payment or you burn down the building or, you know, destroyed the collateral or something really crazy. But it's not like your DSCR or your liquidity ratio wasn't good. Therefore, therefore, closing. The SBA has just traditionally never allowed lenders to take actions like that on technical defaults. So effectively then you don't have covenants with an SBA loan. Yeah. Well, because what you do have is a personal guarantee. So like, you know, in a traditional lending, a non-SBA lending environment, like the reason covenants exist is like early warning

on default, right? Is because the lender wants to have a convert, have a stick to make you have a conversation before you don't pay them. Right. And that's typically because those loans are not personally guaranteed. So if the company stops paying them, there's no further. Right. There's less recourse. Sort of the trigger on an SBA loan, like if the company stops paying them, there's still one more tier of pocket to go after. So like that that's sort of the early warning is that the company stops paying in an SBA loan scenario. So that's why you get. I mean, they look at the quarterly financial statements and they grade the loan internally, but they can't do anything about it. Like let's just say they've seen a few quarters of really bad financial. statements, but you're still paying. You're not in default. You're still paying. But they'll internally grade that this one's in trouble, but it's not really going to, nothing's going to really happen until you stop paying. When we went out to source some commercial debt, just non-SBA kind of traditional on-balance sheet for the bank, a lot of them wanted, we had a scenario we were going to have high debt service coverage ratio. And they would give me a longer am, but they

wanted a cash flow recapture loan to say, yeah, we're going to give you all that, but every year we're going to claw back, which we didn't do, but we're going to claw back access, you know, free cash flow over and above a certain amount so we can de-risk faster. That's very common, Mills. Like a lot of senior debt will prohibit distributions. Yeah. Or at least have to approve them. Yeah.

Which you kind of make sense, right? Like the debt is the senior capital. Yeah. The bank's like, look, we have a 15-year-am or something like that or 20-year-am and a five-year balloon. and you're going to get rich in the meantime and we're still carrying all the risk. Like, help us de-risk this thing. Right, which is kind of fair.

Yes. Yeah, but also like, and that was how our debt was structured too at Eleanor's brands is we had to request. We're allowed to do tax distributions. And if we wanted to do distribution above and beyond tax distributions, we had to ask. And then there was like a whole mini underwrite again, like if they thought okay about that. Exactly. That sounds terrible. What, debt?

Having lenders? Yeah. Yeah, having ringers who have their hooks in you, you know, I mean. Yeah, well, everybody would love that, you know, covenant light debt that they were handing out like candy 10 years ago. But how do that go? Okay, you know, we have to wrap up because I think we're going, this is the longest episode we've done. But it was a really fun conversation. And I learned a lot about SBA, learned a lot about medical equipment, consumable medical equipment, and e-commerce.

enough to say that I know I don't want to be the one competing against Bill in this space, but Bill, I will partner with you. I want you to buy it. Someone, someone's going to do great with this. Any, an e-commerce native U.S. person, I would think, too, could bring this to our market. So really good one. Great deal, Mills.

Yeah, thanks. All right. If you guys like this one, there are 400 more like it on ACQUAnon.com, or you can find us on X at the same handle. e-commerce, construction, manufacturing, whatever you are into,

we have explored it. And you can also get on an email list and we'll email you the episodes. If you're not like a podcast subscriber or you're drowning in podcast subscriptions, let us send it to your email. Go to the website, acque, unon, dot com.

And I'll also say if you want an SBA loan, I feel I've got to plug Heather. Heather is probably the smartest person in the United States when it comes to SBA loans. And her company, Vizzo Capital, is, I think, one of the best connected loan brokers in the SBA.

world. So if you need an SBA loan, working capital or acquisition, Heather is your go-to. You can also find her on X or at visocap.net. Hope you like this episode and we will see you next time.