Acquisitions Anonymous - #1 for business buying, selling and operating - A $1M E-commerce Pest Control Brand - Buzz or Bust? - Acquisitions Anonymous 297

Episode Date: May 14, 2024

In this episode of Acquisitions Anonymous, we dive into a pest control e-commerce deal. Michael, Bill, and Mills unpack everything about this eco-friendly mosquito zapper business, from its $2 million asking price to the risks of banking everything on one popular product. It’s real talk on what it's like to run a niche online business. If you're into e-commerce or just curious about how a single product can make such a big impact, this episode is for you. Check out the listing here: https://www.websiteclosers.com/businesses/pest-control-ecommerce-brand-practical-ecofriendly-solutions-140-aov-200-000-average-monthly-visitors-100-000-email-subs-strong-team-in-place/109592Thanks to this week's sponsor, Plane:Expand your team globally with Plane’s payroll and HR platform. Easily hire, onboard, and pay employees and contractors worldwide. Manage US and international payroll, benefits, and compliance efficiently. Plane automates payments and ensures tax compliance across over 240 countries. Learn more at plane.com/aapodcast.Learn how to buy a business.If you are interested in buying a business but unsure how to start, you should check Michael's Buy a Business Course:You will learn:• Build a thesis for the type of business that's right for you‍• Learn how to stand out in a sea of buyers• Create a working, scalable Deal Engine getting you leads• Maximize your chances of finding great dealsSubscribe 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]

In 2021, this is a three-year-old business? It's crazy. For this size business, is that pretty typical? They haven't diversified the product-specific risk, and they don't want to. They just run up. What you got here is an Australian-based business, manufacturing a Chinese product that is 3PL in China, and it sounds like shipped direct from the 3PLs to their customers, to which they run a whole bunch of Facebook gas for. Hello, ladies and gentlemen, boys and girls. Welcome back to another episode of Acquisitions Anonymous, the Internet's Numerous. the internet's number one podcast on buying, growing, and selling small businesses. My name is Bill Alessandra. I'm one of your hosts. And today we have an e-commerce brand in the pet control niche. They sell bug zappers. And they're Australian. They sell the products in Australia and in the United States. And they source it from Asia. They have an Asian 3PL.

It's a really interesting business model. I have some super strong feelings about this. Whenever we do, whenever we do, e-commerce deals like this. I feel like I run my mouth a whole episode. Hopefully it is worthwhile and that you enjoy this episode of Acquisitions Anonymous. Hey everybody, it's Millnell with Acquisitions Anonymous. We have an exciting new sponsor that I want to talk to you about today. This is a universal problem. It's a universal thing that every business owner deals with, and that's HR and compliance. And so are you looking to grow your team worldwide?

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Learn how Plain can take care of your global payroll needs and benefits and compliance by visiting plain.com forward slash a A podcast. That's P-L-A-N-E dot com slash A-A-A-Podcast. You can find them on Twitter at Use Plain. Thanks so much. You know, I think our listeners may be surprised to know, Bill, that we've actually all become friends for this podcast. I know. Me too. I mean, how many hours that we're pushing, we're pushing up on 300 episodes of Acquisitions Anonymous?

I've spent more time with you guys than a lot of my real friends, like in-person friends, you know. Well, here's still a data point. Mills and I have not been in the same room together. I would even... So, Mills, I need to warn you, if you've never been in the same room as Gurdley, he is shockingly tall, which I've not realized. Yeah, we have a big dude. He is very... I know.

I think... I said your other of your bike, Michael, your road bike. And I was like, oh, my God. Oh, yeah. All my, on the road bike, all my Mexican friends that live here in San Antonio and speak Spanish, they all call me Barabrisas, which is windshield. It's like the best thing back man. So, and then I, you know, I'm learning Spanish. So basically, like, I'll hear them talking in Spanish.

And then I just yell out. end of gibberish in Spanish at them. So, like, one of our jokes is, like, one time we were writing and, like, we're stopped at a stoplight. And I yell back to my Puerto Rican friend. I was like, yo, dude, come so did he say tailwind in Spanish? And I heard him say, Viento de Culo, which means asswent, because Cullo is asswent. But he said, viento de Cola, which is tail, cola is tail.

So ever since then, it's Viento de Kulo, and it's been fantastic. But, yeah, that's why. Well, athlete, he's talking very different around here. Yeah. So that's why I know, that's why my Spanish is basically construction site Spanish. So that's basically what I got going on. Cool. So we got this deal.

Can I read it to you guys? Yes, let's hear it. All right. So it's website closers, which, by the way, is like the People magazine of business listings. That's what I'm convinced. Every time the website closers. It's like, it's like, us weekly. The National Enquirer business list.

Because every single one of you, you're like, there's no way that's what's going on with Keith Middleton. You know, like that's basically the, this type of sword. So anyway. All right. So website closers.com. Pest control e-commerce brand. Oh my gosh.

This is totally at our wheelhouse. Practical and eco-friendly suit. Practical and eco-pillings. $140 average order value, $200,000 average monthly visitors, 100,000 email subs with a strong team in place. And this one is listed as pending. So sorry, guys. Your dreams are getting deflated. All right.

Okay, so here's the problem with also with website closers is they write these giant books about these things. I'll paraphrase what we got here. They were already robust and then Chatsubit came out. and these things have ballooned until like the most, like they were already writing like ChatsyBT before ChatsyVT, and now it's just completely out of control. All right, website closers presents a flourishing e-commerce brand that's been all the buzz in the at-home pest control market niche.

They sell a range of practical and eco-friendly pest control solutions to their dedicated audience through Amazon and their branded websites with the latter generating most of their sales. The founders came up with the company's concept after struggling with the very same problem they work for all their customers. All types of bugs, especially mosquitoes, pestering them during the hot Australian summers in Brisbane. They were tired of the hazardous chemicals that many pest-free products had,

which posed a risk to their health and the environment, and as such, decided to create an environmentally friendly mosquito solution without toxin chemicals in the formula. I'll just pause there. I've tried all of these, like, no-deat, no-whatever mosquito things. They don't work. So anyway. It doesn't work like deep.

Yeah, it's like, you. Yeah, it's like, yeah, the mosquitoes are so bad in San Antonio. I don't know if they are in South Carolina Mills, but at a certain point, everybody spends like a month trying the non-toxic stuff. And then eventually you're just like, you just walk into the Home Depot and you're like, yeah, give me the gallon of DDT, please. Like, I just need that just spray it all over my body. Okay.

Sorry for the rant there. I think we need a site to Brisbane to just verify. Check the quality. So it's interesting, this is in Brisbane, Australia. Yeah. So I'm already wondering how much of these sales are in the United States or in Australia. They, yeah, Australia mosquitoes are crazy, just like all the other animals there. Like the whole place is trying to kill you.

Yes. Yeah, we went, my wife and I, before we got married, we went to Australia and we went, like, on a camping trip. And it was like a guided camping trip. And they were like, do not walk further than 10 feet from the fire. And I was like, well, how do I pee? Like, where do I go to the bathroom? He's like, if you go further than 10 feet, mate, like, a. Dingo will come in and kill you.

I was like, what are you talking about? Like, why are we camping in like Dingo hunting grounds? Like, who thought this was a good idea? Anyway, okay, the initial product was then marketed with sales promptly searching as customers discovered their brand. From there, the brand has to continue to create and successfully launch innovative solutions and tackle the many different types of pests that Australians and consumers around the world struggle with.

Today, the brand has a thriving audience that appreciates the value of the formulas and devices, which contributes to the credibility of bottom lines. Here are some of the reasons why the brokers are excited. They have an Asia 3P&L. They've explored new markets, and of course, you can add social media marketing. Their products are sourced and white-labeled through reliable suppliers with whom the current management has strong networks. The brand uses 100% stock model with their inventory being managed between 3PL facilities of Asia, Australia, and the U.S. Roughly to 70 to 100 orders are shipped out daily.

They keep from 7 to 30 days of stock, and orders are typically placed for the factories every two to three weeks. They have negotiated favorable payment terms, which leads to highly beneficial as a business, continues to grow. They use digital marketing to draw on about 500,000 people to their site every month. I'm just, that basically means meta PPC, right? Is that kind of how to think about that, Bill? Yep, that's what I'm hearing. Facebook is behind most third demand generation model. It's not like a lot of conversion rate. There's a lot of cheap traffic out there. Well, we can basically do the thing. They do 500,000 visitors per month, and they're shipping out 100,000, orders daily at the high end. So per month, that's 3,000 orders. So they're out of a half

million visitors. They're converting that about 3,000 customers, assuming no repeats. The company's core demographic consists of middle class individuals between the ages of 45 and 70 who are finally hoping to put it into their mosquito or pest problems. Yeah, good luck with that. So I don't know if you guys have seen this, but like here we, have huge mosquito problems in San Antonio. And one of my neighbors went and, like, they just let their yard go feral. Like, they're just, like, they just, we're just like, we're going straight, straight feral. And the, the thing that has changed somewhat is the amount of mosquitoes nearby has gone down, like the natural order of things. Like, there's, like, bugs and that sort of thing.

So anyway. Interesting. Yeah. I don't know if they're totally. You're not. What, birds eat mosquitoes or, What eat bats? Bats eat them. Also, bats eat their weight in mosquitoes every day. I need some bass. The other one is...

This business sell bats? That's non-tosic. So that was one of my ideas, actually, to go against the mosquitoes was to, like, put a bat little house in our backyard, but I never attracted any bats, so I gave up on it. The other thing is, have you ever, have you ever, like, studied dragonflies? because I noticed like near a lake near us,

there were tons of dragonflies and there were no mosquitoes. And it's because dragonflies are like stone cold killers. Like we are so lucky dragonflies aren't like two feet big because we'd be so screwed. Like go go watch the nature channel on dragonflies and then like you'll have nightmares for a week. All right.

Back to the deal. All right. The asking price is $2 million. Cash flow is $1.26 million. So they're asking one and a half times cash flow. flow. Gross income is $5.6 million, and it was established in 2021. This is a three-year-old business.

That's crazy. Bill, you hate it, but that, like, to me, this is intriguing. Mel's warrant to be bad. It's so bad. Like, you should run away West Side Clothes if and loaded by and S. Yon, I'm not biased business to be bankrupt here. That'll be good. It'll go great for you.

Roms. Oh, this is the most website closers deal I've ever seen. So this business is three years old tops. And like class, so like read this. So it's based in Australia. This is like classic business broker obfuscation right here. The brand operates primarily in Australia and the U.S. With these regions accounting for 80% of their sales.

And then it says Canada and New Zealand contribute the rest of their revenue. So they've intentionally lumped. Australia and the U.S. together here to get to 80%, which makes no sense. And then immediately the next sentence is their sales peak from October to March when Australian summer is at its peak, which tells you that the Australian bit of the revenue is the massive lump by far. Otherwise, it would be counterbalanced by American summer, which it clearly is not. So most of the sales of this business are in Australia. So what you've got here is an Australia-based business, manufacturing a Chinese product that is 3PL in China and it sounds like shipped direct from

the 3PLs into to their customers to which they run a whole bunch of Facebook gas for. There is, I was expecting this to be almost 100% Amazon and they've said the word Amazon a couple times in this listing, but they don't kind of come out and say it. They say additional traffic to their Amazon storefront. And they also say really at the, at the bottom, There is a key phrase here. Their top selling product is a mosquito zapper, which is currently responsible for 80% of all sales. So this is a single company. That is, that's a death now.

Yeah. So commodity Asian electronic is 80% of your sale. Good luck. So, I think. All right. Yeah, Mills is back on. Congratulations. I changed.

I've changed. It's too late. You already closed. You're done. You call Heather. You're defaulting on your SBA loan. So I just, this is, I, you see this all the time. And there is a business, there is a set of entrepreneurs out here that do this on rents and repeat, which is, and I, you start a business. You scale it up. And then you reach this inflection point where you got 80% of your sales is bug zapper. And you know what's about happened is the bugs apper is not. going to take it's not going to be selling bugs afters a decade from now right so like this thing is about to roll over and you've got two choices you can either come up with new hero products or you can call website closers and sell the business and i explicitly say website closures because other brokerages would not take this on because i mean this is just a recipe for getting screwed and by the way there is a reason this thing is priced at under two times cash flow right this is 1.2 million of cash flow and 2 million asking price you'll be lucky you for you you get your capital back here. This will start feeling like 10 times cash flow inside of a year.

I guarantee it. What you're basically then scrambling and do is come up with the next thing that you can sell these customers. Now, you will have an email list because I think they're doing a lot of dot-com sales here. But still, I mean, this is functionally going to be a different business in a year because I just don't think you're not going to be able to command whatever margins they're commanding here on a commodity Asian product. Like type in Bugs app on Amazon. Amazon. Good luck competing on those keywords. They've got a certain number of ads and you can't run those ads forever. Like, competition is going to show up. I don't see any IP here. I just don't see any mode at all. This is a great way to make some money for the people who started it. This is not a durable business with enterprise value. I don't think.

By the way, and last thing I'll say, it was in 2021 when the Amazon aggregators were buying these things for four times you've done, and that's why they're all bankrupt today. So don't be like the rest of you. It's funny how, I mean, you can see what's going on behind the scenes in Amazon. I just did what you said, Bill, and went in search bugzapper on Amazon. And it's funny how often it's the exact same product from a single factory. and it's listed here like 42 different times, each time with a different name on it.

They just slap a different name on the exact same. The exact same model. Like, here it is. Here it is. Again, it's like, oh. And they'll make, like, different photos or like, and like, let me just tell you, Amazon consumers out there,

if it looks like it's the same product, it's coming from the same factory. You know, the logo is self-screened on it at a factory. Don't pay attention to the reviews, just buy the cheapest one. It's the same. And there will always, be one cheapest one, that one is the latest guy that has private labeled bugstapper from

Amazon and is selling it below cost to try to build rank. Just buy that one. Pro tips. Behind the scenes. I know it's on. Just when you see, when you're buying a buck. Just buy a little one that figure out the one you want and figure out which quote unquote brand is the cheapest. Have you seen the bloodbath on Twitter? I remember seeing one of these a few years ago that was like, like three years old, had gotten to 40 million in sales selling hearing aids. And it was like based in Malta or some tax haven. And it, the guy basically owned it.

Like, yeah, I'm doing to do something. It's tons of paid customer acquisition. I'm really good at it. But it's like, you know, I just held onto the rocket ship as long as I could. And I want you to pick it up for me. And you try and hold on as long as you can. But it's just just seems like the most volatile, risky, unpredictable.

Well, the only certainty is there'll be a race to the bottom in any category that works, right? Like, as Bill's talking about, like, yeah, you're just, you're going to buy it. You're going to ride the wave and then just make sure you're ready to get out of it before the thing crashes under the rocks. Yeah, I mean, you need a moat. You need a, like a really strong brand mode. And I'm talking like, like Nike. Like, you need a really strong or you need IP mode or you need distribution mode.

You know, like in our business, like, that's why we push so hard in a retail. We've got, you know, we're all the nation's biggest pet retailers now, right? We've got a distribution note there. That's why we're really focused on branding, you know, with our name, natural dog company. And we defend that trademark vigorously. You know, you've got to, and we're developing formulas that are accustomed to us. We're sourcing raw ingredients. You know, you've got to build these moats.

But if you come with just, I'm bringing this thing in from China, it's so, so hard. As another fun exercise, anybody out there, if you're looking at buying. a business like this. Figure out, sign the NDA, figure out what product it is. And then you can go on AliExpress, which is Alibaba's like, you know, consume if you go on Alibaba.com, which is like the B2B Chinese marketplace or Alibaba where Alibaba, which is the B2C Chinese marketplace. Go on Alibaba.com and you can find it like straight up.

And then ask yourself, if I was able to find it so quickly, is there really a note? And by the way, you sign an India. I'm not suggesting you then compete with them. What I'm saying is, as diligence, how easy is it to find their supplier? And if it's pretty freaking easy for you, that should give you a lot of pause. I'm also interested it says they've got seven full-time employees that work in video editing, customer service and marketing alongside three additional freelancers that handle also video editing, graphic design and web design.

My questions now are none of these people are managers or leaders or strategists, right? You've got seven full-time employees, like, I'm sure these are all overseas. and nothing against that. But they all report to the entrepreneur. So on day one, you show up and they're like, what ads do I make, boss? And unless you make ads as good as the guy that just sold you the business, you're not going to know what to tell them. And your ads are going to be bad, but relatively, this is just really tough. I'd also be really curious if that these freelancers are working for this owner's other businesses because I guarantee you there are other businesses here.

And this is the one that has like whoever owns this. does this every six months, right? It has a couple of these going parallel and has website closers on speed dial. And like once they have two years of financials and it's SBA eligible, they call website closer. Whoever is selling this is not in the business of hold of the back. I guarantee you. That's such good insight, Bill.

Like proof that you've looked at hundreds or thousands of these because I look at it. I'm like, huh, kind of interesting. Like maybe there's something to this. And you're like, I've signed enough NDAs. I've seen enough of these Transact and Crash, and I mean, you know the nuances of Amazon and the black hole that it, but it just, it's, it's proof and testament to, you know, building subject matter expertise and, you know, that whole adage,

like if, you know, if you're sitting at the poker table and you don't think it. Yeah. Yeah. Someone actually replied to us on Twitter. We did another deal, uh, the luxury marketplace deal, which I was several episodes back. And someone said, perhaps the and we were wondering whether it was involved in illicit activities or whatnot. And someone replied, maybe the best fit broker for the marketplace that does the least diligence is the broker that does the least diligence. You know, that's kind of what we got going on here. But so we're all doing them down on this one. I'm so out.

So what's it where? I mean, like, is there a price? I mean, I think there's a, you know, I said there's in the last episode. A seller note type share revenue with, you know, no obligation type thing. So if this thing tanks, seller doesn't get paid either. You know, that's the only way I would buy this would be with extreme risk share, you know, dramatic risk share by the seller, you know, wanting to step out of it. And I sign this, I mean, this says pending.

Michael, scroll up. Does this say pending? Yeah. Yeah. Oh, boy. Yeah. So I would want to, I would also ask how many other. businesses does the opportunity are own and how many other businesses has he sold and I would

guarantee the numbers both of those will be high so makes me nervous one one thought before we wrap up bill is is there the fact that they have 80% you know maybe it's not one skew maybe it comes in three different colors or something like that but fundamentally there's one product that does 80% in the sales for this size business is that pretty typical. Like they haven't, they haven't diversified the product specific risk. And they don't want to. This is an entrepreneur type person, which I'm sure they do great. And that's, that's why websites exist, by the way, because those, you know, that business model needs a brokerage. The, I mean, this is this $5 million business. Like, you can easily get one product to $5 million

bucks, you know, on e-commerce. So yeah, a lot of times businesses, this scale don't have pure products, or exclusively I have pure products, rather. And I don't hate that it has 80% of sales from one product. What I hate is that 80% of sales are from a commodity Asian electronic. That's the problem. So 80% of sales are on a race to the bottom, no moat skew. That's what scares me. You know, if 80% of sales are on a proprietary patented game or something, great. You know, you probably double it from there. You know, or more. I see. just it's just like, it's a commodity.

Like the joke in Amazon seller circles, there's this guy named Scott Ogler, who was like one of the original Amazon influencers. And everybody was so cagey about telling people what they sold in the early days of Amazon and still are that he would, Scott would always use a garlic press as like the example product, like the stand in product. And so like the garlic press is now like a joke is like synonymous with the word

widget like in Amazon seller circles. So like it's this kind of like, imported from Alibaba, you know, silk screen your logo onto it. Everybody has one really competitive. So like if your main product is a garlic press, I'm scared. If your main product is, you know, something proprietary. Yeah. Dude, that's awesome.

I love what you teach. There's been a decade doing this. So I guess that's why I'm allowed to host a podcast about it. Yeah. And that's true. And you got scars to prove. All right. Let's wrap it up.

If you enjoy this episode, please follow us on Twitter. Aqua Anon, ACQU, Anon. You can follow me at Buildie or Mills at the General Mills or Michael is at Gurdley. We love you to follow or share this episode with somebody who's interested

in buying businesses so that they can learn about the topic just like you have. We'll see you next time.