Acquisitions Anonymous - #1 for business buying, selling and operating - We liked a Deal! 2 profitable eCommerce businesses for sale - Acquisitions Anonymous Episode 100

Episode Date: June 8, 2022

Michael Girdley (@Girdley), Bill D’Alessandro (@BillDA) and Mills Snell (@thegeneralmills) are joined by Andrew Gazdecki (@Agazdecki) to talk about 2 Deals: A Shopify automated SMS and an eCommerce Cartoon generating illustration company. We also talk about how we see buyers, market prices, government financing grants, and more.-----Thanks to our sponsor!MoreNow.co: We help owners build a high functioning, experienced team by leveraging the top manager/director talent in the Phillippines.Go to morenow.co and fill out the form. Or email [e-mail]. Mention this pod for 20% of your first hire.-----* 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.-----Acquisitions Anonymous Episode 100!Show Notes:(1:14) - Morenow.co(3:06) - Andrew Gazdecki is our Guest today!(9:12) - What are you seeing on the buyer's side? (13:01) - Government financing grants(14:29) - How do we see the market right now? What’s going on with the prices?(15:51) - Deal 1: Shopify automated SMS tool(16:00) - How does it work? How do we understand its value?(19:00) - Why is this business so profitable? What is their cost structure like?(20:40) - What is the technology like for this business? Is there proprietary software here?(22:00) - Who would buy this?(25:02) - What is the challenge of starting this business?(26:00) - QSBS tax treatment: How does it work?(29:00) - Deal 2: eCommerce Cartoon generating illustration company(30:35) - How do we think about this business? What is the CAC like?(34:10) - What is the durability of the revenue stream?(35:50) - Bonus deal: Procurement software Saas business-----Past guests on Acquanon include Nick Huber, Brent Beshore, Aaron Rubin, Mike Botkin, Ari Ozick, Mitchell Baldridge, Xavier Helgelsen, Mike Loftus, Steve Divitkos, Dzmitry Miranovich, Morgan Tate and more.-----Additional episodes you might enjoy:#96 From W-2 to Business Owner - Patrick Dichter tells us how to cold reach sellers and we discuss 2 Deals#92 Wait... what? You laid-off 90% of your staff?!? - Pete Erickson joinedSubscribe 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]

Welcome back, everybody, to another episode of Acquisitions Anonymous of Mills Snell, one of your co-hosts joined today by Bill D. Alessandro and Michael Girdley. Acquisitions Anonymous is the number one podcast on Small Business M&A. We have an awesome guest today, Andrew Gadsdecki from Microacquire. Andrew's been on the podcast with us before. He is a really, really fun guest because he sits in this fascinating seat where he gets to see tons of different businesses for sale. Usually e-coms, SaaS, Shopify apps, kind of earlier stage, not the traditional lower middle market

or Main Street businesses, but he brings some really cool deals today. We talk about some interesting businesses. One of them is a SaaS business. It's a Shopify plugin that handles text messages to customers. Those businesses are

fascinating. Bill has some experience with one of those so we're able to get into the weeds. And then we talk about a really odd business that I'd never thought about before, which is a e-com business that handles making cartoon portraits. So really, really different deals today, really fun deals today. And we talk a little bit about the e-commerce space, the SaaS space in general. I think you're really going to enjoy this one with Andrew.

Thanks for joining us. And here's a quick word from one of our sponsors. Hey, everybody. Michael here. I want to talk to you a bit about one of our very welcome sponsors for today's episode. It's the folks at Moore staffing, specifically Greg and his team. over there, have been a great friend of the podcast. And what more helps people do,

and you can find them at more dow, more now.co on the internet, what they help small business owners do kind of goes above and beyond what you're seeing other folks doing in helping small business owners like you build overseas teams, specifically in the Philippines.

And what they do is they're helping, helping you find not only the people that are basic individual contributors and oftentimes virtual assistance and that sort of thing overseas, but going above and beyond that and helping small businesses really upskill and hire strong competency and experience

at a discount overseas. So a lot of that is hiring director and manager level folks, people that can really meet the needs of what you need in terms of running a complex business with complex needs and stuff like that. So a lot of these folks are very experienced, have been in an industry for a long time.

So in the end, make your life a lot easier by hiring great people and experienced people in that way. So, you know, given what's going on with COVID and remote work becoming more normalized and more things getting pushed into different corners of the globe, more has turned into a great resource for a number of folks. I know a number of listeners of our podcast have signed up as customers there, and we're grateful to Greg and his team. You can find them at more now.co.

Take a look there. Tell them we sent you. And if you're starting to build not only, you know, a basic fundamental level of team, overseas, but you want to bring on people who are more experienced as well. This is a great resource to go check out and definitely friends of the pod. So thanks to them and check them out. MoreNow.com. Andrew, thanks so much for being here, man.

Really, really glad that you're back on the podcast with us. You've been a longtime friend and supporter of the podcast and we're glad to have you on for our 100th episode. It's super exciting. And thanks for helping us memorialize 100 episodes together. Yeah. Thanks for having me. Lots of respect for everyone in this room. So thanks for having me on. I'm excited. We're really glad you're here. For those of you who are just listening and not doing YouTube,

Michael has somehow figured out how to do gifts and animation on the screen. So make sure you check out YouTube. There's going to be rolling animation throughout the episode. Thumbs up. Thumbs up now. Thanks. Curly's having way doing fun right now. Yeah. It's amazing. Because I'm a social media influencer now, Lumina, who is one of the new kind of camera companies, they sent me a camera for free. And I didn't know that the software included this little emoji package where you can just click emojis and they show up on your screen. So I just discovered it three minutes ago. And it is awesome.

It is the best thing ever. Gurley, I'm so happy you've moved into product placements and your podcast. Nice to done. You slipped that in subtly, but I caught it. Well, in my defense, Bill got a free one too. Bill got one also, so. Gurley, I'm glad you finally switched from Billy's sponsorship to webcam sponsorships. Yes.

Well, they pay me anything. I'm just going to make a prediction, and then I'll dive into my word. Does that sound good, Mills? Yeah, yeah, that's good. Give us your prediction. So 10 episodes from here, we're going to have Gurley on here. dropping Chili's advertisements like, hey, you ever

heard Chili's? He's a full-on sponsor. And then we're going to see him on a TV commercial one day next to Peyton Manning or something. Oh, that'd be amazing. But yeah, so for those of you listening that aren't familiar with MicroQuire,

it's a startup acquisition marketplace. We mainly focus on profitable software companies, so that would include SaaS businesses, e-commerce. We also list businesses, like newsletters, communities, some crypto companies, really a wide spectrum of just mainly bootstrap software companies ran by small teams and we help them meet buyers completely

free and get acquired. And so, Andrew, for the folks who maybe haven't listened to the first episode, microacquire, as a buyer, I'm paying to have access, right? the folks who are listing their businesses aren't paying anything. I've referred some folks to e-com-related folks who are kind of under the radar. But I think that reduces the friction, right? They're able to get on, get listed, let some people take a look at their business, and it kind of pre-qualifies the buyers.

That's the theory, right? Yeah, and that's really not our long-term revenue plan, if you will. You know, what we really want to do is at a certain point capture commission on these acquisitions, but the way that we want to do it, we don't want to just say, hey, commission time, we got to get paid everybody. We're building tools

that the next product that we're releasing that will probably be out by the time as podcast is out is a guided acquisition process. So walking first-time sellers through an acquisition, everything from finding a buyer to, you know,

reviewing LOIs, to going through due diligence, putting together data room. So just really trying to streamline, standardize, and then also bring data to acquisitions as well. So what is your startup worth? If you list your startup on microrefer,

how many buyers within our network are interested in businesses like that. So our goal is to really build a workflow that allows both buyers and sellers to kind of move through an acquisition. Because when you sign an LOI, sometimes it can feel like you're just, you're going down this dark tunnel.

You don't really know what's next. That's not necessarily the situation all the time, but just getting buyers and sellers on the same page and standardizing the process. I think we can help a lot of, you know, first-time buyers become comfortable acquiring these assets. And if we do that correctly, the thought process is we, so Sam's really increased our buyer pool and that could potentially unlock hundreds of millions or even potentially billions of dollars in liquidity for these lower market startup acquisitions. I mean, I'll just add the liquidity on microquire is nuts. And I say this from experience.

I sold a small side project SaaS on MicroFire late last year. And I talked to Andrew about it. He was gracious enough to kind of help me at the beginning. And it sold from listing to wire in my bank account in 11 days. That's unreal. Unreal. Like the amount of cold LOIs. And by the way, it's sold to a first-time business buyer, which is exactly what Andrews

is mentioning. You know, kind of that guy, I don't know how he would have been in the market to find me without something like microfires. It blew me away. Like I posted it and just like blood in the inbox. I would floor. I remember your DM. You were like, hey, should I price this at this?

And I was like, no, double. Yeah, I underpriced it by half. The one DM that Andrew, he was like twice that. I was like, are you kidding? Are you kidding? I was like, I can always lower it. I remember that moment. I was just like in my kitchen eating.

I was like, no, double it. So I'm glad to double it. It was freaking crazy. Well, let's do this, guys. let's go through. Andrew brought a handful of kind of interesting deals. And I'd love to, we're going to run through these a little bit more rapid fire than we normally do. But I'd love to use some of these deals, Andrew, to kind of look at the marketplace as a whole. We'll dive deep into a couple of these, but I also want to look at it from a 30,000 foot view. And I'm curious to

answer a few questions as we talk about these. We'll probably talk about some e-com. We'll talk about some SaaS. Maybe we'll talk about some other kind of interesting and unique things. But I'm curious, like, who are the buyers based on the segment that we're looking at? What type of multiples are they paying? How are they financing the deals? And then what is the kind of founder or owner's role typically like post-close? So if we kind of look at them all through that lens, I think it's going to give us a good, you know, a good overview of what's going on in the market right now. Is that cool? So just to clarify, we see a wide variety, even regardless of size. So we work with, you know, aggregators, we work with institutional and private equity firms.

And that can range from, you know, billion dollar funds all the way down to, you know, smaller individual buyers just kind of starting in private equity. We also work with a lot of VC firms, which is interesting. I've seen venture capitalists acquire companies. Also VC back companies acquiring VC back companies, so some consolidations. Also, boot shop companies acquiring. bootstrive companies. But I'd say the biggest buyer pool on microcar is definitely first-time buyers like you had mentioned. Just if you do the law of numbers, you know, we have hundreds of thousands of buyers listed. Not all of them have, you know, investment banking experience or have a fund.

Yeah, let's maybe start with that $3 million e-com one that you mentioned. All right. So this is a profitable e-commerce business doing $5.2 million in TTCM revenue. and 2 million in TTM profit that offers the most diverse selection of saunas and hot tubs in the market today and this one sold for just above 3 million so that would put a 1.5x profit

yeah 1.5x profit that's wrong with it wow yeah what's wrong with it that's exactly cheap because right bill they're typically training they're trading typically ecom is trading much higher especially at $2 million in trailing $12.

I will think, you know, assuming it's not like declining or something, you know, I would expect three to five X profit for that business. So were they making, they're not manufacturing. They're just, like maybe they have like a white label relationship with a manufacturer and they set up their own. Yeah, I think it was drop shipping. I think as I'm looking, it appears like they were drop shipping hot tub. So maybe that was something that kind of lowered the valuation.

So that's an interesting one. But let's keep moving. So this one, this one I think is pretty cool. So this is a drone company doing two million in TTM revenue, about a little over one million in TTM profit. And this one sold for $8 million. Jeez. And so they're making drones?

Is that? Yeah, so I'm looking at their website now, and I can't say too much, but it's got all the buzzwords. AI enabled visualization, autonomous systems, and GPS. And the products really advanced drones, if you're into that. So I think this was probably a strategic buy. So very interesting on that end. So they had owned IP, or was it, it wasn't just a reseller. It was owned IP of something.

they had built? Yeah, it looks like one patent, one provisional patent, and they had also secured four million in government contracts in eight months. Interesting. And then, no, this is financing. So in financing, they, in financing to get the business off the ground, they had four million in government contracts in eight months and received, this might be too much information. So I should probably kind of hush-hash since they do it's a private. I mean, it's an interesting point. Like, I see so many startups that kind of bypass something that's pretty straightforward, which is there's just a ton of grants and money available from the government to get you going on some of this stuff, especially if the government thinks it'll be strategic for the military and other folks.

So anyway, I just wanted to bring that up because it's something that I don't think people talk about enough. Like we talk about angels and VCs, but a lot of times the government will give you equity-free money, a lot of this stuff. So anyway, this sounds like it paid off for these guys. I was like, oh, perfect case and point. So this is a business that sold for, let's call it $5 million in change. It was doing 1.64 in TTM profit. This is a profitable SaaS, LinkedIn automation tool,

actually $2.4 million in TTM revenue, and then 1.64 in TTM profit, that automates prospecting basically a SaaS. LinkedIn tool. And this one was pretty interesting. And they had raised $300,000 in funding. So just back in napkin math, that looks like it's sold for basically a 5x profit

of multiple or a four. So Andrew, how is that? So 4x profit for a SaaS tool, that strikes me as kind of on the lower end of at least where the market was last year. Has the market evolved since that and multiples come down at all? I think it's too early to tell.

You know, we're like one month into what we're all calling kind of the downturn. So we'll have to wait and see. But from my vantage point, no, I'm actually still seeing consistent multiples. And the multiples that we consistently see are usually, you know, three to seven times, even though sometimes on revenue if it's a company pushing for growth. but no, I haven't really seen multiple change, but we do have a report that we released where we analyze all the acquisitions

that we did on MicroQuare, and we did that in February, and we're committing to do that biannually. So in August, we'll have another report, and that'll be interesting because we'll have, you know, maybe, let's call it, 30% good times, and if things start trailing down, we'll have a mixture of, you know, 70%,

you know, this is kind of the new reality. We may focus on kind of the new reality. But again, I think, you know, a lot of these businesses will probably remain trading at these ranges. But we'll just have to wait and see you to find out. I wish I had a crystal ball. If I had an answer to that, Bill, I'd be shorter in that. Don't we all. Don't we all.

Okay. So for this next business, and I'm just going to read kind of the high-level metrics, and I'll kind of let you guys dig in. So this was a Shopify SaaS. It was doing $1.2 million in TTM revenue, giving e-commerce merchants the ability to market their customers via SMS. So kind of a retention tool. Like a post script, like a small postscript basically? Yeah.

Founded in 2018 competitors are attentive SMS bomb post script. And they were doing. Andrew, while you're looking that up, Bill, what does this business do? I'm not an e-commerce guy. Yeah, so this business, as I understand, it's a Shopify app. So you connect it to your e-commerce store. And much in the same way, you know, for attention, if you buy something, they're going to email you at to get you to buy another thing.

This allows them instead of emailing them to get you to buy another thing to text you. Oh, yeah. I get these all the time. Like I buy something for my wife for her birthday or Christmas, and I'm still on the text. I never opt out. Oh, yeah. You never, and because the open rate is insane, right?

So the worst brands that do this, like blast you with spam text messages. Like, buy this thing, buy this thing, sale 15% off, right? The best brands that do this, you know, we actually do a lot of this at natural dog company, one of our brands, are like, hey, did your package get the right? Do you have any questions about using it? You know, and you kind of like built, you first cultivated it as a support channel. And then you say, hey, I know it's been about 30 days. You're probably out of that pet supplement.

Would you like to reorder? Do you have any questions? Like, does your dog like it? And you, and you, it's all like half customer service, half sales, and the open rates are insane. I mean, we generated, I think it's like almost half a million dollars in 30 days just for MS. So they list their competitors. Is this like a really crowded space? So we use one of the listed competitors post script.

There are several. PostScript and Tannib are the biggest. I wonder, it's crowded, but, you know, maybe they've got distribution because they're kind of willing to like one size fits all and stick it in the Shopify app store. and like one-click install. And maybe it's the native integration with Shopify. That's the differentiator. Maybe it's just the discoverability on the app store that's a differentiator. Maybe it's price.

The ones that are listed are very expensive. Thousands of dollars a month. So it could be any of those things. That's how you'd have to kind of elbow your way in. Yeah. So here's the interesting part. And I'd love for you all to maybe guess the final sale price. So I don't have TTM revenue on this one.

It looks like they were growing the business. It was founded in February 2018. The team size was only three. And they had posted, I think what they did was they switched to focusing on profitability. So they sold this business with 109,491 in revenue or excuse me, in profit last month. Last month. So over a million in annual. No, that's not TTCM.

I'm assuming they were doing, let's call it, 1.3.3.3.3. let's call it 1.3 top line and then they were doing, but they didn't have a full calendar year of profit, if that makes sense. So what was like the last month, the most recently closed month, was how much revenue and how much profit? The last recently closed month, they did about 149,000 in gross revenue and then 109,000 in profit. Wow. So it looks like they kind of turned into a profit machine, so to speak.

So their run rate, the run rate revenue is a little over a million and their run rate profitability is a little over a million. That's amazing. So this is a business that's doing like $1.5 million in annualized run rate revenue and like $1.2 million in annualized profit. That's SaaS. You actually nailed that. Their annual recurring revenue listed is exactly at $1.5. All right, 1.5 in annual recurring revenue and over a million in annualized recurring profit. Shopify App Store, SMS app, and just kind of some people know.

Yeah, checking all the boxes. Yeah, it's all the boxes. The way the cost structure on a business works like this works is they pay, you know, a provider like Twilio, like half a cent or three quarters of a cent per delivered SMS. And I don't know what the profit or what the pricing structure is in this business, but I assume they're kind of sell like packages of SMS. So they try to match like variable revenue to the variable cost. So they kind of block in their margin.

The other way to do it would be to kind of either per usage or like sell you tiers. So I don't know how this one does it. But that's an incredible profit margin. Guys, what is the, what is the technology like for this, Bill and Michael? I mean, Bill, you did one of these very similar. But like how difficult, how proprietary is like their core infrastructure? Is it like they've spent? tens of millions of dollars get into this point?

Probably not, right? Are they built on AWS? I'm way out of my comfort zone in terms of talking about this. I can share the tech stack of that's helpful. So it's built in React, Ruby, and then hosted on Amazon Web Services. So AWS is right. And I'm sure they use an API called Twilio.

Twilio's public company, as I just described, they do kind of variable pricing SMS. And like if you get an SMS from any app, from Uber, anything, like that's a Twilio SMS. That tool is an incredible business. They've kind of abstracted all the huge pain in the ass for SMS delivery into a single API call. Multi-billion dollar business, huge success.

So honestly, the tech stack is not that proprietary here. I mean, it's built on commodity ABS, commodity Twilio, and you just kind of stitch it all together. What I would expect is the moat here is the installed customer base that like, because once you install this, you got to configure all your flows. you build it into your workflow, you know, changing, you can kind of be a pain in the butt. And then if they're on Shopify App Store, I imagine they have some degree of review mode there. Right?

Where you got some social proof and credibility. So, I mean, realistically, that's what you're buying here, is the customer book and whatever review mode in their method of distribution. So this is selling for more than eight times, right? Eight times profit, I would think. It could be anywhere. I mean, because what can happen

is the buyers that will come after this are not necessarily financial buyers, right? There are strategic buyers who are coming in and say, like, if a strategic buyer comes in and this fills out a portion of their portfolio, like, it could be worth 50 times or 100 times EBTA to that potential strategic. And then secondarily, something we really haven't talked about is how quickly it's growing. And if it's growing as quickly as I would guess it is, like then multiples, you know, it turns out any deal underwrites if it doubles every year for five years,

like it just works like this. So there's some of that kind of, you know, monkey math that happens with a deal like this. So it could be anywhere. A lot of it just depends upon how bad the buyer wants it. And especially with, you know,

overcapitalized public companies or overcapitalized BEP back companies. Like sometimes those guys will just pay anything. So I don't know. I mean, it could be 15 times. I mean, it's not, at a line for something like this?

There's an interesting ecosystem that's popped up lately. So everybody's probably heard of like the Thrasios of the world, the Amazon aggregators. There is this other interesting buyer type that is like Thrasio for Shopify apps. So there are people out there have raised capital just to roll up SaaS Shopify apps that go to market, the Shopify app store. So I, this is like Red Me for one of those guys. Andrew, can you tell us a little bit about what happened with this one?

Yeah, so this one from what I can see. and confirmed with the buyer and sold for $6.3 million. So six times, roughly. Yeah, not too shabby. I think it's worth it. I think it's worth it. That's a good exit for them. And probably good buy for the buyer too.

Yeah. Especially if they could turn around and start selling it to all their existing customers. You know, they're filling out a product portfolio, like all that, like everything just goes, goes nuts in terms of how the math works. The bill is definitely right in terms of the amount of, firms, especially within let's just call it the last five months, I've spoken to more firms that have

specifically raised money to acquire Shopify apps than it's the new Thrasio Amazon FBA trend and I think it's going to continue. I think it's great too because they're great businesses, built in distribution, and Bill, you're right, if you have a very

sticky customer base where it's hard to pull out of your e-commerce store, there's a lot of room to grow that business and potentially be able to portfolio and a cross-sale. So that's been interesting, interesting to watch. So I would, I would predict, you know, we were talking about multiples. I would predict Shopify SaaS multiples to go up just because increased demand. So that'll be interesting to watch. Do you guys want to move on to the next business? Yeah, I have a real fast, I have a girdly pontification

on this one. I think this business, you know, as Bill talked about, is like not technically challenging at all. You're like stitching together. It's like, Like the stuff from Twilio and then you slap it all on AWS, like there's nothing really that difficult there. The hard part here was just when you start a business like these guys did, picking the right business at the right time can just make you a shit ton of money. Right. Like it's why, you know, game selection and which business you're going to work on

when you start a company matters more than anything else. And this is just one of those things where like it's not hard. Like this was not a hard business to build. And these guys just made bank. So it's like buying Bitcoin in 2000. and nine, you weren't going to screw that up. Like, it was pretty hard. Same thing. Right place, right time. And it's just magical when I see it.

Yeah, they worked on the business for four years and I exited for millions of dollars. So I think they're pretty happy with that outcome. And that also, I would assume, I don't have the details on this, but they might have even qualified for QSBS. It's qualified. Let's talk about that. We've talked about it in past episodes, but qualified small business stock. You need five years.

Five years. I'm seen founded February. 2018 so that'd be now you need five years on that five years as a C-Corp text as a C-Corp is what matters so yeah well bummer they got six years for six million

dollars for working for work for four years sucks to be them yeah man life life Thursday eliminate sometimes I mean they're they're probably not unhappy but

funny thing about QSBS I actually found out about QSPS when I sold my first business and we qualified for it. And they were explaining it to me and I was like, are you serious? And I'm like, yeah. Like, can you provide these documents so we can send it to the IRS? And I was like, so I don't have to send like two million to the IRS. And they're like, no, I didn't know about it.

And then, yeah, so for people listening, I'm sure you guys have talked about us on the podcast, but qualified small business stock is an exemption for paying federal taxes. up to the first 10 million of your acquisition. So if you live in Texas, you could essentially pay no taxes on the first 10 million of that. I could be getting that wrong, Gurley. I know you're the QSBS master, but... Well, actually, I'm responsible for potentially ruining QSPS

because I wrote a threat on it, and then the next day the Democrats introduced a bunch of bills to get rid of it. So I had a bunch of angry DMs from people, like, why are you talking about this currently? But yeah, exactly what you said. I think it's the greater of your first $10 million in gains or 10 times your investment. So if you invest, say, a million dollars of your own money to start a C-Corp and you hold it for five years and then you sell it,

then federal tax-wise, the first $10 million or $10 times your investment. So if you put a million in, or let's say you put $5 million in, you could potentially get, if you sold it for $50 million, you would get $10 times that income tax-free. And it's just only for federal C corporations, not for partnerships or LLCs. So that's the kind of the rub there. PIN tweet in my bio. Connor always tells me on your team at Dura. He's like, ask early about QSPS. He's a self-proclaimed expert.

So I had to throw that in there. Oh, that's very kind. I've read the, I've actually read the federal. register of the rules for it. It's pretty interesting if you're really high or something. It's really fun. Interesting. Taking liberally in this context. All right. Do you guys want to backtrack to the drone e-commerce e-commerce cartoon portrait startup? Let's do the cartoons. Let's do the cartoons. Yeah. All right. We got some cartoon fans.

Oh, this is a good time to break out some more emojis. I just know nothing about cartoons. All right. So this is a pure e-commerce company. And the listing is Profo E-Commerce brand with 2.26 in TTM revenue and 485,000 TTM profit, high growth, digital product business, and the portraits and illustration niche. They compete with Turned Yellow, West and Willow, and Happy Tuned. Turnyellow is the one when you submit your own portrait, and they can't say this, but they make you look like a Simpsons character.

That's why it's called Turnyellow. Oh, that's hilarious. Yeah, because the trademarks are protected, so it's turned yellow. I'm looking at it right now. It works just like that. You basically upload a photo and drawing notes, and they, I assume, have some, either someone's drawn a lot of photos, or they have some sort of automated way to animate it. or they, my guess would be they have maybe a low-cost team that can crank these out and then sell them at a high margin.

But I'm looking at a website now. They have pre, like popular portraits like Simpson style. I'm seeing South Bark. Just a fun business. So knowing what you guys know, so 2.3 in TTM revenue, but only half million in TTM profit. How would, oh, also date founded May 2020, startup size, team of two. to how would you guys price that business? What do you think it's sold at?

Well, before we get to what we think it's worth, so this business, I imagine, has almost zero marginal cost, right? You upload your photo and someone overseas draws it. So that is marginal cost, though, because you have to pay for more people. But your fixed costs are pretty fixed. Yeah, I would assume there's a, there's a,

like it's not manual. Someone is either producing the photos at a low cost, Or maybe it is automated. I don't know. To me, it's not, to me, it can't be, like, heavily technology focused. It's got to be manual because their margins are so low. They're great margins for a traditional business, but for an online-based business, it's got to be, there has to be some manual component.

I have a contrary opinion on this one. I bet when you dig in, their cack is enormous. Like, this is not recurring revenue. This is reoccurring revenue. And the number of times I get pitched exactly this, offering on Instagram, TikTok.

Yes, I'm on TikTok with all the young guys, just so you guys know. That's where I'm in touch with the younger generations. You're one of the young guys.

According to some people, it's all right. It's all right. We're in the trust tree. But no, the number of times I get pitched this, like this is entirely a, you know,

a Facebook ads engine arbitrage business. That's what this all comes down to. You're not offering anything that's true. unique except for maybe a, you know, a little bit, there's not that much unique, right? Like, it's very commoditized in terms of what it is. I bet when you go dig into it, they're spending half or more of their revenue on KAC.

I think that's fair. I think you're right. I mean, turn yellow. I've never heard of this. I'm not, I'm not with it. But it's $30 per person. And you can get up to seven people in a picture. I mean, this is incredible. I'm amazed that people will pay that much. But I mean, if you're a raving Simpsons fan or you want to give a gift to a Simpsons fan, that's a good gift idea. But that seems like a lot of money for something that probably happens, maybe automated or semi-automated. Have you guys heard about the factories in Shenzhen where they make basically like,

like unrecognizable clones of the big artworks, like Van Gogh and all this stuff, Monet? There's like factory after factory in Shenzhen where, and you can see, go check it out on YouTube. You'll, you can watch a guy who'll just be saying, sitting there and he paints like a perfect like Van Gogh sunflowers over and over again. Or like Starry Night, he just, they'll just, and these guys, that's all they do all day is just like crank out one after another doing this. It's really, it's really fascinating. So you can

get one that basically looks like an original, but it's because some guy in China has spent the best 20 years learning how to do exact copies over and over again all day. It's pretty awesome. Wow. things you can see on YouTube. Anyway, go ahead, Andrew. I got a soft topic with my random. That's not relevant in China. One thing I wanted to add is looking at prices.

So it looks like their average portrait that they're selling is ranging from 40 to 60 bucks. So I don't know if that adds anything in terms of how you guys would value this business. But I thought I'd throw that in there. Do we know anything about their customer acquisition strategy? I think Michael's right. I think it's, to me, that's where there's either value in their distribution chain or it's completely commoditized and you just have to plan to spend more than your competitors and hopefully you maintain enough margin. I have no details available on their public listing page for customer acquisition strategy. So I think I would probably say Michael is right in terms of how they're requiring customers.

Yeah, that's where I mean, if I was going to value this, that's where I would dig in first. Like, what is the durability of this revenue stream? because I worry about just the very efficient ad engine auctions that Google and Facebook have put together, taking away, capturing all your value over time. And it looks like it's capturing a lot of the value now. And maybe these sellers can see the handwriting on the wall that Mark and company is only going to get more greedy about capturing more value from them. So I like the Shopify one better, a lot better. Mm-hmm.

Mm-hmm. Yeah. I mean, it's hard to differentiate both, but at least the Shopify one has still. making revenue and customers. It's the power of recurring revenue, man. Power of recurring revenue. So huge. So, so huge.

All right. Any guesses on the sale price? I think it still went for three times profit. I was going to guess four, but yeah. This one went for $2.2.2 million. Oh, my gosh. Wait, on how much profit? $485,000?

Oh. This went for a better multiple than the Shopify SaaS? according to what I got, yeah. Wow. So five and a half times, that's five and a half times EBITO? Yeah, roughly. And it appears down.

Jeez. Always, we're about the same as last company. Bill, why are we buying stuff? We should be selling stuff. We are insane. Just so everybody knows,

at these kind of multiples, everything I have is for sale. Like, just come on over, bring your checkbook. Gurdly world is for sale. Can we end this with maybe the largest acquisition on MicroQuarrer so far? Yeah, sure.

All right. So this is a SaaS business. It is a procurement and purchase order management software for SMBs with 1.5 million in TTM revenue and about a half a million in TTM profit. So that's $560,720 in TCM profit. They've raised $300,000. Their competitors are procurified Bellwether, Digital PO. and they are growing like a rocket ship. So they started,

this is all monthly recurring revenue, but they have grown from November 2020. It looks like they've almost grown by, let's call it 100%. Yeah. So growing business, but it was sitting flat. So it was,

this is interesting because Dave founded is August, uh, 2026, team size is 22, which I think is large. But in November 2020, I'm seeing

monthly recurring revenue at $116,000. And then when they sold the business, and mind you, this was in, um, October 2021, um, it's at $149,000.

And their lifetime value of their customers, from the data that were able to grab through profit well, is so their customer lifetime value is 33,000. They have negative 0.3% churn, and recurring revenue is at 1.8, and they have 307 customers. So it's a procurement software for SMBs. Yes.

What are they procuring? Everything? Yeah, I'm looking basically purchase requests, custom fields, budget tracking, rich reporting, supplier RPs, they'll do those. So pretty expensive.

I'm just looking at all their features and they have auto requisition finance operations and then supplier management products and they have a ton of them. So this looks to me like a business that just really focus on building

on a lot of different features and offerings to their customers. it looks like a good business and then high reviews they were I don't know if you're from a G2 crowd but they were rated the highest for winter in their category

some good logo some big enterprise but I can't I won't name them for privacy but strong enterprise logo so this to me looks like if you're enterprise SaaS and maybe there's

a strategic angle here there could be some value, but any questions before we try to guess the multiple on which is sold? And you're saying this is the largest. You've kind of previewed it, but this is the largest acquisition. I mean... To our knowledge, I should say. Yeah, okay. I mean, I don't know. I'm guessing 10 times. So this business sold for about... You want to make another guess? I guess 24 million. Now, the business sold for about 11 million bucks.

Wow. And that's on half a million in profit. So that's 22X. That's just crazy. Yeah, that's amazing. Yeah, it was a strategic buyer. Cudos to them. Well, I mean, they're building a marketplace, and the strategics know once a marketplace

gets going, it's very hard to dislodge, and it's easy to keep that lead. So, yeah, I don't necessarily hate it. that's that's very much a strategic long-term buy. Well, that was the biggest. We're hoping to surpass that sometime this year. Well, promises you'll come back when the first nine-figure deal happens. That's what we're, that's the promise. That's my only ask today.

When the first nine figure, we'd come back and talk about that one. The day it happens, I'll shoot you in your milk early, and I'll hop right back on you. And we'll schedule it. Andrew, thanks so much for joining us, man. Thanks for bringing some fun and unique deal. These are definitely outside of my wheelhouse. So I'm glad you guys could educate me on them, but you're doing great things. And thanks for being a friend of the podcast.

Yeah. Thanks so much for having me on again. Again, just huge fans of everything each of you are doing. And yeah, I look forward to being back when we get a nine-figure deal. We almost had Twitter. So, you know, we could have gotten that one on here. But yeah, pleasure is always, guys. Keep up all the awesome work.

Appreciate you guys.