Acquisitions Anonymous - #1 for business buying, selling and operating - Why This Once-$22M Flatpack Furniture Company Is Worth Almost Nothing Now

Episode Date: August 15, 2025

In this episode, the hosts dissect a distressed e-commerce furniture supplier deal selling near working capital value, debating whether falling revenues, marketplace dependence, and margin mystery leave any room for a profitable turnaround.Sponsored by:Heron Finance – build a personalized private credit portfolio for steady monthly income—without the market rollercoaster. In minutes, take a quiz, see your custom plan, and invest in 12+ top-tier funds from managers like Ares, Apollo, and KKR, overseeing $1T+ with loss rates under 0.5%. Higher returns than bonds, lower volatility than stocks—start earning today at https://www.HeronFinance.com.Capital Pad – The modern back office for dealmakers. Capital Pad helps acquisition entrepreneurs, searchers, and private equity firms streamline deal tracking, investor updates, and portfolio management — all in one easy-to-use platform. Explore more at https://www.capitalpad.com.The team reviews “Project Assembly,” a branded ready-to-assemble furniture supplier with a proprietary product line and strong e-commerce distribution through Amazon, Lowe’s, Home Depot, Target, and Wayfair. Once generating $22M in revenue, the company has seen a four-year slide to $9.4M, though gross margins have oddly improved from 19% to 32% despite the drop. The deal is being marketed at roughly $3.8M — close to the estimated book value of its working capital — making it feel more like a liquidation opportunity than a healthy going concern.Key Highlights:- Asking price: ~$3.8M, pegged to working capital value.- Revenue decline: $22M in 2020 → $9.4M in 2024.- 98% marketplace e-commerce sales via major retailers.- Gross margins increased from 19% to 32% despite shrinking sales.- Marketplace algorithm ranking & Chinese competition as potential killers.Subscribe 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, I am with Mills and Heather. I am Bill Delisandro, and we are doing a really interesting, distressed furniture e-commerce business. So Mills brought this one from a new M&A advisory that we have not done deals from before. This business's revenue has declined by 60 or 70% over the last four years, but it is for sale for the value of the working capital only. So it's really interesting they've managed to preserve their margin during the revenue decline. So we speculate a lot about what might be going on in this business, how to do distress deals, how to protect yourself, et cetera.

So without further ado, I hope you enjoy this episode of Acquisitions Anonymous. We don't have 100% years anymore. And thumbs downing on just the plus inventory line. Hey, founders and business owners. Building your company is complicated enough. Your investments shouldn't be. That's where Heron Finance comes in.

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or tax advice. Private credit is subject to credit, liquidity, and interest rate risk. Past performance does not guarantee future results. The information in this ad is for informational purposes only. All right. Acquisition Anonymous without Michael, my favorite episodes. Summer break episode, right? We'll see where the pod goes today. Sorry, Michael. We love you. See you next time. All right. So we've got Mills, Heather, and I this week. I'm Bill, obviously. But Mills is atoning for his sins on past episodes, he said. Mills, what was the last one you brought? I kept bringing deals and you guys afterwards would be like, can we please do a real company next time? Like, we don't need the Russian music

portfolio. The dairy farm in the Ukraine. Yes, exactly. I liked that one, though. That was fun. I have good memories of that one. You know what? We have not gotten any angry, any angry listeners from those episodes. We do get angry listeners from other episodes. That is my dairy farm in the Ukraine. You've added me. I guess we're not big in Ukraine yet. I do have a deal.

And this is much more, you know, I will say it's much more down the middle, but it jumped out to me because it's fairly unique in that it is almost like a turnaround. And, you know, everybody's always trying to buy something for like a fair multiple. But what if you're buying something for like less than the book value of the assets. And that's what I think could happen here, which is like the true kind of

mecca of deals. And then how messy does it have to be in order for you to do that? So this is from True North mergers and acquisitions. I have the teaser pulled up. And it's called Project Assembly. And they are a supplier of branded ready to assemble furniture. So it says it's an established profitable company in the fast growing ready to assemble furniture market. They're seeking a strategic acquirer to leverage synergies and expand its operations. The company specializes in stylish, affordable home storage solutions, including bathroom storage, children's furniture, and general household organization products. With a strong presence in e-commerce and a proprietary brand, the business is well positioned for growth. Key highlights are their product portfolio.

They offer high quality, easy to assemble home storage solutions with 70 new skews launched annually. Wow. Okay, that's pretty steep. Revenue channels, 98% of revenue is derived from e-commerce partnerships with major retailers like Amazon, Lowe's, Home Depot, Target, and Wayfair. The market opportunity or the TAM is like $4.4.4 billion in North America, projected to grow at 4.7%. The customer trust is one of their competitive advantages. They say they have superior product quality with low return rates of 3 to 5% and high customer satisfaction. marketing excellence. They have best in class merchandising with SEO optimized content, lifestyle imagery, and videos driving engagement. Their operational strength, they say they have established systems, longstanding vendor relationships to ensure scalability and reliability. The sale price, get this, hard assets paid in cash at closing, estimated at 3.8 million at March 31st of 2025. This amount is subject to change as accounts fluctuate over time,

Goodwill amount to be determined. Seller is reasonable. Both key executives are available for post-closing transition periods to ensure continuity. If interested in pursuing, sign the NDA. And then we have 2019 through 2024 pulled up on the screen on this teaser and they show revenue, gross profit, and then gross profit percentage or gross margin percentage. And the business was in 2019, did 16.7 million top line. In 2020, they did $22 million in top line.

Then they start to decline. From 2020 to 2024, the revenue goes from $22 million to $19 million to $17 million to $12. And then in 2024, they're at $9.4 million in top line revenue. The gross profit is $3 million. And they've actually been increasing their gross margins over the last few years. But we have no info about their net. income and the fact that the business is basically being sold for networking capital can tell us some things that we can probably infer some things about what's happening internally. What do you guys

think about this? Wow. Okay. So ready to assemble furniture, this is like flat pack IKEA bookshelves basically. It's had its storage and organization and, you know, so flat pack bookshelves and things like that. I'm fascinated that for the last three years, they've had three million dollars of EBITDA, almost flat while the revenue. That's gross. That's gross profit. Oh, that's gross profit. Yeah. Yeah. Okay. Even more interesting. So they've had three million of gross profit while their revenue has compressed by half. And they have held three million of gross profit. They've gone from 19% gross profit to 32% in gross profit. The thing that jumps out at me is what the hell is gross profit? What's the definition here? Yeah. Because Bill, like for e-commerce, usually you would think

customer acquisition cost is going into your, I mean, it wouldn't be cogs, but it would go above the line, right? It would go above the gross profit line. So it depends. And I will avoid doing my soapbox on gross margin and contribution margin that I do on every e-commerce podcast. If you would like to hear that, Google my name, Bill Del Alessandro, and Contribution Margin, and three or four episodes on Contribution margin will pop up. But the very short version is the typical e-commerce P&L has revenue, less product cost equals gross profit, but then you have less cost of delivery, advertising, all the other kind of variable stuff, and then you get contribution profit or contribution margin or variable profit. And then you got all your overhead and you have net profit. People do this different ways,

that generally the way I think about it. It's hard for me to know what's going on here because on the one hand, it is a relatively low gross profit percentage, you know, as low as 19% or even 32% is not very high. That leads me on one hand to believe it's fully loaded. And they've got a lot of stuff kind of shoved into gross profit. On the other hand, though, this category is a lower gross profit category, this ready to assemble furniture. Like, it's heavy. It's basically made a particle board. It's probably relatively commoditized. I think there's got to be almost no differentiation with this. When I'm buying a ready to assemble bookshelf

for my kid's bedroom, I just am like, what's the cheapest one? Well, some people might read reviews, Mills, but now we know of your budgetary philosophy. Well, it's particle board. I know it's going to break in six months, and I'm going to have to do another one. Yeah, I mean, and we're assuming that's what it is, but

you know, assuming that is true, it's hard for me to know whether this is a fully loaded kind of contribution margin or contribution profit number or whether this is a true gross profit number. Either way, I don't love it, but I'm fascinated at how they could protect margin so much even in the face of falling revenue. Yeah, Heather, what do you make of the, I mean, the revenue is just like, it's a falling knife. It is. And without the net profit to compare, you know, the margin to compare to the gross margin,

I'm with Bill, like I'm pretty skeptical of how they could actually have this. gross margin expansion while they are shrinking. You know, I've seen it too often, and I'm not saying this is what's happening here, but I always look for this when I see something that's odd like that, is I start to think, is this just a reallocation of what they put above the line and below the line? Because like Bill said, there's some gray area there of what you can include in cogs here and what you might not. And sometimes it could just be a little, you know, moving things around. If you look at the net margin, you'll see it's over in operating expenses and the net is, you know, shrunk.

Yeah. So I think the fact that they're not showing us EBITDA at all and EBITDA margin makes me very skeptical of how, you know, that margin is really expanding as they've been shrinking like this. So I don't know this intermediary, true north M&A. I'm going to assume that they are ethical for the most part. And, you know, what you described, Heather, I have absolutely seen it where people change the definition of margin year to year. Let's assume for a minute that they're not actually trying to fool us. Some things that might have happened to improve this margin over the last couple of years, even in the face of a 50% revenue haircut. I mean, maybe they renegotiated with their supplier.

That's kind of hard to do when your volumes are falling 50%. So I'm not sure about that. So I'm not sure about falling volumes and better gross margin. It's possible that this is more of a contribution margin and they've got advertising expense in here. So it's possible they have just cut ads ban dramatically here. And that 50% of revenue they lost was totally unprofitable revenue in the first place. So like that's how I typically see if businesses, their contribution margin stays the same, but they cut their revenue by a lot. you'll typically, and we can't see it because we don't have full P&L, you'll typically see an equal dollar for dollar reduction in ad sped.

I also wonder if the lumber shortage could have played in here a little bit to the lower margin periods and then it got better, maybe? Oh, that's true. I mean, it's safe to assume that this business is distressed, right? I mean, they aren't showing profitability numbers, but it's probably because they aren't profitable. So, Bill, if they're selling 98% e-commerce, but it's on Amazon, Lowe's, you know, Wayfair, do you think that they are, is there ad spin for them? Like, if you're, if you're, like, I don't, I'm not familiar with like the way it would work at Lowe's or Walmart, but I have a cabinet and I want you to sell it. You're not selling it in the store. It's only in the e-commerce catalog.

And so instead of like paying for Amazon ads, I'm paying Lowe's to get promoted and like ranked higher in the search. Oh yeah. All of these retailers, Lowe's Home Depot, Target, et cetera, they all look across the aisle at Amazon printing money with their kind of 3P marketplace model and their ad business. And they've all copied it. So I'm not intimately familiar personally with every single one of these reset, these retailers or online retailers. but I'm pretty sure they all operate marketplace models, which then you would immediately graft an ad business right on top of. So I think a lot of these are going to look more or less like selling on Amazon.

I'd be curious to understand where the fall off would be. I would be unsurprised to learn that of the 98% of revenue that is e-commerce, that 75% of it was Amazon. And that's the thing that fell off dramatically. And it could be that ads got a lot more expensive in their category. It could be that a whole bunch more competition came in from China that was underpricing them. And so they had to cut price. And so they didn't have room to advertise.

But if they didn't advertise, they wouldn't get any sales. So that's typically what happens. Like competition will come into your category. Selling price gets pushed down, right? Because the Chinese folks have better margins than you. So selling price gets pulled down. They can still afford ads. You can't. You, the business owner, freak out and you keep your ads high because it's really

scary to see your revenue tank. So you keep your ads high to keep your sales up, but your profit compresses to nothing or less. And then you hold on for a year or two, or in this case, maybe three, who knows how long before you finally capitulate and you cut your ads, then you let your revenue fall. 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 CapitalPad. 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 and need capital to list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is a place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing, too, from the investor side is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions all up front in black and white. Basically, CapitalPad professionalizes investing in small businesses. And the returns can be really, really good.

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. If they're doing this and they're selling, you know, in essence, it's like it's maybe or maybe not a fulfillment by Amazon business, if they're doing it with Amazon. right? Hard to know. Because this is, like you've talked about, like, average order value in e-commerce and weight being just two, like,

huge critical factors that I think oftentimes get overlooked. And the, I'm just thinking, do they, do you think they actually take possession of this? I'm going to bet yes. And here's why I'm going to bet yes. Two reasons. One, heavy, big stuff gets absolutely brutally penalized by FBI's fee structure. they hate it, they do not want it in their warehouse.

So they really penalize it. So they create financial incentives for you to do your own logistics and ship directly to the customer. At the same time, all of these other marketplaces will require you to have your own logistics. They won't allow you to ship their customers out of an Amazon fulfillment center with Amazon tape all over the box. Yeah. So I'm betting that they have a 3PL or geez, maybe even their own logistics, but probably

a 3PL. And because it's heavy, I would hope it's a multi-node 3PL. where you've got at least East Coast, West Coast to keep those shipping costs down. All right. So if I'm just thinking about if it's like about $3.8 million in networking capital, there's probably inventory on there. I mean, I'm sure that's almost all of it. Well, I bet the other thing is I bet there's trade payables.

And I bet that they have AR that is crushing them in terms of you have like, hooray, you got listed with lows, you got listed with Target. it. And then the sucker punch comes out of nowhere and you realize they're going to pay net 90, you know, and I have to buy back, you know, bad inventory and all kinds of stuff like that. Oh, man, I would love to see the balance sheet of this thing because you're right, Mel, I bet they've got a ton of inventory. I bet they are owed a fair bit of money from Lowe's Home Depot, Target, Wayfair, et cetera. That being said, their revenue is down so much. Those payables, those receivables rather have been compressing. Yeah. So those balances are going down.

but so is their revenue. But I would also bet you're going to see pretty high payables as well. I bet they owe their factories. Yeah. All right, Heather, I think this goes without saying, but there's no way to finance this. No, no, because debt wants to see a healthy company trading hands. You know, debt needs not a turnaround situation. Turnarounds have to be financed with equity or seller carry or some kind of arrangement

that involves the seller, but no debt at all. But it is an interesting topic, the whole idea of the working capital situation here. I mean, if this was a healthy company, that would still be a challenge for a buyer, the fact that you've got this working capital intensive, you know, retail business that you'd have to factor that working capital into the valuation, which kind of brings us back to what you're seeing here is the asking price kind of is the working capital. Like it's kind of worth nothing. But here's the working capital. You got to at least buy the working capital so you can run it effectively, right?

Yeah, because I'm thinking like best case scenario, this business in 2020, doing $22 million top line, $6.9 million in gross profit. Let's just say best case scenario, they had $3 million in EBITDA. So the business is like trading for one times, you know, EBITDA at that point at this $3.8 million that they're telling us is kind of a rolling target. I mean, now you're talking about a drastically different scenario. The business is half as large. They have half the amount of gross profit, arguably is, you know, like burning cash. And I just can't imagine a scenario. You have to get so comfortable, like the people I know who do turnarounds, that's all they do.

Because it's so difficult and they've gotten so comfortable with the risk that they can just run the table. You know, but everybody else is like me, like, oh, gosh, I would never do that. scares the bejesus out of me. But from a valuation perspective, selling, like a business like this, selling for working capital, if it's consuming a lot of cash in the cash conversion cycle, I guess is a smart thing for the seller to say, because look, I could either wind it down and collect all my receivables and liquidate all my inventory and that's the amount of money I'm going to get, or I could try to sell it for that amount of money and let somebody see if they can have a go at it and make it better. Yeah. So actually, Heather, I would bet that they can't even do that. I would bet

payables are higher than receivables, and they're selling the inventory at a loss. I think they basically can't move the inventory. And so like in that death spiral, all the sudden, what do you do? You can't, you can't just like trend down with Target.com. They're going to be like, look, no, we're placing, we're either placing an order for next quarter or we're not. And if we do, then you're doubling down every single time. They're re-upping. Well, keep in mind, Mills, this is probably a marketplace model.

So it's probably more like drop ship. So every time somebody buys something on Target.com, Target plays the order with you and you mail it to them. Don't you think, though, for this type of category, or really for any category, aren't you making some kind of not a guarantee to Target? But like Target wants to know, hey, if we get one order, you're fulfilling it,

or if we get a thousand and one orders you're fulfilling it. Like there's got to be some covenant in your contract where I agree, it's not a PO, you're right. But don't you think that there's some contract actual obligation between this company and their customer, the actual, you know, large cases. You are required to fill the orders. That being said, if you don't fill the orders and they don't owe you any money,

what is their real recourse? Yeah. Yeah. You know, like they just cancel it, refund the customer, and they move on with their lives. Yeah. You know, as well. So I think the thing that scares me about this is I don't think there's anybody on the other end of the phone at Target or Home Depot.

or whatever, right? I think this is sort of like pure marketplace, which means, and I'm guessing here, conjecturing, but I'm guessing that their sales are down here because they are not ranking, right, or they're not spending enough on ads

or either organically ranking or inorganically ranking through ads. They're not coming up when people search flatback bookcase on these stores, right? And it's really hard to reverse that. If there were, if Home Depot were placing a bunch of POs

that they were not filling because they didn't have working capital for inventory, you could call Home Depot up and work with the buyer and kind of get back in their good graces and turn it around, you know, or if this was a brand that owned their own website and they were just absolutely terrible with Facebook advertising, or they're, you know, maybe the product needed to be redone. But like when you're 98% marketplace in this case, they're just so hard to turn around because you're at the mercy of an algorithm that has decided to derank you. And you've got to think. So you're getting kind of like the worst of all angles on it because you are,

you're still waiting to get paid from Home Depot. You know, they're going to hold the cash probably for 30, 45, 60 days or whatever because they're going to receive payment, you know, the moment the customer clicks checkout, then the product's got to get to them. Then they probably have some holdover period to make sure that there weren't issues and they're not clawing back money from you, and you're just waiting to get paid, it seems like a really, really tough place to operate.

It's tough, especially 19 to 32% gross margins. Yeah. Yeah, I mean, marketplace businesses are hard, Mills. Like, this is, it's a challenge. But they have huge volume, and that's why you tolerate it. Yeah. When I was first looking at real estate, this was like, I think I was 18 years old,

and I had this mentor, and I was like, there's this house for sale. It's $5,000. Like, it's, It's so, I know it needs a ton of work. It's such a good deal. Like, let's go by, and ride by and look at it. And my friend and mentor rides by and he's like, $5,000 is too expensive. Like, it's still, it's still overpring. He just knows immediately. And I'm thinking, like, this, it, on paper, it just seems like, it could, like, it can't be any cheaper,

but it's still too expensive. Yeah. It's just, it just makes me real nervous because of the marketplace exposure and you got five years of declines. All right, let's imagine a scenario, though. I think you two would have totally different scenarios, but under what scenario you sign the NDA, you get the SIM, and there's something here, and you say, that thing makes me actually willing to move forward? Is there anything that could make you willing to move forward? Heather, what about you? Something in the customer list that was really special, you know, like, oh, they've been targeting this customer, and I have something else I can sell to that customer, and I have had a hard time aggregating a list of that type of customer, maybe.

I would have to see that they were just absolutely bungling the ball on these marketplaces or on Amazon where they were, you know, there was something I could go in and do right away to re-rank, right? Like maybe they had switched away from, maybe they were FBI, and that's why it was working, and they switched away from FBI and they refused to go back. And then maybe we can put it back to, there's got to be something you could either, you could undo or fix. or you've got to be able to buy this at a place where you can liquidate the inventory and the receivables and, you know, kind of net against payables and get your capital back or more.

Like, this is got to be a true cigar butt where you actually can liquidate it and run it off over six to 12 months and make a return that is nice just with no going concern value at all. Yeah, part of me is hoping that like they own, they own the real estate, you know, in this corporate entity. it's worth like $6 million or something like that. And they just, I mean, they have an MA advisor. So like, you're not going to, you're not going to find that much kind of unturned over value. But my guess is if they've been in decline for four years like this, they've already exhausted. Like, they've already done a sale lease back on their building. You know, they've already like squeezed every possible option to now get to this point.

I'm with you. It has to be something that is like fixable. but like I just I don't know I don't know marketplace businesses and I don't know e-commerce but the thing that scares me about it is like is this just a drastically different category than it was five years ago I mean flat pack ready to assemble furniture has been around for more than five years so I don't think it's I don't think it's like it's like it's like it's like it's like a COVID bump or a COVID crash. maybe it was a little bit of guess mills this is just a flood of Chinese sellers coming on to the marketplaces i mean that's what's happened over the last five years yeah and and this category is especially vulnerable with that yeah so it's not cheap enough i don't think it's cheap enough yet um i'm not sure it can be cheap enough i mean it's i don't i mean yeah there's nine million bucks of revenue here but at three million bucks of gross profit or contribution margin

profit. Like you need a whole year to get your money back. Does it get your money back? Yeah. And I'm not sure you will. And you're probably, you know, assuming you can write the ship, but you're probably burning a million dollars a year, you know, in free time. Well, that's the problem. You also need some sort of operating platform to catch it with. Yeah. All right. Like someone else that's selling furniture that has their existing free PL with bi coastal nodes and can just kind of ship me all the inventory. I'll fill the orders. That's the type of person who could do okay on this. but probably just okay. You might make a 50% return over two years and take a lot of risk doing it.

Yeah, the only other thing I can think is if they actually had like a truly unique product, I think if there was any protectable intellectual property, they would have referenced it. And I mean, it's probably anything that they had that was unique has probably been ripped off already, like a unique design for a bathroom storage unit or something like that people have copied that already. All right, well, thanks for entertaining me. It was a, it was not a, it was not a perfect normal deal. It was slightly more normal than previous episodes. You're getting there. I loved it. I loved it, Mills. Keep, keep, keep on bringing the eyeball one. Yeah, yeah. It was good. All right. If you all like this one, if you like e-commerce deals, you like distress deals, go on our website, ACQUanon.com. And you can search all, I think we're over 400 episodes now, y'all. You can search all 400 plus episodes for. for e-com, for distress, for construction, for roofing, for whatever you want, whatever you're into, I'm sure we've done at least a couple episodes on it. And then also while you're there, get on our email list.

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