Closing Price: $ 4,000,000Specialty International Eyewear Retail Brand - Case Study
An exciting eCommerce company came to Website Closers with a strong growth rate and attractive repeat customer rate.
This eCommerce Company was well positioned both on Amazon and on its Magento Website, representing a 60/40 sales channel mix with only 30% of traffic via paid media. The company also presented with strong KPIs with respect to its brand presentation in social media which helped tremendously with its organic traffic/conversion metrics. Combining the strength of the brand given the stickiness of its customers with a mix of sales in and outside of Amazon helped to elevate the asking price for this business.
With earnings at roughly $800,000 over the Last Twelve Months and a 30% YOY Growth Rate, the company was well positioned for a strong asking multiple at market. Representing a 5X multiple on LTM and closer to a 4X multiple of future twelve based on the then-current run rate, the valuation was sound and resulted in 3 strong offers right out of the gate (less than 2 weeks).
The suitors for this business were varied. The ultimate buyer was a professional from Corporate America looking to exit out of corporate life and to become an entrepreneur – the true American success story. Her buying strategy was to team up with the lending partners at Website Closers to purchasing this strong business with $400,000 in cash down, a seller promissory note of $600,000 and a bank loan of $3 Million. With annual payments at just under $400,000 per year, given the growth rate of the company, given the large amount of inventory included in the sale, and given the working capital loan provided by the lender, the buyers down payment was paid back in 9 short months – a 100% ROI in less than 1 year. This buyer was able to continue to grow the company using the working capital line of credit provided by both Amazon and the lender and is now preparing her business for an exit through Website Closers with a planned hold period of no more than 5 years. If the business continues to grow 30% YOY, resulting in earnings closer to $2.5M by the time the deal goes to market, and assuming the company is sold for a modest 5X multiple, this business would be on the market for $12.5M, which after paying down the balance of the loan used to buy the business and paying long term capital gains on the balance (after expenses and basis), then a business that this buyer purchased using $400,000 allowed her not only to get paid back in 9 months, but also created significant cash flow for her family for 5 years and significant wealth when sold, an estimated $8M in total net deal value at the time of closing, after all taxes and fees – this is a 20X return on the original $400,000 investment.