Welcome!
I’ve looked at thousands of businesses for sale and learned to read between the lines. For every issue, we'll take a deeper look at a listing, learn something, and I'll rate the deal at the end!
This week’s listing: a fractional virtual assistant staffing platform, selling people’s time for a markup.
The numbers: They’re asking $2M. Not unreasonable, at 1.3x revenue… but $0 profit?! Uh oh.
Green flags
The business is growing. Last month’s revenue of $129K is higher than the last 12 months' revenue of $1.5M, so that’s a good sign.
It makes sense because virtual assistant work is becoming increasingly popular. Post-COVID, basically, all of my business friends know about virtual staffing and are getting comfortable with it.
It’s also a fairly simple business to run. You have to figure out a training program and a hiring process, and then you’re pretty much set.
Lastly, you gotta love that recurring revenue. These businesses tend to get higher purchase prices because it makes it very easy to predict what future income is gonna look like.
Red flags
I’ll be honest, this is not an easy gig. VA staffing is a red ocean — if you Google it, you’ll see a bazillion people and companies offering basically the same service.
That means your margin is getting squeezed on both sides: your competition will force your prices down, and your VAs are going to be asking for raises which drives your costs up.
It also means you’re going to have to spend a ton on advertising.
Most of your clients are going to come from Google, Facebook, or YouTube. And unfortunately for you, those platforms are very efficient at charging you (and everyone else) a really high rate, so it ends up the tech giants are the only ones making any money.
These folks might be doing a nice job in their business, but advertising costs are eating all their profits.
It’s a hard way to get rich.
What I’d ask
If I called this place, the biggest question I’d have is: how am I gonna get my money back?
Right now, they’ve got no profit. Normally you’d raise prices or cut costs, and stop investing in growth. But that’s not going to work here, because of the pricing pressure I already mentioned. So what’s the path?
An important question in a red ocean market: what’s the secret sauce they have that someone else can’t just copy?
In other words, you want to find out if these people have any sort of defensive moat. Do they offer specialized services? Do they recruit in an underutilized market? If all you’re doing is competing on price, that’s a tough gig.
My rating
Sometimes you see multiples and asking prices like this, and they look really attractive. But then you double-click on it and ask: how do I get paid?
It kind of feels like…
And sometimes some businesses are like that. Some guy is making a ton of money cause he's ripping everybody off. In this case, maybe it’s YouTube and Facebook with their advertising fees.
Not a game I feel like playing.
That’ll be 🌶️ out of 🌶️🌶️🌶️🌶️🌶️.
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Want to go deeper on this deal? My podcast Acquisitions Anonymous did an episode on it — give it a listen!
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What do you think? Check out the deal yourself and let me know!
Michael
