Introducing the Mainstreet Memo by DealBuilder

You are receiving this email as a subscriber of DealBuilder’s newsletter Deal Dive. 

You may have noticed this newsletter looks a bit different. Why? Well, like the wallpaper in your parent’s house, we felt Deal Dive was a bit dated. 

Which is why we’re proud to announce our new publication - The Mainstreet Memo

In addition to a fresh look, we are improving the quality of this newsletter.

We feel the world of buying businesses is too secretive. We promise to share those secrets with you - without the suit & tie lingo. 

With our re-introduction out of the way, let’s dive in! 👇

INDUSTRY BREAKDOWN

Are Medical Spas a Hidden Goldmine? 🤑

Medical Spas (or ‘Medi Spas’) are a hidden gem in the world of small businesses - but what makes them so special? 

In this breakdown, we’ll share what makes them so interesting + a few live deals you can analyze yourself! 

Industry Trends

If you owned a business during the heat of COVID-19 - we feel your pain 😅. Medical spas were no exception, with spa visits falling off a cliff in 2020 - down 35% from the year before. 

But like the movie Rocky - spas have made a big comeback. Bouncing back off the mat in 2023 to previous highs of $23.2 billion of revenue.    

The Finances 

Turns out there’s a price tag on beauty - with your local medical spa owner ready to take your money. One of the things that stands out with health & wellness spas is their strong margins. On average, most spa’s bottom line exceeds 10%. 

Even better, many spas operate with low overhead as their clinicians will often work on commission, earning up to 30% of the service cost. This allows owners to manage their cash flow better, protecting the business if bookings were to dry up. 

Buy or Bust? 

A well-priced spa can make a great acquisition due to its low overhead, high margins, and ability to charge a premium. 

Buyers need to be aware that many spas are owner-operated, meaning you may need to roll up your sleeves and grow it to a scale where you no longer have to complete treatments yourself.

Check out these medical spa deals:

1. Thriving Day Spa with Exceptional Growth Opportunities - $300,000

2. Acupuncture And Massage Clinic In Victoria For Sale - $124,000

3. Med Spa with fantastic earnings and minimal effort - $2,250,000

DEAL REVIEW

Aesthetic Medical Device Manufacturer

This week’s deal is an Aesthetic Medical Device Manufacturer that is located in Vancouver, BC Canada, but can be operated remotely. 

The business is 14 years old, has regulatory approval, and has recurring revenue. The owner is selling to focus on other business ventures. 

Deal Facts 🔥

Green Flags 🟢

• Competitive Moat: the business operates with a regulatory license, creating a barrier to entry for competitors. 

• Recurring Revenue: 100% recurring revenue = the holy grail of business models. 

• Remotely Operated: this indicates the business does not rely on its geographic presence to grow. 

• Revenue Growth: the business has experienced strong revenue growth despite shutdowns during COVID-19.   

Red Flags 🔴

• Revenue Concentration: the fact that 95% of revenue comes from its best-selling product creates a risk if popularity or demand drops. 

• International Manufacturing: if COVID-19 taught us anything (like couches costing $10,000) - relying on overseas suppliers can be risky, particularly if you’re a small business. 

• Market Sensitivity: the business was not isolated from COVID-19, making it worth investigating whether the business is recession-proof or not. 

Possible Deal Structure: Earn-out payment based on the product sale performance. This will help protect the buyer if its leading product loses popularity.

Overall Deal Spiciness: 🌶🌶🌶🌶*

*Deal Spiciness is a completely subjective rating without a quantitative grading system. Depending on the buyer, a spicy deal may indicate a good thing or a bad thing. Basically, do your own due diligence.  

Watch Our Video Breakdown 

For a more in-depth analysis, check out this video deep dive of the deal by our Founder, Morgan Tate:

Want to learn more about this deal? Reply to this email with a “send me more details” and we will connect you with the broker!

SMB TWEET HIGHLIGHT

A lot of business owners are struggling with hiring people right now - adding a tiny assignment (“attach 1 paragraph on why you’re a good fit for this role”) can be a great filter in the hiring process.

GOOD READS

Recommended Reading 📚

Below is a list of articles and books we recommend for buyers or operators of small businesses!

1. Purchasing a business with zero money down: myth?

2. Profit first: transforming your business from a cash-eating monster to a money-making machine

3. Is buying a big business or small business better?