💸 172% cash on cash return in 12 months with this Amazon Brand?

Nano Thought

Sometimes, the best way to build or improve an online business.

Is to take a deep dive into what your competitors are doing

James Camp 🛠,🛠 @JamesonCamp Tools for spying on competitors: 1. Facebook ads library 2. TikTok ads library 3. YouTube ads library 4. Google transparency 5. SpyFu 6. Similarweb 7. Their newsletters 8. Their social media feeds 9. Their customer reviews Spy to find great ideas, then make them your own. April 3rd 2023 22 Retweets 138 Likes

The tools above will take you incredibly far

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This Week’s Opportunities

​Empire Flippers FBA Listing​

Here is a breakdown of a site from Empire Flippers. The listing can be seen here​

Site Summary:

An Amazon FBA business created in July 2018 in the occasions & gifts, office supply, and equipment niches. The business has 2-brands and is protected with trademarks and Amazon Brand Registry. It sells 10 SKUs that are gifts for various occasions throughout the year and a product used in laboratories and by hobbyists.

The earnings history shows a nice linear growth trend. The business has grown 98% year over year. Revenue has grown considerably and the profits have also grown gradually as well.

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​Things we don't like:

• High multiple for these market times and compared to other FBAs.
• Niche for the main brand is low barrier to entry. Competition will always be a risk.
• Not suited to flippers. This is a well-optimized business.
• All traffic is organic Amazon. Business is heavily reliant on one audience. Also, no follow-up marketing is done so risk of this being a one-stop shop.
• PPC isn’t established. A competitor with strong PPC could be taking the paid market share on Amazon.
• Around 50% of the products have less than 100 reviews. There’ll be high PPC costs and low conversions for these products. Although they have high reviews, and some of the products even have Amazon’s Choice badge, there is still room for growth here.
• Products get double quality checks. While this is what’s kept the products high quality and the reviews high, it’s costly to do this.
• To take this business to the next level and go from $2M in revenue to say $20M, you’ll need to build out a team.

Ok Y'all! things we do like:

• Funding approved through Boopos which offers up to 80% flexible financing with no personal guarantee
• The products have average rating of 4.7 stars. Both brands have Amazon’s Choice products.
• It’s in a high profit margin niche with high-margin products. Profit margins were still over 25% in 2021 when freight rates peaked
• Star supplier is a partner. They communicate with other suppliers to bundle products and they handle the freight forwarding. Makes sourcing and logistics hands off for owners.
• Products aren’t tied to holidays or events so there’s no seasonality.
• Shopify store to diversify risk with multi-channel selling.
• The business has experienced 98% year-over-year growth.
• Strong profit margins.
• A defensible company protected with 7 trademarks.
• Super efficient and cost-effective operations. The two owners spend just 6 hours per week running it

A new owner could:

• There are no established paid channels for the business, PPC is a major opp
• Build an email list for remarketing to increase repeat purchases.
• Both brands are well poised to expand the number of products offered. For the single-product brand, the product line is incredibly easy to expand due to the low cost of entry and ease of ordering from the current single supplier
• The second brand sells the gift boxes, you could repeat the product launch strategy for new products. The Sellers have agreed to include 5 new potential boxes to launch and they’ll share their launch strategy.
• Offering subscription for these types of products is a good opportunity to increase repeat sales and earn recurring revenue. Most of the products last for a few weeks to a month, which is an ideal timeline for a monthly subscription.
• Remove the second quality check. It might be time to remove the second quality check to reduce costs and increase efficiency.

Final Thoughts:

Overall, this is a well established and optimized business. It’s best suited to a buyer who wants a hands off, long-term, and secure investment. Or an aggregator with a team to scale the business to the next level.

Having said that, there are some quick wins like launching the product ideas and new products provided by the sellers that any buyer could implement to increase profits.

The Sellers have listed for ~$1.4M. (37X multiple of trailing 12 months average profit).

This is a high multiple, so we expect the sellers to be open to negotiation to closer to 35X.

The biggest growth lever is to establish the Amazon PPC.

As of last year, Amazon now allows you to send marketing emails to your list. So building out an email list and running some retargeting campaigns is a free and effective way to increase repeat purchases.

Plus, if you remove the second product inspection you could probably keep an extra ~$10K a year in profit.

Plenty of quick-win opportunities for this large, established company that would make an ideal long-term, secure addition to your portfolio. If it’s your first time dabbling in FBA or ecommerce, there’s plenty of room for error since the business has a long earnings history, strong product reviews and Amazon presence, and formidable supply chain.

If you could negotiate to a 35x and used Boopos for financing $264k in cash would get you $169k a month in revenue of $38k in profits. Thats assuming you didnt split that with a partner or raise any money from investors.

With those numbers thats a potential 172% cash on cash return year one before any improvements.

As always...do your own due diligence, the above is based off of what we see as an opportunity from the info provided in the listing and some light due diligence, not a deep dive. It just one of many scenarios that could play out and its up to you to do your own due diligence and see if this makes sense for you!

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​Podcast Corner

A while back I was on Triple Whales Podcast ""You're not your ROAS"! You can watch it below or check it out:

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Listen to it here on spotify

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Whats on the Pod

"In this episode of "You're not your ROAS", James Camp shares his insights on entrepreneurship and investing in companies that can effectuate change.

James also discusses the importance of looking at businesses from the owner's point of view, real estate as a tax-advantaged asset, and identifying your next project, as well as various topics like the crypto market, SEO, non-fungible tokens, and more. Don't miss out on this informative and engaging conversation!"

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Thanks for reading! I'll hit your inbox next week with another breakdown of a website opportunity!

Thanks from the Nano Flips team

(James)

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P.S.

Check out 2 newsletters from my best friends you will love

Colin Landforce's personal newsletter for all things business building: builders.build/colin​​

Product People - Learn the art of building CPG brands with Oren Schauble: https://go.orenjohn.com/cpg/​

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All investment strategies and investments involve risk of loss. Nothing contained in this newsletter should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.