Deal Alert - Video & Animation Agency for $2.2m

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Today, we’re featuring a really cool business for sale in the digital video marketing industry.

The business is a video and animation agency that creates marketing videos (explainer videos, screencast videos, demos, etc.) for large and mid-sized companies to help them convert more customers.

There is a lot to like about this business – it’s in a fast-growing market, operates fully remotely, has amazing margins and a high repeat order rate.

Let’s dig in.

Key Facts

• Location: Fully remote

• Established: 2011

• Asking Price: $2.2m (4x SDE / Adjusted EBITDA)

• 2023 Revenue: $1.4m

• 2023 SDE / Adjusted EBITDA: $548k (39% margin)

• Team: 6 FTE / extensive network of contractors around the world

What We Like

• Growing market – digital video marketing is a $54bn global industry and expected to grow at 26% per year through 2032. Animated explainer videos (60% of this business’ revenue) are in high demand due to their ability to grab customer attention

• Attractive customer footprint – focus on mid-sized and large companies (typically $20m+ in revenue) with sizable marketing budgets. Customers include several Fortune 50 companies. Average project pricing is $10k+

• Recurring revenue – 70% of customers reorder each year, keeping marketing costs low

• Strong margins – 39% Adjusted EBITDA margin, after adding back owner’s comp and related personal expenses

• Established team – 6 FTE across sales and project management, plus an extensive network of global contractors for content creation

• Significant growth opportunities – ramp up outbound sales (low effort historically), move from project based pricing to annual recurring contracts, and expand products and services to include more types of video content

• Attractive valuation – 4x Adjusted EBITDA, with potential to negotiate / explore creative deal structures (seller note, equity roll, etc.) given current owner (who purchased the business 6 months ago) is selling due to health issues in the family

Areas to Dig Deeper

• Client concentration – make sure the largest client / top 10 clients don’t account for too much revenue

• Recurring revenue – while 70% of customers repeat each year, we’d want to know what this looks like in terms of revenue

• Sales – what do the sales cycle and win rates look like? Is there potential to make this more efficient?

• Employee turnover / expansion – how long have the key employees been in the business? How easy is it to add more contractors during periods of higher demand / growth?

• Competitive landscape – this business seems to play in the mid to high end of the market where there is less competition but we’d want to know who the key competitors are and how the company differentiate itself

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