Deal Flow: Specialty Coffee Roasting Business
Evaluating an Established Specialty Coffee Roaster in Denver Metro
2 min readJul 3, 2024
I stumbled on this opportunity outside of the usual channels, and it looks like it may be a good investment given the profitability and growth potential . The acquiring entrepreneur should seriously assess the scalability and stickiness of current customers. The asking price seems tenable given the turnkey nature of the business.
Business Overview
- Location: Denver Metro Area
- Established: 2009
- Facility: 2,000 sq ft modern production facility
- Employees: 5 coffee roasting staff
- Production Capacity: 6,000–8,000 lbs of coffee per month with about 40% excess capacity
Financial Overview
- Annual Sales: $420,000 (average over the past 3 years)
- Gross Margin: 32–35%
- Growth Projections: Sales could increase to $600,000 within 3 years with projected expansion
Key Strengths
- Strong Market Position: The business is strategically located in a high-demand area for specialty coffee, with a solid reputation built over more than a decade.
- Turnkey Operation: The sale includes all necessary equipment and a trained team, allowing for a seamless transition with minimal operational changes needed.
- Loyal Customer Base: The business has nurtured strong relationships with a variety of customers including cafes, restaurants, and online consumers.
Growth Potential
- Increase Production Capacity: Utilizing the existing 40% excess capacity and potentially expanding the facility or equipment to boost output.
- Expand Customer Base: Increasing efforts in marketing, especially in digital platforms, could reach new customers in untapped markets.
- New Sales Channels: Exploring direct-to-consumer sales through e-commerce or subscription models.
Financial Health
- The business maintains healthy gross margins and has shown steady cash flow.
- The existing financial setup suggests the business is well-managed with potential for increased profitability under an engaged owner.
Risks and Considerations
- Market Competition: While the business has a loyal customer base, the specialty coffee market is highly competitive.
- Economic Sensitivity: High-end consumer products like specialty coffee can be sensitive to economic downturns which might affect discretionary spending.
Transaction Rationale and Pricing
- Asking Price: $540,000, approximately 4x EBITDA, seems reasonable given the turnkey nature of the business..
- Seller Financing: Love to see it.
Operational Transition
- Staff Retention: Retaining knowledgeable staff is critical for continuity and maintaining the quality of the product.
Owner Training: The current owners offer 30 days of hands-on training.
What do you think? Check it out and let me know!