Deal Flow: Specialty Coffee Roasting Business

Evaluating an Established Specialty Coffee Roaster in Denver Metro

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!