Field Notes: Established Online Lighting E-Commerce Shopify/Amazon

Bright Prospects in a Profitable Online Lighting Business

I came across a business that looks like it could be right in the sweet spot for many ETA searchers out there. My analysis is based solely on the information that was provided in the listing on BizBuySell. And, as near as I could tell from the listing, it looks like it’s for sale by owner and offers seller financing. It’s a lighting e-commerce business with profitability, an efficient operational model, and ample room for expansion. The streamlined operations make it a compelling choice for potential acquirers, there are critical factors to consider, including the need for business relocation (loss of lease) and the challenges of managing with a small team. Due diligence should focus on the business’s scalability, the practicality of its relocation, and how existing operational processes might integrate post-acquisition.

Business Overview

• Established and Profitable: Founded in 2016 and based in Florida, this e-commerce lighting company specializes in private labeling and dropshipping LED lighting products and fixtures. Its sales channels include Amazon, Shopify, and other marketplaces.
• Revenue and Profitability: The business has shown strong financial performance with gross revenue of $5.158 million and an EBITDA of $1.215 million in 2023. Cash flow stands at $1.1 million.

Operational Insights

• Efficient Operations: With only 3 full-time employees, the company demonstrates efficient operational management. The use of a scalable ERP for order processing, inventory management, and customer support contributes to this efficiency.
• Relocation Requirement: The business needs to be relocated as the current landlord will not lease the warehouse once sold.

Market Position and Strategy

• Low Competition and Risk: The company enjoys low competition in its niche market. Its largest customer only represents 1.5% of total sales.
• Diverse Clientele: Selling nationwide to distributors, sign makers, electrical contractors, and end-users, gives the business a broad and flexible target market.

Growth Potential

• Expansion Opportunities: There is room for growth by expanding the main product line and exploring new consumer segments. The long-standing relationships with 5–7 suppliers since its inception indicates a stable supply chain that could possibly support expansion.

Sale Considerations

• Seller Financing and Support: The seller is open to financing options and offers up to 3 months of post-sale support and training.
• Reason for Selling: The owner’s desire to pursue other interests presents an opportunity for a new owner to take over and potentially grow the business further.

Some Key Questions for the Seller

• Customer Acquisition and Retention: How does the business acquire new customers, and what strategies are in place for customer retention?
• Supplier Relationships and Terms: What are the terms and conditions of the relationships with the 5–7 suppliers? Are there any long-term contracts in place, and how dependent is the business on these suppliers?
• Digital Marketing and Sales Channels: What specific digital marketing strategies are employed? How much revenue is generated from each sales channel (Amazon, Shopify, etc.), and what are the costs associated with these channels?
• Financial Trends: What have been the historical financial trends for the business? How have revenues and profits grown or fluctuated over the years?
• Post-sale Transition Plan: What specific support and training will the seller provide post-sale? How will the transition of relationships with suppliers and customers be managed?
• Reason for Selling: Can the seller provide more details on their motivation for selling? Understanding the seller’s reasons can provide insights into the urgency of the sale.
• Relocation Logistics: What are the specific requirements and costs associated with relocating the business? How might relocation impact the existing operational dynamics?
• Future Growth Strategies: What plans have been implemented, and are there any plans or strategies that have been considered for future growth that haven’t been implemented yet?