Online Shop Creating Dog Accessories
Major online retailing customers have helped this company achieve huge growth over the past few years. Located in Seattle, Chewy.com and Amazon have taken this company’s products nationwide, and positioned it for expansion into global markets. At any given time, there is $80,000 in finished and raw inventory, with the company able to produce over 3,000 pieces in a week.
All sales are 100% online, and the company has a nicely-built website, wholesale website and online catalogue. Products include leashes, collars, ID tags, harnesses and dog clothing. Creations are made from durable nylon webbing and come with an assortment of 80+ patterns.
In addition to the seller are 1 FT Seamstress and 2 PT Seamstresses. All employees are 1099 contractors, and the seller will remain after the sale to manage the Seamstresses. Designs, customer relationships and accounts are handled by the seller, as is most shipping and packaging.
Growth exits in expanding the product lines. These include adding dog toys, dog beds and offering more clothing options. While the biggest customers are Chewy.com and Amazon, there are several smaller retailers that frequently order, and a buyer could capitalize on that by placing product in local Seattle retailers.
- Years in Business: 8
- Location: Seattle
- Service Area: Nationwide – take it global!
- Clients: Chewy.com, Amazon, and smaller retail customers
- Products: Leashes, collars, ID tags, harnesses and dog clothing
- 3,000+ pieces can be created in 1 week
- Reason for Selling: Business is growing too fast for seller to keep up
- Employees: 1 FT Seamstress, 2 PT Seamstresses. All employees are 1099 contractors, and assist with packaging and shipping.
- Seller Training Period: Seller will remain full-time to manage seamstresses
- Growth Opportunities: Dog toys. Dog beds. Expand clothing line. Place products in retailers.
- List Price: $544,000
- Gross Sales:
- 2017: $518,129
- 2016: $311,731
- 2015: $373,305
- 2014: $402,964
- 2017 Cash Flow: $149,384
- YOY Growth Trends: Sales grew by 66% in 2017
- Profit Margin: 29%
- Assets Included in the Purchase:
- Intangible Assets: Company website, wholesale website, online 56-page product catalogue, 80+ patterns
- Inventory: $80,000 – finished inventory and raw material (most material is sourced in the U.S., with some coming from China)
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement|
January - December
|Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$140,079||$72,364||$102,316||$95,399|
|Interest||$6,362||$630||$1,348||$1,413||Non-onward going expense|
|Meals & Entertainment||$1,343||$1,185||$39||$0||Non-onward going expense|
|Contributions/Donations||$1,000||$0||$0||$0||Non-onward going expense|
|Cell Phone||$600||$600||$600||$600||2 lines at $50/month|
|Seller's Cash Flow = Total Addbacks + Net Income||$149,384||$76,456||$104,455||$97,670|
|Profit Margin||28.83 %||24.53 %||27.98 %||24.23 %|
- A buyer could hire the seller to manage sewers at a yearly salary of $30,000
Sales through October 2017
|Amazon Wholesale – Canada||$69.75|
|Amazon.com – Retail||$30,098.16|
|Amazon Sewing Supplies||$10,223.05|
|Rita Bean – Wholesale||$1,149.75|
|Company’s Site – Retail||$6,281.00|
|Unbeatable Sales – Drop Ship||$1,767.00|
- Growth in 2017 has been driven by new customer, Chewy.com, whose initial orders have been bigger than regular orders.
- Freight increased in 2017 because more materials have been purchased from China
- Shipping and delivery decreased in 2017 because Amazon’s shipping method changed from prepaid to collect
- 90% of orders are wholesale, 10% are retail
- Average wholesale order is $1,000
- Average retail order is $20
- Average Amazon order is $600 (about 100 pieces)
- Chewy.com orders between 1 – 3 times per week (at least 50 pieces)
- Amazon payment terms are Net 30, 2% Discount
- Chewy.com terms are Net 90
- Minimum Order Quantity (MOQ) is 5 pieces/SKU and non-returnable
- Company receives retails orders daily from its site
- Wholesale orders are a few times per week
- Patterns – Over 80 patterns are available across all product lines. Below is a small sampling of what’s available:
- About 3,000+ pieces can be made in 1 week. This equates to between $8,000 - $10,000 in inventory.
- 800+ SKUs
- All products are labeled with the company logo
Sales are 50% collars | 30% leashes | 20% harnesses
Production & Merchandising
- 95% of products are made by the Seamstresses, 5% is imported from China
- 3,000 pieces per week can be made
- There are no limitations on the types of products the Seamstresses can produce
- Embroidery is offered, but the seller is discontinuing this service as it is time consuming
- Raw materials are 35% of production costs
Marketing & Web Traffic
- Company stays ahead by competing in pricing, quality and designs
- Previously, the company had tried to drive web traffic only through Amazon, but found that didn’t work
- Web traffic is not very busy on the company’s retail site
- A new wholesale site was launched in March 2017
- Biggest clients are Chewy.com and Amazon
- Wholesale products are marked up 100%
- Additionally, there are some smaller retailers that purchase a few items almost daily
- Business is 100% repeat
- All customers are domestic
- Company is part of a vendor co-op for discount pricing on material
- Commissions and contractor fees are included in the co-op fees
- Vendor fees are 20%
- 1 FT Seamstress
- 2 PT Seamstresses
All employees are 1099-contracted, and provide assistance with shipping and packaging.
The seller is the product designer, and manages customer relationships, accounts and employees. To assist with the transition, the seller will remain full-time to oversee employees.
- Expand product offerings
- Create and sell dog toys and dog beds
- Add more styles to the clothing line
- Company current offers sweaters, coats, vests and more, but this could be expanded to include dog costumes and other apparel accessories
- Place products in local retailers
- The company is mostly focused on Amazon and Chewy.com sales, but finding local retailers to stock products would expand presence and increase top line sales
The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business. The formula used is as follows:
Cash Flow x Multiplier = Price
“Cash flow” is the sum of net income plus any owner perks and non-onward going expenses.
“Multiplier” is a prescribed number between 1 and 5 determined by a 100-point, 20-question rating system used to determine the business valuation (average is 3).
The Cash Flow for 2017 is $149,384, and the prescribed multiplier is 3.65.
With this information, the computation result follows:
$149,384 x 3.65 = $545,241
The List Price for the business is set at $544,000.
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