Deal Breakdown: This blue-collar workwear brand is crushing TikTok

The big question: how sustainable is a TikTok business?
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I’ve looked at thousands of businesses for sale, and learned to read between the lines. Every issue, we'll take a deeper look at a listing, learn something, and I'll rate the deal at the end! 

This week’s listing: A 7-year-old blue-collar workwear brand making great money through Shopify and a rapidly growing TikTok shop… selling a ton of hardhat stickers.

The numbers: $4M in revenue, 38% net margins, asking $4.6M. Also, it’s SBA pre-qualified!

Green flags

First, this is a great market to tap. Rural America gets ignored by a lot of ecommerce, and that makes for an underserved market.

And 38% net margin is great. Obviously, I’d want to make sure that’s sustainable, but it’s a pretty fun place to start from.

The numbers look good right now, and I like that they’ve been around a while. 7 years is pretty long in ecommerce time.

For someone with other ecommerce going on (read: not me), this seems like a pretty good business to roll up into your existing operations!

Red flags

First, ecommerce is not my game. This is just a red flag for me personally — it’s a whole world of expertise, and if you’re not Bill D’Alessandro you can get in over your head.

Next, I’m wary of anything that costs “price plus inventory”. As Heather pointed out on the pod, the price you pay should include the things you need to run your business.

And the elephant in the room: if you’re coming up with cute sayings and graphics, how do you protect that IP? This is TikTok we’re talking about here. Your stuff is going to get ripped off.

Overall, I’m really concerned about the durability of a business like this. It seems like it’s going to be a race to the bottom against Chinese knockoffs copying my every move.

What I’d ask

First, I’d definitely want to know the mix of apparel vs sticker inventory. Stickers are easy to store, easy to ship… but apparel can leave you with a lot of dead stock in weird sizes. 

Next: what are these sticker designs? I’d want to be sure they’re not trampling all over copyright with stuff like Disney or Simpsons characters. That’s a nightmare waiting to happen.

And if the stickers are actually original designs, are they all trademarked and documented? Because anyone can make stickers.

Next, I’d want to figure out how to make this TikTok bump sustainable. Do these folks have a playbook for attracting new TikTok affiliates?

My rating

This is a cautious thumbs up from me… for somebody else. You need some ecomm experience to dive into this kind of business, and that ain’t me.

Curious if this deal is right for you? Click here for the full listing or listen to our deeper dive analysis on Acquisitions Anonymous!

Have a great week!