They did 8.6M in revenue with 4.5M in earnings in 2019 with 5 employees who were mostly family, no sales people, and out of a 5,000 square foot location. In the first quarter of 2020, I could have easily sold this company for 4X the 4.5M plus their 933K in inventory which would have totaled 18.9M. Then Covid showed up. They had only sold through trade shows in the past. After 1 ½ years without trade shows which is where 90% of their sales originated, the owners signed up for 4 trade shows in the fall of 2021 but they had to send proxy’s since the main owner got Covid and could not attend them. The results were 2M in potential bidding but nothing like they experienced in 2019.
They are looking for a partner to take over sales and marketing because there is nothing wrong with their products. They need an expert marketing company to handle online sales, Vlogs, Pod Casts, which should result in a higher number of less costly sales going forward in a non-trade show dependent way. This will include new exposure to video demonstrations for their 42,500 LinkedIn followers with the ability to order their products online or schedule appointments to see in-person demonstrations. They didn’t know this existed or that their competitors were already doing this until August. The trade shows returning combined with their new products and new online marketing/sales kicking off in April of 2022 should have them back to record numbers by the end of 2022 or 2023. The owners will not sell more than 51% based on their confidence in their ability to get to 100M with the right partner. They want to focus on design build. They are looking for a partner to handle, sales, marketing, etc so they can focus on design build. They plan to grow this company to over 100M in revenues over the next 5 years. They understand that Covid has negatively impacted their valuation which ironically has happened while the demand for CBD, essential oils, etc has actually increased. The offers they have gotten over the last couple of months were not the amount or type of partnership they were hoping for. They know they will grow faster if they can find a partner with connections/experience in marketing particularly in Biopharmaceutical and/or Essential Oil and/or CBD markets. They are looking for a partner who will give them a fair offer for 50% of their company by mid year end 2022.
This business designs, manufactures, and sells their patented extraction, separation, evaporation, distillation, and isolation equipment which can be used for the Cannabis (Marijuana and Hemp) industry, biopharmaceuticals industry, and many products that use essential oils like lavender for soap, etc. Most of their sales to date have been the Cannabis industry but that is because they don’t have any sales people and these are the conferences the owners have attended. This advanced technology equipment processes with maximum efficiency and consistency in product quality with cost reduction in mind. The company is 6 years old and had revenues of 8.6M in 2019 with 4.5M in earnings which is a profit margin of 52% with no sales force and designing and building the equipment themselves.
The sales price has been lowered to 2.5M for 50% ownership plus 50% of their 933K in “good” inventory making the total price 2.96M. This price is good until June 30, 2022. They have some flexibility with this. They prefer a 50/50 partnership but will listen to all offers. The data room has projections for 2022 and 2023 indicating revenues of 40M plus based on a capital infusion by the buyer of an estimated 1.5M to move their location to a bigger facility, to buy parts to increase production, and to hire 2 sales people and train them. One of the 2 owners will work for 30 hours a week for a salary while they will keep their 50% equity and continue to grow the company. They want to restarted production of their equipment with the conferences coming back and starting online marketing and sales. Keep in mind that this company had grown steadily while expanding their product lines, revenues, profitability, and market share UNTIL COVID happened. Details below especially in the data room where you will find several video interviews and a walkthrough of the business and its products.
7 Year Old Design and Manufacturing Extraction Company
Location: Denver Metro, CO
The 2019 revenues were 8,625,277 with 4,500,492 in earnings. 2018’s revenues were 5.4M with 2.7M in earnings. 2020 and 2021 are irrelevant because they were not marketing the company because of Covid. They did 2M in 2020 and 840K in 2021 without any marketing. 2022 will be the start of their new more modern approach to marketing. The company started from zero in 2014. The company has grown with no debt except short term payables, has had no bad debt, and 100% of signed contracts have been executed. The company has had been very consistent growth until 2020, making the impact of Covid easier to quantify for this company. The combination of the addition of 2 new products representing a leap forward in the industry, increasing recognition and reputation, an increasing amount of states and people in those states benefiting from CBD, and the slow return to conferences will easily mean that 2022 might show record revenues and earnings. In fact, if they find the buyer they are looking for, they predict that the company will have 42M in revenues with 25M in earnings within 2 years. Please watch all of the videos in the data room link above. The data room also has a pro-forma that they think is accurate except the processing portion(pricing has softened a little for processing since they made the pro-forma).
Their processing equipment is normally sold after an in person/on-site demonstration, which yields a closing rate of 37%. They are frustrated by the shutdown of conferences and travel because they had just developed two exciting new products which have the potential for high revenue with solid margins for years to come. The new equipment’s accuracy, quality, and efficiency will complement their existing product lines; solidifying them as market leaders. Keep in mind that this company was growing at an average of 50% per year until COVID.
The company has a significant following and customer base with over 42,500 Instagram followers and customers in 21 states and multiple countries. They are confident of strong growth, given their new products, strength of existing products and states yet to fully legalize. An additional 29 states should become fully legal in the next couple of years, which indicates they have yet to see full market potential. Additionally, with, their knowledge, demonstration equipment, they could process cannabis in their facility with revenues between 2.2M/yr. (crude oil) to 15.6M/yr. (d8 acetate), which is in addition to equipment sells and manufacturing. While they have historically marketed to the cannabis industry and it is the largest market for their equipment, there are other untapped and very lucrative markets (i.e. essential oils(botanicals), laboratory sciences, education, pharmaceuticals, and beer/wine industry). Their products can be used in many other industries and would be the most modern and accurate extraction and evaporation equipment in many industries. They believe their ability to accurately create an exact formula to industry standards should be mandated throughout the world. In fact one of their products has the ability to efficiently perform liquid-liquid separation on a many different types of solvents. Lastly, the owners have proved their equipment demand, ability to stay ahead of the market with new products, and overall business viability, but want support to go to the next level so they can spend more time on design which is what they enjoy and what will take this company to a much higher level.