We continue our series on Australian buying opportunities by speaking to Michael Kerr from Kerr Capital. Michael discussed his client’s business, a leading web based health and beauty products business which has recently been put on the market for sale. The business, which has an extremely strong online presence, sells health and beauty products to massage and tactile therapists, physiotherapists, day spas, beauty salons, private practitioners and home users.
Thanks for speaking with us Michael. Firstly, in simple terms, what does this business do?
The business sells a variety of oils – massage & essential, massage balms & creams, massage tables & accessories and spa, beauty & waxing supplies. Operationally it involves sourcing products, storing them and then fulfilling orders – its a very well setup business with good suppliers, regular customers and well designed systems.
What markets does the business target? What opportunities exist in the industry?
The business actually incorporates two websites serving different market segments
There is a wholesale website targeted at the industry practitioners – this is currently the major part of the business and represents a fair portion of sales.
The other part of the business is a retail website targeted at consumers who buy high quality oils, creams, gels etc for their own use.
As a subset of the broader and growing online sector Health & Beauty online sales grew 50% in 2015 and is now the 6th largest category overall (this came from a 2016 AusPost report)
As part of the research we did when preparing this business we found some Federal Government data (joboutlook.gov.au) that forecast the number of massage therapists was set to grow from 11,800 to 15,100 by 2020. This is a big increase that the wholesale business could benefit directly from.
The business boasts two fully functional e-commerce websites which are search engine optimised and rank highly on google searches. How important is web presence to this business and what opportunities does this presence create for a new owner?
The websites have developed a strong online presence over a long period of time. This is something to be built on in 2 ways. Firstly with the well established back-end and logistics you could confidently scale the business by investing more into online marketing. It is run on a very part time basis currently – if you wanted to grow quickly there’s a lot you can do. The second opportunity is to build the wholesale business relationships ‘offline’ i.e with more traditional advertising and business development. These practitioners can then be converted into regular and long term customers. So getting out ‘face to face’ to create new relationships, knowing there is a great back end to support future orders, has real and sustainable upside.
The business has an established brand name, registered trademarks, trade relationships and systems. Can you outline how these add value to the business?
As an online business this one has been around for a while. And it works. The quality brand names, relationships and systems mean the new owner can come in a worry about scaling rather than starting up.
This business has brand recognition among practitioners – there are lot who have been customers for a long time. You can really build on that trust and recognition
What stage of development is the business in? What are its key strengths and what differentiates it from other operators in the sector? How has this evolved since the owners began running the business?
The business is best described as a part time venture for the current owner. He’s selling to enable him to focus on another business in another industry all together. This other business has been occupying most of his time and energy for a few years now. The business definitely took much more of a full time effort in the setup years. But now its essentially eight hours a week to operate it. Largely it is ‘taking orders’ and with the established systems and processes its easy for him to manage. This has been the case for a few years now – during this time the business has grown steadily with no additional marketing or effort beyond the absolute minimum. But its time for him to completely move on.
Who would suit running this business? Who who would benefit from acquiring it?
I can see a few different types of buyers for this business.
Given how well established the business I can see this being bought by someone who wants a part-time business, maybe their first business. The business produces a good return now and isn’t overly complicated. The current owner will be able to get someone up to speed very quickly. This leaves the door open for a lot of those business buyers who are looking for a part time business that can be run around family commitments or even to supplement a part time job. From my own direct experience there are more and more people looking to take control of their own future, in the face of job uncertainty or dissatisfaction, by owning a small business. I can see young couples, stay-at-home mothers or fathers and retired couples making a really good go of this. While the current owner rents a warehouse it could really easily be run from a garage or spare room.
If you did know the industry well or were a practitioner then this could work well as a way to diversity your business.
As it stands the business has survived really well with minimal input. If you were a larger industry player you immediately access another product range, another audience and another platform. There are a lot of ways to grow this by increasing the effort and commitment to the business from eight hours a week. The fans and followers across the various social media channels are a good starting point but I think the upside from tapping into the industry through industry associations and affiliate marketing are where the big leaps in turnover can be found.
Given that the business is going so well, why is the owner selling now?
He started another business a few years back. It was more of a hobby but it has turned into his main business. It’s a completely unrelated business but he sees opportunity and that is also where his personal interests are.
Having spent eight years developing this business (and time before that in and around the industry) to a point where it is running so efficiently and is saleable it’s a good time for him to sell to a buyer who can capitalise.
What’s specifically included in the sale of the business?
The sale includes two easy to use websites (including content management systems and email databases), the two main website domains (supported by trademark and registered business names) plus a portfolio of other related and relevant domain names.
There are Facebook, Twitter, Instagram, Youtube, Ebay & Google accounts for both websites.
Underpinning the business are strong supplier relationships and a key, exclusive license for selling a particular range of products in Australia.
Because of the effort that has gone into building this business and the high efficient operating infrastructure the current owner will be able to do a very comprehensive transition of the business to ensure that the new owner gets off to a flying start.
Thanks for your time Michael
Link to Business listing
For more information on Michael Kerr Click here
For more information on the opportunity click here (link to the Eden listing)