The discussed deal involves a virtual business selling architectural plans online, valued at $2.5 million. Founded by a husband-wife duo in 2006, the business offers three main products: architectural blueprints ($1,500), materials lists ($350), and budgeting tools ($20). With 25,000+ plans from third-party architects and a robust online presence, it serves a national market, appealing to home builders seeking cost-effective solutions. The business runs with minimal effort from the owners, supported by a single full-time employee and an admin assistant.

Key strengths include low refund rates (<1%), significant web traffic (2M+ unique visitors), and well-executed SEO by an external firm. However, risks like dependence on a single SEO provider and lack of diversification in marketing were flagged. Opportunities for improvement include leveraging social media, increasing plan customization, automating onboarding for architects, and introducing new product offerings, such as a comprehensive catalog of construction materials and augmented reality features.

Several participants praised the business’s automation and scalability, noting its potential for significant growth under new ownership. Marketing strategies such as paid advertising, influencer collaborations, and advanced community-building were highlighted as ways to enhance revenue. Additionally, the possibility of integrating payment structures for plan modifications was seen as a way to capture more value from existing customers.

The discussion also delved into deal structure options, favoring seller-financing or a royalty-based model to mitigate risks from market volatility. While the asking price was deemed slightly high, participants believed its flexibility, low operational demands, and potential for scaling justified the valuation.

The overall sentiment was highly positive, with participants expressing eagerness to optimize the business through strategic improvements in marketing, operations, and product offerings, positioning it as a leader in the architectural plan marketplace.

Full Transcript:

Okay. Let’s go to deal number two, because this is a really interesting deal. Yeah. I’m not gonna read the disclaimer, but this apply here as well. Before we go to the notes, let’s get that simple model at the top of it for the screen capture for Carmen and anybody else who doesn’t, get a chance to do the screen capture because I don’t leave it up there long enough. You want a screen capture deal number two, the simple model. There you go.

I like to put it down here on the balance sheet on the income statement as we’re going through it. This is Stig’s deal. I’m not gonna shortchange this one on time because it’s a really interesting deal.

And just to sort of, precall, I love this business too. This business supplies blueprints online for people building homes. This is a completely virtual business. Everything is conducted online.

What do they sell? They sell architectural drawings. Average is about fifteen hundred bucks a piece. I think there’s upgrades and there could be some add ons.

You know, Stick explained a little bit about that in our call. We had a nine one one call on this. So that’s the main product. It’s the architectural drawings to home builders.

They also sell a materials list product. You wanna do a takeoff of the drawings and come up with a bill of materials or a list of what you’re gonna need. They have that product. That’s about three hundred and fifty bucks.

Then they got a budgeting product, a cost to build product, only twenty bucks. If you buy this plan, you wanna figure out what it’s gonna cost to build this. Right? They’ve got a product that’s gonna calculate that for you.

Now, this in terms of who supplies these architectural drawings, the owners themselves have provided two hundred house plans to the website and the business. I was really shocked by that number. I have nothing to do with architecture. So it did seem really big to me, but then I realized that, hey, they’ve got a hundred and fifty other third party architects who supplied over twenty five thousand additional plans.

So they have absolute ton of plans on their website. Their target market, Americans who wanna build their own little, they don’t want the expense of hiring an architect to kinda create a customized plan. They might create an architect. They’ll give them somebody to sort of work with as a base to kinda cut down on their costs, or maybe they won’t deal with an architect at all.

We’re gonna talk to Stig about that.

Seller is located in the US Southwest. Business is virtual, but, of course, it sells nationally. Why wouldn’t it? Business has been for sale for six months.

The ask price, two point five million. Now obviously no property involved in this. The business was founded in two thousand six by a husband and wife team who are fifty fifty owners. If you’re unmuted, please mute yourself folks.

Roger, the husband and the team is an architect in his late fifties. He oversees the business and puts in a tough twenty hours a week. Fran, she’s a real estate agent in her late fifties, also active in the business five hours a week. They sold a business exactly like this one in two thousand and three to a private equity firm.

They didn’t feel like they got enough money for it. So they launched this one three years after they sold the other one. I’m assuming when the non competes ran out, they just redid the website, they launched the business again, attracted all the architects, they’ve been kind of, you know, working on it ever since. Now, I’ll tell you, I got a lot of enjoyment.

Motivation for sale. Roger and Fred are tired of working and want to retire. No more responsibility. They want to sell them.

I’m thinking, here’s two people. Since two thousand and seven, they’ve had an online business. As you can see from the from the EBITDA, right, they’re making pretty good coin every year. They go wherever they want.

You can you can run this business from wherever you want. It’s a virtual business. It’s one hundred percent.

I right? Fred is putting in five hours a week. Roger’s putting in twenty, but they’re tuckered out and they’re tired of working. They wanna retire.

Like, to me, it feels like they’ve been semi retired the whole time. I’m sure there was a lot of work that went into this business, but I mean, what a fantastic business to own where you can do it anywhere in the world. Right? Roger’s an architect.

He’s really good at putting this stuff together. He works on polishing up the the, the stuff that’s rendered prior to being published. So and the website looks good. So, I mean, full marks to these certain folks.

But I really had a hard time kind of empathizing with their kind of tiredness, hurt outness, and wanting to retire when, hey, they’re only semi working in the first place. Legacy is very important to them. They value integrity. They wanna maintain strong relationships with all partners, architects, and consultants.

Yeah. So Roger and Fran know what they’re doing. Like, they’re we’re operators. Like, they they they built a business successfully and sold it to a PE firm and then did exactly the same thing a second time, but they are on autopilot.

There’s no doubt about it. Roger Estrana in presentation, very often Photoshop, some renderings that are published. He’s potentially open to carrying on doing some of that work. Only one full time employee in the in the business.

I think it’s a friend who was a former contractor, plus they have one part time admin person. So like I said, they got the business on autopilot. It runs well in its current form. Plenty of opportunity for business improvements have been identified.

What you what you need to know about Stig is Stig is in this business. Right? He’s, he does construction. He works in this area.

So he’s got kind of an insider kind of expert subject matter expert opinion in terms of where the, business improvements have been identified. And what I loved about my call with Stig is he was identifying opportunities that I’m sure Roger and Fran probably have already identified. Right? It’s just they did not have, you know, they did not have enough fuel in the tank, right, to go after it hard.

They wanted to exit. So this is the kind of business that’s great, but it’s on auto autopilot. It has plenty of room for business improvement. I mean, the business improvement that they enjoyed from twenty to twenty one was attributed to engaging a new SEO firm, search engine optimization firm.

They saw it got a strong improvement in their Google rank. It generated improved web traffic. This is a key to this deal, in my opinion. We talked about that quite a lot.

It’s a vulnerability if you bought this business, and somehow or other, you know, Google changed the algorithm or this SEO firm decided that they wanted to serve in Hawaii for a couple years and shut it down. You know, would you be able to replace them easily? Are you vulnerable on that front? We didn’t make a conclusion one way or another.

We were just throwing the the topic around in discussion that. Pandemic actually helped this business because it made online virtual meetings the norm like we’re having right now. You know, it’s the same way it helps so many virtual businesses. I mean, Carl was the same way.

Carl had a virtual business long before the pandemic, you know, and it did really well. But as people became more and more accustomed to and normalized to, you know, Zoom type meetings, right, it helps virtual businesses. They sold approximately twelve hundred plans in twenty twenty one. They sold forty two hundred cost to build reports.

The average customer acquisition cost about fifty bucks income per visitor, eighty cents. Unique visitors over two million. That’s a pretty good number. Request for refunds less than one percent.

Super important metric. I love to see it in the notes. Now, what do they pay the architects to submit these plans? They pay forty percent of the revenue that’s paid.

Alright. So that’s not bad. I’m sure some of these people are doing quite well. They budget for Google AdWords and pay per click type advertising about a hundred and fifty k.

They do have an SBA deal on the radar radar and are willing to carry the necessary standby seller note to make it happen. The website is great. Well organized, appealing, easy to navigate, great photos, you know. Take a bow, Roger and Fran, you know, did a really nice job on it.

Like it’s not flashy but you know, it’s it’s all flows really nicely. You just get the feeling that, you know, this is a very, you know, very reputable sort of well thought out, you know, type of business. Let’s score, I’d say average. You know, they’re motivated to exit but not a ton of the hard urgency distress that we’d like to see in a higher MUD score.

But, yeah, they’ve done it twice.

And, you know, that twenty hours a week is wearing on Roger, and that five hours a week, well, Brandon said enough of that too. So, they want out. Gas price is a little bit, steep, but, I don’t know. It’s not something that I would completely categorically reject.

I am going to get Stig on here right away because I wasted too much time already. So I wanna keep things moving here. So I’m not gonna give you my take on the business, except in a conversation with Stig. If you can give us a little bit of background.

Stig, can you unmute yourself?

Yeah. Totally.

So Andre and I are actually partnering on this. Andre is also in the program. Andre is a product manager in the software space.

I am, like, I’m a contractor. I also work for an architecture firm.

So we sort of have that combination going. I love the comms for everyone, especially non compete.

We’re not too worried about that just because they’re much older. They’re in their sixties now, so they’re sort of, like, done working, that, so that’s a really critical component to this.

Yes. I think it’s overvalued. So they’re speaking to their, financial advisor, and that’s sort of like their retirement number. Like, they want two point five million to retire.

So there’s that.

But there’s a lot of meat left on boats. I mean, they’re not doing much. Like people said, it’s similar to an ecommerce business, except for that all their products are, like, digital data file. You know? And they’re so the products are, like, thousand dollars, five thousand dollars depending on the plan, and then you could have add ons. So you could have you could buy materialist. You could buy a budget.

And then they also have a component where you could change the actual plans, but they’re not taking money for that. So that’s another they don’t do any social media marketing, like advanced community building. They only really do SEO. So they have one firm. And like John said, it’s sort of all dependent on this one firm.

From our research, they’re legit SEO firm. They actually did the website.

But they don’t do the they don’t they don’t attract more, architects for plans.

They don’t, do much marketing. It’s the firm does everything. They just sit back and let it ride. Honestly, they’re not doing much at all.

So there’s a lot to build. And in this industry, there’s like, there’s, twenty or thirty other businesses and they’re doing much better. Like, they’re capturing maybe four percent of the space. So, yeah, Andre, if you could you got stuff to say, please.

Yeah.

My sister just went through the process less than a year ago. She paid, you know, over a thousand dollars for a stock plan, and then she wanted to make a lot of adjustments to it. And she ended up paying something like six or seven or eight thousand total.

And, the one thing we noticed is that the sellers are kind of leaving money in the table because they do have maybe ten percent of the customers who want start, plan and modifications. But what they do is they say, okay. Here’s the architect’s contact info. Arrange it with them.

We have nothing to do with it, which does make it easier from the perspective of them doing less work. But like I said, I think they’re leaving some money on the table because we can integrate a payment structure into this, handle the payments for them, take a certain percent cut and increase revenue. Just one of the ways. Yeah.

And that was a big part of the discussion that, Andre and Stig and I had on the call was, you know, what’s the path to business improvement? Because to me, the key to this deal is you’re not gonna be able to probably borrow any money, cash flow, or assets, upfront to fund a closing payment. So it’s gonna have to be mostly, you know, seller financed. Again, I kinda like the idea of a royalty scheme on this one, because, you know, you’re protected a little bit in terms of, you know, the fact that real estate is so tightly tied to the business cycle.

It’s so tightly tied to interest rates and, you know, if you had royalties allows your, payments to the seller to go up and down depending upon the revenue of the business, so it gives you a little bit more protection on the downside. And we figured that, yeah, we probably could overpay for this business if they would accept that kind of structure, but we also identified that the key to making it happen was the business improvement. That I’m not interested in the royalty plan if this business is gonna flatline for five years, but if if, Stig and Andre can somehow or other two x or three x business over five years, then we thought that would be a fairly compelling narrative.

Stig or Andre, could you guys talk a little bit about, like, the hardcore business improvement plan that you guys would undertake if you did manage to land this business?

Yeah. We got a whole slew of things we’re gonna do. So they, because they’re at the beginning of the life cycle, sort of, construction, someone’s new home, we have the plan to put together a catalog that basically has all the building products in construction, and we’re gonna run ads from all the building products, faucets to, fix plumbing fixtures to, like, paints to, anything you could think of. We could even include interior designers. So there’s that’s just another product offering we could bring. They haven’t done any social media marketing. There’s all there’s all sorts of micro influencers out there, real estate agents, interior designers, etcetera, that could work.

That, that’s just on for that. We also so Andre has a GM that could help run it. And then we also wanna, automate the onboarding. So right now, one, sort of bottleneck is the architect likes to control all everything that happens when the architect submits plans. So we wanna have create more of a platform out of it where they can come in, build a like, enter themselves, and then upload it. So creates more of, like, a SaaS model than a, ecommerce.

So that’s just a few of the ideas we got. And, of course, it’s just technology to get out, like, augmented reality.

Yeah. Plenty of opportunity. And so Yeah. Absolutely.

I love the idea of a platform.

Plenty of opportunity.

And so Yeah. Absolutely.

I love the idea of a platform because it basically gives you all kinds of stuff to be able to kinda add on in the future as VR and other things become, you know, more part of this space.

I wouldn’t mind getting a couple of comments in here. I know JR is kind of involved a little bit in this sort of, home services kind of, kind of thing. Not exactly like this kind of business, but he usually has some good insights as well. JR, you like this business?

Oh, dude. I I would pay three million for this business. I love this business. No. Really. I’m serious.

I I I for real and would get and would get the money out pretty quickly. There’s so many things that you can do on the marketing side that are just massive.

And and I don’t wanna bore anybody, but anybody that’s a hardcore marketer out there is drooling at this deal right now.

You have a lot of control. I know David, asked a question as far as, licensing.

Are they do they have full licensing, to these plans, or are they just reselling somebody else’s IP?

And again, I I think that there’s a lot of considerations. But from a marketing perspective, this from from a guy sitting here in Brazil, this is, like, just the ultimate ultimate deal. There’s so many things you can do with email marketing as you guys have mentioned. So much thing. There’s so many things that you can do with social SEO, I don’t care how good they are. I bet it could be done ten times better. And and if you guys want, you know, a ten minute overview plan, I can get you in touch with Joe Troyer, who’s one of our main, partners.

He could just walk you through just a killer plan, Gradus, on the paid side, Facebook advertising, if you’ve got a good media buyer, Facebook advertising will just heal in the architectural space. Paid ads in Google, paid ads in TikTok, paid ads in Instagram. I mean, you can heal it with paid advertising, developing a platform for the architects to develop.

People develop platforms, but what’s the onboarding process and what’s the nurturing communication strategy with not only your vendor participants, but also to the customer. There’s so many things you can do with something like this, and you take Andrew, and Stig, I don’t know you as well, but you take a a cat like Andrew from the from the, IT software side, you can automate the heck out of this thing. Now I love this business. Yeah.

So, John, thanks for letting me droop a little bit.

That’s exactly what I was thinking when I was going through it. I go, oh, love this. Love this. Love this business.

Okay. Let me get a couple more comments. You were kind of back on track. If you wanna participate, make sure your camera’s on.

Those are the only people that I, that I that I call on because I don’t wanna surprise people who aren’t. How about mister David c Martin? Can you unmute David and give us your take? Maybe a red light, a green light, a number, and a y?

Sure thing, John. I’m at, like, a, a green light, ninety. The the lattice the later comments bump me up, a bit, you know, and and the buyer’s comments as well. I see this also as an online marketplace, which is something I’m personally very interested because you’ve got the sellers showing up that, you know, the people with the plans, and then you got the buyers.

And, you know, in this case, it’s it’s, you know, list once, so many times kind of a product as well. It’s, you know, it’s an information product. So I love I love the fact that it’s there is an online marketplace and that the buyers are looking to, you know, build it out as such really, and the fact that it’s digital products. So, you know, you’re not having to carry the inventory.

You could sell the same thing many, many times.

So you got a you got a pretty high green light on there as well. Okay. Could be maybe go one more.

I wouldn’t mind hearing, Boda’s take on this. Mona, can you in unmute and give me your take?

What do you think of this deal?

Red light, green light, number, and why? Yeah. I I think it’s a great business.

I’m, in the residential, real estate space, so I’ve actually been through this process with clients of mine.

We paid upwards of three thousand dollars for plans and, just the way that it’s set up and with all the possibilities of additional services that get to be provided, because the most of the platforms that I’ve seen out there, you do have to go to different spaces in order to get your materials, you know, take a, you know, really good look at maybe a three d model. And I mean, there’s just so many different things that my, buyers were, like, left with questions about after we just got the plant itself. So I think this is a fantastic business. I green lighted at ninety. And then after hearing all the different ways that, you know, think it’s gonna be added on and improved, I I think this is just a fantastic business. So super excited for you guys.

Thanks for that, Vona. Great take. Last one will go to Jerry and Kelly. They gave it a green light one hundred, so I I wanna I wanna find out why. Jerry, Kelly, what is it that you love about this business?

Because it’s very similar to our website. It’s it’s so automated, and, you know, it it just is an incredible opportunity here to really blow it up. And I I really like this. And what Jared was saying earlier about marketing, there’s so many different ways to market this. This is this is really a great business.

And when Stig and Ed and I were talking on the nine one one, they’re saying, hey. Could we pay full price for this? And I’m saying, yeah. I wouldn’t start there.

I wouldn’t start there. It’s funny. I don’t know if Dan’s on the call, but Dan had this issue, that he went out with his best offer with somebody. It was a good offer.

And, you know, this is just a guy who was in the recycling business, I think. I think that was the deal he was talking about, You know, we just expected to ticker, and he was not about to, you know, be treated as a patsy and have to pay, you know, what the first, you know, what the first offer price was. He wanted some improvement, but, you know, Dan kind of went in at the top of his range. So, you know, I mean, kind of human nature.

Right? You you gotta be in a position where you can comfortably give a few concessions to kind of get where you wanna be. So I wouldn’t go into the ask on this thing. I’d go in under, but I’d certainly if I got bumped to the ask, especially if they were prepared to do a royalty type deal paid on revenue that gave me some flexibility as this business cycle bounces around.

I mean, yeah. Absolutely. I would love to, I would love to own a company like this. I’m going, I’m going reading the light eighty eight.

Yeah. In terms of the market, yeah. I mean, real estate’s obviously in for I it’s it’s obviously market dependent where I live. I mean, real estate market in this part of the world has been insane for, like, four or five years, you know.

But more, my mother-in-law died in twenty twelve, and, you know, to be sell the business or not. It was worth twice what we thought it was. So, of course, you think, well, if it’s twice what you thought it was, I guess you’re gonna sell it. And I thought, well, maybe in three or four years, it’ll be four times what we think it’s worth.

But then when I did some reading and I realized Toronto was, I think, identified as the second biggest bubble real estate market in the world, you know, maybe we shouldn’t be greedy and just, you know, sell it into this very good market. That was ten years ago. I think the the the the house is at least two x since then, maybe three x. Right?

And that’s from being the second, second highest or the second biggest bubble in the whole entire world in terms of real estate. So, yeah, we’re obviously due for a massive correction in real estate, but people are still gonna build homes. Still a great product. You just need to be able to get through that.

Right? And because of the margins of that business, you know, I think you definitely could.