When acquiring a brand, there are a number of factors that we look for. Here are some of the most important ones:
We typically look for acquisition prices in the $500,000 - $1,000,000 range. This is a range that allows us to acquire brands that have achieved some initial success but still have significant potential for growth.
We are interested in acquiring brands in a variety of product categories, including Home & Kitchen, Office, Pet Care, Sports & Outdoors, Wellness & Personal Care, and Children & Education. We avoid other categories like fashion, technology and health care because we don't have the type of specialized knowledge that they require.
Years of operation
We look for brands that have been operating for at least 2 years. This gives us confidence that the brand has a track record of success and is not likely to fail suddenly in the near future.
We acquire brands from the original founders. This gives us confidence that the brand has been managed with care and has a simple track record that we can understand.
We prefer brands with a limited number of SKUs (under 20). This makes it easier for us to manage the brand and ensure that it can grow profitably. However we can also evaluate brands with a larger number of SKUs if there is a strong core of profitable products or other exceptional reasons.
We look for brands with a high number of positive reviews, at least in the hundreds, and an average rating of 4.3 stars or higher. This shows that the brand has a strong reputation and is well-liked by customers.
Pretax profit margin
We look for brands with a margin of at least 15%. This shows that the brand is profitable and has the potential to generate strong returns on our investment.
The brand should have easy to understand differentiation that explains why it’s working in the market. This could be a unique product, a strong brand, or a competitive price point.
Trademarks & Brand Registry
The brand should have fully registered trademarks with the USPTO and Brand Registry properly done. This protects the brand from counterfeiting and gives us the exclusive right to use the brand name.
The brand should have no account suspensions and no serious violations to marketplace terms of service. We think successful brands don’t need to bend or break the rules.
Potential for us to add value
We look for brands where we can add value in a number of ways. We focus on several areas including:
Access to capital: we like situations in which a brand can benefit from additional access to capital.
Inventory management: we can help the brand improve its inventory management practices to increase efficiency and ensure high selling products remain in-stock.
Digital marketing: we can help the brand improve its overall marketing performance for instance by optimizing paid marketing strategies.
While these factors are somewhat flexible, it’s easier for us to make decisions about brands that meet most or all of these criteria.
If you have any questions on how we approach a potential acquisition feel free to contact us, we enjoy talking to entrepreneurs.