Please click this link to get the Non-Disclosure Agreement (NDA): https://businessbrokercolorado.com/buyer-profile-main-generic-nda/
This will allow me to send you the Sales Package containing a detailed data room with financials, a comprehensive interview with the owner and a walk-through of the business. Thank you.
For Sale:
ONLINE ONLY, CONTEMPORARY CRAFT RETAILER
MODERN STYLES OF FABRIC AND SEWING SUPPLIES
Location: North West Metro Denver
This is an online-only craft fabric retailer that is located near Boulder, Colorado. They have a huge selection of high-quality fabrics and sewing supplies, with over 15,000 products online and in stock located on site in their 14,000 square foot warehouse/office. Crafters, Fashion Designers, and Home Dec sewers love their fast service, huge variety, and custom cutting to their specifications.
The trailing 12-month revenues were 4.2M with earnings to June 30th of 416K. The sales price has just been lowered from 1.6M to 1.2M plus 500K in inventory and although they still prefer to sell the real estate, they will consider a sale OR a lease now. I believe that this has the largest equity-building potential of any business that I have represented in at least 5 years. This business has a lot of add on upside capacity through additional fabric and/or related products also like pre-fab sewing kits etc.
We want to clarify two common questions/concerns and an opinion:
Inventory: Inventory should be thought of as more valuable than cash for the following reasons: The more fabric that the business has in stock, the more fabric you will sell and sell after the closing. You will own the fabric on the closing day at its cost and the Seller will have already paid the cost to acquire it. In addition, this allows you to finance the purchase of the inventory through a bank loan as part of the total purchase price. When you sell fabric, you will recover the cost PLUS a profit. This will also reduce or eliminate the need for working capital as you will turn inventory into cash every day from the closing date forward.
Proportionality/Cost of the Building: In short, they take up 56.6% of a building appraised in December 2021 for 5.91M which is 3.39M proportionally(56.6% of 5.91M) while the other 43.4% should be looked at as an income property with positive cash flow because the NNN lease rates are higher than the proportional mortgage payments both now and for the future mortgage. Details are below. They have at least 50% of their warehouse space available for future growth which is very important to a buyer. Most businesses needed warehouse space are at or near capacity already. The building was custom built to their design so it is perfect in every way for their business. Unfortunately, you will need a lot of liquidity to buy it and the business since the SBA won’t take into consideration the rents from the other 2 long term tenants(44% of the building). More details below.
Opinion: They have room for an additional 900K or more in inventory which allows the new owner to run an online Fabric or ? business out of the same location also which would add a larger market and efficiencies. They have the capacity, people, and model to grow. They are not marketing people and this business just needs a very competent online marketing buyer to make this a homerun. This should be a 20M dollar revenue business.
The trailing 12 months revenues to February 29th were 4.2M with 456K in earnings. This is a profit margin of 10.8% which is very good for retailers, and they did this with an advertising expense of 25K which is less than 1% of revenues.
Online sales are based on advertising to drive future customers to their website. The Sellers are approaching retirement age and neither of them are marketing experts. They have created a great foundation for someone who knows how to drive more online traffic to the website to take this to the next level.
The location is only using 50% of their warehouse space and the new owner can easily start a “fabric” online sales business also where there would be significant cost savings and overlap in inventory. They did not know how to go after the Fabric.com customers but the new owner should. This should be a dual business based on the size and excess capacity of their warehouse, excess cutting tables, inexpensive ability to add a 2nd online website, etc.
The Sellers are husband and wife in their mid 60’s(Retirement age). They love their business but she is an artist/designer and wants to spend more time in her studio creating. He was a website designer and puts together the weekly newsletter to their subscribers and updates the website. Both would stay part time if the new buyer wants them to. They have created a great foundation for someone who knows how to drive more online traffic to the website to take this to the next level.
This business has helped to modernize/reinvent an old industry through updated colors and patterns through a very well-known company both domestically and internationally. This company has built a fantastic foundation that the new owner can build on. They have the industry’s best, fastest, and most interactive website, 117,000 subscribers to their online newsletter, very high online ratings and customer service, and a custom-built office/warehouse which is only half utilized. This all adds up to a very valuable foundation to future growth.
Amazon owns Fabric.com which did 88M in revenue in 2021 and on October 20th, 2022 Amazon temporarily abandoned the fabric space. One of the owners states: “This is big news in our industry. Amazon never ‘got’ the concept and it was too labor intensive for them. They were a big discounter, and their closing is a plus for us and our industry.” This is the perfect time for someone with target marketing skills to buy this business. Amazon shuts online store fabric.com in cost-cutting move https://abcnews.go.com/Technology/wireStory/amazon-shuts-online-fabric-store-91826785 Amazon re-opened fabric.com in the Spring of 2023 but without the custom cut fabric most customers demand. Some of their vendors can provide custom cuts directly but most of their fabric sales are now in pre-cut sizes. This will shrink their % of the market forcing many customers to seek a custom cutting fabric online source like this business is set up to be.
These “makers” consider themselves part of the craft community which has come to be known as a “tribe” made up of passionate collectors who frequently buy unique fabrics for their “stash”. This is a movement that has caught the interest of young people and a wide creative demographic, who now have access to bright, fun, and artistic fabrics. Many were looking for a ‘maker community’ and contemplative creative outlets. This company’s average age of buyer is younger than traditional crafting customers, and this is where they have created a contemporary creative niche and loyal customers. They are a leader in the evolution to make crafting more fun and cool, following trends of the fashion and home dec world. They have made online ordering by pattern and fabric width easy and fun.
This company has a great reputation as proven by their 4.8 star Google rating, 4.7 star Facebook with 12,448 followers, 95,000 Pinterest followers, and 117,000 subscribers to their biweekly online newsletter. They have strong recurring revenues based on their selection, excellent interactive quality website, customer service, and pricing. There is an opportunity for growth with overseas customers, as their US prices are typically half of the price per yard or meter, in other countries like the UK, Canada, and Australia. Some of their largest customers are overseas, repackaging their products to sell retail in their own countries. They are one of the largest independent online craft retailers which allows them to buy in bulk, negotiate volume discounts, and carry a large inventory.
The company was envisioned in 1999 by an artist and wanted the company to have contemporary artistic fabrics and her husband who was a website developer and created their first website in March 1999. He focused on speed, being able to show an enormous inventory in high quality images, interactivity, and customer service. Within 60 days they exceeded their 3 year business plan, having tapped into an un-served niche market for fabric collectors. Their website is one of the few that allows makers to pick fabric online and drag various “squares” onto the Design Board to see how they look together. The other important factor is the name. They are only using 6 of their 12 cutting tables which are used to fill their custom orders. Plus, they have room for more.
The business has 25 mostly long term and very loyal employees who love fabric and working there. They have 2 “key” employees, an office manager who has been with them for 16 years and is has been thoroughly groomed to take over her job when the business is sold, and a warehouse manager who has been there for 11 years and can fill in for every key employee also. The owners enjoy their jobs, love their employees, and have had fun expressing their creative talents in this industry. She works 40 hours a week, is an artist/designer, is the head buyer, is a frequent guest on a PBS Arts TV show, and helps travels to speak at festivals and conferences. She will be available to stay part time for the new owner for at least 2 years if wanted.
The other co-owner, works 40 hours a week opening and closing the office/warehouse, website everything, facilitating proprietary patterns, purchasing artwork for the their exclusive fabric line, and has created analytics that provide useful statistical analysis of the revenue trends and overall business. Neither one of them are marketing experts and this is who they think the buyer will either be already or will focus on post-closing. They do very little social media and very little targeted marketing. Targeted marketing will be huge when you consider sports teams, individual countries landmarks/flags, etc. They think that they are the best company in the world to buy fabric from and the new buyer should focus on getting them more exposure. They also carry ‘Fabric’ and the new owner should certainly consider adding a 2nd business run from the same office with the same employees since Fabric is a bigger market than their main specialty products and always will be.
For the last 24 years, they have worked at developing and expanding their reputation and name recognition in the crafting industry. Their weekly newsletters are anticipated by their customers, as a time to sit down and be inspired by beautiful images, to get their creative juices running. They sell art, color and design on fabric, and their customers are avid collectors.
The best part of all of this is that the company is at exactly the right time for new ownership. They are very good at what they do but the company needs a marketing team to take this to the next level. There are many ways to do this: Create landing pages for specific interests like pets, sports teams, various countries colors/artists/flags/landmarks, holidays, anniversaries, weddings, babies, graduations, new fabric customers including Amazons old fabric.com customers, etc. Create pre-made kits to create any of the above which would be precut, fun to sew together, and would have a higher profit margin than just the fabric. This could be a sports mascot, a colorful picture like a mountain scene, etc. Offer to transfer pictures like dogs, cats, family, etc that the customer wants on fabric for quilts or to be framed or ???? The buyer could open their own retail store(s) also which would then include the sale of high end sewing machines, offer training classes, etc. There are many ways to grow this company but none easier than just making more potential customers aware that they exist. They have 117,000 subscribers which sounds great but it is a fraction of the size of the worldwide industry. Once a customer, they believe they will always be a customer. People are looking for fun, hands on hobbies for all ages that are not electronic or sitting in front of a television.
The business price has just been lowered to 1.2M plus almost 30% off of their current estimated inventory value of 720K at 500K. This is an S corp. The business is being offered with the Sellers keeping their cash and collectable AR. They have no debt and will pay off their AP at the closing. They also have a building that they custom designed and built in 2018 for this business that is for sale or lease also. The building that they custom designed and built for this business is for sale or for lease taking over the last 3 years of their lease. The building details are below and in the October 2022 appraisal in the data room and the potential lease details are in the miscellaneous word doc in the data room.
Details:
This is a “Fulfilling and Fun” Business to Own and the Owners feel confident that they can teach the buyer the business easily. They have created training manuals, have already created the perfect website and analytics to react to statistical trends, and built a roomy, employee friendly building customized to their business and employees. This is not a business that can just double or triple. This is a rare opportunity to create a large amount of future equity while loving what you do. This would be great for a family, private equity, or a marketing expert who wants to benefit from his/her skills. It is fun to grow a fun business.
Their location was designed and built by them and finished in 2018. The building is on 2.35 acres, is 22,911 square feet of which they use 12,977 square feet with the rest split between 2 spaces leased long term to excellent on time rent paying leases, Velocity Outdoor and Boulder Environmental. It has a leveling metal dock, high ceilings with room for a lot of additional inventory, roomy offices, several large bathrooms, air conditioning, a large employee area with a kitchen, a 1,000 square foot design studio, and is zoned industrial. The entire building is being offered for 5.91M which is from an October 2022 appraisal. The 2023/2024 lease rate for their portion of the building is 16.33/square foot NNN. Part of the NNN is the CAMs which is 5.50/square foot which is 71,483 per year. This totals 283,398 for the trailing 12 months which is 23,616 per month. The building is in a great location in Boulder County Colorado because it is a growing area where the building is certain to continue to be more valuable over time. Boulder is a limited growth-controlled county.
To purchase the real estate, the buyer will most likely put 10% down on a sales price of 5,900,000 with a 25-year mtg at 6 3/4% which would be an annual P & I payment of 440,244. This is for the entire building, but this business only occupies and pays for 12,977 square feet out of a 22,908 square foot building which is 56.6%. Adjusting 56.6% of 440,244 dollars which is 249,178 dollars. The 43.4% of the building has two long term tenants generating lease payments in excess of what the 43.4% of the new mortgage payments would be so I will ignore that portion of the building for the business calculation. The lease payments by the tenants taking up the 43.4% are higher than what 43.4% of the new mortgage payments.
The average annual PRINCIPAL portion of the payments over the first 5 years will have an average of 8,084 dollars per month going to pay down the loan in the form of principle. Reducing your mortgage cost by 12 X 8,084 which is 97,004 per year. Subtracting 56.6% of 97,004 which is 54,904 from 249,178 gives a net cost of 194,274 per year for the business portion of the building. Adjusting this to past rent shown on the PL’s. The non-business 43.4% has and will have positive cash flow before adding the principal payments on that portion of the building. The rent shown on the PL’s is 71,374 higher than the rent schedule because of 5.50/square ft in CAMs for the businesses. 12,977 square feet. I will properly adjust for this above by adding 71,374 to the 194,274 which totals 265,648 as the amount to be used to properly adjust the earnings spreadsheet with the purchase of the property.
Please Call of Email for Information: The broker is available at any time to discuss your interest in this offering and can set up a meeting either in person or by phone with the owner(s).
Thank you for your interest,