$10M Sauna E-Commerce Business Breakdown
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So it allows you to do a lot more interesting things with customer acquisition. It's a totally different game than I'm used to. Those are the businesses I get into, like the businesses that could just grow really quickly and throw off a lot of cash. It does feel like maybe this was a little bit of a fad and it has already peaked. Hello, another episode of Acquisition Anonymous. We don't have 100% beers anymore. Thumbs down on just the plus inventory.

Hey everybody, welcome to Acquisitions with Artemis. It is Monday, I think, no, it's Tuesday, and we're recording this episode. I have my background as orange and red because the stock market is going horribly today, but we found a deal that's super interesting and is maybe affected by all the tariff drama, so I thought it was perfect.

and we dug into it so heather and myself michael and bill were here and we had a great time lots of fun talking about this deal dig in see what you think it is a sauna business and it could be good could be bad but uh we had a lot to say about it so check it out here's the episode

Hey everyone, it's Bill. And I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called Capital Pad. And it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So Capital Pad is a marketplace for acquisition entrepreneurs. That is people who want to buy a business and need capital to list their deals and solicit capital from other people who want to invest in

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They handle standardized terms, standardized governance, standardized distributions, all upfront in black and white. Basically, Capital Pad professionalizes investing in small businesses, and the returns can be really, really good. I'm so stoked they exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right.

So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out CapitalPad.com and tell them that Acquisitions Anonymous sent you. Heather, I put my background as bright red today. Would you like to know why? It looks kind of scary, but yes, tell us why. Because the market is doing terrible. Oh, the market. Yeah. Oh, mine's green, so I'm more optimistic. Look at that.

So I'm actually thinking it'll be okay. And you're, you're, you're worried. It's the difference between public markets and private markets. I would say that's probably how it's gone. Maybe that's it. That's true. You know, I went last night to the final four game. Oh, fun. Yeah. I sat in section three 17, by the way, not near the court. Okay. Well, you got there. Who cares? The dude next to me was so big.

He had trouble getting up the 47 flights of stairs it takes to get to section 317. But he was big but smarter than me because he brought binoculars. Ah, he thought ahead. So you were really in the nosebleeds. Yeah. There were some people that were further up, but not that many. I sat in a section like that at SoFi Stadium about a year ago. Somebody gave us tickets and I vowed I wouldn't do it again. Honestly, it made me a little, like, a

afraid of heights. It was so high up there. And the stairs got really short. And anyway, it was kind of scary. Isn't SoFi the largest stadium in the United States that's not air conditioned? That's what I read somewhere. That could be true because it is kind of open air. I mean, it's not completely sealed off. And where it is doesn't really get that hot typically. So I can see why it might not have air conditioning. It's in Ingleside, right? Inglewood. You're close. Inglewood.

Yeah, it is near that. When you fly into LAX, you almost always fly over it. And that's an interesting story as to why it ended up going so much over budget was so expensive. Because at some point, they realized they had to dig down, they could not build it up on the dirt at the height that it was going to be because it would be too high for the air traffic.

And so they had to dig it down. So when you go into the stadium, you're kind of entering it at the middle level and you look down and that is, you know, you look down at the field. It's kind of, kind of cool. Most people don't realize how, how often buildings have to go through FAA approval, especially if you're going to be more than a couple of stories. So I've done it multiple times. So yeah. Yeah. Well, speaking of tariffs,

I brought a deal for us to do. Can I, can I pitch you on this? Yeah, let's, let's see it. All right. It's from BizBuySell and it is called Project Sizzle. It's the largest independent sauna retailer doing $10 million in revenue. And they have a picture of a sauna, which looks really nice. That's a nice looking sauna. It is nice. I want it. This may be one of those infrared ones. Have you done an infrared sauna?

Oh, yeah. Actually, there's one down the street. I pay to go there. I wouldn't mind putting one in my house. That's why I'm kind of excited about this deal. I like the product. Well, it's figured out. Maybe you could buy the company and they'll throw in some saunas for free. It's kind of like if you own a private jet company, you get to fly private jets for free. That's what I mean. Right. It makes sense. All right. So the asking price of this, they do $10 million in revenue, they say.

So the asking price is $5 million, gross revenue is $10 million, and EBITDA is $1 million. So I'm not an expert in math, and Bill GPT is not here today, but it appears they're asking five times EBITDA. You've selected one that we can actually do the math on without Bill, which I appreciate very much. Usually Bill has his calculator out, which is awesome. All right. It was established in 2017, so that makes it seven years old.

All right, business description. There's not much to this one, but I figured there's so much going on that affects this one that it would be a good for the episode. It's a high growth, high ticket drop shipping e-commerce business specializing in premium home saunas and cold plunges. The company's strategic focus on high value items has resulted in a loyal customer base.

Management has also fostered strong relationships with suppliers, ensuring quality assurance and reliable shipments. Future growth opportunities include leveraging advanced marketing techniques and exploring new product categories. Reason for selling, your favorite. The owner has the interest in looking to move on to other projects. And that's all we know about it. It's presented by Surge Capital Advisors, which when I ask you next, what do these guys do? Which is my usual first question.

I will pull up the search website and see if maybe there's stuff here that tells us more.

Oh, here's Bill to save the day on our behalf. Oh, hey, Bill. Hello. We're doing this. I'll put it in the chat. We're doing, and editors should just edit out this part. Oh. I couldn't tell if we were recording. Oh, we are recording. Oh, hello, everyone. Right? I click record, right? Yeah, you missed all my, I had prepared some bits. I've already done them all. They're good. This is my representation of what's going on with the stock market today. Yeah, just all red? Yeah.

It's all red. Good. And Heather's is all like a nice – I'm kind of green. A nice green because she don't care about the stocks. It's fine. She's going to be fine. She's holding senior debt. She doesn't care what happens to the equity. I don't care about stocks. No. Yeah, so we're looking at this surge advisors.

listed deal that is a high growth dropshipping opportunity. Interesting. Of huge things. So dropshipping of giant saunas. And cold plunges because you don't want to have a sauna without your cold plunge, right? You got to have both. You got to have both or what are you even doing? You can't even post on Instagram about it if you don't have both. Exactly. The thing that's interesting about this is that it's very high ticket. Do we know the average...

cost per transaction here, the average order value? We do not. They did not give us much. I mean, I would guess it's got to be five to 10 grand. You know, and I'm sure if they're good at their job, there's upsells for accessories, for saunas and cold plants and stuff that could drive it up even higher. And what's really interesting about

Ecom niches like that with the big tickets is two things. One, you're never going to convert anybody straight away from like, oh, I was scrolling Instagram. I saw an ad for a sauna. I dropped 10 grand. Okay, back to scrolling, right? It doesn't really happen that way. So you have a much longer purchase consideration cycle.

But at the same time, you also have way more room for cost of acquisition for advertising, right? Thousands of dollars. You can pay $1,000 to acquire a sale and still make money. I could never do that selling dog supplements, right? So it allows you to do a lot more interesting things with customer acquisition. It's a totally different game than I'm used to. What – your experience –

When at what price point do you have to go to live direct sales? And I'll just put this as a perspective. You know, we just did our conference, which turned out really well. Hopefully both of you can make it next year. Um, but it's an $8,500 price point. It was a really nice conference. Like we went all out, like food was top notch. It was at Robert reference resort, all this kind of stuff. But like, I found out later that Ty, who was like organizing the whole thing, he spoke to like 75% of the attendees directly. Hmm.

Wow. It was that kind of sale versus, say, like a $2,000 conference where, like, I've gone to plenty of those and I just put my credit card in and I never talked to a person. But 75% of the people had a conversation with Ty. It was pretty crazy. So where does that number start in your experience, Bill, that you have to go to direct sales? Well, I think it depends a lot on the category. So, like, a conference ticket for two grand, like, people kind of know what it is. They're going to talk to their friends that are going. People say, oh, yeah, I'm going. I'll see you there. You know, I think people probably drop

couple thousand dollars on a conference ticket because that can be relatively cheap for a conference ticket right but like for an e-commerce product that i'm just going to drop

you know, thousands of dollars on our rule of thumb is kind of anything over a hundred to 150 bucks, probably over 150 bucks starts to turn into what I call considered purchase, which means it's harder to drive people straight from an ad to like click and buy like impulse. So like over 150, 200 bucks impulse gets a little harder.

You've got to do more education. You've got to do more retargeting. You know, people might need to see more than one ad. You might need to do some email. You know, maybe your funnel is more, I'm going to educate you about this. I'm going to capture your email. Then I'm going to send you a long email series convincing you to buy it. Right? You just got to do more of this kind of multi-touch marketing above about 200 bucks.

But then when you get to, Michael, when you talk about like a one-on-one considered sale, I mean, several thousand dollars in e-commerce will definitely drive phone calls. A big thing in e-commerce that drives phone call is customizability. And I'm definitely going to see that here and dimension. So like how big is it? Yeah, I know it's on the webpage, but people are going to want to know some dimension you didn't think about.

Is it going to fit in my space? Will it be delivered on a truck or on a pallet? Or can I get through my front door? Can I pay you to set it up? You know, what wavelength is the infrared? Like, you're just going to have all kinds of, you know, considered purchase questions. So I would think operating a phone line for this business would increase your conversion rate considerably. So you just reminded me of a story. I invested as an angel in a online couch.

company that you could buy like couches like digitally and then they would ship you a couch and um i got a call from them one day and this is like five or six years ago and they're like hey uh do you want a couch like i guess so like how much is it they're like no it's free because they had sold the couch to a lady in dallas and the lady in dallas ordered a gigantic couch

And the movers were unable to figure out how to get the couch because she didn't want it to be a sectional. So it was just like, it was 14 feet long. So anyway, that's why if you go into that conference room, that's right over there, there's a 14 foot long couch because they gave it to me for free. Like, if you'll just take it, we just don't want to ship it back to California. This is a dump.

I have a dumb question because you were talking about what point is the phone call and this is still e-commerce and you've got to convince somebody. Is this a phone call that could become an AI agent phone call or at least at some point in the funnel, can that be used for something like this? So in theory, yes.

However, if there's a $5,000 conversion on the other end of that phone call, this is probably not the first phone call I'm converting to AI. I'm probably converting my, hey, I want to track my order. Hey, I want a refund. Some of those things, maybe not even a refund. These are big refunds. But your $30 refund is different than your $5,000 refund. So I don't think yet, Heather, I mean, I think this will be one of the last things to go because you can actually justify a human.

There's so many dollars on the other end of the phone. You want it perfect. Not to say maybe the AI is going to become a better salesperson than people at some point. I don't think we're there yet.

So maybe, but I wouldn't go there right away given the stakes. I was a consumer potentially of this product. So I was looking into it. I didn't end up buying one. I still might at some point. And I guess my experience was that the salesperson wasn't really doing a great job of telling me what I needed to hear to pull the trigger on it. I got more confused than I got clarified as to knowing like, yes, I could buy this and I could put it where I want it and it was going to work.

I got actually more confused. And that's kind of what made me think about that. Is there a better way to...

Talk to someone who's interested because there are a lot of questions about buying a product like this. Yeah, I don't know. Maybe. I mean, at the very least, having a good FAQ, like fully built out, video tours of the product, like having a really rich sales website will help you conversion rate a lot. So what do we think of these margins? A million dollars of EBITDA on 10 million of revenue. And it's perfectly...

Even. $10 million? $1 million. What are the chances? What are the chances? Honestly, I'm a little bit surprised they are this high. Given that it is dropshipping and given that it is big-ticket dropshipping, a lot of times the margins will be really thin because if you dropship a $5,000 sauna,

Do you need to make 500 bucks on that? You know, maybe $300 is still enough to get people excited. So I'm a little surprised they're that high. I'm certainly not, you know, with the fact of their drop shipping, they don't have any inventory. They don't have any, they never touch it. I would not expect it to be any higher than this.

For sure. So is this a, I guess we don't know, but do they have their own brand or are they representing multiple brands and they're drop shipping all those brands? It's hard to say, Michael. It doesn't really say. Premium home saunas. So whatever it is that they're selling something to the higher end, a higher price point and, and cold plunges. It feels like, it feels like these are, even though I want one, it feels like a fad product too, a little bit.

You know, that there's sort of a peak of when these things get popular and then maybe it sort of tails off a little bit as a health benefit. I don't know. What do you guys think? I don't know. I mean, I'd love to see the trends on that. I mean, it does seem like sauna and cold porn has been a trend now for a while. But how long is a thing a trend? And then it's just around, right? When's it not a fad? It's a trend. I guess a fad is bad. A trend is good, right? So when does it graduate from being a fad to a trend?

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I don't know, but I've been enjoying, there's a parody account on X that talks about spending time in saunas with billionaires and signing lots of LOIs. And it's very funny. Oh, is that Chase Down Leads? Yes, Chase. Yes. It's so funny. Well, obviously that's a parody account, but that's from our buddy, Charlie. Yes. Right. Yeah. He works for...

Xavier and those guys doing content, and this is his hobby, is to run parody accounts. And he's so talented. He's very good. He's so talented at S-posting on the internet. Nice. So, Bill, what would make this a good business you would want to own? Like under what conditions is this a business you want to own? Oh, boy. Not a ton. Not a ton. I mean, this is just – it's dropshipping, and I just hate dropshipping so much because you have so little moat.

Because your drop shipper, whoever's making the sauna, if I call him tomorrow and go, I want to drop ship your saunas, he'll go, great, have at it. You're in business. And then if I'm a better marketer than you, we're selling the same product. And even if it's map controlled and we're selling at the same price, which good luck enforcing that. But even if it is well enforced, now you've got to be the best marketer of these things.

It just doesn't feel like a ton of moat. And also, of course, your supplier can evaporate at any point or change your deal at any point. It's a tough business to buy. It can be a great business to own or to build, to hustle into. It's just very scary to buy with debt because there's not a ton of moat.

On the other side of it, though, I like dropshipping in niches like these more than I like it in what I'll call kind of smaller ticket stuff. Like if you're dropshipping bath mats or towels or pillows or whatever, like that's even worse because there's going to be it's going to be a total red ocean.

This, at least, you've got to be, it's a higher bar to market one of these and convince somebody to buy it on the internet. So like all like the drive-by people are not going to be quite as involved. You know, the people who took a course on how to start a business on the internet are probably not going to be as good as you over time. But then the people who are serial dropshippers are probably better than you, and you've still got to compete with them.

Um, so it's for drop shipping. It's not terrible, but it's still drop shipping. So is there any hope to save us kind of with, with what the mattress people do where like they change the color on one stitching and there's no, uh,

you know, there's no comparison shopping. I assume you guys have looked into this. Maybe. So yeah, like maybe you get your own custom paint color on the sauna or wood tone or something like that. Like maybe, but ultimately I don't like how big a mode is that really? It depends on how customizable these are. Like I have seen some like manufacturers of like grill stations or patio furniture who will do like, you know, people at the drop shipper will have like a custom configurator,

on their website where it's like, I need this kind of like building a sectional couch, but more like for like a grill station or like a bar outside.

um, patio furniture. And then the, the drop, the manufacturing partner actually builds it to order customized. And that starts to feel more like build to order and less like drop ship. I like that better because you're actually providing value. And also in that case, the manufacturer is never going to disintermediate you because they're more of a factory and less of a, uh, sling in one widget. Um, I'd also be curious, or I want to be really sure that the

factory in this case was actually the factory and not another person standing between me and the factory, you know, making this product available for dropship. There's just so many layers of people who could be taking slices here. And to your point, Heather, we're not, not hearing so much about this on social media and news articles anymore. Like the cold plunge, hot, you know, hot sauna fad, it feels pretty peaked.

Yeah, it does. And there's so much in the longevity space and the health space that does that, you know, it sort of has its peak and then it goes away and then something else replaces it. And it does feel like this has peaked, which...

Makes me think this is why the seller is probably trying to sell now. They're maybe starting to see that things have leveled off. And they did start it in 2017, so they had a good run, I would say. But yeah, it does feel like maybe this was a little bit of a fad and it has already peaked. Bill, do I care about tariffs? I'm about to change my background from red to orange in reference to a certain president. How do you like that for...

For light content integration? Yes. Great point. Absolutely. I mean, I got to imagine stuff shipped from Asia here. But I mean, maybe not, though. Maybe not. Because this is so big and heavy. This might be the type of thing that has to be domestically manufactured because the freight to get it here is so expensive. But yeah, if this is drop shipping from Asia, yes, you have major tariff concerns. Assuming you can't pass the price through, of course.

And that would kill the fad pretty fast right there. If these things go from $7,000 to $14,000, you know, people aren't going to be buying them. That would hurt. That would hurt. Well, and you're also competing with the used market in this stuff, right? Because if the fad's ending, there's going to be just like the Pelotons. I don't know if you guys have looked at what a used Peloton sells for now slash coat rack. Not a lot. Right.

But have you ever gone to your friend's house and they have a Peloton and then like, they're like, this is the best thing ever. I do the Peloton every day. And then you come back for a dinner party, like three months later and there's like clothes hanging off of it. Like that's the, that's what happens every single time. Hey, I do my Peloton like three times a week. Yeah, I have one. Oh, Heather, we should race. I didn't know you were Peloton. But I'm like, I'm on and off. Like I get, I get into it for a while and then I do something else. And so, but I still have it and I still pay for my subscription. So yeah, we got to do it. And there are no clothes hanging on you.

There's nothing. No, it's ready to go. All right. Heather and I are going to be racing buddies. All right. If you want to race me and Heather on Peloton, tweet us or X us or whatever with your Peloton name and we're going to get an Acquisitions Anonymous Peloton race. Oh, let's do it. That'll be fun. Let's do it. All right. See, Michael? They're enthusiasts out there. Michael will be jealous. Well, I didn't have a bid I was going to do next, but Heather just ruined it. So thanks, Heather. No, okay. Here's the thing.

The bit was I was having dinner with a buddy the other night and we were talking about Peloton in the future and he said, he said, where this is going to end up is it's only going to be middle-aged dudes as customers for Peloton when all is said and done. And I was like, why? And he said, well,

the ladies that teach the classes are very attractive. So they're hugely motivating to middle-aged dudes that use it. I was like, well, I don't know. So that is true, but it goes the other way also. They have very attractive dudes who teach the classes. Yes. Yeah. And they're funny. And we pick them by how funny they are. They have to be attractive, period. But then they're funny too. Much like life in both directions. Yeah.

Yeah. Well, that's one of the weird things about like online dating sites. Like the average like a site that a woman chooses for online dating is 6-1. But then when you ask women like, what do you want in a mate? They'll say like, I want somebody who makes me laugh. So Heather, could you explain women to us in less than 30 seconds? Yeah.

I'm sorry. We're confused about even explaining ourselves, so that'll be too hard. I had to explain to my 15-year-old the other day. He was like, well, dad, if women and men are equal, why do we have to open the doors for them? I was like, oh, buddy.

It's a whole can of worms, buddy. Don't even go there. Michael likes to play a game on this podcast where he walks on the very edge of being canceled. And then sometimes he goes too far and we have to edit it out. I've been pretty good lately. How are we? You've been good. Did I get it? Wait, did I go too far today? No, I think you're good. Okay. Except for that part we just had to edit out. Okay.

All right. So we're coming up on time here. So we hate this on a retailer. I don't hate it. I just think it's really hard to buy with debt with one. Like, I mean, this guy's making a million bucks a year. Uh,

He's been doing it since 2017. I'm not saying this is a bad business. I'm saying I'd be a little scared to buy it with debt. I'd want to understand the trend here in the sauna cold plunge. I want to understand how dependent I was with my specific dropship partner and if I could find another one if the existing guys bailed on me. I'd also want to understand how many other dropship partners my manufacturer has and just how red this ocean is.

And then finally, I'd want to understand what makes this business unique. Like what is the moat that these guys have? And I'm betting it's that they're good marketers.

That they can make good Facebook ads and a good website and good photography and all that and good video and all that stuff. And I would want to be pretty convinced that that skill, because that's what you're buying. Otherwise, I can call up the sauna manufacturer and sign up as a dropshipper tomorrow. But that skill, you want to make sure it's transferable, that it's not just the seller who is doing all the good marketing. You want to make sure he's got a team and a system and that's replicable and that you can actually transfer it.

You know, whatever it is about this business that makes it able to earn a million bucks a year drop shipping a commodity, right? They have something that makes moat. You want to make sure that's transferable. Heather, what do you think? Oh, we haven't asked the SBA question for this. This would be tough to get an SBA loan. I mean, I will tell you there's lenders out there that might not

listen to our episode or know all the things that Bill knows, and they might still do it because they see a million dollars of EBITDA. But a good underwriter would probably have a tough time putting too much leverage on something like this for the exact reasons you said. It's dropshipping, and there's a lot of risks long term to the cash flow. Maybe there's a right buyer out there. Definitely not me. It's cool business, though. I mean, you can make a lot of money doing this. I mean, there are

Those are the businesses that get into like the businesses that can just grow really quickly and throw off a lot of cash. Like this is one of those, I mean, this person started from nothing, just like running some Facebook ads for saunas and taking phone calls. And now they're making a million bucks a year and they're trying to sell it for 5 million. Like this is what the American dream is about. Still at the drop shipping. American dream is getting harder and harder, but there are different versions of the American dream that are very much alive and well. So, you know, this, this reminds me of, have you, did you ever watch the movie money ball, Heather?

No. You have like the Brad Pitt. So there's the scene. There's the scene where Brad Pitt, who's like the protagonist, is having like a rough day, right? And he's supposedly come up with this great way to revolutionize baseball by, you know, buying these undervalued oddball players. It turned out it didn't actually work. It was a good story, though. But one of the things they do is they go in.

And he's having a bad day. So his colleague, who's a younger guy, brings him in and shows him a video of this like overweight kind of goofy looking minor league player who is batting. And this guy is because he's fat, like never runs past first base. So he hits the ball and he starts sprinting down first base. And right as he's turning around first base, he falls down flat on his face and everybody starts laughing at him.

Um, cause he was going full steam, full head of steam. He was going for second base and everybody's laughing at him. And you see the first baseman reached down and shame him and go, get up dummy, like start running. And it turns out that the guy had hit a home run and he didn't know it. And he had fallen flat on his face and the whole thing. And then Brad Pitt has a great line. And it's, it reminds me of you and me every episode bill, when we run into a business like this, when in Brad Pitt goes,

How can you not be romantic about baseball? And this is Bill and I have like this every episode where it's like, how can you not be romantic about capitalism? How can you not be romantic about America when somebody could do this? I agree, Michael. What a great way to end this episode. How can you not be romantic about America and capitalism? Dropship and saunas on the internet. Million bucks a year. All right, everybody. We'll see you next week. Thanks for being here.