Summary 

This business is a 13 year old D2C ecommerce company that has built and sold over 100,000 high technology computers to individuals, companies, and esports teams in Northern Europe. It is a passionate team of 42 people that build, sell, and support custom-built and pre-built gaming computers to discerning customers. Business maintains almost 250,000 social media followers and has over 4,500+ reviews on TrustPilot at an average of 4.3/5 stars!

The Opportunity 

This is a $22M+/year vertically-aligned D2C ecommerce brand being offered as a turnkey acquisition for a accredited buyer to acquire 80% of it with the CEO retaining 20% of shares with an effective growth plan for the future. This is a chance to acquire this highly standardized ecommerce company at 2/3rds of its revenue figure with all team-members staying on (and no owner responsibilities) - in a high growth niche that supports the up-and-coming professional gaming community. Sold turn-key with no owner responsibilities outside of strategy at the board-level. 

General Highlights

• A trusted 13 year old gaming D2C + B2B brand with over $20M in revenue a year and growing 

• Built and sold 100,000 computers over last 10 years for private individuals, companies, and esports teams (counting over 110,000 customers)

• Sold turnkey with CEO in place with passionate team of 42 team-members staying on

• Large network of 250,000 social media followers and 167,000 email subscribers

• Diversified revenue potential and huge growth opportunities given brand, partners, and network (almost all sales are on the website and not 3rd party marketplaces).

Niche

The market for this business is first and foremost direct-to-consumer ecommerce by which the company builds and sells products directly to customers via its website (not through 3rd party marketplaces which is rare for ecommerce in this day and age).

The niche of this business is within computers that are designed for maximum output for gaming uses (and other potential applications). This means these computers are for people who intend to use them to play games at lightning speeds (or do anything else that requires a high-output computer (possibly high frequency traders, etc.). 

Unlike the computers you get from a company like Apple or BestBuy, these computers can be custom built to your needs and specifications of your activities, having the output and processing power to compete in whatever game/activity you would like. These computers can be broken down into custom built ones and pre-built as well as desktop and laptops. Custom built laptops is a very unique offering by the business as this is a high tech product that is not offered by many companies in Europe. 

As an addition to the computer offerings, the business also sells accessories, including chairs, floor mats, monitors, headsets, mouses, keyboards, and mousepads.

Customer Base

80% of this business’s sales are to Northern Europe (including Norway, Denmark, and Sweden) direct via its site but it also has 20% done B2B via distribution contracts for companies that want to resell its products or ones that want to use them themselves. 

So in this, the 3 targeted buyers are private individuals (gamers, traders, etc.), traditional companies (with high processing needs), and esports organizations (who use the computers to compete in high-stakes competitions). 

The main demographic of customers is gamers via individuals (doing for recreation) and esports organizations (doing for sport or prizes). There is a decent loyalty in these customers as in the past 2 years, 25% of customers are repeat customers from previous transactions.

In general, the D2C customer base includes 110,000 people with average CAC at $67, Customer LTV at $5,100, purchase frequency at 1.1, and average customer lifecycle at 3.75 years. Average customer value is at $1,350.

For analysis of purchases, the breakdown of sales by country for 2022, is approximately the following:

• Denmark is 64% of sales

• Sweden is 30% of sales

• Norway is 6% of sales

For the B2B side, the business sells to distributors and retailers in France, Finland, Norway, and Sweden and this makes up 20-25% of sales.

As far as demographics, around 75% of users are male while 25% are women. As far as age, the highest amount of people are in the 25-34 age range with the next highest ranges being 18-24 and 35-44.

Traffic

In the last 12 months, the business got over 1,281,000 visitors to its 3 different websites

• 730,000 on Denmark website with average session duration of 4 minutes and 16 seconds

• 437,000 on Swedish website with an average session of 4 minutes and 9 seconds

• 104,000 on Norwegian website with an average session duration of 3 minutes and 21 seconds

As you might expect, almost all of visitors to Denmark website are coming from Denmark, almost all to Swedish website are coming from Sweden and almost all to Norwegian site are coming from Norway.

As far as traffic source, the site has a diverse assortment which are all similar in impact to the business but across all the sites, the following 5 sources are leading the way in terms of traffic:

1. Paid Search - about 30% of traffic

2. Direct - about 20% of traffic

3. Organic Search - about 20% of traffic

4. Paid Social - about 10% of traffic

5. Affiliates - about 10% of traffic

6. Social -  5% of traffic

7. Other - 5% of traffic

Overall, it makes sense the business gets a large share of traffic from advertising given the business is a D2C ecommerce brand that doesn’t rely on selling via 3rd party marketplaces. 

Revenue Sources

The business makes money via a traditional e-commerce model in that they build and sell computers and accessories to individuals and companies, especially in the gaming sphere. In this, the revenue sources can be broken down: 

1. Individual Custom/Pre-built Computer Sales (average purchase of $1,350) - 73% of total sales

   1. Desktop - people buying custom built or pre-built desktop computers 

      1. Represents 95%+ of 2022 computer revenue

   2. Laptop - people buying custom built portable computers (rare)

      1. Represents 5% of 2022 computer revenue.

2. B2B Computer Sales - selling to retailers and distributors - 25% of total sales 

   1. 21% of sales are in Denmark

   2. 79% are from outside of Denmark

      1. Including France, Finland, Norway, and Sweden

3. Accessories - mouse pads, gaming chairs, etc being offered for purchase with computers

   1. Only about 1.66% of sales 

4. Freight + Misc Services - shipping and special services given to certain customers

   1. About .4% of sales

In the future, there is a plan to add a subscription model to these sources to boost revenue and margin immensely. This subscription could be like what is done for many smart devices currently where you charge $59-115 a month to each user for them to use This business computer products with them being able to upgrade or switch out their computer every 6 months at this price range. It is the way to convert a solid eCommerce company into a true tech company and turn revenue into ARR.

Financials

The business boasts impressive historical sales records and in 2022, it had a 17% gross profit margin which is historically lower due to micro and macroeconomic factors detailed below. 

Sales (USD)

2020 - $15.8M

2021 - $23.7M

2022 - $16.8M

2023 (as of July 1, 2023) - $12M (Projected for 22.1M by end of year)

Profit (USD)

2020 - $700k (plus owners salary)

2021 - $1.485M

2022 - ($788k)

2023 (as of June 1, 2023) - ($63k) (Projected to be $412.8k by end of year)

Operations

As an ecommerce company, the business’s model is to build, sell, ship, and support pre-built and custom high-end gaming computers for their customers. In this, these aspects are handled by a combination of software, people, and process. The most important software is Magento 2 cloud which powers the ecommerce framework that automates a lot of processes. In general, the operations of the business deals with the following segments:

• Marketing - for content generation and getting potential customers to lead funnels via natural and paid sources

• Pre-Purchase Support - helping customers determine right product for their needs and budget

• Purchase - handling payment via website and corresponding softwares

• Sourcing/Purchasing - getting parts to be able to manufacture products being sold

• Production - assembling products together to build custom computers for customers

• Logistics - after product is finished, making sure product gets to the customer via shipping partners

• Support - after product is delivered and customer uses, making sure they are happy and helping repair products when necessary

• Operational - dealing with managing workforce and admin functions

The business differentiates themselves by having an extremely caring customer service, passionate/mission-driven attitude, and fast/efficient turnarounds on repairs, builds, and support requests. The customer support makes an emphasis to not oversell and only take customer needs and budget to be able to access the right product for them. This has enabled them to maintain a very high trust score on TrustPilot (4.3/5 from 4,500 reviews!).

The business likes to say that “This business is run by gamers for gamers” as most of the team are hardware enthusiasts who either watch e-sports or have ‘gamed’ themselves for years.

For the main service of building custom computers, this service only takes 3-6 work days while there is a average of 1 minute wait time for chat or phone service and only 5 days for any computer repairs. Despite the small team (relative to some of bigger companies), they are able to be scrappy and work fast.

All the team but 2 people (who live out of the country) work physically in the 3000 sqm office they have in Copenhagen - during COVID, production team worked in office and admin worked from home and during the period from 2019-2021, sales tripled!

Team

The team that runs the business is 42 people which includes the following breakdown:

• 3 customer service

• 5 people in the repair shop

• 20 people in production team

• 14 people in administration 

  • Including sales, accounting, marketing, IT, and purchasing)

The organization breakdown is simple - there is a board who directs the executive/CEO and they direct each department, broken down:

• Logistics

• Production + Logistics

• RMA

• Sales

• Accounting

• IT

• Marketing

• Purchasing

Marketing

The business sets itself apart in its highly technical world by offering custom gaming computers designed specially for each customer, without the long wait time and poor customer service of some of its competitors. They are also one of the few offering custom laptop computers in Europe although this is a small part of their business.

The business uses these differentiators and their established brand (which is 13 years in the making) to produce immense amounts of proprietary content that can be absorbed by consumers on different platforms to help convert them into a This business client. This house made content is distributed via 

1. YouTube learning videos - 6,000 subscribers

2. Complex multi-step newsletters - 167,000 subscribers

3. Social media - 244,000 followers

   1. Tiktok

   2. Instagram

   3. Facebook and others

This content distribution is augmented by a strong advertising strategy where the business spends money on search ads, social media ads, and more to get more customers to its sales funnel. Outside of the paid aspect, the business has a strong natural traffic/customer base through its network, shown by over 361,000 visitors who went to the website directly and the 354,000 visitors who went to the website via natural search - 715,000 natural visitors a year in all. 

For the paid visitors, the business spent around $823,350 in 2022 on marketing related expenses, mostly for targeted social media and search advertisements.

Partners

On the sales side, 20-25% of sales come from selling products to retailers and distributors - these partners are highly valued.

On the technology side, in July 2022, the business had its software switched/relaunched to Magnento 2 cloud for experience, efficiency, and scale - this company is a large technical partner that the business relies on.

On the lead generation side, the business relies on social media ads (Instagram, TikTok, etc) and search ads (Google Adwords, etc.) to get a constant stream of clients to its website. 

Given the product side of the business, it has highly valued suppliers (around the world) who give them the parts necessary to build the products they sell.

More information about partners can be given before time of sale. 

Main Expenses

The main expenses of the business are the following (represented for per-year in 2022):

Fixed Costs - about 20% of total expenses or 3.6M

• Rent for their 3000 sqm office: about $350k or 10% of fixed cost

• Admin expenses (all around misc expenses): about $200k or 5% of fixed cost

• IT expenses including software subscriptions: about $200k or 5% of fixed costs

• Marketing/advertising: about $820k or 23% of fixed cost

• Staff/Team Salaries: about $2.07M or 57% of fixed cost

Variable - about 80% of total expenses or $14M

• Desktop Materials Cost - 70% of variable cost

• Laptop Materials Cost - 3% of variable cost

• Accessories Materials Cost - 3% of variable cost

• B2B Materials Cost - 22% of variable cost

• Shipping/Freight Cost - 2% of variable cost

Work and Skills Required

Given the structure of this offering (with the full team staying on), there is unlimited work and zero work needed to buy this business. There is a full team in place with a chief executive in place so no change to the business is needed. The addition of the new buyer will place a new equity holder with renewed enthusiasm to progress the business forward towards growth and optimization.  

Valuation

The business is valued at 14M which is just 2/3rds of its projected sales for this year. Given the brand value, ecosystem of buyers, IP of the products, and the sales numbers, the price is a very competitive one. If the business was more optimized in terms of its profit, the price would be much more although the business is projected to be profitable this year. 

SEO Analysis (for each of the 3 main website links)

Authority Score: 45, 25, 30

Backlinks: 6600 (70% dofollow), 606, 2100

Referring Domains: 681 (68% dofollow), 157, 265

Total Keywords: 20, 11, 8

Social Media 

Instagram - 70,000 followers

TikTok - 83,300 followers

Facebook - 82,000 followers

YouTube - 6,000 followers

TrustPilot - 4,500 reviews at 4.3/5!

Twitter - 2,700 followers

LinkedIn - 800 followers

Expansion Opportunities for New Owner

As a large ecommerce company in a highly technical niche, the business has a lot of expansion opportunities to increase value at all ends. Here are some ideas from the current CEO:

1. Raising production and increasing ad spend

   1. Could double current sales (to 5,000 computers a month) with current operations and some more investment into advertising

2. Open up in new markets 

   1. The business could launch a new business in any EU market in less than 4 weeks

3. Offer product subscription services instead of up front purchases 

   1. By doing this, everyone benefits as clients get better equipment for less up front payments and the business turns its revenue into ARR.

Barriers to Entry

The business is in a very particular niche and has built up an immense brand and IP within its niche which is very hard to replicate. The brand has taken 13 years and 110,000 customers for it to be built so if any new entrant wanted to come in, it would take a lot of time for them. Also, the materials, infrastructure and scale to run a company that builds computers has a certain minimum threshold and you need more than a few people in a garage to make it happen. Also, need a large support team outside of manufacturing to be able to address anytime a product malfunctions and you need to fix. Of course, the content production is also important to stay relevant and connect with consumers - that is not small feat (the business built up a lot of IP around a cartoon animal in its branding).

Because the business’s main product is custom built, it is not conducive to the Amazon 3rd party marketplace model where inventory is collected and shipped from a centralized warehouse. This resilience has allowed it to stay successful while other non-marketplace D2C brands have faltered. The part of the business that focuses on B2B allows another outlet to keep expanding if D2C doesn’t do as good, and vice versa.

Overall, the brand is well positioned in its space and is competitively arranged so that it would be very hard for another brand to take its place. 

Miscellaneous Details

In 2022, both micro and macro economic factors had a negative impact on our financial result of the business and are the reason its numbers are lower than 2021 and 2023. In this, the following factors were at play: inflation, energy costs, war in Ukraine, less money in the average household, limited supply from vendors, of course rising costs because of sky high shipping costs and a higher euro/dollar exchange rate all. The revenue in 2022 was only 16.8M USD while in 2021 it was 23.3M USD and in 2023 we expect 22.1M USD as today we are at 12M USD from January 2023 to Mid July 2023 (and biggest sales days each year tend to be around Black Friday).

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All Assets Included with Sale 

All current assets of the business will be included and a full balance sheet will be shown prior to closing - here is a incomplete list of assets:

1. Domains and all brand IP

2. Website and all related content 

3. Proprietary product IP

4. All customer bases

5. Hosting + technology accounts

6. Ad accounts

7. Social media accounts 

8. Work contracts

9. Supplier contracts

10. Inventory

11. Office leases

12. All equipment (Not much is owned)

13. All applicable customer contracts

14. Partner contracts

15. Misc Accounts (all other business assets owned by the company)