Selling Memorandum. Hilde Group, Inc. John Hilde - Owner

Transcription

1 Selling Memorandum Hilde Group, Inc. John Hilde - Owner 1

2 Table of Contents Business Overview... 3 Summary of Business History, Products, Operations... 3 Summary of Annual Revenue and Profit... 3 Key Strengths... 3 Competitive Overview and Challenges... 4 Challenges... 4 Competitive Overview... 4 Business Details and Operations... 5 Comprehensive List of Products... 5 Operations... 5 Marketing and Future Growth... 6 Marketing... 6 Future Plans and Growth Potential... 6 Financial Information... 7 Offering Price and Terms

3 Business Overview Summary of Business History Hilde Group, Inc. has been in business for 12 years and was founded in Dec. of 2006 with the launch of its first website In subsequent years it expanded adding two more online stores and as well as adding stores on third party marketplaces on amazon.com and Ebay. Business Structure Hilde Group, Inc. is currently structured as an S Corp with all shares held by the owner. Summary of Products, Staffing, Markets, and Operations The business sells historical themed replicas and clothing, including but not limited to medieval armor, helmets, shields, swords, clothing, costumes and accessories. The items are used as costumes, for roleplaying and LARPing, collection, display, home decor, media productions, and business use. The majority of business is done by drop shipping from suppliers within the United States. Some items are sold by FBA (fulfilled by Amazon) which are either imported from suppliers overseas or items ordered in bulk from our U.S. suppliers. These items are shipped to our warehouse to be prepped and shipped into Amazon for FBA listings. There are currently no employees, and the owner runs the entire business. The business is operationally efficient with established contract and freelance workers, low overhead, and flexibility in working hours and location. Summary of Annual Sales and Operating Profit million total revenue. 180k operating profit million total revenue. 182k operating profit million total revenue. 124k operating profit 2018 projected - 968k total revenue. 135k projected operating profit Key Strengths 44k monthly average unique visitors for all three sites combined, 60k monthly average visits Redesigned, modern, and efficient websites proven to convert visitors into sales Large customer base with approximately 23k subscribers combined all three site lists Protected brand and trademarked name on Amazon 95% drop shipping - little overhead, flexibility, easy fulfillment, and can be run anywhere in the U.S. High average order values with close to 40% gross product margins Strong, favorable, and long history with suppliers Efficiently operated with many aspects of business admin, support, and marketing outsourced to low cost freelancers and contractors 3

4 Competitive Overview and Challenges Location This business can be operated from anywhere in the United States and possibly internationally in some cases. The main requirement is an internet connection and computer/hardware to run operations and an address for some returns. Challenges Growing international competition especially on marketplaces such as ebay and amazon. Some revenue decrease may be attributed to price undercutting and market flooding of direct to consumer producers in India and China on amazon and ebay. Growing brand loyalty and positioning oneself with superior customer service, products, and value continues to be the competitive advantage over international competition from India and China who cannot provide personal and U.S. base support. Providing real, accurate product photos and robust product details also gives an advantage over many competitors, especially international ones who tend to be thin on product info or deceiving in product photos. Matching or exceeding return policies and prices with competitors or third party marketplaces such as amazon also is key to remaining competitive. Some of our amazon marketplace listings are not under our registered Armor Venue brand, which allows other sellers to list on our listings. This undercuts prices which either cuts into our margins or may make some products unprofitable to sell. With our protected brand and trademarked name, the key to growth is private labeling and striking deals with the current suppliers on selling their items "white label" under the Armor Venue brand to control pricing and marketing. FBA (fulfilled by Amazon) remains the greatest path to growth for the business and long term success of the brand. Declining website sales. The peak of the three web store sales occurred in While sales have declined the past two years, profit margins still remain strong and combined operating income of the web stores and third party marketplace accounts has stabilized and may increase from 2017 to Strategies for invigorating sales on the web stores and expanding growth on third party marketplaces such as amazon are outlined on page 6 of this memorandum. Competitive Overview There are 3-4 main competitors, and several of them also have a wholesale program and drop ship for us. There are a few minor competitors that do not have the visibility and web presence as our websites and major competitors. Our disadvantage is our main competitors that drop ship for us have a lower COGS, and as a result can either beat us on price or squeeze margins on certain product lines. As direct importers, they have a lower product cost than a drop shipper, and it may be difficult to make a profit or compete on third party marketplaces such as amazon for certain products. 4

5 On our own websites we have positioned ourselves differently by having a well designed website and user friendly experience, excellent customer service and support, and pricing items competitively with a low price guarantee. Because of our history and customer reviews, we have been able to carve out our own customer base and charge higher prices on certain product lines to maintain healthy margins. We have excellent relationships with our suppliers, which in turn drives our excellent service to customers. As primarily drop shipping company, we rely heavily on our suppliers being excellent in service, efficient order processing, and communication. We have favorable relationships with our suppliers who are an extension of our business and key to our success. Because of these strong relationships, we have negotiated price breaks, discounts, and special terms with most of our main suppliers giving us a price advantage over other competitors or new ones that may try and enter the market. Some of our suppliers work directly with us with generous price breaks or willingness to ship items in directly to amazon FBA. These supplier relationships should be focused on. Business Details and Operations List of Products Breastplates and armor (includes pauldrons, greaves, chest plates, arm guards, and more), helmets, shields, swords and weapons, clothing, costumes, costume accessories from many historical eras and themes such as medieval, Roman, Greek, Viking, renaissance, steampunk, pirate, fantasy, and more. Secondary products include home decor and nautical items. We have over 4000 different products listed, all of them can be drop shipped. Each website focuses on certain product lines as listed below: - focuses on armor, helmets, and shields - focuses on clothing, costumes, and accessories - focuses on swords and weapons Operations Business hours are currently 9 am to 4 pm M-F central standard time. Phone lines are open during these hours, but s are usually answered after hours and during weekends. We contract with a call center that answers all of our incoming calls and provide basic help as well as process phone orders. Occasionally it may be necessary to call out to a customer to close a more complicated sale or provide additional service and support. Currently all support and order processing through the websites or third party marketplaces are done by the owner. We have admin support from multiple contractors and freelancers based out of India hired through the freelance website upwork.com. Admin support includes majority of invoice recording and bookkeeping, 5

6 website development and maintenance, graphic design, image touch up, data mining, and PPC and marketing management. Order fulfillment - this is a primarily drop ship business. The bulk of items ordered come from 6 different drop ship suppliers. We have a total of 14 drop ship suppliers. When orders come through the website or third party marketplaces, the order is placed with the respective supplier and they handle fulfillment. Most of our suppliers provide excellent customer service and efficient order processing, with most orders shipping out within hours. There is little overhead in inventory investment, office space, warehousing, or employees. This business has become very efficient operationally and is currently run by one person. Flexible hours and the internet based nature of this business allows it to be operated while traveling or anywhere there is an internet connection. Marketing and Future Growth Marketing The three websites are currently marketed with Google shopping ads, text ads, and remarketing ads. Adroll is currently used for additional remarketing efforts for only. Organic search traffic from Google remains strong, with the websites showing up in top positions for many relevant keywords. Bing and Yahoo search engines also provide referral traffic, as well as Bing ads. On amazon.com, many products naturally rank well for various search terms. We advertise on amazon using their sponsored ads which gives a profitable ROI. We have several successful FBA listings that contribute up to 50% of the sales on amazon. Exclusive and private software is used to aid in the launching and ranking of products on amazon. Additional marketing is done through Exclusive Concepts which helps capture leads and sends coupon offers, and automates triggers for cart abandonment. We currently have over 23k customers combined on three marketing lists for the three websites. Promotional s are sent out for sales, new products, and product segment highlights. Social media marketing and presence is either non-existent or done sporadically. There may be a big opportunity here to build of a strong social media presence to help create brand loyalty, presence, referral traffic, and ultimately sales. Experimenting with facebook or instagram marketing may have additional opportunities. Future Plans and Growth Potential The biggest growth potential may be with private labeling products under the Armor Venue brand which is protected on amazon and trademarked. As a registered brand on amazon, you have more tools and 6

7 actions to take against counterfeiters and others who sell on your listing without authorization. Selling a product under the Armor Venue brand protects the product from getting undercut by counterfeiters and engaging in a price war to zero or negative margins. Focusing on increasing FBA offers should be a key growth driver. New products can be developed or launched on FBA, or current drop ship FBM (fulfilled by merchant) listings that are popular can be converted to FBA listings and marketed to increase sales exponentially. One of our suppliers is especially willing and open to explore new FBA opportunities and gives day terms, so there is no upfront product cost to get a listing launched. Product samples from China can be developed inexpensively and relatively quickly, and some suppliers allow low MOQ's to limit your investment in launching a new product. Other potential growth can be expanding to our marketplaces such as etsy for certain best selling products, or having your popular FBA products expanded to other marketplaces and fulfilling them with amazon. Creating a strong social media presence on various platforms may also be a growth driver. Currently all three sites have facebook pages, but posts are infrequent and audiences are not engaged. There are no instagram accounts, youtube accounts, or other accounts on popular social media apps. Re-branding of the websites may be another key to growth. There has been a decline of website sales the last two years, and new methods may be needed to invigorate sales. New marketing strategies may be needed with video and social media to brand as the authority in the marketplace, create more buzz over specific products, and help drive more traffic. Price matching all products to competitors and closer monitoring of their activities will also help in staying competitive and driving sales. marketing is another area of improvement and driving additional sales. There are approximately 23k subscribers between all three websites, but engagement level is around 10%. s are mostly sent out for sales and promotions surrounding major holidays. There is a lot of room for additional campaigns sent surrounding product promotions, highlights, or featured reviews (not surrounding holiday sales), general market news or tips, and other value added newsletters to garner more interest and a higher engagement rate. Financial Information Hilde Group, Inc. uses the Cash basis accounting method million total revenue. 180k operating profit million total revenue. 182k operating profit million total revenue. 124k operating profit 2018 projected - 968k total revenue. 135k operating profit Additional financial books and supporting documents will be given separately including profit and loss statements, balance sheet, and cash flow statement. 7

8 Offering Price and Terms Hilde Group, Inc., a California Subchapter S Corporation with all shares held by the owner. Seller prefers asset sale of three website properties and third party marketplace accounts on amazon and ebay. The seller intends to keep one asset, a separate amazon seller account, under Hilde Group, Inc. which only sells specific nautical and pirate themed items. While this account is in a similar niche, it does not sell the core products of the other assets for sale. Seller is willing to discuss terms and divulge more information on future plans and products currently sold on this other amazon seller account. Asking Price: $340,000 Sale includes assets of three website properties and and third party marketplace accounts listed under Armor Venue on and which also includes its customer base and lists. Any inventory at time of sale will be sold at cost. Financing Terms: cash deal with seller financing available up to 20% of purchase price at a rate of 10% over three years. Timeframe: seller is willing to close the sale by year end 2018, or by March 31st, Seller will remain as a consultant for three months after close of sale, provide training, and consult of amazon selling if necessary. 8