Should You Buy a Meal Prep Delivery Service?

In this series, CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses up for sale and see if Matt would be interested in buying them.

Video Transcript: 

Alright, so here’s the next in the series of “Would I Buy this Business for Sale” that could be an interesting acquisition. So this one is California Meal Prep Health and Scalability with only 100k down using an SBA loan. Interesting. Okay, so meal prep. Asking prices 3.4 million, cash flow 948,000, gross revenue 290 – 2 million 969. So cash flow is about 30% of sales which is good. Meal prep, so I mean there’s a ton of people in this space including some very big ones like Hello Fresh and Blue Apron. And a lot of those guys are really struggling. They’re having a very hard time getting new customers to try it and then stick around long enough to make the cost of that customer acquisition pay off, right? So between the ads and the coupons and the free trials and everything they’re giving away, it cost them three or four hundred dollars to find a new customer and that customer ends up only ordering three or four times. Then they’re losing money on those. And a lot of these guys have been struggling. So I think if you’re gonna do this, what you have to do is find a niche category where you can find the customers less expensively. And then hopefully have them be more motivated to stick around. So let’s look in the description, see if that’s what they’re doing here. Meal prep industry, culinary revolution, so 35% annual growth. They’ve got cash flow, Only a 15,000 dollar week payroll. Centralized warehouse, sustainable eco-friendly packaging. Hmm, yeah it doesn’t say that they’re focused on any particular specialized market. They’ve got vegan, keto, paleo, pescatarian, they cater to every California taste. So it’s interesting to me to it would be interesting to me to find out who their customers are and how much it’s costing them to get each customer, how they’re finding them, how long the customers stick around. With the numbers they’re talking about, it seems pretty solid. But I would definitely be interested in knowing more about it and how long they’ve been around. They got a 13,000 square foot building. 32 employees, how they have 32 employees with only 15,000 a week in payroll? It says established in 2015. So I mean it certainly could be interesting. I like the margins. I like that’s been around for a while. But I would wanna know how they get customers, how many more customers they can get, and how big they can grow this thing, and how they’re avoiding the struggle that some of the bigger Hello Fresh and Blue Apron guys are having with this business model. So interesting for sure. I also not clear on how you can get into it with 3% down. Normally the SBA is looking for 20% down, part of that can be a seller note um but generally not less than 10% out of the new owner’s pocket, which would be in this case 340,000 if you paid the asking price not 100,000. So something else is going on with the deal terms. Anytime the deal sounds too good to be true it always makes me wonder, is it in fact too good to be true? So worth investigation but I wouldn’t jump on top of this one quite yet, until I had a little bit more information and understood really how they were able to make it work.