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Opportunity to Acquire Established Coffee Roasting Business

19
January 2024
Opportunity to Acquire Established Coffee Roasting Business

A Rare Opportunity to Acquire an Established Specialty Coffee Roasting Business

This article provides an overview of a unique opportunity to purchase a profitable, turnkey specialty coffee roasting business that has been operating successfully for over a decade. With an established brand reputation, loyal customer base, and significant growth potential, this off-the-shelf operation represents a low-risk way for a new owner to enter the booming specialty coffee market.

Key details covered include:

  • Business history and overview of the specialty coffee roasting operation for sale
  • Production capacity and operations showing stable existing workflows
  • Financial performance benchmarks and profitability metrics
  • Turnkey business opportunity requiring minimal changes for new owner
  • Assets and equipment included in the sale
  • Reason for sale and advantages as a turnkey business acquisition

Business Overview and History

This specialty coffee roasting company was founded in 2009 by two experienced coffee professionals in the Denver metro area. Over the past 10+ years, the business has built up a reputation for sourcing exceptional green coffee and producing consistently high-quality roasted coffee products.

Strategically located in a high-demand area for specialty coffee, the business has seen steady organic growth year-over-year. The current owners have focused on nurturing wholesale and retail customer relationships, developing a loyal following, and perfecting their craft.

With a modern 2,000 sq ft production facility, the company has ample capacity to supply its portfolio of cafes, restaurants, offices, and online customers. The turnkey operation comes with an experienced team of 5 coffee roasting staff members who manage the end-to-end production.

Production Capacity and Operations

Equipped with a fully operational 15-kg Typhoon 5 commercial coffee roaster and ancillary grinding and packaging equipment, the company has consistently roasted between 6,000-8,000 lbs of coffee each month.

The streamlined roasting, grinding, and packaging operations are finely tuned after years of experience. Workflows and standard operating procedures ensure optimal roast profiles, minimum waste, and stringent quality control at every stage.

With roughly 40% excess capacity, the business presents opportunity to substantially increase output with the existing infrastructure. Additional growth could be supported by upgrading equipment and expanding the skillful team of barista-trained staff.

Financials and Growth Potential

Over the past 3 years, the business has averaged $420,000 in annual sales and maintained gross margins between 32-35%. The specialty coffee roasting operations have resulted in steady cash flows and profitability for the owners.

Significant potential exists to grow the business by increasing production capacity, expanding the customer base, and entering new sales channels. Conservatively modeled forecasts estimate sales could surpass $600,000 within 3 years under new ownership.

The business represents an ideal platform for growth in the specialty coffee space – with strong demand drivers, loyal customers, and a profitable business model primed for expansion.

Assets and Equipment

The turnkey operation comes complete with all the required commercial grade coffee roasting and packaging equipment. This includes:

  • Typhoon 15-kg gas-powered coffee roaster
  • Industrial coffee grinder and various bagging machines
  • Coffee bean storage silos and roasting accessories
  • Delivery van and other distribution assets

The 2,000 sq ft production facility is leased at very favorable commercial rental rates. The space meets all regulations and requirements for commercial scale food production.

Acquiring the off-the-shelf business means no retail space overhead or liabilities to take on. The assets and equipment enable new owners to seamlessly continue operations.

Reason for Sale and Turnkey Opportunity

After being in business for over a decade, the current owners are looking to retire and focus their energy on other ventures. Their primary interest is finding a buyer who will thoughtfully transition the thriving business.

This represents a truly turnkey business opportunity to take over an established specialty coffee roasting operation with minimal hiccups. The business generates over $350k in sales even without a full-time owner at the helm.

A new buyer can retain the existing staff and simply focus efforts on growth opportunities. This off-the-shelf acquisition fast-tracks the path to coffee roasting business ownership.

Key Benefits and Advantages of Acquiring this Coffee Roasting Business

Beyond the turnkey setup, purchasing this successful specialty coffee roasting business comes with additional advantages that enable new owners to hit the ground running.

Instant Customer Base and Reputation

The acquisition includes the entire portfolio of loyal retail, wholesale, and online customers that has been nurtured over 10+ years. This provides instant revenue streams and eliminates the hard work of establishing a new brand and reputation.

Retaining the experienced staff preserves rapport with customers and specialized coffee knowledge – huge benefits to maintaining quality and business continuity. The reputable local brand also translates into built-in trust and goodwill.

Turnkey Setup and Operations

Since this is an established business with refined operations, the new owner does not have to reinvent systems and processes. The current staff and management structure can be retained to avoid any disruptions.

Minimal changes would be required operationally, making it a true turnkey business acquisition. The buyer can avoid the steep learning curve and be cash flow positive on day one.

Built-in Growth Potential

While the business is already quite profitable, ample opportunities exist to grow revenues and expand into new markets. The loyal customer base represents a strong foundation to incrementally build upon.

Specialty coffee is a high-growth market, so selling to more third-wave cafes, expanding wholesale accounts, and direct-to-consumer e-commerce all represent potential growth levers.

Coffee Sourcing and Quality Advantages

Purchasing an existing roasting business provides the advantage of plugging into established specialty green coffee suppliers. Instead of starting from scratch sourcing beans, you can leverage and expand existing supplier relationships.

Since staff are intimately familiar with current coffee offerings, a new owner can maintain quality consistency. The experienced team can also provide invaluable guidance on curating new green coffee profiles.

Specialized Coffee Roasting Expertise

Acquiring any business with skilled staff eliminates much of the risk associated with hiring and training challenges. The experienced team knows all the operating procedures and can quickly get a new owner up to speed.

More than just staff – you also gain specialized coffee roasting expertise. This includes roast profile knowledge, cupping skills, and the craft that goes into producing amazing coffee.

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Key Financial Metrics and Valuation

To enable serious buyers to assess this rare specialty coffee roasting acquisition opportunity, here is an overview of key financial benchmarks and valuation methods used to arrive at an asking price.

Historical Financials

Over the past 3 years of operations, the business has averaged:

  • $420,000 in annual sales
  • 65% gross margins resulting in $270,000 gross profit
  • 32% EBITDA margins amounting to approximately $135,000 in EBITDA

As a cash flow positive business with relatively low overhead, the historical finances portray stable commercial viability.

Business Valuation Metrics

Based on maintained profitability and specialty coffee roaster valuations, the owners are asking $540,000 for the established business.

This represents an attractive ~4x multiple of EBITDA. Factoring in tangible assets like equipment worth ~$125,000, the asking price reflects a fair market value.

Financing Options

To assist buyers with financing, the sellers are willing to owner-finance 20% of the purchase price over 5 years. The stable free cash flows support servicing this debt.

Conventional SBA bank financing is another option, as the business profitability and assets help qualify for such acquisition loans. Leasing equipment through companies like Typhoon Roasters can also alleviate capital requirements.

Next Steps to Move Forward with Acquisition

For buyers seriously interested in acquiring this off-the-shelf specialty coffee roasting business, here is an overview of next steps in the process.

Acquisition Timeline and Process

The sellers plan to finalize the sale by the end of Q1 2024. Key dates include:

  • Open to offers until December 31, 2023
  • Due diligence completion by January 15, 2024
  • Closing and ownership transfer by March 31, 2024
  • New brand launch in April 2024

During this process, they hope to meet interested buyers and ensure a smooth transition.

Conducting Due Diligence

Typical due diligence should include:

  • Reviewing 3 years of financial statements
  • Inspecting equipment, facility, and operations
  • Sampling coffee and evaluating quality control
  • Interviewing staff members and assessing retention plans
  • Verifying customer contracts and pipeline

Arranging Financing and Capital

Potential financing options to cover the $540,000 purchase include:

  • SBA bank financing of 50-60% of price
  • Seller financing of 20% over 5 years
  • Leasing roasting equipment from Typhoon Roasters
  • Crowdfunding or partnerships for incremental capital

Ensuring Smooth Ownership Transition

To ensure continuity, sellers are willing to provide consulting services for 6 months post-close. Retaining key staff will also promote stability.

Meanwhile, new owners can gradually put their own mark on the business. Actions like marketing campaigns, new packages, and special events help rebrand the business.

Conclusion and Summary

In summary, this represents a rare opportunity to acquire an established, profitable specialty coffee roasting business model for a reasonable valuation.

With a turnkey operation, loyal customer base, and experienced staff, a new owner can realize their passion of owning a specialty coffee business with tremendous upside potential.

This low-risk avenue into the thriving specialty coffee market leverages an existing infrastructure – avoiding costly barriers to entry. For the right buyer, this off-the-shelf business could be an ideal platform for achieving their entrepreneurial visions in the specialty coffee world.

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