I came across SoftPetPaws.com for sale on Flippa (a marketplace for buying and selling online businesses) and decided to break down the business to see how they actually are doing.
You can see their listing on Flippa here: https://flippa.com/10878622-e-commerce-home-and-garden
Soft Pet Paws sells pet grooming supplies which they dropship from a 3rd party. They report just over $1M in revenue and $223K in profit over the past 12 months.
I have placed two orders 11 days apart. During that time period I can see that they had 954 orders, that is 83 orders per day. On Flippa, they report their average order value being approximately $40 (my best guess is they are closer to $36 per order). On a daily basis they are generating approximately $3K in revenue. Annualized that is about $1.1M in revenue (checks out to their reported past 12 months of revenue). I approximate their June 2021 revenue to be $90K, which is $8500 higher than June 2020. I feel pretty confident that their reported revenue numbers are accurate.
Reading through their listing, I see that they use CJ Dropshipping to source their products (essentially the creator of SoftPetPaws.com found the products they are selling on CJ Dropshipping and listed them on a Shopify store). I created an account with CJ Dropshipping and found Soft Pet Paws’ most popular products on there and I was able to get the all in cost for these to be shipped to the consumer. Essentially Soft Pet Paws has a 45% Gross Margin on their revenues (this includes cost of shipping to the end consumer).
Using all the information they have provided in the listing and the data I have gathered, I created a summary P&L of what their May 2021 looked like.
I am able to deduce that they spent about $13K on advertising in the month of May. In the listing, they provided their site traffic from Google Analytics which stated they had 34,930 unique visitors in that month. No doubt some of this traffic is organic (or not directly paid for), either from past purchasers or from their email blasts (30,000 people on their email list).
The seller says that the majority of the website traffic is paid for and that Facebook is their number one source of traffic. I would have to guess that 90% of their overall traffic was a result of their ad spend that month. Which means their ad spend drove approximately 30,000 people to their site. Since they spent about $13K that month, that means it cost them about $0.43 to drive a user. This number concerns me because Cost Per Click average for ecommerce is nearly twice that.
Since we know their May revenue was about $65K and their average order value is between $36 and $40, we know they did about 1,760 orders in the month of May. With 34,000 people coming to their site, that means their conversion rate is 5.16%. This is an insanely high conversion rate
Return on Ad Spend
With $65K in sales in May and $13K spent on advertising their return on ad spend is 5x. This is a very strong return. My guess is is about $3-4K was spent on Google Ads and the remaining about spent on Facebook/Instagram.
They have one Facebook ad currently running, which is a video of the nail grinder in actions. See the ad here.
After visiting their site, I was also hit with this retargeting ad:
Most likely they are driving top of funnel traffic with the video ad (targeted to dog lovers, etc) and then retargeting the user if they did not make a purchase.
86% of their paid search traffic comes from the keyword: “pet nail grinder”. 5.6% of their traffic comes from the keyword: “soft paws review” (a common search term for anyone considering buying from a brand/company).
Here are the ads that come up in Google when searching the term “pet nail grinder”:
As you can see they have very good placement on the Google Shopping section and I have typically found their text ad to be on the second page of Google Results.
Soft Pet Paws has 1,383 likes on Facebook and 5,658 followers on Instagram. I was surprised that they had this many followers on Instagram since the brand has no real character to it, just a straight up dropship company.
I performed an audit on their Instagram account, and was surprised by the metrics I found. I thought for sure the followers would have been bought and their account would have poor metrics. However, I found that they have a fairly authentic Instagram account. With normal audience gender, age, country distributions.
Gender: 19% Male – 81% Female
Age Brackets: 3% 13-17, 35% 18-24, 41% 25-34, 14% 35-44, and 6% 45-64
Audience Location: 71% US, 14% Canada, 6% Australia, 3% UK
There engagement rate is 1.4% which is very high compared to other brands. However, when you look at their account you can probably tell why. They aggregate photos of pets. People love to see cute photos of dogs and cats. Besides the first few posts, they make almost no mention of the products they sell.
From the looks of it, their social media accounts most likely do not generate them any sales directly. However they may assist someone who is thinking about purchasing and researches them. That person then feels more comfortable seeing a brand that has followers.
Should You Buy This Business?
The asking price is $750,000. That is 3.35x net profit from the previous 12 months. That multiple is not that crazy, but I am not convinced you need to spend $750K to have this business. There is no moat, no real defense to this company. It seems like any average Joe with enough knowledge on Shopify and digital marketing can replicate this business for far less money.
In fact, I think I will make a video series of me trying to reproduce this business. Sign up below to follow along. I will make every detail public as I try to recreate this business.