Limited Competition – Growth Opportunity by Expanding Market Share
The owners of this relatively new Lab have invested about $2.5M to make it a modern laboratory. It offers comprehensive testing related to Cannabis.
The Lab has seen steady growth in revenue since it started. In the current year, it expects to generate about $1.2M in gross revenue and is cash-flow positive now, with projected EBITDA in the current year at about $100K.
The Lab has a spacious facility that enables its laboratory to expand its existing services and venture into additional offerings such as environmental testing, microbial testing for water, food, and surfaces, food testing, pharmaceutical testing, and medical toxicology testing. Although each is for a different market, they all use similar instrumentation.
There is a significant business interest in Per Fluro Alkyl (PFA) testing in the state and several surrounding states. Cannabis testing only utilizes half of the Lab space, so there is plenty of room for adding other types of testing here. Hence, this laboratory is ideal for a growth-oriented buyer who is not only looking to try and capture a larger share of the cannabis testing market but also plans to expand into other areas, such as environmental, food, and microbial testing.
Reason For Selling
The Company’s owners intend to retire; nevertheless, they remain dedicated to ensuring the buyer’s success. Therefore, the managing partner is ready to stay on for transition until the buyer is comfortable with managing the Lab independentl
- – A modern lab for Cannabis Testing
- – Limited Competition in the State
- – Cannabis testing market could double with certain regulations changes
- – The buyer can save about two years setting up a Lab and trying to grow the business from scratch
- – The Lab is cash-flow positive, with revenue for 2023 projected at about $1.2M and EBITDA of about 100K
- – Lab offers a solid base revenue for not only expanding the market share in Cannabis testing but also diversifying into other testing areas, including environmental, food, microbial, etc.
It will take a couple of years to set up the Lab from scratch and get all of the permissions, and it will cost about $2.5M to create a new lab from scratch. The sellers are looking to recoup their initial investment of $2.5M and provide the buyer with a cash-flow positive Lab.
Additionally, as mentioned before, the buyer has plenty of space to bring in environmental, food, and microbial testing. The state has strong agricultural and food industries, so food and microbial testing could be attractive additions. This location can help provide a base for these other analytical testing businesses.
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