Market to Expand Dramatically with Expected State Regulation Change
BACKGROUND
This 3-year-old New England Lab was set up to provide Cannabis testing service and is one of only five labs in the state, two of which have just started in the past year.
The lab’s owners have invested about $2.5M to make it one of the most modern and advanced laboratories. It offers comprehensive cannabis testing. Currently, the state mandates testing only for Recreational Cannabis and not for Medical Cannabis. However, these regulations are expected to come, and when they do, the cannabis testing business will expand significantly.
STEADY GROWTH IN BUSINESS
The Lab has seen steady revenue growth since its start. 2022 was its first full year in operation, with $602K in revenue. Last year, its revenue grew to over $1M, and the first quarter saw similar performance with revenue of $247,733. The business is now pretty much break even (first quarter SDE was—$1,690).
GROWTH OPPORTUNITY BY EXPANDING AND DIVERSIFYING
The lab’s spacious facility enables it 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 area is for different markets, it all uses similar instruments.
There is a significant business interest in testing Per- and Poly Fluro Alkyl Substances (PFAS), also called Forever Chemicals, in the State and surrounding states. Cannabis testing only utilizes half the 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.
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 independently.
Opportunity Highlights
- – 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 at break-even with revenues of about $1.05M in 2023.
- – 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.
Financials
The Revenue of the Labs in 2023 were at $1.05M and 2024 first quarter also is trending to show similar revenue this year, although the Lab is continuing its efforts to add more clients. The Lab is currently at about break-even point.
Asking Price
It will take a couple of years to set up the Lab and get all the permissions, and it will cost about $2.5M to create a new lab from scratch. The Sellers are ready to take some loss on the business and sell both the Lab and the building (worth about $675K) for $2M. A more energetic buyer or a buyer with multiple Cannabis labs in several states can more effectively grow the business.
Additionally, as mentioned before, there is plenty of space for the buyer to expand on Cannabis testing and bring in environmental testing, food, and microbial testing. Maine (and surrounding states) also have strong agricultural and fishery industries, so food and microbial testing could be attractive additions. This Lab’s location can help provide a base for these other analytical testing businesses.
When inquiring about the lab, please provide your business email and some information about your company and your background.
