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It can be hard to know when to sell a business. There comes a point in our careers as entrepreneurs and business owners that we want (or need) to sell a business we’ve grown. 

We do so for many reasons – personal circumstances such as retirement, health issues, or the desire for a lifestyle change are top reasons. Some entrepreneurs also sell when they foresee market shifts that could devalue their business in the future. Sometimes, it could be because we feel like we’ve taken the business as far as we could have, and it needs new energy and ideas to continue growing.

Whatever the reason, when we reach this point we iron out what needs ironing with the business we want to sell, put up an ad for it, wait for the buyers, and hope for a successful sale. But nothing, especially not a business sale is ever that straightforward – and I learned this first hand when I was selling a legal CRM product before I started Doorloop.

Selling a business is a tricky matter for business owners. That’s one of the many things selling a business taught me. You must account for every single detail, consider the timing, and, most importantly, ensure that your business is prime for selling. If not, then you will sell yourself short on the negotiation table.

Admittedly, it’s a delicate process and there are a lot of external factors involved. Given that you need to balance the timing and the current value of your business, it’s one of the toughest calls you’ll ever have to make. But we’re hoping to give some guidance on that with this article.

Below, I’ll be sharing some things I did to ensure that I maximize my earnings from selling a startup.

5 Signs Your Business is Ready for Selling

When we say a business is “ready” for selling, we’re not only referring to the logistics and administrative aspects of a business for sale. The sales process, in the context of its readiness for selling and stretching your gains from it, refers to certain optimal conditions and external factors as well as scenarios that signal the best time to sell.

These include internal considerations such as business profitability and cash flows, and external ones like market stability and demand. Ideally, you should observe all these factors before selling a business. In the effort to respond quickly to trends, however, ensuring two or three are considered is acceptable.

Now, let’s detail these factors below.

Your numbers are up and growing.

Up in terms of profits, and rising. If you’ve met your financial goals then this is the best time to sell if you want to maximize your earnings from the sale as it boosts your valuation and makes you an obvious purchase for a buyer.

This is exactly what we did with the legal CRM I co-founded. At its peak, PracticePanther’s numbers were continually growing as it served a huge gap in the legal vertical. Those factors combined made PracticePanther a high-potential business that quickly attracted a high-quality buyer.

Another thing I’d like to emphasize in PracticePanther’s case is the speed of selling it. With good numbers and impeccable financial records, you sell fast. Bad numbers, on the other hand, will take you a while to find the right buyers. This is critical because, the truth is, you never really know how long you’ve got until a good thing starts costing you.

For one, taking too long to sell a business risks lowering its value and it often leads to qualified buyers making sure they have a sound exit strategy should things not work out in their favor. Second, and more importantly, you’re in a race to survive. Fact is: 50% of small businesses will shutter in their fifth year, and one of the key reasons is running out of cash – aka, capital. In a survey of startup post-mortems (as of 2021), CB Insights found that 38% of founders had to shutter their startups because they ran out of cash in the long run. Business owners also choose to sell during financial peaks to fund other passions, repay debts, or because they’ve received an offer too good to refuse, indicating a perfect exit opportunity.

In a previous version of this survey published in 2016, the foremost reason for startup closures was market demand. This suggests that while we’ve gotten much better at identifying market needs (and subsequently developing solutions), the struggle for modern startups lies in funding.

Don’t wait until you can’t raise or manage your funding to sell and put your business up for sale while it’s performing. That way, you not only profit from it, but also ensure that your business thrives with optimal cash flow.

Market stability, and clear demand.

Unless you’re lucky enough to be in an industry that is little affected by seasonal changes in demand, then I urge you to sell when demand is high, and the market is relatively stable.

Market conditions tend to fluctuate depending on market trends. Market stability and demand are external, uncontrollable factors that affect your business value. DesignRush founder, Gianluca Ferrugia, who works with digital marketing agencies, echoes just as much.

Citing the heightened demand for digital marketing services, he explains that these companies tend to “get valued pretty well when [the] time comes to sell the agency.”

However, he warns that “valuation based on demand will still be weighed against market stability.” The best case scenario is that the market remains stable while demand for your product soars.

But that is rarely the case; demand for your product or service won’t always come with market stability. Their relationship isn’t exactly that correlative. Comparing the market for digital marketing services during and after the pandemic lockdowns, the Gianluca explains that, on top of other factors, “market turbulence makes some investors, especially if they are strategic buyers wary, and some more daring.”

He continues, “we saw this a lot during the pandemic. The growing investments in ad spending in a fair were the perfect sign for buyers to acquire companies. But those I talked to decided against it mainly because the industry is oversaturated with players, and the pandemic’s long-term impacts were just too hard to predict.”

So, when the rare chance that your the demand for your product is booming during a time of relative prosperity, you better act fast.

The business has outgrown you – or vice versa.

Any entrepreneur would be happy to see their business grow – I know I would. However, the sad reality is that sometimes, business growth far outpaces your capacity, or you outgrow your own creation.

These two scenarios are the most common reasons business owners tend to start considering putting their business for sale. The former puts you in a situation where you could burn yourself out by trying to keep up with limited resources. The latter, on the other hand, might leave you unstimulated or unmotivated, leading you to seek new opportunities.

In either case, the best resolution would be to sell your company as it will benefit both you and the business. For one, creating an exit plan and selling a business will leave it in the hands of new leadership and teams that can instill new life in it – growing it beyond your expectations.

Meanwhile, you can free up time and resources to allocate to new personal goals and professional pursuits.

You’ve found the right buyer.

Thriving businesses will attract good buyers like honey does to bees. When you’re attracting high-quality buyers or investors for your business, then this is a strong signal that your business is ready to sell. Yes, even when you didn’t mean to sell it, in the first place.

This happens because people are seeing the value and potential of your business – for good and bad reasons alike. Some will buy you out of the boxing ring, like a competitor. While some are looking to help grow your business, like venture capitalists.

No matter which kind of buyer you are facing, remember that it is still critical to evaluate your options carefully. The best buyer is the one whose motivations align with your purpose for selling the business – whatever it may be.

Additionally, here are some criteria you can consider adding on your list:

• Ease of negotiations. Is a potential buyer helping make the transaction flow easier or more difficult?
• Best terms. Who among your potential buyers are offering the best payment terms? Do these payment terms fit your financial decisions post-transition?
• Buyer’s reputation. What’s their buyer history based on previous deals? Are they a credible buyer? Consider also the cultural fit and vision for the business post-sale, ensuring continuity for employees, customers, and stakeholders.

Take a step back to assess if a buyer checks off your most decisive criteria, and above all: Know your true value, and don’t settle for anything less.

Loose ends have been tied up – legally speaking.

Finally, the last thing you need to settle so that your business is primed for a sale, is ensuring that there are no snags before a transaction. Legal snags, to be exact.

It would be naive to think that a buyer would neglect to do their due diligence before making a purchase. They will do it, and do so thoroughly. The devil is in the details, after all; every flaw uncovered is a count against the value and trustworthiness of your business.

In this aspect, it’s best to seek legal counsel so that you’re not missing any kinks that need to be ironed out and disclosed. Transparency is paramount to deals; a buyer could back out of a deal if they discover even a minor legal issue before you get a chance to disclose it to them.

Matthew Clark of Clark Law Office is no stranger to these kinds of consultations. As a personal injury lawyer who’s worked and won cases against companies, he receives requests for legal background checks on companies regularly.

He discloses that, often, these checks will also cover a company’s executives down to its employees.

“Buyers looking to acquire businesses request the most thorough background checks, especially when a deal is about to close. These could cover anything from a company’s legal history to the legal issues one of your tech staff once faced.”

He further reaffirms that even the smallest whiff of a previous legal issue could stir doubts about a deal. “Sometimes, it takes the smallest legal snags of one of your employees to scare them away,” says Matthew.

Even if you’re confident that your legal track record is spotless, it won’t hurt to consult with legal experts when preparing the documents for your sale. Enlist their help in doing the necessary background checks and document everything you need to disclose to a buyer. This level of diligence reassures buyers and can speed up the sale process by preventing last-minute hiccups.

It’s a tedious process, and it will eat up a chunk of your time. But taking the time to go through this will benefit both present and future deals.

Things to Do When Selling Your Business

After ensuring that your business is optimal for selling, it’s time to understand the things you should and shouldn’t do in the process of closing the deal.

Determine the true value of your business.

This is the first and most important step prior to selling your business, as it helps you determine the boundaries for negotiation with potential buyers.

In this step, you must conduct a comprehensive business valuation process. This includes assessing your financial performance, market conditions, and industry comparables.

Flippa’s  straightforward approach to calculating the sale price of a business is simple:  Multiply the Net Profit by the Multiple and then add the value of Assets. The formula should look something like:

(Net Profit x Multiple) + Assets = Business Value

Certain characteristics of business impact the choice of multiple in the equation. Businesses with hands-off owners typically warrant a higher multiple. Whereas companies whose owners actively contribute to operations tend to have a lower multiple.

If unsure how to move forward with business valuation, partnering with a broker is one of the easiest and wisest decisions. For those who want to conduct the selection on their own, consider the following criteria:

• Has deep market and industry understanding. This is essential from the business valuation down to the negotiation of the deal.
• They are organized and come prepared. Meaning they don’t cut corners when conducting due diligence, and work efficiently.
• Supportive and communicates openly. They accommodate your concerns, and give supportive, level-headed advice whenever necessary.
• Commitment to closing the deal. Brokers who understand what these deals mean to you will exhaust all efforts to find the perfect buyer.

Note, however, that the selection process takes time. If you’re looking to move things along faster, I suggest you ask experts to pair you with a broker.

Establish your ideal deal structure.

After you determine the value of your business, you must outline your expectations for the deal structure.

Some buyers can pay cash upfront, while some may opt for SBA financing, or other forms of payment terms. Here, we must balance being firm and flexible, in consideration of both our financial needs, and the ideal buyer’s capacity.

Consult closely with your business brokers and transaction attorneys in this stage. You will need their help in preparing key documents such as the Term Sheet, and Letter of Intent (LOI). For quick reference, I’ve linked useful templates for both below.

• LOI Template
• Term Sheet Template

Be transparent with your buyers.

Dominic Monn, the founder of Mentor Cruise, reminds business owners looking to sell: “Lack of transparency is one of the main reasons buyers back out of a deal. Needless to say, transparency and open communication is very important  to making key business decisions.”

That said, it should be obvious that maintaining open communications with buyers and other stakeholders during the deal is paramount.

In communicating with them, ensure that:

• Reports provide up-to-date and accurate information about your business.
• Communication lines stay open for concerns that need urgent attention.
• Main communication platforms are established for clarity and ease.
• Immediately and honestly communicate issues that arise during the deal.
• Hold yourself accountable for missteps during the process.

Maintaining transparency during deals is critical to fostering trust among current and future buyers alike. You wouldn’t want to start a track record for dishonesty in this industry.

Straighten out your paperwork and documentation.

This usually happens way before a sale happens. In fact, I would assert that effective recording and documentation of everything concerning your company should start from its inception.

Effective documentation proves useful during deals as you won’t have to scramble to get the necessary information to potential buyers. More than completeness, documentation should also communicate important information effectively.

Here are my three non-negotiables for crafting effective business documents:

• Explain using visuals. Whether it’s data charts for financial statements, or flowcharts for business processes, drive the point better with visual aids.
• Maintain your focus. Everything detailed in your document must align with the goals and objectives you’ve stated.
• Keep it short and direct. Get rid of the fluff in your reports; they will only obscure your message and confuse your buyer.

Monitor market conditions.

Your value at the start of the deal can shift later on depending on changes in the market conditions. Hence, it’s important that we monitor these vigilantly.

Market conditions will shift the direction of your value in only two ways. It’s either a.) your business value grows, or; b.) it declines. Both cases will likely result in negotiations for adjustments in the offer.

Ensure that you conduct negotiations professionally, while ensuring that you secure the best value. Here are a few tips:

• Stick as close to your initial valuation as possible. You know your worth. Don’t settle for less. A buyer that refuses to understand this may simply not be the ideal one for you.
• Separate selling price from asset price. Selling price is the value of your entire business, including assets. Asset price, on the other hand, accounts for the price of assets alone. Separating these will allow you to provide flexible offerings to potential buyers.
• Focus on reaching fair compromise. Especially if a buyer looks to be legitimate and sincere. This is because refusing to budge may cause strain in a business relationship you might want to preserve. In this case, it’s better to strive for a mutual agreement, rather than pushing for your way.

Broaden your buyer pool.

Cast a wide net to reel in as many potential buyers as possible. This gives you leeway to find the ideal buyer, while increasing the chances of getting the best possible deal.

Expand your demographic of buyers and consider different kinds of entities like individuals, private equity firms, and strategic investors. Having a mix of potential buyers also increases competition and gives you more leverage in negotiations.

The two best ways to cast this wide net are to:

• Hire a broker with a vast network of buyers. If a broker doesn’t have a vast network, on the other hand, they should commit to hunting down as many leads as possible.
• Put up an ad in a listing site. Websites like Flippa, which boasts the largest network of buyers, effectively broadens your buyer pool.

Final Thoughts

Recognizing signs like business growth, market stability, and heightened demand are critical signals that tell you it’s time to sell your business.

But bear in mind that selling a business is a complex process with much to account for so that you stretch your earnings from the transaction. Along with those, you must be thorough with executing the logistics of the selling process.

We acknowledge that it’s difficult, confusing, and that it can be one of the biggest challenges you face as an entrepreneur. It will take a lot of patience, and all the help you can get so that you’re not taking any missteps. Whenever necessary, enlist the help of professionals so that you can reach a decision that benefits both you and the potential new owner of your business.

Historically low interest rates and high government stimulus provided entrepreneurs and investors with easy access to funding. Transitions to remote and hybrid work and the rise of ecommerce made digitally-based businesses more attractive. Amid the Great Resignation, more workers considered career alternatives including entrepreneurship. While inflation and rising interest rates have somewhat cooled activity in the market more recently, signs point to sustained interest in entrepreneurial activity.

Trends in U.S. Entrepreneurial Activity

Since the beginning of COVID-19, interest in buying and selling businesses has exploded

Source: Flippa analysis of Google Trends data (2005–2024) | Image Credit: Flippa

According to data from the U.S. Census Bureau, total new business application volume today is approximately 50% greater than before the pandemic began in early 2020. And entrepreneurs are also considering transactions around existing businesses. Google search data has shown a spike in the search terms “how to sell a business” and “how to buy a business” in recent years. In the Google Trends index, search interest in both terms has risen from the high 30s (out of 100) before COVID to 80+ now, indicating significantly elevated interest.

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Total M&A Transaction Volume by State

While California accounts for the most buyer volume, lower-tax states account for a greater proportion of seller volume

Source: Flippa marketplace transactions (2016–2024) | Image Credit: Flippa

In recent years, the rapid pace of digital transformation has generated unparalleled demand for online businesses. While interest in entrepreneurship is up throughout the country, the volume of transactions varies by geography. Notably, residents in California, the epicenter of Silicon Valley, lead the pack of digital asset buyers, followed closely by those in Florida. Each state accounts for approximately 14% of total buyer volume. Other top states for buyers include Texas (8.9%), New York (7.3%), and Illinois (6.1%). 

However, the scenario shifts when examining sellers, where California residents do not dominate transaction volumes to the same extent. Instead, residents from states with lower or no tax implications, such as Florida, Texas, and Washington, command a significantly higher share of total seller volume at 15.8%, 14.2%, and 12.8%, respectively.

Per Capita M&A Transaction Volume by State

States in the Mountain West & Florida stand out for high levels of business transactions

Source: Flippa marketplace transactions (2016–2024) | Image Credit: Flippa

On a per capita basis, states in the Mountain West and Florida are home to a higher volume of buyers. Wyoming leads all states in buyer volume per capita at 3.38 times higher than the U.S. average, with other western states like Idaho, Arizona, and Washington also having buyer volume more than twice the national rate.

Leading states for sellers include Delaware, where the seller volume per capita is nearly 11 times higher than the U.S. average, and Wyoming, where the volume is almost 10 times higher. Delaware, Wyoming, and other leading states for sellers tend to be popular places to start a business due to business-friendly regulatory and tax structures. For example, Delaware is known for having clear corporate law, good liability and privacy protections, an efficient corporate court system, and certain tax advantages that make it an attractive place to operate. Meanwhile, Wyoming is regularly rated as having one of the best tax climates for businesses due to its lack of corporate and individual income taxes and relatively low sales tax rates.

Below is a comparison of per capita business transaction volumes for buyers and sellers in all 50 states. The analysis was conducted by Flippa using over 100,000 business transactions on its marketplace spanning the past eight years. For more information, see the methodology section below.

States With the Most Active Buyers

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States With the Most Active Sellers

Methodology

The data used in this study is from a proprietary set of more than 125,000 digital asset sales that occurred on the Flippa.com marketplace between 2016 and 2024. To determine the states with the most active tech investors, researchers at Flippa calculated how each state’s total transaction sales volume per capita compared to the U.S. average for both buyers and sellers. The total transaction sales volume was calculated as the sum of the sale prices for all transactions. States were ordered by the per capita buyer transaction volume.

References

1. Federal Reserve Economic Data (FRED). (2024, February). FEDFUNDS – Effective Federal Funds Rate. https://fred.stlouisfed.org/series/FEDFUNDS Retrieved March 9, 2024.
2. Federal Reserve Economic Data (FRED). (2024, February). FGEXPND – Federal Government: Current Expenditures. https://fred.stlouisfed.org/series/FGEXPND. Retrieved March 9, 2024.
3. World Economic Forum. (2022, February). The great resignation: Boom in startups from more diverse founders. https://www.weforum.org/agenda/2022/02/the-great-resignation-boom-in-startups-from-more-diverse-founders/
4. U.S. Census Bureau. (n.d.). Interactive Visualizations – Business and Financial Statistics. https://www.census.gov/econ/bfs/visualizations/interactivegraphs.html Retrieved March 9, 2024.
5. Harvard Business Services, Inc. (n.d.). Benefits of Incorporating in Delaware. https://www.delawareinc.com/before-forming-your-company/benefits-of-incorporating-in-delaware/
6. Tax Foundation. (2023, October). 2024 State Business Tax Climate Index. https://taxfoundation.org/research/all/state/2024-state-business-tax-climate-index/

Full Results

When inflation surged toward the end of the COVID-19 pandemic, central banks responded by raising interest rates, which caused companies to slash their investments. Reduced funding has hit the startup scene hard: Crunchbase data shows that venture capitalists invested just $285 billion in 2023, down from its $643 billion peak in 2021.

Despite this slowdown in investment activity, America’s economy remains strong. National output, as measured by gross domestic product, grew by about 2.5% in 2023 after accounting for inflation, while unemployment sat at just around 3.9% in February 2024. These strong economic numbers, combined with recent advancements in artificial intelligence, have left many investors optimistic about the future.

To understand what kinds of startups are receiving funding, Flippa used data from Y Combinator, a prominent startup accelerator based in San Francisco, which launched in 2005. The firm invests in early-stage companies to provide mentorship and networking opportunities. Y Combinator’s portfolio is heavily focused on technology; therefore, it might not perfectly represent the overall economy. Still, as the largest startup accelerator, its investments provide some sense of where things are headed.

AI Startups are Trending

Y Combinator has two “batches” per year: one held in the winter (roughly between January and March) and one in the summer (usually between July and September). One obvious trend has been the rise of startups working on AI. ChatGPT’s launch in November 2022 was exciting to investors and entrepreneurs, not because it was a new product but rather because it heralded a new wave of innovation in AI.

Data from its past few batches confirms the popularity of AI. By our count, around 64% of startups backed by Y Combinator in its winter 2024 batch contained the phrase “artificial intelligence” or “AI” in their company descriptions, up from 49% in summer 2022, just before ChatGPT launched.

Startups are working to incorporate AI into a wide range of domains, many focused on office work productivity. One company is building tools to help people scan through legal documents; another is assisting employees in managing investor relations. One startup, Avail, even hopes to use AI to turn movie scripts into videos.

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Business-to-business Companies are Especially Popular

Y Combinator also provides data on which sectors their companies are working in. By far, the most common startups currently receiving funding from the accelerator are business-to-business companies. In the latest batch of winter 2024, 158 out of 235 (67%) Y Combinator-backed startups were focused on B2B—a steep increase from the winter 2022 batch, when only around half of the companies were oriented toward B2B. This change coincides with the rise of AI: Many founders are betting that, in the short term, there will be more opportunities for companies to take advantage of AI than individual consumers.

Fintech has seen an especially big decline in recent years. The decline is partly a result of investors and entrepreneurs shifting their focus to AI, but another part is the bursting of the cryptocurrency bubble in 2022. The price of bitcoin has recently soared again, hitting an all-time high of exceeding $73,000 on March 12, 2024, but consumer interest, as indicated by Google search data, remains below where it was in 2022.

The pace of technological advancement has been so accelerated over the past two years that it can be difficult to remember the current wave of AI development is still in its infancy. Many cutting-edge technology companies still do not have clear visions of where their products are ultimately headed. Moreover, it will take years, if not decades, for more traditional companies to implement these new advancements. This suggests startups working to deploy AI today will have plenty of problems to solve.

These shifts in the economic landscape, coupled with pent-up demand following a period of diminished deal volume spanning more than a year, have spurred optimistic forecasts from industry leaders such as PwC and Bain, predicting a robust year ahead for deal-making.

In anticipation of heightened activity, researchers at Flippa—the world’s leading platform to buy and sell online businesses—analyzed key deal characteristics of more than a thousand business sales over the past two years. This extensive dataset encompasses nine primary business types, 15 sectors, and nearly 60 subsectors, providing valuable insights to assist potential buyers and sellers in navigating the evolving landscape of M&A.

Profit Multiples by Deal Size

Source: Flippa marketplace transactions

Profit multiples vary depending on the dollar value of the acquisition, with a clear trend of increasing multiples as the deal size grows. For micro businesses exiting from $25,000 to $100,000, profit multiples averaged 3.1, with the top quartile reaching 4.1. However, for businesses exiting in excess of $1 million, the trend accelerates with profit multiples rising to an average of 6.1, and the top quartile reaching an impressive 7.1.

The observed trend of increasing profit multiples with larger deal sizes can be attributed to several factors. Larger acquisitions often entail businesses with established revenue streams, stronger market positions, and greater growth potential. Consequently, buyers may be willing to pay higher multiples for businesses with a proven track record of performance and scalability. Additionally, larger acquisitions may offer strategic alignment or operational efficiencies that justify higher valuations. Moreover, larger deals may attract a more competitive bidding process, driving up valuations and resulting in higher profit multiples for sellers.

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Company Financials by Deal Size

Source: Flippa marketplace transactions

A common question among sellers revolves around what it takes to achieve a seven-figure exit. Analyzing data spanning the past two years shows that businesses that sold for at least $1 million had an average annual revenue of $2.8 million, with an average annual profit of approximately $1.6 million. Interestingly, there was no statistically significant difference in the average age of businesses across the sales tiers, with the typical business age at the time of sale falling between nine and 10 years. It was surprising to see how established and tenured these businesses are. 

Days on Market by Deal Size

Source: Flippa marketplace transactions

Another noteworthy difference between the sales price tiers pertains to the time it takes to complete a sale. Businesses that achieved seven-figure exits typically remained on the market for nearly twice as long as those that sold for $100,000 to $500,000 (193 days compared to 105  days). Despite the prolonged waiting period for higher-price-tier sellers, they generally secured more favorable profit multiples than their lower-price-tier counterparts. As discussed previously, the average profit multiple for seven-figure exits over the past two years was 6.1, compared to 2.9 for businesses in the $100,000 to $500,000 tier.

Profit Multiple by Business Type

Source: Flippa marketplace transactions

Profit multiples also vary significantly across different business types. Over the past two years, marketplace, apps, and SaaS businesses commanded the highest multiples.

Marketplaces often benefit from network effects, where the value of the platform increases as more users and transactions occur, leading to higher profit multiples. Additionally, the scalability and potential for rapid growth associated with marketplaces and apps can justify higher valuations. Software as a service (SaaS) businesses are also highly attractive assets due to their higher margins and recurring revenue models, but profit multiples range widely based on several factors related to their viability and growth potential. Revenue metrics such as monthly or annual recurring revenue provide insights into revenue stability and growth trajectory, while profitability metrics like gross margin and EBITDA gauge operational efficiency and financial health. Customer metrics, including customer acquisition cost and lifetime value (LTV), help evaluate marketing and retention strategies. Additionally, factors such as market size, competitive advantage, and product roadmap are crucial for understanding growth prospects and market positioning.

At the other end of the spectrum, content and e-commerce businesses saw the lowest multiples, likely due to higher competition and lower barriers to entry when compared to other business types.

Below is a complete breakdown of profit multiples by sale price tier and business type.

Source: Flippa marketplace transactions; groupings with limited data are not displayed

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Transaction Volume by Business Type

Source: Flippa marketplace transactions

Analyzing the total business acquisition volume across different business types reveals notable variations in market activity. SaaS businesses emerged as the dominant force, comprising the largest share of acquisitions over the past two years. This trend underscores the enduring appeal of SaaS models, driven by their recurring revenue streams and scalability. E-commerce businesses also commanded a significant portion of the acquisition volume, indicative of the continued growth and evolution of online retail platforms in response to shifting consumer behaviors.

Content-based businesses, although representing a substantial share, experienced slightly lower acquisition volumes compared to the SaaS and e-commerce sectors. This trend suggests that while content remains a valuable asset, market dynamics may have favored other business models during the period. Apps, while constituting a smaller share, retained significance due to their potential for user engagement and monetization. Finally, marketplace businesses, while niche, played a notable role in the acquisition landscape, reflecting the enduring appeal of platforms facilitating peer-to-peer transactions.

Industries With the Most Transaction Activity

Source: Flippa marketplace transactions

Among business sales in which the industry was known in 2023, those in the pets, beauty, and fashion industries dominated. Together, these industries constituted approximately one-third of the total transaction volume. What’s noteworthy is not only did each of these industries experience year-over-year growth in total transaction volume, but they also expanded their share of the overall transaction volume. Other industries that experienced notable growth from 2022 to 2023 include football, humor, SEO, and cars. Industries that declined year-over-year include travel guides, shopping, colleges and courses, and cycling.

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Final Thoughts

The analysis of business acquisitions leading up to 2024 reveals optimistic trends for prospective sellers. Marketplaces and apps have demonstrated higher profit multiples compared to SaaS, content, and e-commerce businesses. Notably, larger acquisitions have consistently yielded higher profit multiples, indicating the strategic value attributed to established revenue streams. Industries such as pets, beauty, and fashion have dominated transaction activity, signaling sustained investor interest. 

Additionally, strong financial performance emerges as a key driver of valuation, with businesses boasting solid revenue and profit trajectories commanding favorable attention. These trends collectively underscore promising opportunities for sellers aiming to maximize value in the competitive acquisition landscape.

Methodology

The data used in this study is from a proprietary set of digital asset sales that occurred on the Flippa.com platform between 2022 and 2023. For the purpose of this analysis, only transactions involving mature (at least four years old), profitable businesses with a sale price greater than or equal to $25,000 were included. Additionally, to improve relevance, only the top 50th percentile of transactions based on profit multiples were included in the analysis.

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Industry Snapshot:

Why subscribe to additional newsletters when your inbox is full? Some of the top reasons to subscribe to it are learning something new, getting exclusive deals, and following an expert’s opinion.

Several factors fuel the remarkable growth of the global newsletter market. These include:

• Content Saturation: Newsletters provide personalized and relevant information to subscribers.
• Mobile-Frist Design: Newsletters offer a seamless experience to smartphone users with their mobile-friendly interface.
• Evolving Formats: Aside from simple text, newsletters contain podcasts, videos, and other engagement-enhancing media elements.

10 Best Newsletters in the Industry

Here is a closer look at the world’s biggest newsletters currently captivating readers:

1. NYT’s The Morning:

• Total Subscribers:17 million
• Topics: Politics, World News, Business, Culture
• Paid Subscribers: 8 million
• Age:5 years
• Revenue: robust, primarily generated through premium subscriptions, sponsored content, and exclusive partnerships.

You must be a part of 17 million NYT readers if you want the top news stories of the day in your inbox. From a comprehensive overview to a list of feature stories, it covers the day’s most significant developments around the globe. With Times Journalists, you will never miss the most pertinent stories from business, politics, science, and culture.

2. Daily Skimm:

• Reach: 12 million
• Topics: Daily News, Politics, Pop Culture, Lifestyle
• Subscribers: 7 million
• Age: 8 years
• Revenue: strong and diverse, driven by premium subscriptions, sponsored content collaborations, and strategic partnerships.

Daily Skimm allows the readers to get a roundup of current events in an easy-to-read style. Its personal and ironic approach makes it versatile. Daily Skimm will be a great choice if you are pressed for time but want to cover politics, world events, and lifestyle news.

3. The Hustle:

• Reach: 8 million
• Topics: Business and Tech News, Entrepreneurship, Startups, Investment Trends, Career Insights
• Subscribers: 2.5 million
• Age: 3 years
• Revenue: robust, generated through premium subscriptions offering in-depth market analyses and sponsored content collaborations with industry leaders.

The Hustle provides a convenient 5-minute business and tech talk. The expert’s advice helps readers make smart business decisions quickly. You can glimpse emerging tech news, entrepreneurs’ opinions, and finance resources in video and audio formats. They’ve even created a spot for a digital water cooler, showcasing daily memes, shower thoughts, and more to add a touch of fun to your day.

4. Morning Brew:

• Reach:10 million
• Topics: Business, Finance, Technology, and Daily News
• Subscribers: 4 million
• Age:7 years
• Revenue: strong and diversified revenue streams, including premium subscriptions, sponsored content, and strategic partnerships.

Do you want to get tech news, entertainment, and social media trends at morning coffee? Morning Brew is the only newsletter that will keep you updated in a witty manner. Its subscribers get business news and stock market updates in more formal and humorous ways each morning.

5. Human Crapital: 

• Reach: 8 million
• Topics: Human Resources, Workforce Trends, Leadership, and Workplace Culture
• Subscribers: 4 million
• Age: 2 years
• Revenue: steady, fueled by premium memberships, sponsored industry reports, and corporate partnerships

Human crapital allows you to learn from the experience of HR pros. You can receive guidance and actionable tips weekly on Wednesday to handle various situations. Whether you are an HR professional or seeking HR-dynamic information, this newsletter will be your backstage pass to the real stories. 

6. 1440:

• Reach: 9 million
• Topics: Current Affairs, Global Trends, Science, Technology
• Subscribers:3.2 million
• Age:2 years
• Revenue: strong, driven by premium subscriptions, targeted advertisements, and strategic collaborations with industry leaders.

Millions of 1440 subscribers get an unbiased newsletter each morning with valuable information on science, sports, and politics. If you value policy over politics and want to get updated without filler content, you must subscribe to it. 

7. Hometalk:

• Reach: 8 million
• Topics: Home Improvement, DIY Projects, Interior Design, Gardening, Home Decor
• Subscribers: 2.5 million
• Age: 3 years
• Revenue: stable, generated through premium subscriptions, sponsored content from home improvement brands, and exclusive features on innovative DIY trends.

Hometalks offers a multitude of reasons for its subscription. Whether you are a DIY enthusiast or a passionate interior design expert, Hometalks gives you access to the latest trends. You will be inspired by fresh ideas, practical tips, special offers, and other home improvement projects.

8. Forbes Daily:

• Reach: 15 million
• Topics: Business, Financial news, Leadership, and Workplace Culture
• Subscribers: 4 million
• Age: 2 years
• Revenue: strong, driven by premium subscriptions, targeted advertisements, and strategic partnerships.

You can subscribe to Forbes daily to get in touch with various industries and professions. From leadership skills to entrepreneurship, Forbes will provide advanced guidance. Moreover, learning from experts and promoting personal growth are a few other reasons for its growing community. 

9. The Ankler: 

• Reach:6 million
• Topics: Hollywood Insider, Entertainment Industry Trends, Celebrity Gossip
• Subscribers: 60,000
• Age:6 years
• Revenue: strong, driven by premium subscriptions, exclusive industry insights, and event partnerships.

The trusted and seasoned voice of The Ankler provides insight into Hollywood and the entertainment industry. All its subscribers enjoy ad-free premium content. Also, it offers the opportunity to connect with like-minded individuals to foster network opportunities. 

10.  Lenny’s Newsletter:

• Reach: 15K
• Topics: Career Development, Workplace Insights, Professional Growth
•  Subscribers: 4.5K
•  Age: 1.5 years
•  Revenue: Growing steadily, primarily generated through premium subscriptions and sponsored content from companies.

You can subscribe to Lenny’s newsletter to get exclusive tips and valuable resources for career development. Moreover, you can get exclusive interviews and success stories of its dynamic community. This newsletter will serve as a career advancement tool if you are a busy professional.

Final Thoughts:

Whether you are looking for news, politics, finance, or tech, these newsletters have you covered. You can get fresh ideas, expert opinions, and actionable tips in your inbox by subscribing to your favorite newsletter.

The massive audience of these newsletters shows the authenticity of the information they provide. Subscribing to any of the world’s biggest newsletters saves you time and keeps you updated and informed about the latest industry trends. 

So, which newsletter deserves a place in your inbox? We’ll be happy to know!

References:

• https://www.statista.com/statistics/315041/new-york-times-company-digital-subscribers/
• https://digiday.com/media/why-theskimm-is-extending-its-daily-newsletter-to-the-weekend/
• https://thehustle.co/
• https://www.morningbrew.com/sponsored/bamboohr/inside-look-at-morningbrew
• https://join1440.com/about-us
• https://www.paved.com/sites/hometalk-67766b40-687f-4f9e-83d5-bb9cd1e0cdbc
• https://theankler.com/about
• https://www.lennyrachitsky.com/
• https://talkingbiznews.com/media-news/forbes-daily-newsletter-is-approaching-1-million-subscribers/
• https://www.niemanlab.org/2021/08/the-new-york-times-is-making-about-a-third-of-its-newsletters-subscriber-only/
• https://www.nytimes.com/2020/05/03/reader-center/morning-newsletter-leonhardt.html

Many small businesses get their start and scale up with SBA loans, which increased lending to Black, Latino, and women entrepreneurs in the past few years in step with efforts to become more equitable.

Flippa found the county within each state where applicants were approved for the most SBA loan funds per capita in fiscal year 2023, which ended in September. The analysis was based on the SBA’s most common loan program, known as 7(a) loans. States are listed in alphabetical order.

SBA’s 7(a) program provides extra security to lenders when they loan money to small businesses that might otherwise be considered too risky to grant. Loans can be for up to $5 million, but in 2023, nearly 7 in 10 loans were for amounts of $350,000 or less. Small businesses can use these funds for real estate acquisitions or improvements, working capital, supplies and equipment, and for other business startup or acquisition purposes.

Barriers do still exist for eligibility, including income, credit history, and location, but SBA loans can be fruitful for founders who don’t qualify for conventional business financing. They can also provide protection against high and volatile interest rates, as SBA-backed loans have maximum interest rates that are predictable and often lower than other loans.

All but two of the #1 ranked counties had populations of less than 500,000—most smaller than 100,000. That’s not surprising, as the Census Bureau classifies about 99% of U.S. counties as small. Still, it signifies that these smaller communities are building successful entrepreneurial environments. In most cases, their small businesses are able to succeed beyond those within the major U.S. population centers—at least in terms of success in gaining SBA funding.

Read on to see whether your county was among those receiving the most SBA loans.

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Alabama: Cleburne County

– SBA loan funds approved: $5.6 million (About $375 per resident)
– Number of loans: 5

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Alaska: Sitka Borough

– SBA loan funds approved: $6.1 million (About $716 per resident)
– Number of loans: 4

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Arizona: La Paz County

– SBA loan funds approved: $3.1 million (About $185 per resident)
– Number of loans: 1

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Arkansas: Lawrence County

– SBA loan funds approved: $8.5 million (About $524 per resident)
– Number of loans: 3

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California: Madera County

– SBA loan funds approved: $29.0 million (About $186 per resident)
– Number of loans: 16

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Colorado: Summit County

– SBA loan funds approved: $20.6 million (About $662 per resident)
– Number of loans: 23

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Connecticut: Hartford County

– SBA loan funds approved: $95.6 million (About $106 per resident)
– Number of loans: 212

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Delaware: New Castle County

– SBA loan funds approved: $49.8 million (About $88 per resident)
– Number of loans: 121

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Florida: Gilchrist County

– SBA loan funds approved: $5.6 million (About $317 per resident)
– Number of loans: 2

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Georgia: McIntosh County

– SBA loan funds approved: $10.0 million (About $888 per resident)
– Number of loans: 3

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Hawaii: Kauai County

– SBA loan funds approved: $4.1 million (About $56 per resident)
– Number of loans: 8

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Idaho: Shoshone County

– SBA loan funds approved: $4.8 million (About $365 per resident)
– Number of loans: 4

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Illinois: Logan County

– SBA loan funds approved: $8.2 million (About $291 per resident)
– Number of loans: 2

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Indiana: Bartholomew County

– SBA loan funds approved: $16.4 million (About $201 per resident)
– Number of loans: 10

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Iowa: Chickasaw County

– SBA loan funds approved: $2.5 million (About $207 per resident)
– Number of loans: 6

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Kansas: Gove County

– SBA loan funds approved: $2.0 million (About $721 per resident)
– Number of loans: 1

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Kentucky: Owen County

– SBA loan funds approved: $5.1 million (About $456 per resident)
– Number of loans: 2

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Louisiana: Claiborne Parish

– SBA loan funds approved: $6.0 million (About $412 per resident)
– Number of loans: 5

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Maine: Knox County

– SBA loan funds approved: $5.3 million (About $132 per resident)
– Number of loans: 19

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Maryland: Allegany County

– SBA loan funds approved: $6.5 million (About $95 per resident)
– Number of loans: 9

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Massachusetts: Nantucket County

– SBA loan funds approved: $3.3 million (About $240 per resident)
– Number of loans: 8

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Michigan: Keweenaw County

– SBA loan funds approved: $4.3 million (About $2,101 per resident)
– Number of loans: 5

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Minnesota: Marshall County

– SBA loan funds approved: $5.1 million (About $559 per resident)
– Number of loans: 4

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Mississippi: Smith County

– SBA loan funds approved: $7.3 million (About $506 per resident)
– Number of loans: 14

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Missouri: Pettis County

– SBA loan funds approved: $17.4 million (About $406 per resident)
– Number of loans: 9

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Montana: Sweet Grass County

– SBA loan funds approved: $4.8 million (About $1,312 per resident)
– Number of loans: 1

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Nebraska: Nuckolls County

– SBA loan funds approved: $2.2 million (About $521 per resident)
– Number of loans: 1

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Nevada: Carson City

– SBA loan funds approved: $13.3 million (About $229 per resident)
– Number of loans: 15

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New Hampshire: Rockingham County

– SBA loan funds approved: $35.3 million (About $113 per resident)
– Number of loans: 117

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New Jersey: Cape May County

– SBA loan funds approved: $26.7 million (About $280 per resident)
– Number of loans: 27

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New Mexico: Torrance County

– SBA loan funds approved: $4.2 million (About $280 per resident)
– Number of loans: 1

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New York: Essex County

– SBA loan funds approved: $11.5 million (About $306 per resident)
– Number of loans: 8

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North Carolina: Dare County

– SBA loan funds approved: $13.3 million (About $362 per resident)
– Number of loans: 8

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North Dakota: Oliver County

– SBA loan funds approved: $384,000 (About $208 per resident)
– Number of loans: 1

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Ohio: Putnam County

– SBA loan funds approved: $7.4 million (About $214 per resident)
– Number of loans: 10

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Oklahoma: Craig County

– SBA loan funds approved: $4.4 million (About $311 per resident)
– Number of loans: 2

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Oregon: Wasco County

– SBA loan funds approved: $6.1 million (About $229 per resident)
– Number of loans: 7

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Pennsylvania: Jefferson County

– SBA loan funds approved: $6.8 million (About $153 per resident)
– Number of loans: 8

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Rhode Island: Kent County

– SBA loan funds approved: $14.9 million (About $88 per resident)
– Number of loans: 39

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South Carolina: Jasper County

– SBA loan funds approved: $5.5 million (About $192 per resident)
– Number of loans: 5

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South Dakota: Deuel County

– SBA loan funds approved: $1.5 million (About $341 per resident)
– Number of loans: 1

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Tennessee: Decatur County

– SBA loan funds approved: $3.0 million (About $262 per resident)
– Number of loans: 2

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Texas: Menard County

– SBA loan funds approved: $1.5 million (About $745 per resident)
– Number of loans: 1

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Utah: Piute County

– SBA loan funds approved: $1.4 million (About $746 per resident)
– Number of loans: 1

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Vermont: Windham County

– SBA loan funds approved: $9.2 million (About $201 per resident)
– Number of loans: 15

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Virginia: Richmond County

– SBA loan funds approved: $6.9 million (About $777 per resident)
– Number of loans: 22

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Washington: Columbia County

– SBA loan funds approved: $1.3 million (About $331 per resident)
– Number of loans: 3

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West Virginia: Marshall County

– SBA loan funds approved: $5.3 million (About $172 per resident)
– Number of loans: 3

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Wisconsin: Vilas County

– SBA loan funds approved: $13.6 million (About $597 per resident)
– Number of loans: 8

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Wyoming: Sheridan County

– SBA loan funds approved: $13.9 million (About $451 per resident)
– Number of loans: 7

Story editing by Ashleigh Graf. Copy editing by Paris Close. Photo selection by Michael Flocker.

Though filers may dread the annual process, tax collections are critical for all levels of government in determining revenues, setting budgets, and ultimately providing public services. While states and localities more heavily rely on sales taxes, property taxes, or other types of taxation for funding, many also depend on personal income taxes as part of their revenue mix. In the third quarter of 2023 alone, state and local governments collected $119 billion in individual income taxes, which represented 28.8% of total tax revenue.

State & Local Tax Revenue

The total amount of state & local tax revenue collected increased sharply in recent years

Source: Flippa analysis of U.S. Census Bureau data | Image Credit: Flippa

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The onset of the COVID-19 pandemic sparked a sharp disruption in state and local tax revenue due to the closure of many parts of the economy. Since mid-2022, however, the economy has remained resilient and produced strong state and local tax collections. Consumer spending on taxable goods has been high even in the face of inflation, increasing residential real estate values have boosted property tax collections, and incomes have risen during a run of low unemployment. These and other factors have led to a nearly 25% increase in state and local tax collections since before the pandemic began in early 2020.

However, many of these same factors—particularly inflation and real estate values—have made the cost of living in high-tax states even more expensive. States like New York, Connecticut, and California have the highest state and local tax burdens for their residents and rank among the most expensive locations for cost of living, leaving less in the way of discretionary income. Higher earners in these locations have been burdened further due to new limits on state and local tax deductions.

These expensive states have also seen flattening or declining populations in recent years as more Americans migrate to cheaper locations in the Sun Belt and Mountain regions. Some observers have noted that these states also tend to have lower tax rates as evidence that lower taxes might be motivating interstate movers. However, others suggest that people move for reasons independent of tax concerns and that, in fact, lower taxes in a location may result in underfunded services that make that location less desirable for movers in the long run.

Regardless of why people are moving and whether tax policy plays a role, the ultimate conclusion is that residents in the U.S. are subject to vastly different tax liabilities depending on where they live. For high earners, these variations can add up to tens of thousands of dollars in savings—or additional costs—on an annual basis.

Geographic Differences in State & Local Taxes

High-income residents in New York & California pay ~5X more in taxes than those in Texas

Source: Flippa analysis of IRS data | Image Credit: Flippa

New York and California stand out as the states with the highest state and local taxes for residents earning more than $200,000 per year. High-income households in both states pay around $45,000 in state and local taxes on average, enough to account for more than 7% of the average income among high earners. The average amount of state and local taxes paid in New York—$45,956—is nearly 15 times that of the lowest state, Alaska, where high earners pay an average of just $3,332. And fortunately for residents of the states with the highest earners on average—Wyoming, Florida, and Nevada—each of those states ranks in the bottom half of total average state and local tax payments.

Unsurprisingly, metros in New York, California, and other coastal states like Connecticut and New Jersey lead the nation in taxes paid for high-income households. Ten of the top 12 metros are found in California alone. High earners pay far less in cities in Florida, Texas, and select other states, likely in part due to those states’ lack of personal income tax.

Below is a complete breakdown of state and local taxes paid by households earning more than $200,000 for nearly 400 U.S. metropolitan areas and all 50 states. The analysis was conducted by Flippa—a marketplace for buying and selling digital businesses—using data from the IRS. For more information, see the methodology section.

Full Results

Methodology

The statistics shown are derived from IRS individual income tax data aggregated by the principal residence of filers with $200,000 or more in adjusted gross income for tax year 2020, the most recent year available. As such, the data represents the total amount of state and local taxes paid by residents of each location (regardless of where the tax was actually paid). To determine the locations where high-income residents pay the most in taxes, researchers at Flippa calculated the total amount of state and local taxes paid by high-income filers divided by the total number of high-income filers. These taxes include income, sales, real estate, and personal property taxes.

References

1. U.S. Census Bureau (2023). Quarterly Summary of State & Local Tax Revenue Data Tables. Retrieved on February 15, 2024 from https://www.census.gov/programs-surveys/qtax/data/tables.All.html.
2. Tax Foundation (2022, April 7). State and Local Tax Burdens, Calendar Year 2022. Retrieved on February 15, 2024 from https://taxfoundation.org/data/all/state/tax-burden-by-state-2022/.
3. Missouri Economic Research and Information Center (2023). Cost of Living Data Series. Retrieved on February 15, 2024 from https://meric.mo.gov/data/cost-living-data-series.
4. U.S. Census Bureau (2023). State Population Totals and Components of Change: 2020-2023. Retrieved on February 15, 2024 from https://www.census.gov/data/tables/time-series/demo/popest/2020s-state-total.html.
5. Tax Foundation (2024, January 9). Americans Moved to Low-Tax States in 2023. Retrieved on February 15, 2024 from https://taxfoundation.org/data/all/state/state-population-change-2023/.
6. Center on Budget and Policy Priorities (2023, August 9). State Taxes Have a Minimal Impact on People’s Interstate Moves. Retrieved on February 15, 2024 from https://www.cbpp.org/research/state-budget-and-tax/state-taxes-have-a-minimal-impact-on-peoples-interstate-moves.
7. Internal Revenue Service (2023, October 24). SOI Tax Stats — Statistics of Income. Retrieved on February 15, 2024 from https://www.irs.gov/statistics/soi-tax-stats-statistics-of-income.

Venture capital financing has been a major catalyst for business growth in recent years, particularly through innovations in fields like technology and software. Now-ubiquitous tech companies like Uber and Airbnb got their starts as venture-backed startups within the last 15 years, but the impact of VC investment has flowed into every corner of the economy. As of late, however, high interest rates have pushed venture investors to be more conservative, making it harder for new startups to raise funding and leading to widespread layoffs in many venture-backed companies.

U.S. Venture Capital Investment Growth

Growth in venture funding has dramatically outpaced GDP in recent decades

Source: Flippa analysis of National Science Foundation/Pitchbook data | Image Credit: Flippa

Total annual venture capital investment rose more than tenfold from the start of the Great Recession in 2007 to venture capital funding’s peak in 2021, buoyed by low interest rates during the long recovery from the recession. Over that span, venture capital funding also increasingly outpaced overall GDP growth in the U.S., solidifying itself as a mainstay in the business funding landscape. But from 2021 to 2022—as inflation began to spike and interest rates subsequently began to rise—total VC funding fell by almost half, from $443 billion to $256 billion.

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Trends in U.S. Venture Capital Deal Sizes & Frequency of Investment

While average deal sizes have grown in recent years, they remain below dot-com era highs

Source: Flippa analysis of National Science Foundation/Pitchbook data | Image Credit: Flippa

While overall venture capital investment increased during the last two decades, the size of each investment has remained relatively low compared to historic peaks. During the dot-com era, average deal sizes reached a height of nearly $28 million in today’s dollars but fell off quickly when the bubble burst. Today, the total number of deals completed each year is significantly higher, but while deal sizes have trended upward over the last decade, the average deal size in 2022 was just $10.1 million.

Recent Venture Capital Investment by Company Location

Massachusetts stands out for its VC activity relative to state GDP

Source: Flippa analysis of National Science Foundation/Pitchbook data | Image Credit: Flippa

Venture capital investment is most robust in a select group of states that tend to have strong startup economies, including networks of existing entrepreneurs, a well-educated workforce, and capabilities in high-growth industries. More than half of all venture capital funding flows to just two states: California (40.2%) and New York (12.3%). But on a relative basis, Massachusetts leads the nation with $32,800 in VC funding per $1 million in state GDP. Delaware and Wyoming also rank highly on a per-GDP basis thanks to their business-friendly laws and tax regimes.

Venture Funding Growth by State

Since 2012, Mountain states Wyoming & Idaho experienced the largest VC investment growth

Source: Flippa analysis of National Science Foundation/Pitchbook data | Image Credit: Flippa

Wyoming is also the state that has shown the most rapid growth in VC funding over the last decade. Total VC investment in Wyoming exploded from $10.8 million in 2012 to $792.6 million in 2022, and on a per-GDP basis, the level of VC investment in the state increased by nearly 58 times over that span. Neighboring Idaho ranks second (20.8X increase) while Alaska ranks third (16.8X increase). Each of these states is smaller and tends to have relatively few VC deals compared to other states, which may contribute to the relative impact on GDP.

Below is a complete breakdown of all 50 states. The analysis was conducted by Flippa, a marketplace to buy and sell digital businesses, using data retrieved from the National Science Foundation. For more information on calculations and methods, refer to the methodology section below.

Methodology

The data used in this analysis comes from the U.S. Bureau of Economic Analysis and PitchBook, retrieved from the National Science Foundation’s National Center for Science and Engineering. Researchers at Flippa compared total venture capital disbursed in each state relative to the state’s GDP in both 2022 and 2012 to determine those that experienced the most growth. The data represents venture capital funding secured by companies in each state and includes all stages of financing, from seed to later-stage investments.

References

1. Unemployment Rate | FRED | St. Louis Fed. (n.d.). Retrieved January 29, 2024, from https://fred.stlouisfed.org/series/UNRATE
2. Employed full time: Median usual weekly real earnings: Wage and salary workers: 16 years and over | FRED | St. Louis Fed. (n.d.). Retrieved January 29, 2024, from https://fred.stlouisfed.org/series/LES1252881600Q
3. Personal Consumption Expenditures | FRED | St. Louis Fed. (n.d.). Retrieved January 29, 2024, from https://fred.stlouisfed.org/series/PCE
4. National Center for Science and Engineering Statistics (2023). Retrieved January 29, 2024 from https://ncses.nsf.gov/

Full Results

The market has become choppier due to global pandemic aftershocks, including supply chain disruption, rising inflation, and workplace and productivity changes from remote work adoption.

Though the U.S. economy appears to be headed for a “soft landing,” where restrictive monetary policy slows inflation and job growth without leading to unemployment spikes, the belt-tightening steps businesses took in anticipation of a widely predicted recession are squeezing the venture capital industry.

Because of those challenges, venture-backed startups failed at a record rate in 2023, a winnowing that comes after 15 years of pronounced growth for the industry, according to data from the National Venture Capital Association analyzed by Flippa. Venture capital funds are holding historic amounts of what is called “dry powder,” or the amount of money VCs have raised but haven’t invested yet, creating opportunities for entrepreneurs with compelling ideas and go-to-market strategies and the investors willing to stake them.

A venture capital fund pools the funds of investors to take high-risk and high-reward private equity stakes in startups and small to medium-sized companies with high potential for growth.

Within that broad definition, there are a number of variations. For instance, a fund can be put toward multiple financing rounds at various companies. Firms can have multiple funds under management. And larger funds are naturally able to do larger rounds of financing.

It can be an exciting, high-risk, high-reward opportunity.

With rising interest rates on loans, venture capital has become a more attractive funding option for startups. That creates new opportunities for founders, investors, and skilled workers in in-demand industries interested in working for groundbreaking startups. Venture capital is different from other kinds of funding that might be available to early-stage companies. Unlike a loan, venture capital isn’t repaid. Instead the investor receives equity shares, with the hope they will multiply (considerably) in value. In exchange for this high rate of return, the investor also takes a high risk that the company will fail and they’ll never get their investment back.

PitchBook predicts an increase in venture capital deal activity for 2024 over the year prior, but in a more cautious and investor-friendly way. Expect strong startups with strong ideas, teams, and go-to-market strategies to find ready funding, while startups that aren’t as fit will fall behind. Startup accelerators will also take a stronger role, nurturing budding founders and sharpening their strategies before they enter the new fray.

Flippa

More Firms are Getting into Venture Capital

Venture capital has recovered steadily from the global financial crisis. From 2008 to 2022, the number of venture capital firms increased from about 1,000 to a little over 4,000, a 300% increase.

The period saw a surge in the development of “seed funding,” the initial funds raised in exchange for shares in the company, and it became an investment class in its own right. This expanded access in investing in the earliest stage of companies to a broader array of investors beyond traditional friends, family, and angel investors, catalyzing new growth and opportunities.

The industry saw the proliferation of new funds specializing in specific areas, such as software, biotech, and the environment. Venture capital firms also began creating multiple funds with different investment strategies, diversifying their portfolio and increasing revenue from management fees.

Flippa

VC Firms Increase Assets Under Management with Added Investment

Venture capital firm assets—which refer to the total value of everything a firm owns, including investments, intellectual property, office space, and bank accounts—have jumped considerably in recent years. The moderate growth that followed after 2008 began increasing in pace, noticeably in 2012, then more sharply upward starting in 2017.

The estimated value of venture capital-backed companies, known as valuations, rose consistently during this period, buoyed by a long period of low interest rates and high credit availability. The COVID-19 pandemic outbreak blunted the rate of increase, but it picked up again in the later quarters of 2020 and still remains elevated above historical levels.

Flippa

Average Fund Size Grew Substantially in 2022

After five years of steady increases, in 2022, the average venture capital fund size, the amount of capital raised for investing, suddenly soared from $150 million to over $200 million.

This growth was propelled by several factors. One was the entrance of mega funds, or funds with $500 million or more in capital, backed by institutional and sovereign investors seeking bigger and more diverse investing opportunities.

Low interest rates made it easy for startups to get funding and get off the ground. The rise in the number of companies that successfully went public on the stock exchange, allowing investors to earn hefty returns, brought about a gold rush mentality of founders and investors chasing the same results.

Story editing by Ashleigh Graf. Copy editing by Paris Close. Photo selection by Ania Antecka.

After all, investing resources into attracting your target audience won’t amount to much if you can’t engage them on your website and encourage them to continue interacting with your brand. And the outlook becomes even worse if you spend time and money nurturing leads only to have them opt for your competitors’ solutions once they reach the bottom stage of the sales funnel.

So, if you want all your hard work in attracting web visitors in the awareness stage of the buyer’s journey to pay off, you must do your best to design outstanding product pages. Ideally, ones that will make your prospects feel excited about the idea of buying from your brand.

There are many ways to use web design to drive product page conversions. From ensuring a seamless user experience to displaying social proof and utilizing conversion-oriented language, you can employ multiple strategies to build next-level product pages. 

However, to maximize your chances of converting new clients, it’s a good idea to employ the following eight must-have product page elements. These features are not just tools that will help you drive sales. Perhaps even more importantly, they can allow you to get your target audience to fall in love with your brand, which is the key to building a thriving business with loyal customers and great exit potential down the line.

Video

If you only do one thing to upgrade your product pages in a way that will boost your site’s conversion rates, it needs to be embracing video.

Over the past few years, this format has rapidly risen to the top of the list of highest-performing types of content. According to Semrush, 45% of marketers said that video was the format that delivered the best results in 2022. It outperformed both blog posts and various instances of social proof in attracting high-quality leads. Plus, thanks to the way it can combine images, sounds, and text in a single format, video does a tremendous job of driving product understanding, boosting brand recall, and encouraging emotional connections between consumers and brands.

However, its effectiveness at attracting and engaging buyers is not the only reason to use video on your product pages. If you look at its performance from a user point-of-view, you’ll find that it’s a super powerful tool for getting people to convert.

According to Wyzowl’s Video Marketing Statistics 2023 report, 97% of consumers choose to watch explainer videos to learn about products and services (over text). Furthermore, 89% of people have been convinced to buy a product after watching a video. And most importantly, 91% want brands to use even more of the format in their online presence.

With this in mind, it’s only natural that you should explore ways to include videos on your product pages.

One way to utilize video is to aid product understanding, for example, by using explainers to help your target audience understand the unique benefits offered by your solutions. 

If you check out the Medical Alert System product page on Bay Alarm Medical, you’ll see several instances of this content format used throughout the page. The most prominent one is that in the How It Works section. But you’ll also see a video used to give real-life examples of the service in action, as well as a way to introduce the brand’s support team to build credibility and authenticity for the business.

Source: bayalarmmedical.com

Alternatively, you could also use videos on ecommerce product pages to aid web visitors in gauging whether your products meet their needs. 

An excellent example of how this strategy works comes from the Ralph Lauren Water-Repellent Down Jacket page, with the fashion brand using images and videos to represent garments. This approach ensures web visitors see how each item of clothing behaves while moving, giving them a 360° view of each clothing article and guaranteeing that buyers know what to expect from their purchases.

Source: ralphlauren.com

Customer-Generated Content

When working to improve the conversion potential of product pages, one element to consider adding to your site is customer-generated content, which is gaining in popularity year by year.

According to a recent report from Stackla, user-generated content is an impressive 8.7 times more effective at affecting consumer purchase decisions than influencer content. And it is 6.6 times more persuasive than branded content. It’s also worth noting that almost all online buyers (92% according to Nielsen IQ) trust earned media over traditional advertising, showing just how much you can gain from adding this element to your product pages.

There are multiple ways you can use UGC on your site. However, no matter what you do, the content must be genuinely authentic, as employing staged user-submitted content harms your brand’s credibility instead of aiding it, according to research from TINT.

The safest (and easiest) way to get UGC to work in your favor is to allow satisfied customers to include photos and videos in their product reviews. 

If you check out the Reviews section on the ATH PRE product page, you’ll find it’s chock-full of UGC. The user-submitted reviews include a variety of media, from photos of what the powder looks like to videos of happy users doing their workouts after consuming the supplement.

Source: athsport.co

Alternatively, you can also source user-submitted images and videos from social media. This can be done by automatically displaying all posts that use specified hashtags, as is beautifully done on the Tentree homepage. However, if you choose to go this route, make sure that the photos that end up on your site don’t look too professional, as this might significantly decrease their authenticity and purchase-influencing powers.

Source: tentree.com

Product Recommendations

When designing outstanding product pages, one of the most important UX design elements to include on them are product recommendations. They help you achieve a higher average order value (AOV) and customer lifetime value (CLV). Product recommendations also work in your audience’s favor, ensuring buyers get everything they need to have a superb customer experience.

Now, there are three categories of product recommendations that you can include on your website.

On the one hand, there are standard “You may also like” product suggestions — like the ones on the Vivion Xylitol product page. These are simple product recommendations meant to encourage web visitors to check out more than a single product on your site and help buyers get everything they need from your website.

Source: vivion.com

On the other hand, you can employ cross-selling techniques, as done on the EG4 LifePower 4 Lithium Battery product page on Shop Solar. With cross-selling, the idea is to present shoppers with related, supplementary products to ensure their purchase fully solves their pain points while also ensuring that they get the most value for their investment.

Source: shopsolarkits.com

Finally, you can implement the upselling technique to boost your site’s earning potential. As a strategy that encourages consumers to upgrade to more advanced product options — as done by Canva with the “Try Canva Pro” message below — upselling is a superb tactic for increasing AOV or encouraging users to upgrade from free to paid versions of your SaaS solutions.

Source: canva.com

Price Anchors

Although the primary objective of designing high-performing product pages is to convert as many new customers as possible, it’s worth noting that driving sales is not the only reason to optimize this part of your website. In fact, if you do a great job of creating product pages that appeal to your audience, you can also ensure that web visitors opt for your preferred solutions when choosing what to buy, which is essential if you’re trying to encourage customer loyalty or guarantee your business has a healthy cash flow to continue developing new products and features.

The one strategy that can help you achieve both of the above mentioned goals is to include price anchors on product pages, which are a must-have element for several reasons.

For one, price anchors alter cost perception. Depending on the anchor price you display, you can encourage web visitors to perceive your solutions as cheap or expensive. And even more importantly, by adjusting the price buyers pay, you can ensure that consumers see your offer as delivering more value than what they’re actually paying. 

For a great example, check out the Female Professional Dress Form product page on Dress Forms USA. You’ll notice that the original price is crossed out and replaced with a discounted cost (displayed in a bright red color for an added attention-grabbing effect, followed by the amount saved). This is an amazing way for Dress Forms USA to establish the product’s value and influence web visitors’ purchasing decisions by making them feel like they’re getting a more expensive item at a fraction of the price if they shop while the sale lasts.

Source: dressformsusa.com

But there’s another upside to employing price-anchoring elements on your product pages. Namely, if you want to convince web visitors that your solutions are worth investing in.

According to scientific research, anchoring boosts consumers’ willingness to pay for products. So, by doing something similar to Microsoft’s Compare OneDrive Plans page and following expensive price points (which establish product value) with more affordable ones, you can significantly boost product page conversions. Additionally, this pricing strategy can make your customers feel like they’re making significant savings by opting for a mid-tier plan instead of a top-tier one. And even though they may not need all the features from the top-tier option, they’ll still walk away with a positive buying experience while you’ll have converted another customer who chose a mid-tier option instead of a free or basic one.

Source: microsoft.com

Social Proof

Adding social proof to your product pages is a no-brainer. Especially knowing that 99.75% of online shoppers read product reviews at least sometimes, 98% say reviews are an essential resource for informing their purchase decisions, and 45% of people won’t purchase a product that doesn’t have any reviews.

But here’s the thing. There’s more to genuinely impactful social proof than just reviews. In addition to this widely-used format of user-submitted content, explore opportunities to enrich your product pages with trust-building elements based on customer feedback or credibility data.

For example, meaningful testimonials — like the ones on the Flamingo Pricing page, which mention specific useful product features — can be a great way to highlight user value, inspire your target audience to associate your solutions with solving their pain points, and encourage conversions.

Source: flamingoapp.com

Or, knowing that 85% of consumers rely on third-party certifications to verify product claims, find ways to add trust badges to your website to position your solutions as the most trustworthy option on the market. 

This is what Pact does on the Thermal Waffle Jogger page, where three badges communicate the product’s three main ESG features, while a clickable “Learn More” button allows customers to see an overview of the item’s carbon offset supported by a GreenStory pop-up element.

Source: wearepact.com

Lastly, as you explore ways to use more social proof elements on your product pages, don’t underestimate the power of well-chosen brand ambassadors. 

In 2022, Edelman discovered that approximately 60% of young consumers think scientists and brand experts are the most trustworthy brand spokespeople. So, don’t hesitate to amp up these voices on your product pages, as done on the Scar Gel page in the Feel Confident ecommerce store, which includes a video from a doctor licensed in the US.

Source: feelconfident.com

A Diverse Product Gallery

Product photos have a tremendous impact on consumers’ purchase intention. In fact, surveys have found that 83% of US smartphone users decide what products to invest in based on images.

With this in mind, one of the top must-have elements to use on your product pages is breathtaking product photography. 

However, to achieve higher-than-average conversion rates (which range from 0.6% to 3.1%, depending on your industry), make sure that you create diverse product galleries that showcase your product in many different uses and situations.

For example, you can do this by adding context. This is what MAC does on its Locked In Kiss lip color page, where it uses the product gallery to show how different lipstick shades look on different skin tones.

Source: maccosmetics.com

Or, to guarantee your product photos achieve maximum impact, you can do something similar to Whoop’s Membership page. In this product gallery, the brand displays its solution used in multiple situations, demonstrating its versatility and ensuring potential buyers understand all the benefits they’ll unlock by investing in the wearable device and software subscription.

Source: whoop.com

Urgency Triggers

Using psychology to appeal to your audience’s fear of missing out is a tried and tested sales technique for encouraging buying intention. And it’s no surprise. Brands have used the scarcity principle to create demand and assign value for decades.

So, if you’re trying to elevate your product pages with elements that will drive conversions, do your best to include at least a few urgency triggers throughout the page.

The simplest solution is to use a variety of design elements to advertise limited offers. These can be flash sales, countdown timers, or even simple banners like the one inviting buyers to “Get $60 Off With Our Autumn Sale” used throughout Soundcore.

Source: soundcore.com

However, don’t make the mistake of thinking that you can only use urgency triggers on ecommerce sites. In fact, they can be equally, if not more, effective for digital products and software solutions. 

You’ll see that brands like Levels use the scarcity principle to encourage app downloads. Instead of inviting web visitors to buy a product, Levels asks them to join a waitlist. And although the buying journey doesn’t necessarily become any longer with this modification, the semantic change automatically causes consumers to experience FOMO. This helps the brand convert more leads who now really want to get their hands on a Levels subscription.

Source: levelshealth.com

Shipping Information

Lastly, as you study the anatomy of a great product page, don’t forget about shipping information.

Research into consumer behavior shows that shipping is highly important to people making buying decisions. According to Shopify, 75% of consumers say free shipping significantly impacts what products they buy. 60% consider shipping speed before opting for an item. And 53% want brands to offer flexible shipping options.

With this in mind, it’s super important that you go above and beyond regarding shipping info on your product pages.

For one, you must include estimated shipping dates based on the buyer’s location and chosen shipping method, as done in the Nordstrom ecommerce store.

Source: nordstrom.com

However, knowing that consumers want more versatile shipping options, it’s not a bad idea to take inspiration from brands like Sephora. This business lets shoppers choose one of four options. These include standard shipping, auto-replenish (automatically delivered to a chosen address every four months), same-day delivery, and in-store pickup. What’s great about the last option is that clicking the button triggers an interactive pop-up element, which lets buyers enter their ZIP code, resulting in a list of stores where they can pick up their order, along with information about the store’s address, opening hours, distance from the shopper’s location, curbside pickup availability, and even stock info.

Source: sephora.com

In Closing

Investing in the correct design elements to upgrade your product pages is always an excellent investment — especially if you choose page features based on customer needs and preferences. And not just because they’ll boost your conversion rates and help you build a more robust cash flow. Remember, if you’re aiming for a successful exit, optimizing your business website is essential, as it can be the key to selling your brand for more once the time comes for you to move on to your next project.