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.

INVEST IN AN APP BUSINESS

When considering investing in an app, it is important to do thorough research to find potential rising stars. Checking metrics such as download data, app store optimization data and reviews can be helpful in this process.

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.

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

Europe: The New Frontier in Flippa’s Journey

Marking its dominance in the European market, Flippa has seen impressive growth with over 50,000 new buyers joining the platform and facilitating 238 startup exits in 2023 alone, an exciting 50% growth year-over-year. The opening of a new sales and brokerage office in Amsterdam, coupled with the acquisition of BitsForDigits, underscores Flippa’s deep commitment to Europe.

The Booming Digital Business Landscape in the EU

The EU’s digital business sector is experiencing exponential growth. Research from Amazon’s EU Impact report highlights the significant scale, with 125,000 Amazon stores selling over 1.2 billion products. Shopify, Amazon’s major competitor, has shown robust growth in Europe, particularly in the UK, France, and Germany, with the number of online stores growing by hundreds of percent since 2020. This surge in digital commerce is mirrored in the SaaS industry, with Europe being home to 19% of global SaaS companies.

The Core of Flippa’s Mission: M&A for everyone

At its heart, Flippa is revolutionizing M&A for startups and small businesses. The acquisition of BitsForDigits.com is a pivotal step in our journey to make the process of business exits and ownership more accessible and equitable.

• Expanding Access: We’re transforming the traditionally complex and opaque process of selling or acquiring a business into a transparent and accessible experience for a wider audience. Flippa combines technology with advisory services, ensuring all business owners, regardless of size, have the necessary tools and resources for successful exits.
• Empowering Tools and Services: Our platform offers over 20 valuation consultants and certified M&A advisors worldwide. We provide embedded legal agreements supported by Dropbox Sign for efficient contract negotiation, AI matching for connecting buyers with suitable assets, and comprehensive data tools integrating with major platforms like Amazon, Xero, Quickbooks Online, Shopify, Google Adsense, Stripe, and more.
• Fostering a Diverse Marketplace: Flippa’s diverse range of businesses offers a plethora of options for buyers, creating an inclusive environment where various business types can find their ideal acquisition targets.

Why BitsForDigits.com?

The acquisition of BitsForDigits.com brings several strategic advantages:

• More High Value Deals: BitsForDigits.com’s revenue floor of $100,000 annually and their appeal to founders of profitable SaaS businesses especially fits the direction of Flippa’s growth as the go-to marketplace for all businesses – from $10,000 to $10 million and more. Flippa’s buyer base consists of thousands of institutional and company buyers making it the perfect home for those looking for a strategic and / or sophisticated buyer.
• Complementary Strengths: BitsForDigits.com‘s focus on European startups complements Flippa’s broad marketplace, enhancing our reach across business sizes and types.
• Shared Vision and Enhanced Capabilities: Both platforms share a vision of making business transactions more accessible. This acquisition provides our European customer base with a platform boasting improved services and a wider range of business opportunities.
  

Looking Ahead

This acquisition, a part of Flippa’s global growth strategy, solidifies our position as the leading marketplace for buying and selling online businesses. It’s a step toward a more inclusive and accessible world of business ownership and exits, opening doors for entrepreneurs and small business owners who might have found traditional paths to selling or buying businesses daunting.

In conclusion, Flippa’s acquisition of BitsForDigits.com is more than just an expansion of market reach. It’s a testament to our commitment to the entrepreneurial spirit and the democratization of business ownership, signaling a shift towards a more inclusive and responsive world of business exits and acquisitions.

In Flippa’s insights report, we dig into the data driving the world’s #1 marketplace to buy and sell online businesses. The report provides insight for both prospective acquirers and those looking to exit. We uncover the recent trends and opportunities that have shaped online business M&A over the last 6-months, from January to June 2023.

We delve into:
a) Trends that influence acquisition and exit multiples

b) Demand drivers

c) Average sales cycles

Whether you are a seasoned investor, an aspiring entrepreneur, or a business owner looking to capitalize on the thriving marketplace, this report will help you understand the current online business M&A market as we move into the tail end of the year.

Note: The data in this report is taken from sales that have occurred on the Flippa Marketplace from January to June 2023. For the purpose of the analysis we have looked at revenue generating assets and online businesses only, analyzing deals between $10 thousand and $10 million. 

Online Business M&A Insights from January-June 2023

The start of 2023 showcased an interesting dynamic between macroeconomic challenges and resilient buyer intent. Despite a slight decrease in average profit multiples, a closer analysis revealed intriguing shifts in buyer preferences. This report aims to shed light on the factors influencing profit multiples, the rise of new and promising business categories, and the evident attraction that buyers have to well-established businesses with a proven track record.

We also explore the relationship between profit multiples, business age, and buyer appetite, offering valuable insights for sellers seeking to maximize their returns. 

Additionally, we assess the average time it took to close deals and provide valuable takeaways for sellers navigating the market’s evolving dynamics.

A Slight Dip in Sales Amidst Record Buyer Demand

Flippa bucked the global trend and reported half-on-half increases in 2022 before a slight dip in the most recent half, January to June 2023, with deal numbers down 11% from 2592 to 2306.

While small businesses represent a distinct segment of the M&A market, the trends resemble those of the traditional M&A environment. As noted by Bain & Company, in their report titled M&A Midyear Report 2023: It Takes Two to Make a Market, overall global M&A value is down 44% in the first five months of 2023. 

Notwithstanding the slight dip, we are forecasting a substantial increase in deal volume this upcoming half-year as a function of record buyer demand with an incredible 145,541 joining in prior the 6 months, increasing the total buyer pool to just over 2 million (up 7.59%).

Another leading indicator for deal numbers is messaging volume which increased 14.4% half-on-half. This surge can be attributed to both new buyers entering the marketplace and the release of Flippa’s AI buyer matching engine in early February. Messaging, among other activities, reflects buyer intent, and improves confidence that deal volumes will increase this half (July – December 2023).

Graph 1: Volume of Sales for Revenue Generating Assets from July 2021 to July 2023

This graph represents transactions of revenue generating assets across all business models and asset types including Ecommerce, Content / Advertising, Apps, SaaS and Emerging Models like Plugins, Podcasts, YouTube Channels and more.

Graph 2: Weekly Messaging as a Reflection of Platform Activity

The graph represents the number of absolute messages between buyers and sellers. Higher messaging volume is typically a reflection of marketplace liquidity and a leading indicator for deal numbers.

Who is Buying? 

While companies and institutional buyers dominate higher value deals, accounting for 67% of all $1 million plus transactions, individuals characterized as Acquisition Entrepreneurs and Side Hustlers are dominating sub $1M transactions. These individuals represented ~63% of all deals sold between $250k – 1M and ~84% of all deals sold under $250k.

Table 1: Shows the percentage of transactions completed by each buyer type by two distinct price cohorts.

As expected, company buyers have higher budgets overall and will typically be buying to acquire revenue and fast track overall business growth. An example of this is Eagle Publishing, which acquired Day Trade Spy, a 13- year- old options trading resource for low 7-figures, to complement Eagle’s existing stable of wealth-building advisory products and resources. 

Flippa Success Story

From little things big things grow… The story of a Serbian DJ and 250 plus acquisitions.

Flippa’s global community of buyers and online business owners (see our ‘online business M&A IS global’ analysis below) continues to mature both as new buyers and business owners hit the marketplace but also as buyers evolve through the platform. 

In Serbia, a professional DJ and PHP developer, started his journey on Flippa back in 2019. Since that time, he’s acquired 250 online businesses, averaging 5 deals monthly for nearly 5 years. 

It all started with a humble $600 buy, but most recently, he has bought a wiki biography site for $61,000 (2.2x multiple) and a digital entrepreneurship blog for $102,000 (2.2x multiple) making his total transaction value greater than $800,000.  

We’ve mapped his acquisition journey here – 

Yes. Profit Multiples are Down… But Only Slightly

In the first half of 2023, the average profit multiple across the marketplace showed a slight decline compared to the previous half. This can be attributed to macroeconomic pressures and buyer confidence, with some buyers choosing to push harder on negotiations, referencing the 2022 slow-down in public market multiples and big tech valuations.

The reality is that they are quite different industries.

Public market and tech multiple are different to small business (sub $25M acquisitions). Why?

Big tech and public market valuations operate on a different scale and set of considerations compared to small business valuations, leading to lower multiples. Here’s why:

1. Total Addressable Market (TAM): Big tech companies often target a vast global audience, giving them a massive Total Addressable Market (TAM). This potential for expansive growth justifies higher valuation multiples. In contrast, small businesses predominantly cater to  smaller markets, which will often have limited growth potential, leading to more conservative valuations.
   
2. Growth Rate: Publicly traded tech companies often exhibit rapid growth rates, both in terms of user base and revenue. The chance (and often promise) of exponential growth in the future can lead to higher valuation multiples. In contrast, small businesses might have steady but slower growth trajectories.
   
3. Market Liquidity: Public markets offer high liquidity, meaning investors can easily buy or sell shares. This liquidity premium can inflate valuation multiples. Small businesses lack this level of liquidity, as selling a stake or the entire business can be a lengthy and complex process.
   
4. Economies of Scale: Big tech companies benefit from economies of scale, allowing them to reduce costs and improve margins as they grow. This scalability is a significant factor in their high valuations. Small businesses might not have the same opportunity to scale, which can constrain their valuation multiples.
   
5. Innovation and Disruption: Prominent tech companies often operate at the forefront of innovation, disrupting traditional industries and creating new markets. This potential to revolutionize sectors can lead to higher valuation expectations. Small businesses, while innovative in their own right, might not have the same industry-shaking impact.
   
6. Diversified Revenue Streams: Large tech entities often have multiple revenue streams, spreading risk and increasing their resilience to market changes. Small businesses might rely on a narrower set of income sources, making them more vulnerable to market fluctuations.

Don’t mistake them. This is a different segment of M&A. Small business has never been overvalued and still today, this is an under-valued asset class. It’s crucial for investors and business owners to understand these differences and not erroneously tie small business valuations to public market or tech business multiples.

3.03x Multiple: The New Average. 

Despite macroeconomic challenges, Flippa’s average deal multiple had in fact been increasing half-on-half, up until recently where we saw a decline, from a historic high of 3.2x (Second Half of 2022) down to a multiple of 3.03x during the first half of the year.

Obviously, averages can be misleading with outliers impacting the data set. Accordingly, we have provided a comprehensive table below, categorized by asset type and price range. This table offers insights into the potential range of minimum and maximum values, based on different asset types.

Best of breed –

• Content:
  • Trading-education.com sold for a 5.93x profit multiple, as a 6-year–old business showing profit 16x greater than the average of other content sites sold during the first half of 2023. 
• Ecommerce:
  • Xandrox.com sold for 4.7x profit multiple. It was a 19-year-old site operating at a 96% gross profit margin.  
• Services:
  • The highest multiple achieved for a Service business was 5x annual profit. The business was a growth marketing agency that sold for $2.7 million  to a buyer based in Cyprus.
• SaaS: 
  • Onboardible – practice management software for accountants – sold for 4.6x annual profit multiple. 
• Apps:
  • A 5-year-old privacy app with over 1 million downloads and outstanding daily active user rates sold for a 3.9x annual profit multiple. 
• Marketplace: 
  • A growing influencer marketplace with world recognised corporate clients sold for 23x profit multiple 

Ageism is Real

It’s like location in traditional real estate. Similar to how people gravitate to the best neighborhoods, age in small business M&A has a tremendous impact on the salability of an asset. In other words, your rocket ship 12-month-old company is less likely to appeal when compared to a consistently performing 5-year-old business. It’s the predictability and repeatability that investors in this asset class like a lot. They are just not looking for speculative assets. 

During the first half of 2023, the average age of a sold business was just over 2.5 years, and in certain business models, like content and even across new and emerging asset types like plugins, podcasts, Facebook Groups etc, the average asset was ~4 years of age. 

This is the impact – the mean profit multiple for a business aged under 3 years is 2.58x and for businesses over 3 years of age, the average profit multiple is 3.15x.

Graph 3: Average Age by Business Type Represents each business model sold on Flippa and the average age for those assets that sell. 

Time to Sell

In the first half of 2023, over 50% of all sold listings on Flippa found their buyer within 30 days of going live to market – in short, buyers move quickly. 

Tip: First Access offers unique advantages, giving buyers a first look at each deal that goes live. Within two months of launch, 565 subscribers have become First Access members. Find out more here. 

The analysis below breaks down the duration to finalize transactions based on price cohorts, revealing that lower value deals close quickest (as you would expect), with most deals sub $50,000 closing within 50 days of going live.

Flippa’s efficiency comes down to both buyer competitiveness as well as our recently launched AI matching tool which has increased deal speeds across the board.

Median closing time:

• Sub 50k deals – 15 days
• 50k – 250k deals – 49 days (~1.5 months)
• 250k plus – 73 days (~2.5 months)

A Global Network Representing 193 Countries.

The Flippa marketplace stands out as unique with buyers and sellers agreeing to do deals from thousands to millions, regardless of location or language. 

Fun facts:

• The Flippa marketplace represents buyers and business owners from 193 countries
• 67% of all deals occurred cross-border, marking this one of the most geographically and culturally diverse platforms on earth.
• The most geographically distant deal completed was one between a business owner in Spain and an investor / buyer in New Zealand. That’s 19,812 km apart and a challenging time difference to contend with. 

This map represents cross border deals completed in the first half of  2023 with a line between buyer and seller for each deal. 

If you are a small business owner, you probably have found yourself wondering how the recession will impact your business this year, or how 2023 will shape, with growing pessimism around a recession and persistent inflation looming upon us.

Back in December, we surveyed over 1,200 digital business owners and entrepreneurs both in the US and across the globe, to get a deeper understanding into their economic sentiment and uncover the market conditions for 2023. 

We are now ready to share the most interesting findings: come with us as we delve into the data, and gain an insight into the future for the digital business community.

Millennials: The Force Behind Digital Businesses

Millennials, born 1981-1996, are dominating the digital world as our survey reveals 55% of digital business owners belong to this generation, with Gen X and Gen Z trailing behind.

Digital Business Owners Invest in Multiple Businesses

Why own one business, when you can own two or three?

Small business owners are ready to double down, owning multiple assets: 67% of those surveyed are ready to add another business to their portfolio, and 49% said that they will acquire a complimentary digital business/asset to safeguard their current status in the next 6 to 12 months. So if you were thinking about embracing multi-business ownership and acquiring a new asset, you are in good company. 

Our survey also shows that 47% of respondents are already sitting on two assets, while 16% are taking it to the next level with three or more businesses up and running. 

So the question is: how many businesses will you own in six months?

Content at the Core of Most Digital Businesses

We knew content is still as relevant as ever after the launch of our 2022 Insights Report. The incredible amount of searches on the marketplace (over 300,000 unique searches annually) told us that content dependent assets attracted enormous buy-side attention in 2022. So it comes as no surprise to learn that 35% of those recently surveyed operate in the content/publishing and advertising industries, i.e. they are likely bloggers.

While Content reigns supreme in popularity, Apps, Ecommerce and SaaS businesses follow closely behind. 25% of respondents own an app-based business, 22% run an Ecommerce business, while 10% own a SaaS business.

Enquire at Content@Flippa.com if you would like a valuation consultation for your Content business.

Optimistic Growth Predictions Despite Fear of Recession

Let’s be real: we are living through a turbulent and unstable economic era, but when it comes to the future, the versatile and resilient digital business community is staying positive.

Even if small digital business owners are still worried about inflation, supply chain disruption and soaring prices, their approach remains pragmatic:  40% said they have a bullish outlook about this year’s economy, and only 25% thought it was looking ‘bearish’.

When it comes to the impact of the recession on their own business, 56% of the surveyed individuals see it as an opportunity for growth. So much so that 32% predict 1-10% growth in 2023, 28% predict 11-20% growth and 12% anticipate growth of  50% or more. Only a small 9% don’t expect any growth in 2023. 

The digital economy is undeniably the new driving force, and business owners in this space remain positive, creative and adaptable even in the most challenging economic conditions.

Consumers’ Behavioral Shifts Drive Price Adjustments

Despite a mostly positive sentiment towards the economy, most owners reported a shift in customer behavior over the past year. As expected, rising inflation has taken its toll on businesses, with 42% reporting slower operations, or reduced order sizes, and more price negotiations happening. Only 4% reported no change in their customer behavior throughout the year.

These behavioral shifts have prompted the majority of small business owners (45%) to make the difficult but likely decision to increase prices between 5-10% (31% of the surveyed), while 36% are still waiting to see what the future holds before adjusting their pricing strategy.

Protecting Growth and Stability Through Acquisition

The current economic crisis has forced business owners to reinvent and / or tweak their operational strategies, and take preventive steps to safeguard their businesses. 

Whether by acquiring a complimentary business to survive the crisis (49%), raising capital (37%) or investing in more security (31%), business owners are taking proactive steps to ensure or protect their growth.

And despite recession hitting, the data also shows that 47% are increasing content marketing spend in 2023. So no cutting back on those marketing efforts just yet.

Digital Business Owners Must Invest in Tech for Accounting

If you have been listening to our podcast, The Exit, you’d know by now that the first thing on the exit plan (even if you are not planning on doing it right now) should be having all your finances organized and assessing the financial health of your business.

An interesting finding in our survey is that 21% of small businesses still don’t use any type of accounting software to track their revenue, expenses and tax obligations. If you too are in this 21%, you know just what you need to do now…

Betting on the Future and Staying in Business: The Golden Rule of Digital Entrepreneurship

For our last question in the survey, we wanted to understand and share the golden rule of digital entrepreneurship for 2023. Once again, small business owners are maintaining a positive attitude towards the new year: while reducing costs and staying in business is a priority for most surveyed, a remarkable 36% have a positive outlook and are prepared to invest for growth, and place a bet on a brighter future. 

Methodology: 

About the “Recession Impact on the Digital Small Business Economy” Survey.

Flippa surveyed digital small business owners around the world, including but not limited to owners of ecommerce stores, content websites like blogs, apps, SaaS businesses and more. Two online surveys were fielded via Pollfish and SurveyMonkey between December 18, 2022 – January 6, 2023. 1,252 respondents completed the survey.

Want to discover more insights from Flippa? Read our 2022 Insights Report summarizing the state of online business acquisition in 2022, as well as some of our predictions for 2023 here.

If you’re considering selling your digital asset, we can point to some specific examples to showcase potential for online business owners looking for an exit or buyers looking to negotiate.

The following asset examples yielded higher than average multiples:

• App: The highest achieved multiple for an app was for an iOS and Android design app portfolio out of Singapore which realized a 5.45x annual profit multiple and sold with a total transaction value of $35MM. Enquire at Apps@Flippa.com if you would like a valuation consultation for your app.
• SaaS: The highest achieved multiple for a SaaS business was 10.5x annual SDE. In this case, it was a short-term rental compliance monitoring SaaS for property management professionals, municipalities, and mortgage lenders. This was a $630,000 transaction. Enquire at SaaS@Flippa.com if you would like a valuation consultation for your SaaS business. 

• Ecommerce: The highest achieved multiple for an Ecommerce business was 6.5x annualized SDE. The business sold vitamins and supplements and was sold to a competitor. This was a $10.5MM transaction. Note: Multiples for Ecommerce businesses are adjusted to exclude the value of inventory. Enquire at Ecommerce@Flippa.com if you would like a valuation consultation for your Ecommerce business.

• Content: The highest achieved multiple for a content site was 7.63x annualized net profit. The business was a compliance blog focused on GDPR and related regulations. This was a $5.2MM transaction. Enquire at Content@Flippa.com if you would like a valuation consultation for your Content business.

If you’re ready to sell, check out our First Time Seller’s Guide.

Or, if you’re ready to buy, you can master proper buyer and seller communications etiquette. We’ll show you how to that here.

There’s an overwhelming sentiment that tech is in trouble. Not only will this pass and valuations settle but this catch all assessment is actually less suitable in the world of main street and low to mid 8-figure deal sizes.

In this report, we break down buy-side demand for 2022 in what may become the most turbulent economic period in over a decade. 

The US and Europe are facing rapid inflation rates with the UK recording a 41 year high according to Deloitte Insights. High inflation can be attributed in part to supply chain issues, steady demand, and energy uncertainty. This has led to countries increasing interest rates in an attempt to cut spending. In the US, the Federal Reserve is relying on a decline in consumer spending as it seeks to slow the economy sufficiently, however this has not yet transpired. Specifically, retail sales were up 1.3% from the previous month and up 8.3% from a year earlier. This implies that the tightening has not yet worked and is likely to lead to further increase in interest rates in 2023.

What happens next? At least as it relates to online business transactions and specifically the Flippa ecosystem, the mass uncertainty is not impacting demand. 

Not only has there been growth in demand across all buyer types but we have seen very well capitalized strategic buyers and established operators enter the space in record numbers. Our relationship management team is reporting high confidence as this cohort moves downmarket where valuations are more stable. To put it simply, acquisition activity is likely to grow faster when alternative pathways to growth are increasing in cost. 

Deal making still looks inexpensive, with many buyers recording 25-50% annualized returns. This should translate to strong results for online business owners looking for an exit. Those with consistently good performance will be rewarded with good multiples and in the face of the most challenging economic circumstances we expect the market for online business M&A to flourish.

As we’ll point out when reviewing transaction data, valuations have never been overly high in main street and lower middle market sized digital assets and we don’t expect this to change. With transactions in our assessment ranging between $50,000 & $50 Million, these businesses are not positioned like aspiring unicorn pitch decks, rather they are legitimate businesses with loving customer bases and we think this trends toward a faster growing market rather than a slow-down. Buyers will move to more predictable and less speculative asset types and this will lead to sophisticated buyers like family offices and private equity moving downstream as they hunt for bolt on opportunities.

#1 The Americans Lead the Way

While the market for digital assets is global, the American buyer dwarfs all others. For context, Flippa is headquartered in Australia with a globally distributed staff base. We are heavily dependent on organic and word of mouth referrals so there isn’t really a marketing bias toward one market vs. another. Despite that, US acquisition intent was literally 5x that of the next five largest markets (Pakistan, United Kingdom, India, Canada and Australia). 

Chart 1 shows Search by Country in 2022. We’ve taken 50 weeks of search data and segmented it by user location to show the Top 20 markets. 

One thing to logically conclude is that US centric businesses will find an exit pathway easier. While buyers and investors will certainly look at globally centered digital assets, we still have 5x the number of US to US transactions than we do US to Rest of World.

#2 Shopify Leading the Pack BUT Content is (Still) King

Flippa recorded a massive 4.6MM queries this year and Shopify based Ecommerce businesses dominated buyer demand in 2022 with 3.6% of all queries. This equated to 19 searches per hour and a total of 169,000 queries. Ecommerce as a business model is highest on the list for both professional acquirers and first-time buyers and Shopify’s place at the top of the list is no doubt a function of the platform’s extraordinary brand awareness and huge variety of stores available across all acquisition budgets. Interestingly, there was a peak in search volume with the closure of Shopify’s Flippa clone, Exchange Marketplace.

Rounding out the top 5 search terms and way out in front of the rest were Blog, Amazon, Adsense, and SaaS. Given the relationship between Blog, Adsense and other content related queries, content dependent assets are still attracting enormous buy-side attention with ~300,000 unique searches for content related assets. As they say, content is (still) king. 

Clearly, most buyers will start their search mandate thinking about a business model or platform. Acquirers will typically orientate to a business model they know best or a model where they have a complimentary skillset.

Search for Amazon powered businesses was at its peak during Q1 and Q2 when the FBA aggregator rush was still peaking. Despite a drop off here and increases to third party seller fees and a reduction in affiliate payouts, acquirers for Fulfilled by Amazon (FBA), Fulfilled by Merchant (FBM), Kindle Publishing (KDP) and the Amazon affiliate offering known as Amazon Associates, buyers are still in market and this will no doubt please Amazon business owners fearful of a short-term cooling in their market. If you are sitting on an Amazon business and want to sell, there’s still a very large acquirer base waiting to capitalize on maturing assets. 

Chart 2 charts the keyword search volume over the period of 12 months.

#3 Make Money Helping Others Get Fit

Buyers are searching for Fitness related assets and doing so over 5,000 times monthly. Not only was this the top ranked vertical based search in 2022 but we expect this demand to continue into 2023 as it’s mostly recession proof. Companies in this space are likely to see very strong buyer demand in 2023 and may be able to command higher multiples. 

Crypto was overall very hot but dropped off substantially. We have briefly analyzed the market forces driving the cooling market below. Other categories with material buy-side demand include Travel, Health, Finance, Pet and Real Estate.

#4 Crypto Plummets

Flippa acts like a micro economy and is a proxy for investor sentiment. You want to buy businesses when there’s a strong user demand and you don’t want to buy businesses where there’s not. This is no more clear than the search volume for Crypto related assets. 

Accordingly, we expect a further slowdown in Crypto and NFT related queries on Flippa. With investors shell shocked, related digital assets in the space will lose users and suffer performance impact. This will not only impact the number of buyers but likely also multiples. Buyers looking to buy online businesses won’t chase speculative asset types. 

Chart 3 plots Crypto related search volume mapped against key industry events. Back in January ‘22 search for Crypto related assets was at a high of ~4000 searches per week, showing buyer and acquirer appetite at its peak.

#5 Net New Registered Buyers Top 170,000 and $36 Billion in Liquidity

This year 170,000 new buyers joined the Flippa platform with these buyers segmented into three distinct type(s) – Institutional & Company Buyers, Acquisition Entrepreneurs and Side Hustlers.

Definitions:

Institutional & Company Buyers will typically be a Private Equity, Family Office or private company looking to buy to bolt on.

Acquisition Entrepreneurs are individuals, typically a high net worth individual or someone looking to buy to run and operate one or more businesses on a Full Time basis.

Side Hustler is an individual looking to buy for the purposes of supplementary income. These buyers will typically have an alternative primary source of income.

While by count, Institutional and Company Buyers represented just 7.3% of the net new buyer pool (7,687), their purchasing power is immense making up 58% of purchasing power at 21.2BN. In other words, there’s plenty of dry powder and this is an asset class poised to capitalize on a shifting investment landscape. The average company buyer has an acquisition budget of $2.7MM with some as high as $75MM, which is greater than 10x the buyer average at $213,000. 

When looking at the Top 100 deals sold on Flippa for the year, 77% of the online businesses purchased were acquired by company buyers. Examples include a publisher in Florida who acquired a compliance blog for mid 7-figures to compliment their existing portfolio of sites. And, an app aggregator who paid mid 8-figures for a portfolio of apps.

Chart 4 shows the no. of registered buyers to December 22nd 2022.

#6 You Can Still Buy a Business and Achieve 30% Plus Annualized Returns 

According to ATTOM, which is a market-leading provider of real estate and property data, rental yields were 7% for single-family properties in most of the US in the first quarter of 2022! Impressive but it would seem that buying an online business may still be the best performing asset class.

Across the board, looking at nearly 2,000 online businesses sold between $50,000 and $35,000,000, the average annualized net profit multiple is 3.0x. 

As you would expect, SaaS assets command a premium and in 2022, these assets fetched an 8.28x annual multiple. On the other hand, Ecommerce businesses were the least valuable with annual profit or SDE multiples averaging just 2x although in some isolated cases we’ve recorded multiples as high as 5x earnings. An Ecommerce business typically has far higher operating costs and will operate at a lower margin. With certainty of performance less assured and acquisition costs higher to replenish inventory and acquire new users, buyers are more cautious.

Table 1 shows average multiples and across nearly 2,000 assets sold in 2022.

Of course, averages skew the result and in some cases under-value the high quality assets. For context, we can point to some specific examples to showcase potential for online business owners looking for an exit or buyers looking to negotiate.

The following asset examples yielded higher than average multiples:

• App: The highest achieved multiple for an app was for an iOS and Android design app portfolio out of Singapore which realized a 5.45x annual profit multiple and sold with a total transaction value of $35MM. Enquire at Apps@Flippa.com if you would like a valuation consultation for your app.
  
• SaaS: The highest achieved multiple for a SaaS business was 10.5x annual SDE. In this case, it was a short-term rental compliance monitoring SaaS for property management professionals, municipalities, and mortgage lenders. This was a $630,000 transaction. Enquire at SaaS@Flippa.com if you would like a valuation consultation for your SaaS business. 

• Ecommerce: The highest achieved multiple for an Ecommerce business was 6.5x annualized SDE. The business sold vitamins and supplements and was sold to a competitor. This was a $10.5MM transaction. Note: Multiples for Ecommerce businesses are adjusted to exclude the value of inventory. Enquire at Ecommerce@Flippa.com if you would like a valuation consultation for your Ecommerce business.

• Content: The highest achieved multiple for a content site was 7.63x annualized net profit. The business was a compliance blog focused on GDPR and related regulations. This was a $5.2MM transaction. Enquire at Content@Flippa.com if you would like a valuation consultation for your Content business.

CEO Update: December 2022

Thank you. In 2022, you and the rest of the Flippa community accelerated buying and selling with 14,232 sites, stores and apps changing hands. So many more of you joined the largest marketplace to buy and sell online businesses too. 306,232 started your journey and over 170,000 of you demonstrated buying intent with a combined buying power exceeding $36 billion. More institutional and company buyers joined this year and they showed their purchasing power making up 58% of the pool and representing 77% of Flippa’s Top 100 highest value deals.

You made it clear what you want. Of the 4MM plus searches on Flippa, Shopify owned the top spot with 169,000 queries for Shopify platformed assets. BUT content is still king. If you combine queries for blogs, adsense, affiliate sites and other related searches there were over 300,000 queries for content related assets.

And, despite the market conditions, multiples are not falling. In our 2022 Insights Report we’ve documented multiples on online businesses sold between $50k and $35MM. View the report here.

Business owners in 2023 will be able to capitalize on a new segment of buyer entering the marketplace. As mentioned, we have seen very well capitalized strategic buyers and established operators enter the space in record numbers and our relationship management team is reporting high confidence as this cohort moves downmarket where valuations are more stable. To put it simply, acquisition activity is likely to grow faster when alternative pathways to growth are increasing in cost.

Deal making still looks inexpensive to sophisticated buyers, with many buyers recording 25-50% annualized returns. This should translate to strong results for online business owners looking for an exit. Those with consistently good performance will be rewarded with good multiples and in the face of the most challenging economic circumstances we expect the market for online business M&A to flourish.

In 2023, Flippa matched the insatiable demand by adding a range of new features and offerings to the marketplace. We added:

• Deal Room where you can submit letters of intent, review and shortlist buyer / acquirer profiles with access to acquisition history, verified funds and more.

• Data Integrations from Xero, Amazon, Paypal, Magento, BigCommerce, Lazada, Shoppee and others to take our total number of data integrations to 15.

• Vetted by Flippa with full Financial Verification as we continue to offer the largest selection of online businesses for sale on the planet.

• Multi currency to support a growing business owner base out of 13 different markets.

• Global advisory and broker teams with new offices in Amsterdam and London supporting demand out of a fast growing EU / UK market.

• Benchmarking and insights enabling both acquirers and business owners to transparently compare business pricing and values plus performance data.

We also expanded our marketplace with the launch of Flippa’s Off Market and Flippa Invest. These innovations set you and the rest of the Flippa community up for a successful 2023. We are committed to continued growth and improvement and take our responsibility as the #1 marketplace to buy and sell online businesses seriously. We will continue to pursue our mission to become the investment bank for the 99% by democratizing the exit and enabling a pathway to ownership for all.

Have a fantastic 2023 and thank you for your continued support. As always, we love the feedback – contact me directly at CEO@FlippaMarketplace.com.

Blake

October 2022

Let’s get straight to it. October is going to be enormous.

We are hosting Her Future

Together with an incredible group of award winning and powerful women in business we are delighted to announce the inaugural HerFuture event. It’s free. It’s a virtual event and it will take place on October 18th at 12pm US Eastern Time. Register here.

October is National Women’s Small Business Month and while the gender gap is closing and female business ownership is on the rise, female led exits are still low. According to PitchBook, 2021 exits involving at least one female founder made up just 11%. And here at Flippa, less than 15% of asset sales are from female owned businesses. 

Accordingly, we’ve assembled a wonderful group of speakers including:

Cheryl Contee – Cheryl is Chief Executive Officer at The Impact Seat Foundation, an organization working to create a world in which women can succeed as business leaders.

Codie A. Sanchez – Codie Sanchez is a reformed journalist, turned institutional investor to cannabis investor and adviser, to now Founder at Contrarian Thinking. She is also the owner of 26 ‘boring businesses’ and balances her profession with non-profit service to empower women, veterans, and Latinos.

Lara Morgan – Lara started her first business at 23. The business grew into specialist global supplier and manufacturer of luxury high end brands licensed for five-star hotels and seventeen years later sold for £20million.

Carrie Kwan – Carrie is the Co-Founder and Managing Director of Mums & Co. She is deeply passionate about inspiring women, particularly mums, to realize success in harmonizing their ambition, livelihood and wellbeing.

Jennifer Pereira – Jennifer is leading the Celestial Group, a modern private equity firm which invests in impact-focused women with a goal to make M&A opportunities available and accessible to women across the globe.

Kaitlyn Knopp – Kaitlyn has over a decade of experience in compensation and this led her to create Pequity in 2019. Founded on the principles of fair pay and opportunity for all, Pequity’s software solutions automate compensation workflows to save companies time, money, and talent.

Cheryl Robinson, Ed.D. – Cheryl is a Doctorate of Education in Organizational Leadership. She develops and hosts leadership workshops for corporations. Having interviewed over 400 women, Cheryl focuses on women who have pivoted within their careers, emphasizing their mindsets.

Extraordinarily proud of the team pulling this one together and delighted to be a part of it. Get your tix here. 

Pulse ’22: Flippa is revolutionizing online business M&A

You expect more. We’ve listened. We’ve built new category defining products and services that give you more deals, more options, more data and more flexibility. All will be revealed at Pulse ‘22.  

We will be broadcasting globally and will be presenting live from Las Vegas. Meet us in person (drinks are on us) or register for the global virtual conference here.

Masterminds: Buying a Business

Our latest Mastermind session is live

Last month we released our first Mastermind video. It was all about SEO and how you can set yourself apart. In this next edition, it’s all about how and why you should buy a business and we’ve involved Codie Sanchez from Contrarian Thinking, James Camp from NanoFlips and Sieva Kozinsky from Enduring Ventures.

Their tips are outstanding. To make it easy for you, explore by section:
01:13 – 05:25 Introduction

05:26 – 11:01 Buying to scale/exit VS buying to hold

11:02 – 16:06 Should businesses be bought during a recession?

16:07 – 19:43 Buying what you know

19:44 – 31:50 How to discover and assess business deals

31:51 – 44:06 Assessing and adding value to a business

44:07 – 52:28 How to stand out from the crowd

Watch the full episode here.

Finally, there’s some outstanding online businesses for sale right now. These are my top 5:

1. Ads. Asking: $14MM
   This graduate recruitment platform is a market leader with top tier clients and an 82% revenue retention rate. Trailing 12 month revenue is $5MM. Take a look. 
2. Ecommerce. Asking: US$5.7MM
   Price Reduction. Household name and market leader in Singapore’s homewares segment. Revenue of $8.8MM with an 86% CAGR. Take a look.
3. Marketplace. Asking: US$2.7MM
   This on-demand marketplace connects top-tier influencers, photographers, models and other talent with leading brands around the world. Revenue has grown at a CAGR of 44% from FY17-21. Outstanding. Take a look. 
4. Ecommerce. Asking: US$5MM
   Established in 2003, this Muscle Car Parts business is a top Ebay seller, with 170,000+ items sold, ~$3MM of tooling, and a 98.6 positive feedback score. Take a look.
5. Affiliate Site. Asking: US$320k
   11 year content site brand in recipe niche | $7800/m av profit L3M from 18 affiliate programs, Amazon & AdThrive | 90K+ users from search L30D | 77K subscribers. Take a look. 

As always, I’d love to hear from you. Join our huge announcement and release event here or send me a note at CEO@FlippaMarketplace.com

Blake.

June 2022

Firstly, Happy Birthday to the iPhone. Yesterday, the iPhone turned 15. After 34 versions, we are still as addicted as ever. Last year alone, there were 32 billion app downloads and most of us spent 100 hours monthly on the apps that make this whole ‘thing’ tick. Ecosystems are immensely powerful.

For those interested, we’ve written a review of the apps ecosystem. It’s now a burgeoning playground for next generation roll-ups and aggregators who are betting big on the publishers that occupy our daily lives and for good reason too. We are not near peak penetration. By 2025, Statista forecasts that m-commerce sales will make up 10% of all US retail sales. Personally, I think it will be far bigger than that and many savvy app acquirers agree. In fact, in the first half ‘22, Flippa has seen 54 companies register acquisition intent for apps, with a collective acquisition budget in excess of $330MM.

Beyond the apps ecosystem, I think it’s worth commentating on the dramatic public market sell off and tech valuation blood bath (can you believe that Shopify is down 80% from their all time high?).

The main street and lower middle market is not seeing a downgrade. Small profitable businesses, from sub 500K to $10MM annual revenue are still hot property. For one, these assets were never over-valued. And two, savvy digital acquirers taking a long term view, see the obvious. Digital isn’t going anywhere.

A look at Flippa’s Top 100 Index, suggests the average online business is valued at 2.39x Annual Net Profit or SDE and 1.71x Annual Revenue. We don’t see these compressing. As you can see, it’s still a very inexpensive way to acquire cash flow and returns are therefore really strong and predicatable.

We often get asked. What’s the maximum I can achieve? If you are a business owner and looking to understand peaks, the best results achieved in the first half 2022 are as follows:

• A small business utility app sold for 5.45x Annual Net Profit. Notably this was also 3.06x Annual Revenue. This was a ~$30MM sale.
• An education SaaS sold for 5.81x Annual Revenue. This was an ~8.5MM sale.
• A personalized jewelry Ecommerce business sold for 4.62x Annual Net Profit. This was a ~$2.5MM sale.
• A content site about privacy and compliance sold for 7.63x Annual Net Profit. Notably this incredibly high margin passive site, sold for 7x Annual Revenue. This was a ~5MM sale.

So, don’t let the fear of a recession get in your way. In fact, the June data would suggest buyers will hunt for deal flow more. Growth through acquisition will be a preferred method when compared to other traditional growth practices. Actually, that’s fairly typical of a recessionary market. More opportunities to buy.

For further context:

• An additional 12,042 buyers added 17.3Bn in liquidity. This is a marginal 2% increase from the prior month.
• We have 109,000 active buyers!
• $130MM of deal value was added in June. YTD $561MM in deal value has been added. This is up 106% on the same period prior year.

A few other updates:

1. Meet us at one of our meetups. The Exit has gone global. We will be in NYC and Chicago in July and then we head to Europe.
2. Our valuation engine has been improved. Get an updated valuation for your business is here.
3. Jay Haussman sold Tatooing101 for 10x what he acquired it for. His story is a really good one. Watch it here.

Reach out if I can help with anything. I’m at CEO@FlippaMarketplace.com

Blake.

April 2022

In this edition, I’d like to dig a little deeper into what we’re building and why. More importantly, what does it mean for you?  You’ve been shouting from the rooftops and requesting new richer features and we have listened. 

Before we look at what we’re building now, let’s take a look back at where we’ve come from. While businesses have been bought and sold for 100’s of years, the small and online business market – representing assets priced up to $50M – has historically lacked liquidity, access and transparency. 13 years ago Flippa built a marketplace to trade digital assets and in doing so we created an entirely new market. From then to now, a lot has changed and now it’s arguably the most exciting asset class there is.

We are #MakingMillionaires. Successful business owners like Ramon van Meer are leading the way. Ramon started buying small sites or stores on Flippa before buying and selling his way to a turnover of $8M. You can watch his #MakingMillionaires story here:

We feel deeply indebted to you – the Flippa community – so we’ve ramped up our commitment to you. We’ve invited some marketplace experts to join our product team and we are busily building the investment bank for the 99%, representing digital assets of all types and sizes and providing the tools that you need to get deals done. This will extend Flippa from what is now; the richest network of buyers globally and the most diverse set of assets globally, to the most comprehensive end-to-end market network to buy and sell online businesses.

We are democratizing the process with a vision to become the investment bank for the 99% powering $100BN in asset or online business transactions over the next 10-years.

Around 3-months ago, we plotted a product pathway and the impact is starting to show. 

What have we built?

1. Our embedded LOI feature means you can put your name to a deal faster. You can make an offer, set a closing date and stipulate terms.

2. Multi currency allows you to list and discover assets in over 14 different currencies. This has been an immediate hit. Check out this British asset listed for $1.2MM (Ecommerce | Selling Shower Heads), this Australian asset listed for $2.8M (Content / Affiliate | Travel Bookings) or even this Dutch asset listed for ~$400K (Ecommerce | Streetwear). 

3. Buyer funds verification now exists as an optional toggle for >$250K sellers. You can now control exactly who sees your listing. Buyers looking at listings requiring verification can connect to Plaid or utilize Flippa’s in-house verification team to prove ‘capacity to afford’. Of course, Flippa is still absolutely free for buyers.

What’s coming next? 

1. An entirely new way to buy and sell. The new Flippa Negotiation Hub rewrites the rules. You can organize buyers and shortlist preferred buyers. You can arrange and host video calls. You can sync discussions with WhatsApp. You can invite third parties and you can populate a data room.
   
2. The new Flippa Off Market. We can’t tell you too much about this one…it’s just too juicy.  Let’s just say that we will bring you thousands of more assets and verified buyers will have exclusive access. To get first and exclusive access, ensure you have a full buyer profile and have verified your available funds. 

Oh yeah. I should also mention that our advanced Referral Program is now available – it’s called Spotter. It’s simple, refer an asset or business and we’ll sell it. When we do we’ll pay you 30% of our success fees. That means that on a $1M sale, you would receive a check for $15,000. Register here. 

Finally, if you have a feature you would like to see ping me directly at CEO@FlippaMarketplace.com. 

#MakingMillionaires

March 2022

Buyer Data and Valuations Insight

In this edition, I’m going to lift the lid on some of our buyer data and reveal valuations for five very different, recently completed deals.

It seems that 2022 is the year of opportunity. The Cambrian explosion of new online businesses of almost all types and the growth of major ecosystems has the world awake to this alternative asset class.

For Flippa it’s enabled us to double down on our position as #1 as we continue to build the investment bank for the 99%. As the quarter closes, our transaction volume is up 495% on the same period prior year, stimulated by record buyer demand (again!). And, I am also pleased to say we have recorded a Net Promoter Score (NPS) of 60. We measure our NPS 90 days post sale and we are delighted that both buyers and sellers are as happy as each other.

For those interested in Net Promoter Score and using it to assess their own businesses I highly recommend reading the Qualtrics article here.

Now, the real stuff. This quarter alone (Q1 2022) the new buyer wallet represents $32.5BN and the follow on effect means more competition for good deals. Private Equity is competing with aggregators, high net worths are going head to head with other institutional investors and there’s frothy demand for maturing asset types.

Take apps for instance. There’s a surge in demand as 1000 app publishers earned 1 Million or more for the first time ever and total Android and App revenues exploded 19% to $133 Billion (source: Business of Apps).

We actually saw our biggest app deal this quarter. A Singapore based portfolio of apps generating $12MM of revenue and growing ~30% annually was acquired for upwards of $30MM inclusive of upside payments from an international app publisher.

I’ll go into more detail on actual deal values below but for the moment, let’s break these buyers down a little –

For the period January to March 23rd:

• 30,774 buyers joined Flippa
• 14,107 completed profiles and were broken down into three buyer types:
  • Company – defined as an established organization looking to grow through acquisition
  • Entrepreneur – defined as a full time entrepreneur looking to own and operate
  • Side Hustler – defined as a prospective buyer looking to earn a side income
• Companies only made up 8.9% (1,255) of overall buyers but with an average budget of $3.9M, this cohort dwarfs the other two – see chart 1.
• 76% of Side Hustlers intend to buy more than one asset. This is interesting. Side Hustlers tend to buy multiple assets. They run them all separately – typically content assets or apps – and they amass small fortunes – see chart 2.

Chart 1: Buyer type by average budget

Chart 2: The number of assets that each buyer type wants to acquire

If you would like to receive more data on the Flippa buyer set, we will soon publish in-depth insights, so drop me a note at CEO@FlippaMarketplace.com and let me know what you would be interested in seeing.

And, consider setting your preferences. Have you set your preferences yet? For more personalized recommendations and to improve your best match, set your profile and preferences.

Now for some recent valuations. As many of you will know, valuations vary wildly based on business model, performance, age, niche, defensibility and predictability. Accordingly, I have picked a variety of sales from an $8.5M education site acquisition to a $47,000 soccer forum.

$5.2M Sale | Multiple: 7.59X Trailing 12 Month Net Profit | Model: Adsense
A 13 year old content website, generating Adsense revenue of approximately $57K monthly sold for 7.59X trailing 12 month net profit. The $5.2M asset was incredibly consistent, more passive than I have seen most and still with upside. The seller is based in New Zealand and the buyer is based in the United States.

$8.5M Sale | Multiple: 6.4X Trailing 12 Month Net Profit | Model: Ads & Subscriptions
5 year old advertising and subscriptions platform targeting teachers with teaching kits and aids profited $1.3M in the trailing 12 months and was acquired for $8.5M. The asset had a staggering global traffic base attracting between 20-40m users monthly. The seller is based in Italy and the buyer is based in the United States.

$190K Sale | Multiple: 2.6X Trailing 12 Month Net Profit | Model: Amazon KDP
2 year old Amazon KDP store with 40 books. With over 2000 reviews the store targeted Italian language customers and distributed on Amazon Marketplace Italy. The seller is based in Italy and the buyer is based in the United States.

$275K Sale | Multiple: 2.0X Trailing 12 Month Net Profit | Model: Ecommerce
17 year old ecommerce store operating across Amazon, Shopify, Ebay and Walmart generating $11,000 monthly on a 43% profit margin. The $275K asset has a very strong repeat order rate and operated in the growing plus sized fashion industry. Both buyer and seller are based in the US.

$47K Sale | Multiple 2.35X Trailing 12 Month Net Profit | Model: Ads
18 year old soccer forum site with extraordinarily steady traffic generating 300-500,000 page views monthly and a very strong keyword long long tail, generated $1700 monthly and sold for $47,000. The seller is based in the UK and the buyer is based in Canada.

For a more in depth valuation and to set up a consultation with the team, you can get an indicative valuation here.

Thanks for reading and I hope this was useful insight. To get in touch directly feel free to get me at CEO@FlippaMarketplace.com.

Overview of the App Industry

It’s been 15 years since the iPhone was released and the impact of mobile on our lives is immense. It’s a big industry. They say content is king and this is particularly true in the app universe. We consume more content on mobile than ever before, with people dedicating a third of their waking time to apps. 

According to a new report from Data.ai, we’re on track from a record quarter. We collectively installed 37 billion apps and consumer spend is on target for a record $33 Billion for Q2 2022. It’s the iPhone (or iOS platform) that still reigns supreme. Despite fewer downloads, iOS represented nearly $1.80 for every $1 spent on Android.

As you would expect, big tech names and brands dominate. According to SensorTower.com, 80% of all new installs are from just 1% of app publishers. But, for independent and smaller publishers don’t let the stats diminish your excitement, there’s still material upside with apps in the Top 200 earning on average $82,500 daily, and those in the Top 800, earning on average $3500 daily or $1.27M annually.

A look at Flippa’s cohort, the 1230 app publishers who utilized our intelligent valuations engine to value an app, revealed that the average app publisher earned $243,107 annually. As a category and business model, it’s a good money maker for digital entrepreneurs.

With such a burgeoning industry comes a rise in M&A. There’s been a rise in acquisition funds, aggregators and roll-ups specifically looking for app deals. At Flippa, we think it might be the next land grab. In the first half ‘22, Flippa has seen 54 companies register acquisition intent for apps, with a collective acquisition budget in excess of $330MM. 

In other words it pays to be in apps. Not only can you earn a good income, you can be confident of building toward an exit.

In this article, we take a look at the app ecosystem, explore the most popular categories, talk through app valuations and reveal what buyers are looking for. 

Ecosystem Insights & The Most Popular Categories

There are two ecosystems at play: Android and iOS. Android was first launched in 2008 by Google, and the first version of iOS, owned by Apple, was launched in 2007.

According to key mobile app statistics from buildfire, there are 2.87 million apps available for download on the Google Play Store and 1.96 million apps available for download in the Apple Store.

And, the latest report from Data.ai states that the industry has kept pace with the ‘lockdown-fuelled boom’. The report (available for download here) documents the latest in growth trends but also lifts the lid on consumer habits. As you would expect, games, entertainment and social dominate spend but if you’re looking to invest in growth areas, “the biggest quarter-over-quarter gains were in Comics, Books & Reference and Dating with increases of 46%, 37% and 35% respectively”.

As mentioned, gaming is still the dominant category and we expect this to continue. With 5G leading to higher resolution and faster performance, and the next 4 billion consumers coming online, expect there to be massive gaming adoption.

This is reflected in acquisitions also. When looking at apps sold on Flippa, nearly 70% of all apps sold have been in the gaming space.

The health and fitness industry also experienced a massive shift during the past few years as the world migrated to digital platforms for everything, including the daily yoga class. Two years later though, health and fitness apps are still capitalizing. According to Vantage Market Fitness, the Global Fitness App market is valued at USD 5.1 Billion in 2021 and is projected to attain a value of USD 15.2 Billion by 2028 at a CAGR of 17.6% during the forecast period 2022-28.

Based on the top fitness apps in the market, revenue increased by 84% in 2020.

What does an app publisher look like?

Flippa recently surveyed over 150 app publishers active on the Flippa platform. Here’s what they look like:

They own and operate multiple apps: 

1. 33% operate Android apps
2. 41% operate iOS apps
3. 26% operate both iOS and Android apps

The often operate more than one app:

1. 33% operate just one app
2. 25% operate between 2-5 apps
3. 16% operate between 6-10 apps
4. 25% operate 10+ apps

In app advertising is the most popular way to make money:

1. 54% earn revenue from in app advertising
2. 29% earn revenue from in app purchases
3. 17% earn revenue as paid apps

As mentioned, it’s the diversity that makes this ecosystem so unique. At last count, there were 88 apps for sale on Flippa, from VPN apps, unique video editing tools and games. The apps currently range in value from just $5,000 to $1.5M and we routinely see apps priced up to $35M and beyond. Only recently, a Singapore based $35MM app portfolio was purchased by an international app publisher. The portfolio was generating $12MM of revenue and growing at ~30% annually with the purchase price including upside payments.

For a look at the latest apps for sale click here. You can create an alert for all apps using the ‘Create Alert’ function. 

What buyers are looking for in an app

With the rise of app usage, the M&A market for apps is hotter than ever, from the small to the mega. This trend can be illustrated, for example, by the acquisition of the popular online puzzle game Wordle. It was bought by the New York Times in the low seven figures. Growth through acquisition is a well trodden path but even more so in digital and now with apps. It’s all a matter of increasing overall digital subscriptions and intriguingly the New York Times Games department is a high performing unit within NYT digital.

Similar trends can be seen on Flippa’s marketplace, as apps capitalize on these macro trends. Recent examples include Daily Word Search Puzzle, sold for $140,000, All Stays, a popular travel app, which sold for $4MM, and the aforementioned $35MM portfolio which provided small business owners with key utilities including logo design.

In main street deals (<500k to 2M annual revenue) and the lower middle market (2M to 50M annual revenue) we expect app valuations to increase. This is despite tech valuations falling dramatically in the first half of 2022.

Flippa CEO, Blake Hutchison, says the M&A market is responding to opportunity. “Mobile apps are expected to generate nearly $100BN in revenue by 2023, so it’s no wonder that consolidators and aggregators are sniffing out deals. Multiples are still low as it’s an under-appreciated asset type but competition is increasing – it’s going to get hot.”

App valuations depend on multiple factors. Buyers will consider revenue and underlying profit, daily active usage, category and growth. The below valuations are indicative but right now, growing apps with consistent daily active usage, will trade for the following multiples:

1. Sub >500,000 Annual Revenue: 1.2 – 1.8x Revenue Multiple
2. $500,000 to $2MM Annual Revenue: 1.8x – 2.5x Revenue Multiple
3. $2MM+: Up to 4x Revenue Multiple

For an accurate valuation, check out Flippa’s Online Business and App Valuations tool which takes into consideration historical sales data and existing buyer intent data. 

What makes an app acquirable? 

Financial Performance

When purchasing an app or a portfolio of apps, buyers are looking for financial health and profitability. An app with a consistent, steady income indicates that it is ahead of the competition and has surpassed the “difficult” part of building an app from the ground up.

Buyers generally stay away from newly-launched apps, as most apps gain their peak downloads in the beginning. Buyers need to understand the long term viability of the app. After all, studies show that an average app’s usage retention drops to just 9% after 3 months, even if it still remains installed on a device.

“The fundamentals are the same in app acquisitions as they are in other deal types,” says Blake. “Buyers are looking for proven financial performance typically assessing growth and looking for a CAGR in excess of 15%. Buyers will also look to understand future opportunities by assessing core operations and marketability of the app.”

Critically for apps it is also about Daily Active Users (DAU’s). There’s little value in an app with millions of downloads but very little repeat usage.

In a highly competitive industry, buyers are looking for full financial data in order to move quickly. Quick and complete responses to due diligence requests are essential, as any delays in response can impact deal confidence, leading the buyer to move on to other hot prospects.“If a publisher wants to sell an app, they need to be organized and ready to move,’’ says Tom Kennedy, Co-founder of Loyal Foundry, an acquirer and publisher in the mobile apps industry. “If apps are listed at 10 times revenue for example, we won’t even engage as it’s too hard to find the right price that works for both parties.”

Reviews and Reputation Management

Buyers will pay a premium for an app with an outstanding review history. Critically though, a prospective buyer will also look at the recency of the reviews.

Build a plan to collect reviews, celebrate your best reviews and take on any feedback where there’s negativity around the app or requests for increased functionality.

Uniqueness

It’s a saturated industry. You are either a market leader in a highly competitive landscape or you have developed something unique.

Although quite a small app, one of the best examples we have seen here at Flippa, is Untitled. It’s a screenwriting app developed by a screenwriter. It reached the Top 10 in the paid productivity section of the app store and given its utility – screenwriting – it had an awesome 11m 10s average session duration. It sold quickly! 

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No doubt you agree. It’s a thriving industry. With mobile apps set to represent $100BN in revenue, we expect that the M&A market will heat up. Our prediction is that in 2023 there will be around $150MM in app acquisitions on Flippa. Will you be one of them?Get a valuation for your app by visiting our app business valuation tool here.

This article was originally published on Entrepreneur.

So you’ve bought an online business. Now what?

First, congratulations. Purchasing a business is an accomplishment worth celebrating. Think about all the elements of your business that attracted you to it from the beginning.

What made it appealing?

Perhaps that SaaS business has a strong potential to scale. That content site is generating a healthy amount of organic traffic. Or your ecommerce store has a steady stream of income. 

The common denominator between all these assets? A potential to grow. 

Related: 7 Online Business Ideas That Could Make You Rich

When it comes to thinking about your business long term, scaling should be in your list of priorities. Here’s how you can accomplish just that.

1. Make data-driven decisions

The numbers don’t lie. The stats are there for a reason. When it comes to successfully running your online business, don’t rely solely on your wants and desires. Gaining insight on your target market, consumers and customer purchasing behaviors is the key to running a flourishing business in the long run. If you consistently offer your customers exactly what they’re looking for, you’ll be able to identify and forecast market trends for your business.

When it comes to collecting data for your online business, here are some tools and key information to consider:

• Use Google Optimize. Google Optimize works as an editor and a reporting suite, allowing you to create various altered versions of your page while using data from your linked Google Analytics account. This tool allows you to discern which version of your page gets the best click-through rate. You can test elements like language, color and text placement to influence conversion.
• Gather user-experience data. There are many ways to garner user-experience data. For many, conducting surveys is a common practice. You’ll want to ask broad questions to your audience and, ultimately, identify key solutions for your business. There are many ways you can use your survey. You can ask questions about existing products or gain insight on how keen your customers are likely to feel about potential future products.
• Understand purchasing behavior. Purchasing behavior, also known as consumer buying behavior, refers to the journey taken by a customer to purchase a product or service. For a customer, purchasing a product may look like using a search engine to buy a product, engaging with a social-media post or clicking on a website ad. Understanding the customer’s journey to purchase can help you establish marketing tactics that will allow you to garner more customers.
• Calculate net-promoter score. The net-promoter score is a customer-loyalty metric that measures client satisfaction through a simple question like, “How likely are you to recommend your product or service to a friend or family member?” Based on results, this metric will give you insight on the growth potential of your company or product. A business’s net-promoter score can be calculated with the following formula: net-promoter score = % promoters – % detractors.

The list of data-driven insights is exhaustive. Make sure to leverage this metric to scale your business.

2. Hire an agency to help grow your business

You’re probably thinking, “I just spent money to purchase an online business. Now I have to spend more money to grow it?” The answer is yes. This option is ideal, of course, for those who have no experience running a digital business or lack expertise in some areas of the business. Statistically, your business is more likely to fail if you don’t have the knowledge to run it. Investing in the necessary tools and resources to help grow your business will save you money in the long run and reap great rewards for your company.

Consider hiring an independent contractor or using a marketplace like Flippa that offers business owners post-acquisition growth services. Additionally, depending on the kind of business you own, you may want to hire the right people to fulfill duties like SEO, staying up-to-date on all Google rollouts, web design, and advertising and creatives.

3. Have a marketing strategy in place

When it comes to the perfect marketing strategy, each business is different. It all boils down to what works best for your online business. Some online businesses may do well with paid ads, others may perform better with social-media advertising, email marketing or ad campaigns. As previously mentioned, the key is to study your target audience. Truly hone in on their wants, needs and likes. What makes them tick? What gets them excited? Once you truly understand your customers’ behavior, you can start exploring different marketing strategies. It may take some trial and error to see results, but when you find what works well for your company, the rewards are endless. 

Related: How to Start a Business Online

4. Hone in on your user experience

When it comes to user experience (UX), simplicity and efficiency are best. Your customers shouldn’t have to go through hurdles on your website to purchase a product. If they do, then it’s time to ensure that you don’t have any friction in the checkout process. If you have an ecommerce store, ensuring that your shop is desktop- and mobile-friendly may be a strategy to increase sales. Think of all the possible ways that you can make your customer’s journey to conversion simple and easy. 

5. Do things that don’t scale

So you’re probably thinking, “I went through a whole bunch of action items of things to do in order to scale, and now I’m told not to scale?” Not exactly. Sometimes, scaling long-term may mean spending time or money on things that may otherwise cost you more than expected. This can look like taking extraordinary measures in order to gain new customers, sending each new user of your SaaS business a hand-written “thank you” note or finding new ways to make a new customer feel special. It all starts small and may feel time-consuming, but these are the things that make the most difference in the long run. 

Related: Discover What It Takes to Scale an Online Business

When it comes to growing your online business, the strategies to consider are endless. The goal is to find what works well for your business and stick to it. It may take some trial and error, but remember that there are plenty of resources out there to help you scale. 

And, of course, have fun while doing it.

Flippa Raises USD11m to democratise the exit and ownership of online businesses globally.  

Today, I am delighted to announce our Series A capital raise as we fuel the second phase of Flippa’s journey and ensure a frictionless pathway to exit or ownership for all online business owners globally. 

The journey to become the #1 marketplace to buy & sell online businesses started in 2009. Flippa’s founders saw an opportunity to help connect the entrepreneurs of today with those of tomorrow and since then we’ve witnessed hundreds of thousands of sales on the platform. Flippa started as a place where developers and engineers were buying and selling code, templates, domains and digital assets. Today, it’s a global community of business owners, entrepreneurs, investors, makers and creators who buy and sell the largest collection of online businesses available globally.

Phase 1 was exciting. We introduced our peer-to-peer platform, added third party expert brokers, a proprietary intelligent valuations engine, an auction system, legal and due diligence services, Flippa Private, smart search and our matching algorithm. This has cemented our position as the #1 marketplace to buy & sell online businesses. Collectively, Flippa has helped business owners realize over half a billion in value, to thrive through an exit and accelerate through acquisition.

The platform economy – where commerce and customers benefit from and favour online business models – has fueled a meteoric rise in entrepreneurship and online business ownership, and with the support of an USD11M investment, led by Sydney based OneVentures, we are now ready for Phase 2.

We will provide new ways to buy & sell. We will be adding a rich data insights platform, off market matching and alternative ways to structure deals.

We will become a market network.  Our buyers and sellers will be able to tap into a community of subject matter experts as well as access to financing and advisory service providers. It will be end-to-end. 

We will support more business owners. Flippa is already #1 for Ecommerce, SaaS, Content Sites and Apps. We will soon help you to trade ANY and EVERY digital asset type of ANY size. 

It’s exciting. Our mission – to provide a pathway to exit or ownership for all online business owners globally – is just getting started. The business owners, investors and entrepreneurs that we serve at Flippa are a dynamic group…you make, create and run the businesses used by 100’s of millions of  customers every day. We want to thank you for your ongoing support and can’t wait to see more of your stories on Flippa. 

For more about the Flippa Capital Raise and who’s involved, read our Press Release here. If you are looking for help with buying or selling a business, we invite you to schedule a consultation with a member of the team here.

To connect with me, contact me at CEO@FlippaMarketplace.com.