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QuestCo PEO Review

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Whether you’re looking to grow your business and need to be able to better organize things from an HR perspective, or simply wish to remove the burden of payroll and some additional related tasks, a PEO (professional employer organization) might be just what you need. You outsource such work to the company, and their experts handle it with more efficiency and expertise than you could provide on your own.

Yet there are many PEO different companies operating in this market, which can make choosing a service provider difficult. In this article we look at QuestCo, a widespread and rising PEO in the market, to help you determine if they are the right pick for you.

General Overview

Based around Houston, Texas and founded in 1989, QuestCo has always sought to be at the forefront of the PEO market, providing affordable payroll and HR solutions to its clients whenever possible. Utilizing modern ideas, practices, and technology, QuestCo has made themselves more competitive recently, despite being a somewhat smaller company in the PEO space (but still large enough to handle most company’s needs).

A more affordable and adaptable PEO than many of its competitors, we find that’s it’s usually best for small to medium-sized businesses looking for a simpler solution.

Features

  • All of the normal payroll and tax support functions you primarily expect from a PEO company.
  • Safety programs available for your employees that will be effective for most offices and industries. In some cases, worksite inspections will even be available to help maintain the maximum standards of safety and security.
  • Email and live chat support options, which help to increase accessibility.
  • The ability to cancel your plan without penalty, although they do ask for a commitment and some notice before your services are canceled.
  • You will remain strictly in control of your workplace and still make all relevant decisions.
  • Benefits plans available including those available for health, prescriptions, dental, and vision coverage. Health care accounts are also available.
  • Also available are life and personal accident insurance plans, as well as short and long-term disability insurance options.
  • 401(k) retirement plans available for your employees to utilize.
  • A commitment to lowering your workers compensation costs as much as possible. This is combined with risk management strategies and solutions to keep things affordable for your business.
  • Guidance and support for you regarding potentially tenuous HR and management situations should they arise.
  • Assistance in creating an HR handbook, should you desire it.
  • Help with the recruitment process, including handling job postings, some forms of screening and testing if your industry requires or would be benefited by them, and new employee documentation and setup.
  • The heavy use of a software cloud and related technologies to keep your information available and safe.

Main Takeaways

Pros

Access to All of the Basics: Generally, we found that QuestCo was missing none of the basic services and HR functions a smaller business should look for in a PEO company. If you’re looking for a comprehensive package that can handle anything you might need, QuestCo can help you.

No Bundling of Services: QuestCo generally does not bundle together its services and plans. This means your business will only need to select and pay for the services it plans on using.

A Clear Understanding of How to Use Software: While nearly every notable PEO in business today will have software or an online platform, we found that most of them don’t match up to what QuestCo offers its clients. They stay modern, think ahead, and remain accessible no matter the platform you need to work on.

Cons

A Relative Lack of Accreditation and Certifications: Most of the other PEOs we’ve reviewed had a few certifications ensuring that they were complying with the best practices in the industry. And while QuestCo does ensure they are above board in their dealings, those looking for a bit more confirmation might find it hard to come by. They are, however, a Certified Professional Employer Organization as per the IRS.

Not Too Much Information Regarding Their Customer Service: While we are unwilling to say that their customer service is lacking in any way, there aren’t too many reports about it in either direction.

They Do Not Operate in Every State: It should be noted that QuestCo does not operate across the country, do you will need to check to see if your business still qualifies. This combined with their ten-employee minimum makes them not the most accessible option for small businesses on the market.

What Businesses Is QuestCo Best For?

Smaller to medium-sized businesses: If you are working with a very large team or even an enterprise with hundreds to thousands of employees, we find that there are likely better options available that would not only be able to provide you with a better deal but also provide you with more options and services (which your business will likely need). However, a smaller business can feel right at home with QuestCo.

Businesses that know what services they want: Due to their flexibility regarding your service package, if you know exactly what you want and need for your business, you can make the most of QuestCo and likely save money in the long term.

Businesses with more than ten employees: QuestCo does generally have a ten employee minimum to work with them, which means smaller businesses might be excluded. If you have less than ten employees, you’ll want to find a different company.

Conclusion

With some of its limitations, we understand that QuestCo might not be the choice for every company, and it shouldn’t be. But for businesses that meet some of the criteria listed above and who could use most of the features they offer, QuestCo offers a great entryway into utilizing a PEO for your business. Yet whether you choose to work with them or instead decide on another company to handle your HR needs, we hope that you can come to the best conclusion soon and that you are satisfied with your final choice.

How to Sell Your Ecommerce Business in 2023

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By Robert Kale and Jock Purtle

You have been building an Ecommerce business that you’ve put a lot of time, effort, and sweat equity into growing, and now you’re looking to sell. Your objective is to get maximum value and you’re assessing steps to prepare for the sale. There are a multitude of variables to consider and in this post, we’ll cover them all to maximize the price you receive when exiting. Keep in mind: the insights in this article are not inclusive of Amazon FBA business sales, this is only for standalone Ecommerce websites. If you want to learn more about selling an Amazon FBA business, our insights article is here.

Let’s get right into it.

We Analyzed 215 Ecommerce Sales in 2021. Here’s What We Found:

 

The biggest takeaway — there were less deals overall in 2021 (the least since 2016) and this affected transactions of all sizes. The categories that saw the least decline most were deals in the $2M+ range. Since our data is based on listings, we can’t assume 1) they all closed, and furthermore 2) they closed at the listing prices. So, we will go through some statistics that show big upticks in deal sizes and multiples, and keep in mind this is a result of many more high value Ecommerce listings in 2021 compared to previous years.

  • The average multiple for standalone Ecommerce sites was 3.49x, a slight jump from 3.41x in 2020.
  • Larger businesses still commanded the highest multiple (see multiples graph further down) but businesses selling for over $250K continued to rise as well.
  • Ecommerce continues to be the dominant category in the market, with a whopping 81% of all business sales being standalone Ecommerce websites for 2021.

 

What Are The Market Trends?

 

2021 had an explosion of high-price Ecommerce listings, with many more Ecommerce businesses listed over $7M asking price. With higher earnings, Ecommerce businesses can command higher multiples, so we saw the continued increase in average ecommerce multiples as more businesses reach higher earnings and listing prices:

 

Year Avg Multiple for Ecommerce
2014 2.34
2015 2.20
2016 2.25
2017 2.88
2018 3.00
2019 3.07
2020 3.41
2021 3.49x

 

Transaction volume for Ecommerce:

What Has the Average Sales Multiple Been Per Year?

Ecommerce businesses can sell for as little as a few thousand dollars, to hundreds of millions (if not billions) of dollars. This graph shows the data we analyzed – typically businesses in the $100,000 to $10 million valuation range. The average has been sitting around 2.2-2.3x earnings for the previous two years, and then jumped to 2.88x in 2017, 3.00x in 2018, 3.07x in 2019, 3.41x in 2020 and 3.49x in 2021.

Average multiple over the last 10 years:

What Size Store is Worth More?

In general, the larger the Ecommerce business, the more it is worth. Here is how to understand this graph below. Let’s say that a business sold for $300,000. On average that would mean that its annual profit was around $111,000 ($300,000 divided by 2.7, because the average multiple for that size is around 2.7x). Another example would be a business that sold for $600,000. On average that would mean that its annual profit was $153,000 ($500,000 divided by 3.26). Similarly, a business that sold for $4 million would mean that its annual profit was around $1 million ($4 million divided by 3.91).

 

What is the selling process?

The selling process is fairly straight-forward but can be more complex and take more time depending on the size of the business. In general, most sales will be structured like this:

  1. You decide to sell
  2. You get a valuation of your business
  3. You develop a prospectus (all the facts and figures about your business)
  4. Find potential buyers for your business
  5. Negotiate a price with potential buyers (total price and terms of the deal)
  6. Due Diligence – buyer verifies all the financials of the business
  7. Transfer of the assets & money
  8. Help train the new buyer to run your business

 

What is the value of your inventory?

How do you value my inventory?

Inventory is required to run your business. It is customary to include a normal inventory level in the purchase price of a business that can sustain current revenues being generated by the business. Therefore everything over that amount is to be purchased by the buyer in addition to the business valuation. The following will generally happen when considering inventory:

1) Prior to closing the sale, an inventory count is taken and the sale price is adjusted, up or down, from the amount included in the sale price.

2) Inventory is valued at cost. If the inventory is significantly higher than the normal level, a price over that level will may be negotiated.

3) A decision needs to be made whether the cost of the inventory is to be determined by using the original invoice, a percent of retail price, or a professional inventory firm.

4) Not all inventory is created equal. Aged, broken or obsolete inventory will be determined if it is sellable and the price negotiated appropriately. This mainly comes about as discounting a portion of the inventory, but can also be the seller financing a portion and the buyer paying for it only when it sells.

How do I increase the value of my business before selling?

If you can achieve the following you will be able to increase the value of your business:

  • Predictable key drivers of new sales
  • Stable or growing traffic from diversified sources
  • Established suppliers of inventory with backup suppliers in place
  • Traffic stats (Google Analytics or other) with a long history
  • High percentage of repeat sales
  • High percentage of repeat visitors
  • Clean legal history
  • Brand with no trademark, copyright or legal concerns
  • Documented systems and processes
  • Growth potential

Where Can You Sell Your Business? The Best Ecommerce Business Brokers

Small Business Marketplaces – (under $300K yearly profit)

Smaller business and micro-businesses are usually best sold privately by the owner through forums or classified websites.

To sell your small business, check out:

Broker – ($300K- $10M in yearly profit)

Medium-sized businesses in the $300k-$10m yearly profit are best sold through brokers who help with finding buyers and negotiating and structuring the deal. To sell your medium-sized business, check out:

  • Business Exits – great if your business is making 300k – $10m in yearly profit

Investment Banks and Merger & Acquistion Companies – (over $10M+ in yearly profit)

Larger businesses are best sold through investment banks or merger and acquisition companies. To sell your large business, check out:

  • hl.com – best for businesses over $10m in yearly profit

 

How much will it cost to sell my business?

Generally a business broker will charge 10-12% of the sales price of an Ecommerce business, including inventory (and there can be a smaller, negotiable commission for larger businesses).

How long will it take to sell my business?

The time it takes to sell an Ecommerce business depends on the individual business and terms of the deal. Generally, larger deals (over $1 million) will take longer to sell than smaller deals (under $300K) because of the complexity of the business and the risk that a buyer is taking. Over 50% of deals close within 90 days and over 70% close within four months.

7 Steps to Sell Your Business (in 2023)

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1. Determine what your business is worth

A business is generally worth a multiple of its’ profit. Depending on the size of the deal and the industry, that can range from 2-10 times the profit. Smaller businesses (under $3M in price) generally average 2-3 times profit, medium-size businesses ($3m to $20m) can bring in 3-5 times the profit and large businesses ($20m and over) will often see 5-10 times the profit.

2. Prepare your financials with your accountant

Because a business is valued on its’ profit, thorough and accurate financials are essential, including preparing an adjusted profit and loss statement to present to buyers.

3. Find a broker or investment banker

Depending on the size of your deal and factors such as industry, revenue and potentially having unsolicited offers on the table, most companies will garner a higher valuation when they work with a banker or broker who can bring strategic insights to the process.

4. Develop the executive summary of your business

This is the document that clearly and concisely summarizes the key points of your business’ operations, mission, management, products or services, competitive advantages and financial data to provide an overview that will help a buyer compose an offer.

5. Put your business on the market

Market your business to strategic buyers seeking to acquire a company similar to yours.

6. Field offers from potential buyers

Receive offers from buyers and negotiate the best one based on your expectations around price and other important factors.

7. Let the buyer perform due diligence

Buyers generally receive 60-120 days to verify a business’ financials and validate that all the information presented is accurate.

8. Close the deal

Time to celebrate! Sign the final contract and begin the handover transition.

FAQs On Selling A Business

How much is my business worth? You can sell your business for what the market will pay and it is the buyer that determines the price of a business. That being said, a business is generally worth a multiple of the earnings, which means a value applied to the profit of your business.

How do you price your business for sale? You price your business for sale depending on how much money it makes. It you are making no money, the price is based on the value of the assets. If it is making a little bit of money, the price is based on a seller’s discretionary earnings. If it is making a lot of money, the price will be a multiple of EBIDTA.

How long does it take for a company to sell? Generally the larger the deal, the longer the time frame it will take to sell a business. At Business Exits, we average about 7 months to close a deal.

How can you sell your business quickly? You can sell your business quickly by having it priced correctly and with the right terms. One of the best ways to sell your business fast is to offer it to someone with no up-front payment and an earnout based on performance. This option can be presented to your business partner, employees, competitors or someone in your network.

What type of business is the best to sell? Businesses in all industries can be sold. However, the differences come into play when assessing valuation across industries. Some of the most attractive industries currently receiving high valuations are service companies, logistics and transportation, property management, home services and technology.

Who is the best broker to sell my business? This depends on the size of the deal. Small deals (under $1M in revenue) might be best to use a service like bizbuysell.com. For larger companies, try businessexits.com as they specialize in selling companies with $1M to $25M in yearly revenue.

We Analyzed 13,817 Business Sales: Here’s What We Found

 

sell your business sales data

We analyzed the last five years of sales data, including 14,117 transactions between $50K and $100M. As you can see from the graph above, we discovered some key learnings:

  • Average multiple of profit sold for 2.59 times profit
  • Average sales price was $595,000
  • 90% of deals were valued below $5M in sales price

You will see the term “multiple” used frequently. A multiple can be applied to a number of financial metrics in a business (such as EBITDA, net earnings, gross revenue, etc.) to determine how much the business will be worth at sale. We calculate the multiple for a business based on profit using SDE (seller’s discretionary earnings).

Here’s how we determine what the business is worth:

Total Sales – Cost of Goods Sold – Expenses + Owners Wage = TSDE (your profit)

When we state that a business was sold for a multiple of 2.44X, it means that the amount paid for the business is a value of 2.44 times the profit.

For example, a business that is doing $300,000 in profit per year sold at a 2.44X multiple would have a sale price of $732,000 ($300,000*2.44=$732,000). This works in reverse as well — if a business sold for $732,000 at 2.44X, then ($732,000/2.44) means the profit was $300,000.

Here are the types of businesses we’re going to analyze in this article.

What to prepare for selling your business

Potential buyers will be looking for detailed information about your business’ operational and financial health. Here is a list of things you will be expected to have ready with regards to general information:

  • -One page fact summary sheet that provides an overview of the business
  • -Programs that the website (if applicable) uses and how to work those specific programs
  • -Security reports
  • -Index of every single webpage
  • -Media mentions such as awards or publicity
  • -List of employees

Marketing strategy is going to be a big part of the buyer’s decision. You may need to provide information on:

Statistics within Search Engine Rankings – Keyword Research completed and Keywords that have already been Targeted – Visitor Statistics and Demographics – Competitor Information and Research – Sales History and Conversion Rates

The final information you’ll need to prepare is legal documentation, including proof of ownership, transfers and historical or legacy documents such as:

Revenue documentation – Cashflow Analysis – Customer Base Analysis – Intellectual Property – Expense Reports – Profit Reports – ROI Analysis – Appraisals – Prospective Buyers’ Correpondence — Real Estate Holdings Info

 3 Best Brokers To Sell Your Business 

Selling on your own as a business owner makes sense if you are selling your business to a family member or employee. Selling with a business broker is best if you want to attract multiple buyers and maximize the selling price.

Here are some suggestions for the best business brokers to sell your business:

  1. bizbuysell.com – Best for small business owners under $300,000 in yearly profit
  2. businessexits.com – Best for businesses making $300,000 to $10 million in yearly profit (Usually $2m – $100m in revenue)
  3. hl.com – Best for businesses over $10 million in yearly profit (usually over $100m in revenue)

How long will it take to sell my business?

The average selling process takes to sell a business is 7 months. Simpler deals close in shorter timeframes and more complex deals take longer, ranging from 3-12 months. A business valuation should take a few days and in that process you may decide on an exit strategy to prep your business for sale. Interested buyers will then contact the business brokers for the marketing packet. Prospective business buyers will review tax returns, financial statements and other operational data. Once they are ready to make an offer, they will submit an LOI (“letter of intent”) which may include a down payment. After the LOI, you will negotiate the purchase agreement with your lawyers (and it will usually include a non-compete clause). The process generally takes 3-6 months after the deal closes and the management team transitions.

sell my business

How To Sell Your Amazon FBA Business in 2023

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By Robert Kale and Jock Purtle

The Fulfillment by Amazon (FBA) business model is fast becoming a serious model in the online business space. Some sites see it as the top way to make money online in 2023. For example, companies like Amazing.com have developed a whole new breed of entrepreneur and we are starting to get lots of requests from Amazon business owners for a valuation on their business. Selling your FBA business is an attractive investment for someone without the skills and the knowledge to start a business, but wants to buy one that is easy to manage. That is why we have analyzed the 2021 data on Amazon FBA businesses that have sold to come up with this Amazon FBA business valuation report.

As you can see from the graph below, there was a big spike in Amazon FBA business sales in 2017 and then it normalized in the following years, though 2021 did see another upwards spike.

What is your Amazon FBA business worth?

The value of your Amazon business is in its ability to produce profit. So for example, if your business made $1M in sales in 2017 and your profit (SDE, or Seller’s Discretionary Earnings) was $250,000, then your business would be a multiple of that $250,000 profit. We are seeing the market pay 2-4 times the SDE for Amazon FBA businesses, so depending on the products, attractiveness to a buyer, and transferability, the business would be valued between $500K and $1M.

The profit of your business is calculated as = Total Sale – Cost of Goods Sold – Expenses + Owners Wage

Where your business sits in the range of 2-4 times profit depends on a range of factors including: age of the business, niche, product diversification, number of SKUs, growth, and competitive landscape.

We have put together some data for transactions in 2021 for Amazon FBA businesses:

 

 

           ***This table shows the average multiple in each price range.***

 

How To Increase the Value of your Amazon Business

The amount a buyer is willing to pay for your business will all come down to one thing — return-on-investment (ROI) and relative risk. The lower the risk, the higher the price, and vice-versa. With that being said, what really makes your Amazon FBA business worth more is mitigating the risk of the business failing in the future by having the following characteristics associated with your online store:

  • Age – the older your business, the more value it has to a buyer, as they can see the track record and growth trends. It’s harder to project future earnings for a business that is a year old versus a 3-year-old business with a more stable history.
  • Niche – a hyper-competitive niche like iPhone cases is a much harder market to compete compared to, for example, table mats specifically for marble tables. The market matters and your positioning in that market will affect valuation.
  • Concentration of products – having one product that makes up 80% of your sales is a big risk to a buyer. You can demand a higher price if you have a more evenly distributed revenue by product.
  • Brand – having your own branded and manufactured product creates a certain level of competitive advantage against copycats who are just reselling items (i.e. from from Alibaba).
  • Amazon Best Sellers Rank – if your BSR rank has grown consistently over time, it’s a good sign to a buyer that you provide a quality product and have great customer service.
  • Suppliers – having quality suppliers that are dependable, deliver product in a timely fashion, offer good terms and reliable fulfilment instills more confidence for the buyer.

How does the selling process work?

The selling process is fairly straight-forward but can be more complex and take more time depending on the size of the business. In general, most sales will be structured like this:

  1. You decide to sell
  2. You get a valuation of your business
  3. Develop a prospectus (all the facts and figures about your business)
  4. Find potential buyers for your business (whether you use a broker or sell it yourself)
  5. Negotiate a price with potential buyers (total price and also terms of the deal)
  6. Transfer the assets to buyer, and conversely, money to seller
  7. Help train the new buyer to run the business

Where Can You Sell Your Amazon Business? Best Amazon Business Brokers

 

SMALL BUSINESS MARKETPLACES – (UNDER $100K)

Smaller Amazon business and micro-businesses are usually best sold privately by the owner through forums or classified websites. This applies to Amazon businesses making less than $500,000 in sales per year.

To sell your small business, check out:

BROKER – ($100K – $20M)

Medium-sized Amazon businesses in the $100k-$20m are best sold through Amazon business brokers who help with finding buyers and negotiating and structuring the deal. These are Amazon businesses doing at least $500,000 per year in sales.  To sell your medium-sized business, check out:

INVESTMENT BANKS AND MERGER & ACQUISITION COMPANIES – ($20M+)

Larger businesses are best sold through investment banks or merger and acquisition companies. To sell your large business, check out:

  • Business Exits – great if your business is making over $4M in profit per year

What does it cost to sell my Amazon FBA business?

A website broker will generally charge 10-15% of the gross sale price to sell your Amazon business depending on the size of the business.

How long does it take to sell my Amazon FBA business?

The time it takes to sell an Amazon FBA business depends on the individual business and terms of the deal. Generally, larger deals (over $1M) will take longer to sell than smaller deals (under $300K) because of the complexity of the business and the risk that a buyer is taking. With regards to our deals, over 50% close within 90 days and over 70% close within four months.

Who will buy my Amazon FBA business?

There are 3 main types of buyers of Amazon FBA business that we have seen to date:

  • Corporate Exec – this is someone looking to buy his or her first business. They usually are a high-paid employee or C-level executive with disposable cash, IRA, savings, or access to a SBA loan.
  • Internet Entrepreneur – individuals who have been in the industry for a while and have a good understanding of what it takes to run a digital business. They are either fresh off of a recent sale of their last business or looking to add a business to their portfolio.
  • Brick and Mortar Entrepreneur – generally these are entrepreneurs who have exited or still own their company and are looking for a move into the digital space.

 

How To Sell Your Software/SaaS Business in 2023

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By Robert Kale and Jock Purtle

In our 2021 Business Valuation Report, we analyzed the sales of 215 companies for the year 2021 from 7 different categories of business. Over the past few years, software has typically had a higher average multiple when sold, due to its recurring revenue and more attractive business models. Even though 2021 had a high number of high-value listings in the Ecommerce space, software was the #1 category on average multiples, with an average multiple of 3.63x for software business listings.

Here’s a quick summary of which types of business models are worth the most in today’s current market.

According to our data, software companies sold for an average of 3.63x multiple in 2021 – with the highest premium business selling at a 5x multiple. This specific business had $2M in earnings which contributes to the higher sales multiple.

With a valuation multiple like that, getting a great ROI is a no-brainer! With this information, it’s easy to see that investing in the software niche is smart business.

If you’re interested in selling your software company, the real question is: how can you get the best possible rate for your high-value business? And for investors: how can you make sure you’re acquiring a guaranteed winner when you find a great deal?

At Digital Exits, our valuation and vetting processes are second to none. Thanks to our exceptional appraisal resources, buyers know we ONLY offer the highest quality companies and sellers know they’re listing at the best possible price for the current market.

We’ve leveraged those resources to help high-value investors get the information they need to gain an unfair advantage over the competition in the software niche. Here’s what we found:

We analyzed the sale of 187 software companies over the past 7 years to help high-value investors get a competitive edge when buying or selling software businesses in 2022

Here’s what we found:

 

Average Sales Multiples Per Year

If you’re unfamiliar with the term “multiple”, this metric refers to how much a business is worth (also known as the company’s valuation).

The value of a business is calculated by multiplying the amount of profit a business makes, by the valuation multiple:

$ Profit amount x Multiple = Appraised value of the business.

If a Software company generates $350,000 in profit, and is estimated to sell at 3.2x multiple, then the business is predicted to sell for approximately $875,000.

$350,000 x 3.2x  = $1,120,000

Here is a quick summary of how much software companies were worth in terms of multiples over the past 6 years:

  • Average 2.37x multiple in 2014
  • Average 2.77x multiple in 2015
  • Average 2.90x multiple in 2016
  • Average 3.16x multiple in 2017
  • Average 3.34x multiple in 2018
  • Average 3.21x multiple in 2019
  • Average 3.24x multiple in 2020
  • Average 3.63x multiple in 2021

This gives us an average of 3.36x multiple over the past 4 years.

It’s important to recognize that net profit isn’t the only factor in determining value. In fact, valuation is greatly impacted by the size of the business as well. Let’s look closer at whether small or large sized businesses are worth more in this market.

Are Smaller or Larger Software Businesses Worth More?

Now we’ll look at our multiple per sales price. This indicates how the size of a business impacts its valuation multiple. We can use this metric to determine whether large software companies or smaller software companies are worth more overall, by analyzing what kind of multiples they are commanding based on their profit size.

Here’s how business size impacted the valuation multiple over the past few years:

  • In 2015, software businesses that generated $20K – $110K in net profit would fetch on average a 2.53x multiple. The businesses that did $115K-$600K in net profit would fetch 3.63x on average. Those were the two largest groupings for 2015 and they demonstrate the difference in multiple based on the profit size.
  • 2016 brought a similar trend but with a more drastic contrast. The smaller profit businesses (again the $20K-$110K range) only averaged 1.92x. The medium-sized profit businesses (up to $600K) would sell for an average of 3.37x.
  • In 2017, the data corroborated the same finding but with higher multiples all around: 2.28x multiple for smaller profit businesses and 3.88x for medium profit businesses.
  • In 2018 and 2019, you can also see the higher multiples for the larger-sized businesses:

2018:

Price Bucket Avg Multiple for Software
0-$250K 2.53
$250-500K 1.42
$500K-$1M 3.23
$1-2M 3.07
$2-7M 3.92
Over $7M 4.45

2019:

Price Bucket Avg Multiple for Software
0-$250k 2.2
$250-500k 2.45
$500k-$1 Million 3.76
$1-2 Million 3.54
$2-7 Million None
Over $7 Million 5.0

For 2020, you can see that the largest deal commanded the 6.4x multiple for the $2.5M in earnings, and the rest are mostly in the 3-4x range:

2020:

Price Bucket Avg Multiple for Software
0-$250k 3.95
$250-500k 1.83
$500k-$1 Million 2.89
$1-2 Million 3.29
$2-7 Million 3.65
Over $7 Million 6.40

For 2021, it’s apparent that the deals over the $7M price point commanded the highest multiples, with deals in the $1M-$7M range also beating the average.

2021:

Price Bucket Avg Multiple for Software
0-$250k 2.86
$250-500k 2.69
$500k-$1 Million 3.63
$1-2 Million 4.14
$2-7 Million 4.10
Over $7 Million 5.00

 

Multiples by price bucket:

 

So, if we look at a quick summary of the past 4 years in software business sales…

  • Software companies were valued at an average of 3.36x multiple
  • Software businesses sold for an average of $1,603,728
  • Software companies generated more than $145 million in transaction value combined

Now that you know the numbers — how does your Software business stack up against the current market?

Here’s How to Sell Your Software Business in 2022

The process of selling your software business will vary depending on the size of your company, but generally follows this straightforward process:

  • Get a valuation of your business so you know what it’s worth
  • Put together the prospectus (facts, figures and numbers about your business)
  • List your business on a high-quality investment platform like Digital Exits
  • Negotiate a price with potential buyers (or have an agent handle this for you)
  • Conduct due diligence to verify the buyer’s financials
  • Transfer all assets and money
  • Help transition the new buyer into running your business

If you want to find out how much your business is worth right now, our dedicated team at Digital Exits can help.

With decades of experience in high-value business investments under our belts, our appraisal and vetting resources are unmatched in today’s market.

 

 

Where Can You Sell Your Software Business?

 

Small Business Marketplaces

Smaller software business and micro-businesses are usually best sold privately by the owner through forums or classified websites.

To sell your small business, check out:

  • Flippa – Best for businesses under $100K in yearly profit

Broker

Medium-sized businesses in the $100K-$20M range are best sold through brokers who help with finding buyers and negotiating and structuring the deal. To sell your medium-sized business, check out:

  • Digital Exits – best for software businesses $100K – $1M in yearly profit

Investment Banks and Merger & Acquisition Companies

Larger software businesses with yearly profits more than $1M are best sold through investment banks or merger and acquisition companies. To sell your large business, check out:

  • Business Exits – best for software businesses making over $1M in yearly profit

 

We’ll help you get the most accurate valuation for your business, and match you with the best potential buyers in your niche.

Our specialty is connecting buyers and sellers in high-value transactions that represent only the absolute best companies on the market today. Buyers invest confidently knowing they’re getting the highest quality businesses, and sellers can relax knowing they’re listed among only the highest-value companies available.

How To Sell Your eCommerce Business in 2023

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You have been building an ecommerce business that you’ve put a lot of time, effort, and sweat equity into growing, and now you’re looking to sell. Your objective is to get maximum value and you’re assessing steps to prepare for the sale. There are a multitude of variables to consider and in this post, we’ll cover them all to maximize the price you receive when exiting.

Let’s get right into it.

We Analyzed 115 Sales: Here’s What We Found

Some interesting things we found:

  • -The average multiple (2.25)
  • -There where more transactions in the $0-$250k range, this is reflective of the mode (most frequent) being higher for eCommerce businesses compared to all internet businesses
  • -Larger businesses ($5 million plus) still commanded the highest multiple
  • -Dropship sites commanded a lower multiple
  • -Seems that it’s harder to grow a dropship website over $1 million in sales

What Are The Market Trends?

On a total deal transaction volume basis, we can see that between 2014 and 2015 the total businesses sold doubled. 2016 took a slight downturn but I forsee an uptick for 2017.

What Has the Average Sales Multiple Been Per Year?

 

E-commerce businesses can sell for as little as a few thousand dollars to hundreds of millions if not billions of dollars. This graph shows the data we analyzed which are typically businesses in the $100 thousand to $10 million valuation range. As we can see the average has been sitting around 2.30 times earnings for the past two years. I think there has been a drop in the average multiple slightly because there has been more supply of e-commerce businesses on the market.

Are Small Or Larger Businesses Worth More?

Surprisingly there is a large portion of sales in the $200k-$500k range. In each of our reports, we have seen a large proportion of sales pushed towards the lower end of the spectrum in the sub $200k range. A guess at why this is happening is because of the large transaction value of eCommerce stores. This graph represents gross sale price so that might mean it is easy to grow an eCommerce store a few hundred thousand dollars per year in gross sales.

What Size Store is Worth More?


In general, the larger the e-commerce business, the more that it is worth. Here is how you understand this graph below. Let’s say that a business sold for $75,000. On average that would mean that it’s yearly profit was $32,500 ($75,000 divided by 2). Another example would be a business that sold for $500,000. On average that would mean that it’s yearly profit was $208,000 ($500,000 divided by 2.4). Similarly, a business that sold for $4 million or on average that would mean that it’s yearly profit was $1.2million ($4 million divided by 3.3)

From the data you can see that multiples averaged similar prices for each valuation bracket between 2013 and 2015.

Where Were the Sales Distributed?

This graph represents the distribution of the sales.

What is the selling process?

The selling process is fairly straight forward but can be more complex and take more time depending on the size of the business. In general, most sales will be structured like this:

  1. You decide to sell
  2. You get a valuation of your business
  3. You develop a prospectus (all the facts and figures about your business)
  4. Find potential buyers for your business
  5. Negotiate a price with potential buyers (total price and also terms of the deal)
  6. Due Diligence – buyer verify’s all the financials of the business
  7. Transfer of the assets & money
  8. Help train the new buyer to run your business

What is the value of your inventory?

How do you value my inventory?

Inventory is required to run your business. It is customary to include a normal inventory level in the purchase price of a business that can sustain current revenues being generated by the business. Therefore everything over that amount is to be purchased by the buyer in addition to the business valuation. The following will generally happen when considering inventory:

1) Prior to closing the sale, an inventory count is taken and the sale price is adjusted, up or down, from the amount included in the sale price.

2) Inventory is valued at cost. If the inventory is significantly higher than the normal level, will a price over that level will be negotiated?

3) A decision needs to be made whether the cost of the inventory is to be determined by using the original invoice, a percent of retail price, or a professional inventory firm.

4) Not all inventory is created equal. Aged, broken or obsolete inventory will be determined if it is sell-able and the price negotiated appropriately. This mainly comes as discounting a portion of the inventory but can also be the seller financing a portion and the buyer paying for it only when it sells.

How do I increase the value of my business before selling?

If you can achieve the following you will be able to increase the value of your business.

  • Predictable key drivers of new sales
  • Stable or growing traffic from diversified sources
  • Established suppliers of inventory with backup suppliers in place
  • Traffic stats (Google Analytics or other) with a long history
  • High percentage of repeat sales
  • High percentage of repeat visitors
  • Clean legal history
  • Brand with no trademark, copyright or legal concerns
  • Documented systems and processes
  • Growth potential

Where Can You Sell Your Business? The Best Ecommerce Business Brokers

Small Business Marketplaces – (under $100k)

Smaller business and micro-businesses are usually best sold privately by the owner through forums or classified websites.

To sell your small business, check out:

Broker – ($100k – $20m)

Medium sized businesses in the $100k-$20m are best sold through brokers who help with finding buyers, negotiating and structuring the deal. To sell your medium sized business, check out:

Investment Banks – ($20m +)

Larger businesses are best sold through investment banks or merger and acquisition companies. To sell your large business, check out:

  • Business Exits – great if your business is making over $4m dollar profit per year.

How much will it cost to sell my business?

Generally a business broker will charge 10-12% of the sales price of an eCommerce business including inventory.

How long will it take to sell my business?

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