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How To Sell Your Amazon FBA Business in 2022

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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 2022. 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.

 

7 Steps to Sell Your Business (in 2022)

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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 Ecommerce Business in 2022

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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.

What Is Your Online Business Worth?

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The first question a seller asks us as a website broker when looking to sell their online business: “What is it worth?”

By Jock Purtle and Robert Kale

Back in 2008, we started analyzing all online business transactions that we could find for the previous year and presented it in a report to help online business owners, like you, sell your website. Each year, we analyze the previous year’s sales to come up with industry averages. Fast forward to today — this article represents a sales data analysis of the past 13 years from 2008-2021.

You will see the term “multiple” a lot in this article. That is referring to a multiple of the business’s profit. We use that multiple to determine the valuation, or list price, for the business. We calculate the profit for the business using SDE (Seller’s Discretionary Earnings) using this formula:


SDE = Net Profit + Owner Wages/Benefits,
In other words:
SDE = Total Sales – Cost of Goods Sold – Expenses + Owners Wages/Benefits

What are the Market Trends?

What is also discussed and needs explaining is when we say, for example, a “multiple of 2.44x.” This means that the amount paid for the business is a value of 2.44 times the profit (SDE).

Total Deal Volume (Selling Price) by Year:

EXAMPLE:

A business that is doing $300,000 in profit per year that sold for 2.44x means the selling price was: $300,000 * 2.44 = $732,000. This works in reverse as well. If a business sold for $723,000 at 2.44x, then (2.44 = $732,000 / 2.4x means the profit was $300,000). Note that the SDE is typically calculated for the trailing twelve months (TTM) of the business.

 

We Analyzed 2,543 Businesses With 7 Different Business Models

For this report, we analyzed 2,543 businesses that were listed from 2008 to 2021.

What we’re seeing from the data is a steady increase year-over-year in the average multiple of an internet business sale — and this trend continued through 2021.

In 2017, we saw an explosion in Ecommerce sales and this did not slow down in the following years.

This graph breaks down the percentage of the total deals each business category represented:

Below is how we categorized each business model:

    • Advertising – a website monetized through ads or affiliate offers
    • Ecommerce – traditional Ecommerce stores, drop-shipping and digital products
    • Ecommerce FBA – a storefront on Amazon, including businesses that hold inventory through Amazon FBA or ship inventory themselves or through other means.
    • Lead Generation – websites monetized through selling leads
    • Service – websites monetized through providing a service
    • Software – SAAS (software as a service) and any other software application-based business

Where Can You Sell Your Online Business?

Small Websites (Under $100K) – Sell yourself

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 Flippa.

Medium Websites (Under $50M) – Sell with a broker

Medium-sized businesses making between $250K and $20M in profit are best sold through brokers who help with finding buyers and negotiating and structuring the deal. We recommend Digital Exits.

Large Websites (Over $50M) – Sell with an investment bank or merger & acquisition company

Larger businesses making over $20M in yearly profit are best sold through investment banks or merger and acquisition companies. To sell your large business, check out Business Exits.

What We Found From Our Analysis

This graph represents a snapshot of the total data. It will give you a better understanding of where your business sits in comparison to all the businesses analyzed. The sum of transactions between 2008 and 2021 is over $4 billion. We believe this represents only 10-15% of the overall market of traded web businesses. The rest are either partner buyouts, employee buyouts or private transactions.

What Is The Average Multiple Per Business Model?

Now that we have over 14 years of data, we can see how the average multiple has changed annually:

 

 

Here are my thoughts on why there is a differentiation in average multiple between each business model:

Advertising – Demands a low multiple because you don’t control the customer. Essentially, advertising websites drive people to their website with the goal to send them away to another source.

Ecommerce – A consistent performer with a large volume of businesses selling and growing fast. It is, in my opinion, the easiest business to understand and train a new buyer on. With the ease of platforms like Shopify, they also often require fewer hours per week to maintain, and the owner can focus on marketing and growth. Many more ecommerce listings are coming to market and fetching higher multiples every year.

Ecommerce FBA – The fastest growing segment. Amazon-based businesses, however, demand a lower multiple than standalone Ecommerce websites. This is mainly because the business owner does not “own” the customers – Amazon does. Also, there is always an inherent threat of Amazon competing with the business, adding more risk for the buyer.

Lead Generation – Lead Gen had a surprisingly high multiple for 2017 and it has persisted, with an average multiple of 3.53x in 2021. As more competition comes online it has been harder to generate leads for businesses and thus the higher demand for leads.

Service – Again, a consistent performer and easy to understand business. The main value in a service-based business is the book of clients which can be transferred easily and, if they stay on as clients, it can lead to a decent return for a buyer. This category has seen a steady increase in the average multiple from 2017 (2.57x) to around 3.5x in 2021.

Software – Still a very highly-demanded business model and is normally the biggest winner in terms of average multiple of earnings. In 2021, it was only upstaged by an incredible year for Ecommerce businesses, which saw an influx of larger listings. Software averaged 3.63x multiple in 2021 listings, with the highest multiple at 5x. 

Are Smaller Or Larger Businesses Worth More?

We can see from the last 14+ years that there are consistent trends of multiples at each price point. The larger your business, the higher multiple you can demand. For example, in 2019 the average multiple for a business that sold between the price of 0 – $250K was 2.05x. However, if your business was worth over $7M, the average multiple was 4.21x. This is why if there is capacity in both the operator and the business for more growth, and the operator can be patient, we recommend growing the business to a higher level before seeking a buyer.

 

How to interpret this graph: If your business is generating:

  • 0-$125K annual profit = valuation range of 0-$250K
  • $125K-$200K annual profit = valuation range of $250K-$500K
  • $200K-$380K annual profit = valuation range of $500K-$1M
  • $380K-$650K annual profit = valuation range of $1M-$2M
  • $650K-$2M annual profit = valuation range of $2M-$7M
  • $2M-$10M annual profit = valuation range of $7M-$100M

This will give you a pretty accurate range of where you business sits in the valuation spectrum.

How many transactions occurred at each price point?

This graph represents the total number of transactions that occurred in each price range. For example, in 2017, there were 125 transactions in the $0–$250K range. Similarly, there were 103 transactions in the $250K–$500K range.

 

This data represents the volume of transactions at each price point. Obviously, there will be more transactions of “smaller” businesses in the $0 – $500K range and less supply of businesses at a higher valuation range.

What do the multiples look like on a scatter graph?

To get a true appreciation of averages you need to look at the dataset as a whole. This scatter graph represents each transaction’s multiple:

scatter_Graph

 

How To Sell Your Software/SaaS Business in 2022

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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.

Best YouTube Marketing Agency

By

A specialized YouTube marketing agency will either help your company create video content that will bring in new leads and sales, or alternatively find opportunities via solid ad placement and sponsorships that will allow your products and services to reach new markets. And as opposed to more traditional forms of marketing, YouTube marketing can target the audience your key audience, providing the best ROI possible for each marketing dollar.

Based on our research the top Youtube Marketing Agency for 2019 is Voy Media 

What to Look for from a YouTube Marketing Agency

Choosing the right agency for your business is an important endeavor that is worthy of your time. Fortunately, we’re here to make the research a bit easier. While you look for a marketing agency that will mesh well with your company, you should also look for the following from any company you look at:

  • Adaptivity: Above all else, it’s vital to find a YouTube marketing agency that can quickly adjust to new trends on the platform while also determining which new trends are worthwhile to pursue in the first place.
  • Attention Given to Your Base: A poor YouTube Marketing Agency will use a one-size-fits-all approach to the platform. While there are general strategies that will work for nearly every business, a good agency will know precisely how to identify and then target your core customer base.
  • A Complete Understanding of Video Content: This should be a given, but some marketing agencies might most go strictly by the numbers and react from there. If they don’t have an understanding of what makes good YouTube content or ads in the first place, then they’ll always be a step behind.
  • A History of Success: Many agencies can talk the talk, but how many have proven track records? Look for proof, and don’t just listen to their marketing materials.
  • Honesty and Transparency: If you don’t feel you can trust an agency entirely, move on and look at a different agency. You need to be able to work with people who will at any time by happy to tell you what they are doing and why they are doing it. Your business needs and deserves nothing less.
  • A Clear Vision for Your Marketing Efforts: While adaptivity is vital, you also need to find an agency that won’t get sidetracked too easily. When talking with them, see if they have a goal or vision for your marketing campaign. If they do, even if you want to adjust that vision, that’s a good sign.
  • Sufficient Resources: Is the agency prepared for success? Should your efforts prove highly effective, you don’t want to be weighed down by an agency that doesn’t have enough resources to capitalize on that success. Make sure they can scale their efforts.

1) Voy Media – #1 Pick

Voy Media to have an excellent understanding of You Tube Ads.

Overall, we find Voy Media to be an excellent marketing Youtube agency able to adapt to many platforms (especially YouTube) and create a big-picture strategy for your business, no matter what industry you happen to be in.

You can expect the following when working with Voy Media:

  • – Excellent Facebook integration and great marketing support for other social media platforms on top of YouTube.
  • – A highly adaptive approach that keeps them ahead of the competition, keeping you ahead of your competition.
  • – An approach to video content that emphasizes your business’ specific target audience, making sure to send the right message to the right people.

“Youtube now gives us more granular feedback about the demographics that are responding well to our ads. This way, we can make the necessary adjustments to optimize our campaigns. To make Youtube ads convert well, our brands focus on testing their ad creatives, landing pages, and conversion rates by running promotions and special deals to Youtube users — this will help get better returns on the campaign, also targeting the right people at the right time.”

Kevin Urrutia, Voy Media’s Founder

2) Digital Marketing Agency (DMA)

Digital Marketing Agency is one of the biggest and most highly regarded agencies in the field, seeing as it’s been around since 2002 and they have hundreds of active clients. This expertise and clear demonstration of adaptability (think of all the ways marketing has changed over the last two decades) only prove that they can be a great choice for your business. Their size also means that you’ll always have the resources you need to make the next big move.

There are a few caveats to working with them, as you’ll want to double check what industry you’re in (they handle most industries, but your business might fall outside their traditional purview). And despite their massive reach, they don’t specialize in YouTube marketing as much as other agencies.

As a whole, we would recommend DMA as a good option for a business looking for a full digital marketing solution as opposed to a YouTube-centric service.

You can expect the following when working with Digital Marketing Agency:

  • – An agency large and comprehensive enough to handle all your marketing needs. If there is a marketing service you want to be done, they can deliver. This means you will likely have a greater degree of synergy between your different efforts and campaigns.
  • – Other services as needed such as reputation management and additional web development.
  • – Excellent e-commerce business support, ensuring that you get more leads regardless of your main platform.

3) Marketingagency.io

Founded in 2007, Marketingagency.io is a larger agency that will call its services “boutique,” hoping to emphasize the fact that they will cater to your business’ core audience. It has a variety of more personalized marketing services that make it a great choice when you know what you want to zero in on and you think that the standard plans aren’t going to cut it.

When it comes to YouTube marketing, they have a dedicated plan of action in which they will take their time to investigate your brand, develop a strategy that is tailored to their findings, and then constantly adjust as needed in order to change with the times and with your brand. They’re willing to try every tool in the shed to get you the success your business needs, and for that reason, they stand out among the rest.

You can expect the following when working with Marketingagency.io:

  • – Dedicated engagement and adjustment to your YouTube marketing campaign after it has begun. Optimization of lead generation, conversion rates, and other metrics and processes is their priority.
  • – A willingness to try a variety of (or more likely a combination of) YouTube marketing strategies based on what your business needs.
  • – A high level of communication regarding your marketing services, so you don’t ever feel left out.

4) Working Media Group

A relatively smaller agency when compared to the other entries on this list, Working Media Group (founded in 2005) has a variety of clients ranging from medium-sized businesses to such clients as Walmart and Centurylink. Handling both B2B and B2C needs, it’s likely that they will be able to adjust to your business.

They also engage in influencer marketing (a potentially great way to utilize YouTube) and experimental marketing techniques. Working Media Group is willing to try the most efficient solutions for your business, even if that means they have to put in some extra legwork themselves. For that reason, we recommend them above other YouTube marketing agencies.

You can expect the following when working with Working Media Group:

  • – A high level of transparency. Working Media Group clients will be able to see their ROI for all marketing strategies and media channels.
  • – High-quality sentiment monitoring, so that they (and you) not only know what ads and content and being engaged with, but how those engagements unfold.
  • – A willingness to try experimental marketing ideas, live experiences, and more. With Working Media Group, you might find novel solutions that you won’t get elsewhere.

5) TubeMogul

For our last pick, we decided to choose something a little different from the agencies you’ve looked at thus far. TubeMogul stands out from the rest of the agencies on this list in that it is primarily a product line which you do your own marketing with as opposed to handing over the reins to someone else. If you already have experience or want more control as to your campaign.

If you’re worried that TubeMogul is just a platform, they also offer creative services and support, having videographers, designers and ad professionals on staff so your video content and outreach performs at the top level. Their creative team is very effective, and you will get advice and production that takes your brand and breathes fresh air into it.

TubeMogul is likely not the best fit for a lot of businesses, but if they sound like a good fit you should investigate them further.

You can expect the following when working with TubeMogul:

  • – A greater degree of autonomy for your marketing, if you have a general idea of what you want but just need help getting there.
  • – Economic and performance transparency at all levels to maintain accountability and allow for more informed decision making on your end.
  • – A fantastic platform that gives you the information you need at a touch and makes purchasing and managing ads easy.

Conclusion

YouTube marketing, whether you’re just starting or reinvesting in the practice, can be a daunting task that requires a great deal of expertise. For this reason, we ask you look into the above five companies to help guide your efforts.