Buying Online Businesses 2023: Everything You NEED To Know!
You imagine a billion-dollar investment industry that you’ve never heard of, none of your friends are talking about. Even people on Reddit and YouTube have never really discussed this investment option. And today, I’m going to disclose everything I know about it. Because I’ve been working and building in this industry for the past six years, and I’ve done $120 million worth of deals to help build one of the largest brokerages in this space. And essentially, I’m going to talk to you about micro acquisitions, buying profitable cash-flowing online businesses, and exactly what’s going on in the industry for 2023. And beyond. Basically, I’m going to look at what happened last year, the year before that, and then the ongoing trends and predictions for 2023. And how you can actually take advantage of this investment opportunity to grow and expand outside of stocks outside of crypto, it’s going to be something completely different because you’re essentially buying an asset that’s already cash-flowing from day one. So let’s go ahead and dig into what this industry looks like. And a little bit more background about myself, and how I can help you get started. Hey there, everyone.
My name is Mikel Swigunski. I’m the number one best-selling author of the book, global career, how to work anywhere and travel forever. Over the past decade, I’ve been working and traveling around the world. And my journey has taken me to more than 100 different countries all around the globe, during this time actually helped build one of the fastest-growing private companies in the United States, a company called Empire Flippers. This was a company that helps people buy and sell online businesses, and is going to be a curated marketplace, meaning they’re actually performing a betting service to look into these business financial details, make sure that the businesses are actually legitimate, and verify expenses, which a lot of other marketplaces just have no way of doing on a large scale. I practice as I preach, I have my own portfolio of online businesses, primarily with software companies, and I just had a fairly big acquisition recently, we’re a half-million-dollar software business. But that’s for another video. So one of the photos that I love sharing is building Empire Flippers as an employee number for growing it from a very small team to where it’s at now with hundreds of people all around the globe on almost every different timezone spanning the world. Now, this is a great insight for the industry, because I’ve seen how every business and how the internet is essentially monetized and every different way. So essentially, in this video, though, I’m going to be talking about the valuations of these assets, how they compare versus buying real estate, versus buying an already cash-flowing sort of asset. And I think it’s a little bit different. But there are a lot of parallels between the real estate industry, which I’ll essentially be using today. One of the great things about buying online businesses is they’re primarily valued off of profit, they’re not valued like a Silicon Valley asset that’s based on potential, and sometimes it might have been in a lot of delusions. So sometimes the most unprofitable businesses in Silicon Valley raise the most capital and end up becoming unicorn businesses. This is nothing like that, it’s gonna be primarily based on the trailing 12 months, average net profit. So after all the expenses are taken away, you’re gonna get that average net profit, and then you’re going to get a monthly multiple.
For this example, let’s just say 30 times, and then you’re going to multiply those two together. And that’s going to give you the list price or the valuation of the online asset. Now, you’re probably wondering, what this multiple commonly comes into play here, and some people will use a yearly multiple, some people will use a monthly multiple. For this example, the multiple is going to be higher based on the amount of moat around the business. So the higher the multiple, normally, the less risk it has. So a business that has been around for 10 years, and has year-over-year growth is in an industry that is a bit more of a barrier to getting into meaning I can’t just come out tomorrow and start the same business. Maybe they have some exclusive products, or maybe they’ve had a huge amount of development costs, that’s taking them five to 10 years to get the product launched. So there are a lot of different ways and essentially, the higher the multiple, the lower the risk. And for a normal example, if a business is making $10,000 per month, in average monthly net profit over the last 12 months, that business is going to be valued at around $360,000 on the lower end up to $600,000 on the high end, so it’s a pretty big range depending on the type of business and the example that I like to use is a software business. recurring monthly subscribers 10 years old, has been growing every year. To start that business from scratch would take two to three years of developing the software, versus fidgets spinners that have been around for six months. That’s clearly the next big fad At anybody can pop up a dropshipping store or order the same exact products from China and start selling them on Amazon. So those are the two comparisons that I really love using.
And essentially, it gives you a big contrast of what the multiple ranges can dictate for these businesses. So essentially, buying online businesses and 2023 is going to be a little bit different because the multiples have kind of switched from a seller marketplace where there were huge amounts of funding in the billion-dollar range of funding in the space to buying Amazon FBA ranges. So the multiples kind of went up with the real estate market. We’ve all kind of see this happening where there was a huge seller’s market where it was basically very easy to sell your house, but extremely hard to buy a house. So a lot of people who have been selling their homes in the past year, and having to replace that home have kind of experienced this. So it’s fairly similar to the online business industry, but essentially the multiple skyrocketed and now they’re starting to taper off a little bit into 2023. So in my opinion, it’s still a great time to buy a business, it’s probably gonna be the best year for that, essentially, because of the economic risk of 2023. People are wanting to get capital. So they want to get essentially money in the bank, USD in the bank, and they’re willing to sell some of their cash-flowing assets to do this. And that’s gonna be a base-by-base kind of decision on the seller and why they’re actually selling the business. But that’s basically what I’ve been hearing is, people want to exit, they want to get that capital, they will kind of want to hunker down during this next one to two years that could potentially better essentially going to be in a recession. So we can take a look at the multiples for 2020 and 2021. Essentially, this is based on Empire Flipper’s public data that they release every year. Now that 2022 numbers are not out yet, I’ll be going back and digging through those when they do come out. So essentially, in 2020, they sold many content businesses, E commerce businesses, and a small portion of other businesses. So content businesses were selling at an average sales multiple of 39x. And for E-commerce businesses for an average multiple of 30x, which is fairly surprising, I think these multiples in 2023, are going to drop substantially, I think the average sale value or the multiple is probably going to be around 26 to 28. For E-commerce. And for content sites, I think it’s going to be a lot lower, most likely around the 32x mark. But it will see coming out this year, it’s going to be from this day on from January to December is my prediction for those multiples. Looking at the newest report from Empire Flippers is basically going to be including all the 2022 data, which is essentially for eight months, and in 2022, the multiples were still pretty high. But I think over this next year, they’re going to come down quite a bit. So it’s essentially a switch from a seller’s market to right now to be a buyer’s market, I’m seeing a lot more sellers negotiating down from their list price, where in previous months, everyone was very stuck, I want to get this price what I listed for and there are lots of buyers competing for the best businesses where those businesses were going very quickly at full list price, we’re now I see a lot of people that have kind of missed that sort of big upward trend. And now they’re kind of coming down and realizing that they’re willing to negotiate a little bit more. So this is great for buyers, or sellers, you know, if you have a great business, I think you’re still going to be able to get a good price for it. But if you’re not going to have one of those very easy turnkey businesses that a lot of buyers want, it’s going to be a little bit more complicated. And you’re going to have to come up with some interesting deal structures to make it lucrative for potential buyers.
So some of the other things that here if you’re going to buy a business, the average amount to sell these businesses on market. If you’re looking to buy a content site, these things are moving quickly. So if you’re a buyer looking to buy one of these, you need to move fairly quickly. You need to have a good competitive offer. And you just be quick on the actual responses to counter negotiations for these businesses. For E-commerce businesses is looks like 69 days on average on market. And essentially with this, you have a little bit more time. I do think e-commerce businesses are usually going to be a little bit more complicated to sell because there’s just been a huge amount of inventory. So that’s probably why this number is taken a little bit more because I think some of the bigger businesses just take a lot longer and in 2020 a lot of larger businesses got here. So I’d love to see a breakdown of kind of $500,000 and below how long those businesses took the sell So I’ll try to reach out to Empire Flippers and see if they have that data. But we can kind of break it down by each business model. So software businesses are the businesses that I personally love buying. And I actually help a lot of people buy these businesses, they are going to be a higher multiple, but they’re going to have a much lower risk when you are buying these businesses. And the great thing about digital assets is the profit margins are crazy. The software business I just bought was 100% profit margins, they weren’t reinvesting any of their money back into marketing or anything like that. So it’s a digital product. So you can scale it to the moon, and you don’t have to worry about inventory issues. And as we saw in the pandemic, that was the biggest problem with E-commerce and Amazon FBA businesses, because they were so many issues with the supply chains. And there was a huge influx of demand for online shopping through Amazon and other platforms, and a lot of times these people just didn’t have the inventory to sell to their customers. So as we can see, here are some things that stand out here is the Amazon FBA is at 30x. I think that’s going to level off at around 26. For 2023. And beyond, I think SAS is probably going to stay around the same, I haven’t seen a ton of movement over the years and SAS multiples. But again, I think this business that we just bought was at 22x, multiple, but it was listed for a lot higher than that. So there are people that are willing to negotiate if you find the right seller, and that’s kind of my expertise is isolating these businesses that are going to be a win-win deal structure for the seller, the seller is going to walk away happy and the buyer is going to walk away happy as well. And I help negotiate and structure these deals. So as we can see here some other interesting things that Amazon Associates is crazy, I’m actually pretty shocked at why this is so high, I’ll have to dig into a little bit more of their report to see if there were any big outliers. You know, this could be that they sold a few huge Amazon Associates businesses, for high multiples. But I think overall 2020 was one of those years where it’s kind of pivoting from these content businesses over to physical products.
So that’s probably why these multiples are a lot higher, I think their 2022 report is going to kind of show a little bit of a fluctuation between Amazon Associates going down. And then Amazon’s FBA increased due to the huge aggregator space. And essentially, when I say aggregators, these are billion-dollar companies that have raised funding to buy Amazon, FBA, and E-commerce businesses. But one thing to note is a lot of these aggregators have gone into the tank. I work with a lot of these guys. And they’re amazing people, they’re very smart. But essentially, what I’ve seen is they started all competing for a lot of the same businesses. And essentially, their ROI got a lot extended because if you buy a business at a higher price, it’s essentially going to take a longer period of time to get that money back for the businesses with a lot of other supply chain issues with everything that’s happening in the world. So from what I’ve seen, I’ve I talked to dozens of these aggregators on a regular basis. And essentially, what I’ve seen is a lot of these aggregators have just stopped dealing with these smaller businesses, which has left a lot of inventory out there. So a lot of the aggregators that I’m talking to, they’re not touching businesses under $5 million, the inventory for a $5 million, Amazon or E-commerce business as a lot smaller, and they all kind of been hyper-focused on these deals. So it does leave some opportunity for those individual buyers who want to buy these, you know, $500,000 to $1.5 million businesses. In my opinion, the aggregators have just realized that the risk is slightly higher for these smaller businesses. And they have, you know, set dictations from their investors to kind of focus on these larger businesses, essentially, performing their own due diligence on these businesses, is going to take around the same amount of people the same amount of hours, and the same amount of manpower. And then when you fluctuate just a slightly small percentage of increased risk for smaller business, you’re gonna factor in that it’s probably just not worthwhile in their acquisition strategy. So what I’ve seen is a lot of aggregators are laying off people.
They’ve really heightened their restrictions. So I only buy some aggregators, like I only buy in the baby and pet industry, and I only look at businesses that are four to $6 million. They didn’t have this much revenue per month. And they have a lot of strict criteria now, whereas before it used to be, we’ll just buy anything. We’ve got a lot of funding, as long as the business cash is cash flowing in the right way. We’re gonna buy those businesses. So my prediction for 2023 is A lot of these aggregators are going to kind of take a more risk-averse approach, some of them are going to continue going on as they were, and they’re gonna have no competition to do this. So I do think there’s going to be some aggregators that are going to have a successful lean growth business model, where they’ll be able to pick up these businesses because there’s not as much competition anymore, they’ll be able to pick them up at a good price, and then implement them into their team for growth strategy. So if you’re interested in buying online businesses, I offer an acquisition program where I moved first-time buyers, buying their first business to buy help negotiate, and structured deal that is going to greatly reduce your risk. And then I help people grow and implement a growth plan over the next 12 months. As soon as you buy this business, you can start growing and get your investments back as soon as possible in some of my previous investments, you know, I’ve bought and acquired software businesses, and I’ve received my ROI in under eight months. And now I’m helping do that for others and continue to do it for my own portfolio. So if you’re interested in that, I’ll leave a link below where you can set up a free consultation with me to discuss the buying and selling space. Whether you’re interested in buying a business or if you have a business you’re looking to sell. I help both people so I’ll leave some links below in the description. So keep in touch. If you haven’t yet, make sure you subscribe because I’ll be putting out new videos about the buying and selling space pretty much every other week. So take care
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