Firstly, Happy Birthday to the iPhone. Yesterday, the iPhone turned 15. After 34 versions, we are still as addicted as ever. Last year alone, there were 32 billion app downloads and most of us spent 100 hours monthly on the apps that make this whole ‘thing’ tick. Ecosystems are immensely powerful.
For those interested, we’ve written a review of the apps ecosystem. It’s now a burgeoning playground for next generation roll-ups and aggregators who are betting big on the publishers that occupy our daily lives and for good reason too. We are not near peak penetration. By 2025, Statista forecasts that m-commerce sales will make up 10% of all US retail sales. Personally, I think it will be far bigger than that and many savvy app acquirers agree. In fact, in the first half ‘22, Flippa has seen 54 companies register acquisition intent for apps, with a collective acquisition budget in excess of $330MM.
Beyond the apps ecosystem, I think it’s worth commentating on the dramatic public market sell off and tech valuation blood bath (can you believe that Shopify is down 80% from their all time high?).
The main street and lower middle market is not seeing a downgrade. Small profitable businesses, from sub 500K to $10MM annual revenue are still hot property. For one, these assets were never over-valued. And two, savvy digital acquirers taking a long term view, see the obvious. Digital isn’t going anywhere.
A look at Flippa’s Top 100 Index, suggests the average online business is valued at 2.39x Annual Net Profit or SDE and 1.71x Annual Revenue. We don’t see these compressing. As you can see, it’s still a very inexpensive way to acquire cash flow and returns are therefore really strong and predicatable.
We often get asked. What’s the maximum I can achieve? If you are a business owner and looking to understand peaks, the best results achieved in the first half 2022 are as follows:
- A small business utility app sold for 5.45x Annual Net Profit. Notably this was also 3.06x Annual Revenue. This was a ~$30MM sale.
- An education SaaS sold for 5.81x Annual Revenue. This was an ~8.5MM sale.
- A personalized jewelry Ecommerce business sold for 4.62x Annual Net Profit. This was a ~$2.5MM sale.
- A content site about privacy and compliance sold for 7.63x Annual Net Profit. Notably this incredibly high margin passive site, sold for 7x Annual Revenue. This was a ~5MM sale.
So, don’t let the fear of a recession get in your way. In fact, the June data would suggest buyers will hunt for deal flow more. Growth through acquisition will be a preferred method when compared to other traditional growth practices. Actually, that’s fairly typical of a recessionary market. More opportunities to buy.
For further context:
- An additional 12,042 buyers added 17.3Bn in liquidity. This is a marginal 2% increase from the prior month.
- We have 109,000 active buyers!
- $130MM of deal value was added in June. YTD $561MM in deal value has been added. This is up 106% on the same period prior year.
A few other updates:
- Meet us at one of our meetups. The Exit has gone global. We will be in NYC and Chicago in July and then we head to Europe.
- Our valuation engine has been improved. Get an updated valuation for your business is here.
- Jay Haussman sold Tatooing101 for 10x what he acquired it for. His story is a really good one. Watch it here.
Reach out if I can help with anything. I’m at CEO@FlippaMarketplace.com
Regards
Blake
