Data Shot is a new series that gathers and reviews data from the Hatchit Marketplace. You will be able to use it as a guide in your business transaction process, and as a way of identifying useful insights.
This Data Shot reviews profitability by category, based on 400+ posts.
| Avg. Adj. Net Margin | Avg. Revenue | Avg. Adj. Profit | |
| Software & Platforms | 63% | $645,717 | $410,013 |
| Other Digital & Tech | 32% | $1,575,025 | $506,721 |
| Web Businesses & Sites | 25% | $1,573,345 | $400,392 |
| Brick & Mortar | 20% | $3,296,521 | $661,975 |
Businesses in Software & Platforms have the lowest gross revenue but the highest margins. Likewise, Brick & Mortar businesses have the highest gross revenues with the lowest net margins. Web businesses & Sites and Other Digital & Tech have much more comparable gross revenue and net margins.
In looking at how businesses in these categories are priced for sale, Software & Platforms leads the way again. The remaining three categories are much closer in their profit multiples. Distorting outliers were removed.
| Avg. Adj. Profit Multiple | |
| Software & Platforms | 5.37 |
| Other Digital & Tech | 3.96 |
| Brick & Mortar | 3.73 |
| Web Businesses & Sites | 3.34 |
Questions to consider for yourself, with a qualified business broker or other specialist are:
-What do higher profit multiples mean for buying or selling a business?
-How do businesses within these categories compare in terms of being replicable or occupying a larger moat? Does it influence the profit multiple in a sale?
– Brick & Mortar businesses still command a respectable profit multiple despite a lower net margin. Why?
-Are businesses with higher profit multiples indicative of better profitability potential or is it just what buyers want?
If you are interested in exploring a complimentary business valuation, please reach out to us. We’d be glad to help.
