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?