What was the largest business which sold last year? What did the list price multiples reach? Which niches are the most popular and which sell the quickest? All these questions and more will be answered in our FBA Business Price Guide: 2019 Year In Review.
Introduction
How this report is put together: The team has been researching and collating market information since 2016. We search for ALL listings available online and compile the data. We are limited to publicly available data and rely on brokers and websites to update when listings are sold, the current price and other details.
Note: Where it’s relevant we refer to market pulse data by the International Business Brokers Association (IBBA). It’s sourced from IBBA and M&A Source members who participate in quarterly surveys. Further details and report can be found here: IBBA Industry Research.
An overview of the numbers!
This 2019 report will change to align with our other reports that focus on businesses with $1M+ in revenue.
Without further to do, from the 1st of January 2019 until the 1st of January 2020 we tracked a total of 294 businesses listed for sale, which is down 12% from 2018 (334).
This consists of:
- 106 listings carried over from 2018
- 188 new business listings found during the year
Here’s how the year ended.
Let’s look at how these 294 listings are breakdown based on the list price.
Comparing these figures to those in 2018 highlights that many sellers have continued to build larger businesses. This is very apparent when looking at the $5+ million listings with 51 listings coming to market in 2019, which is 18 more than the year before (33 in 2018).
However, there was almost a 50/50 split between business under the $2MM (54%) and business over the $2MM+ (39%).
Of the businesses listed for sale this year, 26% were noted as doing $5MM or more in revenue (49 of 187).
Reported net profits however in this range vary wildly, being anywhere from 1% to 54%. As businesses are generally valued based on a multiple of annual net profit, list prices also fluctuated.
By breaking up the data into calendar months we can see which month has the highest new listings (April) and which month shows the highest amount of sold businesses (December).
It is also intriguing to note that September was the overall slowest month, this included only 3 sold listings occurring during this time period.
Sold Listings Data
As we see the number of new listings being brought to market increasing year-over-year it poses the question “do these businesses actually get sold”?
The number of listings that came to market decreased by 14% whilst the number of sold listings increased by 3 listings or 4%. It is also worth noting that there are currently 27 pending listings, which is not surprising as the time to close on deals grows.
In 2019 we’ve tracked 72 FBA businesses reported as sold which equated to $292 million in list price value. This was an increase of $42 million in transaction value compared to last year’s total of $245MM.
Looking at the sold listings by price segment we can see that the largest businesses, those with a list price over $5MM almost double compared to last year with a growth of 43%. It is interesting to note that there are still currently 13 pending listings in this price point.
We are also seeing an increase in the number of businesses being sold in the $1 – 5MM price point.
The IBBA reports from 2019 Q4 state:
“Small businesses valued at less than $500,000 have become harder
to sell in the last few years. Advisors have consistently singled out
that sector as a buyer’s market, with more supply than buyer demand”
This is one of the reasons why we choose to focus on deals greater than $1 million in list price vale.
Largest Sold Listing
A $47MM Health & Personal Care business takes the honor of the largest business known to have sold in 2019. It was listed at a 5.4x annual net profit multiple, selling after 314 days or 10.3 months on the market.
Whilst this is one of the largest listings we have ever seen sold were are also currently tracking a $50MM Health & Personal Care business that went pending in 2019 and has currently been on the market 334 days.
The longer sale time on this deal is not surprising as we are seeing the larger deals increasing in time to close, as we’ll discuss next.
Who are buying businesses like these?
The likely buyer for a larger deal of this size is a strategic one, an existing company looking to grow via acquisition.
Source: 2019 Q4 IBBA Report
Days on Market
Taking a closer look at the sales by quarter we can see 2 things:
- Majority of sales occurred in Q4
- Q3 saw the lengthiest days to sale at an average of 309
Additionally, the days on market is trending up over time for business almost all price points with the exception of the $2-5MM price point which is trending down over time. This is due to a number of factors in this space such as the number of SBA deals has continued to increase and knowledge of the space grows.
The IBBA also reports that time to close has increased significantly and they aren’t expecting this to change in 2020.
8.6 months is the average time to sell a small business
“Meanwhile, advisors expect that businesses will take longer to
sell in 2020 and that closing deals will become more difficult.
Business brokers representing small businesses valued at less
than $500,000 point to financing challenges as an obstacle to
getting deals done.”
Days on Market for Active Listings
At the beginning of 2019 the marketplace had 115 active listings. Whereas, as of the 1st of January there were 79 active listings. Of these 35% have been on the market for more than 90 days and only 16% of the active listings were from Q3 2019.
Top Amazon Categories
A lot of entrepreneurs have a goal of one day selling their business for a meaningful amount. Of the 72 sold listings, 57 were listed at $1MM or above, which is where we focus our time.
Below are the top 4 Amazon Categories where they likely sold for 8 figures or more based on their list price.
Percentage of Sold Listings by Category
List Price Multiples (active listings)
2019 saw a small increase in multiples across most price points. The data also suggests that those businesses which did eventual sell had a slightly lower multiple than what it was listed at.
The IBBA findings for median multiples aligns quite well with your own tracking of the ecommerce market.
In the past year, median multiples never varied more than 0.2 points in any market sector, and Q4 2019 ended on par with the year prior
Of the top 4 categories mentioned above here is how they rank in order of highest median multiple of annual net profit. A long way of saying the one’s which got top dollar!
Supplements achieved the highest median multiple, being 0.5x more than the other categories that all had very similar median multiples.
Home & Kitchen comprises of a lot of sub-categories. For our data we use Amazon’s Best Sellers list to categories each listing. You can review the Amazon Best Sellers by departments here.
That’s it for this year’s 2019 review. We’ll be working on for category-specific reports so you can see what your niche trends are. If you want to be the first to know when the top 7 category reports go live click “Be the 1st to Know”.
