Ever wondered why some online businesses are worth millions while others struggle? In this article, I’ll show you what small business makes the most money and why they’re so valuable.
Many entrepreneurs fail to scale towards a big exit, because they don’t know what makes the sector they operate in valuable and why. Let’s change that today.
The value of a small online business is usually calculated by taking the business’s profit (EBITDA) and multiplying it by a sector-specific number called the multiple. Here are the top 6 online businesses with the highest multiples in 2024:
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SaaS (Software as a Service): SaaS businesses top the list with a multiple of 6.03 in the first half of 2024. The recurring revenue, high customer retention, and scalability make SaaS businesses very valuable. Investors love the predictable cash flow and growth potential. To maximize value you should reduce churn rates, increase subscription prices, and keep innovating your software.
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Content Business: Content businesses, like blogs, YouTube channels, and podcasts, follow with a multiple of 4.92. High-quality content attracts loyal audiences, driving ad revenue and sponsorship deals. To boost value as a content business owner, consistently produce engaging content, diversify income streams, and build a strong brand presence.
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Amazon Shop: Amazon shops have an average multiple in 2024 of 4.13. The massive customer base and trust in Amazon’s platform make these businesses attractive to business buyers. Key drivers for a high valuation of an Amazon shop include great product reviews, sales history, and brand reputation. Optimize listings, manage inventory well, and provide great customer service to increase value.
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Ecommerce: In the first half of 2024, Ecommerce businesses have sold at an average multiple of 3.81. With the rise of online shopping since the 2020 global pandemic, these businesses have maintained big growth potential. Factors like a diverse product range, strong supplier relationships, and effective marketing contribute to their value. To further increase your business valuation, streamline operations, enhance user experience, and use data analytics.
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Apps: Apps have a multiple of 3.73 in this first half of 2024. Their popularity and potential for viral growth make apps lucrative. Key aspects include user acquisition cost, retention rates, and monetization strategies. Improve the app, focus on user experience, and explore new revenue models to enhance value.
- Service-based Business: Service-based businesses have an average multiple in 2024 of 3.11. These businesses include consulting, digital marketing, and other professional services. Their value lies in client relationships, recurring contracts, and specialized expertise. To increase value, develop standardized processes, build a strong and loyal client portfolio, and invest in building a strong team to reduce owner dependency.
While you can’t change your sector without totally changing your business, you can influence the multiple for your business. The multiples listed above are averages. To command a higher multiple than the average, make sure your business exit-ready. Focus on optimizing operations, diversifying income streams, and building a strong brand.
Now, it’s your turn to take action. Identify your business type from the list above, evaluate your current EBITDA and sector-specific multiple, and find areas for improvement to enhance your business’s value. You too can position your business for a big exit. Remember, knowing what drives value in your industry is the key to success. Start making changes today. The next 12 months could be transformative for your business.
