Q1 2016 saw us build on the strong success seen in 2015 by completing 21 deals totaling $5M in value. As we approach our 6th anniversary, we are prouder than ever in our best-in-class team, processes and educational content, which is helping FE International champion the industry into a new era of safe, secure and successful deal making. With over $1.1M in revenue since the turn of the year, we continue to reinvest our resources into the future of this asset class and remain on track to reach our 10-year growth plan.
In this post we’ll take a look at what happened in Q1 2016 for sellers and for buyers. We’ve then compared this to our predictions at the start of the year to give the most up-to-date assessment of the industry.
From The Sell-Side
Q1 is always busy with sellers, as many people look for a fresh start in the new year, and this can often mean selling their businesses. We had a record Q1, with 21 sales, totaling $5M in value. We’re now very close to having completed 400 deals. We also saw over 1,000 new seller inquiries, which are being worked on diligently by our expert team.
A particular highlight of Q1 was the listing of a B2B SaaS company. When we initially spoke with the sellers in 2015 the business was smaller than it is today. After an initial discussion we worked collaboratively with the sellers to establish a solid exit plan and the business continued to grow, becoming more valuable each month. This is now one of the best businesses we have ever listed!
Observed Seller Trends
As predicted at the beginning of the year, sellers continue to sell non-core assets. In the past, options were limited: sell privately, sell on a marketplace or sell with a sub-standard broker. FE International’s website brokerage service is available to businesses in the five-, six- and seven-figure ranges, and gives sellers a 95 percent success rate with minimal hassle. This allows business owners to focus on their core assets while the FE International team is working the buyer market.
Business models have also been in line with our expectations. In the e-commerce space, we are talking with a number of FBA business owners, and have sold a number of businesses that utilize FBA for both logistics and physically selling on Amazon. Much like we have seen in the SaaS space over the years, word will continue to spread and sell-side flow should continue to increase.
How We Help Sellers
As demonstrated by our six- to seven-figure business pipeline, exit planning is essential in advance of a sale. We launched an exit planning mini-course to help sellers prepare for a sale, sometimes years ahead of an actual exit. We have a number of listings that began the initial conversation with us over two years ago! We are always happy to discuss well in advance of a sale – as long as you can be transparent and honest about your business and your exit goals.
Having spoken to a number of sellers at events it is clear that while we have done a great job reaching business owners by publishing highly relevant content, speaking at events and general word-of-mouth from successful sellers. This is just the start. There is still a long way to go in terms of industry awareness and there are many small business owners who still don’t realize that their business is sellable! We’re on a mission to educate sellers, and will continue to expand our distribution, both in terms of content and conferences.
In the Pipeline for Q2
FE International will continue to lead the market in SaaS, software, content and affiliate and e-commerce business sales. With a large number of sellers actively exit planning with the FE International team, our short, medium and long-term pipeline remains very strong. We have a number of exciting businesses in the pipeline for Q2 that are sure to be popular (and competitive) with our growing buyer base.
In the seven-figure range, businesses often take longer to prepare for sale. We spend time advising and exit planning to ensure businesses are best positioned for sale. A lot of this work will be coming to fruition in Q2 and beyond, with a number of seven-figure businesses being listed. We are firmly cemented as the market lead for SaaS businesses at this level but also expect to see a number of sizeable content-driven and e-commerce listings, too.
In the five- and six-figure range, Amazon affiliate websites remain extremely popular, often being sold in a matter of hours. We expect this to continue throughout the year along with a number of other businesses in different niches.
Final Thoughts
It’s been an exciting start to the year with 21 businesses sold totaling $5M in value. We would encourage anyone thinking of selling a business to review our seller resources, particularly those on exit planning and valuation. It’s never too early to understand the process of selling, and it’s never too early to start a conversation with the team. We love talking to sellers and are always available to discuss options, whether it’s a near or long-term goal.
From the Buy-Side
Q1 was a strong quarter for buyer engagement, with many buyers taking pro-active steps at the start of the new fiscal year and others looking to invest large tax rebates. In Q1 we and added over 2,000 new buyers to our qualified network. Interest will continue to rise in Q2 as we begin to release exciting new content focused on specific niches for the first time.
Observed Buyer Trends
As predicted at the beginning of the year, more investors are coming together to create either formalized investment funds or micro-investment syndicates. These groups are typically looking for seven-figure businesses, which has been in ample supply at FE International. In particular, we sold PicReel to WebFolio Management in March 2016, marking their largest acquisition to date. We expect this investor demand to grow further as we continue to release six and seven figure listings in Q2.
We have also seen a reduction in the time it takes to get deals under offer. This comes partly from improved internal processes, greater relationship development and, as ever, the high quality of businesses we have been listing. A few buyers have been caught off guard with larger deals that are going under offer within days, when previously this could have taken a few weeks. Buyers are not necessarily making decisions faster, but they are better communicating their criteria with the FE International team and moving as they see opportunities that align right away. Investors that are proactively following up with the FE International team are gaining an advantage.
How We’re Helping Buyers
Our buyer’s guide and advanced buyer’s guide remain the industry standard for buyers looking to understand the asset class and invest safely, securely and successfully. That said, we’ve taken the feedback to go into greater depth on specific business models, and so in Q1 we laid the groundwork for a series of business model-specific content that will come in Q2.
We are starting with our Internet Business Due Diligence series, which cycles through each of the major internet business models and explains their idiosyncrasies for due diligence. You can already view our posts on advertising, Amazon FBA and affiliate due diligence. In the coming weeks, we’ll release content on due diligence for e-commerce, SaaS, lead generation and app businesses. These articles should prove invaluable for investors interested in specific business models and seeking to learn best-in-class due diligence techniques.
After that we will follow up with a series of valuation-specific content of a similar nature to help buyers take a holistic view to online business investments.
Elsewhere, in order to help clients stay up to date on the news that’s important to running an online business, we’ve given our newsletter an overhaul. It now includes news briefs on the latest in SEO, advertising, small business, entrepreneurship and much more. Click here to sign up.
Looking to Q2
We have a very strong pipeline of SaaS and ecommerce businesses in Q2, which shall please a lot of buyers who are waiting to move in those spaces. We’re now seeing some large, evergreen content sites coming back to market as predicted at the end of 2015, which will be very popular amongst a number of offline buy-and-hold investors that like the relatively passive nature of these business models.
There are rumors of more acquisition funding services coming into the marketplace within 3-6 months, which if true will open up the six-figure space to a lot more buyers without going down the SBA route.
Final Thoughts
With a number of exciting listings and events ahead, Q2 will prove to be very interesting for new and existing buyers. Our strong pipeline will give more opportunities for investors to participate actively in this growing asset class, and FE International is committed to breaking more internal and industry standards than ever before.