Valuing an online business can be a complex process, especially if you’re navigating different business models, price ranges, and niches. How do you know what an eCommerce or SaaS business is really worth—and how do you avoid the pitfalls that both buyers and sellers often fall into?
In today’s episode of the Buying Online Businesses Podcast, host Jaryd Krause sits down with Ryan Hutchins, a serial entrepreneur and business valuation expert. Ryan shares his experience as the owner of Peak Business Valuations and several other ventures, including plumbing companies, a multi-location bakery, a pizza restaurant chain, and even a stripping company. His unique background offers incredible insights into the world of business valuations, acquisitions, and investing.
Together, Jaryd and Ryan dive deep into SBA acquisitions, exploring everything from common mistakes buyers and sellers make to the key differences between valuing eCommerce businesses and SaaS businesses. They discuss the importance of working capital, how SBA loans are approved, and what business valuation firms like Peak Business Valuations look for in eCommerce and SaaS acquisitions.
Ryan also shares his thoughts on the risks involved in Amazon-based businesses vs. off-Amazon eCommerce businesses—and why some risks are far more critical than others. Whether you’re buying your first online business or looking to scale your acquisitions strategy, this episode is packed with lessons to help you accurately value a business and secure the right deal.
If you’re considering buying an online business—or just want to better understand the world of business valuations—you won’t want to miss this episode!
Get this podcast on your preferred platform:
RSS | Omny | iTunes | Youtube | Spotify | Overcast | Stitcher
Episode Highlights
02:00 Ryan’s journey on valuing businesses
10:20 Risks of owning an Amazon business
16:00 What are supplier risks?
23:00 How to value a business using an SBA loan?
37:00 Connect with Ryan
Courses & Training
Courses & Training
Key Takeaways
➥ eCommerce businesses tend to have higher risks if sales are Amazon-dependent, as Amazon can change its policies or suspend accounts. SaaS businesses typically have predictable recurring revenue, making them easier to value, but customer churn and tech support are key risks to consider.
➥ Dependency on a few key customers can be risky. If those relationships are tied to the seller personally, customers might leave when the seller exits.
➥ Working capital is essential. Buyers must have enough funds to maintain and grow the business post-acquisition.
About The Guest
Ryan Hutchins owns a business valuation firm, two plumbing companies, a striping company, a multi-location bakery, and a multi-location pizza restaurant.
Connect with Ryan Hutchins
Transcription:
Hi, I'm Jaryd Krause. I'm the host of the Buying Online Business Podcast and today I'm speaking with Ryan Hutchins, who owns a business valuation firm, two plumbing companies, a stripping company, a multi-location bakery and a multi-location pizza restaurant.
Today we talk with Ryan about how he was in finance, doing financial DD for a business valuation firm, how he went out on his own to create his own business valuation firm, peak business valuations, and then moved on to investing in his own businesses himself as an investor and also owning the businesses. In this podcast episode, we talk about so much around where sellers go wrong and buyers go wrong when they're valuing a business to either buy or sell?
What can happen between two parties that want to purchase a business? We also talk about how a seller might undervalue their business when they're selling their business as a strategic acquisition versus selling their business to a wider market of people that might be buying their business for the first or second acquisition. We also talk about how SBA loans are approved and how Ryan and his team do a lot of SBA business valuations and what they look for, talk about how important working capital is, how much working capital you need for an e-commerce business, and how much working capital you need for a SaaS business to get approved to acquire one of those businesses with the SBA.
We also talk about the differences between valuing an e-commerce business versus a SaaS business. We also talk about the risk between an Amazon business and an e-commerce business off Amazon and the variations. We talk about the larger risks in online businesses versus the risks that most buyers focus on, which aren't as important as the larger risks with the primary risks. So there's so much value in this podcast about how to value online business.
If you're looking at buying a business, this is definitely for you. Also, make sure you get my due diligence framework on how to take the guesswork out of buying a business. It's free. Thousands of people have used it. I'm sure you're going to love it. What I use is what all my clients use. Prevent yourself from buying a lemon.
Go to buyingonlinebusiness.com for free resources. can get it there. Let's dive into the pod.
Ryan, welcome to the Bob podcast. Thanks for your time.
Thanks for having me, Jaryd.
Yeah. So you've been valuing businesses. You've started peak business valuations. How long ago did you either buy your first business and when did you start valuing businesses? Did you start valuing businesses first or acquiring first? Good question. I like, I'll give a background. So I started as a tax accountant working for Deloitte in San Francisco. And after I got my CPA license, I left and joined a business valuation firm in 2015 in Utah after being in San Francisco for two years and started working at a business valuation firm that primarily focused on SaaS companies and stock option issuance. And after going from a work environment of working 70 to 90 hour weeks.
Only expected to work 40. I just learned the whole business model, how to sell and theory, and then started my own valuation firm in August of 2018 after just working in valuation for three years. And I bought my first company. It's a water softener company. So it installs and services water softeners and arrows and anything water quality. And I bought that business with a couple of partners in 2021.
And from there on out, bought one or two businesses each year. Cool. Congratulations on starting in 2018. then yeah, one business a year since 2021, right? So you're up to three businesses now? Yes. Yes and no. It's more complicated than that. So, like, I'll go over my track record. So I bought that water softener company, which I kind of classify as more residential plumbing.
In 2021, 2022 put money into a concrete contracting company, which filed for chapter seven bankruptcy in the States last year. So I lost my shirt on that one. Granted, I'm still wearing shirts. And then in 2023, gosh, this is all running together. In 2023, I invested in a holding company that owned a catering business, a multi-location bakery and then a multi-location pizza franchise.
And we recently just sold the catering business to fund their expansion with the bakery and the pizza chain. I learned quickly that it's much easier to invest in other people than it is in companies because if the people running them aren't solid, you're not getting your money back. And then we just closed on a commercial plumbing company last year or not last year, last week. And then we also own a striping company that paints lines like a pickleball court or parking lot. Okay. Yeah. And yeah, cool. Interesting. Yeah. And then we do other debt venture deals. So that's a little bit, yeah. Like, if a small business or business needs a loan and more so for kind of gap financing versus kind of like, I need this chunk.
It's more so I need this much to get to this period and I'll pay you one to one and a half percent interest a month and pay you back in 12 months. And it's like, that's a good deal. Cool. And where does that cash come from? Is that you using finance for that as well? Or, like, is this just cash that's going for that debt financing? Yeah. It's coming from all the other instances.
So the dividends and the distributions that we receive. Right. Cool. There was one question that I wanted to ask around. I've sort of just lost it. I'm sure it's going to come back. It was to do with funding from the holdco. So you sold the bakery or the catering business, one of them to fund.
Yeah. So did you take the cash from the sale and then just put it straight into or use just cash to fund that or did you use the cash to acquire more finance, say, SBA, to get more finance to fund the expansion of the catering business? Yeah, so on that one, our CEO, David, he like sold the catering business and then essentially used the cash from it, one, to pay off the liabilities that were owed on that business.
But then once we had kind of the net proceeds, we used that to leverage and buy real estate in which we were kind of building on next. that's primarily how we used it; it was kind of firming up our balance sheet and then going out and identifying the properties and being able to move much quicker because we had more cash on hand, which made it easier for banks to be comfortable with.
Yeah. I just want to explain that, if I'm wrong, correct me, but this is in very general terms, but just for people listening, it's a really wise move to go away and purchase the location and own a location and have the business rent the location off the whole hold, right? It's a really good financial decision versus just finding somewhere to lease. Right? Yeah. Is that sort of the reasoning?
Yeah. Like, there's a couple of locations that we lease, but most of the locations we've started to own and the reason being is it's much like when you own the property, like you're not answering to other people. Well, granted, you're answering to banks, but you're not answering to a landlord on what you can and cannot do with respect to a leasehold improvement.
And so you can kind of construct what you need for the designated purpose rather than already buying an existing shell or building and kind of customizing it for what you actually need but you're not going to get all the utilization out of it because you didn't start from scratch.
Yeah, absolutely, absolutely. So there are so many things that we could talk about and we could probably talk for hours and hours and hours. So I'm just trying to like scratch. a few questions valuable for the audience. I'm probably going to stick to mostly online businesses and the valuation of online businesses.
What are the major differences between valuing and this is very general, but valuing offgoing businesses versus an online business? Good question. Especially as it relates to e-commerce. E-commerce is, it's very interesting to see kind of the trends of the products being sold through an e-commerce business and where the sales are predominantly coming from.
So, like, when you're looking at a brick-and-mortar business and looking at how sales are generated, you know where it's coming from, whether it's from the local community or just a general geographic market. But when you have the ability to sell more nationally and internationally, then it becomes like your website; it becomes kind of like your digital location.
So, like, you can customize it for what you need. But at the same time, like when we're looking at e-commerce business and assessing value, one of the components is again, where are sales coming from? Likewise, one of the aspects that makes a business typically more risky is if they are predominantly selling on Amazon versus through their own website. Because if it's on Amazon, there's more competition. this is the single source dependency on Amazon as well.
Like I like to typically tell people, they are probably sick of hearing me say this on the podcast: if you own an Amazon business, technically, you don't own the business; Amazon does, because they can just shut down your listing at any time based on them changing their terms of service or policy for what you can or can't write or write in your listing or images that you have in your listing.
It's a tricky one because I'm not sure about the competition in terms of whether there is increased competition on Amazon compared to off Amazon because it depends on the niche, the industry, the product, and then the players in your marketing channels. Yeah, it's really a hit or miss.
We were working with a company that predominantly manufactures its own product, which is actually a great moat to have, as they sell it predominantly through their website and online sales and through affiliates. So, like, because they control and have the patents related to their product, it really makes it difficult to compete in the e-commerce space.
Granted, what they're making are gun parts to make it more efficient, but they sell it to people all over the country and to different governments. And so they have these contracts, but like 90 % of their sales come from website traffic, which is awesome, which is kind of what you want. Like you're more willing to buy a business like that because it has a defined moat and product, and the traffic is solid because it's who you want to sell to. Like it's your right crowd.
Absolutely. Absolutely. And you are not so reliant on Amazon. can have lesser fees in fulfillment. You can have better cost per acquisition rates. You have your email list, which is a massive asset. you can do follow-ups, abandoned cart campaigns, follow-up campaigns, and email marketing campaigns for upsells and downsells. can have upsells and downsells on the website. You can increase your customer lifetime value.
Dramatically, I can even take, I've had guests on the podcast talk about taking an e-commerce business and turning it into a membership business. Say even apparel, for example, every winter or summer you could get X amount of credits to the latest gear and purchase it and use that through a membership or coffee and things like that instead of one-time product sales, ongoing.
It works better with perishables, obviously beauty, consumables and stuff like that. But yeah, you're building a far better ecosystem and a brand that you can build that on Amazon, although there's so much platform risk on Amazon. And I don't mean to rag on Amazoses.
If you've got, like, for people starting a business that doesn't have much experience in marketing, it's easier to start a business and e-commerce brand and put it on Amazon because Amazon does so much heavy lifting in terms of when somebody is on Amazon, the traffic there, their intention is to, they're on Amazon, what are they gonna do? They're gonna buy, right?
So there's so much closer to a purchase of a product versus somebody that's on Google that's just searching around and looking, right? And having a bit of 100%. Yeah, so where do people get hung up? Like, do you have people come to you with e-commerce brands that they want to buy and they have this ideology of what the business is worth and then they get a valuation from you and you're like, and they're like, Oh, interesting or they want to sell their business, get a valuation and they're like, Oh, that's not what I expected.
So where do people get tripped up on this, either for a seller or a buyer? Yeah. Normally, it comes down to their ability to assess risk. ultimately at the end of the day, the value of any business is what's the cash flow that it's going to generate relative to the risk inherent in achieving that cash flow? And like when it comes to e-commerce, some of the key risks are the individual who actually owns it.
Like how involved are they? Are there any employees? If there are no employees, like they are the business, which means they understand the customer. They understand and hold the supplier relationship. And so, like, where management is key and understanding is it for you to actually step into the seller's shoes and run the business the exact same way and kind of grow it and change it from there.
Supplier risk is also a large one. Where are you sourcing your product to sell? And if the owner holds that relationship, like we worked with one company where it was very interesting. The supplier was another company in China that the seller owned and it was like the seller was going to keep that company.
Yeah. And so, like in that situation, it creates an awkward kind of point from the perspective of the buyer because the buyer looks at the primary supplier that supplies 80 % of the product. And now the seller can dictate terms because now they're not shelling money back and forth between the two companies.
I just want to highlight that as well. I'm glad you brought that up. That's so good. Not only that but when you, not only can they dictate terms, like the seller, like, so they sell the business, they get a bit of cash for it, they own the manufacturing plant in China, that, they could just cut off, like, they could be like, We've got something else that we'll start on the side and just sell our products to, or restart another one, especially in China, like, they don't care, like, they've got no rules with this sort of stuff.
They could just start another e-commerce brand, the same as what they just sold, cut off the supply to the business of that person who purchased it, and then just do it sending it to the other new business they started or they could just basically do what they do. It's actually, if you think about incentive, what's the incentive for the seller who owns the manufacturing plant?
Once they sell the business, what's the best move for them to do to grow their business and make more money? It's not the same. It's not in the buyer's best interest. It's the opposite. It's to cut them off. So once you understand incentive like that, the risk becomes more significant, right?
Yeah, it's very interesting to watch because once we go through supplier risk, we assess customer risk. Are you selling to a broad base of individuals or are there individuals mixed in with key companies that are buying? They essentially make up 20 % of your revenue. And it's like, who holds that relationship with those particular customers? And what happens if the seller leaves?
Do the customers follow? What if the seller tells that primary customer where they got the product from and gives the supplier relationship? so customer relationships, supplier relationships, and management are probably the three biggest overlooked risks when we're assessing a company.
And then we get into all the different risks that everyone else thinks of. Okay, what's competition? What are the stats behind marketing campaigns and the website, like how well are we converting each individual that comes onto our website? Are we using different heat maps?
What software is being used on the website? our website is using different heat maps, like what software is being used to identify and follow the customers through their journey and where they are getting hung up on how we can increase, as you said, lifetime value and look at our CAC.
All that's important, but that's normally where buyers focus rather than looking at management, supplier and customer risk first; they like to look at what is currently happening in operation and what they can change versus what they're buying as an existing business.
And you look at the value of that business based on whether or not it's going to continue in its current trend and not necessarily the changes that you're going to make based on your knowledge and skillset. I love that you said that because a buyer is looking at the business through the lens of their own competence and when they do that, they can focus on, all right, it's being marketed by Google Ads; let's look at the Google Ads and see how well they're run. Can I make those better?
And they have blinkers on to out like other risks that are generally, in general, far bigger. Like, if you think about it, you know, when Stephen Covey talks about putting the large rocks into the bucket first, focusing on the big things you have to sort, it's basically we could just call it single source dependency, right?
Single-source dependency on the key person in the business, single-person dependency on a supplier or a customer. And those, there's no point in that you should be looking at those first and starting with those first with evaluation before you move into more micro focuses on different parts of the business with marketing and sales and traffic and whatnot. Yeah. Right. Yeah. Do you notice there's a range?
Just expectations, right? The expectation is just to kill people. Do you have a range? where in is it 10, 20, or 30 % that people believe their business is worth 2010, 20 % more than what it is actually worth for a seller or a range for a buyer that, yeah, do you have any of those stats? Yeah, those are hard.
Like we value 20 to 30 companies a week. And so, like I would say from the perspective of, it also depends on, like, is this a seller and a buyer conversing with each other versus a buyer and a broker with a seller? Because ultimately a seller and a buyer that come together and start chatting, like they are going to have a lot more differences in value.
And so, like, it's very broad. Like e-commerce and SaaS companies have more divergence in what the asking price of a business or the purchase price is versus what it actually should be transacting at in order to create a scenario that's fair and reasonable to both buyer and seller. So, like, that's hard to really nail down kind of where, like, a percentage, because we've seen companies that are like, We did evaluation this morning; granted, it was for brick and mortar but there were math errors performed to determine the purchase price.
So we came in at a valuation that was less than half of the purchase price. so like, that's just for normal business. e-commerce is like, there's a lot more that comes into play when you're working with a broker. A lot of brokers that we've worked with lately in the e-commerce space like to list the business for as high as possible. And it's not based on what's fair and reasonable for the buyer and seller.
It's based off of if the buyer does this, then this would create more value. So therefore, the seller should sell the business based on what that number is. Like you didn't do it, seller. The buyer is going to do it, but let's see if they want it. So I'll notice we always come in under here because it's going to be value creation on the buyer side. So I know it didn't answer your question. It helps, though. It's hard.
It just means that when we've got people listening that are selling their business, if the buyer is, it's going to be a strategic acquisition for them. For example, it's in the same niche and they can merge the business with their primary business. Typically, you would see that you could maybe get more than if you were selling it to a single investor. That's just one acquisition in their portfolio.
Yeah, like one of the ways to think about it is if you're the one selling, like put yourself in the shoes of the buyer. Like if you were selling the business at that price today as the buyer, would you buy your own business at that price? Knowing what you know. Yeah. Most sellers quickly say yes, but the sellers that actually stop and think and go through it do not.
it, like, okay, then why are you trying to sell it at that price? Yeah. Yeah. That's good. That's a really good few questions to be asking. So I want to shout about SBA valuations because a lot of people are going to be wanting to acquire an e-commerce business or a SaaS business using SBA. So you do SBA valuations. I'm assuming you do those for the banks. Is that right?
Correct. Yep. Yeah. Okay. So if that's the case, what are some of the things that buyers need to know when assessing a business and they want to buy it using SBA? So the question is, how do you value the business for an SBA loan? What are some of the things that, let's just stick with e-commerce versus SaaS first, are...
Yeah, so I'll touch on that before you ask more follow-up questions. Ultimately, the valuation process is still the same whether it's for an SBA lender or for two individuals buying and selling a business. Where the primary piece comes into play, if you're the buyer of an e-commerce business, is identifying an SBA lender and bank that actually understand e-commerce and how that works. That's one of the primary areas of concern generally: there are SBA lenders that are lending to e-commerce that don't understand e-commerce.
And so when it gets closer to the finish line, it ends up failing because everyone that, yeah. So that's the first key, because from a business valuation standpoint, it all makes sense; it's all pretty much the same to some degree. Just our client at this point is the bank. And so if you find an SBA lender that understands e-commerce and lending to e-commerce and what makes your business model more unique, whether you actually hold the inventory or it's more of a drop shipping model where you don't have inventory, like there's a clear distinction in e-commerce that makes it more unique than a traditional business.
So yeah, does that answer what you wanted? Yeah, no, that's great. I'll dig into more. I just want to put a bit of a note here for people listening: if you are looking at buying e-commerce business or a SaaS business and you want to use SBA, reach out. I have some people that I can send to you depending on the size of the business you want to purchase, a business model that you want to purchase info at buyingonlinebusiness.com. can just refer you to some of those.
Now, what are some of the things that a buyer should be wary of when buying a business using the SBA? So one of the key pain points that we've been coming across is understanding working capital. Because ultimately, like every business that's currently operating, yeah, what's your question? Yeah, just so people can... so... You've got all these accreditations for this.
Well, yeah, I used to be a CPA. After not practicing for nine years, I gave it up. But essentially, working capital is the necessary kind of funds you have on hand to keep the current business operating as is. And so as your business grows, you need more capital to fund that growth. So with a traditional business, like the simple equation is your current assets or your cash receivables and inventory, minus your current liabilities.
So your accrued payables, your credit cards, and ultimately you take current assets minus current liabilities and that shows what working capital is. But if you want to get more granular, like the better equation generally is to look at all the expenses that the company is incurring on a daily basis or you can look at it on an annual basis but divide by days to get to a daily basis.
And that gives you an idea of how much money we spend per day to keep this business currently operating and doing some industry analysis to figure out how much working capital we need to actually have on hand in order to generate these current revenues of the business. So most individuals selling businesses will extract all the working capital out of a business and require the buyer to bring their own working capital to keep the business going.
And that actually hurts the valuation on our end because if the buyer's required to bring their own capital, generally they're getting a loan to do that. now they have more debt that they have to cover themselves and they're trying to fuel a business and keep it running with little, like if they haven't figured out working capital before they transact.
And that's what a good SPA lender will do. They will help you understand what your working capital requirement is to kind of sustain it and keep it going. like, yeah, that's like one of the primary components that we've been having more issues with with any type of business model. E-commerce is an interesting one because if you have inventory on hand, like you need some of that inventory to operate as is. But most of that inventory is what we call excess inventory.
It's inventory that was pre-purchased that doesn't necessarily have a purpose in its current standing. And so that is kind of additive and increases the value of the business. What type of working capital, and how much working capital, do SBAs like to see? We're talking six months a year. Like, what's the minimum you typically?
Yeah. Yeah. So it really depends on what the industry is. So for instance, like a restaurant, for instance, has a really short lifespan of working capital needs because it's just churn and burn. It's just cash in, cash out and that time frame is generally like seven days.
Whereas other businesses, e-commerce is probably closer to anywhere between 20 and 30 days to like a month on hand of working capital and it kind of skyrockets from there because there's some businesses like we're working with a business that sells online like they kind of cross into the online jewelry store space but they primarily deal with bullion gold and like that holding period is 75 days yeah and so significantly longer because it your inventory like you need more inventory on hand in order to service all your clientele because you don't know what they want whereas if you're kind of one silo like this is our product offering, you could have it much quicker, especially if you know kind of from a sourcing standpoint, like if I were to sell this inventory item today, like a mouse for instance, like a computer mouse, like how long does it take to get a mouse already ordered so I can ship another one?
And just understanding kind of what that cycle is, your cash cycle, and if you're able to turn it over, turn that mouse into cash, buy a mouse and sell it again and it takes eight days—like essentially eight days of working capital to kind of sustain current operations. If you're trying to scale, you want more cash to buy more inventory so that you can ultimately kind of be able to ramp up and sell more inventory, kind of like the holidays.
Everyone ramps up in September and October from a buying perspective because they know they're going to sell in November and December and those are their big months and then it kind of goes like e-commerce is a fun space to work in when looking at a business because it's all cyclical.
It's not consistent. It's understanding the seasonality and where the trends are. So I love that. So working capital for e-commerce businesses can be anywhere from two weeks to a month sort of thing, right? Yeah. Now what about that's very general? That's going to be dependent on the business a lot.
These are funds that the buyer is going to need to have. So basically I would say for my, I like to have more than six months of working capital in my business personally, far more. Nice. each business. I'm the same way. So I mean, people call it like a war chest. The same with my investment is like that costs; it can be profitable, right? Like a property investment, but I'd like to have a year, six months to a year, of working capital. What about a SaaS business? Is it pretty similar?
Like, would you say two weeks to four weeks or something? It says ranges so drastically. So it all depends on the business model. Like, is it actually generating revenue? Yeah, it's not generating revenue. Like it's a matter of where's the cash coming from to kind of have working capital to pay your employees in the technology.
And so, yeah, like that one, I don't have a pulse on because the SaaS company that we worked with and delivered the evaluation report last Friday, like it was, what did we use? Here, let me look it up. sure.
Yeah, so looking at kind of our quick stats and our project management, like the networking capital percentage used as a percentage of revenue was 30%. And so what that equates to from a day's working capital, I honestly don't know, but 30 % of revenue when you're doing, I think they were doing 3 million in revenue.
Like that means you have to have 900 grand on hand as working capital. That's a lot. So most people don't have that, but ultimately they were on a ramp-up stage from a growth perspective because they were growing between 30 and 42 % year over year for the last four years.
And so based on that growth, they were essentially just keeping like they needed the working capital to continue that growth moving forward. That's why a lot of SaaS companies, when they raise venture capital, want that war chest as big as possible in order to prolong their growth cycle.
To continue that growth, for example, say you acquire a business that's got, you know, year-on-year growth the last two years; you want to be able to at least maintain that 20 % growth by spending the same amount of money. Likely most people are going to want to double it. So you're going to have to increase your working capital or have more working capital to grow it. also you're going to probably need around that 20 % enough for working capital for the SBA to approve the financing for the business anyway, right?
Yeah. Yeah. Cool. I love it.
So a lot of people are probably going to be thinking about reaching out to you now for some valuations. So you helped buyers, you helped sellers, and you helped people that are in the middle of a trend, like looking at a transaction. What percentage of people come to you as a seller, a buyer or about to transact or in the middle of a transaction online?
Yeah. From a workload perspective on our end, I would say half of our evaluation work is associated with SBA lenders, where the bank is ordering the valuation 30%. So another 12 to 15 valuations a week are somehow related to a seller and a buyer kind of transacting by themselves. And then outside of that, we deal a lot with partnership disputes and divorces. Yeah, I bet. So those are fun. They're a different type of transaction because they're fun because they're more dramatic, right?
I love it. All right. Well, thank you so much, Ryan, for coming on. Is there anything that you think I should have asked that I didn't ask? Valuation is very complex. like we, as you stated earlier in the conversation, like we could chat for hours because there's so many little, like so many little kind of, oh, this is weird. Like questions where it's like, Oh, I never thought about that. Or like when you're looking at a valuation multiple, like what does a multiple actually represent?
Most people just look at kind of what they could find online without understanding that it's a measure of risk return reward that a buyer and seller kind of agreed to. And so, like when you're looking at e-commerce or SaaS, like those are two industries where the multiples just instead of being here, they're like here. So they range drastically depending on risk, growth, demographics, and what's happening in the business.
Like all the qualitative factors, help us translate. would assume in your case too, like qualitative helps us understand the financial aspects of the business, which ultimately results in this is where factors should be transacting at. And this is the implied multiple as a result. But you've asked great questions.
There are obviously so many more questions we could go over, but that's for another day. Thank you. Yeah. I mean, just to add to what you said, when somebody's looking at buying a business and maybe they bought one or two businesses, maybe they bought three businesses, maybe they know a fair bit about business.
But if they're not in the market, and this is going to be most people buying a business, the first or second business, if they're not in the market of the business model that they're purchasing and the industry or niche that they're purchasing in, how are they going to be able to know the comparables of that business model, that price range, in that specific niche? They just don't have the data.
They're not in the market looking at those businesses all the time, which is where your value comes in: you're in the market for a broad spectrum of all different types of businesses, business models, niches, and industries, plus the price range, like the value of a business that goes through maybe like a couple hundred thousand dollars versus something that goes through a couple of million dollars; the multiples can be very, very different.
I'm not saying they will be, but they can be very, very different based on the type of business model, the industry. So that's why it's so hard for somebody who's investing, even if they've bought two businesses themselves; they're not spending all day, every day in the market knowing what the market value is. So that's why it's worth reaching out to Ryan, guys.
So Ryan, where should we send people to check out more about what you guys are doing? Yeah. So our website is a great spot. We focus a lot on education. So peak, so P E A K. businessvaluation.com is a great way to kind of learn more about what we do. Or you could just call our office and I'm usually the first person that picks up. You can reach me at 435-359-2684 or email; I live in email. So Ryan at peakbusinessvaluation.com. Awesome. Well, Stanger's giving you a phone number, but you'll be getting some calls. Yeah, that's fine. We get about 50 to 60 inquiries a week.
I'm happy. I like chatting with people. fun. Awesome. Yeah. Well, thank you so much for coming on and spending your time chatting. Really appreciate you, Ryan. And everybody's listening. Thank you for listening and I'll see you on the next one. Okay. Thanks, Jaryd.
Want to have more financial and time freedom?
Host:
Jaryd Krause is a serial entrepreneur who helps people buy online businesses so they can spend more time doing what they love with who they love. He’s helped people buy and scale sites all the way up to 8 figures – from eCommerce to content websites. He spends his time surfing and traveling, and his biggest goals are around making a real tangible impact on people’s lives.
Resource Links:
➥ Sell your business to us here – https://buyingonlinebusinesses.com/sell-your-business/
➥ Buying Online Businesses Website – https://buyingonlinebusinesses.com
➥ Download the Due Diligence Framework – https://buyingonlinebusinesses.com/freeresources/
➥ Surfer SEO (SEO tool for content writing) – https://bit.ly/3X0jZiD
➥ Rank Math (WordPress SEO Plugin) – https://bit.ly/3Acyjf4
➥ Ezoic (Ad Network) – https://bit.ly/3NuVR5P
🔥Buy & Sell Online Businesses Here (Top Website Brokers We Use) 🔥
➥ Empire Flippers – https://bit.ly/3RtyMkE
➥ Flippa – https://bit.ly/3wGa8r5
➥ Motion Invest – https://bit.ly/3YmJAmO
➥ Investors Club – https://bit.ly/3ZpgioR
*This post may contain affiliate links, so we may earn a small commission when you make a purchase through links on our site/posts at no additional cost to you.
Read More:
Ep 309: Using Programmatic M&A For Growth By Acquisition To Solve Every Business Problem You Face with Tom Shipley
Unlock the power of programmatic M&A with Tom Shipley! Explore how strategic acquisitions can address every business challenge you face.
Ep 308: How To Value An Ecommerce and SaaS Business for SBA Acquisitions with Ryan Hutchins
Planning to acquire an online business using an SBA loan? Jaryd Krause and Ryan Hutchins reveal the method on valuing an ecom and SaaS business.
Ep 307: SEO For Generative AI Search & What To Do After A Business Exit with Ben Dankiw
SEO For Generative AI Search. Discover how generative AI is transforming search engines. Learn about its impact on search algorithms, content creation, and user experience.