Recession Impact Report
If you are a small business owner, you probably have found yourself wondering how the recession will impact your business this year, or how 2023 will shape, with growing pessimism around a recession and persistent inflation looming upon us.
Back in December, we surveyed over 1,200 digital business owners and entrepreneurs both in the US and across the globe, to get a deeper understanding into their economic sentiment and uncover the market conditions for 2023.
We are now ready to share the most interesting findings: come with us as we delve into the data, and gain an insight into the future for the digital business community.
Millennials: The Force Behind Digital Businesses
Millennials, born 1981-1996, are dominating the digital world as our survey reveals 55% of digital business owners belong to this generation, with Gen X and Gen Z trailing behind.
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Digital Business Owners Invest in Multiple Businesses
Why own one business, when you can own two or three?
Small business owners are ready to double down, owning multiple assets: 67% of those surveyed are ready to add another business to their portfolio, and 49% said that they will acquire a complimentary digital business/asset to safeguard their current status in the next 6 to 12 months. So if you were thinking about embracing multi-business ownership and acquiring a new asset, you are in good company.
Our survey also shows that 47% of respondents are already sitting on two assets, while 16% are taking it to the next level with three or more businesses up and running.
So the question is: how many businesses will you own in six months?
Ready to acquire your next online business? Search thousands of businesses for sale on Flippa.
Content at the Core of Most Digital Businesses
We knew content is still as relevant as ever after the launch of our 2022 Insights Report. The incredible amount of searches on the marketplace (over 300,000 unique searches annually) told us that content dependent assets attracted enormous buy-side attention in 2022. So it comes as no surprise to learn that 35% of those recently surveyed operate in the content/publishing and advertising industries, i.e. they are likely bloggers.
While Content reigns supreme in popularity, Apps, Ecommerce and SaaS businesses follow closely behind. 25% of respondents own an app-based business, 22% run an Ecommerce business, while 10% own a SaaS business.
Enquire at [email protected] if you would like a valuation consultation for your Content business.
Optimistic Growth Predictions Despite Fear of Recession
Let’s be real: we are living through a turbulent and unstable economic era, but when it comes to the future, the versatile and resilient digital business community is staying positive.
Even if small digital business owners are still worried about inflation, supply chain disruption and soaring prices, their approach remains pragmatic: 40% said they have a bullish outlook about this year’s economy, and only 25% thought it was looking ‘bearish’.
When it comes to the impact of the recession on their own business, 56% of the surveyed individuals see it as an opportunity for growth. So much so that 32% predict 1-10% growth in 2023, 28% predict 11-20% growth and 12% anticipate growth of 50% or more. Only a small 9% don’t expect any growth in 2023.
The digital economy is undeniably the new driving force, and business owners in this space remain positive, creative and adaptable even in the most challenging economic conditions.
Consumers’ Behavioral Shifts Drive Price Adjustments
Despite a mostly positive sentiment towards the economy, most owners reported a shift in customer behavior over the past year. As expected, rising inflation has taken its toll on businesses, with 42% reporting slower operations, or reduced order sizes, and more price negotiations happening. Only 4% reported no change in their customer behavior throughout the year.
These behavioral shifts have prompted the majority of small business owners (45%) to make the difficult but likely decision to increase prices between 5-10% (31% of the surveyed), while 36% are still waiting to see what the future holds before adjusting their pricing strategy.
Protecting Growth and Stability Through Acquisition
The current economic crisis has forced business owners to reinvent and / or tweak their operational strategies, and take preventive steps to safeguard their businesses.
Whether by acquiring a complimentary business to survive the crisis (49%), raising capital (37%) or investing in more security (31%), business owners are taking proactive steps to ensure or protect their growth.
And despite recession hitting, the data also shows that 47% are increasing content marketing spend in 2023. So no cutting back on those marketing efforts just yet.
Digital Business Owners Must Invest in Tech for Accounting
If you have been listening to our podcast, The Exit, you’d know by now that the first thing on the exit plan (even if you are not planning on doing it right now) should be having all your finances organized and assessing the financial health of your business.
An interesting finding in our survey is that 21% of small businesses still don’t use any type of accounting software to track their revenue, expenses and tax obligations. If you too are in this 21%, you know just what you need to do now…
Betting on the Future and Staying in Business: The Golden Rule of Digital Entrepreneurship
For our last question in the survey, we wanted to understand and share the golden rule of digital entrepreneurship for 2023. Once again, small business owners are maintaining a positive attitude towards the new year: while reducing costs and staying in business is a priority for most surveyed, a remarkable 36% have a positive outlook and are prepared to invest for growth, and place a bet on a brighter future.
About the “Recession Impact on the Digital Small Business Economy” Survey.
Flippa surveyed digital small business owners around the world, including but not limited to owners of ecommerce stores, content websites like blogs, apps, SaaS businesses and more. Two online surveys were fielded via Pollfish and SurveyMonkey between December 18, 2022 – January 6, 2023. 1,252 respondents completed the survey.
Want to discover more insights from Flippa? Read our 2022 Insights Report summarizing the state of online business acquisition in 2022, as well as some of our predictions for 2023 here.
If you’re considering selling your digital asset, we can point to some specific examples to showcase potential for online business owners looking for an exit or buyers looking to negotiate.
The following asset examples yielded higher than average multiples:
- App: The highest achieved multiple for an app was for an iOS and Android design app portfolio out of Singapore which realized a 5.45x annual profit multiple and sold with a total transaction value of $35MM. Enquire at [email protected] if you would like a valuation consultation for your app.
- SaaS: The highest achieved multiple for a SaaS business was 10.5x annual SDE. In this case, it was a short-term rental compliance monitoring SaaS for property management professionals, municipalities, and mortgage lenders. This was a $630,000 transaction. Enquire at [email protected] if you would like a valuation consultation for your SaaS business.
- Ecommerce: The highest achieved multiple for an Ecommerce business was 6.5x annualized SDE. The business sold vitamins and supplements and was sold to a competitor. This was a $10.5MM transaction. Note: Multiples for Ecommerce businesses are adjusted to exclude the value of inventory. Enquire at [email protected] if you would like a valuation consultation for your Ecommerce business.
- Content: The highest achieved multiple for a content site was 7.63x annualized net profit. The business was a compliance blog focused on GDPR and related regulations. This was a $5.2MM transaction. Enquire at [email protected] if you would like a valuation consultation for your Content business.
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