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Trends for Business Sales

Insight on List vs. Sales Price

 

As 2016 comes to an end and 2017 is on the horizon, business owners need to understand that the decisions they make will impact the ultimate price a Buyer will pay to acquire their business.  Day to day operations are often the focus, but understanding annual cash flow is important when planning an exit strategy.  Consider the trends that The Firm has noted over 2015 and 2016:

 

List Price vs. Sales Price

  • Price negotiation is occurring across all business tiers
  • Average Sales Price is within a 6-12% margin of List Price
  • On average, businesses in Tier 3, with a List Price of greater than $1.5 million, are have less negotiation on Sale Price
  • List Price and Sale Price are directly related to the business’ cash flow

 

 

 

Cash Flow in Relation to Multiple

  • Multiples in the Midwest range from 1-5
  • Businesses with higher cash flow levels, seen predominantly in Tier 3, are obtaining higher Multiples
  • Higher Multiples mean higher List Prices and higher Sales Price

 

 

 

Active Businesses

  • The Firm’s current portfolio of 102 business has 66% of Listings in Tier 1, twice as many as Tiers 2 and 3 combined
  • If a business is in acquisition mode or a new entrepreneur is ready to purchase a business, there are many opportunities in the Tier 1 level
  • With the year-end influx of Buyers, Sellers are in higher demand, especially in Tiers 2 and 3

 

 

 

A business valuation can be done at any time; but acting in the first quarter is a good time.  Knowledge is power.  Whether or not you ready to sell, a business valuation will help plan for the future.  Educate yourself and know your options.

Thinking of Selling?
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The Firm Business Brokerage is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.