This article is the first in a series designed to help staffing company business owners get a better understanding of the current M&A market and terminology. Although the term “multiple” is commonly used in business valuations, this article is intended to provide some additional clarity to the concept.
Much is written about “value drivers”; strong financials, recurring revenue, desirable industry, scalability, impressive customer list, intellectual property, etc. However, I think of value drivers as almost prerequisites to attracting buyers for lower-mid market companies. But eliminating “value detractors” is frequently even more important to buyers because it helps minimize risk. In my opinion, the top two value detractors are: 1) owner dependence and 2) customer concentration.
The reality is that you will not own your business forever. The baby boomer generation owns close to 70% of the estimated 4,000,000 lower-mid market businesses in the U.S. ($2mil - $20mil revenues). And the number of family owned businesses that are transitioned to the next generation is on the decline. The convergence of these statistics is that over the next 10-15 years a large number of privately owned businesses will be on the market.
Entrepreneurs/business owners have some contrasting qualities; part risk taker – part strategic planner and deciding to sell your business will take a significant amount of both. But one thing is f