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.
There is no denying the Baby Boom Generation (people born from 1946 to 1964) have made a significant impact on society. From infancy on, Baby Boomers have changed perceptions on everything from child-rearing to retirement. These changes have helped boost the economy of every decade since the end of WWII. And now, the Boomers are about to have another impact, although this one may not be so positive.
Topics: exit planning
Most business owners fail to realize they must plan for the sale of their business. According to recent statistics, only 20-33% of business complete the sales process. A study conducted by ROCG, a company that specializes in business transitions showed 84% of the respondents to their survey indicated that the proceeds from their transactions were essential to their future.
Topics: selling business action plan
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
If you have resolved to make your company more valuable in 2017, you may
want to think hard about how your customers pay.
If you have a transaction business model where customers pay once for what
they buy and do not return, expect your company’s value to be a low single-digit multiple of your
Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA).
If you have a recurring revenue model, by contrast, where customers subscribe
and pay on an ongoing basis, you can expect your valuation to be a multiple of
Topics: Recurring Revenue