Looking for data and insight into the current market for private businesses – good news – you found it!
We have packed this post with market reports and actionable steps for every business owner.
At Washington Business Brokers we are proud, long-running members of the International Business Brokers Association. It is the premier organization for business brokers and transaction experts. For context, there are ~2,500 members..nationally. We are a small tribe of experts.
The IBBA conducts a quarterly survey on private business sales, it has insight by transaction size into market multiples, deal structure, time to close, and commentary on the market from hundreds of Business Brokers and M&A Intermediaries. This report, combined with BVR’s quarterly DealStats Index, that we also participate in and share, provides an incredibly rich amount of data and market insight.
Wondering if businesses are selling currently? Short answer: YES.
The headlines are not fun lately, we get it.
Interest rates, horrible violence flaring up in the Middle East, US House dysfunction, federal debt limit drama, inflation, Putin, flying spy balloons (remember that story?!).
All that said, market experts increasingly anticipate a soft landing for the economy and financial markets.
Focus on what you can control.
You do not need to spend any $$ to improve your business. We have written about no cost actions to increase the value of your business – encourage you to review and challenge yourself and your employees to think accordingly.
Businesses are transacting, buyers are seeking opportunities, and lenders are facilitating fair deals. There is always a market for quality businesses.
We have three businesses under contract at the moment. Two are under contract for ABOVE the price we took to market at. The third is under contract at full asking.
Expanding on the short answer above – quality businesses, priced appropriately, are selling. If you are considering selling your business, now more than ever, professional representation and guidance matters.
Now, read on for insight into:
Deal Structure (mix of cash / financing / contingent payments aka earn-out’s).
Industries seeing the most deal activity.
Who is buying (good overview of the buyer pool at various deal sizes).
Due diligence considerations for buyers and sellers.
Time to close.
Commentary on the market from deal experts.
Check it out:
Are you a business owner and unsure where to start? Review our 2023 guide to selling your business and update on the legal challenge to the WA State capital gains tax.
Want to discuss your business, the sale process, valuations, or the market?
Reach out for a confidential, no commitment chat. You will come away with knowledge and concrete steps to immediately improve the value of your business (whenever you choose to explore the sale process).
See the Q3 2023 DealStats Value Index from the valuation experts at Business Valuation Resources below, it’s packed with insight across 15 industries, including:
Sales and gross profit multiples.
Earnings multiples (EBITDA / SDE / cash flows).
Impact of transaction size on multiples.
10-year trend for private-seller sector multiples (you might be surprised how consistent some industries are).
Time to close.
Median owner compensation.
Commentary on the market from other transaction experts.
Value levers to review.
Check it out:
We talk with a lot of business owners. One of the neat things about our role is we get to learn a little about many different types of businesses. Right now, every owner is trying to conserve cash, maintain margins, and buckle down in an uncertain economy.
Which begs the question – what can you do now to maintain and improve your business?
I am frequently amazed that owners have not reviewed their P&L, by line / expense, over the last 3 years. This is a great place to start with an objective review of your margins and cost structure. When we do a valuation, we look at each expense as a % of revenue, by year. This helps pinpoint potential areas for review. What is driving your margin pressure? Pricing? Direct materials / labor? Admin costs? Do you know which costs are hurting you the most? I had an owner save nearly $70k / year in merchant processing fees by shopping their business! Call a software supplier before a license renews and ask for a discount. It adds up to real $$.
Next, I challenge all owners to spend a few hours, annually, shopping your competition. What does their online reputation look like? Number of reviews? When was their last customer review? When was yours? Do you know their pricing? Do you know their response time when you call? A few hours investment of your time drilling into others’ processes will yield action items, and when you execute on these, results.
Finally, invest time in documenting roles, processes, and ensuring systems work well. There’s a great podcast I listened to about an owner who spent 1 hour daily, for 3 months, documenting every step in the business. She was prompted to do this after being disappointed with the offers (and deal structure) for the business. The result? She went from receiving offers proposing 60% cash at close to 85%…AND…a nearly 20% higher transaction price. Documentation, process, and systems matter. They increase the valuation and confidence in your business from prospective buyers and their lenders.
Let’s say you were planning to sell your business in 12 – 24 months. What steps could you take today to increase the value of your business and make it more attractive to prospective acquirers?
Do you have an idea of the value of your business? Have you consulted a Business Broker or M&A Advisor? If not, consider contacting Washington Business Brokers for a complimentary consultation on value levers for your business. Regardless of when you plan to sell, a key initial step in improving the value of your business is knowing how it will be perceived by buyers.
Value levers to review
Own your business reputation / reviews / online presence
Hone your market and customer niche
Clean up your financials
Review cash flow and minimize running personal expenses through your business
Review fixed assets, inventory, A/R aging
Develop and motivate key employees
Document processes and organize records
Clean and freshen up any physical space
Identify risks and work to address them
Review customer and supplier concentration risk
Thank past customers and referral partners
These are meant to be thought starters for you as an owner.
Other resources we find valuable include:
This report from BizBuySell is interactive, based on 60 closed business sales in the Seattle, Tacoma, and Bellevue market, the average cash flow multiple was 2.76x in the most recent quarter.
That is it for today – more to come in a future post. Please forward or share this content if you find it valuable. As always, thank you for reading!
At Washington Business Brokers we are experts in valuation, optimizing a business for sale, buyer identification and qualification, negotiation, deal structuring, and closing.
If you would like to better understand the value of your business or learn more about the process of confidentially selling:
Conversations are always confidential and there is no commitment. We will be ready when you are!