We’ve recently analyzed the latest data from users of The Value Builder System™ and the findings present an interesting snapshot of the current value of privately held businesses. Below are some of the highlights: Owner optimism bounces back. More than three quarters of business owners who completed their Value Builder questionnaire last quarter expect their sales to increase in the next quarter. The Business Liquidity Index (BLI) has seen a slight increase. Each quarter, we measure the proportion of business owners that received an offer to buy their business and express the proportion as an index, 100 being the average. The BLI jumped from 90.8 to 94.1 for the quarter ending December 31, 2016, showing that, compared to the previous quarter, a larger proportion of business owners had received an offer to buy their business. Average offer multiple jumps to 3.95 times pre-tax profit.
Moving in lockstep with the BLI, the average offer the users of The Value Builder System received in the last quarter jumped from 3.435 times the pre-tax profit in Q3 of 2016 to 3.95 in Q4, 2016. When we isolate larger companies with at least ten million in annual revenue, the average offer multiple goes up to more than 5 times pre-tax profit. The BLI and average offer multiple usually move in the same direction, since very active markets tend to drive up offer multiples and when less offers are made, multiples go down. Our latest analysis includes data from more than 25,000 users of The Value Builder System from around the world. Of the business owners surveyed, 96% had revenue (annual turnover) of less than $20,000,000, while 4% had revenue in excess of $20,000,000. Findings are considered statistically accurate +/-0.81%, 19 times out of 20. The latest data shows a positive trend in the market for privately held businesses. If you’re planning to sell your business in the next few quarters, we recommend you do everything possible to maximize the sale by focusing on the eight key drivers of business value.