Market Pulse report 2014

September 17, 2014 by

Andrew Rogerson in Buy a business, Selling your business

What is the current market for selling or buying a business?

Each quarter the International Business Brokers Association and M&A Source sponsor a Market Pulse Survey with the support of the Pepperdine Private Capital Markets Project and the Graziado School of Business and Management at Pepperdine University.

The purpose of the Market Pulse Survey is to obtain an accurate understanding of the market conditions for businesses being sold in Main Street (less than $2mm) and Lower to Middle Market (from $2mm to $50mm).

The 2014 second quarter survey is now complete.

Some of the highlights from the report include:

The Median SDE multiple to calculate the value of the business was 2.0 if it was valued at less than $499,000, 2.8 if it was valued from $500,000 to $999,000 and 3.1 if it was valued from $1,000,000 to $2,000,000.
The Median EBITDA multiple to calculate the value of the business was 2.6 if it was valued at less than $499,000, 2.9 if it was valued from $500,000 to $999,000, 4.3 if it was valued from $1,000,000 to $2,000,000, 4.5 if it was valued from $2,000,000 to $5,000,000 and 5.4 if it was valued from $5,000,000 to $50,000,000
If a business was valued at less than $500,000 69% of the respondents perceived it was a buyer’s market. If the business was valued between $500,000 and $5,000,000, it was perceived to be neither a seller’s market nor buyer’s market. If the business was valued at $5,000,000 or more, 69% of respondents perceived it was a seller’s market.

Some of the highlights for those selling a business include:

The main reasons for selling a business were Retirement/Health, Burnout, Relocation/Moving and New opportunities.
Seller finance was offered on an average of 10% of all transactions.
78% of businesses valued at under $499,000 were not bought and taken off the market.
The primary reasons a business did not sell were unrealistic seller expectations, poor financial statements and the owner waiting too long to sell.
64% of business sellers are Baby Boomers.

Some of the highlights for those buying a business include:

The percent of first time individual business buyers in relation to the value of the business was 55% if the value was less than $500,000, 49% if between $500,000 and $1,000,000, 32% if between $1,000,000 and $2,000,000, 64% if between $2,000,000 and $5,000,000 and 0% if greater than $5,000,000 to $50,000,000.
56% of business buyers bought a business worth less than $500,000 to buy themselves a job. 63% of buyers bought a business worth between $500,000 and $1,000,000 to buy themselves a job and get a better Return On Investment. 53% and 54% of business buyers bought a business worth between $1,000,000 to $5,000,000 for a better Return On Investment and a Horizontal Add-on.

Click the following link if you would like to download and read a copy of the 109 page 2014 Q2 Full Report.

If you would like more information about buying a business, buying a franchise, starting a business or selling a business, please visit my website Rogerson Business Services.

About Andrew Rogerson

Andrew Rogerson is a business expert of 35+ years, a 5-time successful business owner, Certified Business Broker (CBB), Certified Business Intermediary (CBI), Certified Mergers & Acquisition Professional (CM&AP), Mergers & Acquisition Master Intermediary (M&AMI), Certified Machinery & Equipment Appraiser (CMEA), and author of 4 books. Andrew gives speaking presentations on request. Andrew helps business owners plan and execute buying or selling a business, and consults with business owners on how to make their ventures stronger so they increase in value.