Value Builder Sellability Tracker Q1 2016 update
The team at Valuebuilder.com 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:
The Business Liquidity Index (BLI) has dropped to its lowest point on record
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 slipped from 90.9 to 81.8 for the quarter ending March 31, 2016, showing that, compared to the previous quarter, a smaller proportion of business owners had received an offer to buy their business.
Average offer multiple slipped to 3.55 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 dropped from 3.64 times the pre-tax profit in Q4 of 2015 to 3.55 in Q1, 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 20,000 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 slight softening trend in the market for privately held businesses. Therefore, if you’re planning to sell your business in the next few quarters, we recommend you do everything possible to maximize its value, focusing on the eight factors business buyers care about most.