As certified Value Builder System advisers we are pleased to provide you with access to the latest global data on private business trends.
In this post we bring you the key findings from the Value Builder System’s latest Sellability Tracker report.
The Sellability Tracker is a quarterly study which tracks worldwide trends in the liquidity and value of private businesses. The latest Sellability Tracker report analysed data from over 25,000 users of the Value Builder System from around the world for Q3 of 2016.
The most important trend in last quarter’s Sellability Tracker was a decline in the Business Liquidity Index and average offer multiples after a strong rebound in both indicators in Q2 of 2016.
Here are the key highlights:
Decline in the Business Liquidity Index
Each quarter, the Sellability Tracker measures the proportion of business owners that received an offer to buy their business and expresses it as an index, 100 being the average (the Business Liquidity Index).
The Business Liquidity Index declined from 105.8 to 90.8 for the quarter ending 30 September 2016, meaning that a lower proportion of business owners received an offer to buy their business compared to the previous quarter.
While the Business Liquidity Index does fluctuate on a quarterly basis, it’s now a long way off its peak in recent years of 137 in mid-2014.
Average offer multiple declines to below 3.5 times pre-tax profit
Moving in lockstep with the Business Liquidity Index, the average offer users of the Value Builder System received in the last quarter declined from 3.75 times pre-tax profit in Q2, 2016 to less than 3.5 times pre-tax profit in Q3, 2016.
Owners without strong customer relationships get higher offers
A key role for many business owners as they build their business is sales. However, somewhat surprisingly, having strong customer relationships is a negative when it comes to selling your business.
The Sellability Tracker for Q3, 2016 again confirms that business owners who have stepped back from a key sales role get higher offers. Business owners who had little or no involvement in sales and customer relationships attracted average offers of 4.54 times pre-tax profit compared to the average of 3.55.
Businesses with Value Builder scores over 80 receive much higher offers
The Sellability Tracker for Q3, 2016 again confirms that businesses with high Value Builder scores get much higher offers. For Q3, 2016 businesses with Value Builder scores over 80 attracted average offers of 6.1 times pre-tax profit compared to the average of 3.55.
The latest Sellability Tracker shows a pull-back from the previous improving trends in the market for business owners looking to exit. It also provides further confirmation of the importance of focusing on the eight Value Builder System drivers to build exit value in your business.
For a full copy of the Sellability Tracker report for Q3 of 2016 click here.