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 Q4 of 2016.
The most important trends in last quarter’s Sellability Tracker were an improvement in business owner optimism and a significant increase in average offer multiples after a decline in Q3 of 2016.
Here are the key highlights:
Improvement in 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 improved from 90.8 to 94.1 for the quarter ending 31 December 2016, meaning that a higher 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 still a long way off its peak in recent years of 137 in mid-2014.
Significant increase in average offer multiple to 3.95 times pre-tax profit
Moving in line with the increase in the Business Liquidity Index, the average offer users of the Value Builder System received in the last quarter increased from 3.435 times pre-tax profit in Q3, 2016 to 3.95 times pre-tax profit in Q4, 2016.
This is among the largest quarterly increases in the average offer multiple since 2012.
Improvement in business owner optimism
The Value Builder System’s key markets include the US, Canada, the United Kingdom and Australasia. Business owner optimism improved in all key markets, particularly in relation to expected revenue growth.
There is no doubt size matters when it comes to attracting good offers for your business. In Q4, 2016, business owners with earnings between $3M and $10M received average offers of 4.42 times pre-tax profits and business owners with earnings over $10M received average offers of 5.1 times pre-tax profits. Both being substantially higher than the Value Builder System average multiple of 3.55.
Businesses with Value Builder scores over 80 receive much higher offers
The Sellability Tracker for Q4, 2016 again confirms that businesses with high Value Builder scores get much higher offers. In Q4, 2016, businesses with Value Builder scores over 80 attracted average offers of 6.1 times pre-tax profit compared to the Value Builder System average of 3.55.
After the pull-back in Q3, 2016, the latest Sellability Tracker shows a move back to 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 Q4 of 2016 click here.