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.
It is a quarterly study which tracks worldwide trends in the value and liquidity 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 Q1 of 2017. The majority of participants were from the United States, the UK, Canada, Australia and South Africa.
The most important trends in last quarter’s Sellability Tracker were a decline in business owner optimism (other than the UK) as well as a decline in average offer multiples for private businesses.
Here are the key highlights:
Decline 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 declined from 94.1 to 89.5 for the quarter ending 31 March 2017, 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, at its current level it is running 10 points below its average since the Sellability Tracker commenced in 2012.
Decrease in average offer multiple to 3.6 times pre-tax profit
Moving in line with the decrease in the Business Liquidity Index, the average offer users of the Value Builder System received in the last quarter decreased from 3.95 times pre-tax profit in Q4, 2016 to 3.6 times pre-tax profit in Q1, 2017.
Decline in business owner optimism
The Value Builder System’s key markets include the United States, Canada, the UK, South Africa and Australia.
Business owner optimism declined in all key markets, other than the UK, particularly in relation to expected revenue growth. Business owner optimism was steadier in relation to industry growth.
Age matters when it comes to attracting offers for your business. There have been two strong age related trends since the inception of the Sellability Tracker.
Younger business owners attract more offers. 16.22 percent of business owners aged 39 or younger received offers to buy their business over the last year compared to the average of 12.29 percent and only 9.86 percent for business owners in their 50s.
On the other hand, however, business owners aged 39 or younger received the lowest value offers, on average 3.34 times pre-tax profit compared to 4.24 times pre-tax profit for business owners in their 50s.
Businesses with Value Builder scores over 80 receive much higher offers
The Sellability Tracker for Q1, 2017 again confirms that businesses with high Value Builder scores get much higher offers. Businesses with Value Builder scores over 80 consistently attract average offers of 6.1 times pre-tax profit compared to the average multiple of 3.55.
After strong improvements in Q4, 2017, the latest Sellability Tracker shows declines in several key market areas 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 Q1 of 2017 click here.