The numbers behind selling a business
Selling your business? Here's a look behind the numbers. Be sure you know the facts before you begin.
Author: Trevin RasmussenDate: August 2014
- The percentage of businesses listed for sale that will actually be sold. Top reasons business don't sell include business is overpriced, seller expects all cash, insufficient books and records, and business is in decline.
- The percentage of the selling price actually paid by the buyer to purchase the business. Another way to look at this is the Seller's asking price on average is 25% too high.
- The average multiplier of Gross Sales used to calculate the value of a small business with less than $5 Million in sales. This multiplier is derived from a dataset of 30,000 sold businesses across all industries, markets, and regions.
- The average multiplier of Seller's Discretionary Earnings used to calculate the value of a small business with less than $5 Million in sales. This multiplier is derived from a dataset of 30,000 sold businesses across all industries, markets, and regions.
- The percentage of businesses sold for all cash. The other 90% are purchased using some combination of seller financing and commercial financing
- The percentage of the selling price carried by the sellers in the form of a Seller Note. Sellers should expect to carry at least 20% and usually more to make the sale of the business successful.
- The percentage of deals that fall apart during the due diligence process. Most common reasons include misrepresentation of the numbers, cold feet, seller's remorse, or the inability to arrange financing, transfer licenses and contracts, or negotiate a lease.
- The percentage of buyers who inquire about a business listed for sale and then actually complete the process and own the business. Another way to look at this is that 99% of all buyers are just "tire kickers."
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- The average number of months it takes to from the time a business is listed for sale until the transactions closes.