Why Size Matters When Selling a Business
Any experienced business broker Calabasas will let you know that size does matter when selling a business. The data shows that there is a correlation between the total sales of small businesses and the price it can command when being sold. In our experience at So-Cal Business Brokers, we have learnt that larger businesses consistently outperform the smaller ones when it comes to the multiple of Seller Discretionary Income (SDE) that buyers want to pay.
Businesses with an excess of $5 million per year have been selling about 3.96 times their SDE since the year 2003 with a peak of 5.0 times their SDE in 2007. Over this same time, companies that had annual sales of $1 to $5 million per year sold an average multiple of 2.87. On the other hand, smaller businesses with annual sales of less than $1 million sell for an average multiple of 2.21. With this data in mind, the next question to your business brokers Calabasas is why bigger businesses are better in this case.
Reasons bigger businesses are better
When you come to us, we will be happy to enlighten you on the facts why bigger businesses are better in this situation. The main reasons include:
- Larger businesses are more stable. They are able to withstand adverse short-term economic trends.
- Larger businesses have more employees. The workload is shared so individual employees don’t have a lot of responsibilities on their table.
- Larger businesses have more procedures in place. This enables them to function smoothly without oversight from the owner.
Not all small businesses are bad
In our experience at So-Cal Business Brokers, we have come to understand that while the data is in favor of bigger businesses, small businesses can be restructured to compete fairly. When you come to us, the first thing our business broker Calabasas will do is ensure your business has documented procedures and keep the books clean. Doing this helps your small business sell for above average SDE multiples.
At So-Cal Business Brokers we work with businesses of all sizes and in all industries. Whether your business is family owned and operated or a mainstream industry company, we have you covered. Our team is well versed in getting these types of businesses ready for sale and will be able to bring you the selling price that your business deserves. What is more is that you will benefit from our experience and in-depth expertise. Our clients benefit from our huge network and franchise resources.
We are one of the largest business brokerage companies in Los Angeles. Visit our website and schedule a free consultation with our experienced business brokers today. Your success is our pride.