Small Business Up 7.1% but Sale Prices Up Only 2.1%

Business Broker BizBuySell produced its annual summary of private company transactions. I found the following points particularly interesting:

• Median revenue up 7.7%
• Cash Flow essentially flat
• Median Sale Price – up only 2.1%
• Cash Flow under $100,000 gets 1.9X multiple (based on purchase price)
• Cash Flow around $1,000,000 gets almost 4X multiple

Key takeaway for me.

1. Grow your revenues! If you are a small business you better be growing at 10% or better a year otherwise you are in trouble
2. Cash Flow (profits) matters. Small business is not “Dot Com” and buyers want to see profits. The best way to increase the value of your small business, get your cash flow up over $500,000 and you will see a significant expansion of the multiple buyers will pay.

The full report can be found here: http://www.bizbuysell.com/news/media_insight.html