Thought starter
What do small businesses sell for?
Small businesses sold through a broker changed hands at about 1.5 to 3.1 times the owner's net return. The multiple rises with earnings. These figures come from sales Lloyds Business Brokers published with a price and the owner's earnings.
Read the measure first
The owner's net return is the profit left for an owner who works in the business, after paying a manager's wage. It is not company EBITDA. So these multiples do not compare with the multiples paid in larger deals, which run higher on a different measure.
What the sales show
Businesses earning under A$250,000 sold at a median of about 1.5 times the owner's net return. Those earning A$500,000 to A$1 million sold at about 3.1 times. Between them, the step is steep.
A buyer of a small business is often buying a job as well as a business. The more the business runs without its owner, the more a buyer will pay for each dollar it earns.
Source: sales Lloyds Business Brokers published. Medians by onestepright.
| (times) | |
|---|---|
| Under A$250,000 | 1.5 |
| A$250,000 to A$500,000 | 1.8 |
| A$500,000 to A$1 million | 3.1 |
Source: sales Lloyds Business Brokers published. Medians by onestepright.
What moves a business up the range
The same things move a small sale as a large one. Earnings a buyer can see in the accounts. Customers who are not one large account on a handshake. A business that does not stop when the owner takes a month off.
The question for your own business
Where would yours sit? Three questions give the range for a business your size. The seller check shows what a buyer will test first.
The figures by band are on small business sales.