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2019 sold biz study color

the sold vs list comps and more data from the bbf in 2019

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2019 sold biz study color

  1. 1. BBF Listed & Sold Data Analysis For the Period of Jan 2014 – Dec 2018 BUSINESS BROKERS OF FLORIDA
  2. 2. Presentation Details • The last detailed analysis of BBF Data and other business MLS data was completed in 2008 by JohnsonServices.com for an IBBA workshop • This update was requested by Trish Walden & Jim Parker • This analysis only includes BBF data and was performed by – Ariel Gonzalez – BBF MLS – Lou Vescio – Coastal Business Intermediaries, Inc.
  3. 3. Problem with BBF Comps • Input by brokers is not always accurate • Listed Sales & DE may not reflect actual Sales & DE at closing • Only comp data from actual financials can be trusted – Tax Returns – P/Ls – Part Year – Annualized? • Same problems exist with BizComps and ValuSource (IBA Comps) • Deal Stats (PrattStats) & PeerComps are more accurate
  4. 4. Total 5 Year Data During the period of January 2014 thru December 2018 BBF Members • Listed – 22,422 businesses – 5 year average = 4,484 listings per year – Average about 4 Listings per member • Sold – 5,286 businesses – 5 year average = 1,192 sold per year – About 23.6% of the businesses listed were sold • The same study in 2008 indicated only 10.5% of listed businesses sold
  5. 5. Listed to Sold 27.2% 27.6% 27.4% 24.2% 12.0%
  6. 6. Listing Periods & Days on Market Year Days 2014 240 2015 239 2016 225 2017 210 2018 132 Year Days 2014 346 2015 350 2016 337 2017 327 2018 321 All Businesses -Days between Listed Date & Expiration Date Sold Businesses - Days on Market
  7. 7. Number of US Businesses by Sales Revenues 78.3%
  8. 8. Breakdown of Transactions by Sold Price Sold Price Number Sold Percent of Total 1000K or more 394 7% 900K-1000K 64 1% 800K-900K 70 1% 700K-800K 75 1% 600K-700K 126 2% 500K-600K 180 3% 400K-500K 222 4% 300K-400K 375 7% 200K-300K 619 11% 100K-200K 1385 26% 50K- 100K 1217 23% $25-50K 516 10% 1-25K 151 3% 36% Sold Under $100K 73% Sold Under $300K 84% Sold Under $500K 93% Sold Under $1M 62% Sold Under $200K
  9. 9. Breakdown of Transactions by Sold Price • 62% of all transactions were under $200K in purchase price • 73% of all transactions were under $300K in purchase price • Median sale price - $149,900 • Average sale price - $359,266
  10. 10. Sales by Type of Financial Data Listed Sold % of Listed Sold P/L Statement 5710 1508 26.4% Tax Return 4334 1083 25.0% Owner to Prove 4044 889 22.0% Sale of Assets 2896 652 22.5% Annualized 2393 647 27.0% Owner Estimate 1557 309 19.8% Proforma 858 208 24.2% Non-Operating 347 48 13.8% Part Year 280 48 17.1% • Highest Percentage based on: • Tax Returns • P/L Statements • Annualized Statements • Pro Forma • Lowest Percentage based on: • Non-operating • Part Year • Owner’s Estimate • BBF should add a Trailing Twelve Month (TTM) Category
  11. 11. Sales by Type of Financial Data of Total Sold Sold % of Total Sold Tax Return 1083 20.1% P/L Statement 1508 28.0% Annualized 647 12.0% Part Year 48 0.9% Proforma 208 3.9% Owner Estimate 309 5.7% Owner to Prove 889 16.5% Sale of Assets 652 12.1% Non-Operating 48 0.9% • 62% of all businesses sold were based on: – Tax Returns – P/L Statements – Annualized Statements – Part Year Statements
  12. 12. DE Multiples – Sold to Not Sold
  13. 13. What Types of Businesses were Sold Restaurants 1242 Hair/Salon/Massage/Spa 342 Construction/Contractor 246 Manufacturing 239 Liquor Related 226 Real Estate Related 222 Lawn/Landscaping/Tree Service 219 Retail 211 Cleaning/Laundry/Dry Clean/Carpet 167 Distribution 166 Auto Related 158 Medical Related 154 Ice Cream/Yogurt 131 Janitorial/Maid Srvc/Misc Cleaning 126 Other Misc 117 Pool/Spa Related 110 Transportation 100 Recreation 89 Routes 85 Gas Station/C Store 83 Consignment/Pawn/Used/Furn 19 Equip/Party Rental 18 Flooring 17 Jewelry Related 17 Agriculture Related 15 Appliance 13 Engineering Related 12 Computer/Music related 11 Security Related 11 Travel Related 10 Telephone & Related 10 Furniture 9 Lawn/Heavy Equip Repair 8 Optical 6 Photo Related 6 Real Property Rltd|Self Storage 5 Tobacco Related 5 Auto Salvage 3 77% Misc Retail 79 Pack/Ship 73 Education Related 71 Computer/Internet Related 70 Financial Srvcs/Insurance 64 Animal-Pet Related 60 Child Care 58 Clothing Related 37 Pack/Ship 36 Pest Control 29 Marine/Aviation Related 26 Retail Home Access/Upholstery 26 Accounting Related 26 Florist 25 Advertising 24 Sports Related 23 Vending 22 Bus Srvcs/Staffing 21 Games/Gifts/Luggage 20 Moving/Storage 19
  14. 14. Negative Cash Flow Listings • 254 businesses were listed with DE less than zero • 37 were sold (14.6%) • Of the 37 sold, 21 sold for less than the value of the fixed assets • Another 4 sold for the value of the assets • The 12 that sold for more than the asset value were – Liquor licenses – Restaurants – Educational/Tutoring businesses – Medical related (one was for the value of the R&D)
  15. 15. Zero Cash Flow Listings • 3,433 businesses were listed with DE of zero • 708 were sold (20.6%) • Of the ones that sold, almost all were sold for the value of their fixed assets or less than the value of the fixed assets
  16. 16. Cash Flow Listing from $1 to $49,999 • 4,278 businesses were listed with DE $1 to $49,000 • 877 were sold (20.5%) • Of the ones that sold, most sold for less than the value of the fixed assets or real estate • Of the ones that sold for over $100,000, almost all sold for the value of the real estate
  17. 17. Cash Flow Listing from $50,000 to $99,999 • 6,060 businesses were listed with DE $50,000 to $99,999 • 1,554 were sold (25.6%) • Of the ones that sold, 402 sold for less than the value of the fixed assets and real estate • Of the ones that sold for over $100,000, almost all sold for the value of the real estate • Of the ones that sold on cash flow, the average DE multiple was 1.92
  18. 18. Listings with $0 to $49,999 in Sales • 3,362 Businesses were listed with sales of zero dollars • 700 listings with $0 sales sold (20.8%) • All were sales of assets • 510 were listed with sales of $1 to $49,999 in sales • 75 listings with $1 to $49,999 in sales sold (14.7%) • Almost all were the sales of assets
  19. 19. • A going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months. • Most small businesses with over $100K in DE would be considered a going concern. Going Concern
  20. 20. Sold With DE $100K or More • 2,218 Sold businesses had a DE of $100K or more P/L Statement Tax Return Annualized Part Year Minimum 20,000$ 40,000$ 30,000$ 130,000$ Maximum 12,000,000$ 7,250,000$ 10,500,000$ 2,400,000$ Average 798,267$ 704,641$ 596,890$ 598,889$ Count 799 579 308 9 % of Total 36.0% 26.1% 13.9% 0.4% Owner to Prove Owner Estimate Proforma Minimum 20,000$ 1$ 21,000$ Maximum 4,725,000$ 4,500,000$ 7,500,000$ Average 378,701$ 383,937$ 607,576$ Count 322 103 96 % of Total 14.5% 4.6% 4.3% 76.4% TTM Financials are also useful for pricing!
  21. 21. Required Sales to get $50K in DE Sales Total Sold With > $50K DE Percent $ 0-100K 1080 91 8% $ 100-200K 823 497 60% $ 200-300K 673 529 79% $ 300-400K 552 474 86% $ 400-500K 398 372 93% $ 500-600K 308 291 94% $ 600-700K 219 207 95% $ 700-800K 177 169 95% $ 800-900K 182 179 98% $ 900-1000K 115 113 98%
  22. 22. Required Sales to get $75K in DE Sales Total Sold With > $75K DE Percent $ 0-100K 1080 8 1% $ 100-200K 823 206 25% $ 200-300K 673 297 44% $ 300-400K 552 343 62% $ 400-500K 398 315 79% $ 500-600K 308 256 83% $ 600-700K 219 193 88% $ 700-800K 177 162 92% $ 800-900K 182 172 95% $ 900-1000K 115 112 97%
  23. 23. Required Sales to get $100K in DE Sales Total Sold With > $100K DE Percent $ 0-100K $ 100-200K 823 67 8% $ 200-300K 673 145 22% $ 300-400K 552 187 34% $ 400-500K 398 226 57% $ 500-600K 308 211 69% $ 600-700K 219 172 79% $ 700-800K 177 135 76% $ 800-900K 182 161 88% $ 900-1000K 115 105 91%
  24. 24. Required Sales to get $150K in DE Sales Total Sold With > $150K DE Percent $ 0-100K $ 100-200K 823 2 0% $ 200-300K 673 30 4% $ 300-400K 552 47 9% $ 400-500K 398 80 20% $ 500-600K 308 93 30% $ 600-700K 219 93 42% $ 700-800K 177 86 49% $ 800-900K 182 105 58% $ 900-1000K 115 86 75%
  25. 25. Required Sales to get $200K in DE Sales Total Sold With > $200K DE Percent $ 0-100K $ 100-200K $ 200-300K 673 3 0% $ 300-400K 552 11 2% $ 400-500K 398 28 7% $ 500-600K 308 42 14% $ 600-700K 219 50 23% $ 700-800K 177 52 29% $ 800-900K 182 65 36% $ 900-1000K 115 59 51%
  26. 26. Using BBF Pricing Comps Example Problem • Italian Restaurant is $650K in sales • DE = $130K • Pull BBF Comps – 373 listed comps 90 comps with sales of $500K - $800K (+/- $150K)
  27. 27. Using BBF Pricing Comps BBF Pricing using the average would be: • $650K of sales times .332 equals $215,800 • $130K of DE times 1.248 equals $162,240 BBF Pricing using the median would be: • $650K of sales times .272 equals $176,800 • $130K of DE times 1.364 equals $177,060
  28. 28. Using BBF Pricing Comps Copy the same BBF Comps into a spreadsheet • Remove any DE comp data outliers – Less than 1 times – And more than 5 times – New average DE multiple is 1.65 – New median DE multiple is 1.51 • Remove any Price to sales data outliers – Less than 20% – And more than 100% – New average Sales multiple is 36.9% – New median DE multiple is 32.3% DE Sale 130000 650000 1.65 214,646$ 239,934$ 36.9% 1.51 196,560$ 210,275$ 32.4%
  29. 29. Using BBF Pricing Comps – SBA Loan Example Problem for SBA Loan Qualification (P/L & Tax Return data only) • Italian Restaurant is $650K in sales • DE = $130K • Pull BBF Comps – 36 listed comps – 26 comps with sales of $500K - $800K (+/- $150K)
  30. 30. Using BBF Pricing Comps – SBA Loan BBF Pricing using the average would be: • $650K of sales times .367 equals $238,550 • $130K of DE times 1.821 equals $236,730 BBF Pricing using the median would be: • $650K of sales times .270 equals $175,500 • $130K of DE times 1.615 equals $209,950
  31. 31. Using BBF Pricing Comps – SBA Loan Copy the same BBF Comps into a spreadsheet • Remove any DE comp data outliers – Less than 1 times – And more than 5 times – New average DE multiple is 2.05 – New median DE multiple is 1.96 • Remove any Price to sales data outliers – Less than 20% – And more than 100% – New average Sales multiple is 42.8% – New median DE multiple is 35.0% DE Sale 130000 650000 2.05 266,209$ 278,233$ 42.8% 1.96 255,060$ 227,175$ 35.0%
  32. 32. Using PeerComps – SBA Loan PeerComps database only includes SBA Loan Transactions Same Problem with PeerComps Italian Restaurant with $650K in sales & DE = $130K Summary Data Transactions Min Max Mean Median CV Sales Price 239 $125,000 $837,000 $381,646 $365,000 N/A Annual Gross Revenue 239 $500,000 $797,900 $642,193 $634,907 N/A Seller's Disc. Earning (SDE) 239 $58,000 $254,335 $132,719 $128,684 N/A EBITDA 229 $21,000 $222,000 $97,054 $93,000 N/A SDE % of Revenue 239 9.93% 37.67% 20.60% 20.38% 0.25 EBITDA % of Revenue 229 3.59% 33.89% 14.81% 14.77% 0.34 Multiple of Revenue 239 0.19 1.17 0.58 0.57 0.3 Multiple of SDE 239 0.9 5.51 2.82 2.82 0.2 Multiple of EBITDA 229 1.15 14.05 4.06 3.95 0.27
  33. 33. Restaurant Pricing Analysis 130,000$ 650,000$ DE Comps Price Rev Comps Price BBF Comps 1.25 162,240$ 22.1% 143,650$ BBF Comps Adjustedfor Outliers 1.65 214,500$ 36.9% 239,850$ BBF Comps (TR & P/Ls) 1.82 236,730$ 36.7% 238,550$ BBF Comps (TR & P/Ls) Adjustedfor Outliers 2.05 266,500$ 42.8% 278,200$ PeerComps 2.82 366,600$ 58.0% 377,000$ • Pricing should be based on the real revenue sources for your business • Always remove outliers • Use Tax Return & P/L data if possible (TTM financials are also useful) • If qualifying the business for an SBA Loan, PeerComps data is better
  34. 34. Summary What we learned • Most main street businesses that sell with a DE under $100K are a Sale of Assets. • Most main street businesses with sales of less than $200K are a Sale of Assets. • The most probable reason why listings do not sell – OVERPRICING. • How to better use BBF Comps when pricing a business. • Why BBF Comps may not be the best source of data for pricing a business for an SBA Loan!
  35. 35. Summary How to make more money as a Business Broker! • If you are just starting, find an experienced mentor that has closed at least 23-30 transactions – Your Office Broker – Fellow BBF member – Fellow IBBA member • Business Broker Education – BBF quarterly meetings – IBBA Summit – Covers Recasting and Pricing – IBBA CBI Track – Become a Certified Business Intermediary – IBBA online courses and classes taught in Florida periodically – IBBA Annual Conferences - next one is May 10-11 in Orlando, FL – M&A Source Courses and Conferences - next one is May 12-15 in Orlando, FL
  36. 36. Thank You for Your Time Lou Vescio, CBI, M&AMI Coastal Business Intermediaries Agency Brokerage Consultants lvescio@cbi-florida.com

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