What the "Big Buyers" Want
At The Firm Advisors, our associates take anywhere from 15 to 25 calls a day from big buyers with significant capital who are searching for an acquisition that will allow them to make money for the members of their groups. This can often net higher returns than the average stock market investment, which (in a good year) will return about 7%. Business profit margins, depending on their clientele and services, can range anywhere from 10% for industries like staffing, to over 50% for IT-related companies with no hard product to sell. Below, we’ll outline the most common requests from Private Equity Groups across North America.
This is the most common request we receive. Recurring revenue simply means that the company doesn’t have to continuously “win” new business in order to keep the money flowing in. Common businesses with this type of revenue include Managed Service Providers, any time of service-based business with ongoing maintenance agreements, subscription services where customers receive a product or service monthly (such as a gym membership) or retainer-based services such as marketing, law firms, or energy consulting.
Management in Place
Many larger firms like profitable companies where the owner is not involved in the day-to-day operations of the business. Having an owner who has successfully built a team who can carry out the company’s work without constant intervention is a key factor for any business’s valuation. This can vary – some PEGs will hire an “operating partner” to run the business once the existing owner exits – but if you have a General Manager, COO or Operations Manager in place, the transition is all the more easy. Think about who will do your work when you’re gone. If there is an employee who could handle most of the operations, begin shifting those responsibilities to him or her as soon as is feasible.
EBITDA over 1M
EBITDA stands for Earnings Before Interest, Tax, Depreciation and Amortization. Basically, it’s the company’s net profit, plus the interest paid on any existing loans, taxes paid to the federal or state government, depreciation write offs, and amortization from any previous purchases. Hitting the 1M mark makes your company a good target for Private Equity Groups (PEGs), who then take the proceeds from the business and distribute it among their investors.
Profit Margin Above 10%
Businesses with higher profit margins are more likely to get high offering prices from PEGs because it simply takes less work to generate the take-home pay related to the business.
Consistent Revenues Over 5M
Showing a history of consistent revenues is important, and the 5M figure is a common benchmark to show the company’s ability to sustain any blips in the market. Typically, this figure is looked at over a three-year timeframe.
For those owners who are looking for a large exit event (a.k.a. a nice price for the sale of your business) these factors can affect what your future will look like.
Curious what your business is worth today? Contact us at 402-998-5288 or firstname.lastname@example.org for a complimentary valuation.
- Why Effective Communication is Essential in Business
- Remote Work Here to Stay
- Learning From General Mills and Shrimp Tails
- 11 Years of Omaha Magazine’s “Best of B2B”
- Due Diligence: Preparation is Key
- Your Business as a Machine: Exit Planning Is Not Just for Exiting
- 10 Industries That Will See Post-Pandemic Profits
- Self-Care in a Pandemic
- Asset Sale vs. Stock Sale
- 5 Most Influential Women in the US
- Advertising Industry Outlook – Adapting Strategies
- How Important Is Due Diligence?
- 6 Best Christmas Movies of All Time
- Construction Industry Outlook – Remodeling & Renovation
- 4 Upcoming Business Trends of 2021
- Industries Booming During COVID-19
- What Are You Thankful For?
- Why it Makes Sense to Carry as a Seller
- Let's Talk About Pets
- What Exactly Are the Benefits of an SBA Loan?
- 2020 Industry Highs and Lows
- What’s an earnout, and why does Ryan Reynolds have one?
- M&A Advisor or Business Broker?
- How to Sell a Business in 7 Easy* Steps
- The Firm Advisors: #1 in the World -- Again!
- Documentation is Key During This Time
- Small Business Debt Relief Program
- Work On Your Small Business (While You Aren't Working In It)
- Meet the Listing: Body Shop w/ Towing & Auto Repair
- Superstitions and Deal Killers
- Choosing Your Investments: Stock Market vs. Business Purchase
- Video: Deal Education
- Industry Spotlight: Advertising and Marketing
- Meet the Team: The Firm Advisors Office Tour
- Securing Your Business Against Ransomware
- M&A: What's an M, and what's an A?
- Location, Location, Relocation
- $20M in One Month
- Pet Care: A Recession-Proof Industry
- The Firm Named to BBB Honor Roll
- Firm Family Christmas
- Firmgiving 2019
- Cortney Sells on IBBA's Podcast
- The Firm Makes Inc. 5000
- M&A: The Industry Defying Gravity
- Have You Met Makayla?
- Dr. Lemberg's Pathway to Retirement
- Steven Makes His Mark in M&A
- Hot Off the Press - June 2019 Magazine
- All Good Things Take Time
- The Firm June Magazine Release Celebration
- The Firm Feels Good Doing Good
- Corner Kick Spoils our Swan
- Opportunity of the Week: A Business That Brightens Children’s Futures
- Q&A With Cortney: Stock Sale Versus Asset Sale
- The Ins and Outs of Seller Financing
- Preparing for the Perfect Retirement
- The Firm Is Breaking Industry Records & Poised for Growth in 2019
- Simply the Best
- Competitor Analysis, Opportunities Listed
- Dentist to Dreamer - Hard Work Pays Off!
- Kansas City Tech Company Useagility Sells to First Tek
- 8th Year as Omaha's Best Business Brokerage
- Sellers: Why You Should Finance Your Buyers
- Summer Intern 2017 - Ameya Shelby
- Industry Forecast: Mind the Generational Gap
- 8 Things We Wish Every Business Buyer Knew Before Calling Us
- Selling Your Business: Getting a Proper Business Valuation
- Asset Sales or Stock Sales: Determining the Best for Your Business Transaction
- Why (and How) Business Owners Are Selling in 2017
- The Law of 3's - Choosing the Right Kind of Broker
- A Mutually Beneficial Relationship
- Reaching Out is Key
- Confidential Business Reviews
- A Change of Pace to Business Ownership
- Confidentiality is at the Core of Business
- Moving into the Boardroom
- Buying a Business vs. Starting Your Own
- Bringing Buyers and Sellers Together is Just the Beginning
- Client Interfacing in the Digital Age
- Four Questions Every Buyer Should Ask
- The Firm Outpaces Transaction Totals from Previous Two Years
- Faces of Omaha 2016: Face of Business Brokerages
- The Firm Business Brokerage Set to Double Sales within Seller's Market - MBJ 2014