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Business Valuation Stats BUSINESS VALUATION STATSPratt's Stats is a major U.S. database of transaction details from over 11,000 actual sales. Their latest median valuation multiples for all industries show a definite increase in the EBIT multiples as profits rise. For businesses with EBITs of less than $1million p.a. the multiple was 3.21, for $1m to $5m it was 5.05, and for $5m+ it was 7.60. These figures are not dissimilar to our New Zealand experience. However, medians and averages must always be treated with great caution. While they provide a point of centrality or a comfort zone it is important to also consider any outliers. In New Zealand, BizStats? is proving ever more valuable as their volume of transaction data expands. With statistics now from almost 4,000 actual business sales they can provide persuasive guidance on business value in many sectors. BUSINESS BROKERS AND VALUATION Experienced business brokers add true value to the business sales process in two major ways. Firstly, with multi-pronged marketing strategies they can give the business maximum exposure to potential buyers. Secondly, they know the market and can indicate a realistic price range. For many small and mid-sized enterprises (SME) academic or accounting-based appraisal methods will not produce a value that reflects the reality of the market. The only true test of value is an arms-length sale after a proper marketing program. Specialist business brokers have statistics on recent sales of similar businesses and the experience to advise whether the particular business is better or worse than average. While price will vary from value according to the negotiating skills and motivations of the parties a professional broker can guide sellers and buyers on what is a reasonable range. WE LIVE IN A BEAUTIFUL COUNTRY Just back from biking the 150km Central Otago Rail Trail with my 51-year old daughter through snow, ice, mud, and gravel. More testing than anticipated but warm and welcoming people, clean and comfy accommodations, and incredible scenery. We are truly blessed to be living in New Zealand. |
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