The Entrepreneurs Advocate

Archive for August, 2009

I was taking a prospective buyer on a client tour recently. The principal of the buyer’s group is a serial entrepreneur who has started or bought numerous companies and taken each to the next level. We were talking about sales levels and growing the business. He made the statement that he and the core group of his people at the top were the key rainmakers. His companies had the systems, procedures and people in place to service the account, but he went out and landed the “whales”. This meshes with my own philosophy.

Many times smaller businesses plateau at a less than ideal sales level or they take a slide backwards. Owners have lived on word of mouth or a few choice clients, but that is not enough in these economic times. I see owners looking to hire that magic salesman and much time and resources wasted when they inevitably fail. Who can advocate your product and services better then you? Potential clients like dealing with the final decision maker, use this to your advantage.

Many entrepreneurs say they are not comfortable selling. Their vision of sales is high pressure, going for the close. A consultative environment where they listen to their client’s needs and together come up with solid fix is a better path.

I received this in an email from Rich Goeldner of FairValue Advisors. My take on the reduced multiples paid for the smaller mid-market companies is that sales/ebitda trended down for many of them in 2008/2009 and financing dried up. I expect a reversal of this chart in 4th quarter 2009. enjoy. Chris

Acquisition Multiples Median acquisition multiples fell 15-44% across the 3 size categories in the most recent quarter; multiples of mid-size acquisitions dropped the most - nearly 44%. EBITDA multiples have dropped approximately 40-50% since 2007/2008 highs. Deal volume rose approximately 6% in most recent quarter but is down approximately 30% from July 2008 peak. Multiples include acquisitions in past 3 years with positive EBITDA. Excludes acquisitions of banks and real estate companies.

We hope that you find this update informative.  Certainly, we would be pleased to assist you with your valuation needs. Sincerely, Rich Goeldner ASA, CBA FairValue Advisors, LLC 888.212.0495 ext. 103 rich@fairvalueadvisors.com