Where Your Company Fits In - VR Business Sales Blog

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Thursday, June 28, 2018

Where Your Company Fits In

Peter King
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Knowing where your company fits into the world of business is a must if you want to understand the dynamics of selling it. The rules that govern the sale of public companies like Ford, Microsoft, and General Electric are radically different from the rules that control the sale of closely held, owner operated, founder owned companies. In the VR Business Brokers / VR Mergers & Acquisitions arena of business sales there are two major categories to which we offer Valued Representation: Small and Mid-Market. By VR definition of these two sectors of the market represent over 95% of the businesses in the United States.

So where do you fit in…

Small businesses may vary from where the owner play the central management and employee roles, to companies that demonstrate consistency in earning and have solid organizational structures. In most small businesses, owner involvement in the day-to-day management is typical. Small businesses are the backbone of the economy and the marketplace for their sale is strong, active, and the specialty of VR Business Brokers. The greatest obstacle to the successful sale of these businesses is overcoming the buyer’s perception of risk.

Earnings for small businesses are generally less than $1 million and are expressed as Discretionary Earnings, which is defined as the money the business generates when the owner’s desire to reduce taxes is eliminated by reconstructing the financial statements. Price Earnings Ratios for small businesses range in the 1 to 4 times discretionary earnings. Normally the terms of sale are a combination of cash, owners note, and third party financing.

Mid-Market businesses on the other hand are typically substantial, privately held companies with earnings in the millions of dollars. Price Earnings Ratios range on average for 3 to 10 times earnings, with businesses of this stature having a very structured management. VR Mergers & Acquisitions specializes in mid-market business sales, valuations, and acquisitions. 


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