2017 Business Valuation Trends and Forecast
Sep 06 2017
Much of the success people find in owning and maintaining a business can be attributed to how much time is spent look towards the future, and with nearly 80% of business owners relying on the value of their business to fund retirement, it always helps to keep track of essential business valuation trends, as either a certified business appraiser or a business owner.
So, here’s our forecast for some of recently watched trends in the business valuation industry, and how to capitalize.
Manufacturing is a Must-Have
High-revenue manufacturing companies—classified as those earning more than $10M a year—have seen a major increase in business value over the last five years (13% higher multiple). The increase is even higher for those making over $20M a year in revenue (39% higher multiple).
Subsequently, manufacturing businesses with an Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) greater than $2.5M on average sold for more than businesses under $2.5M.
What this could mean for small businesses is an incremental yet positive increase in overall business value over the next five years, especially niche industries within manufacturing including, but not limited to: packaging and labeling, joining, 3D printing, and ore.
The Service Industry Boom
Service industries, including hospitality, tourism and travel, and even certain health care services have seen an immense increase in value, too. For example, businesses with revenues greater than $4.9M sold at a 15% premium compared to those earning more.
Conversely, service businesses with EBITDAs greater than $1M sold at a 28% premium compared to businesses with EBITDAs under $1M.
Service industries rely heavily on both ideal environments and a good economic health to prosper, so it makes it somewhat difficult to keep a bead on industry performance. It can be determined, though, that small businesses in the service industry could see increased value parallel to the success of larger companies within the same industry.
Get a Trusted Business Valuation
Getting ahead and staying ahead of the curve starts with knowing the current financial health of a business. PeerComps has a collection of trusted business valuation tools and services that can help gain a better sense of future changes, across multiple industries.