Around the Web: A Week in Summary
A recent article posted on BizBuySell.com entitled “Small Business Transactions Reach Record High As Buyers Shrug Off Amazon Effect” explores business transaction data from the third quarter of 2017. As outlined by the report, closed transactions numbered 2,589 in the third quarter, up 24% from the same time period last year. This quarter continues the overall trend of quarter-over-quarter growth in reported transactions going back two years.
Increases in median revenue and cash flow of sold businesses as well as a decrease in the median time to sell a business show a strengthening small business sector and an improving overall market. Although retail has taken a hit from the “Amazon Effect,” retail transactions are actually up 23% since this time last year. Read the full report by clicking the link below.
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A recent article from the Business News Daily entitled “5 Ways Small Business Owners Can Start Preparing for Retirement” suggests some important steps that a business owner can take to prepare for their exit and subsequent retirement from their business. With recent numbers showing that a full third of small business owners do not have a retirement plan, it is very important for aging owners to think about and plan for their future. The following steps outline a simple retirement planning process:
- Set a goal
- Develop a succession plan
- Build a support team
- Position your business to be valuable without you
- Start a diversified retirement savings plan
It is important to acknowledge that there isn’t a perfect, cookie cutter plan that will fit all retiring business owners. Personal goals and choices as well as the nature of the business play a huge role in retirement planning and the decisions that need to me made are highly individualized.
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A recent article posted on Divestopedia.com entitled “What’s Missing in EBITDA?” explores some common reasons why EBITDA may not always be the best valuation option for a small business during the transaction process. One common argument involves the fact that, while good for comparing companies in the same industry, EBITDA is not a great metric to use for actually valuing a business because it leaves out information and data vital to the very running of the business. Interest, tax, depreciation and amortization, numbers that EBITDA specifically excludes, is often some of the most important data to understand when purchasing a business and is very much involved in the bottom line.
EBITDA does provide a quick way make a judgement on a business’ financials, but it can be misread and even manipulated in a seller’s favor to get a better deal. Considering this and the fact that it excludes several other relevant factors, EBITDA may not be the best valuation option.
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