Riverside County Business Sales up 30% while San Bernardino Co Business Sales are Down 24% (2019 1 vs 2018 Q1)
Number of Businesses Sold in Riverside and San Bernardino Counties
|Jan||Feb||Mar||Total||% Change vs 2018|
|2019 Riv Co||59||79||99||234||+30%|
|2019 Sbd Co||30||62||57||149||-24%|
|2018 Riv Co||69||69||42||180|
|2018 Sbd Co||80||56||60||196|
Business Sales Still Strong
Despite the slower pace of growth, the number of businesses sold in Riverside and San Bernardino Counties is still strong. Business buyers are gobbling-up the businesses established by retiring Baby Boomers. Middle managers leaving the corporate world, immigrants, and minority women make-up the bulk of these business transactions (buyers).
What is your business worth?
The value of any business is determined by a variety of factors, the main factor–a willing buyer set to write a check that a seller is willing to accept. However, there are well established valuation methods. In my decade plus experience of being a business broker, I have found that a business value is largely determined by adjusting a business owners earning and applying an industry based multiple (with plus or minus adjustments for “other” factors like: age of business, absentee-run business, growth of industry, ect..)
Seller’s Discretionary Earnings (SDE) and Business Value
What are Seller’s Discretionary Earnings or SDE? Business Owners want to minimize tax liability. As such, they “write-off” as many legitimate expenses to minimize gross income. Some would argue that some of these expense, although legitimate and legal, are also “owner benefits”. For example: an owner’s life insurance policy, the owner’s salary, health benefits, a car lease, travel expenses, a gas car, etc… So when business brokers refer to Seller’s Discretionary Earnings we are referring to gross earning plus any additional expenses that are considered “owner benefits” or discretionary.
The Value of the Business
Once you calculate the Seller’s Discretionary Earnings (SDE) of a business, you multiply that number by an industry specific multiple to arrive at the “value” of a business. This is usually the price I set when I represent a business for sale. So for example, you have a coffee shop with SDE of $100,000 that has been in business 5 years, each year sales have been increasing, it is fully staffed, you just re-signed a 5 year lease with two 5 year options, (ALL positive attributes) …. I would use a multiple as high as 2.3, whereas most coffee shops on wwwBizBuySell.com are listed at 1.5-2 times SDE.
Thinking about selling your business?
If you are considering the sale of you business, take the first step and contact us for a confidential consultation and strategy session. We have been business brokers in the Inland Empire since 20006. Contact us today for a free business valuation. Call 1-800-Biz-Broker.