the sold vs list comps and more data from the bbf in 2019

1. BBF Listed
& Sold Data Analysis
For the Period of
Jan 2014 – Dec 2018
BUSINESS BROKERS
OF FLORIDA

2. Presentation Details
• The last detailed analysis of BBF Data and other
business MLS data was completed in 2008 by
JohnsonServices.com for an IBBA workshop
• This update was requested by Trish Walden & Jim
Parker
• This analysis only includes BBF data and was
performed by
– Ariel Gonzalez – BBF MLS
– Lou Vescio – Coastal Business Intermediaries, Inc.

3. Problem with BBF Comps
• Input by brokers is not always accurate
• Listed Sales & DE may not reflect actual Sales & DE at closing
• Only comp data from actual financials can be trusted
– Tax Returns
– P/Ls
– Part Year
– Annualized?
• Same problems exist with BizComps and ValuSource (IBA
Comps)
• Deal Stats (PrattStats) & PeerComps are more accurate

4. Total 5 Year Data
During the period of January 2014 thru December 2018
BBF Members
• Listed
– 22,422 businesses
– 5 year average = 4,484 listings per year
– Average about 4 Listings per member
• Sold
– 5,286 businesses
– 5 year average = 1,192 sold per year
– About 23.6% of the businesses listed were sold
• The same study in 2008 indicated only 10.5% of listed businesses sold

5. Listed to Sold
27.2% 27.6% 27.4% 24.2%
12.0%

6. Listing Periods & Days on Market
Year Days
2014 240
2015 239
2016 225
2017 210
2018 132
Year Days
2014 346
2015 350
2016 337
2017 327
2018 321
All Businesses -Days between Listed Date
& Expiration Date Sold Businesses - Days on Market

7. Number of US Businesses by Sales Revenues
78.3%

8. Breakdown of Transactions by Sold Price
Sold Price Number Sold Percent of Total
1000K or more 394 7%
900K-1000K 64 1%
800K-900K 70 1%
700K-800K 75 1%
600K-700K 126 2%
500K-600K 180 3%
400K-500K 222 4%
300K-400K 375 7%
200K-300K 619 11%
100K-200K 1385 26%
50K- 100K 1217 23%
$25-50K 516 10%
1-25K 151 3%
36% Sold Under $100K
73% Sold Under $300K
84% Sold Under $500K
93% Sold Under $1M
62% Sold Under $200K

9. Breakdown of Transactions by Sold Price
• 62% of all transactions were under $200K in purchase
price
• 73% of all transactions were under $300K in purchase
price
• Median sale price - $149,900
• Average sale price - $359,266

10. Sales by Type of Financial Data
Listed Sold % of Listed Sold
P/L Statement 5710 1508 26.4%
Tax Return 4334 1083 25.0%
Owner to Prove 4044 889 22.0%
Sale of Assets 2896 652 22.5%
Annualized 2393 647 27.0%
Owner Estimate 1557 309 19.8%
Proforma 858 208 24.2%
Non-Operating 347 48 13.8%
Part Year 280 48 17.1%
• Highest Percentage based on:
• Tax Returns
• P/L Statements
• Annualized Statements
• Pro Forma
• Lowest Percentage based on:
• Non-operating
• Part Year
• Owner’s Estimate
• BBF should add a Trailing Twelve
Month (TTM) Category

11. Sales by Type of Financial Data of Total Sold
Sold % of Total Sold
Tax Return 1083 20.1%
P/L Statement 1508 28.0%
Annualized 647 12.0%
Part Year 48 0.9%
Proforma 208 3.9%
Owner Estimate 309 5.7%
Owner to Prove 889 16.5%
Sale of Assets 652 12.1%
Non-Operating 48 0.9%
• 62% of all businesses
sold were based on:
– Tax Returns
– P/L Statements
– Annualized Statements
– Part Year Statements

12. DE Multiples – Sold to Not Sold

13. What Types of Businesses were Sold
Restaurants 1242
Hair/Salon/Massage/Spa 342
Construction/Contractor 246
Manufacturing 239
Liquor Related 226
Real Estate Related 222
Lawn/Landscaping/Tree Service 219
Retail 211
Cleaning/Laundry/Dry Clean/Carpet 167
Distribution 166
Auto Related 158
Medical Related 154
Ice Cream/Yogurt 131
Janitorial/Maid Srvc/Misc Cleaning 126
Other Misc 117
Pool/Spa Related 110
Transportation 100
Recreation 89
Routes 85
Gas Station/C Store 83
Consignment/Pawn/Used/Furn 19
Equip/Party Rental 18
Flooring 17
Jewelry Related 17
Agriculture Related 15
Appliance 13
Engineering Related 12
Computer/Music related 11
Security Related 11
Travel Related 10
Telephone & Related 10
Furniture 9
Lawn/Heavy Equip Repair 8
Optical 6
Photo Related 6
Real Property Rltd|Self Storage 5
Tobacco Related 5
Auto Salvage 3
77%
Misc Retail 79
Pack/Ship 73
Education Related 71
Computer/Internet Related 70
Financial Srvcs/Insurance 64
Animal-Pet Related 60
Child Care 58
Clothing Related 37
Pack/Ship 36
Pest Control 29
Marine/Aviation Related 26
Retail Home Access/Upholstery 26
Accounting Related 26
Florist 25
Advertising 24
Sports Related 23
Vending 22
Bus Srvcs/Staffing 21
Games/Gifts/Luggage 20
Moving/Storage 19

14. Negative Cash Flow Listings
• 254 businesses were listed with DE less than zero
• 37 were sold (14.6%)
• Of the 37 sold, 21 sold for less than the value of the fixed
assets
• Another 4 sold for the value of the assets
• The 12 that sold for more than the asset value were
– Liquor licenses
– Restaurants
– Educational/Tutoring businesses
– Medical related (one was for the value of the R&D)

15. Zero Cash Flow Listings
• 3,433 businesses were listed with DE of zero
• 708 were sold (20.6%)
• Of the ones that sold, almost all were sold for the
value of their fixed assets or less than the value of
the fixed assets

16. Cash Flow Listing from $1 to $49,999
• 4,278 businesses were listed with DE $1 to $49,000
• 877 were sold (20.5%)
• Of the ones that sold, most sold for less than the
value of the fixed assets or real estate
• Of the ones that sold for over $100,000, almost all
sold for the value of the real estate

17. Cash Flow Listing from $50,000 to $99,999
• 6,060 businesses were listed with DE $50,000 to $99,999
• 1,554 were sold (25.6%)
• Of the ones that sold, 402 sold for less than the value of
the fixed assets and real estate
• Of the ones that sold for over $100,000, almost all sold
for the value of the real estate
• Of the ones that sold on cash flow, the average DE
multiple was 1.92

18. Listings with $0 to $49,999 in Sales
• 3,362 Businesses were listed with sales of zero
dollars
• 700 listings with $0 sales sold (20.8%)
• All were sales of assets
• 510 were listed with sales of $1 to $49,999 in sales
• 75 listings with $1 to $49,999 in sales sold (14.7%)
• Almost all were the sales of assets

19. • A going concern is a business that functions
without the threat of liquidation for the
foreseeable future, usually regarded as at least
within 12 months.
• Most small businesses with over $100K in DE
would be considered a going concern.
Going Concern

20. Sold With DE $100K or More
• 2,218 Sold businesses had a DE of $100K or more
P/L Statement Tax Return Annualized Part Year
Minimum 20,000$ 40,000$ 30,000$ 130,000$
Maximum 12,000,000$ 7,250,000$ 10,500,000$ 2,400,000$
Average 798,267$ 704,641$ 596,890$ 598,889$
Count 799 579 308 9
% of Total 36.0% 26.1% 13.9% 0.4%
Owner to Prove Owner Estimate Proforma
Minimum 20,000$ 1$ 21,000$
Maximum 4,725,000$ 4,500,000$ 7,500,000$
Average 378,701$ 383,937$ 607,576$
Count 322 103 96
% of Total 14.5% 4.6% 4.3%
76.4%
TTM Financials
are also useful
for pricing!

21. Required Sales to get $50K in DE
Sales Total Sold With > $50K DE Percent
$ 0-100K 1080 91 8%
$ 100-200K 823 497 60%
$ 200-300K 673 529 79%
$ 300-400K 552 474 86%
$ 400-500K 398 372 93%
$ 500-600K 308 291 94%
$ 600-700K 219 207 95%
$ 700-800K 177 169 95%
$ 800-900K 182 179 98%
$ 900-1000K 115 113 98%

22. Required Sales to get $75K in DE
Sales Total Sold With > $75K DE Percent
$ 0-100K 1080 8 1%
$ 100-200K 823 206 25%
$ 200-300K 673 297 44%
$ 300-400K 552 343 62%
$ 400-500K 398 315 79%
$ 500-600K 308 256 83%
$ 600-700K 219 193 88%
$ 700-800K 177 162 92%
$ 800-900K 182 172 95%
$ 900-1000K 115 112 97%

23. Required Sales to get $100K in DE
Sales Total Sold With > $100K DE Percent
$ 0-100K
$ 100-200K 823 67 8%
$ 200-300K 673 145 22%
$ 300-400K 552 187 34%
$ 400-500K 398 226 57%
$ 500-600K 308 211 69%
$ 600-700K 219 172 79%
$ 700-800K 177 135 76%
$ 800-900K 182 161 88%
$ 900-1000K 115 105 91%

24. Required Sales to get $150K in DE
Sales Total Sold With > $150K DE Percent
$ 0-100K
$ 100-200K 823 2 0%
$ 200-300K 673 30 4%
$ 300-400K 552 47 9%
$ 400-500K 398 80 20%
$ 500-600K 308 93 30%
$ 600-700K 219 93 42%
$ 700-800K 177 86 49%
$ 800-900K 182 105 58%
$ 900-1000K 115 86 75%

25. Required Sales to get $200K in DE
Sales Total Sold With > $200K DE Percent
$ 0-100K
$ 100-200K
$ 200-300K 673 3 0%
$ 300-400K 552 11 2%
$ 400-500K 398 28 7%
$ 500-600K 308 42 14%
$ 600-700K 219 50 23%
$ 700-800K 177 52 29%
$ 800-900K 182 65 36%
$ 900-1000K 115 59 51%

26. Using BBF Pricing Comps
Example Problem
• Italian Restaurant is $650K in sales
• DE = $130K
• Pull BBF Comps
– 373 listed comps
90 comps with sales of $500K - $800K (+/- $150K)

27. Using BBF Pricing Comps
BBF Pricing using the average would be:
• $650K of sales times .332 equals $215,800
• $130K of DE times 1.248 equals $162,240
BBF Pricing using the median would be:
• $650K of sales times .272 equals $176,800
• $130K of DE times 1.364 equals $177,060

28. Using BBF Pricing Comps
Copy the same BBF Comps into a spreadsheet
• Remove any DE comp data outliers
– Less than 1 times
– And more than 5 times
– New average DE multiple is 1.65
– New median DE multiple is 1.51
• Remove any Price to sales data outliers
– Less than 20%
– And more than 100%
– New average Sales multiple is 36.9%
– New median DE multiple is 32.3%
DE Sale
130000 650000
1.65 214,646$ 239,934$ 36.9%
1.51 196,560$ 210,275$ 32.4%

29. Using BBF Pricing Comps – SBA Loan
Example Problem for SBA Loan Qualification
(P/L & Tax Return data only)
• Italian Restaurant is $650K in sales
• DE = $130K
• Pull BBF Comps
– 36 listed comps
– 26 comps with sales of $500K - $800K (+/- $150K)

30. Using BBF Pricing Comps – SBA Loan
BBF Pricing using the average would be:
• $650K of sales times .367 equals $238,550
• $130K of DE times 1.821 equals $236,730
BBF Pricing using the median would be:
• $650K of sales times .270 equals $175,500
• $130K of DE times 1.615 equals $209,950

31. Using BBF Pricing Comps – SBA Loan
Copy the same BBF Comps into a spreadsheet
• Remove any DE comp data outliers
– Less than 1 times
– And more than 5 times
– New average DE multiple is 2.05
– New median DE multiple is 1.96
• Remove any Price to sales data outliers
– Less than 20%
– And more than 100%
– New average Sales multiple is 42.8%
– New median DE multiple is 35.0%
DE Sale
130000 650000
2.05 266,209$ 278,233$ 42.8%
1.96 255,060$ 227,175$ 35.0%

32. Using PeerComps – SBA Loan
PeerComps database only includes SBA Loan Transactions
Same Problem with PeerComps
Italian Restaurant with $650K in sales & DE = $130K
Summary Data Transactions Min Max Mean Median CV
Sales Price 239 $125,000 $837,000 $381,646 $365,000 N/A
Annual Gross Revenue 239 $500,000 $797,900 $642,193 $634,907 N/A
Seller's Disc. Earning (SDE) 239 $58,000 $254,335 $132,719 $128,684 N/A
EBITDA 229 $21,000 $222,000 $97,054 $93,000 N/A
SDE % of Revenue 239 9.93% 37.67% 20.60% 20.38% 0.25
EBITDA % of Revenue 229 3.59% 33.89% 14.81% 14.77% 0.34
Multiple of Revenue 239 0.19 1.17 0.58 0.57 0.3
Multiple of SDE 239 0.9 5.51 2.82 2.82 0.2
Multiple of EBITDA 229 1.15 14.05 4.06 3.95 0.27

33. Restaurant Pricing Analysis
130,000$ 650,000$
DE Comps Price Rev Comps Price
BBF Comps 1.25 162,240$ 22.1% 143,650$
BBF Comps Adjustedfor Outliers 1.65 214,500$ 36.9% 239,850$
BBF Comps (TR & P/Ls) 1.82 236,730$ 36.7% 238,550$
BBF Comps (TR & P/Ls) Adjustedfor Outliers 2.05 266,500$ 42.8% 278,200$
PeerComps 2.82 366,600$ 58.0% 377,000$
• Pricing should be based on the real revenue sources for your business
• Always remove outliers
• Use Tax Return & P/L data if possible (TTM financials are also useful)
• If qualifying the business for an SBA Loan, PeerComps data is better

34. Summary
What we learned
• Most main street businesses that sell with a DE under $100K are
a Sale of Assets.
• Most main street businesses with sales of less than $200K are a
Sale of Assets.
• The most probable reason why listings do not sell –
OVERPRICING.
• How to better use BBF Comps when pricing a business.
• Why BBF Comps may not be the best source of data for pricing a
business for an SBA Loan!

35. Summary
How to make more money as a Business Broker!
• If you are just starting, find an experienced mentor that has closed at
least 23-30 transactions
– Your Office Broker
– Fellow BBF member
– Fellow IBBA member
• Business Broker Education
– BBF quarterly meetings
– IBBA Summit – Covers Recasting and Pricing
– IBBA CBI Track – Become a Certified Business Intermediary
– IBBA online courses and classes taught in Florida periodically
– IBBA Annual Conferences - next one is May 10-11 in Orlando, FL
– M&A Source Courses and Conferences - next one is May 12-15 in Orlando, FL

36. Thank You for Your Time
Lou Vescio, CBI, M&AMI
Coastal Business Intermediaries
Agency Brokerage Consultants
lvescio@cbi-florida.com