How to Get a Buyer to Offer Big-Company Value for Your Small Business | Inc.com

Investors perceive big, sophisticated companies as a safer bet than small, owner-dependent companies. As a result, big public companies trade at a significant premium over small businesses in the same industry.

Let's take a look at the professional services industry. Although most consultancies are a small collection of experts, there are also a handful of big, publicly traded professional services firms. Omnicom is a massive marketing services company with a market capitalization of around $18 billion. For all of 2013, Omnicom reported pre-tax income of $1.66 billion, meaning it is trading at around 11 times pre-tax income.

Over at The Sellability Score, we ask smaller business owners--our typical user has between $1 million and $20 million in sales--if they have received an offer to buy their business, and if so, what multiple of their pre-tax profit the offer represents. When we look at the professional services segment, we find the average multiple over the last two years was 3.81--almost three times lower than Omnicom.

When we isolate professional services companies with at least $3 million in revenue, the multiple being offered goes up to 4.97 times pre-tax profit, but it is still less than half of Omnicom's 11 times.

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For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at info@buysellflbiz.com or 239.738.6227. Also, visit our Florida Business Exchange website at www.fbxbrokers.com and my personal website at www.buysellflbiz.com.