Why Buying a Business May be the Smartest Way to Grow Your Business Value
Most businesses are valued on a ‘multiple of earnings’ approach.
And, the higher your overall revenues and earnings, the higher multiple you are entitled to when it is time for you to sell.
For this reason, it may make a lot of sense to consider buying another business in your industry. Here’s why:
Let’s say there is a $2,000,000 annual revenue business in your industry, in your state and it is generating $400,000 in earnings for the Owner.
That business might be worth 2.5 - 3 times earnings.
Now, assuming you are the same size, you are worth a generally similar amount.