The Valuation Gap

 

According to IBISWorld, 98% of business owners do not know the value of their business or have an unrealistic idea of the value of their business.[1]  Business owners who have unrealistic expectations on the value of their business can experience a ‘valuation gap’ that could hinder the sale of the company.

The Stats:

  • 30% of M&A transactions do not close due to a valuation gap[2]
  • A valuation gap of 11%-30% exists in 64% percent of transactions[2]
  • A valuation gap of 50% exists in 8% of transactions[2]

What to do:        To avoid a valuation gap, business owners should seek an advisor to help understand the value of the business.  Owners should do this annually to better understand how industry and market changes affect the value of their business.

12014 IBISWorld report, “Business Valuation Firms in the U.S.”
22017 Private Capital Markets Report,  “Investment Banker Survey”