The valuations of social media companies and other technology darlings are sky-high these days.
But a recent survey of fast-growing smaller companies shows that while most plan to sell their businesses, they also think their businesses are undervalued.
B2B CFO, a company that provides businesses with CFO services and exit-strategy assistance, conducted the survey of 230 companies named to this year’s Inc. 500/5000 list of fast-growing businesses.
A Lack of Data
Sixty-two percent of the Inc. 5000 plan to sell their businesses, according to the survey.
Yet many entrepreneurs are stumped when it comes to adding value to their companies and about what the proper company price should be. Most businesses get stuck at a growth inflection point, requiring knowledgeable managers who can push growth to the next level.
The survey responses revealed a lot of uncertainty about the sale process. More than a third of the companies said they thought their company was undervalued. Meanwhile, 17 percent of the companies said they did not know their company’s worth. B2B CFO says this may reflect a lack of dependable market data on private company valuations.
A sizable number of business owners (about a third) said after selling their companies, they planned to start new businesses. About a quarter said they’d retire, travel, or engage in hobbies.
Thirty-six percent of the Inc. 5000 companies plan to sell their companies in the next five years, while 19% said they will sell in the next six to 10 years. The remainder plan to sell after more than 10 years.