New Data from Cultivate Advisors Finds 97% of Small Businesses Not Healthy Enough to Sell, While Owners Are Overestimating Value by 50%

Chicago, March 20, 2024–According to just-released data from Cultivate Advisors, one of North America’s largest small business advisory firms, only 3% of small businesses are in a healthy enough state to sell. The data, culled from 1,161 owners who took the firm’s Business Value & Health Assessment, also found that owners overestimated their company’s value by 50%.

Cultivate’s free online tool evaluates six key areas of a business—financials, sales, marketing, leadership, recruiting, and productivity—identifying the 24 most vital value drivers that make up its current worth while revealing opportunities and gaps that impact valuation and saleability.

Scores of 85% or above indicate an enterprise is “healthy,” “well built,” and has the systems in place for an owner to successfully sell, transfer ownership, or step back from the day-to-day operations. Cultivate advises those businesses with a 60% or below to “take immediate action,” noting that “failure to do so could be detrimental.”

“What the data confirms to us is that most businesses don’t know their current value,” said Casey Clark, Co-Founder and CEO of Cultivate Advisors. “But the findings aren’t as dire as they seem. Once owners understand where their company is today and where it could go by putting a few systems in place, they can make immediate adjustments leading to higher profits short-term, increased value long-term, and most importantly, a successful exit.”

Other key findings from the Business Value & Health Assessment include:

• The overall health score of businesses was 54%, with only 31 of the 1,161 enterprises meeting the criteria of 85% or above for a successful exit.  

• Owners scored highest in productivity (59%) and leadership (58%) but lacked confidence in their skills in recruiting (51%) and marketing (47%).
• When it came to critical financial guideposts, owners scored only 43% when asked about “having a 12-month micro cash flow and 5-year macro forecast for revenue, expenses, margin, and profit.” 
• Lacking a “strong sales team with an effective compensation structure, where owners do not produce sales themselves” garnered the lowest grade in the assessment at 41%.
• Thirty-nine percent of owners say they want to sell within the next five years, with 25% having a 10-year exit in mind. Only 3% say they never plan to sell their business.

“The combined worth of the businesses that participated in our Business Value & Health Assessment is $5.8 billion. And, according to our data, that’s $3.6 billion that will disappear in the next ten years if no action is taken,” said Clark. “This loss will not only have a devastating impact on the overall economy but on millions of owners and their families who, as most financial planners estimate, have 85-90% of their net worth tied up in their businesses.” 

 

Cultivate’s findings are based on responses from 1,161 small business owners in 30 sectors throughout the United States who participated in its Business Value & Health Assessment between July 2023 through January 2024. 

 

To take the Business Value & Health Assessment, visit exit.cultivateadvisors.com.

 

ABOUT THE BUSINESS VALUE & HEALTH ASSESSMENT

Taking less than 15 minutes, owners answer 24 questions on their business’s financials, sales, marketing, leadership, recruiting, and productivity. Once completed, respondents receive a 25-page comprehensive report on their company’s current worth, along with its potential value, pulled from a database of more than 77,000 recent public and private M&A transactions in the United States. The analysis includes a value multiplier per industry and a complete health assessment with value acceleration strategies. A two-hour free consultation with an advisor from Cultivate, specializing in the unique challenges impacting the business, is available to review the findings, discuss tactics to gain a competitive edge, and create a detailed 5-year roadmap to growth, scalability, and exit-readiness.

 

ABOUT CULTIVATE ADVISORS 

Cultivate Advisors is one of North America’s largest small business skill development and coaching firms. Built with a team of entrepreneurial-minded advisors with firsthand experience running successful companies, Cultivate has helped thousands of owners in 160+ industries scale, grow, and become exit-ready, with those working with the firm for 12+ months growing on an average of 43% in top-line revenue and 65% in bottom-line profit year-over-year. Cultivate has made the Inc. 5000 five years in a row and its Best Workplaces list. It was voted Best Small Business for Coaching, and Clark Best Entrepreneur, by the BASA Awards. Clark also received the Gold Stevie for Best Entrepreneur from the American Business Awards.

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