Someone Is Going to Offer to Buy Your Business. Your Price or Theirs?

Episode notes

What this conversation covers

Kim wrote a press release announcing the sale of Lewis Howard Insurance Group for eighteen times earnings. It has not happened. She wrote it because until you write it, somebody else writes it for you, and when they write it, they pick the number.

Then Hal read his. One sentence, and it says something else entirely: the agency has acquired its eleventh location. Hers has a multiple in it. His has a count. Neither of them heard the difference until it was read out loud.

This one is a Coffee Table Conversation with no tidy ending, because they have not tied it up at home either. Hal makes the case for going and getting the next one, from years spent in rooms with the people who write the checks. Kim worksbackwards from the number instead, and lands on the arithmetic that names the episode: a small independent shop trades at six to nine times earnings, a scaled platform at seventeen to twenty. Same industry, sometimes the same town.

The hinge is Hal in the buyer's chair, saying out loud what a buyer is actually paying for. Not effort. Not how nice everybody is. What he can predict. And if the answer is trust me, I know every customer, then he is not buying a business, he is buying a job, and the day the owner leaves it walks out the door with him.

Also in this episode: the x-date and the one week a year a customer is actually buyable, the reversibility rule that resolves fast thinking against careful thinking without either host losing, and the quiet part about the roll-up buyercoming to your market. He is not better than you. He has capital and a spreadsheet. And he is betting you never write down where you are going.

Ready to Take Action?

Website and IMPACT:https://smallbusinessbigai.com/

Kim Lewis Howard on LinkedIn:https://www.linkedin.com/in/kim-lewis-howard/

Hal Howard on LinkedIn:https://www.linkedin.com/in/halhoward/

Insurance assessment, commercialor personal lines: https://asklewishoward.com

---Q1. What is my small business actually worth, and why dobigger companies in the same industry sell for so much more?

Size changes the category, not just the number. A small independent operator in insurance trades somewherearound six to nine times earnings. A scaled platform in the same industry, sometimes serving the same customers in the same town, sells at seventeen to twenty. The spread is not a reward for revenue. It is a price on predictability. A buyer paying the high end can model next year off your last three years because the records support it. A buyer looking at a business whose knowledge lives in the owner's head is not buying a company, he is buying a job, and he prices it accordingly. Two businesses can be equally profitable andequally well run and still land at opposite ends of that range.

Q2. Why are private equity firms suddenly buying smallbusinesses like plumbing, HVAC, dental and insurance agencies?

Because forty of them bolted together is a different asset than one of them, and the arithmetic finally works at small scale. Capital that historically ignored Main Street as too small and too owner-dependent has reversed on that view fast. In insurance there were 21 disclosed deals in the first half of this year and forecasters expect 120 to 180 over the next fourquarters. HVAC recorded a hundred and forty-nine deals last year even while industrial acquisitions overall declined. With roughly 39,000 independent insurance agencies in the United States and seven to eight hundred changing hands annually, consolidation is already underway. The buyers are not doing this because they love the trade. They are doing it because a platform sells for multiples a single shop never will.

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MUSIC & SOUND CREDITS

Music: "I Am with You" by Dream Cave; Epidemic Sound via iStock.com

License ID: d483d505-8bd8-4b73-988f-298

Sound Effects: https://pixabay.com/sound-effects/