Family Income and Main Street Businesses

Sunbelt sells “Middle Income, Family Incomes” or “Main Street” based on this report from PEW Research on MSN via CNBC today:

Question; Do the Business Broker Rules of Thumb Work regarding Family Income and Value of a Business?
“The share of American adults in middle-income households also decreased, from 55% in 2000 to 51% in 2014,” Pew Research Center reports. “At the same time, the share of adults in the upper-income tier increased from 17% to 20%.”
Although income is just one part of class, it’s a crucial element and the one that’s easy to measure and track.
So just how much do you need to make to qualify as middle class these days?
Pew, which defines middle class as adults whose annual household income is two-thirds to double the national median ($55,775 as of 2016),
details the national middle-income range for various household sizes.
“The income it takes to be middle-income varies by household size, with smaller households requiring less to support the same
lifestyle as larger households,” Pew explains.
Here’s the breakdown of how much you have to earn each year to qualify as middle-income family, depending on the size of your family:
Household Income: A. Business Gross Revenue C. Ave. FI x 2.5 = Biz Value
Household of one: $24,042 to $72,126 $160K to $480K $49K x 2.5 = $123K
Household of two: $34,000 to $102,001 $226K to $687K $68K x 2.5 = $170K
Household of three: $41,641 to $124,925 $280K to $833K $84K x 2.5 = $210K
Household of four: $48,083 to $144,251 $320K to $960K $96K x 2.5 = $240K
Household of five: $53,759 to $161,277 $360K to $1,080K $108K x 2.5 = $270K
Business Broker Rules of Thumb:
A. Using Ed Pendarvis’s Rule of Thumb: A business will net the owners 10-20% of the Gross Revenue Amount when run correctly.
B. So if we take 15% as an average and apply to the above:
C. Using the Business Reference Guide multiples for Business Value: A business is worth 2-3 times it’s SDE (Seller’s Discretionary Earnings (lets call that a (FI) Family Income.
D. So lets take 2.5 x the Family Income Average – this shows we sell business’s in the price range of 2 x $24K = $48K to 3 x $162K = $486K.
E. We looked at 36 random deals closed and the average was $484K – with a range from a small $50K to a larger $3M deal.
In summary; the Rules of Thumb (A & C workout right as shown in E).

“So Sunbelt Is The Place To Go To Buy or Sell A Business”
Call Cecil Dye, The Business Guy to find the Right Business.

Thank You, Ed Pendarvis, Founder of Sunbelt Business Broker’s and Tom West for The Business Reference Guide – The Essential Guide to Pricing Businesses and Franchises.

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