Study Finds American Businesses Undervalued by More than 15%

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Valuation and Succession Planning Platform, Capitaliz, Reveals Untapped Value for Small and Medium-Sized Businesses

Denver, Feb. 29, 2024 (GLOBE NEWSWIRE) — Capitaliz, a digital platform for business valuation, succession, and exit planning, today announced findings from its latest Value Potential Index™ (VPI). The report assessed the VPI of hundreds of small and midsize businesses and revealed that American private businesses have missed out on $3.7 trillion dollars in unrealized value due, in part, to non-existent or poorly structured succession plans. 

Retirement is imminent for hundreds of thousands of business owners. More Americans are turning 65 this year than at any prior time in history, with vast economic implications given that baby boomers own $7.4T in private businesses

By Capitaliz’s estimates, the combined value of private businesses in the US stands at $24.3T, but should be $3.7T higher. This translates to individual businesses being undervalued by 15.1%—leaving substantial dollars on the table. 

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“Our data serves as both a leading indicator and a call to action for business owners and their advisors. We saw a 2.05% increase in the number of businesses listed for sale over the last quarter in tandem with our own index rising to reflect that private company valuations have surged by 3.68% quarter-over-quarter,” said Craig West, Founder and Chairman of Capitaliz. “Despite recent economic challenges, our data underscores that we are in an opportune moment for business owners to prepare themselves and their businesses accordingly.”  

Capitaliz attests that the value gap can be attributed to the non-existent or lack of adequate succession preparation and exit planning strategies, impacting the majority of businesses as 83% of business owners have no written master plan for exit. Businesses with proper succession planning are valued at 15.1% more than unprepared peers, on average. Small businesses are especially impacted, with some 59.5% of this valuation gap residing in the 10-249 employee category–with smaller businesses on that spectrum leaving about $900,000 on the table on average and medium businesses about $1.3M, respectively. 

“If you are undervaluing your business by 10-15%, you’ve got to ask yourself: what does this mean for my retirement? What does this mean for my employees? What does this mean for the local economy?” said Jared Johnson, Capitaliz President, North America. “Tools like Capitaliz exist to extract that untapped and unrealized value and ensure the best possible exit outcomes for all stakeholders.”  

Captializ’s proprietary VPI allows for an accurate assessment of the value potential of mid-market businesses and determines the most appropriate actions to take in order of priority that will most affect business valuations. The VPI is informed by hundreds of business valuations conducted over the last decade and a half and includes economic, industry and business-based risk scores to determine profit gap, benchmarking, exit readiness, and attractiveness to determine business value potential. It also takes into account economic factors, industry trends, and business sentiment. 

Capitaliz’s suite of insights and valuation tools helps quantify current business valuation, identify key value drivers, and make recommendations for strategic actions for enhancing business value. The platform is built by industry professionals for business owners and advisors, including accountants, financial advisers, wealth managers, bankers, and business coaches. 

To download the full US VPI report, visit: https://www.capitaliz.com/vpi-overview/.

ABOUT CAPITALIZ 
Capitaliz is a leading digital platform for business owners and advisors–including accountants, financial advisers, wealth managers, bankers, and business coaches–for business valuation, succession, and exit planning. Created by exit and succession planning veterans, Capitaliz’s suite of insights and valuation tools help quantify current business valuation, identify key value drivers, and recommendations for strategic actions for enhancing business value. Capitaliz is headquartered out of Denver, CO, with offices in Sydney, Australia, and London. For more information, visit www.capitaliz.com

CONTACT: Marissa Arnold [email protected]  

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