The market is awash in capital, and more investors are putting it into entrepreneurial firms. But not all businesses are created equal. Here's a look at the most, and least, valuable industries today.
It's a good time to own a communications equipment company. The same goes for an in vitro fertilization clinic. Bakers and restaurateurs may be wishing they'd chosen another line of work, but the owners of bowling centers could be in for a surprisingly lucrative payday.
Those are just a few of the conclusions of Inc.'s annual survey of the most--and least--valuable businesses in America. For the third straight year, Inc. has partnered with Business Valuation Resources, the Portland, Oreg.-based publisher of Pratt's Stats, a leading database of private company transactions. Such information isn't easy to come by, and owners of private companies always have a tough time determining the value of their investment. The chart, tables, and work sheet on the pages that follow are designed to help. They're based on 3,007 business sales between January 1, 2002, and October 31, 2005, and shine a rare spotlight on the largely unseen private company marketplace.
What do the numbers tell us? Communications equipment manufacturers are fetching the highest median price tag--$75 million. Management and consulting services, media, and anything having to do with the medical and pharmaceutical industries also continue to be hot. Much of the action at the upper reaches of the market is being driven by private equity groups, which are sitting on piles of cash and have become Inc.easingly interested in investing it in entrepreneurial companies. It also reflects consolidation in industries that have previously been fragmented, says Linn Crader, president of Crader and Associates, a midmarket M&A firm based in Portland, Oreg. "Industry players have realized that growth through acquisition can be more profitable, in terms of both time and money, than organic growth," Crader says. "That wasn't true five years ago."
As for bowling alleys... right now, they're in demand, selling for a healthy two times annual revenue. "It's a cash business with no receivables. Plus, most bowling centers own their own real estate, so you're also buying a good chunk of land," says Sandy Hansell, a business broker based in Southfield, Mich., who deals in nothing but bowling alleys (he helped sell about 20 of them in 2005). Plus, Hansell adds, bowling is an extremely stable business: "It's been around in one form or another since biblical days, and it's not going anywhere."
Can you compete with that? The data on the interactive chart at our Ultimate Valuation Guide should help you answer that question. The chart will tell you where you stand in relation to entrepreneurs in 131 other industries. If you want to dig deeper, clicking on different sections of the chart will reveal more data.