TAS Multiples Increase in 2011

By Steve Michaels

The year 2011 saw the price of answering services increase to their highest levels in quite some time. Some of the medical services for sale had to consider three and four offers. In some cases, buyers were actually bidding higher than the asking price. Listed below are the multiples for businesses sold by TAS Marketing:

         Billing            Location           Accounts           Includes          Multiple

       $35,000           Southeast             175             Accts only            11.0

       $36,300           Northwest             252              Accts only           11.3

       $32,000              West                 140              Accts only           11.0

       $37,800         Deep South             192              Accts only           11.1

       $86,200           Southeast             425              Entire TAS           11.5

       $23,000         Deep South             177              Accts only             9.1*

       $22,200              West                 146              Accts only           12.4

       $28,000        New England            164              Entire TAS           13.8

       $34,000        New England              88              Entire TAS           12.2

       $29,500         Deep South             142              Accts only            12.3

       $55,100               East                  215             Accts only            11.9

       $33,200            Midwest               120              Entire TAS           12.8

       $31,000          Southwest              147              Entire TAS           12.9

       $52,000          Southwest              100              Entire TAS           11.5

*distress sale

There were several reasons for the increase:

• Everyone is feeling the effects of the recession. Larger answering services have unused operator positions that they want to keep active, so they are willing to pay a little more to keep their numbers up. This is especially true if they report to investors or a board.

• Some answering services may have difficulties increasing their client base through sales and marketing. For them, it is smarter and faster to grow through acquisition.

• In the current economic market, medical accounts are in high demand due to their reliability and stability. Due to this, bidding wars are not uncommon to acquire medical services.

For 2012, the sky’s the limit. The telephone answering service industry is going the way of cable TV and the funeral home industry, with most of the little guys being bought out by larger competitors. (Even so, my TAS Tips email list still has 1,755 answering services.)

I recently sold a business for 12.8 times monthly billing. One of the offers that came in for this business was in the seven-to-eight times monthly billing range. When I asked the potential buyer why her offer was so low, she stated that this was the multiple she paid years ago and didn’t realize that prices had gone up. Hence the reason for this article!

Steve Michaels is a business broker with TAS Marketing and can be contacted at 800-369-6126, tas@tasmarketing.com, or www.tasmarketing.com. Call him if you have any questions about multiples or the TAS industry.

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