Prospective buyers commonly ask our business brokers about the difference between Middle-Market and Main Street businesses. These terms are thrown around frequently in the brokerage, finance, and banking worlds, but much less so with business owners themselves. Understanding the differences between these two structures can help you make a more educated decision when buying a business. To find the right fit, and discern the implications that come with each arrangement, check out Sunbelt Business Brokers’ guide to Main Street vs. Middle Market businesses.
M&A advisors typically classify Main Street and Middle-Market companies by their business valuations. While specific values aren’t ubiquitous across the brokerage industry, advisors look to other qualities to discern between the two business structures.
As its name implies, a Main Street operation is your average local small business. Although the Main Street market was once on the decline, a widespread interest in shopping local has helped small businesses start to thrive again throughout much of the country. In fact, the small business economy reinvested $4.25 billion back into communities in 2018 alone. The Small Business Administration reports that Main Street businesses now make up two-thirds of companies, employing over 24 million workers.
While small business revenue, cash flow/EBITDA/SDE, and other financial criteria usually aren’t as high as its corporate/conglomerate counterparts, the community market still offers a world of opportunity to strategic buyers. Main Street companies often receive more foot traffic than those who occupy commercial/plaza spaces. Plus, digital marketing and local search engine optimization efforts can take your small business to new heights. Smaller-scale operations can still be very profitable with the right execution.
Sunbelt Business Brokers generally classifies businesses valued greater than $1 million as Middle-Market. However, several other factors distinguish between the two, such as the type of sale the seller proposes. Unlike Main Street transactions, which mostly consist of asset sales, Middle-Market transactions can transpire across many more deal structures. Main Street companies are typically sold within a local market. Middle-Market deals, on the other hand, can involve buyers from other states or countries. These buyers can be an individual, private equity group, or institutional investor.
In the business brokerage industry, most advisors choose to employ a more targeted approach to marketing Middle-Market businesses vs. Main Street. All business transactions are complex and unique to the operation itself. But, those within the Middle-Market typically involve more intermediaries and require greater criteria; therefore, there is a smaller pool of potential buyers. Main Street businesses are often listed through an online directory, but to learn about most larger companies for sale, you’ll need to contact a broker directly.
Other characteristics distinguish the two business structures, but financial criteria and size of operations typically carry the most significant weight. Have you considered whether you should invest in a Middle-Market vs. Main Street business? If so, rely on Sunbelt Business Brokers for expert guidance and leading representation throughout your business transaction. Find the office nearest you to begin discussing your Middle-Market or Main Street entrepreneurial goals!