Andrija Čolak is a serial entrepreneur, franchise consultant, and founder of Colak Business Brokerage (CBB), one of the few companies in Croatia that professionally engages in the brokerage of small business sales. Before establishing his own brokerage firm, he built experience in franchising and business consulting and conducted research on the development of small and medium-sized enterprises in Croatia, particularly regarding their sales and market valuation, which has made him an excellent interlocutor on the topics of the ‘invisible market’ of small business sales in Croatia.
While the Croatian Bureau of Statistics, CEPOR, and the EU SME Fact Sheet publish detailed data on the number of small and medium-sized enterprises, their employees, revenues, and added value, there is no public statistic on how many such companies are sold annually and at what values.
However, this data gap is not just a Croatian specificity. It is a European pattern in which the market for small business sales is fragmented and goes under the radar, with most transactions occurring within private mandates and with the help of specialized intermediaries. Unlike the USA, where precise market standards and publications tracking business sale multiples have existed for decades, Europe significantly lags in this segment.
Based on his experience working with over 700 registered buyers, Čolak reveals how a new market is forming in Croatia where stable and profitable, ‘boring’ businesses are sold at SDE multiples ranging from three to seven, depending on stability, independence from the owner, and scalability potential.
What is the annual volume of small business sales in Croatia, and do you have specific data showing how many of these transactions are actually realized?
– If we look at specific data in Croatia, estimates show that more than 17,000 companies have owners older than sixty years. This means that in the next five to ten years, most of these companies should go through the ownership transfer process, either within the family, through management buyouts, or through market sales. If we translate this into conservative data, we are talking about assets worth at least three billion euros that should change owners, and likely much more valuable considering the potential of these businesses and the value accumulated in them. Unlike large merger and acquisition transactions, there is no unified public statistic for the main-street segment, which consists of micro and small enterprises valued at up to approximately five million euros.
The DZS, Fina, and CEPOR publish a wealth of data on SMEs, such as the number of employees, revenues, and added value, but they do not track the number and value of completed small business sales. This is also a European pattern: the market is fragmented and goes under the radar, with most transactions conducted within private mandates and with the help of specialized intermediaries. I believe this urgently needs to change, and at the European level, where Croatia can be a leader. In comparison, in the USA, they have been tracking the multiples at which businesses are sold for decades, have precisely defined market standards, publications on the subject, etc. I believe Europe needs to wake up to this issue urgently.
How many sales have gone through Colak Business Brokerage so far, what is your success rate, and what does your payment model look like?
– By the end of the year, we plan to exceed ten sales this year, and we expect the number to double year on year. The process from listing to closing takes six to eighteen months; nothing happens overnight. Currently, about twenty percent of listed companies actually sell, which is in line with international standards and practices. CBB operates solely on a success basis and charges a commission on the achieved price. This is usually between four and ten percent, depending on the company’s size or value. These are the standards by which Business Brokerage operates in an international context.
Who are the owners who most often sell businesses: are they people retiring, those without heirs, those who are ‘burned out’ in operations, or serial entrepreneurs looking to seize an opportunity and move on?
– The most common sellers of businesses are owners who feel fatigued in operations after some time. Although they have a healthy and profitable business, daily engagement, solving operational challenges, and constant presence exhaust them to the point where they want a change. The next large group consists of entrepreneurs nearing retirement. Often, these are owners who have no heirs, or their children are simply not interested in continuing the family business, so selling is a logical and rational move. There are also serial entrepreneurs, those who naturally seek new challenges.
Their motivation is to capitalize on success, monetize the value created in one company, and direct resources and experience into a new project. Particularly noteworthy are those who are relocating abroad or facing health issues, life circumstances that force them to sell regardless of the business’s potential. A very interesting category is also owners who have ‘earned enough.’ At some point, they assess that additional growth, expansion, or further engagement is unnecessary because they have already achieved financial security and the standard of living they aspired to. Their decision to sell is not necessarily driven by a problem but rather a desire for a change in lifestyle, enjoying freedom and time.
What does the typical profile of a small business buyer in Croatia look like: are they domestic entrepreneurs, returnees from abroad, or foreign investors?
– Currently, we have over seven hundred registered buyers, significantly more than we expected. Among them are individuals who want to exit the corporate environment and enter entrepreneurship through the model of entrepreneurship through acquisition, i.e., buying an existing business. Then there are searchers, who are constantly looking for opportunities for good acquisitions for development and later sale. We also have companies that buy to consolidate the market or diversify their business. This is the approach of ‘growth by acquisition.’ The first search funds are also emerging, acquiring in the SME segment, which is excellent. A special segment is returnees to Croatia looking for established businesses. There are almost no foreign investors in this micro and small segment because these businesses need to be operated locally.
Which activities sell the easiest and are most in demand, and which sectors prove to be the most difficult and least liquid?
– Generally, globally today, there is a trend of buying ‘boring’ businesses, stable companies with predictable and strong cash flow. Such businesses, although seemingly boring, offer buyers security and predictability, which is extremely attractive. Construction and manufacturing companies are also in high demand because they bring stable revenues, tangible assets, and growth potential. The more profitable a business is, the higher multiple it achieves upon sale. Simply put, the more money a business generates, the easier it is to sell because buyers see clear financial viability and a quicker return on investment.
Another key factor is the level of owner engagement. If a business functions as a nearly passive investment, meaning it can be managed with minimal owner involvement because the team is well organized and processes are in place, it becomes significantly more attractive to potential buyers. The third element is scalability. If it turns out that a business is already proven in one location or in a certain format, and there is room for expansion, either geographically or with additional products and services, its value increases because the buyer sees not only stability but also future potential.
On the other hand, hospitality is currently the hardest to sell due to labor issues, high operational challenges, and the unpredictability of seasonality. These factors pose the greatest challenge for owners, so such businesses typically have lower multiples and take longer to sell. Ultimately, it is clear that trends in business sales are strongly linked to movements in the labor market, as well as economic circumstances that shape the attractiveness of individual sectors.
What values and multiples are achieved in small businesses in Croatia, and where do we stand in relation to more developed markets like Germany or the USA?
– In the micro and small segments, multiples are more or less similar everywhere, whether we are talking about Croatia, Germany, or the USA. The most common starting point is SDE (seller’s discretionary earnings) times three because buyers want a return on investment within three years. SDE represents the owner’s earnings after all operational costs, increased by personal perks and expenses that are not necessary for the business itself, thus providing a realistic picture of how much the owner actually extracts from the business. The final multiple depends on several factors: the larger and more stable the cash flow, the higher the multiple; the less owner involvement is needed in daily operations, the multiple increases from four to five; if there is a clear potential for scalability and expansion of the business model, it can grow to six or seven. In other words, the more stable a business is, less dependent on the owner, and with clear room for growth, the higher the values achieved.
What are the most common reasons for the failure of negotiations: unrealistic seller expectations, lack of financing from buyers, or lack of trust? And what, on the other hand, is the recipe for a successful transaction?
– It is said that every deal is killed by time, lawyers, and accountants. The longer negotiations last, the greater the chances that the buyer will back out or change their mind, especially if a better opportunity arises, for example, in hospitality, where supply currently exceeds demand. The recipe for a successful transaction is to have all the paperwork in order, without ambiguities, to go step by step, to conduct the process with the help of a professional broker, to avoid unnecessary emotions, and to seek a mutually beneficial solution that satisfies both the buyer and the seller.
How do the emotions of owners, especially those who have built family businesses, complicate achieving a realistic price and the speed of sale?
– Owners’ emotions are often one of the challenges in the sales process, especially in family and craft businesses where years of work and personal identity have been invested. Owners often perceive the company’s value as higher than the market value, which slows down agreements and complicates achieving a realistic price. In such situations, it is crucial to show the real picture through comparison with market data and clear valuation, thus facilitating the transition for owners. When emotions are balanced with data, the sale proceeds faster and more successfully.
How often do founders remain in companies after a sale?
– Founders most often stay in the company for six to twelve months after the sale: the first six months actively to transfer knowledge and ensure continuity, and then another six in a more passive advisory role. In some cases, an additional twelve months of ‘on-call’ support is arranged if the buyer needs help or advice.
How are acquisitions most often financed in Croatia: with equity, loans, or are there already models where the seller finances the buyer, such as vendor financing?
– Acquisitions in Croatia are most often financed with equity, but almost all previous transactions have also had an element of seller financing. This means that the buyer does not pay one hundred percent of the agreed price after the takeover, but usually between 50 to 70 percent, with the remainder paid within a certain period and tied to key elements such as knowledge transfer or achieving agreed company performance. This way, the buyer is protected from buying a pig in a poke, and transactions are easier to close. Loans currently play a very small role because banks do not have developed programs for the micro and small segments. I believe that an instrument like the American SBA loan would be extremely useful in European markets because we are facing a relatively rapid generational transfer of ownership if we want to preserve a healthy SME sector.
How would you assess the Croatian market in relation to countries in the region: how liquid, transparent, and ready are we for the professionalization of the business sale process?
– It may still be too early for final assessments, but so far, the Croatian market shows a good direction because there is increasing interest from both buyers and sellers, and transactions, unlike before, are starting to be conducted in a structured manner. It will be crucial to develop brokerage with a professional approach and integrity to avoid what we have seen in the real estate market, where a lack of standards and control has caused chaos. If quality and transparency are maintained, Croatia can quickly become a leader in the region, and even beyond.
Where do you think this market will be in five years? Can we expect it to become a more serious segment of the entrepreneurial ecosystem, and in which sectors do you predict the most significant growth?
– I believe that in five years we will have hundreds of transactions per year and that the volume of value will reach hundreds of millions of euros. I expect that professional brokerage will develop, financial instruments tailored to the micro and small segments will emerge, and more search funds will appear. If this process is executed well, it could have a strong impact on the Croatian economy. The generational transition would bring new energy and vision to thousands of SME sector companies that have stagnated for years, which could give significant momentum to the entire economy.
What role do franchises play in the small business sales market in Croatia? Is there real demand for buying and selling franchise models, or is it still a rarity?
– Franchises in Croatia have opened the way to a new way of thinking, namely that one does not always have to start from scratch, but can buy a proven business model. We are now entering the next phase, where, in addition to franchises, established businesses are being purchased. The franchise market is developing very nicely: many Croatian micro-concepts are growing into national chains, and some are already internationalizing, which is a big deal. For this reason, franchises play an important role as they offer investors a greater choice, from buying a franchise to taking over existing profitable businesses, significantly enriching the domestic market.