Businesses for Sale are Selling More Often
Each quarter, BizBuySell puts together their Insight Report to show what’s happening with the selling of a business and the buying of a business. The annual report and the fourth quarter reports for 2014 are now available and it continues to show that sales of small businesses nationwide are continuing to increase and in fact, at the highest level since they started tracking this data in 2007.
What happened in 2014?
The Insight Report comes from a survey sent to business brokers. Here are some of the highlights from their report looking at the data for all of 2014.
- A total of 7,494 closed transactions were reported in 2014. This is an increase of over six percent from the 7,056 transactions in 2013.
- The top reason for the increase in sales includes an increase in the number of qualified buyers in the market. The second most common response was the general improvement of the small business environment.
- The top reason for a business being sold is that a Baby Boomer now wishes to retire, that is, more than 78 percent of business brokers attributed at least a quarter of their closed transactions to Baby Boomer sellers.
- If you are thinking of selling your business, the Insight Report shows that small businesses are performing at a higher level where the median revenue of small businesses sold grew from $405,905 to $417,562 in 2014, and the median cash flow rose from $97,000 to $100,000.
- Higher performing businesses flowed into a slight uptick in median sales price. In 2013 the median sales price was $180,000 while in 2014 it went up to $185,000.
- Similarly, financial multiples that grew modestly as the average revenue multiple rose from 0.59 to 0.61 and the average cash flow multiple moved from 2.21 to 2.24. This indicates that while sellers are getting slightly higher returns out of their businesses, buyers continue to receive good value on their purchases.
What happened in the fourth quarter of 2014?
In addition to the annual data, BizBuySell’s Insight Report also revealed a strong fourth quarter to end 2014. That is, the growth trend for the sale of businesses was up and so was the financial performance of the businesses.
Some data highlights from the businesses that sold in the fourth quarter of 2014 includes:
- There were 1,848 closed transactions which represents a 12 percent increase from the same period in 2013.
- The fourth quarter of 2014 also marked the third consecutive quarter of increased median revenue, topping out at $445,146. Additionally, the median cash flow rose to $103,829 with both indicators at their highest point since BizBuySell started tracking the data in 2007.
- The impact of the increase in median revenue and median cash flow meant sellers were able to ask for and receive more money for their businesses. That is, the median asking price for a small business during 2013 and the first quarter of 2014 was sitting around $200,000. However, in the fourth quarter of 2014 the amount sellers received had grown to $224,900.
What’s happening in 2015?
With good sales of businesses in both 2013 and 2014, there still appears to be strong supply and demand in the pipeline for 2015. As the economy continues to strengthen, small business financials are likely to keep improving, and sellers will be more confident that they can successfully sell their businesses.
From the business broker’s perspective, 82 percent expect sales transaction activity to increase in 2015 and more than 45 percent believe final sales prices will rise in 2015 compared to just 12 percent who believe they will decrease.
While Baby Boomers were active in selling their business in 2014, business brokers are confident they will remain a driver of supply. Seventy-eight percent of brokers said they expect a larger number of Baby Boomers to exit their businesses in 2015 than did in 2014.
If you would like more information about selling a business, selling a medical practice, valuing a business, buying a business, buying a franchise or starting a business, please visit my website Rogerson Business Services.