Selling a Business Looks Promising
Here’s some great news to start the New Year: the small business for sale market is experiencing a major spike in activity. According to BizBuySell’s 2016 third quarter Insight Report, after consecutive months of steady but modest growth, the number of closed small business transactions skyrocketed 15% from this time one year ago. So, provided there are no major hiccups, 2016 looks to be on its way to setting a new record for annual closed small business transactions.
Transactions and Listings at High Levels
The report notes that third quarter transactions are at the highest level of small business for sale activity since the second quarter of 2008, immediately prior to the recession. This healthy activity level shows a business-for-sale environment that is beneficial for both buyers and sellers.
In addition to this promising news, the Q3 Insight Report provided some other notable findings. One of these was the fact that sellers are continuing to supply the market with a record number of listings. The supply rose 5.1% from Q3 of last year (2015). This jump in the number of listings may be a result of some sense of urgency felt by those small business owners who may be less optimistic about their sale prospects in 2017. A recent industry confidence survey of buyers and sellers found that less than 50% of sellers believe that they could wait another year and realize a higher price for their business. The survey pointed to retiring baby boomers as especially motivated to sell immediately instead of delaying a sale or risking a wait through another recession.
Business for sale: Sales Happening More Quickly
Research also shows that with buyers and sellers both motivated to act, sales transactions are occurring at a faster pace. For example, a business sold in Q3 was on the market for an average of 171 days, which is a 4.5% decrease from the 179 days on the market in Q3 of 2015. It’s also a steady drop from Q1 of 2016, when the average was 188 days on market.
Price Negotiations Balanced
The recent asking and final sale prices studied evidences that the current market is increasingly more balanced, a shift from the aftermath of the recession when the business for sale market was more in favor of buyers due to tight market conditions and limited access to capital.
The report noted that the median asking price for small businesses increased from $200,000 in Q2 to $216,000 in Q3, and the median sale price was up over 7% year-over-year to $199,000. In addition, strong business financials are allowing sellers to justify their higher asking prices, with the median revenue of sold businesses in Q3 up over 4% from 2015, and the median cash flow up about 6%.
Looking forward, many experts like business advisor Andrew Rogerson in Sacramento, believe that this recent activity shows that momentum will continue, and 2016 will wind up being a strong year overall for business transactions.
Contact an Expert Business Intermediary
Andrew Rogerson serves business and franchise owners, as well as those looking to purchase a business or franchise throughout Southern California and Northern California including areas like San Diego and Orange Counties, the Los Angeles metro area, the California Central Valley, San Francisco Bay Area, Sacramento County, Coastal California, and Sierra Nevada.
If you have questions about business opportunities in and around Sacramento, Andrew can help answer your questions. Take some time to speak with Andrew about business transactions or visit our website Services. Contact Andrew via email or call him at (916) 570-2674.