Small Business Sales Continue to Get Stronger
Small business sales continue to get stronger according to BizBuySell. BizBuySell provides one of the many websites in the business-for-sale marketplace that advertises businesses for sale. They either get paid a fee by the owner of the business that wants to sell on their own or from business brokers such as myself that wish to sell the businesses they are representing for sale with authorization from the owner of the business.
A report that BizBuySell has just put together shows there continues to be a steady decline in the median number of days it takes to sell a small business. The report was first started in 2012 and provides a quarterly review that brings it up to date to the end of the 1st quarter of 2015.
Here are some highlights from the report.
- The 2nd quarter of 2012 shows the median business sale time of 200 days. By the 4th quarter of 2014 this was down to 153 days which is the lowest of any quarter since BizBuySell first began tracking sales data in 2007.
- The 1st quarter of 2015 did see an increase in sales time but this is consistent with the seasonal time of year due to the holidays. The overall trend of the last three years however is clearly downward; and so that’s the good news.
- Small business sale times remained relatively consistent from 2007 to 2010 despite the recession that hit in mid-2008. However, from Q3 2010 to Q2 2012, sale cycles dragged on much longer. The median sale time during this period rose 22% to 200 days, likely coinciding with a still sluggish economy and unsure future.
As is customary with a recession, the demand to buy a small business is weak with capable buyers hard to come by. Part of the reason is that the majority of the recession affected those who were attracted to buy a house and as a result, borrowed significantly. When housing prices crashed and the borrower had more debt than equity, there was no incentive for the borrower to continue to repay their loan and so they chose to walk away from paying their loan. One of the side effects of this action was that they now had a negative impact on their credit report and this prevented them from being able to qualify for a loan. An even more important aspect was that they lost the ability to use any equity they may have in their house to use as a down-payment to buy a business. From my perspective, this is a critical reason why California continues to struggle with an uptick on the sale of businesses in some areas.
If you have an interest for more information, click the following link to reach the BizBuySell Insight Reports.
Information available with supporting graphics looks at the data for each quarter for Median revenue and Median cash flow and breaks this down from the first quarter of 2011 to the first quarter of 2015. This information and charts includes:
- Closed Small Business Transactions.
- Key financials of Sold Small Businesses.
- Small Business Sale Price vs Asking Price.
- Small Business sales by industry sector. The industry sectors include Retail – Restaurant, Retail – other, Service, Manufacturing and Other.
- Small Business Sale Price Multiples.
- Small Business Listing metrics by Geography for First Quarter, 2015.
- Closed Small Business Transaction Metrics by Geographic Market for the Full-Year 2014.
- Closed Small Business Transaction Metrics by Sector for the Full-Year 2014
Once again, bear in mind the numbers are based on what’s happening at a national level. The reality is that selling or buying a business is all local and so if you are thinking it is time to sell your business or buy a business, do your research to understand what’s happening in your local market.
If you would like more information about selling a business, selling a medical practice or valuing a business, please visit my website Rogerson Business Services.