BizBuySell.com, the Internet’s largest business-for-sale marketplace reported that small business transactions grew 49% in 2013 compared to 2012. The San Francisco, CA based company has over 1 million monthly visitors and the company releases its Insight Report quarterly. Closed transactions are reported to the company on a voluntary basis by business brokers nationwide.
The full year totals represent the first year of extreme improvement in business sales since levels reached record lows in 2009. In 2013, 7,056 small business sales were reported, a significant spike over 4,730 transactions reported in 2012. Ironically, the improvement was led by exceptional growth in restaurant and retail market’s two industries which traditionally trail other categories. Yearly restaurant transactions rose 78% and retail business 71% in 2013 compared to 2012.
The dramatic rise in 2013 business sales can be attributed to multiple factors, including the improving economy, strong supply and demand (an aging business owner demographic and an increase in the number of qualified buyers) and continued improvement in small business financial performance.
In 2013, small business median revenue rose 13% to $405,905 and median cash flow grew 9% to $97,000. This strong financial improvement helped push the median sale price up 13% to $180,000- good news for sellers. However, the fact that this is still a buyer’s market is revealed by the fact that the average revenue and cash flow valuation multiples fell 1.7% and 3% in 2013. Sale price multiples are down slightly despite the surge in transaction activity due to the fact that supply growth slightly outpaced demand. Demand growth in 2013 was strong as perspective buyers saw strengthening small business financials and economic activity. Improving personal wealth and an active lending landscape translated into more qualified buyers with sufficient means to buy a business.
Baby Boomers, who put retirement plans on hold during the recession returned to the market confident that they could finally receive an appropriate sales price for their business. 76% of business brokers surveyed expected even more Baby Boomers to sell their business in 2014.
The business for sale market is trending toward a continued path of increased activity in 2014. Small business owners have “got their act together” and qualified buyers anxiously await solid business opportunities to emerge in the marketplace, so the fundamentals seem right for sustained business transaction activity ahead.
PUBLISHED IN THE SOUTHCOAST BUSINESS BULLETIN – MARCH 2014