4 Reasons Sales of Small Businesses Are Booming

Small Business Transactions Booming

As reported in BizBuySell’s 3rd Quarter Insight Report, small business transactions jumped 42 percent over the same period in the previous quarter, to reach nearly 1,700 closed transactions. Sales of restaurant and retail businesses have led the way, with transaction growth of 11 percent and 61 percent respectively.

To put this in comparison, BizBuySell reported just over 1,000 transactions in the fourth quarter of 2009. A recent article in The Fiscal Times uncovers why, after years of slow sales following the recession, the business for sale market is making its comeback.

“As the economy continues to improve, consumer confidence increases, and small businesses continue to gain in market share, you’re going to see more businesses looking to sell,” says Brian Miller, COO of AdviCoach, a national business coaching company. “The best time to sell is when a business is doing well.”

According to The Fiscal Times, the small business market is thriving due to these 4 factors:

1) Prices have improved. The median business sale price was up 3% last quarter, making it the fifth quarter to show gains.

“During the downturn a lot of potential sellers paused because their business’ valuations were down,” says Andy Cagnetta, CEO of brokerage firm Transworld. “Now that earnings have picked back up, they feel like there’s an opportunity to sell again.”

2) Transitioning Baby Boomers. As the generation is seeking an escape from their 9-5 lifestyle and a flexible, profitable next endeavor, baby boomers are on both sides of the table as buyers and sellers. “In 1996, just 14 percent of new entrepreneurs were age 55 to 64; last year they made up 23.4 percent of all new entrepreneurs, according to the Ewing Marion Kauffman Foundation.”

Alternately, seasoned business owners ready to retire are seeing today’s market as the right time to exit. Read an example here.

3) Banks are beginning to lend again. Though credit is still restricted, banks are opening financing to qualified buyers. The Small Business Administration reportedly backed 54,106 loans in the 2013 fiscal year ending in September. Also reporting a positive upward trend, Thomson Reuters/PayNet Small Business Lending Index saw a 16% increase in September, year-over-year.

Determined business buyers are also finding other ways to get cash to bankroll a deal. Read how, here.

4) Private equity is investing in smaller deals. Private equity buyers are entering the scene for select small businesses with EBIDTA over $2 million, creating a unique opportunity for sellers. “As returns in stocks and bonds start to look risky, private money is increasingly eyeing smaller deals that promise a better return.”

“If you can attract private equity, it’s a uniquely good time to sell,” says Doug Tatum, the Wright Travel Chair of Entrepreneurship at Middle Tennessee State University. “There’s a lot of money there chasing fewer deals, and they’re coming downhill and looking at smaller companies.”

Read the full report as created by The Fiscal Times here.

*This post was created independently of BizBuySell though our findings were reported. 

1 Comment on 4 Reasons Sales of Small Businesses Are Booming

  1. The reason baby boomers are more likely to buy into a small business has less to do with escaping their 9-to-5 lifestyle and more to do with companies downsizing older employees to make way for younger ones who are paid less and have lower health insurance costs.

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