Small Business Transactions Up 18%, Sellers Earn Higher Sale Prices – According to Industry Report

/in , /by Al Statz
It’s a very good time to be a seller.
According to a report released on October 16, 2014, U.S. small business sale transaction levels are on pace for a record-breaking year. And while the post-recession market has generally favored buyers, a shift appears underway, with sellers now receiving higher selling prices, higher percentage of asking prices and improved cash flow multiples.  The full results are included in BizBuySell’s Q3 2014 Insight Report, which aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.
Report Highlights
  • The number of closed transactions in Q3 represented both a 17.9 percent increase from last year and the highest number of small business sales recorded in a third quarter since BizBuySell began tracking data in 2007.
  • The median sale price for businesses sold in Q3 rose 5 percent compared to last year.
  • The average cash flow multiple jumped nearly 9 percent.
  • Service-related businesses led the way with a 17 percent increase in closed transactions, while manufacturing was up 16.2 percent and restaurants were up 13.3 percent compared to last year
  • In addition to an increased number of closed sales in Q3, there was also a growing number of businesses offered for sale.
  • 2014 remains on pace to record the highest number of closed transactions reported since the BizBuySell Insight Report’s inception in 2007.
Our View
Without a doubt, as business financial results and the economy continue to grow, and as buyer liquidity and acquisition financing options continue to improve, Exit Strategies is seeing more buyers and sellers entering the market here in California, at both the main street and middle-market levels.  Set amidst the backdrop of an aging baby boomer business owner population, low interest rates, plenty of private equity dry powder, and the potential for future tax rate hikes, we expect this trend to continue into 2015.
Business owners without a successor who have an eye toward retirement should look closely at entering the market. The sale process takes 9 months on average. Add time on the front end to evaluate and prepare the business, and on the back end for management transition, and a full year or more is not uncommon.
For more information about current market conditions or to understand how your business is likely to be received by prospective buyers, investors and lenders, feel free to contact us, in total confidence.