Pace of small business sales picks up
Bob House thinks this is a good time to sell a business.
“The window's open,” House says. “Financing activity is up. Buyers have access to capital. Deals are happening.”
Median revenue, and both asking and selling prices are up as well, House says.
House is president of both BizBuySell.com, an Internet marketplace with 45,000 or so businesses for sale, and BizQuest.com, which says it is the oldest businesses-for-sale website. BizQuest was founded in 1994; BizBuySell two years later.
The data behind House's positive outlook are national, from brokers who use the BizBuySell website for listings, but House says activity also is strong in the Chicago area small business market.
Last year, BizBuySell says 194 businesses sold in the Chicago-Naperville-Elgin IL-IN-WI MSA (metropolitan statistical area, a name change the report has not yet captured). The median asking price in 2015 was $257,500; the median sales price was $215,000.
According to BizBuySell's First Quarter 2016 Insight Report, 60 business transactions were closed here in the year's first three months, up from 45 a year ago. The median asking price was $279,000. Median sales price was up 14 percent.
Nationally, the Insight Report says 1,840 business-for-sale transactions were closed in the first quarter, up only marginally from 2015's first quarter. But, the report notes, “The businesses that sold (first) quarter appear to be much healthier” than those that sold a year ago.
“Businesses sold in the first quarter of 2016 grossed a median revenue of $478,000 compared to $442,000 in 2015 and (posted) a median cash flow of $110,000 compared to $104,000” in 2015, the report says.
The median revenue and cash flow figures of sold businesses are highs since BizBuySell began tracking the data in 2007. That's not a lot of years, but the trend is nice.
At least for the short term, the trend seems likely to continue. Although he warns that “Election years can be a little funky,” House notes that second quarter sales data “typically are stronger” than first quarter. Although he can't pin down a reason for stronger second quarters, House views the data and says that “Fundamentals indicate that businesses will continue to sell” at least through the first half.
The number one reason people sell is retirement, House says. “We should see a good run over the next 10 years. Boomers are ready to sell.”
The exception to the rosy outlook could be the restaurant sector, where both median revenue and median cash flow of restaurants sold in the first quarter are down from last year. Median sales price was down, too, but only by $1,500.
The report sees no “seismic threat” in the sector, but House does say that wage costs, especially minimum wage adjustments from the U.S. Department of Labor that will kick in later this year, and health care cost uncertainty have brought a bit of caution to restaurant buyers — and owners, as well.
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