Buying or selling, local data help
Looking to buy a small business? Or, on the flip side, planning to sell the one you have?
Some 2019 first quarter numbers from BizBuySell, a web-based listing of active businesses for sale, might be interesting. The data are BizBuySell first quarter listings from the Chicago-Naperville-Joliet, IL-IN-WI piece of what once was the Chicago Metropolitan Statistical Area. Counties covered include Cook, DeKalb, DuPage, Grundy, Kane, Kendall, both Lakes, McHenry, Will, Jasper, Newton, Porter and Kenosha.
• The median asking price of BizBuySell listings here was $250,000. The businesses had median revenue of $517,101 and median cash flow of $115,197.
• The median first quarter selling price was $179,500, according to BizBuySell's analysis of sold businesses here. Those businesses had median revenue of slightly more than $431,000 and median cash flow of $118,540.
• Buyers, according to BizBuySell, paid 0.55 times revenue and 2.41 times cash flow.
Nationally, first quarter sales were off 6.5 percent in this year's first quarter when compared to last year, which was 6 percent below 2017. But Bob House, president of San Francisco-based BizBuySell, notes that both 2018 and 2017 were record BizBuySell first quarters, which could mean that this year's early data is not much to worry about.
In the Chicago-area market, for example, the number of businesses sold in this year's first quarter actually rose -- to 67 from 53 a year ago.
Also keep in mind as you search for a business, or ponder what you'll ask if you're selling, that different types of businesses have different price tags. BizBuySell says that manufacturing companies for sale in the local market had a median asking price of slightly over $1 million; restaurants had a median price tag of $217,500.
You can find generally useful price and sales data at https://www.bizbuysell.com/.
Especially if this is your first foray into the businesses for sale market, you'll likely benefit from professional help. BizBuySell has a list of brokers. Midwest Business Brokers and Intermediaries (MBBI, on the web at https://mbbi.org/) is another local source of brokers, transaction attorneys, accountants and the like.
Neither buying nor selling is necessarily easy.
Broker Karl Grasemann, the Grasemann Group Ltd., Bartlett, notes that "It's a seller's market" where even successful sellers often say they didn't understand how involved the process would be.
Interestingly, and although he has brokered sales in the hi-tech and manufacturing sectors, Grasemann is a self-proclaimed proponent of "dirty jobs" businesses -- trades-focused opportunities that appeal to "the school of hard knocks guy."
If you're beginning to think seriously about selling, there are at least two early conversations to have. One is with your family; it could be that the kids you thought would buy the business no longer are interested -- or that your spouse isn't ready to have you hanging around every day all day.
Another factor: It takes time to get a business' finances in order. Your accountant should be one of your early conversation partners.