BizBuySell.com, the Internet’s largest business-for-sale marketplace, has put out their Third Quarter 2014 Insight Report this past week. The report supports the idea that we’re in a continued “Seller-Friendly Market.” Apparently, third-quarter small business transactions are at historically high levels and are on pace for a record-breaking year. Sellers are now receiving a higher percentage of asking price and improved cash flow multiples, which supports the notion of sellers becoming more confident in today’s market.
- Within the third quarter of this year, a reported total of 1,987 closed transactions occurred. This represents a 17.9% increase from last year.
- This quarter’s numbers slipped just 2.1% from the second quarter of 2014, which is the most active quarter for small business sales since before the recession.
- There is a clear upward trend in the numbers of sold businesses, and this year’s numbers could represent the highest number of small business transactions since this report’s inception.
Growing Number of Businesses Listed for Sale
- Total listings were up 2.2% from the same time last year, with the most notable growth in manufacturing businesses, service-industry businesses, and restaurants.
- It is clear that both supply and demand in the market is increasing
Financials Show the Market Shift Beginning to Benefit Sellers
- Despite the post-recession market favoring buyers, sellers are now receiving higher sales prices exhibiting that a shift is under way.
- The median sale price for businesses sold in the third quarter rose 5% compared to last year (from $180,000 to $189,000) while the median asking price remained virtually unchanged.
- Sellers are receiving more in relation to their revenue and cash flow. The average revenue multiple grew nearly 6% this quarter, and the average cash flow multiple grew nearly 9%. While buyers are still receiving good value for their investments, rising multiples show that sellers are successfully translating their financial growth into higher sales prices.
- BizBuySell’s Buyer & Seller Confidence Survey revealed that sellers are more confident they will receive an acceptable sales price this year as opposed to last year.
After hearing sellers becoming more confident and now seeing this transaction data to support their claim, it appears that we are shifting back towards a balanced market. Numbers show that the supply of small businesses being listed is still growing and it’s a great time for both buyers and sellers to enter the business-for-sale market.