Business sales have been volatile ever since the onset of the financial crisis in 2008. In fact, business sales in 2009 and 2010 had decreased by 50% compared to prior years. Though the struggling economy’s impact on large mergers has made more national headlines, the financial crisis has affected small business as well. Small businesses valued between $100,000 and $10 million—the value of most the businesses we represent—were particularly affected.
There are many reasons the impact on those businesses was especially distinct. Owners looking to sell their businesses in 2009 and 2010 could not get the valuation they desired because their revenues and earnings were down. Buyers faced formidable challenges as well, with banks making little credit available for acquisition financing. Generally, transactions that were completed were those where the sellers were willing to sell for a lower valuation, and often offer significant seller financing. Of course, there were some small businesses that experienced considerable growth in revenue and earnings during this period that were able to command good valuations, but certainly they were the exception, and not the rule.
Today, five years after the start of the financial crisis, conditions for business sales have improved markedly (Click here to view BizBuySell’s report to get the latest statistics). Small business owners are showing improving revenues and earnings—in some cases exceeding where they were pre-economic downturn. From a valuation perspective, they believe now may be as good a time as any to sell. Owners of these businesses are also five years older and the desire to move into retirement or on to some other venture has only increased. Additionally, bank credit is less of a roadblock for potential buyers, and banks are more willing to lend, particularly through SBA programs, to a greater degree than any time over the last five years.
All of this has fueled a rebound in the number of businesses coming on the market, and as a firm, we are as busy as we’ve ever been speaking to owners about selling their businesses. While our challenge is always one of finding good, well-organized businesses to sell, this has become less difficult in the current climate. We believe that the availability of good businesses for sale will increase significantly over the next several years. This is good for buyers as well as sellers.
Article By: Jeff Swiggett, CBI, M&AMI
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