BizBuySell.com, the Internet’s largest business-for-sale marketplace, announced the results of its August 2013 survey of business buyers and sellers. BizBuySell.com’s nationwide survey, designed to better understand the current wants, needs, and sentiments of buyers and sellers in today’s small business market, surveyed more than 1,500 people currently interested in either buying or selling a business.
Suggesting a strong business-for-sale market overall, the study found that both prospective business sellers and buyers are optimistic about their prospects of finding a match at an acceptable price.
According to the survey, 80 percent of prospective buyers felt confident they would earn an acceptable price and 65 percent of sellers felt they could get a price that met expectations. Buyers expressed this optimism despite the fact that 61 percent also felt businesses currently for sale are generally overvalued. Sellers didn’t agree, with only 29 percent saying businesses are overvalued.
What buyers and sellers do seem to agree on is that transactions can be completed in the current economic climate. That's a big shift from the dearth of small business transitions that took place during recent down-economy years, in which sellers were reluctant to sell struggling companies and there was a shortage of qualified buyers who could get acquisition funding to complete a purchase.
“Qualified business buyers -- including individuals, companies, and private equity firms -- are now very active in the market relative to previous years,” Curtis Kroeker, group general manager of BizBuySell.com, says. “At the same time, because they see more buyers entering the market, the majority of sellers are also optimistic. It's a virtuous cycle that bodes well for both buyers and sellers. With both sides ready to come to the table, we're seeing market fundamentals aligning in a way that bodes well for continued strong small business ownership transition volumes in the United States in the months and, hopefully, quarters to come.”
The survey's finding that buyers are slightly more optimistic about their business-for-sale transaction prospects than sellers is supported by recent results reported in BizBuySell's Q2 2013 Insight Report, a quarterly analysis of business listings and closed-transaction data reported to BizBuySell by the nation's business brokers. In this report, BizBuySell noted that cash flow multiples for sold businesses remained below pre-recession levels, suggesting that buyers can purchase good businesses at a favorable price.
Survey respondents agreed with this sentiment. “Tough economies are the best times to buy investments because they tend to go at significant discounts,” notes one prospective buyer who participated in the survey.
But as the economy and overall business health continues to improve, sellers are beginning to get more for their sales. While still low relative to pre-recession levels, cash flow multiples increased in the first two quarters of 2013, indicating that sellers are gaining more power at the negotiation tables and the market is starting to shift back toward a better balance.
As the economy continues to improve, buyers and sellers are growing more and more confident that the time to make a transaction is now. Many sellers have been patiently waiting out the recession in order to receive an acceptable sale price. This includes a large number of Baby Boomers looking to retire. At the same time, buyers are now getting better access to financing and hoping to take advantage of the buyers' market. In fact, of the prospective buyers surveyed, 88 percent consider themselves in the market to purchase a small business within the next 1-2 years.