4th Quarter Market Snapshot

Almost half of people trying to sell their business have had a much worse response from potential buyers than expected, according to the latest BusinessesForSale.com survey.

Seller trends

Respondents were selling their businesses in geographical locations worldwide including Sweden, Indonesia, Pakistan and Jordan, among others. Seventeen percent of sellers were hoping to sell hotels or guesthouses, the most common type of business for sale, followed by real estate property (13%), manufacturing (13%), retail (11%) and cafes and restaurants (11%).

Of sellers whose businesses have been on the market for some time, 47% said they have had less interest in their business than expected (of which 25% said the response was considerably worse and 22% slightly worse), against 24% who had a better than expected response.

The positive news is that this figure is down 7% from the last quarterly survey results, when 54% had received a worse than expected buyer response. Whether this is due to buyers growing in confidence or sellers becoming more realistic when valuing their business remains to be seen.

Asked to what extent they think the sale of their business is being/will be hampered by a shortage of credit, one in three (33%) said “to some extent” and 30% thought that credit issues had significantly affected matters. A more modest 16% believe that financial issues haven’t noticeably affected their ability to sell, with a further 14% confident that they’ll find a buyer who can fund a deal.

The main reasons for selling are retirement (31%) followed by seeking a new challenge (29%). Interestingly, a further 22% were relocating to a new area or country and 16% didn’t have enough time to focus on their business. Thus, budding entrepreneurs with sufficient time and dedication could make a greater success of one of these businesses for sale than the previous owners.

Only 5% were selling because they believed that the business’s value was at its peak, while just 4% professed to be influenced by challenging trading conditions and 2% because it is increasingly difficult to thrive in their sector. In most cases, it seems, entrepreneurs sell their business for personal reasons, while the circumstances of the business appear to play a negligible role.

The survey also revealed that 78% of sellers are prepared to be flexible with their asking price.

Almost half of those surveyed (49%) indicated that word of mouth was an important way of finding buyers, up from 30% in our previous quarterly survey.

Buyers

Potential buyers were polled from around the world, with the biggest numbers based in the UK (21%) and US (18%), with 15% from South Africa and 10% each from Australia and Canada, although individuals from several other territories, such as Vietnam and Mozambique, also took part.

For the second quarter running the most popular sector was cafes and restaurants (34%), followed by food businesses (27%), hotels and B&Bs (27%), wholesale and distribution businesses (22%) and business services (22%). Despite the increasing importance of online and technology businesses worldwide, only 6% were interested in the technology and media sector.

Nearly half (48%) of buyers surveyed want a business with a good track record and will pay a premium for it, compared to the 45% who will buy a struggling business if it’s realistically priced and 34% who would actively enjoy the challenge of turning round a failing business. The least popular reason for purchasing a business was cash-rich buyers expecting to find bargains because of banks’ reluctance to lend, polling 29% of responses.

Asked about funding, personal savings accounted for seven out of 10 respondents (70%), followed by bank loans (41%), overdraft facilities (18%) and money from friends and family (15%). Other, creative funding resources include insurance policy payouts, severance pay and inheritance money.

The most important reasons for buying instead of starting a venture from scratch were financially motivated, with immediate income important to 51% of all surveyed, 40% finding it more cost-effective to buy an established business and 36% perceiving a lower risk of failure. Other reasons for buying a business include obtaining an existing customer base and gaining the ability to diversify into other markets.

For detailed survey information plus further infographics please contact press@businessesforsale.com.

You may also view additional information and charts online here.