Business Sales Increase!

Business Sales Increase!

According to statistics based on 2012 BizBuySell data, business brokers reported 5,689 closed deals, a small increase from 2011.

What we found interesting was that the median asking price was $185,000 (a 2.8 % increase from 2011) and the median sale price for 2012 was $160,000.

The figures continue to show that the sale of small businesses is alive and well – and increasing. The median sale price was only $160,000. Even more interesting was that the median cash flow for these businesses was $88,902. Assuming that the cash figure is close to the actual SDE figure, then the SDE based on the asking price was 2.08, but based on the actual selling price it was 1.8.

One could conclude that now is a good time to buy a small business. It is difficult to believe that one can buy a business for $160,000 with a cash flow of almost $90,000. We know that we are playing with numbers, but BizBuySell does a great job of maintaining the figures and as the largest player of the business listing sites, their accuracy is probably right on target.

Another interesting figure is that the difference between the asking price and the actual selling price was 86%. In other words, businesses in 2012 sold for 86% of asking price. It has been hovering around 84% for years.

Let’s look at the breakdown of what sold in 2012 based on the BizBuySell data.

  • Restaurants………. 19%
  • Retail (Other)……. 26%
  • Service …………….41%
  • Manufacturing….. 06%
  • Other……………….. 08%

What can we learn from all this?

First, the sale of small businesses is alive and well. While many business brokerage firms seem to be getting involved in M&A transactions (or trying to), main street sales continue to flourish. Second, it seems clear that prices are down considerably – in several areas:

  • prices are down based on selling prices versus asking price
  • prices are down based on cash flow versus full price

One can say with a large degree of confidence (based on over 5,600 sales), that now is a very good time to buy a business.

 
 
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