02 Feb A Look at BizBuySell’s Insight Report – Making Sense of 2020
The latest BizBuySell Insight Report provides a wealth of information. There is no doubt that 2020 most definitely took a toll on a wide array of businesses. As the report notes, acquisitions dropped by a whopping 22% in 2020. It should be noted that this drop represented the largest year-over-year drop since 2009 when transactions dropped by 28%. The report is based on 7,612 reported transactions as well as a poll of 2,800 business owners, buyers, and brokers.
No doubt this isn’t exciting news on face value. However, it should be stated that there are positive signs to consider. BizBuySell’s Insight Report noted that there is likely to be a great deal of pent-up demand that will fuel the market in 2021.
The report goes on to outline that while transactions did slow, the media cash flow of sold businesses did, in fact, grow by a 10.7% over 2019 to $135,567. Likewise, revenue increased 8.2% to $613,341. A key part of these numbers is that the demand for pandemic resistant businesses increased.
The pandemic has hit many businesses, such as gyms and full-service restaurants, quite hard. Yet, this doesn’t mean that some businesses are not doing well. Elkin & Lee Realty & Business Advisors noted that high-volume delivery restaurants were actually seeing a growing demand. Ultimately, the specifics of a given business played a role in how much pain was felt.
All of this points to the fact that 2020 was, as the report notes, a “seller’s market for ‘pandemic-proof’ businesses.” As the report points out, some sectors were hit very hard while other sectors were basically “pandemic resistant” and able to weather the pandemic storm rather well. The Insight Report concludes that businesses such as “delivery and logistics companies, fast-casual restaurants, e-commerce websites and manufacturers of certain goods saw revenue soar in 2020.” The end result was that sellers had what the report deemed a “golden opportunity” in 2020. A survey of business brokers found that 54% of businesses that sold in 2020 were immune to the pandemic with about 24% actually thriving. It is the report’s conclusion that these businesses will likely continue to thrive in 2021.
However, on the flip side of the coin, through a survey of business owners, BizBuySell found that a truly eye-popping 78% of businesses experienced reduced customer demand. As of January 2021, 52% of business owners are still experiencing reduced demand with a mere 25% noting that they are unaffected by the pandemic. 23% of businesses reported an increase in customers.
Looking forward, it is important to realize “a new set of buyers have emerged during the COVID-19 pandemic.” The report points to the fact that “of 14 million reported as currently unemployed, a small percentage are executives who now need to replace income and are aggressively pursuing acquisitions. Most have $500,000 to $1 million to invest and plenty of time on their hands to call on opportunities.” This quote comes from Robert Flynn of United Brokers Group LLC of New England.
While it is impossible to predict the future, it is clear that the pandemic will eventually end. When the pandemic does end, there will still be massive numbers of Baby Boomers who are still marching towards retirement. Shelia Spangler of Murphy Business & Financial Mountain West noted that three key reasons will push businesses onto the market: aging Baby Boomers, pandemic fatigue and uncertainty, and a “new administration that has signaled higher taxes are on the way.” Those in the brokerage industry should expect to find that 2021 will be a busier year than 2020.