18 Oct What Does the Road Ahead Look Like?
Two industry experts, Lisa Riley and Scott Bushkie, joined our last webinar to discuss the importance of the Market Pulse Report for the second quarter of the year. The Market Pulse Report is an IBBA report that focuses on businesses being sold under $50 million. The comprehensive report breaks down into two sections, main street and lower middle market. Research is conducted each quarter to reflect the state of the industry. In this article, we will look at some of the key takeaways of the report and learn what it reveals about the path ahead.
Tracking the Labor Shortage
For the second quarter of 2022, the report revealed a variety of interesting information that you and your clients should know. One massive data point from the report is that the labor shortage continues to be a significant variable for businessowners. A staggering 92% of report respondents state that the labor shortage has negatively impacted their business with 54% stating that the shortage has had a “very negative impact” and 35% stating that the impact is “somewhat negative.”
Hesitation Among Buyers
It is Lisa and Scott’s view that the market has definitely changed. This fact is especially true when compared to four years ago when there was a lot of money chasing deals. Today, buyers are becoming more hesitant due to uncertainty.
They explain, “One of the biggest takeaways here is just how much more seller financing there was this year versus last year…buyers are asking sellers to take on some of the risk in the seller note or rolling over equity.”
Closing Times
The report further indicated that it is taking about seven months for a business to close. They noted that it takes about six months to a year to sell a well-priced business or a well benchmarked business.
The Strongest Industries
In terms of what kinds of businesses are selling, the report points to restaurants making a solid comeback. It is interesting to note that restaurants valued from less than $500K to $1 million are enjoying a particularly strong rebound. Business services, personal services, construction and manufacturing remain steady. Lisa and Scott point to the fact that construction has remained strong for several years.
In Summary
Lisa and Scott conclude that the report is pointing in several directions. Currently, three factors are impacting businessowners, namely, the labor shortage, inflation and supply chain issues. They observe that businesses have had no choice but to give large raises to employees, and others have been able to pass the costs on to consumers and buyers. But they also ask the question, “What happens when supply chain issues are resolved and companies can’t charge huge margins?” Combined with the current level of inflation, problems could be on the horizon.
