A Record-Breaking Year for Small Business Sales

There is good news for business owners who hope to sell their business in 2015. Bizbuysell.com reports that 2014 was a record-breaking year for small-business sales, with the largest number of transactions occurring since 2007, the year they began keeping data.

2014Q4_Closed_Small_Business_TransactionsThis translates to 7,494 businesses sold, up 6 percent from the year before and significantly higher than the period from 2010 to 2012 when economic instability depressed business sales.

Why are more small businesses changing hands now? There are a number of factors contributing to this change in the market. The first is a current increase in qualified buyers. Without qualified buyers, not even the most robust and least owner-dependent business will sell. As the economy shows signs of picking up, banks are beginning to loosen their lending standards as a reaction to what the Wall Street Journal reports as “more aggressive competition from other lenders amid growing competition between banks in a slow-growth, low-interest-rate environment.” This is particularly true in regard to commercial products and especially commercial real estate.

Secondly, business owners have reported an improvement in the small business environment overall. Potential buyers seem emboldened by the lack of turbulence in the economy lately, and the bottom lines of businesses that survived that turbulence have improved. Median revenue of those small businesses that sold increased from $405,905 to $417,562 in 2014, as did median cash flow. Essentially, those companies are survivors and, now that they are making better profits, they look like far more interesting prospects than they did even a short time ago.

Another driver in increased sales is Baby Boomer business owners exiting the market. As Baby Boomers approach retirement age, four million private businesses will either be sold or will close in the next two decades. Obviously, the more entrepreneurial Boomers will seek to sell the companies and boost their retirement resources. When surveyed, almost four out five business brokers reported that a quarter of their most recent closed transactions involved Baby Boomer sellers.

Not only were more small business transactions successfully closed in 2014, but sellers, taking advantage of the current optimism in the market were asking higher amounts for their businesses – and receiving them. The median asking price rose to $224,990 from $200,000 in most of 2013 and 2014, and the median sale price rose to $200,000.

With this increase in both qualified and interested buyers and sellers of well performing businesses, the outlook for the 2015 business market looks good, and that optimism was also reflected in the Bizbuysell.com survey, with 82 percent responding that they expected increasing numbers of small business transactions to continue throughout 2015. So if you have been waiting for the right time to sell your business, there might not be a better one than now.

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